TIDMANCR
RNS Number : 0437O
Animalcare Group PLC
15 May 2018
Animalcare Group plc
("Animalcare", the "Company" or the "Group")
Final Results
Animalcare Group plc (AIM: ANCR), the pan-European Animal Health
business, announces its preliminary results for the Group's first
financial period ended 31(st) December 2017. Following the
acquisition of Ecuphar NV ('Ecuphar') in July 2017, Animalcare has
performed well demonstrating double digit growth, generating cash,
rewarding investors with a dividend and has a solid pipeline of new
products for future growth.
The Group is focussed on the development and sale of veterinary
products in the companion animal, production animal and equine
markets, and is divided into two segments: Pharmaceuticals and
Wholesale.
Financial Highlights
-- Revenue up 22.4% to GBP83.7m (2016: GBP68.4m) at AER
-- Up by 9.6% to GBP91.9m on a proforma basis
-- Underlying* EBITDA up 11.9% to GBP10.0m (2016: GBP8.9) at AER
-- Underlying* basic earnings per share down 24.6% to 12.6p (2016: 16.7p)
-- Total recommended dividend 6.7p per share since the reverse acquisition
Operational Highlights
-- Distribution contracts ended to bring cross selling opportunities in house from Q4 2018
-- Integration is wide-ranging and in progress, with priority
focus on supply chain, systems (HR & IT) and product
development
-- NPD projects have been prioritised to maximise return on investment
-- Personnel reorganisation underway, with internal promotions
made to lead Technical and Commercial Development and Export late
in the year
Post year-end Highlight
-- New Country Managers have been recruited into the UK and Spanish operations
Financial Summary
2017 2016 % change
GBP'000 GBP'000 at AER
----------------- -------- -------- --------
Revenue 83,676 68,361 22.4%
Underlying*
Operating profit 7,759 6,720 15.4%
----------------- -------- -------- --------
Reported
Operating profit 1,200 6,039 (80.1%)
----------------- -------- -------- --------
*underlying measures are before the effect of non-underlying
items which excludes fair value adjustments on acquired inventory,
amortisation of acquired intangibles and acquisition and
integration costs
Jan Boone, Chairman of Animalcare Group plc, said: "2017 was a
transformational year for Animalcare Group plc. Whilst
characterised by continued strong organic revenue growth, the most
dominant factor during the year was the reverse acquisition of
Ecuphar NV. It has positioned the Group to take advantage of the
opportunities arising from the significantly enlarged footprint and
sales network to deliver profitable, cash-generative growth
enabling the Company to deliver long-term shareholder value."
Animalcare Group plc Tel: 01904 487 687
Christiaan Cardon, Chief Executive
Officer
Chris Brewster, Chief Financial
Officer
Panmure Gordon (Nominated Adviser Tel: 020 7886 2500
& Broker)
Freddy Crossley / Peter Steel
(Corporate Finance)
James Stearns (Corporate Broking)
Walbrook PR Ltd Tel: 020 7933 8780 or animalcare@walbrookpr.com
Paul McManus Mob: 07980 541 893
Lianne Cawthorne Mob: 07584 391 303
Chairman's Statement
"2017 was a transformational year for Animalcare Group plc.
Whilst characterised by continued organic growth, the most dominant
factor during the year was the reverse acquisition of Ecuphar NV
("Ecuphar"). The transaction completed on 13th July 2017 and our
statutory results for the year ended December 2017 reflect a full
12 months contribution from Ecuphar and five and a half months of
Animalcare Group plc ("Animalcare"), as previously constituted.
2016 comparatives are only for the Ecuphar business.
Financial Trading
Group revenue increased by 22.4% to GBP83.7m (2016: GBP68.4m)
with 11.3% organic growth within the Ecuphar business which
contributed GBP76.1m to overall Group revenues and GBP7.6m from the
original Animalcare business. Underlying EBITDA (which excludes
fair value adjustments on acquired inventory, amortisation of
acquired intangibles and acquisition and integration costs)
increased by 11.9% to GBP10.0m (2016: GBP8.9m) with GBP1.6m
contributed by the Animalcare business. This performance primarily
reflects the impact of lower gross margins, investments to support
future growth and the disposal of Nutriscience which Ecuphar sold
in October 2016. Including non-underlying items, the Group's profit
before tax decreased to GBP0.5m (2016: GBP5.1m). The Group
generated GBP2.4m (2016: GBP9.3m) net cash from operations which
included a cash outflow from non-underlying items totalling
GBP3.8m.
Further details on business performance can be found in the CEO
Review and CFO Review respectively.
Board
Following the acquisition, the executive Directors comprised
Chris Cardon, who took on the role of Chief Executive Officer for
the enlarged group, supported by Iain Menneer as Chief Operating
Officer and Walter Beyers as Chief Financial Officer. In September
2017 Chris Brewster, who at the time of the acquisition stood down
as a Board Director but remained within the business, was
re-appointed to the Board as Chief Financial Officer, replacing
Walter Beyers who resigned to pursue other interests. More recently
Iain Menneer stood down as Chief Operating Officer. I would like to
take the opportunity to recognise both Iain and Walter's
contributions and we wish them well for the future.
Dividend
The Board is proposing a final dividend of 2.0 pence per share,
which when added to the second interim dividend of 4.7 pence per
shares gives a total dividend of 6.7 pence per share since the
reverse acquisition. This final dividend is subject to shareholder
approval at the Annual General Meeting on 27th June 2018 and will
be paid on 6th July 2018 to shareholders on the register at the
close of business on 8th June 2018.
Product Development
A key strategy for growth remains the continued cultivation of a
strong new product development pipeline. In 2017 we launched
Acecare, a sedative, from Animalcare's original UK pipeline and
sales have performed in line with internal forecasts. We have
deliberately focused the development team on 17 active projects and
we have a steady flow of products that are going through the
registration and are expected to launch in 2018 and 2019.
Summary and Outlook
Having brought together two highly complementary businesses, in
particular with regard to our respective geographic markets,
product portfolios and product development pipelines, we are
growing a successful pan-European animal health business. We have
the opportunity to continue this growth through further strategic
acquisitions, but also through organic growth focused on existing
products and our product development pipeline, as well as the
synergies and benefits of cross-selling which we expect to see
impacting our Q4 2018 performance and more meaningfully in 2019. We
believe we have created a platform for strong future growth and I
look forward to updating on our progress.
Jan Boone
Non-Executive Chairman
chief executive officer's review
Introduction & Summary of the Group
The key aim for our business is to create a cash-generative,
growing pan-European animal health company and in July 2017
Animalcare Group plc completed the acquisition of Ecuphar NV
('Ecuphar'), an acquisition that constituted a reverse takeover.
This brought together two businesses to create an enlarged group
focussed on the development and marketing of innovative products
providing significant benefits to animal health.
The business now has a considerably enlarged footprint and sales
network with direct sales teams in seven European countries and an
export network that covers over 38 countries across Europe, Asia,
Australasia, Africa and South America through 86 different
distribution partners. Within our product portfolio we have 50
licensed drugs, eight vaccines and over 100 care and nutraceutical
products employing around 100 sale representatives and 28 agents
marketing these products to our global customer base.
Shareholders in Animalcare are now invested in a substantially
increased pan-European animal health platform with the following
characteristics and strategic objectives:
-- Delivering double digit profit growth: we expect to deliver
further incremental organic growth across revenues, EBITDA and
underlying net earnings with the potential to achieve double-digit
profit growth
-- Cash generative: continuing focus on cash generation allows
us to maintain dividend payments as well as invest in our business
to drive future growth
-- Strong organic growth potential: we now have an increased
geographic footprint for cross-selling, we expect to extract
further synergies taking effect in 2018 but with a more meaningful
impact in 2019, and we expect to deliver further growth through our
new product development pipeline
-- Acquisitive growth potential: our strong balance sheet and scale also opens opportunities for value-accretive acquisitions which would allow us to target direct sales in other geographical territories
Business Review
The Group is focussed on the development and sale of veterinary
products in the companion animal, production animal and equine
markets and is divided into two segments: Pharmaceuticals and
Wholesale.
Pharmaceuticals
The Pharmaceuticals segment develops and markets veterinary
pharmaceutical products which are supplied to animal health
professionals both directly and through our international
distribution network. Our products fall into two categories:
regulated pharmaceuticals and over the counter products. Products
are either owned by the Group or licensed on long-term distribution
agreements with third parties. We have a very broad portfolio of
over 300 products including pharmaceuticals, vaccines, biocides and
nutraceuticals and the Group focuses on certain niche therapy areas
including odontology, dermatology, otology and surgery/anaesthesia.
As a Group we invest significantly in our in-house development
pipeline which I discuss later on in my report.
Following the acquisition this segment now includes the products
that were previously categorised as Licenced Veterinary Medicines,
Animal Welfare and Companion Animal Identification.
Based on the statutory results for the year ended 31st December
2017, sales in this division (net of intercompany sales) increased
by 28.4% to GBP59.7m (2016: GBP46.5m), which now accounts for 71.4%
of total revenues. The GBP13.2m year-on-year increase is
attributable to an additional GBP7.6m of sales derived from
acquisition growth, with the balance generated through organic
growth within the Ecuphar business.
Organic growth was driven by a number of factors including a
very strong performance from sales into the Production Animals
market, as well as strong growth from Companion Animals.
In the division our top 20 pharmaceutical products, which
account for 51% of this division's total sales grew by 15.1% in
2017. Looking at our direct sales markets, Orozyme, the first
product of the company that was developed, continues to hold a
strong position in the Oro-dental area. Direct sales for this
product grew by 11% and we expect to see further growth in this
area through the launch of new innovative products in 2018.
Leisguard, our treatment against leishmaniosis in dogs, showed
strong sales across our Mediterranean footprint and we expect to
see future growth for this product in 2018 in Scandinavia. Prazitel
and Caniquantel, which both play an important role in the area of
anti-parasitic treatment, also grew well in 2017.
We were pleased with the performance across our export network.
Our key core export markets of France, the Nordics and UK and
Ireland showed significant growth and we expect to benefit from
ongoing direct sales in the UK now following the acquisition.
During the period we signed new distribution agreements to cover
New Zealand and Taiwan and both regions granted regulatory approval
to sell Aqupharm (intravenous fluid range) and Isocare
(anaesthesia), our recently launched products for use in
surgery.
This contributed to the growth of Aqupharm and Isocare sales,
which were ahead of management expectations, and sales of core
established brands such as Danilon (anti-inflammatory), Otoclean
(dermatology) and Caniquantel (anti-parasitics) all showed double
digit growth. Dinalgen (anti-inflammatory) sales were behind prior
year but this was largely down to phasing of purchasing patterns in
major markets.
The positive impact of the cross-selling opportunity was minimal
during the year. We expect to see this contribute to our organic
growth during Q4 2018, later than originally anticipated, with a
more meaningful contribution in 2019.
The underlying EBITDA performance of our Pharmaceuticals
division increased by 15.1% to GBP9.7m (97.1% of the Group's
underlying EBITDA) with reported EBITDA reducing to GBP7.5m (2016:
GBP10.2m). Whilst this underlying growth was driven by the
contribution of the acquisition, the organic performance in this
division was impacted by lower gross margins, mainly due to a
changing sales mix following higher growth from lower margin
Production Animal products and export sales, as well as pricing
pressures in a competitive market and the disposal of Nutriscience
in 2016 which generated GBP1.3m of sales at margins in excess of
50%.
Whilst the impact of a changing sales mix and competitive
pricing pressures are likely to persist over the rest of 2018 we
expect to deliver at least double digit growth in underlying EBITDA
in this division and to see further strong sales growth driven by a
growing portfolio of products and a wider geographical sales reach
for these products.
Wholesale
Our Wholesale division focuses on the sale of third-party
veterinary pharmaceuticals, supplies and instruments in Belgium.
Based close to Bruges, in the North West of Belgium, this business
supplies veterinary professionals across the country and has been
trading for 25 years and is well established in a stable
market.
The extensive range of over 5,000 products includes own label
and branded items ranging from small disposable items to larger
capital equipment to diagnostic instruments. The division also
specialises in the supply of surgical instruments.
Revenues increased by 9.7%, entirely through organic growth, to
GBP23.9m (2016: GBP21.8m) with this division representing 28.6% of
total Group sales. This division delivered underlying and reported
EBITDA of GBP0.3m (2016: GBP0.5m) reflecting the investment made in
sales staff to drive future growth. Growth was driven by the
addition of new customers, as well as expanding the range of
products sold to existing customers.
Product Development Pipeline
The focus on building value within our product development
pipeline continues. As an enlarged business our development team is
located across a number of sites providing extensive skills and
capabilities across Belgium, Germany, Spain and UK. Karolyn Tapper,
previously Director of Business Development for Animalcare Ltd, has
been appointed to the new role of Group Head of Technical and
Commercial Development to structure and integrate the teams to
ensure that we continue to grow through investing in and attracting
new product opportunities.
A project rationalisation and prioritisation process for all
projects across the Group has been undertaken. Within the context
of the enlarged Group, technical feasibility, development costs and
commercial forecasts have been reviewed thoroughly to determine
which projects would be continued. The Company is currently focused
on 17 active new product development pipeline projects within Spain
and UK.
In 2017 we launched Acecare, a sedative, from the original UK
pipeline. Sales have been in-line with the original project
forecast. One centralised registration was submitted in 2017 and
launch of this product is planned in late 2018. Progress of the
pipeline continues and in 2018 three new products have already been
registered across Europe with additional submissions planned
throughout the year.
Alongside the new product development pipeline, a number of
product improvement and product maintenance projects are ongoing.
Several registrations to expand the global presence of our products
were made in 2017 and launch within new territories is planned at
the end of 2018 and during 2019.
New products through strategic alliances & partnerships
In addition to broadening our product portfolio through our own
development pipeline we are aware that our wide geographical
footprint is attractive to similar companies in the US and Asia who
are seeking routes to market for their products across Europe.
During the period we have seen the first result of this strategy
with an agreement with US-based Nutramax, to provide European-wide
distribution of their nutritional supplement Cosequin, which
promotes canine joint health.
People
We currently have 100 sales representatives and 28 agents across
Europe having invested in an additional 6 sales representatives and
support roles during the year.
As a result of changes in senior and executive management in the
Company it was necessary to find and appoint new Country Managers
in Spain and the UK, the two key territories in the Group. This has
been completed with the new recruits now in post in the weeks
following the year end.
Internal appointments have also been made in the important areas
of Technical and Product Development and Export. These new roles
will progress the integration of the Group and help us to realise
commercial opportunities more quickly.
It is clear that an appointment in supply chain management will
be required in the near future to ensure the operational
efficiencies of the Group within this area are achieved.
In addition, we announced at the end of April that Iain Menneer
has stood down from his role as Chief Operating Officer. We are
very grateful for all of Iain's work on the integration of
Animalcare and Ecuphar and we wish him well for the future. Iain's
role as COO will not be replaced and has been redistributed within
the senior management team that he was accountable for, who will
take on further responsibilities and report directly to myself.
The key component to ensuring we continue to deliver on our
long-term growth strategy is to continue to attract and retain the
highest calibre people to drive forward our development. I would
like to extend my thanks to all of our staff for their hard
work.
Brexit
The details of how the UK pharmaceutical regulations will be
extracted from the current harmonised European structure are not
yet clear. The Veterinary Medicines Directorate (UK Government
agency) is looking for close cooperation to enable a smooth
transition to ensure animal welfare and food safety. The recent
acquisition has enabled the new Group to start restructuring its
pharmaceutical licence ownership with legal entities in the UK and
Europe post-Brexit to allow uninterrupted commercial supply of
product. We will continue to monitor the situation and take the
necessary action to ensure business continuity.
Post-period end - Le Vet purchase by Dechra
On 13th February, Dechra plc acquired Le Vet Beheer B.V. ("Le
Vet"), a business which has developed a portfolio of products, and
established a network of marketing partners across Europe. Le Vet
have been a long-term partner of Animalcare and Ecuphar with
distribution agreements in four territories. Whilst certain
distribution arrangements will not change it is clear that this
will not be the case across all of them. We are taking action now
to mitigate against any material change which could adversely
impact trading part way through 2019.
Strategy & Outlook
The strategy of the business remains focused on building long
term shareholder value by creating a growing, profitable and highly
cash generative pan-European animal health platform, capable of
investing in a steady flow of new products and rewarding
shareholders with dividend payments.
Further growth is expected through the execution of a clear
strategy for growth via both organic sales growth and through
targeted acquisitions. Our strategy for growth includes:
-- Cross-selling opportunities across customers and distribution channels
-- More synergies delivered through further integration of the businesses
-- Enhancing geographic footprint and sales, marketing and distribution network
-- Developing network of partnerships / strategic alliances to
increase exposure to new opportunities
-- Identifying selective value-accretive acquisitions
-- Diversifying the portfolio of products into additional
therapeutic areas within companion animal, as well as production
animal and equine markets
-- Broadening the product development pipeline to include novel therapies
We expect growth in revenues to be driven by the launch of new
products from our development pipeline, additional regulatory
approvals for our existing products in new territories and the
distribution of new products for US or Asia based third parties
across our European footprint. We also expect margin improvement to
be seen as the opportunity to cross-sell products fully impacts as
existing distribution agreements held by our UK business for
Germany, Spain, Portugal, Italy and Belgium are exited and replaced
by our own direct sales network.
We believe we are on track to deliver double digit profit growth
during 2018 and enhancement to profit margins will be driven by
further synergies and cross-selling opportunities, which will start
to take effect late in 2018 as integration progresses, but will
deliver a more meaningful impact on profit margins during 2019 as
the full effect of these changes are felt.
We believe the business is well positioned for future growth and
the Directors remain confident of delivering long-term shareholder
value.
Chris Cardon
Chief Executive Officer
chief financial officer's review
Presentation of Results
On 13th July 2017, Animalcare Group plc completed the
acquisition of Ecuphar NV, a European Animal Health Company
headquartered in Belgium. The acquisition constituted a reverse
takeover for the purposes of Rule 14 of the AIM Rules for
Companies.
This business combination has been treated as a reverse
acquisition in accordance with IFRS3. Under the provisions of IFRS3
the results for the year ended 31st December 2017 are reported as a
continuation of Ecuphar NV with the results of Animalcare Group plc
consolidated from the date of acquisition.
Accordingly the statutory results for the year end 31st December
2017 reflect twelve months of Ecuphar NV and approximately five and
a half months of Animalcare Group plc as previously
constituted.
To help Shareholders to assess the Group, an unaudited Proforma
Consolidated Income Statement has been provided, which reflects
twelve months of trading from both entities. The Board believes
that these statements provide the most appropriate basis for future
comparison of operating performance.
Underlying and Statutory Results
To provide comparability across reporting periods, the Group
presents its results on both an underlying and statutory (IFRS)
basis.
The Directors believe that presenting our financial results on
an underlying basis, which exclude non - underlying items, provides
a clearer understanding of business performance. IFRS results
include these items to provide the statutory results.
All figures are reported at actual exchange rates (AER) unless
otherwise stated. Commentary will include references to constant
exchange rates (CER) to identify the impact of foreign exchange
movements.
A reconciliation between underlying and statutory results is
provided at the end of this financial review prior to the pro-
forma information as described above.
Overview of Underlying Results
% Change at
2017 2017 2017 2016 AER
Continuing Acquisition Total Total Continuing Total
GBP'000 GBP'000 GBP'000 GBP'000 % %
------------------------- ----------- ------------ -------- -------- ----------- -------
Revenue 76,118 7,558 83,676 68,361 11.3% 22.4%
Underlying Gross Profit 30,408 4,256 34,664 28,275 7.5% 22.6%
Gross Margin % 39.9% 56.3% 41.4% 41.4% (1.2%) -
Underlying Operating
Profit 6,229 1,530 7,759 6,720 (7.3%) 15.5%
Underlying EBITDA 8,415 1,572 9,987 8,914 (4.2%) 11.9%
Underlying EBITDA margin
% 11.1% 20.8% 11.9% 13.0% (1.9%) (1.3%)
Underlying Profit after
tax 3,824 1,460 5,284 3,964 (3.5%) 33.3%
Basic Underlying EPS
(p) - - 12.6p 16.7p - (24.6%)
------------------------- ----------- ------------ -------- -------- ----------- -------
To assist with the understanding of our underlying financial
results, the Group results presented above are split between
continuing operations (Ecuphar NV) and acquisition, being
Animalcare Group plc from 13th July 2017.
The Group delivered total revenue of GBP83.7m, an increase of
22.4% versus the prior year. This included GBP76.1m from the
continuing Ecuphar business, an increase of 11.3% (3.8% at CER) and
GBP7.6m contribution from the acquired Animalcare operations.
Underlying EBITDA increased by 11.9% to GBP10.0m (2016: GBP8.9m)
including a GBP1.6m contribution from acquisition business.
Ecuphar's continuing business underlying EBITDA decreased by 5.6%
to GBP8.4m primarily reflecting the lower gross margins,
investments in our infrastructure and people to support future
growth and the disposal of NutriScience which Ecuphar sold in
October 2016 which contributed profits of approximately GBP0.2m.
More details regarding operational performance are provided within
the Trading Performance section.
Basic underlying EPS decreased by 24.6% to 12.6 pence (2016:
16.7 pence). The 33.3% increase in profit after tax was offset by
the significant increase in the weighted average number of shares
from 23.8 million (which has been adjusted for the merger ratio of
63:37 as described in note 9) to 42.0 million.
Trading Performance
The following table sets out Group underlying trading
performance by operating segment (see note 5 for more detail)
analysed between continuing and acquisition businesses. This
analysis will evolve over time as we integrate the two
businesses.
% Change
2017 2017 2017 2016 at AER
Continuing Acquisition Total Total Continuing Total
GBP'000 GBP'000 GBP'000 GBP'000 % %
--------------------------- ----------- ------------ -------- -------- ----------- -------
Revenue by Segment
Pharma 52,180 7,558 59,738 46,530 12.1% 28.4%
Wholesale 23,938 - 23,938 21,831 9.7% 9.7%
--------------------------- ----------- ------------ -------- -------- ----------- -------
Total 76,118 7,558 83,676 68,361 11.3% 22.4%
--------------------------- ----------- ------------ -------- -------- ----------- -------
Underlying Gross Profit by
Segment
Pharma 27.993 4,256 32,249 26,003 7.7% 24.0%
Wholesale 2,415 - 2,415 2,272 6.3% 5.8%
--------------------------- ----------- ------------ -------- -------- ----------- -------
Total 30,408 4,256 34,664 28,275 7.5% 22.6%
--------------------------- ----------- ------------ -------- -------- ----------- -------
Underlying EBITDA
Pharma 8,126 1,572 9,698 8,429 (3.6%) 15.1%
Wholesale 289 - 289 485 (40.4%) (40.4%)
--------------------------- ----------- ------------ -------- -------- ----------- -------
Total 8,415 1,572 9,987 8,914 (5.6%) 11.9%
--------------------------- ----------- ------------ -------- -------- ----------- -------
Pharma segment
Revenue in our pharma segment grew by 28.4%, 12.1% of which was
delivered by the continuing Ecuphar business. This growth was
primarily driven by very strong growth in Production Animals
revenue which as an overall category increased by 25.2% versus
prior year to GBP28.4m together with a strong contribution from the
Companion Animals category. Further detail on revenue by product
category is given below.
Underlying EBITDA improved by 15.1% to GBP9.7m however declined
by 3.6% from continuing business to GBP8.1m (2016: GBP8.4m),
representing an EBITDA margin of 15.6% (2016:18.1%). This decline
was driven by a combination of lower gross margins which fell by
2.3% to 53.6% and a GBP2.3m increase in operating costs.
Gross margins in our continuing business have fallen for three
main reasons:
-- Lower margin sales mix primarily reflecting higher growth in
our Production Animal product category and export markets.
-- Maintaining market share in a competitive environment, at some expense to margins.
-- Disposal of NutriScience in October 2016 which generated
GBP1.3m sales at margins in excess of 50%.
Operating costs have increased by GBP2.3m to GBP19.9m (2016:
GBP17.6m) representing 38.2% (2016:37.8%) of sales. Approximately
GBP1.5m of this increase relates to investment in our
infrastructure (in particular IT and R&D), people and marketing
to position the business for future growth. The balance of GBP0.8m
reflects higher distribution costs as a result of significantly
increased vaccine sales together with higher inventory write
offs.
Reported EBITDA, which includes GBP2.2m non-underlying items as
analysed in note 5, reduced to GBP7.5m (2016: GBP10.2m).
Wholesale segment
Our wholesale segment, which comprises the purchase and re-sale
of veterinary pharmaceuticals, supplies and instruments in Belgium,
delivered revenue of GBP23.9m, representing an increase of 9.7% on
the prior year. Whilst gross margins at 10.1% remained broadly
comparable with prior year (2016: 10.4%), underlying and reported
EBITDA reduced from GBP0.5m to GBP0.3m mainly due to increased
employee costs to drive product sales and services growth.
Revenue by Product Category
% Change
2017 2016 at AER
GBP'000 GBP'000 %
---------------------------- -------- -------- --------
Companion Animals 42,791 30,799 38.9%
Production Animals 28,390 22,668 25.2%
Equine 4,718 5,567 (15.3%)
Other products and services 7,777 9,327 (16.6%)
---------------------------- -------- -------- --------
Total 83,676 68,361 11.3%
---------------------------- -------- -------- --------
Companion Animals revenue increased by 38.9% to GBP42.8m, and
following the reverse acquisition of Animalcare Group plc, now
represents 51.1% of total business, up from 45.1% in the prior
year. Animalcare revenues generated 24.5% of the growth with the
balance of 14.4% delivered by existing business, primarily driven
by increased export sales, increased wholesale sales and market
penetration of core pharmaceuticals.
Production Animals revenue grew by 25.2% on prior year despite
ongoing pressure on antibiotic usage. This growth largely came from
full year sales of new products launched in 2016, in particular
rabbit vaccines, continued growth of core products in both our
established markets as well as newer geographies such as Italy.
Equine revenues reduced to GBP4.7m due to the prior year one-off
benefit of horse vaccine sales in Germany as a result of competitor
supply issues.
Reported Financial Results
Given the significant changes to the Group following the reverse
acquisition the financial results contain a number of non -
underlying items comprising the fair value uplift of inventory
acquired, amortisation and impairment of acquired intangibles and
acquisition and integration costs.
A reconciliation of underlying results to reported results is
provided below:
Fair value Amortisation
adjustment and impairment Acquisition 2017 2016
2017 Underlying on acquired of acquired and integration Reported Reported
results inventory intangibles costs results results
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ --------------- ------------ --------------- ---------------- --------- ---------
Revenue 83,676 - - - 83,676 68,361
Gross Profit 34,664 (401) - - 34,263 28,275
Selling, general &
administrative
expenses (24,912) - (3,590) - (28,502) (22,347)
Research & development
expenses (2,048) - (751) - (2,799) (1,776)
Net other operating income
(expenses) 55 - - (1,817) (1,762) 1,887
------------------------------ --------------- ------------ --------------- ---------------- --------- ---------
Operating Profit 7,759 (401) (4,341) (1,817) 1,200 6,039
Net finance expenses (656) - - - (656) (891)
------------------------------ --------------- ------------ --------------- ---------------- --------- ---------
Profit before tax 7,103 (401) (4,341) (1,817) 544 5,148
Taxation (1,819) 76 972 411 (360) (1,632)
------------------------------ --------------- ------------ --------------- ---------------- --------- ---------
Profit after tax 5,284 (325) (3,369) (1,406) 184 3,516
Basic EPS (p) 12.6p - - - 0.4p 14.8p
------------------------------ --------------- ------------ --------------- ---------------- --------- ---------
Including non-underlying items, the Group's profit after tax
fell to GBP0.2m (2016: GBP3.5m). Non-underlying items incurred in
the year are summarised below (all figures are pre-tax):
-- Fair value adjustment of acquired inventory of GBP0.4m - this
is a non-cash uplift to the value of acquisition inventory as a
result of the fair value exercise carried out in accordance with
IFRS3 'Business Combinations'.
-- Amortisation and impairment of acquired intangibles totalling
GBP4.3m - this comprises GBP1.7m charge arising on the acquired
intangibles relating to the Animalcare reverse acquisition and
GBP2.6m in relation to previous acquisitions made by Ecuphar NV,
principally Esteve SA which was acquired on 30th April 2015.
-- Acquisition and integration costs of GBP1.8m - this
principally includes the transaction costs borne by Ecuphar NV in
relation to the reverse acquisition of Animalcare Group plc and
post-acquisition integration costs including the internal transfer
of Animalcare Ltd to Ecuphar NV and the set-up of a new long-term
incentive plan which the Board is seeking to implement during
2018.
Earnings per share and dividend
Basic underlying EPS decreased by 24.6% to 12.6 pence (2016:
16.7 pence). The 33.3% increase in profit after tax was offset by
the significant increase in the weighted average number of shares
from 23.8 million (which has been adjusted for the merger ratio of
63:37 as described in note 8) to 42.0 million.
The reported basic EPS, which incorporates non-underlying items,
decreased to 0.4 pence (2016: 14.8 pence).
The Board is proposing a final dividend of 2.0 pence per share,
added to the second interim dividend of 4.7 pence per share paid in
November 2017, giving a total dividend of 6.7 pence per share since
the reverse acquisition. This final dividend is subject to
shareholder approval at the Annual General Meeting on 27th June
2017. The Board will continue to maintain the current dividend
policy and timing of payments whilst continuing to invest for
future growth.
Cash flow, net debt and borrowing facilities
GBP'000
---------------------------------------- --------
Net debt at 1st January 2017 (23,782)
Net cash generated from operations 2,425
Net capital expenditure (2,532)
Acquisition of subsidiaries net of cash
acquired (26,852)
Receipts from issue of share capital 29,402
Net finance expenses (657)
Dividends paid (2,816)
Other cash movements (45)
Foreign exchange on cash and borrowings (1,051)
---------------------------------------- --------
Net debt at 31st December 2017 (25,908)
---------------------------------------- --------
The Group generated GBP2.4m net cash from operations (2016:
GBP9.3m) which includes a cash outflow from non-underlying items
totalling GBP3.8m. Working capital increased by GBP5.6m principally
reflecting the payment of GBP2.5m non-underlying items which were
recognised (accrued) at the time of the reverse acquisition,
GBP2.0m increase in trade receivables due to strong growth in the
final quarter and GBP1.4m investment in stock. This stock increase
was mainly within our wholesale operation due to anticipated
further antibiotic restrictions with the balance largely in our
high-growth territories.
Net capital expenditure of GBP2.5m largely comprises investment
in our product development pipeline from which a significant number
of new products launches are expected in 2019 and 2020.
The GBP33.1m cash consideration for the acquisition of Ecuphar
NV was funded using GBP4.0m of cash held by Animalcare Group plc
and GBP29.1m of equity raised through a placing net of GBP0.9m
expenses.
As part of the reverse acquisition, the Group agreed to maintain
the existing Ecuphar NV borrowing facilities (the Facilities)
through four banks which comprised (i) EUR41.5m revolving credit
facility (RCF), (ii) EUR10m term facility to finance permitted
acquisitions (Term Loan A) and (iii) EUR4.08m quarterly amortising
term facility (Term Loan B).
There are three covenants governing the facilities:
i. a minimum adjusted solvency ratio of 30% measured as
consolidated adjusted equity to consolidated adjusted total
assets,
ii. a maximum leverage ratio of 3.5 times measured as
consolidated net debt to consolidated EBITDA
iii. a minimum interest coverage ratio of 4 times measured as
consolidated EBITDA to consolidated interest expenses.
Based on the twelve months unaudited pro-forma underlying EBITDA
of GBP11.8m (see below), the Group's net debt underlying EBITDA
leverage ratio was 2.2 times. At 31st December 2017, total
facilities were GBP48.4m, of which GBP33.5m, net of cash balances,
was being utilised leaving headroom of GBP14.9m. These bank
facilities, together with the Group's operational cash flow,
indicate that the Group has sufficient facilities available to fund
its operations and allow for future expansion.
Summary
The transformational reverse acquisition of Ecuphar has created
critical scale for the Group within the European animal health
market, providing a strengthened position to capitalise on growth
in the market to deliver long-term shareholder value.
To support this value creation, and to maximise the commercial,
operational and financial synergies, the Group must deliver a
wide-ranging and comprehensive integration. The historical growth
of Ecuphar was complemented by a series of acquisitions including
the largest and most significant acquisition of Esteve in 2015.
Prior to the reverse, limited integration of these operations was
undertaken. This has presented additional challenges resulting in
the current process to integrate the businesses taking longer than
expected.
From a financial performance perspective, we have delivered
strong revenue growth however this has not translated through to
our operating profit as we have experienced competitive market
pressures and changing sales mix, leading to margin decline in the
second half of 2017.
Against this backdrop, our priorities for the current year
are:
-- Increasing sales of new products from our distribution
network and expanding our geographic footprint
-- Focusing on gross margin and EBITDA development in order to
deliver anticipated profit growth
-- Improving operating cash generation, important in providing
the business with the funds to continue the momentum in our product
development pipeline together with dividend flow
-- Delivering integration to unlock scale benefits and support EBITDA
We remain firm in our belief that the reverse acquisition will
provide a number of opportunities for growth.
Delivering the comprehensive integration to realise the
synergies and benefits available is key. Ultimately to create value
the combination of our businesses must become more than the sum of
the parts.
We expect to see some benefits of the integration in the current
year but a more meaningful impact on profit in 2019.
Once fully integrated, we believe this will provide a strong
platform for long-term value creation for our shareholders.
Pro forma Consolidated Financial Information (unaudited)
As noted previously to help Shareholders to assess the Group, an
unaudited Proforma Consolidated Income Statement has been produced,
which reflects twelve months of trading from both entities as
below. Pro forma information has been prepared in a manner
consistent with the accounting policies adopted by the Group in
preparing the audited financial statements for the year ended 31st
December 2017.
Animalcare Ecuphar Total Animalcare Ecuphar Total
2017 2017 2017 2016 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ---------- -------- -------- ---------- -------- --------
Revenue 15,825 76,118 91,943 15,556 68,361 83,917
Gross Profit 8,720 30,408 39,128 8,722 28,275 36,997
Operating expenses (8,696) (28,475) (37,171) (5,353) (22,236) (27,589)
-------------------------------- ---------- -------- -------- ---------- -------- --------
Operating Profit 24 1,933 1,957 3,369 6,039 9,408
Depreciation, amortisation
& impairment 280 4,843 5,123 403 4,689 5,092
Non-underlying items 3,045 1,639 4,684 172 (1,814) (1,642)
-------------------------------- ---------- -------- -------- ---------- -------- --------
Underlying EBITDA 3,349 8,415 11,764 3,944 8,914 12,858
-------------------------------- ---------- -------- -------- ---------- -------- --------
Net financial (expenses)/income (40) (617) (657) 36 (891) (855)
-------------------------------- ---------- -------- -------- ---------- -------- --------
(Loss)/profit before tax (16) 1,316 1,300 3,405 5,148 8,553
Taxation (104) (724) (828) (466) (1,632) (2,098)
-------------------------------- ---------- -------- -------- ---------- -------- --------
Net (loss)/profit (120) 592 472 2,939 3,516 6,455
-------------------------------- ---------- -------- -------- ---------- -------- --------
Underlying net profit 2,769 3,824 6,593 3,139 3,964 7,103
-------------------------------- ---------- -------- -------- ---------- -------- --------
Underlying basic EPS (p) - - 11.0p - - 11.8p
-------------------------------- ---------- -------- -------- ---------- -------- --------
Proforma Consolidated Income Statement (unaudited)
Compared to the statutory results, the unaudited proforma
consolidated income statement includes an additional 28 weeks of
Animalcare Group plc's results prior to the reverse acquisition
which has the impact of increasing revenue and underlying EBITDA by
GBP8.3m and GBP1.8m respectively. This is shown in further detail
in the reconciliation section below.
On the proforma basis, revenue increased by 9.6% (3.4% at CER)
to GBP91.9m however underlying EBITDA decreased by 8.5% (12.9%
decrease at CER) to GBP11.8m.
The principal drivers for the financial performance of the
existing Ecuphar business are described earlier in the Trading
Performance section.
For the acquired Animalcare business, revenues increased 1.7% to
GBP15.8m, driven by GBP0.6m growth within export offset by a
GBP0.4m reduction in sales from our microchipping business, the
latter primarily as a result of the GBP0.3m incremental sales
benefit observed in 2016 following the introduction of compulsory
microchipping in the UK. Gross profit was flat at GBP8.7m largely
reflecting the changing sales mix towards lower margin export
business. Operating expenses excluding non-underlying items
increased by GBP0.4m of which approximately half relates to higher
central costs, including the enlarged Board. The balance primarily
relates to investment in our UK trading business staff base. As a
result, underlying EBITDA fell by GBP0.6m to GBP3.3m.
The pro-forma results are yet to reflect the benefits from
leveraging the Group's enlarged platform which include commercial
synergies, operating efficiencies and optimisation of the R&D
function. We will continue to deliver the integration throughout
2018 to deliver more significant value creation from 2019.
Reconciliation of Proforma Consolidated Income Statement
A reconciliation of the statutory results to the Proforma
results is shown below:
Fair value Amortisation
adjustment Acquisition of Animalcare
on acquired and integration acquired Animalcare
Reported Proforma
Results inventory(1) costs(2) intangibles(3) pre-acquisition(4) Results
2017 2017 2017 2017 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- ------------- ---------------- --------------- ------------------- --------
Revenue 83,676 - - - 8,267 91,943
--------------------------- -------- ------------- ---------------- --------------- ------------------- --------
Gross Profit 34,263 401 - - 4,464 39,128
Operating expenses (33,063) - - 1,645 (5,753) (37,171)
--------------------------- -------- ------------- ---------------- --------------- ------------------- --------
Operating Profit/(loss) 1,200 401 - 1,645 (1,289) 1,957
--------------------------- -------- ------------- ---------------- --------------- ------------------- --------
Depreciation, amortisation
& impairment 6,569 - - (1,645) 199 5,123
Non-underlying items - - 1,817 - 2,867 4,684
--------------------------- -------- ------------- ---------------- --------------- ------------------- --------
EBITDA 7,769 401 1,817 - 1,777 11,764
--------------------------- -------- ------------- ---------------- --------------- ------------------- --------
Net financial
(expenses)/income (656) - - - (1) (657)
--------------------------- -------- ------------- ---------------- --------------- ------------------- --------
Profit/(loss) before tax 544 401 - 1,645 (1,290) 1,300
--------------------------- -------- ------------- ---------------- --------------- ------------------- --------
Taxation (360) (76) - (310) (82) (828)
--------------------------- -------- ------------- ---------------- --------------- ------------------- --------
Net profit/(loss) 184 325 - 1,335 (1,372) 472
--------------------------- -------- ------------- ---------------- --------------- ------------------- --------
Notes
1. See description within the reconciliation of underlying to statutory results
2. See description within the reconciliation of underlying to statutory results
3. See description within the reconciliation of underlying to
statutory results - this is net of GBP40k amortisation of acquired
intangibles relating to the previous reverse acquisition of
Animalcare Ltd in January 2008.
4. Pre-acquisition results of Animalcare Group plc from 1st January 2017 to 12th July 2017
Chris Brewster
Chief FINANCIAL Officer
Consolidated income statements
Non-Underlying Non-Underlying
(note (note
Underlying 5) Total Underlying 5) Total
---------- -------------- -------- ---------- -------------- --------
2017 2017 2017 2016 2016 2016
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----- ---------- -------------- -------- ---------- -------------- --------
Revenue 5 83,676 - 83,676 68,361 - 68,361
Cost of sales (49,012) (401) (49,413) (40,086) - (40,086)
-------------------------------- ----- ---------- -------------- -------- ---------- -------------- --------
Gross profit 34,664 (401) 34,263 28,275 - 28,275
Research and development
expenses (2,048) (751) (2,799) (1,504) (272) (1,776)
Selling and marketing expenses (14,098) - (14,098) (9,740) - (9,740)
General and administrative
expenses (10,814) (3,590) (14,404) (10,384) (2,223) (12,607)
Net other operating income
/ (expenses) 55 (1,817) (1,762) 73 1,814 1,887
-------------------------------- ----- ---------- -------------- -------- ---------- -------------- --------
Operating profit/(loss) 7,759 (6,559) 1,200 6,720 (681) 6,039
Financial expenses 6 (747) - (747) (988) - (988)
Financial income 7 91 - 91 97 - 97
-------------------------------- ----- ---------- -------------- -------- ---------- -------------- --------
Profit/(loss) before tax 7,103 (6,559) 544 5,829 (681) 5,148
-------------------------------- ----- ---------- -------------- -------- ---------- -------------- --------
Income tax 8 (1,819) 1,459 (360) (1,864) 232 (1,632)
-------------------------------- ----- ---------- -------------- -------- ---------- -------------- --------
Net profit/(loss) 5,284 (5,100) 184 3,965 (449) 3,516
Net profit/(loss) attributable
to:
The owners of the parent 5,284 (5,100) 184 3,964 (449) 3,515
-------------------------------- ----- ---------- -------------- -------- ---------- -------------- --------
Earnings per share attributable
to ordinary owners of the
parent
Basic 9 0.4p 14.8p
Diluted 9 0.4p 14.8p
-------------------------------- ----- ---------- -------------- -------- ---------- -------------- --------
Year ended 31(st) December 2017
In order to aid understanding of underlying business
performance, the Directors have presented underlying results before
the effect of exceptional and other items. These exceptional and
other items are analysed in detail in note 4 to this financial
information.
The accompanying notes form an integral part of the consolidated
financial information.
Consolidated statement of comprehensive income
2017 2016
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Net profit for the year 184 3,516
---------------------------------------------------- -------- --------
Other comprehensive income
---------------------------------------------------- -------- --------
Financial instruments at fair value through OCI * - (5)
Cumulative translation differences * 664 2,515
---------------------------------------------------- -------- --------
Other comprehensive income, net of tax 664 2,510
---------------------------------------------------- -------- --------
Total comprehensive income for the year, net of tax 848 6,026
---------------------------------------------------- -------- --------
Total comprehensive income attributable to:
The owners of the parent 848 6,026
---------------------------------------------------- -------- --------
Year ended 31(st) December 2017
* May be reclassified subsequently to profit & loss.
Consolidated statements of financial position
2017 2016
Notes GBP'000 GBP'000
------------------------------------------- ----- -------- --------------------
Assets
------------------------------------------- ----- -------- --------------------
Non-current assets
Goodwill 10 51,413 9,959
Intangible assets 11 54,037 21,246
Property, plant & equipment 825 719
Deferred tax assets 8 1,603 1,269
Other financial assets 72 69
Other non-current assets - 1
Total non-current assets 107,950 33,263
------------------------------------------- ----- -------- --------------------
Current assets
Inventories 16,795 13,254
Trade receivables 16,680 10,781
Available-for-sale financial assets 464 423
Other current assets 1,934 1,191
Cash and cash equivalents 7,579 951
------------------------------------------- ----- -------- --------------------
Total current assets 43,452 26,600
------------------------------------------- ----- -------- --------------------
Total assets 151,402 59,863
------------------------------------------- ----- -------- --------------------
Liabilities
-------------------------------------------------- -------- -------- --------
Current liabilities
Borrowings 12 (633) (631)
Trade payables (14,128) (10,012)
Tax payables (2,741) (1,774)
Accrued charges & deferred income 13 (2,116) (812)
Other current liabilities (1,980) (2,237)
-------------------------------------------------- -------- -------- --------
Total current liabilities (21,598) (15,466)
-------------------------------------------------- -------- -------- --------
Non-current liabilities
Borrowings 12 (32,854) (24,102)
Deferred tax liabilities 8 (6,454) (224)
Deferred income 13 (780) -
Provisions (72) (216)
Total non-current liabilities (40,160) (24,542)
-------------------------------------------------- -------- -------- --------
Total Liabilities (61,758) (40,008)
-------------------------------------------------- -------- -------- --------
Net Assets 89,644 19,855
-------------------------------------------------- -------- -------- --------
Equity
Share capital 14 11,983 4,244
Share premium 132,588 6,687
Reverse acquisition reserve (56,762) 5,146
Retained earnings (1,347) 1,258
Other reserves 3,180 2,518
Equity attributable to the owners of the parent 89,642 19,853
Non-controlling interest 2 2
-------------------------------------------------- -------- -------- --------
Total equity 89,644 19,855
-------------------------------------------------- -------- -------- --------
Year ended 31(st) December 2017
Consolidated statement of changes in equity
Year ended 31(st) December 2017
Attributable to the owners of the parents
-------------------------------------------------------------------------
Reverse Non-
Share Share Treasury Retained acquisition Other controlling Total
capital premium shares earnings reserve reserve Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- -------- -------- -------- --------- ------------ -------- -------- ------------ --------
At 1 January, 2017 4,244 6,687 - 1,258 5,146 2,518 19,853 2 19,855
------------------- -------- -------- -------- --------- ------------ -------- -------- ------------ --------
Net profit - - - 184 - - 184 - 184
Other comprehensive
income - - - - - 662 662 - 662
Total comprehensive
income - - - 184 - 662 846 - 846
------------------- -------- -------- -------- --------- ------------ -------- -------- ------------ --------
Dividends paid - - - (2,816) - - (2,816) - (2,816)
Shares issued as
consideration 5,750 94,880 - - - - 100,630 - 100,630
Exercise of share
options 275 3,953 - - - - 4,228 - 4,228
Share issue cost - (1,218) - - - - (1,218) - (1,218)
Arising on reverse
acquisition - - - - (61,908) - (61,908) - (61,908)
Issue of new shares 1,714 28,286 - - - - 30,000 - 30,000
Share based
payments - - - 27 - - 27 - 27
At 31 December,
2017 11,983 132,588 - (1,347) (56,762) 3,180 89,642 2 89,644
------------------- -------- -------- -------- --------- ------------ -------- -------- ------------ --------
Attributable to the owners of the parents
-------------------------------------------------------------------------
Reverse Non-
Share Share Treasury Retained acquisition Other controlling Total
capital premium shares earnings reserve reserve Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- -------- -------- -------- --------- ------------ -------- -------- ------------ --------
At 1 January, 2016 7,256 8,821 (646) (142) - 8 15,297 2 15,299
------------------- -------- -------- -------- --------- ------------ -------- -------- ------------ --------
Net profit - - - 3,515 - - 3,515 - 3,515
Other comprehensive
income - - - - - 2,510 2,510 - 2,510
Total comprehensive
income - - - 3,515 - 2,510 6,025 - 6,025
------------------- -------- -------- -------- --------- ------------ -------- -------- ------------ --------
Dividends paid - - - (1,469) - - (1,469) - (1,469)
Capital increase in
cash - - 646 (646) - - - - -
At 31 December,
2016 7,256 8,821 - 1,258 - 2,518 19,853 2 19,855
------------------- -------- -------- -------- --------- ------------ -------- -------- ------------ --------
Arising on reverse
acquisition (3,012) (2,134) - - 5,146 - - - -
At 31 December,
2016 4,244 6,687 - 1,258 5,146 2,518 19,853 2 19,855
------------------- -------- -------- -------- --------- ------------ -------- -------- ------------ --------
Reverse acquisition reserve
Reverse acquisition reserve represents the reserve that has been
created upon the reverse acquisition of Animalcare Group plc.
Other reserve
Other reserve mainly relates to currency translation
differences. These exchange differences arise on the translation of
subsidiaries with a functional currency other than Sterling.
Consolidated cash flow statements
Year ended 31(st) December 2017
2017 2016
Notes GBP'000 GBP'000
------------------------------------------------------- ----- -------- --------
Operating activities
Profit before tax 544 5,148
Non-cash and operational adjustments
Depreciation of property, plant & equipment 327 326
Amortization of intangible assets 11 6,053 3,982
Share-based payment expense 27 -
Loss/(gain) on disposal of property, plant & equipment 2 (1)
Movement in allowance for bad debt and inventories 652 536
Financial income 7 (91) (97)
Financial expense 6 747 988
Impact of foreign currencies 25 1,787
Gain from sale of subsidiaries 3 - (2,432)
Other (30) 30
------------------------------------------------------- ----- -------- --------
Movements in working capital
Increase in trade receivables (2,079) (1,447)
Decrease /(increase) in inventories (1,359) (890)
(Decrease)/Increase in payables (2,115) 2,530
Income tax paid (278) (1,172)
------------------------------------------------------- ----- -------- --------
Net cash flow from operating activities 2,425 9,288
------------------------------------------------------- ----- -------- --------
Investing activities
Purchase of property, plant & equipment (184) (463)
Purchase of intangible assets 11 (2,379) (1,185)
Proceeds from the sale of property, plant & equipment
(net) 31 74
Payments to acquire subsidiaries 3 (33,145) -
Cash and cash equivalents acquired under reverse
acquisition 3 6,293 -
Proceeds from sale of subsidiary 3 - 3,211
Purchase available for sale financial investments (45) (409)
------------------------------------------------------- ----- -------- --------
Net cash flow used in investing activities (29,429) 1,228
------------------------------------------------------- ----- -------- --------
2017 2016
Notes GBP'000 GBP'000
----------------------------------------------------- ----- -------- --------
Financing activities
Proceeds from loans & borrowings and convertible
debt 8,298 15,852
Repayment of loans & borrowings (649) (23,925)
Receipts from issue of share capital 29,402 -
Dividends paid (2,816) (1,469)
Interest paid (528) (663)
Other financial expense (129) (241)
Net cash flow from financing activities 33,578 (10,446)
----------------------------------------------------- ----- -------- --------
Net increase of cash & cash equivalents 6,574 70
Cash & cash equivalents at beginning of the year 14 951 749
Exchange rate differences on cash & cash equivalents 54 132
Cash & cash equivalents at end of the year 14 7,579 951
----------------------------------------------------- ----- -------- --------
Reconciliation of net cash flow to movement in net
debt
Net increase in cash and cash equivalents in the
year 6,574 70
Cash flow from (increase)/decrease in debt financing (7,649) 8,073
Foreign exchange differences on cash and borrowings (1,051) (4,045)
Movement in net debt in the year (2,126) 4,098
Net debt at the start of the year (23,782) (27,880)
----------------------------------------------------- ----- -------- --------
Net debt at the end of the year (25,908) (23,782)
----------------------------------------------------- ----- -------- --------
Notes to the consolidated financial statements
Year ended 31(st) December 2017
1. Financial information
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31st December 2017
but is derived from the 2017 accounts. The statutory accounts of
Animalcare Group plc for the year ended 30th June 2016 have been
delivered to the Registrar of Companies and those for 2017 will be
delivered in due course. The external auditor has reported on those
accounts; the report was (i) unqualified, (ii) did not include
references to any matters to which the external auditor drew
attention by way of emphasis without qualifying the reports and
(iii) did not contain statements under section 498(2) or (3) of the
Companies Act 2006.
2. Basis of preparation
On 13th July 2017 the Company acquired the entire issued
ordinary share capital of Ecuphar NV and became the legal parent of
Ecuphar NV.
The accounting policy adopted by the Directors applies the
principles of IFRS 3 (Revised) 'Business Combinations' in
identifying the accounting parent as Ecuphar NV and the
presentation of the Group consolidated statements of the Company
(the legal parent) as a continuation of financial statements of the
accounting parent or legal subsidiary (Ecuphar NV).
This policy reflects the commercial substance of this
transaction as follows:
-- The original shareholders of the legal subsidiary undertaking
were the most significant shareholders following admission to AIM,
owning 46.9% of the issued share capital;
-- The assets and liabilities of the legal subsidiary Ecuphar NV
are recognized and measured in the Group financial statements at
the pre-combination carrying amounts without restatement to fair
value;
-- The retained earnings and other equity balances recognized in
the Group financial statements reflect the retained earnings and
other equity balances of Ecuphar NV immediately before the business
combination.;
-- The results of the period from 1st January 2017 to the date
of the business combination are those of Ecuphar NV;
-- The equity structure appearing in the Group financial
statements reflects the equity structure of the legal parent,
including the equity instruments issued under the share for share
exchange to effect the business combination and adjusted in
accordance with IFRS 3. This results in the creation of a 'reverse
acquisition reserve' as at 1st January 2017, being the difference
between the Company equity structure and that of Ecuphar NV.
The consolidated financial statements cover the year ended 31st
December 2017. The financial statements for the comparative year
ended 31st December 2016 represent the substance of the reverse
acquisition and are those of Ecuphar NV.
3. Business Combinations and disposals of subsidiaries
Reverse acquisition of Animalcare Group plc
On 13th July 2017 Animalcare Group plc acquired 100% of the
share capital of Ecuphar NV for a total consideration of
GBP133,775k, satisfied through a combination of a share for share
exchange and GBP33,145k in cash net of commissions.
The acquisition of Ecuphar NV by Animalcare Group plc is deemed
to be a reverse acquisition under the provisions of IFRS 3
"Business Combinations".
In accounting for a reverse acquisition (rather than an
acquisition) the combined financial statements are deemed to be a
continuation of the books of the legal acquiree (Ecuphar NV) rather
than a continuation of those of the legal acquirer (Animalcare
Group plc).
The assets and liabilities of the Ecuphar NV are recognised and
measured in the Group financial statements at the pre-combination
carrying amounts, without restatement to fair value and no goodwill
arises in relation to them.
Conversely, the assets of Animalcare Group plc and Animalcare
Ltd are consolidated at their fair values.
The overall effect is that the consolidated financial statements
are prepared from an Ecuphar NV perspective rather than Animalcare
Group plc, in summary this means:
-- The comparative consolidated financial information is that of
Ecuphar NV rather than that of Animalcare Group plc;
-- The result for the year and consolidated cumulative profit
and loss reserves are those of the Ecuphar NV plus the
post-acquisition results of the Animalcare Group plc;
-- A reverse acquisition reserve of (GBP56,762k) has been created;
-- The share capital and share premium account are that of Animalcare Group plc;
-- The cost of the combination has been determined from the perspective of Ecuphar NV.
Goodwill arises on the reverse acquisition when comparing the
deemed fair value consideration of Animalcare Group plc acquiring
the shares of Ecuphar NV. The fair value of the consideration is
the market capitalization of Animalcare Group plc at the
acquisition date based on the closing share price on 12(th) July of
355p per share.
Carrying
value
at Fair value
acquisition Fair value at acquisition
date adjustments date
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------ ------------ ---------------
Assets
Historical goodwill 12,711 (12,711) -
Intangible assets 4,658 30,957 35,615
Tangible assets 227 - 227
Deferred tax asset 149 885 1,034
Inventory 2,014 401 2,415
Trade receivables 3,392 - 3,392
Other current assets 559 - 559
Cash 6,293 - 6,293
30,003 19,532 49,535
---------------------------------------- ------------ ------------ ---------------
Liabilities
Financial debts - - -
Deferred tax liabilities (414) (6,843) (7,257)
Trade payables (3,948) - (3,948)
Other liabilities (4,040) - (4,040)
(8,402) (6,843) (15,245)
---------------------------------------- ------------ ------------ ---------------
Total identified assets and liabilities 21,601 12,689 34,290
---------------------------------------- ------------ ------------ ---------------
Goodwill 41,048
Fair value of consideration - - 75,338
---------------------------------------- ------------ ------------ ---------------
Reverse Acquisition Animalcare
The acquisition consideration, net assets and goodwill are based
upon the reverse acquisition of Animalcare Group plc by Ecuphar NV.
The fair value of the consideration is the market capitalization of
Animalcare Group plc at the closing share price of 355p per share
on 12(th) July 2017. Transaction costs of equity transactions
relating to the issue and re-admission of the Company's shares are
accounted for as a deduction from equity where they relate to the
issue of new shares.
The fair value of the net assets acquired and shown in the table
above was GBP34,290k. The fair value of the consideration was
GBP75,338k resulting in goodwill on reverse acquisition of
GBP41,048k. In addition, the fair value uplift of inventory
amounted to GBP401k, the fair value uplift of the identified
intangibles amounted to GBP30,957k. Deferred tax assets and
liabilities respectively were increased by GBP885k and
(GBP6,843k).
Disposal of subsidiaries
Nutriscience
On 31 October 2016 the 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
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 Group is as follows:
Carrying value
at selling date
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
------------------------------------ ----------------
Nutriscience
This disposal did not meet the IFRS 5 criteria as a component of
a Group, as a separate major line of business nor as a geographical
area of operations. Therefore discontinued operations and asset
held for sale disclosures were not required.
4. Non-Underlying items
2017 2016
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Amortization of acquisition related intangibles
Classified within Research and development expenses 751 272
Classified within General and administrative expenses 3,590 2,223
------------------------------------------------------ -------- --------
Total amortization of acquisition related intangibles 4,341 2,495
------------------------------------------------------ -------- --------
Fair value uplift of inventory acquired through
reverse acquisition 401 -
Acquisition and integration costs 1,454 -
Gain on sale of Nutriscience - (2,432)
Other non-underlying items 363 618
------------------------------------------------------ -------- --------
Total non-underlying items before taxes 6,559 681
------------------------------------------------------ -------- --------
Tax impact (1,459) (232)
------------------------------------------------------ -------- --------
Total non-underlying items after taxes 5,100 449
------------------------------------------------------ -------- --------
The amortization charge of acquisition related intangibles
largely relates to the Esteve acquisition GBP2,017k (2016:
GBP1,880k) and the reverse acquisition of the Animalcare Group
GBP1,685k.
5. Segment information
For management purposes, the Group is organized into two
segments: the Pharmaceuticals and the Wholesale segments.
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 Group in preparing this
segment reporting are also the basis for segment performance
assessment. The Board of Directors of the Group is considered as
the Chief Operating Decision Maker. As a performance indicator, the
Chief Operating Decision Maker controls performance by the Group's
revenue, gross margin, Underlying EBITDA and EBITDA. EBITDA is
defined by the Group as net profit plus finance expenses, less
financial income, plus income taxes and deferred taxes, plus
depreciation, amortization and impairment. Underlying EBITDA equals
EBITDA plus non-underlying items.
The following table summarizes the segment reporting for each of
the reportable periods ending 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 presented per segment.
Adjustments
Pharma Wholesales Total segments & eliminations Consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- ---------- -------------- --------------- ------------
For the year ended 31 December
2017
Revenues 62,291 23,938 86,229 (2,553) 83,676
Gross Margin 31,924 2,415 34,339 (76) 34,263
Gross Margin % 51% 10% 40% 41%
Segment underlying EBITDA 9,698 289 9,987 - 9,987
Segment underlying EBITDA % 16% 1% 12% 12%
Segment EBITDA 7,496 273 7,769 - 7,769
Segment EBITDA % 12% 1% 9% 9%
------------------------------- -------- ---------- -------------- --------------- ------------
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 underlying EBITDA 8,420 485 8,905 8 8,913
Segment underlying EBITDA % 17% 2% 13% 13%
Segment EBITDA 10,235 484 10,719 8 10,727
Segment EBITDA % 21% 2% 15% 16%
------------------------------- -------- ---------- -------------- --------------- ------------
The segment EBITDA is reconciled with the consolidated net
profit of the year as follows:
2017 2016
GBP'000 GBP'000
------------------------------------------ -------- --------
Segment EBITDA 7,769 10,727
Depreciation, amortization and impairment (6,569) (4,689)
Operating profit 1,200 6,038
Financial expenses (747) (988)
Financial income 91 97
Income taxes (643) (1,305)
Deferred taxes 283 (327)
------------------------------------------ -------- --------
Net profit 184 3,515
------------------------------------------ -------- --------
Non-current assets excluding deferred tax assets and financial
instruments located in Belgium, Spain, Portugal, the United Kingdom
and other geographies are as follows:
2017 2016
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Belgium 19,691 21,378
Spain 2,170 2,229
Portugal 4,101 3,913
UK 76,010 -
Other 4,375 4,474
----------------------------------------------------- -------- --------
Non-current assets excluding deferred tax assets and
financial instruments 106,347 31,994
----------------------------------------------------- -------- --------
Revenue by product category:
2017 2016
GBP'000 GBP'000
------------------------------------ -------- --------
Companion animals 42,791 30,799
Production animals 28,390 22,668
Horses 4,718 5,567
Petfood, Instrumentals and Services 7,777 9,327
------------------------------------ -------- --------
Total 83,676 68,361
------------------------------------ -------- --------
Revenue by geographical area:
2017 2016
GBP'000 GBP'000
----------------------- -------- --------
Europe 82,803 67,842
Belgium 29,501 27,797
The Netherlands 1,726 1,434
United Kingdom 9,459 2,516
Germany 8,930 6,714
Spain 20,909 18,695
Italy 4,458 3,559
Portugal 4,514 4,044
European Union - other 3,306 3,083
Asia 473 309
Middle East Africa 47 5
Other 353 205
----------------------- -------- --------
Total 83,676 68,361
----------------------- -------- --------
Revenue by category:
2017 2016
GBP'000 GBP'000
--------------- -------- --------
Product sales 83,314 67,656
Services sales 362 705
--------------- -------- --------
Total 83,676 68,361
--------------- -------- --------
6. Financial expenses
Financial expenses includes the following elements:
2017 2016
GBP'000 GBP'000
------------------------------------------- -------- --------
Interest expense 528 663
Foreign currency losses 118 81
Change in fair value - losses on financial - -
instruments
Other financial expenses 101 244
------------------------------------------- -------- --------
Total 747 988
------------------------------------------- -------- --------
7. Financial income
Financial income includes the following elements:
2017 2016
GBP'000 GBP'000
------------------------------------------ -------- --------
Foreign currency exchange gains 69 28
Change in fair value - gains on financial
instruments - 18
Other financial income 22 51
------------------------------------------ -------- --------
Total 91 97
------------------------------------------ -------- --------
8. Income tax expense
Income tax
The following table shows the breakdown of the tax expense for
2017 and 2016:
2017 2016
GBP'000 GBP'000
---------------------------------------- -------- --------
Current tax
Current tax charge (821) (1,335)
Tax adjustments in respect of previous
years 178 30
Total current tax charge (643) (1,305)
Deferred tax
Deferred tax - origination and reversal
of temporary differences 283 (327)
---------------------------------------- -------- --------
Total tax expense for the year (360) (1,632)
---------------------------------------- -------- --------
The total tax expense can be reconciled to the accounting profit
as follows:
2017 2016
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Profit before tax 544 5,147
Income tax at weighted average tax rate (4) (1,310)
Non-deductible expenses (212) (90)
Income not subject to tax 66 -
Other tax credits and tax deductions (1) 62
Other permanent tax differences (56) (73)
Other taxes (37) (29)
Changes in statutory enacted tax rate (294) (68)
Withholding taxes on acquisition treasury shares - (154)
Tax adjustments in respect of previous year 178 30
Income tax expense as reported in the consolidated
income statement (360) (1,632)
--------------------------------------------------- -------- --------
The tax credit of GBP1,459k (2016: GBP232k) shown within
'non-underlying items' on the face of the consolidated income
statement, which forms part of the overall tax charge of GBP360k
(2016: GBP1,632k) relates to the items analysed in note 5.
The tax rates used for the 2017 and 2016 reconciliation above is
the corporate tax rate of 33.99% (Belgium), 25% (the Netherlands),
29% (Germany), 33% (France), 25% (Spain), 34% in 2017 and 24% in
2016 (Italy), 21% (Portugal) and 19% in 2017 and 20% in 2016 for
the United Kingdom. These taxes are payable by corporate entities
in the above mentioned countries on taxable profits under tax law
in that jurisdiction.
Changes to the UK corporation tax rate were substantially
enacted as part of Finance Bill 2017 (on 6 September 2016). They
include reductions to the main rate to reduce the rate to 17% from
1 April 2020.
A similar tax reform in Belgium was substantially enacted in
December 2017. The tax rate will gradually decrease from 33.99%
(current) to 29.58% in 2018 and 2019 and to 25% from 2020
onwards.
Deferred taxes at the balance sheet date have been measured
using the enacted tax rates and reflected in these financial
statements.
Deferred tax
Assets Liabilities Total
------------------ ------------------ ------------------
2017 2016 2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- -------- -------- --------
Goodwill (7) 44 (362) (264) (369) (220)
Intangible assets 515 175 (6,118) - (5,603) 175
Property, plant & equipment 28 13 (25) 3 3 16
Financial fixed assets 1 1 - - 1 1
Inventory 51 43 (24) - 27 43
Trade and other payables 297 565 - - 297 565
Accruals & deferred income 19 173 75 - 94 173
Tax losses carry forward 699 255 - 37 699 292
---------------------------- -------- -------- -------- -------- -------- --------
Total 1,603 1,269 (6,454) (224) (4,851) 1,045
---------------------------- -------- -------- -------- -------- -------- --------
(a) Recognised deferred tax assets and liabilities
(b) Movements during the year
Balance Acquired
at through Foreign Balance
31 December Recognized business exchange at 31 December
2016 in income combinations adjustments 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ ---------- ------------- ------------ ---------------
Goodwill (220) (138) - (11) (369)
Intangible assets 175 565 (6,356) 13 (5,603)
Property, plant & equipment 13 27 (38) 1 3
Financial fixed assets 1 - - - 1
Inventory 46 53 (76) 3 26
Trade & other payables 565 (285) - 18 298
Accruals & deferred income 173 (331) 247 5 94
Tax losses carry forward 292 392 - 15 699
---------------------------- ------------ ---------- ------------- ------------ ---------------
Gross profit 1,045 283 (6,223) 44 (4,851)
---------------------------- ------------ ---------- ------------- ------------ ---------------
Movement of deferred taxes during 2017:
Movement of deferred taxes during 2016:
Balance Acquired Balance
at through Foreign at
31 December Recognized business exchange 31 December
2015 in income combinations adjustments 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ ---------- ------------- ------------ ------------
Goodwill (7) (205) - (8) (220)
Intangible assets 194 (44) - 25 175
Property, plant & equipment 2 11 - - 13
Financial fixed assets 1 - - - 1
Inventory 26 15 - 5 46
Trade & other payables 759 (304) - 110 565
Accruals & deferred income 103 51 - 19 173
Derivatives 6 (6) - - -
Borrowings 23 (26) - 3 -
Tax losses carry forward 89 181 - 22 292
---------------------------- ------------ ---------- ------------- ------------ ------------
Gross profit 1,196 (327) - 176 1,045
---------------------------- ------------ ---------- ------------- ------------ ------------
(c) Tax losses
The Group has unused tax losses, tax credits and notional
interest deduction available in an amount of GBP2,636k for 2017
(2016: GBP1,045k).
Deferred tax assets have been recognized on all available tax
loss carry forwards, resulting in amounts recognized of GBP699k
(2016: GBP292k). 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.
9. 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.
The weighted average number of ordinary shares outstanding
during 2016 has been calculated by multiplying the existing Ecuphar
NV ordinary shares of 13,957,720 by the merger ratio of 63:37
Ecuphar/Animalcare (after taking into account dilution from the
exercise of certain Animalcare Share incentive arrangements) giving
a total adjusted weighted average of 23,765,858 shares.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holder of the parent
company by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of
ordinary shares that would be issued on conversion of all potential
dilutive ordinary shares.
The following income and share data was used in the earnings per
share computations:
Underlying Underlying Total Total
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- ---------- ---------- -------- --------
Net profit attributable to ordinary equity
holders of the parent adjusted for the effect
of dilution 5,284 3,965 184 3,515
----------------------------------------------- ---------- ---------- -------- --------
2017 2016 2017 2016
------------------------------------------- ---------- ---------- ---------- ----------
Weighted average number of ordinary shares
for basic earnings per share 41,998,692 23,765,848 41,998,692 23,765,858
Dilutive potential ordinary shares 178,191 - 178,191 -
------------------------------------------- ---------- ---------- ---------- ----------
Weighted average number of ordinary shares
adjusted for effect of dilution 42,176,883 23,765,848 42,176,883 23,765,858
------------------------------------------- ---------- ---------- ---------- ----------
2017 2016 2017 2016
-------------------------------------------- ----- ----- ---- -----
Earnings per share attributable to ordinary
owners of the parent
Basic 12.6p 16.7p 0.4p 14.8p
-------------------------------------------- ----- ----- ---- -----
Diluted 12.5p 16.7p 0.4p 14.8p
-------------------------------------------- ----- ----- ---- -----
Earnings per share are as follows:
10. Goodwill
The goodwill has been allocated to the cash generating units
("CGU") as follows:
2017 2016
GBP'000 GBP'000
--------------------- -------- --------
CGU: Pharmaceuticals 50,856 9,425
CGU: Wholesale 557 534
--------------------- -------- --------
Total 51,413 9,959
--------------------- -------- --------
The changes in the carrying value of the goodwill can be
presented as follows for the years 2017 and 2016:
Gross Impairment Total
GBP'000 GBP'000 GBP'000
--------------------- -------- ---------- --------
At 1 January 2016 8,974 - 8,974
Disposals (419) - (419)
Currency translation 1,403 - 1,403
At 31 December 2016 9,958 - 9,958
--------------------- -------- ---------- --------
Additions 41,048 - 41,048
Currency translation 406 - 406
At 31 December 2017 51,413 - 51,413
--------------------- -------- ---------- --------
In addition to currency translation effects the goodwill balance
increased as a result of the reverse acquisition of the Animalcare
business in 2017 by GBP41,048k and decreased as a result of the
disposal of Nutriscience Ltd in 2016 by GBP419k (see Note 3).
As of 31st December 2017 goodwill allocated to the
Pharmaceuticals CGU includes goodwill recognized as a result of
past business combinations of Esteve, Equipharma NV, Ecuphar BV,
Cardon Chemicals NV and the reverse acquisition of the Animalcare
Group plc in 2017. As of 31st December 2017 goodwill allocated to
the Wholesale CGU includes goodwill recognized as a result of the
past business combinations of Medini NV and Orthopaedics NV.
The 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 based on
the Fair Value Less Costs of Disposal "FVLCD" which uses a
multiples model.
For the calculation of the FVLCD we used both the sales and
EBITDA multiples. The multiples used in the model are based on the
most conservative multiples used by Rothschild for the purpose of
valuing both Ecuphar and Animalcare at the time of the acquisition.
The sales multiples for 2018 of the old Animalcare and Ecuphar
businesses are respectively 3.5 and 1.6. The EBITDA multiples used
are 13.8 for Animalcare and 10.9 for Ecuphar. From 2019 onwards,
the multiples are determined for the combined businesses. Sales
multiple is 1.9 and EBITDA multiple is 11.5. EBITDA and sales are
based on the 2018 and 2019 budget provided by management.
Based on the sales multiple model, the value of the
Pharmaceuticals segment is determined at GBP179,479k, leaving a
headroom of GBP65,882k.
The value of the Pharmaceuticals segment is determined at
GBP153,489k when using the EBITDA multiples approach. This leaves a
headroom of GBP39,893k.
CGU Wholesale
The recoverable amount of this cash-generating unit is based on
the Fair Value Less Costs of Disposal "FVLCD" which uses a
multiples model.
For the calculation of the FVLCD we used both the sales and
EBITDA multiples. The multiples used in the model are based on the
most conservative multiples used by Rothschild for the purpose of
valuing both Ecuphar and Animalcare at the time of the acquisition.
The sales multiples for 2018 of the old Animalcare and Ecuphar
businesses are respectively 3.5 and 1.6. The EBITDA multiples used
are 13.8 for Animalcare and 10.9 for Ecuphar. From 2019 onwards,
the multiples are determined for the combined businesses. Sales
multiple is 1.9 and EBITDA multiple is 11.5. EBITDA and sales are
based on the 2018 and 2019 budget provided by management.
Based on the sales multiple model, the value of the Wholesale
segment is determined at GBP53,061k, leaving a headroom of
GBP51,106k. The value of the Wholesale segment is determined on
GBP5,602k when using the EBITDA multiples approach. This leaves a
headroom of GBP3,647k.
11. Intangible assets
Product
Patents, portfolios
distribution & product
In Process rights development Capitalized
R&D & licenses costs software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ------------- ------------ ----------- --------
Acquisition value
At 1 January 2016 2,451 11,065 13,735 - 27,251
Additions - 1,735 1,036 - 2,771
Disposals - (2,090) - - (2,090)
Transfers - - - 179 179
Currency translation 388 1,736 2,219 8 4,351
Other - (9) (34) - (43)
------------------------------------ ---------- ------------- ------------ ----------- --------
At 31 December 2016 2,839 12,437 16,956 187 32,419
------------------------------------ ---------- ------------- ------------ ----------- --------
Additions 550 187 1,174 468 2,379
Change due to business combinations 10,013 4,561 21,041 - 35,615
Disposals - (29) - - (29)
Currency translation 116 510 704 14 1,344
Other - 19 - 48 67
------------------------------------ ---------- ------------- ------------ ----------- --------
At 31 December 2017 13,518 17,685 39,875 717 71,795
------------------------------------ ---------- ------------- ------------ ----------- --------
Amortization
At 1 January 2016 (160) (1,820) (5,856) - (7,836)
Additions (268) (2,256) (1,457) - (3,981)
Disposals - 2,016 7 - 2,023
Transfers - - (1) (55) (56)
Currency translation (39) (299) (991) (2) (1,331)
Other - 8 - - 8
------------------------------------ ---------- ------------- ------------ ----------- --------
At 31 December 2016 (467) (2,351) (8,298) (57) (11,173)
------------------------------------ ---------- ------------- ------------ ----------- --------
Additions (751) (2,523) (2,589) (190) (6,053)
Currency translation (23) (124) (359) (5) (511)
Other - 8 5 (34) (21)
------------------------------------ ---------- ------------- ------------ ----------- --------
At 31 December 2017 (1,241) (4,990) (11,241) (286) (17,758)
------------------------------------ ---------- ------------- ------------ ----------- --------
Net carrying value
At 31 December 2017 12,277 12,695 28,634 431 54,037
------------------------------------ ---------- ------------- ------------ ----------- --------
At 31 December 2016 2,372 10,086 8,658 130 21,246
------------------------------------ ---------- ------------- ------------ ----------- --------
The changes in the carrying value of the intangible assets can
be presented as follows for the years 2017 and 2016:
In Process Research & Development relates to acquired
development projects as part of the Esteve business combination in
2015, the reverse acquisition of Animalcare in 2017 and external
and internal in process R&D costs for which the capitalization
criteria are met.
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 and the
reverse acquisition of Animalcare in 2017.
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.
The total amortization charge for 2017 is GBP6,053k (2016:
GBP3,981k) 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.
12. Borrowings
Interest 2017 2016
rate Maturity GBP'000 GBP'000
------------------------------ -------------- -------- -------- --------
Other loans 1.56% 51 75
Revolving credit facilities Euribor +1.50% March22 26,768 21,482
Roll over investment facility Euribor +1.50% March22 2,676 3,176
Acquisition loan Euribor +1.75% March22 3,992 -
Total loans and borrowings 33,487 24,733
of which non-current 32,854 24,102
current 633 631
------------------------------ -------------- -------- -------- --------
The loans and borrowings include the following:
Revolving credit facilities and roll over investment
facilities
Mid 2016, the Group refinanced all its outstanding investment
loans with different banks. Financing arrangements were 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% or 1.75%. The revolving credit
facilities and the acquisition financing have a bullet maturity in
March 2022. The investment loans are repaid in 23 monthly
instalments.
13. Deferred income and accrued charges
2017 2016
GBP'000 GBP'000
-------------------------------------- -------- --------
Accrued charges 1,868 806
Deferred income - due within one year 219 -
Other 29 6
-------------------------------------- -------- --------
Total due within one year 2,116 812
-------------------------------------- -------- --------
Deferred income - Due after one year 780 -
-------------------------------------- -------- --------
Deferred income and accrued charges consists of the
following:
Accrued charges mainly relate to accrued product development
expenses of GBP757k, accrued management bonuses in Ecuphar NV for
GBP93k (2016: GBP350k) and several accrued charges relating to
commissions and bonuses in Ecuphar Veterinaria for an amount of
GBP333k (2016: GBP318k).
Deferred income arises from certain services sold by the Group's
subsidiary Animalcare Ltd. In return for a single up-front payment,
Animalcare Ltd commits to a fixed term contract to provide certain
database, pet reunification and other support services to
customers. There is no contractual restriction on the amount of
times the customer makes use of the service. At the commencement of
the contract it is not possible to determine how many times the
customer will make use of the services, nor does historical
evidence provide indications of any future pattern of use. As such,
income is recognized evenly over the term of the contract,
currently between eight and fourteen years.
Movements in the Group's deferred income liabilities during the
current year are as follows:
GBP'000
------------------------------------------------- -------
Balance at the beginning of the year -
Acquired through business combinations 925
Income deferred to following periods 181
Release of income deferred from previous periods (107)
------------------------------------------------- -------
Balance at the end of the year 999
------------------------------------------------- -------
The deferred income liabilities fall due as follows:
GBP'000
------------------------------- -------
Within one year 219
After one year 780
------------------------------- -------
Balance at the end of the year 999
------------------------------- -------
14. Equity
Share capital
2017 2016
Number Number
of shares of shares
---------------------------------------------------------- ---------- ----------
Allotted, called up and fully paid Ordinary Shares of 20p
each 59,913,900 21,222,110
---------------------------------------------------------- ---------- ----------
2017 2016
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Allotted, called up and fully paid Ordinary Shares of 20p
each 11,983 4,244
---------------------------------------------------------- -------- --------
The following share transactions have taken place during the
year ended 31(st) December 2017:
2017
Number 2016
of shares GBP'000
-------------------------------------------------- ---------- --------
At 1st July 2016 21,222,110 4,244
Issued as consideration for business combinations 37,322,894 7,465
Exercise of share options 1,368,896 274
-------------------------------------------------- ---------- --------
At 31 December 2017 59,913,900 11,983
-------------------------------------------------- ---------- --------
On 13(th) July 2017 the Group announced that it had completed
the reverse acquisition. In aggregate, 37,322,894 new Ordinary
Shares were allotted and issued comprising 8,571,428 new placing
shares and 28,751,466 consideration shares.
During the year a total of 1,368,896 shares were issued in
respect of the exercise of share options. This comprised a total of
1,218,896 shares issued to certain Directors, with the balance of
150,000 shares issued in relation to the grant of options over the
Company's share by Animalcare Ltd under the Animalcare Group plc
Executive Share Option Scheme and the Save As You Earn (SAYE) Share
Option Scheme.
Dividends
The Group paid an ordinary interim dividend of 4.7p per share,
totalling GBP2,816k, on 24(th) November 2017. During the year ended
31(st) December 2016 the Group paid a final dividend of
GBP1,469k.
The proposed final dividend of 2.0 pence per share is subject to
approval of shareholders at the Annual General Meeting and has not
been included as a liability as at 31(st) December 2017, in
accordance with IAS 10 "Events After the Balance Sheet Date".
Non-controlling interest
The non-controlling interest is GBP2k at 31 December 2017 (2016:
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.
15. Annual Report
This Preliminary financial information is not being sent to
Shareholders.
A further announcement will be made when the Annual Report and
Accounts for the year ended 31(st) December will be made available
on the Company's website and copies sent to shareholders.
Further copies will be available to download on the Company's
website at: www.animalcaregroup.co.uk and will also be available
from the Company's registered office address: 10 Great North Way,
York Business Park, Nether Poppleton, York, YO26 6RB.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFUEELFASEDI
(END) Dow Jones Newswires
May 15, 2018 02:01 ET (06:01 GMT)
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