Preliminary results

Sinclair IS Pharma plc

Preliminary results for the year ended 30 June 2013

19 September 2013, Sinclair IS Pharma plc (AIM: SPH.L), ("Sinclair IS" or the "Company") the international speciality pharma company, announces its preliminary results for the year ended 30 June 2013.

FINANCIAL HIGHLIGHTS

· Revenues increased 7.7% to £55.4m(2012: £51.4m)

· Adjusted EBITDA2 increased by 29% to £7.2m (2012: £5.6m)

· Adjusted profit before tax3 increased 69% to £4.3m (2012: £2.6m)

· Loss before tax of £17.0m (2012: £6.2m) includes non-cash impairment charges of £15.2m

· Strong reduction in net debt to £6.9m (2012: £9.1m)

OPERATING HIGHLIGHTS

· Dermatology revenues grew 9% like-for-like1

· International operations now 37% of revenues growing 20% LFL in 2013

· Sculptra launch in Europe exceeds expectations

· Kelo-cote now largest brand after 16% LFL revenue growth

· New strategic distribution partners. Menarini relationship extended

Chris Spooner, Sinclair's CEO commented:

"With Sculptra's well executed European launch exceeding expectations and the continued success of Kelo-cote, we have decided to further increase investment in our Aesthetics franchise. In FY14 we expect European growth to accelerate, a continued robust growth rate through our distribution partners in fast-growth emerging markets and a further improvement in Group profitability. With the factory closure complete and all past restructuring and litigation issues now resolved we are confident of a strong improvement in cash flow as the year progresses".

1 Like-for-like (LFL) revenues exclude product acquisitions and disposals, one-off licence fee income and currency fluctuations.

2 Adjusted EBITDA defined as earnings before interest, tax, depreciation, amortisation, share based payments, exceptional items and loss from discontinued operations.

3 Adjusted profit before tax excludes intangible asset amortisation on acquired product rights, exceptional items and loss from discontinued operations.

- Ends -

For further information please contact:

Sinclair IS Pharma plc Tel: +44 (0) 20 7467 6920

Chris Spooner

Alan Olby

Robert Taylor

Peel Hunt LLP Tel: +44 (0) 20 7418 8900

James Steel

Vijay Barathan

Sinclair's management team will discuss the company's results at a presentation for analysts today at 9.30am which will be held at the offices of Peel Hunt LLP, Moor House, 120 London Wall, London EC2Y 5ET. Please contact Robert Taylor at Sinclair IS for further details.

Notes to Editors:

About Sinclair IS Pharma plc- see www.sinclairispharma.com

Sinclair IS Pharma is an international specialty pharmaceutical company centred on Dermatology, in particular - Aesthetics, Wound care, and Skin care. The Group has a direct sales and marketing presence in the top five European markets and a rapidly growing International division concentrated on the Emerging Markets through long term multi-product, multi-country, sales, marketing and distribution deals with key strategic partners.

"Safe Harbor" Statement under the US Private Securities Litigation Reform Act of 1995: Some or all of the statements in this document that relate to future plans, expectations, events, performances and the like are forward-looking statements, as defined in the US Private Securities Litigation Reform Act of 1995. Actual results of events could differ materially from those described in the forward-looking statements due to a variety of factors.

CHAIRMAN'S STATEMENT

Your company delivered a solid result overall in the year to 30 June 2013, with like-for-like sales growth of 4% and adjusted EBITDA in line with expectations. Within this result there were some significant positive developments offset by several operating headwinds. Very strong growth in most of our core brands and in emerging markets, including 37% LFL growth in Asia, would have delivered an exceptional result but for the poor performance of two of our non-core products. Variquel and Cryogesic, acquired with IS Pharma, have, as previously reported, been adversely affected by generic competition resulting in a non-cash write down. Our key aesthetic brands, including Sculptra, generated strong growth in Europe, offset by the continuing European economic crisis which created negative revenue headwinds and a weak Euro. The Board believes that the sales affected by these negative trends have now stabilised and we are positioning the company increasingly towards non-reimbursable, or "private pay" markets which generally provide greater margin and control over our own destiny. Meanwhile, prospects for sustained growth in our key dermatology brands look exceptional, notably in emerging markets but also increasingly in Europe.

The strategy being pursued will determine the growth of the company in 2013/14 and beyond and I would like to focus on this. The company has consistently, vigorously and successfully pursued the strategic priorities identified by Chris Spooner and his management team when Chris joined Sinclair 3 years ago. The core parts of this strategy are:

(1) to focus the business on commercialising fewer, larger assets and developing single brand names globally, whilst reducing the number of non-core products

Dermatology now represents 80% of the company's sales and notwithstanding the European economic crisis, showed 9% LFL growth in the year. Our top 5 products now represent 54% of sales, up from 50% in the prior year. The acquisition of Sculptra together with the Kelo franchise means that we have sufficient critical mass to have a specialist aesthetics sales force and the opportunity to achieve a global presence in aesthetics.

We sold several non-core products during the year- Fazol G, Fadiamone and Mela Aura and we expect to continue the increasing focus on fewer, global products.

(2) to reduce in-house research and development and to increase expenditure on developing our global brands, supported by line extensions, to increase the breadth and penetration of these brands

During the year we focussed 80% of our marketing expenditure on our key brands and this generated strong rates of growth in dermatology products. Since 2010 we have reduced our research and development to 2% of sales from 5% of sales in 2009. Over the same period we have more than doubled our marketing spend from £2.7m to £6.2m. We have, at modest cost, developed line extensions, for example to the Kelo brand and across our skin care range which are just as helpful in boosting the market penetration and adoption of these brands as brand marketing expenditure.

(3) to drive profits from the operating leverage provided by our high quality sales platform by increasing sales volumes and identifying compatible product acquisitions and licensing opportunities

We have made a number of successful product acquisitions in the past three years; Flamma in 2010, Kelo-cote in 2011 and Sculptra in 2012. In each case following the acquisition, Sinclair has materially increased sales from pre-acquisition levels by focussed marketing investment, new distribution partnerships, line extensions and training and technical support. In each case the effect has been to steadily increase the overall adjusted EBITDA margin of the company.

The fixed cost of a quality fully integrated pan European sales structure is significant, particularly at low sales volumes, but can deliver enhanced profitability as sales volumes increase. The benefits of this operating leverage can be seen as our adjusted EBITDA margin rose from 11% to 13% for the year and we anticipate that this margin will continue to improve in future.

(4) to push aggressively into emerging markets with global partners who can provide muscle to help us achieve rapid growth

Our product portfolio is attractive to potential partners and we have been able to find powerful partners with sales reach who are willing to invest significant money and human resources in our products. Menarini have continued to invest heavily in driving our products into 11 Asian countries and we are also able to take advantage of a collaboration with their extensive sales forces in Spain and Italy. In March 2013 we announced a partnership with Hikma to commercialise Flammacerium in 18 MENA countries. We are also setting our sights on Latin America and expect to make further progress in the coming year, and we announced during the year a 10 year agreement with Biocodex to commercialise our dermatology portfolio in Russia, Turkey and the Benelux countries.

(5) to exit in-house manufacturing.

We closed our French manufacturing plant during the year and all our products are now sourced by high quality trusted manufacturing partners.

Your company is now very well placed to increase revenues and profits substantially. We have several global brands with significant potential. We are in the early stages of a comprehensive multi-country, multi-product strategy, which, when delivered, can and should deliver significant value to shareholders. We have strong partners and are now increasingly seen as a major worldwide specialty derma player. We continue to look to supplement organic growth with product acquisition and licensing opportunities which will complement the existing portfolio and drive profitability. Our cash flow is positive and net debt has been reduced substantially to £6.9m at 30 June 2013. We are confident about our future growth. I would like to thank shareholders for their continued support.

Grahame Cook

Chairman

BUSINESS REVIEW

Sinclair IS generated £7.2m adjusted EBITDA* for FY13 on sales of £55.4m. Like-for-like (LFL) revenues (excluding product acquisitions and disposals, one-off license income and currency fluctuations) grew by 4%. Core dermatology brands grew by 9% LFL. EBITDA was in line with expectations reflecting this significant growth in our dermatology brands and further strong progress in our International operations but were negatively impacted by generic competition in our non-core portfolio.

Key to our strategy is to focus on both creating and growing global dermatology brands organically and to supplement this growth through acquisition, driving operating margins through a combination of volume growth and where possible setting price. The Group continues to operate a fully integrated pan European structure. While this has suppressed margins in the past the benefits of this significant operational leverage are now becoming apparent with our EBITDA margin** rising to 13% during the financial year.

The 100 year licence for Sculptra in Western Europe is a major step forward in our aesthetic dermatology business and enhances Kelo-cote's significant growth prospects. Sculptra is highly differentiated and competes in the Western European dermal filler market which is expected to grow 8% compound to £145m by 2017. It has just a 3% market share in Europe and only 7% in its biggest market, the UK. Our EU5 sales forces have been reshaped with a clear common objective to prioritise our high margin, private pay aesthetic business. Sculptra's re-launch in January 2013 significantly exceeded expectations, and sales which were declining before acquisition, improved over 20% from the comparable period last year. As a result, the decision has been taken to allocate more resource to aesthetics in FY14.

Focusing the portfolio on a smaller number of key brands and concentrating marketing resource on them has helped revenues from our top 5 products to rise from 34% to 54% of sales in 4 years. Inherent in our growth strategy is a move away from government controlled pricing. In the year to 30 June 2013 just 38% of revenues came from reimbursed products against 47% in 2012.

International operations had another very successful year reporting 20% LFL revenue growth due to the combination of continuing brand development and significant investment by our key partners. In Asia, for example, the 39% organic growth of the Kelo franchise is as much the result of line extensions (Kelo-cote UV, Kelo-stretch) as it is the increased investment by our partners in their sales forces, TV campaigns, major industry events, and involvement of key opinion leaders.

Several disposals of non-core products were made over the year (Fazol G, Fadiamone, and Mela Aura) to further focus the portfolio. Variquel/Haemopressin and Cryogesic, both non-core products suffered generic erosion together with price competition and aggressive marketing of an alternative presentation from an existing competitor. Sales stabilised in H2 but will continue to face revenue headwinds in the coming year. This has resulted in an impairment charge against the value of these assets, see the Finance Review for further detail.

The closure of our Cléry plant marked the Group's exit from in-house manufacturing with production smoothly transferred to Fareva, the leading third party French manufacturer. The planned introduction during the year of a new ERP/MRP system has already played an invaluable part in driving down our working capital requirement. The Group resolved a number of legal disputes in FY13 and is now clear of litigation from previous years.

* Adjusted EBITDA defined as earnings before interest, tax, depreciation, amortisation, share based payments, exceptional items and loss from discontinued operations. Hereafter always referenced as EBITDA.

** EBITDA Margin defined as the ratio of Adjusted EBITDA to revenue.

Country Operations - Revenue £34.9m 5% LFL decline (2012: £35.5m)

The LFL decline reported for country operations was caused by the £2.1m decline in sales of Variquel and Cryogesic in the UK and Germany, and a drive for increased profitability in France where pharmacy sales declined following a reduction in promotional activity in that already weak market. Dermatology LFL was flat in country operations for the year which excludes a very encouraging initial performance from Sculptra which reported sales growth of 22% for the period from January to June 2013 compared with the same period in 2012 prior to the Group's ownership.

France - Revenue £12.3m 8% LFL decline (2012: £12.6m)

Against a difficult overall market background, particularly in the OTC segment, our French sales and marketing strategy continues to focus on the key profitable brands and an underlying move to self-pay. The French sales force was rebalanced towards aesthetic practitioners, with reduced exposure to pharmacy sales and respond to the effect of the weak French economy on the fragmented pharmacy market.

Sculptra's successful launch in France, with sales in the first five months over £1.0m, has already returned the brand to annualised growth after several years of decline. Only 25% of aesthetic doctors previously using Sculptra were active users at launch; our 13 strong sales force has visited over 300 past users of the brand and we are encouraged by their response. Kelo-cote continues as market leader in prescription silicone gel with sales of £0.7m only two years after launch.

In line with the Group's policy of concentrating marketing spend on its key products, promotional activity has been focused in France on our aesthetic brands Sculptra and Kelo-cote, together with our leading skin care products Atopiclair and Sebclair.

UK - Revenue £8.6m 11% LFL decline (2012: £10.1m)

Strong growth from the Group's promoted dermatology brands, in particular the rapid build-up of Sculptra sales post launch was masked by generic competition for Variquel and Cryogesic.

Sculptra made a strong start in the UK and sales post launch exceeded £1.0m with sales growth of 5% against the same period in 2012. UK marketing and sales teams have been strengthened and reshaped with the objective of building up the Group's aesthetic portfolio in the private sector whilst maintaining its NHS business. Over 200 aesthetic doctors have attended Sculptra workshops since launch and 9 key opinion leaders conduct bi-weekly doctor training programs around the UK. Sculptra has been well represented at key industry events including FACE in June 2013. Kelo-cote has inevitably benefited from a dedicated aesthetics team with sales growing 19% LFL in the period.

Sales of Variquel were down 38% for the year and Cryogesic by 53% and both continued to suffer from generic competition. By contrast Aloxi sales grew 32% benefiting from NHS adoption of its oral version in Scotland.

Germany - Revenue £4.7m 10% LFL decline (2012: £4.9m)

German operations were significantly strengthened by new management and a reorientation to aesthetics in H2. Overall revenues were affected by significant price erosion due to generic competition for Variquel with sales down 22%. Unit volumes were however maintained as were most key hospital contracts.

Kelo-cote's strong performance continued with a further 34% LFL sales advance as a result of its integration with Sculptra in a new 9 strong experienced marketing and sales aesthetics team focused on doctors and dermatologists. Sculptra's post launch sales responded well to much increased promotional activity with revenues ahead of expectations at £0.4m.

Spain - Revenue £4.8m 24% LFL growth (2012: £3.5m)

Balanced growth led to another successful year for the Group's Spanish operations. Sculptra experienced a strong start in Spain with sales in the first five months following launch nearly twice the corresponding period in the previous year at £0.8m. Our successful OTC relationship with Vemedia for Kelo-cote and Flammazine has been extended to Bio-Taches building on existing skin care sales to doctors. Wound care also grew strongly as our partner Italfarmco consolidated Aloclair's market position with a further 34% LFL growth during the year.

In February the Group announced a co-marketing deal with Menarini for the Kelo franchise, Atopiclair and Decapinol which is due to start in the current financial year through Menarini's 500 strong Spanish sales network.

Italy - Revenue £4.5m 2% LFL growth (2012: £4.4m)

Aloclair, Italy's market leading mouth ulcer treatment grew 11% LFL on sales of £2.0m. Distribution of Aloclair through Recordati has been extended for five years and expanded to include the Aloclair patch. Recordati will significantly increase marketing support for this important partnership. A strategy to distribute Atopiclair through Menarini was announced in H2 for launch this autumn using Menarini's significant Italian sales and marketing presence.

Sculptra is also being promoted in Italy and from a small base achieved encouraging results in the period to June with sales 66% ahead of the same period in 2012.

International Operations - Revenue £20.5m 20% LFL growth (2012: £15.4m)

International operations, now 37% of Group revenues, are the engine of growth and operating leverage for the Group with its high and improving operating margins. Revenues grew by 34.4% over the year and the operating margin increased from 33.3% to 35.7% leading to a 41% growth in EBITDA contribution from this segment. Asia and MENA had another very successful year and the Group has now targeted LATAM as an area where there is strong future growth potential.

Asia - Revenue £6.4m 37% LFL growth (2012: £3.7m)

Headline growth of 73% in Asia reflected the impact of a full year contribution from Kelo-cote, Atopiclair and Papulex. Asia accounts for over a third of Group Kelo-franchise sales growing 39% LFL during the year to become the region's biggest product.

Kelo-cote had exceptional growth in South Korea with dermatologists and aesthetics specialists and a particular focus on Kelo-cote UV. Chinese sales to private aesthetic doctors grew strongly and Kelo-stretch, branded Glyderm in Asia, significantly exceeded launch expectations in Indonesia. Additionally Glyderm launched in Thailand and Taiwan in H2 with more planned in the coming year.

Menarini continue to invest heavily in our brands in Asia and expanded their Dermatology sales force and advocacy programs over the year. Both Atopiclair and Papulex saw further excellent progress growing 17% and 75% respectively with Atopiclair launching in Indonesia and Vietnam during the year.

Middle East, Turkey, Africa - Revenue £7.0m 27% LFL growth (2012: £5.7m)

Bio-Taches was again the leading product in the region with sales reaching £1.8m (+44% LFL) with particularly strong growth in Algeria and Saudi Arabia, benefiting from the continuing roll out of line extensions in particular Bio-Taches serum.

Kelo-cote sales reached £0.9m (+59% LFL) responding well to launches in Algeria, Turkey and sub Saharan Africa and strong growth in Saudi Arabia. The Group's strengthening relationship with Al Dawaa, Saudi Arabia's leading pharmacy chain and distributor of Bio-Taches, Kelo-cote and Papulex supported further commercial success with country sales up 88 %LFL. Algeria, the Group's largest regional market grew 52 % LFL helped by productive launches of Kelo-cote and Atopiclair.

In March the Group announced a 10 year licensing deal with Hikma to commercialise Flammacerium in 18 MENA countries with first launches expected at the end of 2014.

Americas, Northern Europe, CEE - Revenue £7.1m 2% LFL growth (2012: £6.1m)

LFL growth in the region was weaker than hoped although overall revenues grew 18% due to the full year effect of Kelo-cote revenues acquired part way through last year. The Group has targeted the region as an area of strong growth, and following the precedent in Asia has appointed an experienced commercial manager based in Mexico City. Registration in Mexico of Kelo-cote and our key skin care brands have been submitted and should be completed in October.

Sebclair® (+47% LFL) grew strongly again in the US due to promotion by US dermatology partner Promius. With a 26% share, Promiseb is the leading product in the US seborrhoeic dermatitis market.

The signing of a 10 year licensing deal for the Group's key aesthetic and skin care brands with Biocodex is a major step forward for the Group in Russia, and will enable the Group's aesthetic brands Sculptra and Kelo-cote to develop in the Benelux countries alongside our proprietary sales forces elsewhere in the EU.

Development Pipeline

R&D activities continue to be focused on the development of new products and line extensions to extend our portfolio of key brands and trademarks. A core area of activity is the utilisation of our proprietary anti-biofilm compound delmopinol in topical dermatological applications. During the year under review Sinclair IS successfully gained approval for the use of delmopinol in cosmetic products and the first new brand in this line PapuDuo, a novel anti-biofilm acne treatment, is now approved and will be launched when marketing trials are complete.

Aloclair Plus Patch also received regulatory approval and was launched in Italy during the year to extend the portfolio of this important brand, and an enhanced Aloclair Plus gel formulation is also under development with registration targeted for mid 2014.

The development of Kelo-repair will extend the Kelo franchise to the treatment of damaged skin, with registration and launch targeted for late FY14.

Outlook

International growth will continue to be vital to the success of the overall business, given the lacklustre macro and pharmaceutical industry backdrop in Europe. The move to aesthetics with Kelo-cote and now Sculptra has created significant value and provides the opportunity in the current financial year not just for an acceleration in growth in new markets but Europe as well. Dermatology is now 80% and self-pay business 63% of the Group's revenues and the Board continues to look for further brand and distribution deals which will further drive value and return on sales.

FINANCIAL REVIEW

The year ended 30 June 2013 has been a significant year in the development of the Group as EBITDA margin improved strongly to 13% from 11% in FY12 as operating leverage benefited from the acquisition of Sculptra and growth in International Operations. Importantly, the improvement in underlying performance translated into cash flow from operations improving 70% to £2.6m, net of a cash outflow of £3.1m on restructuring activities. Over the year net debt was reduced to £6.9m at 30 June 2013, down from £9.1m a year earlier.

Revenue

Revenues increased by 7.7% to £55.4m with a full year contribution from Advanced Bio-Technologies ('ABT') and a strong initial contribution from Sculptra with first sales recorded in mid-January 2013. Headline revenues were held back by the poor performance of non-core hospital products. Variquel and Cryogesic sales were a combined £2.1m lower than in the prior year due to generic competition. Revenues were also adversely affected by foreign exchange rates as the Euro was 2.7% weaker on average over the financial year compared to the prior year, which reduced headline revenues by £1.0m over the year.

Discontinued operations

The closure of the factory at Cléry in France at the end of June 2013 has been accounted for as a discontinued operation as this represents the cessation of in-house manufacturing by the Group, leaving all production now outsourced to third parties, allowing the Group to focus on the management of these supplier relationships and also realising a reduction in cost of goods. The comparative figures for the year ended 30 June 2012 have been re-stated as required under IFRS to show the impact on the prior year as if the closure had been implemented at the beginning of that financial year. The impact is that £0.8m of cost of goods, £0.1m of depreciation and £2.6m of restructuring costs previously recorded as exceptional closure costs have been re-allocated to the cost of discontinued operations, thereby increasing gross margin and reducing operating loss for the prior year by these amounts. Further discontinued operation costs of approximately £1.0m will be expensed in the coming financial year relating to costs incurred post the cessation of manufacturing activities in cleaning down the site and passing the building over to the local authority.

Gross profit

Gross profits (excluding fair value adjustments on acquired inventory) grew by 7.9% to £33.8m from £31.3m in 2012 resulting in a gross margin of 61.0% for the full year compared with 60.9% for 2012 as revised for the effect of discontinued operations. Margins were largely unchanged as the benefits of a full year of ABT sales and the introduction of higher margin Sculptra were offset by reduced margins on hospital products and mix effects.

Operating expenses

Selling, marketing and distribution costs increased by 5.0% to £15.3m from £14.5m in 2012 as the Group invested significantly in the re-launch of Sculptra in Western Europe and on building its presence in aesthetics. Sales and marketing investment continues to be focused on a small number of key products including Sculptra and Kelo-cote®

Administrative expenses before exceptional items, of £17.1m were unchanged compared with the prior year as the Group's focus on controlling technical and administrative spend while driving operating leverage through growing sales continues to deliver.

Exceptional items

Exceptional charges of £16.8m (2012: £4.6m) have been recorded in the year net of profits on disposal. Of these, £15.3m are non-cash charges. The key components of the exceptional items are:

· Restructuring costs of £2.2m include reorganisation costs incurred in completing the integration of support functions in the Chester office and amounts paid to distributors in order to return product rights and resolve legacy contract disputes.

· A £0.8m profit on disposal arises on the sale of Fazol G in France.

· Impairment charges of £15.2m against intangible assets and goodwill. These non-cash charges relate to the value of trademarks, primarily Variquel and Cryogesic, and goodwill arising on the acquisition of IS Pharma. Generic competition for these hospital products over the last year and the prospect of increased competition has resulted in a significant reduction in future sales expectation for both brands. The move to re-focus our UK sales team towards aesthetics, away from hospital sales has contributed to the write down of goodwill associated with the IS Pharma acquisition. The remaining carrying value of Variquel, Cryogesic and IS Pharma goodwill is now £9.1m.

Finance costs

Finance costs increased to £1.6m from £1.3m, although this included a £0.4m amortisation expense of previously incurred arrangement fees relating to the re-financing and extension of acquisition related debt facilities with Clydesdale Bank. Underlying interest costs on borrowings were flat compared with 2012 at £0.8m and there was a £0.2m foreign exchange loss (2012: £0.1m gain) on the translation of US Dollar denominated borrowings taken out in 2012 to part fund the acquisition of Advanced Bio-Technologies Inc.

Taxation

A tax charge of £0.4m (2012: credit of £0.9m) has been recorded for the year on continuing operations, pre-exceptional items. This consists of corporation tax charges of £0.4m (2012: £0.7m) and deferred tax charges of £nil (2012: credit of £1.6m). Within deferred tax, a £0.9m charge arises on the utilisation of brought forward losses in the UK resulting in a reduction in deferred tax assets, offset by a deferred tax credit of £0.9m (2012: £1.0m) from the amortisation of intangible assets acquired through business combinations. A further exceptional deferred tax credit of £1.5m (2012: £0.2m) from impairment charges taken against acquired intangibles, leaves an overall tax credit of £1.1m for the year (2012: credit of £1.1m).

Earnings per share

Adjusted basic EPS of 0.7p increased from 0.6p in 2012. Basic loss per share was 4.1p (2012: loss of 2.2p) increased from 2012 due to impairment charges taken in the year. Adjusted basic EPS is calculated after adjusting for exceptional items, loss from discontinued operations, amortisation of acquired intangibles and related deferred tax credits.

Balance sheet and working capital

Additions to intangible assets totalled £8.5m for the year which primarily relate to the €9.0m licence fee paid to Valeant for the distribution rights to Sculptra and Succeev for Western Europe. It remains the Group's policy not to capitalise development expenditure meaning that all development and regulatory expenditure was expensed during the year. Goodwill and intangibles were increased by a combined £4.4m due to the effect of foreign exchange fluctuations on assets denominated in Euros and US Dollars. Impairment charges of £15.1m and annual amortisation charges of £5.0m have reduced the carrying value of goodwill and intangibles which at 30 June 2013 stood at £121.4m.

Careful management of working capital is key to delivering sustainable growth and is a major focus for management. Inventories have been further reduced by £1.0m to £4.8m at the year end, helped by the closure of the manufacturing facility at Cléry and from better management of the supply chain following the roll out of an ERP system which went live in August 2012. The ERP system is expected to deliver further working capital efficiencies through better supply chain management and in improved credit control. Working capital is therefore expected to grow at a rate below forecast sales growth, thereby reducing working capital as a percentage of sales as the benefits of the ERP system implementation are realised over the next couple of years.

Cash flow and net debt

Cash flow from operations was £2.6m, £1.1m better than in 2012 despite a net increase in working capital of £1.4m. This improvement in cash generation is a direct result of the improved operating margins.

Cash and cash equivalents were £5.1m at 30 June 2013 (2012: £4.0m) with net debt of £6.9m, less than 1.0x EBITDA (2012: net debt of £9.1m). The Group successfully extended its acquisition debt facility with Clydesdale Bank in December 2012 increasing its overall facility to £23.6m of which £9.0m is undrawn and available for financing future product acquisitions. The Group will continue to make careful use of debt to fund acquisitions as opportunities arise, without stretching the balance sheet.

Unaudited Consolidated Income Statement

For the year ended 30 June 2013

Unaudited Consolidated Statement of Comprehensive Income

For the year ended 30 June 2013

Unaudited Consolidated Balance Sheet

At 30 June 2013

Unaudited Consolidated Statement of Changes in Shareholders' Equity

For the year ended 30 June 2013

Unaudited Consolidated Cash Flow Statement

For the year ended 30 June 2013

1. Basis of preparation

The preliminary financial information has been prepared in accordance with International Financial Reporting Standards ('IFRS') and International Financial Reporting Interpretations Committee ('IFRIC') interpretations as adopted for use in the European Union and with Companies Act 2006 applicable to Companies reporting under IFRS. In preparing this financial information management has used the principal accounting policies as set out in the Group's annual financial statements for the year ended 30 June 2012 and which will be used in preparing the financial statements for the year ended 30 June 2013. There have been no changes to the accounting policies during the year, except as described below:

The following new standards and amendments to standards are mandatory for the first time for the financial year ending 30 June 2013 and have been applied by the Group, but have had no impact.

· Amendment to IAS 12,'Income taxes' on deferred tax - Effective date - Annual periods beginning on or after 1 January 2012

The preliminary financial information has not been audited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 30 June 2012 has been extracted from the Group's financial statements for the year ended 30 June 2012, restated for the effect of discontinued operations. The auditors' report on the financial statements for the year ended 30 June 2012 was unqualified and did not contain statements under either section 498 (2) or section 498 (3) of the Companies Act 2006. The financial statements for the year ended 30 June 2012 have been delivered to the Registrar of Companies.

The Group's forecasts, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current debt facilities and to meet the required covenant measures. After making enquiries, and considering the covenants on the Group's debt, the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. As a result, they continue to adopt the going concern basis in preparing the preliminary financial information.

This preliminary financial information was approved by the Board of Sinclair IS Pharma plc on 19 September 2013.

2. Segmental information

The chief operating decision maker has been identified as the executive management team. This team reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The executive management team considers the business as being organised into the following reportable operating segments; Country Operations (including the Group's operations in France, UK, Italy, Germany and Spain) where the Group has its proprietary sales infrastructure, and International Operations where the Group sells through a local distributor. Research and development, technology licensing income and costs, intellectual property and corporate costs are included under the 'other' heading.

The executive management team assesses the performance of the operating segments based on a measure of adjusted earnings before interest, tax, depreciation, amortisation, exceptional items and share based payments (Adjusted EBITDA).

Unaudited 2013

Unaudited 2012

The revenue analysis above is stated net of inter-company sales.

A reconciliation of total adjusted EBITDA to total operating loss is provided as follows:

3. Exceptional items

Exceptional items represent significant items of income and expense which due to their nature, size or the expected infrequency of the events giving rise to them, are presented separately on the face of the income statement to give a better understanding to shareholders of the elements of financial performance in the year, so as to facilitate comparison with prior periods and to better assess trends in financial performance.

Acquisition costs of £74,000 include legal and professional expenses incurred in relation to potential acquisitions. In 2012 Acquisition costs of £882,000 included legal and professional expenses incurred in relation to the acquisition of Advanced Bio-Technologies, Inc. which completed in December 2011.

Restructuring costs of £2,197,000 (2012: £2,286,000) include severance packages paid to employees in order to achieve efficiencies, and settlements paid to distributors in order to return certain product rights and resolve legacy contract disputes. In 2012 these costs followed the merger with IS Pharma plc and the restructuring of the Irish operation post the transfer of sales and marketing responsibilities to Fannin Limited.

Impairment charges of £15,151,000 are made up of £11,474,000 impairment to the product rights and £3,677,000 impairments to goodwill following a reappraisal of the value of the remaining assets acquired with the IS Pharma acquisition in May 2011. New entrants in the market have resulted in declining sales and volumes and a reduction in average prices primarily affecting the Variquel and Cryogesic trademarks. The Directors have re-assessed forecast sales and gross margins and as a result of the reduced cash flows, have recorded these non-cash impairments.

In 2012 an impairment of £947,000 was made to the Episil product license included within intangible assets and also acquired as part of the acquisition of the IS Pharma Group. Disappointing sales of the Episil product which is licensed from Camarus led to the decision to terminate this license agreement, thus avoiding future minimum order liabilities. These are non-cash charges.

Exceptional cost of sales of £158,000 are the pass through of the fair value uplift applied, at acquisition, to the carrying value of the inventory acquired with the acquisition of Advanced Bio Technologies Inc. in December 2011. The fair value uplift was expensed as the inventory was sold to the market.

£687,000 in 2012 was the pass through of the fair value of inventory acquired with the acquisition of the IS Pharma Group in May 2011 as well as with Advanced Bio-Technologies Inc. in December 2011. All inventory associated with the acquisition of the IS Pharma Group and Advanced Bio Technologies Inc which was valued as part of these uplifts has now been sold into the market.

Profits on disposal of £827,000 were generated from the disposal of Fazol G by the Group to Laboratories Majorelle for a total consideration of €1,150,000 (£990,000) in March 2013. In 2012 £197,000 were generated from the disposal of Mysoline by the Group to Laboratories Serb SAS for a total consideration of £11,075,000 in November 2011. The profit on disposal is the consideration net of the carrying value of the asset disposed and associated legal costs incurred.

4. Discontinued operations

On 30 June 2013 the Group closed its only manufacturing facility at Cléry in France and has fully outsourced its manufacturing arrangements. The Directors expect to make significant cost savings through the outsourcing of these manufacturing arrangements to its manufacturing partners.

A loss for the year of £1,515,000 (2012: £3,543,000) has been recognised as the costs of discontinued operations. £2,592,000 in 2012 was previously included under exceptional items in the financial statements for the year ended 30 June 2012.

A single amount is shown on the face of the income statement comprising the post-tax result of discontinued operations. The income and expenses of these operations are reported separately from the operations of the group. Revenue from discontinued operations represents intra group revenue of the Cléry site up to the point manufacturing operations ceased in June 2013, determined using third party rates for the products manufactured during the year. The table below provides further detail.

The cash outflow from discontinued operations is disclosed in note 15. There are no discontinued cash flows arising from investing or financing activities.

5. Finance income and costs

6. Taxation

The deferred tax credit on exceptional items includes the amortisation of deferred tax liabilities arising from the impairment of intangible assets (note 3).

7. Loss per share

Basic loss per share has been calculated by dividing the loss for the year, by the weighted average number of shares in existence for the year. The loss and weighted average number of shares for the purpose of calculating the diluted loss per share are identical to those used for the basic loss per share at 30 June 2013, as the exercise of share options and warrants would have the effect of reducing the loss per share and therefore is not dilutive.

Adjusted earnings per share has been calculated by adding back exceptional charges and amortisation of intangible assets to the loss for the year, together with related deferred tax movements resulting in an adjusted profit for the year.

A reconciliation of adjusted profit is as follows:

8. Goodwill

Additions in 2012 comprise the excess consideration paid over the fair value of assets acquired on the purchase of Advanced Bio-Technologies, Inc.

Exchange adjustments arise as a result of the impact of the difference in the Sterling: Euro exchange rate at the beginning and end of the year on balances recorded in Euros and on the impact of the difference in the Sterling: US Dollar exchange rate at the beginning and end of the year on balances recorded in US Dollars.

Goodwill has been allocated to the following cash generating units:

Goodwill is not amortised but tested annually for impairment or more frequently if there are indications that it may be impaired. Value in use calculations have been utilised to calculate recoverable amount. Value in use is calculated as the net present value of the projected post tax cash flows of the cash generating unit, discounted at 10.5% (2012: 11.0%), the Group's estimated post tax weighted average cost of capital.

The cash flows, which have been approved by the Board, have been projected over eight years for Sinclair UK and over five years for all other cash generating units, representing the Director's best estimate of future product revenues and margins. Growth rate assumptions have been applied at an individual product level and range from -25% or termination for non-core products to 25% for key brands.

There is no long term growth rate assumption beyond year eight for Sinclair UK. Long-term growth rate assumptions beyond year five are 2% (2012 5.0%, Sinclair Italy 2012 2.0%) for all other cash generating units. These growth rates are consistent with forecasts used in industry reports.

At 30 June 2013, before impairment testing, goodwill of £8,607,000 was allocated to the Sinclair UK cash generating unit. This cash generating units value in use is based on the products acquired with the IS Pharma acquisition in May 2011. New entrants in the market have resulted in declining sales and volumes and a reduction in average prices primarily affecting the Variquel and Cryogesic trademarks.

The Directors have re-assessed forecast sales and gross margins of the Sinclair UK cash generating unit. The Sinclair UK cash generating unit has therefore been reduced to its recoverable amount and goodwill has been reduced to £4,930,000 through the recognition of an impairment loss against goodwill of £3,677,000.

The recoverable amount of the Sinclair UK CGU is sensitive to the following changes in key assumptions; an increase in the discount rate by 1% would result in a £437,000 reduction in the carrying value. A 20% reduction in sales would reduce the carrying value of this CGU by £3,126,000. A reduction in the useful economic life of from eight years to five years would reduce the carrying value by £2,385,000.

The Directors believe that any reasonably possible change in the key assumptions on which the recoverable amounts are based for the International Operations, Sinclair Italy, Sinclair France, and Advanced Bio Technologies, CGUs would not cause the carrying amount of the other CGUs to exceed their recoverable amount. 

9. Intangible Assets

Additions in the period include the €9.0m paid to Valeant Pharmaceutical North America LLC, for the 100 year distribution agreement for Sculptra, New-fill & Succeev in Western Europe. These intangible assets will be amortised on a straight line basis over 20 years in line with the Group's accounting policy.

Impairments in 2013 include the impairment of the Variquel and Cryogesic trade marks.

An increase in the discount rate by 1% would result in a £144,000 reduction in the carrying value of the Variquel trademark and a £11,000 reduction in the carrying value of the Cryogesic trademark.

10. Trade and other receivables

11. Trade and other payables

12. Provisions

Total provisions comprise legal provisions of £111,000 (2012: £920,000) and restructuring provisions of £1,269,000 (2012: £1,498,000).

Provisions released during the year include £181,000 (2012: nil) legal provisions released against exceptional restructuring costs following a court ruling. The remaining £146,000 released in year has been released following the settlement of other commercial disputes arising from normal trade

In December 2012, the existing bank facilities were replaced with a new term loan facility with Clydesdale Bank of which £13.6m has been drawn and £12.3m remains outstanding at 30 June 2013 after capital repayments. This includes a drawdown denominated in dollars of $8.2m (£5.0m) of which $6.8m (£4.5m) remains outstanding after capital repayments. The total facility is for £23.6m (including a £1.0m revolving credit facility and borrowing facility up to £22.6m) expires on 31 December 2016. Interest is charged at LIBOR plus 3.25%, and interest over two thirds of the amount drawn down is capped at 4.75% through an interest rate cap. Direct issue costs of £383,000 have been offset against the gross liability. Repayments are scheduled to be made in equal instalments of £850,000 every three months and a final settlement payment at the expiry of the facility. Drawings under this facility are secured by a debenture over all the Group's assets.

As a consequence of this arrangement the term loan facility previously in place with Clydesdale Bank was terminated and direct issue costs related to this facility of £415,000 were written off through other finance charges.

Included within other financial liabilities is deferred contingent consideration which represents the fair value of the assumed contractual minimum liabilities of the previous owner of SEPI AG (a Swiss subsidiary acquired by IS Pharma in April 2008) which are payable to the original developers of Haemopressin in annual instalments until March 2017 representing royalties payable on future net revenue from Haemopressin. The amount included represents the Directors' estimate of the fair value based on the timing of minimum contractual amounts payable by March 2017, discounted to its present value.

15. Cash flows from operating activities including discontinued operations

Discontinued activities