REG - Animalcare Group PLC - Interim Results for six months ended 30 June 2023
26/09/2023 07:00
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RNS Number : 5981N Animalcare Group PLC 26 September 2023
Animalcare Group plc
("the Company" or "Group")
Interim Results for the six months ended 30 June 2023
26 September 2023. Animalcare Group plc (AIM: ANCR), the international animal
health business, announces its unaudited interim results for the six months
ended 30 June 2023.
Animalcare is pleased to report strong gross margins and improved cash
generation in a period that saw growth in veterinary markets return to more
pre-Covid growth rates. Over the first half, the Group continued to invest in
drivers of future success and made progress through focus on growth
opportunities, notably the Orthros pipeline, STEM and Identicare as well as on
potential M&A.
Financial highlights
· Revenues £36.7m (H1 2022: £38.3m), a 4.1% decrease at AER (6.8%
down at CER); strong contributions from new products such as Plaqtiv+ offset
by a return to pre-pandemic levels of demand growth and sales phasing due in
part to distributor de-stocking since the FY22 year end
· Underlying* EBITDA margin at 19.5%, reflecting a 1.5% gross margin
expansion to 57.5% combined with disciplined SG&A investment, partially
mitigating the decrease in revenue. Underlying EBITDA of £7.2m (H1 2022:
£8.0m)
· Underlying basic EPS decreased by 17.7% to 6.5 pence (H1 2022: 7.9
pence) predominantly driven by movement in underlying EBITDA
· Improved cash conversion to 52.5% drove a reduction in net debt to
£3.8m (FY22: £5.4m), materially below the Group's target leverage ratio,
maintaining the strong financial platform to invest in growth opportunities
· Statutory profit before tax incorporating non-underlying items was
£2.4m (H1 2022: £3.4m), with reported basic EPS at 2.7 pence (H1 2022: 4.0
pence)
· Board declares interim dividend of 2.0 pence per share, in line with
prior year period
* The Group presents a number of non-GAAP Alternative Performance Measures
(APMs) which exclude non-underlying items as set out in note 3. EBITDA is
defined as underlying earnings before interest, tax, depreciation and
amortisation.
Strategic and Operational highlights
· Orthros Medical pre-clinical studies on track and showing positive
results for the VHH antibody technology. Potential third candidate identified
under research collaboration
· Identicare continues to deliver strong revenue and profit growth,
benefiting from repositioning
· Plaqtiv+ dental range from STEM joint venture performing well.
Extensions to range and new products based on patented DispersinB technology
expected to be launched from 2024. The Group continues to invest in sales and
marketing activities to drive Daxocox uptake and is gaining prescribers in our
direct sales markets
· The Group is assessing the opportunities generated by Kane Biotech's
decision to review its majority equity interest in the STEM joint venture with
Animalcare
· Internal resources further realigned to drive sales and marketing
excellence and increase focus on M&A
Outlook
We are pleased to have delivered improved gross margins and increased cash
conversion for the first half while recognising the revenue effects of a
market that has returned to a more normalised level of growth. We anticipate
an improvement in our second half performance versus FY 2022 and with it, a
return to revenue growth for the full year and EBITDA to be also in line with
market expectations.
Identifying appropriate business development opportunities remains a priority
for Animalcare and the Group continues to explore sustainable value-creating
opportunities through acquisitions, partnerships and pipeline projects. With
low levels of net debt, significantly below our target leverage ratio of one
to two times underlying EBITDA, this creates material headroom to invest in
these opportunities.
Animalcare's Chief Executive Officer, Jenny Winter, commented: "Animalcare has
established itself as a profitable, cash generative business with strong
margins and low levels of debt. That is further underlined by our financial
performance in the first half of 2023 with positive progress on gross margins
and cash conversion despite a return to more pre-pandemic levels of demand
growth across our markets. Looking ahead to the full year, we anticipate a
return to revenue growth and EBITDA to be also in line with market
expectations.
"Notably, the Group continues to make progress against our stated objectives,
the licensing and research collaboration agreement with Orthros Medical
generating positive pre-clinical results and identifying new potential
candidates in the promising field of VHH antibodies. Additionally, Identicare
delivered strong revenue and profit growth in the period as the business
continues its transition towards a scalable recurring-revenue subscription
platform. And alongside our development and commercialisation of products from
the STEM joint venture, we are exploring opportunities generated by Kane
Biotech's decision to review its majority equity interest in STEM.
"The strong financial platform we've built enables the Group to invest in
organic and inorganic drivers of growth, including M&A where we are seeing
increased levels of activity. Animalcare remains firmly in the hunt for
value-creating opportunities in our key areas of interest.
"Over the long-term, we remain confident in the prospects of the Group and the
attractive fundamentals of the animal health sector."
Analyst briefing/webcast
A briefing for analysts will be held at 10:30 BST on Tuesday 26 September 2023
via Zoom webcast. Analysts wishing to join should use the following link to
register and receive access details.
https://stifel.zoom.us/webinar/register/WN_EiQJ0GgdTiCHL0vG8o-YSA
(https://stifel.zoom.us/webinar/register/WN_EiQJ0GgdTiCHL0vG8o-YSA)
A copy of the analyst presentation will be made available on the Group website
shortly after the webcast.
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014.
Enquiries
Animalcare Group plc +44 (0)1904 487 687
Jenny Winter, Chief Executive Officer
Chris Brewster, Chief Financial 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
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)
Chairman's statement
I'm pleased to report that Animalcare delivered improved gross margins and
increased cash conversion for the first half as the Group maintained a clear
focus on its strategic objectives and opportunities in pursuit of future
growth.
Against a tough comparator period, total revenues declined by 4.1% at AER to
£36.7m due to some easing in the rate of veterinary market growth combined
with the effect of distributor de-stocking since the end of 2022.
The Group's ongoing focus on larger selling, more profitable brands in our
portfolio, together with a stable sales mix and carefully judged pricing
designed to mitigate input cost inflation, are key factors in a 1.5%
improvement in gross margins.
Our commitment to strengthen our financial platform over recent years puts us
materially below our target leverage ratio of one to two times underlying
EBITDA. Thanks to an improved rate of cash conversion we have further reduced
our net debt over the period to £3.8m, down from £5.4m at the end of 2022.
Importantly, this gives us the investment flexibility and firepower to seek
out external value-creating opportunities that can grow our business through
M&A activity, licensing and partnerships. Work to identify appropriate
business development opportunities remains a priority for the Company.
During the first half, Animalcare also continued to demonstrate focus and
resolve in capitalising on existing options for growth.
For instance, Identicare, our wholly-owned pet reunification business, built
further sales momentum in the first half with revenues up 28% as it benefited
from strategic repositioning under specialist leadership. And our pipeline
licensing agreement with Orthros Medical, which centres on two pre-clinical
VHH antibody candidates, is progressing well while a further potential licence
candidate has been identified under the research collaboration element of the
deal.
The Plaqtiv+ dental range continues to enjoy an enthusiastic reception from
customers following its launch in the first half of 2022. We plan additions to
the Plaqtiv+ range and new products based on patented technology from our STEM
Animal Health Inc. joint venture. Kane Biotech, which is majority owner of the
joint venture, has announced a review of its equity interest in the business.
Subsequently, we are exploring the opportunities that this presents for the
Group as we regard the STEM partnership as a valuable contributor to the
Group's current and future product mix.
Our people play a critical role in the success of this Company. Investing in
leadership and skills has long been a priority, therefore, and this is
reflected in our SG&A spend profile. With this in mind we have further
aligned our internal resources to the delivery of our key strategic
objectives, most notably sales and marketing excellence and M&A-related
activity.
I'd like to use this opportunity to thank the Animalcare team for delivering a
positive first half performance despite a normalisation in demand and other
trading headwinds. Long-term, we believe the dynamics driving the ongoing
growth in the animal health market remain attractive and the Group is well
placed to take advantage of these fundamentals. Consequently, the Board has
declared an interim dividend of 2.0 pence a share, in line with 2022.
Jan Boone, Chairman
Business and Financial review
Overview of underlying financial results
We are pleased with our first half trading performance; positive progress was
achieved on gross margins and cash conversion while recognising a
normalisation in the rates of demand growth across our markets due to the
changing macro-economic environment and country specific dynamics. The Group's
strong balance sheet has been maintained and with it our ability to continue
pursuing attractive external opportunities and invest in long-term drivers of
growth.
A summary of the underlying financial results for the first six months of
2023, which the Directors believe offers a clearer picture of business
performance, is shown below.
Six months to 30 June 2023 2022 Change at AER
£'000 £'000 %
Revenue 36,712 38,286 (4.1%)
Gross Profit 21,107 21,430 (1.8%)
Gross Margin % 57.5% 56.0% 1.5%
Underlying Operating Profit 5,479 6,502 (15.7%)
Underlying EBITDA 7,157 8,026 (10.8%)
Underlying EBITDA margin % 19.5% 21.0% (1.5%)
Basic Underlying EPS (p) 6.5p 7.9p (17.7%)
Revenues for the period totalled £36.7m, a decrease of 4.1% (6.8% at CER)
against a strong prior year comparator in which sales were broadly in line
with the exceptional first half of 2021. We continued to see a return to
pre-Covid levels of demand growth in European veterinary markets while sales
were also impacted by distributor de-stocking in certain territories across
the firm's portfolio, as well as higher purchases in the fourth quarter of FY
2022 ahead of expected price increases and the effect of promotional
activities. Based on external data from distributors and veterinary clinics,
our product sales from distributors to our end customers increased vs H1 2022,
affirming the healthy fundamentals of the animal health market in Europe.
Revenue performance by product category is shown in the table below:
Six months to 30 June 2023 2022 Change at AER
£'000 £'000 %
Companion Animals 25,957 26,634 (2.5%)
Production Animals 7,737 8,814 (12.2%)
Equine & other 3,018 2,838 6.3%
Total 36,712 38,286 (4.1%)
Companion Animals revenue, which continues to represent around 70% of Group
turnover, declined by 2.5% to £26.0m impacted by a return to more normal
levels of demand growth across Europe and wholesaler de-stocking in certain
territories as noted above. In part, this was offset by strong sales growth
from our dental portfolio including Plaqtiv+ which was launched during Q2
2022. Identicare continues the strong revenue and profit momentum from FY
2022, with sales increasing in the period by 28% to around £1.5m, which we
expect to accelerate in the second half, benefiting from strategic
repositioning of the business towards a scalable, high margin,
recurring-revenue subscription platform. The Group continues to invest in
sales and marketing activities to drive Daxocox uptake and is gaining
prescribers in our direct sales markets. Our largest selling brands in the
Companion Animals product range remained broadly flat versus the prior period.
Production Animal revenues, which are chiefly generated by our Southern
European and International Partners operations, declined by 12.2% versus the
prior period to £7.7m, predominantly driven by phasing of orders and generic
competition.
Equine and other sales increased by 6.3% to £3.0m, benefiting from bringing
Danilon, one of our largest brands, back into the UK business in the second
half of FY 2022. We expect Danilon growth to accelerate during the second half
due to stock in channel placed by our previous distributor at the end of FY
2022.
Underlying EBITDA declined by 10.8% to £7.2m, with EBITDA margins decreasing
to 19.5% (H1 2022: 21.0%). The continuing commercial focus on our larger,
higher margin brands and services, together with a stable sales mix and
pricing actions to help offset supply cost inflation, are the key drivers of
the 1.5% improvement in our gross margins to 57.5%. The Group continues to be
affected by inventory and, to a lesser extent, logistic price increases, and
we will continue to take mitigating pricing actions that safeguard our
competitive position.
Overheads increased during the first half to £13.9m (H1 2022: £13.4m),
representing 37.9% of revenue (H1 2022: 35.0%; FY 2022: 38.4%). People costs
remain the largest component of our SG&A expenses which increased by
£0.3m in the period as we continue to invest in building the skills and
behaviours that will drive our business forward. Shortly after the period end,
we further aligned internal resources to accelerate delivery of our key
strategic objectives, primarily sales and marketing excellence and the
identification of potential M&A opportunities and the building of
commercial alliances. The balance of the increase in overheads primarily
relate to regulatory, quality, professional fees and IT licencing expenses.
Stepping up investment in our R&D pipeline to deliver greater novelty and
sustainable growth is a key pillar of our strategy. Our efforts remain centred
around the licensing and R&D collaboration agreements with Orthros
Medical, initially focusing on canine osteoarthritis. The early-stage research
activities of the two candidates under the licensing deal are on track, with
the data continuing to show positive results for the VHH antibody technology.
In addition, the research collaboration has identified an exciting new
potential licence candidate that we are further exploring. The lower R&D
expenses in the first half are reflective of the timing of project spend and
not a reduction in our expected R&D spend for the full year.
Underlying basic EPS decreased by 17.7% to 6.5 pence (H1 2022: 7.9 pence)
driven by the reduction in underlying EBITDA as noted above, a £0.2m increase
in amortisation and depreciation costs and a decrease in the contribution from
the STEM joint venture due to normalisation of licence income recognition. The
underlying effective tax rate was 22.7%, broadly comparable to the prior
period. As anticipated, this was a return to more normalised levels vs the FY
2022 rate of 16.4% which benefited from the recognition of tax losses in the
UK.
Reported results and non-underlying items
Reported Group profit after tax for the period after accounting for the
non-underlying items detailed below was £1.6m (2022: £2.4m), with reported
basic earnings per share at 2.7 pence (H1 2022: 4.0 pence).
Non-underlying items totalling £2.7m (H1 2022: £2.7m) relating to profit
before tax have been incurred in the period, as set out in note 3. These
principally comprise:
· Amortisation and impairment of acquisition-related intangibles of
£2.1m (H1 2022: £2.4m). As historically, the charge primarily comprises
amortisation in relation to the reverse acquisition of Ecuphar NV and previous
acquisitions made by Ecuphar NV.
· £0.3m (H1 2022: £nil) charge in respect of the Identicare
share-based payments arrangement. The fair value of this long-term incentive
plan is connected to the future value of Identicare and not trading, hence has
been treated as non-underlying since inception on 1 January 2022.
Dividend
The Board is pleased to declare an interim dividend of 2.0 pence per share, in
line with the prior period. The interim dividend will be paid on 17 November
2023 to shareholders whose names are on the Register of Members at close of
business on 20 October 2023. The ordinary shares will become ex-dividend on 19
October 2023.
Cash flow, net debt and borrowing facilities
We entered FY23 in a strong financial position with the net debt to underlying
EBITDA leverage ratio well below our stated target range of one to two times.
Due to improved cash conversion versus prior period, as set out in the table
below, we have further reduced net debt, which now principally encompasses
IFRS16 lease liabilities of £3.1m, to £3.8m as of 30 June 2023 (31 December
2022: £5.4m). This equips Animalcare with the financial strength and
flexibility to continue the pursuit of value-creating opportunities through
M&A, partnerships and pipeline deals.
Six months to Six months to
30 June 2023
30 June 2022
£'000 £'000
Underlying EBITDA 7,157 8,026
Net cash flow from operations 3,482 1,428
Non-underlying items 277 382
Underlying net cash flow from operations 3,759 1,810
Underlying cash conversion % 52.5% 22.6%
Net cash flow generated by our operations increased to £3.5m (H1 2022:
£1.4m). Net working capital increased by £3.4m during the period (H1 2022:
£5.6m increase), chiefly attributable to £1.0m higher receivables, largely
as a result of the geographic mix of revenue towards the period end, and a
reduction in payables of £3.6m principally relating to the inventory build
during Q4 2022, which normalised during the first half leading to an inventory
decrease of £1.2m. Tax cash outflows at £0.6m were broadly comparable to the
prior period.
We are targeting a year-on-year improvement in cash conversion versus the 78%
delivered in FY 2022, the achievement of which will be largely dependent on
trading patterns during the second half and any decisions the Group may take
in connection with strategic stock cover to support surety of supply going
into 2024.
Net debt decreased by £1.6m to £3.8m over the period largely driven by the
improved cash conversion noted above.
£'000
Net debt at 1 January 2023 (5,402)
Net cash flow from operations 3,482
Net capital expenditure (1,304)
Net finance expenses (897)
Foreign exchange on cash and borrowings 416
Movement in IFRS16 lease liabilities (76)
Net debt at 30 June 2022 (3,781)
Net capital expenditure of £1.3m (H1 2022: £1.4m) largely comprises
investment in our product development pipeline of £0.5m and a £0.4m
milestone payment to STEM in respect of the VOHC (Veterinary Oral Health
Council) accreditation relating to Plaqtiv+. The balance of expenditure
relates chiefly to investments in our IT systems, including within Identicare.
Current STEM new product development projects include extensions to the
Plaqtiv+ dental range with a focus on cat specific products, an
under-represented area of the dental market, and development of an otitis
rinse using the patented DispersinB anti-biofilm technology. Development of
the newly formulated dental chew has taken longer than expected and is now
forecast to launch during 2024.
Net debt to underlying EBITDA leverage ratio was approximately 0.3 times (H1
2022: 0.6 times), well below the target net debt to underlying EBITDA range
of one to two times, enabling the Group to pursue external investment
opportunities in support of its growth strategy.
Borrowing facilities and covenants
The Group's financing arrangements consisted of a committed revolving credit
facility of €41.5m and a €10.0m acquisition line, the latter of which
cannot be utilised to fund our operations.
The facilities remain subject to the following covenants which are in
operation at all times:
• Net debt to underlying EBITDA ratio of 3.5 times
• Underlying EBITDA to interest ratio of minimum 4 times
• Solvency (total assets less goodwill/total equity less goodwill)
greater than 25%
As at 30 June 2023, and throughout the period, all covenant requirements were
met with significant headroom across all three measures. As at 30 June 2023,
total facilities were £44.2m with headroom on our revolving credit facility,
including cash on balance sheet, of £38.8m.
Summary and outlook
We are pleased to have delivered improved gross margins and increased cash
conversion for the first half while recognising the revenue effects of a
market that has returned to a more normalised level of growth. We anticipate
an improvement in our second half performance versus FY 2022 and with it a
return to revenue growth for the full year and EBITDA to be also in line with
market expectations.
Our balance sheet remains strong and with it our strategic commitment to
invest in attractive external opportunities that are key long-term drivers of
growth.
The Group continues to make progress against strategic objectives, with focus
on developing and building our R&D and new product pipeline centred around
the licensing and R&D collaboration agreements with Orthros Medical and
additions to the growing Plaqtiv+ range based on patented technology from our
STEM Animal Health Inc. joint venture. In addition, Identicare continues the
positive growth momentum from FY 2022 driven by the repositioning of the
business under specialist leadership.
Looking further ahead, we remain confident in the prospects of the Group and
the attractive fundamentals of the animal health sector and remain ready to
employ our strong financial position to invest in drivers of growth.
Jenny
Winter
Chris Brewster
Chief Executive
Officer
Chief Financial Officer
Condensed consolidated income statement
For the six months ended 30 June
Notes Underlying Non-Underlying (note 3) Total Underlying Non-Underlying (note 3) Total
2023 2023 2023 2022 2022 2022
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 4 36,712 − 36,712 38,286 − 38,286
Cost of sales (15,605) − (15,605) (16,856) − (16,856)
Gross profit 21,107 − 21,107 21,430 − 21,430
Research and development expenses (1,099) (304) (1,403) (1,403) (331) (1,734)
Selling and marketing expenses (6,470) − (6,470) (6,235) − (6,235)
General and administrative expenses (8,057) (1,769) (9,826) (7,308) (2,024) (9,332)
Net other operating income / (expenses) (2) (586) (588) 18 (352) (334)
Operating profit/(loss) 5,479 (2,659) 2,820 6,502 (2,707) 3,795
Finance expenses (711) − (711) (699) − (699)
Finance income 379 − 379 328 − 328
Finance net result (332) − (332) (371) − (371)
Share of net (loss)/profit of joint venture accounted for using the equity (107) − (107) 16 − 16
method
Profit/(loss) before tax 5,040 (2,659) 2,381 6,147 (2,707) 3,440
Income tax expense (1,145) 370 (775) (1,429) 396 (1,033)
Net profit/(loss) for the period 3,895 (2,289) 1,606 4,718 (2,311) 2,407
Net profit/(loss) attributable to:
The owners of the parent 3,895 (2,289) 1,606 4,718 (2,311) 2,407
Earnings per share for profit/(loss) attributable to the ordinary equity
holders of the company:
Basic earnings per share 5 6.5p 2.7p 7.9p 4.0p
Diluted earnings per share 5 6.5p 2.6p 7.9p 4.0p
In order to aid understanding of underlying business performance, the
Directors have presented underlying results before the effect of exceptional
and other items. These exceptional and other items are analysed in note 3.
Condensed consolidated statement of comprehensive income
For the six months ended 30 June
2023 2022
£'000 £'000
Net profit / loss for the period 1,606 2,407
Other comprehensive income/(expense)
Exchange differences on translation of foreign operations * (429) 283
Other comprehensive income/(expense), net of tax (429) 283
Total comprehensive income/(expense) for the period, net of tax 1,177 2,690
Total comprehensive income/(expense) attributable to:
The owners of the parent 1,177 2,690
* May be reclassified subsequently to profit & loss
Condensed consolidated statement of financial position
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 50,537 50,536 50,853
Intangible assets 22,384 27,777 25,283
Property, plant and equipment 747 945 448
Right-of-use assets 2,989 2,638 2,924
Investments in joint venture 1,158 1,430 1,305
Deferred tax assets 2,389 2,043 3,567
Other financial assets 69 65 70
Other non-current assets − − −
Total non-current assets 80,273 85,434 84,450
Current assets
Inventories 11,579 12,074 13,474
Trade receivables 13,857 13,812 13,568
Other current assets 1,468 1,430 715
Cash and cash equivalents 6,609 5,136 6,035
Total current assets 33,513 32,452 33,792
Total assets 113,786 117,886 118,242
Liabilities
Current liabilities
Lease liabilities (856) (794) (852)
Trade payables (12,265) (11,326) (15,497)
Current tax liabilities (1,018) (1,955) (623)
Accrued charges and contract liabilities (1,339) (1,478) (1,276)
Other current liabilities (3,567) (4,842) (4,027)
Total current liabilities (19,045) (20,395) (22,275)
Non-current liabilities
Borrowings (8,138) (10,924) (8,426)
Lease liabilities (2,231) (1,904) (2,159)
Deferred tax liabilities (3,516) (4,120) (4,773)
Contract liabilities − − (372)
Provisions (326) (389) (340)
Other non-current liabilities − − (911)
Total non-current liabilities (14,211) (17,337) (16,981)
Total Liabilities (33,256) (37,732) (39,256)
Net Assets 80,530 80,154 78,986
Equity
Share capital 12,019 12,019 12,019
Share premium 132,798 132,798 132,798
Reverse acquisition reserve (56,762) (56,762) (56,762)
Accumulated losses (10,004) (10,604) (11,977)
Other reserves 2,479 2,703 2,908
Equity attributable to the owners of the parent 80,530 80,154 78,986
Total equity 80,530 80,154 78,986
Condensed consolidated statement of changes in equity
Attributable to the owners of the parents
Share Share Accumulated losses Reverse acquisition reserve Other reserve Total
capital
premium
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2023 12,019 132,798 (11,977) (56,762) 2,908 78,986
Net profit − − 1,606 − − 1,606
Other comprehensive expense − − − − (429) (429)
Total comprehensive income − − 1,606 − (429) 1,177
Share based payments − − 367 − − 367
At 30 June 2023 12,019 132,798 (10,004) (56,762) 2,479 80,530
Attributable to the owners of the parents
Share Share Accumulated losses Reverse acquisition reserve Other reserve Total
capital
premium
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 12,019 132,798 (11,676) (56,762) 2,420 78,799
Net profit − − 2,407 − − 2,407
Other comprehensive income − − − − 283 283
Total comprehensive income − − 2,407 − 283 2,690
Dividends − − (1,442) − − (1,442)
Share based payments − − 107 − − 107
At 30 June 2022 12,019 132,798 (10,604) (56,762) 2,703 80,154
Reverse acquisition reserve
Reverse acquisition reserve represents the reserve that has been created upon
the reverse acquisition of Animalcare Group plc.
Other reserve
Other reserve mainly relates to currency translation differences. These
exchange differences arise on the translation of subsidiaries with a
functional currency other than sterling.
Condensed consolidated cash flow statements
For the six months ended 30 June
2023 2022
£'000 £'000
Operating activities
Profit before tax 2,381 3,440
Profit before tax 2,381 3,440
Non-cash and operational adjustments:
Share in net result of joint venture 106 (16)
Depreciation of property, plant and equipment 541 538
Amortisation of intangible assets 3,210 3,291
Impairment of intangible assets − 32
Share-based payment expense 558 135
Gain on disposal of property, plant and equipment − (165)
Non-cash movement in provisions (8) 103
Movement in allowance for bad debt and inventories 339 34
Finance income (235) (82)
Finance expense 654 375
Impact of foreign currencies (88) 58
Other (22) 14
Movements in working capital
Increase in trade receivables (1,003) (6,465)
Decrease/(increase) in inventories 1,212 (1,572)
(Decrease)/increase in payables (3,610) 2,387
Income tax paid (553) (679)
Net cash flow from operating activities 3,482 1,428
Investing activities
Purchase of property, plant and equipment (225) (373)
Purchase of intangible assets (1,090) (1,209)
Proceeds from the sale of property, plant and equipment (net) 11 166
Net cash flow used in investing activities (1,304) (1,416)
Financing activities
Proceeds from loans and borrowings and convertible debt − 420
Repayment of loans and borrowings (863) −
Repayment IFRS16 lease liability (477) (499)
Interest paid (297) (207)
Other finance expense (123) (87)
Increase in other financial assets − (28)
Net cash flow used in financing activities (1,760) (401)
Net decrease in cash and cash equivalents 418 (389)
Cash and cash equivalents at beginning of period 6,035 5,633
Exchange rate differences on cash and cash equivalents 156 (108)
Cash and cash equivalents at end of period 6,609 5,136
Reconciliation of net cash flow to movement in net debt
Net decrease in cash and cash equivalents in the period 418 (389)
Cash flow from decrease in debt financing 863 (420)
Foreign exchange differences on cash and borrowings 416 (315)
Movement in net debt in the period 1,697 (1,124)
Net debt at the start of the period (5,402) (5,329)
Movement in lease liabilities during the period (76) (978)
Net debt at the end of the period (3,781) (7,431)
Notes to the consolidated interim report
1 General information
Animalcare Group plc ("the Company") is a public company limited by shares
incorporated in the United Kingdom under the Companies Act 2006 and is
domiciled in the United Kingdom. The address of its registered office is
Moorside, Monks Cross, York, YO32 9LB. The condensed set of financial
statements as at, and for, the six months ended 30 June 2023 comprises the
Company and its subsidiaries (together referred to as the "Group"). The nature
of the Group's operations and its principal activities are set out in the
latest Annual Report.
2 Basis of preparation and significant accounting policies
Basis of preparation and accounting policies
This interim financial information for each of the six month periods ended 30
June 2023 and 30 June 2022 has not been audited and does not constitute
statutory accounts as defined in Section 43s of the Companies Act 2006. The
comparative information for the year ended 31 December 2022 does not
constitute statutory accounts however is based on the statutory accounts for
that year, on which the Group's auditors issued an unqualified report and
which have been filed with the Register of Companies.
The consolidated financial statements are presented in thousands of pound
sterling (k£ or thousands of £) and all "currency" values are rounded to the
nearest thousand (£000), except when otherwise indicated.
The Interim Report for the six months ended 30 June 2023 was approved by the
Board of Directors and authorised for issue on 26 September 2023.
The condensed consolidated interim financial information for the six months
ended 30 June 2023 has been prepared using accounting policies consistent with
those of the Company's annual accounts for the year ended 31 December 2022.
Taxes on income in the interim periods are accrued using the estimated tax
rate that would be applicable for the full financial year.
New standards, interpretations and amendments adopted by the Group
The following new Standards, Interpretations and Amendments issued by the IASB
and the IFRIC as adopted by the European Union are effective for the financial
period:
- Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2: Disclosure of Accounting Policies
- Amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates
- Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets
and Liabilities arising from a Single Transaction
- Amendments to IAS 12 Income taxes: International Tax Reform -
Pillar Two Model Rules (effective immediately but not yet endorsed in the EU -
disclosures are required for annual periods beginning on or after 1 January
2023)
The adoption of these new standards and amendments has not led to major
changes in the Group's accounting policies.
New and revised standards not yet adopted
The Group elected not to early adopt the following new Standards,
Interpretations and Amendments, which have been issued by the IASB and the
IFRIC but are not yet effective as of June 30, 2023, and/or not yet adopted by
the European Union as of June 30, 2023. Standards are not expected to have a
material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
- Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current and Non-current
Liabilities with Covenants (applicable for annual periods beginning on or
after 1 January 2024, but not yet endorsed in the EU)
- Amendments to IFRS 16 Leases: Lease Liability in a Sale and
Leaseback (applicable for annual periods beginning on or after 1 January 2024,
but not yet endorsed in the EU).
- Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments: Disclosures: Supplier Finance Arrangements (applicable for annual
periods beginning on or after 1 January 2024, but not yet endorsed in the EU)
Going Concern
Banking Facilities and Covenants
At 30 June 2023, the Group's financing arrangements consisted of a committed
revolving credit facility of €41.5m (£35.6m) and a €10m (£8.6m)
acquisition line, the latter cannot be utilised to fund our operations.
The facilities remain subject to the following covenants which are in
operation at all times:
• Net debt to underlying EBITDA ratio of 3.5 times
• Underlying EBITDA to interest ratio of minimum 4 times
• Solvency (total assets less goodwill/total equity less goodwill)
greater than 25%
As at 30 June 2023, and throughout the period, all covenant requirements were
met with significant headroom across all three measures. As at 30 June 2023,
total facilities were £44.2m with headroom on the revolving credit facility,
including cash on balance sheet, of £38.8m.
3 Non-underlying items
For the six months ended 30 June
2023 2022
£'000 £'000
Amortisation and impairment of acquisition related intangibles
Classified within Research and development expenses 304 331
Classified within General and administrative expenses 1,769 2,024
Classified within net other operating expenses 11 32
Total amortisation and impairment of acquisition related intangibles 2,084 2,387
Restructuring costs − 179
Acquisition and integration costs 34 136
Divestments and business disposals 11 (146)
Long term incentive plan 308 −
Other non-underlying items 222 151
Total non-underlying items before taxes 2,659 2,707
Tax impact (370) (395)
Total non-underlying items after taxes 2,289 2,312
The amortisation and impairment of acquisition-related intangibles charge
totalling £2,084k (2022: £2,387k) largely relates to the Esteve acquisition
of £577k (2022: £826k) and the reverse acquisition of Animalcare Group plc
of £1,497k (2022: £1,529k).
During 2022 the Group entered into a share-based payments arrangement in
respect of growth shares issued in its subsidiary Identicare Limited
("Identicare"). The fair value of this long-term incentive plan is connected
to the future value of Identicare and not trading, hence has been treated as
non-underlying since inception on 1 January 2022. The Group recognised a
charge in respect of non-underlying share-based payments of £308k.
4 Segment information
The Pharmaceutical segment is active in the development and marketing of
innovative pharmaceutical products that provide significant benefits to animal
health.
The measurement principles used by the Group in preparing this segment
reporting are also the basis for segment performance assessment. The Board of
Directors of the Group acts as the Chief Operating Decision Maker. As a
performance indicator, the Chief Operating Decision Maker controls performance
by the Group's revenue, gross margin, Underlying EBITDA and EBITDA. EBITDA is
defined by the Group as net profit plus finance expenses, less financial
income, plus income taxes and deferred taxes, plus depreciation, amortisation
and impairment and is an alternative performance measure. Underlying EBITDA
equals EBITDA plus non-underlying items and is an alternative performance
measure. EBITDA and underlying EBITDA are reconciled to statutory measures
below.
The following table summarises the segment reporting from continuing
operations for 2023 and 2022. As management's controlling instrument is
principally revenue and profit-based, the reporting information does not
include assets and liabilities by segment and is as such not presented per
segment.
For the six months ended 30 June
2023 2022
Pharma Pharma
£'000 £'000
Revenues 36,712 38,286
Gross Margin 21,107 21,430
Gross Margin % 57.5% 56.0%
Segment underlying EBITDA 7,157 8,026
Segment underlying EBITDA % 19.5% 21.0%
Segment EBITDA 6,582 7,706
Segment EBITDA % 17.9% 20.1%
The segment EBITDA is reconciled with the consolidated net profit of the year
as follows:
For the six months ended 30 June
2023 2022
£'000 £'000
Segment EBITDA 6,582 7,706
Depreciation, amortisation and impairment (3,763) (3,911)
Operating profit 2,819 3,795
Finance expenses (711) (699)
Finance income 379 328
Share in net result of joint ventures (107) 16
Income taxes (876) (1,246)
Deferred taxes 102 213
Net profit 1,606 2,407
Revenue by product category:
For the six months ended 30 June
2023 2022
£'000 £'000
Companion animals 25,953 26,634
Production animals 7,736 8,814
Equine and Other 3,023 2,838
Total 36,712 38,286
Revenue by geographical area:
For the six months ended 30 June
2023 2022
£'000 £'000
Belgium 1,505 1,593
The Netherlands 938 749
United Kingdom 7,655 7,269
Germany 4,731 4,766
Spain 11,846 12,165
Italy 4,409 4,610
Portugal 1,784 2,230
European Union - other 3,543 3,927
Asia 268 182
Other 33 795
Total 36,712 38,286
Revenue by category:
For the six months ended 30 June
2023 2022
£'000 £'000
Product sales 35,414 37,376
Services sales 1,298 910
Total 36,712 38,286
Product revenue is recognised when the performance obligation is satisfied at
a point in time. Service revenue is recognised by reference to the stage of
completion. Services sales includes £228k (2022: £227k) of commission income
recognised at a point in time.
5 Earnings per share
Basic earnings per share amounts are calculated by dividing the net profit for
the period attributable to ordinary equity holders of the parent company by
the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary equity holder of the parent company by the weighted
average number of ordinary shares outstanding during the year plus the
weighted average number of ordinary shares that would be issued on conversion
of all potential dilutive ordinary shares.
The following income and share data were used in the earnings per share
computations:
For the six months ended 30 June
Underlying Underlying Total Total
2023 2022 2023 2022
£'000 £'000 £'000
Net profit 3,895 4,718 1,606 2,407
Net profit attributable to ordinary equity holders of the parent adjusted for 3,895 4,718 1,606 2,407
the effect of dilution
Average number of shares (basic and diluted):
For the six months ended 30 June
Underlying Underlying Total Total
2023 2022 2023 2022
Number Number Number Number
Weighted average number of ordinary shares for basic 60,237,694 60,092,161 60,237,694 60,092,161
earnings per share
Dilutive potential ordinary shares 569,632 542,465 569,632 542,465
Weighted average number of ordinary shares adjusted for effect of dilution 60,807,326 60,634,626 60,807,326 60,634,626
Basic earnings per share:
For the six months ended 30 June
Underlying Underlying Total Total
2023 2022 2023 2022
Pence Pence Pence Pence
From operations attributable to the ordinary equity holders of the company 6.5 7.9 2.7 4.0
Total basic earnings per share attributable to the ordinary equity holders of 6.5 7.9 2.7 4.0
the company
Diluted earnings per share:
For the six months ended 30 June
Underlying Underlying Total Total
2023 2022 2023 2022
Pence Pence Pence Pence
From operations attributable to the ordinary equity holders of the company 6.5 7.9 2.6 4.0
Total diluted earnings per share attributable to the ordinary equity holders 6.5 7.9 2.6 4.0
of the company
6 Dividends
The final dividend for the year ended 31 December 2022 of 2.4 pence per share
was paid to shareholders on 14 July 2023.
The directors have declared an interim dividend of 2.0 pence per share. The
interim dividend will be paid on 17 November 2023 to shareholders whose names
are on the Register of Members at close of business on 20 October 2023. The
ordinary shares will become ex-dividend on 19 October 2023.
As the dividend was declared after the end of the period being reported, it
has not been included as a liability as at 30 June 2023 in accordance with IAS
10 'Events after the Balance Sheet date'.
7 Contingent liabilities
On 3 September 2018, Ecuphar NV sold the wholesale business Medini NV to
Vetdis Holding NV (Vetdis) under a Share Purchase Agreement (SPA). In June
2019, Vetdis sent a letter to Ecuphar claiming that Ecuphar had breached the
SPA. Ecuphar disputes the majority of the claim, however Ecuphar considers it
likely that a part of the claim, amounting to €157,988 (£139,988), may be
valid. Following various discussions and correspondence, during which the
parties were unable to reach any agreement, Vetdis issued formal court papers
on 29 May 2020. A full court hearing to consider the case took place in the
Commercial Court in Bruges on 2 March 2021. The court did not decide on the
merits of the claim, instead it appointed an expert auditor to examine the
documents and advise the court on the claim. The court however ordered Vetdis
to pay the current account debt plus interest at 8%, and on 4 May 2021, Vetdis
made a payment of €432,762 (£383,824). The process involving the expert
auditor is now complete. We expect the court to hold another hearing and make
its decision in 2024. Other than the €157,836 (£139,988), which may be
valid, and is written off from the outstanding other receivable from Vetdis,
no further provision in respect of this matter has been included in the
condensed interim financial statements.
8 Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, are eliminated in the Consolidated Financial Statements and no
information is provided thereon in the section. The Group carries an
investment in a joint venture (STEM Animal Health Inc.). The Group's
investment in its joint venture is accounted for using the equity method.
9 Events after the reporting period
There are no events after the reporting period.
10 Cautionary statement
This Interim Management Report ("IMR") consists of the Chairman's Statement
and the Business Review, which have been prepared solely to provide additional
information to shareholders to assess the Group's strategies and the potential
for those strategies to succeed. The IMR should not be relied upon by any
other party or for any other purpose.
The IMR contains a number of forward-looking statements. These statements are
made by the Directors in good faith based upon the information available to
them up to the time of their approval of this report and such statements
should be treated with caution due to the inherent uncertainties, including
both economic and business risk factors, underlying any such forward looking
information.
This IMR has been prepared for the Group as a whole and therefore emphasises
those matters which are significant to Animalcare Group plc and its
subsidiaries when viewed as a whole.
11 Interim report
The Group's Interim Report for the six months ended 30 June 2023 was approved
and authorised for issue on 26 September 2023. Copies will be available to
download on the Company's website at: www.animalcaregroup.com
(http://www.animalcaregroup.com) .
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