Final Results

Final Results

Anpario plc

4 March 2015

Anpario plc (AIM: ANP)

“Anpario” or “the Group”

Anpario plc, the international producer and distributor of natural feed additives for animal health, hygiene and nutrition is pleased to announce its results for the twelve months to 31 December 20141.

Financial Highlights1

  • 18% increase in underlying earnings per share2 to 15.6p (2013: 13.2p1)
  • 14% rise in profit before tax to £3.3m (2013: £2.9m)
  • 10% rise in adjusted EBITDA3 to £3.9m (2013: £3.5m)
  • 29% increase in the proposed dividend to 4.5p per share (2013: 3.5p)
  • Cash balances of £6.6m at year-end (2013: £4.8m)

Operational Highlights

  • US subsidiary gains momentum rapidly with initial sales to pig and poultry market
  • Double digit revenue growth continues in the key regions of the Americas and Asia Pacific
  • Subsidiary in China makes strong progress
  • UK business increases gross profit by 53% from £0.8m to £1.2m.

Richard Rose, Chairman, commented:

“Anpario delivered a strong performance in the twelve months to 31 December 2014 with impressive advances in sales and profit coupled with further market share improvement in its key geographic areas. These results have been achieved during a year when challenges have included currency headwinds and continued political turmoil in a number of our territories.

Our strong trading position, debt free balance sheet and the continuing cash generative nature of the business, leave Anpario well positioned to finance further organic growth and consider selective investments or earnings enhancing acquisitions to further enhance value for all its stakeholders.”

Chairman’s statement

Anpario delivered a strong performance in the twelve months to 31 December 2014 with impressive advances in sales and profit coupled with further market share improvement in its key geographic areas. These results have been achieved during a year when challenges have included currency headwinds and continued political turmoil in a number of territories.

Anpario has continued to focus on developing its presence in two principal geographic areas, the Americas and Asia Pacific. During the year further investments were made in Brazil, China and the United States, the principal pig and poultry producing countries, accounting for more than half global output. Whilst the establishment of our operations in these countries is still at an early stage, progress has been encouraging. Our newest subsidiary, in the United States, is growing faster than expected, demonstrating the interest in that country for alternatives to antibiotic growth promoters.

The global agricultural market offers exciting prospects for growth; demand for meat protein is growing and food producers are under increasing pressure to ensure production is aligned with best practice to maximise performance and minimise disease risk. Anpario’s broad range of nutritional and biosecurity led natural products offers the industry a comprehensive solution to its problems and the Group remains well placed and confident that it can maintain its consistent growth record.

Our focus is to accomplish the implementation of the growth strategy by broadening the customer base in countries that offer the most potential, prioritising key brands and ensuring that the necessary sales and technical resource are in place locally.

Financial review

Profit before tax for the year to 31 December 2014 increased by 14% to £3.3m (2013: £2.9m).

Revenue rose by 2% to £26.6m (2013: £26.0m), this increase equates to 6% at constant exchange rates based on 2013 sales recalculated at the same average exchange rates as applied in 2014. This difference totalling £0.8m on revenue and £0.5m on profit reflects the impact of the strength of sterling in the period, which was compounded by a change in the Group’s currency mix with sales in US dollars increasing by 27%. The currency drag on profit has been offset by margin improvements, particularly in the UK, and further production efficiencies. The continued focus on selling specialist feed additive products in growth markets, coupled with the effect of operational gearing has seen gross profit increase by 8% to £9.8m (2013: £9.1m) with a further improvement in gross margin.

Overheads are some 6% above the level of last year as a result of the Group’s investment in its sales and technical teams to support expansion in Brazil, China and the US. During the year the Group disposed of its interest in a small Australian joint venture.

Underlying earnings per share2 rose 18% to 15.6p (2013: 13.2p). Adjusted EBITDA3 advanced by 10% to £3.9m (2013: £3.5m).

The balance sheet remains strong and debt free with year-end cash balances of £6.6m (2013: £4.8m). During the year the Group invested £0.9m in a number of important areas including IT systems, plant automation and securing international trademark protection for its leading global brands and products. Significant progress has been made implementing a global enterprise resource planning system.

The objective to prioritise the growth of our value-added specialist feed additives has also led to the Group’s decision to dispose of our organic feed business, leaving the Group solely focused on this single objective. Subsequent to the year end the Group has sold its interest in organic feed for £0.75m net proceeds inclusive of £0.25m relating to a production related earn out. Based on 2014 results the annual impact on revenues is £3.1m, however, the low margin nature of this business generates a negligible impact on profits. The cash proceeds have further strengthened the balance sheet.

The Board is recommending a full year dividend of 4.5 pence per share, an increase of 29% over last year’s payment of 3.5 pence per share. Shareholder approval will be sought at the Annual General Meeting, to be held on 25 June 2015, to pay the dividend on 31 July 2015 to shareholders on the register on 17 July 2015.

Operations – International agriculture

The International Division continued to make good progress in its key markets of the Americas and Asia Pacific with revenue in sterling increasing 23% and 10% respectively. At constant exchange rates the increase would have been 28% and 13% respectively, reflecting the impact of currency volatility.

In Asia Pacific, Group sales to customers in Australia, Bangladesh, New Zealand, Philippines and South Korea advanced strongly while in the Americas there were similar sales improvements to customers in Bolivia, Colombia, Ecuador and Mexico.

Anpario sold product in 71 countries in 2014 with the ten largest customers contributing 64% of total revenue and 60% of total gross profit. These statistics endorse the Group’s strategy to prioritise investment and resources on those countries that offer the greatest potential and opportunity for growth. The ongoing adverse political situation in parts of the Middle East and Africa continued to restrict access to and limit business in these regions. There have been early signs of improvement in some of these territories and we remain ready to respond rapidly when local conditions permit.

Brazil, China and the United States are the Group’s largest and most important markets. In China, low pig prices in the early months of the year did not hamper the development of our operation in that country, which has now built a key account list of close to fifty customers. Each of these accounts has over 10,000 breeding sows and our subsidiary is focused on increasing its share of these accounts. Broadening our product offering in China through a conservative launch into the poultry and feed mill channels will serve to lower exposure to the ongoing short term volatility in the swine segment and build our growth over the medium term. Our Brazilian business continued to develop its data bank of trials, whilst supporting growth in the region through servicing its customers.

2014 was the Company’s first year trading in the United States, the largest poultry meat producer in the world and the third largest pork producer after China and the European Union. Our initial focus is on pig and poultry and we are encouraged by the response from customers to our product technology. In the US, we have introduced the Anpario brand and are marketing leading products from the Group’s extensive portfolio of best in class feed additives including Orego-Stim, our 100% natural essential oil product, which is being marketed to pig, chicken, and turkey farmers in a number of states. Building on this successful launch, we have now introduced our acidifier range, including the Salkil and pHorce brands. These products are part of our gut health range and have attracted notable interest from some of the largest poultry producers in the US.

The introduction in the US of our natural product technology, which promotes gut health and helps animals perform to their genetic potential, is proving timely as the Food and Drug Administration and consumer groups are increasingly demanding that food producers reduce the use of antibiotics in the food chain. Anpario’s natural feed additives are well positioned to take advantage of this opportunity. A number of poultry trials have been successfully completed, with Orego-Stim showing feed conversion ratio benefits and a reduction in the incidence of coccidiosis, a serious poultry disease, as well as a number of other benefits, which can help the farmer improve profitability. Further trials are due to commence with some of these key producers.

The prevalence of porcine epidemic diarrhoea virus (PEDv) in the US has caused significant losses for the industry. A number of Anpario products were used to conduct small-scale trials with pigs fed an infected diet to which our products were then added. The pigs were then tested daily for PEDv and it was found that the incidence of PEDv had declined. This work was reinforced by some of our Japanese and Thai customers who also experienced a lower incidence rate of PEDv when using our products. Although these were small-scale trials they have given confidence to customers to buy our products in order to combat PEDv, as well as gaining the other benefits associated with our technology.

The US is a large market and we believe our products are well placed to make this a significant growth opportunity. It is still early days but the signs are encouraging.

The International agricultural division is well positioned for the year ahead and will remain focused on implementing its strategy to work with local distributors to build sales and market penetration while remaining close to the customer.

Operations - UK agriculture

The success of the Group’s strategy to focus on supplying value-added specialist natural feed additives and work closely with customers has been demonstrated by the progress of the UK Division. Following the acquisition of Optivite in 2009, this division has been re-structured and re-positioned. During this time, fundamental changes were made to facilitate this process with sales and profit momentum building over the last couple of years. The delivery of a 53% rise in gross profit in 2014 over 2013 emphasises the potential of the division and gives us encouragement and confidence for the future.

The successful launch in 2014 of a new toxin binder, Ultrabond, has enabled the division to become a major force within the industry. This innovative product is supplied to the ruminant and pig home-mix sectors, alongside our acidifier range, to manage life stages from birth to breeding in the pig and poultry sectors. Detailed work with universities and customers is ongoing to further improve product efficacy as well as combating diseases caused by bacteria, such as campylobacter.

The success of the UK operation has led to close co-operation with the International Division, thus ensuring that market know how and product performance data is available and utilised throughout the Group. An example of this knowledge transfer is the UK business’s success in promoting Clean n Dry, a drying agent and anti-viral product for the farm environment, which was conceived by our team in China. The UK division has recently agreed a partnership with a leading agricultural hygiene company to market this product incorporating their anti-viral compound through their on-farm sales team.

Innovation and product development

The research effort and resulting product portfolio is constantly being refreshed to optimise animal health, hygiene and nutrition and to ultimately deliver quality and value for consumers.

The Group’s technical team is working closely with customers and leading universities to develop a pipeline of new or improved products to enhance the health and performance of livestock and to overcome global disease challenges such as PEDv and campylobacter. This research includes a number of product trials across several different territories and initiatives in aquaculture. The Group will continue to review and, where applicable, invest in improving the efficiency of its manufacturing facility in order to maintain the highest quality standards for our customers whilst maximising operational gearing to enhance earnings and create further value for our shareholders.

People

We now employ over 100 people across the globe. We have made significant progress across Anpario in developing our teams through the recruitment of high quality staff with many years of experience and success in our markets. This diverse and talented workforce is, and continues to be, the key to our success and on behalf of all shareholders I thank everyone for their hard work and commitment.

Outlook

The current year has started well with the Group’s performance in line with our expectations. The successful establishment of subsidiaries in the three largest meat producing markets provides Anpario with a sound platform from which to continue to grow the business.

Our strong trading position, debt free balance sheet and the continuing cash generative nature of the business, leave Anpario well positioned to finance further organic growth and consider selective investments or earnings enhancing acquisitions to further enhance value for all its stakeholders.

Richard S Rose

Chairman

4 March 2015

 

1 All prior year values have been restated under IFRS 11 to reflect the use of the equity method accounting which has replaced proportionate consolidation and is disclosed in note 2.24 to the financial statements.

2 Underlying earnings per share represents profit for the period before unwinding of discount on contingent consideration and prior year tax adjustments, divided by the weighted average number of shares in issue.

3 Adjusted EBITDA represents operating profit £3.3m (2013: £2.9m) adjusted for: share based payments £0.2m (2013: £0.2m); and depreciation, amortisation and impairment charges of £0.4m (2013 £0.4m).

Consolidated income statement
for the year ended 31 December 2014
                 

restated 1

2014 2013
Notes £000 £000
                         
Revenue 3 26,568 25,950
Cost of sales               (16,779)       (16,875)
Gross profit 9,789 9,075
Administrative expenses               (6,497)       (6,144)
Operating profit 3,292 2,931
Finance income 7 48 50
Finance cost of contingent consideration       7       (21)       (78)
Profit before income tax 3,319 2,903
Income tax expense       10       (159)       (329)
Profit for the year from continuing operations 3,160 2,574
Profit attributable to:
Owners of the parent               3,160       2,574
Profit for the year from continuing operations               3,160       2,574
 
 
Basic earnings per share 8 17.18p 14.10p
Diluted earnings per share 8 15.71p 13.13p
 

The Company has elected to take the exemption under Section 408 of the Companies Act 2006 to not present the Parent Company income statement. The profit for the Parent Company for the year was £2,691,000 (2013: £1,858,000).

Consolidated statement of comprehensive income
for the year ended 31 December 2014
            restated1
2014 2013
£000 £000
                 
Profit for the year 3,160 2,574
Items that may be subsequently reclassified to profit or loss:
Exchange difference on translating foreign operations       (42)       (17)
Total comprehensive income for the year       3,118       2,557
                 
Attributable to the owners of the parent: 3,118 2,557
Non-controlling interests       -       -
Total comprehensive income for the year       3,118       2,557
 

1 Prior Year comparatives have been restated following the adoption of IFRS11 as disclosed in note 2.24

Consolidated and parent company balance sheets
as at 31 December 2014
                             
Group Company
restated1
2014 2013 2014 2013
Notes £000 £000 £000 £000
 
Intangible assets 11 9,826 9,302 9,826 6,844
Property, plant and equipment 12 3,018 3,054 3,010 3,036

Investment in Subsidiaries

13 - - 4,738 4,299
Deferred tax assets       18       179       204       179       204
Non-current assets               13,023       12,560       17,753       14,383
 
Inventories 14 1,711 1,816 1,227 1,364
Trade and other receivables 15 7,699 6,979 8,296 5,282
Cash and cash equivalents       16       6,631       4,779       6,144       4,055
Current assets               16,041       13,574       15,667       10,701
 
Total assets               29,064       26,134       33,420       25,084
 
Called up share capital 21 4,622 4,573 4,622 4,573
Share premium 4,051 3,922 4,051 3,922
Other reserves 23 (389) (345) 1,694 (325)
Retained earnings       22       14,462       11,979       12,980       10,966
Total equity               22,746       20,129       23,347       19,136
 
Deferred tax liabilities       18       1,044       1,000       1,044       838
Non-current liabilities 1,044 1,000 1,044 838
 
Trade and other payables 17 5,129 4,693 8,916 5,104
Current income tax liabilities               145       312       113       6
Current liabilities 5,274 5,005 9,029 5,110
                                         
Total liabilities               6,318       6,005       10,073       5,948
 
Total equity and liabilities               29,064       26,134       33,420       25,084
 

1 Prior Year comparatives have been restated following the adoption of IFRS11 as disclosed in note 2.24

Consolidated and parent company statements of changes in equity
for the year ended 31 December 2014
                             

Called up
share capital

Share
premium

Other reserves

Retained
earnings

Total equity
£000 £000 £000 £000 £000
                                         
Balance at 1 January 2013 restated1       4,555       3,884       (497)       9,973       17,915
Profit for the year - - - 2,574 2,574
Currency translation differences       -       -       (17)       -       (17)
Total comprehensive income for the year       -       -       (17)       2,574       2,557
Issue of share capital 18 38 - - 56
Share-based payment adjustments - - 169 - 169
Dividends relating to 2012       -       -       -       (568)       (568)
Transactions with owners       18       38       169       (568)       (343)
Balance at 31 December 2013 restated1       4,573       3,922       (345)       11,979       20,129
Profit for the year - - - 3,160 3,160
Currency translation differences       -       -       (42)       -       (42)
Total comprehensive income for the year       -       -       (42)       3,160       3,118
Issue of share capital 49 129 - - 178
Purchase of treasury shares - - (116) - (116)
Share-based payment adjustments - - 114 - 114
Dividends relating to 2013       -       -       -       (677)       (677)
Transactions with owners       49       129       (2)       (677)       (501)
Balance at 31 December 2014       4,622       4,051       (389)       14,462       22,746
 
 
Company

Called up
share capital

Share
premium

Other reserves

Retained
earnings

Total equity
£000 £000 £000 £000 £000
                                         
Balance at 1 January 2013       4,555       3,884       (494)       9,676       17,621
Profit for the year       -       -       -       1,858       1,858
Total comprehensive income for the year       -       -       -       1,858       1,858
Issue of share capital 18 38 - - 56
Share-based payment adjustments - - 169 - 169
Dividends relating to 2012       -       -       -       (568)       (568)
Transactions with owners       18       38       169       (568)       (343)
Balance at 31 December 2013       4,573       3,922       (325)       10,966       19,136
Profit for the year       -       -       -       2,691       2,691
Total comprehensive income for the year       -       -       -       2,691       2,691
Issue of share capital 49 129 - - 178
Purchase of treasury shares - - (116) - (116)
Share-based payment adjustments - - 114 - 114
Arising on hive up of subsidiary - - 2,021 - 2,021
Dividends relating to 2013       -       -       -       (677)       (677)
Transactions with owners       49       129       2,019       (677)       1,520
Balance at 31 December 2014       4,622       4,051       1,694       12,980       23,347
 
Consolidated and parent company statements of cash flows
for the year ended 31 December 2014
                       
Group Company
restated1
2014 2013 2014 2013
£000 £000 £000 £000
                                 
Cash generated from operating activities 3,500 3,099 3,459 4,361
Income tax paid       (253)       (176)       (108)       (59)
Net cash generated from operating activities       3,247       2,923       3,351       4,302
Investment in subsidiary - - (206) -
Acquisition of subsidiary, net of cash acquired - (429) - (429)
Cash acquired from hived up subsidiaries - - 330 -
Purchases of property, plant and equipment (289) (470) (284) (463)
Proceeds from disposal of property, plant and equipment 34 - 27 -
Payments to acquire intangible assets (574) (401) (559) (377)
Interest received       48       50       45       50
Net cash used in investing activities       (781)       (1,250)       (647)       (1,219)
Purchase of treasury shares (116) - (116) -
Proceeds from issuance of shares 178 56 178 56
Dividend paid to Company's shareholders       (677)       (568)       (677)       (568)
Net cash used in financing activities       (615)       (512)       (615)       (512)
Net increase in cash and cash equivalents 1,851 1,161 2,089 2,571
Effect of exchange rate changes 1 (48) - -
Cash and cash equivalents at the beginning of the year       4,779       3,666       4,055       1,484
Cash and cash equivalents at the end of the year       6,631       4,779       6,144       4,055
 
 
Group Company
restated1
2014 2013 2014 2013
Cash generated from operating activities £000 £000 £000 £000
                                 
Profit before income tax 3,319 2,903 2,654 1,975
Net finance cost (27) 28 (23) 28
Depreciation, amortisation and impairment 357 375 282 282
Profit on disposal of property, plant and equipment (16) - (16) -
Share-based payments 114 169 114 169
Changes in working capital:
Inventories 129 (230) 369 (151)
Trade and other receivables (755) 82 1,329 1,225
Trade and other payables       379       (228)       (1,250)       833
Net cash generated from operating activities       3,500       3,099       3,459       4,361
 

Notes to the financial statements

for the year ended 31 December 2014

1. General information

Anpario plc (“the Company”) and its subsidiaries (together “the Group”) produce and distribute natural feed additives for animal health, hygiene and nutrition.

The Company is traded on the London Stock Exchange AIM market and is incorporated and domiciled in the UK. The address of its registered office is Manton Wood Enterprise Park, Worksop, Nottinghamshire, S80 2RS.

2. Summary of significant accounting policies

2.1. Basis of preparation

The consolidated financial information comprises the accounts of the company and its subsidiaries drawn up to 31 December 2014.

The consolidated financial information has been prepared on the basis of the accounting policies set out below.

Of the new standards, amendments and interpretations that are in issue and mandatory for the financial year ending to 31 December 2014, the impact of the adoption of IFRS 11 ‘Joint arrangements’ has a material impact on this consolidated financial information as disclosed in note 2.24.

The consolidated financial information included in the preliminary announcement does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2013 were approved by the Board of Directors on 9 May 2014 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006. Statutory accounts for the year ended 31 December 2014 will be delivered in due course.

The consolidated financial information for the year ended 31 December 2014 is neither audited nor reviewed.

2.2. Basis of consolidation

The consolidated financial statements comprise the accounts of the Company and its subsidiaries drawn up to 31 December 2014.

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the Group’s voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies, etc. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 in profit or loss. Contingent consideration that is classified as equity is not re-measured and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from intercompany transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

2.3. Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Group’s activities. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue on despatch of goods to the customer.

2.4. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board.

2.5. Foreign currency translation

Monetary assets and liabilities denominated in foreign currencies are translated into Pounds Sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are included in the profit or loss for the period.

  • Functional and presentational currency
    Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which operates (“functional currency”). The consolidated financial statements are presented in Pounds Sterling, which is the Company’s functional and presentational currency.
  • Transactions and balances
    Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

    Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised as part of the fair value gain or loss.
  • Group companies
    The results and financial position of all Group entities that have a functional currency different from the presentational currency are translated into the presentational currency as follows:
    • assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of the balance sheet;
    • income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case the income and expenses are translated at the rate on the dates of the transaction); and
    • all resulting exchange differences are recognised as a separate component of equity.

    On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recognised in equity are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rate.

2.6. Intangible assets

  • Patents, trademarks and registrations
    Separately acquired patents, trademarks and registrations are shown at historical cost. Patents, trademarks and registrations have finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of patents, trademarks and registrations over their estimated useful lives of 5 to 20 years.
  • Goodwill
    Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable net assets acquired. Goodwill is reviewed for impairment at least annually or more frequently if events or changes in circumstances indicate a potential impairment. Goodwill is carried at cost less accumulated impairment losses and is allocated to the appropriate cash-generating unit for the purpose of impairment testing. Any impairment is recognised immediately through the income statement and is not subsequently reversed.
  • Development costs
    Development costs are stated at cost less accumulated amortisation and impairment. Development costs are recognised if it is probable that there will be future economic benefits attributable to the asset, the cost of the asset can be measured reliably, the asset is separately identifiable and there is control over the use of the asset. The assets are amortised when available for use on a straight-line basis over the period over which the Group expects to benefit from these assets. Research expenditure is written off to the income statement in the year in which it is incurred.

    Development costs that are directly attributable to the design and testing of identifiable and unique products controlled by the Group are recognised as intangible assets when the following criteria are met:
    • it is technically feasible to complete the product so that it will be available for use;
    • management intends to complete the product and use or sell it;
    • there is an ability to use or sell the product;
    • it can be demonstrated how the product will generate probable future economic benefits;
    • adequate technical, financial and other resources to complete the development and to use or sell the product are available; and
    • the expenditure attributable to the product during its development can be reliably measured.

    Directly attributable costs that are capitalised as part of the product include the development employee costs and an appropriate portion of relevant overheads.

  • Brands
    Brands are stated at cost less accumulated amortisation and impairment. Brand names acquired in a business combination are recognised at fair value based on an expected royalty value at the acquisition date. Useful lives of brand names are estimated and amortised over 20 years, except where they are deemed to have an indefinite life and consequently are not amortised. Brands with an indefinite useful life are reviewed for impairment at least annually or more frequently if events or changes in circumstances indicate a potential impairment. However, they are allocated to appropriate cash-generating units and subject to impairment testing on an annual basis. Any impairment is recognised immediately through the income statement and is not subsequently reversed.
  • Customer relationships
    Customer relationships acquired in a business combination are recognised at fair value at the acquisition date. Customer relationships are deemed to have a finite useful life and are carried at original fair value less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected useful life of 10 years.

2.7. Impairment of non-financial assets

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment, if so; the asset’s recoverable amount is estimated. The recoverable amount is the higher of its fair value less costs to sell and its value in use. For intangible assets that are not yet available for use, goodwill or other intangible assets with an indefinite useful life, an impairment test is performed at each balance sheet date.

In assessing value in use, the expected future cash flows from the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.

A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a change in the estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined (net of depreciation and or amortisation) had no impairment loss been recognised in prior years. For goodwill, a recognised impairment loss is not reversed.

2.8. Investments

Investments in subsidiaries are stated at cost less provision for diminution in value.

2.9. Joint ventures

Joint ventures are accounted for using the equity method following the adoption of IFRS 11. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group's share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group's net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures. Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. The effects of the change in accounting policy on the financial position and consolidated income statement of the Group are shown in note 2.24.

2.10. Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Land is not depreciated. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:

Buildings           50 years or period of lease if shorter
Plant and machinery 3-10 years
Fixtures, fittings and equipment 3-10 years

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment and an impairment loss is recognised in the income statement where appropriate.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within the income statement.

2.11. Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is determined using the average cost method. The cost of finished goods comprises raw materials, direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business.

2.12. Trade receivables

Trade receivables are recognised and carried at original invoice amounts less an allowance for any amount estimated to be uncollectable.

2.13. Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

2.14. Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.

2.15. Derivative financial instruments

The Group uses derivative financial instruments to manage certain exposures to fluctuations in foreign currency exchange rates, although these have not been designated as qualifying cash flow hedges. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value and gains or losses recognised in the income statement.

2.16. Leasing and hire purchase

The Group has entered into hire purchase contracts and leases certain property, plant and equipment.

Assets obtained under finance leases and hire purchase contracts, where the Group has substantially all the risks and rewards of ownership are capitalised as property, plant and equipment and depreciated over the shorter of the lease term and their useful lives. Obligations under such agreements are included in borrowings net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the income statement so as to produce constant periodic rates of charge on the net obligations outstanding in each period.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

2.17. Exceptional items

Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

2.18. Taxation

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.19. Employee benefits

  • Share-based payments

    The group issues equity-settled share-based payments and shares under the Joint Share Ownership Plan (“JSOP”) to certain employees. These are measured at fair value and along with associated expenses are recognised as an expense in the income statement with a corresponding increase (net of expenses) in equity. The fair values of these payments are measured at the dates of grant using appropriate option pricing models, taking into account the terms and conditions upon which the awards are granted. The fair value is recognised over the period during which employees become unconditionally entitled to the awards subject to the Group’s estimate of the number of awards which will lapse, either due to employees leaving the Group prior to vesting or due to non-market based performance conditions not being met. Proceeds received on the exercise of share options are credited to share capital and share premium.

    The Group operates a number of equity-settled, share-based compensation plans, under which receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:
    • including any market performance conditions; (for example, an entity’s share price);
    • excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of over a specified time period); and
    • including the impact of any non-vesting conditions (for example, the requirement for employees to save).

    Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.

    In addition, in some circumstances employees may provide services in advance of the grant date and therefore the grant date fair value is estimated for the purposes of recognising the expense during the period between service commencement period and grant date.

    At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

    When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

    The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.

    The social security contributions payable in connection with the grant of the share options is considered an integral part of the grant itself, and the change will be treated as a cash-settled transaction.

  • Pension obligations

    The Group operates a defined contribution pension scheme and contributes a percentage of salary to individual employee schemes. Pension contributions are recognised as an expense as they fall due and the Group has no further payment obligations once the contributions have been paid.

2.20. Equity

Share capital is determined using the nominal value of Ordinary shares that have been issued. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

The share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issue of shares are deducted from the share premium account, net of any related income tax benefits.

The premium arising on the issue of consideration shares to acquire a business is credited to the merger reserve.

Amounts arising on the restructuring of equity and reserves to protect creditor interests are credited to the special reserve.

Exchange differences arsing on the consolidation of foreign operations are taken to the translation reserve.

The share-based payment reserve is credited with amounts charged to the income statement in respect of the movements in the fair value of equity-settled share-based payments and shares issued under the JSOP.

The JSOP shares reserve arises when the Company issues equity share capital under the JSOP, which is held in trust by Anpario plc Employees’ Share Trust (“the Trust”). The interests of the Trust are consolidated into the Group’s financial statements and the relevant amount treated as a reduction in equity.

2.21. Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

2.22. Financial risk management

The Group is exposed to a number of financial risks, including credit risk, liquidity risk, exchange rate risk and capital risk.

  • Credit risk

    Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and deposits with financial institutions. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group has an established credit policy under which each new customer is analysed for creditworthiness before the Group’s payment and delivery terms and conditions are offered. Where possible, risk is minimised through settlement via letters of credit and purchase of credit insurance. The Group’s investment policy restricts the investment of surplus cash to interest bearing deposits with banks and building societies with high credit ratings.
  • Liquidity risk

    Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or damage to the Group’s reputation.
  • Exchange rate risk

    The Group’s principal functional currency is Pounds Sterling. However, during the year the Group had exposure to Euros, US Dollars and other currencies. The Group’s policy is to maintain natural hedges, where possible, by matching revenue and receipts with expenditure and put in place forward contracts as considered appropriate to mitigate the risk.
  • Capital risk

    The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends payable to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

2.23. Critical accounting estimates and judgements

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are:

  • Estimated impairment value of intangible assets

    The Group tests annually whether intangible assets have suffered any impairment. Impairment provisions are recorded as applicable based on Directors’ estimates of recoverable values.
  • Income taxes

    The Group is subject to income taxes predominately in the United Kingdom but also in other jurisdictions. Significant estimates are required in determining the provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated queries by the tax authorities based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different for the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

2.24. Impact of accounting standards and interpretations

The following standards have been adopted by the Group for the first time for the financial year beginning on 1 January 2014.

IFRS 11, ‘Joint arrangements’ focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an arrangement. A joint operator accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are accounted for under the equity method. Proportional consolidation of joint arrangements is no longer permitted. The consolidated financial statements have been restated on the adoption of IFRS 11. The impact on key financial information is immaterial and a summary of the main changes are detailed in the following table:

      as reported       adjustments       restated
2013 2013
£000 £000 £000
Revenue       26,264       (314)       25,950
Gross profit 9,219 (144) 9,075
Administrative expenses       (6,306)       162       (6,144)
Operating profit       2,913       18       2,931
Profit before income tax       2,885       18       2,903
 
as reported adjustments restated
2013 2013
£000 £000 £000
Current assets 13,554 20 13,574
Equity 20,089 40 20,129
Current Liabilities 5,025 (20) 5,005
 

Retained earnings at 1 January 2013 have been restated by £30,000.

The impact on the cashflow is immaterial but has been restated for consistency.

In addition the following standards have been adopted by the Group for the first time for the financial year beginning on 1 January 2014, none of which have a material impact on the Group:

  • IFRS 10, ‘Consolidated financial statements’
  • IFRS 12, ‘Disclosures of interests in other entities’
  • IAS 27 (revised 2011) 'Separate financial statements'
  • IAS 28 (revised 2011) 'Associates and joint ventures'
  • Amendment to IAS 32, ‘Financial instruments: Presentation’
  • Amendments to IAS 36, ‘Impairment of assets’
  • Amendment to IAS 39, ‘Financial instruments: Recognition and measurement’

A number of new standards and amendments to standards and interpretations are effective for annual years beginning after 1 January 2015, and have not been applied in preparing these consolidated financial statements. These have been set out below:

  • IFRS 9, ‘Financial instruments’
  • IFRS 15, ‘Revenue from contracts with customers’
  • IFRIC 21, ‘Levies’

The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in future periods.

3. Segment information
 
All revenues from external customers are derived from the sale of goods in the ordinary course of business to the agricultural markets and are measured in a manner consistent with that in the income statement.
 
Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions. The Board considers the business from a geographic perspective.
 
Management considers adjusted EBITDA to assess the performance of the operating segments, which comprises profit before interest, tax, depreciation and amortisation adjusted for share-based payments and exceptional items.
 
Inter-segment revenue is charged at prevailing market prices.
 
      UK and Eire       International       Total
£000 £000 £000
Year ended 31 December 2014                        
 
Total segmental revenue 6,852 21,155 28,007
Inter-segment revenue       (281)       (1,158)       (1,439)
Revenue from external customers       6,571       19,997       26,568
 
Adjusted EBITDA 527 3,324 3,851
Depreciation, amortisation and impairment charges (54) (303) (357)
Income tax credit/(expense) 7 (166) (159)
                         
Total assets       7,907       21,157       29,064
Total liabilities       (1,526)       (4,792)       (6,318)
 
 
Year ended 31 December 2013 (restated)
Total segmental revenue 6,314 20,358 26,672
Inter-segment revenue       -       (722)       (722)
Revenue from external customers       6,314       19,636       25,950
 
Adjusted EBITDA 312 3,185 3,497
Depreciation, amortisation and impairment charges (44) (331) (375)
Income tax expense (15) (314) (329)
                         
Total assets       7,506       18,628       26,134
Total liabilities       (1,483)       (4,522)       (6,005)
 
 
A reconciliation of adjusted EBITDA to profit before income tax is provided as follows:
restated
2014 2013
£000 £000
 
Adjusted EBITDA for reportable segments 3,851 3,497
Depreciation, amortisation and impairment charges (357) (375)
Share-based payment charges (202) (191)
Finance income 48 50
Finance cost of contingent consideration               (21)       (78)
Profit before income tax               3,319       2,903
The entity is domiciled in the UK.
 
The total of non-current assets other than financial instruments and deferred tax assets (there are no employment benefit assets and rights arising under insurance contracts) located in the UK is £12,836,000 (2013: £12,352,000) and the total of these assets located in other countries is £8,000 (2013: £4,000).
 
Share-based payment charges of £202,000 (2013: £191,000) includes £88,000 (2013: £22,000) of professional fees that have been expensed during 2014.
4. Expenses by nature            
restated
2014 2013
£000 £000
 
Changes in inventories of finished goods (28) (120)
Raw materials and consumables used 13,759 14,005
Employee expenses (note 6) 4,033 3,859
Research and development expenditure 25 4
Transportation expenses 1,887 1,816
Other operating expenses 3,022 2,852
Operating lease payments 42 37
Depreciation, amortisation and impairment charges 357 375
Share-based payment charges 202 191
Gain on foreign exchange transactions      

(23)

      -
Total cost of sales, distribution and administrative expenses      

23,276

      23,019
 
 
5. Auditors' remuneration
 
During the year the Group obtained the following services from the Company’s auditors:
 
2014 2013
Group £000 £000
 
Fees payable to Company’s auditor for the audit of Parent Company consolidated financial statements 48 36
 
 
Fees payable to Company’s auditor for other services:
The audit of Company Subsidiaries 5 8
Tax compliance service 28 28
Other non-audit services       15       11
        96       83
 
 
6. Employees
 
Number of employees
The average monthly number of employees including Directors during the year was:
 
2014 2013
Group Number Number
Production 27 28
Administration 23 25
Sales and Technical       51       38
Total average headcount       101       91
 
Company
Production 27 28
Administration 19 15
Sales and Technical       37       30
Total average headcount       83       73
 

 

           
 
Employment costs
 
2014 2013
Group £000 £000
 
Wages and salaries 3,554 3,373
Social security costs 341 348
Other pension costs 138 138
Share-based payment charges       202       191
        4,235       4,050
 
 
7. Finance income/(cost)
restated
2014 2013
£000 £000
 
Interest receivable on short-term bank deposits       48       50
Finance income       48       50
 
Unwinding of discount on contingent consideration       (21)       (78)
Finance cost of contingent consideration       (21)       (78)
                 
Net finance income/(cost)       27       (28)

The unwinding of the discount on the contingent consideration is not a borrowing related cost however, it is required to be classified as finance cost.

8. Earnings per share            
restated
2014 2013
 
Weighted average number of shares in Issue (000's) 18,393 18,260
Adjusted for effects of dilutive potential Ordinary shares (000's)       1,717       1,341
Weighted average number for diluted earnings per share (000's)       20,110       19,601
 
Profit attributable to owners of the Parent (£000's) 3,160 2,574
 
Basic earnings per share 17.18p 14.10p
Diluted earnings per share 15.71p 13.13p
 
restated
2014 2013
£000 £000
Underlying profit attributable to owners of the Parent
Profit attributable to owners of the Parent 3,160 2,574
Unwinding of discount on contingent consideration 21 78
Prior year tax adjustments       (318)       (250)
Underlying profit       2,863       2,402
 
Underlying earnings per share 15.57p 13.15p
Diluted underlying earnings per share 14.24p 12.25p
 
 
9. Dividend payable
 
2014 2013
£000 £000
 
2012 final dividend paid: 3.0p per 23p share - 568
2013 final dividend paid: 3.5p per 23p share       677       -
        677       568

A dividend in respect of the year ended 31st December 2014 of 4.5p per share, amounting to a total dividend of £0.9m, is to be proposed at the Annual General Meeting on 25 June 2015. These financial statements do not reflect this dividend payable.

10. Income tax expense            
 
Group
2014 2013
£000 £000
Current tax
Current tax on profits for the year 226 349
Adjustment for prior years       (136)       -
Total current tax       90       349
 
Deferred tax
Origination and reversal of temporary differences 251 230
Adjustment for prior years       (182)       (250)
Total deferred tax (note 19)       69       (20)
Income tax expense       159       329
 
Adjustments in respect of prior years represent the benefits from enhanced research and development tax credits and the corresponding increased availability of losses in future periods.
The tax on the Company's profit before tax, differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the Company as follows:
      2014       2013
Factors affecting the charge for the year £000 £000
 
Profit before tax       3,318       2,903
Tax at domestic rates applicable to profits in the respective countries - 21.5% (2013: 23.25%) 713 671
Tax effects of:
Non-deductible expenses 39 100
Losses not recognised for deferred tax 54 -
Research and development tax credits (282) (206)
Prior year tax adjustments (318) (250)
Other tax adjustments       (47)       14
Income tax expense       159       329
Corporation tax is calculated at 21.5% (2013: 23.25%) of the estimated assessable profit for the year.

 

Reductions to the UK tax rate were introduced in the Finance Act 2013. The changes reduced the corporation tax rate to 21% from 1 April 2014 and to 20% from 1 April 2015. These changes have been enacted at the balance sheet date and, therefore, are recognised in these Financial Statements.

11. Intangible assets
                                   
Group Goodwill Brands

Customer
relationships

Patents,
trademarks and
registrations

Development
costs

Total
£000 £000 £000 £000 £000 £000
Cost                                                
As at 1 January 2013 5,490 2,210 686 116 1,622 10,124
Additions       -       -       -       132       269       401
As at 31 December 2013 5,490 2,210 686 248 1,891 10,525
Additions - - - 175 399 574
Reclassification from property, plant and equipment       -       -       -       -       102       102
As at 31 December 2014       5,490       2,210       686       423       2,392       11,201
 
Accumulated amortisation/impairment                                                
As at 1 January 2013 - 27 91 26 904 1,048
Charge for the year - 35 68 14 8 125
Impairment provision       -       -       -       -       50       50
As at 31 December 2013 - 62 159 40 962 1,223
Charge for the year       -       36       69       32       15       152
As at 31 December 2014       -       98       228       72       977       1,375
 
Net book value
As at 31 December 2014       5,490       2,112       458       351       1,415       9,826
As at 31 December 2013       5,490       2,148       527       208       929       9,302
As at 1 January 2013       5,490       2,183       595       90       718       9,076

Reclassification from property, plant and equipment relates to software development.

Company       Goodwill       Brands      

Customer
relationships

     

Patents,
trademarks and
registrations

     

Development
costs

      Total
£000 £000 £000 £000 £000 £000
Cost                                                
As at 1 January 2013 4,144 1,501 176 91 1,622 7,534
Additions       -       -       -       133       244       377
As at 31 December 2013 4,144 1,501 176 224 1,866 7,911
Additions - - - 173 385 558
Reclassification from property, plant and equipment - - - - 102 102
Arising on hive up of subsidiary (note 25)       1,346       620       383       18       36       2,403
As at 31 December 2014       5,490       2,121       559       415       2,389       10,974
 
Accumulated amortisation/impairment                                                
As at 1 January 2013 - - 53 24 904 981
Charge for the year - - 17 11 8 36
Impairment provision       -       -       -       -       50       50
As at 31 December 2013 - - 70 35 962 1,067
Charge for the year       -       9       31       29       12       81
As at 31 December 2014       -       9       101       64       974       1,148
 
Net book value
As at 31 December 2014       5,490       2,112       458       351       1,415       9,826
As at 31 December 2013       4,144       1,501       106       189       904       6,844
As at 1 January 2013       4,144       1,501       123       67       718       6,553
 
Reclassification from property, plant and equipment relates to software development.
 

Goodwill is allocated to the Group’s cash-generating units (“CGU’s”) identified according to trading brand. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond a five-year period are extrapolated using estimated growth rates of 1.5% per annum (2013: 1.5%). The discount rate used of 12% (2013: 12%) is pre-tax and reflects specific risks relating to the operating segments.

Based on the calculations of the recoverable amount of each CGU, no impairment to goodwill was identified.
Goodwill is allocated as follows:
     
Goodwill
Acquisition of Kiotechagil operations 3,552
Acquisition of Optivite operations 592
Acquisition of Meriden operations       1,346
As at 31 December 2013       5,490
As at 31 December 2014       5,490
Brands relate to the fair value of the Optivite brands acquired in the year ended 31 December 2009 and Meriden brands acquired in the year ended 31 December 2012. These are deemed to have between 20 years and an indefinite useful life due to the inherent intellectual property contained in the products, the longevity of the product lives and global market opportunities. Brands with indefinite useful lives are assessed for impairment with goodwill in the annual impairment review as described above.
Amortisation of brands, customer relationships and patents, trademarks and registrations is included in administrative expenses, totalling £152,000 (2013: £125,000) for the Group and £81,000 (2013: £36,000) for the Company.
The total impairment provision against development costs that has been provided in the year is nil (2013: £50,000).
 
12. Property, plant and equipment
                             
Group Land and buildings

Plant and
machinery

Fixtures, fittings and
equipment

Assets in the course
of construction

Total
£000 £000 £000 £000 £000
Cost                                        
As at 1 January 2013 2,034 900 387 - 3,321
Additions 3 226 78 163 470
Disposals       (5)       (53)       (1)       -       (59)
As at 31 December 2013 2,032 1,073 464 163 3,732
Additions 78 117 94 - 289
Transfer of assets in construction 61 - - (61) -
Reclassificiation to intangible assets - - - (102) (102)
Disposals       -       (64)       (62)       -       (126)
As at 31 December 2014       2,171       1,126       496       -       3,793
 
Accumulated depreciation                                        
As at 1 January 2013 162 246 129 - 537
Charge for the year 28 116 56 - 200
Disposals       (5)       (53)       (1)       -       (59)
As at 31 December 2013 185 309 184 - 678
Charge for the year 29 111 65 - 205
Disposals       -       (62)       (46)       -       (108)
As at 31 December 2014       214       358       203       -       775
 
Net book value
As at 31 December 2014       1,957       768       293       -       3,018
As at 31 December 2013       1,847       764       280       163       3,054
As at 1 January 2013       1,872       654       258       -       2,784
 
 
Company Land and buildings

Plant and
machinery

Fixtures, fittings and
equipment

Assets in the course
of construction

Total
£000 £000 £000 £000 £000
Cost                                        
As at 1 January 2013 2,034 889 371 - 3,294
Additions 3 224 73 163 463
Disposals       (5)       (53)       (1)       -       (59)
As at 31 December 2013 2,032 1,060 443 163 3,698
Additions 78 111 94 - 283
Transfer of assets in construction 61 - - (61) -
Reclassificiation to intangible assets - - - (102) (102)
Hive up of subsidiary - - 4 - 4
Disposals       -       (64)       (48)       -       (112)
As at 31 December 2014       2,171       1,107       493       -       3,771
 
Accumulated depreciation/impairment                                        
As at 1 January 2013 162 238 125 - 525
Charge for the year 28 115 53 - 196
Disposals       (5)       (53)       (1)       -       (59)
As at 31 December 2013 185 300 177 - 662
Charge for the year 29 109 63 - 201
Disposals       -       (62)       (40)       -       (102)
As at 31 December 2014       214       347       200       -       761
 
Net book value
As at 31 December 2014       1,957       760       293       -       3,010
As at 31 December 2013       1,847       760       266       163       3,036
As at 1 January 2013       1,872       651       246       -       2,769
Reclassification from property, plant and equipment relates to software development.
Held within land and buildings is an amount of £700,000 (2013: £700,000) in respect of non-depreciable land.
13. Investment in subsidiaries
     
Company Unlisted investments
£000
Cost        
As at 1 January 2013 and at 31 December 2013 6,691
Investment in subsidiaries 536
Arising on hive up of subsidiary operations       (97)
As at 31 December 2014       7,130
 
Provisions for diminution in value        
As at 1 January 2013, 31 December 2013 and at 31 December 2014     2,392
 
Net book value        
As at 31 December 2014       4,738
As at 31 December 2013 4,299
As at 1 January 2013 4,299
The increase in investment in subsidiaries is principally in Anpario Saúde Nutrição Animal Ltda.
On 31 March 2014 the Company disposed of its investment in Meriden Trading Pty Limited for Australian $1.
 
Holdings of more than 20 per cent
                       
The Company holds more than 20 per cent of the share capital of the following companies:
 
Company

Country of registration
or incorporation

Principal activity

Percentage
held

Shares
held Class

 

Anpario (Shanghai) Biotech Co., Ltd.

China Technology Services 100 Ordinary

(formerly, Kiotechagil (Shanghai) Agriculture Science and Technology Limited)

Anpario Inc US Technology Services 100 Ordinary
Anpario Saúde Nutrição Animal Ltda Brazil Technology Services 100 Ordinary
Anpario UK Limited England and Wales Dormant 100 Ordinary
Meriden Animal Health Limited England and Wales Technology Services 100 Ordinary
Orego-Stim Limited England and Wales Dormant 100 Ordinary
Meriden (Shanghai) Chemical Products Co., Ltd. China Technology Services 100 Ordinary
Optivite Animal Nutrition Private Limited India Dormant 100 Ordinary
Optivite Latinoamerica SA de CV Mexico Technology Services 98 Ordinary
Optivite SA (Proprietary) Limited South Africa Technology Services 100 Ordinary
Optivite Limited England and Wales Dormant 100 Ordinary
Optivite International Limited England and Wales Dormant 100 Ordinary
Aquatice Limited England and Wales Dormant 100 Ordinary
Agil Limited England and Wales Dormant 100 Ordinary
Kiotechagil Limited England and Wales Dormant 100 Ordinary
Kiotech Limited England and Wales Dormant 100 Ordinary
14. Inventories                        
 
Group Company
restated
2014 2013 2014 2013
£000 £000 £000 £000
 
Raw materials and consumables 1,062 1,195 1,062 1,067
Finished goods and goods for resale       649       621       165       297
        1,711       1,816       1,227       1,364
The cost of inventories recognised as expense and included in 'cost of sales' amounted to £13,731,000 (2013: £13,885,000) for the Group and £11,115,000 (2013: £10,412,000) for the Company.
15. Trade and other receivables
                       
Group Company
restated
2014 2013 2014 2013
£000 £000 £000 £000
 
Trade receivables 6,728 6,524 6,441 4,470
Less: provision for impairment of trade receivables       (64)       (126)       (64)       (119)
Trade receivables - net 6,664 6,398 6,377 4,351
Receivables from Subsidiary undertakings - - 1,247 713
Receivables from joint ventures - 236 - -
Taxes 224 96 209 87
Prepayments and accrued income       811       249       463       131
        7,699       6,979       8,296       5,282
The ageing analysis of net trade receivables is as follows:
      Group       Company
2014       2013 2014       2013
£000 £000 £000 £000
 
Up to 3 months 5,386 4,383 5,125 3,192
3 to 6 months 1,084 1,659 1,083 829
Over 6 months       194       356       169       330
Trade receivables - net       6,664       6,398       6,377       4,351
As of 31 December 2014 trade receivables of £1,109,000 (2013: £1,292,000) for the Group and £1,084,000 (2013: £917,000) for the Company were past due but not impaired. These relate to longstanding customers where there is no recent history of default. The ageing analysis of these receivables is as follows:
      Group       Company
2014       2013 2014       2013
£000 £000 £000 £000
 
Up to 3 months 940 1,240 940 904
3 to 6 months 65 26 65 13
Over 6 months       104       26       79       -
        1,109       1,292       1,084       917
As of 31 December 2014 trade receivables of £64,000 (2013: £126,000) for the Group and £64,000 (2013: £119,000) for the Company were impaired and fully provided for. The individually impaired receivables mainly related to historic debt for which recovery is still being sought. The Group mitigates its exposure to credit risk by extensive use of credit insurance and letters of credit to remit amounts due. The ageing of these trade receivables is as follows:
      Group       Company
2014       2013 2014       2013
£000 £000 £000 £000
 
3 to 6 months - - - -
Over 6 months       64       126       64       119
        64       126       64       119
Movement on the Group provision for impairment of trade receivables as follows:
                       
Group Company
2014 2013 2014 2013
£000 £000 £000 £000
 
At 1 January 126 109 126 102
Provisions for receivables created 63 60 63 60
Amounts written off as unrecoverable (7) (19) (7) (19)
Amounts recovered during the year       (118)       (24)       (118)       (24)
At 31 December       64       126       64       119
 
The carrying amounts of net trade and other receivables are denominated in the following currencies:
 
Group Company
2014 2013 2014 2013
£000 £000 £000 £000
 
Pounds Sterling 2,814 3,605 2,814 2,423
Euros 1,227 1,174 1,227 1,106
US Dollars 2,367 1,418 2,335 822
Other currencies       256       201       1       -
At 31 December       6,664       6,398       6,377       4,351
The other classes within trade and other receivables do not contain impaired assets.
16. Cash and cash equivalents
 
Cash and cash equivalents comprise cash and short-term deposits held by Group companies. The carrying amount of these assets approximates to their fair value.
17. Trade and other payables                        
 
Group Company
restated
2014 2013 2014 2013
£000 £000 £000 £000
 
Trade payables 3,315 3,086 3,269 2,115
Amounts due to subsidiary undertakings - - 4,368 1,651
Taxes and social security costs 237 155 185 88
Other payables 207 577 150 508
Accruals and deferred income       1,370       875       944       742
        5,129       4,693       8,916       5,104
Included within 'Other payables' above is £71,000 (2013: £550,000) in respect of contingent consideration arising on the acquisition of Meriden.
18. Deferred income tax                        
 
2014 2013
Group £000 £000
 
At 1 January 796 816
Income statement expense/(credit) (note 10)                       69       (20)
At 31 December                       865       796
 
Deferred tax liabilities / (assets)
 

Accelerated
tax allowances

Fair value
gains

Losses Total
£000 £000 £000 £000
 
At 1 January 2013 377 667 (228) 816
Income statement expense/(credit) (note 10)       8       (52)       24       (20)
At 31 December 2013 385 615 (204) 796
Income statement expense/(credit) (note 10)       145       (101)       25       69
At 31 December 2014       530       514       (179)       865
 
Classified as:
Deferred income tax asset (179)
Deferred income tax liability 1,044
 
Reductions to the UK tax rate were introduced in Finance Act 2013. The changes reduced the corporation tax rate to 21% from 1 April 2014 and to 20% from 1 April 2015. These changes have been enacted at the balance sheet date and, therefore, are recognised in these Financial Statements.
 
A deferred tax asset has been recognised for UK tax losses carried forward on the grounds that sufficient future taxable profit is forecast to be realised. No deferred tax asset is recognised in respect of losses incurred in overseas subsidiaries, due to the uncertainty surrounding the timing of the utilisation of those losses.
                  2014       2013
Company £000 £000
 
At 1 January 634 548
Arising on hive up of Meriden trade and assets into the company 232 -
Income statement expense/(credit)                       (1)       86
At 31 December                       865       634
 
Deferred tax liabilities / (assets)
 

Accelerated
tax allowances

Fair value
gains

Losses Total
£000 £000 £000 £000
 
At 1 January 2013 402 374 (228) 548
Income statement expense/(credit)       66       (4)       24       86
At 31 December 2013 468 370 (204) 634
Arising on hive up of Meriden trade and assets into the company 2 230 232
Income statement expense/(credit)       60       (86)       25       (1)
At 31 December 2014       530       514       (179)       865
 
Classified as:
Deferred income tax asset (179)
Deferred income tax liability 1,044
19. Capital commitments            
 
The Group had authorised capital commitments as at 31st December 2014 as follows:
 
2014 2013
£000 £000
 
Property, plant and equipment       26       164
Total       26       164
 
20. Financial commitments            
 
At 31 December 2014 the Group had future aggregate minimum lease payments under non-cancellable operating leases as follows:
 
2014 2013
£000 £000
                 
Less than one year 76 38
Between one and five years 110 22
Greater than five years       -       -
Total       186       60
 
The lease expenditure charged to the income statement during the year is disclosed in note 4.
21. Called up share capital        
 
2014 2013
£000 £000
Authorised
86,956,521 Ordinary shares of 23p each 20,000 20,000
1,859,672 'A' Shares of 99p each       1,841   1,841
21,841 21,841
Alloted, called up and fully paid
19,880,789 (2013: 19,805,572) Ordinary shares of 23p each 4,573 4,555
Options exercised Ordinary shares of 23p each       49   18
20,094,275 (2013: 19,880,789) Ordinary shares of 23p each       4,622   4,573
 
During the year 213,486 (2013: 75,217) ordinary shares of 23 pence each were issued pursuant to the exercise of employee share options.
22. Retained earnings            
 
Group Company
£000 £000
 
At 1 January 2013 9,973 9,676
Profit for the year 2,574 1,858
Dividends relating to 2012       (568)       (568)
At 31 December 2013 restated 11,979 10,966
Profit for the year 3,160 2,691
Dividends relating to 2013       (677)       (677)
At 31 December 2014       14,462       12,980
 
23. Other reserves                        
 
Other reserves comprise:
 
Group Company
2014 2013 2014 2013
£000 £000 £000 £000
 
Treasury shares (185) (69) (185) (69)
Joint Share Ownership Plan (1,210) (1,210) (1,210) (1,210)
Merger reserve 228 228 228 228
Unrealised reserve (note 25) - - 2,021 -
Share-based payment reserve 840 726 840 726
Translation reserve       (62)       (20)       -       -
        (389)       (345)       1,694       (325)
On 16 September 2014 the company purchased 31,000 of its own ordinary shares of 23p each for 254p each. On 6 October 2014 the company purchased 15,000 of its own ordinary shares of 23p each for 248p each. The total number of ordinary shares of 23p each held in treasury at the year end was 143,042 (2013: 97,042).
24. Share-based payments                        
 
Movements in the number of share options outstanding are as follows:
 

Weighted
average
exercise price

 Shares 2014

Weighted
average
exercise price

 Shares 2013
(p) 000 (p) 000
                                 
Outstanding at 1 January 101 1,447 81 1,096
Granted during the year 242 234 144 426
Exercised during the year       83       (213)       74       (75)
Outstanding at 31 December 104 1,468 101 1,447
Excercisable at 31 December               807               870
 
Share options outstanding at the end of the year have the following expiry dates and weighted average exercise prices:
 

Weighted
average
exercise price

 Shares 2014

Weighted
average
exercise price

 Shares 2013
(p) 000 (p) 000
 
2015 165 44 165 44
2016 99 223 99 223
2017 98 45 104 65
2018 32 96 32 96
2019 69 240 68 262
2020 79 55 81 121
2021 76 10 76 60
2022 89 94 89 150
2023 144 427 144 426
2024       242       234       -       -
                1,468               1,447
On 9 June 2014 39,397 options were issued to employees under the Group's SAYE scheme. During the year options totalling 120,000 (2013: 150,000) were awarded under the Company's Enterprise Management Incentive Scheme (EMIS) and 213,486 options were exercised.
 
The fair value of services received in return for share options granted and the shares which have been issued into the joint beneficial ownership of the participating Executive Directors and the Trustee of The Anpario plc Employees' Share Trust is calculated based on appropriate valuation models.
 
The expense is apportioned over the vesting period and is based on the number of financial instruments which are expected to vest and the fair value of those financial instruments at the date of the grant. The charge for the year in respect of share options granted and associated expenses amounts to £202,000 (2013: £191,000) of which £81,000 (2013: £22,000) is related to professional fees that have been expensed during the year.
 
The weighted average fair value of options granted during the year was determined based on the following assumptions using the Black-Scholes pricing model.
 
Plan       Unapproved       Unapproved       SAYE       EMIS       EMIS       EMIS
Grant date 1-Feb 26-Mar 9-Jun 23-Jul 20-Oct 1-Dec
Number of options granted (000) 25 50 39 10 10 100
Grant price (p) 253.0 248.0 283.8 237.5 231.5 242.0
Exercise price (p) 253.0 248.0 227.0 237.5 231.5 242.0
Carrying cost (per annum) N/A N/A N/A N/A N/A N/A
Vesting period (years) 5 3 3 3 3 3
Option expiry (years) 10 10 10 10 10 10
Expected volatility of the share price 20% 20% 20% 20% 20% 20%
Dividends expected on the shares 1.38% 1.41% 1.22% 1.47% 1.47% 1.45%
Risk-free rate 1.78% 1.82% 1.88% 1.93% 1.48% 1.30%
Fair value (p) 43.74 42.86 80.19 41.15 39.26 39.16
 
25. Business combinations
 
On the 30 September 2014 the operations and net assets of Meriden Animal Health Limited, a wholly owned subsidiary, were transferred to Anpario plc as a hive up transaction.
 
This represents a common control transaction and hence is outside the scope of IFRS3. The Group has therefore selected to account for the transaction using predecessor values which represent the value of the assets and liabilities in the highest level of the Group. These values have therefore been determined from the carrying value of assets and liabilities in the consolidated group as at 30 September 2014. The assets and liabilities transferred as at 30 September 2014 are as follows:
 
      Carrying value
£000
 
Goodwill 1,346
Brands 620
Customer relationships 383
Trademarks, registrations and development 54
Cash and cash equivalents 330
Property, plant and equipment 4
Inventories 232
Trade and other receivables 4,346
Trade and other payables (744)
Corporation tax (252)
Deferred tax liabilities       (232)
Carrying value of assets hived up       6,087
The consideration for the hive up represented the carrying value of the assets and liabilities as recorded in the statutory accounting records of Meriden Animal Health Limited and amounted to £3,969,000. The balance of £2,118,000 represents net assets previously recognised on consolidation and which are also hived up under the provisions of predecessor accounting.
 
To correctly reflect the accounting for the hive up, the Company has therefore credited investments in subsidiaries by £97,000 and reserves by £2,021,000. This reserve remains unrealised until the investment in Meriden is recovered by means of a dividend payable from Meriden Animal Health Limited to Anpario plc.
26. Related party transactions
Group and Company
 
The following transactions were carried out with related parties:
P A Lawrence, Chairman of ECO Animal Health Group plc, is a Non-Executive Director of the Company and £32,500 (2013: £39,000) was paid to ECO Animal Health Group plc in respect of his services and expenses. £16,000 (2013:£16,000) was received from ECO Animal Health Group plc in respect of pension committments to a former employee.
Electro Switch Limited, a company controlled by close family members of the Chairman, R S Rose, received the sum of £1,000 (2013: £15,000).

Steve Harris was a director of Meriden Animal Health Limited until 14 April 2014 and was also a director and shareholder of Meriden (Guangzhou) Biotech Co.Ltd. Sales to Meriden (Guangzhou) Biotech Co.Ltd until this date were £271,000 (2013: £1,002,000).

Amounts due to related parties at 31 December 2014 were, ECO Animal Health Group plc £3,000 (2013: nil), Electro Switch Limited £nil (2013: £2,000).
Key management comprises the Directors of Anpario plc and their emoluments are as follows:
      2014       2013
£000 £000
 
Short-term employment benefits 790 650
Post employment benefits 32 39
Share-based payments       43       40
Total       865       729
           
Company
 
The following transactions were carried out with related parties:
 
2014 2013
£000 £000
 
Sales of goods:
- Subsidiaries 1,337 721
Sales of services:
- Subsidiaries 62 -
 
Purchases of goods:
- Subsidiaries 40 23
Purchases of services:
- Subsidiaries       34       54
 
Year-end balances with related parties:
 
Receivables from related parties (note 15):
- Subsidiaries 1,247 713
 
Payables to related parties (note 17):
- Subsidiaries 4,368 1,651
27. Post balance sheet event
Subsequent to the year end the group has sold its interest in organic feed for £0.75m net proceeds inclusive of £0.25m relating to a production related earn out. Based on 2014 results the annual impact on revenues is £3.1m, however, the low margin nature of this business generates a negligible impact on profits. The cash proceeds have further strengthened the balance sheet.
 

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