Half Yearly Report

RNS Number : 3458Y

Animalcare Group PLC

21 February 2013

 



Animalcare Group plc

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

Half Yearly Report

Animalcare Group plc, a leading supplier of veterinary medicines, announces unaudited interim results for the six months ended 31 December 2012 and confirms that full year results are expected to be in line with expectations. Animalcare is made up of three product groups: Licensed Veterinary Medicines, Companion Animal Identification and Animal Welfare products.

Financial Highlights

	6 months to 31st  Dec 2012	6 months to 31st  Dec 2011	% change
Revenue	£6.10m	£5.40m	+13.0%
Underlying EBITDA*	£1.57m	£1.32m	+19.4%
Underlying operating profit*	£1.47m	£1.22m	+20.3%
Underlying profit before tax*	£1.48m	£1.22m	+21.5%
Profit for the period	£1.07m	£0.88m	+21.6%
Basic underlying earnings per share	5.8p	4.7p	+23.4%
Interim dividend	1.5p	1.5p	-
Cash and cash equivalents	£2.96m	£1.75m	+69.1%

* The Directors believe that presenting underlying results before the effect of exceptional and other items (details in note 3) provide a better understanding of underlying business performance.

Operational Highlights

·     Launch of two veterinary medicines:

§    Buprecare ampoules - an analgesic for cats and dogs

§    Vitofyllin - for problems associated with canine ageing

·     Strong growth delivered within the Licensed Veterinary Medicines product group

·     Companion Animal Identification  range is performing in line with management expectations

·     Product development pipeline progressing on target and investment in Project Sustain continuing

·     Operational cash flows remain strong with cash balances at £3.0m

·     Executive management changes now in place with hand over period underway; strengthening of sales and marketing senior management team complete

James Lambert, Chairman of Animalcare, said: "Prospects for the second half of this financial year look good and in line with market expectations. We expect to launch four veterinary products during this financial year and to keep the pipeline stocked for the next several years, so continuing Animalcare's growth record. Your board is delighted with the first half results of Animalcare and it remains positive about the opportunities ahead for the future development of your company."

Animalcare Group plc	Tel: [phone]
Iain Menneer (Chief Executive Officer)
Chris Brewster (Chief Financial Officer)
N+1 Singer (Nominated Adviser and Broker)
Aubrey Powell/Richard Lindley	Tel: [phone]
Walbrook PR Ltd	Tel: [phone] or [e-mail]
Paul McManus	Mob: [phone]
Helen Westaway	Mob: [phone]

Chairman's Statement

The first six months of the current financial year has seen your Company return to solid growth. The key driver for this is the contribution from our continuing and successful launch programme of generic medicines for cats and dogs.

First half revenues increased by 13%, driven almost entirely by growth of the veterinary medicines business with the consequent effect of raising the gross profit percentage from 54.5% to 55.7%. Higher net cash generation has been driven by these improved profits and lower cash tax following the settlement of a prior year research and development tax credit.

Basic underlying earnings per share has risen in line with profits, increasing by 23% to 5.8 pence. The strong cash position has enabled your Board to maintain an interim dividend of 1.5 pence payable on 3rd May 2013 to all shareholders on the register on the 12th April 2013.

As announced in January I am delighted your Board has promoted Dr Iain Menneer to Group CEO, a worthy and able replacement to Stephen Wildridge, the architect of Animalcare's successful development into one of the UK's leading animal health companies. I would personally like to record your Board's thanks for all Stephen has achieved on your behalf and I am delighted he is staying until October 2013 as a Director on the Board and in an executive role as Director of Strategy and Business Development.

Much of the increased sales in the first half have been achieved through the sale of generic medicines launched either this financial year or last financial year and still not at maturity, for example Vitofyllin and Buprecare multi-dose vial respectively. Your Board is also pleased that 2013 has started with the resumption in sales of our important product Buprecare single dose ampoules after an enforced break of 18 months.

As well as continuing to grow our Licensed Veterinary Medicine business during the first half we have managed to stabilise the Companion Animal Identification and Animal Welfare groups. Prospects for the second half of this financial year look good and the Group is trading in line with market expectations for the year as a whole. Our target is again to launch four veterinary medicines during this financial year and to keep the pipeline stocked for the next several years, so continuing Animalcare's growth record.

Your Board is delighted with the first half results of Animalcare and it remains positive about the opportunities ahead for the future development of your Company.

James Lambert
Chairman

Operational and Financial Review

Operations

In the first half of the financial year overall performance has been solid with Group revenue up 13% to £6.10m (2011: £5.40m). This performance largely reflects the strong growth in our Licensed Veterinary Medicines which has again performed better than the wider animal health market. Our Companion Animal Identification product group continues to operate in a competitive market however is showing evidence of recovery in performance with improved sales from database services (in particular insurance commissions and the Locate pet finding service). Animal Welfare Products sales have made good progress on the same period last year.

Revenue by product group

Revenue	6 months to 31st  Dec 2012 £'000	6 months to 31st  Dec 2011 £'000	% change
Licensed Veterinary Medicines	3,590	2,916	+23.1%
Companion Animal Identification	1,137	1,202	-5.4%
Animal Welfare	1,376	1,282	+7.3%
TOTAL	6,103	5,400	+13.0%

Gross profit increased by 16% to £3.40m in the same period (2011: £2.94m). Gross profit percentage for the six months ended 31st December 2012 increased to 55.7% (2011: 54.5%), as a result of greater sales of higher margin Licensed Veterinary Medicines products.

Distribution costs increased moderately to £0.134m (2011: £0.125m) as a consequence of the increased sales volumes and administrative expenses rose to £1.80 million (2011: £1.60m). Salary costs have risen reflecting in part the strengthening of the senior management team. Development costs have been lower in the period but this is a phasing issue; development costs for the full year are anticipated to be in line with the markets full year expectations.

Underlying* operating profit increased 20.3% to £1.47m (2011: £1.22m) and underlying profit before tax was up 21.5% to £1.48m (2011: £1.22m).

Taxation

The taxation charge of £0.3m reflects the estimated effective tax rate for the full financial year of 20% (2011: 19%). The effective rate is lower than the standard rate of corporation tax, principally due to prior year research and development tax credits.

Cash Flow

Operating cash flows for the period at £1.3m were £0.1m lower than 2011 largely as a result of an increase in working capital of £0.2m which principally reflects the increased level of sales towards the period end.

Net income taxes received were +£0.04m due to the settlement of a prior year research and development tax credit.

Capital expenditure at £0.1m was lower than the prior period (2011: £0.2m). However this expected to increase significantly in the second half of the financial year driven by our business relocation and planned new product development expenditure including progress on enhanced generics.

Cash balances at 31st December 2012 were £3.0m compared to £2.3m at 30th June 2012 and £1.8m at 31st December 2011.

Dividend

The Board is pleased to announce an interim dividend of 1.5 pence per share which will be paid on 3rd May 2013 to all shareholders on the register on 12^th April 2013. The interim dividend is covered 3.9 times by underlying earnings (2011: 3.1 times).

Outlook

The Group enters the second half of the financial year with confidence and remains committed to its strategy of developing a pipeline of new licensed veterinary medicine products delivering up to four launches a year. Work on the Sustain product development platform is continuing and will deliver new products that, where possible, will include patent protectable technology. We believe that our strong balance sheet will allow us to fund this from operational cash flows.

Whilst the overall economic climate remains challenging, full year results to 30^th June 2013 are expected to be in line with market expectations.

* Underlying results are before the effect of exceptional costs, amortisation of acquired intangible assets and other items as disclosed in note 3 to the financial statements.

Iain Menneer	Chris Brewster
Chief Executive Officer	Chief Financial Officer

Condensed Consolidated Statement of Comprehensive Income - Unaudited

Six months ended 31^st December 2012

		6 months ended 31st December 2012			6 months ended 31st December 2011
		Underlying results* £'000	Exceptional and other items* £'000	Total £'000	Underlying results* £'000	Exceptional and other items* £'000	Total £'000
	Note
Revenue		6,103	-	6,103	5,400	-	5,400
Cost of sales		(2,701)	-	(2,701)	(2,457)	-	(2,457)
Gross profit		3,402	-	3,402	2,943	-	2,943
Distribution costs		(134)	-	(134)	(125)	-	(125)
Administrative expenses		(1,800)	(139)	(1,939)	(1,598)	(130)	(1,728)
Operating profit/loss		1,468	(139)	1,329	1,220	(130)	1,090
Finance income		14	-	14	-	-	-
Profit/(loss) before tax		1,482	(139)	1,343	1,220	(130)	1,090
Income tax (expense)/credit	5	(288)	19	(269)	(249)	42	(207)
Total comprehensive income/(loss) for the period		1,194	(120)	1,074	971	(88)	883
Basic earnings per share	7	5.8p		5.2p	4.7p		4.3p
Fully diluted earnings per share	7	5.8p		5.2p	4.7p		4.3p

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

*           In order to aid understanding of underlying business performance, the directors have presented underlying results before the effect of exceptional costs, amortisation of acquired intangible assets and other items. These items are analysed in note 3 to the financial statements.

Condensed Consolidated Statement of Comprehensive Income - Audited

Year ended 30^th June 2012

	Note	Underlying results* '000	Exceptional and other items* £'000	Total £'000
Revenue		10,856	-	10,856
Cost of sales		(4,994)	-	(4,994)
Gross profit		5,862	-	5,862
Distribution costs		(262)	-	(262)
Administrative expenses		(3,306)	(190)	(3,496)
Operating profit/(loss)		2,294	(190)	2,104
Finance income		2	-	2
Profit/(loss) before tax		2,296	(190)	2,106
Income tax (expense)/credit	5	(395)	18	(377)
Total comprehensive income/(loss) for the year		1,901	(172)	1,729
Basic earnings per share	7	9.3p		8.4p
Fully diluted earnings per share	7	9.2p		8.4p

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

*           In order to aid understanding of underlying business performance, the directors have presented underlying results before the effect of exceptional costs, amortisation of acquired intangible assets and other items. These items are analysed in note 3 to the financial statements.

Condensed Consolidated Statement of Changes in Shareholders' Equity

Six months ended 31^st December 2012

	Note	6 months ended 31st December 2012 Unaudited £'000	6 months ended 31st December 2011 Unaudited £'000	Year ended 30th June 2012 Audited £'000
Balance at beginning of period		16,837	15,789	15,789
Total comprehensive income for the period		1,074	883	1,729
Transactions with owners of the Company, recognised in equity:
Dividends paid	6	(622)	(615)	(926)
Issue of share capital		24	72	197
Share-based payments		42	6	48
Balance at end of period		17,355	16,135	16,837

Condensed Consolidated Balance Sheet

31^st December 2012

	31st December 2012 Unaudited £'000	31st December 2011 Unaudited £'000	30th June 2012 Audited £'000
Non-current assets
Goodwill	12,711	12,711	12,711
Other intangible assets	1,633	1,843	1,728
Property, plant and equipment	98	59	83
	14,442	14,613	14,522
Current assets
Inventories	1,430	1,439	1,420
Trade and other receivables	1,676	1,547	1,297
Cash and cash equivalents	2,956	1,750	2,305
	6,062	4,736	5,022
Total assets	20,504	19,349	19,544
Current liabilities
Trade and other payables	(1,473)	(1,693)	(1,316)
Current tax liabilities	(464)	(407)	(169)
Deferred income	(205)	(195)	(207)
	(2,142)	(2,295)	(1,692)
Net current assets	3,920	2,441	3,330
Non-current liabilities
Deferred income	(827)	(854)	(844)
Deferred tax liabilities	(180)	(65)	(171)
	(1,007)	(919)	(1,015)
Total liabilities	(3,149)	(3,214)	(2,707)
Net assets	17,355	16,135	16,837
Capital and reserves
Called up share capital	4,149	4,102	4,144
Share premium account	6,192	6,090	6,173
Retained earnings	7,014	5,943	6,520
Equity attributable to equity holders of the parent	17,355	16,135	16,837

Cash Flow Statement

Six months ended 31^st December 2012

	6 months ended 31st December 2012 Unaudited £'000	6 months ended 31st December 2011 Unaudited £'000	Year ended 30th June 2012  Audited £'000
Comprehensive income for the period before tax	1,343	1,090	2,106
Adjustments for:
Depreciation of property, plant and equipment	10	8	19
Amortisation of intangible assets	151	146	307
Finance income	(14)	-	(2)
Share-based payment award	42	6	48
Movement in deferred income liabilities	(19)	5	7
Loss on disposal of property, plant and equipment	21	-	-
Operating cash flows before movements in working capital	1,534	1,255	2,485
Increase in inventories	(10)	(93)	(74)
(Increase)/decrease in receivables	(379)	134	384
Increase/(decrease) in payables	157	127	(250)
Cash generated by operations	1,302	1,423	2,545
Income taxes received/(paid)	35	(120)	(422)
Net cash flow from operating activities	1,337	1,303	2,123
Investing activities:
Payments to acquire intangible assets	(71)	(169)	(215)
Payments to acquire property, plant and equipment	(29)	(20)	(55)
Interest received	12	-	2
Net cash used in investing activities	(88)	(189)	(268)
Financing:
Receipts from issue of share capital	24	72	197
Equity dividends paid	(622)	(615)	(926)
Net cash used in financing activities	(598)	(543)	(729)
Net increase in cash and cash equivalents	651	571	1,126
Cash and cash equivalents at start of period	2,305	1,179	1,179
Cash and cash equivalents at end of period	2,956	1,750	2,305
Comprising:
Cash and cash equivalents	2,956	1,750	2,305

Condensed Notes to the Financial Statements

31^st December 2012

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 condensed set of financial statements as at, and for, the six months ended 31st December 2012 comprises the Company and its subsidiaries (together referred to as the "Group").  The nature of the Group's operations and its principal activities are set out in the Chairman's Statement.

This Interim Report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The information contained herein has not been reviewed by the Group's auditor.

The prior year comparatives are derived from the audited financial information as set out in the Group's Annual Report for the year ended 30th June 2012 and the unaudited financial information in the Group's Interim Report for the six months ended 31st December 2011. The comparative figures for the financial year ended 30th June 2012 are not the Group's statutory accounts. Those accounts have been reported on by the Group's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include any reference to matters to which the auditors drew attention without qualifying their report and did (iii) not contain a statement under section 498(2) or (3) of the Companies Act 2006.

This Interim Report for the six months ended 31^st December 2012 was approved by the board of directors on 21^st February 2013.

2. SIGNIFICANT ACCOUNTING POLICIES

     Basis of preparation and accounting policies

Except as described below, the condensed consolidated interim financial information for the six months ended 31st December 2012 has been prepared using accounting policies consistent with those of the Company's annual accounts for the year ended 30th June 2012, which were prepared in accordance with IFRSs as adopted by the European Union.

Taxes on income in the interim periods are accrued using the estimated tax rate that would be applicable for the full financial year.

The following new standards and amendments are mandatory for the first time for the financial period beginning 1st July 2012:

IFRS7 Financial Instruments: Disclosures (amended)

IAS1 Presentation of Items in Other Comprehensive Income (amended)

Adoption where applicable has not had a material effect on the Group's financial information.

Going concern

The principal risks and uncertainties facing the Group remain those set out in the latest Annual Report.

During the period the Group met its day-to-day general corporate and working capital requirements through existing cash resources. At 31st December 2012 the Group had cash on hand of £2.96 million (30th June 2012: £2.31 million).

Based on the Group's forecasts and projections, taking account of reasonable possible changes in trading performance, the directors believe that the Group will have sufficient cash resources to meet its requirements for at least the next 12 months.  Accordingly, the adoption of the going concern basis of preparation remains appropriate.

3. EXCEPTIONAL AND OTHER ITEMS
Six months ended 31^st December 2012

	6 months ended 31 December 2012 Unaudited £'000	6 months ended 31 December 2011 Unaudited £'000	Year ended 30 June 2012 Audited £'000
Management/Executive severance payments	41	71	71
Amortisation of acquired intangible assets	59	59	119
Head office relocation	35	-	-
Fair value movements on foreign currency hedging	4	-	-
Total exceptional and other items	139	130	190

4. REVENUE AND OPERATING SEGMENTS

During the period, the principal activity of the Group was the supply and distribution of veterinary medicines, identification and other products for companion animals.

The Chief Operating Decision Maker ("CODM") is considered to be the Chief Executive Officer of Animalcare Group plc. Performance assessment is principally based on underlying operating profit. The Group solely comprises one reportable segment, being Companion Animal.

5. INCOME TAX EXPENSE

The charge for taxation for the six months ended 31^st December 2012 is based on an estimate of the likely effective tax rate for the year ending  30^th June 2013 of  20% (year ended 30^th June 2012: 18%, 6 months ended 31^st December 2011: 19%). The effective rate is lower than the standard rate of corporation tax principally due to prior year research and development tax credits.

On 23^rd March 2012, the Chancellor of the Exchequer announced the reduction in the main rate of UK corporation

tax to 23.0% for the year starting 1^st April 2013 and a further 1.0% reduction to 22.0% in April 2014. On 5^th December 2012, the Chancellor of the Exchequer also announced the further reduction in the main rate of UK

corporation tax to 21.0% for the year starting 1^st April 2014. The proposed rate reduction will reduce the amount of

cash tax payments to be made by the Group.

6. DIVIDENDS

	6 months ended 31st December 2012 Unaudited £'000	6 months ended 31st December 2011 Unaudited £'000	Year ended 30th June 2012 Audited £'000
Ordinary final dividend paid for the year ended 30th June 2011 of 3.0p per share	-	615	615
Ordinary interim dividend paid for the year ended 30th June 2012 of 1.5p per share	-	-	311
Ordinary final dividend paid for the year ended 30th June 2012 of 3.0p per share	622	-	-
	622	615	926

7. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing the total comprehensive income for the period attributable to ordinary equity holders of the Company by the weighted average number of fully paid ordinary shares outstanding during the period.

The dilutive effect of share options is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares from the start of the period. The only dilutive potential ordinary shares of the Company are share options.

The following income and share data was used in the earnings per share computations:

	6 months ended 31st December 2012  Unaudited	6 months ended 31st December 2011 Unaudited	Year ended 30th June 2012  Audited	6 months ended 31st December 2012  Unaudited	6 months ended 31st December 2011 Unaudited	Year ended 30th June 2012  Audited
	Underlying earnings £'000	Underlying earnings £'000	Underlying earnings £'000	Total earnings £'000	Total earnings £'000	Total earnings £'000
Total comprehensive income attributable to equity holders of the Company	1,194	971	1,901	1,074	883	1,729
	No.	No.	No.	No.	No.	No.
Basic weighted average number of shares	20,720,339	20,442,230	20,546,961	20,720,339	20,442,230	20,546,961
Dilutive potential ordinary shares	34,702	217,779	58,085	34,702	217,779	58,085
Fully diluted weighted average number of shares	20,755,041	20,660,009	20,605,046	20,755,041	20,660,009	20,605,046
Total earnings per share:
Basic	5.8p	4.7p	9.3p	5.2p	4.3p	8.4p
Fully diluted	5.8p	4.7p	9.2p	5.2p	4.3p	8.4p

8. CAUTIONARY STATEMENT

This Interim Management Report ("IMR") consists of the Chairman's Statement and Financial Review, which have been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied upon by any other party or for any other purpose.

The IMR contains a number of forward looking statements. These statements are made by the directors in good faith based upon the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking information.

This IMR has been prepared for the Group as a whole and therefore emphasises those matters which are significant to Animalcare Group plc and its subsidiaries when viewed as a whole.

9. INTERIM REPORT

The Group's interim and annual reports are available from the Company's website: www.animalcaregroup.co.uk

 

END

 

 

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