REG - Animalcare Group PLC - Full year results 2021
29/03/2022 07:00
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RNS Number : 3079G Animalcare Group PLC 29 March 2022
Animalcare Group plc
("Animalcare", the "Company" or the "Group")
Full Year Results for the year ended 31 December 2021
29 March 2022. Animalcare Group plc (AIM: ANCR), the international animal
health business, announces its audited full year results for the year ended 31
December 2021.
Financial Highlights
· Revenues grew 5.0% to £74.0m (8.0% up at CER) on strong Companion
Animals demand and contribution from new products
· Improved gross margins drove double-digit increase in underlying*
EBITDA to £13.5m as profitability benefited from continuing focus on top
selling brands (2020: £12.1m)
· Statutory profit before tax, incorporating non-underlying items of
£0.9m (2020: £0.2m), with reported basic loss per share of 0.1 pence (2020:
0.4 pence profit per share)
· Continued strong underlying* cash conversion of 108.8% (2020: 102.9%)
reduced net debt to £5.3m at year end, further strengthening Group's capacity
to support investment in growth strategy
· Proposed final dividend of 2.4 pence per share (2020: 2.0 pence per
share)
Strategic and Operational Highlights
· Daxocox approved in EU and UK and launched successfully across all
markets, generating £1.2m in second half sales
· Further optimisation of portfolio yields 8.3% increase in revenues
generated by top 40 selling brands
· Sandra Single joins Senior Executive Team in newly created Strategic
Product and Portfolio Director role
· Continuing investment in people focuses on Group-wide sales and
marketing excellence and leadership development
· Pipeline strengthened through post-period end early-stage licencing
and collaboration agreement with Orthros Medical for innovative VHH antibodies
therapy
*Underlying measures are before the effect of non-underlying items which excludes fair value adjustments on acquired inventory, amortisation of acquired intangibles and acquisition and integration costs. A reconciliation to statutory measures is provided in the Chief Financial Officer's Review.
Commenting on the full year results, Chief Executive Officer, Jenny Winter
said: "Positive trading performance and improved margins combined to further
strengthen our financial platform as we continue to invest in the future
success of the Group.
"Growth in revenues over the year was driven by attractive fundamentals and
increased demand in our Companion Animals markets. Profitability, meanwhile,
benefited from our ongoing focus on the top selling brands supported by
contributions from newly launched products. Continuing strong cash conversion
drove a further marked reduction in net debt putting us comfortably below our
net debt to underlying EBITDA leverage target range thereby increasing our
deal-making flexibility.
"Operationally, we made good progress against our strategic priorities.
Daxocox, our novel COX-2 inhibitor for osteoarthritis-related pain in dogs,
received marketing approval in the EU and the UK in April 2021 and launched
successfully in the second half. In a post-period event we made important
advances on the business development front through an early-stage licencing
and collaboration agreement with Orthros Medical, initially to develop new
arthritis treatments that exploit the innovative potential of VHH antibodies.
"We recognise that investing in our people is as important as investing in our
pipeline and other areas of our business. It's exciting, therefore, to see the
roll-out of consistent Group-wide leadership development and sales and
marketing frameworks to ensure we maintain and build competitiveness in our
fast-evolving, dynamic markets.
"Early sales performance in 2022 is in line with management expectations and
we are confident that we can continue to grow revenues while facing marked
inflationary and foreign exchange headwinds. It's a credit to the commitment,
agility and skill of the Animalcare team that the Group is in a strong
position as we set our sights on delivering another successful year."
Analyst webcast
A briefing for analysts will be held at 10:30 BST on Tuesday 29 March 2022 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_LQ129OkwTsmm3fYVAmeQzg
(https://eur04.safelinks.protection.outlook.com/?url=https%3A%2F%2Fstifel.zoom.us%2Fwebinar%2Fregister%2FWN_LQ129OkwTsmm3fYVAmeQzg&data=04%7C01%7Cnmccrae%40animalcaregroup.com%7C48417db4672c400cc52a08da081dfb0c%7Ce3d54ae94f784bcdb87ca73ab1c9c241%7C0%7C0%7C637831222104981832%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000&sdata=Zx%2FygCs2nzrzgWgS2Pi3lseiI7CluZoR0P7Gj7db7%2Fo%3D&reserved=0)
A copy of the analyst presentation will be made available on the Group website
shortly after the webcast.
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 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
Nick Harland
Panmure Gordon +44 (0)20 7886 2500
(Joint Broker)
Corporate Finance
Freddy Crossley/Emma Earl
Corporate Broking
Rupert Dearden
Chairman's statement
I am delighted to report that 2021 was a year of delivery for Animalcare.
Positive trading performance on the back of resurgent demand further
strengthened our financial platform as we continued to make significant
progress against our strategic priorities.
After a particularly challenging 2020, in which the Animalcare team
demonstrated resilience and agility in the face of the COVID-19 pandemic, we
delivered a healthy level of growth across the year.
At £74.0m, total revenues were 5.0% ahead of the prior year, an increase of
8.0% at constant exchange rates. The principal driver of growth was the
recovery in the Companion Animals market with demand boosted by positive
fundamentals such as increased pet ownership and the relative relaxation of
pandemic controls on the operation of veterinary practices. Our Companion
Animals segment, which also benefited from newly introduced products, grew by
14.6% over the period.
Underlying EBITDA, a key measure of profit, increased at a double-digit
percentage rate to £13.5m as margins benefited from a favourable product mix,
even accounting for an increase in SG&A-related investment in our people.
The ongoing management of our product portfolio is also having a positive
impact; efforts to retire smaller "tail" products continue, concentrating
management attention on bigger selling brands with higher returns and higher
potential. After underlying adjustments totalling £8.6m (2020: £7.8m) the
profit before tax on a reported basis was £0.9m (2020: £0.2m).
Cash generation was again a feature of our performance with a particularly
strong cash conversion rate of 108.8% helping to reduce net debt to £5.3m by
year end. This represents a 60% improvement for the year (2020: £13.6m),
placing us well below our target leverage range and further equipping us with
the financial muscle to invest in pipeline and commercial growth
opportunities.
The Group's positive trading performance, robust financial position and
confident outlook have supported the Board's decision to propose a final
dividend of 2.4 pence per share (2020: 2.0 pence per share).
Organisationally, the move to a regional management structure at the beginning
of the year has had a positive impact, enabling a more focused Senior
Executive Team to concentrate decision-making on performance and growth
opportunities. Investment in our people remains a priority so the roll out of
a new leadership development programme that will provide a consistent approach
is an important step for the Group.
This has been a significant year for our internal pipeline with the launch of
Daxocox, our novel COX-2 inhibitor for the treatment of osteoarthritis-related
pain in dogs. We received marketing approval in the EU and the UK in April and
commenced launch activities across our markets in the second half of the year.
We're still at an early stage with Daxocox but are encouraged by progress to
date and remain confident that this product can have a growing, positive
impact on animals and their owners for years to come. Life cycle management
projects are under way to extend the potential of Daxocox into new indications
and new territories.
Consistent with our strategy, we continue to focus on external business
development opportunities: from pipeline partnerships with long-term potential
to commercial deals that deliver earnings growth in the nearer term. STEM
Animal Health Inc., the joint venture we established with Kane Biotech in
September 2020, is soon to reach our markets with the launch of the first
Plaqtiv+ range of dental treatment products that exploit the benefits of
anti-biofilm technology to combat oral infections. Additionally, in a post
period event, we reached a research and development partnership with
Netherlands-based Orthros Medical to explore the promising therapeutic
potential of novel antibodies in a veterinary setting. This collaboration and
R&D agreement gives us access to innovative VHH antibody technology
thereby substantially strengthening our early-stage pipeline, a key building
block of our long-term growth strategy.
Animalcare has always strived to be a good corporate citizen wherever we
operate. Historically, we have viewed this through a local lens. But as we
grow, so do the expectations of a widening set of stakeholders. In our annual
report we lay out the steps we will take to create a meaningful, achievable
and measurable Group-wide plan that ensures we operate sustainably across our
markets in a co-ordinated manner.
Looking to the future, we believe the attractive fundamentals that helped fuel
demand during 2021 will continue to support growth in 2022; sales in the early
part of the year provide grounds for optimism on that score while we navigate
and manage headwinds, notably in the form of inflation and foreign exchange.
Overall, however, the long-term positives of the animal health market and the
strong position of the Group continue to give us confidence to invest in
value-creating growth opportunities.
I'd like to take this opportunity to welcome Dr Douglas Hutchens to the Board
of Animalcare Group plc whose appointment as Non-Executive Director was
announced on 10 February 2022. Douglas's expertise in veterinary medicine and
R&D combined with his extensive network will prove invaluable as
we pursue our long-term growth strategy.
On behalf of the Board, I'd also like to recognise our employees for
delivering such a positive performance in 2021 and thank our shareholders for
their continuing support.
Jan Boone
Non-Executive Chairman
Chief Executive Officer's Review
2021 was a year to celebrate for Animalcare. The continuing evolution of our
product portfolio, which saw significant contributions from new products such
as Daxocox, helped deliver positive results in a growing and dynamic animal
health market. This performance further strengthened the Group's financial
position, equipping us with the firepower to invest in opportunities that are
consistent with our growth strategy.
Organisationally, we continued to build the scalable and sustainable business
platform required to support delivery of our long-term ambitions.
Strong finances
Pleasingly, we delivered positive results against all our key financial
parameters.
Revenues for the year were £74.0m, an increase of 5.0% on the prior year, or
8.0% at constant exchange rates. Group sales performance largely mirrored the
strong uptick in demand seen across the Companion Animals market which was
propelled by attractive fundamentals such as increased pet ownership and a
loosening of COVID-related restrictions on veterinary practices during the
year. The rapid recovery in trading conditions was visible in exceptionally
strong Q1 revenues compared to the same period in 2020. We expect to see a
more normal pattern of sales for the opening months of 2022.
Benefiting from a favourable product mix, our gross margin of 53.3% was ahead
of the prior year (2020: 51.9%). This contributed to underlying EBITDA of
£13.5m (2020: £12.1m) which grew ahead of revenue even allowing for the
absorption of increased SG&A costs chiefly related to investment in our
people and sales and marketing excellence. After underlying adjustments
totalling £8.6m (2020: £7.8m) the profit before tax on a reported basis was
£0.9m (2020: £0.2m).
The Group's very strong cash conversion rate of 108.8% helped drive net debt
lower to £5.3m as of 31 December 2021, a remarkable 60% reduction over the 12
months.
This was a significant achievement and an important milestone. After several
years of concerted effort to improve our balance sheet, we are now comfortably
below our stated target leverage range of 1 to 2 times underlying EBITDA. This
increases our investment capacity and flexibility in the continued pursuit of
pipeline and business development opportunities that support our long-term
growth strategy.
Key leadership
In 2021 we made important strides to further align our capabilities and
structure with our growth strategy.
At the beginning of the year, we adopted a regional model overseen by a
slimmed down Senior Executive Team (SET). Built around the South Region
(Spain, Portugal and Italy) and North Region (UK, Germany, Belgium and
Netherlands), the new structure has increased management focus on performance
and growth opportunities while streamlining decision-making.
To help embed this approach we have deployed a number of our key people to
regional or Group roles. That has the effect of improving operational
efficiency and consistency as we continue to build a scalable organisation
that can adapt and flex as we grow. We are also investing in company-wide
skills development, most notably in the area of sales & marketing
excellence. It's vital that we continue to forge capability in this space as
we introduce innovative new products in increasingly competitive and dynamic
veterinary markets that have seen changes in ways of working, often
accelerated by the pandemic.
More broadly, we are implementing a company-wide initiative to develop the
cadre of leaders that will steer Animalcare to a successful future. Built
around the proven principles of "high challenge, high support", this programme
will help us to nurture the strong talent that exists at all levels across the
Group.
Our annual Gallup employee survey is a valuable management tool that helps us
pinpoint opportunities to maintain and build levels of engagement across the
business. Following on from an exceptionally positive survey result in 2020,
we saw a slight (4%) decrease in the overall engagement measure for 2021.
Naturally, we would like to see that score improve year on year. But we also
recognise that this rating keeps us well ahead of Gallup's European average
benchmark of companies.
Through the survey, employees told us that they felt more of a "One Team"
spirit, noticed an improvement in communication and cross-country
collaboration and appreciated increased training and development
opportunities.
They have also helped us set priorities for 2022 including better
understanding of our strategic pillars in a changing marketplace, improved
internal communication process and associated use of digital tools and the
roll-out of our leadership programme.
Strategic Product and Portfolio Director
We're delighted to welcome Sandra Single to the Animalcare team who has joined
us as Strategic Product and Portfolio Director and as a member of the Group's
Senior Executive Team. In the newly created role Sandra is accountable for
the alignment of internally and externally sourced products to drive future
growth. She leads the Technical, R&D, Quality, Regulatory and Project
Management teams and works alongside the Group's specialist Business
Development resource on potential deals. Sandra brings a wealth of research,
development, portfolio management and licensing experience to the Group.
Growth portfolio
Maintaining a high quality and competitive portfolio is key to our future
success. It serves as both a solid foundation and an engine of growth. In
2021, we continued with our efforts to rationalise the number of smaller
"tail" products, thereby concentrating management and sales & marketing
attention on bigger selling, higher margin products. Collectively, our top 40
selling brands accounted for approximately 75% of total revenue, an increase
of 8.3% compared with the prior year.
In 2021 we were delighted to see Daxocox enter that top 40 category. Our novel
treatment for osteoarthritis-related pain in dogs was introduced in the second
half and generated £1.2m in sales. Though we are launching into a vigorous
marketplace, increasingly characterised by large corporate veterinary groups,
we remain confident Daxocox will be our biggest selling product within the
next five to ten years.
We continue to see the greatest growth potential in the Companion Animals and
Equine segments of our business, particularly over the longer term.
Consequently, that's where we direct most of our investment. However, our
Production Animals business continues to enjoy positive fundamentals and
generate attractive returns. Indeed, while the revenues derived from this
product category declined by 13.9% versus 2020, adjusting for the previously
mentioned discontinuation of a legacy distribution agreement in Belgium at the
beginning of 2021, our retained Production Animals business grew sales and
margins over the year.
Business development
Seeking out pipeline and business development opportunities through
partnerships or acquisitions is a central element of our growth strategy. It's
never an easy task, but there are attractive opportunities. Indeed, I don't
recall many occasions during the year when we were not involved in talks over
one or more promising agreements.
Animalcare's strong balance sheet, backed by an experienced business
development team, equips us with the financial resources and skills to convert
these opportunities into reality. It's particularly satisfying, therefore, to
have struck an early-stage research and development agreement with
Netherlands-based Orthros Medical. Announced on 24 March 2022, the licensing
and collaboration deal seeks to unlock the exciting therapeutic potential of
VHH antibodies, initially for the treatment of canine osteoarthritis. This
agreement represents a key building block in our long-term growth strategy in
an area of therapeutic focus and significant market growth.
In addition, the first products from STEM Animal Health Inc. - our joint
venture with Kane Biotech signed in September 2020 - are soon to hit the
market following completion of manufacturing transfer and the start of listing
negotiations with key customers. We have also extended our commercial reach
through a distribution agreement with Virbac to market and sell Daxocox in
most European countries outside Animalcare's direct territories.
Innovative pipeline
Daxocox received marketing authorisation for EU countries and the UK in April
2021. Launch activities kicked off at the end of the first half of the
financial year and are under way across all our markets. R&D life cycle
management programmes for Daxocox have been initiated to target new
indications, new formulations and geographic expansion. For the STEM joint
venture, coactive+ biofilm and Dispersin B pipeline projects have been
initiated, with a particular focus on otitis.
Our early-stage agreement with Orthros Medical provides an important new
dimension to our growing pipeline as we pursue the potential for novel VHH
antibody technology that we believe will become an increasing feature of
veterinary treatment.
To support delivery of pipeline opportunities, total R&D investment
reached £1.3m. We expect this to increase in 2022 as we invest in our VHH
antibodies partnership with Orthros Medical and other future growth
opportunities.
Summary and outlook
We entered 2021 at pace with exceptional revenue and profit growth rates in
the first quarter driven by a post-pandemic recovery in Companion Animals
demand. While we saw a return to more normal trading levels across the rest of
the year, we delivered a very positive overall performance and a further
significant improvement in the Group's financial position, enabling us to
continue investing in our long-term growth strategy.
Early sales activity in 2022 is in line with management expectations, although
compared to 2021 we anticipate a more even balance between the first and
second halves as the grip of COVID-19 loosens over time. Across the full year
we expect our revenue and growth momentum to continue while we navigate
inflationary and foreign exchange headwinds. Whatever conditions we encounter,
I know that we can continue to call on the commitment, agility, focus and
professionalism of the Animalcare team on our journey to become a leading
company in our chosen markets.
I'd like to thank each of our employees for their hard work and dedication.
It's hugely appreciated by all members of the senior management team.
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 statutory (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
2021 2020 % Change at AER
£'000 £'000 %
Revenue 74,024 70,494 5.0%
Gross Profit 39,418 36,559 7.8%
Gross Margin % 53.3% 51.9% 1.4%
Underlying Operating Profit 10,593 8,561 23.7%
Underlying EBITDA 13,455 12,091 11.3%
Underlying EBITDA margin % 18.2% 17.2% 1.0%
Underlying Basic EPS (p) 12.0p 10.6p 13.2%
We are pleased to report a positive trading performance with revenue growth
and improved gross margins leading to a double-digit increase in underlying
EBITDA. The Group delivered very strong cash conversion which drove a
significant reduction in net debt during the year, further strengthening our
capacity to invest in our long-term growth strategy.
Revenues grew to £74.0m (2020: £70.5m), up 5.0% on the prior year (8.0% at
CER). As anticipated, revenue growth was weighted towards the first half as a
result of exceptional veterinary demand in Q1 and markets returning to more
normal levels over the course of the financial year.
Revenue by product category is shown in the table below:
2020 2020 % Change at AER
£'000 £'000
Companion Animals 51,326 44,808 14.5%
Production Animals 16,980 19,720 (13.9%)
Equine & other 5,718 5,966 (4.1%)
Total 74,024 70,494 5.0%
Companion Animals revenue, which represented approximately 69% of Group
turnover, is the key driver of our overall revenue growth, increasing by 14.5%
to £51.3m. This growth can be attributed to strong in-year market dynamics
across Europe, in particular during the first half of the year, newly
introduced products, which contributed £2.2m (2020: £1.9m) and continued
focus on driving value from our key (top 40) brands. Daxocox, our novel COX-2
inhibitor pain treatment for dogs, added £1.2m to revenue, predominantly
during the second half.
In contrast, Production Animals revenue declined by 13.9% versus the prior
year to £17.0m. This is primarily driven by the discontinuation of a legacy
distribution contract of several antibiotics and other lower margin products
within the Group's Belgium subsidiary. Production Animals remains an important
part of our South Region business, accounting for approximately 40% of
regional revenues. Within this region, Production Animals sales increased by
3.0% compared to 2020.
As expected, Equine and other sales decreased by 4.1% to £5.7m primarily due
to prior year stock build within our international partner channel in advance
of the manufacturing transfer of Danilon, which was completed during the year.
During 2021, we maintained our emphasis on optimising our portfolio to reduce
fragmentation and drive commercial focus towards our larger selling, higher
margin, brands. As a result, we entered 2022 with a portfolio that is close to
our target of approximately 150 brands. Revenues from the top 40 brands grew
by 8.3%, predominantly driven by new product launches during 2021 and 2020,
while improving our gross margins.
The strong revenue growth and higher margin product mix drove a significant
improvement in our operating profitability with underlying EBITDA at £13.5m
(2020: £12.1m), an increase of 11.3% versus prior year. SG&A costs
increased during the year to £26.0m (2020: £24.5m) principally driven by
investments in sales and marketing activities and our people. As a result,
SG&A expenses as a percentage of revenue increased to 35.1% (2020: 34.7%).
The underlying effective tax rate of 24.4% (2020: 20.1%) has increased versus
prior year primarily reflecting the geographic mix of profits and the one-off
impact of the substantively enacted 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 increased by 13.2% to
12.0 pence (2020: 10.6 pence).
Overview of reported financial results
Reported Group loss after tax for the year (after accounting for the
non-underlying items shown in the table and discussed below) was £0.1m (2020:
£0.2m profit), with reported loss per share at 0.1 pence (2020: 0.4 pence
earnings per share).
2021 Amortisation and impairment of intangibles Acquisition, restructuring, integration and other costs 2021 2020
Underlying results £'000 £'000 Reported Reported
£'000 results results
£'000 £'000
Revenue 74,024 - - 74,024 70,494
Gross Profit 39,418 - - 39,418 36,559
Selling, general & administrative expenses (26,759) (4,580) - (31,339) (30,427)
Research & development expenses (2,181) (951) - (3,132) (3,486)
Net other operating income/(expense) 115 (2,761) (312) (2,958) (1,843)
Operating profit/(loss) 10,593 (8,292) (312) 1,989 803
Net finance expenses (856) - - (856) (511)
Share in net loss of joint ventures (188) - - (188) (93)
Profit/(loss) before tax 9,542 (8,292) (312) 945 199
Taxation (2,325) 1,256 47 (1,022) 35
Profit/(loss) for the year 7,224 (7,036) (265) (77) 234
Basic earnings/(loss) per share (p) 12.0p - - (0.1p) 0.4p
Non-underlying items totalling £8.6m (2020: £7.8m) 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
£8.3m (2020: £5.9m). This charge primarily comprises amortisation in
relation to the reverse acquisition of Ecuphar NV and previous acquisitions
made by Ecuphar NV. The increase versus 2020 primarily reflects the non-cash
impairment of four projects that formed part of the acquired development
pipeline, the principal drivers for which are:
● the recall and suspension of all products containing ranitidine
for human use by European and US authorities. Consequently, Animalcare has
ceased development of ranitidine for animal use; and
● technical and manufacturing issues that have significantly
impacted the timing of supply and expected commercial returns of an equine
product.
2. Expenses relating to acquisition, business development, integration,
restructuring and other costs of £0.8m (2020: £1.5m) including the carve out
and partnership of Identicare Ltd, our microchipping and database services
business, with effect from 1 January 2022, reorganisation and restructuring of
our Belgium and UK logistic operations and relocation of our Spanish office;
3. £0.5m income in respect of product divestments as we continue to
focus on our core higher margin brands.
Dividends
An interim dividend of 2.0 pence per share was paid in November 2021.
The Board is proposing a final dividend of 2.4 pence per share (2020: 2.0
pence per share) in line with pre-COVID levels. Subject to shareholder
approval at the Annual General Meeting to be held on 7 June 2022, the final
dividend will be paid on 8 July 2022 to shareholders whose names are on the
Register of Members at close of business on 10 June 2022. The ordinary shares
will become ex-dividend on 9 June 2022.
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 have made significant progress during 2021 in reducing our debt and
increasing our financial capacity for M&A and pipeline opportunities that
support our long-term growth. The main driver for this was our very strong
cash conversion performance as set out in the table below:
2021 2020
£'000 £'000
Underlying EBITDA 13,455 12,091
Net cash flow from operations 14,023 11,117
Non-underlying items 611 1,324
Underlying net cash flow from operations 14,634 12,441
Underlying cash conversion % 108.8% 102.9%
Net cash flow generated by our operations increased to £14.0m (2020:
£11.1m). Net working capital reduced by £2.2m primarily due to lower than
expected receivables as a result of phasing of trading towards year end.
Inventories reduced by £1.4m driven by delayed supply, a large proportion of
which came into stock during Q1. The reduction in net working capital was in
part offset by a £1.8m increase in cash taxes mainly due to a combination of
geographic mix of profits, phasing of payments, settlement of prior year taxes
and reduced cash receipts in respect of R&D tax credits.
As we expect trading and inventory patterns to be more balanced over the
current financial year ending 31 December 2022, we anticipate cash conversion
to be lower in 2022, but remain on average over 2021 and 2022 within the
target 90-100% range.
Net debt reduced by £8.3m over the full year and stood at £5.3m on 31
December 2021. This significant improvement was largely driven by the very
strong cash conversion noted above. Exchange rate variations benefited the
net debt position by £1.1m.
£'000
Net debt at 1 January 2021 (13,618)
Net cash generated from operations 14,023
Net capital expenditure (2,675)
Investments in joint venture (289)
Net finance expenses (1,684)
Issue of share options 76
Dividends paid (2,403)
Foreign exchange on cash and borrowings 1,148
Movement in IFRS 16 lease liabilities 92
Net debt at 31 December 2021 (5,330)
Net capital expenditure of £2.7m (2020: £1.5m) largely comprises investment
in our product development pipeline of £1.3m, the most significant components
of which relate to Daxocox and milestone licence payments to STEM Animal
Health inc, together with £1.0m of expenditure relating to continuing
investment in our IT infrastructure, including new regulatory and quality
management systems and website and platform development relating to Identicare
Ltd.
The net debt to underlying EBITDA leverage ratio was approximately 0.4 times
(FY20: 1.1 times) comfortably below the Group's stated target range of 1-2
times underlying EBITDA.
Borrowing facilities
During the first half of the year, we completed an exercise with our four
syndicate banks to extend our existing banking facilities from 31 March 2022
to 31 March 2025.
The Group's financing arrangements consist of a committed revolving credit
facility of €41.5m and a €10m acquisition line, which cannot be utilised
to fund our operations. The investment loan facility was repaid in full at the
time of renewal.
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 2021 and throughout the financial year, all covenant
requirements were met with significant headroom across all three measures.
At 31 December 2021, total facilities were £43.3m, of which £3.6m, net of
cash balances, was utilised, leaving headroom of £39.7m.
Going concern
The Directors have prepared cashflow 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 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, including further unexpected COVID
disruptions, 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.
Summary and outlook
We delivered a strong set of results driven by growing demand in our Companion
Animals segment, underpinned by strong market fundamentals which have
moderated as we progressed through the financial year. Demand levels in the
early part of 2022 are encouraging and in line with expectations that revenue
and profit delivery will be more balanced over the current financial year
compared to 2021.
Our very strong underlying cash conversion led to a significant reduction in
net debt and the net debt to underlying EBITDA leverage ratio. We hence enter
2022 with increased capacity and flexibility to pursue business and product
development opportunities. Our licensing and collaboration agreement with
Orthros Medical, announced on 24 March 2022, is the first step towards
increasing investment in our product development pipeline.
Chris Brewster
Chief Financial Officer
29 March 2022
Consolidated income statement
Year ended 31 December 2021
For the year ended 31 December
Underlying Non-Underlying (note 4) Total Underlying Non-Underlying (note 4) Total
2021 2021 2021 2020 2020 2020
Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue 5 74,024 − 74,024 70,494 − 70,494
Cost of sales (34,606) − (34,606) (33,935) − (33,935)
Gross profit 39,418 − 39,418 36,559 − 36,559
Research and development expenses (2,181) (951) (3,132) (2,386) (1,100) (3,486)
Selling and marketing expenses (12,277) − (12,277) (12,325) − (12,325)
General and administrative expenses (14,482) (4,580) (19,062) (13,302) (4,800) (18,102)
Net other operating (expense)/income 115 (3,073) (2,958) 15 (1,858) (1,843)
Operating profit/(loss) 10,593 (8,604) 1,989 8,561 (7,758) 803
Financial expenses 6 (2,613) − (2,613) (1,051) − (1,051)
Financial income 7 1,757 − 1,757 540 − 540
Financial expenses net (856) − (856) (511) − (511)
Share in net loss of joint ventures accounted for using the equity method 12 (188) − (188) (93) − (93)
Profit/(loss) before tax 9,549 (8,604) 945 7,957 (7,758) 199
Income tax 8 (2,325) 1,303 (1,022) (1,604) 1,639 35
(Loss)/profit for the year 7,224 (7,301) (77) 6,353 (6,119) 234
Net profit/(loss) attributable to:
The owners of the parent 7,224 (7,301) (77) 6,353 (6,119) 234
Earnings per share for profit/(loss) attributable to the ordinary equity
holders of the Company:
Basic earnings per share 9 12.0p − (0.1p) 10.6p − 0.4p
Diluted earnings per share 9 12.0p − (0.1p) 10.6p − 0.4p
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 detail in
note 4 to these financial statements.
Consolidated statement of comprehensive income
Year ended 31 December 2021
For the year ended 31 December
2021 2020
£'000 £'000
(Loss)/ profit for the year (77) 234
Other comprehensive income
Cumulative translation differences* (638) 508
Other comprehensive (loss)/ income, net of tax (638) 508
Total comprehensive (loss)/ income for the year, net of tax (715) 742
Total comprehensive (loss)/ income attributable to:
The owners of the parent (715) 742
* May be reclassified subsequently to profit & loss
Consolidated statement of financial position
Year ended 31 December 2021
For the year ended 31 December
Notes 2021 2020
£'000 £'000
Assets
Non-current assets
Goodwill 10 50,337 50,987
Intangible assets 11 29,719 37,812
Property, plant and equipment 626 265
Right-of-use-assets 16 1,658 1,790
Investments in joint ventures 12 1,290 1,457
Deferred tax assets 8 1,963 2,220
Other financial assets 90 63
Other non-current assets 24 48
Total non-current assets 85,707 94,642
Current assets
Inventories 10,328 12,797
Trade receivables 7,135 10,142
Other current assets 1,200 1,589
Cash and cash equivalents 5,633 5,265
Total current assets 24,296 29,793
Total assets 110,003 124,435
Liabilities
Current liabilities
Borrowings 13 − (637)
Lease liabilities 16 (723) (951)
Trade payables (10,021) (11,348)
Tax payables (471) (553)
Accrued charges and contract liabilities 14 (1,083) (2,686)
Other current liabilities (2,156) (3,202)
Total current liabilities (14,454) (19,377)
Non-current liabilities
Borrowings 13 (9,243) (16,432)
Lease liabilities 16 (996) (861)
Deferred tax liabilities 8 (4,271) (4,804)
Contract liabilities 14 (675) (556)
Provisions (408) (96)
Other non-current liabilities (1,157) (717)
Total non-current liabilities (16,750) (23,466)
Total Liabilities (31,204) (42,843)
Net assets 78,799 81,592
Equity
Share capital 15 12,019 12,012
Share premium 15 132,798 132,729
Reverse acquisition reserve (56,762) (56,762)
Accumulated losses (11,676) (9,445)
Other reserves 2,420 3,058
Equity attributable to the owners of the parent 78,799 81,592
Total equity 78,799 81,592
Consolidated statement of changes in equity
Year ended 31 December 2021
Attributable to the owners of the parents
Share Share Retained earnings/ 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 for 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
Attributable to the owners of the parents
Share Share Retained earnings/ Accumulated losses Reverse acquisition reserve Other reserve Total
capital
premium
equity
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2020 12,012 132,729 (8,640) (56,762) 2,550 81,889
Profit for the year − − 234 − − 234
Other comprehensive income − − − − 508 508
Total comprehensive expense − − 234 − 508 742
Dividends paid − − (1,201) − − (1,201)
Share based payments − − 162 − − 162
At 31 December 2020 12,012 132,729 (9,445) (56,762) 3,058 81,592
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
Year ended 31 December 2021
For the year ended
31 December
Notes 2021 2020
£'000 £'000
Operating activities
Profit before tax 945 199
Non-cash and operational adjustments
Share in net loss of joint ventures 12 188 93
Depreciation of property, plant and equipment 1,186 1,243
Amortisation of intangible assets 11 7,217 8,149
Impairment of intangible assets 11 2,761 19
Share-based payment expense 249 162
Gain on disposal of fixed assets (396) (16)
Non-cash movement in provisions 120 534
Movement allowance for bad debt and inventories 760 509
Financial income (459) (219)
Financial expense 1,221 815
Impact of foreign currencies 88 (82)
Fair value adjustment contingent consideration (17) −
Movements in working capital
Decrease in trade receivables 3,540 640
Decrease/(Increase) in inventories 1,356 (1,615)
(Decrease)/increase in payables (2,698) 882
Income tax paid (2,038) (196)
Net cash flow from operating activities 14,023 11,117
Investing activities
Purchase of property, plant and equipment (557) (177)
Purchase of intangible assets 11 (2,658) (2,258)
Proceeds from the sale of property, plant and equipment (net) 540 122
Capital contribution in joint venture 12 (289) (593)
Net cash flow used in investing activities (2,964) (2,906)
Financing activities
Proceeds from loans and borrowings and convertible debt (8,476) (6,002)
Repayment of loans and borrowings 1,524 (5)
Repayment of IFRS16 lease liability 16 (1,024) (1,081)
Receipts from issue of share capital 76 −
Dividends paid 15 (2,403) (1,201)
Interest paid (447) (516)
Other financial (expense)/income (213) (53)
Net cash flow used in financing activities (10,963) (8,858)
Net increase/(decrease)in cash and cash equivalents 96 (647)
Cash and cash equivalents at beginning of year 5,265 6,165
Exchange rate differences on cash and cash equivalents 272 (253)
Cash and cash equivalents at end of year 5,633 5,265
For the year ended 31 December
Notes 2021 2020
£'000 £'000
Reconciliation of net cash flow to movement in net debt
Net increase in cash and cash equivalents in the year 96 (647)
Cash flow from decrease in debt financing 6,952 6,007
Foreign exchange differences on cash and borrowings 1,148 (1,290)
Movement in net debt during the year 8,196 4,070
Net debt at the start of the year (13,618) (17,812)
Movement in lease liabilities during the year 16 92 124
Net debt at the end of the year (5,330) (13,618)
Notes to the consolidated financial statements
Year ended 31 December 2021
1. Financial information
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2021 and 31 December 2020.
The financial information for 2020 is derived from the statutory accounts for
2020 which have been delivered to the Registrar of Companies and those for
2021 will be delivered in due course. 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.
2. Basis of preparation
The Group financial statements have been prepared and approved by the
Directors, except for the revaluation of certain financial instruments in
accordance with UK-adopted international accounting standards ('IFRS') and the
applicable legal requirements of the Companies Act 2006. They have also been
prepared in accordance with the requirements of the AIM Rules.
The consolidated financial statements cover the year ended 31 December 2021
and compromise the consolidated results of the Group. The financial
information included in this preliminary announcement has been prepared on the
same basis as set out in the Annual Report 2021.
3. Summary of significant accounting policies
Going concern
The Directors have prepared cashflow forecasts for a period of at least 12
months from the date of signing of the financial statements (the going concern
assessment period). These forecasts indicate that the Group will have
sufficient funds 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, including further unexpected COVID
disruptions, 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.
The Group's financing arrangements consist of a committed revolving credit
facility of €41.5m and a €10m acquisition line, 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 2021 and throughout the financial year, all covenant
requirements were met with significant headroom across all three measures.
4. Non-underlying items
For the year ended
31 December
2021 2020
£'000 £'000
Amortisation and impairment of acquisition related intangibles
Classified within research and development expenses 951 1,100
Classified within general and administrative expenses 4,580 4,800
Classified within net other operating expenses 2,761 -
Total amortisation and impairment of acquisition-related intangibles 8,292 5,900
Restructuring costs 17 415
Acquisition and integration costs 188 698
Brexit-related costs - 5
Divestments and business disposals (462) 85
COVID-19 11 283
Other non-underlying items 558 372
Total non-underlying items before taxes 8,604 7,758
Tax impact (1,303) (1,639)
Total non-underlying items after taxes 7,301 6,119
The amortisation charge of acquisition-related intangibles largely relates to
the Esteve acquisition of £1,980k (2020: £2,047k), the Riemser acquisition
of £212k (2020: £373k) and the reverse acquisition of Animalcare Group plc
of £3,375k (2020: £3,479k).
The impairment charge of £ 2,761k (2020: £nil) primarily reflects the
non-cash impairment of four projects that formed part of the acquired
development pipeline, the principal drivers for which are:
· the recall and suspension of all products containing ranitidine for
human use by European and US authorities. Consequently, Animalcare has ceased
development of ranitidine for animal use; and
· technical and manufacturing issues that have significantly impacted
the timing of supply and expected commercial returns of an equine product.
Expenses relating to acquisition, business development, integration,
restructuring and other costs of £0.8m (2020: £1.5m) include the carve out
and partnership of Identicare Ltd, our microchipping and database services
business, with effect from 1 January 2022, reorganisation and restructuring of
our Belgium and UK logistic operations and the relocation of our Spanish
office.
Finally, strong focus on core higher margin brands have led to several product
divestments with associated income on sale of £462k (2020: £85k).
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 financial
income, plus income taxes and deferred taxes, plus depreciation, amortisation
and impairment. Underlying EBITDA equals EBITDA plus non-underlying items.
The following table summarises the segment reporting from continuing
operations for 2021 and 2020. 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
2021 2020
£'000 £'000
Pharma
Revenues 74,024 70,494
Gross Profit 39,418 36,559
Gross Profit % 53% 52%
Segment underlying EBITDA 13,455 12,091
Segment underlying EBITDA % 18% 17%
Segment EBITDA 13,143 10,231
Segment EBITDA % 18% 15%
The segment EBITDA is reconciled with the consolidated net profit/(loss) of
the year as follows:
For the year ended 31 December
2021 2020
£'000 £'000
EBITDA 13,143 10,231
Depreciation, amortisation and impairment (11,154) (9,428)
Operating profit/(loss) 1,989 803
Financial expenses (2,613) (1,051)
Financial income 1,757 540
Share in net profit/(loss) of joint ventures (188) (93)
Income taxes (1,371) (985)
Deferred taxes 349 1,020
(Loss)/profit for the year (77) 234
Segment assets excluding deferred tax assets and financial instruments located
in Belgium, Spain, Portugal, the United Kingdom and other geographies are as
follows:
For the year ended
31 December
2021 2020
£'000 £'000
Belgium 8,834 11,353
Spain 2,811 2,476
Portugal 4,061 4,276
UK 62,157 68,042
Other 5,881 6,275
Non-current assets excluding deferred tax assets and financial instruments 83,744 92,422
Revenue by product category
For the year ended
31 December
2021 2020
£'000 £'000
Companion animals 51,326 44,808
Production animals 16,980 19,720
Equine 5,637 5,947
Other 81 19
Total 74,024 70,494
Revenue by geographical area
For the year ended 31 December
2021 2020
£'000 £'000
Belgium 4,023 9,502
The Netherlands 1,769 1,326
United Kingdom 15,471 11,553
Germany 10,373 10,746
Spain 21,035 17,990
Italy 8,885 7,935
Portugal 4,193 4,554
European Union - other 6,971 5,621
Asia 681 782
Middle East Africa 1 81
Other 622 404
Total 74,024 70,494
Revenue by category
For the year ended
31 December
2021 2020
£'000 £'000
Product sales 72,651 69,443
Services sales 1,373 1,051
Total 74,024 70,494
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. Financial expenses
Financial expenses include the following elements:
For the year ended
31 December
2021 2020
£'000 £'000
Interest expense 447 516
Foreign currency losses 1,912 418
Change in fair value - losses on financial instruments 85 17
Other financial expenses 169 100
Total 2,613 1,051
7. Financial income
Financial income includes the following elements:
For the year ended
31 December
2021 2020
£'000 £'000
Foreign currency exchange gains 1,754 518
Income from financial assets 1 13
Other financial income 2 9
Total 1,757 540
8. Income tax
Income tax
The following table shows the breakdown of the tax expense for 2021 and
2020:
For the year ended
31 December
2021 2020
£'000 £'000
Current tax charge (1,371) (830)
Tax adjustments in respect of previous years − (155)
Total current tax charge (1,371) (985)
Deferred tax - origination and reversal of temporary differences 458 950
Deferred tax - adjustments in respect of previous years (109) 70
Total deferred tax credit 349 1,020
Total tax (expense)/income for the year (1,022) 35
The total tax expense can be reconciled to the accounting profit as follows:
For the year ended
31 December
2021 2020
£'000 £'000
Profit before tax 945 199
Share in net loss/(profit) of joint ventures (188) (93)
Profit before tax, excl. Share in net loss of joint ventures 1,133 292
Tax at 19.00% (2020: 19.00%) (215) (55)
Effect of:
Overseas tax rates (386) (262)
Non-deductible expenses (180) (109)
Other taxes − (7)
Use of tax losses previously not recognised 76 181
Changes in statutory enacted tax rate (273) (4)
Tax adjustments in respect of previous year (109) (85)
Non recognition of deferred tax on current year losses (105) (423)
Recognition of formerly non-recognised deferred tax assets on TLCF 50 821
R&D relief 200 44
Other (80) (66)
Income tax (expense)/income as reported in the consolidated income statement (1,022) 35
The tax credit of £1,303k (2020: £1,639k) shown within "non-underlying
items" on the face of the consolidated income statement, which forms part of
the overall tax charge of £1,022k (2020: £35k credit) relates to the items
in note 4.
The tax rates used for the 2021 and 2020 reconciliation above are the
corporate tax rates of 25.00% (Belgium), 15.00% (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.
The March 2021 Budget resulted in an increase to the UK standard rate of
corporation tax to 25% from 1 April 2023. Given the legislation was enacted
during the year deferred taxes have been adjusted accordingly reflecting the
increase of the tax rate in the future, resulting in a deferred tax charge of
£273k.
Deferred taxes at the balance sheet date have been measured using the enacted
tax rates and reflected in these financial statements.
Deferred tax
(a) Recognised deferred tax assets and liabilities
Assets Liabilities Total
2021 2020 2021 2020 2021 2020
£'000 £'000 £'000 £'000 £'000 £'000
Goodwill (125) (150) (923) (785) (1,048) (935)
Intangible assets 243 275 (3,435) (4,048) (3,192) (3,773)
Property, plant and equipment (186) (309) (195) (130) (381) (439)
Financial fixed assets 1 1 − − 1 1
Inventory (11) (22) (40) (19) (51) (41)
Trade and other payables/receivables 94 120 59 46 153 166
Borrowings 182 272 223 132 405 404
Provisions 3 − − − 3 −
Accruals and deferred income 13 104 40 − 53 104
Tax losses carried forward 1,749 1,929 − − 1,749 1,929
Total 1,963 2,220 (4,271) (4,804) (2,308) (2,584)
(b) Movements during the year
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 payables/receivables 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)
Movement of deferred taxes during 2020:
Balance at 1 January 2020 Recognised in income Foreign exchange adjustments Balance at 31 December 2020
£'000 £'000 £'000 £'000
Goodwill (772) (118) (45) (935)
Intangible assets (3,771) (37) 35 (3,773)
Property, plant and equipment (399) (21) (19) (439)
Financial fixed assets 1 − − 1
Inventory (29) (10) (2) (41)
Trade and other payables/receivables 2 165 (1) 166
Accruals and deferred income 6 97 1 104
Borrowings 407 (24) 21 404
Tax losses carry forward and other tax benefits 903 968 58 1,929
Net deferred tax (3,652) 1,020 48 (2,584)
Tax losses
The Group has unused tax losses, tax credits and notional interest deduction
available in an amount of £7,435k for 2021 (2020: £7,532k).
Deferred tax assets have been recognised on available tax losses carried
forward for some legal entities, resulting in amounts recognised of £ 1,749k
(2020: £ 1,929k). This was based on management's estimate that sufficient
positive taxable basis will be generated in the near future for the related
legal entities with fiscal losses.
After re-evaluation it was decided that Ecuphar NV will not recognise new
deferred tax assets of £118k in 2021.
9. Earnings per share
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:
Profit/(loss) before continuing operations
For the year ended 31 December
2021 2020 2021 2020
Underlying Underlying Total Total
£'000 £'000 £'000 £'000
Net profit/(loss) for the year 7,224 6,353 (77) 234
Net profit/(loss) attributable to ordinary equity holders of the parent 7,224 6,353 (77) 234
adjusted for the effect of dilution
Average number of shares (basic and diluted)
For the year ended 31 December
2021 2020 2021 2020
Number of shares Underlying Underlying Total Total
Weighted average number of ordinary shares for basic 60,081,167 60,057,161 60,081,167 60,057,161
earnings per share
Dilutive potential ordinary shares - share options 376,836 42,581 376,836 42,581
Weighted average number of ordinary shares adjusted for effect of dilution 60,458,003 60,099,742 60,458,003 60,099,742
Basic earnings/(loss) per share
For the year ended 31 December
2021 2020 2021 2020
Underlying Underlying Total Total
in pence in pence in pence in pence
From operations attributable to the ordinary equity holders of the company 12.0 10.6 (0.1) 0.4
Total basic earnings per share attributable to the ordinary equity holders of 12.0 10.6 (0.1) 0.4
the company
Diluted earnings/(loss) per share
For the year ended 31 December
2021 2020 2021 2020
Underlying Underlying Total Total
in pence in pence in pence in pence
From operations attributable to the ordinary equity holders of the Company 12.0 10.6 (0.1) 0.4
Total basic earnings per share attributable to the ordinary equity holders of 12.0 10.6 (0.1) 0.4
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
2021 2020
£'000 £'000
CGU: Pharmaceuticals 50,337 50,987
Total 50,337 50,987
The changes in the carrying value of the goodwill can be presented as follows
for the years 2021 and 2020:
Total
£'000
At 1 January 2020 50,454
Currency translation 534
At 31 December 2020 50,988
Currency translation (651)
At 31 December 2021 50,337
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:
2021 2020
Discount rate (pre-tax) % 11.8 11.2
Growth rate (in perpetuity) % 1.9 2.0
In the prior year the discount rate (pre-tax) was incorrectly disclosed as
10.2%. This has been restated to disclose the actual pre-tax rate used in 2020
of 11.2%.
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 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 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 £19.9m 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 £15.3m but would not give rise to an impairment.
The CGU is robust to small reductions in short-term cash flows, whether driven
by lower sales growth, lower operating profits or lower cash conversion. A
57.0% reduction in total annual cash flows would give rise to an impairment of
£100k. An increase in discount rates to 20.1% or a reduction in perpetuity
growth rates to (18.6%) would each give rise to an impairment in the CGU of
£100k.
11. Intangible assets
The changes in the carrying value of the intangible assets can be presented as
follows for the years 2021 and 2020:
In Process R&D Patents, distribution rights and licenses Product portfolios and product development costs Capitalised software Total
£'000 £'000 £'000 £'000 £'000
Acquisition value/cost
At 1 January 2020 17,921 18,438 38,606 1,516 76,481
Additions 1,592 39 51 573 2,255
Disposals (1,104) − (1,957) (14) (3,075)
Currency translation 246 789 916 74 2,025
At 31 December 2020 18,655 19,266 37,616 2,149 77,686
At 1 January 2021 18,655 19,266 37,616 2,149 77,686
Additions 1,247 − 1,030 1,080 3,357
Disposals (4,934) (57) (134) (20) (5,145)
Transfers (2,195) − 2,195 − −
Currency translation (327) (961) (1,140) (119) (2,547)
At 31 December 2021 12,446 18,248 39,567 3,090 73,351
In Process R&D Patents, distribution rights and licenses Product portfolios and product development costs Capitalised software Total
Amortisation
At 1 January 2020 (4,813) (9,969) (17,769) (930) (33,481)
Amortisation (1,473) (2,805) (3,508) (363) (8,149)
Disposals 1,080 − 1,958 14 3,052
Impairments − (19) − − (19)
Transfers 44 − − (44) −
Currency translation (93) (511) (619) (54) (1,277)
At 31 December 2020 (5,255) (13,304) (19,938) (1,377) (39,874)
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 88 1,860
Other − − − (9) (9)
At 31 December 2021 (4,955) (14,374) (22,417) (1,886) (43,632)
Net carrying value
At 31 December 2021 7,491 3,874 17,150 1,204 29,719
At 31 December 2020 13,400 5,962 17,678 772 37,812
In-process research and development relates 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 an IT driven by accelerated CRM software
investment and website and platform development relating to Identicare Ltd.
The total amortisation charge for 2021 is £7,217k (2020: £8,149k) which is
included in 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 and impairment charge is
£8,292k (2020: £5,900k) relating to acquisition related intangibles.
Further an impairment charge of £2,761k (2020: £19k) was recorded during the
financial year.
In 2021, the Group has invested in intangibles for an amount of £ 3,357k,
which is £ 699k higher than the additions reported in the cashflow (£
2,658k). This is the result of the license payable to STEM, which is only
taken into capex for the actual cash out part.
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$1m was paid in 2020, CA$0.5m during the financial year and CA$1.5m
still payable over 34 months. The Group has an option, for a period of 5
years, to acquire an additional one-sixth 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 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.
During the financial year the group made its first license payment of CA$0.5m.
The following payment is due in 2023, therefore only a long-term payable of
CA$1.3m (£766k) is remaining. Further, for the capital contribution, the
outstanding short-term liability is £277k (2020: £272k), shown in the
balance sheet as other current liability. The outstanding long-term liability
is £502k (2020: £717k), shown in the balance sheet as other non-current
liability. The Group expects the licencing agreement to be earnings enhancing
in 2022.
Name of entity Place of business/country of incorporation % of ownership interest Nature of relationship Measurement method Carrying amount
2021 2020 2021 2020
% % £'000 £'000
STEM Animal Health Inc. Canada 33.34% 33.34% Joint Venture Equity method 1,290 1457
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 reflects the amounts presented in the financial
statements of the relevant joint venture followed by Animalcare's share of
those amounts.
For the year ended 31 December 2021 For the year ended 31 December 2020
£'000 £'000
Non-current assets 547 760
Current assets 945 911
Total assets 1,492 1,671
Non-current liabilities 0 0
Current liabilities 525 297
Total liabilities 525 297
Net assets 967 1,374
Group Share 322 458
Goodwill 561 552
Fair value identified intangibles 554 608
Deferred tax liability (147) (161)
Investment value in joint venture 1,290 1,457
Summarised statement of comprehensive income:
For the year ended For the year ended 31 December 2020
31 December 2021
£'000 £'000
Sales 856 134
Operating expenses (1,338) (378)
Financial result, net 55 (1)
Net (loss)/profit for the year (427) (245)
Group share in net (loss)/profit for the year (142) (82)
Depreciation on fair value adjustments on intangible fixed assets (net of (46) (11)
deferred tax)
Total group share in net (loss)/profit for year (188) (93)
Other comprehensive income 21 (18)
Group share in total comprehensive income (167) (111)
Reconciliation of the aforementioned financial information with the net
carrying amount of the investment of STEM Animal Health Inc. in the
consolidated financial statements:
As at 1 January 1,457 −
Acquisition in joint venture − 1,568
Group share of net profit/(loss) for the year (188) (93)
Foreign currency translation differences 21 (18)
As at 31 December 1,290 1,457
13. Borrowings
The loans and borrowings include the following:
For the year ended 31 December
Interest Maturity 2021 2020
rate
£'000 £'000
Revolving credit facilities Euribor +1.50% March 25 5,462 12,227
Roll over investment facility Euribor +1.50% March 25 − 797
Acquisition loan Euribor +1.75% March 25 3,781 4,045
Lease liabilities See note 16 1,719 1,812
Total loans and borrowings 10,962 18,881
Of which
Non-current 10,239 17,293
Current 723 1,588
Revolving credit facilities and roll over investment facilities
The Group's financing arrangements are split equally amongst four syndicate
banks. The current agreements consist of:
· €41.5m revolving credit facilities
· €10m available acquisition financing
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.
14. Accrued charges and contract liabilities
Accrued charges and contract liabilities consists of the following:
For the year ended 31 December
2021 2020
£'000 £'000
Accrued charges 923 2,450
Contract liabilities - due within one year 168 234
Other (8) 2
Total due within one year 1,083 2,686
Contract liabilities - due after one year 675 556
Accrued charges of £923k (2020: £2,450k) mainly include Ecuphar Veterinaria
(£451k), Ecuphar NV (£138k) and Belphar (£266k) and are mostly related to
pay-roll, marketing authorisation holder fees and bank interest costs.
Contract liabilities arise from certain services sold by the Group's
subsidiary Identicare Ltd. Historically, and in return for a single upfront
payment, Identicare Ltd 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 2021, Identicare Ltd 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
2021 2020
£'000 £'000
Balance at the beginning of the year 790 772
Contract liabilities deferred to following years 170 201
Release of contract liabilities from previous years (117) (183)
Balance at the end of the year 843 790
The contract liabilities fall due as follows:
For the year ended 31 December
2021 2020
£'000 £'000
Within one year 168 234
After one year 675 556
Balance at the end of the year 843 790
15. Equity
Share capital
For the year ended
31 December
Number of shares 2021 2020
Allotted, called up and fully paid Ordinary Shares of 20p each 60,092,161 60,057,161
For the year ended 31 December
2021 2020
£'000 £'000
Allotted, called up and fully paid Ordinary Shares of 20p each 12,019 12,012
The following share transactions have taken place during the year ended 31
December 2021:
For the year ended 31 December
Number of shares £'000
At 1 January 2021 60,057,161 12,012
Exercise of share options 35,000 7
At 31 December 2021 60,092,161 12,019
Dividends
For the year ended 31 December
2021 2020
£'000 £'000
Ordinary interim dividend paid for the period ended 31 December 2020 of 2.0p − 1,201
per share
Ordinary final dividend for the year ended 31 December 2020 of 2.0p per 1,201 −
share
Ordinary interim dividend paid for the period ended 31 December 2021 of 2.0p 1,202 −
per share
2,403 1,201
16. IFRS 16 Leases
The balance sheet shows the following amounts relating to leases as at 31
December 2021:
31 December 2021 1 January 2021
£'000 £'000
Buildings 579 831
Vehicles 1,079 957
Other - 1
Total right-of-use assets 1,658 1,789
Current lease liabilities 723 951
Non-current lease liabilities 996 861
Total lease liabilities 1,719 1,812
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
At 1 January 2020 1,271 1,587 81 2,939
Additions 343 583 - 926
Disposals and contract modifications (30) (225) (2) (257)
Transfers (71) - - (71)
Currency Translation 57 84 5 146
Other - - - -
At 31 December 2020 1,570 2,029 84 3,683
Additions 336 881 - 1,217
Disposals and contract modifications (286) (425) (63) (774)
Transfers 3 - (3) -
Currency Translation (84) (134) (2) (220)
Other (12) (61) - (73)
At 31 December 2021 1,527 2,290 16 3,833
Depreciation
At 1 January 2020 (378) (598) (46) (1,022)
Depreciation charge for the year (433) (619) (31) (1,083)
Disposals 22 181 (3) 200
Transfers 71 - - 71
Currency translation (21) (35) (3) (59)
At 31 December 2020 (739) (1,071) (83) (1,893)
Depreciation charge for the year (428) (634) (4) (1,066)
Disposals and contract modifications 182 424 63 669
Transfers (6) - 6 -
Currency translation 43 70 2 115
At 31 December 2021 (948) (1,211) (16) (2,175)
Net book value
At 31 December 2021 579 1,079 - 1,658
Below are the values for the movements in lease liability during the year:
Lease Liability
£'000
At 1 January 2021 1,812
Additions 1,217
Disposals (118)
Interest expense 53
Payments (1,077)
Modifications (61)
CTA (107)
At 31 December 2021 1,719
The following amounts are recognised in the income statement:
For year ended 31 December
2021
£'000
Depreciation expense of right-of-use assets (1,066)
Interest expense on lease liabilities (53)
(Loss)/gain on disposal of IFRS16 assets -
Expense relating to short-term leases and low-value assets (159)
Total amount recognised in the income statement (1,278)
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 a part of the claim, amounting to €126,430, 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 €432,762. The process involving the expert auditor is
ongoing. Other than the €126,430, which may be valid, no further provision
in respect of this matter has been included in the financial statements.
18. Events after balance sheet date
On 1 January 2022, we entered into a partnership with an entrepreneur to
develop and drive growth within Identicare Ltd, the Group's pet microchipping
and consumer-focused services business. In connection with this partnership, a
growth share plan has been put in place based on certain equity value-based
performance criteria.
On 24 March 2022, the Group announced that it has 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, Animalcare will make
upfront payments to Orthros Medical totalling €500,000 and will fund some
early research activities as part of the collaboration. 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 as well as single digit royalties on net sales of the products. These
payments are expected to be paid out of the Group's operating cash flow.
19. Annual Report
This 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 2021 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: 10 Great North Way, York Business Park, Nether
Poppleton, York, YO26 6RB, UK.
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. END FR BKFBQFBKDDNBRecent news on Animalcare
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