REG - Animalcare Group PLC - Interim Results for six months ended 30 June 2024
24/09/2024 07:00
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RNS Number : 3257F Animalcare Group PLC 24 September 2024
Animalcare Group plc
("Animalcare" or the "Group" or the "Company")
Interim Results for the six months ended 30 June 2024
24 September 2024. Animalcare Group plc (AIM: ANCR), the international animal
health business, announces its unaudited interim results for the six months
ended 30 June 2024.
Animalcare is pleased to report a positive first half performance following
strong revenue growth in our operations and improved levels of cash
conversion. With our transformed balance sheet following the sale of
Identicare and minority interest in STEM, we are focused on utilising this
strong financial position in pursuit of opportunities through M&A,
licensing, partnerships and investing in our R&D pipeline to accelerate
growth and create long-term value for shareholders.
Financial highlights
· Revenues from continuing operations of £36.9m (H1 2023: £35.2m), up
5.0% (+7.1% at constant exchange rates) with increases in both price and
volume and growth across all three product categories, notably in Production
Animals and Equine
· Underlying* EBITDA grew by 2.5% to £6.6m (H1 2023: £6.5m)
reflecting improved gross margins and further targeted SG&A investment
· Statutory profit after tax incorporating non-underlying items and
discontinued operations was £18.8m (H1 2023: £1.6m)
· Underlying continuing basic EPS decreased by 4.9% to 5.8 pence (H1
2023: 6.1 pence) predominantly driven by increased taxes with reported basic
EPS at 31.2 pence (H1 2023: 2.7 pence)
· Transformational change in the Group's balance sheet following the
sale of Identicare and minority stake in STEM, leading to net cash position
before accounting for IFRS 16 leases at 30 June 2024 of £32.9m (FY23:
£1.7m). Revolving credit facilities renewed to extend the term to 31 March
2029
· Strong improvement in underlying cash conversion to 78.3% (H1 2023:
52.5%), on track to achieve full year improvement vs FY23
· 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. Underlying
figures quoted are also based on continuing operations. Underlying EBITDA is
defined as underlying earnings before interest, tax, depreciation and
amortisation.
Strategic and Operational highlights
· Organic growth: Both Daxocox and the Plaqtiv+ dental range delivered
strong double-digit growth. In connection with the sale of STEM Animal Health
Inc, the existing Licence and Distribution Agreement was extended to allow
Animalcare access to all sales channels in Europe and the UK. Production
Animals has performed strongly in the period across a number of key brands
while Equine benefited from continuing momentum in Danilon
· Inorganic growth: The Group continues to actively explore external
opportunities through acquisition, licensing or partnerships. Divestment of
Identicare and sale of STEM equity significantly enhances financial
flexibility and firepower to execute our M&A strategy
· New Product Development: We continue to develop our pipeline of
products across novel, generic and life cycle management projects in multiple
species. Our novel VHH antibody product development programme is progressing,
as well as life cycle management activities with certain key brands, notably
the recent addition of two new tablet strengths to the Daxocox range. Studies
to expand the licensed indications for Daxocox are ongoing
Outlook
We are encouraged by our overall first half performance and the positive start
to the second half. While mindful of the wider macroeconomic backdrop, the
Board is confident that full year results will be in line with market
expectations(1).
Animalcare's Chief Executive Officer, Jenny Winter, commented: "I'm delighted
to report that we delivered a positive performance for the first six months of
2024 characterised by increased revenues and profits and improved cash
conversion. Production Animals and Equine made notable contributions to sales,
underlining the importance of these segments of our markets to our overall
business while our Plaqtiv+ dental range and Daxocox osteoarthritis treatment
returned strong double-digit revenue growth for Companion Animals.
"The divestment of Identicare and disposal of our minority stake in STEM
Animal Health Inc. in the first half have had a transformative effect on our
balance sheet yielding cash of £27.7m net of expenses. The resultant positive
cash position equips the Group with significantly increased flexibility and
firepower as we maintain our pursuit of organic and inorganic investment
opportunities to drive sustainable growth in line with our long-term strategy.
"Looking to the rest of 2024, we are confident that the Group's full year
results will be in line with market expectations(1)."
(1. ) The company compiled analyst consensus expectation for
FY24 immediately prior to this announcement is £74.5m for revenue and £11.7m
underlying EBITDA. FY23 comparatives, presented on the same basis as in this
announcement for the six months ended 30 June 2023, will be made available in
the appendix of the analyst presentation.
Analyst briefing/webcast
A briefing for analysts will be held at 11:30 BST on Tuesday 24 September 2024
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_n86yxuwrS7yInoq92PvA0Q
(https://stifel.zoom.us/webinar/register/WN_n86yxuwrS7yInoq92PvA0Q)
A copy of the analyst presentation is available on the Group website using the
link below:
https://www.animalcaregroup.com/investors/document-library/results-and-presentations/
(https://www.animalcaregroup.com/investors/document-library/results-and-presentations/)
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
Nicholas Harland
Francis North
Panmure Liberum +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)
Chair's Statement
In what is one of my first public duties since assuming responsibility as
Chair of the Board, I have the pleasing task of reflecting on a positive
operational performance that further underpins our strong financial position
over the first six months of 2024.
The financial details of our performance can be found elsewhere in this
report. Instead, I will focus my comments on the progress we have made during
this period which is contributing to the achievement of our longer-term goals.
Revenue growth is a key performance indicator for the Group so it's
particularly encouraging to see a marked increase in sales from our continuing
operations in the first half, notably from Production Animals and Equine. That
provides a reminder, if needed, of the valuable contribution these segments
make to our overall business. Across our Companion Animals markets I'm
particularly encouraged to see how well our Plaqtiv+ dental range and Daxocox
osteoarthritis treatment are responding to refocused commercial leadership
backed by investment in sales and marketing excellence.
Underlying EBITDA improved versus the prior period, supported by expanding
gross margins, which benefited from a favourable product mix as the Group
continues to focus on larger volume, more profitable brands. Targeted
investment in overheads continues, chiefly related to people and marketing.
Achieving growth inorganically is an important pillar of the Group's strategy;
investing in external opportunities through acquisition, licensing or
partnerships is also key to our future success and we continue to assess
promising options on a daily basis. Equally, as we demonstrated in the first
half, we are able to unlock value in support of our long-term objectives
through targeted disposals.
The divestment of Identicare, an excellent though ultimately non-core
business, made compelling sense for Animalcare, while the sale of our minority
stake in STEM Animal Health Inc. ("STEM") to Dechra Pharmaceuticals not only
augmented our business development firepower, we separately secured an
enhanced licensing agreement for valuable anti-biofilm products.
The proceeds of these two transactions, alongside a marked improvement in the
rate of underlying cash conversion, have genuinely transformed the Group's
balance sheet, providing us with a strong net cash balance. This significantly
enhanced financial flexibility and resources allow us to seek out a wider
range of value-creating opportunities, whether inorganic or organic, that can
help grow our portfolio, extend our geographic reach and partner to develop
new treatments. A good example of the latter is our ongoing research
collaboration with Orthros Medical focused on novel VHH antibody technology.
With an eye on the outlook for the whole of 2024 we are encouraged by our
overall first half trading supported by a continuing focus on strategic
priorities. While conscious of the macroeconomic pressures that exist in our
markets, the Board is confident that full year results will be in line with
market expectations. Against that backdrop, the Board has declared an interim
dividend of 2.0 pence per share, as we did for the prior year period.
Finally, I'd like to offer my personal thanks to our shareholders for their
continuing support while recognising the contribution of the entire Animalcare
team for their hard work and commitment that helped deliver the results we see
today.
Ed Torr, Non-Executive Chair
Business and Financial review
Overview of underlying financial results
We are pleased with our first half trading performance; positive progress was
achieved on sales growth and cash conversion. At the same time, our balance
sheet has been significantly strengthened following the disposals of
Identicare and our minority interest in STEM and, with this, our financial
firepower to accelerate growth in the future.
A summary of the underlying financial results for the first six months of
2024, which the Directors believe offers a clearer picture of business and
trading performance, is shown below. Following the divestment of Identicare
announced on 28 February 2024, both the 2024 and 2023 income statements have
been presented to show the remaining pharmaceuticals business as continuing
operations separately from Identicare, which has been classified as
discontinued.
Six months to 30 June 2024 2023 Change at AER
£'000 £'000 %
Revenue 36,915 35,170 5.0%
Gross Profit 20,871 19,684 6.0%
Gross Margin % 56.5% 56.0% 0.5%
Underlying Operating Profit 5,096 5,088 0.2%
Underlying EBITDA 6,627 6,466 2.5%
Underlying EBITDA margin % 18.0% 18.4% (0.4%)
Basic Underlying Continuing EPS (p) 5.8p 6.1p (4.9%)
Group pharmaceutical revenues for the period improved to £36.9m, an increase
of 5.0% (7.1% at CER) with the key contributors being strong growth in Daxocox
and Plaqtiv+ together with double digit growth in our Production Animals and
Equine portfolios. Gross margins improved by 50 bps to 56.5% predominantly
reflecting sales mix. The 2.5% increase in underlying EBITDA to £6.6m
reflects continuing investment in SG&A costs, notably related to our
people.
Revenue performance by product category is shown in the table below:
Six months to 30 June 2024 2023 Change at AER
£'000 £'000 %
Companion Animals 24,437 24,411 0.1%
Production Animals 8,841 7,736 14.3%
Equine & other 3,637 3,023 20.3%
Total 36,915 35,170 5.0%
Overall, Companion Animals revenue was in line with the prior period at
£24.4m. This included strong double-digit growth in Daxocox (+41%) and
Plaqtiv+ (+36%) which benefited from the organisational changes made in H2
2023 and associated ongoing focus and investment to drive sales and marketing
excellence. This very positive performance has been offset by a combination of
sales phasing within our International Partner (export) network, delayed new
product launches and some continuing disruption in the supply of certain
brands, the effects of which we expect to ease, and revenue growth accelerate,
as a result, during the second half.
During the period the existing Licence and Distribution Agreement with STEM,
which covers veterinary markets worldwide excluding the Americas, was amended
to allow Animalcare access to all channels in Europe and the UK. This means
the Group has the opportunity to maximise the value of the dental franchise
through both veterinary and retail channels including through e-commerce.
Production Animal revenues increased by 14.3% versus the prior period to
£8.8m. This strong performance was driven by growth in certain larger-selling
brands, phasing of orders and benefit of a one-off competitor out of stock. As
a result, we expect growth to moderate to mid-single digit for the full year.
The Group's Production Animal expertise is focused in our Southern Europe
markets and we are exploring opportunities to build on this expertise and
existing sales footprint to grow this important part of our business.
Equine and other sales increased by 20.3% to £3.6m, benefiting from
continuing momentum in Danilon within the UK and growth across other equine
products. During the first half and shortly after we received approval for a
number of territory expansions for Danilon, including France, with commercial
launches expected during 2025.
Underlying EBITDA for the Group improved by 2.5% to £6.6m, with EBITDA margin
reducing slightly to 18.0%. Gross margins improved by 50 bps to 56.5%
predominantly reflecting sales mix. Carefully implemented pricing action has
helped to mitigate input cost inflation in cost of goods. We remain alert and
continue to be agile in responding to a dynamic inflationary environment.
Underlying overheads, defined as gross profit less underlying EBITDA,
increased during the first half to £14.2m (H1 2023: £13.2m), an increase of
7.8% principally driven by people and marketing costs. People costs include
the impact of inflationary and salary increases across the Group and
investment in additional headcount, notably in commercial, R&D and supply
chain roles.
Basic underlying continuing EPS decreased by 4.9% to 5.8 pence (H1 2023: 6.1
pence) chiefly due to an increase in the underlying effective tax rate to
27.0% (H1 2023: 21.5%; FY23: 26.6%) driven primarily by an increase in the UK
tax rate to 25% and reduced R&D and innovation relief.
Reported results and non-underlying items
Reported Group profit for the period after accounting for the non-underlying
items noted below was £18.8m (H1 2023: £1.6m), with reported basic earnings
per share at 31.2 pence (H1 2023: 2.7 pence).
Non-underlying items totalling £15.2m (H1 2023: £2.3m loss) relating to
profit after tax have been incurred in the period, as set out in note 3. These
principally comprise:
· Gain on disposal of Identicare of £13.7m and profit on sale of our
minority interest (33.34%) in STEM of £3.4m. See notes 3 and 5 for further
details
· Amortisation and impairment of acquisition-related intangibles of
£2.1m (H1 2023: £2.1m) relating to the reverse acquisition of Ecuphar NV and
previous acquisitions made by Ecuphar NV.
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 15 November
2024 to shareholders whose names are on the Register of Members at close of
business on 18 October 2024. The ordinary shares will become ex-dividend on 17
October 2024.
Cash flow and funding position
During the first half of the year, the proceeds from the divestment of
Identicare and the sale of our minority stake in STEM, alongside a marked
improvement in the rate of underlying cash conversion, have transformed the
Group's balance sheet. Net cash balances at 30 June 2024, pre IFRS 16 leases,
were £32.9m, significantly enhancing our financial flexibility and resources
to accelerate growth. Our capital allocation is closely aligned to our three
strategic priorities: investment in organic growth, carefully selected and
value-enhancing acquisitions and increasing the number of novel products in
development.
Underlying net cash flow generated by our operations increased to £5.4m (H1
2023: £3.8m) as shown in the table below:
Six months to 30 June 2024 2023
£'000 £'000
Underlying EBITDA - continuing operations 6,627 6,466
Underlying EBITDA - discontinued operations 249 691
Total Underlying EBITDA 6,876 7,157
Change in net working capital (1,231) (3,401)
Taxation (490) (553)
Non-cash and other adjusting items 397 279
Net cash flow from operations 5,552 3,482
Non-underlying cash items (169) 277
Underlying net cash flow from operations 5,383 3,759
Underlying cash conversion % 78.3% 52.5%
Net working capital increased by £1.2m during the period, the movement
chiefly attributable to a £1.7m increase in inventories as the higher than
expected inventory reduction during FY23 normalised in the first half.
We are on track to deliver our targeted cash conversion in the range of
85-90%, the achievement of which will be largely dependent on trading patterns
towards the end of the second half and any decisions the Group may take in
connection with strategic stock cover to support surety of supply, hence
sales, for 2025.
As noted above, our balance sheet and cash position have been significantly
strengthened during the period as summarised below:
£'000
Net debt at 1 January 2024 (1,234)
Net cash flow from operations 5,552
Net capital expenditure (1,296)
Proceeds from sale of subsidiary and joint venture, net of cash disposed 27,668
Net finance income 261
Exercise of share options 53
Other movements (786)
Foreign exchange on cash and borrowings (242)
Movement in IFRS 16 lease liabilities 524
Net cash at 30 June 2024 30,500
Comprising:
Net cash at bank 32,919
IFRS 16 lease liability (2,419)
Net capital expenditure of £1.3m was in line with the prior period and
largely comprised investment in our product development pipeline of £0.8m and
£0.4m in IT infrastructure.
We continue to invest in new product development to strengthen our pipeline
through a balance of early and later-stage opportunities. Our development
pipeline is spread across novel, generic and lifecycle management projects in
multiple species. Continued progress has been made with our novel VHH antibody
products in collaboration with Orthros Medical. Lifecycle management
activities of our key brands are ongoing. We have recently added two new
tablet strengths to the Daxocox range as well as submitting regulatory filings
to extend the geographic reach into new territories.
As at 31 December 2023 and 30 June 2024, the Group had total facilities of
€51.5m, which are due to expire on 31 March 2025, comprising a committed
revolving credit facility (RCF) of €41.5m and a €10.0m acquisition line.
Post period end, we have increased our existing RCF from €41.5m to €44.0m
with an extension of the maturity date to 31 March 2029. The acquisition line
has been fully repaid and not extended given the significant cash on balance
sheet.
The Group's facilities are, and will 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%.
Throughout the period, all covenant requirements were met with significant
headroom across all three measures.
Net cash as at 30 June 2024, pre IFRS 16 leases, was £32.9m with the RCF
unutilised. Including the net cash balance, total headroom on the Group's
facilities (excluding the undrawn acquisition line) was approximately £70.0m
at the date of the statement of financial position.
Summary and outlook
Encouraged by the strong performance of our operations over the period and a
positive start to trading in the second half, we anticipate a continuation of
sales growth for the full year in line with market expectations featuring an
accelerated top line contribution from our Companion Animals segment.
Looking further ahead, and while watchful of the macroeconomic pressures that
affect our markets, we remain confident in the attractive fundamentals of the
animal health sector as we pursue value-enhancing opportunities to invest in
our growth strategy, backed by a stronger than ever balance sheet transformed
by the divestment of Identicare and the sale of our minority stake in STEM.
Jenny
Winter
Chris Brewster
Chief Executive
Officer
Chief Financial Officer
Condensed consolidated income statement
(unaudited) For the six months ended 30 June
Notes Underlying Non-Underlying (note 3) Total Underlying Non-Underlying (note 3) Total
2024 2024 2024 2023 2023 2023
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 4 36,915 − 36,915 35,170 − 35,170
Cost of sales (16,044) − (16,044) (15,486) − (15,486)
Gross profit 20,871 − 20,871 19,684 − 19,684
Research and development expenses (1,197) (320) (1,517) (1,099) (304) (1,403)
Selling and marketing expenses (6,240) − (6,240) (6,314) − (6,314)
General and administrative expenses (8,356) (1,760) (10,116) (7,181) (1,769) (8,950)
Net other operating income / (expenses) 18 3,290 3,308 (2) (242) (244)
Operating profit/(loss) 5,096 1,210 6,306 5,088 (2,315) 2,773
Finance expenses (1,051) − (1,051) (648) − (648)
Finance income 737 − 737 379 − 379
Finance cost net (314) − (314) (269) − (269)
Share of net profit/(loss) of joint venture accounted for using the equity 31 − 31 (107) − (107)
method
Profit/(loss) before tax 4,813 1,210 6,023 4,712 (2,315) 2,397
Income tax (expense)/income (1,301) 379 (922) (1,056) 333 (723)
Net profit/(loss) for the period from continuing operations 3,512 1,589 5,101 3,656 (1,982) 1,674
Profit/(loss) for the period from discontinued operations 5 48 13,629 13,677 239 (307) (68)
Profit/(loss) for the period 3,560 15,218 18,778 3,895 (2,289) 1,606
Earnings per share for profit attributable to the ordinary equity holders of
the company:
Total profit for the period
Basic earnings per share 6 5.9p 31.2p 6.5p 2.7p
Diluted earnings per share 6 5.9p 31.0p 6.4p 2.6p
Continuing underlying profit for the period
Basic earnings per share 6 5.8p 8.5p 6.1p 2.8p
Diluted earnings per share 6 5.8p 8.4p 6.0p 2.8p
In order to aid understanding of underlying business performance, the
Directors have presented underlying results before the effect of exceptional
and other items. These exceptional and other items are categorised as
'non-underlying' and are analysed in note 3.
Condensed consolidated statement of comprehensive income
(unaudited) For the six months
ended 30 June
2024 2023
£'000 £'000
Net profit for the period 18,778 1,606
Other comprehensive expense
Exchange differences on translation of foreign operations * (276) (429)
Other comprehensive expense, net of tax (276) (429)
Total comprehensive income for the period, net of tax 18,502 1,177
Total comprehensive income attributable to:
The owners of the parent 18,502 1,177
Total continuing other comprehensive income for the period, net of tax 4,825 1,245
Total discontinued other comprehensive income/(expense) for the period, net of 13,677 (68)
tax
18,502 1,177
* May be reclassified subsequently to profit & loss
Condensed consolidated statement of financial position
At 30 At 30 At 31 December
June
June
(unaudited) (unaudited)
2024 2023 2023
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 39,550 50,537 50,656
Intangible assets 18,072 22,384 20,584
Property, plant and equipment 227 747 403
Right-of-use-assets 2,311 2,989 2,819
Investments in joint ventures − 1,158 1,119
Deferred tax assets 1,693 2,389 1,726
Other financial assets 68 69 70
Total non-current assets 61,921 80,273 77,377
Current assets
Inventories 11,241 11,579 10,062
Trade receivables 12,628 13,857 13,294
Other current assets 2,788 1,468 1,417
Cash and cash equivalents 34,823 6,609 4,642
Total current assets 61,480 33,513 29,415
Total assets 123,401 113,786 106,792
Liabilities
Current liabilities
Lease liabilities (884) (856) (914)
Trade payables (11,734) (12,265) (10,808)
Current tax liabilities (644) (1,018) (125)
Accrued charges and contract liabilities (321) (1,339) (1,159)
Other current liabilities (5,246) (3,567) (5,412)
Total current liabilities (18,829) (19,045) (18,418)
Non-current liabilities
Borrowings (1,904) (8,138) (2,933)
Lease liabilities (1,535) (2,231) (2,029)
Deferred tax liabilities (3,604) (3,516) (4,015)
Contract liabilities − − (293)
Provisions (140) (326) (160)
Other non-current liabilities − − (1,049)
Total non-current liabilities (7,183) (14,211) (10,479)
Total liabilities (26,012) (33,256) (28,897)
Net assets 97,389 80,530 77,895
Equity
Share capital 12,075 12,019 12,022
Share premium 132,798 132,798 132,798
Reverse acquisition reserve (56,762) (56,762) (56,762)
Accumulated profits/(losses) 6,936 (10,004) (12,781)
Other reserves 2,342 2,479 2,618
Equity attributable to the owners of the parent 97,389 80,530 77,895
Total equity 97,389 80,530 77,895
Condensed consolidated statement of changes in equity
Unaudited
Attributable to the owners of the parents
Notes Share Share Accumulated (losses)/ Reverse acquisition reserve Other reserve Total
capital
premium
profits
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2024 12,022 132,798 (12,781) (56,762) 2,618 77,895
Net profit − − 18,778 − − 18,778
Other comprehensive expense − − − − (276) (276)
Total comprehensive income − − 18,778 − (276) 18,502
Exercise of share options 53 − − − − 53
Share based payments 5 − − 939 − − 939
At 30 June 2024 12,075 132,798 6,936 (56,762) 2,342 97,389
Attributable to the owners of the parents
Share Share Accumulated (losses)/ Reverse acquisition reserve Other reserve Total
capital
premium
profits
£'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
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 principally 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
Unaudited
For the six months
ended 30 June
2024 2023
£'000 £'000
Operating activities
Profit before tax from continuing operations 6,023 2,397
Profit/(loss) before tax from discontinued operations 5 13,685 (16)
Profit before tax 19,708 2,381
Non-cash and operational adjustments:
Share in net result of joint venture (31) 107
Depreciation of property, plant and equipment 564 541
Amortisation of intangible assets 3,207 3,210
Share-based payment expense 410 558
Non-cash movement in provisions 11 (8)
Gain on sale of discontinued operation, net of tax 5 (13,723) −
Movement in allowance for bad debt and inventories 155 339
Finance income (744) (235)
Finance expense 484 654
Impact of foreign currencies 605 (88)
Gain from sale of joint venture and release of associated liabilities, net of 3 (3,375) −
tax
Other 2 (23)
Movements in working capital
Increase in trade receivables (284) (1,003)
(Increase)/decrease in inventories (1,723) 1,212
Decrease/(increase) in payables 776 (3,610)
Income tax paid (490) (553)
Net cash flow from operating activities 5,552 3,482
Investing activities
Purchase of property, plant and equipment (58) (225)
Purchase of intangible assets (1,238) (1,090)
Proceeds from the sale of property, plant and equipment (net) − 11
Proceeds from the sale of joint venture 3 3,780 −
Loans given (300) −
Proceeds from sale of subsidiary, net of cash disposed 5 23,888 −
Net cash flow used in investing activities 26,072 (1,304)
Financing activities
Repayment of loans and borrowings (958) (863)
Repayment IFRS 16 lease liability (486) (477)
Exercise of share options 53 −
Interest paid (235) (297)
Other finance income/(expense) 496 (123)
Net cash flow used in financing activities (1,130) (1,760)
Net increase in cash and cash equivalents 30,494 418
Cash and cash equivalents at beginning of period 4,642 6,035
Exchange rate differences on cash and cash equivalents (313) 156
Cash and cash equivalents at end of period 34,823 6,609
Reconciliation of net cash flow to movement in net funds/(debt)
Net increase in cash and cash equivalents in the period 30,494 418
Cash flow from decrease in debt financing 958 863
Foreign exchange differences on cash and borrowings (242) 416
Movement in net funds/(debt) in the period 31,210 1,697
Net funds/(debt) at the start of the period (1,234) (5,402)
Movement in lease liabilities during the period 524 (76)
Net funds/(debt) at the end of the period 30,500 (3,781)
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 2024 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 material accounting policies
This interim financial information for each of the six month periods ended 30
June 2024 and 30 June 2023 has not been audited nor reviewed and does not
constitute statutory accounts as defined in Section 434s of the Companies Act
2006. The comparative information for the year ended 31 December 2023 does not
constitute statutory accounts however is based on the statutory accounts for
that year, on which the Group's former auditor, PricewaterhouseCoopers LLP,
issued an unqualified report and which have been filed with the Register of
Companies.
As presented in note 5, in accordance with IFRS 5 Non-current Assets Held for
Sale and Discontinued Operations, the income statement and related notes have
been presented to show the disposed Identicare Limited subsidiary as
discontinued and the remaining pharmaceuticals business as continuing.
Comparative information has been represented to align with this format. In
assessing the value of the net assets disposed, the Group was required to
allocate a portion of goodwill to the Identicare Limited business. Goodwill
allocated to the pharmaceuticals cash-generating unit ("CGU"), of which
Identicare Limited formed a part, includes goodwill recognised as a result of
past business combinations. In assessing the portion of this goodwill that
should be disposed as part of the sale of the Identicare business, the
transaction value was taken as a percentage of the total Group's market
capitalisation at the point of disposal.
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 2024 was approved by the
Board of Directors and authorised for issue on 24 September 2024.
The condensed consolidated interim financial information for the six months
ended 30 June 2024 has been prepared using UK adopted international accounting
standards and accounting policies consistent with those of the Company's
annual accounts for the year ended 31 December 2023.
The accounts have been prepared on a going concern basis, the justification
for which is set out in the Going Concern section below.
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:
Classification of Liabilities as current or non-current
- Amendments to IAS 7 'Statement of Cash Flows' and IFRS 7
'Financial Instruments: Disclosures': Supplier Finance Arrangements
- Amendments to IFRS 16 'Leases': Lease Liability in a Sale and
Leaseback
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, 2024, and/or not yet adopted by
the European Union as of June 30, 2024. 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 21 'The Effects of Changes in Foreign Exchange
Rates: Lack of Exchangeability' (effective 1 January 2025).
- Amendments to IFRS 9 and to IFRS 7: the Classification and
Measurement of Financial Instruments (effective on 1 January 2026).
- IFRS 18 Presentation and Disclosure in Financial Statements
(effective on 1 January 2027).
- IFRS 19 Subsidiaries without Public Accountability: Disclosures
(effective on 1 January 2027).
Going Concern
Banking Facilities and Covenants
As at 30 June 2024, the Group had total facilities of €51.5m, due to expire
31 March 2025, provided by a syndicate of four banks, comprising a committed
revolving credit facility (RCF) of €41.5m and a €10.0m acquisition line,
the latter of which cannot be utilised to fund operations. The loans have a
variable, Euribor-based interest rate, with a margin of 1.50% (RCF) or 1.75%
(acquisition line). The revolving credit facilities and the acquisition
financing had a bullet maturity in March 2025.
As from September 2024 we have increased our existing RCF from €41.5m to
€44.0m with an extension of the maturity date to 31 March 2029. The
acquisition line, which was drawn down by €2.3m as at 30 June 2024, has been
settled. The covenant requirements in the RCF remain unchanged from the
current RCF agreement, details of which are provided below. The Group manages
its banking arrangements centrally through cross-currency cash pooling. Funds
are swept daily from its various bank accounts into central bank accounts to
optimise the Group's net interest payable position.
The facilities remain subject to the following covenants which are in
operation at all times:
• Net debt to underlying EBITDA ratio of 3.5 times;
• Underlying EBITDA to interest ratio of minimum 4 times; and
• Solvency (total assets less goodwill/total equity less goodwill) greater
than 25%.
Net cash as at 30 June 2024, pre IFRS 16 leases, was £32.9m with the RCF
unutilised. Including the net cash balance, total headroom on the Group's
facilities (excluding the undrawn acquisition line) was approximately £70.0m
at the date of the statement of financial position. As at 30 June 2024 and
throughout the financial period, all covenant requirements were met with
significant headroom across all three measures.
3 Non-underlying items
For the six months ended 30 June
2024 2023
£'000 £'000
Amortisation and impairment of acquisition related intangibles
Classified within Research and development expenses 320 304
Classified within General and administrative expenses 1,760 1,769
Classified within Net other operating expenses − 11
Total amortisation and impairment of acquisition related intangibles 2,080 2,084
Acquisition and integration costs 43 34
Divestments and business disposals 21 11
Gain on sale of joint venture and release of associated liabilities (3,375) −
Other non-underlying items 21 186
(3,290) 231
Total non-underlying items before taxes from continuing operations (1,210) 2,315
Tax impact (379) (333)
Total non-underlying items after taxes from continuing operations (1,589) 1,982
Other non-underlying items from discontinued operations (note 5) 94 307
Gain on disposal of discontinued operation, net of tax (note 5) (13,723) −
Total non-underlying items after taxes (15,218) 2,289
The amortisation and impairment of acquisition-related intangibles charge
totalling £2,080k (2023: £2,084k) largely relates to the historic Esteve
acquisition of £565k (2023: £577k) and the reverse acquisition of Animalcare
Group plc of £1,515k (2022: £1,497k).
On 12 April 2024 the Group sold its minority interest (33.34%) in STEM Animal
Health Inc. for a cash payment of US$4.7m (£3,780k). In total, a gain of
£3,375k was realised resulting from two distinct agreements. The sale of the
Group's equity holding generated a profit on disposal of £2,654k. In
addition, the Group's requirement to pay a capital contribution of CAD$0.5m
(£289k) in September 2024 was terminated. As part of a separate agreement,
future milestone commitments totalling CAD$748k (£432k) were renounced.
On 28 February 2024 the Group disposed of its subsidiary Identicare Ltd,
resulting in a gain on disposal of £13,723k (note 5).
Other non-underlying items from discontinued operations primarily relates to
share-based payment arrangements in respect of growth shares in the disposed
subsidiary (net of tax). The fair value of this long-term incentive plan was
connected to the future value of the subsidiary and not trading; hence it has
been treated as non-underlying since inception on 1 January 2022.
4 Segment information - from continuing operations
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 2024 and 2023. 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
2024 2023
Pharma Pharma
From continuing operations £'000 £'000
Revenues 36,915 35,170
Gross Margin 20,871 19,684
Gross Margin % 56.5% 56.0%
Segment underlying EBITDA 6,627 6,466
Segment underlying EBITDA % 18.0% 18.4%
Segment EBITDA 9,916 6,235
Segment EBITDA % 26.9% 17.7%
The segment EBITDA is reconciled with the consolidated net profit of the year
as follows:
For the six months ended 30 June
2024 2023
From continuing operations £'000 £'000
Segment EBITDA 9,916 6,235
Depreciation, amortisation and impairment (3,610) (3,462)
Operating profit 6,306 2,773
Finance expenses (1,051) (648)
Finance income 737 379
Share in net result of joint ventures 31 (107)
Income taxes (1,277) (826)
Deferred taxes 355 103
Net profit 5,101 1,674
Revenue by product category:
For the six months
ended 30 June
2024 2023
£'000 £'000
Companion Animals 24,437 24,411
Production Animals 8,841 7,736
Equine and Other 3,637 3,023
Total 36,915 35,170
Revenue by geographical area:
For the six months
ended 30 June
2024 2023
£'000 £'000
Belgium 1,606 1,505
The Netherlands 1,140 938
United Kingdom 6,703 6,113
Germany 5,009 4,731
Spain 10,952 11,846
Italy 5,198 4,409
Portugal 1,998 1,784
European Union - other 4,002 3,543
Asia 232 268
Other 75 33
Total 36,915 35,170
Continuing revenue relates to product sales and is recognised when the
performance obligation is satisfied at a point in time.
5 Discontinued operations
On 28 February 2024, the Group sold its entire interest in its majority stake
in its subsidiary Identicare Ltd. Identicare Ltd was not previously classified
as held-for sale or as discontinued operation based on the investment not
meeting the requirements of IFRS 5 as at 31 December 2023. The comparative
condensed consolidated income statement and statement of other comprehensive
income have been represented to show the discontinued operation separately
from continuing operations.
The Group recognised a gain in relation to the sale of £13,723k. This is
based on the total consideration (net of associated costs) of £24,228k and a
net asset value of £10,505k.
In accordance with IFRS 5, the income statement for the 6 months ended 30 June
2024 and 30 June 2023 have been restated to show continuing operations
separately from discontinued operations. Restatements have been performed in
relation to transactions between Identicare Ltd and the other entities.
For the six months ended 30 June
Underlying Non-Underlying (note 3) Total Underlying Non-Underlying (note 3) Total
2024 2024 2024 2023 2023 2023
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 610 − 610 1,542 − 1,542
Cost of sales (91) − (91) (119) − (119)
Gross profit 519 − 519 1,423 − 1,423
Research and development expenses − − − − − −
Selling and marketing expenses (66) − (66) (156) − (156)
General and administrative expenses (365) − (365) (876) − (876)
Net other operating expenses − (94) (94) − (344) (344)
Operating profit/(loss) 88 (94) (6) 391 (344) 47
Finance expenses (35) − (35) (63) − (63)
Finance income 3 − 3 − − −
Finance costs net (32) − (32) (63) − (63)
Profit/(loss) before tax 56 (94) (38) 328 (344) (16)
Income tax expense (8) − (8) (89) 37 (52)
Gain on sale of discontinued operations − 13,723 13,723 − − −
Net profit/(loss) for the period from discontinued operations 48 13,629 13,677 239 (307) (68)
Net profit/(loss) attributable to:
The owners of the parent 48 13,629 13,677 239 (307) (68)
Earnings per share for profit/(loss) attributable to the ordinary equity
holders of the company:
Basic earnings per share 0.1p 22.7p 0.4p -0.1p
Diluted earnings per share 0.1p 22.6p 0.4p -0.1p
There are no discontinued gains and losses in the current or prior period
other than those presented in the income statement.
The net cash flow by discontinued operations can be found below:
For the six months
ended 30 June
2024 2023
£'000 £'000
Operating 432 461
Investing 24,364 (256)
Financing (59) (205)
Net increase in cash generated by the discontinued operations 24,737 −
The major classes of assets and liabilities of Identicare Ltd. at the disposal
date can be found below:
28 February
2024
£'000
Consideration received in cash 24,862
Associated transaction costs (634)
Net proceeds 24,228
Net book value of assets disposed of:
Goodwill (10,855)
Intangible assets (390)
Property, plant and equipment (72)
Right-of-use assets (361)
Inventories (144)
Trade receivables (342)
Other receivables (20)
Cash and cash equivalents (340)
Provisions 7
Deferred tax liabilities 10
Lease liabilities 297
Trade payables 197
Current tax liabilities 232
Other payables (5)
Accrued charges and contract liabilities 1,281
Net assets disposed of (10,505)
Profit on disposal 13,723
Net cash inflow arising on disposal:
Consideration received in cash 24,862
Associated transaction costs (634)
Cash and cash equivalents disposed of (340)
Net cash inflow 23,888
Goodwill allocated to the pharmaceuticals cash-generating unit ("CGU"), of
which Identicare Limited formed a part, includes goodwill recognised as a
result of past business combinations. In assessing the portion of this
goodwill that should be disposed as part of the sale of the Identicare
business, the transaction value was taken as a percentage of the total Group's
market capitalisation at the point of disposal.
Within the consolidated statement of changes in equity, a net credit of £860k
is recognised within the £939k share based payments movement in the
accumulated profits reserve. This relates to the crystallisation of the fair
value of the long term incentive plan ("LTIP") scheme as a result of the
disposal of Identicare Limited. £802k of the £860k represents the release of
the previous cash settled liability held within the statement of financial
position. The remainder is taken as a credit to non-operating income in the
non-underlying, discontinued profit or loss. The ownership of the shares
required ongoing employment and carried value to the holder on either the sale
of Identicare, or after five years the holder could obligate the Group to
repurchase the shares at market value via a put option. The Group could also
obligate the holder to sell the shares to the Group at market value via a call
option. The shares carried preferential rights to return upon the sale of
Identicare with an increasing ratchet depending on the equity value of
Identicare.
In line with IFRS 2 Share Based Payments, the accounting immediately prior to
the disposal was updated to reflect the position that the revised form of
settlement had always been expected.
6 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
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Net profit 3,560 3,895 18,778 1,606
Net profit attributable to ordinary equity holders of the parent adjusted for 3,560 3,895 18,778 1,606
the effect of dilution
Net continuing profit 3,512 3,656 5,101 1,674
Net continuing profit attributable to ordinary equity holders of the parent 3,512 3,656 5,101 1,674
adjusted for the effect of dilution
Average number of shares (basic and diluted):
For the six months ended 30 June
Underlying Underlying Total Total
2024 2023 2024 2023
Number Number Number Number
Weighted average number of ordinary shares for basic 60,204,118 60,237,694 60,204,118 60,237,694
earnings per share
Dilutive potential ordinary shares 360,005 569,632 360,005 569,632
Weighted average number of ordinary shares adjusted for effect of dilution 60,564,123 60,807,326 60,564,123 60,807,326
Basic earnings per share: For the six months ended 30 June
Underlying Underlying Total Total
2024 2023 2024 2023
Pence Pence Pence Pence
From total operations attributable to the ordinary equity holders of the 5.9 6.5 31.2 2.7
company
Total basic earnings per share attributable to the ordinary equity holders of 5.9 6.5 31.2 2.7
the company
From continuing operations attributable to the ordinary equity holders of the 5.8 6.1 8.5 2.8
company
Total continuing basic earnings per share attributable to the ordinary equity 5.8 6.1 8.5 2.8
holders of the company
Diluted earnings per share:
For the six months ended 30 June
Underlying Underlying Total Total
2024 2023 2024 2023
Pence Pence Pence Pence
From total operations attributable to the ordinary equity holders of the 5.9 6.4 31.0 2.6
company
Total diluted earnings per share attributable to the ordinary equity holders 5.9 6.4 31.0 2.6
of the company
From continuing operations attributable to the ordinary equity holders of the 5.8 6.0 8.4 2.8
company
Total continuing diluted earnings per share attributable to the ordinary 5.8 6.0 8.4 2.8
equity holders of the company
Earnings per share for discontinued operations are presented in note 5.
7 Dividends
The final dividend for the year ended 31 December 2023 of 3.0 pence per share
was paid to shareholders on 19 July 2024.
The directors have declared an interim dividend of 2.0 pence per share. The
interim dividend will be paid on 15 November 2024 to shareholders whose names
are on the Register of Members at close of business on 18 October 2024. The
ordinary shares will become ex-dividend on 17 October 2024.
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 2024 in accordance with IAS
10 'Events after the Balance Sheet date'.
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 this section. The Group carried an
investment in a joint venture (STEM Animal Health Inc.) which was accounted
for using the equity method up to 12 April 2024 when the interest in the joint
venture was sold. In addition, a separate agreement regarding future milestone
payments was reached. As a result of these two agreements, the Group realised
a gain of £3,375k comprising profit on disposal of the equity of £2,654k and
a release of license and capital contribution liabilities of £721k (for
further details see note 3). This gain is included in Net other operating
income / (expenses).
9 Events after the reporting period
There are no events after the reporting period further to those described in
note 7 and the refinance described in note 2.
10 Cautionary statement
This Interim Management Report ("IMR") consists of the Chairman's Statement
and the Business and Financial 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 2024 was approved
and authorised for issue on 24 September 2024. Copies will be available to
download on the Company's website at: www.animalcaregroup.com
(http://www.animalcaregroup.com) .
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