Half-year Report

Half-year Report

Anpario plc

14 September 2016

Anpario plc (AIM: ANP)

Anpario plc, the international producer and distributor of natural feed additives for animal health, hygiene and nutrition is pleased to announce its interim results for the six months to 30 June 2016.

Financial and operational highlights

Financial highlights

  • 9% increase in adjusted profit before tax from continuing operations1 to £1.7m (2015: £1.6m)
  • 5% rise in adjusted EBITDA2 to £2.0m (2015: £1.9m)
  • 3% improvement in gross profit to £5.1m (2015: £5.0m)
  • Cash balances of £10.9m at 30 June 2016 (30 June 2015: £7.9m)

Operational highlights

  • Successful launch of Ultrabond in the United States shows potential in the dairy sector
  • New regional commercial directors appointed
  • Regional office established in Dubai
  • Supply of Orego-Stim to a major US integrator for antibiotic free chicken
  • Distribution of Orego-Stim in China transferred to Anpario subsidiary

Richard S Rose, Chairman, commented:

“In the first half, the resilience and positioning of Anpario delivered both a modest profit growth and an improved cash position and we are building on that. We are still in a transition phase of building stronger commercial relationships with end users but we remain confident that the Group will continue to make steady progress growing the business. Our strong balance sheet gives Anpario a sound platform from which to implement change and build earnings growth organically while also seeking acquisition opportunities.”

Chairman’s Statement

Anpario delivered a resilient profit performance for the six months to 30 June 2016. The Group’s policy to focus on value added natural feed additives and efficiency improvements in our manufacturing plant, together with favourable foreign exchange movements, have helped to maintain profitability.

The recent appointment of regional commercial directors is enabling the company to better understand local markets and to begin to build closer relationships with major end users. The sales process to these larger customers is demanding but by capitalising on the experience of our own local teams we are able to demonstrate the merits of our product portfolio in partnership with our key distributors.

Financial Review

In the six months to 30 June 2016 adjusted profit before tax increased by 9% to £1.7m (2015: £1.6m). Adjusted EBITDA for the period rose by 5% to £2.0m (2015: £1.9m).

Revenues for the period were £10.7m (2015: £11.1m); this sterling reduction of 4% was equivalent to a 9% fall at constant exchange rates. The principal negative factors were lower sales of Orego-stim in China as a result of a legal dispute in addition to ongoing challenging economic and political factors in Middle East markets.

Gross profit has continued to increase, advancing 3% to £5.1m (2015: £5.0m). This further improvement represents an uplift in gross margin percentage to 48% (2015: 45%), mainly as a result of product mix and foreign exchange gains.

Operating expenses increased from £3.4m to £3.6m after including £0.3m of costs in connection with internal restructuring and the set-up of new operations. We continue to invest in plant automation with expenditure this year to date of £0.4m and further expenditure of £0.6m committed in the second half of the year. On completion all production and packaging lines will be fully automated. Development costs include £0.2m from product pipeline costs including university trials and £0.2m in respect of product and trademark registrations.

The balance sheet is strong and debt free with further positive cash generation. The Group’s cash position remains stable with a cash balance of £10.9m (30 June 2015: £7.9m).

Underlying diluted earnings per share increased by 1% to 7.35 pence per share (2015: 7.31 pence).

Operations

Sales to continental Europe rose 9% with strong performances from Germany, the Netherlands and Spain. In Northern Europe, Anpario is building sales to the dairy sector, which is a new market area for the Group. The UK and Irish markets experienced a decline in sales due to challenging market conditions in the dairy sector.

Asia, excluding China, experienced modest sales growth with good performances in Indonesia, the Philippines, Thailand, and Vietnam. Over stocking by some distributors at the beginning of the year took a few months to work through. Our China subsidiary made further steady progress building on its established position in the pig sector by targeting the poultry and feed mills segments. However, in China, we are in a dispute with a local distributor regarding ownership of the Orego-Stim trademark, consequently our China subsidiary has now registered a new brand name - Meriden-Stim. Anpario will be the only supplier of Orego-Stim in China but marketed under the Meriden-Stim brand. Our Chinese team is also launching a marketing communication campaign to support these changes and the relaunch of our leading natural oregano product. We are confident of regaining Orego-Stim’s leading position in China.

Latin America achieved a 10% sales growth with notable strong performances from Bolivia and Ecuador. The region has been affected by rising corn prices, particularly in poultry production, where margins are small. The rising costs have led to a reduction in meat consumption in some markets but we see further opportunities for growth in the region while, as ever, paying close attention to credit management.

The United States continues to grow its customer base particularly with Orego-Stim, our leading phytogenics product for animal health, and Ultrabond, a product targeted at the dairy sector. The natural antioxidant and health properties of our oregano oil help to boost the natural immunity of birds, thereby enabling them to present a robust response to the environment. Orego-Stim is now additionally being used in the organic market where it has been certified for use by a number of specialist producers and also supports antibiotic free poultry production. Sales of Ultrabond to the US dairy sector continue to advance with the product maintaining animal health, thereby delivering measurable benefits in performance and hence improved profitability for producers.

We continue to expand our specialist sales team in the US to drive growth in the region. Anpario has reached an understanding with Pharmgate Animal Health to represent and introduce Anpario products to identified prospects predominantly in the swine market. Pharmgate Animal Health is a joint operation between Pharmgate LLC of Wilmington, North Carolina and Eco Animal Health Group plc.

The Middle East and Africa remain difficult territories as a result of ongoing geopolitical events, especially in Turkey and Egypt which have been traditionally strong markets. During the period we began supplying our poultry products to Kuwait. The establishment of a new regional office in Dubai and recruitment of a regional head in May 2016 will help us better serve existing local markets and facilitate expansion.

Innovation and development

Anpario’s unique carrier technology enhances animals’ natural gut microbiota processes helping to boost immunity. Pressure on farmers to reduce the use of antibiotics in animal production will require more than one simple solution; Anpario’s natural additive technology addresses this issue by supporting the animal’s ability to present a robust response to the environment and the threat of infection.

Outlook

In the first half, the resilience and positioning of Anpario delivered both a modest profit growth and an improved cash position and we are building on that. We are still in a transition phase of building stronger commercial relationships with end users but we remain confident that the Group will continue to make steady progress growing the business. Our strong balance sheet gives Anpario a sound platform from which to implement change and build earnings growth organically while also seeking acquisition opportunities.

Richard S Rose
Chairman
14 September 2016

1 Adjusted profit before tax from continuing operations represents profit before income tax from continuing operations £1.514m (2015: £1.610m) adjusted for closure and restructuring costs £0.235m (2015: £nil)

2 Adjusted EBITDA represents operating profit £1.480m (2015: £1.583m) adjusted for: share based payments £0.047m (2015: £0.135m); depreciation, amortisation and impairment charges of £0.254m (2015: £0.195m) and closure and restructuring costs £0.235m (2015: £nil).

 
Unaudited consolidated income statement
for the six months ended 30 June 2016
    six months to   six months to   year ended

30/6/2016

30/6/2015

31/12/2015

Notes £000 £000 £000
 
Continuing operations
Revenue 3 10,687 11,143 23,322
Cost of sales       (5,561 )   (6,164 )   (12,852 )
Gross profit 5,126 4,979 10,470
Administrative expenses (3,411 ) (3,396 ) (6,916 )
Closure and restructuring costs       (235 )   -     -  
Operating profit 1,480 1,583 3,554
Finance income       34     27     62  
Profit before income tax 1,514 1,610 3,616
Income tax expense       (203 )   (151 )   (367 )
Profit for the period from continuing operations       1,311     1,459     3,249  
Discontinued operations
Profit for the period from discontinued operations
(attributable to owners of the parent)       -     368     487  
Profit for the period       1,311     1,827     3,736  
 
Profit attributable to:
Owners of the parent       1,311     1,827     3,736  
Profit for the period       1,311     1,827     3,736  
 
 
 
Basic earnings per share from continuing operations 4 6.55p 7.53p 16.52p
Diluted earnings per share from continuing operations 4 6.42p 7.31p 15.97p
 
Basic earnings per share 4 6.55p 9.43p 18.99p
Diluted earnings per share 4 6.42p 9.16p 18.37p
 
 
Unaudited consolidated statement of comprehensive income
for the six months ended 30 June 2016
six months to six months to year ended

30/6/2015

30/6/2015

31/12/2015

£000 £000 £000
 
Profit for the period 1,311 1,827 3,736
Items that may be subsequently reclassified to profit or loss:
Exchange difference on translating foreign operations       (19 )   (39 )   (88 )
Total comprehensive income for the period       1,292     1,788     3,648  
                 
Attributable to the owners of the parent:       1,292     1,788     3,648  
 
Total comprehensive income attributable to equity
shareholders arises from:
Continuing operations 1,292 1,420 3,161
Discontinued operations       -     368     487  
Total comprehensive income for the period       1,292     1,788     3,648  
Unaudited consolidated balance sheet
as at 30 June 2016
    as at   as at   as at

30/6/2016

30/6/2015

31/12/2015

Notes £000 £000 £000
 
Intangible assets 5 10,390 10,014 10,168
Property, plant and equipment 6 3,289 3,083 3,069
Deferred tax assets       307     179     306  
Non-current assets       13,986     13,276     13,543  
 
Inventories 2,014 1,646 1,815
Trade and other receivables 6,379 6,975 6,791
Cash and cash equivalents       10,870     7,938     9,337  
Current assets       19,263     16,559     17,943  
 
Total assets       33,249     29,835     31,486  
 
Called up share capital 5,095 5,040 5,058
Share premium 7,796 7,528 7,613
Other reserves (3,331 ) (3,807 ) (3,374 )
Retained earnings       18,598     16,289     17,287  
Total equity       28,158     25,050     26,584  
 
Deferred tax liabilities       1,176     1,044     1,176  
Non-current liabilities 1,176 1,044 1,176
 
Trade and other payables 3,759 3,474 3,681
Current income tax liabilities       156     267     45  
Current liabilities 3,915 3,741 3,726
                 
Total liabilities       5,091     4,785     4,902  
 
Total equity and liabilities       33,249     29,835     31,486  
Unaudited consolidated statement of changes in equity
for the six months ended 30 June 2016
         
Called up share capital Share premium Other

reserves

Retained earnings Total

equity

£000 £000 £000 £000 £000
 
Balance at 1 January 2015   4,622   4,051   (389 )   14,462     22,746  
Profit for the period - - - 1,827 1,827
Currency translation differences   -   -   (39 )   -     (39 )
Total comprehensive income for the period   -   -   (39 )   1,827     1,788  
Issue of share capital 418 3,477 - - 3,895
Joint-share ownership plan - - (3,415 ) - (3,415 )
Share-based payment adjustments   -   -   36     -     36  
Transactions with owners   418   3,477   (3,379 )   -     516  
Balance at 30 June 2015   5,040   7,528   (3,807 )   16,289     25,050  
Profit for the period - - - 1,909 1,909
Currency translation differences   -   -   (49 )   -     (49 )
Total comprehensive income for the period   -   -   (49 )   1,909     1,860  
Issue of share capital 18 85 - - 103
Deferred tax regarding share–based payments - - 455 - 455
Cash flow hedge reserve - - (23 ) - (23 )
Share-based payment adjustments - - 50 - 50
Dividends relating to 2014   -   -   -     (911 )   (911 )
Transactions with owners   18   85   482     (911 )   (326 )
Balance at 31 December 2015   5,058   7,613   (3,374 )   17,287     26,584  
Profit for the period - - - 1,311 1,311
Currency translation differences   -   -   (19 )   -     (19 )
Total comprehensive income for the period   -   -   (19 )   1,311     1,292  
Issue of share capital 37 183 - - 220
Share-based payment adjustments   -   -   62     -     62  
Transactions with owners   37   183   62     -     282  
Balance at 30 June 2016   5,095   7,796   (3,331 )   18,598     28,158  
Unaudited consolidated statements of cash flows
for the six months ended 30 June 2016
 
  six months to   six months to   year ended

30/6/2016

30/6/2015

31/12/2015

£000 £000 £000
 
Cash generated from operating activities 1,943 1,074 3,599
Income tax paid   (13 )   (123 )   (205 )
Net cash generated from operating activities   1,930     951     3,394  
Purchases of property, plant and equipment (367 ) (198 ) (301 )
Net proceeds from disposal of discontinued operations - 344 623
Payments to acquire intangible assets (354 ) (275 ) (690 )
Interest received   34     27     62  
Net cash used in investing activities   (687 )   (102 )   (306 )
Acquisition of shares by JSOP - (3,415 ) (3,415 )
Proceeds from issuance of shares 220 3,895 3,998
Dividend paid to Company's shareholders   -     -     (911 )
Net cash used in financing activities   220     480     (328 )
Net increase in cash and cash equivalents 1,463 1,329 2,760
Effect of exchange rate changes 70 (22 ) (54 )
Cash and cash equivalents at the beginning of the period   9,337     6,631     6,631  
Cash and cash equivalents at the end of the period   10,870     7,938     9,337  
 
 
 
six months to six months to year ended

30/6/2016

30/6/2015

31/12/2015

£000 £000 £000
Cash generated from operating activities
Profit before income tax including discontinued operations 1,514 1,623 4,227
Net finance income (34 ) (27 ) (62 )
Net proceeds on disposal of discontinued operations - - (623 )
Depreciation, amortisation and impairment 254 195 573
Profit on disposal of property, plant and equipment - - 24
Share-based payments 62 36 86
Fair value of contingent consideration - 130 -
Changes in working capital:
Inventories 28 60 (141 )
Trade and other receivables 430 673 907
Trade and other payables   (311 )   (1,616 )   (1,392 )
Net cash generated from operating activities   1,943     1,074     3,599  

1. General information

Anpario plc ("the Company") and its subsidiaries (together "the Group") manufacture and supply high performance natural feed additives for the agricultural market with products to improve the health and output of animals.

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

2. Basis of preparation

The consolidated financial statements comprise the accounts of the Company and its subsidiaries drawn up to 30 June 2016.

The Group has presented its financial statements in accordance with International Reporting Standards ("IFRSs"), as endorsed by the European Union, IFRS IC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. Full details on the basis of the accounting policies used are set out in the Group's financial statements for the year ended 31 December 2015, which are available on the Company's web site at www.anpario.com.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2015 were approved by the Board of Directors on 8 March 2016 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.

The consolidated interim financial information for the period ended 30 June 2016 is neither audited nor reviewed.

3. Segment information

Management has determined the operating sements based on the reports reviewed by the Board that are used to make strategic decisions. The Board considers the business from a geographic perspective. Following recent changes, including the appointment of Regional directors and the opening of additional regional offices, Anpario has made adjustments to its segmental reporting structure. All previous values have been restated in line with the new structure.

  Americas   Asia   Europe   MEA   Head Office   Total
£000 £000 £000 £000 £000 £000
 
for the six months ended 30 June 2016
Total segmental revenue 1,832 4,177 3,975 1,465 - 11,449
Inter-segment revenue   -     -     (762 )   -     -     (762 )
Revenue from external customers   1,832     4,177     3,213     1,465     -     10,687  
 
Adjusted EBITDA   655     1,397     1,243     681     (1,960 )   2,016  
Depreciation and amortisation (4 ) (1 ) (2 ) - (247 ) (254 )
Net finance income - - - - 34 34
Share-based payments - - - - (47 ) (47 )
Exceptional items (21 ) (6 ) - (25 ) (183 ) (235 )
Income tax   -     1     -     -     (204 )   (203 )
Profit for the period   630     1,391     1,241     656     (2,607 )   1,311  
                         
Total assets                   33,249     33,249  
Total liabilities                   (5,091 )   (5,091 )
 
 
Americas Asia Europe MEA Head Office Total
£000 £000 £000 £000 £000 £000
 
for the six months ended 30 June 2015
Total segmental revenue 1,555 4,382 3,974 1,938 - 11,849
Inter-segment revenue   -     -     (706 )   -     -     (706 )
Revenue from external customers   1,555     4,382     3,268     1,938     -     11,143  
 
Adjusted EBITDA   636     1,294     1,194     815     (2,026 )   1,913  
Depreciation and amortisation (3 ) (2 ) (2 ) - (188 ) (195 )
Net finance income - - - 1 26 27
Share-based payments - - - - (135 ) (135 )
Income tax - - - - (151 ) (151 )
Profit on disposal of continued operations   -     -     -     -     368     368  
Profit for the period   633     1,292     1,192     816     (2,106 )   1,827  
                         
Total assets                   29,835     29,835  
Total liabilities                   (4,785 )   (4,785 )
 
 
Americas Asia Europe MEA Head Office Total
£000 £000 £000 £000 £000 £000
 
for the year ended 31 Dec 2015
Total segmental revenue 3,417 9,614 5,251 3,545 - 21,827
Inter-segment revenue   -     -     1,495     -     -     1,495  
Revenue from external customers   3,417     9,614     6,746     3,545     -     23,322  
 
Adjusted EBITDA   1,340     3,134     2,522     1,581     (4,188 )   4,389  
Depreciation and amortisation (7 ) (3 ) (4 ) - (559 ) (573 )
Net finance (income)/expense - - - 1 61 62
Share-based payments - - - - (262 ) (262 )
Income tax (2 ) (12 ) - - (353 ) (367 )
Profit on disposal of continued operations   -     -     -     -     487     487  
Profit for the year   1,331     3,119     2,518     1,582     (4,814 )   3,736  
                         
Total assets                   31,486     31,486  
Total liabilities                   (4,902 )   (4,902 )
4. Earnings per share
     
six months to six months to year ended

30/6/2016

30/6/2015

31/12/2015

 
Weighted average number of shares in Issue (000's) 20,024 19,366 19,669
Adjusted for effects of dilutive potential Ordinary shares (000's)   381   585   673  
Weighted average number for diluted earnings per share (000's)   20,405   19,951   20,342  
             
Profit attributable to owners of the Parent from continuing operations (£000's)   1,311   1,459   3,249  
Result of discontinued operations   -   368   487  
Profit attributable to owners of the Parent (£000's)   1,311   1,827   3,736  
 
Basic earnings per share from continuing operations 6.55p 7.53p 16.52p
Diluted earnings per share from continuing operations 6.42p 7.31p 15.97p
 
Basic earnings per share 6.55p 9.43p 18.99p
Diluted earnings per share 6.42p 9.16p 18.37p
 
 
six months to six months to year ended

30/6/2016

30/6/2015

31/12/2015

£000 £000 £000
Underlying profit attributable to owners of the Parent
Profit attributable to owners of the Parent 1,311 1,459 3,249
Exceptional items 188 - -
Prior year tax adjustments   -   -   (157 )
Underlying profit from continuing operations   1,499   1,459   3,092  
Result of discontinued operations   -   368   487  
Underlying profit attributable to owners of the Parent   1,499   1,827   3,579  
 
Underlying earnings per share from continuing operations 7.49p 7.53p 15.72p
Diluted underlying earnings per share from continuing operations 7.35p 7.31p 15.20p
 
Underlying earnings per share 7.49p 9.43p 18.20p
Diluted underlying earnings per share 7.35p 9.16p 17.59p
5. 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 2016 5,490 2,210 686 688 2,817 11,891
Additions   -   -   -   109   245   354
As at 30 June 2016   5,490   2,210   686   797   3,062   12,245
 
Accumulated amortisation/impairment                        
As at 1 January 2016 - 134 297 138 1,154 1,723
Charge for the period   -   17   34   23   58   132
As at 30 June 2016   -   151   331   161   1,212   1,855
 
Net book value
As at 30 June 2016   5,490   2,059   355   636   1,850   10,390
As at 1 January 2016   5,490   2,076   389   550   1,663   10,168
6. 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 2016 2,171 1,357 522 - 4,050
Additions 9 48 7 303 367
Disposals   -   (44 )   -   -       (44 )
As at 30 June 2016   2,180   1,361     529   303       4,373  
 
Accumulated depreciation                        
As at 1 January 2016 245 456 280 - 981
Charge for the period 15 71 36 - 122
Disposals   -   (19 )   -   -       (19 )
As at 30 June 2016   260   508     316   -       1,084  
 
Net book value
As at 30 June 2016   1,920   853     213   303       3,289  
As at 1 January 2016   1,926   901     242   -       3,069  
 

Enquiries:

Anpario plc
Richard Edwards, Chief Executive Officer +44 (0)7776 417129
Karen Prior, Group Finance Director +44 (0)1909 537 380

Peel Hunt +44 (0)207 418 8900
Dan Webster
George Sellar

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