TIDMANCR
RNS Number : 9589I
Animalcare Group PLC
23 June 2017
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION. THIS ANNOUNCEMENT
(INCLUDING THE APPICES) AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN
WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE
UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH
AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION
OR DISTRIBUTION WOULD BE UNLAWFUL.
For immediate release
23 June 2017
Animalcare Group plc
("Animalcare", the "Company" or, together with its Subsidiaries,
the "Group")
Proposed acquisition of Ecuphar NV
Approval of waiver of obligations under Rule 9 of the Takeover
Code
Proposed primary placing of approximately 8.6 million New
Placing Shares
Proposed secondary placing of up to approximately 0.8 million
Sale Shares
Admission of the Enlarged Issued Share Capital to trading on
AIM
and
Notice of General Meeting
Animalcare Group plc (AIM: ANCR), a leading supplier of generic
veterinary medicines and identification products and services to
the companion animal veterinary markets, announces that it has
today entered into a conditional share purchase agreement to
acquire the entire issued share capital of Ecuphar NV ("Ecuphar",
together with Animalcare, the "Enlarged Group"), a European animal
health company focused on the development and sale of veterinary
pharmaceutical products that provide significant benefits to animal
health in the companion animal, equine and production animal
markets (the "Acquisition").
The consideration for the Acquisition is structured on a
consolidated Animalcare/Ecuphar Enlarged Issued Share Capital ratio
of 37:63 (after taking into account dilution from certain
Animalcare incentive arrangements), and will be satisfied through
the issue of Consideration Shares and cash to the Ecuphar vendors.
The cash component of the consideration will be satisfied in part
through a placing of approximately 8.6 million New Placing Shares
(representing approximately 40.4 per cent. of the Existing Issued
Share Capital) to raise gross proceeds of not less than GBP30.0
million, with the balance (of GBP4.0 million) to be funded by
existing cash held by the Group. The number of Consideration Shares
to be issued to the vendors of Ecuphar, will be determined
following completion of the Placing (and by reference to the exact
number of New Placing Shares issued in the Placing).
The Acquisition constitutes a reverse takeover for the purposes
of Rule 14 of the AIM Rules for Companies and, as such, is
conditional, inter alia, upon Shareholder approval.
In addition, certain directors and employees of the Company
intend to participate in the Placing in order to sell up to
approximately 0.8 million Existing Ordinary Shares (in aggregate),
and a proposed director of the Company, Edwin Torr, a former
executive director of Dechra Pharmaceuticals PLC, intends to
participate in the Placing by purchasing approximately 85,000
Placing Shares.
Highlights
Transformational Acquisition
-- Proposed acquisition of the entire issued share capital of
Ecuphar, a European animal health company focused on the
development and sale of veterinary pharmaceutical products that
provide significant benefits to animal health in the companion
animal, equine and production animal markets.
-- The consideration for the Acquisition is structured on a
consolidated Animalcare/Ecuphar Enlarged Issued Share Capital ratio
of 37:63 (after taking into account dilution from certain
Animalcare incentive arrangements), and will be satisfied through
the issue of Consideration Shares and cash to the Ecuphar
vendors.
-- Ecuphar is led by founder and Chief Executive Officer, Chris
Cardon, supported by a strong and highly experienced management
team.
-- The Existing Directors believe that Animalcare and Ecuphar
are highly complementary businesses, in particular with regard to
their geographic markets, product portfolios and new product
development pipelines, and the Existing Directors therefore expect
the Acquisition to provide enhanced scale and capabilities. As
such, the Existing Directors consider the Acquisition to provide an
opportunity to create a specialist pan-European animal health
company that gives the Enlarged Group leadership in its chosen
niches that are supported by attractive and complementary market
drivers.
-- The Enlarged Group would comprise direct sales organisations
in seven countries (currently one for Animalcare); export to
approximately 50 markets (currently 12, with agreements signed for
a further 14, for Animalcare) and have approximately 98 sales
representatives (currently 22 for Animalcare) and 28 agents
(currently none for Animalcare).
-- For the year ended 31 December 2016, Ecuphar recorded revenue
of GBP68.4 million and Underlying EBITDA of GBP8.9 million. Ecuphar
has existing credit facilities with KBC Bank NV, BNP Paribas Fortis
NV, Belfius Bank NV and ING België NV. These facilities will
continue to be available to Ecuphar after Completion.
-- The Acquisition complements, broadens and diversifies
Animalcare's existing portfolio of licenced veterinary
pharmaceutical products, in particular, generic medicines for the
treatment of companion animals. The Enlarged Group will own 50
licenced drugs, eight vaccines and over 100 care and nutraceutical
products (currently 21 licenced drugs for Animalcare).
-- The Acquisition materially enhances Animalcare's portfolio of
intellectual property and trademarks, which will help to protect
the Enlarged Group's overall market position. The Enlarged Group
will have three unique veterinary products (other than one
competing ethamsylate product in France and currently none for
Animalcare); ten patents (currently none for Animalcare) and
approximately 300 trademarks (currently 42 for Animalcare).
-- The Existing Directors believe that the Enlarged Group will
represent a growing, highly cash generative dividend paying company
with a solid pipeline of new products.
-- The Existing Directors believe that, taking into account the
business and prospects of the Enlarged Group, the Acquisition will
be enhancing to the Board's expectations of underlying earnings for
the Existing Group in the first full financial year of
ownership.
-- With effect from Admission, Chris Cardon (proposed Chief
Executive Officer), Walter Beyers (proposed Chief Financial
Officer), Jan Boone (proposed Non-executive Chairman), Edwin Torr
(proposed senior independent Non-executive Director) and Marc
Coucke (proposed Non-executive Director) will be appointed as
Directors of the Company. Iain Menneer will remain as a Director
following Admission with his role within the Group changing to
Chief Operating Officer. James Lambert will step down as Chairman
of the Company but will remain on the Board as a Non-executive
Director. Nick Downshire will remain on the Board as a
Non-executive Director. Chris Brewster will resign as a Director
but will remain a critical and committed member of the senior
management team of the Enlarged Group as Country Manager of the
Enlarged Group's UK business. Raymond Harding will resign as a
Director.
-- The Acquisition constitutes a reverse takeover for the
purposes of Rule 14 of the AIM Rules for Companies and, as such, is
conditional, inter alia, upon Shareholder approval, which will be
sought at a general meeting of the Company to be held at 10.00 a.m.
on 12 July 2017 at the offices of Squire Patton Boggs (UK) LLP at 7
Devonshire Square, London, EC2M 4YH.
-- In accordance with Rule 14 of the AIM Rules for Companies,
trading in the Existing Ordinary Shares will be suspended from 7.30
a.m. today, 23 June 2017, pending publication of the Admission
Document. The Admission Document, which will include a circular and
a notice convening the General Meeting, is expected to be published
as soon as possible after the Bookbuild (see details below), at
which point it is expected that the suspension of trading in the
Existing Ordinary Shares will cease the following business day. A
copy of the Admission Document will be available on the Company's
website at www.animalcaregroup.co.uk upon publication. The Company
will provide a further update in due course.
The Placing and the Bookbuild
-- The Company is proposing to raise gross proceeds of not less
than GBP30.0 million by the issue of approximately 8.6 million New
Placing Shares, which represents approximately 40.4 per cent. of
the Existing Issued Share Capital.
-- The net proceeds of the Placing receivable by the Company
will be applied in full to paying a substantial proportion of the
cash component of the Acquisition consideration.
-- In addition, the Selling Shareholders intend to sell up to
approximately 0.8 million Sale Shares in the Placing. In the case
of each of the Selling Shareholders except Lord Nick Downshire, the
Sale Shares which may be sold in the Placing will be obtained from
the exercise of certain existing Options or the exchange of shares
in Animalcare Limited by the relevant individuals. These Option
Shares are expected to represent 6.5 per cent. of the Existing
Issued Share Capital
-- Edwin Torr, a proposed Director and former executive of
Dechra, is intending to purchase approximately 85,000 Placing
Shares in the Placing to show his support for the Acquisition and
the Enlarged Group.
-- The Placing will be conducted through an accelerated
bookbuilding process (the "Bookbuild"), which will be launched
immediately following this Announcement, in accordance with the
terms and conditions set out in Appendix III to this Announcement.
The Placing Shares are not being made available to the public. It
is envisaged that the Bookbuild will be closed no later than 4.30
p.m. today, 23 June 2017. Details of the number of New Placing
Shares, the number of Sale Shares, the price per share of the
Placing Shares (the "Placing Price") and the gross proceeds of the
Placing will be announced as soon as practicable after the closing
of the Bookbuild. The Placing will not be underwritten.
-- The Existing Directors believe that the increase in liquidity
and free float of the Ordinary Shares of the Enlarged Group
following the Placing will be beneficial to the Enlarged Group and
to Shareholders as a whole.
-- The Acquisition and Placing are conditional, inter alia, upon
the Share Purchase Agreement not having been terminated and having
become unconditional, the Placing and Admission Agreement having
become unconditional and not having been terminated, the Company
raising gross proceeds of not less than GBP30.0 million pursuant to
the Placing of New Placing Shares and upon approval of Resolutions
1-6 by Shareholders at the General Meeting. In total, the Company
has received letters of intent and irrevocable undertakings to vote
in favour of the Resolutions (other than the Whitewash Resolution)
in respect of beneficial holdings totalling 4,231,653 Ordinary
Shares, representing, in aggregate, approximately 19.9 per cent. of
the Existing Issued Share Capital.
-- Application will be made for the Enlarged Issued Share
Capital, including the Existing Issued Share Capital, the New
Placing Shares, the Consideration Shares and the Option Shares, to
be admitted to trading on AIM. It is expected that Admission will
become effective and that dealings in the Enlarged Issued Share
Capital will commence at 8.00 a.m. on 13 July 2017, and that the
Acquisition will complete at the same time. The ISIN number of the
Ordinary Shares is, and from Admission will continue to be,
GB0032350695, and the TIDM will remain as ANCR.
-- Rothschild is acting as Financial Adviser to the Company,
Panmure Gordon is acting as Nominated Adviser, Lead Bookrunner and
Broker to the Company in connection with the Placing and Admission,
and Degroof Petercam is acting as Joint Bookrunner to the Company
in connection with the Placing of the New Placing Shares.
Rule 9 Waiver
-- Ecuphar is majority owned by Ecuphar Invest NV, an entity
controlled by Chris Cardon, and Alychlo NV, the investment vehicle
of Marc Coucke, a highly successful entrepreneur and investor
having founded Omega Pharma. These entities hold, in aggregate,
96.4% of the shares in Ecuphar.
-- The Panel has confirmed that it considers Ecuphar Invest NV,
Alychlo NV and Jaak Cardon (the son of Chris Cardon and a minority
shareholder in Ecuphar) to be acting in concert for the purposes of
the Takeover Code (together, the "Concert Party").
-- Following completion of the Acquisition, this Concert Party
(by virtue of the Consideration Shares to be issued to Ecuphar
Invest NV, Alychlo NV and Jaak Cardon pursuant to the Acquisition)
is expected to control approximately 46.3 per cent. of the voting
rights of the Enlarged Group.
-- The Panel has agreed to grant a waiver of Rule 9 of the
Takeover Code (which would otherwise require the Concert Party to
make a general offer to acquire the balance of Ordinary Shares in
issue immediately following the Acquisition), subject to the
Whitewash Resolution being passed by the Independent Shareholders,
being the Shareholders other than the Selling Shareholders and any
person acting in concert with them who holds Ordinary Shares, (on a
poll) at the General Meeting.
-- In total, the Company has received letters of intent and
irrevocable undertakings to vote in favour of the Whitewash
Resolution, on which only the Independent Shareholders are entitled
to vote, in respect of beneficial holdings totalling 2,739,075
Ordinary Shares, representing, in aggregate, approximately 13.9 per
cent. of the Existing Issued Share Capital entitled to vote on that
Resolution.
-- Further details of the Waiver Resolution are set out below
and in the Admission Document to be made available shortly after
the conclusion of the Bookbuild.
Commenting on the Acquisition and the Placing, Iain Menneer,
Chief Executive Officer of Animalcare said: "We are very pleased to
present to shareholders this highly complementary acquisition which
will provide enhanced scale and capabilities for the Group and
create a pan-European animal health platform from which to
accelerate growth. The acquisition will be truly transformational:
it will expand our direct sales operation to cover seven countries
and our international reach into 50 export markets, as well as
greatly increasing the depth and diversity of our licensed
veterinary medicines product range. As an enlarged Group we expect
to deliver a growing, highly cash generative, dividend paying
company with a solid pipeline of new products and multiple
cross-selling opportunities."
This summary should be read in conjunction with the full text of
this Announcement. Further details of the Acquisition and Placing
are set out in Appendix I to this announcement. You should read and
understand the information provided in the "Important Notices"
section of this Announcement. Unless otherwise defined, defined
terms have the same meanings as those given in Appendix IV to this
Announcement.
The Market Abuse Regulation ("MAR") became effective from 3 July
2016. Market Soundings, as defined in MAR, were taken in respect of
the proposed Placing with the result that certain persons became
aware of inside information, as permitted by MAR. That inside
information is set out in this announcement and has been disclosed
as soon as possible in accordance with paragraph 7 of article 17 of
MAR. Therefore, those persons that received inside information in a
Market Sounding are no longer in possession of inside information
relating to the Company and its securities.
Enquiries:
Animalcare Group plc
Iain Menneer, Chief Executive Officer Tel: 01904 487 687
Chris Brewster, Chief Financial Officer
Panmure Gordon (UK) Ltd (Nominated Adviser, Tel: 020 7886 2500
Lead Bookrunner and Broker)
Corporate Finance
Freddy Crossley / Peter Steel / Duncan
Monteith
Corporate Broking
James Stearns
Rothschild (Financial Adviser) Tel: 0113 200 1900
Stephen Griffiths
Tim Day
Bank Degroof Petercam NV (Joint Bookrunner) Tel: +32 2229 6659
Sales
Gert Potvlieghe
Walbrook PR Ltd Tel: 020 7933 8780 or
animalcare@walbrookpr.com
Paul McManus Mob: 07980 541 893
Lianne Cawthorne Mob: 07584 391 303
About Animalcare
Animalcare is a leading veterinary sales and marketing company
based in York with 67 employees including a sales team of 22
selling to veterinary practices around the United Kingdom.
Animalcare has developed a range of generic veterinary medicines
and animal identification products primarily to companion animal
veterinary markets.
Animalcare operates in three product areas:
-- Licensed Veterinary Medicines
-- Animal Welfare Products
-- Companion Animal Identification
For more information see: www.animalcaregroup.co.uk
IMPORTANT NOTICES
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
This announcement does not constitute, or form part of, a
prospectus relating to the Company, nor does it constitute or
contain any invitation or offer to any person, or any public offer,
to subscribe for, purchase or otherwise acquire any shares in the
Company or advise persons to do so in any jurisdiction.
The content of this announcement has not been approved by an
authorised person within the meaning of the Financial Services and
Markets Act 2000 ("FSMA"). This announcement has been issued by and
is the sole responsibility of the Company. The information in this
announcement is subject to change.
This announcement is not an offer of securities for sale into
the United States. The securities referred to herein have not been
and will not be registered under the U.S. Securities Act of 1933,
as amended (the "Securities Act"), and may not be offered or sold,
directly or indirectly, in or into the United States, except
pursuant to an applicable exemption from registration. No public
offering of securities is being made in the United States. This
announcement is not for release, publication or distribution,
directly or indirectly, in or into the United States, Australia,
Canada, Japan, the Republic of South Africa or any jurisdiction
where to do so might constitute a violation of local securities
laws or regulations (a "Prohibited Jurisdiction"). This
announcement and the information contained herein are not for
release, publication or distribution, directly or indirectly, to
persons in a Prohibited Jurisdiction unless permitted pursuant to
an exemption under the relevant local law or regulation in any such
jurisdiction.
This announcement is directed only at persons whose ordinary
activities involve them in acquiring, holding, managing and
disposing of investments (as principal or agent) for the purposes
of their business and who have professional experience in matters
relating to investments and: (i) if in a member state of the
European Economic Area, are qualified investors within the meaning
of article 2(1)(e) of the Prospectus Directive ("Qualified
Investors"); and (ii) if in the United Kingdom, fall within: (a)
article 19(5) (investment professionals) of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005, as amended
(the "Order"); (b) article 49(2)(a) to (d) (high net worth
companies, unincorporated associations, etc.) of the Order; or (c)
if in Belgium, qualified investors within the meaning of article 10
of the act of 16 June 2006 on public offerings; and/or (d) any
other person to whom it may lawfully be communicated without any
obligation to issue a prospectus approved by competent regulators
(all such persons together being referred to as "Relevant
Persons"). The minimum consideration to be provided by a Placee for
their Placing Participation pursuant to the Placing is EUR100,000.
This announcement must not be acted on or relied on by persons who
are not Relevant Persons. Any investment or investment activity to
which this announcement relates is available only to Relevant
Persons and will be engaged in only with Relevant Persons.
Panmure Gordon (UK) Limited ("Panmure Gordon") is authorised and
regulated by the Financial Conduct Authority in the United Kingdom.
Panmure Gordon is acting as nominated adviser, Lead Bookrunner and
Broker exclusively for the Company and no one else in connection
with the contents of this announcement and will not regard any
other person (whether or not a recipient of this announcement) as
its client in relation to the contents of this announcement nor
will it be responsible to anyone other than the Company for
providing the protections afforded to its clients or for providing
advice in relation to the contents of this announcement. Apart from
the responsibilities and liabilities, if any, which may be imposed
on Panmure Gordon by FSMA or the regulatory regime established
thereunder, Panmure Gordon accepts no responsibility whatsoever,
and makes no representation or warranty, express or implied, for
the contents of this announcement including its accuracy,
completeness or verification or for any other statement made or
purported to be made by it, or on behalf of it, the Company or any
other person, in connection with the Company and the contents of
this announcement, whether as to the past or the future. Panmure
Gordon accordingly disclaims all and any liability whatsoever,
whether arising in tort, contract or otherwise (save as referred to
above), which it might otherwise have in respect of the contents of
this announcement or any such statement.
Degroof Petercam is acting as Joint Bookrunner exclusively for
the Company in the framework of the Placing of the New Placing
Shares and no one else in connection with the contents of this
announcement and will not regard any other person (whether or not a
recipient of this announcement) as its client in relation to the
contents of this announcement nor will it be responsible to anyone
other than the Company. Degroof Petercam accepts no responsibility
whatsoever, and makes no representation or warranty, express or
implied, for the contents of this announcement including its
accuracy, completeness or verification or for any other statement
made or purported to be made by it, or on behalf of it, the Company
or any other person, in connection with the Company and the
contents of this announcement, whether as to the past or the
future. Degroof Petercam accordingly disclaims all and any
liability whatsoever, whether arising in tort, contract or
otherwise (save as referred to above), which it might otherwise
have in respect of the contents of this announcement or any such
statement.
The Joint Bookrunners are acting only for the Company in
connection with the matters described in this announcement and are
not acting for or advising any other person, or treating any other
person as their client, in relation thereto and will not be
responsible for providing the regulatory protection afforded to
clients of the Joint Bookrunners or advice to any other person in
relation to the matters contained herein. Such persons should seek
their own independent legal, investment and tax advice as they see
fit.
In connection with the Placing, the Joint Bookrunners and any of
their respective affiliates, acting as investors for their own
accounts, may subscribe for or purchase ordinary shares in the
Company ("Ordinary Shares") and, in that capacity may retain,
purchase, sell, offer to sell or otherwise deal for their own
accounts in such Ordinary Shares and other securities of the
Company or related investments in connection with the Placing or
otherwise. Accordingly, references to the Ordinary Shares being
offered, subscribed, acquired, placed or otherwise dealt in should
be read as including any offer to, or subscription, acquisition,
placing or dealing by a Joint Bookrunner and any of its respective
affiliates acting as investors for their own accounts. In addition,
a Joint Bookrunner or its respective affiliates may enter into
financing arrangements and swaps in connection with which it or its
affiliates may from time to time acquire, hold or dispose of
Ordinary Shares. The Joint Bookrunners have no intention to
disclose the extent of any such investment or transactions
otherwise than in accordance with any legal or regulatory
obligations to do so.
N M Rothschild & Sons Limited ("Rothschild"), which is
authorised and regulated by the Financial Conduct Authority in the
United Kingdom, is acting for Animalcare Group plc and no one else
in relation to the Acquisition and Placing and will not be
responsible to anyone other than Animalcare Group plc for providing
the protections afforded to clients of Rothschild nor for providing
advice in relation to the Acquisition, Placing and the contents of
this announcement. The information provided in this announcement is
entirely based on information provided by Animalcare Group plc and
has not been independently verified by Rothschild. Accordingly,
Rothschild does not accept any responsibility or liability
whatsoever, and makes no representations or warranty, express or
implied, for the contents of this announcement. Rothschild
disclaims, to the fullest extent permitted by law all and any
responsibility and liability howsoever arising which it might
otherwise have in respect of this announcement
FORWARD-LOOKING STATEMENTS
This announcement includes "forward-looking statements" which
include all statements other than statements of historical facts,
including, without limitation, those regarding the Company's
business strategy, plans and objectives of management for future
operations, or any statements proceeded by, followed by or that
include the words "targets", "believes", "expects", "aims",
"intends", "will", "may", "anticipates", "would", "could" or
similar expressions or negatives thereof. Such forward-looking
statements involve known and unknown risks, uncertainties and other
important factors beyond the Company's control that could cause the
actual results, performance or achievements of the Company to be
materially different from future results, performance or
achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous
assumptions regarding the Company's present and future business
strategies and the environment in which the Company will operate in
the future. No undue reliance should be placed upon forward-looking
statements. These forward looking statements speak only as at the
date of this announcement. The Company expressly disclaims any
obligation or undertaking to disseminate any updates or revisions
to any forward-looking statements contained herein to reflect any
change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such
statements are based, unless required to do so by applicable law or
the AIM Rules for Companies.
APPIX I - FURTHER DETAILS OF THE ACQUISITION AND PLACING
Proposed acquisition of Ecuphar NV
Approval of waiver of obligations under Rule 9 of the Takeover
Code
Proposed primary placing of approximately 8.6 million New
Placing Shares
Proposed secondary placing of up to approximately 0.8 million
Sale Shares
Admission of the Enlarged Issued Share Capital to trading on
AIM
and
Notice of General Meeting
1. Introduction
Animalcare announces that it has entered into the conditional
Share Purchase Agreement to acquire the entire issued share capital
of Ecuphar from the Vendors. Ecuphar is a European animal health
company focused on the development and sale of veterinary
pharmaceutical products that provide significant benefits to animal
health in the companion animal, equine and production animal
markets. Ecuphar is led by founder and Chief Executive Officer,
Chris Cardon, together with a strong and highly experienced
management team. The Existing Directors believe that Animalcare and
Ecuphar are highly complementary businesses, in particular with
regard to their geographic markets, product portfolios and new
product development pipelines and the Existing Directors therefore
expect the Acquisition to provide enhanced scale and capabilities.
On completion of the Acquisition, the senior management teams of
Animalcare and Ecuphar will be integrated to continue to operate
the Enlarged Group, with Chris Cardon assuming the role of Chief
Executive Officer and Iain Menneer, current Chief Executive Officer
of Animalcare, becoming the Chief Operating Officer. For further
details on the Ecuphar Group, see paragraph 3 of Appendix I in this
Announcement.
The consideration for the Acquisition is structured on a
consolidated Animalcare/Ecuphar Enlarged Issued Share Capital ratio
of 37:63 (after taking into account dilution from certain
Animalcare incentive arrangements), and will be satisfied through
the issue of Consideration Shares and cash to the Vendors. The cash
component of the consideration will be satisfied in part through a
placing of approximately 8.6 million New Placing Shares
(representing approximately 40.4 per cent. of the Existing Issued
Share Capital) to raise gross proceeds of not less than GBP30.0
million, with the balance (of GBP4.0 million) to be funded by
existing cash held by the Group. The number of Consideration Shares
to be issued to the vendors of Ecuphar will be determined following
completion of the Placing (and by reference to the exact number of
New Placing Shares issued in the Placing). In addition, certain
directors and employees of the Company intend to participate in the
Placing in order to sell up to approximately 0.8 million Existing
Ordinary Shares (in aggregate), and a proposed director of the
Company, Edwin Torr, a former executive of Dechra Pharmaceuticals
PLC, intends to participate in the Placing by purchasing
approximately 85,000 Placing Shares.
The Existing Directors believe that the increase in liquidity
and free float of the Ordinary Shares of the Enlarged Group
following the Placing will be beneficial to the Enlarged Group and
to Shareholders as a whole.
For further details on the terms of the Acquisition and the
Placing, see paragraphs 7 and 8 of Appendix I respectively in this
Announcement.
As further detailed in paragraph 9 of Appendix I in this
Announcement, the Panel has confirmed that it considers Ecuphar
Invest NV, Alychlo NV and Jaak Cardon (the son of Chris Cardon and
a minority shareholder in Ecuphar) to be acting in concert for the
purposes of the Takeover Code. Following completion of the
Acquisition, this Concert Party (by virtue of the Consideration
Shares to be issued to Ecuphar Invest NV, Alychlo NV and Jaak
Cardon pursuant to the Acquisition) is expected to control
approximately 46.3 per cent. of the voting rights of the Company.
The Panel has agreed to grant a waiver of Rule 9 of the Takeover
Code (which would otherwise require the Concert Party to make a
general offer to acquire the balance of Ordinary Shares in issue
immediately following the Acquisition), subject to the Whitewash
Resolution being passed by the Independent Shareholders (on a poll)
at the General Meeting. Your attention is drawn to paragraph 9 of
Appendix I in this Announcement, which contains further details on
the Rule 9 Waiver.
The Acquisition constitutes a reverse takeover under the AIM
Rules for Companies, requiring the approval of a majority of all of
the Shareholders who vote. It is also conditional upon, inter alia,
the passing of other resolutions relating to the issue of new
Ordinary Shares in connection with the Acquisition and the Placing.
These approvals will be sought at the General Meeting to be held at
Squire Patton Boggs (UK) LLP at 7 Devonshire Square, London EC2M
4YH at 10.00 a.m. on 12 July 2017, notice of which will be set out
in the Admission Document. Voting on all of the Resolutions will be
by way of a poll.
The Company has received letters of intent and irrevocable
undertakings to vote in favour of the Resolutions to be proposed at
the General Meeting in respect of, in the case of all Resolutions
other than the Whitewash Resolution, 4,231,653 Existing Ordinary
Shares, representing, in aggregate, approximately 19.9 per cent. of
the Existing Issued Share Capital and, in respect of the Whitewash
Resolution, on which only the Independent Shareholders are entitled
to vote, 2,739,075 Existing Ordinary Shares, representing, in
aggregate, approximately 13.9 per cent. of the Existing Issued
Share Capital entitled to vote on that Resolution.
2. Background to and reasons for the Acquisition
The Existing Directors believe that Animalcare and Ecuphar are
highly complementary businesses in particular across products,
product development and geographies. As such, the Existing
Directors consider the Acquisition to provide an opportunity to
create a specialist pan-European animal health company that gives
the Enlarged Group leadership in its chosen niches that are
supported by attractive and complementary market drivers. The
Existing Directors believe that the Enlarged Group will represent a
fast growing, highly cash generative and dividend paying company
with a solid pipeline of new products.
The Existing Directors believe that there is a strong strategic
rationale for the Acquisition for the following reasons.
Position of critical scale within the European animal health
market
The Acquisition materially strengthens the position of
Animalcare and Ecuphar in the supply and distribution of companion
and food producing animal health products in Europe. This market is
large and growing (estimated size of US $8 billion with 5 per cent.
historic CAGR). The Directors believe the Enlarged Group's focus on
niche, highly specialist therapeutic areas together with its
increased scale makes it well positioned to capitalise on the
underlying growth in the wider animal health market.
Creation of a pan-European platform
The Acquisition creates a pan-European animal health platform,
which significantly enhances Animalcare's geographic footprint and
sales, marketing and distribution network. Specifically, the
Enlarged Group would comprise direct sales organisations in seven
countries (currently one for Animalcare); export to approximately
50 markets (currently 12, with agreements signed for a further 14,
for Animalcare) and have approximately 98 sales representatives
(currently 22 for Animalcare) and 28 agents (currently none for
Animalcare). Ecuphar's extensive European presence and established
distribution network provides direct access to new markets for
Animalcare and its products, and the combination provides the
Enlarged Group with a scale platform from which to target new,
significant commercial opportunities and attract new distribution
partners.
Broader, more diversified product portfolio
The Acquisition complements, broadens and diversifies
Animalcare's existing portfolio of licenced veterinary
pharmaceutical products, in particular generic medicines for the
treatment of companion animals. In addition, the Acquisition
enlarges Animalcare's addressable market, both by diversifying
Animalcare's areas of therapeutic focus within companion animals
and adding new product capabilities in food producing animal
segments. Specifically, the Enlarged Group will own 50 licenced
drugs, eight vaccines and over 100 care and nutraceutical products
(currently 21 licenced drugs for Animalcare). This will enable the
Enlarged Group to offer its customers a broader range of products
and services.
Enhanced intellectual property portfolio and new product
development pipeline
The Acquisition materially enhances Animalcare's portfolio of
intellectual property and trademarks, which will help to protect
the Enlarged Group's overall market position. The Enlarged Group
will have three unique veterinary products (other than one
competing ethamsylate product in France and currently none for
Animalcare); ten patents (currently none for Animalcare) and
approximately 300 trademarks (currently 42 for Animalcare).
Together, the Enlarged Group will have a broader and more
diversified new product development pipeline, supported by the
greater cash generation of the Enlarged Group. The Existing
Directors believe that this enhances the likelihood of successful
new product launches and, given the increased scale and network of
the Enlarged Group, also increases the potential revenue generation
per product once launched versus a launch by Animalcare or Ecuphar
on a standalone basis. Specifically, Animalcare currently has 18
projects in its pipeline and Ecuphar has 11 new product development
projects in its pipeline. The combined research and development
knowledge and expertise of the Enlarged Group may also lead to and
accelerate additional product development opportunities.
The combined new product development pipeline of the Enlarged
Group is as follows:
http://www.rns-pdf.londonstockexchange.com/rns/9589I_-2017-6-23.pdf
Highly experienced management team
The Existing Directors believe the experienced and capable
management structure at Animalcare will be significantly enhanced
by the high quality leadership of Ecuphar's management team. The
Enlarged Group's management team will be led by Ecuphar current
Chief Executive Officer Chris Cardon, who will join as Chief
Executive Officer of the Enlarged Group. Animalcare's current Chief
Executive Officer, Iain Menneer, will assume the role of Chief
Operating Officer of the Enlarged Group. The Existing Directors and
Proposed Directors believe that the Enlarged Group will have a
strong management team and organisation, which is positioned to
deliver shareholder value.
The Enlarged Group's Management team will also have significant
M&A experience. The Directors believe that this will support an
effective integration process and provide the Enlarged Group with
the experience and capabilities to play a shareholder
value-creating role in any industry consolidation, within what is
considered by the Existing Directors to be a fragmented market.
Material opportunities for synergy creation
The Existing Directors believe the Acquisition will create
significant synergy opportunities from which to drive shareholder
value, including from:
-- cross-selling the Enlarged Group's broader range of products
and services to Animalcare's and Ecuphar's existing customers;
-- bringing in-house the respective third party distribution of
products from Animalcare to customers in Europe and from Ecuphar to
customers in the UK;
-- gaining significant operating efficiencies by leveraging the
Enlarged Group's substantial supply chain, distribution, sales and
marketing network;
-- optimisation of the Enlarged Group's research and development function; and
-- the enhanced brand and market position of the Enlarged Group,
which is likely to generate more customer interest.
3. Information on Ecuphar
Introduction
Ecuphar is a European animal health company focused on the
development and sale of veterinary pharmaceutical products that
provide significant benefits to animal health in the companion
animal, equine and production animal markets. Ecuphar is
headquartered in Belgium and is also directly present in the
Netherlands, Germany, Spain, Italy and Portugal through its own
sales, marketing and distribution organisations. In addition,
Ecuphar supplies its veterinary products to partners in 37
countries and operates a wholesale business, Medini, which is
focused on the sale of veterinary pharmaceuticals, supplies and
instruments in the Belgian market.
Since its foundation, Ecuphar has developed a strong track
record of high growth and cash generation. For the year ended 31
December 2016, Ecuphar generated revenue of GBP68.36 million and
Underlying EBITDA of GBP8.91 million (year ended 31 December 2015:
GBP47.10 million and GBP4.82 million respectively). This growth is
attributable to a combination of strong organic growth driven by
the launch of new products and distributions, and the full-year
impact of the 2015 acquisition of the animal health business of
Laboratorios del Dr. Esteve, S.A. and other entities of the same
group, an international pharmaceutical and chemical group, and the
resulting expansion into the Spanish, Italian and Portuguese animal
health markets.
Ecuphar has continuously invested in the future of the business
and has a robust new product development pipeline focused on
developing innovative licenced veterinary drugs and extending the
lifecycle of existing products. In 2016, Ecuphar spent GBP2.8
million on new product development projects. Ecuphar's product
development pipeline is currently composed of eleven new product
development projects in various stages of development, which are
expected to be launched and commercialised over the coming
years.
In addition to growing its business through developing and
launching new products, Ecuphar has over the past 15 years
completed more than 15 asset and company acquisitions to strengthen
its product portfolio and enter new geographical markets.
Acquisitions are a key focus of Ecuphar's strategy and Ecuphar
strongly believes that acquiring complementary veterinary
businesses and products can lead to important commercial synergies,
including through the cross-selling of Ecuphar's products through
the acquiree's sales channels and vice versa.
Ecuphar is led by founder and Chief Executive Officer, Chris
Cardon, together with a strong and highly experienced management
team, which includes Chief Financial Officer Walter Beyers, Chief
Strategy Officer, Jeroen Bastijns and Chief Commercial Officer and
General Manager South Europe, Emilio Gil Ventura.
Background and history
Founded in 2001 in Bruges, Belgium, as Chris Cardon NV and
renamed Cardon Pharmaceuticals in 2002 and subsequently Ecuphar in
2006, Ecuphar has grown through a successful focus on product
portfolio development. Starting with the development and sale of
OTC veterinary products such as Orozyme, for the dental health of
companion animals, Ecuphar now has a portfolio of over 300 products
covering pharmaceuticals, vaccines, and care and nutraceutical
products which are successfully marketed to the European and wider
international market, as well as over 250 registered trademarks, 10
patents and three veterinary products considered by Ecuphar to be
unique (with the exception of one competing ethamsylate product in
France). This has been achieved through in-house product
development, acquired products, licensed products (through
strategic alliances such as those with Bayer Animal Health and
Elanco) and distribution partnerships (such as those with Orion
Pharmaceuticals and Eco Animal Health).
The chart below shows the revenue evolution of Ecuphar (in GBP
million, at a constant exchange rate) since its foundation and
highlights certain of the key developments in its corporate
history.
http://www.rns-pdf.londonstockexchange.com/rns/9589I_1-2017-6-23.pdf
Ecuphar has successfully grown its platform during this time via
acquisitions to develop a direct commercial presence in six
European countries. Initially, a series of acquisitions between
2005 and 2008 was primarily aimed at expanding its position in the
Belgian veterinary market and establishing a foothold in the
Netherlands. Acquisitions during this period include among
others:
2005 Clinagel Vet: the first veterinary pharmaceutical (Belgian
anti-bacterial eye gel for companion animals) acquired.
Vetred: a Netherlands based specialist distributor of veterinary
orthopaedic implants.
2006 Ecuphar: a Belgium based animal health company with
pharmaceutical products for both companion and production animals.
This acquisition led to a change of name from Cardon
Pharmaceuticals to Ecuphar.
Medini: a Belgium based veterinary wholesaler and
distributor.
Instrulife: a Belgium based specialist in veterinary
instruments.
2008 Ace Veterinary Products: a Netherlands based specialist in
pharmaceuticals for companion animals and horses.
Equipharma: a Belgium based specialist in equine
nutraceuticals.
Ornis: a France based specialist in pigeon pharmaceuticals.
During 2009 and 2011, Ecuphar expanded further abroad with the
acquisitions of Nutri-Science in Ireland and the Riemser Animal
Health business in Germany:
2009 Nutri-Science: Ireland based manufacturer of a broad range
of feed supplements for horses and companion animals. This business
was sold to Swedencare in 2016 in order to allow Ecuphar to focus
more closely on its core veterinary pharmaceuticals business.
2011 Riemser Animal Health: Germany based animal health
portfolio. The acquisition enabled Ecuphar to enter the vaccines
market and gain direct access to the German veterinary market.
In 2015, Ecuphar made its largest acquisition to date by
acquiring the veterinary business of the Spanish pharmaceutical
company, Esteve:
2015 Esteve Veterinaria: this acquisition provided Ecuphar with
an important footprint in the Spanish, Italian and Portuguese
veterinary markets as well as a number of new products in
complementary therapeutic areas such as Danilon (equine
anti-inflammatory) and Dinalgen (equine, bovine and swine
anti-inflammatory).
The current group structure of the Ecuphar Group is as
follows:
http://www.rns-pdf.londonstockexchange.com/rns/9589I_2-2017-6-23.pdf
Product overview
For management purposes, Ecuphar is organised into two segments:
Pharmaceuticals and Wholesale. The Pharmaceuticals segment is
active in the development and sale of Ecuphar's veterinary
pharmaceutical products that provide significant benefits to animal
health directly or via wholesalers to end customers (i.e.
veterinary practices), whereas the Wholesale segment focuses on the
purchase and re-sale of veterinary pharmaceuticals, supplies and
instruments to Belgian veterinary practices.
In the year to 31 December 2016, the Pharmaceuticals segment
contributed approximately 69 per cent. of Ecuphar's revenue, and as
much as 95 per cent. of Underlying EBITDA and is therefore
considered the key focus area for Ecuphar's management.
http://www.rns-pdf.londonstockexchange.com/rns/9589I_3-2017-6-23.pdf
In the Pharmaceuticals segment, Ecuphar's products fall into
three main categories: companion animals (being those that are kept
primarily for an individual's company, protection or
entertainment), equine (being horses) and production animals (being
those that are raised in an agricultural setting to produce
commodities such as food, fibre and labour). Within these
categories, Ecuphar supplies a broad portfolio of over 300
veterinary products, of which own products include 29 licensed
drugs, eight vaccines and over 100 care and nutraceutical
products.
Ecuphar's Pharmaceuticals segment product portfolio can be
summarised as follows:
Product range Growth drivers
Companion
animal * Veterinary pharmaceuticals, food supplements and car * Increasing number of pets due to changes in lifestyle
products e and pets being considered as family members
products
* Higher life expectancy of pets due to innovation and
* Specific focus on odontology, dermatology, increased consumption of veterinary care
incontinence, behaviour and anaesthesia
* Increasing disposable income potentially making
* Also range of otology, surgery, joint support and owners more willing to spend money on their pets
anti-parasitic products
Production
animal * Broad range of injectables, oral powders, premixes * Increasing global population and increasing
products and intra-mammary tubes disposable income leading to increasing demand for
protein
* Also range of feed supplements and dietary
complementary feed to support metabolic functions of * Increasing industrialisation of meat and milk
livestock production to ensure growing demand is met
* Food safety concerns encouraging more prevention of
disease
Equine
products * Range of veterinary pharmaceuticals, horse * Equine customers demand increasingly specialised
supplements and specific care products services
* Specific focus on anti inflammatories * Professionalism and globalisation increase the demand
for medical care for horses
* Increasing disposable income makes owners more
willing to spend money on their horses
Ecuphar's Pharmaceuticals segment revenue in 2016 can be broken
down as follows:
http://www.rns-pdf.londonstockexchange.com/rns/9589I_4-2017-6-23.pdf
Ecuphar has retained a core focus on licensed pharmaceutical
products, and a key area of strategic focus has been the
diversification of Ecuphar's product portfolio into different
therapeutic areas. This strategy has been successfully executed by
the management team, and Ecuphar now supplies products into
odontology, dermatology, surgery, anaesthesia and otology areas,
among others. Ecuphar's management have also focused on expanding
the therapeutic indications for its existing product portfolio to
expand the respective product's lifecycle.
Details of Ecuphar's Pharmaceutical segment's top ten products
for the year ended 31 December 2016, which in aggregate accounted
for approximately GBP20.3 million of revenue in that period, are
set out below.
Product Market Indication Type
Aivlosin Production animals Antibiotic Distribution
Conofite Companion animals Otology Licence
Danilon Equine Anti-inflammatory Own
Dinalgen Production animals Anti-inflammatory Own
Dokamox Production animals Antibiotic Licence
Flubenol Production & comp. Antiparasitic Licence
animals
IsoFlo Companion animals Anaesthesia Distribution
Leisguard Companion animals Antiparasitic Own
Orozyme Companion animals Odontology Own
Seponver Production animals Antiparasitic Licence
Ecuphar's own products
Ecuphar's own products represented approximately 33 per cent. of
Ecuphar's Pharmaceuticals segment revenue for the year ended 31
December 2016. Product sales can be split between the following
categories: pharmaceuticals and biocides representing 78 per cent.,
nutraceuticals representing 12 per cent., vaccines representing 8
per cent. and other representing 2 per cent. Ecuphar has three
veterinary products which it believes are unique (other than one
competing ethamsylate product in France):
-- Danilon (suxibuzone): equine anti-inflammatory;
-- Hemo-141 (ethamsylate): haemostatic for production animals; and
-- E-6087: anti-inflammatory for companion animals (currently under development).
In-licensed and distributed products
Products sold via longstanding licenses with strategic partners
represented approximately 24 per cent. of Ecuphar's Pharmaceuticals
segment revenue for the year ended 31 December 2016, and
third-party products sold via distribution agreements with partners
represented approximately 44 per cent. of Ecuphar's Pharmaceuticals
segment revenue for the year ended 31 December 2016.
Business model
Ecuphar's business model is complementary to that of the Company
and the respective businesses are significantly aligned in the way
that products are sourced and delivered to veterinary customers and
in manufacturing being completely outsourced. Ecuphar relies on a
mix of proprietary products, strategic alliances and distribution
partnerships to grow and diversify its product portfolio. The
process of developing products and acquiring licences is largely
driven by the first-hand feedback from Ecuphar's local marketing
and sales teams who are in frequent contact with veterinary
practices and wholesalers and are therefore able to offer the right
portfolio of products to meet customers' needs and provide a fully
integrated solution. The two key focus areas for Ecuphar are
product development and sales and marketing.
Ecuphar's business model can be summarised as follows:
http://www.rns-pdf.londonstockexchange.com/rns/9589I_5-2017-6-23.pdf
Products are sourced through in-house development, as well as
through product acquisitions, strategic alliances and distribution
partnerships. These are marketed by local sales teams in the six
countries where Ecuphar has its own presence and through
distributors in other markets. Vet practices are the end customers
and targeted by the sales teams, although they are usually invoiced
and physically supplied through wholesalers.
Product development
Product development at Ecuphar focuses on both life cycle
extension and novel products. Life cycle extension entails the
broadening of existing drug licences into other therapeutic areas,
other target species and other application forms (tablet, liquid,
injection). This helps to reduce the risk of outfall during the
development trajectory. Each project is evaluated against stringent
technical and commercial criteria before determining its
suitability to become a full development project. All product
development occurs in close cooperation with Ecuphar's in-house
pharmaceutical and regulatory affairs teams which together comprise
a total of 18 people focused on life-cycle extension of existing
products and on novel products. As all manufacturing of Ecuphar's
products is outsourced, contract manufacturers with whom Ecuphar
has developed close working relationships are also involved early
in the product development process.
Examples of innovations which are currently under development
include improved galenic formulations, improved administration
devices, improved gastric tolerance and improved palatability, as
well as new indications or new species for existing molecules. The
product development pipeline of Ecuphar is currently composed of
eleven projects in various stages of development which are expected
to be launched and commercialised over the coming years, and can be
summarised as follows.
http://www.rns-pdf.londonstockexchange.com/rns/9589I_6-2017-6-23.pdf
* CAP: companion animal products; FAP: farm (production) animal
products; EQ: equine products
Strategic alliances and distribution partnerships
Ecuphar's product portfolio is enhanced by its longstanding
strategic alliances with global animal health leaders such as Bayer
and Elanco. These alliances provide Ecuphar with long-term licences
for the distribution of veterinary pharmaceutical products which
both diversifies the scope of therapeutic areas targeted by Ecuphar
and enables a broader integrated solution to be provided to its
customers. In addition, Ecuphar's product portfolio is further
enhanced through distribution partnerships with several leading
animal health companies, such as Orion Pharmaceuticals and Eco
Animal Health.
Local sales and marketing presence and distributors
Ecuphar has direct sales, marketing and distribution operations
in Belgium, the Netherlands, Germany, Spain, Italy, and Portugal
and supplies products in 37 countries through distribution
agreements with local partners. Often the same partners that
provide Ecuphar with long-term licenses or distribution agreements
for the sale of third-party veterinary pharmaceutical products (see
"Strategic alliances and distribution partnerships" above) function
as distributor for Ecuphar's products abroad, further strengthening
these relationships.
At the end of 2016, Ecuphar's workforce counted 201 employees
(including consultants), of which 76 were sales representatives and
an additional 28 were sales agents, as follows:
Employees Sales reps
Benelux 33 7
Germany 34 13
Spain 73 37
Portugal 11 7
Italy 11 7 (+ 28 agents)
Wholesale segment 39 5
Total 201 76 (+ 28 agents)
Ecuphar's commercial workforce is composed of a team of
ambitious and result-oriented employees with an in-depth knowledge
of their respective regional markets and strong local relationships
with customers.
Wholesale
In addition to its Pharmaceuticals segment, Ecuphar has a
Wholesale segment, which focuses on the purchase and re-sale of
veterinary pharmaceuticals, supplies and instruments to Belgian
veterinary practices. This business is relatively stable at both
revenue and gross margin, and generates a gross margin lower than
that of the Pharmaceuticals segment due to the nature of the
wholesale business model.
Market, customers and competitive environment
Market
The European animal health market in which Ecuphar operates is a
highly regulated and specialist market with significant
intellectual and financial barriers to entry. Animal health in
Europe is a large and growing market, underpinned by robust
macroeconomic drivers and underlying trends. In the companion
animal and equine market segments, these include population growth,
and increasing wealth and urbanisation. Population growth and
rising life expectancy are driving an increase in the demand for
companion animals as pets. In addition, the increase in wealth has
led to an increased focus on the welfare of animals and therefore
an increased propensity for pet and horse owners to buy animal
health products. Pets are increasingly seen as a "family member"
which also leads to higher spending on animal health products.
The food producing animal market demonstrates similarly solid
fundamental drivers and themes, with population growth and
increasing wealth driving increases in the levels of protein
consumption.
Ecuphar's management team believes that the business is well
positioned to capitalise on the underlying growth in the animal
health market.
Customers
The largest group of Ecuphar's customers are veterinary
practices, which, depending on local market rules and customs are
supplied either directly by Ecuphar or through wholesalers and/or
distributors. The commercial efforts of Ecuphar are largely
directed at veterinary practices as they create the underlying
demand for its products. Customer concentration for Ecuphar is
limited with its top ten customers in 2016 together representing
less than 20 per cent. of revenue. Ecuphar's top ten customers are,
with the exception of one distributor, all wholesalers who are not
the actual end-customer, so in effect customer concentration can be
considered lower still.
Geographically, Ecuphar's customers are spread broadly and total
revenue in 2016 can be broken down as follows:
http://www.rns-pdf.londonstockexchange.com/rns/9589I_7-2017-6-23.pdf
Competitive environment
Similar to Animalcare, in all countries where Ecuphar operates,
the market is dominated by large multinationals that have
consolidated over the past years, such as Zoetis/Abbott,
Elanco/Novartis, Boehringer/Merial and MSD/Intervet.
Ecuphar is differentiating itself from such players by focusing
on certain niche markets, such as for instance odontology,
dermatology, surgery/anaesthesia and otology. In such niche
markets, Ecuphar often markets its products under umbrella brands,
such as Orozyme, Dermazyme, Quirofarm and Otofarm. Ecuphar further
tries to differentiate itself through its efforts to create
customer loyalty. This is achieved through, among other things,
value added services such as online advisory, maintenance of
equipment, sector meetings and training seminars; as well as
through stable local sales teams with many sales representatives
having been with Ecuphar for many years, creating a close personal
link between the customer and Ecuphar. As a result, Ecuphar can
often focus more on attracting business through the relationship
and the solution than through price.
In the markets where it operates, Ecuphar is also well
positioned to become a distributor of choice for licensors that are
looking for a professional local sales and marketing company.
Because of its entrepreneurial culture and long-lasting local
presence, Ecuphar is often preferred by licensors over larger
players that often only want to focus on their own product
portfolio and who may be slower in making decisions and preparing
new product launches because of administrative procedures and
complicated international structures.
The competitive market is also considered by Ecuphar to be
fragmented, and the Ecuphar management team have a proven track
record of growth through acquisitions to help the Enlarged Group
take advantage of the right opportunities.
Ecuphar's financial record
Since its foundation, Ecuphar has developed a strong track
record of high growth and cash generation. The table below provides
a summary of the financial results of Ecuphar for each of the three
financial years ended 31 December 2014, 2015 and 2016 and has been
extracted from the historical financial information contained below
in this Announcement. This summary financial information should be
read in conjunction with the full text of this Announcement.
Investors should not rely solely on the summarised financial
information.
GBP million 12 months to 31 December
2014 2015 2016
Revenue 34.5 47.1 68.4
% change 37% 45%
Gross Margin 10.6 16.5 28.3
% of revenue 31% 35% 41%
Underlying EBITDA 4.2 4.8 8.9
% of revenue 12% 10% 13%
EBITDA 3.9 3.4 10.7
% of revenue 11% 7% 16%
Underlying Net
Earnings 1.5 1.3 4.0
Between 2014 and 2016, Ecuphar's revenue nearly doubled to
GBP68.4 million due to the 2015 acquisition of Esteve's animal
health business and the resulting expansion into the Spanish,
Italian and Portuguese animal health markets, in combination with
organic growth driven by the launch of new products and
distributions, as well as existing products. Over the same period,
gross margin increased from 30.8 per cent. to 41.4 per cent. of
revenue as the relative contribution of Ecuphar's higher margin
Pharmaceuticals segment became more important in the overall
revenue mix, while growth in the lower margin Wholesale segment was
less pronounced. Underlying EBITDA margin increased from 12.2 per
cent. of revenue in 2014 to 13.0 per cent. in 2016, following a
decline to 10.2 per cent. in 2015 due to the temporary impact of
the integration of the acquired Esteve animal health business.
Underlying EBITDA has been adjusted for non-recurring items
which amounted to GBP1.8 million in 2016. This is comprised of the
gain on the sale of Nutri-Science (GBP2.4 million) and GBP0.6
million non-recurring costs, largely related to the integration of
the Esteve acquisition (GBP0.4 million). In 2015, non-recurring
items largely related to the Esteve acquisition comprising
transaction costs (GBP0.4 million) and a PPA adjustment on acquired
stock (GBP0.4 million). Non-recurring items in 2014 largely
comprised non-recurring market research and M&A costs (GBP0.3
million).
Ecuphar has high cash generating capabilities as a result of its
business model which focuses on product development and sales and
marketing, while manufacturing is outsourced. Therefore, capital
expenditure is largely limited to new product development
investments and cash conversion is high.
Recent trends, current trading and outlook
Trading since 31 December 2016 has been broadly in line with
management expectations. Ecuphar has, over this period continued to
invest in systems and people to further strengthen the organisation
of the company. Recent hires in 2017 include a new country manager
in Italy and a new group IT manager.
Ecuphar is continuing to invest in its new product development
and since 31 December 2016, has closed a number of agreements
related to manufacturing, clinical trials and regulatory consulting
for products under development. Ecuphar management expects
Ecuphar's next new product launch to occur during the fourth
quarter of 2017 or the first quarter of 2018. In Belgium, Ecuphar
lost the distribution rights for a number of companion animal
products from Sogeval (which together represented less than GBP1
million of revenue in 2016) effective 1 January 2017, following its
acquisition by Ceva (in December 2013). A number of new
distribution agreements are, however, being discussed with partner
companies to further complement Ecuphar's product offering in the
future.
In February 2017, Ecuphar acquired from Elanco the rights to
market a veterinary product in Germany, Ripercol Drench, a
roundworm remedy for production animals. This product acquisition
will complement Ecuphar's product portfolio for cattle, however, it
is not expected to have a material impact on Ecuphar's financial
performance.
In the second half of 2017, Ecuphar is expecting to start
distributing its own Orozyme range of companion animal products in
Spain and Portugal, which have until then been distributed by local
distributors in those countries.
4. Strategy of the Enlarged Group
Following Completion, it is intended that the Enlarged Group
will continue to grow both organically and through selective
acquisitions to accelerate its overarching strategy of becoming a
leader in the European animal health market.
The Enlarged Group's core areas of strategic focus will be
on:
-- initiating cross selling opportunities of both Animalcare's
and Ecuphar's products across existing customers and distribution
channels;
-- implementing an effective business integration, including by
combining product development activities, providing the technology
and systems to drive product quality improvement programmes and by
optimising the Enlarged Group's supply chain;
-- developing the Enlarged Group's wider network of partnerships
and strategic alliances in order to increase its exposure, as
licensor and licensee, to global animal health leaders;
-- leveraging its platform by identifying selective
value-accretive acquisitions that can broaden the pan-European
sales, marketing and distribution platform of the Enlarged
Group;
-- diversifying the Enlarged Group's portfolio of products into
additional therapeutic areas within the companion animal, as well
as production animal and equine, markets; and
-- continuing the shift towards broadening the Enlarged Group's
pipeline innovations to include novel therapies.
The Existing Directors and Proposed Directors believe that the
key components required to ensure that the Enlarged Group continues
to deliver this long-term growth strategy are to:
-- continue to attract and retain the highest calibre people to drive forward its development;
-- maintain leadership capability in research and development; and
-- invest in high quality infrastructure in strategic locations.
5. Board of Directors and Proposed Directors
The Board of Animalcare is currently comprised of James Lambert
as Non-executive Chairman, Iain Menneer as Chief Executive Officer,
Chris Brewster as Chief Financial Officer, Lord Nick Downshire as
Non-executive Director and Raymond Harding as Non-executive
Director.
The following changes, each of which will take effect from
Admission, will be made to the Board in connection with the
Acquisition:
-- Chris Cardon, (proposed Chief Executive Officer), Walter
Beyers (proposed Chief Financial Officer), Jan Boone (proposed
Non-executive Chairman), Edwin Torr (proposed senior independent
Non-executive Director) and Marc Coucke (proposed Non-executive
Director) will be appointed as Directors;
-- Iain Menneer will remain a Director following Admission and
his role within the Group will change to Chief Operating
Officer;
-- James Lambert will step down as Chairman of the Company but
will remain on the Board as a Non-executive Director;
-- Chris Brewster will resign as a Director but will remain a
critical and committed member of the senior management team of the
Enlarged Group as Country Manager of the Enlarged Group's UK
business; and
-- Raymond Harding will resign as a Director.
The biographical details of the Directors upon Admission are set
out below:
Chris Cardon (aged 49) - Proposed Chief Executive Officer
Chris founded Ecuphar as Chris Cardon NV in 2001 to capitalise
on opportunities identified in the animal health industry. The
company began with the development of a number of original and
high-quality OTC products for companion animal markets. Chris
graduated as a pharmacist from the University of Ghent in 1993
after which he took over his family's pharmacy business. In 1995,
he completed an MBA at the Vlerick Leuven-Gent Management School
and then in 2006 received the prestigious award "Export Lion of
Flanders 2005" in the Young Exporters category.
Chris has a strong entrepreneurial background in human OTC
product development. In 1996, Chris established Mooss Pharma, a
company which developed human OTC products that were exclusively
distributed by pharmacists. Mooss Pharma developed into a key
player in the Belgian market, and in 2001 the OTC assets of Mooss
Pharma were acquired by Omega Pharma.
Walter Beyers (aged 57) - Proposed Chief Financial Officer
Walter is the current Chief Financial Officer of Ecuphar. He has
a master's degree in Economics from the University of Antwerp and
obtained an MBA from the University of Leuven (KUL) in Belgium.
Walter has significant experience in senior financial management
positions in publicly listed and privately owned companies.
Walter started his career with the American multinational
Cargill and subsequently joined his family's business in logistics
until he sold that business. He then became finance director of
Akeda, a Belgian family office and in 1998 he joined
Euronext-listed company USG People, for which he worked for eight
years, before working for listed companies Autogrill and Ecodis,
then returning to USG People in 2009 for a further five years as VP
Finance, being responsible for ten countries in Europe.
Before joining Ecuphar in April 2016, he was CFO Europe for the
US based FCMG manufacturer Ecover-Method.
Iain Menneer (aged 47) - Proposed Chief Operating Officer
Iain is the current Chief Executive Officer of the Company. He
has a degree and PhD in Chemistry, both from Newcastle
University.
Following roles in the brewery industry in product development
and technical research, Iain joined the Group in 2003, working in
sales, marketing and business development roles, including an
instrumental role in the new product development pipeline.
Iain was promoted to the Board as Director of Marketing in July
2011. Iain was appointed Managing Director of Animalcare Limited in
March 2012 and subsequently Chief Executive Officer of the Company
in January 2013, since when he has led the transformation of the
business infrastructure, including the focus on new product
development. Following Admission, Iain will fulfil the role of
Chief Operating Officer in the Enlarged Group.
Jan Boone (aged 45) - Proposed Chairman
Jan is the Chief Executive Officer of Lotus Bakeries, which is
listed on Euronext Brussels. He started at Lotus Bakeries as
managing director in 2005 and was named chief executive officer in
2011.
Between 2000 and 2005, Jan served as Head of Corporate
Controlling and Member of the Executive Committee of Omega Pharma.
He started his career in the audit department at
PricewaterhouseCoopers and holds a Master's degree in Applied
Economics (KU Leuven) and a Master's degree in Audit (UMH).
In addition to his role at Lotus Bakeries, Jan serves as
non-executive director of Club Brugge.
Edwin Torr (aged 57) - Proposed Senior Independent Non-Executive
Director
Edwin Torr has significant experience of international
veterinary and animal health markets, gained over a period of more
than 20 years, during which time he has worked for ICI, Pitman
Moore, Alfa Laval Agri and Dechra Pharmaceuticals. He was part of
the management buyout team that set up Dechra Veterinary Products
in 1997, and was an executive director on the board of the Dechra
entity that was listed on the London Stock Exchange from 2000 until
2013. During this time, he was responsible for business
development, managed the European business unit and was
instrumental in setting up the USA business. Since 2014, Edwin has
independently advised various companies on sales and marketing
structures, M&A opportunities, 'in' and 'out' licensing of
products and investment opportunities within the veterinary and
animal health market sector.
James Lambert (aged 58) - Proposed Non-Executive Director
James was appointed Chairman of the Company in 2008 when the
Company was acquired by Ritchey plc for whom he had been the
chairman since 2005 and a non-executive director since 2003. James
was previously co-founder and Chief Executive Officer of R&R
Ice Cream where under James' leadership, R&R Ice Cream made a
series of acquisitions to become the largest ice cream manufacturer
by volume in the UK. James is now chairman of Burton's Biscuits, a
company he helped Ontario Teachers' Pension Plan acquire in 2013.
He was also awarded the EY UK Entrepreneur of the Year award in
2014.
Marc Coucke (aged 52) - Proposed Non-Executive Director
Marc founded Omega Pharma in 1987 and developed the company into
a leading pan-European OTC health and personal care business. Marc
has served as both chairman and chief executive officer of Omega
Pharma. Following the sale thereof in 2015 to Perrigo Company plc
for EUR3.6 billion, Marc invests via his private investment firm
Alychlo NV in several listed and non-listed companies.
Marc currently serves as chairman of Mithra Pharmaceuticals
(EBR: MITRA) and as non-executive director of Fagron (EBR: FAGR),
in addition to a number of private companies.
Marc graduated as a pharmacist from the University of Ghent
after which he completed an MBA at the Vlerick Leuven-Gent
Management School. He was also awarded, as Chief Executive Officer
of Omega Pharma, the EY Flemish Entrepreneur of the Year award in
2002.
Lord Nick Downshire (aged 58) - Proposed Non-Executive
Director
Nick joined the Board of the Company when it was acquired by
Ritchey plc for whom he had acted as a director since 1998. Nick is
a qualified chartered accountant who has worked in corporate
finance and venture capital. He has held and still holds
non-executive directorships in a diverse range of businesses in the
insurance, agricultural, hospitality, education and technology
sectors. Nick runs an estate in Yorkshire with a range of
activities including quarrying, renewables, forestry and a hotel as
well as agriculture and real estate. He is also Chairman of the
Agriculture and Land Use Committee for the Country Landowners &
Business Association and also sits on their national policy
committee, as well as acting as a trustee for a number of
charitable and land related trusts.
6. Financial effects of the Acquisition
Animalcare is financing the Acquisition through a combination of
the Consideration Shares, the proceeds of the Placing and through
existing cash on Animalcare's balance sheet.
The Existing Directors believe that, taking into account the
business and prospects of the Enlarged Group, the Acquisition will
be enhancing to the Board's expectations of underlying earnings for
the Existing Group in the first full financial year of
ownership.
For the year ended 31 December 2016, Ecuphar recorded revenue of
GBP68.4 million and Underlying EBITDA of GBP8.9 million. The table
below shows an unaudited pro forma aggregated income statement for
the Enlarged Group for the year ended 31 December 2016:
in GBP'000 Animalcare Ecuphar Total
----------- --------- ---------
Revenue 15,556 68,361 83,917
Gross profit 8,722 28,275 36,997
Operating costs (5,181) (22,236) (27,417)
----------- --------- ---------
Operating profit 3,541 6,039 9,580
----------- --------- ---------
Depreciation, amortisation
& impairment 402 4,690 5,092
Non recurring items - (1,814) (1,814)
----------- --------- ---------
Underlying EBITDA 3,943 8,915 12,858
----------- --------- ---------
Financial expenses 36 (988) (952)
Financial income - 97 97
Exceptional costs (172) - (172)
----------- --------- ---------
Profit before tax 3,405 5,148 8,553
Taxation (466) (1,632) (2,098)
----------- --------- ---------
Net (loss) profit 2,939 3,516 6,455
----------- --------- ---------
Underlying net earnings 3,139 3,964 7,103
----------- --------- ---------
Notes:
The Existing Group's results have been presented on a pro forma
basis for 12 months period to 31 December 2016, comprising the
audited six month period to 30 June 2016 from the audited 12 month
accounts to 30 June 2016, plus the unaudited interim accounts to 31
December 2016.
The Ecuphar Group's results have been extracted from the audited
12 months accounts to 31 December 2016.
Underlying EBITDA is summarised in paragraph 3 of this
Announcement.
Ecuphar has existing credit facilities with KBC Bank NV, BNP
Paribas Fortis NV, Belfius Bank NV and ING België NV, details of
which are set out in paragraph 15 of Appendix I and in the notes to
the historical financial information contained in Appendix II in
this Announcement. These facilities will continue to be available
to Ecuphar after Completion. The Existing Group does not have any
debt facilities.
7. Details of the Acquisition
Animalcare has entered into the Share Purchase Agreement,
pursuant to which it has conditionally agreed to acquire the entire
issued share capital of Ecuphar from the Vendors in consideration
for the issue of Consideration Shares and cash to the Vendors. The
cash component of the consideration will be satisfied in part
through a placing of approximately 8.6 million New Placing Shares
(representing approximately 40.4 per cent. of the Existing Issued
Share Capital) to raise gross proceeds of not less than GBP30.0
million, with the balance (of GBP4.0 million) to be funded by
existing cash held by the Group. The number of Consideration Shares
to be issued to the vendors of Ecuphar, will be determined
following completion of the Placing (and by reference to the exact
number of New Placing Shares issued in the Placing).
Under the Share Purchase Agreement, completion of the
Acquisition is conditional on, among other things, the passing of
Resolutions 1 to 6 at the General Meeting, Admission and the
Placing and Admission Agreement having become unconditional. The
Share Purchase Agreement contains customary warranties by the
Vendors to Animalcare, and vice versa, subject to limitations on
liability including a cap on liability. Under the Share Purchase
Agreement, Ecuphar Invest NV and Alychlo NV, being the majority
Vendors, have agreed to give covenants restricting them from
competing with the Enlarged Group for a period of 24 months
following Completion.
It is also proposed that Ecuphar Invest NV and Alychlo NV will
enter into a relationship agreement with the Company and Panmure
Gordon with effect from Admission.
Following completion of the Acquisition, it is intended that
Ecuphar will acquire Animalcare Limited in an intragroup
transaction, with Animalcare Limited thereby becoming a subsidiary
of Ecuphar. The funding for this will be provided from Ecuphar's
existing debt facilities, details of which are set out in paragraph
15 of Appendix I in this Announcement.
8. Details of the Placing
The Bookbuild will be launched immediately following this
Announcement and will be conducted in accordance with the terms and
conditions set out in Appendix III to this Announcement. The timing
of the closing of the book, pricing and allocation is at the
absolute discretion of the Company and Panmure Gordon. The exact
number of Placing Shares will be determined by the Company and
Panmure Gordon at the close of the Bookbuild. Details of the number
of New Placing Shares, Sale Shares and the Placing Price will be
announced as soon as practicable after the closing of the Bookbuild
process.
The net proceeds of the Placing receivable by the Company will
be applied in full to paying a substantial proportion of the cash
component of the Acquisition consideration.
In addition, the Selling Shareholders (who comprise the
Participating Directors and certain employees of the Company) also
intend to sell up to approximately 0.8 million Sale Shares in the
Placing. In the case of each of the Selling Shareholders except
Lord Nick Downshire, the Sale Shares which are intended to be sold
in the Placing will be obtained from the exercise of certain
existing Options or the exchange of shares in Animalcare Limited by
the relevant individuals.
Edwin Torr, a Proposed Director, is also showing his support for
the Acquisition and the Enlarged Group by intending to purchase
85,000 Placing Shares in the Placing. The extent of the
participation by the Selling Shareholders and Edwin Torr will be
announced following completion of the Bookbuild.
The New Placing Shares will be issued credited as fully paid and
will, on issue, rank pari passu in all respects with the Existing
Ordinary Shares, including the right to receive all dividends and
other distributions thereafter declared, made or paid on the
Enlarged Issued Share Capital.
On 23 June 2017, the Company, the Majority Vendors, the Existing
Directors, the Proposed Directors, Panmure Gordon and Degroof
Petercam entered into the Placing and Admission Agreement, pursuant
to which, among other things, the Joint Bookrunners have each
agreed to use its reasonable endeavours to place approximately 8.6
million New Placing Shares on behalf of the Company. In addition,
the Company, the Selling Shareholders and Panmure Gordon are
intending to enter into the Selling Shareholders' Agreement,
pursuant to which Panmure Gordon agreed to use its reasonable
endeavours to place up to approximately 0.8 million Sale Shares on
behalf of the Selling Shareholders.
The Placing is conditional on, among other things:
-- the Placing and Admission Agreement having become
unconditional and not having been terminated in accordance with its
terms;
-- the Share Purchase Agreement not having been terminated or
amended, and having become unconditional in all respects (other
than the conditions relating to Admission and the Placing and
Admission Agreement); and
-- Admission occurring by no later than 13 July 2017 (or such
later date as the Company and the Joint Bookrunners agree, not
being later than 25 July 2017).
By choosing to participate in the Placing and by making an oral
and legally binding offer to acquire Placing Shares, investors will
be deemed to have read and understood this Announcement in its
entirety and to be making such offer on the terms and subject to
the conditions in it, and to be providing the representations,
warranties, acknowledgements and undertakings contained in Appendix
III to this Announcement.
Pursuant to the Placing and Admission Agreement, each of the
Majority Vendors and the Participating Directors will also
undertake to the Company and Panmure Gordon:
-- not, without the prior written consent of each of the Company
and Panmure Gordon, to dispose of any of the Ordinary Shares held
by them or their respective associates at Admission for a period of
12 months following Admission; and
-- for a further period of 12 months following the end of such
lock-in period, to be subject to customary orderly market
restrictions.
9. The Takeover Code and Rule 9 Waiver
Application of the Takeover Code
The Company is subject to the Takeover Code. Brief details of
the Panel, the Takeover Code and the protections they afford are
described below.
The Takeover Code is issued and administered by the Panel. The
Takeover Code applies to all takeover and merger transactions,
however effected, where the offeree company is, inter alia, a
listed public company resident in the United Kingdom. The Company
is a listed public company resident in the United Kingdom and its
shareholders are therefore entitled to the protections afforded by
the Takeover Code.
Under Rule 9 of the Takeover Code, where any person acquires,
whether by a series of transactions over a period of time or not,
an interest in shares (as defined in the Takeover Code) which
(taken together with shares already held by him and any interest in
shares held or acquired by persons acting in concert with him)
carry 30 per cent. or more of the voting rights of such a company,
that person is normally required to make a general offer to all the
holders of any class of equity share capital or other class of
transferable securities carrying voting rights in that company to
acquire the balance of their interests in the company.
Rule 9 of the Takeover Code also provides that, among other
things, where any person who, together with persons acting in
concert with him, is interested in shares which in aggregate carry
not less than 30 per cent. of the voting rights of such a company
but does not hold shares carrying more than 50 per cent. of the
voting rights of such a company, and such person, or any person
acting in concert with him, acquires an additional interest in
shares which increases the percentage of shares carrying voting
rights in which he is interested, then such person is normally
required to make a general offer to all the holders of any class of
equity share capital or other class of transferable securities
carrying voting rights of that company to acquire the balance of
their interests in the company.
An offer under Rule 9 of the Takeover Code must be in cash (or
with a cash alternative) and at not less than the highest price
paid within the preceding 12 months for any shares in the company
by the person required to make the offer or any person acting in
concert with him.
Rule 9 of the Takeover Code further provides, among other
things, that where any person who, together with persons acting in
concert with him holds over 50 per cent. of the voting rights of a
company, acquires an interest in shares which carry additional
voting rights, then they will not generally be required to make a
general offer to the other shareholders to acquire the balance of
their shares. However, individual members of a concert party will
not be able to increase their percentage interest in shares through
or between a Rule 9 threshold without Panel consent.
For the purposes of the Takeover Code, persons acting in concert
comprise persons who, pursuant to an agreement or understanding
(whether formal or informal), cooperate to obtain or consolidate
control of a company. Paragraph (9) of the definition of 'acting in
concert' also deems any shareholders in a private company who sell
their shares in that company in consideration for the issue of new
shares in a company to which the Takeover Code applies to be acting
in concert for the purposes of the Takeover Code unless the
contrary is established.
Rule 9 Waiver
The Panel has confirmed that it considers Ecuphar Invest NV,
Alychlo NV and Jaak Cardon (the son of Chris Cardon and a minority
shareholder in Ecuphar) to be acting in concert for the purposes of
the Takeover Code. The Panel has also confirmed that it does not
consider the other Vendors (the current minority shareholders in
Ecuphar) to be acting in concert with the Concert Party.
None of the members of the Concert Party hold Existing Ordinary
Shares as at the date of this Announcement. On completion of the
Acquisition, the Concert Party are expected to hold (by virtue of
the Consideration Shares to be issued to Ecuphar Invest NV, Alychlo
NV and Jaak Cardon pursuant to the Acquisition) approximately 46.3
per cent. of the voting rights of the Company.
Following Completion, it is expected that Chris Cardon, who is
presumed under the Takeover Code to be acting in concert with
members of the Concert Party, will participate in the New LTIP
which may result in him acquiring Ordinary Shares in the Company.
The maximum aggregate number of Ordinary Shares that Chris Cardon
would be entitled to receive pursuant to any awards made to him
under the New LTIP will be equal to 0.5 per cent. of the Enlarged
Issued Share Capital (the "New LTIP Awards").
On the basis that Chris Cardon is granted and exercises the
maximum aggregate number of New LTIP Awards, and assuming no other
changes in the Concert Party's or Chris Cardon's holding of
Ordinary Shares or in the Company's issued share capital, the
maximum controlling interest of the Concert Party and Chris Cardon
(being a person presumed to be acting in concert with members of
the Concert Party) in the period following Completion is expected
to be approximately 46.8 per cent. of the voting rights of the
Company.
As a consequence of the Acquisition, without a waiver of the
obligation under Rule 9 of the Takeover Code, the Concert Party
would be required to make a general offer for the balance of
Ordinary Shares in issue immediately following the Acquisition. In
addition, any future exercise by Chris Cardon of any New LTIP
Awards could potentially trigger an obligation under Rule 9 of the
Takeover Code, given that he is a person presumed to be acting in
concert with members of the Concert Party, depending on the Concert
Party's holding of Ordinary Shares at that time. The Panel has been
consulted and has agreed, subject to the Whitewash Resolution being
passed by the Independent Shareholders (on a poll) at the General
Meeting, to waive the obligation that would otherwise arise under
Rule 9 of the Takeover Code as a result of the issue of
Consideration Shares to the Concert Party pursuant to the
Acquisition or the exercise by Chris Cardon of any New LTIP Awards.
The Whitewash Resolution will be passed if approved by a simple
majority of votes cast by Independent Shareholders on a poll.
Shareholders should be aware that if the Resolutions are passed,
the Concert Party will not be restricted from making an offer for
the Company. Ecuphar Invest NV and Alychlo NV have confirmed that
the Concert Party has no intention of making an offer for the
Company.
Following completion of the Acquisition, unless the Concert
Party holds more than 50 per cent. of voting rights in the Company
(as to which, see the paragraph below), Rule 9 of the Takeover Code
will continue to apply to the Concert Party, requiring a general
offer to be made to all Shareholders if any member of the Concert
Party or persons acting in concert with them acquires any Ordinary
Shares in addition to those which are the subject of the Whitewash
Resolution, unless a further waiver is obtained. Shareholders
should note that the waiver of Rule 9 of the Takeover Code which
the Panel has agreed to give (conditional on the Whitewash
Resolution being passed by the Shareholders) is only in respect of
the acquisition of Consideration Shares by the Concert Party as a
result of the Acquisition and the exercise by Chris Cardon of any
New LTIP Awards and not in respect of any other future acquisition
of Ordinary Shares by any member of the Concert Party or persons
acting in concert with them.
Shareholders should note that, if the Ordinary Shares issued to
members of the Concert Party and persons acting in concert with
them within the scope of the Whitewash Resolution are such that the
Concert Party together with such persons controls more than 50 per
cent. of voting rights in the Company following completion of the
Acquisition, for so long as the Concert Party together with such
persons collectively controls more than 50 per cent. of voting
rights in the Company, Rule 9 of the Takeover Code will not apply
in respect of future acquisitions of interests in Ordinary Shares
by the Concert Party. As a result, the Concert Party could acquire
further interests in Ordinary Shares without being required to make
a general offer to all Shareholders pursuant to Rule 9 of the
Takeover Code. Individual members of the Concert Party will not be
able to increase their percentage interests in shares through or
between a Rule 9 threshold without the Panel's consent.
Rothschild has provided independent advice to the Independent
Directors in respect of the Acquisition and the Rule 9 Waiver.
10. Change of Accounting Reference Date
In connection with the Acquisition, it has been resolved to
change the accounting reference date of the Company to 31 December,
conditional on Admission. As such, the first full reporting period
of the Enlarged Group will be for the 12 month period ending 31
December 2018.
11. Dividend Policy
The Existing Directors and Proposed Directors intend to continue
the Company's current dividend policy which they believe maintains
an appropriate balance between investment for future growth and
dividend flow to deliver overall value for Shareholders.
The Company issued the following final and interim dividends in
2016, 2015 and 2014:
Year ended Ordinary final dividend Ordinary interim dividend Total dividend
paid
30 June GBP904,000 (4.3 pence GBP379,000 (1.8 pence GBP1,283,000
2016 per share) per share)
30 June GBP839,000 (4.0 pence GBP378,000 (1.8 pence GBP1,217,000
2015 per share) per share)
30 June GBP788,000 (3.8 pence GBP315,000 (1.5 pence GBP1,103,000
2014 per share) per share)
The Company will change its financial year end to 31 December
with effect from Admission. As a result, the first dividend
expected to be paid will be an interim dividend in respect of the
six months to 30 June 2017 which the Existing Directors and
Proposed Directors anticipate will be paid in November 2017. The
final dividend in respect of the financial year ending 31 December
2017 is currently anticipated to be paid in May or June 2018
following the announcement of the Enlarged Group's preliminary
results during March 2018.
From 2018 onwards, the Company's interim and final dividend
payments are expected to be split approximately 30 per cent. to 70
per cent. respectively, in line with historical payment ratios.
12. Working Capital
In the opinion of the Existing Directors and the Proposed
Directors, having made due and careful enquiry, the working capital
available to the Enlarged Group will be sufficient for its present
requirements, that is, for at least 12 months from Admission.
13. Share Incentive Schemes
The Group currently has in place three share incentive schemes:
the Executive Share Option Scheme, the Existing LTIP and the
Savings Related Share Option Scheme. On 22 June 2017, the Board
also adopted the New LTIP. The New LTIP is conditional on, and will
take effect from, Admission. The Directors do not intend to issue
any new Options under the Existing LTIP or the Executive Share
Option Scheme after Admission.
In connection with the Acquisition, certain of the holders of
Options that have vested and are exercisable under the Executive
Share Option Scheme intend to execute a form of election pursuant
to which certain of their Options, of approximately 1.4 million
Ordinary Shares, will be exercised, conditional on completion of
the Acquisition and the Placing. Certain of these Option Shares to
be issued on exercise of these Options are intended to be sold in
the Placing.
The Options not exercised by the Selling Shareholders, as well
as the unvested remainder of the Options under the Executive Share
Option Scheme and all existing Options under the Savings Related
Share Option Scheme will continue in force and effect on their
existing terms until they become exercisable.
The Company intends to offer the two holders of awards under the
Existing LTIP, Iain Menneer and Chris Brewster, the right to
exchange their shares in Animalcare Limited for Ordinary Shares
before completion of the Acquisition, and each intend to take up
that right. As a consequence, approximately 0.9 million new
Ordinary Shares are expected to be issued to Iain Menneer and Chris
Brewster under the Existing LTIP prior to Admission, and a
proportion of such new Ordinary Shares are intended to be sold as
part of the Placing. In accordance with the Existing LTIP, the
number of new Ordinary Shares to be issued pursuant to the exercise
of these rights was determined using the lower of the closing
middle market price for an Ordinary Share on 22 June 2017, being
the dealing day before the date the offer to exchange was made and
the average of the closing middle market prices for an Ordinary
Share over the dealing days in the thirty day period before that
date.
14. Admission, Settlement and Dealings
Application will be made to the London Stock Exchange for the
Enlarged Issued Share Capital to be admitted to trading on AIM. It
is expected that Admission will become effective and that dealings
in the Enlarged Issued Share Capital will commence on 13 July
2017.
CREST is a computerised paperless share transfer and settlement
system which allows shares and other securities to be held in
electronic rather than paper form and transferred otherwise than by
written instrument. The Articles permit the Ordinary Shares to be
issued and transferred in uncertified form in accordance with the
CREST Regulations. The Ordinary Shares are currently enabled for
settlement through CREST. Accordingly settlement or transactions in
the Ordinary Shares following Admission may take place within CREST
if relevant Shareholders so wish. CREST is a voluntary system and
Shareholders who wish to hold their shares in certified form will
be able to do so.
The ISIN number of the Ordinary Shares is, and from Admission
will continue to be, GB0032350695. The TIDM is, and from Admission
will continue to be, ANCR.
15. Material Contracts
Banking facility agreements
Ecuphar has entered into the following bilateral credit
facilities with KBC Bank NV, BNP Paribas Fortis NV, Belfius Bank NV
and ING België NV (together, the "Banks"): (i) a EUR10 million
bullet term facility dated 31 August 2016 to finance permitted
acquisitions of which EUR10 million was available as at 31 December
2016 (the "Term Loan A"), (ii) a EUR4.08 million quarterly
amortising term facility dated 31 August 2016 to refinance existing
financial indebtedness of which EUR3.725 million was outstanding on
31 December 2016 (the "Term Loan B"), and (iii) a EUR41.5 million
revolving credit facility dated 31 August 2016 to refinance a
bridge loan which was used to finance the LDE APA and other
existing financial indebtedness and for general corporate purposes
and permitted acquisitions of which EUR25.2 million was drawn as at
31 December 2016 and EUR16.3 million is available (the "RCF")
(together, the "Facilities"). The Facilities mature in March 2022
and carry a floating interest rate calculated as EURIBOR plus a
margin of 1.75% for the Term Loan A, 1.50% for the Term Loan B, and
1.50% for the RCF.
Ecuphar has granted the following security interests to the
Banks on a pari passu basis to secure the Facilities: (i) a
business pledge and a business pledge mandate covering
substantially all the business assets of Ecuphar, (ii) a pledge on
all the shares Ecuphar holds in Medini NV and Orthopaedics.be NV,
(iii) a pledge on receivables relating to the LDE APA, and (iv) a
pledge on all intellectual property rights owned by Ecuphar.
In terms of financial covenants, the Facilities provide for: (i)
a minimum adjusted solvency ratio measured as consolidated adjusted
equity to consolidated adjusted total assets, (ii) a maximum
leverage ratio measured as consolidated net debt to consolidated
EBITDA, and (iii) a minimum interest coverage ratio measured as
consolidated EBITDA to consolidated interest expenses.
The Facilities are subject to general terms and conditions which
contain customary covenants (e.g. a negative pledge and
restrictions on additional financial indebtedness, acquisitions and
disposals), information undertakings, representations and events of
default.
If a change of control over Ecuphar takes place, the Banks may
require a cancellation and repayment of the Facilities prior to
their maturity date. Each of the Banks has provided a written
waiver and consent letter whereby they have consented to the
Acquisition and the change of control resulting from the
Acquisition. The Banks have also confirmed that Ecuphar can draw
down under the Facilities in order to fund part of the
consideration payable in respect of the proposed acquisition of
Animalcare Limited following Completion, subject to the
satisfaction of certain condition precedents. The Bank may require
security to be granted over the shares or assets of Animalcare
Limited as one such condition.
16. Significant Change
There has been no significant change in the financial or trading
position of the Existing Group since 31 December 2016, the date to
which the last interim financial information of the Existing Group
was prepared.
Net debt of the Ecuphar Group at 31 May 2017 (being the latest
practicable date prior to publication of this Announcement) was
GBP28.8 million compared with net debt of GBP23.8 million at 31
December 2016, being the date to which the consolidated financial
information for the Ecuphar Group set out in Appendix II of this
Announcement. Management attributes this increase principally to
movements in working capital, with the Ecuphar Group carrying
higher levels of inventory and trade accounts receivable and a
lower level of trade payables. Except as set out in this paragraph,
there has been no significant change in the financial or trading
position of the Ecuphar Group since 31 December 2016, the date to
which the consolidated historical financial information for the
Ecuphar Group set out in Appendix II of this Announcement.
17. General Meeting
The full terms of the Resolutions are set out in the notice
convening the General Meeting, to be included in the Admission
Document to be published shortly after the conclusion of the
Bookbuild, and are summarised below:
-- Resolution 1 is an ordinary resolution to approve the
Acquisition for the purposes of the AIM Rules for Companies.
-- Resolution 2 is the Whitewash Resolution described above in
paragraph 9 of Appendix I in this Announcement. It is an ordinary
resolution. This Resolution requires approval by the Independent
Shareholders at the General Meeting.
-- Resolution 3 is an ordinary resolution to authorise the
Existing Directors under section 551 of the Companies Act to allot
equity securities for the purpose of issuing the Consideration
Shares and the New Placing Shares. This authority is in addition to
the existing authorities granted to the Existing Directors at the
previous annual general meeting of the Company.
-- Resolution 4 is a special resolution to approve the
disapplication of statutory pre-emption provisions to allow for the
allotment of the New Placing Shares on a non pre-emptive basis.
-- Resolutions 5 and 6 are special resolutions to remove
existing, and now redundant, limitations on the authorised capital
of the Company set out in the Company's memorandum and articles of
association. These are required because the issue of the
Consideration Shares and the New Placing Shares would otherwise
result in the Company's share capital exceeding the limits set out
in the memorandum and articles of association. Resolutions 5 and 6
are not conditional on any of the other Resolutions being
passed.
-- Resolution 7 is a special resolution to remove existing
limitations on the composition of the Company's board and
restrictions on non-UK resident directors and shareholders set out
in the Company's articles of association, and to conform the
provision of the articles of association relating to the timing of
the annual general meeting with the position under the Companies
Act.
All of Resolutions 1 to 6 need to be passed at the General
Meeting in order for the Acquisition to be implemented and if any
one of those Resolutions is not passed, the Acquisition will not go
ahead. Voting on all Resolutions at the General Meeting will be by
way of a poll.
16. Irrevocable undertakings
James Lambert, being the only Independent Director who holds
Existing Ordinary Shares, has given an irrevocable undertaking to
the Company to vote in favour of the Resolutions (and to procure
that such action is taken by the relevant registered holders) in
respect of his beneficial holdings totalling 1,313,691 Existing
Ordinary Shares, representing approximately 6.19 per cent. of the
Existing Issued Share Capital.
In addition, the Company has received letters of intent and
irrevocable undertakings from certain other Shareholders to vote in
favour of the Resolutions to be proposed at the General Meeting in
respect of a total of 1,425,384 Existing Ordinary Shares
representing, in aggregate, approximately 6.7 per cent. of the
Existing Issued Share Capital.
Iain Menneer, Chris Brewster and Nick Downshire (along with the
other Selling Shareholders) are considered not to be independent in
respect of the Rule 9 Waiver by virtue of their participation in
the Placing, and will therefore not vote in respect of the
Whitewash Resolution. Iain Menneer, Chris Brewster and Nick
Downshire have given irrevocable undertakings to the Company to
vote in favour of the Resolutions other than the Whitewash
Resolution (and to procure that such action is taken by the
relevant registered holders) in respect of their beneficial
holdings totalling 1,492,578 Existing Ordinary Shares,
representing, in aggregate, approximately 7.0 per cent. of the
Existing Issued Share Capital.
In total, therefore, the Company has received letters of intent
and irrevocable undertakings to vote in favour of the Resolutions
to be proposed at the General Meeting in respect of, in the case of
all Resolutions other than the Whitewash Resolution, 4,231,653
Existing Ordinary Shares, representing, in aggregate, approximately
19.9 per cent. of the Existing Issued Share Capital and, in respect
of the Whitewash Resolution, 2,739,075 Existing Ordinary Shares,
representing, in aggregate, approximately 13.9 per cent. of the
Existing Issued Share Capital entitled to vote on that
Resolution.
17. Recommendation
The Existing Directors consider the Acquisition to be in the
best interests of the Company and the Shareholders as a whole.
Accordingly, the Existing Directors recommend that Shareholders
vote in favour of the Resolutions (such recommendation being given,
in the case of the Whitewash Resolution, as provided below).
Iain Menneer, Chris Brewster and Nick Downshire are considered
not to be independent in respect of the Rule 9 Waiver by virtue of
their participation in the Placing, and will not therefore vote in
respect of the Whitewash Resolution. Iain Menneer, Chris Brewster
and Nick Downshire do not therefore feel it appropriate to make any
recommendation to Independent Shareholders in respect of the
Whitewash Resolution.
The Independent Directors, having been so advised by Rothschild,
consider that the Rule 9 Waiver is fair and reasonable and in the
best interests of the Company and the Independent Shareholders as a
whole. In providing advice to the Independent Directors, Rothschild
has taken into account the Independent Directors' commercial
assessments. Accordingly the Independent Directors recommend that
the Shareholders vote in favour of the Whitewash Resolution.
APPIX II - HISTOICAL FINANCIAL INFORMATION ON ECUPHAR
Consolidated income statements
For the year ended 31 December
----------------------------------
in GBP'000 Notes 2016 2015 2014
---------- ---------- ----------
Revenue 20.1 68,361 47,097 34,478
Cost of sales 20.2 (40,086) (30,566) (23,842)
---------- ---------- ----------
Gross profit 28,275 16,531 10,636
---------- ---------- ----------
Research and development expenses 20.3 (1,776) (1,064) (284)
Selling and marketing expenses 20.4 (9,740) (6,682) (3,390)
General and administrative
expenses 20.5 (12,607) (8,738) (5,081)
Net other operating income/(expenses) 20.6 1,887 (345) (277)
---------- ---------- ----------
Operating (loss) profit 6,039 (298) 1,604
---------- ---------- ----------
Financial expenses 20.9 (988) (668) (341)
Financial income 20.10 97 74 46
---------- ---------- ----------
Profit (Loss) before taxes 5,148 (892) 1,309
---------- ---------- ----------
Current income taxes 20.11 (1,305) (537) (466)
Deferred taxes 20.11 (327) 735 53
---------- ---------- ----------
Net (loss) profit 3,516 (694) 896
---------- ---------- ----------
Net (loss) profit attributable
to:
The owners of the parent 21 3,515 (694) 896
Non-controlling interest - - 1
Earnings per share attributable
to
ordinary owners of the parent
Basic 0.25 (0.06) 0.08
Diluted 0.25 (0.06) 0.08
The accompanying notes form an integral part of these
consolidated special purpose financial statements.
Consolidated statements of comprehensive income
For the year ended 31
December
----------------------- -----
in GBP'000 Notes 2016 2015 2014
----- ---------------- -----
Net (loss) profit for the year 3,515 (694) 896
Other comprehensive income (loss)
Financial instruments at fair value
through OCI* (5) - -
Cumulative translation differences* 2,515 (153) (354)
----- ---------------- -----
Other comprehensive income (loss), net
of taxes 2,510 (153) (354)
----- ---------------- -----
Total comprehensive (loss) income for
the year, net of taxes 6,025 (847) 542
Total comprehensive (loss) income attributable
to:
The owners of the parent 6,025 (847) 541
Non-controlling interest - - 1
* May be reclassified subsequently to profit & loss
The accompanying notes form an integral part of these
consolidated special purpose financial statements.
Consolidated statements of financial position
For the year ended 31 1 January
December
----- --------------------------------- ---------
Notes 2016 2015 2014 2014
----- ------ ------------ ----------- ---------
in GBP'000
Assets
Non-current assets
Goodwill 5 9,959 8,974 2,083 2,229
Intangible assets 6 21,246 19,415 7,279 7,425
Property, plant & equipment 7 719 662 386 330
Deferred tax assets 20.11 1,269 1,240 956 969
Other financial assets 69 68 52 96
Other non-current assets 1 1 - -
----- ------ ------------ ----------- ---------
Total non-current assets 33,263 30,360 10,756 11,049
----- ------ ------------ ----------- ---------
Current assets
Inventories 9 13,254 13,024 6,383 6,937
Trade receivables 10 10,781 9,801 3,889 3,699
Available-for-sale financial
assets 18 423 1 1 -
Other current assets 1,191 1,330 300 346
Cash and cash equivalents 11 951 749 966 1,154
----- ------ ------------ ----------- ---------
Total current assets 26,600 24,905 11,539 12,136
----- ------ ------------ ----------- ---------
Total assets 59,863 55,265 22,295 23,185
----- ------ ------------ ----------- ---------
Equity and liabilities
Equity
Share capital 12 7,256 7,256 5,148 5,148
Share premium 12 8,821 8,821 - -
Treasury shares - (646) (646) -
Retained earnings 12 1,258 (142) 660 496
Other reserves 2,518 8 161 515
Equity attributable to the
owners of the parent 19,853 15,297 5,323 6,159
Non-controlling interest 12 2 2 2 1
----- ------ ------------ ----------- ---------
Total equity 19,855 15,299 5,325 6,160
----- ------ ------------ ----------- ---------
Non-current liabilities
Borrowings 14 24,102 2,019 3,837 4,020
Deferred tax liabilities 20.11 224 44 1 2
Derivative financial liability - 30 41
Provisions 15 216 25 8 -
----- ------ ------------ ----------- ---------
Total non-current liabilities 24,542 2,088 3,876 4,063
----- ------ ------------ ----------- ---------
Current liabilities
Borrowings 14 631 26,609 6,908 7,464
Trade payables 10,012 8,406 3,512 3,433
Tax payables 1,774 973 388 299
Derivative financial liability - 16 - -
Accrued charges & deferred
income 16 812 286 129 228
Other current liabilities 17 2,237 1,588 2,157 1,538
----- ------ ------------ ----------- ---------
Total current liabilities 15,466 37,878 13,094 12,962
----- ------ ------------ ----------- ---------
Total equity and liabilities 59,863 55,265 22,295 23,185
----- ------ ------------ ----------- ---------
The accompanying notes form an integral part of these
consolidated special purpose financial statements.
Consolidated statements of changes in equity
Attributable to the owners of the parents
Share Share Treasury Retained Other Non-- Total
controlling
in GBP'000 Notes capital premium shares earnings reserves Total interest equity
-------- -------- -------- -------- -------- -------- --------
--------
At 1 January 2016 7,256 8,821 (646) (142) 8 15,297 2 15,299
-------- -------- -------- -------- -------- -------- --------
--------
Net profit (loss) - - - 3,515 - 3,515 - 3,515
Other comprehensive
income (loss) - - - - 2,510 2,510 - 2,510
-------- -------- -------- -------- -------- -------- --------
--------
Total comprehensive
income (loss) - - - 3,515 2,510 6,025 - 6,025
-------- -------- -------- -------- -------- -------- --------
--------
External dividend - - - (1,469) - (1,469) - (1,469)
Redemption treasury
shares - - 646 (646) - - - -
-------- -------- -------- -------- -------- -------- --------
--------
At 31 December 2016 7,256 8,821 - 1,258 2,518 19,853 2 19,855
Attributable to the owners
of the parents
Non--
Share Share Treasury Retained Other controlling Total
in GBP'000 Notes capital premium shares earnings reserves Total interest equity
-------- -------- -------- -------- -------- -------- --------
--------
At 1 January 2015 5,148 - (646) 660 161 5,323 2 5,325
-------- -------- -------- -------- -------- -------- --------
--------
Net profit (loss) - - - (694) - (694) - (694)
Other comprehensive
income (loss) - - - - (153) (153) - (153)
-------- -------- -------- -------- -------- -------- --------
--------
Total comprehensive
income (loss) - - - (694) (153) (847) - (847)
-------- -------- -------- -------- -------- -------- --------
--------
External
dividend 12 - - - (108) - (108) - (108)
Capital
increase
in cash 12 2,108 8,821 - - - 10,929 - 10,929
-------- -------- -------- -------- -------- -------- --------
--------
At 31 December 2015 7,256 8,821 (646) (142) 8 15,297 2 15,299
Attributable to the owners
of the parents
Non--
Share Share Treasury Retained Other controlling Total
in GBP'000 Notes capital premium shares earnings reserves Total interest equity
-------- -------- -------- -------- -------- -------- --------
--------
At 1 January 2014 5,148 - - 496 515 6,159 1 6,160
-------- -------- -------- -------- -------- -------- --------
--------
Net profit (loss) - - - 896 - 896 1 897
Other comprehensive
income (loss) - - - - (354) (354) - (354)
-------- -------- -------- -------- -------- -------- --------
--------
Total comprehensive
income (loss) - - - 896 (354) 542 1 543
-------- -------- -------- -------- -------- -------- --------
--------
Dividend
payment 13 - - - (732) - (732) - (732)
Other movement 12 - - (646) - - (646) - (646)
-------- -------- -------- -------- -------- -------- --------
--------
660
--------
--------
--------
--------
--------
--------
--------
At 31 December 2014 5,148 - (646) -------- 161 5,323 2 5,325
The accompanying notes form an integral part of these
consolidated special purpose financial statements.
Consolidated cash flow statements
Notes For the year ended 31
December
------------------------- -------
2016 2015 2014
------- ---------------- -------
in GBP'000
Operating activities
Net (loss) profit for the period 3,516 (694) 896
Non-cash and operational adjustments
Depreciation of property, plant
& equipment 7 326 156 154
Amortization of intangible assets 6 3,982 2,957 2,193
Loss (gain) on disposal of property,
plant & equipment (1) (7) (4)
Movement in provisions 180 17 8
Movement allowance for bad debt
and inventories 355 457 42
Financial income 20.10 (97) (74) (46)
Financial expense 20.9 988 668 341
Impact of foreign currencies 1,787 (136) (334)
Gain from sale of subsidiaries 4 (2,432) - -
Deferred tax expense (income) 20.11 327 (735) (53)
Income taxes 20.11 1,305 537 465
Other 31 100 31
Working capital adjustment
Increase in trade receivables
and other receivables (1,447) (6,706) (156)
Decrease (increase) in inventories (890) (2,152) 512
Increase in trade payables and
other payables 2,530 4,644 (1,323)
Income tax paid (1,172) (350) (396)
------- ---------------- -------
Net cash flow from operating
activities 9,288 (1,318) 2,330
------- ---------------- -------
The accompanying notes form an integral part of these
consolidated special purpose financial statements.
For the year ended 31 December
--------------------------------------
Notes 2016 2015 2014
------------ --------------- -------
in GBP'000
Investing activities
Purchase of property, plant &
equipment 7 (463) (458) (290)
Purchase of intangible assets 6 (1,185) (781) (587)
Proceeds from the sale of property,
plant & equipment (net) 74 29 57
Acquisition of subsidiaries 4 - (26,125) -
Proceeds from sale of subsidiary 4 3,211 - -
Purchase available for sale financial
investments (409) - -
------------ --------------- -------
Net cash flow used in investing
activities 1,228 (27,335) (820)
------------ --------------- -------
Financing activities
Proceeds from loans & borrowings
and convertible debt 15,852 21,091 3,265
Repayment of loans & borrowings (23,925) (2,817) (3,245)
Proceeds from capital increase - 10,924 -
Purchase treasury shares - - (646)
Dividends paid (1,469) (108) (732)
Interest paid (663) (498) (289)
Other financial income (expense) (241) (104) (12)
------------ --------------- -------
Net cash flow from financing activities (10,446) 28,488 (1,659)
------------ --------------- -------
Net increase of cash & cash equivalents 70 (165) (149)
------------ --------------- ---------
Cash & cash equivalents at beginning
of period 11 749 966 1,154
Exchange rate differences on cash
& cash equivalents 132 (52) (39)
Cash & cash equivalents at end
of period 11 951 749 966
The accompanying notes form an integral part of these
consolidated special purpose financial statements.
Notes to the consolidated special purpose financial
statements
1 Corporate information
Ecuphar NV is a limited liability company with its registered
office at Legeweg 157, bus I, 8020 Oostkamp, Belgium. The
consolidated special purpose financial statements comprise Ecuphar
NV (the "Parent Company" or "Parent") and its subsidiaries
(collectively, the "Ecuphar Group"). See Note 26 for a list of
subsidiaries of the Parent Company.
The Ecuphar Group is a leading provider of animal health
products. Through the development of a veterinary pharmaceutical
portfolio it aims to increase market penetration in existing
markets, expand into new export markets and enter into new
strategic partnerships and alliances. The Ecuphar Group sells its
products in Europe, Americas and Asia.
2 Basis of preparation
The consolidated special purpose financial statements of the
Ecuphar Group for the 3 years ended 31 December 2016 were prepared
for the purposes of the proposed acquisition of Ecuphar NV by
Animalcare Group plc (the "Company") and the Company's proposed
readmission to AIM. These consolidated special purpose financial
statements have been prepared in accordance with the requirements
of the AIM Rules for Companies, and in accordance the International
Financial Reporting Standards ("IFRS") as adopted by the European
Union ("EU-IFRS"). The Ecuphar Group has applied IFRS 1, First-Time
adoption of International Financial Reporting Standards ("IFRS 1")
in its adoption of IFRS. The Transition Date ("Transition Date")
for the Ecuphar Group was 1 January 2014 which is the opening
balance sheet date for fiscal year 2014. The Ecuphar Group has
applied IFRS standards effective for the period ended 31 December
2016 to all years presented in these consolidated special purpose
financial statements, as if these standards had always been in
effect (subject to the mandatory and optional IFRS 1 exemptions
discussed in Note 27).
These consolidated special purpose financial statements have
been prepared on a historical cost basis, except for the assets and
liabilities that have been acquired as part of a business
combination which have been initially recognized at fair value and
certain financial instruments which are measured at fair value.
The consolidated special purpose financial statements are
presented in thousands of pound sterling (KGBP or thousands of GBP)
and all "currency" values are rounded to the nearest thousand
(GBP000), except when otherwise indicated.
The preparation of financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Ecuphar Group management to exercise
judgment in applying the Ecuphar Group's accounting policies. The
areas where significant judgment and estimates have been made in
preparing the financial statements and their effect are disclosed
in Note 3.
3 Summary of significant accounting policies
Basis for consolidation
The consolidated special purpose financial statements comprise
the financial statements of the Ecuphar Group and its
subsidiaries.
Entities are fully consolidated from the date of acquisition,
which is the date when the Ecuphar Group obtains control, and
continue to be consolidated until the date when such control
ceases. The financial statements of the entities are prepared for
the same reporting period as the parent company, using consistent
accounting policies. All intra-group balances, transactions,
unrealized gains and losses resulting from intra-group transactions
and dividends are fully eliminated.
The Ecuphar Group attributes profit or loss and each component
of other comprehensive income to the owners of the parent company
and to the non-controlling interest based on present ownership
interests, even if this results in the non-controlling interest
having a negative balance.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction. If the
Ecuphar Group loses control over the subsidiary, it will
derecognize the assets (including goodwill) and liabilities of the
subsidiary, any non-controlling interest and the other components
of equity related to the subsidiary. Any surplus or deficit arising
from the loss of control is recognized in profit or loss. If the
Ecuphar Group retains an interest in the previous subsidiary, then
such interest is measured at fair value at the date the control is
lost.
The proportion allocated to the parent and non-controlling
interests in preparing the consolidated special purpose financial
statements is determined based solely on present ownership
interests.
The following changes to the consolidation scope occurred during
the reported periods:
-- Acquisition of the assets related to the Animal Health
Business of Esteve SA, a Spanish pharmaceutical company, effective
on 30 April 2015 (see Note 4). As part of this acquisition, the
following entities has entered to the consolidation scope: Ecuphar
Veterinaria, Ecuphar Italia, Belphar and Euracon GmbH;
-- Disposal of Nutriscience Ltd., the subsidiary of the Ecuphar
Group located in the Republic of Ireland, effective on 31 October
2016 (see Note 4).
Non-controlling interests
The Ecuphar Group has the choice, on a transaction by
transaction basis, to initially recognize any non-controlling
interest in the acquiree which is a present ownership interest and
entitles its holders to a proportionate share of the entity's net
assets in the event of liquidation at either acquisition date fair
value or, at the present ownership instruments' proportionate share
in the recognized amounts of the acquiree's identifiable net
assets. Other components of non-controlling interest such as
outstanding share options are generally measured at fair value. The
Ecuphar Group has not elected to take the option to use fair value
in acquisitions completed to date and currently only has minor
non-controlling interest resulting from business combinations.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the executive committee. Operating
segments are aggregated when they have similar economic
characteristics which is the case when there is similarity in terms
of (a) the nature of the products and services, (b) the nature of
the production processes, (c) the type or class of customer for
their products and services, (d) the methods used to distribute
their products or provide their services, and (e) if applicable,
the nature of the regulatory environment. The Ecuphar Group has two
operating segments, Pharmaceutical and Wholesale.
Foreign currency translation
Functional and presentation currency
The Ecuphar Group's consolidated special purpose financial
statements are presented in Pound Sterling (GBP) which is different
that the functional currency of the parent company and
subsidiaries. The presentation currency is different as it is the
Ecuphar Group intention to be publicly quoted in the United
Kingdom.
For each entity, the Ecuphar Group determines the functional
currency, and items included in the financial statements of each
entity are measured using the functional currency. The functional
currency of all entities of the Ecuphar Group is Euro.
The statement of financial position is translated into GBP at
the closing rate on the reporting date and their income statement
is translated at the average exchange rate at year-end. Differences
resulting from the translation of the financial statements of the
parent and the subsidiaries are recognized in other comprehensive
income as "cumulative translation differences".
Foreign currency transactions
Transactions denominated in foreign currencies are translated
into Euro at the exchange rate at the end of the previous
month-end. Monetary items in the statement of financial position
are translated at the closing rate at each reporting date and the
relevant translation adjustments are recognized in financial or
operating result depending on its nature.
Business combinations
Business combinations are accounted for using the acquisition
method at the acquisition date, which is the date at which the
Ecuphar Group obtains control over the entity.
The cost of an acquisition is measured as the amount of the
consideration transferred to the seller, measured at the
acquisition date fair value, and the amount of any non-controlling
interest in the acquiree.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the
acquisition date. The Ecuphar Group recognizes any non-controlling
interest in the acquired entity on an acquisition-by-acquisition
basis either at fair value or at the non-controlling interest's
proportionate share of the acquired entity's net identifiable
assets.
The Ecuphar Group measures goodwill initially at cost at the
acquisition date, being:
-- the fair value of the consideration transferred to the seller, plus
-- the amount of any non-controlling interest in the acquiree, plus
-- if the business combination is achieved in stages, the fair
value of the existing equity interest in the acquiree re-measured
at the acquisition date, less
-- the fair value of the net identifiable assets acquired and assumed liabilities
Goodwill is recognized as an intangible asset with any
impairment in carrying value being charged to the consolidated
income statement. Where the fair value of identifiable assets,
liabilities and contingent liabilities exceed the fair value of
consideration paid, the excess is credited in full to the
consolidated income statement on acquisition date.
Acquisition costs incurred are expensed and included in general
and administrative expenses. Property, plant and equipment
Property, plant and equipment is stated at cost, net of
accumulated depreciation and/or accumulated impairment losses, if
any. Such cost includes borrowing costs directly attributable to
construction projects if the asset necessarily takes a substantial
period of time to get ready for its intended use, it is probable
that they will result in future economic benefits to the group and
the cost can be measured reliably. When significant parts of
property, plant and equipment are required to be replaced at
intervals, the Ecuphar Group recognizes such parts as individual
assets with specific useful lives and depreciates them accordingly.
Likewise, when a major inspection is performed, its cost is
recognized in the carrying amount of the property, plant and
equipment as a replacement if the recognition criteria are
satisfied. All other repair and maintenance costs are recognized in
the income statement as incurred.
Depreciation is calculated on a straight-line basis over the
estimated useful lives of the assets as follows:
-- Equipment 5 years
-- Office furniture & office 3-5 years or lease term if shorter
equipment
-- Leased equipment 4-5 years
-- Leasehold improvements 5 years or lease term if shorter
Land is not depreciated.
A leased asset is depreciated over the useful life of the asset.
However, if there is no reasonable certainty that the Ecuphar Group
will obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the
asset or the lease term.
An item of property, plant and equipment and any significant
part initially recognized is derecognized upon disposal or when no
future economic benefits are expected from its use or disposal. Any
gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the income statement when the
asset is derecognized.
The assets' residual values, useful lives and methods of
depreciation are reviewed at each financial year-end and adjusted
prospectively, if appropriate.
Leases
The determination of whether an arrangement is, or contains, a
lease is based on the substance of the arrangement at the inception
date, whether fulfillment of the arrangement is dependent on the
use of a specific asset or assets or the arrangement conveys a
right to use the asset, even if that right is not explicitly
specified in an arrangement.
Finance leases which transfer to the Ecuphar Group substantially
all the risks and benefits incidental to ownership of the leased
item, are capitalized at the commencement of the lease at the fair
value of the leased item or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between
finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the
liability.
Finance charges are recognized as financial expenses in the
consolidated income statement.
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Ecuphar Group (an "operating
lease"), the total rentals payable under the lease are charged to
the consolidated income statement on a straight-line basis over the
lease term. The aggregate benefit of lease incentives is recognized
as a reduction of the rental expense over the lease term on a
straight-line basis.
Intangible assets
Intangible assets comprise the acquired product portfolios,
in-process research and development, licensing and distribution
rights and customer acquired in connection with business
combinations, product portfolios & product development costs
and capitalized software.
The useful life of the intangible assets is as follows:
-- Capitalized software: 5 years;
-- Patents, distribution rights 7-12 years;
and licenses:
-- Product portfolios & product 10 years;
development:
-- In Process Research and Development 10 years;
-- Goodwill Not amortized
Intangible assets acquired separately
Intangible assets with finite useful lives which are acquired
separately are carried at cost less accumulated amortization and
accumulated impairment losses. Intangible assets with finite lives
are amortized over their useful economic life and assessed for
impairment whenever there is an indication that the intangible
asset may be impaired. The amortization period and the amortization
method for an intangible asset with a finite useful life are
reviewed at least at the end of each reporting period. The
amortization expense on intangible assets with finite lives is
recognized in the consolidated income statement based on its
function which may be "cost of sales", "sales & marketing
expenses", "research & development expenses" and "general and
administrative expenses".
Intangible assets with indefinite useful lives that are acquired
separately are carried at cost less accumulated impairment
losses.
Goodwill
Goodwill is not amortized but it is tested for impairment
annually, or more frequently if events or changes in circumstances
indicate that it might be impaired, and is carried at cost less
accumulated impairment losses. Gains and losses on the disposal of
an entity include the carrying amount of goodwill relating to the
entity sold.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the
goodwill arose. The units or groups of units are identified at the
lowest level at which goodwill is monitored for internal management
purposes, being the operating segments.
Internally generated intangible assets - research and
development expenditures
Research and development includes the costs incurred by
activities related to the development of software solutions (new
products, updates and enhancements), guides and other products.
Expenditures in research and development activities are recognized
as an expense in the period in which they are incurred.
Development activities involve the application of research
findings or other knowledge to a plan or a design of new or
substantially improved (software) products before the start of the
commercial use.
Internal development expenditures on an individual project are
recognized as an intangible asset when the Ecuphar Group can
demonstrate:
-- the technical feasibility of completing the intangible asset
so that the asset will be available for use or sale;
-- its intention to complete and its ability to use or sell the asset;
-- how the asset will generate future economic benefits;
-- the availability of resources to complete the asset;
-- the ability to measure reliably the expenditure during development.
Internal development expenditures not satisfying the above
criteria and expenditures on the research phase are recognized in
the consolidated income statement as incurred.
Subsequent to initial recognition internally generated
intangible assets are reported at cost less accumulated
amortization and accumulated impairment losses, on the same basis
as intangible assets which are acquired separately.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and
recognized separately from goodwill are initially recognized at
their fair value at the acquisition date (which is regarded as
their cost). Subsequent to initial recognition intangible assets
acquired in a business combination are measured at cost less
accumulated amortization and accumulated impairment losses, on the
same basis as intangible assets which are acquired separately.
Impairment of non-financial assets
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its
recoverable amount (i.e. the higher of value in use and fair value
less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows; its cash generating units
("CGUs"). Goodwill is allocated on initial recognition to each of
the Ecuphar Group's CGUs that are expected to benefit from the
synergies of the combination giving rise to the goodwill.
The Ecuphar Group bases its impairment calculation on detailed
budgets and forecast calculations, which are prepared separately
for each of the Ecuphar Group's CGUs to which the individual assets
are allocated. These budgets and forecast calculations generally
cover a period of five years. For longer periods, a long-term
growth rate is calculated and applied to future cash flows
projected after the fifth year.
Impairment charges are included in profit or loss, except, where
applicable, to the extent they reverse gains previously recognized
in other comprehensive income. An impairment loss recognized for
goodwill is not reversed.
Where goodwill forms part of a cash-generating unit and part of
the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the
carrying amount of the operation when determining the gain or loss
on disposal of the operation. Goodwill disposed of in this
circumstance is measured based on the relative values of the
operation disposed of and the portion of the cash-generating unit
retained.
Inventories
Inventories are valued at the lower of cost and net realizable
value.
Costs incurred in bringing each product to its present location
and condition are accounted for as follows:
-- Raw materials: purchase cost on a first in, first out basis;
-- Goods purchased for resale: purchase cost on a first in, first out basis.
Net realizable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale.
Financial assets
Financial assets include loans, deposits, receivables measured
at amortized cost and available for sale financial investments
measured at fair value.
Financial assets measured at amortized cost
The Ecuphar Group has loans and receivables that are measured at
amortized cost.
The Ecuphar Group's loans and receivables comprise trade and
other receivables, other financial assets and cash and cash
equivalents in the consolidated statement of financial
position.
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short term highly liquid investments with
original maturities of three months or less, and - for the purpose
of the statement of cash flows - bank overdrafts. Bank overdrafts
are shown within loans and borrowings in current liabilities on the
consolidated statement of financial position.
Financial assets that are classified as loans and receivables
are initially measured at fair value plus transaction costs and
subsequently at amortized cost using the effective interest rate
method (EIR). Amortized cost is calculated by taking into account
any discount or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortization is included under
financial income in the consolidated income statement. The losses
arising from impairment are
recognized in the consolidated income statement under other
operating expenses or financial expenses.
Available-for-sale financial assets measured at fair value
Available-for-sale financial assets relate to investments that
are not initially acquired in view of a short term sale (shares and
securities) and that are nor fully consolidated nor equity
consolidated. Assets in this category are measured at fair value
with the resulting gains and losses being directly recognized in
other comprehensive income (equity).
Assets in this category are measured at cost when there is no
price input available in an active market and the fair value cannot
be measured reliable by applying alternative valuation methods.
Impairment of financial assets
The Ecuphar Group assesses at each reporting date whether there
is any objective evidence that a financial asset or a group of
financial assets is impaired. A financial asset or a group of
financial assets is to be impaired if there is objective evidence
of impairment as a result of one or more events that has occurred
after the initial recognition of the asset (an incurred 'loss
event') and that loss event has an impact on the estimated future
cash flows of the financial asset or the group of financial assets
that can be reliably estimated.
In case of available-for-sale financial assets, objective
evidence would include a significant or prolonged decline in the
fair value of the investment below its cost.
If there is objective evidence that an impairment loss has been
incurred, the amount of the loss is measured as the difference
between the asset's carrying amount and the present value of
estimated future cash flows (excluding future expected credit
losses that have not yet been incurred) or its current fair value,
in case of available-for-sale financial assets. The present value
of the estimated future cash flows is discounted at the financial
asset's original effective interest rate. If a loan has a variable
interest rate, the discount rate for measuring any impairment loss
is the current effective interest rate.
The carrying amount of the asset is reduced through the use of
an allowance account and the amount of loss is recognized in the
income statement. In the event of an impairment loss for
available-for-sale financial assets, the accumulated impairment
loss is removed from other comprehensive income and recognized in
the consolidated statement of profit or loss.
Impairment losses on available-for-sale financial assets are not
reversed. Financial liabilities
The Ecuphar Group has financial liabilities measured at
amortized cost which include loans and borrowings, trade payables
and other payables and financial liabilities resulting from an
interest rate swap (classified as held for trading).
Financial liabilities at amortized cost
Those financial liabilities are recognized initially at fair
value plus directly attributable transaction costs and are measured
at amortized cost using the effective interest rate method. Gains
and losses are recognized in the income statement when the
liabilities are derecognized as well as through the effective
interest rate method amortization process.
Derivative financial liabilities
The Ecuphar Group uses derivative financial instruments to hedge
the exposure to changes in interest rates, however the use of
derivatives is limited and does not represent significant amounts.
Derivative financial instruments are initially measured at fair
value. After initial recognition the financial instruments are
measured at fair value on the balance sheet date.
Such hedging transactions do not qualify for hedge accounting
criteria, although they offer economic hedging according to the
Ecuphar Group's risk policy. Changes in the fair value of such
instruments are recognized directly in the consolidated statement
of profit or loss.
Derecognition
A financial liability is derecognized when the obligation under
the liability is discharged or cancelled or expires.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount is reported in the consolidated statement of financial
position if there is a currently enforceable legal right to offset
the recognized amounts and there is an intention to settle on a net
basis, or to realize the assets and settle the liabilities
simultaneously.
Share capital
Financial instruments issued by the Ecuphar Group are classified
as equity only to the extent that they do not meet the definition
of a financial liability or financial asset. The Ecuphar Group's
ordinary shares are classified as equity instruments.
Dividends
Dividends paid are recognized within the statement of changes in
equity only when an obligation to pay the dividends arises prior to
the year end.
Provisions
Provisions are recognized when the Ecuphar Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
Employee benefits
Short-term employee benefits
The Ecuphar Group has short-term employee benefits which are
recognized when the service is performed as a liability and
expense. The short-term employee benefit is the undiscounted amount
expected to be paid.
Management incentive plans
The Ecuphar Group has implemented an incentive plan for some of
its employees. The liability recognized is the undiscounted amount
expected to be paid.
Post-employment benefits
The Ecuphar Group has a defined contribution obligation where
the Ecuphar Group pays contributions based on salaries to an
insurance company, in accordance with the laws and agreements in
each country.
The Belgian defined contribution pension plans are by law
subject to minimum guaranteed rates of return, currently 3.25% on
employer contributions and 3.75% on employee contributions. These
rate have been modified by the law of 18 December 2015 and
effective for contribution paid as from 2016 to a new variable
minimum return based on the Belgian government bonds, with a
minimum of 1.75% and a maximum of 3.75%.
These plans quality as a defined benefit plan as from 1 January
2016 considering the modified law. Previously, the Ecuphar Group
has adopted a retrospective approach whereby the net liability
recognized in the statement of financial position is based on the
sum of the positive differences,
determined by individual plan participant, between the minimum
guaranteed reserves and the benefits accrued at the closing date
based on the actual rates of return.
The impact of the defined contribution plans accounted for as a
defined benefit plan is not material.
Contributions are recognized as expenses for the period in which
employees perform the corresponding services. Outstanding payments
at the end of the period are shown as other current
liabilities.
Revenue recognition Sales of goods
Revenue is measured at the fair value of the consideration
received or receivable, and represents amounts receivable for goods
supplied, stated net of discounts, returns and value added
taxes.
Revenue from the sale of goods is recognized when all the
following 5 conditions are met:
-- The Ecuphar Group transfers to the buyer the significant
risks and rewards of ownership of the goods;
-- The Ecuphar Group retains neither continuing managerial
involvement to the degree usually associated with ownership nor
effective control over the goods sold;
-- The Ecuphar Group can measure reliably the amount of revenue;
-- It is probable that the economic benefits associated with the
transaction flow to the Ecuphar Group; and
-- The Ecuphar Group can measure reliably the costs incurred or
to be incurred in respect of the transaction.
Trade goods include goods produced for the purpose of sale and
goods purchased for resale.
The Ecuphar Group bases its estimate of return on historical
results, taking into consideration the type of customer, the type
of transaction and the specifics of each arrangement.
Sales of services
When the outcome of a transaction involving the rendering of
services is estimated reliably, revenue associated with the
transaction is recognized when the services are rendered. The
outcome of a transaction is estimated reliably when all the
following four conditions are satisfied:
-- The amount of revenue is measured reliably;
-- It is probable that the economic benefits associated with the
transaction will flow to the Ecuphar Group;
-- The stage of completion of the transaction at the balance
sheet date can be measured reliably; and
-- The costs incurred for the transaction and the costs to
complete the transaction are measured reliably.
In general, these services are invoiced as they are performed
and the amounts directly recognized in the income statement and do
not require the measurement of the stage of completion.
Up-front income received in relation to long-term service
contracts is deferred and subsequently recognized over the life of
the relevant contracts.
Interest income
For all financial instruments measured at amortized cost,
interest income is recorded using the effective interest rate,
which is the rate that exactly discounts the estimated future cash
payments or receipts over the expected life of the financial
instrument or a shorter period, where appropriate, to the net
carrying amount of the financial asset or liability. Interest
income is included under financial income in the income
statement.
Financing costs
Financing costs relate to interests and other costs incurred by
the Ecuphar Group related to the borrowing of funds. Such costs
mostly relate to interest charges on short- and long-term
borrowings as well as the amortization of additional costs incurred
on the issuance of the related debt. Financing costs are recognized
in profit and loss of the period or capitalized in case they are
related to a qualifying asset.
Other financial income and expenses
Other financial income and expenses include mainly foreign
currency gains or losses on financial transactions and bank related
expenses.
Taxes
Current income tax
Income tax assets and liabilities for the current period are
measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively enacted, at
the reporting date.
Current income tax relating to items that are recognized
directly in equity is recognized in equity and not in the income
statement. Management periodically evaluates positions taken in the
tax returns with respect to situations in which applicable tax
regulations are subject to interpretation and establishes
provisions where appropriate.
Deferred tax
Deferred tax is calculated using the liability method on
temporary differences at the reporting date between the tax bases
of assets and liabilities and their carrying amounts for financial
reporting purposes.
Deferred tax liabilities are recognized for all taxable
temporary differences. Deferred tax assets are recognized for all
deductible temporary differences, carry forward of unused tax
credits and unused tax losses, to the extent that it is probable
that taxable profit will be available against which the deductible
temporary differences, and the carry forward of unused tax credits
and unused tax losses can be utilized.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilized. Unrecognized
deferred tax assets are reassessed at each reporting date and are
recognized to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset is
realized or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
reporting date.
Deferred tax assets and deferred tax liabilities are offset, if
a legally enforceable right exists to set off current tax assets
against current income tax liabilities and the deferred taxes
relate to the same taxable entity and the same taxation
authority.
Fair value measurements
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either in the
principal market for the asset or liability or in the absence of a
principal market, in the most advantageous market for the asset or
liability. The principal or the most advantageous market must be
accessible by the Ecuphar Group. The fair value of an asset or a
liability is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming that market participants act in their economic best
interest.
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorized within the
fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a
whole:
-- Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities
-- Level 2 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable
-- Level 3 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable
Events after balance sheet date
Events after the balance sheet date which provide additional
information about the parent company's position as at the balance
sheet date (adjusting events) are reflected in the financial
statements. Events after the balance sheet date which are not
adjusting events are disclosed in the notes if material.
New and revised standards not yet adopted
The standards and interpretations that are issued, but not yet
effective, up to the closing date of the Ecuphar Group's financial
statements are disclosed below.
IFRS 9 Financial Instruments and subsequent amendments
On 24 July 2014 the IASB published the complete version of IFRS
9, Financial instruments, which replaces most of the guidance in
IAS 39. This includes amended guidance for the classification and
measurement of financial assets by introducing a fair value through
other comprehensive income category for certain debt instruments.
It also contains a new impairment model which will result in
earlier recognition of losses. No changes were introduced for the
classification and measurement of financial liabilities, except for
the recognition of changes in own credit risk in other
comprehensive income for liabilities designated at fair value
through profit or loss. IFRS 9 also includes a new hedging
guidance. It will be effective for annual periods beginning on or
after 1 January 2018. The Ecuphar Group has yet to undertake a
detailed assessment but no significant impact is expected.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 specifies how and when a company will recognize revenue
as well as requiring such entities to provide users of financial
statements with more informative, relevant disclosures. The
standard provides a single, principles based five step model to be
applied to all contracts with customers as follows:
-- Identify the contract(s) with a customer;
-- Identify the performance obligations in the contract;
-- Determine the transaction price;
-- Allocate the transaction price to the performance obligations in the contract; and
-- Recognize revenue when (or as) the entity satisfies a performance obligation.
IFRS 15 was issued in May 2014 and replaces IAS 11-Construction
Contracts, IAS 18-Revenue, IFRIC 13-Customer Loyalty Programmes,
IFRIC 15-Agreements for the Construction of Real Estate, IFRIC
18-Transfers of Assets from Customers and SIC 31-Revenue-Barter
Transactions involving Advertising Services. The Standard will be
effective for annual periods beginning on or after 1 January 2018.
The Ecuphar Group will make more detailed assessments of the impact
over the next months and expect to complete the assessment in the
third quarter of 2017.
IFRS 16 Leases
On 13 January 2016, the IASB issued IFRS 16, Leases, which
provides lease accounting guidance. Under the new guidance, lessees
will be required to present right-of-use assets and lease
liabilities on the statement of financial position. At the lease
commencement date, a lessee is required to recognize a lease
liability, which is the lessee's discounted obligation to make
lease payments arising from a lease, as well as a right of use
asset, representing the lessee's right to use, or control the use
of, a specified asset for the lease term. IFRS 16 is effective for
annual reporting periods beginning on or after 1 January 2019,
subject to endorsement by the European Union. Earlier application
is permitted for entities that apply IFRS 15, Revenue from
Contracts with Customers, at or before the initial application of
IFRS 16.
As at the reporting date, the Ecuphar Group has non-cancellable
operating lease commitments of GBP2,759k, see Note 22. However, the
Ecuphar Group has not yet determined to what extent these
commitments will result in the recognition of an asset and a
liability for future payments and how this will affect the Ecuphar
Group's profit and classification of cash flows.
The other standards, interpretations and amendments issued by
the IASB (all of them still subject to endorsement by the European
Union), but not yet effective are not expected to have a material
impact on the Ecuphar Group's future consolidated financial
statements and those applicable for the Ecuphar Group are listed
below:
-- Amendments to IAS 12: Recognition of Deferred Tax Assets for
Unrealized Losses (issued on 19 January 2016) and effective for
annual periods on 1 January 2017, subject to endorsement by the
European Union;
-- Amendments to IAS 7: Disclosure Initiative (issued on 29
January 2016) and effective for annual periods on 1 January
2017;
-- Clarifications to IFRS 15 Revenue from Contracts with
Customers (issued on 12 April 2016) and effective for annual
periods on 1 January 2018;
-- Annual Improvements to IFRS Standards 2014-2016 Cycle (issued
on 8 December 2016) and effective for annual periods on 1 January
2018;
Significant accounting judgments, estimates and assumptions
The preparation of the Ecuphar Group's consolidated special
purpose financial statements requires management to make judgments,
estimates and assumptions that affect the reported amounts of
revenue, expenses, assets and liabilities, and the accompanying
disclosures. Uncertainty about these assumptions and estimates
could result in outcomes that require a material adjustment to the
carrying amount of assets or liabilities for future periods.
On an ongoing basis, the Ecuphar Group evaluates its estimates,
assumptions and judgments, including those related to revenue
recognition, development expenses, income taxes, impairment of
goodwill, intangible assets and property, plant & equipment and
business combinations.
The Ecuphar Group based its assumptions and estimates on
parameters available when the consolidated special purpose
financial statements were prepared. Existing circumstances and
assumptions about future developments, however, may change due
to market changes or circumstances arising beyond the control of
the Ecuphar Group. Such changes are reflected in the assumptions
when they occur.
Internally-developed intangible assets
Under IAS 38, internally generated intangible assets from the
development phase are recognized if certain conditions are met.
These conditions include the technical feasibility, intention to
complete, the ability to use or sell the asset under development,
and the demonstration of how the asset will generate probable
future economic benefits. The cost of a recognized internally
generated intangible asset comprises all directly attributable cost
necessary to make the asset capable of being used as intended by
management. In contrast, all expenditures arising from the research
phase are expensed as incurred.
Determining whether internally generated intangible assets from
development are to be recognized as intangible assets requires
significant judgment, particularly in determining whether the
activities are considered research activities or development
activities, whether the product enhancement is substantial, whether
the completion of the asset is technical feasible considering a
company-specific approach, the probability of future economic
benefits from the sale or use.
Management has determined that the conditions for recognizing
internally generated intangible assets from product development
activities are not met until shortly before the developed products
are available for sale. This assessment is monitored by the Ecuphar
Group on a regular basis.
Income taxes
Deferred tax assets are recognized for unused tax losses to the
extent that it is probable that taxable profit will be available
against which the losses can be utilized. Significant management
judgment is required to determine the amount of deferred tax assets
that can be recognized, based upon the likely timing and the level
of future taxable profits together with future tax planning
strategies.
As at 31 December 2016, the Ecuphar Group had GBP255k (2015:
GBP58k; 2014: GBP142k) of tax losses carry forward and other tax
credits such as investment tax credits and notional interest
deduction. These losses relate to the subsidiaries that have a
history of losses, do not expire and may not be used to offset
taxable income elsewhere in the Ecuphar Group.
The Ecuphar Group may also be required to evaluate some
uncertainty surrounding potential liability in relation to
uncertain tax positions. Uncertain tax positions (whether assets or
liabilities) are recognized using a 'probable' threshold in
accordance with IAS 12, and they are reflected at the amount
expected to be recovered from, or paid to, the taxation
authorities. It may also include interpretations of complex tax
laws as well as transfer pricing considerations which could be
disputed by tax authorities. Assessing uncertain tax positions
requires significant judgement from Management.
Impairment of goodwill
The Ecuphar Group has goodwill for a total amount of GBP9,959k
(2015: GBP8,974k; 2014: GBP2,083k) which has been subject to an
impairment test. The goodwill is tested for impairment based on a
discounted cash flow model with cash flows for the next five years
derived from the budget and a residual value considering a
perpetual growth rate. The recoverable amount is sensitive to the
discount rate used for the DCF model as well as the expected future
cash-inflows and the growth rate used for extrapolation purposes.
The key assumptions used to determine the recoverable amount for
the different CGUs are disclosed and further explained in Note
5.
No impairment charges have been recorded during the reported
periods.
Business combinations
The Ecuphar Group determines and allocates the purchase price of
an acquired business to the assets acquired and liabilities assumed
as of the business combination date. The purchase price allocation
process requires the Ecuphar Group to use significant estimates and
assumptions, including:
-- estimated fair value of the acquired intangible assets; and
-- estimated fair value of property, plant and equipment.
While the Ecuphar Group is using its best estimates and
assumptions as part of the purchase price allocation process to
accurately value assets acquired and liabilities assumed at the
date of acquisition, our estimates and assumptions are inherently
uncertain and subject to refinement. Examples of critical estimates
in valuing certain of the intangible assets the Ecuphar Group has
acquired or may acquire in the future include but are not limited
to:
-- future expected cash flows from customer contracts and
relationships, software license sales and maintenance
agreements;
-- the fair value of the plant and equipment;
-- the fair value of the deferred revenue;
-- discount rates; and
-- the determination of useful lives and amortization period of acquired intangible assets.
4 Business Combinations and disposals of subsidiaries
Business combinations
The Ecuphar Group did not complete any business combinations
during the year ended 31 December 2016.
Esteve
On 30 April 2015, the Ecuphar Group acquired the assets related
to the Animal Health business of Esteve SA, a Spanish
pharmaceutical company, through an asset purchase agreement. The
consideration paid in cash for those assets amounted to GBP26,125k
(EUR36,000k). This acquisition related in substance to an
integrated set of activities as defined by IFRS 3 Business
Combinations. As a result a purchase price allocation was performed
at the date of acquisition. The fair values of the related assets
at acquisition date are described below.
Carrying
value at Fair value
acquisition Fair value acquisition
date adjustments at date
--------------------- ------------ ------------
in GBP'000
Assets
Intangible assets - 14,582 14,582
Other non-current assets - 124 124
Inventory 4,523 423 4,946
Trade receivables - - -
Other current assets - - -
Cash - - -
--------------------- ------------ ------------
4,523 15,129 19,652
--------------------- ------------ ------------
Liabilities
Financial debts - - -
Deferred tax liabilities - (443) (443)
Trade payables - - -
Other liabilities - - -
--------------------- ------------ ------------
- (443) (443)
--------------------- ------------ ------------
Total identified assets and liabilities 4,523 14,686 19,209
--------------------- ------------ ------------
Goodwill 6,916
--------------------- ------------ ------------
Acquisition price - - 26,125
--------------------- ------------ ------------
The purchase price allocation resulted in a residual goodwill
balance recognized of GBP6,916k. The impact on the cash flow
position of the Ecuphar Group resulting from this business
combination is as follows:
Cash flow from business combination
Consideration paid in cash 26,125
Total cash flow 26,125
The asset purchase agreement did not include any contingent
consideration payable in addition to the purchase price.
The goodwill is mainly attributable to Esteve's significant
commercial leverages opportunities, the value of the trained and
knowledge workforce and the significant operational and commercial
synergies realized.
The acquisition has contributed since the date of acquisition
until 31 December 2015 a total revenue of GBP16,005k and a net loss
of GBP(605)k. The Ecuphar Group does not have the information to
disclose the impact on the revenue and the net profit as if the
acquisition has been completed on 1 January 2015.
Disposals of subsidiaries Nutriscience
On 31 October 2016, the Ecuphar Group entered into a share
purchase agreement with Swedencare AB regarding the sale of one of
its subsidiaries, Nutriscience Ltd. The consideration received by
the Ecuphar Group amounts to GBP3,507k and this resulted in a gain
of GBP2,432k. The effect of this transaction on the financial
position and cash flows of the Ecuphar Group is as follows:
Nutriscience
Carrying value at selling
date
---------------------------------------------------------------
in GBP'000
Assets
Goodwill 419
Property, plant and equipment 53
Inventories 407
Trade receivables 419
Other receivables 37
Cash and cash equivalents 296
---------------------------------------------------------------
1,631
---------------------------------------------------------------
Liabilities
Financial debts -
Trade payables (315)
Other payables (241)
---------------------------------------------------------------
(556)
---------------------------------------------------------------
Total assets and liabilities 1,075
---------------------------------------------------------------
Gain on sale Nutriscience 2,432
-----------------------------------------------------------------
Selling price received in cash 3,507
-----------------------------------------------------------------
Cash flow from sale
Cash & cash equivalents transferred (296)
Selling price 3,507
---------------------------------------------------------------
Total cash flow 3,211
---------------------------------------------------------------
This disposal did not meet the IFRS 5 criteria as component of a
group, as separate major line of business nor as geographical areas
of operations. Therefore discontinued operations and asset held for
sale disclosures are not required.
5 Goodwill
The goodwill has been allocated to the cash generating units
("CGU") as follows:
For the year ended 31 December
in GBP'000 2016 2015 2014
-------------------------------- ----- ----------
CGU: Pharmaceuticals 9,425 8,513 1,593
CGU: Wholesale 534 461 490
-------------------------------- ----- ----------
Total 9,959 8,974 2,083
-------------------------------- ----- ----------
The changes in the carrying value of the goodwill can be
presented as follows for the years 2016, 2015 and 2014:
in GBP'000 Gross Impairment Total
----- ---------- -----
At 1 January 2014 2,229 - 2,229
----- ---------- -----
Additions - - -
Currency translation (145) - (145)
----- ---------- -----
At 31 December 2014 2,083 - 2,083
----- ---------- -----
Additions/(disposals) 6,917 - 6,917
Currency translation (25) - (25)
----- ---------- -----
At 31 December 2015 8,974 - 8,974
----- ---------- -----
Additions/(disposals) (419) - (419)
Currency translation 1,403 - 1,403
----- ---------- -----
At 31 December 2016 9,958 - 9,958
----- ---------- -----
In addition to currency translation effects the goodwill balance
increased as a result of the Esteve business combination in 2015
with GBP6,917k and decreased as a result of the disposal of
Nutriscience Ltd in 2016 with GBP(419)k (see Note 4).
As of 31 December 2016 goodwill allocated to the Pharmaceuticals
CGU includes goodwill recognized as a result of past business
combinations of Esteve, Equipharma NV, Ecuphar BV and Cardon
Chemicals NV. As of 31 December 2016 goodwill allocated to the
Wholesale CGU includes goodwill recognized as a result of the past
business combinations of Medini NV and Orthopaedics NV.
The Ecuphar Group has performed an impairment test based on a
discounted cash flow model including cash flows derived from the
three year budget plan and residual value as of the fourth
year.
Both the Pharmaceuticals and Wholesale CGU are included in their
respective reportable segment Pharmaceuticals and Wholesale.
CGU Pharmaceuticals
The recoverable amount of this cash-generating unit is
determined based on a value in use calculation which uses cash flow
projections based on financial budgets approved by management
covering a 5-year period. The cash flows beyond that five-year
period have been extrapolated using a steady 2% per annum growth
rate. The main assumptions used for the goodwill impairment testing
include a pre-tax discount rate based on a weighted average cost of
capital ("WACC") of 10.56%. Other assumptions include the
year-on-year growth rate of the revenue, gross margin and the
operating costs which has been determined by management based on
past experience. It was concluded that the recoverable amount of
GBP61,892k is approximately GBP43,804k higher than the carrying
value of the cash generating unit. If the year-on-year growth rate
of the revenue, gross margin and the operating costs would be zero,
the headroom would decrease by approximately GBP16,784k. If the
discount rate would increase by 1%, the headroom would decrease
by
approximately GBP8,349k. In both sensitivity analyses, the net
recoverable amount is significantly higher than the carrying value
of the cash generating units.
CGU Wholesale
The recoverable amount of this cash-generating unit is
determined based on a value in use calculation which uses cash flow
projections based on financial budgets approved by management
covering a 5-year period. The cash flows beyond that five-year
period have been extrapolated using a steady 2% per annum growth
rate. The main assumptions used for the goodwill impairment testing
include a pre-tax discount rate (based on WACC) of 10.56%. Other
assumptions include the year-on-year growth rate of the revenue,
gross margin and the operating costs which has been determined by
management based on past experience. It was concluded that the
recoverable amount of GBP5,895k is approximately GBP4,127k higher
than the carrying value of the cash generating unit. If the
year-on-year growth rate of the revenue, gross margin and the
operating costs would be zero, the headroom would decrease by
approximately GBP1,345k. If the discount rate would increase by 1%,
the headroom would decrease by approximately GBP628k. In both
sensitivity analyses, the net recoverable amount is higher than the
carrying value of the cash generating units.
6 Intangible assets
The changes in the carrying value of the intangible assets can
be presented as follows for the years 2016, 2015 and 2014:
Product
Patents, portfolios
distribution &
rights product
In Process & development Capitalized
R&D licenses costs software Total
---------- ------------- ------------ ----------- --------
in GBP'000
Acquisition value
At 1 January 2014 - 1,580 10,325 - 11,905
---------- ------------- ------------ ----------- --------
Additions (11) 1,999 543 - 2,531
Change due to business combinations - - - - -
Disposals - (1,211) - - (1,211)
Exchange differences - (127) (690) - (817)
Other 11 - - - 11
---------- ------------- ------------ ----------- --------
- 2,241 10,178 - 12,419
At 31 December 2014 ------- ------- ------- ------- -------
Additions - 34 747 - 781
Change due to business combinations 2,417 8,798 3,367 - 14,582
Disposals - (15) - (15)
Currency translation 34 (8) (542) - (516)
Other - - - - -
---------- ------------- ------------ ----------- --------
2,451 11,065 13,735 - 27,251
At 31 December 2015 ------- ------- ------- ------- -------
Additions - 1,735 1,036 - 2,771
Change due to business combinations - - - - -
Disposals - (2,090) - - (2,090)
Currency translation 388 1,736 2,219 8 4,351
Transfers - - - 179 179
Other - (9) (34) - (43)
---------- ------------- ------------ ----------- --------
At 31 December 2016 2,839 12,437 16,956 187 32,419
------- ------- ------- ------- -------
Product
Patents, portfolios
distribution &
rights product
In Process & development Capitalized
R&D licenses costs software Total
---------- ------------- ------------ ----------- --------
Amortization
At 1 January 2014 - (156) (4,323) - (4,479)
---------- ------------- ------------ ----------- --------
Additions 2 (1,238) (956) - (2,192)
Disposals - 1,211 - - 1,211
Change due to business combinations - - - - -
Impairments - - - - -
Currency translation - 11 311 - 322
Other (2) - - - (2)
---------- ------------- ------------ ----------- --------
At 31 December 2014 - (172) (4,968) - (5,140)
Additions (159) (1,635) (1,163) - (2,957)
Disposals - - - - -
Change due to business combinations - - - - -
Impairments - - - - -
Currency translation (2) (13) 276 - 261
Other 1 - (1) - -
---------- ------------- ------------ ----------- --------
(160) (1,820) (5,856) - (7,836)
At 31 December 2015 ------- ------- ------- ------- -------
Additions (268) (2,256) (1,457) - (3,981)
Disposals - 2,016 7 - 2,023
Change due to business combinations - - - - -
Currency translation (39) (299) (991) (2) (1,331)
Transfers - - (1) (55) (56)
Other - 8 - - 8
At 31 December 2016 (467) (2,351) (8,298) (57) (11,116)
Net carrying value
At 31 December 2016 2,372 10,086 8,658 130 21,246
At 31 December 2015 2,291 9,245 7,879 - 19,415
At 31 December 2014 - 2,069 5,210 - 7,279
In Process Research & Development relates to acquired
development projects as part of the Esteve business combination in
2015.
Patents, distribution rights & licenses include amounts paid
for exclusive distribution rights as well as distribution rights
acquired as part of the Esteve business combination in 2015.
Product portfolios & product development costs relate to
amounts paid for acquired brands as well as external and internal
product development costs capitalized on the development projects
in the pipeline for which the capitalization criteria are met.
At 31 December 2016, the remaining amortization period for the
in process R&D intangibles amounts to 8.3 years.
The total amortization charge for 2016 is GBP3,981k (2015:
GBP2,957k; 2014: GBP2,192k) which is included in lines cost of
sales, research and development expenses, sales and marketing
expenses and general and administrative expenses of the
consolidated income statement.
7 Property, plant & equipment
The changes in the carrying value of the property, plant and
equipment can be presented as follows for the years 2016, 2015 and
2014:
Office
furniture
and Finance Leasehold
Equipment equipment leases improvements Total
366 953 - 377 1,696
in GBP'000
Acquisition value At 1 January
2014
Additions 63 175 - 52 290
Change due to business combinations - - - - -
Disposals (40) (146) - (92) (278)
Transfers - - - - -
Currency Translation (25) (63) - (23) (111)
Other - - -
At 31 December 2014 364 919 - 314 1,597
Additions 84 250 51 73 458
Change due to business combinations - - - - -
Disposals - (103) - - (103)
Transfers - - - - -
Currency Translation (20) (52) 1 (17) (88)
Other - - - - -
428 1,014 52 370 1,864
At 31 December 2015 ------- ------- ------- ------- -------
Additions 25 391 - 47 463
((419)
Change due to business combinations (196) (59) - ((164) ) )
Disposals - (23) - - (23)
Transfers - (174) - - (174)
Currency Translation 60 166 8 53 287
Other - - - - -
60
-------
-------
-------
-------
At 31 December 2016 317 1,315 ------- 306 1,998
Office
furniture Finance Leasehold
Equipment and equipment leases improvements Total
in GBP'000
Depreciation
At 1 January 2014 (323) (710) - (334) (1,367)
Depreciation charge for the
year (20) (108) - (26) (154)
Disposals 37 98 - 90 225
Transfers - - - - -
Change due to business combinations - - - - -
Currency Translation 20 47 - 20 87
Other - (2) - - (2)
(286) (675) - (250)
At 31 December 2014 ------- ------- ------- ------- ------- (1,211)
Depreciation charge for the
year (32) (95) (10) (21) (158)
Disposals - 96 - - 96
Transfers - - - - -
Change due to business combinations - - - - -
Currency Translation 15 40 - 14 69
Other - 2 - - 2
(303) (632) (10) (257)
At 31 December 2015 ------- ------- ------- ------- ------- (1,202)
Depreciation charge for the
year (37) (234) (11) (44) (326)
Disposals - 17 - - 17
Transfers - 52 - - 52
Change due to business combinations 149 57 - 160 366
Currency translation (43) (105) (2) (36) (186)
At 31 December 2016 (234) (845) (23) (177) (1,279)
Net book value
At 31 December 2016 83 470 37 129 719
At 31 December 2015 125 382 42 113 662
At 31 December 2014 78 244 - 64 386
At 1 January 2014 43 243 - 43 329
The investments in property, plant & equipment in 2016 amounted 2014:
to GBP463k (2015: GBP458k;
GBP290k) and mainly related to the acquisitions of IT and office
equipment. The additions of 2015 and 2014 essentially related to
acquisitions of office furniture and vehicles.
The Ecuphar Group realized a net result on disposals of
property, plant and equipment of GBP0k in 2016 (2015: gain of
GBP7k; 2014: loss of GBP1k).
No impairment of property, plant and equipment was recorded.
Finance leases
The carrying value assets held under finance leases at 31
December 2016 was GBP37k (2015: GBP42k; 2014: GBP0k). Finance
leases mainly relate to leased trucks.
Borrowing costs
No borrowing costs were capitalized during any of the years
ended 31 December 2016, 2015 and 2014.
9 Inventories
Inventories include the following:
For the year ended 31 December 1 January
in GBP'000 2016 2015 2014 2014
Raw materials 966 768 844 876
Goods purchased for resale 12,288 12,256 5,539 6,060
Total inventories (at cost or
net realizable value) 13,254 13,024 6,383 6,936
The amount of inventory recognized as an expense during 2016
amounts to GBP38,918k (2015: GBP29,561k; 2014: GBP23,331k).
Inventory write downs during 2016 amounted to GBP523k (2015:
GBP621k; 2014: GBP167k).
10 Trade receivables
The trade receivables include the following:
For the year ended 31 December 1 January
in GBP'000 2016 2015 2014 2014
Trade receivables 10,905 9,825 3,914 3,726
Allowance on trade receivables (123) (23) (25) (27)
Total 10,781 9,801 3,889 3,699
Trade receivables are non-interest bearing and are generally on
payment terms of 30 to 90 days.
As at 31 December 2016, trade receivables of an initial value of
GBP123k (2015: GBP23k; 2014: GBP25k) were impaired and fully
provided for. The table below shows the changes in the allowance of
receivables.
in GBP'000
At 1 January 2014 (27)
Exchange difference 2
At 31 December 2014 (25)
Reversal impairment 1
Exchange difference 2
Other movement (1)
At 31 December 2015 (23)
Additional impairments (102)
Change in consolidation scope 9
Exchange difference (8)
Other movement 1
At 31 December 2016 (123)
11 Cash and cash equivalents and held to maturity investments
Cash and cash equivalents include the following:
For the year ended 31 December 1 January
in GBP'000 2016 2015 2014 2014
Cash at bank 945 746 958 1,114
Cash equivalents 6 3 8 39
Total 951 749 966 1,153
There were no restrictions on cash during 2016, 2015 or
2014.
12 Equity Share capital
The share capital of the parent company Ecuphar NV consists of
14,174,000 ordinary nominative shares at 31 December 2016 (2015:
14,174,000; 2014: 11,614,000) with no nominal but par value of 0.51
in 2016 (2015: 0.51; 2014: 0.44) for a total amount GBP7,255k at 31
December 2016
(2015: GBP7,255k; 2014: GBP5,148k). Total share--
in GBP'000, except share data Total number of holders' Total share--
shares capital premium
Outstanding at 1 January 2014 11,614,000 5,148 -
Capital increase in cash - - -
Other - - -
Outstanding on 31 December 2014 11,614,000 5,148 -
Capital increase in cash 2,560,000 2,107 8,821
Other
Outstanding on 31 December 2015 14,174,000 7,255 8,821
Capital increase in cash - - -
Other - - -
Outstanding on 31 December 2016 14,174,000 7,255 8,821
Par Value 2016 0.5119
Par Value 2015 0.5119
Par Value 2014 0.4433
During 2015 two capital increases occurred through subscriptions
in cash, the first on 15 July 2015 representing 2,500,000 shares
for a total consideration GBP2,068k and the second on 26 October
2015 representing 60,000 shares for a total consideration of
GBP39k. Ordinary shares are not divided into categories.
Share premium
In Belgium, the portion of the capital increase in excess of par
value is typically allocated to share premium.
The carrying value of the share premium is GBP8,821k at 31
December 2016 (2015: GBP8,821k; 2014: GBP0k). The change in 2015 of
GBP8,821k is the result of the capital increases explained in the
paragraph above.
Other reserves
The nature and purpose of the reserves is as follows:
For the year ended 31 December 1 January
in GBP'000 2016 2015 2014 2014
Legal reserve 515 515 515 515
Other comprehensive income 2,003 (507) (354) -
Other reserves 2,518 8 161 515
The legal reserve is increased by reserving 5% of the yearly
Belgian statutory profit until the legal reserve reaches at least
10% of the shareholders' capital. The legal reserve cannot be
distributed to the shareholders.
Dividends
The Ecuphar Group paid dividends to its ordinary shareholders
during 2016 for an amount of GBP1,469k (2015: GBP108k; 2014:
GBP0k).
Non-controlling interest
The non-controlling interest is GBP2k at 31 December 2016 (2015:
GBP2k; 2014: GBP2k). This non-controlling interest represents 0.2%
of the share capital of Medini NV and 0.02% of Orthopaedics.be NV
which are held by third parties.
14 Borrowings
The loans and borrowings include the following:
Interest For the year ended 1 January
rate 31 December
in GBP'000 (except if 2016 2015 2014 2014
mentioned otherwise) Maturity
Investment loan EUR1,500,000 Euribor
+1.25% Aug18 - 421 615 837
Investment loan EUR750,000 2.52% Dec16 - 184 391 627
Investment loan EUR1,500,000 3.97% Jun18 - 394 586 806
Investment loan EUR750,000 2.60% Jan18 - 318 481 -
Investment loan EUR250,000 2.11% Dec17 - 94 148 209
Investment loan EUR2,489,820 3.75% March16 - 87 371 700
Investment loan EUR800,800 1.50% Feb18 - 331 509 -
Investment loan EUR1,500,000 3.75% Jul18 - 434 628 851
Investment loan EUR1,500,000 1.50% Feb18 - 621 953 -
Investment loan EUR1,500,000 4.03% Jun18 - 407 600 821
Investment loan EUR750,000 2.36% Dec17 - 276 440 627
Other loans 1.44% 75 250 312 25
Revolving credit facilities Euribor
+1.50% March 22 21,482 - - -
Roll over investment Euribor
facility
+1.50% March 22 3,176 - - -
Straight loans Euribor
+2% - 24,811 4,711 5,981
Other loans - - - -
------ ------ ------ ------
Total loans and borrowings 24,733 28,628 10,745 11,484
of which non-current 24,102 2,019 3,837 4,020
current 631 26,609 6,908 7,464
Revolving credit facilities and roll over investment
facilities
Mid 2016, the Ecuphar Group refinanced all its outstanding
investment loans with different banks. Financing arrangements have
been entered into with four Belgian banks. These financing
arrangements have been split equally amongst these four banks. The
new agreements consist of:
-- EUR 41.5m Revolving credit facilities
-- EUR 10m available acquisition financing
-- EUR 4.08m investment loans
The loans have a variable, EURIBOR based interest rate,
increased with a margin of 1.5%. The revolving credit facilities
and the acquisition financing have a bullet maturity on March 2022.
The investment loans are repaid in 23 monthly instalments.
15 Provisions
Provisions consist of the following:
For the year ended 31 December 1 January
in GBP'000 2016 2015 2014 2014
Provisions for redundancy 20 - - -
Provisions for risks and charges 196 25 8 -
Total 216 25 8 -
Provisions for risks and charges amount to GBP196k at 31
December 2016 (2015: GBP25k; 2014: GBP8k) and relate to various
obligations which are not individually significant.
The assessment of the accounting treatment of the Belgian
employee benefit contribution plans with a minimal guaranteed
return was based on actuarial calculations which resulted in an
immaterial impact as only a limited number of individuals can
benefit from the plan and given the limited fixed amount which is
being covered per covered individual. No provision has been
recognized as of 31 December 2016, 2015 and 2014. As a result no
further disclosures have been provided.
16 Deferred income and accrued charges
Deferred income and accrued charges consists of the
following:
For the year ended 31 December
in GBP'000 2016 2015 2014
Accrued charges 806 194 129
Deferred income 6 93 -
Other - (1) -
----
Total 812 286 129
Accrued charges mainly relate to accrued management bonuses in
Ecuphar NV for GBP350k and several accrued charges in Ecuphar
Veterinaria for an amount of GBP318k.
17 Other current liabilities
Other current liabilities include the following:
For the year ended 31 December 1 January
in GBP'000 2016 2015 2014 2014
Payroll-related liabilities 572 683 253 281
Other - - 1 -
Other current liabilities 1,665 905 1,903 1,257
Total 2,237 1,588 2,157 1,538
Other current liabilities mainly relate to an outstanding
payable at year-end for expected contractual pay-outs under a
license agreement, amounting to GBP1,655k at 31 December 2016
(2015: GBP892k; 2014: GBP1,896k; 1 January 2014: GBP1,255k).
18 Fair value
Financial assets
The carrying value and fair value of the financial assets for 31
December 2016, 2015 and 2014 can be presented as follows:
Carrying value Fair value
in GBP'000 2016 2015 2014 1 Jan 2016 2015 2014 1 Jan
--------- --------- --------- 2014 --------- --------- --------- 2014
Financial assets
measured at fair
value
Assets available
for sale at
FV through OCI 423 1 1 - 423 1 1 -
Loans and receivables
measured at amortized
cost
Trade and other
receivables (current) 11,737 11,032 4,166 4,001 11,737 11,032 4,166 4,001
Other financial
assets (non-current) 69 68 52 96 69 68 52 96
Other current assets 1,191 1,330 300 346 1,191 1,330 300 346
Cash & cash equivalents 951 749 966 1,154 951 749 966 1,154
-------- -------- -------- -------- -------- -------- --------
--------
5,597
--------
--------
--------
--------
--------
--------
Total loans and --------
other receivables 13,948 13,179 5,484 -------- 13,948 13,179 5,484 5,597
The fair value of the financial assets has been determined on
the basis of the following methods and assumptions:
-- The carrying value of the cash and cash equivalents and the
current receivables approximate their fair value due to their short
term character;
-- The fair value of the financial assets at fair value through
other comprehensive income is derived from market observable data,
namely stock and foreign exchange market data (level 1 inputs). The
Ecuphar Group has no financial instruments carried at fair value in
the statement of financial position on 31 December 2016 except for
an investment in a company through publicly listed shares. The fair
value of this investment is determined based on level 1 inputs.
-- Trade and other receivables are being evaluated on the basis
of their credit risk and interest rate. Their fair value is not
different from their carrying value on 31 December 2016, 2015 and
2014.
Financial liabilities:
The carrying value and fair value of the financial liabilities
for 31 December 2016, 2015 and 2014 can be presented as
follows:
Carrying value
in GBP'000 2016 2015 2014 1 Jan 2014
Financial liabilities measured
at amortized cost
Borrowings 24,733 28,629 10,745 11,484
Trade payables 10,012 8,406 3,512 3,433
Other liabilities 4,822 2,848 2,674 2,065
Total financial liabilities
measured at amortized cost 39,567 39,883 16,931 16,982
Financial liabilities measured
at fair value
Derivative financial instruments
at
FV through PL - 16 30 41
Total financial liabilities
measured at fair value - 16 30 41
Total non-current 24,102 2,035 3,867 4,061
Total current 15,465 37,848 13,064 12,921
Fair value
in GBP'000 2016 2015 2014 1 Jan 2014
Financial liabilities measured
at amortized cost
Borrowings 24,733 28,629 10,745 11,484
Trade payables 10,012 8,406 3,512 3,433
Other liabilities 4,822 2,848 2,674 2,065
Total financial liabilities
measured at amortized cost 39,567 39,883 16,931 16,982
Financial liabilities measured
at fair value
Derivative financial instruments
at
FV through PL - 16 30 41
Total financial liabilities
measured at fair value - 16 30 41
Total non-current 24,102 2,035 3,867 4,061
Total current 15,465 37,848 13,064 12,921
The fair value of the financial liabilities has been determined
on the basis of the following methods and assumptions:
-- The carrying value of trade payables and other liabilities
approximates their fair value due to the short term character of
these instruments;
-- Loans and borrowings are evaluated based on their interest
rates and maturity date. Most interest bearing debts have floating
interest rates and their fair value approximates to their amortized
cost value.
Fair value hierarchy
The Ecuphar Group has no financial instruments carried at fair
value in the statement of financial position on 31 December 2016
except for an investment in a company through publicly listed
shares. The fair value of this investment is a level 1 fair
value.
19 Segment information
For management purposes, the Ecuphar Group is organized into two
segments: the Pharmaceuticals and the Wholesale segment.
The Pharmaceutical segment is active in the development and
marketing of innovative pharmaceutical products that provide
significant benefits to animal health.
The Wholesale segment focusses on the sale of veterinary
pharmaceuticals, supplies and instruments in the Belgian
market.
The measurement principles used by the Ecuphar Group in
preparing this segment reporting are also the basis for segment
performance assessment. The Chief Executive Officer of the Ecuphar
Group acts as the chief operating decision maker. As a performance
indicator, the chief operating decision maker controls the
performance by the Ecuphar Group's revenue, gross margin, REBITDA
and EBITDA. EBITDA is defined by the Ecuphar Group as net profit
plus finance expenses, less financial income, plus income taxes and
deferred taxes, plus depreciation, amortization and impairment.
REBITDA equals EBITDA plus non-recurring expenses, less
non-recurring income.
The following table summarizes the segment reporting for each of
the reportable periods ended 31 December. 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 available per segment.
Ecuphar Total Adjustments
Pharma Wholesales segments & eliminations Consolidated
in GBP'000
For the year ended 31 December
2016
Revenues 48,355 21,831 70,186 (1,825) 68,361
Gross Margin 26,007 2,272 28,279 (4) 28,275
Gross Margin % 54% 10% 40% 41%
Segment REBITDA 8,420 485 8,905 8 8,913
Segment REBITDA % 17% 2% 13% 13%
Segment EBITDA 10,235 484 10,719 8 10,727
Segment EBITDA % 21% 2% 15% 16%
For the year ended 31 December
2015
Revenues 30,542 17,987 48,529 (1,432) 47,097
Gross Margin 14,628 1,906 16,534 (3) 16,531
Gross Margin % 48% 11% 34% 35%
Segment REBITDA 4,501 318 4,819 3 4,822
Segment REBITDA % 15% 2% 10% 10%
Segment EBITDA 3,125 319 3,444 3 3,447
Segment EBITDA % 10% 2% 7% 7%
For the year ended 31 December
2014
Revenues 15,708 20,393 36,101 (1,623) 34,478
Gross Margin 8,445 2,193 10,638 (2) 10,636
Gross Margin % 54% 11% 29% 31%
Segment REBITDA 3,844 379 4,223 (2) 4,221
Segment REBITDA % 24% 2% 12% 12%
Segment EBITDA 3,546 379 3,925 (2) 3,923
Segment EBITDA % 23% 2% 11% 11%
The segment EBITDA is reconciled with the consolidated net
profit (loss) of the year as follows:
For the year ended 31 December
in GBP'000 2016 2015 2014
Segment EBITDA 10,727 3,447 3,923
Depreciation, amortization and
impairment (4,690) (3,745) (2,319)
Operating (loss) profit 6,037 (298) 1,604
Financial expenses (988) (668) (341)
Financial income 97 74 46
Income taxes (1,305) (537) (466)
Deferred taxes (327) 735 53
Net (loss) profit 3,515 (694) 896
Non-current assets excluding deferred tax assets and financial
instruments located in Belgium, Spain and other geographies are as
follows:
For the year ended 31 1 January
December
2016 2015 2014 2014
Belgium 21,378 19,435 8,035 8,014
Spain 2,229 1,827 - -
Portugal 3,913 3,371 - -
Other 4,474 4,486 1,765 2,067
Non-current assets excluding
deferred tax assets and financial
instruments 31,994 29,119 9,800 10,081
Entity-wide disclosures
We refer to the Note 20.1 for the revenue by geographical area,
based on location of the customer. The total revenue realized in
the country of domicile (Belgium) amounts to GBP27,797k in 2016
(2015: GBP23,213k; 2014: GBP26,399k).
20 Income and expenses
20.1 Revenue
Revenue by geographical area
is presented as follows:
in GBP'000 For the year ended 31 December
2016 2015 2014
---------
Europe 67,842 46,546 33,977
Belgium 27,797 23,213 26,399
The Netherlands 1,434 1,277 1,308
United Kingdom 2,516 1,906 969
Germany 6,714 3,840 3,358
Spain 18,695 10,215 197
Italy 3,559 1,930 111
Portugal 4,044 2,262 96
European Union - other 3,083 1,903 1,539
Asia 309 284 308
Middle East Africa 5 21 157
Other 205 246 36
Total 68,361 47,097 34,478
The Ecuphar Group has no customers with individual sales larger
than 10% of the total revenue.
The revenue by category is presented
as follows:
in GBP'000 For the year ended 31 December
2016 2015 2014
----------
Product sales 67,656 46,081 33,928
Services sales 705 296 550
Total 68,361 47,097 34,478
The revenue by product category
is presented as follows:
in GBP'000 For the year ended 31 December
2016 2015 2014
---------
Companion animals 30,799 20,092 14,027
Production animals 22,668 15,353 8,796
Horses 5,567 3,522 2,166
Other 9,327 8,130 9,489
Total 68,361 47,097 34,478
Other product sales represent sales of wholesale products
unrelated to companion animals, production animals or horses as
well as sales of equipment.
20.2 Cost of sales
Cost of sales includes the following
expenses:
in GBP'000 For the year ended 31 December
2016 2015 2014
---------
Purchase of goods and services 38,917 29,561 23,331
Inventory & other write-downs 682 669 228
Payroll expenses 242 198 141
Other expenses 245 138 143
Total 40,086 30,566 23,842
20.3 Research and development expenses
Research and development expenses
include the following expenses:
in GBP'000 For the year ended 31 December
2016 2015 2014
---------
Amortization and depreciation 269 159 (73)
Payroll expenses 1,507 905 35
Other - - -
Total 1,776 1,064 284
20.4 Selling and marketing expenses
Selling and marketing expenses include the following
expenses:
For the year ended 31 December
in GBP'000 2016 2015 2014
Transport costs sold goods 907 416 473
Promotion costs 2,002 1,095 312
Payroll expenses 6,081 4,913 2,368
Amortization and depreciation 23 20 9
Other 727 238 228
Total 9,740 6,682 3,390
20.5 General and administrative expenses
General and administrative expenses include the following
expenses:
For the year ended 31 December
in GBP'000 2016 2015 2014
Amortization and depreciation 3,962 2,917 2,280
Payroll expenses 3,448 1,286 739
Other 5,197 4,535 2,062
Total 12,607 8,738 5,081
20.6 Net other operating income (expense)
The net other operating income (expense) can
be detailed as follows:
For the year ended 31 December
in GBP'000 2016 2015 2014
Re-invoicing costs 11 639 20
Gains/losses on disposals of fixed
assets - 7 4
Other operating income 2,453 245 18
Impairments (29) (145) -
Other operating expenses (548) (1,091) (319)
Total 1,887 (345) (277)
Other operating income for 2016 mainly relates to a gain of
GBP2,432k on the sale of Nutriscience Ltd on 31 October 2016.
Impairments were recorded in 2016 and 2015 on certain intangible
assets for GBP29k and GBP145k respectively.
Other operating expenses incurred during 2016 mostly relate to
the loss on disposal of intangibles related to Nutriscience Ltd and
Sogeval.
20.7 Expenses by nature
Expenses by nature for the period 31 December 2016
For the year ended 31 December
2016
Other
Research General operating
and Sales and & (income)/
development marketing administrative expense,
in GBP'000 expenses expenses expenses net Total
Rentals - 295 1,070 - 1,365
Maintenance and repair - 58 275 - 333
Personnel expenses 1,507 6,081 3,448 - 11,036
Utilities - - 58 - 58
Travel and representation - - 973 - 973
Transport costs goods
sold - 1,046 - - 1,046
Car expenses - - 162 - 162
Promotion costs - 2,207 - - 2,207
Office expenses - - 292 - 292
Fees - - 1,909 - 1,909
Insurance - 26 140 - 166
Depreciation & amortization 269 23 3,962 - 4,254
Fixed assets retirements - - - - -
Re-invoicing costs - - - (11) (11)
Extraordinary depreciation
and amortization - - - 29 29
Gain on sale Nutriscience - - - (2,676) (2,676)
Other 4 318 771 1,093
-------
Expenses by nature
for the period 31
December 2015
Total expenses 1,776 9,740 12,607 (1,887) 22,236
For the year ended 31 December
2015
Other
Research General operating
and Sales and & (income)/
------- development marketing administrative expense,
in GBP'000 expenses expenses expenses net Total
Rentals - 2 604 - 606
Maintenance and repair - 34 91 - 125
Personnel expenses 905 4,913 1,286 - 7,104
Utilities - - 35 - 35
Travel and representation - - 350 - 350
Transport costs goods
sold - 468 - - 468
Car expenses - - 110 - 110
Promotion costs - 1,182 - - 1,182
Office expenses - - 139 - 139
Fees - - 3,097 - 3,097
Insurance - 15 89 - 104
Depreciation & amortization 159 20 2,917 - 3,096
Fixed assets retirements - - - (7) (7)
Re-invoicing costs - - - (684) (684)
Extraordinary depreciation
and amortization - - - 145 145
Other - 48 20 891 959
Total expenses 1,064 6,682 8,738 345 16,829
Expenses by nature for the period 31 December 2014
For the year ended 31 December
2014
Other
Research General operating
and Sales and & (income)/
------- development marketing administrative expense,
in GBP'000 expenses expenses expenses net Total
Rentals - (1) 469 - 468
Maintenance and repair - 45 78 - 123
Personnel expenses 357 2,368 739 - 3,464
Utilities - - 48 - 48
Travel and representation - - 132 - 132
Transport costs goods
sold - 535 - - 535
Car expenses - - 89 - 89
Promotion costs - 363 - - 363
Office expenses - - 127 - 127
Fees - - 1,003 - 1,003
Insurance - 18 79 - 97
Depreciation & amortization (73) 9 2,280 - 2,216
Fixed assets retirements - - - (4) (4)
Re-invoicing costs - - - (20) (20)
Extraordinary depreciation
and amortization - - - - -
Other - 53 37 301 391
Total expenses 284 3,390 5,081 277 9,032
20.8 Payroll expenses
The following table shows the breakdown of payroll expenses
for 2016, 2015 and 2014:
For the year ended 31 December
in GBP'000 2016 2015 2014
Gross employee benefits 8,421 5,521 2,582
Social security expenses 1,875 1,221 680
Other employee expenses 982 560 343
Total 11,278 7,302 3,605
Average registered employees during
the period 179 155 83
20.9 Financial expenses
Financial expenses includes the following
elements:
For the year ended 31 December
in GBP'000 2016 2015 2014
Interest expense 663 498 287
Foreign currency losses 81 81 28
Change in fair value - losses on - - -
financial instruments
Other financial expenses 244 89 26
Total 988 668 341
20.10 Financial income
Financial income includes the following elements:
For the year ended 31
December
in GBP'000 2016 2015 2014
Foreign currency exchange gains 28 49 32
Change in fair value - gains on financial
instruments 18 12 9
Other financial income 51 13 5
Total 97 74 46
20.11 Income taxes
Current income tax
The following table shows the breakdown of the tax expense for
2016, 2015 and 2014:
For the year ended 31 December
in GBP'000 2016 2015 2014
Current tax expense for the period (1,384) (533) (488)
Tax adjustments to the previous
period 30 - -
Other 49 (4) 22
Total tax income (loss) for the
period (1,305) (537) (466)
The current tax expense is equal to the amount of income tax
owed to the tax authorities for the year, under the applicable tax
laws and rates in effect in the various countries.
Deferred tax
Deferred tax is presented in the statement of financial position
under non-current assets and non-current liabilities, as
applicable. The following table shows the breakdown of the deferred
tax assets, deferred tax liability and the deferred tax expense for
2016, 2015, and 2014:
Statement of financial Statement of
position comprehensive income
At 31 December At 1 January For the year ended
31 December
in GBP'000 2016 2015 2014 2014 2016 2015 2014
Goodwill 44 91 (13) - 59 23 13
Intangible assets 175 194 149 372 44 (495) 192
Property, plant
& equipment 13 2 - - (11) (1) -
Financial fixed
assets 1 1 1 - - - -
Inventory 43 26 (4) 1 (18) (141) 6
Trade an other payables 565 759 645 426 302 (151) (253)
Accruals & deferred
income 173 103 26 4 (51) (78) (23)
Derivatives - 6 10 14 6 4 3
Tax losses carry
forward 255 58 142 152 (182) 19 12
Total deferred tax
assets 1,269 1,240 956 969 149 (820) (50)
At 1 For the year ended
At 31 December January 31 December
in GBP'000 2016 2015 2014 2014 2016 2015 2014
Goodwill (264) (98) - - 145 90 -
Intangible assets - - - (15) - - (3)
Financial fixed
assets - - - 1 - - -
Inventory 3 - (1) (1) 3 (7) -
Borrowings - 23 - - 26 (23) -
Tax losses carry
forward 37 31 - 13 4 25 -
Total deferred tax
liabilities (224) (44) (1) (2) 178 85 (3)
Total deferred tax
expense (income) 327 (735) (53)
The Ecuphar Group has unused tax losses, tax credits and
notional interest deduction available in an amount of GBP1,045k for
2016 (2015: GBP291k; 2014: GBP461k).
Deferred tax assets have been recognized on all available tax
loss carry forwards, resulting in amounts recognized of GBP292k
(2015: GBP89k; 2014: GBP142k). This was based on management's
estimate that sufficient positive taxable basis will be generated
in the near future for the related legal entities with fiscal
losses.
The Ecuphar Group has unrecognized temporary differences
relating to investments in subsidiaries for which deferred tax
liabilities have not been recognized in an amount of GBP5,155k
(2015: GBP4,822k; 2014: GBP3,847k). The corresponding deferred tax
liability would be minor because of the dividend received deduction
regime applicable in Belgium.
Relationship between Tax Expense and Accounting Profit
For the year ended 31 December
in GBP'000 2016 2015 2014
Profit (loss) before tax 5,147 (893) 1,309
Income tax at weighted average tax
rate (1,310) 339 (376)
Non-deductible expenses (90) (49) (19)
Other tax credits and tax deductions 62 18 32
Other permanent tax differences (73) (69) (78)
Other (29) (41) 28
Changes in statutory enacted tax
rate (68) - -
Withholding taxes on acquisition
treasury shares (154) - -
Prior year tax adjustments 30 - -
Income tax expense as reported in
the consolidated income statement (1,632) 198 (413)
21 Earnings per share
Basic earnings per share amounts are calculated by dividing the
net profit for the year 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
warrants.
The net profit for the year used for the basic and diluted
earnings per share are reconciled as follows:
For the year ended 31 December
2016 2015 2014
in GBP'000
Net profit attributable to ordinary
equity holders
of the parent for basic earnings 3,515 (694) 896
Dilutive effects - - -
Net profit attributable to ordinary
equity holders of the parent adjusted
for the effect of dilution 3,515 (694) 896
The following reflects the share data used in the basic and
diluted earnings per share computations:
For the year ended 31 December
2016 2015 2014
Weighted average number of ordinary
shares for basic earnings per share 13,957,720 12,566,103 11,471,249
Effect of dilution:
- - -
- - -
Weighted average number of ordinary
shares adjusted for effect of dilution 13,957,720 12,566,103 11,471,249
The earnings per share are as follows:
For the year ended 31 December
2016 2015 2014
Earnings per share attributable to
ordinary owners of the parent
Basic 0.25 (0.06) 0.08
Diluted 0.25 (0.06) 0.08
22 Commitments and contingent liabilities
Operating lease commitments
The Ecuphar Group has operating lease commitments mainly related
to buildings as follows:
For the year ended 31 December
in GBP'000 2016 2015 2014
Within one year 510 352 226
Between two and three years 884 339 30
Between four and five years 678 325 -
More than 5 years 687 26 -
Total 2,759 1,042 256
The total operating lease payments recognized in the
consolidated income statement are GBP1,365k in 2016 (2015: GBP606k;
2014: GBP468k).
Finance lease commitments
The Ecuphar Group has finance leases for the building and
various other items of plant and equipment. Future minimum lease
payments under finance lease with the present value of the net
minimum lease payments are, as follows:
31 December 2016 31 December 2015 31 December 2014
Minimum Present Minimum Present Minimum Present
lease value lease value lease value
payments of payments of payments of
in GBP'000 payments payments payments
Within one year 25 26 21 22 - -
Between two and
three years 40 41 44 45 - -
Between four and
five years 8 8 19 20 - -
More than five years - - - - - -
Total 73 75 84 87 - -
Less finance charges 2 - 3 - - -
Present value of
minimum lease payments 75 75 87 87 - -
23 Risks
In the exercise of its business activity the Ecuphar Group is
exposed to credit, liquidity and market risks.
Credit risk
As at 31 December 2016 the Ecuphar Group's maximum exposure to
credit risk is GBP10,781k, which is the amount of the trade
receivables in the consolidated accounts (2015: GBP9,801k; 2014:
GBP3,889k).
To control this risk, the Ecuphar Group has set up a strict
credit collection process. Historically, no major bad debts have
been recorded. The Ecuphar Group has no individual customers who
represent a significant part of the consolidated turnover, nor of
the trade receivables at year-end.
The following is an ageing schedule of trade receivables:
in GBP'000 Total Non-due < 30 days 31-60 61-90 91-180 > 181
days days days days
31 December 2016 10,781 9,966 710 25 44 10 26
31 December 2015 9,801 9,260 474 46 9 - 12
31 December 2014 3,889 3,221 237 169 29 212 21
1 January 2014 3,699 2,698 785 101 (2) (2) 119
Liquidity risk
Liquidity risk is the risk that the company may not be able to
meet its financial obligations as they fall due. The Ecuphar Group
expects to meet its obligations related to the financing agreements
through operating cash flows. Additionally, the Ecuphar Group
ensures there is sufficient headroom on the existing credit lines
to have an additional working capital buffer. At 31 December 2016
the Ecuphar Group had the following sources of liquidity
available:
Cash and cash equivalents: GBP423k
Undrawn credit facilities with a several banks: GBP13,895k
Undrawn acquisition financing: GBP8,525k
The table below provides an analysis of the maturity dates of
the financial liabilities:
in GBP'000 < 1 year 1 to 3 4-5 years > 5 years Total
At 31 December 2016 years
Borrowings 631 1,259 1,210 21,633 24,733
Trade payables 10,012 - - - 10,012
Other current liabilities 2,237 - - - 2,237
Total 12,880 1,259 1,210 21,633 36,982
in GBP'000 < 1 year 1 to 3 4-5 years > 5 years Total
At 31 December 2015 years
Borrowings 26,609 2,019 - - 28,628
Trade payables 8,406 - - - 8,406
Other current liabilities 1,588 - - - 1,588
Total 36,603 2,019 - - 38,622
in GBP'000 < 1 year 1 to 3 4-5 years > 5 years Total
At 31 December 2014 years
Borrowings 6,908 3,258 579 - 10,745
Trade payables 3,512 - - - 3,512
Other current liabilities 2,157 - - - 2,157
Total 12,577 3,258 579 - 16,414
in GBP'000 < 1 year 1 to 3 4-5 years > 5 years Total
At 1 January 2014 years
Borrowings 7,464 2,643 1,377 - 11,484
Trade payables 3,433 - - - 3,433
Other current liabilities 1,538 - - - 1,538
Total 12,435 2,643 1,377 - 16,455
The Parent Company has an international cash pool with different
banks to limit excess cash. The Parent Company closely monitors
cash balances within the group and uses short term withdrawals on
the credit lines to minimize the cash balances.
Foreign exchange risk
Given the fact that the Ecuphar Group operates in the Eurozone
the functional currency is determined to be the Euro. Given its
Euro functional currency and the fact that most transactions occur
in that currency, foreign currency transactional risks are deemed
to be limited.
Transactional exposures are mainly related to the USD. During
2016, 2015 and 2014, the fluctuations in the USD did not have a
significant impact on the operating profit of the Ecuphar Group. In
view of the limited exposure, no foreign currency hedging has been
entered into. If the USD had increased (decreased) by 10% during
2016, the 2016 operating profit for that year would have been
GBP163k lower (higher).
The cumulative effect of the foreign currency translation
effects is reported under other comprehensive income in the
statement of financial position and amounts to GBP2,003k (2015:
GBP(507)k; 2014: GBP(354)k).
Interest rate risk
The maturity dates and interest rates of the financial debts and
liabilities are detailed in Note 14. The exposure to interest rate
risks is mainly related to existing borrowing facilities. The
current loans of credit institutions have variable interest rates.
There are no significant differences between the nominal interest
rates as listed in Notes 14 and the effective interest rates of the
loans.
If the interest rates had been 100 basis points higher (lower),
the financial result would have been GBP287k lower (higher) in
2016, GBP205k lower (higher) in 2015 and GBP50k lower (higher) in
2014.
Capital management
The primary objective of the Ecuphar Group's shareholders'
capital management strategy is to ensure it maintains healthy
capital ratios to support its business and maximize shareholder
value. Additionally, minimum solvency ratios are agreed upon in the
financing agreements. Capital is defined as the Ecuphar Group
shareholders' equity which amounts to GBP19,853k at 31 December
2016 (2015: GBP15,297k; 2014: GBP5,323k).
The Ecuphar Group consistently reviews its capital structure and
makes adjustments in light of changing economic conditions and
performances of the Ecuphar Group. The Ecuphar Group made no
changes to its capital management objectives, policies or processes
during the years ended 31 December 2016, 2015 and 2014.
24 Related party transactions
This disclosure provides an overview of all transactions with
related parties.
Transactions between the Parent Company and its subsidiaries,
which are related parties, are eliminated in the consolidated
account and no information is provided hereon in this section.
Ecuphar NV is controlled by MC(3) Health NV, which currently
holds approximately 96% of the Ecuphar shares. The two shareholders
of MC(3) Health NV are Ecuphar Invest NV (with ultimate controlling
party Chris Cardon) and Alychlo NV (with ultimate controlling party
Marc Coucke). Both Ecuphar Invest NV and Alychlo NV hold 50% of the
MC(3) Health NV shares.
The compensation of key management personnel of the Ecuphar
Group is as follows:
For the year ended 31 December
in GBP'000 2016 2015 2014
Short-term employee benefits 1,513 825 603
Post-employment benefits - - -
Termination benefits - - -
Total 1,513 825 603
The amounts disclosed in the table are the amounts recognized as
an expense during the reporting period related to key management
personnel.
Directors of the Parent Company are:
Bellevue NV (being a company controlled by Chris Cardon)
Business Contact International BVBA Alychlo NV
Mylecke Management, Art & Invest NV
The following table provides the total amount of transactions
that have been entered into with related parties for the relevant
financial year:
in GBP'000 Fees paid Liabilities
to
Non-executive directors of the Ecuphar
Group
2016 38 -
2015 - -
2014 - -
Shareholders of the Group 60 -
2016 - -
2015 - -
2014 Equity interest
26 Overview of consolidated entities %
Name Country of incorporation 2016 2015 2014
Ecuphar NV Belgium 100% 100% 100%
Medini NV Belgium 99.8% 99.8% 99.8%
Orthopaedics.be NV Belgium 99.98% 99.98% 99.98%
Ecuphar BV The Netherlands 100% 100% 100%
Ecuphar Veterinary Products
BV The Netherlands 100% 100% 100%
Ornis SA France 100% 100% 100%
Nutriscience Ltd Ireland 0% 100% 100%
Ecuphar GmbH Germany 100% 100% 100%
Euracon Pharma Consulting
und Trading GmbH Germany 100% 100% 100%
Ecuphar Veterinaria SA Spain 100% 100% 0%
Ecuphar Italia Italy 100% 100% 0%
Belphar Portugal 100% 100% 0%
27 First time adoption
The accounting policies set out in Note 3 have been applied in
preparing the Ecuphar Group's consolidated special purpose
financial statements for the year ended 31 December 2016, the
comparative information presented in these financial statements for
the year ended 31 December 2015 and 31 December 2014 and in the
preparation of an opening IFRS balance sheet at 1 January 2014 (the
Parent Company's date of transition), as required by IFRS 1.
The Ecuphar Group previously prepared consolidated financial
statements in accordance with Belgian GAAP.
Set out below are the applicable mandatory exceptions and
exemption elections in IFRS 1 applied in preparing the Parent
Company's first financial statements under IFRS:
IFRS mandatory exceptions
The applicable mandatory exceptions in IFRS 1 applied in
preparing the Parent Company's first financial statements under
IFRS are as follows:
Estimates
An entity's estimates in accordance with IFRS at the date of
transition shall be consistent with estimates made for the same
date in accordance with its previous assertions made for its
internal financial information purposes, unless there is objective
evidence that those estimates were in error.
The Parent Company has considered such information about
historic estimates and has treated the receipt of any such
information in the same way as non-adjusting events after the
reporting period in accordance with IAS 10 "Events after the
Reporting Period", thus ensuring IFRS estimates as at 1 January
2012 are consistent with the estimates as at the same date made
previously.
The other compulsory exceptions to IFRS 1 have not been applied
as these are not relevant to the Parent Company or have not been
early adopted:
Hedge accounting;
De-recognition of financial assets and financial
liabilities;
Non-controlling interests;
Embedded derivatives;
Classification and measurement of financial assets; and
Government grants.
As the Parent Company has not early adopted IFRS 9: Financial
Instruments, it has not considered the application of the
compulsory exception for classification and measurement of
financial assets.
IFRS exemption elections
The Ecuphar Group has applied the following optional exemptions
when preparing the IFRS consolidated financial statements for the
first time:
The Ecuphar Group has applied the exemption as provided in IFRS
1 First-time Adoption of International Financial Reporting
Standards on non-application of IFRS 3, Business Combinations to
business combinations consummated prior to 1 January 2014 (date of
transition).
The Ecuphar Group has applied the transitional provisions in
IFRIC 4 "Determining whether an Arrangement contains a Lease" and
determined whether an arrangement existing at the date of
transition to IFRSs contains a lease on the basis of facts and
circumstances existing at that date.
Reclassifications
Several reclassifications between Belgian GAAP and IFRS have
been made in order to reconcile the presentation format for Belgian
GAAP purposes to IFRS. The expenses in the consolidated statement
of profit & loss under Belgian GAAP is presented by nature
while under IFRS by function. In addition, exceptional income and
costs are presented separately under Belgian GAAP while this is not
allowed under IFRS. The column "reclasses" in the following tables
include all such reclassifications.
Reconciliation of statement of financial position from Belgian
GAAP to IFRS Consolidated statement of financial position as at 1
January 2014
Effect of transition
to
IFRS
Effect
Adjustments of
BE transition GBP
in GBP'000, Comment BE GAAP Reclasses GAAP to IFRS presentation IFRS
except if note euros euros euros euros currency
otherwise -------
mentioned
Assets
Non-current assets
{a},
Goodwill {b} 3,642 (978) - - (435) 2 229
{a},
Intangible assets {c} 11,255 978 - (3,355) (1,453) 7,425
Property, plant
& equipment 395 - - - (65) 330
Investments in - - - - - -
joint
ventures
Deferred tax
assets {d} - - - 1,158 (189) 969
Other financial
assets 115 - - - (19) 96
Other non-current - - - - - -
assets
Derivative - - - - - -
financial
assets
------- ------- ------- ------- ------- -------
Total non-current
assets 15,407 - - (2,197) (2,161) 11,049
------- ------- ------- ------- ------- -------
Current assets
Inventories {e} 8,289 - - 4 (1,356) 6,937
Trade receivables 4,422 - - - (723) 3,699
Held to maturity
investments {f} 36 (36) - - - -
Derivative - - - - - -
financial
assets
Other current
assets 414 - - - (68) 346
Cash and cash
equivalents 1,379 - - - (225) 1,154
------- ------- ------- ------- ------- -------
Total current
assets 14,540 (36) - 4 (2,372) 12,136
------- ------- ------- ------- ------- -------
29,947 (36) - (2,193) (4,533) 23,185
Total assets ------- ------- ------- ------- ------- -------
Equity and
liabilities
Equity
Equity
attributable
to the
owners of the
parent 10,146 964 - (3,744) (1,207) 6,159
Non-controlling
interest 1 - - - - 1
------- ------- ------- ------- ------- -------
Total equity 10,147 964 - (3,744) (1,207) 6,160
------- ------- ------- ------- ------- -------
Non-current
liabilities
Loans & borrowings 4,806 - - - (786) 4,020
Deferred tax
liabilities {d} - - - 2 - 2
Derivative
financial
liability {g} - - - 49 (8) 41
Other non-current - - - - - -
liabilities
------- ------- ------- ------- ------- -------
Total non-current
liabilities 4,806 - - 51 (794) 4,063
------- ------- ------- ------- ------- -------
Current
liabilities
Loans & borrowings 8,922 - - - (1,458) 7,464
Trade payables 4,103 - - - (670) 3,433
Tax payables 358 - - - (59) 299
Derivative - - - - - -
financial
liability
Deferred income 272 - - - (44) 228
Other current {h},
liabilities {i} 1,339 (1,000) - 1,500 (301) 1,538
------- ------- ------- ------- ------- -------
Total current
liabilities 14,994 (1,000) - 1,500 (2,532) 12,962
------- ------- ------- ------- ------- -------
Total equity and
liabilities 29,947 (36) - (2,193) (4,533) 23,185
Consolidated statement of financial position as at 31 December
2014
Effect of transition
to
IFRS
Adjustments IFRS GBP
BE
in GBP'000, Comment BE GAAP Reclasses GAAP adjustments
presentation
except if note euros euros euros euros currency IFRS
mentioned -------
otherwise
Assets
Non-current assets
{a},
Goodwill {b} 2,916 (838) - 585 (580) 2,083
{a},
Intangible assets {c} 11,214 838 - (2,743) (2,030) 7,279
Property, plant
& equipment 493 - - - (107) 386
Investments in - - - - - -
joint
ventures
Deferred tax
assets {d} - - - 1,223 (267) 956
Other financial
assets 67 - - - (15) 52
Other non-current - - - - - -
assets
Derivative - - - - - -
financial
assets
------- ------- ------- ------- ------- -------
Total non-current
assets 14,690 - - (935) (2,999) 10,756
------- ------- ------- ------- ------- -------
Current assets
Inventories {e} 8,150 - - 13 (1,780) 6,383
Trade receivables 4,973 - - - (1,084) 3,889
Held to maturity
investments {f} 837 (837) - - - -
Financial
investments 1 - - - - 1
Other current
assets 384 - - - (84) 300
Cash and cash
equivalents 1,235 - - - (269) 966
------- ------- ------- ------- ------- -------
Total current
assets 15,580 (837) - 13 (3,217) 11,539
------- ------- ------- ------- ------- -------
Total assets 30,270 (837) - (922) (6,216) 22,295
------- ------- ------- ------- ------- -------
Equity and
liabilities
Equity
Equity
attributable
to the
owners of the
parent 10,897 (704) - (3,386) (1,484) 5,323
Non-controlling
interest 2 - - - - 2
------- ------- ------- ------- ------- -------
Total equity 10,899 (704) - (3,386) (1,484) 5,325
------- ------- ------- ------- ------- -------
Non-current
liabilities
Loans & borrowings 4,907 - - - (1,070) 3,837
Deferred tax
liabilities {d} - - - 1 - 1
Derivative
financial
liability {g} - - - 38 (8) 30
Other non-current
liabilities 10 - - - (2) 8
Total non-current
liabilities 4,917 - - 39 (1,080) 3,876
------- ------- ------- ------- ------- -------
Current
liabilities
Loans & borrowings 8,834 - - - (1,926) 6,908
Trade payables 4,492 - - - (980) 3,512
Tax payables 496 - - - (108) 388
Derivative - - - - - -
financial
liability
Deferred income 165 - - - (36) 129
Other current {h},
liabilities {i} 467 (133) - 2,425 (602) 2,157
------- ------- ------- ------- ------- -------
Total current
liabilities 14,454 (133) - 2,425 (3,652) 13,094
------- ------- ------- ------- ------- -------
Total equity and
liabilities 30,270 (837) - (922) (6,216) 22,295
Consolidated statement of financial position as at 31 December
2015
Effect of transition
to IFRS
Adjustments
BE IFRS GBP
in GBP'000, Comment BE GAAP Reclasses GAAP adjustments presentation IFRS
except otherwise note euros euros euros euros currency
mentioned -------
Assets
Non-current assets
{a}, {b},
Goodwill {k} 12,621 (650) - 223 (3,220) 8,974
{a}, {c},
Intangible assets {k} 28,513 650 - (2,780) (6,968) 19,415
Property, plant
& equipment 899 - - - (237) 662
Investments in joint - - - - - -
ventures
Deferred tax assets {d}, {k} - - - 1,685 (445) 1,240
Other financial
assets 92 - - - (24) 68
Other non-current
assets 1 - - - - 1
Derivative financial - - - - - -
assets
------- ------- ------- ------- ------- -------
Total non-current
assets 42,126 - - (872) (10,894) 30,360
------- ------- ------- ------- ------- -------
Current assets
Inventories {e} 17,800 - - (102) (4,674) 13,024
Trade receivables 13,319 - - - (3 518) 9 801
Held to maturity
investments {f} 837 (837) - - - -
Financial investments 1 - - - - 1
Other current assets 1,842 - - (35) (477) 1,330
Cash and cash equivalents 1,018 - - - (269) 749
------- ------- ------- ------- ------- -------
Total current assets 34,817 (837) - (137) (8,938) 24,905
------- ------- ------- ------- ------- -------
Total assets 76,943 (837) - (1,009) (19,832) 55,265
------- ------- ------- ------- ------- -------
Equity and liabilities
Equity
Equity attributable
to the
owners of the parent 26,383 (837) (2,283) (2,478) (5,488) 15,297
Non-controlling
interest 2 - - - - 2
------- ------- ------- ------- ------- -------
Total equity 26,385 (837) (2,283) (2,478) (5,488) 15,299
------- ------- ------- ------- ------- -------
Non-current liabilities
Loans & borrowings 2,744 - - - (725) 2,019
Deferred tax liabilities {d} - - - 60 (16) 44
Derivative financial - - - - - -
liability
Other non-current
liabilities 34 - - - (9) 25
Total non-current
liabilities 2,778 - - 60 (750) 2,088
------- ------- ------- ------- ------- -------
Current liabilities
Loans & borrowings 36,158 - - - (9,549) 26,609
Trade payables {j} 9,139 - 2,283 - (3,016) 8,406
Tax payables 1,148 - - 174 (349) 973
Derivative financial
liability {g} - - - 22 (6) 16
Deferred income 389 - - - (103) 286
Other current liabilities {h}, {i} 946 - - 1,213 (571) 1,588
------- ------- ------- ------- ------- -------
Total current liabilities 47,780 - 2,283 1,409 (13,594) 37,878
------- ------- ------- ------- ------- -------
Total equity and
liabilities 76,943 (837) - (1,009) (19,832) 55,265
Reconciliation of total comprehensive income between Belgian
GAAP and IFRS:
Belgian GAAP has not defined the term "comprehensive income
(loss)" and as such the reconciliation below starts with the profit
for the year under Belgian GAAP.
Statement of comprehensive income for the year ended 31 December
2014
Effect of transition
to
IFRS
Adjustments
BE IFRS GBP
in GBP'000, Comment BE GAAP Reclasses GAAP adjustments presentation
except otherwise note euros euros euros euros currency IFRS
mentioned -------
Revenue 42,889 (119) - - (8 292) 34 478
(29,410) (175) - 9 5,734 (23,842)
Cost of sales ------- ------- ------- ------- ------- -------
Gross profit 13,479 (294) - 9 (2,558) 10,636
------- ------- ------- ------- ------- -------
Research and development {m},
expenses {n} (793) (235) - 676 68 (284)
Selling and marketing
expenses {m} (1,267) (2,938) - - 815 (3,390)
General and administrative {m},
expenses {o} (9,349) 3,348 - (302) 1,222 (5,081)
Net other operating
income/ (expenses) (243) - - (100) 66 (277)
------- ------- ------- ------- ------- -------
Operating (loss)
profit 1,827 (119) - 283 (387) 1,604
------- ------- ------- ------- ------- -------
Financial expenses {l} (543) 119 - - 83 (341)
Financial income {g} 46 - - 11 (11) 46
------- ------- ------- ------- ------- -------
(Loss) profit before
taxes 1,330 - - 294 (315) 1,309
------- ------- ------- ------- ------- -------
Income taxes (577) - - - 111 (466)
- - - 66 (13) 53
Deferred taxes {d} ------- ------- ------- ------- ------- -------
Net (loss) profit 753 - - 360 (217) 896
------- ------- ------- ------- ------- -------
Other comprehensive
income (loss)
Exchange differences
on translation of - - - - (354) (354)
foreign operations ------- ------- ------- ------- ------- -------
Total other comprehensive
income (loss) - - - - (354) (354)
------- ------- ------- ------- ------- -------
Total comprehensive
income (loss) 753 - - 360 (571) 542
------- ------- ------- ------- ------- -------
Statement of comprehensive income for the year ended 31 December
2015
Effect of transition
to IFRS
Adjustments
BE IFRS GBP
in GBP'000, Comment BE GAAP Reclasses GAAP adjustments presentation IFRS
except otherwise note euros euros euros euros currency
mentioned -------
Revenue {j} 65,288 (140) (250) - (17,801) 47,097
Cost of sales {j} (40,086) (272) (1,064) (697) 11,553 (30,566)
------- ------- ------- ------- -------
---
Gross profit 25,202 (412) (1,314) (697) (6,248) 16,531
------- ------- ------- ------- -------
--
Research and development {m},
expenses {n} (1,030) (1,092) - 656 402 (1,064)
Selling and marketing
expenses {m} (2,438) (6,771) - - 2,527 (6,682)
General and administrative {m},
expenses {o} (20,094) 8,135 - (82) 3,303 (8,738)
Net other operating
income/ (expenses) {j} 358 - (969) 135 131 (345)
------- ------- ------- ------- -------
---
Operating (loss)
profit 1,998 (140) (2,283) 12 115 (298)
------- ------- --- ------- ------- -------
Financial expenses {l} (1,060) 140 - - 252 (668)
Financial income {g} 86 - - 16 (28) 74
------- ------- ------------ ------- -------
(Loss) profit before
taxes 1,024 - (2,283) 28 339 (892)
------- ------- ------------- ------- -------
Income taxes (530) - - (210) 203 (537)
- - - (279) 735
Deferred taxes {d} ------- ------- ------------- 1,014 ------- -------
Net (loss) profit 494 - (2,283) 832 263 (694)
------- ------- ------------- ------- -------
Other comprehensive
income (loss)
Exchange differences
on translation of - - - (153) (153)
foreign operations {q} ------- ------- ------------ - ------- -------
Total other comprehensive
income (loss) - - - - (153) (153)
------- ------- ------------- ------- -------
Total comprehensive
income (loss) 494 - (2,283) 832 110 (847)
Other information on the reconciliation from Belgian GAAP to
IFRS
The consolidated financial statements as prepared under Belgian
GAAP did not include cash flow statements and as such no
reconciliation is provided in relation to the cash flows.
The first-time adoption of IFRS had the following effects on the
financial statements and equity of the Ecuphar Group at the
respective reporting periods:
Goodwill was decreased with the amount of identifiable
intangible assets which were recognized as a result of acquisitions
meeting the criteria on asset deals under IFRS 3. Such intangibles
were reclassified to the line intangible assets and amortized over
their remaining estimated useful lives. Such reclasses amounted to
EUR650k at 31 January 2015 (2014: EUR838k; 1 January 2014:
EUR978k).
Goodwill was increased in the periods beyond the date of
transition for amortizations which were recorded under Belgian
GAAP. Such goodwill amortization are not allowed under IFRS.
Amortizations reversed amounted to EUR223k at 31 December 2015
(2014: EUR585k).
Intangible assets were decreased for assets recognized under BE
GAAP which do not meet the recognition criteria under IAS 38.
Amortization on those intangible assets was reversed in the years
beyond the date of transition. The cumulative effect of these
adjustments amounted to EUR(2,780)k at 31 December 2015 (2014:
EUR(2,743)k; 1 January 2014: EUR(3,355)k).
Deferred income taxes as defined under IAS 12 are not recognized
under Belgian GAAP. As a result adjustments were recognized on
deferred tax assets for EUR1,685k at 31 December 2015 (2014:
EUR1,223k; 1 January 2014: EUR1,158k) and on deferred tax
liabilities for EUR60k at 31 December 2015 (2014: EUR1k; 1 January
2014: EUR0k). Deferred income tax (expense) and income was
recognized for EUR1,014k at 31 December 2015 (2014: EUR66k).
Inventory was adjusted to bring the carrying amounts to cost as
defined under IAS 2 and to move from a weighted average costing
formula to the First in - First out costing method. The cumulative
effect of these adjustments amount to EUR(102)k at 31 December 2015
(2014: EUR13k; 1 January 2014: EUR4k).
Treasury shares classified as asset under Belgian GAAP were
reclassified and recognized
as a deduction of equity under IFRS. The amount of treasury
shares reclassified amounted to EUR837k at 31 December 2015 (2014:
EUR837k; 1 January 2014: EUR36k).
Derivative financial instruments were not recognized under
Belgian GAAP. They were recognized under IFRS based on the
requirements of IAS 39. No hedge accounting as defined under IAS 39
has been applied. The effect of the recognition of derivative
financial instruments on the statement of financial position
amounted to EUR22k at 31 December 2015 (2014: EUR38k; 1 January
2014: EUR49k). The effect of the relating fair value adjustments in
the income statement amounted to an income of EUR16k at 31 December
2015 (2014: EUR11k).
Dividends payable recorded as a liability under Belgian GAAP at
the year-end prior to the shareholder's approval were reclassified
to retained earnings as such dividends only give rise to a
liability under IFRS at the moment of shareholder's approval.
Dividends reclassified amounted to EUR0k at 31 December 2015 (2014:
EUR133k; 1 January 2014: EUR1,000k).
A financial liability was recognized under IFRS for the
estimated pay-outs under a license
agreement for which obligated payments were due by the Ecuphar
Group at year-end. Under Belgian GAAP such pay-outs were recognized
as intangible assets upon payment and amortized in subsequent
periods. The amount of the financial liability recognized amounts
to EUR1,213k at 31 December 2015 (2014: EUR2,425k; 1 January 2014:
EUR1,500k).
Additional accruals were made in the 31 December 2015 IFRS
statement of financial
position and income statement relating to costs that met the
recognition criteria of a liability under IFRS at that date. Such
costs were recorded in the Belgian GAAP financial statements in
2016. The amount of such accruals recognized in the statement of
financial position at 31 December 2015 amounts to EUR2,283k. The
negative impact on the income statement of 2015 amounts to
EUR(250)k on revenues, EUR(1,064)k on cost of sales and EUR(969)k
on other operating expenses.
The application of IFRS 3 Business combinations on the
acquisition of the Esteve business (see Note 4) resulted in a
purchase price allocation being performed. This allocation resulted
in different values being recognized under IFRS then the ones
formerly recognized under Belgian GAAP. An overview of the impact
of this business combination on the statement of financial position
can be found under Note 4.
Cash discounts were recognized as a financial expense under
Belgian GAAP while they are
deducted from revenues under IFRS. Such discounts amounted to
EUR140k at 31 December 2015 (2014: EUR119k).
Payroll costs have been allocated to the several functions in
the functional income statement. This resulted in increasing cost
of sales of EUR272k in 2015 (2014: EUR175k), increasing research
and development expenses of EUR1,092k in 2015 (2014: EUR235k),
decreasing general and administrative expenses of EUR8,135k in 2015
(2014: EUR3,348k) and increasing selling and marketing expenses of
EUR6,771k in 2015 (2014: EUR2,938k).
The positive IFRS restatement effect on research and development
expenses mostly relates lower amortization charges given the fact
that less R&D related intangibles were recognized under
IFRS.
The negative IFRS restatement effect on general and
administrative expenses mostly relates to higher amortization
charges given the fact that more License-related intangibles were
recognized under IFRS.
The negative restatement of effect of EUR(100)k recorded in IFRS
during 2014 relates to additional acquisition costs for which the
IFRS 1 exemption on goodwill was applied. Such subsequent
expenditures do not meet the recognition criteria under IFRS and
were expensed as incurred.
Given that the reporting currency is determined to be GBP all
functional currency Euro balances, income and expenses were
translated into GBP. This resulted in foreign currency translation
effects which cumulate within other comprehensive income.
28 Events subsequent to 31 December 2016
Subsequent to 31 December 2016, the Ecuphar Group lost one of
its distribution contracts as a result of a takeover. This has an
estimated negative impact on yearly sales of about GBP0.8m as from
2017.
APPIX III - TERMS AND CONDITIONS OF THE PLACING
IMPORTANT INFORMATION FOR PLACEES ONLY REGARDING THE
PLACING.
THIS ANNOUNCEMENT, INCLUDING THE APPICES AND THE INFORMATION
CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE
OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE
UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA, THE
REPUBLIC OF IRELAND JAPAN, NEW ZEALAND OR ANY JURISDICTION IN WHICH
THE SAME WOULD BE UNLAWFUL. PERSONS INTO WHOSE POSSESSION THIS
ANNOUNCEMENT (INCLUDING THE APPICES) COMES ARE REQUIRED BY THE
COMPANY AND THE JOINT BOOKRUNNERS TO INFORM THEMSELVES ABOUT AND TO
OBSERVE ANY SUCH RESTRICTIONS.
MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE
PLACING. THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT IN
THIS APPICES ARE FOR INFORMATION PURPOSES ONLY AND ARE DIRECTED
ONLY AT: (A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA
WHO ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(1)(E)
OF THE PROSPECTUS DIRECTIVE ("QUALIFIED INVESTORS"); AND (B) IF IN
THE UNITED KINGDOM, PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN
MATTERS RELATING TO INVESTMENTS AND FALL WITHIN ARTICLE 19(5) OF
THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION)
ORDER 2005 (THE "ORDER"); OR (II) ARE PERSONS FALLING WITHIN
ARTICLE 49(2)(A) TO (D) ("HIGH NET WORTH COMPANIES, UNINCORPORATED
ASSOCIATIONS, ETC") OF THE ORDER; OR (C) IF IN BELGIUM, QUALIFIED
INVESTORS WITHIN THE MEANING OF ARTICLE 10 OF THE ACT OF 16 JUNE
2006 ON PUBLIC OFFERINGS; AND/OR (D) ARE PERSONS WHO ARE OTHERWISE
LAWFULLY PERMITTED TO RECEIVE IT WITHOUT REQUIRING THE COMPANY TO
ISSUE A PROSPECTUS APPROVED BY COMPETENT REGULATORS (ALL SUCH
PERSONS REFERRED TO IN (A), (B), (C) AND (D) TOGETHER BEING
REFERRED TO AS "RELEVANT PERSONS"). THE MINIMUM CONSIDERATION TO BE
PROVIDED BY A PLACEE FOR THEIR PLACING PARTICIPATION PURSUANT TO
THE PLACING IS EUR100,000. THIS ANNOUNCEMENT AND THE TERMS AND
CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY
PERSONS WHO ARE NOT RELEVANT PERSONS. PERSONS DISTRIBUTING THIS
ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO.
ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT
AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATE IS AVAILABLE
ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT
PERSONS. THIS ANNOUNCEMENT DOES NOT ITSELF CONSTITUTE AN OFFER FOR
SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY.
THE CONTENT OF THIS ANNOUNCEMENT HAS NOT BEEN APPROVED BY AN
AUTHORISED PERSON WITHIN THE MEANING OF THE FINANCIAL SERVICES AND
MARKETS ACT 2000 (AS AMED). RELIANCE ON THIS ANNOUNCEMENT FOR THE
PURPOSE OF ENGAGING IN ANY INVESTMENT ACTIVITY MAY EXPOSE AN
INDIVIDUAL TO A SIGNIFICANT RISK OF LOSING ALL OF THE PROPERTY OR
OTHER ASSETS INVESTED.
EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL,
TAX, BUSINESS AND RELATED ASPECTS OF A SUBSCRIPTION FOR OR PURCHASE
OF THE PLACING SHARES.
THE PLACING SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMED (THE
"SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY AUTHORITY OF
ANY STATE OR JURISDICTION OF THE UNITED STATES, AND MAY NOT BE
OFFERED, SOLD OR TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED
STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION OF THE UNITED STATES. THE PLACING SHARES ARE
BEING OFFERED AND SOLD ONLY OUTSIDE THE UNITED STATES IN "OFFSHORE
TRANSACTIONS" WITHIN THE MEANING OF, AND IN ACCORDANCE WITH,
REGULATION S UNDER THE SECURITIES ACT AND OTHERWISE IN ACCORDANCE
WITH APPLICABLE LAWS. NO PUBLIC OFFERING OF THE PLACING SHARES IS
BEING MADE IN THE UNITED STATES OR ELSEWHERE.
This Announcement or any part of it does not constitute or form
part of any offer to issue or sell, or the solicitation of an offer
to acquire, purchase or subscribe for, any securities in the United
States (including its territories and possessions, any state of the
United States and the District of Columbia), Australia, Canada,
Japan or the Republic of South Africa or any other jurisdiction in
which the same would be unlawful. No public offering of the Placing
Shares is being made in any such jurisdiction.
The Placing Shares have not been approved or disapproved by the
US Securities and Exchange Commission, any state securities
commission or other regulatory authority in the United States, nor
have any of the foregoing authorities passed upon or endorsed the
merits of the Placing or the accuracy or adequacy of this
Announcement. Any representation to the contrary is a criminal
offence in the United States. The relevant clearances have not
been, nor will they be, obtained from the securities commission of
any province or territory of Canada, no prospectus has been lodged
with, or registered by, the Australian Securities and Investments
Commission or the Japanese Ministry of Finance; the relevant
clearances have not been, and will not be, obtained for the South
Africa Reserve Bank or any other applicable body in the Republic of
South Africa in relation to the Placing Shares and the Placing
Shares have not been, nor will they be, registered under or
offering in compliance with the securities laws of any state,
province or territory of Australia, Canada, Japan or the Republic
of South
Africa. Accordingly, the Placing Shares may not (unless an
exemption under the relevant securities laws is applicable) be
offered, sold, resold or delivered, directly or indirectly, in or
into Australia, Canada, Japan or the Republic of South Africa or
any other jurisdiction outside the United Kingdom.
Persons (including, without limitation, nominees and trustees)
who have a contractual right or other legal obligations to forward
a copy of this Announcement should seek appropriate advice before
taking any action.
By participating in the Bookbuild and the Placing, each Placee
will be deemed to have read and understood this Announcement in its
entirety to be participating, making an offer and acquiring Placing
Shares on the terms and conditions contained herein and to be
providing the representations, warranties, indemnities,
acknowledgements and undertakings contained in this
Announcement.
Details of the Placing
The Joint Bookrunners have each today entered into the Placing
and Admission Agreement pursuant to which, subject to the
conditions set out in such agreement, they have each agreed to use
their respective reasonable endeavours to procure subscribers for
the New Placing Shares at the Placing Price with certain
institutional and other investors.
Panmure Gordon will also today enter into the Selling
Shareholders' Agreement pursuant to which, subject to the
conditions set out in such agreement, it has agreed to use its
reasonable endeavours to procure purchasers for the Sale Shares
which are intended to be sold by certain Selling Shareholders at
the Placing Price with certain institutional and other
investors.
No element of the Placing is underwritten.
The Placing of the New Placing Shares is conditional upon the
Placing and Admission Agreement becoming unconditional in all
respects. The Placing of the Sale Shares is conditional upon the
Selling Shareholders' Agreement becoming unconditional in all
respects.
The New Placing Shares will, when issued, be subject to the
articles of association of the Company, be credited as fully paid
and rank pari passu in all respects with the Existing Ordinary
Shares, including the right to receive dividends and other
distributions declared or made following Admission.
Application for Admission
Application will be made to the London Stock Exchange for
admission of the Placing Shares and the Enlarged Issued Share
Capital to trading on AIM. Admission is conditional upon, amongst
other things, the conditions in the Placing and Admission Agreement
being satisfied and the Placing and Admission Agreement not having
been terminated in accordance with its terms. It is expected that
Admission will become effective at 8.00 a.m. on 13 July 2017 and
that dealings in the Placing Shares will commence at that time.
Bookbuild
The Joint Bookrunners will today commence the Bookbuild to
determine demand for participation in the Placing by Placees. This
Announcement gives details of the terms and conditions of, and the
mechanics of participation in, the Placing. No commissions will be
paid to Placees or by Placees in respect of any Placing Shares.
The Joint Bookrunners shall be entitled to effect the Placing by
such alternative method to the Bookbuild as they may, in their sole
discretion, determine.
A Relevant Person who wishes to participate in the Bookbuild
should communicate its bid by telephone to its usual sales contact
at either of the Joint Bookrunners. If successful, an allocation
will be confirmed orally following the close of the Bookbuild, and
a conditional contract note will be dispatched as soon as possible
thereafter.
A Placee's acceptance of their Placing Participation shall be
irrevocable and its obligations in respect thereof shall not be
capable of rescission or termination by it in any circumstance
except fraud. All such obligations are entered into by a Placee
with the Joint Bookrunners in their capacity as agent for the
Company in respect of the New Placing Shares and with Panmure
Gordon as agent of the Selling Shareholders in respect of the Sale
Shares and are therefore directly enforceable by the Company and
the Selling Shareholders.
Participation in, and principal terms of, the Placing
1. The Joint Bookrunners are acting as agents of the Company in
respect of the New Placing Shares. Panmure Gordon will be acting as
agent of certain Selling Shareholders in respect of the Sale
Shares.
2. Participation in the Placing will only be available to
Relevant Persons and others who may lawfully be, and are, invited
to participate by the Joint Bookrunners. The Joint Bookrunners and
their affiliates are each entitled to participate in the Placing as
principal.
3. The minimum consideration to be provided by a Placee for
their Placing Participation pursuant to the Placing is
EUR100,000.
4. The Placing Price and the number of Placing Shares will be
agreed between the Company and Panmure Gordon following completion
of the Bookbuild exercise by the Joint Bookrunners. The Placing
Price and number of Placing Shares will be announced on a
Regulatory Information Service following completion of the
Bookbuild.
5. Each Placee's allocation will be confirmed to Placees orally
by the relevant Joint Bookrunner, and a trade confirmation or
contract note will be dispatched as soon as possible thereafter.
The oral confirmation to such Placee will constitute an irrevocable
legally binding commitment upon such person (who will at that point
become a Placee) in favour of the Joint Bookrunners and the
Company, under which it agrees to subscribe for or acquire the
number of Placing Shares allocated to it at the Placing Price on
the terms and conditions set out in this Announcement and in
accordance with the Company's articles of association.
6. The Bookbuild is expected to close no later than 4.30 p.m.
(London time) on 23 July 2017 but may be closed earlier or later at
the discretion of the Joint Bookrunners. The Joint Bookrunners
reserve the right to scale back the number of Placing Shares to be
subscribed for or acquired by any Placee in the event of an
oversubscription under the Placing. The Joint Bookrunners also
reserve the right not to accept offers for Placing Shares or to
accept such offers in part rather than in whole.
7. Each Placee also has an immediate, separate, irrevocable and
binding obligation, owed to the Joint Bookrunners as agents of the
Company (in the case of both Joint Bookrunners) and as agent of the
Selling Shareholders (in the case of Panmure Gordon), to pay in
cleared funds immediately on the settlement date in accordance with
the registration and settlement requirements set out below, an
amount equal to the product of the Placing Price and the number of
Placing Shares that such Placee has agreed to subscribe for or
acquire in connection with the Placing, conditional upon Admission
becoming effective.
8. Irrespective of the time at which a Placee's Placing
Participation is confirmed, settlement for all Placing Shares to be
acquired pursuant to the Placing will be required to be made at the
same time, on the basis explained below under "Registration and
Settlement".
9. Each Placee will be deemed to have read and understood this
Announcement in its entirety, to be participating in the Placing
upon the terms and conditions contained in this Announcement, and
to be providing the representations, warranties, agreements,
acknowledgements and undertakings, in each case as contained in
this Announcement.
10. Completion of the Placing will be subject to the fulfilment
of the conditions referred to below under "Conditions of the
Placing" and to the Placing not being terminated on the basis
referred to below under "Termination of the Placing". In the event
that the Placing and Admission Agreement does not become
unconditional in all respects or is terminated, the Placing will
not proceed and all funds delivered by you to us in respect of your
Placing Participation will be returned to you at your risk without
interest. The Placing of the Sale Shares will be conditional upon
the Selling Shareholders' Agreement becoming unconditional in all
respects.
11. By participating in the Placing, each Placee will agree that
its rights and obligations in respect of the Placing will terminate
only in the circumstances described below and will not be capable
of rescission or termination by the Placee.
12. To the fullest extent permissible by law, neither (i) the
Joint Bookrunners, nor (ii) any of their respective directors,
officers, employees or consultants, nor (iii) to the extent not
contained in (i) or (ii), any person connected with the Joint
Bookrunners as defined in the FCA Rules ((i), (ii) and (iii) being
together "affiliates" and individually an "affiliate"), shall have
any liability to Placees (or to any other person whether acting on
behalf of a Placee or otherwise). In particular, neither of the
Joint Bookrunners nor any of their affiliates shall have any
liability (including to the extent permissible by law, any
fiduciary duties) in respect of the Joint Bookrunners' conduct of
the Bookbuild or of such alternative method of effecting the
Placing as the Joint Bookrunners and the Company may agree.
Conditions of the Placing
The obligations of the Joint Bookrunners under the Placing and
Admission Agreement are conditional on, amongst other things:
the Placing and Admission Agreement having become unconditional
in all respects and not having been terminated in accordance with
its terms prior to Admission;
the Share Purchase Agreement (i) not having been terminated or
varied or amended and (ii) having become unconditional in all
respects, save for any condition relating to the Placing and
Admission Agreement becoming unconditional in accordance with its
terms (including, for the avoidance of doubt, Admission);
the Admission Document having been posted to shareholders
together with the Notice of Meeting;
the Resolutions having been duly passed without amendment by the
required majority at the General Meeting;
the representations and warranties contained in the Placing and
Admission Agreement being true, accurate and not misleading in any
material respect as at the date of the Placing and Admission
Agreement and at all times up to and including Admission;
the Company having complied with all of its obligations under
the Placing and Admission Agreement (to the extent such obligations
fall to be performed prior to Admission); and
Admission taking place by 8.00 a.m. on 13 July 2017 (or such
other later date as may be agreed between the parties).
If any of the conditions contained in the Placing and Admission
Agreement are not fulfilled (or waived) by the respective time or
date where specified or the Placing and Admission Agreement is
terminated, the Placing will not proceed and the Placee's rights
and obligations hereunder in relation to the Placing Shares shall
cease and terminate at such time and each Placee agrees that no
claim can be made by the Placee in respect thereof.
The Placing of the Sale Shares by Panmure Gordon pursuant to the
Selling Shareholders' Agreement is conditional upon the Selling
Shareholders' Agreement having become unconditional in all respects
and not having been terminated in accordance with its terms prior
to Admission. The Selling Shareholders' Agreement is conditional
upon the Placing and Admission Agreement becoming unconditional in
accordance with its terms (other than in respect of any condition
in relation to the Selling Shareholders' Agreement becoming
unconditional).
The Joint Bookrunners and the Company may agree in writing to
extend the time and/or date by which any of the conditions
contained in the Placing and Admission Agreement are required to be
fulfilled to no later than 4.30 p.m. on the Long Stop Date.
The Joint Bookrunners may, at their discretion and upon such
terms as they think fit, waive compliance by the Company with the
whole or any part of any of the Company's obligations in relation
to the conditions in the Placing and Admission Agreement, to the
extent permitted by law or regulations. Any such extension or
waiver will not affect Placees' commitments as set out in this
Announcement.
None of the Joint Bookrunners, the Company or any other person
shall have any liability to any Placee (or to any other person
whether acting on behalf of a Placee or otherwise) in respect of
any decision they may make as to whether or not to waive or to
extend the time and/or the date for the satisfaction of any
condition to the Placing nor for any decision they may make as to
the satisfaction of any condition or in respect of the Placing
generally, and by participating in the Placing each Placee agrees
that any such decision is within the absolute discretion of the
Joint Bookrunners.
Termination of the Placing
The Joint Bookrunners (having first consulted with each other)
are entitled, at any time before Admission, to terminate the
Placing and Admission Agreement by giving notice to the Company at
any time prior to Admission if, amongst other things:
a party (other than a Joint Bookrunner) fails, in any material
respect, to comply with any of its obligations under the Placing
and Admission Agreement; or
it comes to the notice of a Joint Bookrunner that any statement
contained in any of the Admission Document, investor presentation
or this Announcement was untrue, incorrect or misleading at the
date of such document in any respect which the Joint Bookrunners
(acting reasonably) consider to be material in the context of the
Placing, Acquisition and/or Admission; or
it comes to the notice of a Joint Bookrunner that any statement
contained in any of the Admission Document, investor presentation
or this Announcement has become untrue, incorrect or misleading in
any respect which the Joint Bookrunners (acting reasonably)
consider to be material or that any matter which the Joint
Bookrunners (acting reasonably) consider to be material has arisen
which would, if the Placing were made at that time, constitute a
material omission therefrom; or
it comes to the notice of a Joint Bookrunner that any of the
warranties was not at the date of the agreement true and accurate
in any respect which the Joint Bookrunners (acting reasonably)
consider to be material by reference to the facts subsisting at the
time when the notice referred to below is given; or
it comes to the notice of a Joint Bookrunner that there has
been, or will be, a breach or potential breach of the Share
Purchase Agreement including any of the warranties thereunder which
is material or such Share Purchase Agreement is otherwise
terminated, rescinded or frustrated; or
in the opinion of a Joint Bookrunner (acting reasonably) there
shall have occurred any Material Adverse Change whether or not
foreseeable as at the date of the agreement; or
the application by the Company for Admission is refused or
rejected by the London Stock Exchange.
Upon such termination, the parties to the Placing and Admission
Agreement shall be released and discharged (except for any
liability arising before or in relation to such termination) from
their respective obligations under or pursuant to the Placing and
Admission Agreement subject to certain exceptions.
Panmure Gordon will be entitled, at any time before Admission,
to terminate the Selling Shareholders' Agreement by giving notice
to the Selling Shareholders at any time prior to Admission if:
a Selling Shareholder fails, in any material respect, to comply
with any of its obligations under the agreement; or
it comes to the notice of Panmure Gordon that any of the
warranties was not at the date of the agreement true and accurate
in any respect which Panmure Gordon (acting reasonably) considers
to be material in the context of the Placing by reference to the
facts subsisting at the time when the notice referred to below is
given; or
it comes to the notice of Panmure Gordon that there has been, or
will be, a breach or potential breach of the Share Purchase
Agreement and/or Placing and Admission Agreement including any of
the warranties thereunder which is material or such Share Purchase
Agreement and/or Placing and Admission Agreement is otherwise
terminated, rescinded or frustrated.
By participating in the Placing, Placees agree that the exercise
by the Joint Bookrunners of any right of termination or other
discretion under the Placing and Admission Agreement and/or Selling
Shareholders' Agreement (as the case may be) shall be within the
absolute discretion of the Joint Bookrunners and that they need not
make any reference to Placees and that they shall have no liability
to Placees whatsoever in connection with any such exercise or
failure so to exercise.
No prospectus
No offering document, prospectus or admission document has been
or will be submitted to be approved by the FCA in relation to the
Placing and Placees' commitments will be made solely on the basis
of the information contained in this Announcement released by the
Company today.
Each Placee, by accepting a participation in the Placing, agrees
that the content of this Announcement is exclusively the
responsibility of the Company and confirms that it has neither
received nor relied on any other information, representation,
warranty, or statement made by or on behalf of the Company or the
Joint Bookrunners or any other person (including but not limited to
the investor presentation given by the Company in connection with
its recent roadshow) and none of Panmure Gordon, Degroof Petercam
or the Company nor any other person will be liable for any Placee's
decision to participate in the Placing based on any other
information, representation, warranty or statement which the
Placees may have obtained or received. Each Placee acknowledges and
agrees that it has relied on its own investigation of the business,
financial or other position of the Company in accepting a
participation in the Placing.
Registration and Settlement
The General Meeting, at which the Resolutions to grant the
Directors authority to allot new Ordinary Shares on a
non-pre-emptive basis will be proposed, is scheduled for 10.00 a.m.
on 12 July 2017.
Admission is expected to become effective at 8.00 a.m. on 13
July 2017.
Settlement of transactions in the Placing Shares following
Admission will take place within the system administered by
Euroclear UK & Ireland Limited ("CREST"), subject to certain
exceptions. The Company reserves the right to require settlement
for and delivery of the Placing Shares (or a portion thereof) to
Placees in certificated form if, in the Joint Bookrunners' opinion,
delivery or settlement is not possible or practicable within the
CREST system or would not be consistent with the regulatory
requirements in the Placee's jurisdiction.
Each Placee allocated Placing Shares in the Placing will be sent
a contract note (if affirmation is not sent electronically) stating
the number of Placing Shares to be allocated to it at the Placing
Price and settlement instructions.
Each Placee agrees that it will do all things necessary to
ensure that delivery and payment is completed in accordance with
the standing CREST or certificated settlement instructions that it
has in place with the Joint Bookrunners. Settlement should be:
-- through Degroof Petercam against: CREST ID: BH01, Account
No.: 768125, BIC Code MIDLGB22
-- through Panmure Gordon against: CREST ID: 83801.
For the avoidance of doubt, Placing allocations will be booked
with a trade date of 23 June 2017 and settlement date of 13 July
2017, the date of Admission.
The Company will deliver the New Placing Shares to the CREST
accounts operated by Degroof Petercam and Panmure Gordon as agents
for the Company and Degroof Petercam and Panmure Gordon will each
enter its delivery (DEL) instruction into the CREST system. The
input to CREST by a Placee of a matching or acceptance instruction
will then allow delivery of the relevant Placing Shares to that
Placee against payment.
The Selling Shareholders will deliver the Sale Shares to the
CREST account operated by Panmure Gordon.
It is expected that settlement will take place on 13 July 2017,
on a delivery versus payment basis.
Interest is chargeable daily on payments not received from
Placees on the due date in accordance with the arrangements set out
above at the rate of two percentage points above LIBOR as
determined by the Joint Bookrunners.
Neither of the Joint Bookrunners nor the Company will be
responsible for any liability to stamp duty or stamp duty reserve
tax resulting from the transfer of shares to a Placee or its
agent(s).
Each Placee is deemed to agree that, if it does not comply with
these obligations, the Company may sell any or all of the Placing
Shares allocated to that Placee on such Placee's behalf and retain
from the proceeds, for the Company's account and benefit, an amount
equal to the aggregate amount owed by the Placee plus any interest
due. The relevant Placee will, however, remain liable for any
shortfall below the aggregate amount owed by it and may be required
to bear any stamp duty or stamp duty reserve tax (together with any
interest or penalties) which may arise upon the sale of such
Placing Shares on such Placee's behalf.
If Placing Shares are to be delivered to a custodian or
settlement agent, Placees should ensure that the trade confirmation
is copied and delivered immediately to the relevant person within
that organisation. Insofar as Placing Shares are registered in a
Placee's name or that of its nominee or in the name of any person
for whom a Placee is contracting as agent or that of a nominee for
such person, such Placing Shares should, subject as provided below,
be so registered free from any liability to UK stamp duty or stamp
duty reserve tax. Placees will not be entitled to receive any fee
or commission in connection with the Placing.
Representations and Warranties
If any prospective Placee is not able to give the confirmations,
representations, indemnities, warranties, undertakings and
acknowledgements contained in this Announcement then it should not
act on the information contained herein. This Announcement has not
been nor is being issued by the Joint Bookrunners in their capacity
as an authorised person nor has it been approved by an authorised
person and it may not therefore be subject to the controls which
would apply if it were made or approved as a financial promotion by
an authorised person.
Placees are reminded that they are agreeing to accept their
Placing Participation solely on the basis of information contained
in this Announcement and other publicly available information.
By participating in the Placing each Placee (and any person
acting on such Placee's behalf):
1 represents and warrants that it has read this Announcement in its entirety;
2 confirms that the exercise by either of the Joint Bookrunners
of any right of termination or any right of waiver contained in the
Placing and Admission Agreement and/or Selling Shareholders'
Agreement, including without limitation the right to terminate the
Placing and Admission Agreement and/or Selling Shareholders'
Agreement, is within the absolute discretion of the relevant Joint
Bookrunner and neither will have any liability to any Placee
whatsoever in connection with any decision to exercise or not to
exercise any such rights;
3 in respect of the New Placing Shares, acknowledges that if (i)
any of the conditions in the Placing and Admission Agreement are
not satisfied (or, where relevant, waived), or (ii) the Placing and
Admission Agreement is terminated or (iii) the Placing and
Admission Agreement does not otherwise become unconditional in all
respects, the Placing will lapse and its rights and obligations
hereunder shall cease and determine at such time and no claim shall
be made by any Placee in respect thereof;
4 in respect of the Sale Shares, acknowledges that if (i) any of
the conditions in the Selling Shareholders' Agreement are not
satisfied (or, where relevant, waived), or (ii) the Selling
Shareholders' Agreement is terminated or (iii) the Selling
Shareholders' Agreement does not otherwise become unconditional in
all respects, the Placing of the Sale Shares will lapse and its
rights and obligations hereunder shall cease and determine at such
time and no claim shall be made by any Placee in respect
thereof;
5 acknowledges that no prospectus has been or will be prepared
in connection with the Placing and represents and warrants that it
has not received a prospectus in connection with the Placing or the
Placing Shares;
6 acknowledges that the Ordinary Shares are admitted to trading
on AIM, and the Company is therefore required to publish certain
business and financial information in accordance with the rules and
practices of AIM (collectively, the "Exchange Information"), which
includes a description of the nature of the Company's business and
the Company's most recent balance sheet and profit and loss account
and that it is able to obtain or access such Exchange Information
without undue difficulty and is able to obtain access to such
information or comparable information concerning any other publicly
traded company without undue difficulty;
7 acknowledges that (i) it is not and, if different, the
beneficial owner of the Placing Shares is not and at the time the
Placing Shares are acquired will not be a resident of the United
States, Australia, Canada, the Republic of South Africa, the
Republic of Ireland, Japan or New Zealand, and (ii) that the
Placing Shares have not been and will not be registered under the
securities legislation of the United States, Australia, Canada, the
Republic of South Africa, the Republic of Ireland, Japan or New
Zealand and, subject to certain exceptions, may not be offered,
sold, taken up, renounced or delivered or transferred, directly or
indirectly, in or into those jurisdictions;
8 acknowledges that the content of this Announcement is
exclusively the responsibility of the Company and that none of
Degroof Petercam, Panmure Gordon nor any person acting on their
behalf has or shall have any liability for any information,
representation or statement contained in this Announcement or any
information previously published by or on behalf of the Company and
will not be liable for any Placee's decision to participate in the
Placing based on any information, representation or statement
contained in this Announcement or otherwise. Each Placee further
represents, warrants and agrees that the only information on which
it is entitled to rely and on which such Placee has relied in
committing itself to subscribe for or purchase the Placing Shares
is contained in this Announcement and any information previously
published by the Company by notification to a Regulatory
Information Service, such information being all that it deems
necessary to make an investment decision in respect of the Placing
Shares and that it has neither received nor relied on any other
information given or representations, warranties or statements made
by any of the Joint Bookrunners or the Company and none of Degroof
Petercam, Panmure Gordon nor the Company will be liable for any
Placee's decision to accept an invitation to participate in the
Placing based on any other information, representation, warranty or
statement. Each Placee further acknowledges and agrees that it has
relied on its own investigation of the business, financial or other
position of the Company in deciding to participate in the
Placing;
9 represents and warrants that neither it, nor the person
specified by it for registration as a holder of Placing Shares is,
or is acting as nominee or agent for, and that the Placing Shares
will not be allotted to, a person who is or may be liable to stamp
duty or stamp duty reserve tax under any of sections 67, 70, 93 and
96 of the Finance Act 1986 (depositary receipts and clearance
services);
10 represents and warrants that it has complied with its
obligations in connection with money laundering and terrorist
financing under applicable legislation, including if in the United
Kingdom or otherwise applicable, the Proceeds of Crime Act 2002,
the Terrorism Act 2000, the Terrorism Act 2006 and the Money
Laundering Regulations 2007 (the "Regulations") and, if making
payment on behalf of a third party, that satisfactory evidence has
been obtained and recorded by it to verify the identity of the
third party as required by the Regulations. If within a reasonable
time after a request for verification of identity the Joint
Bookrunners have not received such satisfactory evidence, the Joint
Bookrunners may, in their absolute discretion, terminate your
Placing Participation in which event all funds delivered by you to
the Joint Bookrunners pursuant to this letter (if any) will be
returned without interest to the account of the drawee bank or
CREST account from which they were originally debited;
11 if a financial intermediary, as that term is used in Article
3(2) of the Prospectus Directive (including any relevant
implementing measure in any member state), represents and warrants
that the Placing Shares subscribed for or purchased by it in the
Placing will not be acquired on a non-discretionary basis on behalf
of, nor will they be acquired with a view to their offer or resale
to, persons in a member state of the European Economic Area which
has implemented the Prospectus Directive other than to qualified
investors, or in circumstances in which the prior consent of the
Joint Bookrunners has been given to the proposed offer or
resale;
12 represents and warrants that it has not offered or sold and,
prior to the expiry of a period of six months from Admission, will
not offer or sell any Placing Shares to persons in the United
Kingdom, except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their business or otherwise
in circumstances which have not resulted and which will not result
in an offer to the public in the United Kingdom within the meaning
of section 85(1) of FSMA;
13 represents and warrants that it has not offered or sold and
will not offer or sell any Placing Shares to persons in the
European Economic Area prior to Admission except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes
of their business or otherwise in circumstances which have not
resulted in and which will not result in an offer to the public in
any member state of the European Economic Area within the meaning
of the Prospectus Directive (Directive 2003/71/EC) (including any
relevant implementing measure in any member state);
14 represents and warrants that it has only communicated or
caused to be communicated and will only communicate or cause to be
communicated any invitation or inducement to engage in investment
activity (within the meaning of section 21 of FSMA) relating to the
Placing Shares in circumstances in which section 21(1) of FSMA (if
applicable) does not require approval of the communication by an
authorised person;
15 represents and warrants that it has complied and will comply
with all applicable provisions of FSMA with respect to anything
done by it in relation to the Placing Shares in, from or otherwise
involving, the United Kingdom;
16 represents and warrants that it is a person (i) if in the
United Kingdom, falling within Article 19(5) and/or Article
49(2)(a) to (d) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 or (ii) if in Belgium, is a
qualified investor within the meaning of article 10 of the act of
16 June 2006 on public offerings; or (iii) is a person to whom this
Announcement may otherwise be lawfully communicated and that any
offer of Placing Shares may only be directed at persons to the
extent in member states of the European Economic Area who are
"qualified investors" within the meaning of Article 2(1)(e) of the
Prospectus Directive and represents and warrants that it is such a
qualified investor or is otherwise permitted to receive it;
17 represents and warrants that it and any person acting on its
behalf is entitled to subscribe for and purchase the Placing Shares
under the laws of all relevant jurisdictions which would apply to
it, and that its, and any person acting on its behalf's,
subscription and/or purchase of the Placing Shares will be in
compliance with applicable laws and regulations in the jurisdiction
of its residence, the residence of the Company, or otherwise;
18 represents and warrants, without prejudice to the generality
of paragraph 17 above, either that it is outside of the United
States, it is not a "U.S. person" and is subscribing for or
purchasing the Placing Shares in an "offshore transaction" (within
the meaning of Regulation S under the Securities Act);
19 undertakes that it (and any person acting on its behalf) will
make payment for the Placing Shares allocated to it in accordance
with this Announcement on the due time and date set out herein,
failing which the relevant Placing Shares may be placed with other
subscribers or purchasers or sold as the Joint Bookrunners may in
their discretion determine and without liability to such
Placee;
20 acknowledges that its allocation (if any) of Placing Shares
will represent a maximum number of Placing Shares which it will be
entitled, and required, to acquire in connection with the Placing,
and that the Company or the Joint Bookrunners may call upon it to
acquire a lower number of Placing Shares (if any), but in no event
in aggregate more than the aforementioned maximum without the
Placee's prior agreement;
21 acknowledges that (i) neither of the Joint Bookrunners, nor
any of their respective affiliates, nor any person acting on behalf
of either of them, is making any recommendations to it, advising it
regarding the suitability of any transactions it may enter into in
connection with the Placing and that participation in the Placing
is on the basis that it is not and will not be a client of Degroof
Petercam or Panmure Gordon for the purposes of the Placing and that
the Joint Bookrunners have no duties or responsibilities to it for
providing the protections afforded to their clients or customers or
for providing advice in relation to the Placing nor in respect of
any representations, warranties, undertakings or indemnities
contained in the Placing and Admission Agreement nor for the
exercise or performance of any of its rights and obligations
thereunder including any rights to waive or vary any conditions or
exercise any termination right and (ii) that neither it nor, as the
case may be, its clients expect the Joint Bookrunners to have any
duties or responsibilities to it similar or comparable to the
duties of "best execution" and "suitability" imposed by the Conduct
of Business Sourcebook contained in the FCA's Handbook of Rules and
Guidance, and that the Joint Bookrunners are not acting for it or
its clients, and that the Joint Bookrunners will not be responsible
to any person other than the Company for providing protections
afforded to their clients;
22 represents and warrants that the person whom it specifies for
registration as holder of the Placing Shares will be (i) itself or
(ii) its nominee, as the case may be. Neither of the Joint
Bookrunners nor the Company will be responsible for any liability
to stamp duty or stamp duty reserve tax resulting from a failure to
observe this requirement. Each Placee and any person acting on
behalf of such Placee agrees to participate in the Placing and it
agrees to indemnify the Company and the Joint Bookrunners in
respect of the same on the basis that the Placing Shares will be
allotted to the CREST stock accounts of Degroof Petercam and
Panmure Gordon who will hold them as nominee on behalf of such
Placee until settlement in accordance with its standing settlement
instructions;
23 acknowledges that these terms and conditions and any
agreements entered into by it pursuant to these terms and
conditions and any non-contractual obligations arising out of or in
connection with such agreements shall be governed by and construed
in accordance with the laws of England and Wales and it submits (on
behalf of itself and on behalf of any person on whose behalf it is
acting) to the exclusive jurisdiction of the English courts as
regards any claim, dispute or matter arising out of any such
contract, except that enforcement proceedings in respect of the
obligation to make payment for the Placing Shares (together with
any interest chargeable thereon) may be taken by the Company,
Degroof Petercam or Panmure Gordon in any jurisdiction in which the
relevant Placee is incorporated or in which any of its securities
have a quotation on a recognised stock exchange;
24 acknowledges that Degroof Petercam and Panmure Gordon and
their respective affiliates will rely upon the truth and accuracy
of the representations, warranties and acknowledgements set forth
herein and which are irrevocable;
25 agrees to indemnify and hold the Company, the Joint
Bookrunners and their respective affiliates harmless from any and
all costs, claims, liabilities and expenses (including legal fees
and expenses) arising out of or in connection with any breach of
the representations, warranties, acknowledgements, agreements and
undertakings in this Announcement and further agrees that the
provisions of this Announcement shall survive after completion of
the Placing;
26 acknowledges that its commitment to acquire Placing Shares on
the terms set out herein will continue notwithstanding any
amendment that may in future be made to the terms of the Placing
and that Placees will have no right to be consulted or require that
their consent be obtained with respect to the Company's conduct of
the Placing. The foregoing representations, warranties and
confirmations are given for the benefit of the Company and the
Joint Bookrunners;
27 acknowledges that the agreement to settle a Placee's
acquisition (and/or the acquisition by a person for whom such
Placee is contracting as agent) free of stamp duty and stamp duty
reserve tax depends on the settlement relating only to the
acquisition by it and/or such person direct from the Company for
the Placing Shares in question. Such agreement assumes, and is
based on a warranty from each Placee, that neither it, nor the
person specified by it, for registration as holder of Placing
Shares is, or is acting as nominee or agent for, and that the
Placing Shares will not be acquired by, a person who is or may be
liable to stamp duty or stamp duty reserve tax under any of
sections 67, 70, 93 and 96 of the Finance Act 1986 (depositary
receipts and clearance services). If there are any such
arrangements, or the settlement relates to any other dealing in the
Placing Shares, additional stamp duty or stamp duty reserve tax may
be payable. In that event the Placee agrees that it shall be
responsible for such additional stamp duty or stamp duty reserve
tax, and neither the Company nor the Joint Bookrunners shall be
responsible for such additional stamp duty or stamp duty reserve
tax. If this is the case, each Placee should seek its own advice
and notify the Joint Bookrunners accordingly;
28 understands that no action has been or will be taken by any
of the Company, the Joint Bookrunners or any person acting on
behalf of the Company or the Joint Bookrunners that would, or is
intended to, permit a public offer of the Placing Shares in any
country or jurisdiction where any such action for that purpose is
required;
29 confirms that it has knowledge and experience in financial,
business and international investment matters as is required to
evaluate the merits and risks of subscribing for or purchasing the
Placing Shares. It further confirms that it is experienced in
investing in securities of this nature in this sector, is familiar
with the market in which the Company operates and is aware that it
may be required to bear, and is able to bear, the economic risk of,
and is able to sustain a complete loss in connection with the
Placing. It further confirms that it relied on its own examination
and due diligence of the Company and its associates taken as a
whole, and the terms of the Placing, including the merits and risks
involved;
30 represents and warrants that it has (a) made its own
assessment and satisfied itself concerning legal, regulatory, tax,
business and financial considerations in connection herewith to the
extent it deems necessary; (b) had access to review publicly
available information concerning the Enlarged Group that it
considers necessary or appropriate and sufficient in making an
investment decision; (c) reviewed such information as it believes
is necessary or appropriate in connection with its subscription or
purchase of the Placing Shares; and (d) made its investment
decision based upon its own judgement, due diligence and analysis
and not upon any view expressed or information provided by or on
behalf of Degroof Petercam and Panmure Gordon or any of their
Affiliates;
31 understands that it may not rely on any investigation that
Degroof Petercam and Panmure Gordon or any person acting on their
behalf may or may not have conducted with respect to the Company,
its group, or the Placing and Degroof Petercam and Panmure Gordon
have not made any representation to it, express or implied, with
respect to the merits of the Placing, the subscription for or
purchase of the Placing Shares, or as to the condition, financial
or otherwise, of the Company, its Group, or as to any other matter
relating thereto, and nothing herein shall be construed as a
recommendation to it to subscribe for or purchase the Placing
Shares. It acknowledges and agrees that no information has been
prepared by Degroof Petercam, Panmure Gordon or the Company for the
purposes of this Placing;
32 acknowledges that all representations, warranties,
acknowledgements, undertakings and agreements which have been made
in this Announcement shall survive the transaction and the delivery
of the Placing Shares; and
33 represents, warrants and agrees that it will not hold Degroof
Petercam, Panmure Gordon or any of their respective affiliates or
any person acting on their behalf responsible or liable for any
misstatements in or omission from any publicly available
information relating to the Group or information made available
(whether in written or oral form) in presentations or as part of
roadshow discussions with investors relating to the Enlarged Group
(the "Information") and that none of Degroof Petercam, Panmure
Gordon or any person acting on behalf of Degroof Petercam or
Panmure Gordon, makes any representation or warranty, express or
implied, as to the truth, accuracy or completeness of such
Information or accepts any responsibility for any of such
Information.
In addition, Placees should note that they will be liable for
any stamp duty and all other stamp, issue, securities, transfer,
registration, documentary or other duties or taxes (including any
interest, fines or penalties relating thereto) payable outside the
United Kingdom by them or any other person on the subscription or
purchase by them of any Placing Shares or the agreement by them to
subscribe for or purchase any Placing Shares.
Each Placee and any person acting on behalf of each Placee
acknowledges and agrees that Degroof Petercam, Panmure Gordon or
any of their affiliates may, at their absolute discretion, agree to
become a Placee in respect of some or all of the Placing
Shares.
Money laundering
It is also a term of these terms and conditions that, to ensure
compliance with the FCA Rules, the Proceeds of Crime Act 2002 and
the Regulations (as applicable) the Joint Bookrunners may, in their
absolute discretion, require verification of a Placee's identity to
the extent that it has not already provided the same. Pending the
provision to the Joint Bookrunners of evidence of identity,
definitive certificates in respect of the Placing Shares or the
crediting of the relevant CREST accounts may be retained or delayed
at the Joint Bookrunners' absolute discretion.
If within a reasonable time after a request for verification of
identity, the relevant Joint Bookrunner has not received evidence
satisfactory to it, a Joint Bookrunner may, in its absolute
discretion, terminate a Placee's Placing Participation (but without
prejudice to the Joint Bookrunners' rights or the Company's rights
to take proceedings to recover any loss suffered by either or both
of them as a result of a failure to provide satisfactory evidence),
in which event the monies payable on acceptance of the relevant
Placing Shares will, if paid, be returned without interest to the
account of the bank from which they were originally debited. No
Placing Shares will be placed with a Placee if before Admission its
acceptance of any Placing Shares is rejected pursuant to the
Regulations. The Joint Bookrunners will not be liable to a Placee
or any other person for any loss suffered or incurred as a result
of the exercise of such discretion or as a result of any sale of
shares comprised in a Placee's Placing Participation.
Law and jurisdiction
These terms and conditions and any non-contractual obligations
connected with them are governed by English law.
All disputes arising under or in connection with these terms and
conditions, or in connection with the negotiation, existence, legal
validity, enforceability or termination of these terms and
conditions, regardless of whether the same shall be regarded as
contractual claims or not, shall be exclusively governed by and
determined only in accordance with English law.
Placees irrevocably agree that the English courts are to have
exclusive jurisdiction, and that no other court is to have
jurisdiction to:
-- determine any claim, dispute or difference arising under or
in connection with these terms and conditions or in connection with
the negotiation, existence, legal validity, enforceability or
termination of these terms and conditions, whether the alleged
liability shall arise under English law or under the law of some
other country and regardless of whether a particular cause of
action may successfully be brought in the English courts
("Proceedings"); or
-- grant interim remedies, or other provisional or protective relief.
Placees submit to the exclusive jurisdiction of such courts and
accordingly any Proceedings may be brought against the Placees or
any of them or any of their respective assets in such courts.
In considering this investment Placees should note that the
Placing Shares are, or will be, traded on AIM, a market designed
primarily for emerging or smaller companies to which a higher
investment risk than that associated with larger or more
established companies tends to be attached. The rules of AIM are
less demanding than those applicable to companies listed on the
Official List of the UK Listing Authority.
The Company and the Joint Bookrunners draw Placees' attention
expressly to the fact that the value of shares can fluctuate in
value in money terms, and accordingly that a Placee may not
realise, on disposal by it of Placing Shares which it acquires or
subscribes for, the full amount of its investment.
All times and dates in this Announcement may be subject to
amendment. The Joint Bookrunners shall notify the Placees and any
person acting on behalf of the Placees of any changes.
Past performance is no guide to future performance and persons
needing advice should consult an independent financial adviser.
APPIX IV - ADDITIONAL DEFINITIONS
The following definitions apply throughout this Announcement
unless the context otherwise requires:
"Acquisition" the proposed acquisition by the
Company of the entire issued
share capital of Ecuphar pursuant
to the Share Purchase Agreement
"Admission" admission of the Enlarged Issued
Share Capital to trading on AIM
becoming effective in accordance
with Rule 6 of the AIM Rules
"Admission Document" means the admission document
containing information relating
to the Enlarged Group, the Acquisition
and details of the Placing
"Affiliates" any person that directly, or
indirectly through one or more
intermediaries, controls or is
controlled by, or is under common
control with, the person specified
"AIM" the market of that name operated
by the London Stock Exchange
"AIM Rules" the AIM Rules for Companies as
published by the London Stock
Exchange from time to time
"Alychlo NV" Alychlo NV, a company registered
in Belgium with registered number
0895.140.645 and whose registered
office is at Lembergsesteenweg
19, 9820 Merelbeke, Belgium
"Announcement" means this announcement (including
the Appendices to this announcement)
"Articles" the articles of association of
the Company
"Bookbuild" the accelerated bookbuilding
process launched immediately
following this Announcement to
conduct the Placing
"CAGR" compound annual growth rate
"Companies Act" the Companies Act 2006 (as amended)
"Company" or "Animalcare" Animalcare Group plc
"Completion" completion of the proposed acquisition
of the entire issued share capital
of Ecuphar, pursuant to the Share
Purchase Agreement
"Concert Party" Ecuphar Invest NV, Alychlo NV
and Jaak Cardon (as further detailed
in paragraph 9 of Appendix I
in this Announcement) who are
deemed to be acting in concert
for the purposes of the Takeover
Code
"Consideration" new Ordinary Shares to be allotted
and issued by the Company, credited
as fully paid, under the Share
Purchase Agreement to the Vendors
in consideration for the Acquisition
"CREST" the relevant system (as defined
in the Uncertificated Securities
Regulations 2001) for the paperless
settlement of trades and the
holding of uncertificated securities
operated by Euroclear UK & Ireland
Limited
"CREST Regulations" the Uncertificated Securities
Regulations 2001, including (i)
any enactment or subordinate
legislation which amends or supersedes
those regulations; and (ii) any
applicable rules made under those
regulations
"Degroof Petercam" Bank Degroof Petercam NV, the
Company's Joint Bookrunner for
the purposes of the Placing of
the New Placing Shares
"Directors" or "Board" the directors of the Company,
or any duly authorised committee
thereof
"EBITDA" net profit plus finance expenses,
less financial income, plus income
taxes and deferred taxes, plus
depreciation, amortisation and
impairment
"Ecuphar" Ecuphar NV, a company registered
in Belgium with registered number
0476.255.350 and whose registered
office is at Legeweg 157 box
I, 8020 Oostkamp, Belgium
"Ecuphar Group" Ecuphar and its subsidiaries
at the date of this Announcement
"Ecuphar Invest NV" Ecuphar Invest NV, a company
registered in Belgium with registered
number 0476.250.994 and whose
registered office is at Rijselstraat
29, 8200 Brugge, Belgium
"Enlarged Group" means the Group on Admission
and as enlarged by the Acquisition
"Enlarged Issued Share Capital" the issued ordinary share capital
of the Company immediately following
Admission (including the Existing
Ordinary Shares, the Option Shares,
the Consideration Shares and
the New Placing Shares)
"Esteve" Laboratorios del Dr. Esteve,
S.A.
"Euroclear UK & Ireland" Euroclear UK & Ireland Limited
"Executive Share Option Scheme" the Animalcare Group plc Executive
Share Option Scheme 2008 adopted
by the Company on 30 May 2008
"Existing Directors" the directors of the Company
as at the date of this Announcement,
being James Lambert, Iain Menneer,
Chris Brewster, Lord Nick Downshire
and Raymond Harding
"Existing Group" the Company and Animalcare Limited
"Existing Issued Share Capital" the 21,222,110 Ordinary Shares
in issue as at the date of this
Announcement
"Existing LTIP" the Animalcare Limited Long Term
Incentive Plan adopted on 20
June 2014
"Existing Ordinary Shares" the Ordinary Shares in issue
at the date of this Announcement
"FCA" the Financial Conduct Authority
in its capacity as the competent
authority for the purposes of
Part VI of FSMA
"Force Majeure" means any unforeseen circumstance
not within the reasonable control
of the affected party including,
without limitation, any strike,
civil commotion, act of terrorism,
riot, war, threat of war, political
upheaval and any fire, explosion,
storm, flood, earthquake or other
natural physical disaster
"FSMA" the Financial Services and Markets
Act of 2000 (as amended).
"General Meeting" the general meeting of the Company
to be held at the offices of
Squire Patton Boggs (UK) LLP
at 7 Devonshire Square, London
EC2M 4YH at 10.00 a.m. on 12
July 2017, or any adjournment
thereof, notice of which will
be set out in the Notice of Meeting
"Group" the Company, its subsidiaries
and its subsidiary undertakings
"Independent Directors" James Lambert and Raymond Harding
"Independent Shareholders" the Shareholders, other than
the Selling Shareholders and
any person acting in concert
with them (including any members
of their immediate families,
related trusts or connected persons)
who holds Ordinary Shares
"ISIN" international security identification
number
"Joint Bookrunners" together, Panmure Gordon and
Degroof Petercam
"London Stock Exchange" London Stock Exchange plc
"Long Stop Date" 25 July 2017
"Majority Vendors" Ecuphar Invest NV and Alychlo
NV
"Material Adverse Change" means any adverse change, or
any development reasonably likely
to involve an adverse change,
in the condition (financial,
operational, legal or otherwise),
earnings, business, management,
property, assets, rights, results,
operations or prospects of the
Company or the Enlarged Group
which, taken as a whole, is material
in the context of the Placing,
Acquisition and Admission;
"New LTIP" the Animalcare Group plc Long
Term Incentive Plan 2017 adopted
by the Board on 22 June 2017
"New Placing Shares" the new Ordinary Shares to be
subscribed for by Placees pursuant
to the Placing
"Notice of Meeting" the notice convening the General
Meeting set out in the Admission
Document
"Official List" the Official List of the UK Listing
Authority
"Options" rights to acquire (whether by
subscription or market purchase)
Ordinary Shares
"Option Shares" new Ordinary Shares which are
intended to be issued by the
Company to certain persons who
intend to exercise certain of
their Options or the exchange
of shares in Animalcare Limited
"Ordinary Shares" ordinary shares of 20 pence each
in the capital of the Company
"OTC" over the counter
"Panel" the UK Panel on Takeovers and
Mergers
"Panmure Gordon" Panmure Gordon (UK) Limited,
the Company's nominated adviser
and Joint Bookrunner
"Participating Directors" Iain Menneer, Chris Brewster
and Lord Nick Downshire
"Placees" subscribers or purchasers of
the Placing Shares pursuant to
the Placing
"Placing" the conditional placing of (i)
the New Placing Shares at the
Placing Price by the Joint Bookrunners
as agents for and on behalf of
the Company pursuant to the terms
of the Placing and Admission
Agreement; and (ii) the Sale
Shares at the Placing Price by
Panmure Gordon as agent for and
on behalf of the Selling Shareholders
pursuant to the terms of the
Selling Shareholders' Agreement
"Placing and Admission Agreement" the conditional agreement dated
23 June 2017 between (i) the
Company; (ii) each of the Joint
Bookrunners; (iii) the Directors;
(iv) the Proposed Directors;
and (v) the Majority Vendors
relating to the Placing, further
details of which are set out
in this Announcement
"Placing Participation" a Placee's allocation of Placing
Shares in the Bookbuild
"Placing Price" the price per Placing Share,
as will be agreed between the
Company and the Joint Bookrunners
at the close of the Bookbuild
"Placing Shares" the New Placing Shares and the
Sale Shares
"Proposed Directors" Jan Boone, Chris Cardon, Walter
Beyers, Marc Coucke and Edwin
Torr
"Prospectus Directive" EU Directive 2003/71/EC
"Proxy Form" the form of proxy enclosed with
the Admission Document for use
by Shareholders in connection
with the General Meeting
"Regulatory Information Service" any of the services set out on
the list maintained by the London
Stock Exchange as set out in
the AIM Rules
"Resolutions" the resolutions to be proposed
at the General Meeting as set
out in the Notice of Meeting
"Rothschild" N M Rothschild & Sons Limited
"Rule 9 Waiver" the conditional waiver by the
Panel of the obligation that
would otherwise arise on the
Concert Party to make a general
offer to all Shareholders pursuant
to Rule 9 of the Takeover Code
as a result of the allotment
and issue of the Consideration
Shares or which may arise on
the Concert Party
"Sale Shares" the Ordinary Shares (including
certain of the Option Shares)
intended to be sold by the Selling
Shareholders pursuant to the
Placing
"Savings Related Share Option the Animalcare Group plc Savings
Scheme" Related Share Option Scheme adopted
by the Company on 12 September
2006
"Selling Shareholders" certain Shareholders who intend
to sell Sale Shares under the
Placing
"Selling Shareholders' Agreement" the conditional agreement to
be dated today's date between
the Company, the Selling Shareholders
and Panmure Gordon relating to
the sale of the Sale Shares by
Panmure Gordon on behalf of the
Selling Shareholders
"Shareholders" holders of Ordinary Shares
"Share Purchase Agreement" the share purchase agreement
dated 23 June 2017 and entered
into between, among others, (1)
the Vendors and (2) the Company,
in respect of the Acquisition
"subsidiary" has the meaning given to it in
section 1159 of the Companies
Act
"Takeover Code" the City Code on Takeovers and
Mergers published by the Panel
"TIDM" tradable investment display mnemonic
"UK" or "United Kingdom" the United Kingdom of Great Britain
and Northern Ireland
"UK Listing Authority" the FCA acting in its capacity
as the competent authority for
the purposes of Part VI of the
FSMA
"uncertificated" or "in uncertificated recorded on a register of securities
form" maintained by Euroclear in accordance
with the CREST Regulations as
being in uncertificated form
in CREST and title to which,
by virtue of the CREST Regulations,
may be transferred by means of
CREST
"Underlying EBITDA" EBITDA adjusted for non-recurring
items
"United States" or "USA" United States of America, its
territories and possessions,
any state of the United States
of America and the District of
Columbia and all other areas
subject to its jurisdiction
"Vendors" Alychlo NV, Ecuphar Invest NV
and the minority shareholders
of Ecuphar, as set out in the
Share Purchase Agreement
"Whitewash Resolution" the resolution proposed to be
passed at the General Meeting,
which relates to the Rule 9 Waiver
APPENDIX V - EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication of Admission Document On or around 23
June 2017
Latest time and date for lodging CREST voting 10.00 am on 10 July
instructions 2017
Latest time and date for lodging forms of 10.00 am on 10 July
proxy for the Animalcare 2017
General Meeting
Animalcare General Meeting 10.00 am on 12 July
2017
Expected time and date of cancellation of 7.00 am on 13 July
trading on AIM of the 2017
Existing Ordinary Shares
Expected time and date of completion of the 8.00 am on 13 July
Acquisition 2017
Expected time and date of Admission and commencement 8.00 am on 13 July
of 2017
dealings in the Enlarged Issued Share Capital
on AIM
Expected date for CREST accounts to be credited 13 July 2017
(where applicable)
Expected despatch of definitive share certificates 27 July 2017
(where applicable)
Note:
The times and dates in this timetable may be subject to change
which will be notified on a Regulatory Information Service.
All references to times in this timetable are to London
time.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQGDGDLSGDBGRX
(END) Dow Jones Newswires
June 23, 2017 02:01 ET (06:01 GMT)
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