Final Results

RNS Number : 8871N

Animalcare Group PLC

04 October 2012

 



Animalcare Group plc

("Animalcare" or the "Company")

Full Year Results

Animalcare Group plc ("the Group" or "Animalcare"), a leading supplier of veterinary medicines, announces results for the year ended 30 June 2012. Animalcare is made up of three product groups: Licensed Veterinary Medicines, Companion Animal Identification and Animal Welfare products.

Financial Highlights

·      Revenue from continuing operations down 8.2% to £10.9m (2011: £11.8m)

o  Sales of licensed veterinary medicines (excluding Buprecare ampoules) up 16.8%

·      Underlying profit before tax from continuing operations* down 21.7% to £2.3m (2011: £3.0m)

·      Underlying basic earnings per share* down 25% to 8.8p (2011: 11.8p)

·      Year end cash position grew from £1.18m to £2.3m

·      Total dividend for the year up 12.5% to 4.5p (2011: 4p)

* Underlying measures exclude, where applicable, amortisation of acquired intangibles, impairment of goodwill, fair value movements on interest hedging, impairments to current and non-current assets and other charges relating to Group reorganisation.

Operational Highlights

·      Launch of five new generic veterinary medicines during the year

·      Growth in UK sales of licensed veterinary medicines significantly ahead of market

·      Development pipeline on track for products already in regulatory review and new products in development

·      Successful development and implementation of new identification microchip database

·      Strong net cash flow from operating activities of £1.1m (2011: cash outflow £0.4m)

Post-period end

·      Launch of Vitofyllin in the UK and Ireland in a market worth approximately £1.5m per annum

James Lambert, Chairman of Animalcare, said:

"As anticipated, this has been a difficult year for Animalcare but I believe the measures the Board has taken during it will see the business beginning to grow again during the current financial year.

The board believes with the focus on growing our Companion Animal Identification business, the resumption of supply of Buprecare ampoules, and the planned launch of four new licensed veterinary products during the financial year Animalcare should return to growth. Your Board is encouraged by current trading for the beginning of the new financial year."

For further information, please contact:

Animalcare Group plc	Tel: [phone]
Stephen Wildridge (Chief Executive Officer)
Chris Brewster (Chief Financial Officer)
N+1 Brewin (Nominated Advisor & Broker)
Aubrey Powell / Richard Lindley	Tel: [phone]
Walbrook PR Ltd	Tel: [phone]
Paul McManus	07980 541 893 or [e-mail]
Helen Westaway	07841 917 679 or [e-mail]

Our Business and Strategy

The overall strategy for the Animalcare Group changed to reflect the success of Animalcare Ltd, the veterinary supplies activity of the Group. The non-profitable, underperforming business of the old Ritchey Group has now been disposed of leaving only Animalcare Ltd. All the Group's efforts are now focussed in driving this business forward.

The growth of Animalcare Ltd was based on strategies designed to build a sustainable high performing business in the UK through the development and sale of generic veterinary medicines and other complementary products. The success of those strategies has now given the Group a platform from which it is now capable of making stepwise changes in the rate of development of the business. In addition the targeted growth opportunities, both in businesses and product areas, will bring sustainability to the Group through the inclusion of intellectual property protected processes and technology.

The strategies we will follow during 2012-13 are;

•       continue our new product development of differentiated generic medicines at the current rhythm

•       increase the sales of our current products outside the UK

‒    with existing distribution in current markets

‒    increased geographic cover with new distribution in new markets particularly within the EU and North America

•       selectively strengthen UK Companion Animal Identification range of goods and services

•       continue to rationalise other product groups

•       accelerate Project Sustain initially in enhanced generics

•       reorganise business leadership and operational management to reflect our focus and concentration on the pharmaceutical side of the veterinary supplies business

What is a generic veterinary medicine?

To obtain a Marketing Authorisation a licensed generic veterinary medicine has to be "essentially similar" to the originator product. Pharmaceutical performance in particular must be almost identical i.e. not substantially better or worse than the originator product.

Within Animalcare we classify generic veterinary medicines in three broad types;

•       undifferentiated generics - these are generics whose pharmaceutical action is the same as the originator product and are almost identical in all aspects (packaging, composition, dosage size) to the originator product

•       differentiated generics - these are generics whose pharmaceutical action is the same as the originator product but have one or more aspect of packaging, flavouring, coating, tablet size etc., modified to improved its acceptance by vets, owners or pets

•       enhanced generics - these are generics using well established veterinary medicines but which have been formulated in such a way that their pharmaceutical performance is enhanced in use.

Veterinary Medicines New Product Development Pipeline

Our new product development (NPD) pipeline is key to the future success of the Group. We maintain our target of the introduction of four new licensed veterinary medicine per year originating from our NPD pipeline and that of our development and distribution partners in Europe.

In a dynamic and diverse market such as veterinary medicine it is important that our development direction is reviewed regularly and targets adjusted accordingly. Unlike many larger organisations with resource and fixed asset commitments in defined areas our development model allows great flexibility of approach and direction.

Our NPD pipeline reflects our focus on the companion animal market but also our strategies to increase our geographic reach and to introduce products with the potential to delivery sustained intellectual property protected growth to the Group. 

Project	Sector	Expected launch date*	Target markets	Years to maturity from launch
Simple and differentiated generics
Stone 1	Livestock	2013	Limited EU	5
Stone 2	Companion Animal	2013	Limited EU	3
Poppy II	Companion Animal	2013	Selected EU	2
Raleigh	Companion Animal	2014	EU and others	3
Amigo	Companion Animal	2014	Selected EU	3
Calm	Companion Animal	2014	Selected EU	3
Isle	Companion Animal	2015	EU and others	3
Beat	Companion Animal	2015	EU and others	3
Sustain Projects
Archipelago	Companion Animal	2016	EU and others	2
Phoenix	Companion Animal	2016	Selected EU	3
Sally	Companion Animal	2017	EU and others	2
Cardinal	Companion Animal	2018	EU and others
	and Livestock
		*All dates are calendar year

The expected revenue from these projects in the UK alone is between £5 million and £7 million at maturity

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 30 June 2012

Introduction

This has been a difficult year for Animalcare but I believe the measures the Board has taken will see it beginning to grow again during the current financial year. Animalcare is currently made up of three product groups, Licensed Veterinary Medicines, Companion Animal Identification and Animal Welfare products that are all sold mainly through veterinary practices. Whilst the Licensed Veterinary Medicines have continued to grow, albeit slower than anticipated, there has been a marked reduction in sales of both Identichip and Animal Welfare products during the year. Your Board is refocusing the management on these two areas, plus the continued development of new licensed veterinary products and this should return your company to growth during the current year.

Financial Trading

Sales during the financial year fell by 8.2% from £11.8 million to £10.9 million. This resulted in a reduction in underlying profit before tax from £2.3 million to £1.8 million and fully diluted earnings per share from continuing operations fell 18% from 11.2p to 9.2p. However your company continues to be strongly cash generative and the year-end cash position has grown from £1.18m to £2.31m which helps improve the strength of our balance sheet. The reduction of sales was mainly caused by the delay to re- launch a replacement 'single dose Buprecare ampoule' in the veterinary medicine market, a 28% fall in sales in our Companion Animal Identification business, and a 9% reduction in sales of animal welfare products. To reverse this trend your Board promoted Dr Iain Menneer from Marketing Director to Managing Director Animalcare Ltd in charge of all sales and marketing in the UK. This allows Stephen Wildridge, Chief Executive Officer, to concentrate on increasing and delivering our product development pipeline and sales of our licence veterinary products through our European partners.

Dividend

With the increase in cash and the strong underlying cash flow of your business the company increased the interim dividend from 1.0 pence per share to 1.5 pence per share which was paid on the 4th May 2012. With this in mind the Board proposes to maintain the final dividend at 3 pence per share. This gives a total dividend for the year of 4.5 pence per share, an increase of 12.5% over the previous financial year and is covered 2.1 times by earnings. The dividend, which is subject to shareholders' approval, at our Annual General meeting, to be held on 6th November 2012, will be paid on 16th November 2012 to the shareholders on the register on 19th October 2012.

The Board

Your Board has been considerably strengthened during the year with the appointment to the Board of Dr Iain Menneer, Managing Director of Animalcare Ltd and also Ray Harding as a non- executive director. Until 2010 Ray was an owner and Managing Director of Cyton Bioscience Ltd, a leading company in multi-service consultancy to both the animal health and pharmaceutical industries, and he remains as a part time consultant to it. Chris Brewster also joined the Board towards the end of the financial year as Chief Financial Officer and Company Secretary. He gained considerable commercial experience as Group Accounting Manager at Findus Group. Prior to this Chris was a senior manager in the KPMG audit department in the Leeds office.  I would like to thank, on behalf of the Board, all our customers, suppliers and colleagues who have helped support and develop Animalcare during the year.

Prospects

The Board believes with the focus on growing our Companion Animal Identification business, the resumption of supply of Buprecare ampoules, and the planned launch of four new licensed veterinary products during the financial year Animalcare should return to growth. Your Board is encouraged by current trading for the beginning of the new financial year.

James Lambert

Chairman

CHIEF EXECUTIVE'S REVIEW

FOR THE YEAR ENDED 30 June 2012

Introduction

The Animalcare Group is now fully focussed on serving the professional veterinary industry through its expanding licensed veterinary medicines portfolio and highly profitable Companion Animal Identification product group. At a time when temporary supply difficulties with one key product strongly affected the business, our proven strategy of growth through the introduction of generic licensed veterinary medicines has meant that our performance in this key segment has been significantly better than the overall market (see below).

Our pipeline for new products remained productive with our target of four new licensed generic veterinary medicines launched in the year being surpassed with the introduction of five new products. Additionally our development programme remained on track with other products in development meeting their milestones and other target products being brought forward into the pipeline.

It is clear however that the competition in licensed generic veterinary medicines will accelerate and intensify over the short-term and although we remain very well placed to continue to compete and grow we have been adapting our strategy to deliver even more durable success in the future. Our efforts in this regard, referred to as Project Sustain, focus on accelerating our development activities beyond differentiated generics initially in enhanced generics. The work we have been doing during 2011-12 on Project Sustain is designed to provide the sustained, protected growth of the Animalcare Group. Project Sustain will become a more evident and important part of the business from here on in.

Business Overview

The Animalcare business was strongly affected by the abrupt loss for the whole year of one of our key products, Buprecare ampoules. At the same time rationalisation of lower margin products and a downturn in sales within our Companion Animal Identification products negatively affected the business. Overall revenues were down £0.9m (8.2%) and gross profit was down £0.5m (8.3%) on last year. Although it will take a little longer than we had initially hoped to reintroduce Buprecare ampoules we are now significantly along the way to achieving this in the current financial year. We have made significant progress in strengthening our Companion Animal Identification segment through cost of goods and cost to serve reductions and the implementation of improved data handling capabilities which lead to increased selling opportunities.

It is very encouraging that in a period when the overall economic climate has been troubled the resilience of the market for licensed veterinary medicines in key markets has been notable and our growth in the segment has been strong. In the UK (which remains the Animalcare Group's largest market representing 92.2% of revenue and 91.9% of gross profit), excluding Buprecare ampoules, the growth in revenue from our licensed veterinary medicines was 16.8%. Even when Buprecare ampoules are included growth was still 3.3% year on year.

Sales of Licensed Veterinary Medicines in the UK

	2011	2012	% change
UK market*	£272.6m	£269.1m	-1.3%
Animalcare**	£5.1m	£5.9m	+16.8%

* NOAH website - NOAH members 12 months to March 2012 net of all discounts

** Animalcare results - financial years 2011 and 2012 excluding Buprecare ampoules

Revenue from our sales outside the UK were 1.3% lower than the previous financial year affected by the loss of Buprecare ampoules and the continued poor market conditions in Spain. Gross profit was however 29.5% higher as a result of increased sales in higher value markets.

It is our target to launch four new licensed generic veterinary medicines in course of each financial year, a rate which is at the forefront for the market. During the course of financial year 2011-12 we launched a total of five new licensed veterinary medicines:

- Torphosol, a sedative and short term analgesic for use in horses

- Detonervin, a deep sedative and mild analgesic for use in horses

- Emdocam, an anti-inflammatory for use in horses, cattle and pigs

- Tilmodil, an antibacterial for use in cattle and sheep

- Buprecare MDV, a multidose vial version of our successful severe pain analgesic for cats and dogs

In addition our currently marketed range of companion animal licensed generic medicines continued to perform well.

Sales revenue from the Companion Animal Identification products group was £0.9m (27.7%)  below last year principally due to the one off effect of ending the low margin distribution of Sureflap cat flaps (-£0.51m) and the reduced sales of Identichip, our pet identification microchips (-£0.25m).  Gross profit in the segment was £0.36m (17.9%) lower than last year.

During the course of the year we took the important step of reorganising the senior management team to meet the needs of the business now and for the future. Chris Brewster joined the Group as Chief Financial Officer and Dr. Iain Menneer took over the role of Managing Director for Animalcare Ltd with the primary responsibility of managing the UK business to achieve its short-term operational targets. This concentration of the UK business with Iain has allowed other members of the senior management team to concentrate on another three key areas of the business;

- increased penetration of our current products in existing markets

- controlled expansion of the geographic reach of the business

- driving the development programme notably project Sustain

Future Developments

In the short-term licensed generic medicines for companion animals in our main target markets (UK, France and Germany) will provide the engine for growth of the Animalcare Group. This growth will be supplemented by better penetration of our existing products in markets outside the UK where we currently operate. We will improve sales through the selective geographic expansion of the markets we address.

In addition to our development efforts in "undifferentiated and differentiated" generic veterinary medicines we have made progress in the identification of the technologies which we believe will form the basis of the Group's medium-term development. Project Sustain is an umbrella title for a group of activities that we are progressing as the sustained driver of the business. Discussions are already underway with potential technology providers in Europe and North America and these efforts are expected to crystallise into the first development projects in the course of the next 12 months.

In early September we launched Vitofyllin in the UK and Ireland in a market worth approximately £1.5m per annum. It is a product which fits well into our growing portfolio of products to treat chronic diseases and conditions of old age, in this case a central nervous system stimulant for older dogs. Our next two products are in the final stages of development and have almost completed regulatory review. We expect to be able to launch both products in the UK in Q3 of the current financial year. A fourth product has just entered regulatory review and should be available for launch in Q4 of the financial year. We are therefore confident of once more achieving our target of the launch of four new licensed generic veterinary medicines in financial year 2012-13.

We have moved two projects to the next phase in development and remain confident that through our own product development pipeline, and that of our development partners, this rate of product innovation and introduction can be maintained for the foreseeable future.

Outlook

In my CEO's statement last year I commented that 2011-12 "may be a difficult year", it was. Although challenging, the difficulties were however uncomplicated market issues which have been recognised and either addressed or are well in the course of resolution.  2012-13 will not be without its challenges but the Animalcare Group is well placed to deliver a strong performance in the year, in line with expectations, moving back to the growth levels recently experienced.  Current trading is in line with expectations and comfortably above last year.

The Group has moved away from its previous position as an undifferentiated supplier of low value animal welfare products into a predominantly veterinary pharmaceutical based business. That trend must continue and intensify. I believe that with the support it needs in terms of product development expenditure and leadership evolution, the business is well positioned to provide even higher levels of sustained, IP protected growth in the future.

Stephen Wildridge

Chief Executive Officer

FINANCIAL REVIEW

FOR THE YEAR ENDED 30 June 2012

Group Overview - Revenue and Profit

Overall revenue from continuing operations reduced by 8.2% to £10.9 million driven principally by our Companion Animal Identification group of products (-£0.9 million) together with the full year loss of Buprecare ampoules (-£0.8 million). This was partially offset by the strong performance within our licensed veterinary medicines portfolio which benefited from the launch of five new medicines during the year.

Despite the increased competition in licensed veterinary medicines, gross margin remained consistent with prior year at 54%.

Distribution costs reduced by 10.3% compared to 2011, broadly in line with the reduction in revenues. Administrative expenses increased by 8.6% reflecting in particular, investment in personnel (including Non-Executive Directors).

Both underlying(*) operating profit and underlying(*) profit before tax were £2.3 million for the year compared to £3.1 million and £3.0 million respectively in 2011.

Exceptional and other items

Exceptional and other items in the year comprised executive severance costs and amortisation of acquired intangible assets. Full details are provided in note 6.

Finance income and costs

Following the repayment of bank debt on 31 March 2011, the Group has continued to maintain healthy positive cash balances hence has eliminated its borrowing costs in full during 2012.

Taxation

The Group's effective tax rate reduced from 23% to 17.9% primarily due to the current year benefit of prior year research and development tax credits.

Earnings per share and dividends

The Group achieved 9.3 pence (2011: 11.8 pence) underlying basic earnings per share.

An interim dividend of 1.5 pence per share was paid on 4^th May 2012 (2011: 1.0 pence per share). The Board proposes the payment of a final dividend of 3.0 pence per share (2011: 3.0 pence per share) given the satisfactory cash flow performance of the business during 2012 giving a total dividend of 4.5p up 12.5% on the previous year (2011: 4p).

Cash flows

The Group generated £1.1 million (2011: cash outflow £0.4 million) cash during the year, resulting in a strong net cash position at 30 June 2012 of £2.3 million (2011: £1.2 million). Working capital reduced by £0.1 million (2011: £0.5 million increase) in line with the reduced year end sales and phasing of strategic inventory purchases.

Income taxes paid were £0.4 million (2011: £0.8 million) the reduction principally reflecting the decrease in the Group's taxable profits together with the benefit of prior year research and development tax credits.

We have increased our investment by 75% in new product development of licensed veterinary medicines compared to 2011 and will continue this trend during the next financial year. New product development will continue to be funded from operational cash flows.

*Underlying results are before the effect of exceptional costs and other items disclosed in note 6 to the financial statements.

Chris Brewster

Chief Financial Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 30 June 2012
		Underlying results before exceptional and other items	Exceptional and other items(*)	Total	Underlying results before exceptional and other items	Exceptional and other items(*)	Total
		2012	2012	2012	2011	2011	2011
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	5	10,856	-	10,856	11,825	-	11,825
Cost of sales		(4,994)	-	(4,994)	(5,435)	-	(5,435)
Gross profit		5,862	-	5,862	6,390	-	6,390
Distribution costs		(262)	-	(262)	(292)	-	(292)
Administrative expenses		(3,306)	(190)	(3,496)	(3,045)	(118)	(3,163)
Operating profit/(loss)	4	2,294	(190)	2,104	3,053	(118)	2,935
Finance costs	6	-	-	-	(51)	(1)	(52)
Finance income	6	2	-	2	2	-	2
Profit/(loss) before tax	4	2,296	(190)	2,106	3,004	(119)	2,885
Income tax (expense)/credit	7	(395)	18	(377)	(717)	52	(665)
Total comprehensive income/(loss) for the year from continuing operations		1,901	(172)	1,729	2,287	(67)	2,220
Total comprehensive income for the year from discontinued operations	2	-	-	-	105	-	105
Total comprehensive income/(loss) for the year		1,901	(172)	1,729	2,392	(67)	2,325
Total basic earnings per share	9	9.3p		8.4p	11.8p		11.5p
Total fully diluted earnings per share	9	9.2p		8.4p	11.4p		11.1p
Basic earnings per share from continuing operations	9	9.3p		8.4p	11.3p		11.0p
Fully diluted earnings per share from continuing operations	9	9.2p		8.4p	11.2p		10.8p

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Year ended 30 June 2012
		Note	Share Capital	Share Premium Account		Retained Earnings		Total
GROUP			£'000	£'000		£'000		£'000
Balance at 1 July 2010			4,010	5,931		4,140		14,081
Total comprehensive profit for the year			-	-		2,325		2,325
Transactions with owners of the Company, recognised in equity:
Dividends paid		8	-	-		(812)		(812)
Issue of share capital		18	65	114		-		179
Share based payments			-	-		16		16
Balance at 1 July 2011			4,075	6,045		5,669		15,789
Total comprehensive profit for the year			-	-		1,729		1,729
Transactions with owners of the Company, recognised in equity:
Dividends paid		8	-	-		(926)		(926)
Issue of share capital		18	69	128		-		197
Share based payments			-	-		48		48
Balance at 30 June 2012			4,144	6,173		6,520		16,837
			Share Capital	Share Premium Account		Retained Earnings		Total
COMPANY			£'000	£'000		£'000		£'000
Balance at 1 July 2010			4,010	5,931		2,286		12,227
Total comprehensive profit for the year			-	-		3,570		3,570
Transactions with owners of the Company, recognised in equity:
Dividends paid		8	-	-		(812)		(812)
Issue of share capital		18	65	114		-		179
Share based payments			-	-		10		10
Balance at 1 July 2011			4,075	6,045		5,054		15,174
Total comprehensive loss for the year			-	-		(438)		(438)
Transactions with owners of the Company, recognised in equity:
Dividends paid		8	-	-		(926)		(926)
Issue of share capital		18	69	128		-		197
Share based payments			-	-		22		22
Balance at 30 June 2012			4,144	6,173		3,712		14,029
	As permitted by section 408 of the Companies Act 2006, the statement of comprehensive income of the parent Company is not presented as part of these financial statements.

BALANCE SHEETS
30 June 2012
			Group				Company
			2012		2011		2012		2011
	Note		£'000		£'000		£'000		£'000
Non-current assets
Goodwill	10		12,711		12,711		-		-
Other intangible assets	11		1,728		1,820		-		-
Property, plant and equipment	12		83		47		-		-
Investments in subsidiary companies			-		-		14,361		14,361
Deferred tax asset	17		-		-		31		156
			14,522		14,578		14,392		14,517
Current assets
Inventories	13		1,420		1,346		-		-
Trade and other receivables	14		1,297		1,681		866		652
Cash and cash equivalents	14		2,305		1,179		1,738		207
			5,022		4,206		2,604		859
Total assets			19,544		18,784		16,996		15,376
Current liabilities
Trade and other payables	15		(1,316)		(1,566)		(2,967)		(202)
Current tax liabilities			(169)		(320)		-		-
Deferred income	16		(207)		(182)		-		-
Current liabilities			(1,692)		(2,068)		(2,967)		(202)
Net current assets/(liabilities)			3,330		2,138		(363)		657
Non-current liabilities
Deferred income	16		(844)		(862)		-		-
Deferred tax liabilities	17		(171)		(65)		-		-
			(1,015)		(927)		-		-
Total liabilities			(2,707)		(2,995)		(2,967)		(202)
Net assets			16,837		15,789		14,029		15,174
Capital and reserves
Called up share capital	18		4,144		4,075		4,144		4,075
Share premium account			6,173		6,045		6,173		6,045
Retained earnings			6,520		5,669		3,712		5,054
Equity attributable to equity holders of the parent			16,837		15,789		14,029		15,174

CASH FLOW STATEMENTS
Year ended 30 June 2012
		Group		Company
	Note	2012	2011	2012	2011
		£'000	£'000	£'000	£'000
Comprehensive income/(loss) for the year before tax	7	2,106	2,936	(528)	(723)
Adjustments for:
Depreciation of property, plant and equipment	12	19	88	-	35
Amortisation of intangible assets	11	307	317	-	16
Finance costs	6	-	55	-	52
Finance income	6	(2)	(2)	(2)	(2)
Share-based payment award	19	48	16	22	10
Release of deferred income		7	53	-	-
Profit on disposal of property, plant and equipment		-	(2)	-
Loss on sale of businesses	2	-	94	-	366
Operating cash flows before movements in working capital		2,485	3,555	(508)	(246)
Increase in inventories	13	(74)	(596)	-	(77)
Decrease in receivables	14	384	572	1	750
(Decrease)/increase in payables	15	(250)	(471)	2,765	(1,745)
Cash generated by operations		2,545	3,060	2,258	(1,318)
Income taxes (paid)/received		(422)	(805)	-
Interest paid		-	(110)	-	(108)
Net cash flow from operating activities		2,123	2,145	2,258	(1,426)
Investing activities:
Payments to acquire intangible assets	11	(215)	(134)	-	(1)
Payments to acquire property, plant and equipment	12	(55)	(18)	-	(1)
Interest received	6	2	2	2	2
Dividends received		-	-	-	4,072
Receipts from sale of property, plant and equipment		-	4	-	1
Receipts from sale of businesses	2	-	2,705	-	2,425
Net cash (used in)/generated by investing activities		(268)	2,559	2	6,498
Financing:
Receipts from issue of share capital		197	179	197	179
Equity dividends paid	8	(926)	(812)	(926)	(812)
Repayment of bank loans		-	(4,456)	-	(4,456)
Net cash used in financing activities		(729)	(5,089)	(729)	(5,089)
Net increase/(decrease) in cash and cash equivalents		1,126	(385)	1,531	(17)
Cash and cash equivalents at start of year		1,179	1,564	207	224
Cash and cash equivalents at end of year		2,305	1,179	1,738	207
Comprising:
Cash and cash equivalents	14	2,305	1,179	1,738	207
		2,305	1,179	1,738	207

1. BASIS OF PREPARATION

The Group and Company financial statements have been prepared and approved by the directors under the historical cost convention, except for the revaluation of certain financial instruments, in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("adopted IFRSs") and the Companies Act 2006 as applicable to companies reporting under IFRS. They have also been prepared in accordance with the requirements of the AIM Rules.

This announcement has been prepared based on accounting policies which are consistent with those described in the Annual Report for the year ended 30 June 2011. Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRS as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements in March 2012.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2012 or 2011 but is derived from the 2012 accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered in due course. The Auditor has reported on those accounts; the report was (i) unqualified, (ii) did not include references to any matters to which the Auditor drew attention by way of emphasis without qualifying the reports and (iii) did not contain statements under section 498(2) or (3) of the Companies Act 2006.

For the purposes of their assessment of the appropriateness of the preparation of the Group's accounts on a going concern basis, the Directors have considered the current cash position, the availability of bank facilities and forecasts of future trading including working capital requirements.

The Group has an undrawn overdraft facility of £100,000 which is available for general corporate and working capital requirements.  At 30 June 2012 the Group had cash on hand of £2.31 million (30 June 2011 - £1.18 million).  In the directors' opinion, the Group's working capital requirements can be met from operating cash flow.

Overall, the directors believe the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current committed facilities.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. 

2.  CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - DISCONTINUED OPERATIONS

On 17 September 2010 the Company disposed of the business and assets of its trading division, Ritchey, and the shares of its wholly owned subsidiary Fearing International  (Stock Aids) Limited.  On 17 November 2010 the Group sold the trade and certain assets of its loss making subsidiary Travik Chemicals Limited (now Naychem Limited).  These sales comprised the whole of the Group's Livestock division.
		2012	2011
	Notes	£'000	£'000
Revenue		-	2,038
Cost of sales		-	(923)
Gross profit		-	1,115
Distribution costs		-	(84)
Administrative expenses		-	(883)
Operating profit	4	-	148
Finance costs		-	(3)
Profit before tax	4	-	145
Income tax expense		-	(7)
Profit after tax for the period from discontinued operations		-	138
Loss on sale of discontinued operations	3	-	(94)
Income tax credit on loss on sale of discontinued operations		-	61
Total comprehensive profit for the period from discontinued operations		-	105

3.  DISPOSAL OF BUSINESSES
	Total	Total
	2012	2011
	£'000	£'000
Consideration and Costs
Cash consideration	-	2,819
Costs	-	(114)
	-	2,705
Assets and liabilities sold
Goodwill	-	316
Other intangible assets	-	102
Property, plant and equipment	-	1,034
Inventories	-	1,065
Trade and other receivables	-	1,165
Trade and other payables	-	(733)
Income tax payable	-	(29)
Deferred taxation	-	(121)
Net assets sold	-	2,799
Loss on sale of businesses	-	(94)
Net cash flow from operating activities	-	(136)
Net cash used in investing activities	-	(3)
Net cash used in financing activities	-	(180)

4.  EXCEPTIONAL AND OTHER ITEMS
		2012	2011
	Note	£'000	£'000
Executive severance payments		71	-
Amortisation of acquired intangible assets	16	119	118
Fair value movements on interest rate hedging	11	-	1
Total exceptional and other items		190	119
On 11 November 2011 Peter Warner resigned from the Board. On termination of this contract, he received a compensation package totalling £71,000 including associated employers national insurance.

5.  REVENUE AND OPERATING SEGMENTS

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker to allocate resources and assess performance. The Chief Operating Decision Maker is considered to be the Chief Executive Officer of Animalcare Group Plc. Performance assessment is based on underlying operating profit.

Following the disposal of the Livestock business during September 2010, the Groupsolely comprises one reportable segment, being Companion Animal.

During 2011, the Group comprised two segments, Companion Animal and Livestock (discontinued).

		Companion Animal
		2012
2012	Note	£'000
Revenue		10,856
Gross Profit		5,862
Underlying Operating Profit		2,294
Other Items	4	(119)
Exceptional items	4	(71)
Operating Profit		2,104
Finance Income	6	2
Profit before tax		2,106
5. REVENUE AND OPERATING SEGMENTS (continued)
		Companion Animal (continuing)		Livestock discontinued				Eliminations				Segment Total	Unallocated				Total
		2011		2011				2011				2011	2011				2011
2011	Note	£'000		£'000				£'000				£'000	£'000				£'000
Revenue
External sales		11,812		2,038				-				13,850	-				13,850
Inter-segment sales		13		-				(13)				-					-
Total revenue		11,825		2,038				(13)				13,850	-				13,850
Gross Profit		6,390		1,115				-				7,505	-				7,505
Underlying Operating Profit/(Loss)		3,426		148				-				3,574	(373)				3,201
Other Items	4	(118)		-				-				(118)	-				(118)
Operating Profit - discontinued operations	2																(148)
Operating profit																	2,935
Finance income	6																2
Finance Costs	6																(52)
Profit before tax																	2,885
		Companion Animal (continuing)
		2012
2012	Note	£'000
Products and Services
Licensed veterinary		5,972
Animal identification		2,338
Animal welfare		2,546
Other		-
		10,856
Other information
Intangible asset additions	11	215
Property, plant and equipment additions	12	55
Depreciation and amortisation	11,12	326
Consolidated assets		19,544
Consolidated liabilities		(2,707)
Consolidated net assets		16,837
5. REVENUE AND OPERATING SEGMENTS (continued)
		Companion Animal (continuing)			Livestock discontinued					Eliminations		Segment Total	Unallocated					Total
		2011			2011			2011				2011	2011					2011
2011	Note	£'000				£'000		£'000				£'000	£'000				£'000
Products and Services
Licensed veterinary		5,784				-		-				5,784	-				5,784
Animal identification		3,232				907		(13)				4,126	-				4,126
Animal welfare		2,809				916						3,725	-				3,725
Other		-				215		-				215	-				215
		11,825				2,038		(13)				13,850	-				13,850
Other information
Intangible asset additions	11		134						-			134				134
Property, plant and equipment additions	12		16				3		-			19	-			19
Depreciation and amortisation	11,12		333				72		-			405	-			405
Consolidated assets		18,784				-		-				18,784	-				18,784
Consolidated liabilities		(2,995)			-							(2,995)					(2,995)
Consolidated net assets		15,789			-			-				15,789					15,789
Key customers													2012				2011
Number													3				3
Percentage of total revenue													74%				86%
Key customers all within the Companion Animal segment, are those responsible for 10% or more of segmental revenue.
													2012				2011
Geographical market													£'000				£'000
United Kingdom													10,023				12,879
Other European countries													833				984
													10,856				13,863
All the Group assets are wholly located in the United Kingdom and accordingly no geographical analysis of assets and liabilities is presented. 5. REVENUE AND OPERATING SEGMENTS (continued)
An analysis of total group revenue is as follows:
												2012	2011
												£'000	£'000
Revenue from sale of goods												10,052	12,873
Revenue from provision of services												804	990
												10,856	13,863
Finance income												2	2
												10,858	13,865
6.  FINANCE COSTS AND FINANCE INCOME
												2012	2011
												£'000	£'000
Interest expense on financial liabilities held at amortised cost:
Bank interest												-	54
Fair value losses on financial instruments*												-	1
Finance costs												-	55
Other net finance income
Interest income on bank deposits												(2)	(2)
Finance income												(2)	(2)
Net finance (income)/costs												(2)	53
Finance costs above include the following amounts relating to discontinued operations
Bank interest -													3
* Finance costs arising from derivatives held at fair value through profit and loss relate to fair value movements on the Group interest rate swap. The costs are included within "other items" on the face of the statement of comprehensive income.

7.  INCOME TAX EXPENSE
				2012	2011
		Note		£'000	£'000
The income tax expense/(credit) comprises:
Current tax expense				470	728
Adjustment in the current year in relation to prior years				(199)	(53)
				271	675
The deferred tax expense/(credit) comprises:
Origination and reversal of temporary differences		17		81	(64)
Adjustment in the current year in relation to prior years		17		25	-
				106	(64)
Total tax expense for the year				377	611
The total tax expense for the year comprises:
Income tax expense in the statement of comprehensive income				377	665
Income tax expense (credit) on discontinued operations		4		-	7
Income tax credit on loss on sale of discontinued operations		4		-	(61)
Total tax expense for the year				377	611
The total tax charge can be reconciled to the accounting profit as follows:
Total comprehensive income/(loss) for the year				1,729	2,325
Total tax expense				377	611
Profit before tax				2,106	2,936
Income tax calculated at 25.5% (2011 - 27.5%)				537	807
Effect of expenses not deductible				3	3
Effect of share-based deductions				28	(80)
Change in UK tax rate				(13)	(32)
Effect of unprovided temporary differences				-	(2)
Effect of write back of deferred tax (assets)/liabilities				(4)	(32)
Effect of adjustments in respect of prior years				(174)	(53)
				377	611
The tax credit of £18,000 (2011: £52,000) shown within "exceptional and other items" on the face of the statement of comprehensive income relates to the amortisation of acquired intangibles, fair value movements on interest rate hedging and severance costs, details of which are contained in note 6.
During the year the Group has reflected the reduction in the enacted UK corporation tax rate from 26% to 24%, which is effective from 1 April 2012. A further reduction to 23% (effective from 1 April 2013) was substantively enacted on 3 July 2012. The future 1% standard tax rate reduction to 22% (effective from 1 April 2014) is not expected to have a material impact on the financial statements.
8.  DIVIDENDS
			2012		2011
			£'000		£'000
Ordinary final dividend paid in respect of prior year			615		609
Ordinary interim dividend paid			311		203
			926		812
The final dividend paid during the year ended 30 June 2012 was 3.0 pence per share (2011: 3.0 pence per share).  The interim dividend paid during the year ended 30 June 2012 was 1.5 pence per share (2011: 1.0 pence per share).
The proposed final dividend was approved by the Board of Directors on 27 September 2012 and is subject to approval of shareholders at the Annual General Meeting.  The proposed dividend has not been included as a liability as at 30 June 2012, in accordance with IAS10 'Events After the Balance Sheet Date'.

9.  EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing the total comprehensive income for the year attributable to ordinary equity holders of the Company by the weighted average number of fully paid ordinary shares outstanding during the year.
The following income and share data was used in the basic earnings per share computations:
	Underlying earnings before exceptional and other items			Underlying earnings before exceptional and other items	Total earnings	Total earnings
	2012			2011	2012	2011
	£'000			£'000	£'000	£'000
Total comprehensive income attributable to equity holders of the Company	1,901			2,392	1,729	2,325
Total comprehensive income from continuing operations attributable to equity holders of the Company	1,901			2,287	1,729	2,220
Total comprehensive income from discontinued operations attributable to equity holders of the Company	-			105	-	105
	2012			2011	2012	2011
	No.			No.	No.	No.
Basic weighted average number of shares	20,546,961			20,225,635	20,546,961	20,225,63
Dilutive potential ordinary shares	58,085			239,891	58,085	239,891
	20,605,046			20,465,526	20,605,046	20,465,526
Total earnings per share: Basic	9.3p			11.8p	8.4p	11.5p
Fully diluted	9.2p			11.7p	8.4p	11.4p
Earnings per share from continuing operations: Basic	9.3p			11.3p	8.4p	11.0p
Fully diluted	9.2p			11.2p	8.4p	10.8p
Earnings per share from discontinued operations
Basic	-			0.5p	-	0.5p
Fully diluted	-			0.5p	-	0.5p

10.        GOODWILL
	Group	Company
	£'000	£'000
Cost
At 1 July 2010	15,949	715
Disposals	(3,238)	(715)
At 1 July 2011 and 30 June 2012	12,711	-
Accumulated impairment losses
At 1 July 2010	2,922	715
Disposals	(2,922)	(715)
At 1 July 2011 and 30 June 2012	-	-
Net book value
At 30 June 2012	12,711	-
At 30 June 2011	12,711	-

The carrying amount of Group goodwill is allocated to the Companion Animal Segment.

The recoverable amount of goodwill is determined from value in use calculations.

The Group prepares cash flow forecasts derived from the most recent financial budgets and projections approved by management for the next three years and thereafter assuming an estimated annual growth rate of 1.9 per cent (2011 - 1.0 per cent).

The financial budgets and projections are based on past experience and actual operating results. The growth rates for the three year period are based on current performance of the existing product portfolio and the contribution from new products currently in development which will be launched in the short term. The directors consider the growth rate to be modest based on historical performance. The directors believe that the long-term growth rate does not exceed the average long term growth rate for the UK economy.

The directors estimate the discount rates using the post-tax rates that reflect the current market assessments of the time value of money and the risks specific to the CGU. In the current year the directors estimated the applicable pre -tax rate to be 11.4 per cent (2011 - 12.1 per cent).

The directors modelled a range of different scenarios by applying sensitivities to both the cash flow assumptions and the discount rate. Based on this sensitivity analysis there is significant headroom between the value in use calculation and the carrying value of the cash generating unit ("CGU").

11.        OTHER INTANGIBLE ASSETS
	Acquired brands and customer relationships	New product development costs	Capitalised Software	Total
Group	£'000	£'000	£'000	£'000
Cost
At 1 July 2010	1,361	1,336	209	2,906
Additions	-	92	42	134
Sale of business	-	(200)	(210)	(410)
At 30 June 2011	1,361	1,228	41	2,630
Additions	-	161	54	215
At 30 June 2012	1,361	1,389	95	2,845
Amortisation
At 1 July 2010	297	350	154	801
Charge for the year	118	188	11	317
Sale of business	-	(145)	(163)	(308)
At 30 June 2011	415	393	2	810
Charge for the year	119	169	19	307
At 30 June 2012	534	562	21	1,117
Net book value
At 30 June 2012	827	827	74	1,728
At 30 June 2011	946	835	39	1,820
Veterinary medicine product development costs are amortised over 4 to 7 years, acquired brands are amortised over 15 years and acquired customer relationships are amortised over 10 years. The amortisation period for capitalised software relating to the bespoke online ordering system is four years.

11. OTHER INTANGIBLE ASSETS (continued)
	Product development costs	Capitalised Software	Total
Company	£'000	£'000	£'000
Cost
At 1 July 2010	145	264	409
Additions	-	1	1
Sale of business	(145)	(265)	(410)
At 1 July 2011 and 30 June 2012	-	-	-
Amortisation
At 1 July 2010	138	154	292
Charge for the year	7	9	16
Sale of business	(145)	(163)	(308)
At 1 July 2011 and 30 June 2012	-	-	-
Net book value
At 30 June 2011 and 30 June 2012	-	-	-

12.        PROPERTY, PLANT AND EQUIPMENT
	Freehold land and buildings	Leasehold improvements	Plant and Equipment	Office furniture and equipment	Motor Vehicles	Total
Group	£'000	£'000	£'000	£'000	£'000	£'000
Cost
At 1 July 2010	1,268	73	1,874	550	51	3,816
Additions	-	-	10	8	-	18
Sale of businesses	(1,268)	(73)	(1,821)	(480)	(19)	(3,661)
Disposals	-	-	-	-	(9)	(9)
At 1 July 2011	-	-	63	78	23	164
Additions	-	-	-	55	-	55
At 30 June 2012	-	-	63	133	23	219
Depreciation
At 1 July 2010	609	46	1,583	387	38	2,663
Charge for the year	8	1	36	35	8	88
Sale of businesses	(617)	(47)	(1,589)	(357)	(17)	(2,627)
On disposals	-	-	-	-	(7)	(7)
At 1 July 2011	-	-	30	65	22	117
Charge for the year	-	-	10	8	1	19
At 30 June 2012	-	-	40	73	10	136
Net book value
At 30 June 2012	-	-	23	60	-	83
At 30 June 2011	-	-	33	13	1	47

12. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

		Freehold land and buildings			Plant and Equipment		Office furniture and equipment		Motor Vehicles		Total
Company		£'000			£'000		£'000		£'000		£'000
Cost
At 1 July 2010		718			1,581		409		8		2,716
Additions		-			-		1		-		1
Sale of business		(718)			(1,581)		(410)		(8)		(2,717)
At 1 July 2011 and 30 June 2012		-			-		-		-		-
Depreciation
At 1 July 2010		289			1,342		282		8		1,921
Charge for the year		3			15		17		-		35
Sale of business		(292)			(1,357)		(299)		(8)		(1,956)
At 1 July 2011 and 30 June 2012		-			-		-		-		-
Net book value
At 30 June 2011 and 30 June 2012		-			-		-		-		-
	13.  INVENTORIES
				Group
				2012		2011
				£'000		£'000
	Finished goods and goods for resale			1,420		1,346
				1,420		1,346
	In the directors' opinion, the replacement cost of inventories is not materially different from their balance sheet value.

14.        OTHER FINANCIAL ASSETS
Trade and other receivables
		Group		Company
		2012	2011	2012	2011
	Note	£'000	£'000	£'000	£'000
Trade receivables		1,134	1,520	-
Amounts receivable from subsidiaries		-	-	423	420
Corporation tax - group relief		-	-	431	216
Other receivables		66	35	4	8
Prepayments and accrued income		97	126	8	8
		1,297	1,681	866	652
The directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Cash and cash equivalents
		Group		Company
		2012	2011	2012	2011
		£'000	£'000	£'000	£'000
Cash and cash equivalents		2,305	1,179	1,738	207

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months of less.

The carrying amount of these assets approximates their fair value.
15.        OTHER FINANCIAL LIABILITIES
Trade and other payables
		Group		Company
		2012	2011	2012	2011
		£'000	£'000	£'000	£'000
Trade payables		702	958	70	49
Amounts payable to subsidiaries		-	-	2,821	61
Other taxes and social security costs		338	273	40	45
Other creditors		227	212	27	40
Accruals		49	123	9	7
		1,316	1,566	2,967	202
The directors consider that the carrying amount of trade and other payables approximates their fair value.

16.        DEFERRED INCOME
Deferred income arises from certain services sold by the Group's subsidiary Animalcare Limited.  In return for a single up front payment, Animalcare Limited commits to a fixed term contract to provide certain database, pet reunification and other support services to customers.  There is no contractual restriction on the amount of times the customer makes use of the service.  At the commencement of the contract it is not possible to determine how many times the customer will make use of the services, nor does historical evidence provide indications of any future pattern of use.  As such, income is recognised evenly over the term of the contract, currently 8 years.
Movements in the Group's deferred income liabilities during the current and prior year are as follows:
		2012	2011
		£'000	£'000
Balance at 1 July		1,044	991
Income deferred to future periods		189	207
Release of income deferred from previous periods		(182)	(154)
		1,051	1,044
The deferred income liabilities fall due as follows:
		2012	2011
		£'000	£'000
Within one year		207	182
After one year		844	862
		1,051	1,044
Income recognised during the year is set out below:
		2012	2011
		£'000	£'000
Income received		203	220
Income deferred to future periods		(189)	(207)
Release of income deferred from previous periods		182	154
Income recognised in the year		196	167

17.        DEFERRED TAX LIABILITIES
The following are the major components of the deferred tax liabilities/(assets) recognised by the Group, and the movements thereon, during the current and prior reporting period.
	Property, Plant and Equipment	Share based payments	Other	Intangible fixed assets	Total
	£'000	£'000	£'000	£'000	£'000
Balance at 1 July 2010	55	(94)	(3)	292	250
Charge/(credit) to income	13	(28)	3	(52)	(64)
Disposal of businesses	(127)	-	-	6	(121)
Balance at 30 June 2011	(59)	(122)		246	65
(Credit)/Charge to income	45	111	(2)	(48)	106
Balance at 30 June 2012	(14)	(11)	(2)	198	171
As set out in Note 7 the rate of corporation tax will be reducing to 23% on 1 April 2013.  A reduction of 1% would reduce deferred tax liabilities, if applied at 30 June 2012, to £164,000.
The following are the major components of the deferred tax liabilities/(assets) recognised by the Company, and the movements thereon, during the current and prior reporting period.

	Accelerated tax depreciation	Share-based payments	Other	Total
	£'000	£'000	£'000	£'000
Balance at 1 July 2010	58	(93)	-	(35)
Credit to income	-	(7)	-	(7)
Disposal of businesses	(114)	-	-	(114)
At 30 June 2011	(56)	(100)	-	(156)
Charge to income	35	92	(2)	125
At 30 June 2012	(21)	(8)	(2)	(31)

As set out in Note 7 the rate of corporation tax will be reducing to 23% on 1 April 2013.  A reduction of 1% would reduce deferred tax assets, if applied at 30 June 2012, to £30,000.
18.        SHARE CAPITAL
			2012	2011
			No.	No.
Allotted, called up and fully paid ordinary shares of 20p each			20,720,204	20,373,711
			2012	2011
			£'000	£'000
Allotted, called up and fully paid ordinary shares of 20p each			4,144	4,075
During the year £69,000 (2011 - £65,000) of ordinary shares were issued for proceeds of £197,000 (2011 - £179,000) resulting in a share premium of £128,000 (2011 - £114,000).

19.        SHARE-BASED PAYMENTS
Details of the movement in share options during the year are as follows:
	EMI		SAYE		Unapproved
		Price		Price		Price
	Options	£	Options	£	Options	£
Outstanding at beginning of year	144,500	0.727	50,240	0.440	300,000	0.71
Granted during the year	276,500	1.556	75,337	1.340	28,400	1.675
Lapsed during the year	(35,000)	1.640	(6,470)	1.340	-	0.58
Exercised during the year	(99,500)	0.615	(46,993)	0.440	(200,000)	-
Open at 30 June 2012	286,600	1.455	72,114	0.440	128,400	1.130
Exercisable at the end of the year	-	-	-	-	-	-
The weighted average inputs into the Black-Scholes model at the time of grant were as follows:
	EMI	SAYE	Unapproved
	Scheme	Scheme	Scheme
Weighted average share price	133p	88p	85p
Weighted average exercise price	136p	69p	90p
Expected volatility	44%	40%	35%
Expected life	3.0 years	3.0years	3.2 years
Risk-free rate	0.7%	3.8%	2.4%
Expected volatility was determined by calculating the historical volatility of the Group's share price over the previous two years.  The expected lives used in the model were estimated based on management's best estimate for the effects of non-transferability, exercise restrictions, and behavioural considerations.
The aggregate estimated fair value of the options granted during the year was £nil (2011: £nil).
The Group recognised total expenses of £48,000 (2011: £16,000) within administrative expenses.

20.        ANNUAL REPORT

The Group's Annual Report and Financial Statements for the year ended 30 June 2012 were approved on 4 October 2012 and are expected to be posted to shareholders shortly. Further copies will be available to download at its website at: www.animalcaregroup.co.uk and will also be available from the Company's head office at Common Road, Dunnington, York, YO19 5RU.

 

END

 

 

FR FSIFWDFESEIS