Full Year Results

RNS Number : 8085O

Animalcare Group PLC

25 September 2013

 



25^th September 2013

Animalcare Group plc

Full Year Results

Animalcare Group plc ("the Group" or "Animalcare"), a leading supplier of veterinary medicines, announces results for the year ended 30^th June 2013. Animalcare sells products in three discreet groups: Licensed Veterinary Medicines, Companion Animal Identification and Animal Welfare products.

Financial Highlights

·      Revenue increased 11.6% to £12.1m (2012 - £10.9m)

s Sales of Licensed Veterinary Medicines up 20.6%

·      Underlying* EBITDA increased by 16.6% to £2.9m (2012 - £2.5m) 

·      Underlying* operating profit up 17.0% to £2.7m (2012 - £2.3m)

·      Underlying* basic earnings per share increased by 12.9% to 10.5p (2012 - 9.3p)

·      Continued strong cash generation with year-end cash of £3.7m (up from £2.3m)

·      Total dividend for the year up 17.8% to 5.3p (2012 - 4.5p)

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

Operational Highlights

·      Strong revenue growth from Licenced Veterinary Medicines against a flat UK companion animal pharmaceuticals market

·      Focus on Companion Animal Identification has stabilized the decline in sales of microchips. Associated services derived from microchip database growing

·      Three new products launched in the year and a fourth gained its Marketing Authorisation during the year

·      Relocation to new premises with better facilities and  increased capacity achieved with no disruption to trading

·      Executive and senior management changes successfully completed according to plan

James Lambert, Chairman of Animalcare, said:

"Your Board is pleased with the return to growth of your business over the past 12 months and believes it is in a strong position to deliver its stated strategy. Your Board is also encouraged by trading at the beginning of the current financial year."

For further information, please contact:

Animalcare Group plc
Iain Menneer (Chief Executive Officer)	Tel: [phone]
Chris Brewster (Chief Financial Officer)	Tel: [phone]
Panmure Gordon (Nominated Advisor & Broker)
Nicola Marrin	Tel: [phone]
Joanne Lake / Peter Steel	Tel: [phone]
Walbrook PR Ltd	Tel: [phone] or [e-mail]
Paul McManus	Mob: [phone]
Helen Cresswell	Mob: [phone]

Chairman's Statement

Introduction

I am pleased to announce that during the past financial year, Animalcare has returned to growth and is now in a much stronger position to build on this in both the current and subsequent years. Animalcare is made up of three product groups: Licensed Veterinary Medicines, Companion Animal Identification and Animal Welfare products that are all sold mainly through veterinary practices. The Licensed Veterinary Medicines group, which continues to be the main focus of our investment, has grown strongly in the current year with sales up by 20.6%. The Management has stabilized the Companion Animal Identification group after a difficult year in the previous period.

Financial Trading

Group revenues during the financial year increased by 11.6% from £10.9m to a record £12.1m. This is in the context of latest market statistics which indicate that sales of veterinary medicines in the UK have been flat. This performance has resulted in an increase in underlying operating profits, pre-exceptional and other items, from £2.3m to £2.7m, a full 17.0%. Basic underlying earnings per share increased to 10.5p from 9.3p. The Group continued to be strongly cash generative during the year with the cash position increasing from £2.3m to £3.7m at the year-end which demonstrates the strength of the business model. Additional sales coming from the Licensed Veterinary Medicine group enabled us to improve margins from 54% to 56%. The main driver of the increased licensed veterinary sales was a replacement supply of 'single-dose' Buprecare ampoules and the launch of two new licensed generic veterinary medicines.

Dividend

With the increase in cash generation during the year and the return to profitable growth, your Board proposes to increase the final dividend to 3.8 pence per share. With this increase of 0.8 pence per share, and the maintained first half dividend of 1.5 pence per share this gives a total dividend for the year of 5.3 pence per share, an increase of 17.8%.

The Board

During the financial year, your Board announced that Stephen Wildridge would step down as Group CEO, to be replaced by Dr Iain Menneer, formerly Managing Director of Animalcare Ltd, and that Stephen would remain on the Board as Director of Strategy and Business Development until the end of October. This has allowed a smooth transition for Iain into the role of CEO and the appointment of a senior management team to head up sales, marketing and product development. The Board wishes to thank Stephen for all his endeavours in building your business over the past ten years into one of the leading UK animal health companies. Iain is ideally qualified to take on the CEO role with experience in a number of positions within the business over the past ten years including marketing, sales and business development.

Prospects

Your Board is pleased with the return to growth of your business over the past 12 months and believes it is in a strong position to deliver its stated strategy. Your Board is also encouraged by trading at the beginning of the current financial year.

James Lambert

Chairman

Chief Executive's Review

Introduction

Animalcare Group plc has delivered a strong performance for the year to 30^th June 2013. This noteworthy result has been achieved during a year of transition; transition that has placed Animalcare in a strong position to grow and succeed into the next decade. Executive and senior management changes have been completed alongside a long-anticipated change of premises, both of which give us capacity for the future.

In addition, the Group is firmly in the transition to its new strategy to bring enhanced generic products into the development pipeline which will deliver protectable and sustainable commercial benefits over the long-term.

Business Overview

The UK companion animal medicines market decreased by 0.02% in the year to December 2012, making our performance all the more significant (reference: National Office of Animal Health, www.NOAH.co.uk). Output from the current in-house and EU partner pipelines has continued to drive growth with three launches in the period, of which the principal launch was the re-introduction of Buprecare 'single-dose' ampoules.

Revenues derived from services marketed to pet owners on our microchip pet database, Anibase, continued to rise in the period. Microchip sales volumes were marginally ahead of management expectations despite competitive pressure. The Animal Welfare group continued to perform steadily in line with management expectations.

Product Segmental Review

	12 months to 30th June 2013 £'000	12 months to 30th June 2012 £'000	% change
Licensed Veterinary Medicines	7,200	5,972	20.6%
Companion Animal Identification	2,244	2,338	(4.0%)
Animal Welfare Products	2,674	2,546	5.0%

Animalcare launched three products in 2013 (Vitofyllin, Buprecare ampoules and Marbocare injection). A fourth product received its Marketing Authorisation in the last month of the financial year and will be launched in H1 of the current year. 

Licensed Veterinary Medicines

The importance of the contribution from new product launches is clear; of less obvious impact is the critical mass that has been achieved by launching such a range of new products. Animalcare now has a much more comprehensive range of companion animal pharmaceuticals in more therapeutic areas than 10 years ago giving its UK sales team greater significance in UK veterinary practices.

Since the launch of Benazecare in 2006, the first licensed generic veterinary pharmaceutical in the recent strategy, Animalcare has launched 17 further new products that have either been products of our highly successful new product development pipeline, collaboration projects with our EU partners or straight forward distribution opportunities from our EU partners.

Vitofyllin (project Quattro), the first of the three products to be launched in the period, is a treatment for the symptoms of old age in dogs. Good sales have been achieved through the year exceeding our expectations in this £2m market. Whilst Animalcare is looking to grow its market share we also believe that there is potential to grow this market as the symptoms are often overlooked by owners and veterinary professional alike.

A new, more robust manufacturer has been found for Buprecare ampoules and in December the product was relaunched on schedule following a successful registration process. Revenues from sales in the second half have been strong and in line with our expectations. Buprecare ampoules complement the multi-dose presentation that was launched in the second half of last year (ended 30^th June 2012). The two Buprecare products generated combined revenues in the UK of £0.9m in the year ended 30^th June 2013.

The third launch in the year was Marbocare injection (project Stone 1), a co-development with one of our EU partners. It is used in the treatment of respiratory infections in cattle and pigs. Whilst not significant target species for Animalcare, this successful registration will allow us to develop this active ingredient into our core species market.

Companion Animal Identification

Continuing sales and marketing efforts which have significantly slowed the decline in microchips sales to 6% in the period are set to maintain a positive effect. Over 3.5 million owners have their pets registered on our microchip database, Anibase. Improvements in the way we are able to market associated goods and services to these pet owners has allowed us to increase revenues and at improved margins as efficiencies have been achieved in operational and marketing activities.

Animal Welfare Products

The Animal Welfare product group is made up of a variety of product sub-groups. Half of this group's revenue is generated from infusion accessories that complement the sale of our intravenous infusion fluids. The infusion accessories sub-group grew by 3% in the year to 30^th June 2013. The remaining half is made up of unconnected legacy products that are increasingly difficult to differentiate from their competitor products. They also continue to require operational support. Most of these products are in decline and it is our strategy to selectively withdraw from these markets. During the year, the first of these products was discontinued from sale.

Operational Overview

Animalcare had out grown its leased warehouse and offices some time ago. In March, after a programme of refurbishment, the business was moved to the new premises still in the York area, with no disruption to trading. The new warehouse operation has approximately 70% more capacity than the old facility, allowing for the planned business growth to 2020 and beyond. The office move has allowed IT infrastructure to be upgraded resulting in a much more capable and robust system. Overall, our operations are now in good shape for the years ahead.

In January, the Company announced that Stephen Wildridge would leave the business in October 2013. In the intervening period he assumed the role of Director of Strategy and Business Development. In August 2013 Karolyn Tapper joined the business as Director of Business Development. Karolyn has 19 years' experience working in a global contract manufacturing company with experience in pharmaceutical formulation, project management and business development. There has been a thorough handover to ensure the momentum of new product development is maintained.

Also in August, Torben Orskov was promoted to Director of Technical and Regulatory Affairs. Torben is a qualified veterinary surgeon with 10 years' experience in companion and large animal practice before he joined Animalcare in 2006. Torben has been heavily involved in the technical and regulatory aspects of our successful product development pipeline.

Both appointments reflect our continued emphasis on the new product development strategy and more specifically the increasing importance of Project Sustain.

Future Developments

Animalcare will continue to launch undifferentiated generic licensed veterinary medicines from its in-house development pipeline, co-developed projects with our European partners or simple distribution products from our existing partners in Europe.

In July 2013, we launched an enhanced presentation of Phenoleptil, a product used in the prevention of epileptic seizures in dogs. Phenoleptil was originally launched in June 2011. The enhanced presentation makes accurate dosing of patients easier and will allow us to gain faster market penetration as it has practical prescribing advantages for the veterinary surgeon.

Two further products, one from our own development pipeline and one a distribution product, are in the final commercialisation planning stages for launch in Q2 of this year. Both products are for use in companion animal medicine.

Depending on the time required to fully develop the market for the three products outlined above we may also launch a fourth product in H2.

During this financial year we will be upgrading the software tools available to our sales team. We have identified a partner who will be able to enhance the management information we can derive from our sales data; as well as reducing the administrative work by the wider team.

We also expect to see significant progress on Project Sustain that will crystalize the work already undertaken. We forecast that the first products will launch in 2017-18.

In addition, we expect to take the first steps in this period to expand the geographic footprint of territories in which Animalcare distributes outside the UK.

Outlook

In February, the UK Parliament announced that it will be compulsory for all dogs in England to be microchipped by April 2016. Furthermore, the Welsh Assembly has now announced that it will introduce similar legislation for implementation in March 2015. Whilst there will be some undoubted commercial opportunities as a result of this legislation, in the short to medium-term, it is not yet clear how the initial implementation will impact Animalcare. However, as a company selling microchips and also administering the Anibase pet database of over 3.5million pets and their owners, Animalcare remains in a strong position in this market for the medium-term after a potential initial disruptive period.

We have commented in previous reports that competition is strong in the Licensed Veterinary Medicines market however we have consistently outperformed the UK market and we believe this will continue.

Over the past seven years, since the launch of the first product from the Animalcare new product pipeline, the Group has achieved increased revenues and profitability. However, with this upside comes the requirement to invest further in the routine maintenance of the associated Marketing Authorisations. The number of Marketing Authorisation licences that Animalcare owns and therefore must maintain was 14 in 2003 rising to 136 in 2013.

Having delivered a successful undifferentiated and differentiated generics strategy, the Company is moving into a period of investment for the future. We intend to invest more in research and development, particularly in enhanced generics, than we have to date. In this context, we expect limited growth in the coming 12 to 36 months; however this will put the foundations in place to deliver the next phase in our strategy.

As these projects are commercialised from 2017 onwards we believe the rewards will be significant and ensure the future growth and success of the Group.

Iain Menneer

Chief Executive Officer

 

Financial Review

The Group has made good progress during the financial year, achieving a 17.0% increase in underlying* operating profit to £2.7m (2012 - £2.3m) and a £0.6m increase in cash generated by operations to £3.1m (2012 - £2.5m). We continue to have a robust balance sheet to support the strategy and invest in our long term future. 

Revenue and gross profit

Group revenues increased by 11.6% to £12.1m (2012 - £10.9m), the key driver of which was the strong growth achieved in our Licensed Veterinary Medicines product group. For further analysis of the Group's revenue performance please refer to our Chief Executive's Review. The gross profit margin for 2013 was 56%, representing a year-on-year increase of 2%. This was achieved through a combination of successful new product launches and a shift towards a larger proportion of Group sales being generated by our Licensed Veterinary Medicines product group.

Operating profit

Underlying* operating profit increased by 17.0% to £2.7m (2012 - £2.3m) reflecting the improved trading performance offset in part by an increase in administrative costs of £0.5m. The increase primarily resulted from additional staff costs of £0.3m, reflecting the strengthening of the senior management team and higher performance-related pay, together with a £0.1m increase in share based payment charges.  Notwithstanding the increase, the Group continues to maintain a firm control on costs.

During the year we incurred exceptional costs of £0.3m (2012 - £0.1m) largely as a result of executive board changes and one-off head office relocation costs. Further details are provided in note 2.

Reflecting all of the above, Group operating profit was up 8.9% to £2.3m (2012 - £2.1m).

Taxation

The tax charge for the year of £0.4m (2012 - £0.4m) takes into account prior year research and development tax credits totalling £0.2m. Hence the effective tax rate of 19.1% (2012 - 17.9%) is again below the headline rate of corporation tax.

Earnings per share ("EPS")

Basic underlying EPS increased by 12.9% to 10.5 pence (2012 - 9.3 pence). The statutory basic EPS increase was lower at 8.3% to 9.1 pence (2012 - 8.4 pence), principally due to the higher exceptional items in the year.

Dividend

Subject to shareholder approval at the Annual General Meeting on 5^th November 2013, the Board proposes to pay a final dividend of 3.8 pence per share on 14^th November 2013 to shareholders on the register on 4^th October 2013. This would make a total dividend of 5.3 pence per share for 2013, an increase of 17.8%, reflecting the growth in earnings and cash generated from operations. The total dividend for the year is covered 2.0 times by underlying earnings (2012 - 2.1 times).

Cash flow

Cash flows generated by operations were £3.1m (2012 - £2.5m). £0.2m of this increase is attributable to favourable working capital movements which reversed in the first week of FY 2014. Net income taxes paid at £0.3m (2012 - £0.4m) include a £0.2m cash benefit in relation to prior year research and development tax credits.

Capital expenditure increased to £0.5m (2012 - £0.3m), driven primarily by the Group's relocation to its newly refurbished head office and warehouse which were occupied from March 2013. Expenditure on new product development during 2013 at £0.1m (2012 - £0.2m) was lower than anticipated due to delays in certain project schedules. However in line with our strategy, we plan to accelerate capital spending in 2014 and during the last 6 months, the Board has approved 3 new development projects.

Net cash increased by £1.4m to £3.7m (2012 - £2.3m). This strong cash flow is enabling the Group to fund its new product development pipeline from internal resources.

Chris Brewster

Chief Financial Officer

Consolidated Statement of Comprehensive Income

Year ended 30th June 2013

	Note	Underlying results before exceptional and other items 2013 £'000	Exceptional and other items (i) 2013 £'000	Total 2013 £'000	Underlying results before exceptional and other items 2012 £'000	Exceptional and other items(i) 2012 £'000	Total 2012 £'000
Revenue	3	12,118	-	12,118	10,856	-	10,856
Cost of sales		(5,337)	-	(5,337)	(4,994)	-	(4,994)
Gross profit		6,781	-	6,781	5,862	-	5,862
Distribution costs		(271)	-	(271)	(262)	-	(262)
Administrative expenses		(3,826)	(392)	(4,218)	(3,306)	(190)	(3,496)
Operating profit/(loss)	2	2,684	(392)	2,292	2,294	(190)	2,104
Finance income	4	27	11	38	2	-	2
Profit/(loss) before tax		2,711	(381)	2,330	2,296	(190)	2,106
Income tax (expense)/credit	5	(535)	90	(445)	(395)	18	(377)
Total comprehensive income/(loss) for the year		2,176	(291)	1,885	1,901	(172)	1,729
Earnings per share
Basic	7	10.5p		9.1p	9.3p		8.4p
Fully diluted	7	10.4p		9.0p	9.2p		8.4p

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 2 to these financial statements.

Statements of Changes in Shareholders' Equity

Year ended 30th June 2013

Group	Note	Share Capital £'000	Share Premium Account £'000	Retained Earnings £'000	Total £'000
Balance at 1st July 2011		4,075	6,045	5,669	15,789
Total comprehensive profit for the year		-	-	1,729	1,729
Transactions with owners of the Company, recognised in equity:
Dividends paid	6	-	-	(926)	(926)
Issue of share capital	16	69	128	-	197
Share-based payments		-	-	48	48
Balance at 1st July 2012		4,144	6,173	6,520	16,837
Total comprehensive profit for the year		-	-	1,885	1,885
Transactions with owners of the Company, recognised in equity:
Dividends paid	6			(932)	(932)
Issue of share capital	16	5	19	-	24
Share-based payments		-	-	148	148
Balance at 30th June 2013		4,149	6,192	7,621	17,962

Company	Note	Share Capital £'000	Share Premium Account £'000	Retained Earnings £'000	Total £'000
Balance at 1st July 2011		4,075	6,045	5,054	15,174
Total comprehensive loss for the year		-	-	(438)	(438)
Transactions with owners of the Company, recognised in equity:
Dividends paid	6	-	-	(926)	(926)
Issue of share capital	16	69	128	-	197
Share-based payments		-	-	22	22
Balance at 1st July 2012		4,144	6,173	3,712	14,029
Total comprehensive loss for the year		-	-	(471)	(471)
Transactions with owners of the Company, recognised in equity:
Dividends paid	6	-	-	(932)	(932)
Issue of share capital	16	5	19	-	24
Share-based payments		-	-	90	90
Balance at 30th June 2013		4,149	6,192	2,399	12,740

Balance Sheets

30th June 2013

		Group		Company
	Note	2013 £'000	2012 £'000	2013 £'000	2012 £'000
Non-current assets
Goodwill	8	12,711	12,711	-	-
Other intangible assets	9	1,538	1,728	-	-
Property, plant and equipment	10	412	83	-	-
Investments in subsidiary companies		-	-	14,361	14,361
Deferred tax asset	15	-	-	32	31
		14,661	14,522	14,393	14,392
Current assets
Inventories	11	1,418	1,420	-	-
Trade and other receivables	12	1,662	1,297	578	866
Cash and cash equivalents	12	3,745	2,305	1,791	1,738
		6,825	5,022	2,369	2,604
Total assets		21,486	19,544	16,762	16,996
Current liabilities
Trade and other payables	13	(1,982)	(1,316)	(4,022)	(2,967)
Current tax liabilities		(362)	(169)	-	-
Deferred income	14	(231)	(207)	-	-
Current liabilities		(2,575)	(1,692)	(4,022)	(2,967)
Net current assets/(liabilities)		4,249	3,330	(1,653)	(363)
Non-current liabilities
Deferred income	14	(790)	(844)	-	-
Deferred tax liabilities	15	(159)	(171)	-	-
		(949)	(1,015)	-	-
Total liabilities		(3,524)	(2,707)	(4,022)	(2,967)
Net assets		17,962	16,837	12,740	14,029
Capital and reserves
Called up share capital	16	4,149	4,144	4,149	4,144
Share premium account		6,192	6,173	6,192	6,173
Retained earnings		7,621	6,520	2,399	3,712
Equity attributable to equity holders of the parent		17,962	16,837	12,740	14,029

Cash Flow Statements

Year ended 30th June 2013

		Group		Company
	Note	2013 £'000	2012 £'000	2013 £'000	2012 £'000
Comprehensive income/(loss) for the year before tax		2,330	2,106	(596)	(528)
Adjustments for:
Depreciation of property, plant and equipment	10	32	19	-	-
Amortisation of intangible assets	9	319	307	-	-
Finance income	4	(27)	(2)	(25)	(2)
Share-based payment award	17	149	48	90	22
(Release)/deferral of deferred income	14	(30)	7	-	-
Loss on disposal of motor vehicles		21	-	-	-
Operating cash flows before movements in working capital		2,794	2,485	(531)	(508)
Decrease/(increase) in inventories	11	2	(74)	-	-
(Increase)/decrease in receivables	12	(365)	384	413	1
Increase/(decrease) in payables	13	665	(250)	1,056	2,765
Cash generated by operations		3,096	2,545	938	2,258
Income taxes paid		(265)	(422)	-	-
Net cash flow from operating activities		2,831	2,123	938	2,258
Investing activities:
Payments to acquire intangible assets	9	(129)	(215)	-	-
Payments to acquire property, plant and equipment	10	(379)	(55)	-	-
Interest received		25	2	23	2
Net cash (used in)/generated by investing activities		(483)	(268)	23	2
Financing:
Receipts from issue of share capital		24	197	24	197
Equity dividends paid	6	(932)	(926)	(932)	(926)
Net cash used in financing activities		(908)	(729)	(908)	(729)
Net increase in cash and cash equivalents		1,440	1,126	53	1,531
Cash and cash equivalents at start of year		2,305	1,179	1,738	207
Cash and cash equivalents at end of year		3,745	2,305	1,791	1,738
Comprising:
Cash and cash equivalents	12	3,745	2,305	1,791	1,738

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 for the year ended 30 June 2012. Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRS as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements in October 2013.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2013 or 2012 but is derived from the 2013 accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 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

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 2013 the Group had cash on hand of £3.75m (30^th June 2012 - £2.31m).

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 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.

 

2. Exceptional and Other Items

 

	Note	2013 £'000	2012 £'000
Executive and management severance payments		152	71
Amortisation of acquired intangible assets	9	119	119
Head office relocation		121	-
Fair value movements on foreign currency hedging		(11)	-
Total exceptional and other items		381	190

On 11^th January 2013, Stephen Wildridge stepped down from the position as Group CEO and will remain in the Group until the end of October 2013 as Director of Strategy and Business Development. The total compensation package agreed on 11^th January 2013 in relation to Stephen stepping down as CEO is  £71,000 which is due to be paid on 31^st October 2013, and in addition, an accelerated share based payments charge of £39,000 has been recognised to reflect Stephen's ability to exercise early any outstanding share options at 31^st October 2013. The balance of £42,000 relates to management severance payments.

Head office relocation costs principally represent operating costs of the new premises whilst unoccupied together with one-off regulatory costs associated with changing the address on our pharmaceutical licences. 

On 11^th November 2011 Peter Warner resigned from the Board. On termination of this contract, he received a compensation package totalling £71,000 including associated employer's national insurance.

 

3. Revenue and Operating Segments

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

The Group solely comprises one reportable segment, being Companion Animal.

	Note	Companion Animal 2013 £'000	Companion Animal 2012 £'000
Revenue		12,118	10,856
Gross Profit		6,781	5,862
Underlying Operating Profit		2,684	2,294
Other Items	2	(119)	(119)
Exceptional items	2	(262)	(71)
Operating Profit		2,303	2,104
Finance Income	4	27	2
Profit before tax		2,330	2,106

	Note	Companion Animal 2013 £'000	Companion Animal 2012 £'000
Products and Services
Licensed veterinary		7,200	5,972
Animal identification		2,244	2,338
Animal welfare		2,674	2,546
		12,118	10,856
Other information
Intangible asset additions	9	129	215
Property, plant and equipment additions	10	379	55
Depreciation and amortisation	9,10	351	326
Consolidated assets		21,486	19,544
Consolidated liabilities		(3,524)	(2,707)
Consolidated net assets		17,962	16,837

	2013 £'000	2012 £'000
Key customers
Number	3	3
Percentage of total revenue	80%	74%

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

	2013 £'000	2012 £'000
Geographical market
United Kingdom	11,061	10,023
Other European countries	1,057	833
	12,118	10,856

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:

	2013 £'000	2012 £'000
Revenue from sale of goods	11,250	10,052
Revenue from provision of services	868	804
	12,118	10,856
Finance income	27	2
	12,145	10,858

 

 

 

4. Finance Costs and Finance Income

	2013 £'000	2012 £'000
Other net finance income:
Fair value gains on financial instruments*	11	-
Interest income on bank deposits	27	2
Finance income	38	2

* Finance gains 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 are included within "other items" on the face of the statement of comprehensive income.

 

5. Income Tax Expense

 

	Note	2013 £'000	2012 £'000
The income tax expense comprises:
Current tax expense		632	470
Adjustment in the current year in relation to prior years		(175)	(199)
		457	271
The deferred tax (credit)/expense comprises:
Origination and reversal of temporary differences	15	(18)	81
Adjustment in the current year in relation to prior years	15	6	25
		(12)	106
Total tax expense for the year		445	377
The total tax charge can be reconciled to the accounting profit as follows:
Total comprehensive income for the year		1,885	1,729
Total tax expense		445	377
Profit before tax		2,330	2,106
Income tax calculated at 23.75% (2012 - 25.5%)		553	537
Effect of expenses not deductible		48	3
Effect of share-based deductions		20	28
Change in UK tax rate		(7)	(13)
Effect of write-back of deferred tax liabilities		-	(4)
Effect of adjustments in respect of prior years		(169)	(174)
		445	377

The tax credit of £90,000 (2012 - £18,000) shown within "exceptional and other items" on the face of the statement of comprehensive income, which forms part of the overall tax charge of £445,000 (2012 - £377,000) relates to the items analysed in note 2.

Reductions in the UK corporation tax rate from 26% to 24% (effective from 1^st April 2012) and to 23% (effective 1^st April 2013) were substantively enacted on 26^th March 2012 and 3^rd July 2012 respectively.  Further reductions to 21% (effective from 1^st April 2014) and 20% (effective from 1^st April 2015) were substantively enacted on 2^nd July 2013. Deferred tax balances have been calculated at an effective rate of 23%, being the substantively enacted rate at 30^th June 2013.

 

6. Dividends

 

	2013 £'000	2012 £'000
Ordinary final dividend paid in respect of prior year	621	615
Ordinary interim dividend paid	311	311
	932	926

The final dividend paid during the year ended 30^th June 2013 was 3.0 pence per share (2012 - 3.0 pence per share). The interim dividend paid during the year ended 30^th June 2013 was 1.5 pence per share (2012 - 1.5 pence per share).

The proposed final dividend was approved by the Board of Directors on 24^th September 2013 and is subject to approval of shareholders at the Annual General Meeting. The proposed dividend has not been included as a liability as at 30^th June 2013, in accordance with IAS 10 "Events After the Balance Sheet Date".

 

7. 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 2013 £'000	Underlying earnings before exceptional and other items 2012 £'000	Total earnings 2013 £'000	Total earnings 2012 £'000
Total comprehensive income attributable to equity holders of the Company	2,176	1,901	1,885	1,729

	2013 No.	2012 No.	2013 No.	2012 No.
Basic weighted average number of shares	20,732,636	20,546,961	20,732,636	20,546,961
Dilutive potential ordinary shares	124,519	58,085	124,519	58,085
	20,857,155	20,605,046	20,857,155	20,605,046
Earnings per share:
Basic	10.5p	9.3p	9.1p	8.4p
Fully diluted	10.4p	9.2p	9.0p	8.4p

 

8. Goodwill

	Group £'000
Cost
At 1st July 2011, 1st July 2012 and 30th June 2013	12,711
Accumulated impairment losses
At 1st July 2011, 1st July 2012 and 30th June 2013	-
Net book value
At 30th June 2013	12,711
At 30th June 2012	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 1.3% (2012 - 1.9%).

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 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 11.9% (2012 - 11.4%).

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.

 

9. Other Intangible Assets

 

Group	Acquired brands and customer relationships £'000	New product development costs £'000	Capitalised software £'000	Total £'000
Cost
At 1st July 2011	1,361	1,228	41	2,630
Additions	-	161	54	215
At 30th June 2012	1,361	1,389	95	2,845
Additions	-	102	27	129
At 30th June 2013	1,361	1,491	122	2,974
Amortisation
At 1st July 2011	415	393	2	810
Charge for the year	119	169	19	307
At 30th June 2012	534	562	21	1,117
Charge for the year	119	175	25	319
At 30th June 2013	653	737	46	1,436
Carrying value
At 30th June 2013	708	754	76	1,538
At 30th June 2012	827	827	74	1,728

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 relating to the bespoke online ordering system is four years.

 

10. Property, Plant And Equipment

Group	Leasehold improvements £'000	Plant and equipment £'000	Office furniture and equipment £'000	Motor vehicles £'000	Total £'000
Cost
At 1st July 2011	-	63	78	23	164
Additions	-	-	55	-	55
Disposals	-	-	-	(13)	(13)
At 1st July 2012	-	63	133	10	206
Additions	187	44	131	17	379
Disposals	-	-	(1)	(27)	(28)
At 30th June 2013	187	107	263	-	557
Depreciation
At 1st July 2011	-	30	65	22	117
Charge for the year	-	10	8	1	19
Disposals	-	-	-	(13)	(13)
At 1st July 2012	-	40	73	10	123
Charge for the year	3	2	27	-	32
Disposals	-	-	-	(10)	(10)
At 30th June 2013	3	42	100	-	145
Net book value
At 30th June 2013	184	65	163	-	412
At 30th June 2012	-	23	60	-	83

 

11. Inventories

 

	Group
	2013 £'000	2012 £'000
Finished goods and goods for resale	1,418	1,420
	1,418	1,420

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

 

12. Other Financial Assets

Trade and other receivables

		Group		Company
		2013 £'000	2012 £'000	2013 £'000	2012 £'000
Trade receivables		1,386	1,134	-	-
Amounts receivable from subsidiaries		-	-	-	423
Corporation tax - Group relief		-	-	556	431
Other receivables		8	66	7	4
Derivative financial instruments		11	-	-	-
Prepayments and accrued income		257	97	15	8
		1,662	1,297	578	866

Cash and cash equivalents

	Group		Company
	2012 £'000	2011 £'000	2012 £'000	2011 £'000
Cash and cash equivalents	3,745	2,305	1,791	1,738

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates of their fair value.

 

13. Other Financial Liabilities

 

	Group		Company
	2013 £'000	2012 £'000	2013 £'000	2012 £'000
Trade payables	983	702	62	70
Amounts payable to subsidiaries	-	-	3,757	2,821
Other taxes and social security costs	369	338	39	40
Other creditors	288	227	18	27
Accruals	342	49	146	9
	1,982	1,316	4,022	2,967

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

 

14. Deferred Income

Deferred income arises from certain services sold by the Group's subsidiary Animalcare Ltd. In return for a single upfront 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:

	2013 £'000	2012 £'000
Balance at the beginning of the period	1,051	1,044
Income deferred to future periods	177	189
Release of income deferred from previous periods	(207)	(182)
	1,021	1,051

The deferred income liabilities fall due as follows:

	2013 £'000	2012 £'000
Within one year	231	207
After one year	790	844
	1,021	1,051

Income recognised during the year is set out below:

	2013 £'000	2012 £'000
Income received	190	203
Income deferred to future periods	(177)	(189)
Release of income deferred from previous periods	207	182
Income recognised in the year	220	196

 

15. 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 2011	(59)	(122)	-	246	65
Charge/(credit) to income	45	111	(2)	(48)	106
Balance at 30th June 2012	(14)	(11)	(2)	198	171
Charge/(credit) to income	41	(13)	(5)	(35)	(12)
Balance at 30th June 2013	27	(24)	(7)	163	159

As set out in note 5 the rate of corporation tax will be reducing to 21% (effective from 1^st April 2014) and 20% (effective from 1^st April 2015). A reduction of 2% would reduce deferred tax liabilities, if applied at 30^th June 2013, by £14,000 to £145,000.

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 2011	(56)	(100)	-	(156)
Charge/(credit) to income	35	92	(2)	125
At 30th June 2012	(21)	(8)	(2)	(31)
Charge/(credit) to income	4	(5)	-	(1)
At 30th June 2013	(17)	(13)	(2)	(32)

As set out in note 5 the rate of corporation tax will be reducing to 21% (effective from 1^st April 2014) and 20% (effective from 1^st April 2015). A reduction of 2% would reduce deferred tax assets, if applied at 30^thJune 2013, by £3,000 to £29,000.

 

16. Share Capital

 

	2013 No.	2012 No.
Allotted, called up and fully paid ordinary shares of 20p each	20,745,204	20,720,204

	2013 £'000	2012 £'000
Allotted, called up and fully paid ordinary shares of 20p each	4,149	4,144

During the year £5,000 (2012 - £69,000) of ordinary shares were issued for proceeds of £24,375 (2012 - £197,000) resulting in a share premium of £19,375 (2012 - £128,000).

 

 

17. Share-based Payments

Details of the movement in share options during the year are as follows:

	EMI		SAYE		Unapproved
	Options	Price £	Options	Price £	Options	Price £
Outstanding at beginning of year	286,600	1.455	72,114	1.34	128,400	1.130
Granted during the year	445,000	1.334	114,140	1.028	180,000	1.408
Lapsed during the year	(30,000)	1.42	(47,409)	1.34	-	-
Exercised during the year	(25,000)	0.975	-	-	-	-
Open at 30th June 2013	676,600	1.392	138,845	1.084	308,400	1.292
Exercisable at the end of the year	20,000	0.975	-	-	100,000	0.975

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		133p		144p		121p
Weighted average exercise price		135p		115p		125p
Expected volatility		50%		55%		47%
Expected life		3.1 years		3.1 years		3.1 years
Risk-free rate		0.6%		0.5%		0.7%

Expected volatility was determined by calculating the historical volatility of the Group's share price over the previous two years. The expected lives used in the model were estimated based on management's best estimate for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The aggregate estimated fair value of the options granted during the year was £nil (2012 - £nil).

The Group recognised total expenses of £149,000 (2012 - £48,000), £110,000 (2012 - £48,000) within administrative expenses and £39,000 (2012 - £nil) within exceptional and other items as disclosed in note 2.

 

18 Annual Report

The Group's Annual Report and Financial Statements for the year ended 30 June 2013 were approved 24^th September 2013 and are expected to be posted to shareholders during the week commencing 7^th October 2013. 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 head office at 10 Great North Way, York Business Park, Nether Poppleton, York, YO26 6RB.

 

END

 

 

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