TIDMANCR
RNS Number : 5981N
Animalcare Group PLC
26 September 2023
Animalcare Group plc
("the Company" or "Group")
Interim Results for the six months ended 30 June 2023
26 September 2023. Animalcare Group plc (AIM: ANCR), the
international animal health business, announces its unaudited
interim results for the six months ended 30 June 2023.
Animalcare is pleased to report strong gross margins and
improved cash generation in a period that saw growth in veterinary
markets return to more pre-Covid growth rates. Over the first half,
the Group continued to invest in drivers of future success and made
progress through focus on growth opportunities, notably the Orthros
pipeline, STEM and Identicare as well as on potential M&A.
Financial highlights
-- Revenues GBP36.7m (H1 2022: GBP38.3m), a 4.1% decrease at AER
(6.8% down at CER); strong contributions from new products such as
Plaqtiv+ offset by a return to pre-pandemic levels of demand growth
and sales phasing due in part to distributor de-stocking since the
FY22 year end
-- Underlying* EBITDA margin at 19.5%, reflecting a 1.5% gross
margin expansion to 57.5% combined with disciplined SG&A
investment, partially mitigating the decrease in revenue.
Underlying EBITDA of GBP7.2m (H1 2022: GBP8.0m)
-- Underlying basic EPS decreased by 17.7% to 6.5 pence (H1
2022: 7.9 pence) predominantly driven by movement in underlying
EBITDA
-- Improved cash conversion to 52.5% drove a reduction in net
debt to GBP3.8m (FY22: GBP5.4m), materially below the Group's
target leverage ratio, maintaining the strong financial platform to
invest in growth opportunities
-- Statutory profit before tax incorporating non-underlying
items was GBP2.4m (H1 2022: GBP3.4m), with reported basic EPS at
2.7 pence (H1 2022: 4.0 pence)
-- Board declares interim dividend of 2.0 pence per share, in line with prior year period
* The Group presents a number of non-GAAP Alternative
Performance Measures (APMs) which exclude non-underlying items as
set out in note 3. EBITDA is defined as underlying earnings before
interest, tax, depreciation and amortisation.
Strategic and Operational highlights
-- Orthros Medical pre-clinical studies on track and showing
positive results for the VHH antibody technology. Potential third
candidate identified under research collaboration
-- Identicare continues to deliver strong revenue and profit
growth, benefiting from repositioning
-- Plaqtiv+ dental range from STEM joint venture performing
well. Extensions to range and new products based on patented
DispersinB technology expected to be launched from 2024. The Group
continues to invest in sales and marketing activities to drive
Daxocox uptake and is gaining prescribers in our direct sales
markets
-- The Group is assessing the opportunities generated by Kane
Biotech's decision to review its majority equity interest in the
STEM joint venture with Animalcare
-- Internal resources further realigned to drive sales and
marketing excellence and increase focus on M&A
Outlook
We are pleased to have delivered improved gross margins and
increased cash conversion for the first half while recognising the
revenue effects of a market that has returned to a more normalised
level of growth. We anticipate an improvement in our second half
performance versus FY 2022 and with it, a return to revenue growth
for the full year and EBITDA to be also in line with market
expectations.
Identifying appropriate business development opportunities
remains a priority for Animalcare and the Group continues to
explore sustainable value-creating opportunities through
acquisitions, partnerships and pipeline projects. With low levels
of net debt, significantly below our target leverage ratio of one
to two times underlying EBITDA, this creates material headroom to
invest in these opportunities.
Animalcare's Chief Executive Officer, Jenny Winter, commented:
"Animalcare has established itself as a profitable, cash generative
business with strong margins and low levels of debt. That is
further underlined by our financial performance in the first half
of 2023 with positive progress on gross margins and cash conversion
despite a return to more pre-pandemic levels of demand growth
across our markets. Looking ahead to the full year, we anticipate a
return to revenue growth and EBITDA to be also in line with market
expectations.
"Notably, the Group continues to make progress against our
stated objectives, the licensing and research collaboration
agreement with Orthros Medical generating positive pre-clinical
results and identifying new potential candidates in the promising
field of VHH antibodies. Additionally, Identicare delivered strong
revenue and profit growth in the period as the business continues
its transition towards a scalable recurring-revenue subscription
platform. And alongside our development and commercialisation of
products from the STEM joint venture, we are exploring
opportunities generated by Kane Biotech's decision to review its
majority equity interest in STEM.
"The strong financial platform we've built enables the Group to
invest in organic and inorganic drivers of growth, including
M&A where we are seeing increased levels of activity.
Animalcare remains firmly in the hunt for value-creating
opportunities in our key areas of interest.
"Over the long-term, we remain confident in the prospects of the
Group and the attractive fundamentals of the animal health
sector."
Analyst briefing/webcast
A briefing for analysts will be held at 10:30 BST on Tuesday 26
September 2023 via Zoom webcast. Analysts wishing to join should
use the following link to register and receive access details.
https://stifel.zoom.us/webinar/register/WN_EiQJ0GgdTiCHL0vG8o-YSA
A copy of the analyst presentation will be made available on the
Group website shortly after the webcast.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
Enquiries
Animalcare Group plc +44 (0)1904 487 687
Jenny Winter, Chief Executive
Officer
Chris Brewster, Chief Financial communications@animalcaregroup.com
Officer
Media/investor relations
Stifel Nicolaus Europe Limited
(Nominated Adviser & Joint
Broker)
Ben Maddison
Nick Adams
Nicholas Harland
Francis North +44 (0)20 7710 7600
Panmure Gordon
(Joint Broker)
Corporate Finance
Freddy Crossley/Emma Earl
Corporate Broking
Rupert Dearden +44 (0)20 7886 2500
About Animalcare
Animalcare Group plc is a UK AIM-listed international veterinary
sales and marketing organisation. Animalcare operates in seven
countries and exports to approximately 40 countries in Europe and
worldwide. The Group is focused on bringing new and innovative
products to market through its own development pipeline,
partnerships and via acquisition. For more information about
Animalcare, please visit www.animalcaregroup.com
Chairman's statement
I'm pleased to report that Animalcare delivered improved gross
margins and increased cash conversion for the first half as the
Group maintained a clear focus on its strategic objectives and
opportunities in pursuit of future growth.
Against a tough comparator period, total revenues declined by
4.1% at AER to GBP36.7m due to some easing in the rate of
veterinary market growth combined with the effect of distributor
de-stocking since the end of 2022.
The Group's ongoing focus on larger selling, more profitable
brands in our portfolio, together with a stable sales mix and
carefully judged pricing designed to mitigate input cost inflation,
are key factors in a 1.5% improvement in gross margins.
Our commitment to strengthen our financial platform over recent
years puts us materially below our target leverage ratio of one to
two times underlying EBITDA. Thanks to an improved rate of cash
conversion we have further reduced our net debt over the period to
GBP3.8m, down from GBP5.4m at the end of 2022. Importantly, this
gives us the investment flexibility and firepower to seek out
external value-creating opportunities that can grow our business
through M&A activity, licensing and partnerships. Work to
identify appropriate business development opportunities remains a
priority for the Company.
During the first half, Animalcare also continued to demonstrate
focus and resolve in capitalising on existing options for
growth.
For instance, Identicare, our wholly-owned pet reunification
business, built further sales momentum in the first half with
revenues up 28% as it benefited from strategic repositioning under
specialist leadership. And our pipeline licensing agreement with
Orthros Medical, which centres on two pre-clinical VHH antibody
candidates, is progressing well while a further potential licence
candidate has been identified under the research collaboration
element of the deal.
The Plaqtiv+ dental range continues to enjoy an enthusiastic
reception from customers following its launch in the first half of
2022. We plan additions to the Plaqtiv+ range and new products
based on patented technology from our STEM Animal Health Inc. joint
venture. Kane Biotech, which is majority owner of the joint
venture, has announced a review of its equity interest in the
business. Subsequently, we are exploring the opportunities that
this presents for the Group as we regard the STEM partnership as a
valuable contributor to the Group's current and future product
mix.
Our people play a critical role in the success of this Company.
Investing in leadership and skills has long been a priority,
therefore, and this is reflected in our SG&A spend profile.
With this in mind we have further aligned our internal resources to
the delivery of our key strategic objectives, most notably sales
and marketing excellence and M&A-related activity.
I'd like to use this opportunity to thank the Animalcare team
for delivering a positive first half performance despite a
normalisation in demand and other trading headwinds. Long-term, we
believe the dynamics driving the ongoing growth in the animal
health market remain attractive and the Group is well placed to
take advantage of these fundamentals. Consequently, the Board has
declared an interim dividend of 2.0 pence a share, in line with
2022.
Jan Boone, Chairman
Business and Financial review
Overview of underlying financial results
We are pleased with our first half trading performance ;
positive progress was achieved on gross margins and cash conversion
while recognising a normalisation in the rates of demand growth
across our markets due to the changing macro-economic environment
and country specific dynamics. The Group's strong balance sheet has
been maintained and with it our ability to continue pursuing
attractive external opportunities and invest in long-term drivers
of growth.
A summary of the underlying financial results for the first six
months of 2023, which the Directors believe offers a clearer
picture of business performance, is shown below.
Six months to 30 June 2023 2022 Change at
AER
GBP'000 GBP'000 %
----------------------------- -------- -------- ----------
Revenue 36,712 38,286 (4.1%)
Gross Profit 21,107 21,430 (1.8%)
Gross Margin % 57.5% 56.0% 1.5%
Underlying Operating Profit 5,479 6,502 (15.7%)
Underlying EBITDA 7,157 8,026 (10.8%)
Underlying EBITDA margin % 19.5% 21.0% (1.5%)
----------------------------- -------- -------- ----------
Basic Underlying EPS (p) 6.5p 7.9p (17.7%)
----------------------------- -------- -------- ----------
Revenues for the period totalled GBP36.7m, a decrease of 4.1%
(6.8% at CER) against a strong prior year comparator in which sales
were broadly in line with the exceptional first half of 2021. We
continued to see a return to pre-Covid levels of demand growth in
European veterinary markets while sales were also impacted by
distributor de-stocking in certain territories across the firm's
portfolio, as well as higher purchases in the fourth quarter of FY
2022 ahead of expected price increases and the effect of
promotional activities. Based on external data from distributors
and veterinary clinics, our product sales from distributors to our
end customers increased vs H1 2022, affirming the healthy
fundamentals of the animal health market in Europe.
Revenue performance by product category is shown in the table
below:
Six months to 30 June 2023 2022 Change at
AER
GBP'000 GBP'000 %
----------------------- -------- -------- ----------
Companion Animals 25,957 26,634 (2.5%)
Production Animals 7,737 8,814 (12.2%)
Equine & other 3,018 2,838 6.3%
----------------------- -------- -------- ----------
Total 36,712 38,286 (4.1%)
----------------------- -------- -------- ----------
Companion Animals revenue, which continues to represent around
70% of Group turnover, declined by 2.5% to GBP26.0m impacted by a
return to more normal levels of demand growth across Europe and
wholesaler de-stocking in certain territories as noted above. In
part, this was offset by strong sales growth from our dental
portfolio including Plaqtiv+ which was launched during Q2 2022.
Identicare continues the strong revenue and profit momentum from FY
2022, with sales increasing in the period by 28% to around GBP1.5m,
which we expect to accelerate in the second half, benefiting from
strategic repositioning of the business towards a scalable, high
margin, recurring-revenue subscription platform. The Group
continues to invest in sales and marketing activities to drive
Daxocox uptake and is gaining prescribers in our direct sales
markets. Our largest selling brands in the Companion Animals
product range remained broadly flat versus the prior period.
Production Animal revenues, which are chiefly generated by our
Southern European and International Partners operations, declined
by 12.2% versus the prior period to GBP7.7m, predominantly driven
by phasing of orders and generic competition.
Equine and other sales increased by 6.3% to GBP3.0m, benefiting
from bringing Danilon, one of our largest brands, back into the UK
business in the second half of FY 2022. We expect Danilon growth to
accelerate during the second half due to stock in channel placed by
our previous distributor at the end of FY 2022.
Underlying EBITDA declined by 10.8% to GBP7.2m, with EBITDA
margins decreasing to 19.5% (H1 2022: 21.0%). The continuing
commercial focus on our larger, higher margin brands and services,
together with a stable sales mix and pricing actions to help offset
supply cost inflation, are the key drivers of the 1.5% improvement
in our gross margins to 57.5%. The Group continues to be affected
by inventory and, to a lesser extent, logistic price increases, and
we will continue to take mitigating pricing actions that safeguard
our competitive position.
Overheads increased during the first half to GBP13.9m (H1 2022:
GBP13.4m), representing 37.9% of revenue (H1 2022: 35.0%; FY 2022:
38.4%). People costs remain the largest component of our SG&A
expenses which increased by GBP0.3m in the period as we continue to
invest in building the skills and behaviours that will drive our
business forward. Shortly after the period end, we further aligned
internal resources to accelerate delivery of our key strategic
objectives, primarily sales and marketing excellence and the
identification of potential M&A opportunities and the building
of commercial alliances. The balance of the increase in overheads
primarily relate to regulatory, quality, professional fees and IT
licencing expenses.
Stepping up investment in our R&D pipeline to deliver
greater novelty and sustainable growth is a key pillar of our
strategy. Our efforts remain centred around the licensing and
R&D collaboration agreements with Orthros Medical, initially
focusing on canine osteoarthritis. The early-stage research
activities of the two candidates under the licensing deal are on
track, with the data continuing to show positive results for the
VHH antibody technology. In addition, the research collaboration
has identified an exciting new potential licence candidate that we
are further exploring. The lower R&D expenses in the first half
are reflective of the timing of project spend and not a reduction
in our expected R&D spend for the full year.
Underlying basic EPS decreased by 17.7% to 6.5 pence (H1 2022:
7.9 pence) driven by the reduction in underlying EBITDA as noted
above, a GBP0.2m increase in amortisation and depreciation costs
and a decrease in the contribution from the STEM joint venture due
to normalisation of licence income recognition. The underlying
effective tax rate was 22.7%, broadly comparable to the prior
period. As anticipated, this was a return to more normalised levels
vs the FY 2022 rate of 16.4% which benefited from the recognition
of tax losses in the UK.
Reported results and non-underlying items
Reported Group profit after tax for the period after accounting
for the non-underlying items detailed below was GBP1.6m (2022:
GBP2.4m), with reported basic earnings per share at 2.7 pence (H1
2022: 4.0 pence).
Non-underlying items totalling GBP2.7m (H1 2022: GBP2.7m)
relating to profit before tax have been incurred in the period, as
set out in note 3. These principally comprise:
-- Amortisation and impairment of acquisition-related
intangibles of GBP2.1m (H1 2022: GBP2.4m). As historically, the
charge primarily comprises amortisation in relation to the reverse
acquisition of Ecuphar NV and previous acquisitions made by Ecuphar
NV.
-- GBP0.3m (H1 2022: GBPnil) charge in respect of the Identicare
share-based payments arrangement. The fair value of this long-term
incentive plan is connected to the future value of Identicare and
not trading, hence has been treated as non-underlying since
inception on 1 January 2022.
Dividend
The Board is pleased to declare an interim dividend of 2.0 pence
per share, in line with the prior period. The interim dividend will
be paid on 17 November 2023 to shareholders whose names are on the
Register of Members at close of business on 20 October 2023. The
ordinary shares will become ex-dividend on 19 October 2023.
Cash flow, net debt and borrowing facilities
We entered FY23 in a strong financial position with the net debt
to underlying EBITDA leverage ratio well below our stated target
range of one to two times. Due to improved cash conversion versus
prior period, as set out in the table below, we have further
reduced net debt, which now principally encompasses IFRS16 lease
liabilities of GBP3.1m, to GBP3.8m as of 30 June 2023 (31 December
2022: GBP5.4m). This equips Animalcare with the financial strength
and flexibility to continue the pursuit of value-creating
opportunities through M&A, partnerships and pipeline deals.
Six months Six months to
to 30 June 2022
30 June 2023 GBP'000
GBP'000
------------------------------------------ -------------- --------------
Underlying EBITDA 7,157 8,026
Net cash flow from operations 3,482 1,428
Non-underlying items 277 382
Underlying net cash flow from operations 3,759 1,810
Underlying cash conversion % 52.5% 22.6%
------------------------------------------ -------------- --------------
Net cash flow generated by our operations increased to GBP3.5m
(H1 2022: GBP1.4m). Net working capital increased by GBP3.4m during
the period (H1 2022: GBP5.6m increase), chiefly attributable to
GBP1.0m higher receivables, largely as a result of the geographic
mix of revenue towards the period end, and a reduction in payables
of GBP3.6m principally relating to the inventory build during Q4
2022, which normalised during the first half leading to an
inventory decrease of GBP1.2m. Tax cash outflows at GBP0.6m were
broadly comparable to the prior period.
We are targeting a year-on-year improvement in cash conversion
versus the 78% delivered in FY 2022, the achievement of which will
be largely dependent on trading patterns during the second half and
any decisions the Group may take in connection with strategic stock
cover to support surety of supply going into 2024.
Net debt decreased by GBP1.6m to GBP3.8m over the period largely
driven by the improved cash conversion noted above.
GBP'000
----------------------------------------- --------
Net debt at 1 January 2023 (5,402)
Net cash flow from operations 3,482
Net capital expenditure (1,304)
Net finance expenses (897)
Foreign exchange on cash and borrowings 416
Movement in IFRS16 lease liabilities (76)
----------------------------------------- --------
Net debt at 30 June 2022 (3,781)
----------------------------------------- --------
Net capital expenditure of GBP1.3m (H1 2022: GBP1.4m) largely
comprises investment in our product development pipeline of GBP0.5m
and a GBP0.4m milestone payment to STEM in respect of the VOHC
(Veterinary Oral Health Council) accreditation relating to
Plaqtiv+. The balance of expenditure relates chiefly to investments
in our IT systems, including within Identicare.
Current STEM new product development projects include extensions
to the Plaqtiv+ dental range with a focus on cat specific products,
an under-represented area of the dental market, and development of
an otitis rinse using the patented DispersinB anti-biofilm
technology. Development of the newly formulated dental chew has
taken longer than expected and is now forecast to launch during
2024.
Net debt to underlying EBITDA leverage ratio was approximately
0.3 times (H1 2022: 0.6 times), well below the target net debt to
underlying EBITDA range of one to two times, enabling the Group to
pursue external investment opportunities in support of its growth
strategy.
Borrowing facilities and covenants
The Group's financing arrangements consisted of a committed
revolving credit facility of EUR41.5m and a EUR10.0m acquisition
line, the latter of which cannot be utilised to fund our
operations.
The facilities remain subject to the following covenants which
are in operation at all times:
-- Net debt to underlying EBITDA ratio of 3.5 times
-- Underlying EBITDA to interest ratio of minimum 4 times
-- Solvency (total assets less goodwill/total equity less goodwill) greater than 25 %
As at 30 June 2023, and throughout the period, all covenant
requirements were met with significant headroom across all three
measures. As at 30 June 2023, total facilities were GBP44.2m with
headroom on our revolving credit facility, including cash on
balance sheet, of GBP38.8m.
Summary and outlook
We are pleased to have delivered improved gross margins and
increased cash conversion for the first half while recognising the
revenue effects of a market that has returned to a more normalised
level of growth. We anticipate an improvement in our second half
performance versus FY 2022 and with it a return to revenue growth
for the full year and EBITDA to be also in line with market
expectations.
Our balance sheet remains strong and with it our strategic
commitment to invest in attractive external opportunities that are
key long-term drivers of growth.
The Group continues to make progress against strategic
objectives, with focus on developing and building our R&D and
new product pipeline centred around the licensing and R&D
collaboration agreements with Orthros Medical and additions to the
growing Plaqtiv+ range based on patented technology from our STEM
Animal Health Inc. joint venture. In addition, Identicare continues
the positive growth momentum from FY 2022 driven by the
repositioning of the business under specialist leadership.
Looking further ahead, we remain confident in the prospects of
the Group and the attractive fundamentals of the animal health
sector and remain ready to employ our strong financial position to
invest in drivers of growth.
Jenny Winter Chris Brewster
Chief Executive Officer Chief Financial Officer
Condensed consolidated income statement
For the six months ended 30 June
--------------------------------------------------------------------------
Non-Underlying
Non-Underlying (note
Notes Underlying (note 3) Total Underlying 3) Total
2023 2023 2023 2022 2022 2022
---------- -------------- -------- ---------- -------------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 4 36,712 - 36,712 38,286 - 38,286
Cost of sales (15,605) - (15,605) (16,856) - (16,856)
Gross profit 21,107 - 21,107 21,430 - 21,430
---------- -------------- -------- ---------- -------------- --------
Research and
development
expenses (1,099) (304) (1,403) (1,403) (331) (1,734)
Selling and marketing
expenses (6,470) - (6,470) (6,235) - (6,235)
General and
administrative
expenses (8,057) (1,769) (9,826) (7,308) (2,024) (9,332)
Net other operating
income / (expenses) (2) (586) (588) 18 (352) (334)
Operating
profit/(loss) 5,479 (2,659) 2,820 6,502 (2,707) 3,795
---------- -------------- -------- ---------- -------------- --------
Finance expenses (711) - (711) (699) - (699)
Finance income 379 - 379 328 - 328
Finance net result (332) - (332) (371) - (371)
---------- -------------- -------- ---------- -------------- --------
Share of net
(loss)/profit
of joint venture
accounted for using
the equity method (107) - (107) 16 - 16
Profit/(loss)
before tax 5,040 (2,659) 2,381 6,147 (2,707) 3,440
========== ============== ======== ========== ============== ========
Income tax expense (1,145) 370 (775) (1,429) 396 (1,033)
Net profit/(loss)
for the period 3,895 (2,289) 1,606 4,718 (2,311) 2,407
========== ============== ======== ========== ============== ========
Net profit/(loss)
attributable to:
The owners of the
parent 3,895 (2,289) 1,606 4,718 (2,311) 2,407
========== ============== ======== ========== ============== ========
Earnings per share
for profit/(loss)
attributable to
the ordinary equity
holders of the
company:
Basic earnings
per share 5 6.5p 2.7p 7.9p 4.0p
Diluted earnings
per share 5 6.5p 2.6p 7.9p 4.0p
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 note 3.
Condensed consolidated statement of comprehensive income
For the six months
ended 30 June
--------------------
2023 2022
--------- ---------
GBP'000 GBP'000
Net profit / loss for the period 1,606 2,407
Other comprehensive income/(expense)
Exchange differences on translation of foreign
operations * (429) 283
--------- ---------
Other comprehensive income/(expense), net of
tax (429) 283
--------- ---------
Total comprehensive income/(expense) for the
period, net of tax 1,177 2,690
========= =========
Total comprehensive income/(expense) attributable
to:
The owners of the parent 1,177 2,690
========= =========
* May be reclassified subsequently to profit &
loss
Condensed consolidated statement of financial position
30 June 30 June 31 December
2023 2022 2022
-------- -------- -----------
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Goodwill 50,537 50,536 50,853
Intangible assets 22,384 27,777 25,283
Property, plant and equipment 747 945 448
Right-of-use assets 2,989 2,638 2,924
Investments in joint venture 1,158 1,430 1,305
Deferred tax assets 2,389 2,043 3,567
Other financial assets 69 65 70
Other non-current assets - - -
Total non-current assets 80,273 85,434 84,450
-------- -------- -----------
Current assets
Inventories 11,579 12,074 13,474
Trade receivables 13,857 13,812 13,568
Other current assets 1,468 1,430 715
Cash and cash equivalents 6,609 5,136 6,035
Total current assets 33,513 32,452 33,792
-------- -------- -----------
Total assets 113,786 117,886 118,242
-------- -------- -----------
Liabilities
Current liabilities
Lease liabilities (856) (794) (852)
Trade payables (12,265) (11,326) (15,497)
Current tax liabilities (1,018) (1,955) (623)
Accrued charges and contract liabilities (1,339) (1,478) (1,276)
Other current liabilities (3,567) (4,842) (4,027)
Total current liabilities (19,045) (20,395) (22,275)
-------- -------- -----------
Non-current liabilities
Borrowings (8,138) (10,924) (8,426)
Lease liabilities (2,231) (1,904) (2,159)
Deferred tax liabilities (3,516) (4,120) (4,773)
Contract liabilities - - (372)
Provisions (326) (389) (340)
Other non-current liabilities - - (911)
Total non-current liabilities (14,211) (17,337) (16,981)
-------- -------- -----------
Total Liabilities (33,256) (37,732) (39,256)
-------- -------- -----------
Net Assets 80,530 80,154 78,986
======== ======== ===========
Equity
Share capital 12,019 12,019 12,019
Share premium 132,798 132,798 132,798
Reverse acquisition reserve (56,762) (56,762) (56,762)
Accumulated losses (10,004) (10,604) (11,977)
Other reserves 2,479 2,703 2,908
Equity attributable to the owners of
the parent 80,530 80,154 78,986
-------- -------- -----------
Total equity 80,530 80,154 78,986
======== ======== ===========
Condensed consolidated statement of changes in equity
Attributable to the owners of the parents
----------------------------------------------------------------
Reverse
Share Share Accumulated acquisition Other
capital premium losses reserve reserve Total
-------- -------- ----------- ------------ -------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2023 12,019 132,798 (11,977) (56,762) 2,908 78,986
Net profit - - 1,606 - - 1,606
Other comprehensive expense - - - - (429) (429)
-------- -------- ----------- ------------ -------- -------
Total comprehensive income - - 1,606 - (429) 1,177
-------- -------- ----------- ------------ -------- -------
Share based payments - - 367 - - 367
-------- -------- ----------- ------------ -------- -------
At 30 June 2023 12,019 132,798 (10,004) (56,762) 2,479 80,530
-------- -------- ----------- ------------ -------- -------
Attributable to the owners of the parents
----------------------------------------------------------------
Reverse
Share Share Accumulated acquisition Other
capital premium losses reserve reserve Total
-------- -------- ----------- ------------ -------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2022 12,019 132,798 (11,676) (56,762) 2,420 78,799
Net profit - - 2,407 - - 2,407
Other comprehensive income - - - - 283 283
-------- -------- ----------- ------------ -------- -------
Total comprehensive income - - 2,407 - 283 2,690
-------- -------- ----------- ------------ -------- -------
Dividends - - (1,442) - - (1,442)
Share based payments - - 107 - - 107
-------- -------- ----------- ------------ -------- -------
At 30 June 2022 12,019 132,798 (10,604) (56,762) 2,703 80,154
-------- -------- ----------- ------------ -------- -------
Reverse acquisition reserve
Reverse acquisition reserve represents the reserve that has been
created upon the reverse acquisition of Animalcare Group plc.
Other reserve
Other reserve mainly relates to currency translation
differences. These exchange differences arise on the translation of
subsidiaries with a functional currency other than sterling.
Condensed consolidated cash flow statements
For the six months
ended 30 June
--------------------
2023 2022
--------- ---------
GBP'000 GBP'000
Operating activities
Profit before tax 2,381 3,440
Profit before tax 2,381 3,440
--------- ---------
Non-cash and operational adjustments:
Share in net result of joint venture 106 (16)
Depreciation of property, plant and equipment 541 538
Amortisation of intangible assets 3,210 3,291
Impairment of intangible assets - 32
Share-based payment expense 558 135
Gain on disposal of property, plant and equipment - (165)
Non-cash movement in provisions (8) 103
Movement in allowance for bad debt and inventories 339 34
Finance income (235) (82)
Finance expense 654 375
Impact of foreign currencies (88) 58
Other (22) 14
Movements in working capital
Increase in trade receivables (1,003) (6,465)
Decrease/(increase) in inventories 1,212 (1,572)
(Decrease)/increase in payables (3,610) 2,387
Income tax paid (553) (679)
Net cash flow from operating activities 3,482 1,428
--------- ---------
Investing activities
Purchase of property, plant and equipment (225) (373)
Purchase of intangible assets (1,090) (1,209)
Proceeds from the sale of property, plant and equipment
(net) 11 166
Net cash flow used in investing activities (1,304) (1,416)
------- -------
Financing activities
Proceeds from loans and borrowings and convertible debt - 420
Repayment of loans and borrowings (863) -
Repayment IFRS16 lease liability (477) (499)
Interest paid (297) (207)
Other finance expense (123) (87)
Increase in other financial assets - (28)
Net cash flow used in financing activities (1,760) (401)
------- -------
Net decrease in cash and cash equivalents 418 (389)
======= =======
Cash and cash equivalents at beginning of period 6,035 5,633
Exchange rate differences on cash and cash equivalents 156 (108)
Cash and cash equivalents at end of period 6,609 5,136
======= =======
Reconciliation of net cash flow to movement in net debt
Net decrease in cash and cash equivalents in the period 418 (389)
Cash flow from decrease in debt financing 863 (420)
Foreign exchange differences on cash and borrowings 416 (315)
Movement in net debt in the period 1,697 (1,124)
------- -------
Net debt at the start of the period (5,402) (5,329)
Movement in lease liabilities during the period (76) (978)
Net debt at the end of the period (3,781) (7,431)
======= =======
Notes to the consolidated interim report
1 General information
Animalcare Group plc ("the Company") is a public company limited
by shares incorporated in the United Kingdom under the Companies
Act 2006 and is domiciled in the United Kingdom. The address of its
registered office is Moorside, Monks Cross, York, YO32 9LB. The
condensed set of financial statements as at, and for, the six
months ended 30 June 2023 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 latest Annual Report.
2 Basis of preparation and significant accounting policies
Basis of preparation and accounting policies
This interim financial information for each of the six month
periods ended 30 June 2023 and 30 June 2022 has not been audited
and does not constitute statutory accounts as defined in Section
43s of the Companies Act 2006. The comparative information for the
year ended 31 December 2022 does not constitute statutory accounts
however is based on the statutory accounts for that year, on which
the Group's auditors issued an unqualified report and which have
been filed with the Register of Companies.
The consolidated financial statements are presented in thousands
of pound sterling (kGBP or thousands of GBP) and all "currency"
values are rounded to the nearest thousand (GBP000), except when
otherwise indicated.
The Interim Report for the six months ended 30 June 2023 was
approved by the Board of Directors and authorised for issue on 26
September 2023 .
The condensed consolidated interim financial information for the
six months ended 30 June 2023 has been prepared using accounting
policies consistent with those of the Company's annual accounts for
the year ended 31 December 2022 .
Taxes on income in the interim periods are accrued using the
estimated tax rate that would be applicable for the full financial
year.
New standards, interpretations and amendments adopted by the
Group
The following new Standards, Interpretations and Amendments
issued by the IASB and the IFRIC as adopted by the European Union
are effective for the financial period:
- Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2: Disclosure of Accounting Policies
- Amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates
- Amendments to IAS 12 Income Taxes: Deferred Tax related to
Assets and Liabilities arising from a Single Transaction
- Amendments to IAS 12 Income taxes: International Tax Reform -
Pillar Two Model Rules (effective immediately but not yet endorsed
in the EU - disclosures are required for annual periods beginning
on or after 1 January 2023)
The adoption of these new standards and amendments has not led
to major changes in the Group's accounting policies.
New and revised standards not yet adopted
The Group elected not to early adopt the following new
Standards, Interpretations and Amendments, which have been issued
by the IASB and the IFRIC but are not yet effective as of June 30,
2023 , and/or not yet adopted by the European Union as of June 30,
2023 . Standards are not expected to have a material impact on the
entity in the current or future reporting periods and on
foreseeable future transactions.
- Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current and
Non-current Liabilities with Covenants (applicable for annual
periods beginning on or after 1 January 2024, but not yet endorsed
in the EU)
- Amendments to IFRS 16 Leases: Lease Liability in a Sale and
Leaseback (applicable for annual periods beginning on or after 1
January 2024, but not yet endorsed in the EU).
- Amendments to IAS 7 Statement of Cash Flows and IFRS 7
Financial Instruments: Disclosures: Supplier Finance Arrangements
(applicable for annual periods beginning on or after 1 January
2024, but not yet endorsed in the EU)
Going Concern
Banking Facilities and Covenants
At 30 June 2023 , the Group's financing arrangements consisted
of a committed revolving credit facility of EUR41.5m (GBP35.6m) and
a EUR10m (GBP8.6m) acquisition line, the latter cannot be utilised
to fund our operations.
The facilities remain subject to the following covenants which
are in operation at all times:
-- Net debt to underlying EBITDA ratio of 3.5 times
-- Underlying EBITDA to interest ratio of minimum 4 times
-- Solvency (total assets less goodwill/total equity less goodwill) greater than 25%
As at 30 June 2023 , and throughout the period, all covenant
requirements were met with significant headroom across all three
measures. As at 30 June 2023, total facilities were GBP44.2m with
headroom on the revolving credit facility, including cash on
balance sheet, of GBP38.8m.
3 Non-underlying items
For the six
months ended
30 June
----------------
2023 2022
------- -------
GBP'000 GBP'000
Amortisation and impairment of acquisition related
intangibles
Classified within Research and development expenses 304 331
Classified within General and administrative expenses 1,769 2,024
Classified within net other operating expenses 11 32
Total amortisation and impairment of acquisition
related intangibles 2,084 2,387
------- -------
Restructuring costs - 179
Acquisition and integration costs 34 136
Divestments and business disposals 11 (146)
Long term incentive plan 308 -
Other non-underlying items 222 151
Total non-underlying items before taxes 2,659 2,707
------- -------
Tax impact (370) (395)
Total non-underlying items after taxes 2,289 2,312
======= =======
The amortisation and impairment of acquisition-related
intangibles charge totalling GBP2,084k ( 2022 : GBP2,387k) largely
relates to the Esteve acquisition of GBP577k ( 2022 : GBP826k) and
the reverse acquisition of Animalcare Group plc of GBP1,497k (2022:
GBP1,529k).
During 2022 the Group entered into a share-based payments
arrangement in respect of growth shares issued in its subsidiary
Identicare Limited ("Identicare"). The fair value of this long-term
incentive plan is connected to the future value of Identicare and
not trading, hence has been treated as non-underlying since
inception on 1 January 2022. The Group recognised a charge in
respect of non-underlying share-based payments of GBP308k.
4 Segment information
The Pharmaceutical segment is active in the development and
marketing of innovative pharmaceutical products that provide
significant benefits to animal health.
The measurement principles used by the Group in preparing this
segment reporting are also the basis for segment performance
assessment. The Board of Directors of the Group acts as the Chief
Operating Decision Maker. As a performance indicator, the Chief
Operating Decision Maker controls performance by the Group's
revenue, gross margin, Underlying EBITDA and EBITDA. EBITDA is
defined by the Group as net profit plus finance expenses, less
financial income, plus income taxes and deferred taxes, plus
depreciation, amortisation and impairment and is an alternative
performance measure. Underlying EBITDA equals EBITDA plus
non-underlying items and is an alternative performance measure.
EBITDA and underlying EBITDA are reconciled to statutory measures
below.
The following table summarises the segment reporting from
continuing operations for 2023 and 2022 . As management's
controlling instrument is principally revenue and profit-based, the
reporting information does not include assets and liabilities by
segment and is as such not presented per segment.
For the six
months ended
30 June
----------------
2023 2022
------- -------
Pharma Pharma
------- -------
GBP'000 GBP'000
Revenues 36,712 38,286
Gross Margin 21,107 21,430
Gross Margin % 57.5% 56.0%
Segment underlying EBITDA 7,157 8,026
Segment underlying EBITDA % 19.5% 21.0%
Segment EBITDA 6,582 7,706
Segment EBITDA % 17.9% 20.1%
The segment EBITDA is reconciled with the consolidated net
profit of the year as follows:
For the six months
ended 30 June
--------------------
2023 2022
--------- ---------
GBP'000 GBP'000
Segment EBITDA 6,582 7,706
Depreciation, amortisation and impairment (3,763) (3,911)
Operating profit 2,819 3,795
--------- ---------
Finance expenses (711) (699)
Finance income 379 328
Share in net result of joint ventures (107) 16
Income taxes (876) (1,246)
Deferred taxes 102 213
Net profit 1,606 2,407
========= =========
Revenue by product category:
For the six months
ended 30 June
--------------------
2023 2022
--------- ---------
GBP'000 GBP'000
Companion animals 25,953 26,634
Production animals 7,736 8,814
Equine and Other 3,023 2,838
Total 36,712 38,286
========= =========
Revenue by geographical area:
For the six months
ended 30 June
--------------------
2023 2022
--------- ---------
GBP'000 GBP'000
Belgium 1,505 1,593
The Netherlands 938 749
United Kingdom 7,655 7,269
Germany 4,731 4,766
Spain 11,846 12,165
Italy 4,409 4,610
Portugal 1,784 2,230
European Union - other 3,543 3,927
Asia 268 182
Other 33 795
Total 36,712 38,286
========= =========
Revenue by category:
For the six months
ended 30 June
--------------------
2023 2022
--------- ---------
GBP'000 GBP'000
Product sales 35,414 37,376
Services sales 1,298 910
Total 36,712 38,286
========= =========
Product revenue is recognised when the performance obligation is
satisfied at a point in time. Service revenue is recognised by
reference to the stage of completion. Services sales includes
GBP228k (2022: GBP227k) of commission income recognised at a point
in time.
5 Earnings per share
Basic earnings per share amounts are calculated by dividing the
net profit for the period attributable to ordinary equity holders
of the parent company by the weighted average number of ordinary
shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holder of the parent
company by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of
ordinary shares that would be issued on conversion of all potential
dilutive ordinary shares.
The following income and share data were used in the earnings
per share computations:
For the six months ended 30 June
--------------------------------------
Underlying Underlying Total Total
---------- ---------- ------- -----
2023 2022 2023 2022
---------- ---------- ------- -----
GBP'000 GBP'000 GBP'000
Net profit 3,895 4,718 1,606 2,407
Net profit attributable to ordinary equity
holders of the parent adjusted for the
effect of dilution 3,895 4,718 1,606 2,407
========== ========== ======= =====
Average number of shares (basic and diluted):
For the six months ended 30 June
----------------------------------------------
Underlying Underlying Total Total
---------- ---------- ---------- ----------
2023 2022 2023 2022
---------- ---------- ---------- ----------
Number Number Number Number
Weighted average number of ordinary shares
for basic
earnings per share 60,237,694 60,092,161 60,237,694 60,092,161
Dilutive potential ordinary shares 569,632 542,465 569,632 542,465
Weighted average number of ordinary shares
adjusted for effect of dilution 60,807,326 60,634,626 60,807,326 60,634,626
========== ========== ========== ==========
Basic earnings per share:
For the six months ended 30 June
--------------------------------------
Underlying Underlying Total Total
----------- ----------- ----- -----
2023 2022 2023 2022
----------- ----------- ----- -----
Pence Pence Pence Pence
From operations attributable to the ordinary
equity holders of the company 6.5 7.9 2.7 4.0
Total basic earnings per share attributable
to the ordinary equity holders of the
company 6.5 7.9 2.7 4.0
=========== =========== ===== =====
Diluted earnings per share:
For the six months ended 30 June
--------------------------------------
Underlying Underlying Total Total
----------- ----------- ----- -----
2023 2022 2023 2022
----------- ----------- ----- -----
Pence Pence Pence Pence
From operations attributable to the ordinary
equity holders of the company 6.5 7.9 2.6 4.0
Total diluted earnings per share attributable
to the ordinary equity holders of the
company 6.5 7.9 2.6 4.0
=========== =========== ===== =====
6 Dividends
The final dividend for the year ended 31 December 2022 of 2.4
pence per share was paid to shareholders on 14 July 2023.
The directors have declared an interim dividend of 2.0 pence per
share. The interim dividend will be paid on 17 November 2023 to
shareholders whose names are on the Register of Members at close of
business on 20 October 2023. The ordinary shares will become
ex-dividend on 19 October 2023.
As the dividend was declared after the end of the period being
reported, it has not been included as a liability as at 30 June
2023 in accordance with IAS 10 'Events after the Balance Sheet
date'.
7 Contingent liabilities
On 3 September 2018, Ecuphar NV sold the wholesale business
Medini NV to Vetdis Holding NV (Vetdis) under a Share Purchase
Agreement (SPA). In June 2019, Vetdis sent a letter to Ecuphar
claiming that Ecuphar had breached the SPA. Ecuphar disputes the
majority of the claim, however Ecuphar considers it likely that a
part of the claim, amounting to EUR157,988 (GBP139,988), may be
valid. Following various discussions and correspondence, during
which the parties were unable to reach any agreement, Vetdis issued
formal court papers on 29 May 2020. A full court hearing to
consider the case took place in the Commercial Court in Bruges on 2
March 2021. The court did not decide on the merits of the claim,
instead it appointed an expert auditor to examine the documents and
advise the court on the claim. The court however ordered Vetdis to
pay the current account debt plus interest at 8%, and on 4 May
2021, Vetdis made a payment of EUR432,762 (GBP383,824). The process
involving the expert auditor is now complete. We expect the court
to hold another hearing and make its decision in 2024. Other than
the EUR157,836 (GBP139,988), which may be valid, and is written off
from the outstanding other receivable from Vetdis, no further
provision in respect of this matter has been included in the
condensed interim financial statements.
8 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, are eliminated in the Consolidated Financial
Statements and no information is provided thereon in the section.
The Group carries an investment in a joint venture (STEM Animal
Health Inc.). The Group's investment in its joint venture is
accounted for using the equity method.
9 Events after the reporting period
There are no events after the reporting period.
10 Cautionary statement
This Interim Management Report ("IMR") consists of the
Chairman's Statement and the Business 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.
11 Interim report
The Group's Interim Report for the six months ended 30 June 2023
was approved and authorised for issue on 26 September 2023 . Copies
will be available to download on the Company's website at:
www.animalcaregroup.com .
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END
IR EAFNSAFXDEAA
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