Alliance Pharma plc (APH) Earnings Call Transcript & Summary

Thank you, and good morning, everybody. For those of you who don't know me, I'm Peter Butterfield. And I'm sat here with Andrew Franklin, our Chief Financial Officer. I hope you're all keeping well, and thank you for attending this analyst meeting, albeit virtually for all the reasons that we know. So before we start the presentation, could I just check that you are have today's slides? And if not, a copy can be found in the investors section of our website. So let's start by turning to Slide #3, which is the contents page, just to give you an overview of how this call will run. I'll take you through a business overview, more for those of you that aren't familiar with Alliance, just to give you an orientation around our business. Andrew will then talk about the financials and the first half and how that's turned out for us in 2020. We'll get into a bit of brand performance, talk about some of the operational highlights and then end on our outlook and summary. So turning to Page 5, our business overview. For those of you that don't know Alliance, just a little introduction. So we're a growing international health care business, and we hold the rights and own around 80 Consumer Healthcare brands and Prescription Medicines which are marketed around the world. We look at our portfolio across 2 broad bases. One is our Consumer Healthcare brands, which are generally promoted and drive growth. And 4 of the main brands are listed underneath: Kelo-cote for scar reduction; MacuShield, an eye care supplement; Nizoral, medicated anti-dandruff shampoo; and Vamousse, a treatment for head lice. Those are our main 4 brands, but those are underpinned by another suite of consumer brands and also our Prescription Medicines, which are generally unpromoted, but provide very, very good cash generation. And if you look at the revenue split in terms of consumer and prescription, we're now just over 2/3 Consumer Healthcare brands, with the remainder being made up by prescription. And in terms of where we're generating our sales, still around 70% out of Europe. But we have a growing business in both APAC and China, which is now about 1/4 of our business; and a small business in the U.S., predominantly through Vamousse. But certainly, having that exposure to the fast-moving APAC region has been great, and you'll see China's performance a little later on. We're headquartered in the U.K. in Chippenham, but we have regional offices in -- 10 offices around the world and a wide reach through distributors, reaching around 100 different countries. And we employ just over 200 people. Moving to Slide 6. Our business proposition is pretty well defined for those of you that have followed us for some time. Our vision is to become a leading international health care business built around products that are clinically valuable to patients. That's really, really important to us. Our purpose is to make a difference to people's lives through making a range of clinically valuable health care products available to consumers and to patients around the world. And our strategy for growth is really twofold. Firstly, maximizing the brand potential of those brands that we own, delivering organic growth on the top line through insight-led marketing activity, extending geographical reach, range development and extension. And we've started doing that with Nizoral quite recently, we'll tell you a little bit more about that later on. And we see our growth opportunities predominantly around those Consumer Healthcare brands, and you'll have heard that in many previous presentations that we've pulled together. Also, a key tenet of our business is acquiring new products. And we do that on a very selective basis, taking advantage of operational synergy where possible, geographic synergy and also product type as well. And we're constantly looking to add to the portfolio, targeting those products that fit behind our vision and purpose, clinically valuable to health care consumers and patients. And over the years, we've done a mix of small product acquisitions and also both fewer but larger strategic acquisitions to get us to where we are today. Underneath that, we have a great team which we continue to invest in, and they've performed brilliantly throughout the last, certainly, 6 months. And that's contributed to a very strong performance. And we also like to cat responsibly as well, maximizing the value that we create for all our stakeholders through managing the business in a really responsible way. So hopefully, that just gives you a very quick orientation of who we are. I'm going to hand it to Andrew now, who's going to take you through the financial results. And then, as I say, we'll dig into the brand performance and some more color around COVID and how that's affected the business and our outlook moving forward. So Andrew, over to you.

Thanks so much, indeed, Peter. So I'd like to move on to Slide 8. As you can see from the first 6 months, the group delivered a really strong, robust financial performance and particularly in the light of the challenges around COVID, with total revenues decreasing around [ 7% ], the first half is at GBP 65.3 million. As Peter already mentioned, our focus has become increasingly consumer health products. And this year, we've taken a decision to retranslate our portfolio into 2 areas: Consumer Health Brands and the Prescription Medicines. And so going forward, those international star brands and approximately 25 other brands as we previously recorded within Local brands will now be part of that Consumer Health portfolio. So with that, for the first half, the consumer health business delivered strong sales with sales performance of just under GBP 44 million at GBP 43.8 million, 3% below the prior 6 months. Kelo-cote's the star performer in that -- with that category up 8%. As previously reported, our Prescription Medicines business was lower than the first half, primarily due to the ongoing delays in routine treatments within the U.K., primarily, with our Prescription Medicines, with sales 15% lower on last year at GBP 21.5 million. With regards to currency, the group was only minimally impacted by exchange rates movements. And on a like-for-like constant currency basis, revenues were down 7%. Gross margin rate at 59.1%. It was 0.3% up on the prior year, and that's more due to the evolving product mix as we move towards the consumer health products but also improving inventory management. Similar to other companies, we've seen a slowdown in the rate of spend primarily due to COVID. And our operational leverage has resulted in underlying EBITDA decreasing only 4% versus last year at GBP 18.1 million. And taking account of favorable currency variance and lower borrowing cost as our debt reduces, our underlying PBT increased 7% to GBP 16.3 million. I think what Pete and I are very pleased about is the way that the financial dynamics of the business has performed in the first 6 months. So we have not reduced -- we have -- furloughed any staff or taken any government schemes. And also, we kept this revolving facility all the way through without some putting -- drawing down any further cash. And that's a really strong performance, and which you'll see in the next slide, when we move on to Slide 9. Free cash flow remained strong at GBP 10.5 million for that first 6-month period. And as a result of this strong cash flow, net debt reduced from GBP 59.2 million, reduced is GBP 7 million to GBP 52.2 million, with a leverage now at 1.34, which is comfortably below our covenant limit of 3x. Earnings per share, we grew 5% at 2.45p per share. And after suspending the final dividend for 2019 in response to COVID pandemic, we're pleased to declare an interim dividend of 0.536p per share, in line with what was paid for 2019. This interim dividend will be paid on the 7th of January '21 to those shareholders on the register on the 18th of December 2020. Moving on to Slide 10, please. So this slide shows the underlying results for the year. As mentioned earlier, our total revenues were down nearly 7% despite the impact of COVID. And our consumer health business developed -- delivered a strong performance. Kelo-cote, as I mentioned before, with sales up 8% as we began to see demand return back to China during the second quarter. Nizoral, our medicated anti-dandruff shampoo acquired from J&J, delivered a resilient performance with sales broadly in line with last year at just under GBP 10 million despite those extensive lockdowns we've seen in Asia Pac region. MacuShield reported a sales decline, GBP 1.8 million. But that's part due to Brexit stock build during the first half last year, and as we move from a trading arrangements with a key distributor. But Vamousse delivered a really strong performance in that first half, with sales up 4% at GBP 3.2 million in its core markets in the U.S., although we're now beginning to see the impacts of children not going to school, and therefore, an overall reduction in the overall head lice population. It still performed very well in its market. As I mentioned earlier, operating cost is just under GBP 20 million, at GBP 19.9 million, were 8% below last year. And again, mainly through the cancellation and reduction of discretionary spend with that marketing. But we've also used some of that spend to support the growth of Nizoral and invest in our core consumer brands going forward. And as a percentage of sales, operating costs were broadly in line with last year at 30.5% of sales. And due to the lower operating cost, underlying EBITDA decreased only 4% versus last year, 18.1%, and now represents 28% of the sales, ahead of last year's rate of 27% of sales. Financing costs were down GBP 1.5 million, part due to reduction in our overall borrowing itself, and a reduction in interest rates of around GBP 0.5 million, but also impacted by currency. This year, we had a favorable variance of around GBP 0.5 million, whereas the prior year, we had an adverse of GBP 600,000. The net of all of that results in a PBT of GBP 16.3 million, GBP 1.1 million or 7% up on last year, with earnings -- with basic earnings per share up 5% at 2.45p and 2.5p and diluted earnings per share at a 2.42p, up 5% as well. Moving on to Slide 11. You can see here, this slide clearly shows the reconciliation between our underlying profit before tax and the reported profit after tax and shows the impact of 2 key changes. First is we've continued to focus on our growing consumer health care portfolio. We've now split from an accounting perspective and have reviewed our useful economic lives of our intangible asset portfolio. We will now amortize our prescription medicine brands over 20 years, which is in line with other pharmaceutical companies in other set. This change has been made from the beginning of this year. For our consumer assets, we will continue to apply the indefinite useful life concept due to the enduring nature of these brands which are supported by ongoing marketing spend. As a result, the Prescription Medicines then will now be amortized with a charge to the P&L which we'll generate over this 20-year period. And that will generate an annual noncash amortization charge of just over GBP 7 million. And you can see there, GBP 3.6 million is the charge for the first half of this year. That will happen from now going forward. This accounting change from indefinite to 20-year life, together with our normal impairment reviews, has also resulted in an in-year noncash amortization impairment charge of GBP 12.1 million. Secondly, following this accounting change, all amortization and impairment charges and any future rate changes due to tax will be shown as non-underlying. This aligns with the general market treatment for these items and will better help users of our financial accounts compared with our peer set and from one period to another. So the area here is to make sure that there's good comparability. The majority of whom from our peer set also exclude amortization and impairment charges from their underlying results. Whilst this accounting change reduces our PBT, the charges are all noncash. So therefore, the [ noncash ] measures, such as EBITDA, free cash flow and leverage do not change. Moving on to Slide 12. This shows our strong performance from cash flow in this period. We've seen trading -- cash flow from trading at GBP 16.1 million, which just reinforces the very good cash generation we can generate from this business. We retained good control over our working cap despite the challenge of COVID. And as you recall during our full year results in April, we were looking to tactically increase our inventory holdings to help mitigate any -- against any manufacturing supply challenges arising from COVID. So that's the main change you've seen from a working capital perspective. We also made good control of our overall -- of our trade receivables. And once you take into account tax, interest and capital expenditure, our free cash flow for the first 6 months was GBP 10.5 million. Moving on to Slide 13, which shows the balance sheet. The key main movements, a decrease in intangibles as a result of the accounting change offset by a favorable currency movement of just under GBP 5 million. As mentioned there, we have increased our working capital due to the higher inventories. But again, we've had good control over the levels of inventory and also cash collection. And net of all of that, with the cash generation from the business, we reduced our net debt by GBP 7 million in that first 6 months to GBP 52.2 million. And this is shown on the next slide, where we start with the opening period of a leverage of 1.48x leverage at GBP 59.2 million. And after we've generated cash of GBP 16 million, taking account of tax, interest, CapEx, our leverage reduced GBP 7 million to GBP 52.2 million at 1.34x leverage, which, as I said earlier, is comfortably below our 3x covenant. We expect free cash generation to remain good during the second half of this year. And in the absence of any acquisitions, we anticipate leverage to continue to reduce during the second half. And finally, as noted, in June, we exercised an option to secure a 12-month extension to our existing GBP 165 million revolving facility. This extension was in the same terms and now runs through to July 2024. And with that, I'll hand back to Peter.

Thanks, Andrew. So hopefully, that's all pretty clear. It's all in the numbers and the RNS that went out this morning. I think operationally, as well, we'll dig into the business a little bit more, but it's safe to say our suppliers and our distributors have all performed brilliantly over this period as well. We haven't had a major supply chain issue. We've done a lot to make sure that, that's been shored up as well. So overall, that's contributed to a very robust first half, all things considered with COVID. Turning to Slide 16. I think we'll talk now a bit more about brand performance, what are the dynamics, how we're seeing the market, how do we feel about life with our portfolio right now. So running through from the top, Kelo-cote. I'll talk to you in a little bit more depth about this, but clearly, continuing to perform well. Kelo-cote's main market is China. And as you recall if you dialed in, in April, we were hinting to a recovery in China at that time. I'm pleased to say that, that has continued. So that has really helped our overall strong results for the first half. But Nizoral has held up very, very well, only down 2%. We've made some great strides in terms of bringing that product in, in the first half of the year in terms of marketing authorizations coming across, in terms of distribution agreements being signed. And actually, even a line extension, our first line extension, which I'll talk to you about in a little more detail moving forward. MacuShield looks worse than it is. It came down 39%. Again, if you remember, in the first half of the year last year, we had a large sell-in due to Brexit, which was on everybody's mind at that point, particularly in the Republic of Ireland. Actually, the dynamics for MacuShield are a little bit better than you see here. Certainly, we've seen a switch to online, as you would imagine, less footfall going through retail pharmacies, such as Boots, but switched to online. And MacuShield's underlying performance is broadly stable, which is you would expect for a brand like MacuShield. Vamousse had a very strong first half in the U.S. That's coming off the back of a very strong year last year where we made some material distribution gains. That will soften, as Andrew said, in the second half, and in probably anticipated in our numbers. But actually in terms of category, that category, as you can imagine, is going backwards. But we've gained a couple of percentage points in terms of market share as well. So we're actually winning, albeit in a category that's going backwards. So overall, if you look at the other consumer brands just down 2%, overall down 3%, but with that sell-in to MacuShield, actually a really robust performance given everything that's going on in the macro environment. So very pleased with the consumer brands. Underneath, the prescription brands, down 15%. So just to remind you, our consumer brands business is broadly in Western Europe, 90% of it. 70% of that sits in the U.K. And the Prescription Medicines business is about 1/3 of what we do overall. And I think within that Prescriptions Medicines business, there are some winners and some losers in our portfolio, products that have had a particularly tough time. Flammazine, a treatment for severe burns and also chronic wounds. The severe burns obviously reduced just due to lack of sort of general outdoor activity and lack of activity in general. And with products like Ametop, which is used pre-cannulation for injection, pre-elective procedure, that's obviously struggled as well. And products like Naseptin, which is an intranasal antibacterial agent used against MRSA, products like that just have suffered a little bit. On the flip side to that, you've got brands like Hydromol, which is having a very strong performance in the market. It is a chronic treatment, good consumer loyalty and patient loyalty with that, and that's really held its own. And also Forceval has had a strong half as well, the licensed multivitamin and mineral supplement used here in the U.K. So a bit of up and down in the Prescription Medicines business. I'll talk to you about outlook and how that's looking the best we can towards the year-end and into next year a little later on. But obviously, there's been a bit of a demand restraint due to COVID-19 and hospitals reserving capacity, therefore. So yes, just to go into brands in more depth, if we turn to Slide 17. Start with Kelo-cote, largest brand. That category is still growing. That was to the end of 2019, the best data that we have. Obviously, that will come off a few points, but still very, very strong fundamentals of both the brand and also the category. And you'll see Kelo-cote revenue, since we've acquired that brand, continuing to grow very nicely. We reiterate our future brand potential at GBP 50-million plus. Grew 8% in the first half of the year. And we're seeing China particularly strong for this brand. And we did get quite a bounce back. And I think that that's looking sustained for the second half of the year and well into next year, too. So operationally, we've done a few things with Kelo-cote since lockdown. We've signed a new agreement with our Chinese distributor, which we're very pleased about. That's another 5-year agreement. Across APAC, we've been managing that business. We've got partial lockdowns in some of the APAC regions, obviously, through COVID. And some of are being lifted more slowly, some not. But ultimately, the brand is very strong. And as things recover, we expect to see Kelo-cote recover, too. I know you're going to ask about what sort of shift have you got online with Kelo-cote in China. We see a sort of 10% shift to online, so it's not a seismic shift. But certainly having brands that are able to be build over the web has certainly helps us in adding that patient exposures pause a little bit in pharmacy. We've also conducted a large bit of market research, and predominantly to hone in on market size. So the market size you see here is everything excluding online sales, which are clearly large for Kelo-cote and the competition as well. So we think that, that market size is undercooked a little. To what degree, we'll have a better triangulation on as we move forward. And also, we do quite a lot of what's called social listening to the social media platforms, particularly in China, to see what the latest trends are with Kelo-cote. So there's a lot going on there, and we'll continue to invest behind what has really been a star brand for us both now and also moving forward well into the future. If we turn to Nizoral, Slide 18. For those less familiar, we acquired Nizoral from Johnson & Johnson in 2018, ketoconazole-based shampoo for antidandruff. It's a medicated antidandruff shampoo, either OTC or Rx in certain markets. And half 2 sales were broadly stable at 9.8%, down 2% on the same half the year before. So a really resilient performance there, and that's despite extensive and prolonged lockdowns across APAC. Again, China is the #1 market for this brand. And we've seen a good uptake of Nizoral over the last 6 months as the activity actually starts to normalize. We made great progress transferring the marketing authorizations over the last 6 months. We've got 11 of the 14 will happen by the end of this year. We've got majority of the distribution agreement now signed. So very, very pleased with the way that that's gone. And we set up new legal entities in Thailand and India. Some of the launches that we wanted for this year are going to be set back. Obviously, India, that was one, just to get behind that brand again, we see large potential there. And as lockdowns sort of change across APAC, we'll be flexing our launch plans accordingly. But it just shows you how robust a brand like this is through a particularly difficult time. There's still significant opportunity for this brand, particularly in China. And I think I hinted at the line extension when we spoke last in April. I'm very pleased to say that we've managed to successfully launch that this year. That was launched in July, but is a ketoconazole and clobetasol combination product to challenge the market leader, and with the Nizoral brand. So we're really excited about that. The indications so far, so good. So I guess, watch this space as we watch that brand development. But great to have that new product launched on time and on budget. So very pleased with the way Nizoral continues to progress. We absolutely stand behind the future brand potential here at GBP 30 million-plus. And we'll keep developing this brand and our marketing plans as the business continues. So very pleased with that. Slide 19 just dives into some of our operational highlights. Some of the things that might not be front and center, but certainly has been very, very important to us as we've navigated through the first half of 2020 unprecedented times. So in terms of our commercial focus, we've got a new commercial structure put in place; focused, as we've said before, behind our 3 geographic targets, EMEA, APAC and China and the Americas. And that's very much how we're going to be running the business moving forward. I'm delighted to say we've hired a new Head of APAC, very experienced. And they've been appointed to really lead the commercial efforts with both Nizoral and also Kelo-cote as well and work through a lot of the challenges that we have out there in terms of setting up new entities. And he's made a fantastic start and will make a big difference in that region. So still carrying on with recruitment, although it's been a different experience over the last 6 months. Very pleased to have him on board. I think our digital strategy as well is something that we've been -- it's being brought into sharp focus over the last 6 months. We've not had a pivot in our business or change our wholesaler models, but we are looking very, very closely at our marketing excellence and how we exploit digital as much as we can. And that's going to work for some brands better than others. But we have seen a shift in certain brands from bricks-and-mortar pharmacy into Internet sales, and that's something that we will look to continue as we move forward. And that's just responding also to the market. So we've looked at the way our customers want to be -- have their interactions, particularly on the medical sales side of things. So we're doing a lot more e-retailing than we've done before, and that's proved very, very successful for us with brands like Hydromol throughout lockdown. Our employee engagement has been first class. I can't thank them enough. We've had a really -- we moved very, very quickly into working remotely. We've invested a lot last year in Microsoft Teams. And we've introduced new things. Alliance Connect is just one, but that's -- we have informal catch ups every couple of weeks. We keep with our breakfast briefings that we run every month. And we've been surveying our workforce right through the COVID crisis to understand how this is affecting them, how we might change our working arrangements in the future as well. In terms of operational excellence, we've embedded a new S&OP process within the business. So in terms of forecasting and supply chain reliability and also financial accuracy, that's something we've been working on over the last 18 months. That's now fully embedded in the business. I'm really pleased to say our on-time and in-full deliveries into this business have actually gone up through COVID, not down. So we've had a really good response from all our suppliers. Not had a single major supply interruption. And we look well set to go into 2021. Our ERP system has continued, and we're in the final phases of completing the build on that. That's inevitably been pushed out a little bit, but we're looking to bring that in the first half next year and is looking great and will make a big difference to us. I think also, in terms of -- just over to the left of the picture, our portfolio development. You'll have heard from Andrew our reclassification. I think if you've been following us as a business, you'll have seen the way that this portfolio has done particularly since we stepped away a little bit from Xonvea, and we're left with our top 4 brands, being consumer health care medicines and driving the growth. There is some overlap between prescription and Rx in terms of the -- prescription and consumers in terms of licensing. But in terms of go-to-market strategy, they are different, and we're looking at our business in such a way. And there's a comparison of how those 2 units look versus the old classification in the document, if you want to turn to that. We've also been quite quietly just tidying up the tail within the business. Nothing seismic. But over the last 2 years, we've got rid of probably GBP 1.5 million worth of very, very old licenses that were just uneconomical to run at the time. So that's allowed us to free up other resources to put to the parts of the business that have been growing very, very nicely. And the question you'll all ask is what is the landscape looking like for acquisitions? I'm pleased to say it looks really strong at the moment. We have a lot on our desk right now. We always do, but that doesn't seem to have slowed up too much. We've got everything on the desk, from sort of bolt-on medicines in established territories right through to strategic consumer health care assets, which are all very exciting. And as our leverage has come down and our firepower has increased, we're very, very well placed for future development of the portfolio. And that is absolutely something we're going to look at for the right deal. So yes, still very much on with our acquisition strategy. And in terms of our business, we've also launched a new initiative, our sort of in depth look at all of our suppliers, right through the supply chain, right up to active ingredients for many of them, and making sure that, that supply chain is shored up and running correctly. And I think also, just in terms of responsibility and social impact, we've also donated more to charity this year than we ever have done, particularly here in the U.K., but also overseas as well. I think just what we've done with Hydromol within health care professionals and some of the irritation they've had with PPE is a really good example of that. There've been many more examples of that within the portfolio that we've kept our eye on what's happening outside this business as well as in. Turning to '21, our outlook and summary, actually on to '22. How do we see half 2? Yes, things are changing. I think they've even changed this morning, just so of through the announcements that are being put out. But I think you're going to see that continued recovery in -- particularly in China. I think unquestionably, some brands are going to remain challenged. Vamoose, we've called out, that's an obvious one. I think if you look further down the portfolio, some of the U.K. hospital products are probably going to still take a while to get back, and that's not through competitive dynamic, it's just through demand. If you look at U.K. dispensing data in secondary care across the industry, if you look at the top OTC classes, that's down probably 10% in the last 12 months. Actually in July, it was down 20%, but we are starting to see a recovery coming through. So that's something that we hope to be the beneficiary of. Again, I think for our full year results, we expect those to be in line with market expectations so far. As Andrew said, we've introduced a dividend payment. I think that just shows you the level of confidence that we have in the business right now and glad to get back to that. And operationally, I think the business remains as strong as ever. I think COVID has really brought this team together. Our remote working continues to work well, and they will be sort of tested in the next 3 to 4 months, but we're very, very well set up to ensure that we can continue the business moving forward. Great ongoing dialogue with our distributors, and we're working very proactively with health care professionals and customers to support them as we move into new ways of working. Fundamentally though, this financial -- the business in terms of this financial position remains very strong. So as Andrew said, over GBP 10 million of free cash generation in the first half. We've got further positive cash generation expected in half 2. Again, we'll be reducing our leverage barring any acquisitions. And we remain really well placed to take advantage of those acquisition opportunities as when suitable opportunities arise. So -- and just to reiterate, we've not furloughed any of our staff. We haven't taken any government assistance. We've not drawn down on our revolver at all. So we're pretty pleased to have come through so strongly in the first half. Moving to Slide 23. In terms of our medium -- we've got to look past this. And in terms of our medium-term ambition, that really does remain unchanged. So we're really looking to grow this business to be at least twice the size that we are now. Clearly, that will need to be fueled by acquisitions but also the organic profile within the business. And then this balance of Consumer Healthcare brands and Prescription Medicines has worked really, really well for us. I think having that diversified portfolio right now is useful. And I think that, that will continue moving forward. So if we can find prescription medicines that are bolt-ons, great. But I think the real step change will come through our consumer brands and adding to those portfolio, we've shown that we can really generate growth. Our geographical reach. I've labored this before, but we don't really want to expand this. We're very happy with the 3 large areas that we have covered, APAC and China, the Americas and also EMEA. So we're not looking to expand into the Nordics or Russia or any of the emerging territories. We're quite happy with that footprint that we have now and are seeing plenty of opportunities there. And I think our affiliate and distributor operations are working very well, and there's going to be no change there. So our medium-term ambition remains very much unchanged. So moving to our summary, Slide 24. I think, Andrew, I'm not going to labor the financials again. Andrew has taken them through those very nicely. Really strong half 1 trading performance despite the challenges of COVID-19. Our profits are up. Our cash generation is really strong, and we've resumed our dividend payments. But I think the other thing is the underlying business remains resilient and strong. And we've got operational flexibility to really react to any short-term headwinds that might be out there. We've proven that over the last 6 months. And our ambition remains really unchanged. We've got a pretty clear sense of where we're heading. And we've also got the resources now in place to support us in achieving this. So notwithstanding the impact of COVID on our half 1 2020, our underlying business remains robust, and we're also really well placed to take advantage of future opportunities. So there ends the formal part of the presentation. And now I'm very, very happy to take any questions from the floor.

[Operator Instructions] Our first question comes from the line of Paul Cuddon from Numis Securities.

I'm afraid we can't be from the floor, but on the phone, I have a few questions. And the first one is you've very helpfully shown the sort of rejuvenation of Kelo-cote. And I'm just wondering whether there's anything from that playbook that you'll be using for the sort of Nizoral rollout and strategy. And secondly, as you -- sort of balance sheet in good shape and waiting for acquisitions. But I wondered if there's anything from the Local brands that you see might have potential as sort of international brands that could step up alongside those 4.

Great questions. Thank you very much, Paul. So yes, the first one on Kelo-cote and what's in our playbook without giving too much away. Clearly, we had -- the first thing that we did with Kelo-cote was a real deep dive into that brand. When we bought it from Sinclair, it was clear that there were some quite soft targets to go for, and we managed to exploit those really well. So a real deep dive in terms of market insight is what's been required. We have hired in some really good marketing expertise that sits in region. And we've got some first-class market research that has landed and has really helped to steer this brand, and I think will pay dividends moving forward. So there's a clear market insight process that we go through. We have -- I'd say he's new. He's been with us a year now, but we -- our Head of Global Marketing has made a big impact in terms of bringing in our marketing excellence program. So our marketing plans and execution are in much better shape than they ever have been. And there are some things that we're transferring in terms of our web understanding, our e-commerce understanding, distributor management. And also just generally, our supply chain management of that brand, I think we can bring to bear. So there's a lot that we've learned from Kelo-cote that we're sharing and reapplying to Nizoral. And actually, I think we can learn a bit from Nizoral and reapply that into Kelo-cote. So one of the things we'd like to do with Kelo-cote is bring some new product development to market, and we managed to do that very, very quickly with Nizoral. It's quite obvious what needs to be done with that brand. And with Kelo-cote, we have to achieve the same pretty soon. So that was the first part. The second part was around Local brands, and is there anything that we can internationalize? There are 2, I think, that we are looking at right now. One is Aloclair, which does really well for us. This is an old Sinclair brand. The -- there are some challenges with that, but certainly, that's very, very strong. And I think the other one is Ashton & Parsons, and that's something that we're looking at for China. I believe our Ashton & Parsons, we always talk about it because we love the brand. In reality, a GBP 2 million, GBP 3 million brand here in the U.K., but growing really strongly for us with, again, some very nice line extension that's come through. We think that there may be opportunity, certainly through cross-border e-commerce, for a product like Ashton & Parsons into China, and that's something that we're actively working on right now. Will there be a wholesale shift of internationalization of Local brands across the territories that we've got? Absolutely not. And that's something we need to make clear. But there might be 1 or 2 gems in there that we can work on.

[Operator Instructions] Our next question comes from the line of Andrew Whitney from Investec.

Just 2. One on, I guess, strategy and one on accounting, if I may. So just the strategy piece. I saw the midterm ambition is to be twice the size you are now with revenues principally generated from organic growth. I just wondered, in that, you have some -- you have the interactional stars which are growing well, and then you have other brands which are a bit flat and diluting the growth. Is there the opportunity for you to pass on some of those lower-growth products to someone else? And then you could augment your growth profile? I appreciate that would come at the expense of scale. But I wondered if that was something that you were thinking about just optimizing the portfolio sort of in a more inorganic way. Yes, that's one piece. And then the other thing was on the accounting, I appreciate the impairment charge that's gone through, I guess that's based on future cash generated from brands, now that those brands are now live. I just wondered if any of that is impacted by COVID. And is there the opportunity for impairment reversals when COVID sort of washes out a little bit?

Yes, both good questions, and thank you for those, Andrew. So firstly, on that tail, I think is around the question, can we be a bit more aggressive with perhaps taking away some of the lower-growth brands in there? Look, we've looked at that quite judiciously, and we do it every year with what we call an inefficient assets review. And actually, as we've said a few times, there is still a heck of a lot of value in that -- in our hands. So the cash flow that we generate from that is still vital to the business. Those prescription brands, whilst they've been a little bit affected by COVID, they're not in rampantly competitive markets. So we're not losing market share, simply footfall. And when the doors start to reopen in secondary care, you're going to see a pickup in those. You've also got to look at the distraction that a big divestment brings into the business and the value that you might gain with such a portfolio right now. So if you look at the sort of buyers for those assets, generally, they're not going to be strategic. They might be private equity right now, but you've got to look at the type of growth that you can get from those. And we see those as steady, cash generative, very important parts of our balanced portfolio. So I don't think you're going to see anything any time soon with those. What's really going to be the difference in our acquisition strategy and bringing in potentially a large acquisition, if we can, to certainly bolster the consumer brands business. It's no secret that we're out right now in the U.S. looking for businesses to go alongside our Vamousse business and to bolster that. But similarly, we find a good European business that looks -- that has all the right characteristics, that's something we'll look at, too. And I think we're coming to the point where Nizoral's at the tail end of its integration now, and we're starting to turn to APAC, too. So we've got a really big pond to fish in. I think where you're going to see the step change in the business is through those acquisitions. And that's something we continue to be very, very much focused on. And then on the accounting, I'll turn the phone to my colleague who...