TIDMANCR
RNS Number : 1414N
Animalcare Group PLC
28 September 2021
Animalcare Group plc
Interim Results for the six months ended 30 June 2021
28 September 2021. Animalcare Group plc ("the Company" or
"Group") (AIM: ANCR), the international animal health business,
announces its unaudited interim results for the six months ended 30
June 2021.
Animalcare has delivered a very strong first half with
double-digit revenue and profit growth and a further strengthening
of our financial position. Driven by the continuation of favourable
trading conditions into the second half, the Board expects that
underlying EBITDA and underlying basic EPS for the full year will
be ahead of current market expectations.
Financial Highlights
-- Revenue increased 13.3% (14.2% at CER) to GBP39.1m compared to prior period (H1 2020: GBP34.5m) with sales growth
particularly strong within Companion Animals
-- Gross profit margin increased 2.6% to 54.6% compared to prior period (H1 2020: 52.0%), benefiting from a
continued focus on brands with higher growth and margin potential
-- Underlying* EBITDA up 28.3% on the prior period to GBP8.5m, largely reflecting strong revenue growth coupled with
higher margin sales mix
-- Underlying basic EPS increased by 35.6% to 8.0 pence (H1 2020: 5.9 pence)
-- Statutory profit before tax, incorporating non-underlying items was GBP0.8m (H1 2020: GBP0.8m), with reported
basic EPS at 0.5 pence (H1 2020: 0.8 pence)
-- Net debt further reduced by GBP3.5m to GBP10.1m as of 30 June 2021 supported by continued strong cash conversion.
Net debt to underlying EBITDA leverage ratio reduced to approximately 0.7 times
-- Board declares interim dividend of 2.0 pence per share
* 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
Pipeline
-- Following approval by EU and UK authorities, Daxocox launch activities commenced at the end of the first half
while the STEM dental range of products remains on track to complete manufacturing transfer and launch in late Q4
-- The Group plans to increase investment in the development pipeline versus the prior year and further still into
2022
Business development
-- The Group continues to pursue business development opportunities that will further Animalcare's strategic
priorities: strengthening and building the pipeline; enhancing earnings through sustainable commercial deals; and
scaling up and extending the geographic footprint
Operational
-- New organisation structure and streamlined leadership team implemented to support delivery of growth strategy
Animalcare's Chief Executive Officer, Jenny Winter, commented: "
We delivered a very strong set of results for the first six months
supported by growing demand in our Companion Animals segment.
Increased revenues and profit fed through to improvements in our
balance sheet, further strengthening the Group's capacity to pursue
value-creating opportunities that align with our growth strategy.
Encouraged by the trading momentum carried into the third quarter
we are confident that profit performance will be ahead of current
market expectations for the full year.
"Animalcare achieved a major milestone for our development
pipeline in the first half with Daxocox receiving marketing
approval across EU markets and in the UK. We are now in the early
launch phase and have committed to increase investment as we
maximise the potential of this differentiated new pain treatment
over the coming years.
"The positive trading results and the strategic progress made in
the first half are a credit to the commitment, focus and agility of
our employees across the Group."
Analyst briefing/webcast
A briefing for analysts will be held at 10:30 BST on Tuesday 28
September 2021 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_OSSRUqBXRkGzDxde3T-mVg
A copy of the analyst presentation will be made available on the
Group website shortly after the webcast.
Enquiries
Animalcare Group plc +44 (0)1904 487 687
Jenny Winter, Chief Executive
Officer
Chris Brewster, Chief Financial communications@animalcaregroup.com
Officer
Media/investor relations
Stifel Nicolaus Europe Limited
(Nominated Adviser & Joint
Broker)
Ben Maddison
Fred Walsh
Nick Adams +44 (0)20 7710 7600
Panmure Gordon
(Joint Broker)
Corporate Finance
Freddy Crossley/Emma Earl
Corporate Broking
Rupert Dearden +44 (0)20 7886 2500
About Animalcare www.animalcaregroup.com
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.
Chairman's Statement
Animalcare made a very positive start to the year as we
benefited from a clear focus on our growth strategy and increased
customer demand across our markets, particularly in the Companion
Animals segment.
First half revenue grew by 13.3% to GBP39.1m helping drive
underlying EBITDA to GBP8.5m, 28.3% ahead of the prior period.
Continued improvement in underlying cash conversion, which keeps
the Group on track to deliver our target of a 90%-100% conversion
rate for the full year, was reflected in a further reduction of our
net debt, down GBP3.5m to GBP10.1m at 30 June 2021. The Group's net
debt to underlying EBITDA ratio of 0.7 times strengthens our
overall financial position and capacity to pursue value-enhancing
business development opportunities that support our growth
strategy.
While we still anticipate growth in revenue and underlying
EBITDA will be weighted towards the first half of 2021, the level
of market demand we have seen during the third quarter gives us the
confidence that underlying EBITDA and underlying basic EPS will
exceed current market expectations for the full year. Against this
backdrop, and alongside a continuing increase in investment in the
pipeline, the Board has declared an interim dividend of 2.0 pence
per share, in line with 2020.
One of the highlights of the first half was the grant of
marketing authorisation for Daxocox, paving the way for the launch
of our differentiated canine pain treatment in EU markets and the
UK. This is a notable achievement for the Group and represents the
culmination of many years of dedication and expertise of our
internal development team. With the completion of manufacturing
transfer, we also expect to add biofilm treatments from our STEM
joint venture to our line-up of new products in the fourth
quarter.
Our employees drive our business and deserve huge credit for
these positive results. Under Jenny Winter's leadership, the Group
has continued to strengthen the capabilities and focus of
Animalcare. The establishment of a streamlined senior executive
management team at the beginning of the year has facilitated more
efficient decision-making while internal promotions and external
hires have further bolstered the experience and talent at Group and
country level.
A notable post period event saw Christiaan Cardon stand down
from his role as Director following the sale of shares held by
Ecuphar Invest NV. On behalf of the Group, I would like to offer my
thanks to Christiaan for the valuable contribution he has made to
the Company over several years. The Board also extends a warm
welcome to the incoming shareholders who have demonstrated their
support for the Group and the direction we are taking the
Company.
Jan Boone, Chairman
Business Review
In the first half we continued to make progress on the five
clear priorities of our growth strategy.
1. Strong financial platform
After showing resilience in the face of pandemic-related
disruption in the prior year period, the Group delivered strong
revenue growth of 13.3%, helped to a significant degree by
increased demand from a resurgent Companion Animals segment.
Underlying EBITDA, up 28.3% in the first half, benefited from
positive revenue leverage and higher margin sales mix. In large
part, this was due to a focus in recent years on brands that
possess higher growth and margin potential. The cash conversion
rate remains strong and on track to meet the Group's 90% to 100%
target. This helped drive a further reduction in net debt to
GBP10.1m as of 30 June 2021. This figure is inclusive of the full
year 2020 dividend paid post period end. In addition, net debt to
underlying EBITDA ratio reduced to 0.7 times in the period.
2. Right people and capabilities
The Group continues to strengthen capabilities in key areas
across the organisation. The transition to a regional model and
streamlined senior executive team is supporting more efficient
decision making and increased focus on the growth strategy. Sales
and Marketing excellence remains a priority, particularly with the
addition of differentiated products and an accelerated evolution of
customer work practices driven by COVID-19. A dedicated,
experienced resource has been appointed to drive this critical
programme while internal and external appointments have been made
to further improve capabilities and Group-wide consistency in the
areas of supply chain, technical veterninary support and financial
management.
3. Building our pipeline
Daxocox, our novel COX-2 inhibitor pain treatment for dogs,
received marketing authorisation for EU countries and the UK in
April 2021. Early launch activities kicked off at the end of the
first half and are under way across all our markets. R&D life
cycle management programmes for Daxocox have been initiated to
target new indications, new formulations and geographic expansion.
For the STEM joint venture with Kane Biotech, biofilm pipeline
projects have commenced, with a particular focus on otitis. To
support delivery of pipeline opportunities, total R&D
investment is expected to increase versus the prior year and
further still into 2022.
4. Driving portfolio delivery
In recent years we have reduced the total number of products in
our portfolio with the aim of increasing management focus and sales
and marketing attention on brands that possess higher growth and
margin potential. In the first half, revenues generated by our top
40 products, including products launched in 2021, increased by
around 15%. This increased focus towards higher value products has
been a meaningful contributor to the 2.6% increase in gross margin
versus the prior period.
5. Business development
The Group continues to pursue a number of business development
opportunities that have the potential to strengthen and build the
pipeline, enhance earnings through sustainable commercial
agreements and increase geographic scale and reach.
Financial Review
Overview of underlying financial results
We are pleased to report a very strong first half trading
performance with the double-digit revenue growth and improved gross
margin driving a significant increase in underlying EBITDA. The
Group continues to deliver strong cash conversion which drove
further reduction in net debt during the period.
A summary of the underlying financial results for the first six
months of 2021, which the Directors believe provides a clearer
picture of business performance, is shown below.
Six Months to 30 2021 2020 Change
June at AER
GBP'000 GBP'000 %
-------- -------- --------
Revenue 39,121 34,520 13.3%
-------- -------- --------
Gross Profit 21,354 17,937 19.1%
-------- -------- --------
Gross Margin % 54.6% 52.0% 2.6%
-------- -------- --------
Underlying Operating
Profit 7,089 4,915 44.2%
-------- -------- --------
Underlying EBITDA 8,474 6,606 28.3%
-------- -------- --------
Underlying EBITDA
margin % 21.7% 19.1% 2.6%
-------- -------- --------
Basic Underlying
EPS (p) 8.0p 5.9p 35.6%
-------- -------- --------
Revenue
Revenue performance by product category is shown in the table
below:
Six Months to 30 June 2021 2020 Change
at AER
GBP'000 GBP'000 %
-------- -------- --------
Companion Animals 27,385 21,210 29.1%
-------- -------- --------
Production Animals 9,263 10,543 (12.1%)
-------- -------- --------
Equine & other 2,473 2,767 (10.6%)
-------- -------- --------
Total 39,121 34,520 13.3%
-------- -------- --------
Companion Animals, which represents the majority of our business
at around 70% of Group turnover, grew at 29.1% over the
corresponding period last year. This growth can be attributed to
strong market dynamics, particularly in Southern Europe where
overall trading additionally benefited from the effects of phasing,
newly introduced products and favourable comparisons to the prior
period when the effects of COVID-19 were prevalent across the
animal health industry.
We continue to optimise and refine our existing portfolio to
reduce fragmentation and increase commercial focus to drive growth
within our higher margin core product range. In the first half,
revenues generated by our top 40 products, including those launched
in 2021, increased by around 15%. Consistent with this focus, as
from 1 January 2021, the Group's Belgium subsidiary discontinued
the local commercialisation of several antibiotics and other lower
margin products under a legacy distribution contract . As a result,
Production Animals revenue declined by 12.1% versus the prior
period to GBP9.3m. Excluding the discontinuation of the commercial
agreement in Belgium, sales of Production Animals grew over the
first half.
As expected, Equine and other sales decreased by 10.6% to
GBP2.5m principally due to the unwind of prior year customer stock
build in advance of manufacturing transfers.
Underlying operating results
The strong revenue growth and higher margin product mix drove a
significant improvement in our profitability with underlying EBITDA
at GBP8.5m (2020: GBP6.6m), an increase of 28.3% versus prior
period. We have continued to invest in our people and drivers of
future growth including those related to new product launches,
pipeline projects and business development opportunities. As a
result, SG&A expenses increased by GBP1.5m , r epresenting
32.9% of revenue, versus the comparator period, which included
around GBP1.0m savings generated from reduced or deferred spend in
response to the lower demand related to COVID-19.
The underlying effective tax rate was 24.4% (H1 2020: 24.2%; FY
2020: 20.1%) primarily reflecting the regional mix of profits
arising, and expected to arise, in higher rate tax jurisdictions.
This includes the one-off impact of the substantively enacted
increase in corporate tax rates in the UK (from 19% to 25%
effective 1 April 2023) on deferred tax balances. We continue to
optimise research and development tax credits.
Reflecting the points noted above, underlying basic EPS
increased by 35.6% to 8.0 pence (2020: 5.8 pence).
Non-underlying items
Non-underlying items totalling GBP5.6m (2020: GBP3.9m) relating
to profit before tax have been incurred in the period, as set out
in note 3. These principally comprise:
1. Amortisation and impairment of acquisition related
intangibles of GBP5.4m (2020: GBP2.9m). The increase versus 2020
primarily reflects the non-cash impairment of a project that formed
part of the acquired development pipeline at a fair value of
GBP1.8m. The principal driver is the recall and suspension of all
products containing ranitidine for human use by European and US
authorities. Consequently, Animalcare has ceased development of
ranitidine for animal use due to the high level of regulatory
uncertainty. Discontinuation of the ranitidine programme is not
expected to have a material impact on the Group.
2. Expenses relating to acquisition, integration and
restructuring costs of GBP0.6m (2020: GBP0.7m) largely relating to
business development activities and reorganisation of our Belgium
and UK operations;
3. GBP0.4m income in respect of product divestments as we
continue to focus on our core higher margin brands.
Dividend
The Board is pleased to declare an interim dividend of 2.0 pence
per share, in line with 2020. The interim dividend will be paid on
19 November 2021 to shareholders whose names are on the Register of
Members at close of business on 22 October 2021. The ordinary
shares will become ex-dividend on 21 October 2021.
Cash flow, net debt and borrowing facilities
Establishing and then maintaining a strong financial platform
has been a core element of our strategy, providing capacity for
acquisition and further investment in business development and
pipeline opportunities that support our long-term growth. We
entered 2021 in a strong financial position following further
progress made during 2020 in generating positive levels of
operating cash and strengthening our balance sheet.
Following a period of strong trading in which our underlying
stock profile operated at normalised levels, we are pleased to
report, as expected, a significant improvement in our first half
underlying cash conversion performance at 79.5% (2020: 56.9%) as
set out in the table below:
Six months Six months
to 30 June to 30 June
2021 2020
GBP'000 GBP'000
------------------------------- ------------ ------------
Underlying EBITDA 8,474 6,606
------------ ------------
Net cash flow from operations 6,193 3,076
------------ ------------
Non-underlying items 546 686
------------ ------------
Underlying net cash flow
from operations 6,739 3,762
------------ ------------
Cash conversion % 79.5% 56.9%
------------------------------- ------------ ------------
The Group's working capital increased by GBP1.3m compared to
GBP3.7m in the prior period, largely reflecting the normalisation
of our stock profile noted above. Within our 2020 half year
results, there was an overall GBP2.3m cash increase in our
inventories, primarily relating to GBP1.1m strategic stock build in
advance of manufacturing transfers with the balance reflecting the
demand disruption in Q2 trading as a result of COVID-19.
Non-underlying cash items principally relate to acquisition,
integration and restructuring costs offset by the divestment
proceeds as noted above.
Net debt reduced by GBP3.5m over the period and stood at
GBP10.1m on 30 June 2021. This improvement was largely driven by
the continued strong cash conversion noted above and is inclusive
of accounting for the GBP1.2m FY20 final dividend paid to
shareholders on 2 July 2021. Exchange rate variations benefited the
net debt position by GBP0.9m.
GBP'000
Net debt at 1 January 2021 (13,618)
---------
Net cash flow from operations 6,193
---------
Net capital expenditure (1,541)
---------
Net finance expenses (1,006)
---------
Issue of equity 44
---------
Dividends paid (1,201)
---------
Foreign exchange on cash and borrowings 853
---------
Movement in IFRS16 lease liabilities 167
---------
Net debt at 30 June 2021 (10,109)
---------
Net capital expenditure of GBP1.5m (2020: GBP1.0m) largely
comprises investment in our product development pipeline of
GBP1.1m, the most significant components of which relate to Daxocox
and STEM. The balance of expenditure largely relates to continuing
investment in our IT infrastructure.
The net debt to underlying EBITDA leverage ratio was
approximately 0.7 times (FY20: 1.1 times) versus the bank covenant
of 3.5 times. At 30 June 2021, total facilities were GBP44.2m, of
which GBP12.8m, net of cash balances, was utilised, leaving
headroom of GBP31.3m.
Going Concern
Banking Facilities and Covenants
During the first half we completed an exercise with our four
syndicate banks to extend our existing banking facilities from 31
March 2022 to 31 March 2025.
At 30 June 2021, the Group's financing arrangements consisted of
a committed revolving credit facility of EUR41.5m and a EUR10m
acquisition line, which cannot be utilised to fund our operations.
The investment loan facility was repaid in full at the time of
renewal.
The facilities remain subject to the following covenants which
are in operation at all times:
-- Net debt to underlying EBITDA ratio of 3.5 times
-- Underlying EBITDA to interest ratio of minimum 4 times
-- Solvency (total assets less goodwill/total equity less goodwill) greater than 25 %
As at 30 June 2021, all covenant requirements were met with
significant headroom across all three measures. As at 30 August
2021, net debt further reduced to approximately GBP7.6m. Headroom
on the banking facilities, including cash on balance sheet, was
around GBP33.8m.
Summary and outlook
The Animalcare team delivered excellent revenue and profit
growth in the first six months, further strengthening our financial
position which underpins the Group's long-term growth strategy.
Market dynamics in the animal health market have been strong
over the period, notably in the Companion Animals segment which has
been boosted by positive fundamentals such as increased pet
ownership across many countries. We continue to assume that full
year growth will be weighted towards the first half, largely as a
result of phasing. However, we have been encouraged by demand
levels during the third quarter which makes us confident that
underlying EBITDA and underlying basic EPS for the full year will
exceed current market expectations.
We are allocating resources to growth opportunities including
new products such as Daxocox - which is early in its launch phase -
and the STEM biofilm range of treatments for which we expect to
complete manufacturing transfer ahead of introduction to our
markets in the fourth quarter.
Looking further ahead, our strong financial platform and
confident outlook enable us to pursue value creating business
development opportunities that have the potential to generate
earnings and margins growth through commercial agreements, increase
our geographic scale and reach and build and strengthen our
pipeline. We intend to increase our investment in the pipeline over
the prior year and further still into 2022.
We would like to recognise the commitment, agility and expertise
of the Animalcare team who made these first half results possible
and continue to build the platform that underpins our long-term
sustainable growth strategy.
Jennifer Winter Chris Brewster
Chief Executive Officer Chief Financial Officer
Condensed consolidated income statement
For the six months ended 30 June
--------------------------------------------------------------------------
Non-Underlying
Non-Underlying (note
Underlying (note 3) Total Underlying 3) Total
2021 2021 2021 2020 2020 2020
---------- -------------- -------- ---------- -------------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 39,121 - 39,121 34,520 - 34,520
Cost of sales (17,767) - (17,767) (16,583) - (16,583)
Gross profit 21,354 - 21,354 17,937 - 17,937
---------- -------------- -------- ---------- -------------- --------
Research and development
expenses (1,212) (547) (1,759) (1,163) (547) (1,710)
Selling and marketing expenses (6,285) - (6,285) (5,685) - (5,685)
General and administrative
expenses (6,818) (2,373) (9,191) (6,235) (2,376) (8,611)
Net other operating income
/ (expenses) 50 (2,685) (2,635) 61 (986) (925)
Operating profit/(loss) 7,089 (5,605) 1,484 4,915 (3,909) 1,006
---------- -------------- -------- ---------- -------------- --------
Financial expenses (1,131) - (1,131) (488) - (488)
Financial income 574 - 574 244 - 244
Financial net result (557) - (557) (244) - (244)
---------- -------------- -------- ---------- -------------- --------
Share in net (loss)/profit
of joint ventures accounted
for using the equity method (136) - (136) - - -
---------- -------------- -------- ---------- -------------- --------
Profit/(loss) before tax 6,396 (5,605) 791 4,671 (3,909) 763
---------- -------------- -------- ---------- -------------- --------
Income tax (1,563) 1,100 (463) (1,129) 832 (297)
---------- -------------- -------- ---------- -------------- --------
Net Profit/(loss) 4,833 (4,505) 328 3,542 (3,077) 466
---------- -------------- -------- ---------- -------------- --------
Net profit/(loss)
attributable
to:
---------- -------------- -------- ---------- -------------- --------
The owners of the parent 4,833 (4,505) 328 3,542 (3,077) 466
---------- -------------- -------- ---------- -------------- --------
Earnings per share for
profit/(loss) attributable
to the ordinary equity
holders of the company:
Basic 8.0p 0.5p 5.9p 0.8p
Diluted 8.0p 0.5p 5.9p 0.8p
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 analysed in note 3.
Condensed consolidated statement of comprehensive income
For the six months
ended 30 June
--------------------
2021 2020
--------- ---------
GBP'000 GBP'000
Net profit for the period 328 466
Other comprehensive (expense)/income
Cumulative translation differences * (468) 672
--------- ---------
Other comprehensive (expense)/income, net of
tax (468) 672
--------- ---------
Total comprehensive (expense)/income for the
period, net of tax (140) 1,138
--------- ---------
Total comprehensive (expense)/income attributable
to:
The owners of the parent (140) 1,138
--------- ---------
* May be reclassified subsequently to profit
& loss
Condensed consolidated statement of financial position
30 June 31 Dec
2021 2020
-------- --------
GBP'000 GBP'000
Assets
Non-current assets
Goodwill 50,534 50,987
Intangible assets 33,400 37,812
Property, plant and equipment 442 265
Right-of-use assets 1,622 1,790
Investments in joint ventures 1,339 1,457
Deferred tax assets 2,470 2,220
Other financial assets 92 63
Other non-current assets 25 48
Total non-current assets 89,924 94,642
-------- --------
Current assets
Inventories 11,955 12,797
Trade receivables 10,233 10,142
Other current assets 2,949 1,589
Cash and cash equivalents 4,550 5,265
Total current assets 29,687 29,793
-------- --------
Total assets 119,611 124,435
-------- --------
Liabilities
Current liabilities
Borrowings (152) (637)
Lease liabilities (769) (951)
Trade payables (9,581) (11,348)
Tax payables (1,849) (553)
Accrued charges and deferred income (2,221) (2,686)
Other current liabilities (2,874) (3,202)
Total current liabilities (17,446) (19,377)
-------- --------
Non-current liabilities
Borrowings (13,641) (16,432)
Lease liabilities (875) (861)
Deferred tax liabilities (4,612) (4,804)
Deferred income (468) (556)
Provisions (232) (96)
Other non-current liabilities (717) (717)
Total non-current liabilities (20,545) (23,466)
-------- --------
Total Liabilities (37,991) (42,843)
-------- --------
Net Assets 81,620 81,592
-------- --------
Equity
Share capital 12,016 12,012
Share premium 132,769 132,729
Reverse acquisition reserve (56,762) (56,762)
Accumulated losses (8,993) (9,445)
Other reserves 2,590 3,058
Equity attributable to the owners of the parent 81,620 81,592
-------- --------
Total equity 81,620 81,592
-------- --------
Condensed consolidated statement of changes in equity
Attributable to the owners of the parents
--------------------------------------------------------------
Reverse Non-
Share Share Accum-ulated acqui-sition Other controll-ing Total
capital premium losses reserve reserve Total interest equity
------- ------- ------------ ------------ ------- ------- ------------ -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2020 12,012 132,729 (8,640) (56,762) 2,550 81,889 - 81,889
Net profit - - 466 - - 466 - 466
Other
comprehensive
expense - - - - 672 672 - 672
Total
comprehensive
income - - 466 - 672 1,138 - 1,138
------- ------- ------------ ------------ ------- ------- ------------ -------
Share-based
payments - - 43 - - 43 - 43
------- ------- ------------ ------------ ------- ------- ------------ -------
At 30 June 2020 12,012 132,729 (8,130) (56,762) 3,223 83,072 - 83,072
------- ------- ------------ ------------ ------- ------- ------------ -------
Attributable to the owners of the parents
--------------------------------------------------------------
Reverse Non-
Share Share Accum-ulated acqui-sition Other controll-ing Total
capital premium losses reserve reserve Total interest equity
------- ------- ------------ ------------ ------- ------- ------------ -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2021 12,012 132,729 (9,445) (56,762) 3,058 81,592 - 81,592
Net profit - - 328 - - 328 - -
Other comprehensive
expense - - - - (468) (468) - (468)
Total comprehensive
income/(expense) - - 328 - (468) (140) - (140)
------- ------- ------------ ------------ ------- ------- ------------ -------
Exercise of share
options 4 40 - - - 44 - 44
Share based payments - - 124 - - 124 - 124
------- ------- ------------ ------------ ------- ------- ------------ -------
At 30 June 2021 12,016 132,769 (8,993) (56,762) 2,590 81,620 - 81,620
------- ------- ------------ ------------ ------- ------- ------------ -------
Condensed consolidated cash flow statements
For the six months
ended 30 June
--------------------
Notes 2021 2020
--------- ---------
GBP'000 GBP'000
Operating activities
Profit before tax 791 763
Profit before tax 791 763
--------- ---------
Adjustments for:
Share in net result of joint ventures 136 -
Depreciation of property, plant and equipment 574 610
Amortisation of intangible assets 3,746 4,020
Impairment of intangible assets 2,417 -
Share-based payment expense 124 43
Gain on disposal of property, plant and equipment (396) (16)
Non-cash movement in provisions 163 300
Movement in allowance for bad debt and inventories 233 362
Financial income (86) (148)
Financial expense 673 467
Impact of foreign currencies (34) (79)
Other 2 (3)
Movements in working capital
Increase in trade receivables (88) (582)
Decrease/(Increase) in inventories 257 (2,342)
Decrease in payables (1,610) (797)
Income tax (paid)/received (757) 478
Net cash flow from operating activities 6,145 3,076
--------- ---------
Condensed consolidated cash flow statements (continued)
Investing activities
Purchase of property, plant and equipment (265) (49)
Purchase of intangible assets (1,566) (961)
Proceeds from the sale of property, plant and
equipment (net) 337 49
Proceeds from sale of subsidiary - -
Net cash flow used in investing activities (1,494) (961)
-------- --------
Financing activities
Proceeds from loans and borrowings and convertible
debt (2,807) -
Repayment of loans and borrowings (582) (3,760)
Repayment IFRS16 lease liability (520) (526)
Receipts from issue of share capital 44 -
Interest paid (239) (264)
Other financial expense (247) (55)
Increase in other financial assets 6 (1,201) -
Net cash flow used in financing activities (5,552) (4,605)
-------- --------
Net decrease in cash and cash equivalents (901) (2,490)
======== ========
Cash and cash equivalents at beginning of period 5,265 6,165
Exchange rate differences on cash and cash equivalents 186 (333)
Cash and cash equivalents at end of period 4,550 3,342
======== ========
Reconciliation of net cash flow to movement in
net debt
Net decrease in cash and cash equivalents in
the period (901) (2,490)
Cash flow from decrease in debt financing 3,389 3,760
Foreign exchange differences on cash and borrowings 853 (1,666)
Movement in net debt in the period 3,341 (396)
-------- --------
Net debt at the start of the period (13,617) (17,812)
Movement in lease liabilities during the period 167 109
Net debt at the end of the period (10,109) (18,099)
======== ========
Notes to the consolidated interim report
1. General information
Animalcare Group plc ("Animalcare" or "the Company") is a public
company incorporated in England and Wales under the Companies Act
2006 and is domiciled in the United Kingdom. The condensed set of
financial statements as at, and for, the six months ended 30 June
2021 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 2021 and 30 June 2020 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 2020 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 Interim Report for the six months ended 30 June 2021 was
approved by the Board of Directors and authorised for issue on 28
September 2021 .
Except as described below, the condensed consolidated interim
financial information for the six months ended 30 June 2021 has
been prepared using accounting policies consistent with those of
the Company's annual accounts for the year ended 31 December 2020
which were prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union
("adopted IFRSs") and the amendment to IFRS 16 - COVID-19 related
rent concessions, and which will form the basis of the 2021 Annual
Report.
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
Several amendments and interpretations, issued in August 2020,
are effective for annual periods beginning on or after 1 January
2021.
- Interest Rate Benchmark Reform
- Phase 2: Amendments to IFRS9, IAS39, IFRS7, IFRS4 and IFRS16
The Phase 2 amendments provide practical relief from certain
requirements in IFRS Standards to ease adoption of alternative
interest rate benchmarks. These reliefs relate to modifications of
financial instruments and lease contracts or hedge relationships
driven by the replacement of a benchmark interest rate in a
contract with a new alternative benchmark rate. The Phase 2
amendments also require disclosure of the effect of interest rate
benchmark reforms on an entity's financial instruments and risk
management strategy.
New and revised standards not yet adopted
Certain new accounting standards and interpretations have been
published that are not mandatory for 30 June 2021 reporting periods
and have not been early adopted by the Group. These 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
Classification of Liabilities as Current or Non-current - Deferral
of Effective Date (applicable for annual periods beginning on or
after January 1, 2023, but not yet approved in the European
Union)
- Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2: Disclosure of Accounting policies
(applicable for annual periods beginning on or after January 1,
2023 but not yet endorsed in the European Union)
- Amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates
(applicable for annual periods beginning on or after January 1,
2023 but not yet adopted in the European Union)
- Amendments to IFRS 16 Leases: Covid-19-Related Rent
Concessions beyond 30 June 2021 (applicable for financial years
after April 1, 2021, but not yet approved in the European
Union)
- Amendments to IAS 12 Income Taxes: Deferred Tax related to
Assets and Liabilities arising from a Single Transaction
- Amendments to IFRS 3 Business Reference to the Conceptual
Framework (applicable for annual periods beginning on or after 1
January 2022)
- Amendments to IAS 16 Property, Plant and Equipment: received
for use (applicable for annual periods beginning on or after
January 1, 2022)
- Amendments to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets: Onerous Contracts - Cost of Compensation
(applicable for years beginning January 1, 2022)
- Annual procedure 2018-2020 (applicable for financial years from January 1, 2022)
Going Concern
Banking Facilities and Covenants
During the first half we completed an exercise with our four
syndicate banks to extend our existing banking facilities from 31
March 2022 to 31 March 2025.
At 30 June 2021 , the Group's financing arrangements consisted
of a committed revolving credit facility of EUR41.5m and a EUR10m
acquisition line, which cannot be utilised to fund our operations.
The investment loan facility was repaid in full at the time of
renewal. The facilities remain subject to the following covenants
which are in operation at all times:
-- Net debt to underlying EBITDA ratio of 3.5 times
-- Underlying EBITDA to interest ratio of minimum 4 times
-- Solvency (total assets less goodwill/total equity less goodwill) greater than 25%
As at 30 June 2021 , all covenant requirements were met with
significant headroom across all three measures. As at 30 August
2021, net debt has further reduced to approximately GBP7.6m.
Headroom on the banking facilities, including cash on balance
sheet, was around GBP33.8m.
3. Non-underlying items
For the six months
ended 30 June
--------------------
2021 2020
--------- ---------
GBP'000 GBP'000
Amortisation and impairment of acquisition related
intangibles
Classified within Research and development expenses 547 547
Classified within General and administrative expenses 2,373 2,376
Classified within net other operating expenses 2,432 -
Total amortisation and impairment of acquisition
related intangibles 5,352 2,923
--------- ---------
Restructuring costs 457 351
Acquisition and integration costs 164 304
Divestments and business disposals (368) 49
Brexit-related costs - 2
Other non-underlying items - 280
Total non-underlying items before taxes 5,605 3,909
--------- ---------
Tax impact (1,100) (832)
--------- ---------
Total non-underlying items after taxes 4,505 3,077
--------- ---------
The amortisation charge of acquisition related intangibles
largely relates to the Esteve acquisition of GBP1.0m (30 June 2020
: GBP1.0m), the Riemser acquisition of GBP0.1m (30 June 2020:
GBP0.1m) and the reverse acquisition of Animalcare Group plc
GBP1.7m (30 June 2020 : GBP1.7m). The impairment of acquisition
related intangibles reflects the non-cash impairment of a project
that formed part of the acquired development pipeline at a fair
value of GBP1.8m. The principal driver is the recall and suspension
of all products containing ranitidine for human use by European and
US authorities. Consequently, Animalcare has ceased development of
ranitidine for animal use due to the high level of regulatory
uncertainty.
During the period the Group incurred acquisition, integration
and restructuring costs of GBP0.6m (30 June 2020 : GBP0.7m) largely
relating to business development activities and reorganisation of
our Belgium and UK operations. The prior period charge principally
related to restructuring of the Production Animals business unit in
Spain and manufacturing transfer costs as we work towards
simplifying our supply chain.
Product divestments include GBP0.4m income as we continue to
focus on our core higher margin brands.
4. Segment information
The Group reports one business segment, being "Pharmaceuticals".
This reporting segment is used for management purposes. 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. The Chief Operating Decision Maker
assesses performance based on the Key Performance Indicators set
out on page 14 of the latest Annual Report which include revenue
and underlying EBITDA, excluding the effect of non-underlying
items.
The following table shows an analysis of the segment reporting
from continuing operations. As management's controlling instrument
is mainly revenue-based, the reporting information does not include
assets and liabilities by segment and is as such not presented per
segment.
For the six
months ended
30 June
----------------
2021 2020
------- -------
Pharma Pharma
------- -------
GBP'000 GBP'000
Revenues 39,121 34,520
Gross Margin 21,354 17,936
Gross Margin % 54.6% 52.0%
Segment underlying EBITDA 8,474 6,606
Segment underlying EBITDA % 21.7% 19.1%
Segment EBITDA 8,237 5,634
Segment EBITDA % 21.1% 16.3%
The segment EBITDA is reconciled with the consolidated net
profit of the year as follows:
For the six months ended
30 June
2021 2020
------- -------
GBP'000 GBP'000
Segment EBITDA 8,237 5,634
Depreciation, amortisation and impairment (6,753) (4,628)
Operating profit 1,484 1,006
------- -------
Financial expenses (1,131) (488)
Financial income 574 244
Share in net result of joint ventures (136) -
Income taxes (959) (402)
Deferred taxes 496 106
Net profit 328 466
------- -------
Revenue by product category:
For the six months
ended 30 June
--------------------
2021 2020
--------- ---------
GBP'000 GBP'000
Companion animals 27,385 21,210
Production animals 9,263 10,543
Horses 2,407 2,758
Petfood, Instrumentation and Services 66 -
Total 39,121 34,520
--------- ---------
Revenue by geographical area:
For the six months
ended 30 June
--------------------
2021 2020
--------- ---------
GBP'000 GBP'000
Belgium 2,210 4,840
The Netherlands 687 659
United Kingdom 7,395 4,255
Germany 5,397 5,209
Spain 11,509 9,650
Italy 4,906 3,895
Portugal 2,394 2,379
European Union - other 3,828 2,608
Asia 324 603
Middle East Africa 1 26
Other 470 396
Total 39,121 34,520
--------- ---------
Revenue by category:
For the six months
ended 30 June
--------------------
2021 2020
--------- ---------
GBP'000 GBP'000
Product sales 38,504 34,000
Services sales 617 520
Total 39,121 34,520
--------- ---------
Product revenue is recognised when the performance obligation is
satisfied at a point in time. Service revenue is recognised by
reference of the stage of completion.
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 was used in the earnings per
share computations:
For the six months ended 30 June
----------------------------------------
Underlying Underlying Total Total
---------- ---------- ------- -------
2021 2020 2021 2020
---------- ---------- ------- -------
GBP'000 GBP'000 GBP'000 GBP'000
Net profit 4,833 3,542 328 466
Net profit attributable to ordinary equity
holders of the parent adjusted for the
effect of dilution 4,833 3,542 328 466
========== ========== ======= =======
Average number of shares (basic and diluted):
For the six months ended 30 June
----------------------------------------------
Underlying Underlying Total Total
---------- ---------- ---------- ----------
2021 2020 2021 2020
---------- ---------- ---------- ----------
Number Number Number Number
Weighted average number of ordinary shares
for basic
earnings per share 60,058,266 60,057,161 60,057,161 60,057,161
Dilutive potential ordinary shares 466,871 256,510 466,871 256,510
Weighted average number of ordinary shares
adjusted for effect of dilution 60,525,137 60,313,671 60,524,032 60,313,671
========== ========== ========== ==========
Basic earnings per share:
For the six months ended 30 June
--------------------------------------
Underlying Underlying Total Total
----------- ----------- ----- -----
2021 2020 2021 2020
----------- ----------- ----- -----
Pence Pence Pence Pence
From operations attributable to the ordinary
equity
holders of the company 8.0 5.9 0.5 0.8
Total basic earnings per share attributable
to the
ordinary equity holders of the company 8.0 5.9 0.5 0.8
=========== =========== ===== =====
Diluted earnings per share:
For the six months ended 30 June
--------------------------------------
Underlying Underlying Total Total
----------- ----------- ----- -----
2021 2020 2021 2020
----------- ----------- ----- -----
Pence Pence Pence Pence
From operations attributable to the ordinary
equity holders of the company 8.0 5.9 0.5 0.8
Total diluted earnings per share attributable
to the ordinary equity holders of the
company 8.0 5.9 0.5 0.8
=========== =========== ===== =====
6. Dividends
The final dividend for the year ended 31 December 2020 of 2.0
pence per share was paid to shareholders on 3 July 2021. However,
settlement was made to our registrar prior to the period end. The
payment totalling GBP1.2m is included with the Condensed
consolidated cash flow statement as part of the cash used in
financing activities. However, the dividend is not included in the
results (accumulated losses) for the six months ended 30 June
2021.
The directors have declared an interim dividend of 2.0 pence per
share ( 2020 : 2.0 pence per share). The interim dividend will be
paid on 19 November 2021 to shareholders whose names are on the
Register of Members at close of business on 22 October 2021. The
ordinary shares will become ex-dividend on 21 October 2021.
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
2021 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 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 basis and the
value of the claim. Vetdis issued formal court papers on 29 May
2020. A court hearing to consider the case took place in the
Commercial Court in Bruges on 2 March 2021. In a judgment issued on
30 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 certain amounts counterclaimed by Ecuphar and on 4 May 2021,
Vetdis made a payment to Ecuphar of EUR 432,762. We are now
engaging in the process involving the expert auditor, which we
expect will take until at least Q4 2021 .
8. Related party transactions
There have been no new related party transactions that have
taken place in the six months ended 30 June 2021 .
9. 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.
10. Interim report
The Group's Interim Report for the six months ended 30 June 2021
was approved and authorised for issue on 28 September 2021 . Copies
will be available to download on the Company's website at:
www.animalcaregroup.com
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END
IR SEWEFWEFSELU
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