REG - Animalcare Group PLC - 2022 Preliminary Results
28/03/2023 07:00
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RNS Number : 3886U Animalcare Group PLC 28 March 2023
Animalcare Group plc
("Animalcare", the "Company" or the "Group")
Preliminary Unaudited Results for the year ended 31 December 2022
28 March 2023. Animalcare Group plc (AIM: ANCR), the international animal
health business, announces its preliminary unaudited results for the year
ended 31 December 2022.
Financial Highlights
● Revenues of £71.6m (2021: £74.0m) reflecting growth from product
launches offset by moderation in post-pandemic demand, conclusion of
distribution agreements and application of EU laws in Spain to reduce
antibiotic use
● Focus on Top 40 brands and an improved sales mix drove marked 3.5%
improvement in gross margins
● Careful targeting of SG&A investment, including
Orthros-related R&D, contributed to underlying* EBITDA of £13.1m (2021:
£13.5m); underlying* EBITDA margin 18.3% (2021: 18.2%)
● Reported profit before tax was £2.5m (2021: £0.9m)
● Underlying* basic earnings per share increased by 5.0% to 12.6
pence (2021: 12.0 pence); reported basic earnings per share of 3.3 pence
(2021: 0.1 pence loss per share)
● Supported by good rates of cash conversion, net debt was £5.4m at
year end (2021: £5.3m) maintaining the Group's capacity to invest in growth
strategy
● Board proposes final dividend of 2.4 pence per share, in line with
2021
Strategic and Operational Highlights
● Daxocox becomes a top 10 selling product in the Group's portfolio
● Plaqtiv+ dental range launched after receiving accreditation from
Veterinary Oral Health Council
● Identicare re-positioned as subscription-based services business
under specialist digital leadership
● Preclinical pipeline projects initiated following licensing and
R&D collaboration agreement with Orthros Medical to explore therapeutic
potential of VHH antibodies
● Tailored talent management programme implemented to identify and
develop future leaders
● Doug Hutchens and Sylvia Metayer joined the Group Board as
Non-Executive Directors
● Sustainability Task Force established to develop and drive
Group-wide ESG strategy
* Alternative Performance Measures (APMs) are reconciled to reported results
in the Chief Financial Officer's review and within the notes to the unaudited
consolidated financial statements.
Commenting on the full year results, Chief Executive Officer, Jenny Winter
said: "The way that Animalcare responded to a series of headwinds in 2022
underlines the resilience and agility of our business and the attractive
fundamentals of the animal health market.
"Revenue growth for the full year was impacted by a combination of moderating
market demand, the discontinuation of some distribution contracts and
implementation of EU laws to limit the use of antibiotics. Nevertheless, I am
pleased that we were able to deliver against several of our key performance
indicators, notably gross margins which benefited from our continuing focus on
the Top 40 selling brands. Good rates of cash conversion kept our year-end net
debt position well below our leverage target, maintaining the strong financial
platform that supports the Group's pursuit of its long-term growth strategy.
"It's clear that much of the growth in veterinary pharmaceuticals is
attributable to innovative new products. That's reflected in our numbers.
Daxocox, our treatment for osteoarthritic pain in dogs continues to grow,
comfortably becoming a Top 10 Animalcare brand during the year. In addition,
Plaqtiv+ our dental health range, the first brand to emerge from our STEM
joint venture, was launched in the second quarter to an enthusiastic response
from many of our customers. This was also a year that Identicare began to come
to the fore. Returning double-digit revenue growth over the period, Identicare
responded positively to the re-positioning of the business to a
subscription-based services model under specialist digital leadership.
"Operationally, we continue to make progress against our strategic objectives,
including the ongoing pursuit of growth opportunities through M&A,
partnerships and in-licensing. The licensing and research collaboration
agreement with Orthros Medical, which we signed in March 2022, provides us
with an exciting foothold in the promising field of VHH antibodies and
strengthens our early-stage pipeline. Investing in our people is critically
important to the success of our business, not least in the field of sales and
marketing excellence. Alongside this we reached all parts of our business with
our tailored behavioural programme in 2022 and are now implementing a
consistent approach to the development of our future leaders.
"Looking ahead to 2023, we have confidence in the continued resilience of our
business and the attractive fundamentals of our markets. And while we
recognise the inherent uncertainties in the current macroeconomic climate we
anticipate a return to revenue growth over the full year."
Analyst webcast
A briefing for analysts will be held at 10:30 BST on Tuesday 28 March 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_ircSmi85QaSaRkXPtuScog
(https://stifel.zoom.us/webinar/register/WN_ircSmi85QaSaRkXPtuScog)
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.
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
(http://www.animalcaregroup.com/) or contact:
Animalcare Group plc +44 (0)1904 487 687
Jenny Winter, Chief Executive Officer
Chris Brewster, Chief Financial Officer
Media/investor relations communications@animalcaregroup.com (mailto:communications@animalcaregroup.com)
Stifel Nicolaus Europe Limited +44 (0)20 7710 7600
(Nominated Adviser & Joint Broker)
Ben Maddison
Nick Adams
Nicholas Harland
Francis North
Panmure Gordon +44 (0)20 7886 2500
(Joint Broker)
Corporate Finance
Freddy Crossley/Emma Earl
Corporate Broking
Rupert Dearden
Chair's Statement
Animalcare's performance in 2022 highlighted the resilience of our business
and the markets in which we operate as we continued to make progress against
our strategic priorities.
Revenues for the full year were £71.6m, a 3.3% decline that reflects a
moderation in post-pandemic demand combined with factors such as the
conclusion of product distribution agreements and the application of EU laws
in Spain designed to reduce antibiotic usage.
At £13.1m, underlying EBITDA declined broadly in line with revenues thanks to
a favourable product mix and disciplined management of SG&A costs. After
adjusting for underlying items totalling £6.5m (2021: £8.6m), profit before
tax on a reported basis was £2.5m (2021: £0.9m).
A good cash conversion rate of 78% (2021: 109%) maintained the healthy state
of the Group's financial platform with net debt standing at £5.4m (2021:
£5.3m) by the year end and leverage well below our stated target range of one
to two times underlying EBITDA. This solid balance sheet position continues to
support the Group's pursuit of value-creating opportunities that have the
potential to grow our business over the coming years.
In March 2022 we reached an agreement with Netherlands-based Orthros Medical
to secure a global licence for innovative VHH antibody candidates, initially
addressing canine osteoarthritis. This exciting early-stage research and
development collaboration helps build our pipeline in a fast-growing disease
area that we know well. Elsewhere, we continue to seek out investments that
can extend our geographic footprint and add to our product line-up in the
shorter term, whether through M&A or partnerships.
Rationalisation of the Group's portfolio, which is now materially complete,
continues to bear fruit. Management focus on larger more profitable products,
combined with the discontinuation of several lower value "tail" treatments,
has concentrated our firepower to the benefit of our gross margins. Against
this backdrop it was particularly satisfying to see Daxocox, our innovative
treatment for osteoarthritis-related pain in dogs, enter the top 10 selling
products in our portfolio less than two years after coming to market. It was
also pleasing to see the Plaqtiv+ dental range contribute to earnings
following planned launches in the second quarter.
The Group's proven resilience and robust financial position support the
Board's decision to propose a final dividend of 2.4 pence per share (2021: 2.4
pence per share).
The experience and skills of the Animalcare team drive our business forward.
It's vital, therefore, that we continue to build the capabilities we need, now
and into the future. In 2022 we rolled out a tailored programme to develop the
next generation of leaders across the Group. We also invested in the sales and
marketing excellence required to succeed in this dynamic and increasingly
innovation-driven market.
In our previous Annual Report, we laid out our Group-wide approach to the
environmental, social and governance (ESG) pillars of sustainable development.
During the last 12 months we have noted an increasing interest in ESG-related
topics among a number of our stakeholders. While recognising that we are at
the early stage of our journey in this area, we have established important
foundations with the creation of a dedicated Sustainability Task Force chaired
by CFO Chris Brewster to advise on aspects of sustainability, including
identification of material issues to our stakeholders and the potential impact
on our business.
Despite the uncertain economic environment, we see reasons for optimism as we
look ahead. The attractive fundamentals of our animal health markets and the
strong position of the Group provide us with the confidence to continue
investing in our long-term growth strategy.
Following the appointment of Doug Hutchens as a Non-Executive Director at the
beginning of the year, we welcomed Sylvia Metayer to the Board in May 2022.
Subsequently, she took over as Chair of the Audit and Risk Committee at the
Group's AGM. Sylvia brings a wealth of financial and commercial experience
gained most recently at Sodexo SA, a global leader in food and facility
management outsourcing. I know that Sylvia will be of huge value as the Group
continues to implement its long-term growth strategy.
No review of the year would be complete without recognition for the skills and
commitment of the Animalcare team across all our markets. Our progress in 2022
was made possible through their efforts. I'd also like to thank you, our
shareholders, for your continued support in our Company as we strive to
achieve better animal health.
Jan Boone
Non-Executive Chair
Chief Executive Officer's Review
Looking back at 2022, we have reasons to be pleased with several of our key
indicators - not least positive margin growth and good cash conversion - as we
continue to benefit from a strong balance sheet in the pursuit of our
long-term growth strategy.
Strong finances
Revenues for the full year reflected a moderation in demand after the
pronounced spike in post-pandemic veterinary activity seen in 2021 across
Europe. Termination of certain Companion Animals distribution agreements and
the application of EU regulations in Spain designed to reduce the widespread
use of antibiotics in Production Animals, exerted further downward pressure on
overall revenues. As a result, the headline sales figure of £71.6m was down
3.3% at actual exchange rates (2.5% at constant exchange rates).
Our focus on bigger-selling, more profitable products in our portfolio
continued to deliver results, driving much improved gross margins of 56.8%
(2021: 53.3%). Carefully targeted interventions on pricing also helped us
mitigate the impact of inventory and logistics inflation.
Following on from the significant progress we have made in recent years to
reduce our debt and improve our balance sheet, the Group delivered positive
cash conversion in line with our goals. As a result, net debt stood at £5.4m
at the year end with leverage well below the target range of one to two times
underlying EBITDA (0.4 times underlying EBITDA). Maintaining such a strong
financial platform is critical to our strategy, enabling us to pursue
value-creating opportunities through a combination of M&A, partnerships
and pipeline projects.
Key leadership
In 2022 we continued to invest in building the skills and behaviours that will
drive our business forward. Identifying and developing the next generation of
leaders has been a clear theme over the course of the year with the
introduction of a consistent approach to the management of our talent. This
initiative is also designed to dovetail with our branded "High Challenge High
Support" programme of behavioural development.
Market data show that innovative products are driving much of the growth in
the animal health sector. This dynamic is hard-wired into our business
strategy. It's crucial, therefore, that our people are equipped with
industry-leading skills to engage with customers and explain how these new
technologies can benefit animal health and wellbeing in the appropriate
settings. That's why we intensified our focus on sales and marketing
excellence during 2022.
In partnership with Gallup, we carry out an annual survey of employee
engagement. Recognising that we recorded a decline of 2% in our overall 2022
score, the data we gather through this process provides us with a rich source
of insights as we seek to identify areas for improvement down to team level.
We extended a warm welcome to two new Non-Executive Directors in 2022. Doug
Hutchens joined the company in February while Sylvia Metayer assumed her role
in May. Doug's impressive background in veterinary medicine and R&D and
Sylvia's senior level commercial leadership experience are already making a
positive mark on the Group.
Growth portfolio
Our product portfolio acts as both a solid platform and a driver of growth. In
recent years we have refined our product line-up, concentrating attention on
larger-selling, higher margin brands while disposing of smaller "tail"
products, some of which offered little more than a distraction. This
rationalisation programme is now effectively complete with approximately 150
brands offering a comprehensive yet manageable portfolio. Though our
Production Animals business remains a valuable part of the overall mix, it is
evident that the Companion Animals segment offers greater growth potential.
Consequently, that's where we direct more of our investment.
In 2022, our top 40 selling brands accounted for approximately 78% of total
product sales, marginally down on the prior year. It was particularly
satisfying to see Daxocox, our novel treatment for osteoarthritis-related pain
in dogs, comfortably enter the top 10 ranking of Animalcare products.
Additionally, our Plaqtiv+ dental health range, the first product to emerge
from the STEM joint venture with Kane Biotech Inc., contributed to earnings
following the later than expected accreditation from the influential
Veterinary Oral Health Council (VOHC).
Identicare Ltd, the Group's UK-based pet microchipping and pet owner-focused
services company, which we carved out from our pharmaceutical business under
specialist leadership during 2021, delivered double-digit revenue growth over
the period.
Business development
Achieving growth via inorganic business development routes is a core strategic
objective for the Group. This is made possible by a financial platform that
has been materially strengthened in recent years. Over the course of 2022 our
dedicated business development team focused their efforts on the
identification and pursuit of value-creating deals that can build our
pipeline, add to revenues at attractive levels of profitability and extend our
operational footprint and sales and marketing reach.
Our agreement with Netherlands-based Orthros Medical, signed in March 2022,
secured an exclusive licence for VHH antibody technology with an initial focus
on canine osteoarthritis. Though still in the early stages, the partnership
has all the hallmarks of a collaborative template for our business.
Innovative pipeline
In 2022 the Group stepped up R&D investment as we continued to build an
innovative pipeline that is capable of generating sustainable growth; we
expect to further increase spend as a proportion of sales in 2023.
The aforementioned licensing and collaboration agreement with
Orthros Medical has generated a number of preclinical projects exploring the
potential for VHH antibodies, initially for the treatment of
osteoarthritis-related pain in dogs. This is an expanding area of the market
in which we are recognised for our knowledge and expertise. Following the
European approval of Daxocox in 2021, we are also leveraging our product
development capability to pursue life cycle management opportunities that can
extend the therapeutic and commercial reach of our long-acting COX-2
inhibitor.
Summary and outlook
Though the Group fell short of its revenue expectations in 2022 due to a
combination of moderating market demand and other more specific factors, we
made positive progress on gross margins, helping us maintain our strong
financial position, and with it our ability to invest in growth opportunities.
Looking ahead, we remain confident in the resilience of our business and the
wider animal health market which has seen record levels of pet ownership in
many countries. We continue to be mindful of macroeconomic uncertainties,
including inflationary pressures, but we anticipate a return to revenue growth
for the full year.
Our people deserve huge credit for the commitment they have shown in 2022. I'd
like to record my thanks for their hard work as we continue to deliver on our
long-term growth strategy.
Jenny Winter
Chief Executive Officer
Chief Financial Officer's Review
Underlying and statutory results
To provide comparability across reporting periods, the Group presents its
results on both an underlying and UK-adopted international accounting
standards ("IFRS") basis. The Directors believe that presenting our financial
results on an underlying basis, which excludes non-underlying items, offers a
clearer picture of business performance. IFRS results include these items to
provide the statutory results. All figures are reported at actual exchange
rates (AER) unless otherwise stated. Commentary will include references to
constant exchange rates (CER) to identify the impact of foreign exchange
movements. A reconciliation between underlying and statutory results is
provided at the end of this financial review.
Overview of underlying financial results
Unaudited 2021 % Change at AER
2022 £'000
£'000
Revenue 71,616 74,024 (3.3%)
Gross Profit 40,659 39,418 3.2%
Gross Margin % 56.8% 53.3% 3.5%
Underlying Operating Profit 9,753 10,593 (7.9%)
Underlying EBITDA 13,131 13,455 (2.4%)
Underlying EBITDA margin % 18.3% 18.2% 0.1%
Underlying Basic EPS (p) 12.6p 12.0p 5.0%
Trading activity in 2022 reflected the continued moderation of market growth
across Europe from the exceptionally high levels of post pandemic-related
demand in 2021. The continuing commercial focus on our larger, higher margin
brands was the main driver of much-improved gross margins. The Group's strong
balance sheet and good levels of cash generation allow us to continue to
invest to support future growth.
Revenues were £71.6m (2021: £74.0m), a decline of 3.3% at AER (2.5% at CER).
An analysis by product category is shown in the table below:
Unaudited 2021 % Change at AER
2022 £'000
£'000
Companion Animals 50,217 51,326 (2.2%)
Production Animals 15,674 16,980 (7.7%)
Equine & other 5,725 5,718 0.1%
Total 71,616 74,024 (3.3%)
Companion Animals revenue, which continues to represent around 70% of Group
turnover, declined by 2.2% to £50.2m, impacted by moderating demand levels
across Europe as noted above together with the loss of distribution rights of
certain key brands. In part, this was offset by sales growth from new
products, which contributed £2.1m (2021: £2.2m), predominantly driven by
Daxocox and Plaqtiv+, the latter launching during Q2 following the later than
expected VOHC (Veterinary Oral Health Council) accreditation. In addition,
Identicare, the Group's small but growing UK-based pet microchipping and pet
owner-focused services business, delivered 13% revenue growth over the period.
One year on from bringing in specialist leadership, we are pleased with the
progress in transitioning the business to a subscription-based services model
with recurring revenues.
Production Animal revenues, which are largely generated by our South Region
business, declined by 7.7% versus the prior year to £15.7m, predominantly due
to the application of EU laws in Spain designed to further reduce the
widespread use of antibiotics.
Equine and other sales were broadly flat versus 2021 at £5.7m during a period
in which we took Danilon, one of our largest brands, back into the UK
business, giving the Group more control over supply and our commercial
offering.
Revenues generated by our Top 40 brands, collectively accounting for
approximately 78% of sales, reduced by 0.9%, predominantly impacted by the
conclusion of distribution rights within our Companion Animals portfolio as
noted earlier. The continuing commercial focus on these larger, higher-margin
brands, together with a more favourable sales mix, are the key drivers of the
3.5% improvement in our gross margins. While the Group has been affected by
inventory and logistic price increases, the net impact on gross and EBITDA
margins during the year has not been significant as we have taken mitigating
pricing actions where possible. However, we remain alert to the accelerating
inflationary pressures impacting our overall cost base as we progress into
2023.
Underlying EBITDA declined by 2.4% to £13.1m, broadly in line with revenues.
Disciplined management of SG&A costs in the light of the moderating
revenues enabled us to deliver EBITDA margins at approximately the same level
as the prior year. SG&A expenses increased during the year to £27.5m
(2021: £26.0m) as we continue to invest in our people and drivers of future
growth such as new products and pipeline projects, the latter including
R&D expenditure related to the early-stage collaboration with Orthros
Medical.
The underlying effective tax rate of 16.4% (2021: 24.4%) has decreased versus
2021 primarily reflecting the geographic mix of profits and the prior year
one-off impact of the enactment of the increase in corporate tax rates in the
UK (from 19% to 25% effective 1 April 2023) on deferred tax balances. We
continue to optimise research and development tax credits.
Reflecting the points noted above, underlying basic EPS was 5.0% ahead of
prior year at 12.6 pence (2021: 12.0 pence).
Overview of statutory financial results
Statutory Group profit after tax for the year (after accounting for the
non-underlying items shown in the table and discussed below) was £2.0m (2021:
£0.1m loss), with statutory earnings per share at 3.3 pence (2021: 0.1 pence
loss per share).
Unaudited
2022 Amortisation and impairment of intangibles Acquisition, restructuring, integration and other costs 2022 2021
Underlying results £'000 £'000 Statutory Reported
£'000 results results
£'000 £'000
Revenue 71,616 - - 71,616 74,024
Gross profit 40,659 - - 40,659 39,418
Selling, general & administrative expenses (28,547) (3,794) (219) (32,560) (31,339)
Research & development expenses (2,363) (667) - (3,030) (3,132)
Net other operating income/(expense) 4 - (919) (915) (197)
Impairment losses - (918) - (918) (2,761)
Operating profit/(loss) 9,753 (5,379) (1,138) 3,236 1,989
Net finance expenses (642) - - (642) (856)
Share in net loss of joint ventures (52) - - (52) (188)
Profit/(loss) before tax 9,059 (5,379) (1,138) 2,542 945
Taxation (1,487) 725 185 (577) (1,022)
Profit/(loss) for the year 7,572 (4,654) (953) 1,965 (77)
Basic earnings/(loss) per share (p) 12.6p - - 3.3p (0.1p)
Underlying EBITDA is reconciled to the statutory measures in the table above
and within the notes to the unaudited consolidated financial statements.
Non-underlying items totalling £6.5m (2021: £8.6m) relating to profit before
tax have been incurred in the year, as set out in note 4. These principally
comprise:
1. Amortisation and impairment of acquisition-related intangibles of
£5.4m (2021: £8.3m). The current year charge primarily comprises
amortisation in relation to the reverse acquisition of Ecuphar NV and previous
acquisitions made by Ecuphar NV (£4.5m) and a non-cash impairment charge of
Research & Development assets that formed part of the acquired development
pipeline, the principal driver for which was manufacturing challenges that
have significantly impacted the timing and costs to resume supply with
appropriate commercial returns.
2. Expenses relating to acquisition, business development, integration,
restructuring and other costs of £1.1m (2021: £0.3m) including the
reorganisation and restructuring of our Benelux and UK operations, the latter
relating to the carve-out of Identicare in 2021, manufacturing transfers and
relocation of our Spain and UK offices.
Dividends
An interim dividend of 2.0 pence per share was paid in November 2022.
The Board is proposing a final dividend of 2.4 pence per share (2021: 2.4
pence per share). Subject to shareholder approval at the Annual General
Meeting to be held on 13 June 2023, the final dividend will be paid on 14 July
2023 to shareholders whose names are on the Register of Members at close of
business on 16 June 2023. The ordinary shares will become ex-dividend on 15
June 2023.
The Board continues to closely monitor the dividend policy, recognising the
Group's need for investment to drive future growth and dividend flow to
deliver overall value to our shareholders.
Cash flow and net debt
We entered 2022 in a healthy position following the significant progress made
during 2021 in reducing our debt and increasing the Group's financial
strength. With the net debt to underlying EBITDA leverage ratio comfortably
below our stated target range of one to two times, we continue to pursue
value-creating opportunities through M&A, partnerships and pipeline
projects.
The Group delivered good cash generation during the year following the very
strong cash conversion performance in 2021. In line with our expectations, our
cash conversion moderated during the financial year, while remaining on
average within the previous target 90-100% range over 2021 and 2022.
Unaudited 2021
2022 £'000
£'000
Underlying EBITDA 13,131 13,455
Net cash flow from operations 9,429 14,023
Non-underlying items 847 611
Underlying net cash flow from operations 10,276 14,634
Underlying cash conversion % 78.3% 108.8%
Net cash flow generated by our operations reduced to £9.4m (2021: £14.0m).
Working capital increased by £1.9m in the year compared to a £2.2m reduction
during 2021. This movement, chiefly attributable to significantly higher
receivables as a result of revenue phasing towards the year end, was largely
offset by increased payables. Inventories increased by £2.7m from the lower
than expected position at the end of 2021, primarily driven by normalisation
of our stock profile following restocking of delayed supply together with some
investment in strategic inventories to maintain strong service levels. The
increase in working capital was in part offset by a £0.7m reduction in cash
taxes mainly due to a combination of geographic mix of profits and lower
settlement of prior year taxes.
We are targeting a year-on-year improvement in cash conversion for the
financial year ending 31 December 2023, with a profile broadly consistent with
the first and second halves of 2022.
£'000
Net debt at 1 January 2022 (5,330)
Net cash flow from operations 9,429
Net capital expenditure (2,794)
Investments in joint venture (325)
Net finance expenses (1,732)
Dividends paid (2,644)
Foreign exchange on cash and borrowings (715)
Movement in IFRS 16 lease liabilities (1,291)
Net debt at 31 December 2022 (Unaudited) (5,402)
Net capital expenditure of £2.8m (2021: £2.7m) largely comprises investment
in our product development pipeline of £1.3m, including £0.4m in relation to
the first licence milestone payment to Orthros Medical. The balance of
expenditure relates chiefly to investment in our business systems, including
CRM, ERP and IT infrastructure within Identicare, and the relocation of our UK
office.
The net debt to underlying EBITDA leverage ratio was approximately 0.4 times,
consistent with 2021 and comfortably below the Group's stated target range of
one to two times underlying EBITDA.
Borrowing facilities
The Group has total facilities of €51.5m (£45.7m) to 31 March 2025,
provided by a syndicate of four banks comprising a committed revolving credit
facility (RCF) of €41.5m (£36.8m) and a €10.0m (£8.9m) acquisition line,
the latter of which cannot be utilised to fund operations.
The Group manages its banking arrangements centrally through cross-currency
cash pooling. Funds are swept daily from its various bank accounts into
central bank accounts to optimise the Group's net interest payable position.
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; and
• Solvency (total assets less goodwill/total equity less goodwill)
greater than 25%.
Net of cash balances totalling £6.0m, £4.4m of the RCF was utilised at the
year end, leaving headroom of £38.4m.
As at 31 December 2022 and throughout the financial year, all covenant
requirements were met with significant headroom across all three measures.
Going concern
The Directors have prepared cash flow forecasts for a period of at least 12
months from the release of these results (the going concern assessment
period). These forecasts indicate that the Group will have sufficient funds
and liquidity to meet its obligations as they fall due, taking into
consideration market conditions, the profile of cash generation, the Group's
financial position (including the level of headroom available within the bank
facilities and compliance with the financial covenants associated with these
facilities), bank facility maturity and principal risks.
Accordingly, the Directors continue to adopt the going concern basis in
preparing the financial statements.
Summary and outlook
While our revenue performance, which was impacted by a combination of factors,
was not as strong as expected, the Group has made positive progress on gross
margins and demonstrated agility in managing our cost base in line with
trading levels. Good levels of cash conversion have also maintained our strong
financial platform.
Mindful of the current economic environment, we are confident in the
resilience of the Group and the animal health sector, underpinned by
historically high levels of pet ownership.
With our strong balance sheet, we believe the Group remains well placed to
deliver on our long-term growth strategy and we continue to explore business
and product development opportunities.
Chris Brewster
Chief Financial Officer
28 March 2023
Consolidated Income Statement (Unaudited)
Year ended 31 December 2022
For the year ended 31 December
Unaudited
Underlying Non-Underlying (note 4) Total Underlying Non-Under-lying (note 4) Total
2022 2022 2022 2021 2021 2021
Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue 5 71,616 − 71,616 74,024 − 74,024
Cost of sales (30,957) − (30,957) (34,606) − (34,606)
Gross profit 40,659 − 40,659 39,418 − 39,418
Research and development expenses (2,363) (667) (3,030) (2,181) (951) (3,132)
Selling and marketing expenses (13,547) − (13,547) (12,277) − (12,277)
General and administrative expenses (15,000) (4,013) (19,013) (14,482) (4,580) (19,062)
Net other operating income/(expense) 4 (919) (915) 115 (312) (197)
Impairment losses − (918) (918) − (2,761) (2,761)
Operating profit/(loss) 9,753 (6,517) 3,236 10,593 (8,604) 1,989
Finance costs 6 (1,752) − (1,752) (2,613) − (2,613)
Finance income 7 1,110 − 1,110 1,757 − 1,757
Finance costs net (642) − (642) (856) − (856)
Share of net loss of joint venture accounted for using the equity method 12 (52) − (52) (188) − (188)
Profit/(loss) before tax 9,059 (6,517) 2,542 9,549 (8,604) 945
Income tax expense 8 (1,487) 910 (577) (2,325) 1,303 (1,022)
Profit/(loss) for the period 7,572 (5,364) 1,956 7,224 (7,301) (77)
Net profit/(loss) attributable to:
The owners of the parent 7,572 (5,607) 1,965 7,224 (7,301) (77)
Earnings per share for profit/(loss) attributable to the ordinary equity
holders of the Company:
Basic earnings per share 9 12.6p − 3.3p 12.0p − (0.1p)
Diluted earnings per share 9 12.5p − 3.2p 12.0p − (0.1p)
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 categorised as
'non-underlying' and are analysed in detail in note 4 to these financial
statements. The accompanying notes form an integral part of these unaudited
consolidated financial statements.
Consolidated statement of comprehensive income (unaudited)
Year ended 31 December 2022
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Profit/(loss) 1,965 (77)
Other comprehensive income/(expense)
Exchange differences on translation of foreign operations* 488 (638)
Other comprehensive income/(expense), net of tax 488 (638)
Total comprehensive income/(expense) for the year, net of tax 2,453 (715)
Total comprehensive income/(expense) attributable to:
The owners of the parent 2,453 (715)
* May be reclassified subsequently to profit and loss
Consolidated statement of financial position (unaudited)
Year ended 31 December 2022
For the year ended 31 December
Notes Restated*
Unaudited 2021
2022
£'000 £'000
Assets
Non-current assets
Goodwill 10 50,853 50,337
Intangible assets 11 25,283 30,213
Property, plant and equipment 448 132
Right-of-use-assets 16 2,924 1,658
Investments in joint ventures 12 1,305 1,290
Deferred tax assets 8 3,567 1,963
Other financial assets 70 90
Other non-current assets − 24
Total non-current assets 84,450 85,707
Current assets
Inventories 13,474 10,328
Trade receivables 13,568 7,135
Other current assets 715 1,200
Cash and cash equivalents 6,035 5,633
Total current assets 33,792 24,296
Total assets 118,242 110,003
Liabilities
Current liabilities
Lease liabilities 16 (852) (723)
Trade payables (15,497) (10,021)
Current tax liabilities (623) (471)
Accrued charges and contract liabilities 14 (1,276) (1,083)
Other current liabilities (4,027) (2,156)
Total current liabilities (22,275) (14,454)
Non-current liabilities
Borrowings 13 (8,426) (9,243)
Lease liabilities 16 (2,159) (996)
Deferred tax liabilities 8 (4,773) (4,271)
Contract liabilities 14 (372) (675)
Provisions (340) (408)
Other non-current liabilities (911) (1,157)
Total non-current liabilities (16,981) (16,750)
Total Liabilities (39,256) (31,204)
Net assets 78,986 78,799
Equity
Share capital 15 12,019 12,019
Share premium 15 132,798 132,798
Reverse acquisition reserve (56,762) (56,762)
Accumulated losses (11,977) (11,676)
Other reserves 2,908 2,420
Equity attributable to the owners of the parent 78,986 78,799
Total equity 78,986 78,799
*Restated as detailed in note 18
Consolidated statement of changes in equity (unaudited)
Year ended 31 December 2022
Attributable to the owners of the parents
Share Share Accumulated losses Reverse acquisition reserve Other reserve Total
capital
premium
equity
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 12,019 132,798 (11,676) (56,762) 2,420 78,799
Net profit − − 1,965 − − 1,965
Other comprehensive income − − − − 488 488
Total comprehensive income − − 1,965 − 488 2,453
Dividends paid − − (2,644) − − (2,644)
Share-based payments − − 378 − − 378
At 31 December 2022 (Unaudited) 12,019 132,798 (11,977) (56,762) 2,908 78,986
Attributable to the owners of the parents
Share Share Accumulated losses Reverse acquisition reserve Other reserve Total
capital
premium
equity
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 12,012 132,729 (9,445) (56,762) 3,058 81,592
Loss of the year − − (77) − − (77)
Other comprehensive expense − − − − (638) (638)
Total comprehensive expense − − (77) − (638) (715)
Dividends paid − − (2,403) − − (2,403)
Exercise of share options 7 69 − − − 76
Share-based payments − − 249 − − 249
At 31 December 2021 12,019 132,798 (11,676) (56,762) 2,420 78,799
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.
Consolidated cash flow statement (unaudited)
Year ended 31 December 2022
For the year ended 31 December
Notes Unaudited 2021
2022
£'000 £'000
Operating activities
Profit before tax 2,542 945
Non-cash and operational adjustments
Share in net loss of joint venture 12 52 188
Depreciation of property, plant and equipment 1,118 1,185
Amortisation of intangible assets 11 6,685 7,217
Impairment of intangible assets 11 918 2,761
Share-based payment expense 542 249
Gain on disposal of fixed assets (146) (396)
Non-cash movement in provisions 202 120
Movement allowance for bad debt and inventories 105 760
Finance income (260) (459)
Finance expense 1,001 1,221
Impact of foreign currencies (235) 88
Fair value adjustment contingent consideration 140 (17)
Gain on disposal of IFRS 16 and initial recognition (6) −
Movements in working capital
(Increase)/decrease in trade receivables (5,875) 3,541
(Increase)/decrease in inventories (2,735) 1,356
Increase/(decrease) in payables 6,706 (2,698)
Income tax paid (1,325) (2,038)
Net cash flow from operating activities 9,429 14,023
Investing activities
Purchase of property, plant and equipment 11 (407) (557)
Purchase of intangible assets (2,540) (2,658)
Proceeds from the sale of property, plant and equipment (net) 153 540
Capital contribution in joint venture 12 (325) (289)
Net cash flow used in investing activities (3,119) (2,964)
Financing activities
Repayment of loans and borrowings (1,320) (6,952)
Repayment of IFRS 16 lease liability 16 (996) (1,024)
Receipts from issue of share capital − 76
Dividends paid 15 (2,644) (2,403)
Interest paid (444) (447)
Other financial expense (297) (213)
Decrease in other financial assets 5 −
Net cash flow used in financing activities (5,696) (10,963)
Net increase of cash and cash equivalents 614 96
Cash and cash equivalents at beginning of year 5,633 5,265
Exchange rate differences on cash and cash equivalents (212) 272
Cash and cash equivalents at end of year 6,035 5,633
For the year ended 31 December
Notes Unaudited 2021
2022
£'000 £'000
Reconciliation of net cash flow to movement in net debt
Net increase in cash and cash equivalents in the year 614 96
Cash flow from decrease in debt financing 1,320 6,952
Foreign exchange differences on cash and borrowings (715) 1,146
Movement in net debt during the year 1,219 8,194
Net debt at the start of the year (5,330) (13,616)
Movement in lease liabilities during the year 16 (1,291) 92
Net debt at the end of the year (5,402) (5,330)
Notes to the unaudited consolidated financial statements
Year ended 31 December 2022
1. Financial information
The unaudited financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2022 and 31
December 2021. The financial information for the year ended 31 December 2021
is derived from the statutory accounts for 2021 which have been delivered to
the Registrar of Companies. The Auditor has reported on those accounts; their
report was (i) unqualified, (ii) did not include references to any matters to
which the auditor drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006. The audit of the statutory accounts for the year
ended 31 December 2022 is not yet complete. Accordingly, the financial
information for 2022 is presented unaudited in the preliminary announcement.
2. Basis of preparation
The Group financial statements have been prepared and approved by the
Directors. The financial information has been prepared in accordance with
UK-adopted international accounting standards ("IFRS") and the applicable
legal requirements of the Companies Act 2006, except for the revaluation of
certain financial instruments. They have also been prepared in accordance with
the requirements of the AIM Rules.
3. Summary of significant accounting policies
Going concern
The Group's financing arrangements consist of a committed revolving credit
facility of €41.5m (£36.8m) and a €10.0m (£8.9m) 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; and
● Solvency (total assets less goodwill/total equity less goodwill)
greater than 25%.
As at 31 December 2022 and throughout the financial year, all covenant
requirements were met with significant headroom across all three measures.
The Directors have prepared cash flow forecasts for a period of at least 12
months from the date of signing of these financial statements (the going
concern assessment period). These forecasts indicate that the Group will have
sufficient funds and liquidity to meet its obligations as they fall due,
taking into account the potential impact of "severe but plausible" downside
scenarios to factor in a range of downside revenue estimates and higher than
expected inflation across our cost base, with corresponding mitigating
actions. The output from these scenarios shows the Group has adequate levels
of liquidity from its committed facilities and complies with all its banking
covenants throughout the going concern assessment period. Accordingly, the
Directors continue to adopt the going concern basis of preparation.
4. Non-underlying items
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Amortisation and impairment of acquisition related intangibles
Classified within research and development expenses 667 951
Classified within general and administrative expenses 3,794 4,580
Impairment losses 895 2,761
Total amortisation and impairment of acquisition-related intangibles 5,356 8,292
Restructuring costs 282 17
Acquisition and integration costs 335 188
Impairment on intangibles 23 -
Divestments and business disposals (146) (462)
COVID-19 2 11
Long-term incentive plan 220 -
UK and Spain office relocation costs 182 111
Other non-underlying items 263 447
Total non-underlying items before taxes 6,517 8,604
Tax impact (910) (1,303)
Total non-underlying items after taxes 5,607 7,301
The following table shows the breakdown of non-underlying items before taxes
by category for 2022 and 2021:
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Classified within research and development expenses 667 951
Classified within general and administrative expenses 4,013 4,580
Classified within net other operating (income)/expense 919 312
Impairment losses 918 2,761
Total non-underlying items before taxes 6,517 8,604
The 2022 £4,013k general and administrative expenses principally encompasses
amortisation and impairment of acquisition related intangibles of £3,794k
plus the £220k long-term incentive plan charge.
Non-underlying items totalling £6,517k (2021: £8,604k) relating to profit
before tax have been incurred in the year. These principally comprise:
● Amortisation and impairment of acquisition-related intangibles of
£5,356k (2021: £8,292k). The current year charge primarily comprises
amortisation in relation to the reverse acquisition of Ecuphar NV and previous
acquisitions made by Ecuphar NV of £4,461k (2021: £5,531k) and a non-cash
impairment charge of Research & Development assets (£895k; 2021: £
2,761k) that formed part of the acquired development pipeline, the principal
driver for which was manufacturing challenges that have significantly impacted
the timing and costs to resume supply with appropriate commercial returns.
● Expenses relating to restructuring costs of £282k (2021: £17k)
principally relate to the closure of our warehouse in Belgium and subsequent
out-sourcing to a third-party logistics provider, together with costs
associated with the reorganisation of our UK operations following the
carve-out of Identicare in 2021.
● Acquisition and integration costs of £335k (2021: £188k)
primarily relate to costs associated with manufacturing transfers and the
cessation of production animals sales in Benelux.
● Costs associated with the relocation of our Spain and UK
operations totalling £182k (2021: £111k) include one-off move costs and
dilapidation provisions.
5. 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 finance 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 2022 and 2021. As management's controlling instrument is mainly
revenue-based, the reporting information does not include assets and
liabilities by segment and is as such not presented per segment.
For the year ended 31 December
Unaudited
2022 2021
£'000 £'000
Revenues 71,616 74,024
Gross Profit 40,659 39,418
Gross Profit % 57% 53%
Segment underlying EBITDA 13,131 13,455
Segment underlying EBITDA % 18% 18%
Segment EBITDA 11,971 13,143
Segment EBITDA % 17% 18%
The underlying and segment EBITDA is reconciled with the consolidated net
profit/(loss) for the year as follows:
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Underlying EBITDA 13,131 13,455
Non-recurring expenses (excluding amortisation and impairment) (1,160) (312)
EBITDA 11,971 13,143
Depreciation, amortisation and impairment (8,735) (11,154)
Operating profit 3,236 1,989
Finance costs (1,752) (2,613)
Finance income 1,110 1,757
Share of net loss of joint venture accounted for using the equity method (52) (188)
Income taxes (1,637) (1,371)
Deferred taxes 1,060 349
Profit/ (loss) for the period 1,965 (77)
Segment assets excluding deferred tax assets located in Belgium, Spain,
Portugal, the United Kingdom and other geographies are as follows:
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Belgium 7,510 8,834
Spain 3,695 2,811
Portugal 4,234 4,061
UK 59,184 62,157
Other 6,260 5,881
Non-current assets excluding deferred tax assets 80,883 83,744
Revenue by product category
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Companion animals 50,217 51,326
Production animals 15,674 16,980
Equine 5,698 5,637
Other 27 81
Total 71,616 74,024
Revenue by geographical area
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Belgium 3,354 4,023
The Netherlands 1,627 1,769
United Kingdom 15,257 15,471
Germany 10,056 10,373
Spain 19,724 21,035
Italy 8,404 8,885
Portugal 4,215 4,193
European Union - other 7,199 6,971
Asia 494 681
Middle East Africa 17 1
Other 1,269 622
Total 71,616 74,024
Revenue by category
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Product sales 69,642 72,651
Services sales 1,974 1,373
Total 71,616 74,024
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.
6. Finance costs
Finance costs include the following elements:
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Interest expense 444 447
Foreign currency losses 985 1,912
Change in fair value - losses on financial instruments 124 85
Other finance costs 199 169
Total 1,752 2,613
7. Finance income
Finance income includes the following elements:
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Foreign currency exchange gains 1,060 1,754
Income from financial assets 39 1
Other finance income 11 2
Total 1,110 1,757
8. Income tax
Current tax liabilities
The tax payable relates to income taxes of £623k (2021: £471k).
The following table shows the breakdown of the tax expense for 2022 and 2021:
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Current tax charge (1,685) (1,371)
Tax adjustments in respect of previous years 48 −
Total current tax charge (1,637) (1,371)
Deferred tax - origination and reversal of temporary differences 774 458
Deferred tax - adjustments in respect of previous years 286 (109)
Total deferred tax credit 1,060 349
Total tax expense for the year (577) (1,022)
The total tax expense can be reconciled to the accounting profit as follows:
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Profit before tax 2,542 945
Share of net loss of joint ventures 52 188
Profit before tax, excl. Share in net loss of joint venture 2,594 1,133
Tax at 19.00% (2021: 19.00%) (493) (215)
Effect of:
Overseas tax rates (389) (386)
Non-deductible expenses (99) (180)
Use of tax losses previously not recognised (24) 76
Changes in statutory enacted tax rate 93 (273)
Tax adjustments in respect of previous year 334 (109)
Non-recognition of deferred tax on current year losses (21) (105)
Usage of formerly non-recognised deferred tax assets on timing differences 15 50
R&D relief 53 200
Other (46) (80)
Income tax expense as reported in the consolidated income statement (577) (1,022)
The tax credit of £910k (2021: £1,303k) shown within "non-underlying items"
on the face of the consolidated income statement, which forms part of the
overall tax charge of £577k (2021: £1,022k), relates to the items in note 4.
The tax rates used for the 2022 and 2021 reconciliation above are the
corporate tax rates of 25.00% (Belgium), 19.00% (the Netherlands), 30.70%
(Germany), 33.00% (France), 25.00% (Spain), 24.00% (Italy), 21.00% (Portugal)
and 19.00% (the United Kingdom). These taxes are payable by corporate entities
in the above-mentioned countries on taxable profits under tax law in that
jurisdiction.
Deferred taxes at the balance sheet date have been measured using the UK
enacted tax rate, being 25% from 1 April 2023.
Deferred tax
(a) Recognised deferred tax assets and liabilities
Assets Liabilities Total
Unaudited 2021 Unaudited 2021 Unaudited 2021
2022 2022 2022
£'000 £'000 £'000 £'000 £'000 £'000
Goodwill − (125) (1,290) (923) (1,290) (1,048)
Intangible assets 329 243 (2,722) (3,435) (2,393) (3,192)
Property, plant and equipment − (186) (707) (195) (707) (381)
Financial fixed assets 1 1 − − 1 1
Inventory − (11) (54) (40) (54) (51)
Trade and other receivables/(payables) 71 94 − 59 71 153
Borrowings 565 182 − 223 565 405
Provisions 4 3 − − 4 3
Accruals and deferred income 32 13 − 40 32 53
Tax losses carried forward 2,565 1,749 − − 2,565 1,749
Total 3,567 1,963 4,773 (4,271) (1,206) (2,308)
(b) Movements during the year
Movement of deferred taxes during 2022:
Balance as at 1 January 2022 Recognised in income Foreign exchange adjustments Balance as at 31 December Unaudited
2022
£'000 £'000 £'000 £'000
Goodwill (1,048) (176) (66) (1,290)
Intangible assets (3,192) 782 17 (2,393)
Property, plant and equipment (381) (296) (30) (707)
Financial fixed assets 1 − − 1
Inventory (51) − (3) (54)
Trade and other receivables/(payables) 153 (62) (20) 71
Accruals and deferred income 53 (23) 2 32
Borrowings 405 133 27 565
Provisions 3 − 1 4
Tax losses carry forward and other tax benefits 1,749 702 114 2,565
Net deferred tax (2,308) 1,060 42 (1,206)
Movement of deferred taxes during 2021:
Balance at 1 January 2021 Recognised in income Foreign exchange adjustments Balance at 31 December 2021
£'000 £'000 £'000 £'000
Goodwill (935) (174) 61 (1,048)
Intangible assets (3,773) 600 (19) (3,192)
Property, plant and equipment (439) 34 24 (381)
Financial fixed assets 1 − − 1
Inventory (41) (13) 3 (51)
Trade and other receivables/(payables) 166 (11) (2) 153
Accruals and deferred income 104 (44) (7) 53
Borrowings 404 27 (26) 405
Provisions − − 3 3
Tax losses carry forward and other tax benefits 1,929 (70) (110) 1,749
Net deferred tax (2,584) 349 (73) (2,308)
Tax losses
The Group has unused tax losses, tax credits and notional interest deduction
available in an amount of £11,361k (2021: £7,435k).
Deferred tax assets have been recognised on available tax losses carried
forward for some legal entities, resulting in amounts recognised of £ 2,565k
(2021: £ 1,749k). This was based on management's estimate that sufficient
positive taxable profits will be generated in the near future for the related
legal entities with fiscal losses. It is expected that £32k of the deferred
tax asset will be recovered within the next 12 months and the remaining
£2,533k of the deferred tax asset will be recovered after 12 months.
The non-recognised deferred tax assets of Ecuphar NV on temporary differences
decreased by £15k in 2022 (2021: £50k).
9. Earnings per share
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary equity holders 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 was used in the earnings per share
computations:
Profit/(loss) before continuing operations
For the year ended 31 December
Unaudited 2021 Unaudited 2021
2022 2022
Underlying Underlying Total Total
£'000 £'000 £'000 £'000
Net profit/(loss) for the year 7,572 7,224 1,965 (77)
Net profit/loss attributable to ordinary equity 7,572 7,224 1,965 (77)
holders of the parent adjusted for the effect of dilution
Average number of shares (basic and diluted)
For the year ended 31 December
Unaudited 2021 Unaudited 2021
2022 2022
Number of shares Underlying Underlying Total Total
Weighted average number of ordinary shares 60,175,407 60,081,167 60,175,407 60,081,167
for basic earnings per share
Dilutive potential ordinary share options 629,087 376,836 629,087 376,836
Weighted average number of ordinary shares 60,804,494 60,458,003 60,804,494 60,458,003
adjusted for effect of dilution
Basic earnings/(loss) per share
For the year ended 31 December
Unaudited 2021 Unaudited 2021
2022 2022
Underlying Underlying Total Total
in pence in pence in pence in pence
From operations attributable to the ordinary 12.6 12.0 3.3 -0.1
equity holders of the company
Total basic earnings per share attributable to 12.6 12.0 3.3 -0.1
the ordinary equity holders of the company
Diluted earnings/(loss) per share
For the year ended 31 December
Unaudited 2021 Unaudited 2021
2022 2022
Underlying Underlying Total Total
in pence in pence in pence in pence
From operations attributable to the ordinary 12.5 12.0 3.2 -0.1
equity holders of the Company
Total diluted earnings per share attributable 12.5 12.0 3.2 -0.1
to the ordinary equity holders of the Company
10. Goodwill
On acquisition, goodwill acquired in a business combination is allocated to
the cash-generating units which are expected to benefit from that business
combination. This cash-generating unit corresponds to the nature of the
business, being Pharmaceuticals. The goodwill has been allocated to the
cash-generating unit ("CGU") as follows:
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
CGU: Pharmaceuticals 50,853 50,337
Total 50,853 50,337
The changes in the carrying value of the goodwill can be presented as follows
for the years 2022 and 2021:
Total
£'000
As at 1 January 2021 50,988
Disposals −
Other −
Currency translation (651)
As at 31 December 2021 50,337
As at 1 January 2022 50,337
Disposals −
Impairment −
Currency translation 516
As at 31 December 2022 50,853
Goodwill allocated to the Pharmaceuticals CGU includes goodwill recognised as
a result of past business combinations of Esteve, Equipharma NV, Ecuphar BV,
Cardon Pharmaceuticals NV and the reverse acquisition of Animalcare Group plc
in 2017.
The discount rate and growth rate (in perpetuity) used for value-in-use
calculations are as follows:
Unaudited
2022 2021
Discount rate (pre-tax) % 14.2 11.8
Growth rate (in perpetuity) % 2.0 1.9
Cash flow forecasts are prepared using the current operating budget approved
by the Directors, which covers a five-year period and an appropriate
extrapolation of cash flows, using the long-term growth rate, beyond this. The
cash flow forecasts assume revenue and profit growth in line with our
strategic priorities. Further, we have assessed the potential impact of
climate change, with reference to our principal risks and the environmental
disclosures made in the Sustainability report and consider that the impact on
the valuation of goodwill is limited.
The Group's impairment review is sensitive to change in assumptions used, most
notably the discount rates and the perpetuity growth rates.
A 1.0% increase in discount rates would cause the value in use of the CGU to
reduce by £15.5m but would not give rise to an impairment. A 1.0% reduction
in perpetuity growth rates would cause the value in use of the CGU to reduce
by £11.6m but would not give rise to an impairment.
11. Intangible assets
The changes in the carrying value of the intangible assets can be presented as
follows for the years 2022 and 2021:
Research & Development assets Patents, distribution rights and licences Product portfolios and product development costs Capitalised software *Assets under construction As restated
Total*
£'000 £'000 £'000 £'000 £'000 £'000
Acquisition value/cost
As at 1 January 2021 18,655 19,266 37,616 2,149 51 77,737
Additions 1,247 - 1,030 1,080 499 3,856
Disposals (4,934) (57) (134) (20) (43) (5,188)
Transfers (2,195) - 2,195 - - -
Currency translation (327) (961) (1,140) (119) (13) (2,560)
As at 31 December 2021 (Restated*) 12,446 18,248 39,567 3,090 494 73,845
Additions 719 - 603 1,218 - 2,540
Disposals (982) - (90) (55) (4) (1,131)
Transfers 375 - - - (375) -
Currency translation 241 760 978 146 12 2,137
As at 31 December 2022 12,799 19,008 41,058 4,399 126 77,391
(Unaudited)
Amortisation
As at 1 January 2021 (5,255) (13,304) (19,938) (1,377) - (39,874)
Amortisation (1,387) (1,897) (3,303) (630) - (7,217)
Disposals 4,211 57 46 55 - 4,369
Impairments (2,671) - (77) (13) - (2,761)
Currency translation 147 770 855 79 - 1,851
As at 31 December 2021 (Restated*) (4,955) (14,374) (22,417) (1,886) - (43,632)
Amortisation (1,239) (1,325) (3,233) (888) - (6,685)
Disposals 676 - 89 61 - 826
Impairments (868) - (32) (18) - (918)
Currency translation (151) (693) (753) (102) - (1,699)
As at 31 December 2022 (6,537) (16,392) (26,346) (2,833) - (52,108)
(Unaudited)
Net carrying value
As at 31 December 2022 6,262 2,616 14,712 1,566 126 25,283
(Unaudited)
As at 31 December 2021 (restated*) 7,491 3,874 17,150 1,204 494 30,213
*Restatement as described in note 18
Research and development assets relate to acquired development projects as
part of the Esteve business combination in 2015, the reverse acquisition of
Animalcare Group plc in 2017 and external and internal in-process R&D
costs for which the capitalisation criteria are met. Patents, distribution
rights and licences include amounts paid for exclusive distribution rights as
well as distribution rights acquired as part of the Esteve business
combination in 2015 and the reverse acquisition of Animalcare Group plc in
2017.
Product portfolios and product development costs relate to amounts paid for
acquired brands as well as external and internal product development costs
capitalised on the development projects in the pipeline for which the
capitalisation criteria are met.
The capitalised software includes IT driven by accelerated CRM software
investment and website and platform development relating to Identicare Ltd.
The total amortisation charge for 2022 is £6,685k (2021: £7,217k) which is
included in the lines cost of sales, research and development expenses, sales
and marketing expenses and general and administrative expenses of the
consolidated income statement. Included in the total amortisation is £4,461k
(2021: £5,531k) relating to acquisition-related intangibles and £2,224k
(2021: £1,686k) relating to other intangibles.
A total impairment charge of £918k (2021: £2,761k) was recorded during the
financial year. Thereof £895k (2021: £2,761k) is related to a non-cash
impairment charge of acquisition-related intangibles of Research &
Development assets.
In 2022, Animalcare Group plc invested in intangibles for an amount of
£2,540k (2021: £3,357k).
On 24 March 2022, the Group entered into two early-stage agreements with
Netherlands-based Orthros Medical, a company focused on the research and early
development of VHH antibodies, also known as small single-chain antibody
fragments. Under the terms of the deal, and during the period, Animalcare made
upfront payments to Orthros Medical totalling €500k. These are included as
intangible assets "product portfolios and product development costs". As the
two licensed preclinical candidates progress, Orthros Medical may receive
development, regulatory and commercial milestone payments up to a total value
of €11 million, a significant proportion of which are linked to successful
commercialisation. In addition, single digit royalties will be due on the net
sales of the products. These payments are expected to be paid out of the
Group's operating cash flow.
12. Investments in joint ventures
On 28 September 2020 the Group announced that it has entered into an agreement
with Canada-based biotech company Kane Biotech Inc. under which the parties
formed STEM Animal Health Inc. ("STEM"), a company dedicated to treating
biofilm-related ailments in animals. The Group acquired, via its 100%
subsidiary Ecuphar NV, 33.34% in STEM for a cash consideration of CA$3m, of
which CA$1.5m was already paid in prior years, CA$0.5m during the financial
year and CA$1.0m still payable over 20 months.
The Group has a call option, for a period until 28 September 2026, to acquire
an additional 18% stake in STEM for CA$4 million. Based on the existing voting
rights (33.34%) and other contractual arrangements, the Group does not have
power over the investee. Accordingly, the investment in STEM is accounted for
through the equity method in the consolidated financial statements.
Separately, we also announced that we had entered into a licensing agreement,
under which we will invest a further CA$2m, consisting of an initial payment
along with a series of potential payments linked to various milestones, for
rights to commercialise products in global veterinary markets outside the
Americas.
Both the remaining equity investment in STEM and the licensing fee are
expected to be paid from existing cash resources. In the prior year, the
Group made its first licence payment of CA$0.5m. The following payment is due
in 2023, resulting in a short-term payment of CA$692k or £425k, and a
long-term payable of CA$748k or £459k.
Further, for the capital contribution, the outstanding short-term liability is
£371k (2021: £277k), shown in the balance sheet as other current liability.
The outstanding long-term liability is £254k (2021: £502k), shown in the
balance sheet as other non-current liability.
Name of entity Place of business/ % of ownership interest Nature of relationship Measurement method Carrying amount
country of incorporation
2022 2021 Unaudited 2021
2022
£'000 £'000
STEM Animal Health Inc. Canada 33.34% 33.34% Joint Venture Equity method 1,305 1,290
The tables below provide summarised financial information for the Joint
Venture in STEM Animal Health Inc. which is material to the group. The
information disclosed first reflects the amounts presented in the financial
statements of the relevant joint venture followed by Animalcare's share of
those amounts.
Unaudited
For the year ended For the year ended
31 December 2022
31 December 2021
£'000 £'000
Non-current assets 321 547
Current assets 1,511 945
Total assets 1,832 1,492
Current liabilities 825 525
Total liabilities 825 525
Net assets 1,007 967
Group Share 336 322
Goodwill 561 561
Fair value identified intangibles 555 554
Deferred tax liability (147) (147)
Investment value in joint venture 1,305 1,290
Summarised statement of comprehensive income:
Unaudited For the year ended
31 December 2021
For the year ended
31 December 2022
£'000 £'000
Sales 1,581 856
Operating expenses (1,651) (1,338)
Financial result, net 65 55
Net loss for the year (5) (427)
Group share in net loss for the year (2) (142)
Depreciation on fair value adjustments on intangible fixed assets (net of (50) (46)
deferred tax)
Total Group share in net loss for the year (52) (188)
Other comprehensive income 67 21
Group share in total comprehensive income/ (expense) 15 (167)
Reconciliation of the aforementioned financial information with the net carrying amount of the investment of STEM Animal Health Inc. in the consolidated financial statements:
Unaudited
For the year ended For the year ended
31 December 2022
31 December 2021
£'000 £'000
As at 1 January 1,290 1,457
Acquisition in joint venture − −
Group share of net loss for the year (52) (188)
Foreign currency translation differences 67 21
As at 31 December 1,305 1,290
13. Borrowings
The loans and borrowings include the following:
For the year ended
31 December
Interest Maturity Unaudited
rate
2022 2021
£'000 £'000
Revolving credit facilities Euribor +1.50% March 25 4,435 5,462
Acquisition loan Euribor +1.75% March 25 3,011 1,719
Lease liabilities See note 16 11,437 10,962
Total loans and borrowings
Of which
Non-current 10,585 10,239
Current 852 723
Borrowing facilities
The Group has total facilities of €51.5m to 31 March 2025, provided by a
syndicate of four banks, comprising a committed revolving credit facility
(RCF) of €41.5m and a €10.0m acquisition line, the latter of which cannot
be utilised to fund operations.
The loans have a variable, Euribor-based interest rate, increased with a
margin of 1.50% or 1.75%. The revolving credit facilities and the acquisition
financing have a bullet maturity in March 2025.
The Group manages its banking arrangements centrally through cross-currency
cash pooling. Funds are swept daily from its various bank accounts into
central bank accounts to optimise the Group's net interest payable position.
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; and
● Solvency (total assets less goodwill/total equity less goodwill)
greater than 25%.
Net of cash balances totalling £6.0m, £4.4m of the RCF was utilised at the
year end, leaving headroom of £38.4m.
As at 31 December 2022 and throughout the financial year, all covenant
requirements were met with significant headroom across all three measures.
Net debt reconciliation
As at 31 December
Unaudited 2021
2022
£'000 £'000
Net debt
Cash and cash equivalents 6,035 5,633
Borrowings (8,426) (9,244)
Lease liabilities (3,011) (1,719)
Total (5,402) (5,330)
Liabilities from financing activities Other assets
Borrowings Leases Cash Total
£'000 £'000 £'000 £'000
Net debt as at 1 January 2020 (17,069) (1,812) 5,265 (13,616)
Financing cash flows 6,952 1,077 96 8,125
New leases − (1,037) − (1,037)
Foreign exchange adjustments − 105 272 377
Other charges
Interest Income / (expense) 873 (53) − 820
Net debt as at 31 December 2021 (9,244) (1,720) 5,633 (5,331)
Financing cash flows 1,320 1,086 614 3,020
New leases − (2,142) − (2,142)
Foreign exchange adjustments − (145) (212) (357)
Other charges
Interest expense (502) (90) − (592)
Net debt as at 31 December 2022 (Unaudited) (8,426) (3,011) 6,035 (5,402)
14. Accrued charges and contract liabilities
Accrued charges and contract liabilities consists of the following:
For the year ended
31 December
Unaudited 2021
2022
£'000 £'000
Accrued charges 777 923
Contract liabilities - due within one year 512 168
Other (13) (8)
Total due within one year 1,276 1,083
Contract liabilities - due after one year 372 675
Accrued charges of £777k (2021: £923k) mainly include Ecuphar Veterinaria
(£406k), Ecuphar NV (£64k), Belphar (£235k) and UK (£70k) and are mostly
related to payroll and accrued bank interest costs.
Contract liabilities are liabilities that arise from certain services sold by
the Group's subsidiary Identicare Limited.
Historically, and in return for a single upfront payment, Identicare Limited
committed to providing certain database, pet reunification and other support
services to customers over the life of the pet. There is no contractual
restriction on the amount of times the customer makes use of the services. At
the commencement of the contract, it is not possible to determine how many
times the customer will make use of the services, nor does historical evidence
provide indications of any future pattern of use. As such, income is
recognised evenly over the term of the contract, currently between eight and
14 years.
Throughout 2022, Identicare Limited also operated both monthly and annual
subscription-based services to pet owners, with income recognised accordingly
over the period of the subscription.
Movements in the Group's contract liabilities tables outstanding:
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Balance at the beginning of the year 843 790
Contract liabilities to following years 418 170
Release of contract liabilities from previous years (377) (117)
Balance at the end of the year 884 843
The contract liabilities fall due as follows:
For the year ended 31 December
Unaudited 2021
2022
£'000 £'000
Within one year 512 168
After one year 372 675
Balance at the end of the year 884 843
15. Number of shares to be disclosed
Share Capital For the year ended
31 December
Number of shares Unaudited 2021
2022
Allotted, called up and fully paid ordinary shares of 20p each 60,092,161 60,092,161
For the year ended
31 December
Unaudited 2021
2022
£'000 £'000
Allotted, called up and fully paid ordinary shares of 20p each 12,019 12,019
The following share transactions have taken place during the year ended 31
December 2022:
For the year ended
31 December
Number of shares £'000
At 1 January 2022 60,092,161 12,019
At 31 December 2022 (Unaudited) 60,092,161 12,019
Dividends
For the year ended
31 December
Unaudited 2021
2022
£'000 £'000
Ordinary final dividend as at 31 December 2020 of 2.0p per share − 1,201
Ordinary interim dividend paid as at 31 December 2021 of 2.0p per share − 1,202
Ordinary final dividend as at 31 December 2021 of 2.4p per share 1,442 −
Ordinary interim dividend paid as at 31 December 2022 of 2.0p per share 1,202 −
2,644 2,403
An interim dividend of 2.0 pence per share was paid in November 2022.
The Board is proposing a final dividend of 2.4 pence per share (2021: 2.4
pence per share). Subject to shareholder approval at the Annual General
Meeting to be held on 13 June 2023, the final dividend will be paid on 14 July
2023 to shareholders whose names are on the Register of Members at close of
business on 16 June 2023. The ordinary shares will become ex-dividend on 15
June 2023.
16. IFRS 16 Leases
The balance sheet shows the following amounts relating to leases as at 31
December 2022:
Unaudited
As at 31 December 2022 As at 31 December 2021
£'000 £'000
Buildings 1,639 579
Vehicles 1,257 1,079
Other 28 -
Total right-of-use assets 2,924 1,658
Current lease liabilities 852 723
Non-current lease liabilities 2,159 996
Total lease liabilities 3,011 1,719
Below are the carrying amounts of right-of-use assets recognised and the
movements during the year:
Land and buildings Vehicles Other Total
£'000 £'000 £'000 £'000
Acquisition value/cost
As at 1 January 2021 1,570 2,029 84 3,683
Additions 336 881 - 1,217
Disposals (286) (425) (63) (774)
Transfers 3 - (3) -
Currency Translation (84) (134) (2) (220)
Contract modifications (12) (61) - (73)
As at 31 December 2021 1,527 2,290 16 3,833
Additions 1,343 678 30 2,051
Disposals (855) (415) (14) (1,284)
Currency Translation 104 128 1 233
Contract modifications (5) 75 - 70
As at 31 December 2022 (Unaudited) 2,114 2,756 33 4,903
Depreciation
As at 1 January 2021 (739) (1,071) (83) (1,893)
Depreciation charge for the year (428) (634) (4) (1,066)
Disposals 173 393 63 629
Transfers (6) - 6 -
Contract modifications 9 31 - 40
Currency translation 43 70 2 115
As at 31 December 2021 (948) (1,211) (16) (2,175)
Depreciation charge for the year (358) (662) (3) (1,023)
Disposals 855 415 14 1,284
Contract modifications - 27 - 27
Currency translation (24) (68) - (92)
As at 31 December 2022 (Unaudited) (475) (1,499) (5) (1,979)
Net book value
At 31 December 2022 1,639 1,257 28 2,924
Below are the values for the movements in lease liability during the year:
Lease Liability
£'000
As at 1 January 2022 1,719
Additions 2,066
Disposals (6)
Interest expense 90
Payments (1,086)
Modifications 82
Currency translation adjustment 146
As at 31 December 2022 (Unaudited) 3,011
The following amounts are recognised in the income statement:
Unaudited
For the year ended 31 December 2022
£'000
Depreciation expense of right-of-use assets (1,023)
Interest expense on lease liabilities (90)
Gain on disposal of IFRS 16 assets 6
Expense relating to short-term leases and low-value assets (108)
Total amount recognised in the income statement (1,215)
Cash-flows relating to leases are presented as follows:
● Cash payments for the principal portion of the lease liabilities
as cash flows from financing activities;
● Cash payments for the interest portion consistent with
presentation of interest payments chosen by the Group; and
● Short-term lease payments, payments for leases of low-value assets
and variable lease payments that are not included in the measurement of the
lease liabilities as cash flows from operating activities.
17. Contingent liability relating to the sale of Medini NV
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 part of the claim, amounting to €157,836 (£139,988), may be
valid. Following various discussions and correspondence, during which the
parties were unable to reach an 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 €432,762 (£383,824). The process involving the
expert auditor is ongoing. Other than the €157,836 (£139,988), which may
be valid, and is written off from the outstanding other receivables from
Vetdis, no further provision in respect of this matter has been included in
the financial statements.
18. Restatement of comparative figures
Intangible Assets (note 11) has been restated to reclassify 'Assets under
construction' that were previously presented as Property, Plant and Equipment
as Intangible Assets as they related to research and development. The impact
on the balances for the year ended 31 December 2021 and 1 January 2022 is as
follows:
As at 31
December 2021
£'000
Previously stated
Intangible assets 29,719
Property, plant and equipment 626
Adjusted
Intangible assets 494
Property, plant and equipment (494)
Restated
Intangible assets 30,213
Property, plant and equipment 132
19. Annual Report
This unaudited preliminary financial information is not being sent to
Shareholders.
A further announcement will be made when the Annual Report and Accounts for
the year ended 31 December 2022 will be made available on the Company's
website and copies sent to shareholders.
Further copies will be available to download on the Company's website at:
www.animalcaregroup.com and will also be available from the Company's
registered office address: Moorside, Monks Cross, York, YO32 9LB, United
Kingdom.
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