Final Results

RNS Number : 1634C

Animalcare Group PLC

14 October 2015

 

Animalcare Group plc

("Animalcare", the "Company" or the "Group")

Full Year Results

Animalcare Group plc (AIM: ANCR), a leading supplier of veterinary medicines, announces results for the year ended 30^th June 2015. This year has seen good progress which is reflected in the financial performance and strong cash position, placing the Group in an excellent position to take advantage of investment opportunities as and when they arise.

Animalcare is made up of three product groups: Licensed Veterinary Medicines, Companion Animal Identification and Animal Welfare Products.

Financial Highlights

·     Revenue up 5.1% to £13.5m (2014: £12.9m)

·     Underlying* operating profit up 11.0% to £3.1m (2014: £2.8m)  

·     Underlying* basic earnings per share up 16.7% to 12.6p (2014: 10.8p)

·     Reported pre-tax profits up 12.6% to £3.01m (2014: £2.67m)

·     Strong, debt free balance sheet with net cash of £5.8m (2014: £3.8m)

§ Cash generated from operations £4.5m (2014: £1.6m)

·     Total recommended dividend up 10.9% to 6.1p (2014: 5.5p) 

 

*underlying measures are before the effect of exceptional costs and other items

Operational Highlights

·     Strong increase in sales of Licensed Veterinary Medicines, up 8.8% to £8.6m (2014: £7.88m)

·     Volume of microchips sold increased in the period, with revenues impacted by the phasing of equine export chip sales

·     Revenues from the Animal Welfare Products range increased 2.6% to £2.65m (2014: £2.58m)

·     Investment in product development pipeline has increased substantially in the period. 3 development projects progressed to regulatory submission, of which 1 licence has been granted

·     A new post of European Development Manager has been successfully filled to focus entirely on expanding potential from territories outside the UK

Iain Menneer, Chief Executive Officer of Animalcare, said: "I am delighted that we've followed last year's growth with another set of solid results, particularly with a strong performance from our Licensed Veterinary Medicines business. Again a key feature of our financial results has been the impressive cash generation of the business which has allowed us to continue our investment in new product development whilst maintaining a progressive dividend policy. We are well positioned to deliver further growth as planned from 2017 onwards."

Animalcare Group plc	Tel: [phone]
Iain Menneer, Chief Executive Officer
Chris Brewster, Chief Financial Officer
Panmure Gordon  (Nominated Adviser and Broker)
Freddy Crossley/Peter Steel	Tel: [phone]
Walbrook PR Ltd	Tel: [phone] or [e-mail]
Paul McManus	Mob: [phone]
Lianne Cawthorne	Mob: [phone]

Notes to editors

Animalcare is a leading veterinary sales and marketing company based in York with 60 employees including a field sales force of 16 representatives selling to all veterinary practices around the United Kingdom.

Animalcare has developed a range of generic veterinary medicines and animal identification products primarily to companion animal veterinary markets.  

Animalcare operates in three product areas:

·     Licensed Veterinary Medicines - a range of branded veterinary licensed pharmaceuticals sold to veterinary professionals in the UK and selected markets in Northern Europe. The range can be divided into four main categories; antibacterials, anaesthetics and analgesics, Aqupharm intravenous fluids and vitamins & speciality pharmaceuticals.

·     Companion Animal Identification - Identichip is the pioneering microchip identification system in the UK. Animalcare also owns and operates the Anibase database; together the market leader in electronic identification for pets in the UK.

·     Animal Welfare Products - a range used by veterinary professionals in the diagnosis and care of their patients, for example intravenous infusion accessories, ophthalmic instruments, hygiene solutions and bandages and dressings.

 

 

Chairman's Statement

Animalcare remains focused on three product groups: Licensed Veterinary Medicines, Companion Animal Identification and Animal Welfare Products; all sold through veterinary practices. The three areas of the business have performed well during the year; in particular the continued growth of Licensed Veterinary Medicines by 8.8% is very pleasing and follows a strong year in 2014.

Financial Trading

Group revenues increased by 5.1% from £12.9m to £13.5m principally due to the growth in sales of Licensed Veterinary Medicines by £696k to £8.6m. This good performance has led to pre-tax profits increasing by 12.7% during the year and over 30% in the past two years. Basic earnings per share have increased from 10.3p to 12.1p, up 17.5% in the period and 33% in the past two years. Cash generation has remained very strong, with cash increasing from £3.8m to £5.8m.

People

The senior management of your business has been further strengthened during the year with high calibre individuals from the human and animal pharmaceutical industry. A Senior Management Team meeting made up of all the heads of departments is chaired monthly by our CEO Iain Menneer, setting and monitoring budgets, and running the business day-to-day.

The plc Board, which meets eight times a year, is chaired by myself as Non-Executive Chairman, having held CEO and Chairman roles for thirty years. Nick Downshire also has wide business experience and is a qualified accountant and chairs the Audit Committee. Ray Harding is a qualified veterinary surgeon and set up and ran a successful pharmaceutical regulatory consultancy for fifteen years and is Chairman of the Remuneration and the Nomination Committees. Along with the CEO and CFO your Board sets the strategy to enhance shareholder value in all three main operating areas of the business. I believe the success and the long-term growth of Animalcare are well served by a stable, experienced, well balanced and challenging Board. This coupled with an able, talented hard working management team gives your Company real opportunity for continued growth over the coming years.

Product Development Pipeline

Progress has been made during the period developing new products in our in-house development pipeline. Our investment in product development and in regulatory assessment fees has grown significantly during the year to almost £800k, an area which is core to our growth strategy.

Dividend

Your Board proposes, subject to shareholder approval, an increased final dividend of 4.3 pence per share. With 1.8 pence per share paid as the interim dividend this brings the total for the year to 6.1 pence per share, representing growth of 10.9% (2014: 5.5 pence per share), which is in line with underlying operating profit and is well covered by the increase in cash balances.

Prospects

With the significant increase in investment in new product development and in the infrastructure across all areas of its business, Animalcare is well positioned and delivering its strategy for further growth in sales from 2017 onwards. Your Company possesses not only an experienced, talented and well-balanced leadership team but also a capable hard working workforce. I would like to thank them all for their commitment during the year, which continues to deliver an exciting growing business.

James Lambert

Non-Executive Chairman

 

Chief Executive's Review

 

Introduction

I am very pleased to report increased sales for the business during a period of investment. Revenues have grown in the period by 5.1% to £13.5m (2014: £12.8m). During the last two years we have been building a business that provides a strong platform from which to launch a new period of growth. This has been based on bringing together the best team possible and giving them the right environment to deliver our key strategic objectives. I am very happy with the progress we are making to deliver that growth.

Business Review

The veterinary market continues to evolve, presenting new opportunities to work differently with a customer base that is consolidating and looking for increasing value from the products and services we provide.

Latest industry figures show that dog numbers in the UK have declined by 4.7% to 8.5m and cats by 6.8% to 7.4m (Pet Food Manufacturers' Association, www.pfma.co.uk), with this trend appearing to reflect across other pet species too. There are no clear reasons for this change at a time when the economy is getting stronger in the UK after several years of recession. The national dog and cat charities believe these changes are as a result of their campaigns promoting responsible pet ownership. We believe we have limited exposure to these changes in pet population due to the clinical nature of our product portfolio and the demographic of veterinary customers likely to have been affected by changes in pet ownership.

Licensed Veterinary Medicines

The Licensed Veterinary Medicines group again generated strong sales, growing by 8.8%. During the first half of the period the main competitor to our product Buprecare (an analgesic and controlled drug) was absent from the market for a period of several months allowing Animalcare to benefit from non-recurring sales estimated at £0.2m.

In the first half of the year we launched the Pet Remedy range of over the counter products on distribution in the UK and Ireland. Pet Remedy is based on a patented formulation containing valerian at a specific level to calm pets. It can be used across all species and has proved very popular and effective in many domestic and veterinary settings.

During the second half we launched four new pharmaceutical products, all on distribution from an EU partner. Synthadon and Anaestamine both complemented our growing anaesthetic and analgesic range; Clavubactin and Fungiconazole are an antibiotic and antifungal product respectively. All are focused on the companion animal market. Whilst in the first few months of their launch phase, sales of each are progressing well.

Encouragingly, our pharmaceutical products are growing above market rates in comparison to the most recent UK market data which show a 1.1% increase for companion animal medicines revenues in the 12 months to March 2015 (National Office of Animal Health, www.noah.co.uk).

Companion Animal Identification

The sales volume of our Identichip microchips increased in the period by 1.7%, however UK revenues decreased by 2.2%, like-for-like. A significant equine export order fulfilled late in the prior period adversely affected revenues from this channel in this reporting period.

In April 2016 it will be a legal requirement for all dogs in England to be microchipped and in addition it will be an offence if the owners' details are not kept up to date on the associated microchip database. The Scottish Parliament and Welsh Assembly have recently followed suit in introducing similar legislation, effective April 2016.

This impending change in the law has not had a dramatic effect on the uptake of microchipping. However, our veterinary customers have become more price sensitive and responsive to short-term promotional campaigns. We have plans underway to bring value back into the market once it settles down.

Pleasingly through this period our revenues from services derived from the microchip database have continued to rise.

Animal Welfare Products

The Animal Welfare Products group grew by 2.6% in the period. The infusion accessories range complements our prescription medicine intravenous fluids range and grew in the period by 5.3%, representing over 50% of the product group. Other categories in this group achieved revenues meeting our expectations with very modest levels of commercial support.

As stated before, we continue to assess our product portfolio not only to rationalise poor performing or lower margin items but to selectively invest in new opportunities that complement our existing ranges to enhance revenue growth and profit generation.

People

 

General

Animalcare is a great place to work and we pride ourselves on the positive and supportive culture. I have highlighted in previous reports that changes have been made to bring the personnel systems up to date and to a level befitting a company of its size and stature. I am very pleased that further progress has been made during the year to incentivise and reward colleagues better. Attention has now focused on staff engagement by improving company-wide communication and awareness raising. These efforts are having a positive effect in all areas of the business; and I am pleased that this year we have again experienced more staff promotions into new and responsible positions.

Management

Senior management changes during the financial year have resulted in a stronger, more capable leadership team. Sarah McKenzie joined as Head of Marketing from a senior commercial position at Teva UK, the global generic pharmaceutical company. Sarah brings directly applicable skills and experience from some very similar dynamics in the human generics market.

More recently, Martin Gore, formerly of Novartis Animal Health's leadership team in the UK, was appointed to a newly created position to focus on European development. Martin has a wealth of commercial skills gained in the animal and human health sector and has recent experience as a country manager in Ireland.

Sales

During the period we have concluded the reorganisation of our sales team. It is divided into two regions addressing the north and south of the UK. A structure has been introduced to support sales management. This change allows us to reward and motivate senior representatives more effectively. Field sales have been supported by the successful introduction of a telesales team. The final development is the strengthening of our key account support necessitated by the increase in corporate and buying group customers. Structural changes have been complemented by significant investment in training and development of our sales team. It is our goal to better serve our customers' changing requirements and build a team that is capable of fully exploiting the new products and services that our product pipeline will bring to market.

Product Pipeline

I am very pleased to report that good progress has been made in our product development pipeline. Development work has focused on identifying new product opportunities and also ways to significantly enhance the commercial potential of existing pharmaceutical products.

Four new and four existing product development projects reached the 'Regulatory' stage of our pipeline, three being submitted to the authorities for assessment. One of these products has already been approved and will be launched to the UK market early in the second half of the current financial year. The other two are currently progressing through regulatory assessment successfully to date.

These submissions are a clear sign that the strengthening of the development process is having an effect and that progress is being made; evidence of which will be in their launch from January 2016 onwards. Furthermore, other submissions will be made during the current financial year.

Europe

Animalcare's sales outside the UK have been broadly constant for several years, averaging 8% of total turnover. The growth in our home UK market has not been reflected in mainland Europe. Therefore one of Animalcare's stated strategic ojectives is to increase sales outside the UK and reach the potential that patently exists.

A major step forward was the creation of a new post with the sole responsibility to achieve this. As outlined above, Martin Gore was appointed Head of Export Development late in the period.

Martin will assess current distribution arrangements in existing territories, offering support and insight from our central technical and marketing functions as required. In addition he will also identify new territory and distribution partner opportunities. In doing so Martin will increase our exposure in Europe with the intention to stimulate more inward product opportunities too.

Operations

Supply Chain

During the year our operations function has started a structured programme to manage the supply chain more robustly, including monitoring supplier performance and developing more informed forecasting models. It is believed that both of these elements will improve product supply and tighten control of stock levels.

Outlook

Over the past two financial years significant effort has been made to build a strong platform to launch into a new growth phase in Animalcare's history. I believe the essential ingredients are now in place and are already delivering progress in key areas of sales, product development and European growth.

During the past six months significant progress has been made increasing networks and contacts in an effort to source products to acquire or in-license. Whilst still in the early stages, there are some exciting opportunities under discussion.

Our business is strongly cash generative giving us the necessary resources to invest significantly in our product pipeline. We will continue to invest in and develop our enthusiastic and committed Animalcare team who are at the core of everything
we do.

Iain Menneer

Chief Executive Officer

 

Chief Financial Officer's Review

Presentation of results

We present our financial results on two bases. Underlying results show the performance of the business before exceptional and other items since the Directors believe this provides a clearer understanding of business performance. IFRS results include these items to give the statutory results.

Overview

We delivered another solid performance during the financial year to 30^th June 2015, with underlying operating profit increasing by 11.0% compared with previous year to £3.1m. This reflects our strong operational performance, both in revenue and margin terms, while continuing to make the necessary investment in our business to support future growth.

Our balance sheet strength continues to build, with Group cash balances of £5.8m at 30^th June 2015. The Group's consistent profitable growth has enabled us to generate the funds we need to invest in our product development pipeline, a key part of our organic growth strategy.

Revenue and gross profit

Revenue £'000	2015	2014	% change
Licensed Veterinary Medicines	8,579	7,883	8.8%
Companion Animal Identification	2,309	2,418	(4.5%)
Animal Welfare Products	2,648	2,580	2.6%
TOTAL	13,536	12,881	5.1%

Overall revenues grew by 5.1% to £13.5m (2014: £12.8m). Our Licensed Veterinary Medicines group, which represents 63% of total revenue, again delivered good growth of 8.8%, 5.5% of which is like-for-like growth. As we noted in our Interim Report dated 31^st December 2014, this includes a circa £0.2m non-recurring first half benefit from sales of Buprecare as a result of supply issues with a competitor product. The remaining growth is largely driven by sales of recently launched new products.

The strong performance in Licensed Veterinary Medicines was offset by a decline in Companion Animal Identification sales, mostly due to the phasing of export equine chip sales.

Our Animal Welfare Products group grew modestly driven by our growing infusion accessories range, which represents around 50% of the £2.6m sales.

Gross profit increased by 6.0% to £7.6m (2014: £7.1m). Our gross margins improved to 55.9% (2014: 55.4%), primarily due to the non-recurring Buprecare benefit noted above. Due to favourable sales mix, underlying gross margins remain comparable with the prior year.

The financial performance of each product group is reviewed in more detail within the Business Review section of the Chief Executive's Review.

Operating results

Revenue £'000	2015	2014	% change
Underlying EBITDA	3,423	3,162	8.3%
Depreciation & amortisation	(313)	(360)
Underlying operating profit	3,110	2,802	11.0%
Profit before tax	3,010	2,672	12.7%

Underlying operating profit increased by 11.0% to £3.1m and our operating margin improved by 120 basis points to 23% (2014: 21.8%). Overheads, excluding research and development expenses, increased by £0.2m to £4.3m, as we continue to make the necessary investment, in particular in our management and support teams, to position the business for future growth. Research and development costs, which incorporate a share of the salaries of the product development team, have decreased by £0.1m against last year, reflecting the largely capital nature of the overall spend on our product pipeline.

Non-underlying items principally incorporate the amortisation of acquired intangibles as detailed in note 4 to this announcement.

Reflecting all of the above, Group profit before tax was up 12.7% to £3.0m (2014: £2.7m).

Cash flow

Our Group cash position grew by £2.0m to £5.8m as at 30^th June 2015. Cash generated by operations was very strong at £4.5m (2014: £1.6m). We have focused on optimising our stock position following the peak seen in FY14 which has, to date, delivered a reduction of £0.8m. This project continues to ensure we maintain the necessary focus on our supply chain and the resulting impact of streamlining our working capital.

It is of primary importance that the Group reinvests the free cash in our business to support future growth and, as planned, during the year we have substantially increased our expenditure in our product development pipeline as shown in the table below:

Year ended 30th June	Capitalised development costs (£m)
2013	£0.1m
2014	£0.2m
2015	£0.8m

The four-fold increase in expenditure against 2014 highlights the progress made in our pharmaceutical pipeline, as a result of the decisions made during FY14 to recruit additional resource within our Technical and Business Development teams.

Earnings per share ("EPS")

Basic underlying EPS improved by 16.7% to 12.6 pence (2014: 10.8 pence). Basic EPS rose by 17.5% to 12.1 pence (2014: 10.3 pence) reflecting the lower cost of exceptional items incurred during 2015.

Dividends

Since 2008 we have returned £5.5m to shareholders or 26.6 pence per share. This reflects the consistent and continuing strength of our operations, our balance sheet and cash position.

The Board is proposing a final dividend in respect of the year of 4.3 pence per share, giving a total dividend of 6.1 pence per share for 2015 (2014: 5.5 pence per share). This final dividend is subject to shareholder approval at the Annual General Meeting on 17^th November 2015 and will be paid on 27^th November 2015 to shareholders on the register at the close of business on 23^rd October 2015.

The ordinary shares will become ex-dividend on 22^nd October 2015.

The Board will continue to monitor the Group's cash position to ensure an appropriate balance between investment for future growth and dividend flow to deliver overall value for our shareholders.

Summary

The Group continues to make good progress which is reflected in our financial performance. We enter the 2016 financial year with a strong cash position, placing our business in an excellent position to take advantage of investment opportunities as and when they arise. Focused investment will continue, both within our employee base and product development pipeline, to deliver sustainable profitable growth in the coming years.

Chris Brewster

Chief Financial Officer

 

Consolidated Statement of profit and loss and Comprehensive Income

Year ended 30ᵗʰ June 2015

	Note	Underlying  results before  exceptional and  other items  2015  £'000	Exceptional and other items(i) 2015 £'000	Total 2015 £'000	Underlying results before exceptional and other items 2014 £'000	Exceptional and other items(i) 2014 £'000	Total 2014 £'000
Revenue	5	13,536	-	13,536	12,881	-	12,881
Cost of sales		(5,963)	-	(5,963)	(5,739)	-	(5,739)
Gross profit		7,573	-	7,573	7,142	-	7,142
Distribution costs		(279)	-	(279)	(257)	-	(257)
Administrative expenses		(4,041)	(110)	(4,151)	(3,823)	(119)	(3,942)
Research & development expenses		(143)	-	(143)	(260)	-	(260)
Operating profit/(loss)	4, 6	3,110	(110)	3,000	2,802	(119)	2,683
Finance income		27	-	27	27	-	27
Finance expense	9	-	(17)	(17)	-	(38)	(38)
Profit/(loss) before tax	4, 6	3,137	(127)	3,010	2,829	(157)	2,672
Income tax (expense)/credit	10	(502)	26	(476)	(570)	35	(535)
Total comprehensive income/ (loss) for the year		2,635	(101)	2,534	2,259	(122)	2,137
Earnings per share
Basic	12	12.6p		12.1p	10.8p		10.3p
Fully diluted	12	12.5p		12.0p	10.8p		10.2p

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

i.     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 to these financial statements.

 

Statements of Changes in Shareholders' Equity

Year ended 30ᵗʰ June 2015

Group	Note	Share Capital £'000	Share Premium Account £'000	Retained Earnings £'000	Total £'000
Balance at 1st July 2013		4,149	6,192	7,621	17,962
Total comprehensive profit for the year		-	-	2,137	2,137
Transactions with owners of the Company, recognised in equity:
Dividends paid	11	-	-	(1,103)	(1,103)
Issue of share capital	23	43	199	-	242
Share-based payments	25	-	-	215	215
Balance at 1st July 2014		4,192	6,391	8,870	19,453
Total comprehensive profit for the year		-	-	2,534	2,534
Transactions with owners of the Company, recognised in equity:
Dividends paid	11	-	-	(1,217)	(1,217)
Issue of share capital	23	12	70	-	82
Share-based payments	25	-	-	139	139
Balance at 30th June 2015		4,204	6,461	10,326	20,991

 

Company	Note	Share Capital £'000	Share Premium Account £'000	Retained Earnings £'000	Total £'000
Balance at 1st July 2013		4,149	6,192	2,399	12,740
Total comprehensive profit for the year		-	-	2,166	2,166
Transactions with owners of the Company, recognised in equity:
Dividends paid	11	-	-	(1,103)	(1,103)
Issue of share capital	23	43	199	-	242
Share-based payments	25	-	-	86	86
Balance at 1st July 2014		4,192	6,391	3,548	14,131
Total comprehensive loss for the year		-	-	(327)	(327)
Transactions with owners of the Company, recognised in equity:
Dividends paid	11	-	-	(1,217)	(1,217)
Issue of share capital	23	12	70	-	82
Share-based payments	25	-	-	74	74
Balance at 30th June 2015		4,204	6,461	2,078	12,743

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

Year ended 30ᵗʰ June 2015

		Group		Company
	Note	2015 £'000	2014 £'000	2015 £'000	2014 £'000
Non-current assets
Goodwill	13	12,711	12,711	-	-
Other intangible assets	14	1,780	1,327	6	-
Property, plant and equipment	15	306	372	-	-
Investments in subsidiary companies	16	-	-	14,361	14,361
Deferred tax asset	22	-	-	88	39
		14,797	14,410	14,455	14,400
Current assets
Inventories	17	1,653	2,420	-	-
Trade and other receivables	18	2,247	1,883	238	144
Cash and cash equivalents	19	5,777	3,812	1,576	1,315
		9,677	8,115	1,814	1,459
Total assets		24,474	22,525	16,269	15,859
Current liabilities
Trade and other payables	19	(2,186)	(1,606)	(3,526)	(1,728)
Current tax liabilities		(212)	(385)	-	-
Deferred income	21	(234)	(242)	-	-
		(2,632)	(2,233)	(3,526)	(1,728)
Net current assets/(liabilities)		7,045	5,882	(1,712)	(269)
Non-current liabilities
Deferred income	21	(724)	(730)	-	-
Deferred tax liabilities	22	(127)	(109)	-	-
		(851)	(839)	-	-
Total liabilities		(3,483)	(3,072)	(3,526)	(1,728)
Net assets		20,991	19,453	12,743	14,131
Capital and reserves
Called up share capital	23	4,204	4,192	4,204	4,192
Share premium account		6,461	6,391	6,461	6,391
Retained earnings		10,326	8,870	2,078	3,548
Equity attributable to equity holders of the parent		20,991	19,453	12,743	14,131

 

 

Cash Flow Statements

Year ended 30ᵗʰ June 2015

		Group		Company
	Note	2015 £'000	2014 £'000	2015 £'000	2014 £'000
Comprehensive income/(loss) for the year before tax	10	3,010	2,672	(464)	(519)
Adjustments for:
Depreciation of property, plant and equipment	15	73	69	-	-
Amortisation of intangible assets	14	359	410	1	-
Finance income	9	(27)	(27)	(15)	(20)
Share-based payment expense	25	139	152	74	86
Release of deferred income	21	(14)	(49)	-	-
Operating cash flows before movements in working capital		3,540	3,227	(404)	(453)
Decrease/(increase) in inventories	17	767	(1,002)	-	-
(Increase)/decrease in receivables	18	(392)	(221)	(6)	7
Increase/(decrease) in payables	19	608	(376)	1,798	(2,294)
Cash generated by operations		4,523	1,628	1,388	(2,740)
Income taxes (paid)/received		(631)	(561)	-	552
Net cash flow from operating activities		3,892	1,067	1,388	(2,188)
Investing activities:
Payments to acquire intangible assets	14	(812)	(199)	(7)	-
Payments to acquire property, plant and equipment	15	(7)	(32)	-	-
Receipts from sale of property, plant and equipment		-	2	-	-
Dividends received		-	-	-	2,553
Interest received		27	27	15	20
Net cash (used in)/generated by investing activities		(792)	(202)	8	2,573
Financing:
Receipts from issue of share capital		82	305	82	242
Equity dividends paid	11	(1,217)	(1,103)	(1,217)	(1,103)
Net cash used in financing activities		(1,135)	(798)	(1,135)	(861)
Net increase/(decrease) in cash and cash equivalents		1,965	67	261	(476)
Cash and cash equivalents at start of year		3,812	3,745	1,315	1,791
Cash and cash equivalents at end of year		5,777	3,812	1,576	1,315
Comprising:
Cash and cash equivalents	18	5,777	3,812	1,576	1,315

 

Notes to the Accounts

Year ended 30ᵗʰ June 2015

1. General Information

Animalcare Group plc ("the Company") is a company incorporated in England and Wales under the Companies Act 2006 and is domiciled in the United Kingdom. The Group comprises Animalcare Group plc and its subsidiary, Animalcare Ltd.

The following new standards and amendments to standards are mandatory for the first time for financial periods beginning on or after 1^st January 2014. Their effect has been limited to disclosure amendments.

IFRS 10: Consolidated Financial Statements

IAS 27: Separate Financial Statements

Amendments to IAS 32: Financial Instruments: Disclosures - Offsetting Financial Assets & Liabilities

Amendments to IAS 36: Recoverable Amount Disclosures for non-Financial Assets

The IASB and IFRIC have issued the following standards and interpretations, endorsed by the EU, with an effective date after the date of these financial statements. Their adoption, where applicable, is not expected to have a material effect on the financial statements of the Group.

International Financial Reporting Standards	Applies to periods beginning after
Annual Improvements to IFRSs 2010-2012 Cycle	1st February 2015
Annual Improvements to IFRSs 2011-2013 Cycle	1st February 2015

2. Significant Accounting Policies

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 2014. 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 before the end of October 2015.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2015 or 2014 but is derived from the 2015 accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 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.

Going concern

An analysis of the factors likely to impact on the Group's future business activities, performance and strategy are set out in the Chief Executive's Review and Chief Financial Officer's Review.

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 and forecasts of future trading including working capital and investment requirements.

During the year the Group met its day-to-day general corporate and working capital requirements through existing cash resources. At 30^th June 2015 the Group had cash on hand of £5.8m (30^th June 2014: £3.8m).

Overall, the Directors believe the Group is well placed to manage its business risks successfully. The Group's forecasts and projections, taking account of reasonable possible changes in trading performance, show that the Group should have sufficient cash resources to meet its requirements for at least the next 12 months. Accordingly, the adoption of the going concern basis in preparing the financial statements remains appropriate.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entity controlled by the Company (its subsidiary) made up to 30^th June each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The results of a subsidiary acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of the subsidiary to bring the accounting policies used into line with those used by the Group.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Exceptional and other items

Exceptional items are material items of income or expense which, because of their nature and the expected frequency of the events giving rise to them, merit separate disclosure.

Other items relate to the amortisation of acquired intangible assets and fair value movements on foreign exchange hedging.

The separate presentation of exceptional and other items enables the users of the accounts to better understand the elements of trading performance during the year and hence to better assess trends in that performance.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in comprehensive income and is not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units ("CGUs") expected to benefit from the synergies of the combination. CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the CGU may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the CGU pro rata on the basis of the carrying amount of each asset in the CGU. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Intangible assets

The Group recognises intangible assets at cost less accumulated amortisation and impairment losses. Intangible assets arise both as a result of applying IFRS 3 which requires the separate recognition of intangible assets from goodwill on all business combinations from 1^st January 2004, and from the purchase of software (that is separable from any associated hardware), and development machinery and from research and development (see below).

Intangible assets are amortised on a straight-line basis over their useful economic lives as follows:

Customer relationships	10 years
Brands	15 years
Software	Estimated useful life, normally 2-4 years
New product development costs & marketing authorisations	Estimated economic life, normally 5-7 years

Research and development costs

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised as an expense in the year in which it is incurred.

An internally generated intangible asset arising from the Group's new product development is recognised only if all of the following conditions are met:

·     an asset is created that can be identified (such as a new pharmaceutical product);

·     it is probable that the asset created will generate future economic benefits; and

·     the development cost of the asset can be measured reliably.

Internally generated intangible assets are amortised on a straight-line basis over their estimated economic lives. Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the year in which it is incurred.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes.

Revenue from the sale of goods is recognised when the risks and rewards of ownership are transferred which is generally when goods are delivered.

Income received in relation to long-term service contracts is deferred and subsequently recognised over the life of the relevant contracts. Further details are contained in note 21.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying value.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessee

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group's obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

Foreign currencies

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in comprehensive income for the year.

Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transaction with any of the Group's other components. An operating segment's operating results are reviewed regularly by the Board to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in, first-out principle. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Dividends

Dividends paid are recognised within the Statement of Changes in Equity only when an obligation to pay the dividend arises prior to the year end.

Share-based payments

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of such equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions (with a corresponding movement in equity).

Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The fair value of the shares issued under the new Long Term Incentive Plan were valued on a discounted cash flow basis in conjunction with a third party valuation specialist.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Property, plant and equipment

Land and buildings and other assets held for use in the production or supply of goods and services or for administrative purposes, fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Other than for land, which is not depreciated, depreciation is charged so as to write off the cost of assets, less their estimated residual value, over their estimated useful lives, as follows:

Straight-line

Leasehold improvements	10 years
Plant and equipment	4-7 years
Office furniture and equipment	3-5 years

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the net sales proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income as incurred.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation outstanding at the balance sheet date, and are discounted to present value where the effect is material.

Impairment of tangible and intangible assets excluding goodwill

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit (CGU) to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (CGU) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (CGU) in prior years. A reversal of an impairment loss is recognised as income immediately.

Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Trade receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in comprehensive income when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Investments

Investments in Group companies are stated at cost less provisions for impairment losses.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits repayable on demand, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Trade payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

3. Critical Accounting Judgements and Key Sources of Estimation Uncertainty

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, which are described in note 2, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below).

Capitalised new product development expenditure

It is the Group's policy, where the relevant criteria of IAS 38 "Intangible Assets" are met, to capitalise new product development expenditure and to amortise this expenditure over the estimated economic life of the asset (product). Judgement is required when assessing the technical and commercial feasibility of new product development projects including whether regulatory approval will ultimately be achieved.

Capitalised software expenditure

The Group has historically capitalised software projects and developments. Expenditure on a bespoke web based system, designed to facilitate online ordering of its products and services, is currently capitalised in the Group's financial statements as the Directors have adjudged it to meet the relevant criteria.

The rate of depreciation on capitalised software is set so as to reflect the pattern of usage and the level of pace of change within the global information technology market.

Key sources of estimation uncertainty

Impairment of non-current assets

Determining whether a non-current asset is impaired requires an estimation of the "value in use" and/or the "fair value less costs to sell" of the cash-generating units ("CGUs") to which the non-current asset has been allocated. The value in use calculation requires an estimate of the future cash flows expected to arise from the CGU and a suitable discount rate in order to calculate present value. The key assumptions for these value in use calculations are those regarding discount rates, growth rates and expected changes to selling prices and direct costs. The Directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the individual CGU. In the current year the Directors estimated the applicable rate to be 11.1% (2014: 10.2%). The Directors' sensitivity analysis indicates significant headroom to the carrying value of the CGU when taking into account a reasonably possible change in any one of the key assumptions used in the 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 five years, thereafter assuming an estimated growth rate of 2% (2014: 2%). The growth rates for the five year period are based on current performance of the existing product portfolio and the estimated contribution from the Group's new product development pipeline. The Directors believe that the long-term growth rate does not exceed the average long-term growth rate for the UK economy.

Impairment of slow-moving and obsolete inventory

The Group performs regular stock holding reviews, in conjunction with sales and market information, to help determine any slow-moving or obsolete lines. Where identified, adequate provision is made in the financial statements for writing down or writing off the value of such lines in order to reflect the realisable value of its stock.

4. Exceptional and Other Items

	Note	2015 £'000	2014 £'000
Amortisation of acquired intangible assets	14	119	119
Supplier legal dispute - dividend received		(9)	-
Interest rate swap refund		(18)	-
Fair value movements on foreign currency hedging	9	35	38
Total exceptional and other items		127	157

The amortisation charge totalling £119,000 (2014: £119,000) relates to brand and customer relationship intangible assets recognised on the acquisition of Animalcare Ltd in January 2008.

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 Board of Directors of Animalcare Group plc. Performance assessment is primarily based on underlying operating profit and cash generation.

The Group solely comprises one reportable segment, being Animalcare.

	Note	Animalcare 2015 £'000	Animalcare 2014 £'000
Revenue		13,536	12,881
Gross Profit		7,573	7,142
Underlying Operating Profit		3,110	2,802
Other Items	4	(119)	(119)
Exceptional items	4	9	-
Operating Profit		3,000	2,683
Finance income	9	27	27
Finance expense	9	(17)	(38)
Profit before tax		3,010	2,672

	Note	Animalcare 2015 £'000	Animalcare 2014 £'000
Products and Services
Licensed Veterinary Medicines		8,579	7,883
Companion Animal Identification		2,309	2,418
Animal Welfare		2,648	2,580
		13,536	12,881
Other information
Intangible asset additions	14	812	199
Property, plant and equipment additions	15	7	32
Depreciation and amortisation	14,15	432	479
Consolidated assets		24,474	22,525
Consolidated liabilities		(3,483)	(3,072)
Consolidated net assets		20,991	19,453

	2015 £'000	2014 £'000
Key customers
Number	3	3
Percentage of total revenue	91%	82%

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

	2015 £'000	2014 £'000
Geographical market
United Kingdom	12,573	11,557
Europe and Rest of World	963	1,324
	13,536	12,881

All the Group 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:

	2015 £'000	2014 £'000
Revenue from sale of goods	12,590	11,951
Revenue from provision of services	946	930
	13,536	12,881
Finance income	27	27
	13,563	12,908

 

6. Total Comprehensive Income for the Year

	2015 £'000	2014 £'000
Total comprehensive income for the year has been arrived at after charging:
Cost of inventories recognised as expense	5,831	5,639
Depreciation of tangible assets	73	69
Amortisation of intangible assets	359	410
Research and development	143	260
Operating lease rentals	199	187
Foreign exchange losses	1	21
Increase in provision for receivables	-	9
Increase in provision for inventories	23	34

The above items are those charged to total comprehensive income only. Full details on items charged/(credited) to exceptional and other items are contained in note 4.

The analysis of remuneration paid to the Company's auditor is as follows:

	2015 £'000	2014 £'000
Fees payable to the Company's auditor for the audit of the Company's annual accounts	13	12
The audit of the Company's subsidiaries pursuant to legislation	20	20
Total audit fees	33	32
Tax services	11	16
Other services	16	44
Total non-audit fees	27	60
Total auditors' remuneration	60	92

7. Directors' Remuneration and Interests

Emoluments

The various elements of remuneration received by each Director were as follows:

Year ended 30th June 2015	Salary £'000	Bonus £'000	Company pension contributions £'000	Benefits £'000	Compensation  for loss of office £'000	Total £'000
J S Lambert*	34	-	-	-	-	34
Lord Downshire*	23	-	-	1	-	24
R B Harding*	23	-	-	-	-	23
Dr I D Menneer	140	16	17	8	-	181
C J Brewster	102	11	12	6	-	131
Total	321	27	29	15	-	393

Year ended 30th June 2014
J S Lambert*	33	-	-	-	-	33
Lord Downshire*	22	-	-	2	-	24
R B Harding*	22	-	-	-	-	22
S M Wildridge (resigned 31st October 2013)	30	34	-	-	66	130
Dr I D Menneer	135	23	16	7	-	181
C J Brewster	102	16	11	1	-	130
Total	344	73	27	10	66	520

* Indicates Non-Executive Directors.

Mr George Gunn was appointed to the Board as a Non-Executive Director on 9^th February 2015 and subsequently resigned on 2^nd June 2015. Mr Gunn received no remuneration during this period.

All Company pension contributions relate to defined contribution pension schemes. Benefits consist of company car and private medical insurance. The compensation for loss of office in relation to S M Wildridge was settled on 31^st October 2013.

 

Share options

The Directors had the following beneficial options:

I D Menneer

Scheme	SAYE	EMI	EMI	EMI	Unapproved	SAYE	Unapproved	SAYE	Total
Exercise Price	£1.34	£1.675	£1.30	£1.325	£1.40	£1.03	£1.415	£1.05
Date of Grant	4th  October 2011	14th October 2011	2nd August  2012	20th November 2012	21st February 2013	22nd May 2013	20th  June 2013	28th November 2014
Outstanding at 30th June 2014	3,358	60,000	60,000	50,000	90,000	4,377	90,000	-	357,735
Granted during the year	-	-	-	-	-	-	-	5,142	5,142
Exercised during the year	(3,358)	-	-	-	-	-	-	-	(3,358)
Outstanding at 30th June 2015	-	60,000	60,000	50,000	90,000	4,377	90,000	5,142	359,519

C J Brewster

Scheme	EMI	EMI	SAYE	EMI	SAYE	Total
Exercise Price	£1.30	£1.30	£1.03	£1.415	£1.05
Date of Grant	22nd June 2012	2nd August 2012	22nd May 2013	20th June 2013	28th November 2014
Outstanding at 30th June 2014	30,000	30,000	8,754	40,000	-	108,754
Granted during the year	-	-	-	-	8,571	8,571
Outstanding at 30th June 2015	30,000	30,000	8,754	40,000	8,571	117,325

The Directors' interests in the shares of the Company as at 30^th June are set out below:

	2015	2014
	Ordinary shares of 20p	Ordinary shares of 20p
J S Lambert	1,413,691	1,413,691
Lord Downshire	1,109,583	1,109,583
I D Menneer	17,739	14,381
C J Brewster	4,079	4,079

In addition to the above, Lord Downshire had a non-beneficial interest in 310,446 shares.

Long Term Incentive Plan (LTIP)

The Animalcare Group plc LTIP was introduced in June 2014 to provide an effective mechanism for senior executives to participate in the Company's equity at a meaningful level, aligning their interests with those of shareholders.

The Directors' interests in the LTIP, which was implemented via a subscription for growth shares in the capital of Animalcare Ltd, a subsidiary of the Company, are as follows:

·     Iain Menneer - 31,955 A Ordinary Shares of £1.00 each ("A Shares") for a total cash subscription of £31,955, representing 5.2% of Animalcare Ltd's issued share capital; and

·     Chris Brewster - 19,173 A Shares, representing 3% of Animalcare Ltd's issued share capital and 11,800 B Ordinary Shares of £1.00 each ("B Shares"), representing a further 2% of Animalcare Ltd's issued share capital, for a total cash subscription of £30,973.

Dr Menneer and Mr Brewster have the right to sell their A Shares to the Company at any time after 27^th June 2017 in exchange for Ordinary Shares of 20 pence each in the Company ("Ordinary Shares"). The rights of Dr Menneer and Mr Brewster to sell their A Shares are subject to, amongst other provisions, the Company having a market capitalisation in excess of £39.0m ("the Hurdle") at the time of sale. The Hurdle was determined by Animalcare's Remuneration Committee and broadly represented a 20% premium to the Company's market capitalisation on 27^th June 2014.

Each holder of A Shares would, on a sale of his entire holding to the Company, be entitled to receive Ordinary Shares representing a percentage of the increase in the Company's market capitalisation above the Hurdle; being 5% for Dr Menneer and 3% for Mr Brewster.

The B Shares are not entitled to participate in any increase in the value of the Company above the Hurdle but can be exchanged for Ordinary Shares of an equal value at any time after 27^th June 2017.

Further details of the Plan, including the Hurdle, anti-dilution and other provisions, are set out in Animalcare Ltd's articles of association, which is available within the Investors section (constitutional documents) of the Company's website at http://www.animalcaregroup.co.uk

8. Staff Costs

	2015	2014
Number of employees
The average monthly number of employees (including Directors) during the year was:
Production and distribution	4	4
Selling and administration	56	53
	60	57

	2015 £'000	2014 £'000
Related costs
Wages and salaries	2,024	1,820
Social security costs	187	166
Other pension costs	78	89
	2,289	2,075

9. Finance Costs and Finance Income

	2015 £'000	2014 £'000
Fair value losses on financial instruments*	35	38
Interest rate swap refund	(18)	-
Finance costs	17	38
Other net finance income:
Interest income on bank deposits	(27)	(27)
Finance income	(27)	(27)
Net finance (income)/costs	(10)	11

*  Finance gains and losses arising from derivatives held at fair value through profit and loss relate to fair value movements on the Group's foreign exchange hedges. These gains and losses are included within "other items" on the face of the statement of comprehensive income.

10. Income Tax Expense

	Note	2015 £'000	2014 £'000
The income tax expense comprises:
Current tax expense		601	690
Adjustment in the current year in relation to prior years		(143)	(105)
		458	585
The deferred tax (credit)/expense comprises:
Origination and reversal of temporary differences	22	(99)	(70)
Adjustment in the current year in relation to prior years	22	117	20
		18	(50)
Total tax expense for the year		476	535
The total tax charge can be reconciled to the accounting profit as follows:
Total comprehensive income for the year		2,534	2,137
Total tax expense		476	535
Profit before tax		3,010	2,672
Income tax calculated at 20.75% (2014: 22.5%)		625	601
Effect of expenses not deductible		42	55
Effect of share-based deductions		(88)	(13)
Innovation related tax credits		(77)	-
Change in UK tax rate		-	(23)
Effect of adjustments in respect of prior years		(26)	(85)
		476	535

The tax credit of £26,000 (2014: £35,000) shown within "exceptional and other items" on the face of the statement of comprehensive income, which forms part of the overall tax charge of £476,000 (2014: £535,000) relates to the items analysed in note 4.

The prior year current tax credits in respect of both 2015 and 2014 primarily relate to research and development tax credits. The prior year deferred tax charge in 2015 of £117,000 relates to the first time recognition of deferred tax in relation to capitalised development costs.

The Budget on 8^th July 2015 announced that the UK corporation tax rate will reduce to 19% by 2017. The change in rates was not substantively enacted at the balance sheet date and therefore has not been reflected in the tax rates used for deferred tax purposes. The future rate reductions will affect the Group's future current tax charges.

11. Dividends

	2015 £'000	2014 £'000
Ordinary final dividend paid in respect of prior year	839	788
Ordinary interim dividend paid	378	315
	1,217	1,103

The final dividend paid during the year ended 30^th June 2015 was 4.0 pence per share (2014: 3.8 pence per share). The interim dividend paid during the year ended 30^th June 2015 was 1.8 pence per share (2014: 1.5 pence per share).

The proposed final dividend of 4.3 pence per share, which is subject to approval of shareholders at the Annual General Meeting results in a total dividend for the year of 6.1 pence per share. The proposed dividend has not been included as a liability as at 30^th June 2015, in accordance with IAS 10 "Events After the Balance Sheet Date".

12. 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 2015 £'000	Underlying earnings  before exceptional  and other items 2014 £'000	Total earnings 2015 £'000	Total earnings 2014 £'000
Total comprehensive income attributable to equity holders of the Company	2,634	2,259	2,534	2,137

	2015 No.	2014 No.	2015 No.	2014 No.
Basic weighted average number of shares	20,982,367	20,824,931	20,982,367	20,824,931
Dilutive potential ordinary shares	123,127	126,980	123,127	126,980
	21,105,494	20,951,911	21,105,494	20,951,911
Earnings per share:
Basic	12.6p	10.8p	12.1p	10.3p
Fully diluted	12.5p	10.8p	12.0p	10.2p

13. Goodwill

	Group £'000
Cost
At 1st July 2013, 1st July 2014 and 30th June 2015	12,711
Accumulated impairment losses
At 1st July 2013, 1st July 2014 and 30th June 2015	-
Net book value
At 30th June 2015 and 30th June 2014	12,711

The carrying amount of Group goodwill is allocated to the Group's sole cash-generating unit ("CGU"), being 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 five years and thereafter assuming an estimated long-term annual growth rate of 2.0% (2014: 2.0%).

The financial budgets and projections are based on past experience and actual operating results. The growth rates for the five year period are based on current performance of the existing product portfolio and the estimated contribution from the Group's new product development pipeline. The Directors believe that the long-term growth rate does not exceed the average long-term growth rate for the UK economy, the principal geographic area in which Animalcare operates.

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 cash-generating unit. In the current year the Directors estimated the applicable pre-tax rate to be 11.1% (2014: 10.2%).

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 CGU.

14. Other Intangible Assets

Group	Acquired brands and customer relationships £'000	New product development costs £'000	Capitalised software £'000	Total £'000
Cost
At 1st July 2013	1,361	1,491	122	2,974
Additions	-	156	43	199
At 30th June 2014	1,361	1,647	165	3,173
Additions	-	768	44	812
Disposals	-	-	(31)	(31)
At 30th June 2015	1,361	2,415	178	3,954
Amortisation
At 1st July 2013	653	737	46	1,436
Charge for the year	119	253	38	410
At 30th June 2014	772	990	84	1,846
Charge for the year	119	195	45	359
Disposals	-	-	(31)	(31)
At 30th June 2015	891	1,185	98	2,174
Carrying value
At 30th June 2015	470	1,230	80	1,780
At 30th June 2014	589	657	81	1,327

Veterinary medicine product development costs are amortised over four to seven years, acquired brands are amortised over 15 years and acquired customer relationships are amortised over ten years. The amortisation period for capitalised software, which principally relates to the bespoke Anibase pet database, is four years.

Company	Capitalised software £'000	Total £'000
Cost
At 1st July 2014	-	-
Additions	7	7
At 30th June 2015	7	7
Amortisation
At 1st July 2014	-	-
Charge for the year	1	1
Carrying value
At 30th June 2015	6	6
At 30th June 2014	-	-

 

15. Property, Plant And Equipment

Group	Leasehold improvements £'000	Plant and equipment £'000	Office furniture and equipment £'000	Total £'000
Cost
At 1st July 2013	187	107	263	557
Additions	-	27	5	32
Disposals	(3)	-	-	(3)
At 1st July 2014	184	134	268	586
Additions	-	2	5	7
Disposals	-	(17)	(129)	(146)
At 30th June 2015	184	119	144	447
Depreciation
At 1st July 2013	3	42	100	145
Charge for the year	19	14	36	69
At 1st July 2014	22	56	136	214
Charge for the year	19	18	36	73
Disposals	-	(17)	(129)	(146)
At 30th June 2015	41	57	43	141
Net book value
At 30th June 2015	143	62	101	306
At 30th June 2014	162	78	132	372

16. Investments in Subsidiaries

Subsidiary undertakings

	Company
	2015 £'000	2014 £'000
Cost and net book value
At 1st July 2013, 2014 and 30th June 2015	14,361	14,361

The sole subsidiary undertaking of the Company is detailed below.

	Country of registration or incorporation	Class	Shares held %
Animalcare Ltd	England	Ordinary	90

The principal activity of this undertaking for the last financial year was the sale of companion animal products and related services.

17. Inventories

	Group
	2015 £'000	2014 £'000
Finished goods and goods for resale	1,653	2,420

In the Directors' opinion, the replacement cost of inventories is not materially different from their balance sheet value.

18. Other Financial Assets

Trade and other receivables

	Group		Company
	2015 £'000	2014 £'000	2015 £'000	2014 £'000
Trade receivables	1,924	1,577	-	-
Amounts receivable from subsidiaries	-	-	-	-
Corporation tax - Group relief	-	-	217	129
Other receivables	6	4	6	4
Prepayments and accrued income	317	302	15	11
	2,247	1,883	238	144

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

 

Movement in allowance for doubtful debts

	Group		Company
	2015 £'000	2014 £'000	2015 £'000	2014 £'000
Balance at 1st July	15	6	-	-
Impairment losses recognised	-	9	-	-
Balance at 30th June	15	15	-	-

Ageing of past due but not impaired receivables

	Group
	2015 £'000	2014 £'000
1-30 days past due	-	59
31-90 days past due	1	-
91 days and more	-	-
	1	59

Cash and cash equivalents

	Group		Company
	2015 £'000	2014 £'000	2015 £'000	2014 £'000
Cash and cash equivalents	5,777	3,812	1,576	1,315

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

Credit risk

The Company's principal financial assets are bank balances and cash, and trade and other receivables. The Company's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The allowance for doubtful debts represents the difference between the carrying value of the specific trade receivables and the present value of the expected recoverable amount.
The average credit period on sales of goods is 31 days (2014: 36 days). No interest has been charged on overdue receivables.

19. Other Financial Liabilities

	Group		Company
	2015 £'000	2014 £'000	2015 £'000	2014 £'000
Trade payables	936	858	73	63
Amounts payable to subsidiaries	-	-	3,385	1,570
Other taxes and social security costs	450	226	46	40
Other creditors	386	299	18	15
Derivative financial instruments (see note 20)	18	28	-	-
Accruals	396	195	4	40
	2,186	1,606	3,526	1,728

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

 

20. Financial Instruments

Capital and liquidity risk management

At 30^th June the Group was contractually obliged to make repayments of principal and payments of interest as detailed below:

	Within one year or on demand £'000	1-2 years £'000	3-5 years £'000	More than 5 years £'000	Total £'000
2015
Trade and other payables	2,186	-	-	-	2,186
2014
Trade and other payables	1,606	-	-	-	1,606

Categories and Fair Value of Financial Instruments Carrying value

	2015 £'000	2014 £'000
Financial assets
Trade and other receivables (including cash and cash equivalents)	7,707	5,393
Financial liabilities
Trade and other payables	(2,186)	(1,606)

The fair values of the Group's financial assets and liabilities are not materially different from their carrying values.

Foreign Currency Risk Management

The Group undertakes transactions denominated in foreign currencies which gives rise to the risks associated with currency exchange rate fluctuations. Exposures are managed by a combination of matching foreign currency income and expenditure, maintaining foreign currency deposits and the use of forward contracts. The carrying value of the Group's foreign currency assets and liabilities at the reporting date was:

	Assets		Liabilities
	2015 £'000	2014 £'000	2015 £'000	2014 £'000
Euro	446	459	153	51
US Dollar	264	34	-	65

Foreign Currency Sensitivity Analysis

At 30^th June 2015 the Group is mainly exposed to the Euro and the US Dollar. The following table details the effect of a 10% increase and decrease in the exchange rate of these currencies against Sterling when applied to outstanding monetary items denominated in foreign currency as at 30^th June 2015. A positive number indicates that an increase in profit would arise from a 10% change in value of Sterling against these currencies, a negative number indicates that a decrease would arise.

	Strengthening £'000	Weakening £'000
Euro	(27)	33
US Dollar	(24)	29

Interest Rate Sensitivity Analysis

This sensitivity analysis was not performed as the Group had no exposure to interest rates for either derivatives or non-derivative instruments at the balance sheet date.

Forward Foreign Exchange Contracts

The Group had three (2014: four) open foreign exchange contracts at 30^th June 2015. The values are shown below:

	2015 £'000	2014 £'000
Principal value	338	752
Fair value	(18)	(28)

Capital Management

In line with the disclosure requirements of IAS 1, "Presentation of Financial Statements", the Company regards its capital as being the issued share capital together with its banking facilities, used to manage short-term working capital requirements. Note 23 to the financial statements provides details regarding the Company's share capital and movements in the period. There were no breaches of any requirements with regard to any relevant conditions imposed by the Company's Articles of Association during the periods under review.

21. Deferred Income

Deferred income arises from certain services sold by the Group's subsidiary Animalcare Ltd. In return for a single up-front payment, Animalcare Ltd 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 eight years.

Movements in the Group's deferred income liabilities during the current and prior reporting period are as follows:

	2015 £'000	2014 £'000
Balance at the beginning of the period	972	1,021
Income deferred to future periods	241	182
Release of income deferred from previous periods	(255)	(231)
Balance at end of the period	958	972

The deferred income liabilities fall due as follows:

	2015 £'000	2014 £'000
Within one year	234	242
After one year	724	730
	958	972

Income recognised during the year is set out below:

	2015 £'000	2014 £'000
Income received	227	195
Income deferred to future periods	(241)	(182)
Release of income deferred from previous periods	255	231
Income recognised in the year	241	244

22. 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 £'000	Share-based payments £'000	Other £'000	Intangible fixed assets £'000	Total £'000
Balance at 1st July 2013	27	(24)	(7)	163	159
Charge/(credit) to income	14	(19)	-	(45)	(50)
Balance at 30th June 2014	41	(43)	(7)	118	109
Charge/(credit) to income	(4)	(111)	(1)	134	18
Balance at 30th June 2015	37	(154)	(8)	252	127

Deferred tax balances have been calculated at an effective rate of 20%, being the substantively enacted rate at 30^th June 2015.

The following are the major components of the deferred tax assets recognised by the Company, and the movements thereon, during the current and prior reporting period:

	Accelerated tax depreciation £'000	Share-based payments £'000	Other £'000	Total £'000
Balance at 1st July 2013	(17)	(13)	(2)	(32)
Charge/(credit) to income	5	(12)	-	(7)
Balance at 30th June 2014	(12)	(25)	(2)	(39)
Charge/(credit) to income	3	(52)	-	(49)
At 30th June 2015	(9)	(77)	(2)	(88)

Deferred tax balances have been calculated at an effective rate of 20%, being the substantively enacted rate at 30^th June 2015.

23. Share Capital

	2015 No.	2014 No.
Allotted, called up and fully paid ordinary shares of 20p each	21,019,636	20,960,204

	2015 £'000	2014 £'000
Allotted, called up and fully paid ordinary shares of 20p each	4,204	4,192

During the year £11,886 (2014: £43,000) of ordinary shares were issued for proceeds of £81,814 (2014: £242,125) resulting in a share premium of £69,928 (2014: £199,125).

24. Operating Lease Arrangements

The Group as lessee

	2015 £'000	2014 £'000
Lease payments under operating leases recognised as an expense in the year	199	187

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

	2015 £'000	2014 £'000
Within one year	168	162
In the second to fifth years inclusive	298	252
After five years	78	110
	544	524

Operating lease payments principally represent rentals payable by the Group for its office and warehouse properties and motor vehicles.

25. Share-based Payments

During the year the Group operated the Animalcare Group plc Executive Share Option Scheme, the Save As You Earn (SAYE) Share Option Scheme and the new Long Term Incentive Plan as described below:

Animalcare Group plc Executive Share Option Scheme

Under this scheme, options may be granted to certain Executives and senior employees of the Group to subscribe for new shares in the Company at a fixed price equal to the market value at the time of grant. The options are exercisable three years after the date of grant. Once vested, options must be exercised within six years of the date of grant. The exercise of these options is not subject to any performance criteria.

SAYE Option Scheme

This scheme is open to all UK employees to encourage share ownership. Share options are granted at an option price fixed at a 20% discount to the market value at the start of the savings period. The SAYE options vest and are exercisable three years after the date of grant and must ordinarily be exercised within six months of the completion of the relevant savings period.

Details of the movement in all share option schemes during the year are as follows:

	EMI		SAYE		Unapproved
	Options	Price £	Options	Price £	Options	Price £
Outstanding at beginning of year	560,000	1.413	112,172	1.084	180,000	1.408
Granted during the year	20,000	1.725	120,673	1.050	-	-
Lapsed during the year	(30,000)	1.355	(22,311)	1.218	-	-
Exercised during the year	(55,000)	1.380	(4,432)	1.340	-	-
Open at 30th June 2015	495,000	1.432	206,102	1.041	180,000	1.408
Exercisable at the end of the year	90,000	1.55	-	-	-	-

The weighted average inputs into the Black-Scholes model at the time of grant were as follows:

	EMI Scheme	SAYE Scheme	Unapproved Scheme
Weighted average share price	144p	130p	141p
Weighted average exercise price	144p	104p	141p
Expected volatility	53%	50%	56%
Expected life	3.1 years	3.1 years	3.0 years
Risk-free rate	0.5%	0.5%	0.5%

Expected volatility was determined by calculating the historical volatility of the Group's share price over the previous three 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 (2014: £nil).

The Group recognised a total charge in respect of share based payments of £139,000 (2014 : £152,000) within administrative expenses.

Long Term Incentive Plan

The Animalcare Group plc LTIP was introduced in June 2014 to provide an effective mechanism for senior executives to participate in the Company's equity at a meaningful level, aligning their interests with those of shareholders.

The Directors' interests in the LTIP, which was implemented via a subscription for growth shares in the capital of Animalcare Ltd, a subsidiary of the Company, are as follows:

·     Iain Menneer - 31,955 A Ordinary Shares of £1.00 each ("A Shares") for a total cash subscription of £31,955, representing 5.2% of Animalcare Ltd's issued share capital; and

·     Chris Brewster - 19,173 A Shares, representing 3% of Animalcare Ltd's issued share capital and 11,800 B Ordinary Shares of £1.00 each ("B Shares"), representing a further 2% of Animalcare Ltd's issued share capital, for a total cash subscription of £30,973.

Further details of the Plan are provided in note 7.

The charge for the year to the income statement in respect of the Plan is £nil (2014: £nil).

26. Related Party Transactions

Trading transactions

During the year ended 30^th June, the following trading transactions took place between the Company and its subsidiary listed in note 16:

2015	Animalcare Ltd £'000	Total £'000
Management Charges levied	240	240

2014	Animalcare Ltd £'000	Total £'000
Management Charges levied	240	240

Remuneration of key management personnel

The remuneration of the Directors, who are the key management personnel of the Group, is set out in aggregate for each of the categories specified in IAS 24 "Related Party Disclosures". Further information about the remuneration of Directors is provided in note 7.

The Directors' interests in the shares of the Company are contained in note 7.

27. Annual Report

The Group's Annual Report and Financial Statements for the year ended 30^th June 2015 were approved on 13^th October 2015 and are expected to be posted to shareholders, along with the Group's Notice of Annual General Meeting ("AGM") and related form of proxy, on 23^rd October 2015. The AGM will be held at 11.30am on 17^th November 2015 at the Company's registered offices, 10 Great North Way, York Business Park, Nether Poppleton, York, YO26 6RB.

Further copies will be available to download on the Company's website at: www.animalcaregroup.co.uk and will also be available from the Company's registered office address, as above.

 

END

 

 

FR FFEFWDFISESS