Animalcare Grp Regulatory News (ANCR)

Animalcare Group plc

("Animalcare" or "the Company")

Full Year Results

Animalcare Group plc ("the Group" or "Animalcare"), a leading supplier of veterinary medicines, announces results for the year ended 30 June 2011.

Following the disposal of Animalcare's livestock businesses during the year the comparatives below are restated to show discontinued operations separately and so give more accurate understanding of the underlying business performance.

Financial Highlights

·; Revenue from continuing operations up 5.4% to £11.8m (2010: £11.2m)

·; Underlying operating profit from continuing operations* up 17.3% to £3.05m (2010: £2.60m)

·; Underlying profit before tax from continuing operations* up 21.0% to £3.00m (2010: £2.48m)

·; Underlying basic earnings per share* up 5.4% to 11.8p (2010: 11.2p)

·; Final dividend of 3p bringing total dividend for the year of 4p (2010: 3p)

·; Debt free with cash balances of c £1.2m (2010: net debt of c. £2.9m)

* Underlying measures exclude, where applicable, amortisation of acquired intangibles, impairment of goodwill, fair value movements on interest hedging, impairments to current and non-current assets and other charges relating to Group reorganisation.

Operational Highlights

·; Divestment of the Livestock Division with focus now fully on the Companion Animal Division

·; Launch of four new generic veterinary products during the year

·; Good pipeline of new products for launch later in the year

·; Reorganisation of the structure of the UK sales force

James Lambert, Chairman of Animalcare said:

"During the past financial year and now in the current one, there has been little or no growth in the veterinary medicines market in the UK. However, with the launch of several new veterinary drugs in the first quarter building on those introduced during the last financial year, and with the reintroduction of Buprecare, your Board believes that we will continue to grow the business markedly faster than the market overall and increase our market share . Trading in the year to date has started in line with your Board's expectations."

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CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 30 June 2011

Introduction

The Group has been operating for nearly a full year uniquely as a companion animal veterinary supplies business, having divested itself of the agricultural supplies businesses of Ritchey, Fearing and Travik in the first quarter of the financial year. This has allowed your Group to focus and concentrate all its resources on growing the more profitable and stable veterinary medicines and Identichip ranges. We can now plan for acceleration in the introduction of new licensed pharmaceutical products for our growing veterinary medicine portfolio. These divestures, combined with continued strong cash generation in the companion animal supplies business, means that your Group is debt free at the year end; indeed it had cash balances of c£1.2 million at 30 June 2011 as opposed to net debt of c£2.9 million at the previous year end.

Financial Trading

In a flat veterinary market our "new" Animalcare business achieved record sales, margins and profits during this financial year. Sales increased by approximately 5% and margins by 1%, whilst overheads were well controlled being 1% lower than last year. This has meant that the underlying fully diluted earnings per share from the continuing operations have risen from 8.5p to 11.2p, a full 31%. This is a good performance. Unlike previous years, there are few exceptional or other items during this financial year. The Company announced, in our pre-close trading update issued in July, that following an extended period of poor supplies performance that had already damaged sales in the 2010-11 financial year Recipharm, the suppliers of one of our important veterinary medicines Buprecare, had closed their sterile production unit in the UK and had ceased supply with immediate effect from 30 June 2011. As we had already taken steps to introduce a new supplier, we expect that we will be reintroducing Buprecare to our range during the last quarter of the coming financial year. The expected loss of turnover at the time was estimated to be up to £450K for 2011/2012. The Board is confident that once supplies are available again we can soon win back lost sales and market share and the temporary loss of supply will not have a long term financial effect on your business.

Dividend

With the increase in cash and the underlying cash flow of your business, the Company paid its maiden interim dividend of 1.0 pence per share on 6 June 2011. With this in mind your Board is recommending a final dividend of 3.0 pence per share. This total dividend for the year of 4.0p (2010: 3.0p) represents an annual increase of 33% and is covered 2.9 times by earnings. The dividend is subject to shareholders' approval at our Annual General Meeting to be held on 28 October 2011 and is proposed to be paid on 7 November 2011 to shareholders on the register on 14 October 2011.

The Board

During the financial year Peter Warner joined the Board as Chief Financial Officer. Dr Iain Menneer, the Director of Marketing of Animalcare Limited, also joined the Board on 1 July 2011. I welcome them both as they will help to contribute to the growth of your business enormously. During the course of the year Geoff Rhodes, one of the original founders of the Ritchey business, resigned from his role as non executive director. I wish to record the appreciation of the Board and my own personal thanks to Geoff for his service to the company over many years. It is intended that a new non executive director with experience in life sciences businesses will join your Board this calendar year. On behalf of your Board I would like to thank all the employees, customers and suppliers that have helped make the financial year such a success.

Prospects

During the past financial year and now in the current one, there has been little or no growth in the veterinary medicines market in the UK. However, with the launch of several new veterinary drugs in the first quarter building on those introduced during the last financial year, and with the reintroduction of Buprecare , your Board believes that we will continue to grow the business markedly faster than the market overall and increase our market share . Trading in the year to date has started in line with your Board's expectations.

James Lambert

Chairman

CHIEF EXECUTIVE'S REVIEW

FOR THE YEAR ENDED 30 June 2011

Introduction

The past year has seen significant change in the structure of the Animalcare Group. After a careful strategic review we divested the Ritchey, Fearing and Travik businesses that comprised the old Livestock Division. As previously reported, the underlying reason for the sale of these businesses was the clear recognition that the time and resource required to revitalise the Livestock Division in a market sector that was showing few signs of sustainable, profitable growth could be better focussed and used in our rapidly growing and profitable Companion Animal Division.

Our focus now is fully on the Companion Animal Division with its strategy of growth through the introduction of branded generic versions of selected veterinary medicines in key markets in Europe. This strategy is supported by the distribution in the UK of other professional goods and services to veterinary professionals where we have or can build a sustainable complementary product offering. The Companion Animal Identification and Infusion Accessories ranges are good examples of this approach.

Market Overview

The National Office of Animal Health, NOAH, the trade association which represents approximately 90% of the distributors of veterinary medicines in the UK, in its latest published figures for the year ended March 2011 announced that the ex manufacturer sales, net of all discounts of all veterinary medicines, were flat at £467.2 million (2010: £469.0 million) and 2.1% up on 2009 (£452.0 million). In comparison, sales of Animalcare veterinary medicines in the UK in the financial year grew by 7.6%. Sales of our established range of veterinary medicines in the UK grew by 5.6% whilst UK sales of more recently launched generic veterinary medicines grew by 22.7%. This result is all the more pleasing in the light of the supply problems we had throughout the year with one of our key brands Buprecare. These supply problems ensured that we could not achieve the growth targets we set for the Buprecare brand in the UK but we endured a slight reduction in sales revenue of 2.1%. A programme is in place to introduce an alternative supplier of Buprecare ampoule during the second half of the financial year.

Sales via our distribution network in Europe were 4.0% lower than the previous financial year. Although we experienced strong sales in some markets, notably Germany, this was however offset by the loss of our distributor in Belgium and a particularly weak market in Spain. We are in discussions with an alternative distributor for our products in Belgium and will give our other European markets more additional focus in the coming year.

Sales in the Companion Animal Identification products group were strong despite the market experiencing increased competitive pressure on prices. The amalgamated sales of all other product groups were ahead of expectations and overall market growth as our continued penetration with new veterinary medicines presents opportunity to sell other parts of our range.

During the course of the year we continued to develop the sales of Enrocare, a later generation fluoroquinalone antibiotic and Phenoleptil, a treatment for epilepsy in dogs, which were launched at the end of the final quarter of the previous financial year. We launched Florgane, a patented formulation of a well established cattle antibiotic; Anivac, a vaccine against viral haemorraghic disease ("VHD") in rabbits; and Sedastart and Sedastop, a sedative and reversing agent used in cats and dogs. Whilst the sales of the two large animal products Enrocare and Florgane, have been slow to take off additional product introductions in the autumn will give renewed impetus to these products. In contrast the sales of Anivac in particular but also Sedastart and Sedastop have been very good, comfortably surpassing the early sales targets set for them. We believe this momentum will be sustained.

Overall Animalcare Group grew revenue from continuing operations 5.4% in the year to £11.8 million (2010: £11.2 million) ahead of market rates. The improvement in mix of products in the range continued, and despite the pressure on selling prices seen in some product groups, overall gross profit grew by 7.3% to £6.4 million (2010: £6.0 million). Although we again strengthened the UK sales team during the course of the year, cost savings as a result of the divestitures and good overall cost control saw the administrative expenses for continuing operations decline to £3.2 million (2010: £3.5million). Underlying operating profit for continuing operations once more saw very good growth in the year of 17.6% to £3.1 million (2010: £2.6 million).

Future Developments

We anticipate that the market for companion animal veterinary products in UK and in our target European markets will remain difficult in the coming year. We are however confident that through the efficient execution of our strategy of the registration, marketing and sale of selected veterinary generic medicines we will continue to deliver rates of growth significantly better than the market.

It was our intention to launch four new generic veterinary medicines during the course of the year and this was achieved through the launch of Anivac VHD, Florgane, Sedastart and Sedastop. As the new veterinary generics launched in the previous year's approach the mature market share targets we set for them in the UK, we will continue to develop the recently launched products. At the same time we already have finished packed goods on hand for two new products that we will launch to the market in the first half of October along with a third complementary product. These will be supplemented by a very important addition to our range that is finishing its regulatory passage in September. It will be launched in the UK and with our European partners in the coming months. Our knowledge of our existing new product development pipeline and that of our European development partners is such that, for the foreseeable future, we can be confident that we can continue to bring our target of four new products to the market each year. At the same time the focus and concentration that the evolved business structure brings will allow us to improve the quality and profitability of our future development pipeline through the introduction into the veterinary medicines we develop protected technology and innovation. We are already working in some novel areas of formulation development that have significant commercial promise.

We have already reorganised the structure of our UK sales force and we will continue to develop its capabilities. We are in the process of recruiting to strengthen other areas of the business and these, along with the addition of Iain Menneer to the Main Board as Director of Marketing and our anticipated move to new premises during the course of the year, will see us well placed to perform well in what may be a difficult year. Importantly it will lay the foundations of the next steps in the development of Animalcare.

Stephen Wildridge

Chief Executive Officer

FINANCIAL REVIEW

Group Overview

The Group disposed of its entire livestock division during the year, but the marginally profitable nature of the livestock division and the improving profitability in the continuing companion animal division saw the underlying profit after tax rise to £2.39million (2010: £2.22m).

Earnings before interest, taxation, depreciation and amortisation ("EBITDA") for the year was £3.39m (2010: £3.13million), this improvement was despite the loss of £0.09million on the disposal of the livestock businesses.

Net financing costs for the year ended 30 June 2011 were £0.05 million (2010: £0.15 million), reflecting the repayment in full of Group borrowings.

The proceeds of the business disposals and strong cash flow from operations enabled us to repay in full the bank loans which were £4.46million at 30 June 2010. As a consequence, the Group moved from a net debt of £2.89million at 30 June 2010 to net funds, being all cash on hand, of £1.18million at 30 June 2011.

Basic underlying earnings per share were 11.8p (2010: 11.2p). Basic total earnings per share were 11.5p (2010: loss of 5.2p), the prior year number including the impact of exceptional write downs in the livestock division. Fully diluted total earnings per share were 11.4p (2010: loss of 5.2p).

The final dividend of 3.0 pence for 2010 paid in December 2010 was followed by a maiden interim dividend of 1.0 pence per share paid in June 2011.

Continuing Operations

Revenue in the year was £11.83million (2010: £11.22million) and gross profit was £6.39million (2010: £5.96million), representing growth of 5 and 7 per cent respectively. As previously, the main driver for this was the 8 percent growth in licensed veterinary medicines, but revenue from services of £0.99million (2010: £0.88million), principally in animal identification, also grew by 13 percent.

Underlying gross profit for the segment increased marginally at 54.0 per cent of revenue against 53.1 per cent in 2010, reflecting the revenue growth in our higher margin product groups.

Underlying distribution costs rose to £0.29million (2010: £0.26million) as a consequence of increased sales volumes and higher fuel costs. Underlying administrative expenses fell to £3.05million (2010: £3.10million) partially due to lower spend on new product development than in 2010. As noted in previous reports this expenditure tends by its nature to occur in an irregular pattern dependent on development programmes. Underlying operating profit from continuing operations rose as a consequence to £3.05million (2010: £2.60million).

The effective tax charge for the year for continuing operations was 23.1% (2010 - 31.2%), reflecting the effect of adjustments to the prior year's corporation tax expense.

EBITDA for the continuing operation was £3.27million (2010: £2.61million).

Disposals

On 17 September 2010 the Company sold the business and assets of its trading division, Ritchey, and the shares of its wholly owned subsidiary, Fearing International (Stock Aids) Limited for cash. The expected gross consideration was £3.25million, based on the audited accounts for these businesses at 30 June 2010 and subject to completion accounting. The Group received £0.52million as working capital inflows prior to the sale and £2.52million in cash from the purchaser, which included an agreed reduction in the consideration of £0.20million in respect of unanticipated difficult trading conditions and profit shortfall in a key new product. The costs of disposal were £0.09million, producing a loss before tax of £0.12million. All the consideration was received during the year.

On 19 November 2010 the Group sold the trade and assets of its loss making subsidiary, Travik Chemicals Limited (now Naychem Limited), for a total consideration of £0.07million net of costs. The buyer of the business subsequently purchased the freehold of Travik's Newton Aycliffe property for £0.23million on 24 June 2011. These disposals produced a profit before tax of £0.03 million.

The discontinued operations contributed an underlying profit after tax of £0.15million (2010: £0.50million) from trading during the period prior to disposal.

Exceptional costs and other items

Other items excluded from underlying results are amortisation of acquired intangibles £0.12million (2010 : £0.12million) and fair value movements on interest rate hedging £nil (2009 : £0.04million).

There were no exceptional costs during the year. Full details of exceptional costs during the previous year, which comprised impairments and other costs related to the Ritchey and Fearing businesses, charges relating to Group reorganisation and impairments and other costs related to Travik Chemicals can be found in note 4.

Cash Flow

Net cash flow from operating activities was £2.15million (2010: £1.94million). Working capital showed an outflow of £0.50million (2010: £0.54million). A reduction in trade receivables of £0.57million, due principally to reductions in Livestock trade debtors prior to disposal of the businesses was offset to some extent by strategic increases in inventories in continuing operations.

Income taxes paid were £0.80million (2010: £0.55million), reflecting the increase in the Group's taxable profits. Interest payments fell to £0.11million (2010: £0.27million) due to the settlement of the Group's loans and interest rate swap during the year Net cash flow from operating activities was £2.15million (2010: £1.94million).

Capital expenditure in the continuing operation was £0.15million (2010: £0.35million), due to lower expenditure on intangible assets. Share proceeds generated £0.18million (2010: £0.17million) with the issue of 326,195 ordinary shares in respect of approved employee share options. Dividends of £0.81million (2010: £0.61million) were paid in the year.

 (*)Underlying results are before the effect of exceptional costs and other items disclosed in note 4.

Peter Warner

Chief Financial Officer

1. Basis of preparation and going concern

Basis of preparation

The Group and Company financial statements have been prepared and approved by the directors under the historical cost convention, except for the revaluation of certain financial instruments, in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("adopted IFRSs") and the Companies Act 2006 as applicable to companies reporting under IFRS. They have also been prepared in accordance with the requirements of the AIM Rules.

This announcement has been prepared based on accounting policies which are consistent with those described in the Annual Report and Accounts for the year ended 30 June 2010. Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRSs, this announcement does not itself contain sufficient information to comply with IFRSs.'

Discontinued operations

The Livestock businesses were disposed of during the year and represent a discontinued operation as defined in IFRS 5 Non Current Assets held for sale and Discontinued Operations. As a result the Statement of Comprehensive Income has been restated as if the Livestock businesses had been discontinued from 1 July 2009 (see note 2).

Going concern

Following the sale of the Group's livestock businesses in the current year for cash, on 31 March 2011 the Group repaid the balance of its outstanding loan facility, which stood at £4.46millon on 30 June 2010. The Group has an undrawn overdraft facility of £100,000 which is available for general corporate and working capital requirements. At 30 June 2011 the Group had cash on hand of £1.18 million (30 June 2010: £1.56 million), leaving it in a net funds position. In the directors' opinion, the Group's working capital requirements can be met from operating cash flow.

Overall, the directors believe the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current committed facilities.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 2. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - DISCONTINUED OPERATIONS

5. REVENUE AND OPERATING SEGMENTS

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker to allocate resources to the segments and to assess their performance. The Chief Operating Decision Maker is considered to be the Chief Executive Officer of Animalcare Group Plc.

The Group comprised two segments, Companion Animal and Livestock (discontinued).

The Chief Operating Decision Maker receives and reviews underlying segmental operating profit.

Intersegment transactions are undertaken in the ordinary course of business.

The Board considers that certain items are cross divisional in nature and cannot be allocated between the segments on a meaningful basis. The administrative costs of central group management are presented as unallocated in the following tables, as this entity has trading relationships with companies in both the segments.

Net funding costs and taxation are treated as unallocated reflecting the nature of the Group's borrowing facilities and its tax group.

Each segment is shown net of intercompany transactions and balances within that segment. The eliminations remove intercompany transactions and balances between the segments.

Principal activities were as follows:

The Companion Animal Division supplies and distributes veterinary medicines, identification and other welfare products to veterinary markets; and

The Livestock Division manufactured and distributed livestock identification and welfare products to agricultural merchants, retailers and farmers. Following disposals during the year the whole of the Livestock division is a discontinued operation.

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5. REVENUE AND OPERATING SEGMENTS (continued)

5. REVENUE AND OPERATING SEGMENTS (continued)

9. ANNUAL REPORT

The Group's Annual Report and Financial Statements for the year ended 30 June 2011 were approved on 19 September 2011and are expected to be posted to shareholders during the week commencing 3 October 2011 and will be available to download at its website at: www.animalcaregroup.co.uk and will also be available from the Company's head office at Common Road, Dunnington, York, YO19 5RU.

The financial information set out above does not constitute the Company's accounts for the years ended 30 June 2010 or 2011, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters of emphasis without qualifying their report and did not contain statements under s498(2) or (3) of the Companies Act 2006.