Final Results

RNS Number : 4467O
Animalcare Group PLC
19 September 2011
 



 

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 2011.

 

Following the disposal of Animalcare's livestock businesses during the year the comparatives below are restated to show discontinued operations separately and so give more accurate understanding of the underlying business performance.

 

Financial Highlights

·     Revenue from continuing operations up 5.4% to £11.8m (2010: £11.2m)

·     Underlying operating profit from continuing operations* up 17.3% to £3.05m (2010: £2.60m)

·     Underlying profit before tax from continuing operations* up 21.0% to £3.00m (2010: £2.48m)

·     Underlying basic earnings per share* up 5.4% to 11.8p (2010: 11.2p)

·     Final dividend of 3p bringing total dividend for the year of 4p (2010: 3p)

·     Debt free with cash balances of c £1.2m (2010: net debt of c. £2.9m)

* 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

·     Divestment of the Livestock Division with focus now fully on the Companion Animal Division

·     Launch of four new  generic veterinary products during the year

·     Good pipeline of new products for launch later in the year

·     Reorganisation of the structure of the UK sales force

 

James Lambert, Chairman of Animalcare said:

 

"During the past financial year and now in the current one, there has been little or no growth in the veterinary medicines market in the UK. However, with the launch of several new veterinary drugs in the first quarter building on those introduced  during the last financial year, and with the reintroduction of Buprecare, your Board believes that we will continue to grow the business markedly faster than the market overall and increase our market share . Trading in the year to date has started in line with your Board's expectations."

For further information, please contact:

 

Animalcare Group plc

 

James Lambert (Chairman)

07850 702 042

Stephen Wildridge (Chief Executive)

01904 487 601

 

 

Brewin Dolphin (NOMAD)

 

Neil Baldwin

0845 213 4726

 

 

Walbrook PR Ltd

020 7933 8787

Helen Westaway

07841 917 679 or helen.westaway@walbrookpr.com

Paul Cornelius

07866 384 707 or paul.cornelius@walbrookir.com

 


CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 30 June 2011

 

Introduction

 

The Group has been operating for nearly a full year uniquely as a companion animal veterinary supplies business, having divested itself of the agricultural supplies businesses of Ritchey, Fearing and Travik in the first quarter of the financial year. This has allowed your Group to focus and concentrate all its resources on growing the more profitable and stable veterinary medicines and Identichip ranges. We can now plan for acceleration in the introduction of new licensed pharmaceutical products for our growing veterinary medicine portfolio. These divestures, combined with continued strong cash generation in the companion animal supplies business, means that your Group is debt free at the year end; indeed it had cash balances of c£1.2 million at 30 June 2011 as opposed to net debt of c£2.9 million at the previous year end.

 

Financial Trading

 

In a flat veterinary market our "new" Animalcare business achieved record sales, margins and profits during this financial year. Sales increased by approximately 5% and margins by 1%, whilst overheads were well controlled being 1% lower than last year. This has meant that the underlying fully diluted earnings per share from the continuing operations have risen from 8.5p to 11.2p, a full 31%. This is a good performance. Unlike previous years, there are few exceptional or other items during this financial year. The Company announced, in our pre-close trading update issued in July, that following  an extended period of poor supplies performance that had already damaged sales in the 2010-11 financial year Recipharm, the suppliers of one of our important veterinary medicines Buprecare, had closed their sterile production unit in the UK and had ceased supply with immediate effect from 30 June 2011. As we had already taken steps to introduce a new supplier, we expect that we will be reintroducing Buprecare to our range during the last quarter of the coming financial year. The expected loss of turnover at the time was estimated to be up to £450K for 2011/2012. The Board is confident that once supplies are available again we can soon win back lost sales and market share and the temporary loss of supply will not have a long term financial effect on your business.

 

Dividend

 

With the increase in cash and the underlying cash flow of your business, the Company paid its maiden interim dividend of 1.0 pence per share on 6 June 2011. With this in mind your Board is recommending a final dividend of 3.0 pence per share. This total dividend for the year of 4.0p (2010: 3.0p) represents an annual increase of 33% and is covered 2.9 times by earnings. The dividend is subject to shareholders' approval at our Annual General Meeting to be held on 28 October 2011 and is proposed to be paid on 7 November 2011 to shareholders on the register on 14 October 2011.

 

The Board

 

During the financial year Peter Warner joined the Board as Chief Financial Officer.  Dr Iain Menneer, the Director of Marketing of Animalcare Limited, also joined the Board on 1 July 2011.  I welcome them both as they will help to contribute to the growth of your business enormously. During the course of the year Geoff Rhodes, one of the original founders of the Ritchey business, resigned from his role as non executive director. I wish to record the appreciation of the Board and my own personal thanks to Geoff for his service to the company over many years.  It is intended that a new non executive director with experience in life sciences businesses will join your Board this calendar year. On behalf of your Board I would like to thank all the employees, customers and suppliers that have helped make the financial year such a success.

 

Prospects

 

During the past financial year and now in the current one, there has been little or no growth in the veterinary medicines market in the UK. However, with the launch of several new veterinary drugs in the first quarter building on those introduced  during the last financial year, and with the reintroduction of Buprecare , your Board believes that we will continue to grow the business markedly faster than the market overall and increase our market share . Trading in the year to date has started in line with your Board's expectations.

 

James Lambert

 

Chairman


CHIEF EXECUTIVE'S REVIEW

FOR THE YEAR ENDED 30 June 2011

 

Introduction

 

The past year has seen significant change in the structure of the Animalcare Group. After a careful strategic review we divested the Ritchey, Fearing and Travik businesses that comprised the old Livestock Division. As previously reported, the underlying reason for the sale of these businesses was the clear recognition that the time and resource required to revitalise the Livestock Division in a market sector that was showing few signs of  sustainable, profitable growth could be better focussed and used in our rapidly growing and profitable Companion Animal Division.

 

Our focus now is fully on the Companion Animal Division with its strategy of growth through the introduction of branded generic versions of selected veterinary medicines in key markets in Europe. This strategy is supported by the distribution in the UK of other professional goods and services to veterinary professionals where we have or can build a sustainable complementary product offering. The Companion Animal Identification and Infusion Accessories ranges are good examples of this approach.

 

Market Overview

 

The National Office of Animal Health, NOAH, the trade association which represents approximately 90% of the distributors of veterinary medicines in the UK, in its latest published figures for the year ended March 2011 announced that the ex manufacturer sales, net of all discounts of all veterinary medicines, were flat at £467.2 million (2010: £469.0 million) and 2.1% up on 2009 (£452.0 million). In comparison, sales of Animalcare veterinary medicines in the UK in the financial year grew by 7.6%. Sales of our established range of veterinary medicines in the UK grew by 5.6% whilst UK sales of more recently launched generic veterinary medicines grew by 22.7%. This result is all the more pleasing in the light of the supply problems we had throughout the year with one of our key brands Buprecare. These supply problems ensured that we could not achieve the growth targets we set for the Buprecare brand in the UK but we endured a slight reduction in sales revenue of 2.1%. A programme is in place to introduce an alternative supplier of Buprecare ampoule during the second half of the financial year.

 

Sales via our distribution network in Europe were 4.0% lower than the previous financial year. Although we experienced strong sales in some markets, notably Germany, this was however offset by the loss of our distributor in Belgium and a particularly weak market in Spain. We are in discussions with an alternative distributor for our products in Belgium and will give our other European markets more additional focus in the coming year.

 

Sales in the Companion Animal Identification products group were strong   despite the market experiencing increased competitive pressure on prices. The amalgamated sales of all other product groups were ahead of expectations and overall market growth   as our continued penetration with new veterinary medicines presents opportunity to sell other parts of our range.

 

During the course of the year we continued to develop the sales of Enrocare, a later generation fluoroquinalone antibiotic and Phenoleptil, a treatment for epilepsy in dogs, which were launched at the end of the final quarter of the previous financial year. We launched Florgane, a patented formulation of a well established cattle antibiotic; Anivac, a vaccine against viral haemorraghic disease ("VHD") in rabbits; and Sedastart and Sedastop, a sedative and reversing agent used in cats and dogs. Whilst the sales of the two large animal products Enrocare and Florgane, have been slow to take off additional product introductions in the autumn will give renewed impetus to these products. In contrast the sales of Anivac in particular but also Sedastart and Sedastop have been very good, comfortably surpassing the early sales targets set for them. We believe this momentum will be sustained.

 

Overall Animalcare Group grew revenue from continuing operations 5.4% in the year to £11.8 million (2010: £11.2 million) ahead of market rates. The improvement in mix of products in the range continued, and despite the pressure on selling prices seen in some product groups, overall gross profit grew by 7.3% to £6.4 million (2010: £6.0 million). Although we again strengthened the UK sales team during the course of the year, cost savings as a result of the divestitures and good overall cost control saw the administrative expenses for continuing operations decline to £3.2 million (2010: £3.5million). Underlying operating profit for continuing operations once more saw very good growth in the year of 17.6% to £3.1 million (2010: £2.6 million).



Future Developments

 

We anticipate that the market for companion animal veterinary products in UK and in our target European markets will remain difficult in the coming year. We are however confident that through the efficient execution of our strategy of the registration, marketing and sale of selected veterinary generic medicines we will continue to deliver rates of growth significantly better than the market.

 

It was our intention to launch four new generic veterinary medicines during the course of the year and this was achieved through the launch of Anivac VHD, Florgane, Sedastart and Sedastop. As the new veterinary generics launched in the previous year's approach the mature market share targets we set for them in the UK, we will continue to develop the recently launched products. At the same time we already have finished packed goods on hand for two new products that we will launch to the market in the first half of October along with a third complementary product. These will be supplemented by a very important addition to our range that is finishing its regulatory passage in September. It will be launched in the UK and with our European partners in the coming months. Our knowledge of our existing new product development pipeline and that of our European development partners is such that, for the foreseeable future, we can be confident that we can continue to bring our target of four new products to the market each year. At the same time the focus and concentration that the evolved business structure brings will allow us to improve the quality and profitability of our future development pipeline through the introduction into the veterinary medicines we develop protected technology and innovation. We are already working in some novel areas of formulation development that have significant commercial promise.

 

We have already reorganised the structure of our UK sales force and we will continue to develop its capabilities. We are in the process of recruiting to strengthen other areas of the business and these, along with the addition of Iain Menneer to the Main Board as Director of Marketing and our anticipated move to new premises during the course of the year, will see us well placed to perform well in what may be a difficult year. Importantly it will lay the foundations of the next steps in the development of Animalcare.

 

 

Stephen Wildridge

 

Chief Executive Officer

 



FINANCIAL REVIEW

 

Group Overview

The Group disposed of its entire livestock division during the year, but the marginally profitable nature of the livestock division and the improving profitability in the continuing companion animal division saw the underlying profit after tax rise to £2.39million (2010: £2.22m).

 

Earnings before interest, taxation, depreciation and amortisation ("EBITDA") for the year was £3.39m (2010: £3.13million), this improvement was despite the loss of £0.09million on the disposal of the livestock businesses.

 

Net financing costs for the year ended 30 June 2011 were £0.05 million (2010: £0.15 million), reflecting the repayment in full of Group borrowings.

 

The proceeds of the business disposals and strong cash flow from operations enabled us to repay in full the bank loans which were £4.46million at 30 June 2010.  As a consequence, the Group moved from a net debt of £2.89million at 30 June 2010 to net funds, being all cash on hand, of £1.18million at 30 June 2011.

 

Basic underlying earnings per share were 11.8p (2010: 11.2p).  Basic total earnings per share were 11.5p (2010: loss of 5.2p), the prior year number including the impact of exceptional write downs in the livestock division.  Fully diluted total earnings per share were 11.4p (2010: loss of 5.2p).

 

The final dividend of 3.0 pence for 2010 paid in December 2010 was followed by a maiden interim dividend of 1.0 pence per share paid in June 2011.

 

Continuing Operations

Revenue in the year was £11.83million (2010: £11.22million) and gross profit was £6.39million (2010: £5.96million), representing growth of 5 and 7 per cent respectively.  As previously, the main driver for this was the 8 percent growth in licensed veterinary medicines, but revenue from services of £0.99million (2010: £0.88million), principally in animal identification, also grew by 13 percent.

 

Underlying gross profit for the segment increased marginally at 54.0 per cent of revenue against 53.1 per cent in 2010, reflecting the revenue growth in our higher margin product groups.

 

Underlying distribution costs rose to £0.29million (2010: £0.26million) as a consequence of increased sales volumes and higher fuel costs. Underlying  administrative expenses fell to £3.05million (2010: £3.10million) partially due to lower spend on new product development than in 2010.  As noted in previous reports this expenditure tends by its nature to occur in an irregular pattern dependent on development programmes.  Underlying operating profit from continuing operations rose as a consequence to £3.05million (2010: £2.60million).

 

The effective tax charge for the year for continuing operations was 23.1% (2010 - 31.2%), reflecting the effect of adjustments to the prior year's corporation tax expense.

 

EBITDA for the continuing operation was £3.27million (2010: £2.61million).

 

Disposals

On 17 September 2010 the Company sold the business and assets of its trading division, Ritchey, and the shares of its wholly owned subsidiary, Fearing International (Stock Aids) Limited for cash. The expected gross consideration was £3.25million, based on the audited accounts for these businesses at 30 June 2010 and subject to completion accounting. The Group received £0.52million as working capital inflows prior to the sale and £2.52million in cash from the purchaser, which included an agreed reduction in the consideration of £0.20million in respect of unanticipated difficult trading conditions and profit shortfall in a key new product. The costs of disposal were £0.09million, producing a loss before tax of £0.12million.  All the consideration was received during the year.

 

On 19 November 2010 the Group sold the trade and assets of its loss making subsidiary, Travik Chemicals Limited (now Naychem Limited), for a total consideration of £0.07million net of costs. The buyer of the business subsequently purchased the freehold of Travik's Newton Aycliffe property for £0.23million on 24 June 2011. These disposals produced a profit before tax of £0.03 million.

 

The discontinued operations contributed an underlying profit after tax of £0.15million (2010: £0.50million) from trading during the period prior to disposal.

 



Exceptional costs and other items

Other items excluded from underlying results are amortisation of acquired intangibles £0.12million (2010 :  £0.12million) and fair value movements on interest rate hedging £nil (2009 : £0.04million).

 

There were no exceptional costs during the year.  Full details of exceptional costs during the previous year, which comprised impairments and other costs related to the Ritchey and Fearing businesses, charges relating to Group reorganisation and impairments and other costs related to Travik Chemicals can be found in note 4.

 

Cash Flow

Net cash flow from operating activities was £2.15million (2010: £1.94million). Working capital showed an outflow of £0.50million (2010: £0.54million).  A reduction in trade receivables of £0.57million, due principally to reductions in Livestock trade debtors prior to disposal of the businesses was offset to some extent by strategic increases in inventories in continuing operations.

 

Income taxes paid were £0.80million (2010: £0.55million), reflecting the increase in the Group's taxable profits.  Interest payments fell to £0.11million (2010: £0.27million) due to the settlement of the Group's loans and interest rate swap during the year Net cash flow from operating activities was £2.15million (2010: £1.94million).

 

Capital expenditure in the continuing operation was £0.15million (2010: £0.35million), due to lower expenditure on intangible assets.  Share proceeds generated £0.18million (2010: £0.17million) with the issue of 326,195 ordinary shares in respect of approved employee share options.   Dividends of £0.81million (2010: £0.61million) were paid in the year.

 

 (*)Underlying results are before the effect of exceptional costs and other items disclosed in note 4.

 

 

Peter Warner

Chief Financial Officer


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME






Year ended 30 June 2011










Underlying results before exceptional and other items

Exceptional and other items(*)

Total

Underlying results before exceptional and other items

Exceptional and other items(*)

Total






Restated(**)

Restated(**)

Restated(**)



2011

2011

2011

2010

2010

2010


 Note

£'000

£'000

£'000

£'000

£'000

£'000

Revenue


                 11,825

                     -

          11,825

                   11,223

                     -

           11,223

Cost of sales


                  (5,435)

                     -

          (5,435)

                   (5,266)

                     -

           (5,266)

Gross profit


                   6,390

                     -

            6,390

                     5,957

                     -

             5,957

Distribution costs


                     (292)

                     -

             (292)

                      (264)

                     -

              (264)

Administrative expenses


                  (3,045)

              (118)

          (3,163)

                   (3,096)

              (401)

           (3,497)

Operating profit/(loss)


                   3,053

              (118)

            2,935

                     2,597

              (401)

             2,196

Finance costs


                       (51)

                  (1)

               (52)

                      (130)

                (38)

              (168)

Finance income


                          2

                     -

                   2

                          16

                     -

                  16

Profit/(loss) before tax


                   3,004

              (119)

            2,885

                     2,483

              (439)

             2,044

Income tax (expense)/credit                

6   

                     (717)

                  52

             (665)

                      (761)

                123

              (638)

Total comprehensive income/(loss) for the year from continuing operations


                   2,287

                (67)

            2,220

                     1,722

              (316)

             1,406

Total comprehensive income/(loss) for the year from discontinued operations

2

                      105

                     -

               105

                        499

           (2,936)

           (2,437)

Total comprehensive income/(loss) for the year


                   2,392

                (67)

            2,325

                     2,221

           (3,252)

           (1,031)









Total basic earnings/(loss) per share

8

11.8p


11.5p

11.2p


(5.2p)

Total fully diluted earnings/(loss) per share


11.7p


11.4p

11.0p


(5.2p)









Basic earnings per share from continuing operations


11.3p


11.0p

8.7p


7.1p

Fully diluted earnings per share from continuing operations


11.2p


10.8p

8.5p


6.9p









Total comprehensive income/(loss)for the year is attributable to the equity holders of the parent.









* In order to aid understanding of underlying business performance, the directors have presented underlying results before the effect of exceptional and other items.  These exceptional and other items are analysed in detail in note 4.









** During 2011 the Group disposed of the businesses and assets of its livestock division.  The segment was not classified as held for sale or as a discontinued operation as at 30 June 2010, and the comparative consolidated statement of comprehensive income has been restated to show discontinued operations separately.

 

 



 

CONSOLIDATED STATEMENTOF CHANGES IN SHAREHOLDERS' EQUITY



Year ended 30 June 2011








 

 

Share Capital

Share Premium Account

Retained Earnings

Total

GROUP


£'000

£'000

£'000

£'000

Balance at 1 July 2009


   3,951

      5,824

      5,607

 15,382

Total comprehensive loss for the year


          -

             -

     (1,031)

  (1,031)

Transactions with owners of the Company, recognised in equity:






Dividends paid


          -

             -

        (494)

    (494)

Issue of share capital


       59

         107

             -

     166

Share based payments


          -

             -

          58

       58

Balance at 1 July 2010


   4,010

      5,931

      4,140

 14,081

Total comprehensive income for the year


          -

             -

      2,325

   2,325

Transactions with owners of the Company, recognised in equity:






Dividends paid


          -

             -

        (812)

    (812)

Issue of share capital


       65

         114

             -

     179

Share based payments


          -

             -

          16

       16

Balance at 30 June 2011


   4,075

      6,045

      5,669

 15,789







 

 

 

 



 

CONSOLIDATED BALANCE SHEET




30 June 2011









2011

2010



£'000

£'000

Non-current assets




Goodwill    


    12,711

    13,027

Other intangible assets    


     1,820

     2,105

Property, plant and equipment    


          47

     1,153



    14,578

    16,285

Current assets




Inventories


     1,346

     1,815

Trade and other receivables


     1,681

     3,418

Cash and cash equivalents


     1,179

     1,564



     4,206

     6,797

Total assets


    18,784

    23,082

Current liabilities




Trade and other payables


    (1,566)

    (2,770)

Current tax liabilities


       (320)

       (479)

Bank overdraft and loans


            -

       (883)

Deferred income


       (182)

       (154)

Derivative financial instruments


            -

         (55)

Current liabilities


    (2,068)

    (4,341)

Net current assets/(liabilities)


     2,138

     2,456

Non-current liabilities




Bank loans


            -

    (3,573)

Deferred income


       (862)

       (837)

Deferred tax liabilities


         (65)

       (250)



       (927)

    (4,660)

Total liabilities


    (2,995)

    (9,001)

Net assets


    15,789

    14,081

Capital and reserves




Called up share capital


     4,075

     4,010

Share premium account


     6,045

     5,931

Retained earnings


     5,669

     4,140

Equity attributable to equity holders of the parent

    15,789

    14,081











 

CONSOLIDATED CASH FLOW STATEMENT




Year ended 30 June 2011









2011

2010


Note

£'000

£'000

Comprehensive income/(loss) for the year before tax

 6

      2,936

       (558)

Adjustments for:




Depreciation of property, plant and equipment


          88

        287

Amortisation of intangible assets


        317

        308

Impairment of intangible assets


             -

        115

Impairment of property, plant and equipment


             -

        596

Goodwill impairment charge


             -

     2,227

Finance costs


          55

        175

Finance income


           (2)

         (16)

Share-based payment award


          16

          58

Release of deferred income


          53

        108

(Profit)/loss on disposal of property, plant and equipment

           (2)

         (16)

Loss on sale of businesses


          94

            -

Operating cash flows before movements in working capital

      3,555

     3,284

(Increase)/decrease in inventories


       (596)

        217

Decrease/(increase) in receivables


        572

       (829)

(Decrease)/Increase in payables


       (471)

          76

Cash generated by operations


      3,060

     2,748

Income taxes (paid)/received


       (805)

       (547)

Interest paid


       (110)

       (265)

Net cash flow from operating activities


      2,145

     1,936

Investing activities:




Payments to acquire intangible assets


       (134)

       (407)

Payments to acquire property, plant and equipment


         (18)

       (205)

Interest received


            2

          16

Receipts from sale of property, plant and equipment 

            4

          20

Receipts from sale of businesses


      2,705

            -

Net cash generated by/(used in) investing activities   

      2,559

       (576)

Financing:




Receipts from issue of share capital  


        179

        166

Equity dividends paid


       (812)

       (494)

Repayment of bank loans 


     (4,456)

    (1,000)

Net cash used in financing activities


     (5,089)

    (1,328)

Net (decrease)/increase in cash and cash equivalents

       (385)

          32

Cash and cash equivalents at start of year


      1,564

     1,532

Cash and cash equivalents at end of year


      1,179

     1,564

Comprising:




Cash and cash equivalents 


      1,179

     1,564



      1,179

     1,564


1. Basis of preparation and going concern

 

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 and Accounts for the year ended 30 June 2010. Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRSs, this announcement does not itself contain sufficient information to comply with IFRSs.'

 

Discontinued operations

The Livestock businesses were disposed of during the year and represent a discontinued operation as defined in IFRS 5 Non Current Assets held for sale and Discontinued Operations.  As a result the Statement of Comprehensive Income has been restated as if the Livestock businesses had been discontinued from 1 July 2009 (see note 2).

 

 

Going concern

Following the sale of the Group's livestock businesses in the current year for cash, on 31 March 2011 the Group repaid the balance of its outstanding loan facility, which stood at £4.46millon on 30 June 2010.  The Group has an undrawn overdraft facility of £100,000 which is available for general corporate and working capital requirements.  At 30 June 2011 the Group had cash on hand of £1.18 million (30 June 2010: £1.56 million), leaving it in a net funds position.  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 19 November 2010 the Group sold the trade and certain assets of its loss making subsidiary Travik Chemicals Limited (now Naychem Limited).  These disposals comprised the whole of the Group's Livestock division. 



Total

Underlying results before exceptional and other items

Exceptional and other items(*)

Total



2011

2010

2010

2010


Note

£'000

£'000

£'000

£'000

Revenue


           2,038

                   8,698

                         -

         8,698

Cost of sales


             (923)

                 (3,965)

                   (181)

       (4,146)

Gross profit/(loss)


           1,115

                   4,733

                   (181)

         4,552

Distribution costs


               (84)

                    (367)

                         -

          (367)

Administrative expenses


             (883)

                 (3,822)

                (2,958)

       (6,780)

Operating profit/(loss)


              148

                      544

                (3,139)

       (2,595)

Finance costs


                 (3)

                        (7)

                         -

              (7)

Profit/(loss) before tax


              145

                      537

                (3,139)

       (2,602)

Income tax (expense)/credit

6

                 (7)

                      (38)

                     203

            165

Profit/(loss) after tax for the year from discontinued operations


              138

                      499

                (2,936)

       (2,437)

Loss on sale of discontinued operations


               (94)

                           -

                         -

                -

Income tax credit on loss on sale of discontinued operations

        6

                61

                           -

                         -

                -

Total comprehensive profit/(loss) for the year from discontinued operations


          105

               499

           (2,936)

    (2,437)

 

* In order to aid understanding of underlying business performance, the directors have presented underlying results before the effect of exceptional and other items.  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.  These exceptional and other items are analysed in detail in note 4.  There were no exceptional or other items relating to discontinued operations during the year ended 30 June 2011



 

3. DISPOSAL OF BUSINESSES





Ritchey & Fearing

Travik

Total


2011

2011

2011


£'000

£'000

£'000

Consideration and Costs




Cash consideration

         2,520

               299

         2,819

Costs

             (95)

                (19)

           (114)


         2,425

               280

         2,705

Assets and liabilities disposed of:




Goodwill

            316

                    -

            316

Other intangible assets

            102

                    -

            102

Property, plant and equipment

            807

               227

         1,034

Inventories

         1,026

                 39

         1,065

Trade and other receivables

         1,165

                    -

         1,165

Trade and other payables

           (733)

                    -

           (733)

Income tax payable

             (29)

                    -

             (29)

Deferred taxation

           (110)

                (11)

           (121)

Net Assets sold

         2,544

               255

         2,799





(Loss)/profit on sale of businesses

           (119)

                 25

             (94)





Net cash flow from operating activities

            200

              (336)

           (136)





Net cash used in investing activities   

              (3)

                    -

              (3)





Net cash used in financing activities

           (180)

                    -

           (180)



 

4. EXCEPTIONAL AND OTHER ITEMS




In early 2010 the Group undertook a strategic review of its Livestock division activities, given its financial performance and the ongoing challenges it faced in the market.  This review resulted in the directors forming the view that the fair value less costs to sell of the Livestock division exceeded the value in use, and that an impairment charge was necessary.  These considerations resulted in exceptional charges for 2010.



2011

2010



£'000

£'000

Charges relating to the reorganisation of the Group




Aborted group relocation costs


              - 

          69

Executive severance payments


              - 

        212



                                 -

            281

Impairments and other charges relating to the Ritchey and Fearing businesses




Impairment of goodwill


              - 

     2,165

Impairment of other intangible assets


              - 

        115

Impairment of property, plant and equipment


              - 

        225

Other charges


              - 

          59



                                 - 

         2,564

Impairments and restructuring charges relating to the Travik Chemicals business




Impairment of goodwill


              -  

          62

Impairment of property, plant and equipment


              -  

        371

Inventory provisions


              -  

        181

Release of contingent consideration


              -  

         (39)



                                 -  

            575

Total exceptional items


                                 -  

         3,420





Amortisation of acquired intangible assets


          118  

        120

Fair value movements on interest rate hedging


             1  

          38

Other items


                            119

            158





Total exceptional and other items


          119  

     3,578

The charges relating to the reorganisation of the Group and the other items relate to continuing operations, the remainder to discontinued operations.



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 to the segments and to assess their performance. The Chief Operating Decision Maker is considered to be the Chief Executive Officer of Animalcare Group Plc.

 

The Group comprised two segments, Companion Animal and Livestock (discontinued).

 

The Chief Operating Decision Maker receives and reviews underlying segmental operating profit.

 

Intersegment transactions are undertaken in the ordinary course of business.

 

The Board considers that certain items are cross divisional in nature and cannot be allocated between the segments on a meaningful basis.  The administrative costs of central group management are presented as unallocated in the following tables, as this entity has trading relationships with companies in both the segments.

 

Net funding costs and taxation are treated as unallocated reflecting the nature of the Group's borrowing facilities and its tax group.

 

Each segment is shown net of intercompany transactions and balances within that segment. The eliminations remove intercompany transactions and balances between the segments.

 

Principal activities were as follows:

 

The Companion Animal Division supplies and distributes veterinary medicines, identification and other welfare products to veterinary markets; and

 

The Livestock Division manufactured and distributed livestock identification and welfare products to agricultural merchants, retailers and farmers.  Following disposals during the year the whole of the Livestock division is a discontinued operation.



Companion Animal (continuing)

Livestock (discontinued)

Eliminations

Segment Total

Unallocated

Total



2011

2011

2011

2011

2011

2011

2011


£'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


             (118)

                    -

                  -

       (118)

                -

        (118)

Operating profit - discontinued operations







        (148)

Operating Profit






      2,935

Finance Income







            2

Finance Costs







         (52)

Profit before tax







      2,885









 

.

5. REVENUE AND OPERATING SEGMENTS (continued)

 




 



Companion Animal (continuing)

Livestock (discontinued)

Eliminations

Segment Total

Unallocated

Total

 



2010

2010

2010

2010

2010

2010

 

2010


£'000

£'000

£'000

£'000

£'000

£'000

 

Revenue








 

External sales   


         11,156

             8,765

                  -

    19,921

                -

    19,921

 

Inter-segment sales


               67

                   4

              (71)

             -


             -

 

Total revenue   


         11,223

             8,769

              (71)

    19,921

                -

    19,921

 

Underlying Operating Profit/(Loss)


           2,873

                545

                  -

      3,418

           (276)

      3,142

 

Other Items


             (120)

                    -

                  -

       (120)

                -

        (120)

 

Exceptional items


                  -

            (3,139)

                  -

     (3,139)

           (281)

     (3,420)

 

Operating profit - discontinued operations







        (545)

 

Exceptional items - discontinued operations







      3,139

 

Operating Profit







      2,196

 

Finance Income







          16

 

Finance Costs







        (168)

 

Profit before tax







      2,044

 



Companion Animal (continuing)

Livestock (discontinued)

Eliminations

Segment Total

Unallocated

Total

 



2011

2011

2011

2011

2011

2011

 

2011


£'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


              134

                    -

                  -

        134

                -

         134

 

Property, plant and equipment additions


               16

                   3

                  -

          19

                -

          19

 

Depreciation and amortisation


              303

                 72

                  -

        375

                -

         375

 

Impairment of intangible assets


               30

 -

                  -

          30

                -

          30

 

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

 

 







5. REVENUE AND OPERATING SEGMENTS (continued)

 


Companion Animal (continuing)

Livestock (discontinued)

Eliminations

Segment Total

Unallocated

Total


2010

2010

2010

2010

2010

2010

2010

£'000

£'000

£'000

£'000

£'000

£'000

Products and Services







Licensed veterinary 

           5,373

                    -

                  -

      5,373

                -

      5,373

Animal identification   

           2,980

             3,903

              (67)

      6,816

                -

      6,816

Animal welfare   

           2,870

             3,943

                (4)

      6,809

                -

      6,809

Other 

 

                  -

                923

                  -

        923

                -

         923

 

 

         11,223

             8,769

              (71)

    19,921

                -

    19,921

Other information







Intangible asset additions

              338

                 69

                  -

        407

                -

         407

Property, plant and equipment additions

                 8

                197

                  -

        205

                -

         205

Depreciation and amortisation

              296

                299

                  -

        595

                -

         595

Impairment of intangible assets

                  -

                115

                  -

        115

                -

         115

Impairment of property, plant and equipment

                  -

                159

                  -

        159

                -

         159

Goodwill impairment charge

                  -

             2,227

                  -

      2,227

                -

      2,227

Consolidated assets

 

         19,439

             4,731

          (1,088)

    23,082

                -

    23,082

Consolidated liabilities

          (3,119)

            (2,514)

           1,088

     (4,545)

        (4,456)

     (9,001)

Consolidated net assets

         16,320

             2,217

                  -

    18,537

        (4,456)

    14,081



5. REVENUE AND OPERATING SEGMENTS (continued)

 

Key Customers


2011

2010





Number


3

3





Percentage of total revenue

86%

84%





Key customers, all within the Companion Animal segment, are those responsible for 10% or more of segmental revenue.

 



2011

2010







£'000

£'000





Geographical market







United Kingdom


12,879

18,061





Other European Countries 

984

1,706





Americas


                  -

41





Australasia


                  -

2





Rest of the World


                  -

111







13,863

19,921





The Group's assets are wholly located in the United Kingdom and accordingly no geographical analysis of assets and liabilities is presented.





 

An analysis of total Group revenue is as follows:



2011

2010



£'000

£'000

Revenue from sale of goods

12,873

19,045

Revenue from provision of services 

990

876



13,863

19,921

Finance income


                 2

                 16



13,865

19,937



 

6. INCOME TAX EXPENSE






2011

2010



£'000

£'000

The income tax expense/(credit) comprises:




Current tax expense


        728

        712

Adjustment in the current year in relation to prior years


         (53)

         (25)



        675

        687

The deferred tax credit comprises:




Origination and reversal of temporary differences


         (64)

       (214)

Adjustment in the current year in relation to prior years


            -

            -



         (64)

       (214)

Total tax expense for the year


        611

        473





The total tax expense for the year comprises:




Income tax expense in the statement of comprehensive income


        665

        638

Income tax expense/(credit) on discontinued operations

   

            7

       (165)

Income tax credit on loss on sale of discontinued operations

   

         (61)

            -

Total tax expense for the year


        611

        473





The total tax charge can be reconciled to the accounting profit as follows:



Total comprehensive income/(loss) for the year


     2,325

    (1,031)

Total tax expense


        611

        473

Profit before tax 


     2,936

       (558)

Income tax calculated at 27.5% (2010: 28%)


        807

       (156)

Effect of expenses not deductible


            3

          26

Effect of share-based deductions


         (80)

         (51)

Effect of  goodwill impairments not deductible


            -

        623

Effect of reduction in deferred tax rate from 28% to 26%


         (32)

           (5)

Effect of unprovided temporary differences


           (2)

          61

Effect of write back of deferred tax liabilities


         (32)

            -

Effect of adjustments to the income tax expense of earlier years


         (53)

         (25)



        611

        473

 

 

The tax credit of £52,000 (2010: £326,000) 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, impairments to non-current assets and other charges relating to Group reorganisation..

 

During the period the Group has reflected the change in the enacted tax rate from 28% to 26%, which is effective from 1 April 2011. The Government has also indicated that it intends to enact future reductions in the main tax rate of 1% each year down to 23% by 1 April 2014.  A further reduction in the rate to 25% was substantively enacted on 5 July 2011.  The future 1% main tax rate reductions are not expected to have a material impact.

 

 

7. DIVIDENDS




 

 



2011

2010

 

 



£'000

£'000

 

 

Ordinary final dividend paid for the year ended 30 June 2010


609

494

 

 

Ordinary interim dividend paid for the year ended 30 June 2011


203

            -

 

 



812

494

 

 

The final dividend paid during the year ended 30 June 2011 was 3.0 pence per share (2010: 2.5 pence per share).  The interim dividend paid during the year ended 30 June 2011 was 1.0 pence per share (2010: nil).

 

 

The proposed final dividend is subject to approval from shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

 

8. 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 (loss)/earnings


2011

2010

2011

2010


£'000

£'000

£'000

£'000

Total comprehensive income attributable to equity holders of the Company   

            2,392

              2,221

         2,325

        (1,031)

Total comprehensive income from continuing operations attributable to equity holders of the Company   

            2,287

              1,721

         2,220

         1,406

Total comprehensive income from discontinued operations attributable to equity holders of the Company   

               105

                499

            105

        (2,437)


2011

2010

2011

2010


No.

No.

No.

No.

Basic weighted average number of shares   

20,225,635

19,870,419

20,225,635

19,870,419

Dilutive potential ordinary shares

239,891

348,218

239,891

348,218


20,465,526

20,218,637

20,465,526

20,218,637






Total basic earnings/( loss) per share

11.8p

11.2p

11.5p

(5.2p)

Total fully diluted earnings/(loss) per share

11.7p

11.0p

11.4p

(5.2p)






Basic earnings per share from continuing operations

11.3p

8.7p

11.0p

7.1p

Fully diluted earnings per share from continuing operations

11.2p

8.5p

10.8p

7.0p






Basic earnings per share from discontinued operations

0.5p

2.5p

0.5p

(12.3p)

Fully diluted earnings per share from discontinued operations

0.5p

2.5p

0.5p

(12.3p)

The potential ordinary shares in the previous year did not increase the loss per share.

 

9. ANNUAL REPORT

 

The Group's Annual Report and Financial Statements for the year ended 30 June 2011 were approved on 19 September 2011and are expected to be posted to shareholders during the week commencing 3 October 2011 and 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.

 

The financial information set out above does not constitute the Company's accounts for the years ended 30 June 2010 or 2011, but is derived from those accounts.  Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters of emphasis without qualifying their report and did not contain statements under s498(2) or  (3) of the Companies Act 2006.

 

 


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