Alliance Pharma : Final Results for the year ended 31 December 2023 Reports

Alliance Pharma plc

Annual Report and Accounts 2023

WE ARE

ALLIANCE

Alliance Pharma plc

Avonbridge House, Bath Road, Chippenham, Wiltshire, SN15 2BB, United Kingdom T: [phone] F: [phone] E: [e-mail] www.alliancepharmaceuticals.com

Company Overview

Strategic Report

Governance

Financial Statements

Additional Information

An Alliance of people, partners and brands, working together to achieve more

Strategic Report			Governance		Financial Statements
Read about the development			Read about how we have		Read about the roll out of our
of our ecosystem in China			strengthened our Board		ERP system in APAC
	See page 08			See page 57			See page 104

H O W W E R E P O R T T O O U R S T A K E H O L D E R S

C O N T E N T S

Company Overview

Who We Are	01
Chair's Introduction	02
2023 Performance Overview	03
2023 A Year in Review	04
A Clear Purpose	05
Living our Values	06

Strategic Report

Chief Executive's Review	09
Market Overview	14
Our Strategy	16
Our Strategic Priorities	18
Spotlight on…
Brand growth	20
Commercial execution	21
Strategy supply partnerships	22
Organisational agility	23
Our People	24
Key Performance Indicators	26
Sustainability	28
Spotlight on…
Purpose	30
People	31
Planet	32
Product	33
TCFD	34
Stakeholder Engagement	42
Financial Review	44
Principal Risks and Uncertainties	49

Governance

Chair's Introduction	58
Our Governance Structure	59
Board of Directors	60
Governance	63
Nomination Committee Report	70
Spotlight feature	75
Audit and Risk Committee Report	77
ESG Committee Report	83
Remuneration Committee Report	86
Directors' Report	98
Directors' Responsibilities Statement	103

Financial Statements

Independent Auditor's Report	105
Consolidated Income Statement	114
Consolidated Statement
of Comprehensive Income	115
Consolidated Balance Sheet	116
Consolidated Statement of Changes
in Equity	117
Consolidated Cash Flow Statements	118
Notes to the Financial Statements	119
Company Balance Sheet	161
Company Statement of Changes in Equity 162
Notes to the Company
Financial Statements	163

Additional Information

Unaudited Information	167
Five Year Summary	168

Annual Report	Online Sustainability Report
View our report online at	Sustainability report at osr23.
alliancepharmaceuticals.com/	alliancepharmaceuticals.com
investors/2023-annual-report

Alliance Pharma plc Annual Report and Accounts 2023

Our website

Visit our main site for further information at alliancepharmaceuticals.com

Advisers and Key Service Providers	169
Cautionary Statement	170
Glossary	171

Company Overview			Strategic Report	Governance

W H O W E A R E

An international Consumer Healthcare Company, empowering people to make a positive difference to their health and wellbeing, through making our trusted and proven brands available around the world.

WE ARE

ALLIANCE

Alliance Pharma plc Annual Report and Accounts 2023

Financial Statements	Additional Information

BASED IN

9

STRATEGIC

LOCATIONS

A TEAM OF

292

TALENTED PEOPLE

AS AT 31 DECEMBER 2023

01

Working together to deliver value for our stakeholders through maximising the value of our brands.

INVESTING IN OUR

PRIORITY BRANDS

AND CHANNELS

INNOVATING

TO ENSURE OUR

BRANDS REMAIN

RELEVANT

SELECTIVELY

EXTENDING THE

GEOGRAPHIC

REACH OF OUR

BRANDS

Outsourcing capital-

intensive activities, such as manufacturing and logistics, to allow us to focus on what we do best.

Company Overview			Strategic Report	Governance

C H A I R ' S I N T R O D U C T I O N

Chair's introduction

I am delighted to have joined the Board as Chair this February. I'd like to thank everyone at Alliance for delivering the 2023 results and for welcoming me to the Company."

Camillo Pane

Chair

Alliance Pharma plc Annual Report and Accounts 2023

Financial Statements

Additional Information

02

I am delighted to have joined the Board as Chair this February at such an exciting and important time for the Company. Alliance has a strong global footprint in several fast growth Consumer Healthcare categories.

I'd like to start by thanking you for your patience as we endured a number of audit delays. This process has been extremely frustrating for all of us, and whilst it has taken much longer than we anticipated to complete the audit, the delay has allowed us time to implement a thorough review of our processes, and perform more detailed work in respect of impairments. This enhanced impairment review is now more robust, and we are working on a plan to ensure we are in a strong position for future audits.

Over the past few months, I have enjoyed meeting members of the executive team, global senior leaders, and colleagues based in both Chippenham and Paris. I appreciate their knowledge, skills and enthusiasm, and am excited for the opportunities that lie ahead.

I am pleased to have apppointed Nick Sedgwick as our new CEO on

13 May 2024, following Peter Butterfield's decision to leave the company. I thank Peter for all that he has done for Alliance over the past 14 years and wish him well in his future endeavours.

In the next few months I will spend time with the management team to deepen my understanding of the business as I look to support the enhancement of the group's strategy, with a strong focus on organic growth through marketing, innovation and geographical diversification, and to ensure we deliver value.

I'd like to thank everyone at Alliance for delivering the 2023 results and for welcoming me to the Company. I look forward to sharing my vision for the long-term future of Alliance later this year.

Finally, I would like to congratulate Alliance for its successful appeal at the Competition Appeal Tribunal, which was announced on 23 May 2024, and unequivocally cleared the company and its former Directors, Peter Butterfield and John Dawson, of any anti-competitive behaviours.

Camillo Pane

Chair

18 June 2024

Company Overview			Strategic Report	Governance	Financial Statements	Additional Information

2 0 2 3 P E R F O R M A N C E O V E R V I E W
SEE-THROUGH REVENUE¹			STATUTORY REVENUE
£182.7m +6%		£180.7m +8%
(2022: £172.0m)			(2022: £167.4m)
UNDERLYING PROFIT/(LOSS) BEFORE TAX¹		REPORTED PROFIT/(LOSS) BEFORE TAX
£31.5m	+4%		£(48.8)m+111%
(2022: £30.3m)			(2022: (£23.1)m)²
UNDERLYING BASIC EPS¹			REPORTED BASIC EPS
4.55p +6%		(6.13)p+56%
(2022: 4.28p)			(2022: (3.93)p²

29%20%

KELO-COTETM: GROWTH	SCARAWAYTM:
IN KELO-COTE	INCREASE IN
FRANCHISE REVENUES	LIKE FOR LIKE SALES
Read more on page 21	Read more on page 20
Alliance Pharma plc Annual Report and Accounts 2023

03

FREE CASH FLOW¹

£21.3m +35%

(2022: £15.8m)

NET DEBT¹,³

£91.2m -11%

(2022: £102.0m)

• Non-IFRSAlternative Performance Measures ("APMs"), (see note 30). See-through revenue includes all sales from Nizoral™ as if they had been invoiced by Alliance as principal. For statutory accounting purposes the product margin relating to Nizoral sales made on an agency basis is included within Revenue, in line with IFRS 15.

• Restated. See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022.

• Net debt excludes leases

100%

ON-TIME IN FULL NIZORALTM

DELIVERY, SIGNIFICANT

IMPROVEMENT

Read more on page 22

Company Overview

Strategic Report

Governance

Financial Statements

Additional Information

04

2 0 2 3 A Y E A R I N R E V I E W

Following a challenging H1, a strong H2 performance drove record sales for 2023, leading to underlying profit expansion. The performance of our Kelo- CoteTM franchise was particularly impressive, growing 29% CER including sales from ScarAwayTM, whilst Amberen was weaker than expected. We doubled the amount of revenues from products launched from our own innovation and development pipeline. With further investment planned to support new product development and increased marketing, the Group is well-positioned for growth over the medium term.

• Consumer Healthcare See-through revenue¹ up 11% at constant exchange rates ("CER") to £136.4m (2022: £125.2m) and up 9% on a reported basis.
• Continued strong consumer demand driving significant recovery in Kelo-Cote franchise revenues in H2, with FY revenues reaching £63.2m, +29% CER.

Alliance Pharma plc Annual Report and Accounts 2023

• Prescription Medicines performance broadly stable with revenues of £46.3m (2022: £46.8m).
• Strong performance from latest US acquisition, ScarAway, with £9.9m revenue, up 20% CER on like-for-like basis, exceeding original expectations.

• Progress continues to be made on brand innovation, with £3.5m of revenues from internal development (more than double the £1.7m in 2022).
• Non-cashimpairments of £79.3m due to lowered future cash flow expectations and higher cost of capital, of which £46.4m relates to Amberen, £10.3m to Nizoral, and £22.6m to twenty smaller assets in aggregate.
• The correction of valuation errors for the prior year has yielded a £28.3m increase to non-cash impairment charges reported in 2022, of which £20.0m relates to Amberen and £8.3m to other intangibles.
• Underlying PBT increaed 4% to £31.5m (2022: £30.3m) and reported loss before tax was £48.8m (2022 restated: £23.1m loss).
• Reported PBT loss of £48.8m on higher impairment charges (2022 restated: £23.1m loss).
• Robust free cash flow of £21.3m (2022: £15.8m), up 35%.
• Group leverage reduced to 2.05x at 31 December 2023 (2.69x at June 2023; 2.57x at 31 December 2022).

• Dividend paused while Board considers new policy.
• Leveraged our ecommerce knowledge to broaden the geographic reach of our ecommerce platforms and enter new markets, with further expansion planned in 2024.
• NizoralTM manufacturing moved from Belgium to Thailand driving cost savings, improving on-time-in-full order delivery and reducing carbon emissions.
• 48% reduction in Scope 1 and 2 emissions (versus 2018 baseline), on track to meet interim 65% reduction target by 2025 and achieve net zero in 2030. Scope 3 emissions target set to achieve net zero by 2044 (versus 2022 baseline), with an interim reduction target of 25% by 2030.

• Re-certifiedas a Great Place To Work® in UK, US, China and Singapore.
• Strengthened Board of Directors with appointment of Jeyan Heper, Martin Sutherland, Richard McKenzie and Eva-Lotta Sjöstedt. Post year end appointments of new Independent Chair, Camillo Pane and new CEO, Nick Sedgwick.
• Successful appeal of Competition and Markets Authority decision clearing Alliance, Peter Butterfield and John Dawson (former CEOs) of any wrongdoing. £7.9m provision for potential fine now released.
• See-throughrevenue includes all sales from Nizoral, as if they had been invoiced by Alliance as principal. For statutory accounting purposes, the product margin relating to Nizoral sales made on an agency basis is included within revenue, in line with IFRS 15.

• See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022.

Company Overview			Strategic Report	Governance	Financial Statements	Additional Information

A C L E A R P U R P O S E

PURPOSE	VISION
We empower people to make a positive difference	To be a high-performing consumer healthcare company,
to their health and wellbeing	built on a portfolio of leading, trusted and proven brands

05

WHERE WE WILL FOCUS

Helping Damaged Skin

Supporting Healthy Ageing

Other High-Performing Brands

Core Priority Markets

HOW WE WILL WIN - 4 STRATEGIC PRIORITIES	Read more on page 18

BRAND GROWTH	COMMERCIAL	STRATEGIC SUPPLY	ORGANISATIONAL
EXECUTION	PARTNERSHIPS	AGILITY

	UNDERPINNED BY OUR VALUES		Read more on page 06
Performance	Realism	Accountability	Integrity	Skill	Entrepreneurship
	SUPPORTED BY OUR SUSTAINABILITY STRATEGY		Read more on page 28
	PEOPLE	PLANET		PRODUCT

Alliance Pharma plc Annual Report and Accounts 2023

Company Overview			Strategic Report	Governance	Financial Statements

L I V I N G O U R V A L U E S

Our PRAISE values are at the heart of how we work together; they are central to what makes Alliance unique.

Additional Information

06

Performance

Our UK campaign boosted sales and strengthened the Kelo-CoteTM brand."

With limited consumer awareness of the scar treatment category in the UK, we sought to develop a creative campaign with a key focus on empowering women, to support Kelo- Cote's retail launch in Boots. We used pilot testing to ensure this message resonated with our target market: 18-50 year old women. Featuring real people with real scars, we ran an out-of-home billboard campaign in the UK during 2023, which delivered 60% sales increase at Boots and a 12 point increase in prompted brand awareness. Our campaign has since been recognised by the Pharmaceutical Marketing Society

as Best Digital Brand Promotion.

Listen to Jessica talk about Living Our Values

Jessica Gray

Marketing Manager

Realism

Our success is due to great teamwork and outstanding planning and delivery."

Singles' Day takes place in China every November. It is the world's biggest shopping festival and a global ecommerce phenomenon. Following our success at the festival in 2022, our cross-functional team and our partners worked together closely to plan and accomplish an exceptional performance for Alliance products in 2023. We achieved +197% year-on-year growth and sales worth £3.0m during the festival. We sold 144,000 units of our products and close to one million people visited our Tmall store and live-streaming shows.

Listen to Natalie talk about Living Our Values

Natalie Bayes

Senior Global Brand

Manager, Kelo-Cote

Accountability

We take responsibility for ethical conduct in all of our business operations."

During 2023, we continued to focus on ethical and legal compliance, which is fundamentally important to our business. We launched our Employee Code of Conduct, continued to embed our Partner Code of Conduct and strengthened our suite of policy documents. Employees and other stakeholders now have access to Safecall, an independent speak up helpline that is available in every country in which we operate. In addition, we introduced a new, more comprehensive programme of online compliance training to upskill our employees and contractors.

Listen to Gaby talk about Living Our Values

Gaby Gray

Head of Legal

Alliance Pharma plc Annual Report and Accounts 2023

Company Overview			Strategic Report

L I V I N G O U R V A L U E S C O N T I N U E D

WE ARE

ALLIANCE

Governance

Financial Statements

Additional Information

07

Integrity

We work hard to ensure the integrity of our products and supply chain."

As a business, we value integrity in all of our operations and this extends to our products and supply chain. Counterfeiting and illicit trade put our consumers and patients at risk of serious adverse health effects and deprive them of the benefits that our products bring. We work closely with government agencies, law enforcement and other organisations to prevent, detect and respond to illicit trade. In 2023, we substantially reduced counterfeiting of Kelo-CoteTM in China through security measures, which included monitoring, investigations and raids. Further anti-counterfeiting

measures will follow in 2024.

Listen to Rhodri talk about Living Our Values

Rhodri Smith

Head of Global Brand Protection

Alliance Pharma plc Annual Report and Accounts 2023

Skill

Our skilled colleagues step up when faced with a challenge."

The regulatory transition from the European Medical Device Directive ("MDD") to the complex and detailed new Medical Device Regulation ("MDR") has required painstaking and meticulous work from our cross-functional team; necessitating extensive engagement with regulators and notifying bodies to clarify guidance. The new legislation did impact the supply of certain products in 2023, but we worked hard to resolve the situation effectively. We welcome the higher safety standards of the MDR and, thanks to our skilled team, we remain on track in terms of compliance with all affected

products now back in stock.

Listen to Richard talk about how Keilli Lives Our Values

Keili Lawrence

Regulatory Affairs Specialist

Entrepreneurship

I have learned more at Alliance than I could have imagined."

The Alliance graduate development programme has given me the opportunity to explore and develop my entrepreneurial skills. I was encouraged to choose my own pathway and to step up to hold leadership responsibilities on major projects. The highlight so far has been my three-month rotation in Singapore - an exciting and dynamic environment where

I helped to launch Kelo-Cote on ecommerce sites in Australia, Malaysia and Singapore. Exceptional mentoring and support have allowed me to really contribute to the success of the business, and I am excited

about my future at Alliance.

Listen to Georgia talk about Living Our Values

Georgia Wood

Commercial Graduate