Release Date: September 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alliance Pharma PLC (FRA:DVL, Financial) reported a 5% revenue growth at constant currency for the group, driven by strong performance from the Kelo-Cote franchise.
- The company achieved a significant gross margin improvement, increasing by 300 basis points to 59.8%, due to a positive product mix.
- Robust free cash flow generation allowed Alliance Pharma PLC (FRA:DVL) to reduce net debt and lower group leverage to 1.8x.
- The new product development pipeline is gaining momentum, with 6% of consumer revenues in H1 2024 coming from products developed in-house and launched in the last three years.
- The company successfully completed the rollout of its global ERP system, enhancing operational efficiency across the business.
Negative Points
- Amberen revenues declined by 9% at constant currency and 11% on a reported basis due to softer trading on Amazon.
- Nizoral revenues were down 21% at constant currency and 25% on a reported basis, impacted by destocking ahead of a planned manufacturing change.
- The company faced an increase in effective tax rate from 17.3% to 23.4%, which affected the underlying profit before tax.
- High interest rates led to an increase in interest costs, although this was partially offset by net exchange gains.
- The market for menopause relief products, where Amberen operates, is rapidly shifting from bricks-and-mortar to e-commerce, posing a challenge for the brand's traditional sales channels.
Q & A Highlights
Q: On the geographic expansion and focusing on MacuShield and potentially Hydromol, how will you build the same level of clinician awareness for those brands in new markets?
A: We are focusing on key market brand opportunities where we believe we can gain sufficient scale and market share. Building clinician awareness takes time, but it is all incremental business when launching in new markets. We have to choose wisely to ensure we are targeting the biggest opportunities.
Q: On the green shoots for Amberen in the US, are the clinical benefits of Amberen being recognized against other products?
A: The first priority is to fix the buy box issue on Amazon. Teresa, our new Head of North America, is conducting a full review of Amberen's pricing and strategy. She has a strong consumer marketing background and is focused on driving growth.
Q: Can you give us a sense of the stocking cycle for Nizoral in the second half of this year?
A: We moved supply from Belgium to Thailand and built stock to ensure supply security. The stock has been burned off in the first half, and we are now back to normal trading. Nizoral generally performs well in our markets, and we have positive momentum in the second half.
Q: What options are on the table for the Amberen franchise in the US?
A: It is not a strategic review of the US business. The US is a key market for us, and Teresa's job is to significantly increase the size of the business. We are focused on growth opportunities in the US market.
Q: How will the investment in brand extensions and geographic expansion reflect in the P&L?
A: We have to be choiceful about where we expand and how. Our consumer brands are profitable, allowing space in the P&L to invest. Market rollout will take time, but innovation is more pipeline-driven and ready to go over the next two years.
Q: Should we think of 2024 as setting a new base for growth from 2025? Are there any one-offs to consider?
A: We have recruited new heads and are making structural changes. There will be one-off changes, but not necessarily one-off costs. We are setting a good base for 2024 to go into 2025.
Q: Is Kelo-Cote at a normalized base for growth?
A: The market in China is in double-digit growth, and we are ahead of that. We are managing the P&L to deliver consistent performance and expect Kelo-Cote to get back to better growth next year.
Q: Will there be a new dividend policy announced?
A: We are focused on cash generation and reducing debt. The current debt level is still too high, and we aim to get it down before considering a new dividend policy.
Q: How much of the market has shifted from bricks and mortar to e-commerce for Amberen?
A: E-commerce continues to outpace brick-and-mortar growth. The VMS market in the US is very e-commerce driven, and we expect this trend to continue.
Q: What are you doing in terms of innovation, and what is the cost around that?
A: We started with no innovation pipeline in 2021 and are scaling up. We spend between GBP1 million and GBP2 million on R&D annually. Innovation drives incremental business and consumer reappraisal of our brands.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
