Final Results
28JULY 2004
Lawrence plc
Preliminary Results for the year ended 31 March 2004
HIGHLIGHTS
- Extensive corporate activity during the year:
- disposal of Interpet for £14.5 million cash
- reorganisation of South African marketing arrangements realises £1.7
million
- Disposals allow enhanced focus on animal health and feed core businesses
- Aivlosin receives marketing approval for Europe after year end
- Earnings per share reach 16.26p (2003:11.33p)
- Net assets are record £22.1 million
- Final dividend raised 12.0 per cent to 4.475 pence
- Strong cash position allows additional one-off dividend payment of 1.30
pence
- Discussions commenced to purchase the 50 per cent. of ECO Animal Health not
already owned
- Positive start to the current financial year
Peter Lawrence, Chairman of Lawrence plc, commented:
"I am pleased to report on one of the most significant periods in the strategic
development of your company. Our exit from the UK pet industry emphasises our
commitment to our core business, we are now sharply focused on our future as a
leading supplier to the animal food farming industry worldwide. We expect ECO
to grow strongly in the years ahead and be boosted by the grant of further
valuable marketing authorisations for Aivlosin and other new products. I look
forward to reporting further progress to shareholders".
Contacts:
Lawrence plc
Peter Lawrence 020 8336 2900
07919 552055
Charles Stanley & Co Ltd 020 7739 8200
Philip Davies
Robert Corden
Redleaf Communications Limited
020 7955 1410
Emma Kane
Spiro Financial
Anthony Spiro 020 8949 0428
Lawrence plc is a leader in the development, manufacture and distribution of
principally specialist chemical and pharmaceutical products for the animal
health and farming markets worldwide. Our products for these growth markets
incorporate natural ingredients to promote well-being and sustainability. We
achieve our financial goals through the careful and responsible application of
science to generate value for our shareholders.
CHAIRMAN'S STATEMENT
I am pleased to report on one of the most significant periods in the strategic
development of your company. After the year-end, in the space of six weeks in
April and May 2004, we announced two extremely important events, which will
shape the future of the company for many years to come; the disposal of
Interpet, our UK pet business, and a positive opinion on Aivlosin, our exciting
patented veterinary antibiotic.
Pre-tax profit for the year to 31 March 2004 was £5.4 million, which includes
goodwill adjustments arising from the corporate activity. This Group result
compares with a pre tax profit of £4.7 million in the previous year. Earnings
per share advanced to 16.3 pence.
The strongest sales months for Interpet are February and March, the last two
months of our financial year, as customers stock up for the outdoor pond and
gardening season. The reorganisation of our animal health trading arrangements
in South Africa, which was effective from 1 March 2004, meant that we did not
include its March sales, which are normally the highest of the year as they
include pesticide tenders. The absence of these sales is reflected in the group
turnover figure of £33.3 million, which is below the £36.3 million achieved in
the previous twelve months.
The sale of Interpet for £14.5 million in cash and the reorganisation in South
Africa, which realised cash of £1.7 million, have together had a very positive
impact on the group. Our cash position is the strongest it has ever been and net
assets are in excess of £22.1 million, some £3.5 million above the previous
year's record level.
The proceeds from these two transactions were received after the year end and
have been treated as a post balance sheet event. The current strength of our
balance sheet allows us to return surplus cash to our shareholders, which we
plan to achieve through a specially enhanced dividend payment. At the Annual
General Meeting on 23 September 2004 shareholders will be asked to approve a
payment of 5.725 pence (net) per share, which comprises a final ordinary
dividend of 4.425 pence plus a one off payment of 1.30 pence (net) per share.
This makes a total dividend for the year, including the one off payment, of 7.00
pence (net) per share.
The underlying final dividend of 4.425p (net) per share is 12.0 per cent above
last year's final dividend of 3.95 pence (net) and maintains our progressive
payment record. The total payment of 5.725 pence (net) per share will be made on
1 November 2004 to shareholders on the register on 6 August 2004. The payment
of 1.30 pence (net) allows us to reward shareholders without impairing the
efficient capital structure of the company going forward. The balance of our
cash will continue to be used to finance the expansion of the company through
organic growth and by strategic acquisitions. This includes our intention to
purchase the 50 per cent of the shares of ECO Animal Health, which the company
does not own, and discussions with the ECO shareholders have already commenced.
The sale of our Interpet pet business to Central Garden and Pet Company Limited
marks the end of one of the traditional areas of business of your company. Over
30 years ago, we began by introducing cat litter to the UK pet industry and this
led to the creation of MOR Products Ltd, our pet wholesale business and to our
retail operation, Petworld Superstores Ltd. We subsequently sold these
businesses and in 1997 acquired Interpet, which grew strongly under our
ownership; turnover increased fourfold and profit twelve fold. I would like to
offer my good wishes and thanks to the excellent staff, past and present of
Interpet and wish them success in their exciting future with Central Garden and
Pet. Our exit from the pet industry emphasises our commitment to our core
business, animal health and animal feed additives. We are now sharply focused on
our future as a leading supplier to the animal food farming industry worldwide.
The sale of our US business, Aquarium Products, has not yet been concluded; we
continue to make every effort to complete this transaction in line with our
original agreement with Central Garden and Pet.
In order to facilitate improved dealings in our shares, approval was given by
shareholders at an EGM on 2 July 2004 for our shares to be traded through CREST
as uncertificated securities.
ECO GROUP: ECO's animal health business delivered another strong performance
with sales and profit ahead of the previous year. Ecomectin, our endectocide
range for all grazing animals, completed its first full year of sales in the USA
and is being very well received in this important market. The pour-on product
for cattle, sold under the Coopermec name by Schering Plough, has rapidly
established itself as a leading brand. Sales of Ecomectins in Europe and Japan
also progressed well. We expect further growth in sales in the current year,
particularly in Europe where the recent expansion of the EU has created a larger
market opportunity.
During the last year, we were granted over 40 new registrations for a range of
our products both in Europe and the rest of the world which brings our current
number of registrations to over 350 with a further 250 grants still pending.
Following the year-end, on 12 May 2004, ECO was awarded a European marketing
authorisation for Aivlosin for the treatment and prevention of swine pneumonia.
The registration process started over ten years ago and it is expected that
further registrations for Aivlosin for different diseases in other species of
animals and geographic territories will be forthcoming over the next few years.
We expect to commence sales of Aivlosin in Europe in the autumn through
distribution arrangements, which have been recently finalised. Further
European registrations for Aivlosin for use in treating other conditions in pigs
and for its use with chickens, turkeys and other poultry should follow over the
coming months.
Earlier this month, the Committee for Medicinal Products for Veterinary Use
adopted a further opinion recommending the establishment of Provisional maximum
residue limits for Aivlosin in poultry species. This is another major hurdle
that has been overcome and we expect to complete our full documentation for
regulatory approval for poultry before the end of the year.
Submission of our registration dossiers to the Food and Drug Administration in
the USA for Aivlosin should be made towards the end of 2004 with a view to
receiving a marketing authorisation some twelve months later. As has always
been the case, forecasting the precise timing of the grant of drug registrations
is impossible, but now that the first European authorisation is in place we look
forward to a sharply increasing level of sales and profit over the coming years.
We already have registrations for Aivlosin and Ecomectin in China and in June
2004 ECO signed a joint venture agreement with Zheijang Shenghua BIOK Biology
Co. Ltd. to manufacture these and other animal health products for this fast
expanding market. Our joint venture partner is a first class business and is
one of the very few Chinese pharmaceutical manufacturers to have achieved the
essential GMP (Good Manufacturing Practice) accreditation standard. The day-to-
day management and expansion of our business in China continues to be controlled
from our Shanghai office, which we opened in 1996. Following the sale of our
trading business in South Africa to Afrivet Business Management earlier this
year, ECO has retained all its drug registrations and has agreed to their
exclusive use by Afrivet. ECO will receive a continuing payment based on
Afrivet's total sales, which should enhance the profitability of ECO.
We have further strengthened our sales, management and registration teams at ECO
Animal Health to ensure we are able to cope efficiently with the increasing
workload that these additional registrations and projects generate. A number of
second and third generation anti parasitic and anti infective products have
completed their testing and the registration process has already begun. First
sales of these products were made in South Africa this year and we expect that
other parts of the world should start selling them during the next financial
year and will be followed by sales in Europe and the USA. a year later.
AGIL: Agil's performance improved steadily over the course of the year and the
company has benefited significantly from the strong ties it has built with its
worldwide distributors. It is rewarding to see business recovering in South East
Asia following SARS and avian flu. Agil introduced a number of new products
during the year including Credence, a treatment for animal drinking water
supplies and veterinary disinfectants that has been well received. Agil will
continue to add new and innovative products to its range including one with a
novel approach to the administration of vitamins to growing animals.
A new market for Agil is in crop protection systems for stored grains for
brewing and malting. Demeter, our chemical free pesticide, has recently been
approved by the Central Scientific Laboratory and Home Grown Cereals Authority
in the UK as a replacement for traditional organophosphate insecticides. This
could prove to be an exciting new business area for us.
The biggest opportunity for Agil remains the expected heavy use of natural
digestion improvers to replace antibiotic growth promoters in Europe when they
are banned at the end of 2005. Agil is well placed for this change, having sold
its range of Prefect, Salkil and Bact-A-Cid antibiotic free products to the pig
and poultry industry for some years. It is particularly encouraging that many
poultry and pork exporters outside the EU and America are now adopting a regime
of drugs and additives, which meet European and FDA standards for meat products.
This will benefit Agil and we expect continuing growth and success in this area.
BLACKFAST: Blackfast Chemicals enjoyed a record year with exports continuing to
account for more than half of total sales. A second sales manager has been
appointed to help support and supervise the many distributors we have around the
world. It is encouraging to note an increase in the number of larger automated
installations that are now using our room temperature ecologically favourable
process in place of traditional hot blacking methods.
INTERPET: This business performed well during the ten months prior to its sale,
with a good advance in profit and improvement in operating margin.
EMPLOYEES: I would like to express my thanks to all employees and everyone
associated with the company without whose hard work and loyalty we could not
continue to flourish.
OUTLOOK: The current year has started well and while the future looks very
different in its turnover and profit makeup from the past, we have good reason
to be confident. We expect ECO to grow strongly in the years ahead and be
boosted by the grant of further valuable marketing authorisations for Aivlosin
and other new products. I look forward to reporting further progress to
shareholders.
Peter Lawrence
July 2004
PROFIT AND LOSS ACCOUNT
For the year ended 31 March 2004
2004 2003
£ £
TURNOVER 33,330,767 36,264,380
Continuing operations 16,128,11
8
Discontinued operations 17,202,64
9
=========
==
Cost of sales (2019,876, (21,397,46
277) 5)
---------- ----------
---------- ----------
GROSS PROFIT 13,454,490 14,866,915
Net operating expenses (10,787,83 (10,179,00
6) 6)
---------- ----------
---------- ----------
OPERATING PROFIT 2,666,654 4,687,909
Continuing Operations 770,215
Discontinued Operations 1,896,439
==========
=
Loss on sale of listed (5,901)
investments
Exceptional write down of (674,488)
goodwill
Exceptional bonus (1,080,504
provisions )
Income from listed fixed 64,115 64,115
asset investments
Profit on Sale of a 4,543,826 -
Division
Net interest (158,957) 2,688,091 (204,961)
---------- ----------
---------- ----------
PROFIT ON ORDINARY
ACTIVITIES BEFORE TAXATION 5,354,745 4,547,063
Tax on profit on ordinary (677,199) (1,170,167
activities )
---------- ----------
---------- ----------
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION 4,667,546 3,376,896
Minority interest - equity (382,545) (459,789)
---------- ----------
---------- ----------
PROFIT FOR THE FINANCIAL 4,295,001 2,917,107
YEAR
Dividends - equity (1,753,491 (1,414,208
) )
---------- ----------
---------- ----------
RETAINED PROFIT
TRANSFERRED TO RESERVES 2,541,510 1,502,899
---------- ----------
---------- ----------
EARNINGS PER SHARE 16.26p 11.33p
DILUTED EARNINGS PER SHARE 15.97p 11.17p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year Ended 31 March 2004
2004 2003
£ £
PROFIT FOR THE FINANCIAL 4,295,001 2,917,107
PERIOD
Exchange differences (164,371) (312,699)
---------- -----------
---------- ---------
TOTAL RECOGNISED GAINS AND
LOSSES FOR THE YEAR 4,130,630 2,604,408
---------- ----------
---------- ----------
BALANCE SHEET
As at 31 March 2004
2004 2003
£ £
FIXED ASSETS
Intangible assets 5,660,510 7,314,157
Tangible assets 864,669 1,455,979
Investments 713,252 805,324
--------- ---------
-------- --------
7,238,431 9,575,460
CURRENT ASSETS
Stocks 2,316,261 7,829,666
Debtors 23,924,64 12,762,40
8 7
Cash at bank and in hand 524,265 581,463
--------- ---------
-------- --------
26,765,17 21,173,53
4 6
CREDITORS: AMOUNTS FALLING DUE WITHIN
ONE YEAR (10,596,0 (10,955,0
31) 51)
--------- ---------
-------- --------
NET CURRENT ASSETS 16,169,14 10,218,48
3 5
--------- ---------
-------- --------
TOTAL ASSETS LESS CURRENT LIABILITIES 23,407,57 19,793,94
4 5
CREDITORS: AMOUNTS FALLING DUE AFTER
MORE THAN ONE YEAR (1,291,98 (1,204,81
9) 9)
22,115,58 18,589,12
5 6
--------- ---------
-------- --------
CAPITAL AND RESERVES
Called up share capital 1,337,368 1,300,948
Share premium account 7,936,115 7,199,240
Capital redemption reserve 105,829 105,829
Profit and loss account 11,518,26 9,141,128
7
--------- ---------
-------- --------
EQUITY SHAREHOLDERS' FUNDS 20,897,57 17,747,14
9 5
Minority interest - equity 1,218,006 841,981
--------- ---------
-------- --------
22,115,58 18,589,12
5 6
--------- ---------
-------- --------
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2004
2004 2003
£ £
NET CASH INFLOW FROM OPERATING 3,381,368 5,167,786
ACTIVITIES
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE
Interest received 95,343 59,221
Interest paid (254,300) (264,182)
Dividends received 64,115 64,115
--------- ---------
--------- ---------
NET CASH OUTFLOW FROM RETURNS ON
INVESTMENTS
AND SERVICING OF FINANCE (94,842) (140,846)
--------- ---------
--------- ---------
TAXATION (801,672) (1,546,25
6)
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Purchase of intangible fixed assets (2,870,85 (2,461,96
2) 6)
Purchase of tangible fixed assets (246,671) (211,096)
Sale of tangible fixed assets 20,773 18,120
Sale of Investments 86,170 244,211
--------- ---------
--------- ---------
NET CASH OUTFLOW FROM CAPITAL
EXPENDITURE
AND FINANCIAL INVESTMENT (3,010,58 (2,410,73
0) 1)
--------- ---------
--------- ---------
Acquisitions and disposals (59,139) -
--------- ---------
--------- ---------
EQUITY DIVIDENDS PAID (1,333,68 (1,144,97
4) 9)
FINANCING
Issue of shares 773,295 394,238
(Repayment of) borrowing (net) (17,434) (199,744)
--------- ---------
--------- ---------
NET CASH INFLOW FROM FINANCING 755,861 194,494
--------- ---------
--------- ---------
(Decrease)/Increase in cash (1,162,68 119,468
8)
--------- ---------
--------- ---------
NOTES
1. NET OPERATING EXPENSES
Total Total
2004 2003
£ £
Distribution costs 499,961 550,964
Administrative 10,350,278 9,921,571
expenses
Other operating (62,403) (293,529)
income
----------- -----------
-------- --------
10,787,836 10,179,006
----------- -----------
-------- --------
2. EARNINGS PER SHARE
The calculation of earnings per share is based upon the profit for the financial
year divided by the weighted average number of ordinary shares in issue during
the year.
The calculation of diluted earnings per share is based on the basic earnings per
share, adjusted to allow for the issue of shares and the post tax effect of
dividends, on the assumed conversion of all dilutive options and other dilutive
potential ordinary shares.
2004 2003
Weight Weight
ed ed
averag Per averag Per
e e
number share Earnin number share
of gs of
Earnin shares amount shares amount
gs
000 (pence £'000 000 (pence
£'000 ) )
Basic earnings
per share
Earnings
attributable to
ordinary 4,295 26,420 16.26 2,917 25,748
shareholders 11.33
Dilutive effect
of securities
options 469 372
(0.29) (0.16)
4,295 26,889 15.97 2,917 26,120
11.17
3. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Group
2004 2003
£ £
Profit for the financial year 4,295,00 2,917,10
1 7
Dividends
(1,753,4 (1,414,2
91) 08)
2,541,51 1,502,89
0 9
Exchange differences
(164,371 (312,699
) )
Increase in shares 394,238
773,295
Net increase in shareholders' funds 3,150,43 1,584,43
4 8
Shareholders' funds at 1 April 2003 16,162,7
17,747,1 07
45
Shareholders' funds at 31 March 2004 20,897,5 17,747,1
79 45
The cumulative amount of goodwill arising from acquisitions which has been
written off to reserves has not been disclosed as the information cannot be
obtained without unreasonable expense and delay.
ANALYSIS OF CHANGES IN NET DEBT
At 31 Exchange At 31
March March
2003 Cash movement 2004
flow
£ £ £ £
Cash at bank and in hand - 524,265
581,463 (57,198
)
Overdraft -
(1,636,0 (1,346, (2,982,
05) 452) 457)
-
(1,054,5 (1,403, (2,458,
42) 650) 192)
Debt
(1,445,7 258,396 (104,602) (1,291,
83) 989)
(2,500,3 (1,145, (104,602) (3,750,
25) 254) 181)
SALE OF BUSINESSES Eco
South
Interpet Africa Total
Net assets disposed of
Fixed Assets -
3,141,90 3,141,901
1
Stocks
5,284,34 1,696,9 6,981,282
5 37
Debtors
3,474,80 748,901 4,223,701
0
Creditors
(1,579,7 (417,49 (1,997,28
95) 0) 5)
10,321,2 2,028,3 12,349,59
51 48 9
Sales costs -
263,919 263,919
Profit on disposal -
4,543,83 4,543,830
0
Sales proceeds outstanding at
the year end - to be satisfied 15,129,0 2,028,3 17,157,34
in cash. 00 48 8
4.REPORT AND FINANCIAL INFORMATION
The financial information set out in this preliminary announcement does not
constitute accounts as defined in section 240 of the Companies Act 1985.
The summarised balance sheet at 31 March 2004 and the summarised profit and loss
account, summarised cash flow statement and summarised statement of total
recognized gains and losses and associated notes for the year then ended have
been extracted from the Group's 2004 audited statutory financial statements.
Copies of the financial statements for the Group for the year ended 31 March
2004 will be available from the offices of Charles Stanley & Company Limited, 25
Luke Street, London, EC2A 4AR and will be posted to shareholders in due course