Animalcare Grp Regulatory News (ANCR)

15 Jan 2008 08:00

Ritchey PLC15 January 2008 For release: 0800hrs 15 January 2008 Ritchey plc ("Ritchey" or the "Company") First day's dealings on AIM Ritchey plc ("Ritchey"), announces that dealings in its shares commence on AIMtoday (EPIC code: "ANCR"). This follows completion of the acquisition ofAnimalcare Limited ("the Acquisition"), a wholly owned subsidiary of GenusAnimal Health Limited (a member of the Genus plc group), for a totalconsideration of up to £14 million; a placing of 13,632,000 new ordinary sharesat 55 pence per share to raise approximately £6.4 million net of expenses ("thePlacing");; and the decision to move from PLUS Market to AIM. At the EGM of theCompany held on 11 January 2008, shareholders approved the change of name of theCompany to Animalcare Group plc. It is now expected that this name change willbe effected at Companies House within the next few days. The balance of the total consideration for the Acquisition, after applying theproceeds of the Placing, has been funded out of £8.2 million of new bankfacilities. The total consideration for the Acquisition will comprise an initial cashpayment of £13.4 million and deferred cash consideration of up to £600,000. Thedeferred consideration relates to a new product currently in development andpayment of it is contingent upon Animalcare securing a manufacturing contractfor the product; and manufacturing the first batch of the product. This paymentwill fall due between 31 January and 31 May 2008. James Lambert, Simon Riddell, Nick Downshire and Stephen Wildridge, allDirectors of Ritchey, participated in the Placing, together investing a total ofapproximately £1 million in the Company. Details of their holdings after theplacing, and those of other Directors, are given below. Simon Riddell, Chief Executive of Ritchey, commented: "The enlarged group commands strong positions in niche areas supplying both thelivestock and companion animal markets, and offering excellent growthopportunities. We have ambitious plans which include increasing sales throughour established customer base and distribution network, broadening our productrange, entering new markets and selectively making acquisitions." CONTACTS Ritchey plcJames Lambert (Chairman) 07850 702042Simon Riddell (Chief Executive) 01765 689541 Brewin Dolphin (NOMAD and Broker)Neil Baldwin 0845 270 8610 Bankside Consultants (Financial PR) 020 7367 8888Simon Bloomfield or Andy Harris INFORMATION ON THE EXISTING RITCHEY BUSINESS Business overview Ritchey's core business is the supply of premium quality livestock products toagricultural retailers for onward sale to farmers. The Group's main product islivestock identification ear tags used on cattle and sheep which are necessaryto comply with EU requirements. Other products include products for calving,lambing and farrowing, footcare and handling, a range of grooming products forsheep and cattle, and equine, veterinary, pet and hygiene products. Asubstantial proportion of the Group's products are bought in from a variety ofsuppliers though the tags are largely manufactured in house. Ritchey uses a partnership approach to the agricultural supply industry.Emphasis is placed on co-operation with its customers facilitated by regularvisits and an experienced customer services team that is available to answerboth product and legislative queries. The Directors consider that it is thispartnership approach, along with its in-house expertise and liaison withexternal expertise which has secured the sound reputation of the Ritchey brand.The business currently sells to about 1,000 customers with around 75 of theseregarded as major accounts comprising large agricultural retailers such asWynnstay Limited, Farmway Limited and Mole Valley Farmers. In addition Fearing,acquired in 2001, supplies a range of agricultural products directly to about10,000 farmers. History and Development The business of Ritchey was established in the early 1970's to distribute cattleear tags in the UK for use in livestock management. Non-tag products were addedto its portfolio over the next 20 years. Following the outbreak of BSE In the1990's the obligatory tagging of cattle for the purpose of providingtraceability of livestock movement was introduced in the UK. In future years,further legislative changes extended the tagging regime to other species therebyproviding favourable trading conditions for Ritchey. In recent years, the Group has made several acquisitions to broaden its productoffering and in December 2002 the Company joined OFEX (now Plus Markets). Theseacquisitions included: * Fearing Limited (acquired July 2001): a mail order business selling cattle tags and related products; * Brookwick Ward & Co Limited (acquired July 2002): equine health and grooming products; * Petcode Business (acquired November 2003): a distributor of identification chips to vets, and animal charities; and * Travik Limited (acquired March 2006): a contract manufacturer of liquid cleaning products, such as vehicle grime remover, to commercial customers including Halfords. Although the Group had previously enjoyed high margins and strong market share,in recent years Ritchey has been faced with a number of challenges in itsmarkets including increased competition resulting in pressure on margins. TheCompany suffered declining financial performance from 2002 through 2006.Additionally the Company was hampered by historic underinvestment in Ritchey'sexisting operating management systems. The management team was significantly strengthened by the appointment of SimonRiddell as Managing Director in July 2005 and James Lambert as Chairman inOctober 2005. A strategic review was undertaken which identified the need toimprove the performance of the Company in areas such as product offering andquality, customer service, management processes, overheads and the marketing ofthe Ritchey and Fearing brands. The new management team is now well established, and the operational changes arebeginning to deliver significant benefits. The year ended 30 June 2007 showed animproved financial performance with the Company generating earnings beforeexceptional items and goodwill impairment of £556,000 (£449,000). Products and services Identification tags The Group's largest business category by sales is the supply of identificationtags primarily for cattle and sheep. EU regulations require that all livestockare identified with a unique reference number provided by the local agriculturaldepartment, e.g. DEFRA for England. The reference number for cattle and sheep ismarked on an identification tag whilst for pigs the mark can be applied directlyto the animal. Livestock cannot enter the food chain without the correctidentification. Latest DEFRA estimates indicate there are 10.3 million cattle and 33.6 millionsheep in the UK. Based on data supplied by DEFRA, the Directors believe thatRitchey has a market share of approximately 20 percent providing significantgrowth opportunities for the Group. Ritchey also supplies other identification products, primarily for Health &Safety and asset management purposes, to commercial customers such as Fire &Rescue Services. The Directors consider that this area of business hascnsiderable growth potential. Agricultural supplies Ritchey supplies a wide range of livestock products to the agricultural sectorsuch as marking, vaccination & drenching, weighing, clipping, lambing & calvingand grooming. Fearing Fearing was acquired in 2001 and is a complementary business to Ritcheysupplying directly to farmers via mail order, allowing the group to cover bothroutes to market. Whilst this is a potential source of conflict, the companytakes great care to maintain separate brand identities. Fearing also sellsanimal microchips under the Petcode brand to vets and animal charities. Equine Products Ritchey also sell a range of equine products focused on the distribution of theOster branded grooming and clipping products to equine retailers. Liquid chemicals Following the acquisition of Travik in March 2006, the Group manufactures arange of liquid cleaning products for sale to commercial customers, and variousproducts such as iodine for sale under the Ritchey brand. Current product development Ritchey entered into a four year contract from 2006 to exclusively distributeDaploma tags in the UK and Ireland. This agreement gives Ritchey access to RFIDtechnology, which should be beneficial to the Group going forward in addressingimpending regulatory changes discussed below. This also allows Ritchey to accessdifferent price points for tags without cannibalising Ritchey's existing sales. In sheep tags, Ritchey is developing a time-saving automatic tagger, expected tolaunch early in 2008, in response to competition products, mainly the RoxanAdamatic automatic sheep tagger recently acquired by Allflex. Regulatory framework Following previous Foot & Mouth and BSE outbreaks in the UK there have beenincreasing levels of UK and EU derived legislation regarding the management andmovement of livestock and the generation of accurate information beforelivestock enters the food chain. In the UK this regulation is primarily carriedout through DEFRA, SEERAD & DARD. Relevant existing legislation which influencesthe marketplace in which Ritchey operates includes: * Cattle Identification Regulations (1998) / Cattle Database Regulations (1998): Cattle born after 1 January 1998 require one tag in each ear bearing the same unique number which must be ordered from a DEFRA approved manufacturer such as Ritchey. This number must then be notified to the relevant government agency. The first tag must comply with certain specifications such as font and colour although the secondary tag may be plastic or metal and may contain a microchip/Radio Frequency ID device ("RFID"). * Single Payment Scheme (2005): Under the Common Agricultural Reform package, the Single Payment Scheme replaced several existing schemes with one new single payment. Each farmer applying under the new scheme receives an entitlement for each hectare of eligible land (including all arable and horticultural land as well as temporary grassland) that he declares in his application. * Introduction of electronic identification (EID): EU Directive number 21/ 2004 states that sheep and goats within the EU must be identified with an EID tag and a visual tag from January 2008. It is extremely unlikely that DEFRA and the devolved administrations will be in a position to implement this in January 2008 since the technology is not yet proven and the details of electronic identification (e.g. the numbering sequence on the chip) have yet to be agreed. In addition the key farming organisations (NFU, National Sheep Association) are bitterly opposed to the implementation of compulsory EID for sheep due to the very substantial extra costs involved. The introduction of compulsory EID is unlikely to take place before early 2009. * Withdrawal of the Hill Farmers Allowance (HFA): A key challenge facing the sheep farming industry in particular is the potential withdrawal of the Hill Farm Allowance from 2008/09. The Hill Farm Allowance was introduced in 2001 as part of a Government initiative to support rural development and is due to continue until 2013. Early withdrawal would be very damaging to the UK's sheep farming industry, of which around half is estimated to comprise of hill breeds. DEFRA are aware that outright withdrawal of the subsidy would be disastrous for both the industry and the upland environment and have signalled that payments are likely to continue in some form after this, possibly as an environmental subsidy. INFORMATION ON ANIMALCARE Overview of the business Animalcare markets and sells a range of licensed veterinary pharmaceuticals,animal identification microchips and other veterinary supplies to wholesalersfor onward distribution to veterinary surgeons in the UK and the Republic ofIreland. It also supplies to charities such as the PDSA and the RSPCA.Animalcare's focus is within the growing companion animal sector (cats, dogs,horses and other small animals) with a presence in parts of the livestock andfood production animal sector. Animalcare has an established UK sales force that promotes its range ofpharmaceutical and other veterinary products to veterinary surgeons in the UKand Republic of Ireland. On the whole does not sell the products directly to theveterinary surgeons; it encourages them to order from their veterinarywholesaler who stocks and supply Animalcare products as well as other brands.The Directors consider that building and maintaining these customerrelationships is therefore key to the Animalcare business. Animalcare has established a successful track record of managing productslicensed from other manufacturers. The business has recently begun to expand itsown intellectual property benefiting from a range of measures taken to promotethe development of veterinary pharmaceuticals and broaden their geographical usewithin the EU. Animalcare has been wholly owned by the Genus plc group since 1999. TheDirectors understand that Animalcare has not been a core part to Genus strategyfor some time, and has operated with tight cash constraints. The Directorsbelieve Animalcare represents a robust platform from which Ritchey can grow anddevelop a broader European veterinary supply business. Products and Services All the manufacturing of Animalcare's products is outsourced. It hasapproximately 1,400 items in its established product range across the followingbroad categories: idENTICHIP IdENTICHIP is a microchip, with its own unique identification number, andelectromagnetic coil contained in a capsule the size of a grain of rice. It isimplanted into the nape of an animal's neck in a quick and painless manner. Thechip remains inactive until it is scanned by a special RFiD scanner. Onceimplanted into an animal it is a permanent means of identification throughoutthe life of the animal. idENTICHIP was introduced in 1989 as the first UK animal identificationmicrochip and remains the market leader (the Directors estimate it has a 33 percent market share) due to its patented innovations such as its anti-migrationcollar (which ensures that the chip does not move around the body followingimplant) and temperature reading abilities (which provides and efficient,non-invasive way to check a pets temperature). There are now over two millionanimals with idENTICHIP in the UK. The product is imported from the US and is directly sold by the Animalcare salesforce in the UK and Republic of Ireland for companion animals, including horses,under an exclusive distribution agreement. Pharmaceuticals Animalcare sells an established range of over 40 proprietary branded veterinarylicensed pharmaceuticals divided into four main categories: (1) antibiotics, (2)analgesics and anaesthetics (3) vitamins, and (4) speciality pharmaceuticals.The Directors believe that the quality, both of its pharmaceutical products andtechnical support, is a major strength. Animalcare is actively developing new products to add to its range in order tooffer its customers a wider range of effective therapies discussed morethoroughly in the paragraph headed "New Product Development" below. Aqupharm Intravenous Infusions and accessories Aqupharm was the first veterinary licensed intravenous fluid range and is stillthe market leader for the treatment of dehydration and shock in cats and dogs.The Aqupharm fluids range is complemented by an array of fluid therapyaccessories including drip poles, infusion pumps, catheters and giving sets. Thecombined marketing of the range of fluids and accessories is a profitablesegment for Animalcare and one in which the Board believes there is scope forfurther development. Animalcare supplies the above products directly to veterinary wholesalers andmarkets the products directly to veterinary practices through a team of 11 staffoperating in the UK and Republic of Ireland, with idENTICHIP, locate anddatabase services sold directly by Animalcare. Other Animalcare also sells an extensive range of hygiene consumables, traumamanagement products, veterinary equipment and instruments includingorthopaedics, diagnostics, instrumentation and theatre equipment, and a widerange of pet healthcare products. Database Services Once an animal has an idENTICHIP implanted, its unique identification number isregistered by Animalcare on Anibase, which currently contains 2.5m registeredanimals. Animalcare generates revenues every time an entry is amended by the petowner. Animalcare uses the database to sell the proactive pet location service,Pet Locate, for missing pets, and provides targeted pet insurance offerings inaddition to small scale use by third party services. The Directors believe that there are other potential commercial uses andapplications for this data. Insurance In conjunction with Pet Protect Limited (a subsidiary of Domestic & Generalplc), Animalcare provides a variety of pet healthcare policies providinginsurance cover for vet's fees. Animalcare is able to utilise its Anibasedatabase to exploit this market segment. Animalcare receives commission on newpolicies taken out by a member of the public as well as repeat commission onrenewed policies. New Product Development Animalcare has taken advantage of the harmonisation of licensing regulationswithin the EU which enables regulatory dossiers developed for the approval of aproduct in one EU member state to be used in support of registration of the sameproduct in other EU member states. It has established a development pipeline forgeneric veterinary pharmaceutical products to serve the needs of its coremarkets in the UK and Republic of Ireland whilst at the same time registeringthe same products for distribution in other key markets of the EU. The Directorsbelieve that the large number of veterinary medicines coming out patent andlosing regulatory data protection linked to the harmonisation of veterinarymedicine regulation within the EU will provide Animalcare with a significantopportunity to expand its business and intellectual property base. In developing this area, management intend to specifically target those marketswhere they consider competition to be weak or unlikely to enter. Europeanpartnerships are expected to provide Animcalcare with a number of advantages,including a division of costs and the ability to pursue a number of new productsat any one time thereby spreading risks of failure. Animalcare currently has four major drug development programmes in late stagedevelopment and another five in the early evaluation stage of development allbased around its core therapeutic areas of cardiovascular, analgesia/sedation,anti-infectives and the central nervous system. The projects in late stage development are: Project A - Benazecare Animalcare has obtained a Marketing Authorisation ("MA") for a generic versionof Benazepril, a treatment for hypertension (high blood pressure) andcardiovascular disease in dogs. Management estimate an addressable market, basedon sales of the incumbent product, of £6.6 million in Europe and is confident ofgaining a foothold in this market through its existing sales force and throughmarketing and promotions. Project B - Aqupharm Large Animal This is a formulation of a 5 litre pack size of the Aqupharm fluids range, forthe treatment of large animals such horses and cattle. This has completed itsassessment by the Veterinary Medicines Directorate in the UK and receivedapproval in September 2007. Project C - "Poppy" Poppy is a morphine-derived analgesic for post operative pain in cats and dogswhich is intended to be introduced in eight EU territories. Management believethey could benefit from first mover advantage in Europe as no similar product iscurrently approved for marketing. Pain management is a growing area in theveterinary field with an increased consciousness of the issue amongst veterinarysurgeons. Management estimate the size of the UK market for this product to bearound £1.75 million. Project D - "Gouda" Application for an MA under the Decentralised Procedure in eight EU memberstates for the generic version of a widely used beta-lactam antibiotic has beenmade and approval is expected in early 2008. Distribution in certain marketswill be managed by both Animalcare and a Dutch partner. Management estimate thesize of the UK market for this product to be around £5.1 million. Regulatory framework The development and sale of veterinary medicines within the EU occurs within awell controlled and regulated environment. EU Directive 2001/82/EC (as amendedby Directive 2004/28/EC) established the legal framework for nationalauthorisations issued by the regulatory authorities of the Member State. CouncilRegulation 726/2004 replaced Council Regulation 2309/93 which originallyestablished the European Medicines Agency and the Centralised Procedure. In addition to the normal protections afforded to medicines and veterinarymedicines by appropriate patents the registration data files relating tospecific dosage forms of veterinary medicines in the EU are also afforded 10years data protection the data of the grant of the first Marketing Authorisationfor any use within the EU. This harmonised regulatory framework not only provides robust initial protectionand easier EU wide registration to proprietary veterinary medicines but is nowproviding the mechanism by which they can be challenged more quickly andeffectively on a wider scale once the protected periods have elapsed MARKET OVERVIEW The animal healthcare market for biological, anti-infectives and otherpharmaceuticals was estimated to be worth in excess of $9.45bn in 2006. The keymarkets are America (c.35 per cent), Western Europe (c.30 per cent) and the FarEast (c.16 per cent) (Source: International Federation for Animal Health). The Companion Animal Market The companion animal market has been growing in its significance to the overallanimal health market. The National Office of Animal Health ("NOAH") estimatethat the total market for authorised animal medicines in the UK was worth £410million in 2006. Around 55 per cent of this was spent on the companion animalgoods sector on which Animalcare is focused. This expenditure on companionanimal goods has increased from 47 per cent of expenditure on animals in 1999.The Directors believe that the relative growth in expenditure has been broughtabout by a number of factors such as: * continued advancement of medical science knowledge; * new product development has historically been a significant contributor to growth; * demographic factors and rising life expectancy of companion animals; * an increasing propensity by pet owners to spend on animal healthcare; and * increasing take up of insurance products. The Directors believe that this growth is set to continue. Veterinary Practices The market is highly fragmented with around 90 per cent of the total 3,932practices in the UK being small independents (Source: Royal College ofVeterinary Surgeons Annual Accounts 2007). The top five groups have a combinedmarket share of 6 per cent (by number of practices) although the trend in recentyears has been a reduction in mixed animal practices, with a polarisation toeither small animal or large animal only. UK Agricultural Market Ritchey's key agricultural markets have been difficult in recent years due tocompetition from low cost overseas producers, chiefly South America and NewZealand, the ban on livestock exports following the 2001 Foot & Mouth outbreakand the reduction in subsidies due to the review of the EU Common AgriculturalPolicy. Whilst the economics of beef production remain challenging, recent priceincreases have transformed the profitability of the dairy industry. Furthermore,competition for sheep production from New Zealand looks set to diminish infuture years as New Zealand farms switching from sheep to more profitable dairy. GROWTH STRATEGY AND OPPORTUNTIES FOR THE ENLARGED GROUP The cornerstone of the Group's strategy will be to focus on building leadingpositions in premium high value products distributed via established channels tothe livestock and companion animal markets. The Directors also believe that dueto the fragmented nature of the market significant consolidation opportunitiesexist and therefore the Group intends to seek complementary acquisitions at theappropriate time. In addition the Group intends to enter new geographies bydeveloping Animalcare's European distribution capacity and by seeking productswith foreign Marketing Authorisations for distribution in the UK. The Directors intend to pursue this strategy by exploiting the followingopportunities available to the Enlarged Group: Organic opportunities From its core identification business Ritchey has expanded its product range,much of which is now third-party sourced. The Directors believe there arefurther opportunities to develop this facet of the business. The Company willlook to increase market share of existing products by working more closely withmajor customers and to introduce new products to complement the existing rangefor sale through the existing customer base. The Directors consider that thesupply of other identification products, primarily for Health & safety and assetmanagement purposes. Has considerable growth potential. Strengthen the Group's current product range in the UK through the introductionof new, independently developed generic products Historically Animalcare either acquired distribution contracts for out ofpatent, generic products from third party suppliers or, for a limited number ofproducts, obtained generic licences for which it outsourced production. Over thelast three years, Animalcare has pursued a different strategy of sourcing itsown veterinary medicines that are about to come out of patent, building apan-European regulatory dossier and obtaining its own marketing authorisationsin important European markets. Animalcare sells or markets over 40 licensedproducts and owns a total of 34 trade marked brands, four new productsapplications at an advanced stage of development and a further pipeline ofproducts at an early stage of development. Animalcare aims to be a profitable niche player in the veterinary suppliesmarket, concentrating on key segments of the companion animal sector, developingits own generic medicines, partnering with low cost producers and, as available,developing proprietary medicines. Regulatory Changes Historically, both facets of the Enlarged Group have benefited by responding tochanges in regulation. For example the outbreak of BSE and Foot & Mouth led tothe introduction of obligatory tagging of cattle and sheep whilst theintroduction of tighter controls on veterinary medicines boosted demand forAnimalcare's products. Whilst the introduction of electronic tagging remains uncertain, the Directorsbelieve that such a move would create a significant opportunity, building on allthe expertise of the Enlarged Group. Synergy benefits Whilst not a significant factor driving the rationale for the Acquisition, theDirectors expect that the Acquisition will lead to some synergistic benefits,for example the use of Travik for the production of veterinary lubricants anddisinfectants. The Directors also anticipate deriving benefits from co-marketingthe Group's two identification products, idENTICHIP and Petcode. idENTICHIP is arelatively higher value offering and the Directors envisage that the addition ofPetcode at a lower price point would afford the combined offering greater scopefor market penetration, particularly in the charities market where Animalcaredoes not currently focus. In addition the Directors have identified the futurepotential to reduce the number of locations from which the Enlarged Group willoperate. Supply chain Consolidation by Ritchey's agricultural retailers should provide the Group withopportunities to grow volumes and cross-sell other products. Improve commercial exploitation of the existing product range The two facets of the Enlarged Group have traditionally focused marketing andsupply efforts towards two distinct customer bases, namely veterinary suppliersand farmers. The Enlarged Group will have marketing and distribution systems inplace to improve the commercial exploitation of the existing product range. Develop the Company's operations outside the UK, primarily in Europe Animalcare has sought to broaden its product range and the end markets to whichit distributes. It has achieved this both through the sale of its existingproducts in other European jurisdictions and by seeking out foreign productswith marketing authorisation in their domestic markets to license and distributein the UK. Animalcare is establishing distribution agreements for some of itsproducts in certain markets of the European Union, and has identified severalnew foreign products that it would like to develop. Animalcare has alsoestablished a direct presence in Ireland, with a view to establishing itself inother European markets. Build a collaborative network of partners in key European markets to co-developgeneric products for the EU and potentially other markets. The Directors believe that the partnership model accelerates and expands theproduct development pipeline, whilst at the same time reduces cost and risk.Animalcare is collaborating in three product development consortia with up tothree partners in each consortium. It is the intention that the resultingmarketing authorisations that are hoped to be obtained are exploited by thepartners in their core markets and by distribution partners in non-core markets. Growth through veterinary medicines A large number of proprietary medicines are losing both patent and dataprotection across Europe whilst the availability of generic activepharmaceutical ingredients has improved. The registration of veterinarymedicines in the EU has been simplified and harmonised making for an easierprocess. The Directors believe that a knowledge and understanding exists withinthe management team of Animalcare for this successful model of pan-Europeangenerics in another life science industry to be replicated across the EnlargedGroup. KEY BUSINESS STRENGTHS OF THE ENLARGED GROUP The Directors believe that the combination of Animalcare and Ritchey offers anopportunity for increased growth and value through business expansionopportunities and the application of Ritchey's existing business model. Thefollowing demonstrate how the Directors anticipate extra value can be extractedfrom the Enlarged Group: Greater range of products Ritchey has been exploring diversification into different areas of operation,yet still within the Company's areas of core skills and expertise, in order toachieve sustained growth. The Enlarged Group has significantly more capacity anda wider portfolio of strong brands and so can greatly diversify output,positioning the Enlarged Group favourably for future growth. Greater capacity The Enlarged Group operates with a total of 25,000 square feet of warehouse andover 150 employees and will therefore be able to actively seek a greater numberof contracts of greater volume. Greater flexibility and efficiency in output Having a greater range of products at its disposal, the Enlarged Group will beable to customise supply schedules and concentrate output on particular areaswhen efficient to do so in order to boost overall productivity. Diversified customer base The majority of Ritchey's customers are private farmers whereas of Animalcareserves primarily are veterinary wholesalers and practices. In markets wherecustomer demand for goods is potentially highly susceptible to events such asdisease epidemics (e.g. foot and mouth disease) this diversification of thecustomer base should serve to mitigate some of this risk. Strong management team The Directors and senior managers have considerable experience in the animalhealth sector. Key members of the management team have experience insignificantly larger organisations which will prove useful in integrating thetwo businesses into the Enlarged Group and in implementing the Enlarged Group'sgrowth strategy. As at 30 June 2007, Ritchey had 108 employees and Animalcare had 50 employees. REASONS FOR ACQUISITION, ADMISSION AND THE PLACING The key reasons for seeking Admission at this time are as follows: 1. to provide funding for the Acquisition; 2. to provide working capital for the Enlarged Group's future organicgrowth; 3. to establish a more diverse shareholder base in order to facilitatefuture acquisitions through the use of equity; and 4. to provide liquidity which, in conjunction with its Share OptionSchemes, will help to motivate and retain key senior employees. 5. to raise the profile of the Enlarged Group DIRECTORS The Board at Admission comprises the following: James Lambert (aged 49) - Non-executive Chairman James was appointed Chairman in October 2005 having been a non-executivedirector since 2003. He started at Richmond Foods in 1998, leading a series ofacquisitions to make Richmond the largest ice cream manufacturer by volume inthe UK. He has a strong track record of making money for shareholders. Richmondexited the stock market in April 2006 when it was bought by Oaktree CapitalLimited for £176 million and merged with Roncadin. James is now running theenlarged group which is one of the largest in Europe. Simon Riddell (aged 46) - Chief Executive Appointed to the Board of Ritchey in July 2005, Simon has extensive backgroundin marketing consumer products. A graduate in Land Economy from Cambrideg, hesubsequently spent 10 years at Procter & Gamble, becoming a Marketing Directorin the Babycare division. Prior to joining Ritchey in July 2005, he spent fiveyears with Mayborn plc managing the Sangenic nappy business since acquired by3i. Stephen Wildridge (aged 51) - Managing Director - Animalcare Stephen spent 16 years with Rhone-Poulenc (now Sanofi-Aventis) in a variety ofSales, Marketing and Strategic Planning and General Managing roles encompassingagro-chemicals, animal health and animal nutrition. Subsequently, he spent fiveyears with Monsanto as General Manager of Operations for Northern Europe. He wasappointed Managing Director of Animalcare in April 2003 and developed thestrategic plan for the business and the new product development programme. Hecurrently sits on the board of the National Office for Animal Health (NOAH). Stephen Hall (aged 54) - Financial Director Stephen qualified as an ACCA chartered accountant in 1979 and an FCCA in 1986.He has commercial accounting experience in several industries including theElectricity Supply Industry, Timber and Waste Disposal in addition toAgriculture. Following admission, Stephen has taken up the role of Commercial Director forthe Enlarged Group responsible for managing legal, IT and purchasing. Geoff Rhodes (aged 62) - Non-Executive Director Geoff has a background in farming and agriculture and was educated at AskhamBryan agricultural college. Following a spell at agricultural machinerymanufacturer British Lely, he joined Ritchey Tagg as general manager in 1972. Hewas Managing Director of Ritchey Tagg (now Ritchey plc) from 1972 until heretired in 2005 continuing as a non-executive Director of the Company. Nick Downshire (aged 48) - Non-Executive Director Nick Downshire has been a director of Ritchey since 1998. He trained as aChartered Accountant with Touche Ross before transferring to the corporatefinance department where he worked for three years on acquisitions, flotationsand new ventures. Following this he worked for 13 years at Scheduling TechnologyGroup Limited, a venture capital backed international software company, becomingFinance Director up until the sale of the business in 2001. He currently managesan estate in Yorkshire and also holds non-executive directorships of a hotelbusiness, an RFID company, a Lloyd's underwriting company and Farmway, anagricultural products supplier. The Board has embarked upon a campaign to identify potential candidates with therelevant skill set, experience and knowledge to fulfil the role of Group FinanceDirector and intends to make a suitable appointment as soon as prcaticable. SUMMARY FINANCIAL INFORMATION ON THE ENLARGED GROUP the results for Ritchey for the last three financial years to 30 June 2007 areset out below. Year ended Year ended 30 Year ended 30 June 2005 June 2006 30 June 2007 £'000 £'000 £'000 Turnover 7,555 7,852 8,286Gross profit 4,213 4,378 4,782EBITDA 563 602 813Net Assets 5,685 5,818 6,137Net cash from operating 200 646 985activities the results for Animalcare for the 12 months to 31 March 2005, the 15 months to30 June 2006 and the 12 months to 30 June 2007 are set out below. Year ended 15 months 31 March 2005 ended 30 June 2006 Year ended 30 June 2007 £'000 £'000 £'000 Turnover 6,525 8,589 7,596Gross profit 3,243 4,367 3,759EBITDA 1,706 2,121 1,618Net Assets 1,019 (259) (96)Net cash from operating 731 1,141 1,294activities DIRECTORS' SHAREHOLDINGS Immediately after Admission the following Directors will be interested in theissued Ordinary Share capital of the Company. Percentage Number of of Issued Ordinary OrdinaryName Shares Share Capital J S Lambert 803,373 4.07 S F Riddell 732,727 3.71 S Hall 151,780 0.77 G C Rhodes 696,500 3.53 N Downshire 1,461,809 7.40 S Wildridge 444,000 2.25 TOTAL 4,290,189 21.73 AIM RULE 26 The Company's website, the content of which complies with AIM Rule 26, is at www.animalcaregroup.co.uk END This information is provided by RNS The company news service from the London Stock Exchange