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Have followed this company for a while and was contemplating having a nibble, but don't like this deal.

Before the deal (and trading update / downgrades) at 112p they were trading at roughly 7.5x EV/EVIT (£125m mcap, £20m debt, £19m EBIT for FY25). Arguably decent valuation to get in at given the quality of the company. After the deal and downgrades, at 106p, they are at 12x EV/EBIT for FY25 and 9.5x for FY26. Not sure the business justifies that valuation until they demonstrate growth. And they are v geared now. £80m bank debt and a £7.5m pa interest bill. Vs EBITDA it might look OK, but bear in mind that a) EBITDA is flattered by lease accounting, and b) they spend a lot on capex. Hence why adj EBIT is about £20m lower than adj EBITDA (for FY26 £40m vs £20m).

It looks like they're buying growth tbh, which is a bit damning re the existing business not being able to grow; and also damning that despite trying for some time they cant / haven't been able to attract the talent to organically build the cloud based competencies that Atech provides. And they're paying a high price - 17x EBITDA for a business that whilst growing only delivers EBITDA margins of 10%.

If I was clutching at straws it would be re synergies and cost they can take out. But the risk with this is it impacts growth and existing customer retention, and is expensive to do in terms of cash.

Will continue to watch it. Maybe if the shares really struggle from here the valuation will be attractive enough given the balance sheet and integration risk...

Anyone got any views on the AGM statement? Slightly unusual to only refer to last years PBT growth (already reported with the FY results in July) with no commentary or figures on trading other than saying they are in line with consensus...

My average in is below 100p and I've trimmed already; was thinking about increasing my holding again but the lack of detail on the above makes me a little nervous. Also I suspect mgmt / analysts have kept consensus flat (£29m adj PBT) despite the Thrusfield acquisition which should add £1-2m to profits this year (£2-3m annual PBT).

Having said that I still think its cheap - probably around 5x EV/EBIT (£115m mcap, maybe £55m net debt, £170m EV vs I guess c.£33m EBIT this year). Note I've adjusted the net debt figure for the high capex this year (£11m) and acquisition payments and contingent consideration payments due in subsequent years...

I listened in to the webinar, thought it was OK, maybe even marginally positive esp. on contract outlook. I have a decent holding so obviously think the shares will do well. But for now I don't think there will be much more interest in them until they start delivering on the promises. And I think 2025 is probably the first time we'll actually see concrete evidence of Adolfo's actions actually coming through into improved financial performance. They need to stabilise the top line (ideally even get some growth), start to move the dial on operating margin, and show they can generate cash. IF they can do this, I think the shares will be proven to be materially undervalued, and we could see a big movement in the SP. For me 40-50p is entirely achievable, but we wont get there until early / middle of next year at the earliest...

On next years FY25 consensus numbers, 118m EBIT and 25m net financial debt. Put it on a conservate 6x EV/EBIT, you can get to a mcap of £680m, which is roughly 2x where we are today, ie 40p. On FY 26 consensus, £144m EBIT and 20m net cash the same calculation gets you to £880m ie c50p.

I don't think the market fully believes these figures (yet?), but if the talk is backed up by results they will eventually come round. Patience is a virtue!

Thoughts on results?

I thought trading was OK, good they are finally getting towards end of exceptional integration / M&A / restructuring costs. My back of envelope figures were a bit out, mainly because they have restated FY23 TIC numbers slightly, reducing FY23 TIC revenue by about £10m vs what was reported in the FY23 Annual Report; so TIC did better than I expected, whilst OH did worse. I think maybe some small part of TIC was included in the sale (although they don't mention this or any restatement or reasons for it).

Looking at Cavendish's new forecasts, I reckon once they have finished the buyback (£45m left to go) this will be c.£360m mcap and have about £20m net cash by y/e, so EV £340m and expected to do £35m EBIT this year, so about 10x EV/EBIT. At that valuation I think I'm happy to keep sitting on the side line for now.

To warrant a better rating I think they need to demonstrate higher organic growth (esp. in OH), better ambition re margins (15% medium term EBITDA target is fairly lacklustre imho, equates to only 10-11% EBIT margin), and demonstrate ability to do some decent value add M&A with balance sheet. Ideally all of the above...

Agree with comments re Ashcroft possibly wanting to see it sold, but not sure how big a premium would be paid for it at this juncture in this market. Probably different buyers for the OH and TIC bits also. TIC at 10x EBIT would be £240m, OH at 10x IF they can get back to FY23 profits would be £180m, plus £20m cash; gets you to £440m vs my £360m post buyback mcap - 20% upside only? At 12x it would be 45% upside but I wonder if that's a bit optimistic at the moment?

Anyone else watch the results presentation? Recording is on their website. I came away feeling pretty positive on it; top line trends seems to be improving on a few products that had specific issues last year (eg Amberen on Amazon, and regulatory delays on a few of the smaller products), I think their forward guidance is pretty conservative, and new CEO seems sensible and growth oriented. Think we'll get more detail in a month with their HY trading update. Last year was on 18th July.

Good result. Only accounting issues are non-cash impairments to the balance sheet, mainly relating to Amberen (which to be fair has not gone to plan and was a poor acquisition for which they overpaid, however it seems 2023 will be low the point). God knows why it took Deliotte so long... Importantly, these are historic issues, non-cash, and forward looking forecasts for the year are maintained. Should generate a lot of cash from here, I think their guidance on net debt looks pretty conservative, expect it to be around the low £70m range, which means net debt / EBITDA should fall to 1.6x by year end. At which point I think divis will be back on the table.

Good to see the market taking it positively. Think it probably trades around the mid 40s until some visibility on next year. Be interesting to hear what the new CEO has to say once he's had a chance to get his feet under the desk.

I'm not convinced it will get bought in near term. I think BoD will hold out for price well in excess of what DBay would want to pay. Rumour was they turned down APAX at 70p or something early last year. Also DBay would not be allowed to buy shares in the market if they were in active discussions with the company currently.

https://news.sky.com/story/apax-steps-away-from-400m-takeover-of-london-listed-alliance-pharma-12861074

FWIW, my base case is annual report gets published with little fanfare in the next week or so with no real reason given as to why it took so long (ie assume Deloitte were / are useless). There might be some write downs of intangibles on the balance sheet but that's a non-cash charge and don't think that would change anything about the company going forward. Shares probably back to 40-45p or something, and will track sideways until there is visibility on forwards earning growth next year. And should generate cash and restart divi at some point in next 12m I would have thought also. More a long term hold for me I think.

If they don't get the annual report out before the deadline surely they will have to give a better reason for why it is taking so long, which means we should get some more info one way or another in the next week or so. GLA.

IIRC AIM requires companies post annual reports within 6 months of year end; so if the accounts aren't released before the end of June the shares will be suspended until they are published. Might see the shares weaken over the next couple of weeks as a result unless / until they publish them as many will not want to be locked in and unable to trade.

It really is incredible that we are in this situation for a company of this sort and size. Someone is going to end up with egg on their face if they miss the deadline... Deloitte if there are no material issues with the accounts (ie delay is simply because they are useless / slow); the brokers (Numis, Investec) if they have not forced the company to fess up earlier to known issues eg with trading of the balance sheet; the company / board if there are material issues that have not been identified historically...

They refer to them a lot but don't tell us what they are! I don't have access to any sell side notes so have no idea what they are guiding to for this year! Really annoying how so many companies do this - why not just tell us directly what your guiding to, or what the range of market expectations currently are...

Others may disagree, but given the CMA decision I think its a shame Peter Butterfield (ec-CEO) has stepped down. Thought he was v good apart from this CMA mess that was hanging over the company and his (now unsullied) reputation.

Unexpected and welcome news indeed! Means an extra £8m+ cash ie no fine, and no need to pay CMA legal fees. Big black eye for the CMA having spent literally years pursuing this! Hopefully means accounts can be released shortly and we can return to a rating that's commensurate with the quality of the business... We might even get a divi restored sooner rather than later given gearing should fall quite quickly from here. I've got a mid 50s target price over the next 18-24 months, but that's on a pretty conservative 8x EBIT multiple, so we could push beyond that with a little top / bottom line growth...

I couldn't see it anywhere in the release, but would expect them to announce it alongside the deal completion, ie on the 31st May. Guessing the buyback and special will be soon after that. Can't imagine they would be able to do it all on the same day, so maybe it goes ex-div a couple of weeks later at a guess, ie mid June, payment generally a few weeks after ex-div date so maybe early July. All speculation, could be earlier, but definitely wont be before 31st May.

Mixed update today I thought. £75m buy back is positive and should support the shares, and business has outperformed on cash which is always good. I've been trying to piece together the FY24 performance. At headline level EBITDA is about £4-5m behind what I was expecting.

- I think OH is doing OK and probably up about 3% yoy in revenue (£111m) but maybe down a bit on profit due to the lost customer reducing volumes. I think this is probably better than some expected given the customer loss, and they are winning new contracts which is positive for outlook.

- However, I can't get the TIC numbers to square unless TIC has gone backwards organically quite a lot in H2, which is not what I expected given it grew organically 6% in H1 and did acquisitions that probably added about £20m in annualised revenue also. It did £149m in H1, so given FY24 was £292m (vs £272m in FY23), H2 was only £143m, vs £142m H2 last year, so flat yoy despite M&A. Probably down 6-7% organically in H2, and no organic growth overall in FY24 (eg something like +6% in H1, -6% in H2).

-This is probably the reason EBITDA is about 10% behind where I expected.

- I'm slightly uneasy that they haven't communicated the above in their trading update, ie not giving any organic growth figures, or divisional EBITDA figures. Both are pretty important to understand the business imho.

As a result of the above, and the decent performance of the stock today (and the fact mine it was not in an ISA so the special divi would have attracted high tax rate) I've sold out for now. I still think this is worth 700p+ medium term, and with the buyback the shares could continue to be strong so I can understand those who want to stick with it, but I'm going to sit it out until the special is paid, and there is more clarity on trading. Hopefully will be another bite at the cherry down the road...

I think the mcap cut off for the FTSE rebalance date is June 4th, and I think SYNT would need to be around the £575m mcap (ie 350p) mark to get back into the FTSE 250. Not out of the question but shares would need to push on quite a bit over the next two weeks. I don't think any updates are expected until Interims on 13th August, so might be tough to get there this time... Obviously what happens between now and then with other stocks matters also, eg a big profit warning from some of the smaller current FTSE 250 constituents would help lower the threshold for SYNT.

Good spot re Esken's holding Dartron. I originally misread your message and thought you were saying LDG owned some Esken (which would be v bad) and not vice versa! 11% of such an illiquid company will be difficult to shift so could be an overhang on the stock for a while unless they work out a deal...

Agree with most on here; reading between the lines I think they are ahead of where they wanted to be, but given recent history they don't want to upgrade yet. They should have good visibility of Q2 now given we're halfway through May ie H1 is in the bag. Beta-hydroxy sales strong which I think is high margin so good news also.

I think the news on cash tax refund and that they've been getting cash out of Russian subsidiary is positive also, and probably unexpected. Hopefully means they'll beat on all three of revenue, profit and cash which market will love. And potentially means we could see divis return sooner rather than later...

Getting the new fermentation capacity utilised the remaining hurdle for the company, probably a story for 2025 numbers rather than this year, although some positive noises on this at interims would be welcome.

Hi all, been looking at this (have a slither), mainly because I'm bullish APH and this seems a decent (if overcomplicated) way to play a recover in APH stock. But they don't make it easy to work out a mark to market NAV. And I'm disappointed that the buy back seemingly has been halted (despite getting authorisation at AGM) well short of their 20% target - think they bought back 37m shares total vs a target of more than 110m...

From what I can work out from the AR they had at end November 2023:

1. 55m shares in APH worth about £22m then (39p), and about £19m at todays SP (34p)

2. 11.1% of SQLI held indirectly via DBay vehicles worth (I think) about £18m, if you value vs current mcap of €195m I believe. But DBay effectively acquired SQLI at €31 a share back in 2021 (vs current SP of €42 a share), so maybe this should be valued more conservatively eg £14m, although we are 2.5 years down the line from the transaction now...

3. 10.6m shares The Mission Group worth about £2m then, and about £2.5m now

4. They had £2.8m worth of Trifast, which they subsequently sold for £3.1m

5. A private holding in the recently acquired (by DBay) Finsbury Foods. They held 12.4% at point of completion and deal was worth £143m, so reasonable to say this is worth £18m. But they say they now own 27.5% although I wonder if some of this is debt funded - the structure and value is unclear.

Putting the above together, I get to about £63m at end Nov, versus their accounts which state investments (all held via Fixtaia subsidiary, which is annoyingly Jersey listed and so opaque) are valued at £55m. So a £7m delta I can't quite square... Add net cash of £42.5m to this and NAV is around £92.5m.

Marked to market today, I get to £67.5m for the assets above excl Trifast (diposed), incl. £10m loan they've written to Nash Squared. If I keep the same delta above, this becomes £60.5m. Add my estimate of cash today (after Trifast proceeds £3.1m, spend on buyback since Nov of £1.1m, less £10m loan to Nash Square, less £1m estimate of opex) of £33.5m. So total NAV of £94m.

Versus current mcap of £51.5m. Ie a discount of about 45%! What am I missing?!

Effectively this is 3 equity investments (APH, Finsbury Food, SQLI) which all seem decent businesses, although I don't know SQLI well it doesn't seem to be valued stupidly on the books. The latter two of these are private businesses, both of which seem to have been bought at reasonable valuations (eg two investors in Finsbury publicly said the price was too low at the time of the deal). Plus a £10m loan at 15% pa to Nash Square (which companies house suggests is profitable and solvent). Plus £33m cash...

FYI, KPMGs resignation letter as auditor in 2022, and the company's response to it is below. Relates to the accounting treatment of the CMA fine, ie the £8m provision made in 2021 accounts, and KPMGs view of the process by which the Board signed off on this treatment. Despite these concerns they still signed off on the 2021 accounts, as Deloitte did on the 2022 accounts. FWIW I don't really care about accounting treatment of the CMA fine, my base case is they eventually have to pay the £8m in full plus some CMA costs of £1-2m. Anything less is upside. Again me saying this doesn't preclude some other issues, technical or otherwise, with the delayed 2023 accounts...

https://www.alliancepharmaceuticals.com/media/gdgnqciv/circular-080822.pdf

For me the main risk is weak trading and more downgrades, but I hope them pointing to Jan trading update as recently as yesterday means this is not the case currently. I don't think the board / Numis Deutsche / Investec (blue chips in small cap world) would let them mislead on this point.

I should say - those EBIT multiples I gave are EV/adj EBIT multiples.

Even if no profit growth for next three years (v unlikely in my view), and if it only rerates to 8x EV/EBIT (v conservative in my view vs peers), I see c.80% upside at least from here simply as the business should reduce net debt to about £30m by 2026 even after paying the fine as interest costs will come down as debt reduces.

£41.5m EBIT x8 = £330m EV, less £30m net debt in 2026 = £300m mcap vs £165m today, ie 80% upside over 2-3 years. Excellent risk vs reward imho.

In reality (assuming nothing more nefarious in the accounts - which is a known risk) I think they will return to growth in 2025, reinstate divi and rerate to something more in line with historic rating of c.10x, so think my target above is pretty conservative in terms of both timing and share price. Also opportunity for further M&A which I think on the balance will lead to upgrades and be positive for the story.

Good post. A few additional points:

+ve. They've repeatedly pointed to their Jan trading update saying everything in it remains valid, ie: 2023 inline with cons ie £183m rev, £45m adj EBITDA, £41.5m adj EBIT, and net debt £92.4m, so leverage 2.05x EBITDA . AND importantly for 2024, revenue growth (ie £185-190m?) and flat profit ie £45m EBITDA and £41.5m EBIT.

-ve. CMA investigation. They've been found guilty (in 2022) and have provided for £8m fine but not paid it as they appealed, which was heard Aug 2023, no decision yet. I've looked at the CMA decision document (CMA website) and seems more likely than not that the appeal will not succeed so they will have to pay the fine. Personally I think this is already 'in the price'.

+ve. Balance sheet looks fine. Net debt £92.4m at y/e, should be lower now. Business is v cash generative, capex c.£2m, interest £9-10m so post tax should generate about £25m FCF (ie 45m EBITDA - 2m capex -10 interest) less 25% tax. Maybe a bit less due to working capital investment for growth (£2-3m?) and a few exceptionals (£2m?), it should generate £20m FCF. Even if they have to pay the fine plus costs (say £10m) net debt should reduce by about £10m this year to £80-85m. Note covenants are 3x leverage vs adj EBITDA (2x currently) and 4x net interest vs adj EBITDA (4.5x to 5.0x currently).

-ve. CEO has left. My take is it was related to the above - he was likely to be disqualified from being a director if the appeal failed. Think its probably on balance positive that the Board (which has been refreshed and looks high quality) is being proactive to have a new CEO in place before the appeal ruling.

??. Accounts delayed. Don't know why, seems many companies have had this happen this year. But delayed 4 times is very poor, especially with no reasons given. We know though that Deliotte was appointed 2022 and signed off 2022 accounts when all the CMA issues already existed and when debt was higher and profit lower. I think uncertainty the delayed results have caused is main reason for SP being where it is.

+ve. DBAY biggest shareholder at 20%. Good track record, and potentially could take it private. I also note Apax were sniffing around with a rumoured 70p bid early last year. No TR1s yet to see if any changes.

Overall I'm bullish at this price, I think this is a decent business that has built up a portfolio of quality global consumer healthcare brands, has demonstrated a consistent / predictable revenue profile and good cash generation. Consumer health businesses should trade on 10-15x EBIT (Reckitt on about 11.5x, Haleon on about 14.5x); Alliance can be had for c.6x EBIT, and after the fine has been paid it will throw off cash, degear rapidly and reinstate divis.

Obvious risk is that something more nefarious is going on with the accounts so understand those who want to sit it out. For me the main risk is weak trading and more downgrades, but I hope them pointing to Jan trading update