TIDMCLIN
RNS Number : 9831F
Clinigen Group plc
27 February 2018
27 February 2018
GOOD H1 PERFORMANCE WITH ADJUSTED EPS UP 13%
Clinigen Group plc (AIM: CLIN, 'Clinigen' or 'the Group'), the
global pharmaceuticals and services group, has today published its
half year results for the six months ended 31 December 2017.
FINANCIAL SUMMARY
Six months ended 31 December 2017 2016 Growth
GBPm GBPm
------------------------------- ----- ----- ------
Revenue 167.8 131.2 28%
------------------------------- ----- ----- ------
Adjusted gross profit 63.9 58.1 10%
------------------------------- ----- ----- ------
Adjusted EBITDA 34.4 30.0 15%
------------------------------- ----- ----- ------
Cash generated from operations 34.3 7.7 >100%
------------------------------- ----- ----- ------
Reported earnings per share 10.2p 2.3p >100%
------------------------------- ----- ----- ------
Adjusted earnings per share 21.2p 18.8p 13%
------------------------------- ----- ----- ------
Interim dividend per share 1.76p 1.6p 10%
------------------------------- ----- ----- ------
Net debt 141.8 70.9
------------------------------- ----- ----- ------
Note: Group results on an adjusted basis exclude amortisation of
acquired intangibles and products, and other non-underlying items
relating to acquisitions (see note 3 and 4 of this financial
information). Adjusted EBITDA includes the Group's share of EBITDA
from its joint venture. Adjusted results now include amortisation
on software and the prior period has been restated accordingly.
HIGHLIGHTS
-- Adjusted gross profit up 10% driven by strong performance by
Commercial Medicines and two months contribution from Quantum
Pharma plc ('Quantum')
-- Adjusted EPS up 13% to 21.2p (2016: 18.8p)
-- Strong cash flow performance with cash generated from
operations of GBP34.3m (2016: GBP7.7m)
-- Interim dividend increased 10% to 1.76p (2016: 1.6p)
-- All products across Commercial Medicines portfolio performing
strongly
-- Good growth in Africa and Asia Pacific region
-- Acquisition of Quantum adds complementary capability in
Unlicensed Medicines and provides pipeline of products and in-house
development capabilities
-- Unlicensed Medicines capability and geographical footprint
further enhanced by acquisition of IMMC in Japan
Shaun Chilton, Group Chief Executive Officer, said:
"We have delivered good growth resulting in a 15% increase in
adjusted EBITDA and 13% increase in adjusted EPS.
"Commercial Medicines has achieved a strong performance across
the portfolio whilst growth in Africa and Asia Pacific was good,
demonstrating the strength of our increasingly diversified
portfolio.
"We have made strong progress against our strategic priorities.
We have and will continue to drive organic growth and search for
selective acquisitions to complement our existing offering and
capabilities.
"The acquisitions of Quantum and IMMC extend our Unlicensed
Medicines capability and accelerates our unlicensed to licensed
global strategy. Both acquisitions are performing well with
integration going to plan.
"We are well positioned to deliver another good year of
progress."
- Ends-
An analyst briefing will be held at 9:30am on Tuesday, 27
February 2018 at the offices of Instinctif Partners, 65 Gresham
Street, London EC2V 7NQ.
An audio replay file will be made available shortly afterwards
via the Group's website: www.clinigengroup.com.
Contact details
Clinigen Group plc Tel: +44 (0) 1283 495010
Shaun Chilton, Group Chief Executive
Officer
Martin Abell, Group Chief Financial
Officer
Matt Parrish, Head of Investor Relations
Numis Securities Limited Tel: +44 (0) 20 7260 1000
Michael Meade / Freddie Barnfield (Nominated
Adviser)
James Black / Tom Ballard (Corporate
Broking)
RBC Capital Markets - Joint Broker Tel: +44 (0) 20 7653 4000
Marcus Jackson / Elliot Thomas / Jack
Wood
Instinctif Partners Tel: +44 (0) 20 7457 2020
Adrian Duffield / Melanie Toyne-Sewell
/ Alex Shaw Email: clinigen@instinctif.com
Notes to editors
The Unlicensed Medicines operation encompasses the original
Managed Access and Global Access business, and the unlicensed
businesses within Link and Quantum. The Commercial Medicines
business encompasses Clinigen's own products and the commercial
businesses of Link and Quantum.
About Clinigen Group
Clinigen Group plc (AIM: CLIN) is a global pharmaceutical and
services company with a unique combination of businesses focused on
providing ethical access to medicines. Its mission is to deliver
the right medicine to the right patient at the right time through
three areas of global medicine supply; clinical trial, unlicensed
and licensed medicines.
Clinical Trial Services
Clinigen is the global market leader in the specialist supply
and management of quality-assured comparator medicines and services
to clinical trials and Investigator Initiated Trials.
Unlicensed Medicines
Clinigen is the global leader in ethically sourcing and
supplying unlicensed medicines to hospital pharmacists and
physicians for patients with a high unmet medical need. The Group
manages early access programmes to innovative new medicines and
provides 'on demand' access globally to medicines which remain
unlicensed at the point of care.
Commercial Medicines
Clinigen acquires global rights to niche hospital only and
critical care products, revitalising these assets around the world
and returning them back to sustained growth. It also provides
access to licensed and branded generic medicines in the Africa and
Asia Pacific region.
The Group also has an 'unlicensed to licensed' strategy, where
it looks to take unlicensed medicines with commercial potential and
licences them, helping to address unmet medical need and allowing
the Group to capitalise on its market-leading positions.
For more information on Clinigen, please visit
www.clinigengroup.com
Cautionary statement
This announcement contains certain projections and other
forward-looking statements with respect to the financial condition,
results of operations, businesses and prospects of Clinigen Group
plc. These statements are based on current expectations and involve
risk and uncertainty because they relate to events and depend upon
circumstances that may or may not occur in the future. There are a
number of factors which could cause actual results or developments
to differ materially from those expressed or implied by these
forward-looking statements. Any of the assumptions underlying these
forward-looking statements could prove inaccurate or incorrect and
therefore any results contemplated in the forward-looking
statements may not actually be achieved. Recipients are cautioned
not to place undue reliance on any forward-looking statements
contained herein. Except as required by law, Clinigen undertakes no
obligation to update or revise (publicly or otherwise) any
forward-looking statement, whether as a result of new information,
future events or other circumstances.
OVERVIEW
Clinigen has a unique combination of businesses providing access
to medicines across clinical trials, unlicensed and licensed
medicines - the key stages of a pharmaceutical product's lifecycle.
It is able to offer access and supply solutions to both
pharmaceutical companies and Healthcare Professionals ('HCPs')
through a combination of a global reach and local knowledge.
Underlying the business remains the mission: 'Right Medicine,
Right Patient, Right Time'.
In the first half of the year, Clinigen has combined a good
financial performance with further progress in driving the strategy
to cement the Group's market leading positions.
Group revenues increased 28% to GBP167.8m (2016: GBP131.2m).
This is higher than the growth in gross profit due largely to an
increase in the amount of pass through costs within the early
access part of Unlicensed Medicines.
Adjusted gross profit, viewed by the Board as the best measure
of top line growth, increased by 10%, driven by a combination of a
strong performance by Commercial Medicines and two months
contribution from Quantum.
Adjusted EBITDA increased by 15% to GBP34.4m (2016: GBP30.0m).
Broadly, half the growth was organic, and half was driven by
acquisitions, with adverse currency movements offsetting some of
the growth.
Adjusted EPS increased by 13% to 21.2p (2016: 18.8p). Reported
EPS was 10.2p (2016: 2.3p) after taking account of amortisation on
acquired intangibles and products, and other non-underlying items
including acquisition costs.
Cash generated from operations was GBP34.3m (2016: GBP7.7m)
indicating another strong cash flow performance, underpinned by
good credit control and working capital management.
In view of the good trading performance, the Directors have
increased the interim dividend by 10% to 1.76p per share (2016:
1.6p).
Current trading and outlook
The second half of the year has started well and the Group is
trading in line with the Board's expectations, although the
appreciation of sterling versus the Group's major overseas'
currency, the US dollar, is expected to dampen headline growth
rates in the second half.
Strategically, the priority is to capitalise on Clinigen's
international market leading positions and geographical footprint
in order to drive organic growth across the Group.
Acquisitions and integration
Quantum
On 1 November 2017, the Group acquired Quantum for GBP143.5m.
This acquisition will strengthen Clinigen's position as global
leader in ethical access to medicines by extending its Unlicensed
Medicines capability and accelerating its unlicensed to licensed
medicines ('UL2L') global strategy. The acquisition will also
enable Quantum's portfolio of commercial products to be
internationalised through Clinigen's global infrastructure.
The Quantum business is trading well post acquisition and the
integration is progressing to plan.
IMMC
On 23 October 2017, the Group acquired IMMC, Japan's largest
supplier of unlicensed medicines. The acquisition adds to
Clinigen's existing footprint in Japan and further supports the
strategy to become the 'go to' global leader in ethical access to
unlicensed medicines.
The IMMC team are now embedded within the Clinigen office in
Japan and performance is in line with management's
expectations.
OPERATIONAL REVIEW
Adjusted gross profit by operation
2016
Six months ended 31 December 2017 Restated Var
Adjusted results GBPm GBPm
----------------------------- ---- --------- -----
Commercial Medicines 31.0 22.5 37%
----------------------------- ---- --------- -----
Unlicensed Medicines 26.3 25.6 3%
----------------------------- ---- --------- -----
Clinical Trial Services 6.6 10.0 (34)%
----------------------------- ---- --------- -----
63.9 58.1 10%
----------------------------- ---- --------- -----
Note: The prior period comparative has been restated for the
change in segmental reporting as detailed in note 2 of the
condensed financial statements.
Commercial Medicines (encompassing licensed products and
Quantum's commercial business)
Clinigen's Commercial Medicines operation acquires global rights
to niche hospital only and critical care products and revitalises
them back to sustained growth. In addition, it provides access to
licensed and branded generic medicines in the Africa and Asia
Pacific region.
The Group also has an UL2L strategy, where it looks to take
unlicensed medicines with commercial potential and licences them,
helping to address unmet medical need.
Commercial Medicines represents 49% of adjusted Group gross
profit. This operation was the biggest driver of Group profit,
increasing gross profits by 37% due to a strong performance across
all products and regions and two months contribution from
Quantum.
Gross margin was 73.8% (2016: 70.8%) with the increase due to
the change in mix towards the higher margin products.
Clinigen owns five products undergoing revitalisation in two
therapy areas (oncology support and infectious disease).
Collectively, these products represent 73% of Commercial Medicines
gross profit (2016: 75%).
Foscavir is an anti-viral used to treat cytomegalovirus (CMV)
viraemia and infection primarily in bone marrow transplant
patients. Foscavir achieved strong growth in the half, benefiting
from a good underlying performance across all regions and from
driving direct to hospital business in Europe. Foscavir now
represents 48% of Commercial Medicines gross profit (2016: 54%).
The Foscavir bag line extension is progressing to plan, with launch
expected in the second half of 2018.
In February 2018, the MHLW ('Ministry of Health, Labour and
Welfare') agreed to a price increase in Japan for Foscavir, the
first such increase since launching the product there in 2010. The
specifics of the price increase are still to be finalised with the
MHLW.
Ethyol, used to reduce the incidence of dry mouth in patients
undergoing high dose radiation treatment, saw an improvement in
gross profit, following the transfer last year of the US licence,
and full commercial and medical support, to Clinigen's strategic
partner, Cumberland. The Group continues to search for new uses of
Ethyol as demonstrated by the study, announced in January 2018, on
the impact Ethyol has in reducing gastro-intestinal toxicity in
patients who receive treatment for multiple myeloma.
The Group's dexrazoxane portfolio comprises Cardioxane, Savene
and Totect. Cardioxane is used as a cardio protectant with cancer
chemotherapy (anthracycline) treatment. Savene and Totect are used
as important emergency treatments for extravasation (leakage) at
the site of infusion of chemotherapy (anthracycline) treatment. The
dexrazoxane portfolio performed strongly across all products and
major geographies.
Sales of Cardioxane demonstrated strong growth, in part as a
result of increased usage following the approval from the European
Commission in August 2017 to modify its current product information
and change its guidance for paediatric use. The Group continues to
work with physicians to expand the clinical understanding of the
recent Cardioxane label changes and the introduction of new sarcoma
treatments that demand increased anthracycline and Cardioxane use.
This is expected to lead to an increase in usage of Cardioxane in
the medium term.
Following the launch in the US in September 2017, sales of
Totect benefited from a manufacturing shortage of a competitor
product. Whilst this benefit was temporary and sales have now
normalised, this has enabled Totect to accelerate gains in market
share.
Sales of the remaining dexrazoxane product, Savene, were
excellent due to strong demand for replacement kits for treating
extravasations in hospitals across Europe.
In the Africa and Asia Pacific region, the Group has 192
specialist pharmaceutical and medical technology actively marketed
licensed products including both branded and generic products.
In the Africa and Asia Pacific region, growth was across all
geographies, with the region continuing its momentum from last
year. The Group continues to make progress in extending the
commercial strategy in converting unlicensed medicines to licensed
medicines.
In November 2017, Clinigen announced the registration of Garsun
in South Africa and in January 2018, announced an extension to the
agreement with Eisai to launch three products into 10 African
countries, building on the successful partnership held with Eisai
in providing access to medicines across Africa. These agreements
demonstrate that the Group is increasingly becoming a partner of
choice to pharmaceutical companies, both in Africa and around the
world, in the supply and distribution of their products.
The commercial business within Quantum develops, licenses and
commercialises medicines with a particular focus on those currently
prescribed as unlicensed medicines. The business's main product
Glycopyrronium Bromide Oral Solution 1mg/5ml ('Glyco'), performed
well in the two months since acquisition. Quantum also has a
portfolio and pipeline of UL2L products, as well as complementary
larger niche generic products across several therapeutic areas that
the Group aims to commercialise.
The priorities for Commercial Medicines are: continued
revitalisation of existing products, seeking selective product
acquisitions that fit within the portfolio, extending the
commercial strategy of licensing and distributing regional
products, the development of the Quantum pipeline and further
conversion of UL2L medicines.
Assuming the competitive landscape remains unchanged (most sales
are derived from products not under patent protection and so
increased competition is an ongoing risk), Commercial Medicines is
well positioned to continue to drive growth across all parts of the
portfolio.
Unlicensed Medicines (encompassing early access, 'on demand'
access and Quantum's unlicensed business)
Clinigen is the global leader in ethically sourcing and
supplying unlicensed medicines to hospital pharmacists and
physicians for patients with a high unmet medical need. The Group
manages early access programmes to innovative new medicines,
provides 'on demand' access globally to medicines which remain
unlicensed at the point of care, and through Quantum, manufactures,
procures and supplies unlicensed medicines.
The Unlicensed Medicines operation represents 41% of adjusted
Group gross profit. Gross profit increased by 3% driven by two
months contribution from the acquired businesses.
In early access, the Group is the global market leader in
providing exclusive, ethical worldwide access to the most promising
innovative medicines on behalf of pharmaceutical and biotech
companies in disease areas where there is a high unmet patient
need. These disease areas are typically in oncology, central
nervous system, infectious disease, immunology and orphan disease.
These early access initiatives are called Managed Access Programmes
('MAPs').
At the end of December, there were 109 MAPs under management (30
June 2017: 107), including those in the Africa and Asia Pacific
region, of which 91% of products shipped on behalf of the client
were provided free of charge to patients. When the product is
'charged for', the revenue is passed through the Group's accounts.
A shift in mix towards 'free of charge' products can have a
material impact on the revenue generated without affecting gross
profit. This is why the Group views gross profit as the best
measure of top-line growth.
Performance in the first half was affected by the two largest
programmes coming to the natural end of their lifecycle. There were
19 new MAPs won in the first half of the year, many of which are
sizable programmes. These new programme wins are expected to drive
a stronger second half performance and position the business well
for the next year.
In 'on demand' access, the Group ethically supplies unlicensed
or short supply medicines to patients, via their physicians.
Further progress was made against the key objective of
increasing the number of 'on demand' exclusive supply agreements
for high demand or niche medicines. During the half, the number of
these agreements, including those in the Africa and Asia Pacific
region, increased to 34 (30 June 2017: 31) covering 43 products (30
June 2017: 36).
On a regional basis, the Africa and Asia Pacific region
delivered good growth, demonstrating the value of integrating the
legacy Link business fully within the Group's global supply and
distribution infrastructure.
The Unlicensed Medicines business of Quantum performed in line
with management's expectations and integration into the wider Group
is progressing to plan.
The Group's strategy for Unlicensed Medicines remains unchanged:
to capitalise on the considerable long-term international
opportunity by increasing the number of exclusive supply agreements
for high demand or niche products and to increase Clinigen's
profile amongst hospital pharmacists and physicians through
targeted marketing activity.
The Unlicensed Medicines operation is well positioned for an
improvement in performance through the second half.
Clinical Trial Services
CTS is the global market leader in the specialist supply and
management of quality-assured comparator medicines and services to
clinical trials and Investigator Initiated Trials ('IIT').
Following two years of double digit growth (2016: 25%; 2015:
25%), CTS adjusted gross profits, representing 10% of adjusted
Group gross profit, decreased 34%. Whilst the breadth of activity
was good, CTS did not have the usual number of bigger programmes
that normally represent an important part of the divisions' gross
profit.
The gross margin of 22% decreased versus prior year (2016: 26%)
due to the change in mix towards lower margin products and
activity.
CTS continues to make progress in developing complementary
services to the core offering. The gross profit from expanded added
value services, which are intended to deepen relationships with
clients and reinforce CTS' market-leader status, contributed around
8% of the operation's total gross profit (2016: 4%).
The market remains dynamic with clients demanding ever more
global and complex solutions and remains the most competitive
market in which the Group operate. CTS has established a leading
position in the market as a trusted partner capable of delivering
high quality service across the world with an extensive
understanding of the complex regulatory environment. These
strengths, combined with the strategy of over-layering the core
service offering with added value services, position the operation
to take advantage of the rapidly developing market opportunity.
The priorities this year are to further develop the expanded
services, formalise the IIT service offering, increase client
penetration and extend into new markets.
The Group has strengthened the leadership of the CTS business to
better position it in the US and to drive the future development of
the business globally. Terry Walsh has been appointed Senior Vice
President of CTS and joins from GSK where he held a number of
senior leadership roles in Clinical Trial Supply Chain, Outsourcing
and External Drug Discovery, US Managed Markets and Comparator
Management. While at GSK, he was seconded to TransCelerate
Biopharma Inc, the not-for-profit pharma industry collaboration
organisation where he created the Comparator Purchasing Network.
Terry is considered an industry-wide expert in comparator sourcing
strategies. He will join Clinigen on 19 March 2018.
Whilst visibility for the CTS business is shorter than for the
rest of the Group, it is expected that CTS' performance will
incrementally improve through the second half.
FINANCIAL REVIEW
Summary adjusted income statement
Six months ended 31 December 2017 2016 Growth
Adjusted results GBPm GBPm
------------------------------ ------ ------ -------
Revenue 167.8 131.2 28%
------------------------------ ------ ------ -------
Gross profit 63.9 58.1 10%
------------------------------ ------ ------ -------
Administrative expenses (30.1) (28.5) (6)%
EBITDA from joint venture 0.6 0.4 50%
------------------------------ ------ ------ -------
EBITDA 34.4 30.0 15%
------------------------------ ------ ------ -------
Depreciation and amortisation
of software (0.6) (0.8)
------------------------------ ------ ------ -------
EBITA 33.8 29.2 16%
------------------------------ ------ ------ -------
Finance cost (2.1) (1.3)
------------------------------ ------ ------ -------
Profit before tax 31.7 27.9 14%
Basic earnings per share 21.2p 18.8p 13%
------------------------------ ------ ------ -------
Dividend per share 1.76p 1.6p 10%
------------------------------ ------ ------ -------
This summary adjusted income statement presents Group results on
an adjusted basis excluding amortisation of acquired intangibles
and products, and other non-underlying items relating to
acquisitions (see note 3 and 4 of the condensed financial
statements). Adjusted EBITDA includes the Group's share of EBITDA
from its joint venture. Adjusted results now include amortisation
on software and the prior period has been restated accordingly.
Administrative expenses includes share-based payments.
When presenting the financial results, a number of adjusted
measures are used which are considered by the Board and management
in reporting, planning and decision making. Adjusted results
reflect the Group's trading performance and exclude amortisation of
acquired intangibles and products, and non-underlying costs
relating to acquisitions which are explained in note 4.
Overall, the Group achieved a good financial performance with
its three key financial metrics, adjusted gross profit, adjusted
EBITDA and adjusted earnings per share all growing by more than
10%.
Group revenues increased 28% to GBP167.8m (2016: GBP131.2m).
This is higher than the growth in gross profit due largely to an
increase in the amount of pass through costs within the early
access part of Unlicensed Medicines.
Adjusted gross profit, viewed by the Board as the best measure
of top line growth, increased by 10%, driven by a combination of a
strong performance by Commercial Medicines and two months
contribution from Quantum.
Following a period of investment last year and tight cost
control in the half, underlying overheads increased at a slower
pace than gross profit driving improved profit leverage. As a
result, adjusted EBITDA increased by 15%. Broadly, half the growth
was organic, and half was driven by acquisitions, with adverse
currency movements offsetting some of the growth. Whilst the
currency effect was modest in the first half, it is expected to be
a bigger effect in the second half due to the appreciation of
sterling against the Group's major overseas currency, the US
dollar.
See note 3 of the condensed financial statements for a
reconciliation of adjusted EBITDA to the IFRS equivalent
comparative.
Finance cost
The adjusted net finance cost excluding the impact of the Link
contingent consideration, was GBP2.1m (2016: GBP1.3m). The increase
relates to the increase in net debt following the payment of the
Link contingent consideration in October and the acquisition of
Quantum in November. The average interest charge on gross debt
during the period was 1.7%.
The reported finance cost was GBP3.2m (2016: GBP15.6m), after
taking account of the non-cash GBP1.1m unwind of discount on the
Link contingent consideration (2016: GBP13.5m increase in Link
contingent consideration and GBP0.8m unwind of discount).
The table below shows the reconciling items between the adjusted
profit before tax of GBP31.7m (2016: GBP27.9m) and the reported
profit before tax of GBP15.8m (2016: GBP4.2m).
Reconciliation of adjusted profit before tax to reported profit
before tax
Six months ended 31 December
------ ------
2017 2016
GBPm GBPm
--------------------------------------------------------------- ------ ------
Adjusted profit before tax 31.7 27.9
--------------------------------------------------------------- ------ ------
Amortisation of acquired intangibles and products (9.5) (9.2)
--------------------------------------------------------------- ------ ------
Acquisition costs (3.7) -
--------------------------------------------------------------- ------ ------
Restructuring costs (1.3) -
--------------------------------------------------------------- ------ ------
Adjustment for fair value of acquired stock sold in the period (1.1) (0.1)
--------------------------------------------------------------- ------ ------
NuPharm legal settlement 1.0 -
--------------------------------------------------------------- ------ ------
Link contingent consideration (1.1) (14.3)
--------------------------------------------------------------- ------ ------
Tax on joint venture in South Africa (0.2) (0.1)
--------------------------------------------------------------- ------ ------
Total adjustments (15.9) (23.7)
--------------------------------------------------------------- ------ ------
Reported profit before tax 15.8 4.2
--------------------------------------------------------------- ------ ------
The adjustments to profit before tax comprise costs relating to
amortisation, acquisitions and the Group's share of the tax charge
on the JV earnings of GBP0.2m (2016: GBP0.1m).
Total amortisation was GBP9.7m (2016: GBP9.6m), of which GBP7.3m
(2016: GBP6.7m) related to acquired intangibles, GBP2.2m (2016:
GBP2.5m) related to product licences and GBP0.2m (2016: GBP0.4m)
related to software.
Acquisition costs amounted to GBP3.7m of which GBP3.4m related
to the Quantum acquisition and GBP0.3m to the IMMC acquisition.
Restructuring costs relating to the acquisitions are GBP1.3m, most
of which is redundancy costs.
Under IFRS 3 (revised), stock acquired in a business combination
is valued at fair value on acquisition, which includes the profit
margin in the stock's carrying value. The GBP1.1m adjustment
represents the profit margin associated with the acquired stock in
Quantum. This profit margin is included in adjusted profit before
tax to reflect better the underlying profitability of the business
but is excluded from statutory reported profit.
The NuPharm legal settlement represents net proceeds received
following a settlement completed in November 2017 on an action
brought by Quantum against the vendors of the NuPharm business. The
NuPharm business was closed before Clinigen acquired Quantum. The
likelihood and amount of any settlement of the claim was highly
uncertain at the date of acquisition and therefore a contingent
asset was not recognised in the acquisition balance sheet.
Taxation
Taxation was GBP3.8m (2016: GBP1.6m), based primarily on the
prevailing UK and overseas tax rates. This charge is calculated as
GBP6.8m based on the adjusted profit of GBP31.7m, offset by a
credit of GBP3.0m in respect of the adjusted items.
The adjusted effective tax rate ('ETR') decreased modestly to
21.5% (2016: 22.6%) due to the higher proportion of earnings in the
UK and the reduction in the UK corporation tax rate. The adjusted
ETR also takes account of the reduction in the corporation tax rate
going forward in the US.
Earnings per share
Adjusted basic earnings per share, calculated excluding
amortisation of acquired intangibles and products, and other
non-underlying items, increased by 13% to 21.2p (2016: 18.8p). The
increase reflects the Group's higher adjusted profit from
operations, partially offset by dilution and higher finance costs
following the acquisitions.
Reported basic earnings per share was 10.2p (2016: 2.3p). The
increase is due primarily to the revision to the estimate of
contingent consideration on the Link acquisition being charged to
the income statement in the prior period.
Dividend
The Board is committed to a sustainable and progressive dividend
policy and expects interim and final dividend payments to be split
approximately one-third to two-thirds respectively.
In view of the good first half results, the Board has increased
the interim dividend by 10% to 1.76p per share (2016: 1.6p).
The interim dividend will be paid on 12 April 2018 to
shareholders on the register on 23 March 2018.
Cash flow and net debt
Cash flow performance was again strong in the half, with cash
generated from operations of GBP34.3m (2016: GBP7.7m). Net working
capital decreased by GBP0.9m in the period (excluding the effect of
acquisitions and exchange adjustments) due to tight working capital
management and the favourable timing of cash flows around the
period end.
Capital expenditure was GBP6.6m (2016: GBP5.6m) of which GBP2.8m
related to the Group ERP system, GBP0.4m related to office and
warehouse refurbishments and GBP3.4m related to Commercial
Medicines' products (including GBP1.5m deferred consideration on
Foscavir bags). As previously guided, capital expenditure has been
higher than normal due to budgeted spend on the Group ERP system,
which is currently being implemented.
Income tax paid was GBP7.0m (2016: GBP1.2m), interest paid was
GBP1.3m (2016: GBP0.9m) and dividends paid was GBP4.2m (2016:
GBP3.1m).
As provided for in last year's accounts, GBP38.6m was paid in
respect of the final Link contingent consideration in October 2017.
This payment and the Quantum acquisition, detailed below, accounted
for net debt increasing during the first half from GBP35.0m to
GBP141.8m.
Quantum acquisition
Quantum was acquired on 1 November 2017 and its results have
been fully consolidated from that point onwards.
The Group paid a total consideration of GBP143.5m, being a cash
payment of GBP62.9m and an issue of 6,849,264 shares in Clinigen
Group plc which had a fair value of GBP80.6m representing the
market price on 31 October 2017. The consideration was paid in full
to Quantum shareholders on the acquisition date. In order to fund
the cash element of the consideration, the Group's bank facility
was amended and extended (as detailed in the Treasury management
section).
A further GBP8.6m was spent on settling Quantum share awards at
acquisition which are recognised as a liability in the Quantum
acquisition balance sheet.
Net debt of Quantum at the time of acquisition was GBP12.2m.
Balance sheet
Intangible assets increased by GBP173.1m to GBP505.6m, with most
of the increase relating to the goodwill and identifiable
intangibles arising on the acquisitions of Quantum and IMMC as well
as capital expenditure of GBP4.7m. The increase has been offset by
amortisation of GBP9.7m and foreign exchange adjustments of
GBP0.9m.
Net working capital decreased to GBP3.5m (30 June 2017:
GBP4.4m). The low levels of working capital in the business reflect
a strong focus on credit control, working capital management and
favourable working capital flows around the period end.
Total deferred consideration payable at December 2017 is GBP7.5m
(30 June 2017: GBP41.8m) relating to two further milestone payments
for Foscavir bags payable over the next two years and a further
payment due in the second half for the IMMC acquisition. The
reduction reflects the payment of the contingent consideration on
the Link acquisition.
Treasury management
The Group's operations are financed by retained earnings and
bank borrowings, and on occasion, the issue of shares to finance
acquisitions.
During the six months ended 31 December 2017, the Group's bank
facility was amended and extended in order to finance the Quantum
acquisition. The revolving credit facility ('RCF') has been
increased from GBP95m to GBP200m and extended for five years to
October 2022. Additionally, the Group has exercised its option to
further extend this facility by GBP20m to GBP220m for a period of
six months ended April 2018. There are two covenants that apply to
the bank facility: interest cover of not less than 4.0x and net
debt/adjusted EBITDA cover of not more than 3.25x falling to 3.0x
and then 2.75x over the term of the bank facility. As at 31
December 2017, interest cover was 12.2x and the net debt/adjusted
EBITDA cover was 2.0x. The fixed term loan was fully repaid with
the extended facility consisting entirely of RCF.
The Group's finance facilities provide good headroom and
flexibility to support the Group's strategy of adding bolt-on
acquisitions.
Borrowings at the end of the year are in sterling and to a
lesser extent US dollar, and are managed by the Group's UK based
Treasury function, which manages the Group's treasury risk in
accordance with policies set by the Board.
The Group reduces its exposure to currency fluctuations on
translation by typically managing currencies at Group level using
bank accounts denominated in foreign currencies. Where there is
sufficient visibility of currency requirements, forward contracts
are used to hedge exposure to foreign currency fluctuations. The
Group's treasury function does not engage in speculative
transactions and does not operate as a profit centre.
The Group has applied hedge accounting where permissible to
match hedges to the transactions to which they relate thereby
reducing volatility in the results which may arise from gains and
losses on hedging instruments.
Principal risks facing the business
Clinigen operates an embedded risk management framework, which
is monitored and reviewed by the Board. There are a number of
potential risks and uncertainties that could have a material impact
on the Group's financial performance and position. These include
risks relating to competitive threat, the regulatory environment,
political environment, counterfeit products penetrating the supply
chain, reliance on technology, reputational risk, and foreign
exchange. These risks and the Group's mitigating actions are set
out on pages 28 and 29 of the Annual Report 2017.
Condensed consolidated income statement
Six months ended 31 December
2016
Six months ended 31 December
2017 (Unreviewed)
----------------------------------- ------------------------------------
Non-underlying
Non-underlying (note
(note Underlying 4)
(In GBPm) Note Underlying 4) Total restated restated Total
-------------------------- ---- ---------- -------------- ------- ------------ -------------- ------
Revenue 3 167.8 - 167.8 131.2 - 131.2
Cost of sales (103.9) (1.1) (105.0) (73.1) (0.1) (73.2)
-------------------------- ---- ---------- -------------- ------- ------------ -------------- ------
Gross profit 3 63.9 (1.1) 62.8 58.1 (0.1) 58.0
Administrative expenses (30.7) (13.5) (44.2) (29.3) (9.2) (38.5)
Profit from operations 33.2 (14.6) 18.6 28.8 (9.3) 19.5
Finance cost 5 (2.1) (1.1) (3.2) (1.3) (14.3) (15.6)
Share of profit of
joint venture 0.4 - 0.4 0.3 - 0.3
-------------------------- ---- ---------- -------------- ------- ------------ -------------- ------
Profit before income
tax 31.5 (15.7) 15.8 27.8 (23.6) 4.2
Income tax expense 6 (6.6) 2.8 (3.8) (6.2) 4.6 (1.6)
-------------------------- ---- ---------- -------------- ------- ------------ -------------- ------
Profit attributable
to owners of the Company 24.9 (12.9) 12.0 21.6 (19.0) 2.6
-------------------------- ---- ---------- -------------- ------- ------------ -------------- ------
Earnings per share
(pence)
Basic 7 10.2p 2.3p
Diluted 7 10.1p 2.2p
-------------------------- ---- ---------- -------------- ------- ------------ -------------- ------
Condensed consolidated statement of comprehensive income
Six months ended 31 December
2016
Six months ended 31 December
2017 (Unreviewed)
--------------------------------- ---------------------------------
Non-underlying Non-underlying
(note Underlying (note
(In GBPm) Underlying 4) Total restated 4) restated Total
--------------------------------- ---------- -------------- ----- ---------- -------------- -----
Profit for the period
attributable to owners
of the Company 24.9 (12.9) 12.0 21.6 (19.0) 2.6
Other comprehensive income
items that may be reclassified
to profit or loss
Cash flow hedges (0.1) - (0.1) (0.4) - (0.4)
Currency translation differences 0.2 - 0.2 1.4 - 1.4
--------------------------------- ---------- -------------- ----- ---------- -------------- -----
Total comprehensive income
attributable to owners
of the Company 25.0 (12.9) 12.1 22.6 (19.0) 3.6
--------------------------------- ---------- -------------- ----- ---------- -------------- -----
All amounts relate to continuing operations.
Condensed consolidated statement of financial position
31 December
-----------
2016 30 June
restated 2017
(In GBPm) Note 2017 (Unreviewed) restated
--------------------------------- ---- ----------- ------------- ---------
Assets
Non-current assets
Intangible assets 9 505.6 329.0 332.5
Property, plant and equipment 7.0 3.7 3.3
Investment in joint venture 8.1 8.2 8.7
Deferred tax assets 3.8 3.4 3.6
---------------------------------- ---- ----------- ------------- ---------
Total non-current assets 524.5 344.3 348.1
Current assets
Inventories 20.5 17.2 16.7
Trade and other receivables 70.8 63.3 65.9
Derivative financial instruments 0.3 - 1.0
Cash and cash equivalents 46.9 20.2 27.8
---------------------------------- ---- ----------- ------------- ---------
Total current assets 138.5 100.7 111.4
---------------------------------- ---- ----------- ------------- ---------
Total assets 663.0 445.0 459.5
---------------------------------- ---- ----------- ------------- ---------
Liabilities
Non-current liabilities
Trade and other payables 1.3 2.7 1.3
Loans and borrowings 10 188.7 82.5 54.2
Deferred tax liabilities 33.2 20.7 20.1
---------------------------------- ---- ----------- ------------- ---------
Total non-current liabilities 223.2 105.9 75.6
Current liabilities
Trade and other payables 94.0 87.8 118.7
Loans and borrowings 10 - 8.6 8.6
Corporation tax liabilities 6.5 2.9 7.5
Derivative financial instruments - 1.4 -
Total current liabilities 100.5 100.7 134.8
---------------------------------- ---- ----------- ------------- ---------
Total liabilities 323.7 206.6 210.4
---------------------------------- ---- ----------- ------------- ---------
Net assets 339.3 238.4 249.1
---------------------------------- ---- ----------- ------------- ---------
Equity
Share capital 12 0.1 0.1 0.1
Share premium account 161.3 161.1 161.2
Merger reserve 86.0 5.4 5.4
Hedging reserve 0.2 (0.4) 0.3
Foreign exchange reserve 10.7 1.8 10.5
Retained earnings 81.0 70.4 71.6
---------------------------------- ---- ----------- ------------- ---------
Total shareholders' equity 339.3 238.4 249.1
---------------------------------- ---- ----------- ------------- ---------
The notes on pages 17 to 25 form an integral part of these
condensed consolidated financial statements.
Condensed consolidated statement of cash flows
Six months to 31
December Year to
----------------------
Note 2016 30 June
(In GBPm) 2017 (Unreviewed) 2017
---------------------------------------- ---- ------- ------------- -------
Operating activities
Profit for the period before
tax 15.8 4.2 14.1
Share of profit of joint venture (0.4) (0.3) (0.8)
Finance cost 5 3.2 15.6 31.5
---------------------------------------- ---- ------- ------------- -------
Profit from operations 18.6 19.5 44.8
Adjustments for:
Amortisation of intangible fixed
assets 9.7 9.6 18.6
Depreciation of property, plant
and equipment 0.4 0.4 0.6
Loss on disposal of non-current
assets - - 0.2
Dividends received from joint
venture 1.2 - -
Movement in fair value of derivatives 0.6 (0.3) (2.0)
Release of fair value on acquired
inventory 3 1.1 0.1 0.1
Equity-settled share-based payment
expense 1.1 1.1 2.0
---------------------------------------- ---- ------- ------------- -------
Operating cash flows before movements
in working capital 32.7 30.4 64.3
Decrease in trade and other receivables 9.6 6.6 3.2
Increase/(decrease) in inventories 0.1 (1.6) (0.8)
Decrease in trade and other payables (8.1) (27.7) (12.0)
---------------------------------------- ---- ------- ------------- -------
Cash generated from operations 34.3 7.7 54.7
Income taxes paid (7.0) (1.2) (6.9)
Interest paid (1.3) (0.9) (1.7)
---------------------------------------- ---- ------- ------------- -------
Net cash flows from operating
activities 26.0 5.6 46.1
Investing activities
Purchase of intangible fixed
assets 9 (4.7) (4.2) (7.4)
Deferred consideration on the
purchase of products (1.5) - -
Purchase of property, plant and
equipment (0.4) (1.4) (1.4)
Purchase of subsidiaries, net
of cash acquired (56.4) - -
Settlement of Quantum share awards
on acquisition (8.6) - -
Contingent consideration paid
on the Link acquisition (38.6) - -
---------------------------------------- ---- ------- ------------- -------
Net cash flows used in investing
activities (110.2) (5.6) (8.8)
Financing activities
Proceeds from issue of shares 0.1 0.4 0.5
Proceeds from increase in loan 130.6 - -
Loan repayments (23.0) (5.0) (33.4)
Derivative margin call - (1.1) -
Dividends paid (4.2) (3.1) (4.9)
---------------------------------------- ---- ------- ------------- -------
Net cash flows from/(used in)
financing activities 103.5 (8.8) (37.8)
---------------------------------------- ---- ------- ------------- -------
Net increase/(decrease) in cash
and cash equivalents 19.3 (8.8) (0.5)
Cash and cash equivalents at
beginning of the period 27.8 27.8 27.8
Exchange (losses)/gains (0.2) 1.2 0.5
---------------------------------------- ---- ------- ------------- -------
Cash and cash equivalents at
end of the period 46.9 20.2 27.8
---------------------------------------- ---- ------- ------------- -------
Condensed consolidated statement of changes in equity
Share Share Merger Hedging Foreign Retained Total
capital premium reserve reserve exchange earnings equity
(In GBPm) account reserve
--------------------------------- -------- -------- -------- -------- --------- --------- -------
At 1 July 2017 0.1 161.2 5.4 0.3 10.5 71.6 249.1
Profit for the period - - - - - 12.0 12.0
Currency translation differences - - - - 0.2 - 0.2
Cash flow hedges
- Effective portion of
fair value gains - - - 0.4 - - 0.4
- Ineffective portion of
fair value gains - - - (0.4) - - (0.4)
- Transfers to income statement
(revenue) - - - (0.1) - - (0.1)
--------------------------------- -------- -------- -------- -------- --------- --------- -------
Total comprehensive income - - - (0.1) 0.2 12.0 12.1
Share-based payment scheme - - - - 1.1 1.1
Deferred taxation on share-based
payment scheme - - - - - 0.2 0.2
Tax credit in respect of
tax losses arising on exercise
of share options - - - - - 0.3 0.3
Issue of new shares - 0.1 80.6 - - - 80.7
Dividend paid (note 8) - - - - - (4.2) (4.2)
Total transactions with
owners of the Company,
recognised directly in
equity - 0.1 80.6 - - (2.6) 78.1
--------------------------------- -------- -------- -------- -------- --------- --------- -------
At 31 December 2017 0.1 161.3 86.0 0.2 10.7 81.0 339.3
--------------------------------- -------- -------- -------- -------- --------- --------- -------
Share Share Merger Hedging Foreign Retained Total
capital premium reserve reserve exchange earnings equity
(In GBPm) (Unreviewed) account reserve
--------------------------------- -------- -------- -------- -------- --------- --------- -------
At 1 July 2016 0.1 160.7 5.4 - 0.4 69.9 236.5
Profit for the period - - - - - 2.6 2.6
Currency translation differences - - - - 1.4 - 1.4
Cash flow hedges
- Effective portion of
fair value gains - - - (0.4) - - (0.4)
--------------------------------- -------- -------- -------- -------- --------- --------- -------
Total comprehensive income - - - (0.4) 1.4 2.6 3.6
Share-based payment scheme - - - - - 0.8 0.8
Deferred taxation on share-based
payment scheme - - - - - (0.2) (0.2)
Tax credit in respect of
tax losses arising on exercise
of share options - - - - - 0.4 0.4
Issue of new shares - 0.4 - - - - 0.4
Dividend paid (note 8) - - - - - (3.1) (3.1)
--------------------------------- -------- -------- -------- -------- --------- --------- -------
Total transactions with
owners of the Company,
recognised directly in
equity - 0.4 - - - (2.1) (1.7)
--------------------------------- -------- -------- -------- -------- --------- --------- -------
At 31 December 2016 0.1 161.1 5.4 (0.4) 1.8 70.4 238.4
--------------------------------- -------- -------- -------- -------- --------- --------- -------
Notes forming part of the condensed consolidated financial
statements
1. General information
Clinigen Group plc ('the Company') and its subsidiaries
(together, 'the Group') is a specialty global pharmaceutical and
services group headquartered in the UK, with offices in the US,
South Africa, Australia, New Zealand, Japan, Hong Kong, Singapore
and Greece.
The company is a public limited company, which is listed on the
Alternative Investment Market of the London Stock Exchange and
incorporated and domiciled in the UK. The address of its registered
office is Pitcairn House, Crown Square, First Avenue,
Burton-on-Trent, DE14 2WW, United Kingdom.
These condensed interim financial statements were approved for
issue on 27 February 2018.
These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 30 June
2017 were approved by the board of directors on 27 September 2017
and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
These condensed interim financial statements have been reviewed,
not audited.
2. Basis of preparation
These condensed interim financial statements for the six months
ended 31 December 2017 have been prepared in accordance with
International Accounting Standard 34 'Interim financial reporting'
('IAS 34') as adopted by the European Union (the 'EU'). The
condensed interim financial statements should be read in
conjunction with the annual financial statements for the year ended
30 June 2017, which have been prepared in accordance with
International Financial Reporting Standards ('IFRS' or 'IFRSs') as
adopted by the EU.
The Group meets its day-to-day working capital requirements
through its bank facilities. The Group's forecasts and projections,
taking account of reasonably possible changes in trading
performance, show that the Group should be able to operate within
the level of its current facilities. After making enquiries and
having reassessed the principal risks, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. The
Group therefore continues to adopt the going concern basis of
accounting in preparing the condensed interim financial
statements.
The financial information in the condensed consolidated
financial statements has been prepared on a basis consistent with
that adopted for the year ended 30 June 2017 except as described
below.
-- Taxes on income in the interim periods are accrued using the
tax rate that would be applicable to expected total annual profit
or loss.
-- With effect from 1 July 2017, following the completion of the
Link earn-out period, the organisation structure has changed to
three operating segments of Commercial Medicines, Unlicensed
Medicines and Clinical Trial Services. The reporting to the Group's
Chief Operating Decision Maker, the Executive Directors, has
changed to reflect the change to three synergistic operations
previously being organised as five business units of Speciality
Pharmaceuticals, Managed Access, Global Access, Clinical Trial
Services and Link Healthcare. The segmental reporting within these
condensed interim financial statements reflects the three segments
and the comparative disclosures for 2016 have been restated to the
current segmental basis.
-- Non-underlying items include amortisation on acquired
intangibles and other items principally relating to acquisitions.
Non-underlying items now include GBP2.2m (2016: GBP2.5m) of
amortisation on acquired products, but still exclude GBP0.2m (2016:
GBP0.4m) of amortisation on software. The prior period has been
restated to a consistent basis.
-- The revolving credit facility element of the Group's
borrowings has been reclassified from current to non- current
liabilities. The facility has been renewed and extended during the
period and is committed for a period of 5 years to September 2022.
The Group has the right to defer settlement of the debt up to the
date of maturity of the facility but retains the flexibility to
vary the amount drawn under the facility. Therefore classification
as non-current is considered to be the most appropriate
presentation. The comparative periods have been restated to a
consistent basis.
The preparation of interim consolidated financial statements in
compliance with IAS 34 requires the use of certain critical
accounting estimates. It also requires Group management to exercise
judgment in applying the Group's accounting policies. The areas
where significant judgments and estimates have been made in
preparing the financial statements and their effect are disclosed
in the notes to the Group's statutory consolidated financial
statements for the year ended 30 June 2017 in note 2 on page 56 and
in the notes to these interim condensed consolidated financial
statements.
There have been no accounting standards, amendments and
interpretations that are effective for the first time in respect of
the Group condensed interim financial statements for the six months
ended 31 December 2017 and which have had a material impact on
these financial statements.
3. Segment information
The Group's reportable segments are strategic operating business
units that provide different products and service offerings into
different market environments. They are managed separately because
each operational business requires different expertise to deliver
the different product or service offering they provide.
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision Maker
during the reporting period. The Chief Operating Decision Maker has
been identified as the Executive Directors. The organisation
structure of the business has changed to the three reported
businesses of Commercial Medicines, Unlicensed Medicines and
Clinical Trial Services, and with effect from 1 July 2017 the
internal reporting to the Chief Operating Decision Maker was
changed to this basis.
Operating segment results
The Group evaluates performance of the operational segments on
the basis of gross profit from operations.
2016 (restated)
2017 (Unreviewed)
-------------------------------------- ---------------- -----------------
Revenue Gross Revenue Gross
(In GBPm) profit profit
-------------------------------------- ------- ------- -------- -------
Commercial Medicines 42.0 31.0 31.8 22.5
Unlicensed Medicines 96.4 26.3 60.4 25.6
Clinical Trial Services 29.4 6.6 39.0 10.0
-------------------------------------- ------- ------- -------- -------
Segmental result 167.8 63.9 131.2 58.1
Adjustment for fair value of acquired
stock sold in the period (note 4) - (1.1) - (0.1)
Reported results 167.8 62.8 131.2 58.0
-------------------------------------- ------- ------- -------- -------
Six months ended
Six months ended 31 December 2016
31 December 2017 (Unreviewed)
------------------------------ ---------------------------------- -------------------------- ------
Underlying Non-underlying
(In GBPm) Underlying Non-underlying Total restated restated Total
------------------------------ ---------- -------------- ------ ---------- -------------- ------
Segmental gross profit 63.9 (1.1) 62.8 58.1 (0.1) 58.0
Administrative expenses
excluding amortisation and
depreciation (30.1) (4.0) (34.1) (28.5) - (28.5)
EBITDA 33.8 (5.1) 28.7 29.6 (0.1) 29.5
------------------------------ ---------- -------------- ------ ---------- -------------- ------
Analysed as:
Adjusted EBITDA including
share of joint venture 34.4 (5.1) 29.3 30.0 (0.1) 29.9
Joint venture EBITDA (0.6) - (0.6) (0.4) - (0.4)
EBITDA excluding share of
joint venture 33.8 (5.1) 28.7 29.6 (0.1) 29.5
------------------------------ ---------- -------------- ------ ---------- -------------- ------
Amortisation (0.2) (9.5) (9.7) (0.4) (9.2) (9.6)
Depreciation (0.4) - (0.4) (0.4) - (0.4)
------------------------------ ---------- -------------- ------ ---------- -------------- ------
Profit from operations 33.2 (14.6) 18.6 28.8 (9.3) 19.5
Finance costs (2.1) (1.1) (3.2) (1.3) (14.3) (15.6)
Share of joint venture profit 0.4 - 0.4 0.3 - 0.3
------------------------------ ---------- -------------- ------ ---------- -------------- ------
Profit before income tax 31.5 (15.7) 15.8 27.8 (23.6) 4.2
------------------------------ ---------- -------------- ------ ---------- -------------- ------
Analysed as:
Adjusted profit before tax
excluding share of joint
venture tax 31.7 (15.9) 15.8 27.9 (23.7) 4.2
Joint venture tax (0.2) 0.2 - (0.1) 0.1 -
Profit before tax including
share of joint venture tax 31.5 (15.7) 15.8 27.8 (23.6) 4.2
------------------------------ ---------- -------------- ------ ---------- -------------- ------
Income tax expense (6.6) 2.8 (3.8) (6.2) 4.6 (1.6)
------------------------------ ---------- -------------- ------ ---------- -------------- ------
Profit after tax 24.9 (12.9) 12.0 21.6 (19.0) 2.6
------------------------------ ---------- -------------- ------ ---------- -------------- ------
Adjusted earnings per share is now calculated based on
underlying profit after tax which has been restated to exclude
amortisation on acquired products of GBP2.2m (2016: GBP2.5m), but
includes software amortisation of GBP0.2m (2016: GBP0.4m) and the
associated tax credit of GBPnil (2016: GBP0.1m). The prior period
has been restated accordingly.
4. Non-underlying items
Non-underlying items have been reported separately in order to
provide the reader of the financial statements with a better
understanding of the operating performance of the Group. These
items include amortisation of intangible assets acquired through
business combinations and acquired products, and one-off costs
principally relating to the acquisitions. The associated tax impact
is also reported as non-underlying.
Six months to 31 December
---------------------------
2016
restated
(In GBPm) 2017 (Unreviewed)
---------------------------------------------------------- ------- ------------------
Cost of sales
a) Adjustment for fair value of acquired stock
sold in the period 1.1 0.1
Administrative expenses
b) Acquisition costs 3.7 -
c) Settlement of Quantum's legal claim (1.0) -
d) Restructuring costs relating principally
to acquisitions 1.3 -
e) Amortisation of intangible fixed assets
acquired through business combinations and
acquired products 9.5 9.2
---------------------------------------------------------- ------- ------------------
13.5 9.2
Finance costs
f) Increase in Link contingent consideration - 13.5
g) Unwind of discount on Link contingent consideration 1.1 0.8
---------------------------------------------------------- ------- ------------------
1.1 14.3
Taxation
h) Credit in respect of tax on non-underlying
costs (2.8) (4.6)
12.9 19.0
---------------------------------------------------------- ------- ------------------
a) Under IFRS 3, inventory acquired in a business combination is
valued at fair value on acquisition, which includes the profit
margin in the inventory's carrying value. The GBP1.1m (2016:
GBP0.1m Link business) above represents the profit margin on the
inventory sold in the period which was acquired with the Quantum
business.
b) The acquisition costs relate to Quantum and IMMC comprising
legal, corporate finance and due diligence advice.
c) Following the acquisition of Quantum, a settlement has been
agreed in Quantum's favour in relation to a legal claim with the
vendors of a business acquired by Quantum in a prior period which
has now subsequently been closed. The likelihood and amount of any
settlement of the claim was highly uncertain at the time the Group
acquired Quantum and therefore a contingent asset was not
recognised in the acquisition balance sheet.
d) Restructuring costs have been incurred during the period in
respect of the integration of acquired businesses primarily
relating to redundancy costs.
e) The amortisation of intangible assets acquired as part of the
business combination with Idis, Link, IMMC and Quantum (namely
brand, trademarks and licences, customer relationships, and
contracts) and acquired products, is included in non-underlying due
to its significance and to provide the reader with a consistent
view of the underlying costs of the operating Group.
f) The change in the estimate of the contingent consideration
payable in relation to Link in the prior period was based on the
earnings of the Link group for the period ended 31 December 2016.
This was classified as a finance cost as the primary reason for the
increase was the depreciation of sterling against the local
functional currencies since October 2015, when the contingent
consideration was originally calculated.
g) The non-cash unwind of the discount applied to the contingent
consideration on Link.
h) The tax credit in respect of non-underlying items reflects
the tax benefit on the costs incurred and an adjustment for the
full year tax rate.
5. Finance cost
Six months to
31 December
-------------------
2016
(In GBPm) 2017 (Unreviewed)
---------------------------------------------------- ---- -------------
Bank interest 1.6 0.8
Borrowing costs 0.2 0.1
Amortisation of facility issue costs 0.2 0.2
Unwind of discount on Foscavir and Totect deferred
consideration 0.1 0.2
---------------------------------------------------- ---- -------------
Underlying finance cost 2.1 1.3
Increase in Link contingent consideration - 13.5
Unwind of discount on Link contingent consideration 1.1 0.8
Total finance cost 3.2 15.6
---------------------------------------------------- ---- -------------
6. Income tax
The Group has recognised a tax charge in the income statement
based on the current projected full year tax rate for each
territory.
7. Earnings per share
Six months to
31 December
--------------------
2016
(In GBPm) 2017 (Unreviewed)
--------------------------------------------------- ----- -------------
Profit after tax used in calculating reported EPS 12.0 2.6
--------------------------------------------------- ----- -------------
Underlying profit after tax used in calculating
adjusted EPS 24.9 21.6
--------------------------------------------------- ----- -------------
Number of shares (million)
Weighted average number of shares 117.4 114.9
Dilution effect of share options 1.9 1.4
--------------------------------------------------- ----- -------------
Weighted average number of shares used for diluted
EPS 119.3 116.3
--------------------------------------------------- ----- -------------
Reported EPS (pence)
Basic 10.2p 2.3p
Diluted 10.1p 2.2p
Adjusted EPS (pence)
Basic 21.2p 18.8p
Diluted 20.9p 18.6p
--------------------------------------------------- ----- -------------
Adjusted earnings per share is now calculated based on
underlying profit after tax which has been restated to exclude
amortisation on acquired products of GBP2.2m (2016: GBP2.5m), but
includes software amortisation of GBP0.2m (2016 GBP0.4m) and the
associated tax credit of GBPnil (2016: GBP0.1m). The prior period
has been restated accordingly.
8. Dividends
A final dividend in relation to the year ended 30 June 2017 of
3.4p (2016: 2.7p) per ordinary share was paid on 1 December 2017.
This amounted to GBP4.2m (2016: GBP3.1m).
An interim dividend of 1.76p (2016: 1.6p) per ordinary share has
been approved by the Board. This amounts to GBP2.2m (2016: GBP1.8m)
and will be paid on 12 April 2018 to all shareholders on the
register as at 23 March 2018.
9. Intangible assets
Customer Trademarks Computer
(In GBPm) Brand Contracts relationships & licenses software Goodwill Total
--------------------- ----- --------- -------------- ----------- --------- -------- -----
At 30 June 2017 49.6 14.5 36.1 44.7 5.4 182.2 332.5
Acquisition of
subsidiaries 9.3 - 33.7 38.0 0.3 97.7 179.0
Additions - - - 1.7 3.0 - 4.7
Amortisation charge (1.5) (1.8) (3.7) (2.5) (0.2) - (9.7)
Exchange differences (0.1) (0.2) - - (0.2) (0.4) (0.9)
At 31 December
2017 57.3 12.5 66.1 81.9 8.3 279.5 505.6
--------------------- ----- --------- -------------- ----------- --------- -------- -----
10. Net debt
During the six months ended 31 December 2017, the Group's bank
facility was amended and extended in order to finance the Quantum
acquisition. The RCF has been increased from GBP95m to GBP200m and
extended for 5 years to October 2022, and the fixed term loan was
fully repaid with the extended facility consisting entirely of RCF.
Additionally, the Group has exercised its option to further extend
this facility by GBP20m to GBP220m for a period of six months ended
April 2018.
31 December
---------------------
2016 30 June
(In GBPm) 2017 (Unreviewed) 2017
-------------------------- ------ ------------- -------
Revolving credit facility 190.9 60.8 36.9
Term loan - 31.5 27.0
Unamortised issue costs (2.2) (1.2) (1.1)
-------------------------- ------ ------------- -------
Gross borrowings 188.7 91.1 62.8
Cash (46.9) (20.2) (27.8)
-------------------------- ------ ------------- -------
Net debt 141.8 70.9 35.0
-------------------------- ------ ------------- -------
There were no instances of default, including covenant terms, in
either the current or the preceding period.
11. Financial risk management and financial instruments
Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, interest rate risk and
price risk), credit risk and liquidity risk.
The condensed interim financial statements do not include all
financial risk management information and disclosures required in
the annual financial statements; they should be read in conjunction
with the Group's annual financial statements as at 30 June 2017.
There have been no changes in the risk management processes or in
any risk management policies since the year end.
Financial instruments
Designated
at fair Amortised Total carrying
At 31 December 2017 (In GBPm) value cost value Fair value
--------------------------------- ---------- --------- -------------- ----------
Cash and cash equivalents - 46.9 46.9 46.9
Trade and other receivables - 55.7 55.7 55.7
Derivative financial instruments 0.3 - 0.3 0.3
Total financial assets 0.3 102.6 102.9 102.9
--------------------------------- ---------- --------- -------------- ----------
Trade and other payables - (85.3) (85.3) (85.3)
Borrowings - (188.7) (188.7) (188.7)
Total financial liabilities - (274.0) (274.0) (274.0)
--------------------------------- ---------- --------- -------------- ----------
Designated
at fair Amortised Total carrying
At 31 December 2016 (In GBPm) (Unreviewed) value cost value Fair value
------------------------------------------- ---------- ----------------------- -------------- ----------
Cash and cash equivalents - 20.2 20.2 20.2
Trade and other receivables - 52.0 52.0 52.0
Total financial assets - 72.2 72.2 72.2
------------------------------------------- ---------- ----------------------- -------------- ----------
Trade and other payables - (88.3) (88.3) (88.3)
Borrowings - (91.1) (91.1) (91.1)
Derivative financial instruments (1.4) - (1.4) (1.4)
Total financial liabilities (1.4) (179.4) (180.8) (180.8)
------------------------------------------- ---------- ----------------------- -------------- ----------
Fair value estimation
Financial instruments are classified as follows: level 1
instruments are those valued using unadjusted quoted prices in
active markets for identical instruments; level 2 instruments are
those valued using techniques based significantly on observable
market date; and level 3 instruments are those valued using
information other than observable market data.
Derivative financial instruments at 31 December 2017 and 31
December 2016 comprise forward foreign exchange contracts. These
derivatives have been fair valued using forward exchange rates that
are quoted in an active market and fall within level 2 of the fair
value hierarchy. There are no level 1 or level 3 financial
instruments at 31 December 2017, and there have been no transfers
between valuation levels nor changes in valuation techniques during
the period.
12. Share capital
Ordinary shares of 0.1p each
Issued and fully paid Number (m) Cost (GBPm)
----------------------------- ---------- ------------------------
At 1 January 2017 115.1 0.1
Issue of new shares 0.1 -
----------------------------- ---------- ------------------------
At 30 June 2017 115.2 0.1
Issue of new shares 7.1 -
----------------------------- ---------- ------------------------
At 31 December 2017 122.3 0.1
----------------------------- ---------- ------------------------
The issue of new equity share capital on the acquisition of
Quantum required the application of merger relief under the
Companies Act 2006. As a result, the difference between the nominal
value and fair value of shares issued has been recognised in the
merger reserve.
13. Business combinations
During the period, the Group settled the final contingent
consideration for the acquisition of Link Healthcare of GBP38.6m in
cash.
On 23 October 2017, the Group acquired the entire share capital
of International Medical Management Corporation ('IMMC'), Japan's
largest supplier of unlicensed medicines. In the year ended 30
September 2017, the unaudited IMMC gross profit was GBP2.4m.
On 1 November 2017, Clinigen Group plc acquired the entire
diluted share capital of Quantum Pharma Holdings Limited (formerly
known as Quantum Pharma plc), a company incorporated in the UK and
previously listed on the Alternative Investment Market (AIM). This
transaction provides the opportunity to strengthen Clinigen's
position as global leader in ethical access to medicines. The
Quantum group extends Clinigen's Unlicensed Medicines capability
and will accelerate the Group's UL2L global strategy. The
acquisition also enables Quantum's portfolio of commercial products
to be internationalised through Clinigen's global
infrastructure.
The Group paid total consideration of GBP143.5m being a cash
payment of GBP62.9m and an issue of 6,849,264 shares in Clinigen
Group plc which had a fair value of GBP80.6m representing the
market price on 31 October 2017. The consideration was paid in full
to Quantum shareholders on the acquisition date. In order to fund
the cash element of the consideration, an extension to the Group's
borrowing facilities was agreed as detailed in note 10.
The provisional fair value of assets acquired and liabilities
assumed on the acquisition of Quantum are as follows:
(In GBPm) Quantum
----------------------------------- -------
Intangible assets 77.0
Property, plant and equipment 3.6
Inventories 4.9
Trade and other receivables 14.2
Cash 6.8
Trade and other payables (25.7)
Corporation tax liability (0.8)
Borrowings (19.0)
Provision for deferred tax (13.7)
------------------------------------- -------
Net assets acquired 47.3
Goodwill arising on acquisition 96.2
------------------------------------- -------
Total consideration 143.5
Satisfied by:
Cash consideration paid 62.9
Consideration settled by shares in
Clinigen Group plc 80.6
143.5
----------------------------------- -------
The fair value of the acquired identifiable intangible assets in
Quantum consists of GBP9.3m attributable to brand, GBP29.4m
attributable to customer relationships, and GBP38.0m attributable
to trademarks and licenses (including developed licences,
outlicence contracts, dossiers and licenses under development). A
related deferred tax liability of GBP13.5m has also been
recognised. In IMMC, the only identifiable acquired intangible
assets are customer relationships which have been valued at GBP4.3m
with an associated GBP1.3m deferred tax liability. These values
have been assessed by an independent third party valuation
expert.
A fair value uplift to inventories of GBP1.4m was recognised on
the Quantum acquisition in line with IFRS 3 (revised) together with
an associated GBP0.3m deferred tax liability.
The loans and other borrowings assumed as part of the
acquisition were repaid in full out of the Group's existing
facilities.
Goodwill represents the synergies, assembled workforces and
future growth potential of the acquired businesses. The goodwill
arising in the period of GBP97.7m is not deductible for tax
purposes.
The revenue and loss before tax included in the consolidated
income statement for the six months to 31 December 2017 contributed
by Quantum was GBP12.3m and GBP0.3m respectively. The loss in the
period is after the charge for amortisation of acquired intangibles
and adjustment for fair value of stock sold in the period.
On a pro forma basis for the six months ended 31 December 2017,
the revenue and loss before tax of Quantum would be GBP36.4m and
GBP8.8m respectively. The loss in the period is driven by the
purchase of employee share options and other costs relating to the
acquisition by Clinigen.
Independent review report to Clinigen Group plc
Report on the half year results
Our conclusion
We have reviewed Clinigen Group plc's half year results (the
"interim financial statements") for the 6 month period ended 31
December 2017. Based on our review, nothing has come to our
attention that causes us to believe that the interim financial
statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the AIM
Rules for Companies.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated statement of financial position as at 31 December 2017;
-- the condensed consolidated income statement and condensed
consolidated statement of comprehensive income for the period then
ended;
-- the condensed consolidated statement of cash flows for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half year
results have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the AIM Rules for Companies.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half year results, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the half
year results in accordance with the AIM Rules for Companies which
require that the financial information must be presented and
prepared in a form consistent with that which will be adopted in
the company's annual financial statements.
Our responsibility is to express a conclusion on the interim
financial statements in the half year results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the AIM
Rules for Companies and for no other purpose. We do not, in giving
this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
Independent review report to Clinigen Group plc (continued)
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half year
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Other Matter - Comparative interim financial statements not
reviewed
The interim financial statements of Clinigen Group plc as at 31
December 2016 and for the 6 month period then ended have not been
reviewed.
PricewaterhouseCoopers LLP
Chartered Accountants
Birmingham
27 February 2018
a) The maintenance and integrity of the Clinigen Group plc
website is the responsibility of the directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the interim financial statements
since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KQLFLVLFZBBK
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