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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Clinigen Group Plc | LSE:CLIN | London | Ordinary Share | GB00B89J2419 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 925.00 | 924.50 | 925.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
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
Hot Features
Premium
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
(END) Dow Jones Newswires
February 27, 2018 02:00 ET (07:00 GMT)
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