Final Results
Lawrence PLC
20 July 2007
21 July 2007
Lawrence plc
Preliminary Results for the year ended 31 March 2007
HIGHLIGHTS
• Strategy to dispose of non-core activities nears completion following
£5.5 million sale of Agil division
• Group now focused principally on ECO Animal Health, its global
veterinary pharmaceutical products business
• Turnover on continuing operations £18.3 million (2005: £20.3million)
• Profit before interest, tax, depreciation, amortisation and
impairments was £5.8 million (2006: £3.4 million) and includes the
contribution from discontinued activities and the profit on disposal
of Agil
• Aivlosin(R) sales over 30 per cent ahead of same period last year
• Total dividend raised to 7.15 pence (net) per share (2006: 7.0 pence)
• Collaborative research with Cambridge University at its Department of
Pathology, suggests that Aivlosin(R) may have a far wider reach than
was previously thought
Peter Lawrence, Executive Chairman of Lawrence plc, commented:
'We have transformed the Company over the last four years through the disposal
of our non-core activities and I am confident that ECO, our key business, is
evolving to become a truly major force in the animal health industry.'
Contacts:
Lawrence plc
Peter Lawrence 020 8336 6190
Spiro Financial
Anthony Spiro 020 8336 6196
Nominated Adviser & Broker
Charles Stanley Securities
Philip Davies / Russell Cook 020 7149 6000
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. We achieve our financial goals through the
careful and responsible application of science to generate value for our
shareholders.
CHAIRMAN'S STATEMENT
The year to 31 March 2007 saw the near completion of our strategy to dispose of
non-core businesses, which means that well over 90 per cent of Lawrence's sales
are now attributable to our ECO animal health operation. In view of this,
authorisation will be sought at the Annual General Meeting to change the name of
the Company to ECO Animal Health Group plc.
Group turnover reached a satisfactory £18.3 million. Comparison with the
previous year's figure of £20.3 million is distorted by the sale, in November
2006, of our Agil natural animal feed additive business, as its contribution is
only included for eight months in the year under review. Agil has a seasonal
bias towards the winter months and therefore its disposal further skews
comparison between the year just ended and the previous twelve months. In
addition, the US dollar weakened by 8.5 per cent against sterling during the
financial year and as the majority of sales are invoiced in dollars, this had a
negative translational impact on our results.
Profit before interest, tax, depreciation, amortisation and impairment for the
year to 31 March 2007 was £5.8 million (2006: £3.4 million) and includes
discontinued activities and the profit on the Agil disposal. Amortisation rose
during the year from £2.2 million to £2.6 million reflecting the high level of
investment in new drug registrations. The amortisation figure reflects the
Company's investment in the future of the Eco business. Amortisation is a
non-cash item and has no effect on our underlying trading performance.
Profit before tax for the year ended 31 March 2007 was £2.4 million, which
included discontinued activities and the profit on the Agil disposal (2006: loss
£66,741), while the earnings per share were 5.77p (2006: loss 0.135p).
ECO has successfully obtained in excess of 600 marketing authorisations (also
known as drug registrations), in over 70 countries. Marketing authorisations are
a pre requisite in every country before sales can begin. The regulatory
authorities granting these authorisations have become increasingly stringent in
order to ensure the safety of the animals treated and also that of the consumers
and the environment. These ever-rising standards have inevitably led to longer
development lead times and increased costs in obtaining registrations.
Within this very tight global regulatory framework, we have invested some £20
million since 1994 applying for and obtaining marketing authorisations. In
addition, applications for approximately 100 further approvals have been
submitted or trial work is being undertaken. This is a huge achievement for a
company the size of Lawrence, which has to date funded all the work from its own
resources. At a recent animal health conference, a speaker suggested that the
cost of achieving marketing approval for a new drug today is now approaching
£100 million and the process can take up to 15 years. Our total investment in
intangible assets (drug registrations) could represent exceptional value, which
we believe is not reflected in the stock market capitalisation of the Company.
On 27 November 2006 we sold the business and assets of the Agil division to
Kiotech International plc for a total consideration of up to £5.5 million.
Lawrence received a cash payment of £4,695,000 and 8,333,334 new ordinary
Kiotech shares. A further payment of up to £555,000 is due to Lawrence by May
2008.
To enable management to accelerate further and expand the Company's veterinary
drug development programmes we have today announced a placing of 2,718,500 new
ordinary shares with a number of institutional and other investors to raise,
subject to shareholder approval at an Extraordinary General Meeting to be held
on 14 August 2007, £5.44 million before expenses. Details of the EGM are set out
in a circular, which has been sent to shareholders. The effect of this placing
will be to bring forward our anticipated profit growth.
Over the past few years we have successfully implemented a strategy to sell our
mature businesses to focus on animal health, which we are confident will deliver
a far superior long-term performance. Mature businesses tend to be more cash
generative because they require less investment than fast growing operations. We
believe it is right to forego this short-term cash benefit for the longer-term
attractions of the animal health industry. The Board considers it is now
appropriate to rebase the dividend so that the Company's cash resources are used
to maximum effect in building long-term value for shareholders. We therefore
recommend a final dividend of 5.45 pence (net) per share, the same as for the
equivalent period last year, making a total for the year of 7.15 pence (net) per
share (2006: total dividend 7.0 pence). Shareholder approval will be sought at
the Annual General Meeting on 20 September 2007 to pay the final dividend on 5
November 2007 to shareholders on the register on 19 October 2007. In future
years the Board's policy will be to grow the dividend in line with earnings.
ECO Group
Our core animal health business continued to make good progress with sales in US
dollars some five per cent ahead of the previous year. Aivlosin(R), our patented
macrolide antibiotic, increased its global revenues by almost 33 per cent
compared with the previous year. This significant advance demonstrates the
growing acceptance of Aivlosin(R), which now contributes close to half of total
ECO sales, as a premium position drug. Aivlosin(R) sales in Europe were ahead by
70 per cent year on year albeit from a low base, while sales outside Europe and
the USA (where registration is not expected for another couple of years) were up
by one quarter over the same period.
Although sales of Aivlosin(R) in Europe advanced, the rate of progress was below
our expectations. Under the very strict EU rules, a higher than anticipated dose
rate was approved for the treatment of swine enteric diseases; this has
treatment cost implications. However the higher dose rate results in a faster
return to health for the animal and virtually no impact on productivity, thereby
justifying its premium pricing. We are confident that, with the provision of
additional data, we will be able to support the use of Aivlosin(R) at a lower
and even more cost-effective dose rate. This will provide our European
distributors, principally Schering Plough, with a product capable of securing a
significant market share. It is encouraging that sales in several EU countries
have been good, although late launches in some, resulting from delays in
agreeing labelling requirements, have meant that only a few weeks sales are
included in these results.
We are delighted that Aivlosin(R), which was a new molecule in Europe when we
introduced it in 2004, has been approved for use in pigs and we shall continue
to work closely with Schering Plough and our other European distributors, to
gain higher sales and profits in line with our targets.
An application for the use of Aivlosin(R) for treating mycoplasmosis in poultry
has been submitted to the European Agency for the Evaluation of Medicinal
Products (EMEA) and it is hoped that marketing authorisations will be gained
before the end of 2007. Sales should commence in individual EU member countries
some six months after the approval of local labelling requirements. This
approval should allow non-EU poultry producers in countries where Aivlosin is
already approved, to export their products to the EU. Only drugs licensed within
the EU can be used outside the EU for production animals destined for the
European market. We expect a commensurate rise in sales in those exporting
countries to reflect this. Additional important new Aivlosin(R) approvals are
expected before the financial year-end in Australia, India and Japan, where
submissions have already been made. In Europe, further submissions to the EMEA
will be made shortly for other presentations and dosage levels of Aivlosin(R).
Sales of Ecomectin(R), our antiparasitic treatment for all grazing animals, were
in aggregate some ten per cent ahead of the previous year in markets outside the
USA. Sales in the USA were significantly lower, principally as a result of our
distributor, Schering Plough, withdrawing from the market segment. As the USA is
a significant market for Ecomectin(R), the disappointing performance in that
country resulted in total Ecomectin(R) sales falling below the level of the
previous year. Further new Ecomectin(R) marketing authorisations are expected in
Europe and Japan before the end of 2007.
Our success over the years in obtaining drug approvals is attributable to the
quality, knowledge and experience of our product development and registration
department. Within our traditional drug markets for production animals our team
has identified several immediate new opportunities, including the pet medication
sector and also one for Aivlosin(R) in swine.
Whilst sales of these new products will build over a period of years, we expect
that the margins attaching to them will be very attractive. In addition, in
order to complete the work in progress in our production animal drugs programme,
we estimate a further £8.3 million will be spent over the next three years.
These new registrations, together with our on-going work with the Center for
Veterinary Medicine in America, should complete our current development and
registration programme and as a consequence result in a progressive reduction in
our cash spend.
In my Interim Statement of November 2006 I referred to a collaborative research
agreement with Cambridge University's Department of Pathology to investigate new
indications for Aivlosin(R). The results suggest that Aivlosin(R) may have a far
wider reach than was previously thought and be suitable for treating additional
diseases in pigs and poultry. Subsequent related studies by Iowa State
University have indicated significant results.
Our joint venture company in China continues to make progress, with production
now growing apace and several new marketing authorisations have been obtained.
In April 2007, after the year-end, we increased our shareholding and now have
control of this company; as a result we expect to enjoy faster growth in this
very large and fast growing market. In Japan, we have launched Ecopharma.com, an
innovative web based sales and marketing platform for our medications, which
gives customers direct access to this important market.
People
We currently employ close to 70 people in our 16 offices around the world, their
hard work and dedication to growing our Company is never underestimated. They
underpin the development of the Company and are committed to generating greater
value for both our shareholders and themselves, through our share option
incentive programme.
Outlook
The year has commenced in line with our expectations. We have transformed the
Company over the last four years through the disposal of our non-core activities
and I am confident that ECO, now our key business, is evolving to become a truly
major force in the animal health industry.
Peter A Lawrence
Executive Chairman 21 July 2007
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 March 2007
Notes 2007 2006
£ £
As Restated
TURNOVER
Continuing operations 14,702,667 20,332,832
Discontinued operations 3,593,165 -
18,295,832 20,332,752
Cost of sales (12,367,047) (13,752,749)
GROSS PROFIT 5,928,785 6,580,003
Administrative expense (6,459,584) (6,051,847)
Other operating income 432,275 401,275
OPERATING LOSS / PROFIT 2
Continuing operations (593,674) 929,431
Discontinued operations 495,150 -
(98,524) 929,431
Profit on sale of a division 2,895,875 -
Amounts written off investments (40,449) (713,294)
PROFIT ON ORDINARY ACTIVITIES BEFORE 2,756,902 216,137
INTEREST
Other interest receivable and similar 89,667 64,930
income
Interest payable and similar charges (476,624) (347,808)
PROFIT / (LOSS) ON ORDINARY ACTIVITIES 2,369,945 (66,741)
BEFORE TAXATION
Tax on profit/(loss) on ordinary (571,286) 24,859
activities
PROFIT / (LOSS) ON ORDINARY ACTIVITIES 1,798,659 (41,882)
AFTER TAXATION
EARNINGS PER SHARE 4 2007 2006
Basic Diluted Basic Diluted
Continuing operations (3.27p) (3.26p) (0.135p) (0.134p)
Discontinued activities 9.04p 8.99p - -
Total 5.77p 5.73p (0.135p) (0.134p)
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year Ended 31 March 2007
2007 2006
As restated
£ £
PROFIT / (LOSS) FOR THE FINANCIAL YEAR 1,798,659 (41,882)
Revaluation reserve - 428,532
Actuarial gain/ (loss) on pension scheme 173,500 (16,000)
Currency translation differences on foreign currency net 271,264 10,467
investments
TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE YEAR 2,243,423 381,117
Prior year adjustment (218,389) 1,098,982
TOTAL RECOGNISED GAINS AND LOSSES SINCE LAST FINANCIAL 2,025,034 1,480,099
STATEMENTS
BALANCE SHEET
As at 31 March 2007
Group Company
2007 2006 2007 2006
as restated as restated
Notes £ £ £ £
FIXED ASSETS
Intangible assets 31,119,408 28,799,870 - 18,475
Tangible assets 942,883 1,375,813 665,384 1,039,667
Investments 778,822 569,271 21,462,912 21,212,912
32,841,113 30,744,954 22,128,296 22,271,054
CURRENT ASSETS
Stocks 3,356,703 3,626,256 - 308,828
Debtors 9,442,453 10,626,685 18,149,518 17,419,759
Cash at bank and in hand 935,911 1,299,196 778,005 1,042,555
13,735,067 15,552,137 18,927,523 18,771,142
CREDITORS: AMOUNTS FALLING DUE WITHIN (10,649,255) (8,025,311) (7,496,848) (5,094,918)
ONE YEAR
NET CURRENT ASSETS 3,085,812 7,526,826 11,430,675 13,676,224
TOTAL ASSETS LESS CURRENT LIABILITIES 35,926,925 38,271,780 33,558,971 35,947,278
CREDITORS: AMOUNTS FALLING DUE AFTER (630,098) (3,082,497) (630,098) (3,082,497)
MORE THAN ONE YEAR
Provisions for liabilities (110,500) (338,000) (110,500) (338,000)
35,186,327 34,851,283 32,818,373 32,526,781
CAPITAL AND RESERVES
Called up share capital 1,559,011 1,556,011 1,559,011 1,556,011
Share premium account 21,367,211 21,271,961 21,367,211 21,271,961
Revaluation reserve 256,237 428,532 256,237 428,532
Other reserves 548,231 324,218 548,231 324,218
Profit and loss account 11,453,162 11,268,086 9,087,683 8,946,059
EQUITY SHAREHOLDERS' FUNDS 5 35,183,852 34,848,808 32,818,373 32,526,781
Minority interest - equity 2,475 2,475 - -
35,186,327 34,851,283 32,818,373 32,526,781
The financial statements were approved by the Board of Directors on 20 July
2007.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2007
2007 2006
Notes £ £ £ £
NET CASH INFLOW FROM OPERATING 6 5,650,044 2,968,979
ACTIVITIES
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Interest received 89,667 64,930
Interest paid (476,624) (347,808)
NET CASH (OUTFLOW)/INFLOW FROM RETURNS (386,957) (282,878)
ON INVESTMENTS AND SERVICING OF FINANCE
TAXATION (51,210) 27,306
CAPITAL EXPENDITURE
Payments to acquire intangible assets (4,969,912) (4,188,184)
Payments to acquire tangible assets (56,582) (188,092)
NET CASH OUTFLOW FROM CAPITAL (5,026,494) (4,376,276)
EXPENDITURE
Sale of division 3,031,786 --
NET CASH INFLOW FOR ACQUISITIONS AND 3,031,786 -
DISPOSALS
EQUITY DIVIDEND PAID (2,177,454) (1,982,987)
NET CASH INFLOW/(OUTFLOW) BEFORE 1,039,715 (3,645,856)
MANAGEMENT OF LIQUID RESOURCES AND
FINANCING
FINANCING
Issue of ordinary share capital 98,250 243,199
(Decrease)/increase in borrowing (2,452,398) 1,035,377
NET CASH (OUTFLOW)/INFLOW FROM (2,354,148) 1,278,576
FINANCING
(Decrease)/increase in cash 7 (1,314,433) (2,367,280)
NOTES
1. COST OF SALES AND NET OPERATING EXPENSES
2007 2006
Continuing Discontinued Total Continuing Discontinued Total
£ £ £ £ £ £
Cost of sales 9,889,482 2,477,565 12,367,047 13,752,749 - 13,752,749
Administrative 5,839,134 620,450 6,459,584 6,051,847 - 6,051,847
expenses
Other operating (432,275) - (432,275) (401,275) - (401,275)
income
15,296,341 3,098,015 18,394,356 19,403,321 - 19,403,321
2. OPERATING (LOSS)/PROFIT
2007 2006
£ £
Operating (loss)/profit is stated after changing:
Depreciation of intangible assets 2,634,193 2,206,358
Depreciation of tangible assets 116,892 121,745
Research and development 15,781 70,093
Operating lease rentals 100,611 179,372
Auditors' remuneration (company £20,575; 2006: £28,729) 45,000 41,000
Remuneration of auditors non-audit work 11,757 3,000
and after crediting:
Profit on foreign exchange transactions - 10,467
3. DIVIDENDS
2007 2006
£ £
Final dividend for the period ended 31 March 2005 of 5p per ordinary share - 1,547,997
Interim dividend for the period ended 31 March 2006 of 1.55p per ordinary - 482,364
share
Under provision for the period ended 31 March 2005 - 57,294
Final dividend for the period ended 31 March 2006 of 5.45p per ordinary share 530,064 -
Interim dividend for the period ended 31 March 2007 of 1.7p per ordinary share 1,697,687 -
2,227,751 2,087,655
4. EARNINGS PER SHARE
Basic earnings per share is calculated upon the result of the continuing
activities for the financial year shown in the profit and loss account divided
by the weighted average number of ordinary shares in issue during the year.
Diluted earnings per share takes into account the dilutive effect of share
options.
2007 2006
Number Earnings Number Earning
Earnings of shares per share Earnings of shares per share
£'000 '000 (pence) £'000 '000 (pence)
Basic (1,021) 31,202 (3.27) (42) 31,042 (0.135)
Dilutive effect of share 152 0.01 251 0.001
options
Diluted (1,021) 31,354 (3.26) (42) 31,293 (0.134)
The earnings per share relating to discontinued activities is calculated after
adjustment to include the profit on the sale of a division less applicable
corporation tax.
The total earnings per share is presented combining continuing operations and
discontinued activities to assist shareholders in understanding the overall
performance of the Group's business.
5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Group
2007 2006
£ £
Profit/(Loss) for the financial year 1,798,659 (41,882)
Dividends (2,227,751) -
(429,092) (41,882)
Other recognised gains and losses 444,764 438,999
Proceeds from issue of shares 98,250 -
Cost of share options granted 224,013 103,374
Write back of depreciation (2,891) -
Net addition to shareholders' funds 335,044 500,491
Opening shareholders' funds 34,848,808 34,348,317
Closing shareholders' funds 35,183,852 34,848,808
6. RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
2007 2006
£ £
Operating (loss)/profit (98,524) 929,431
Depreciation of tangible assets 116,892 121,744
Amortisation of intangible assets 2,634,193 2,206,358
Actuarial pension losses (54,000) (16,000)
Cost of granting share options 224,014 103,374
Decrease/(increase) in stocks 269,553 (251,419)
Decrease/(increase) in debtors 1,294,699 (400,800)
Increase/(decrease) in creditors within one year 1,219,453 (61,709)
Net effect of foreign exchange differences 271,264 -
(Decrease)/increase in pension provision (227,500) 338,000
Net cash inflow from operating activities 5,650,044 2,968,979
7. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2007 2006
£ £
Decrease in cash in the year (1,314,433) (2,367,280)
Cash outflow/(inflow) from decrease/(increase) in debt 2,452,396 (1,035,377)
Net effect of foreign exchange differences - 10,467
Movement in net debt in the year 1,137,963 (3,392,190)
Opening net debt (4,905,952) (1,513,762)
Closing net debt (3,767,989) (4,905,952)
8. 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 2007 and the summarised profit and loss
account, summarised cash flow statement and summarised statement of total
recognised gains and losses and associated notes for the year then ended have
been extracted from the Group's 2007 audited statutory financial statements.
Copies of the financial statements for the Group for the year ended 31 March
2007 will be available from the Company's registered office and will be posted
to shareholders in due course.
This information is provided by RNS
The company news service from the London Stock Exchange
Wednesday, 22nd January 2025
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