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Alliance Pharma confident despite 'Brexit' uncertainty

Published: 21:51 19 Jul 2016 AEST

Pills and the EU stars
Alliance hopes its mainland European presence will protect it from any hit from 'Brexit'

Speciality drug company Alliance Pharma plc (LON:APH) more than doubled sales after an acquisition last year.

Alliance said its purchase of Sinclair Healthcare Products in December helped it rack up sales of £46.4mln in the six months to June 30 versus £22.8mln a year ago. Sinclair contributed sales of £20.6mln.

The group said it was unlikely to face any potential loss of access to the EU market after the referendum because it already has operations in France, Germany, Italy and Spain.

Chief executive John Dawson said: "Additionally, we do not expect to be adversely affected by the current sterling exchange rate volatility.

"Indeed, if current exchange rates prevail we would expect a modest benefit to our sales and financial performance as we expect trading volumes to continue in line with expectations throughout 2016."

Alliance said the integration of Sinclair products under the Alliance name was going well.

Activities relating to finance and operations are expected to be largely complete by the end of the third quarter this year and product transfers in the countries are meeting local regulatory timelines.

What the chief executive said

On first-half performance

John Dawson said: "The group performed well and in line with the board's expectations with sales more than doubling."

On the potential impact of the EU referendum vote

"It is too early to assess the long-term impact of the UK's decision to leave the EU, although, having operations in France, Germany, Italy and Spain, we do not anticipate any issues over market access.

About the company

At a time when mergers and acquisitions in the drug industry are all the rage, Alliance Pharma looks well-placed to cash in.

The company's strategy of expanding its product portfolio through bolt-on deals appears to be paying off.

In November, the company did a deal with Sinclair IS PHARMA to buy its healthcare products division for £127.5mln, which it said would materially expand the business outside the UK.

That included 27 products including five key growth brands including scar reduction product Kelo-Cote, Flammacerium, Aloclair, Kelo-stretch and Atopiclair.

Another product, eczema cream Hydromol, maintained strong sales growth of 10% in the first half with sales of £3.5mln.

Ophthalmology product MacuShield, acquired in February 2015, made £2mln in the first half versus £1.4mln in the first five months after the acquisition.

In May, the group said it had begun the year well, with the Alliance business and Sinclair together making revenues of £30.5mln in the first four months of 2016.

The UK consumer healthcare business was also continuing to develop well, with sales of £2.9mln up 20% on the same period last year, driven by strong growth of Ashton and Parsons and Macushield.

It has expanded into more than 100 countries from about 40, greatly strengthened its presence in Europe and Asia, and increased its tally of products to about 90.

Chairman Andrew Smith said at the time: "We are in the process of integrating the Sinclair products under the Alliance name and of aligning the operational capabilities of the enlarged company; both projects are progressing to plan.

"We look forward to the year ahead with confidence."

What the shares did

Alliance Pharma's stock rose 2.25p, or 5.1%, to 46p.

What the brokers said

Sally Taylor at Numis Securities said: "In summary, another solid trading update from APH that we believe will reassure that the integration of the Sinclair Healthcare Products business remains on track and that the legacy Alliance portfolio continues to perform well.

"APH remains attractively valued. We reiterate our 'buy' recommendation."

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