Animalcare Grp Regulatory News (ANCR)

15th October 2014

Animalcare Group plc

("Animalcare" or the "Group")

Full Year Results

Animalcare Group plc (AIM: ANCR), a leading supplier of veterinary medicines, announces results for the year ended 30th June 2014. This year has seen a solid performance resulting in the Group being cash generative, debt free and adopting a clear strategy for growth.

Animalcare is made up of three product groups: Licensed Veterinary Medicines, Companion Animal Identification and Animal Welfare Products.

Financial Highlights:

· Revenues increased 6.3% to £12.9m (2013: £12.1m)

· Underlying* EBITDA up 8.4% to £3.2m (2013: £2.9m)

· Underlying* operating profit up 4.4% to £2.8m (2013: £2.7m)

- Reflecting investments in our infrastructure and people

· Underlying* basic earnings per share increased by 2.9% to 10.8p (2013: 10.5p)

- Reported pre tax profits up 14.7% to £2.7m (2013: £2.3m)

- Reported basic earnings per share up 13.2% to 10.3p (2013: 9.1p)

· Strong, debt free balance sheet with net cash of £3.8m (2013: £3.7m)

· Total recommended dividend increased in line with earnings to 5.5p (2013: 5.3p). Board intention to maintain this policy during investment phase.

*underlying measures are before the effect of exceptional costs and other items

Operational Highlights:

· Strong revenue growth from our Licensed Veterinary Medicines group, up 9.5% to £7.9m (2013: £7.2m)

· Companion Animal Identification group sales and marketing strategy started to deliver with revenue growth of 7.8% to £2.4m (2013: £2.2m)

· Animal welfare products has seen top line decline, with margin improvement in line with management intention to streamline lower value products

· Three new products launched this year

· Investment in infrastructure and senior management team to drive future growth

· IT investment creating a more robust infrastructure to business and Identichip database

Iain Menneer, Chief Executive Officer of Animalcare, said: "These are a solid set of results which show good overall growth. It is pleasing that with our strong cash position we will be able to fund our investment programme while maintaining the dividend policy. Our investment in infrastructure and people, as well as our pipeline of enhanced generic products, provides a strong platform for a business that is already debt free and cash generative, and hence is well positioned for future growth."

Notes to editors

Animalcare is a leading veterinary sales and marketing company based in York with 57 employees including a field sales force of 16 representatives selling to all veterinary practices around the United Kingdom.

Animalcare has developed a range of generic veterinary medicines and animal identification products primarily to companion animal veterinary markets.  

Animalcare operates in three product areas:

· Licensed Veterinary Medicines - a range of branded veterinary licensed pharmaceuticals sold to veterinary professionals in the UK and selected markets in Northern Europe. The range can be divided into four main categories; antibacterials, anaesthetics and analgesics, Aqupharm intravenous fluids and vitamins & speciality pharmaceuticals.

· Companion Animal Identification - Identichip is the pioneering microchip identification system in the UK. Animalcare also owns and operates the Anibase database; together the market leader in electronic identification for pets in the UK.

· Animal Welfare Products - a range used by veterinary professionals in the diagnosis and care of their patients, for example intravenous infusion accessories, ophthalmic instruments, hygiene solutions and bandages and dressings.

Chairman's Statement

Introduction

Animalcare is made up of three product groups: Licensed Veterinary Medicines, Companion Animal Identification and Animal Welfare products that are sold mainly through veterinary practices. I am pleased to announce that all three product areas have continued to show solid performance during the 2014 financial year. The Licensed Veterinary Medicines group, which is the main focus of our investment, has grown strongly in the current year by 9.5%.

Financial Trading

Group revenues increased by 6.3% from £12.1m to a record £12.9m, driven by increasing our market share in the Licensed Veterinary Medicines market and continuing to grow in the animal identification market. This performance has resulted in pre tax profits increasing by 14.7% from £2.3m to £2.7m and basic earnings per share increased from 9.1 pence per share to 10.3 pence per share, or 13.2%. Year end cash increased by £0.1m to £3.8m, with the decision taken during the year to increase stock levels of certain licensed veterinary medicines with long lead times.

People

Under Chief Executive Iain Menneer's leadership, we invested in increasing the quality and strength of the senior management team to position your Company for much increased product development in future years. I am therefore delighted that we have a new Head of Sales, Director of Business Development and several new colleagues across the business to support their work. This as we announced with our interim results will allow a step change in our ability to bring an increased number of new and important generic veterinary medicines to market from 2016-2017 onwards. This should make a real difference to Animalcare's future prospects.

Dividend

Your Board proposes, subject to shareholder approval, an increased final dividend of 4.0 pence per share (2013: 3.8 pence). With 1.5 pence per share being paid as the interim dividend, this brings the total dividend for 2014 to 5.5 pence per share, representing growth over the prior year of 4%, in line with our underlying earnings.

Prospects

Your Board, I believe, has totally repositioned Animalcare over the past year or so to allow the use of the Company's cash to rapidly grow the business organically from 2016 onwards. We are working to develop a high quality, experienced senior management team to deliver this growth plan. With the new share incentive scheme that has been introduced during the year for both executive directors, the interests of shareholders and colleagues are aligned to deliver an exciting and profitable growth phase for your business.

James LambertChairman

Chief Executive's Review

Introduction

Animalcare has again delivered record sales, up 6.3% to £12.9m, continuing its track record of top line growth.

This result has been achieved against a backdrop of a veterinary market that is very slowly responding to the strengthening economy.

Activities in the period can be split into the following three main areas: revenue delivery, product development pipeline and business infrastructure. I am very pleased with the progress we have made in all these areas.

Animalcare has changed significantly in the last decade and achieved much; as we move into the next stage of the journey the business must change further for it to achieve even more.

The veterinary market is evolving and consolidating; it is imperative therefore that Animalcare develops a new approach too, whilst not losing sight of its core strengths that set it apart from its competitors.

Our objective is to deliver further growth from the current core business and to accelerate that growth with the introduction of enhanced generic veterinary medicines. In response to the number of opportunities available, we have developed a more structured approach for managing and monitoring progress in our development pipeline.

Market Review

Whilst surveys have shown consumers are generally feeling better off now than a year ago, this nascent confidence has been slow to flow through to veterinary practices. Results from a survey carried out annually show that 37% of UK veterinary practices believe that "things are still the same", with 35% saying things had improved and 29% that they had got worse. (CM Research July 2014)

In contrast, according to the latest available data, the pet medicines market reportedly grew by 10.7% for the year ended December 2013 (National Office of Animal Health www.noah.co.uk).

The veterinary industry has seen further consolidation during the period under review on two fronts: veterinary practices and pharmaceutical manufacturers and suppliers.

Listed and private equity backed consolidators have continued to swell their estates with double digit percentage acquisition growth. These key accounts offer an opportunity for Animalcare to negotiate significant revenues and buy-in from the centre; though of course this comes at a cost. Buying groups have also grown during the period, however as this model matures this growth has been mainly in member numbers and inter-group switching rather than number of buying groups. The crowded space has prompted an increasing number of buying groups to seek to differentiate themselves through premium service offerings which gives Animalcare an opportunity to engage more.

There has been a 9% growth in the number of independent small animal practices in the UK over the last three years, with a 25% increase in the number of corporate and charity practices. The number of practices joining a buying group has grown by 74% over the same period (Veterinary Record, January 2014).

The European animal health (AH) sector has experienced unprecedented merger and acquisition activity during the past 12 months, most notably with the sale of Novartis AH to Elanco (Ely Lilly) for $5.4bn. Within the UK, one competitor, Alstoe AH, was purchased by the French company Sogeval, only for the latter to be purchased itself by Ceva Santé Animale (Fr). There are unlikely to be many product acquisition possibilities from this activity but the industry consolidation and distraction does give Animalcare other opportunities in the marketplace as a result.

Business Review

Licensed Veterinary Medicines

Our Licensed Veterinary Medicines product group grew by 9.5% to £7.9m and gross profit by 6.2% to £4.4m representing a strong result against the prior period and in line with the companion animal pharmaceutical market.

The proportion of total Group revenue from veterinary pharmaceuticals has grown again in the year, up almost 2%, to 61.2%. Sales of products from our development pipeline grew in the period and importantly the group of older, lower margin legacy medicines has experienced strong growth too.

The change in sales mix as a result of the strength of our lower gross margin older products has had a modest effect on the overall gross margin of the product group compared to the prior period. The consolidation in our customer base has also meant that margins are under some pressure from the increased buying power.

Our strategy of progress through new products has continued with three launches in the period.

The first, early in the period, was an extension to the range of Phenoleptil tablets, the epileptic treatment for dogs. The addition of 25mg and 100mg tablet strengths to the existing range launched previously and gives veterinary surgeons a range of options to fine tune the dosing of patients. As expected, Phenoleptil sales have been increasing slowly as patients must be transferred very carefully from other therapies.

In January, Animalcare launched Thiafeline, a treatment for hyperthyroidism in cats, a chronic disease affecting an estimated 12% of the UK cat population. Thiafeline is the first generic to be launched in this therapy area in the UK. Sales are growing steadily and we believe there is good potential for the product as hyperthyroidism is under-diagnosed, which gives Animalcare the opportunity to penetrate the existing market and also grow the total market through education and technical support.

The third launch of the year was Marbocare tablets, the associated in-house development of Marbocare injection launched last period. Marbocare contains an antibiotic for the treatment of infections in dogs and cats. Restrictions on the use of antibiotics in production animals are having an impact on their use in companion animals too. Several other generic products were also launched in the year having an impact on the anticipated growth of Marbocare.

Companion Animal Identification

Our Companion Animal Identification group sales and marketing strategy has started to deliver results with revenue growth of 7.8% to £2.4m and gross profit up by 6.0% to £1.7m, an even more pleasing result against the backdrop of uncertainty over new legislation and the Dogs Trust free microchipping campaign through veterinary practices.

Microchip sales grew by 8.2% whilst our database of pet owners, Anibase, has now grown to 4.0 million. The revenues derived from services sold to these owners also grew in line with microchip sales revenues, at 7.1%.

In February 2013, the English Parliament announced that it would be compulsory for all dogs in England to be implanted with a microchip and have up-to-date owner contact details on a database from April 2016 onwards. This was soon followed by the Welsh Assembly announcing the same legislation would be introduced in March 2015 for dogs in Wales. It is already compulsory in Northern Ireland and the Scottish Parliament is reviewing the situation.

At the same time as the English Parliament's announcement the Dogs Trust announced it would fund a million free microchips in a year-long campaign leading up to April 2016.

As a result of this activity the microchip market has seen some price pressure in the short-term.

The lack of clarity and disruption in the market around both announcements has now settled and we better understand how both will be implemented, however uncertainty remains as to what extent owners and veterinary practices will engage in either the legislation or free microchipping campaign respectively.

Animal Welfare Products

We further rationalised some of our lower margin, commoditised lines in the Animal Welfare Products group resulting in a fall in revenue of 3.6% to £2.6m but gross profit increasing by 0.5% to £1.1m. Approximately half of the revenue from this group is generated from our growing infusions accessories range which complements our intravenous fluids portfolio.

Operational Overview

As one of the three focus areas over the past twelve months, a lot of work has gone into building a strong foundation to underpin our investment phase over the next three to five years.

These infrastructure improvements outlined below have all been implemented in a planned and measured way, keeping control of our cost base whilst not restricting our growth.

People

Sales

Our sales team is a rare asset in the animal health sector and vital for our success. Our new Head of Sales, Samantha Williamson, joined us from a senior sales role in Novartis human health and has had an immediate impact on the shape and culture of the team. The UK sales team has been split into two geographic territories with stronger management support and coaching. In addition, Animalcare has embarked on a long-held plan and is introducing a telesales team. The breadth of products across all three product groups means we need to identify new channels to better address our market. The new structure has allowed our Head of Sales to invigorate our approach to key accounts, the corporate, charity and buying groups mentioned earlier. All three elements of our rejuvenated sales operations will take time to show full effect, however the early signs in all areas are promising.

Technical and Business Development

Karolyn Tapper, Director of Business Development, was appointed at the start of August 2013, allowing for a thorough hand over of projects and responsibilities from Stephen Wildridge, Animalcare's previous Director of Strategy and Business Development who left the Company in October 2013. Karolyn joined Animalcare from Catalent, the global pharmaceutical manufacturer, with a wealth of formulation, project management and development experience. At the same time, Torben Orskov was promoted to Director of Technical and Regulatory Affairs. Torben was a practising large and small animal veterinary surgeon for ten years before joining Animalcare in 2007. It became clear that the number of opportunities available to Animalcare meant more resource was required in our Technical and Business Development departments. In the second half of the period both departments were enlarged. These appointments have not only increased the capacity of both teams but this has in turn allowed both senior managers more time to drive our product development strategy.

Moreover, the addition of more veterinary qualified staff across technical, marketing and sales functions means our expertise and service to our customers will improve further still.

General

Animalcare recognises the dedication and calibre of its employees. The growth in the business has opened up internal promotions and career progression opportunities; hard earned expertise being retained, complemented by the freshness of a 'new' career.

Underpinning our growing business, our suite of personnel systems and policies has been brought up-to-date to further reinforce commitment to our valued team.

IT

We have carried out upgrades to our computing infrastructure during the period to both the core business and the microchip database, Anibase. Virtualised servers, which provide smooth and uninterrupted operation, have significantly reduced the risk of downtime.

In the second half of the period we started the roll out of a new sales Customer Relationship Management (CRM) software system. This is now implemented and beginning to add value to many areas of the business.

Inventories

During the period Animalcare increased its inventory levels of certain key products. The increase applied particularly to two product lines, microchips and Buprecare. In the case of the former, this was in readiness for an anticipated surge in demand following the announcement of planned compulsory microchipping by the English Parliament and Welsh Assembly. Now that we understand more of the dynamics of this legislation and the activities of the Dogs Trust we will manage stock levels accordingly. Buprecare ampoules were reintroduced into the market in January 2013 and we have built stock of this key product line to ensure continuity of supply.

We will continue to balance having sufficient stocks to meet demand and contingency to protect us from unexpected eventualities in our supply chain whilst, at the same time, keeping our working capital at an acceptable level. The nature of a highly regulated industry with prescribed batch sizes, and prohibitively expensive regulatory costs to maintain a second supplier, means that this process has to be managed carefully.

Future Developments

Animalcare will be launching two new veterinary medicines in the second half of the new financial year on distribution from one of our key European partners. These complement existing products within the range very well. A third distribution product may be launched towards the end of the second half of the current financial year dependent on exact timing of regulatory packaging approvals.

Development of new non-pharmaceutical products and services is still commercially attractive where this can build on our core strengths and improve profitability; where this is not possible we will continue to review and potentially remove more products from our Animal Welfare Products range.

Outlook

In the short-term there is still great potential in our existing product range and imminent launches to keep our momentum and grow further. Moreover, there is capacity for Animalcare to grow sales through building better relationships with the key account market.

The strength of our business will continue to generate the necessary cash to meet our development and dividend targets, particularly through our investment phase.

I am confident that we can keep our pipeline well stocked with new product candidates into the medium-term.

I have outlined above the dynamics in the European animal health space, leading to a more crowded medicines market and pressure on margins from veterinary channel consolidation. Our strategy to complement (un)/differentiated generic medicine launches with enhanced generic product development will enable us to grow market share and protect margin.

Additions we have made to our team and improved structure to our development process will ensure we are on course to meet our objectives.

Iain MenneerChief Executive Officer

Financial Review

The Group delivered another solid performance during the financial year to 30th June 2014. Underlying operating profit, our measure of trading performance excluding exceptional costs, grew by 4.4% to £2.8m. This reflects our continued strong revenue growth together with increased investment in our business to provide a solid platform for future growth.

We continue to operate a strong, debt-free, balance sheet. This not only provides us with the ability to invest significantly in new product development opportunities to drive long-term growth, but also maintenance of the dividend during our planned investment cycle.

Revenue and gross profit

Group revenues increased by 6.3%, broadly comparable to the 5.9% delivered in the first half of the financial year. Our Licensed Veterinary Medicines product group continues to be the main driver for growth, with sales up 9.5% on prior year to £7.9m, 8.5% of which is like-for-like growth.

Our Companion Animal Identification grouping has returned to growth, delivering an overall increase in sales of 7.8% to £2.4m. This growth rate was approximately evenly spread across both microchips and database services.

As stated in the Chief Executive's Review, we took action to rationalise some of the older, uncompetitive and less profitable products from the Animal Welfare Products group. This planned rationalisation led to a reduction in revenues of 3.6% to £2.6m however with gross margins improving, overall gross profitability has been maintained.

Gross profit increased by 5.2% to £7.1m. Our gross margins fell modestly to 55.4% (2013: 56.0%) reflecting the higher proportion of export sales, which are generally at lower margin, together with the continued competitive market conditions.

Operating results

Underlying* operating profit increased by 4.4% to £2.8m which was achieved by increasing gross profits whilst maintaining overheads (excluding research and development expenses) at around 32% of revenue. This was in part achieved through a thorough review of selected operational overheads which generated an average of 5% to 10% savings on an annualised basis.

As noted in the Chairman's Statement, the business took a decision during the last financial year, in light of our continued solid trading performance, to invest in the infrastructure and senior management team to position ourselves for future growth. This investment included the relocation to our new premises during March 2013 together with the increase and strengthening of our employee base, in particular, our senior management, sales and product development teams.

Research and development costs, which incorporate a share of the enhanced product development team, are separately analysed in the income statement for the first time in preparation for the expected significant increase from FY15.

Non-underlying items of £0.2m are £0.2m lower than prior year, principally reflecting the one-off costs incurred during 2013 in respect of executive Board changes and head office relocation costs. Further details are provided in note 4.

Reflecting all of the above, Group profit before tax was up 14.7% to £2.7m.

Cash flow

Cash flows generated by operations were £1.6m (2013: £3.1m). During the year, the Group increased its stock levels by £1.0m to ensure we have the inventory depth to improve surety of supply of key products and in addition, to support certain strategic projects.

The increase in our stock levels was planned; similarly we expect to see a reduction of circa £0.3m during the next financial year as the run up to compulsory microchipping concludes.

Net income taxes paid increased by £0.3m to £0.6m, the movement primarily reflecting the lower cash benefit in relation to prior year research and development tax credits. We continue to take full advantage of the UK's R&D tax relief where appropriate.

Following the relocation of our offices in March 2013, total capital expenditure reduced by £0.3m to £0.2m. The 2014 expenditure primarily related to product development which remained broadly in line with prior year. Whilst our spend was lower than anticipated, the positive impact of the enhanced focus on our product pipeline is clear.

Group cash balances at 30th June 2014 were £3.8m (2013: £3.7m).

Earnings per share ("EPS")

Basic underlying* EPS improved by 2.9% to 10.8 pence (2013: 10.5 pence). Basic earnings per share rose more significantly by 13.2% to 10.3 pence (2013: 9.1 pence) reflecting the lower cost of exceptional items incurred during 2014.

Dividend

As stated during our interim reporting at 31st December 2013, the Board intends to maintain the dividend flow during the investment cycle. This reflects the continuing strength of our balance sheet and cash position. The Board will monitor the Group's cash balances, paying particular regard to future investment opportunities.

As a result, the Board is proposing a final dividend in respect of the year of 4.0 pence per share, giving a total dividend of 5.5 pence per share for 2014 (2013: 5.3 pence per share). This final dividend is subject to shareholder approval at the Annual General Meeting on 18th November 2014 and will be paid on 28thNovember 2014 to shareholders on the register at the close of business on 24th October 2014. The ordinary shares will become ex-dividend on 23rd October 2014. The total dividend is covered 2.0 times underlying* earnings (2013 - 2.0 times) 

Summary and outlook

Current trading during the first three periods of the year is in line with management expectations.

Building on the strong, solid foundations laid down during the year, we will continue to invest in the long-term growth and development of the business. In the shorter term, this will lead to higher research and development costs, which will impact both our cost base as well as capital expenditure. Nonetheless, short-term revenue growth is important to the business, and we expect to benefit from the sales and marketing investments made in the second half of 2014.

Chris BrewsterChief Financial Officer

* Underlying measures are before the effect of exceptional costs and other items. These are disclosed in note 4 to the financial statements.

Consolidated Statement of Comprehensive Income

Year ended 30ᵗʰ June 2014

Total comprehensive income/(loss)for the year is attributable to the equity holders of the parent.

i. 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 these financial statements.

Statements of Changes in Shareholders' Equity

Year ended 30ᵗʰ June 2014

As permitted by section 408 of the Companies Act 2006, the statement of comprehensive income of the parent Company is not presented as part of these financial statements.

Balance Sheets

30ᵗʰ June 2014

The financial statements of Animalcare Group plc, registered number 1058015, were approved by the Board 

of Directors and authorised for issue on 14th October 2014.

They were signed on its behalf by:

Chris BrewsterChief Financial Officer

Cash Flow Statements

Year ended 30ᵗʰ June 2014

Notes to the Accounts

Year ended 30ᵗʰ June 2014

1. General Information

Animalcare Group plc ("the Company") is a company incorporated in England and Wales under the Companies Act 2006 and is domiciled in the United Kingdom. The Group comprises Animalcare Group plc and its subsidiaries. The nature of the Group's operations and its principal activities are set out in note 5 and within the Directors' Report.

The IASB and IFRIC have issued the following standards and interpretations, endorsed by the EU, with an effective date after the date of these financial statements. Their adoption, where applicable, is not expected to have a material effect on the financial statements of the Group.

2. Significant Accounting Policies

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 for the year ended 30 June 2013. Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRS as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements in October 2014.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2014 or 2013 but is derived from the 2014 accounts. Statutory accounts for 2013 have been delivered to the Registrar of Companies and those for 2014 will be delivered in due course. The Auditor has reported on those accounts; the report was (i) unqualified, (ii) did not include references to any matters to which the 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.

Going concern

An analysis of the factors likely to impact on the Group's future business activities, performance and strategy are set out in the Chief Executive's Review and Financial Review. The principal risks and uncertainties facing the Group are set out in the Directors' Report.

For the purposes of their assessment of the appropriateness of the preparation of the Group's accounts on a going concern basis, the Directors have considered the current cash position and forecasts of future trading including working capital and investment requirements.

During the year the Group met its day-to-day general corporate and working capital requirements through existing cash resources. At 30th June 2014 the Group had cash on hand of £3.8m (30th June 2013 - £3.7m).

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 reasonable possible changes in trading performance, show that the Group should have sufficient cash resources to meet its requirements for at least the next 12 months. Accordingly, the adoption of the going concern basis in preparing the financial statements remains appropriate.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30th June each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Exceptional and other items

Exceptional items are material items of income or expense which, because of their nature and the expected frequency of the events giving rise to them, merit separate disclosure.

Other items relate to the amortisation of acquired intangible assets and fair value movements on foreign exchange hedging.

The separate presentation of exceptional and other items enables the users of the accounts to better understand the elements of financial performance during the year and hence to better assess trends in that financial performance.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in comprehensive income and is not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units ("CGUs") expected to benefit from the synergies of the combination. CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the CGU may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the CGU pro rata on the basis of the carrying amount of each asset in the CGU. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Intangible assets

The Group recognises intangible assets at cost less accumulated amortisation and impairment losses. Intangible assets arise both as a result of applying IFRS 3 which requires the separate recognition of intangible assets from goodwill on all business combinations from 1st January 2004, and from the purchase of software (that is separable from any associated hardware), and development machinery and from research and development (see below).

Intangible assets are amortised on a straight-line basis over their useful economic lives as follows:

Research and development costs

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised as an expense in the year in which it is incurred.

An internally generated intangible asset arising from the Group's new product development is recognised only if all of the following conditions are met:

· an asset is created that can be identified (such as a new pharmaceutical product);

· it is probable that the asset created will generate future economic benefits; and

· the development cost of the asset can be measured reliably.

Internally generated intangible assets are amortised on a straight-line basis over their estimated economic lives. Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the year in which it is incurred.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes.

Revenue from the sale of goods is recognised when the risks and rewards of ownership are transferred which is generally when goods are delivered.

Income received in relation to long-term service contracts is deferred and subsequently recognised over the life of the relevant contracts. Further details are contained in note 21.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying value.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessee

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group's obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

Foreign currencies

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in comprehensive income for the year.

Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transaction with any of the Group's other components. An operating segment's operating results are reviewed regularly by the Chief Executive Officer to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in, first-out principle. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Dividends

Dividends paid are recognised within the Statement of Changes in Equity only when an obligation to pay the dividend arises prior to the year end.

Share-based payments

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of such equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions (with a corresponding movement in equity).

Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The fair value of the shares issued under the new Long Term Incentive Plan were valued on a discounted cash flow basis in conjunction with a third party valuation specialist.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Property, plant and equipment

Land and buildings and other assets held for use in the production or supply of goods and services or for administrative purposes, fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Other than for land, which is not depreciated, depreciation is charged so as to write off the cost of assets, less their estimated residual value, over their estimated useful lives, as follows:

Straight-line

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the net sales proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income as incurred.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation outstanding at the balance sheet date, and are discounted to present value where the effect is material.

Impairment of tangible and intangible assets excluding goodwill

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit (CGU) to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (CGU) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (CGU) in prior years. A reversal of an impairment loss is recognised as income immediately.

Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Trade receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in comprehensive income when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Investments

Investments in Group companies are stated at cost less provisions for impairment losses.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits repayable on demand, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Trade payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

3. Critical Accounting Judgements and Key Sources of Estimation Uncertainty

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, which are described in note 2, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below).

Capitalised new product development expenditure

It is the Group's policy, where the relevant criteria of IAS 38 "Intangible Assets" are met, to capitalise new product development expenditure and to amortise this expenditure over the estimated economic life of the asset (product). Judgement is required when assessing the technical and commercial feasibility of new product development projects including whether regulatory approval will ultimately be achieved.

Capitalised software expenditure

The Group has historically capitalised software projects and developments. Expenditure on a bespoke web based system, designed to facilitate online ordering of its products and services, is currently capitalised in the Group's financial statements as the Directors have adjudged it to meet the relevant criteria.

The rate of depreciation on capitalised software is set so as to reflect the pattern of usage and the level of pace of change within the global information technology market.

Key sources of estimation uncertainty

Impairment of non-current assets

Determining whether a non-current asset is impaired requires an estimation of the "value in use" and/or the "fair value less costs to sell" of the cash-generating units ("CGUs") to which the non-current asset has been allocated. The value in use calculation requires an estimate of the future cash flows expected to arise from the CGU and a suitable discount rate in order to calculate present value. The key assumptions for these value in use calculations are those regarding discount rates, growth rates and expected changes to selling prices and direct costs. The Directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the individual CGU. In the current year the Directors estimated the applicable rate to be 10.2% (2013: 11.9%). The Directors' sensitivity analysis indicates significant headroom to the carrying value of the CGU when taking into account a reasonably possible change in any one of the key assumptions used in the value in use calculations. 

The Group prepares cash flow forecasts derived from the most recent financial budgets and projections approved by management for the next five years, thereafter assuming an estimated growth rate of 2% (2013: 1.3%). The growth rates for the five year period are based on current performance of the existing product portfolio and the estimated contribution from the Group's new product development pipeline. The Directors believe that the long-term growth rate does not exceed the average long-term growth rate for the UK economy.

Impairment of slow-moving and obsolete inventory

The Group performs regular stockholding reviews, in conjunction with sales and market information, to help determine any slow-moving or obsolete lines. Where identified, adequate provision is made in the financial statements for writing down or writing off the value of such lines in order to reflect the realisable value of its stock.

4. Exceptional and Other Items

During the previous financial year, Stephen Wildridge stepped down from the position as Group CEO and remained in the Group until 31st October 2013 as Director of Strategy and Business Development. The total compensation package agreed on 11th January 2013 in relation to Stephen stepping down as CEO of £71,000 was paid on 31st October 2013. In addition, an accelerated share based payments charge of £39,000 was recognised to reflect Stephen's ability to exercise early any outstanding share options at 31stOctober 2013. These options, where Stephen chose to do so, were exercised during FY14. The balance of £42,000 related to other management severance payments.

During March 2013, the Group relocated to its new premises. Associated relocation costs principally comprised the costs of the new premises whilst unoccupied together with an estimate of the one-off regulatory costs associated with changing the address on our pharmaceutical licences. The latter has been fully settled during FY14.

The amortisation charge totalling £119,000 (2013: £119,000) relates to brand and customer relationship intangible assets recognised on the acquisition of Animalcare Ltd in January 2008.

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 and assess performance. The Chief Operating Decision Maker is considered to be the Chief Executive Officer of Animalcare Group plc. Performance assessment is based on underlying operating profit.

The Group solely comprises one reportable segment, being Companion Animal.

Key customers, all within the Companion Animal segment, are those responsible for 10% or more of segmental revenue.

All the Group assets are wholly located in the United Kingdom and accordingly no geographical analysis of assets and liabilities is presented.

An analysis of total Group revenue is as follows:

6. Total Comprehensive Income for the Year

The above items are those charged to total comprehensive income only. Full details on items charged/(credited) to exceptional and other items are contained in note 4.

The analysis of remuneration paid to the Company's auditor is as follows:

7. Directors' Remuneration and Interests

Emoluments

The various elements of remuneration received by each Director were as follows:

* Indicates Non-Executive Directors.

All Company pension contributions relate to defined contribution pension schemes. Benefits consist of company car and private medical insurance. The compensation for loss of office in relation to S M Wildridge was settled on 31st October 2013.

Share options

The Directors had the following beneficial options:

S M Wildridge

I D Menneer

C J Brewster

The Directors' interests in the shares of the Company as at 30th June are set out below:

In addition to the above, Lord Downshire had a non-beneficial interest in 310,446 shares.

S M Wildridge, who resigned as Director on 31st October 2013, had interests in 287,068 shares of the Company at 30th June 2014 (2013- 177,068 shares).

New Long Term Incentive Plan

As part of the Animalcare board's consideration of its overall growth strategy, its Remuneration Committee has been reviewing the most effective means of providing a mechanism for senior executives to participate in the Company's equity at a meaningful level.

In this regard, on 20th June 2014, the Board approved the Company's new senior executive Long Term Incentive Plan (the "Plan"). On 27th June 2014, Iain Menneer, Chief Executive Officer, and Chris Brewster, Chief Financial Officer, subscribed for growth shares in the capital of Animalcare Ltd, a subsidiary of the Company, under the Plan as follows:

· Iain Menneer - 31,955 A Ordinary Shares of £1.00 each ("A Shares") for a total cash subscription of £31,955, representing 5.2% of Animalcare Ltd's issued share capital; and

· Chris Brewster - 19,173 A Shares, representing 3% of Animalcare Ltd's issued share capital and 11,800 B Ordinary Shares of £1.00 each ("B Shares"), representing a further 2% of Animalcare Ltd's issued share capital, for a total cash subscription of £30,973.

Dr Menneer and Mr Brewster have the right to sell their A Shares to the Company at any time after 27th June 2017 in exchange for Ordinary Shares of 20 pence each in the Company ("Ordinary Shares"). The rights of Dr Menneer and Mr Brewster to sell their A Shares are subject to, amongst other provisions, the Company having a market capitalisation in excess of £39.0m ("the Hurdle") at the time of sale. The Hurdle was determined by Animalcare's Remuneration Committee and broadly represented a 20% premium to the Company's market capitalisation on 27th June 2014.

Each holder of A Shares would, on a sale of his entire holding to the Company, be entitled to receive Ordinary Shares representing a percentage of the increase in the Company's market capitalisation above the Hurdle; being 5% for Dr Menneer and 3% for Mr Brewster.

The B Shares are not entitled to participate in any increase in the value of the Company above the Hurdle but can be exchanged for Ordinary Shares of an equal value at any time after 27th June 2017.

Further details of the Plan, including the Hurdle, anti-dilution and other provisions, are set out in Animalcare Ltd's articles of association, which is available on the investor relations section of the Company's website http://www.animalcaregroup.co.uk.

8. Staff Costs

9. Finance Costs and Finance Income

* Finance gains and losses arising from derivatives held at fair value through profit and loss relate to fair value movements on the Group's foreign exchange hedges. These gains and losses are included within "other items" on the face of the statement of comprehensive income.

10. Income Tax Expense

The tax credit of £35,000 (2013 : £90,000) shown within "exceptional and other items" on the face of the statement of comprehensive income, which forms part of the overall tax charge of £535,000 (2013 : £445,000) relates to the items analysed in note 4.

The prior year current tax credits in respect of both 2014 and 2013 primarily relate to research and development tax credits.

Reductions in the UK corporation tax rate to 21% (effective from 1st April 2014) and 20% (effective from 1stApril 2015) were substantively enacted on 2nd July 2013. Deferred tax balances have been calculated at an effective rate of 20%, being the substantively enacted rate at 30th June 2014. The future rate reductions will affect the Group's future current tax charges.

11. Dividends

The final dividend paid during the year ended 30th June 2014 was 3.8 pence per share (2013 : 3.0 pence per share). The interim dividend paid during the year ended 30th June 2014 was 1.5 pence per share (2013 : 1.5 pence per share).

The proposed final dividend was approved by the Board of Directors on 15th October 2014 and is subject to approval of shareholders at the Annual General Meeting. The proposed dividend has not been included as a liability as at 30th June 2014, in accordance with IAS 10 "Events After the Balance Sheet Date".

12. Earnings per Share

Basic earnings per share amounts are calculated by dividing the total comprehensive income for the year attributable to ordinary equity holders of the Company by the weighted average number of fully paid ordinary shares outstanding during the year.

The following income and share data was used in the basic earnings per share computations:

13. Goodwill

The carrying amount of Group goodwill is allocated to the Group's sole cash-generating unit ("CGU"), being the Companion Animal segment.

The recoverable amount of goodwill is determined from value in use calculations.

The Group prepares cash flow forecasts derived from the most recent financial budgets and projections approved by management for the next five years and thereafter assuming an estimated long-term annual growth rate of 2.0% (2013: 1.3%).

The financial budgets and projections are based on past experience and actual operating results. The growth rates for the five year period are based on current performance of the existing product portfolio and the estimated contribution from the Group's new product development pipeline. The Directors believe that the long-term growth rate does not exceed the average long-term growth rate for the UK economy.

The Directors estimate the discount rates using the post-tax rates that reflect the current market assessments of the time value of money and the risks specific to the cash-generating unit. In the current year the Directors estimated the applicable pre-tax rate to be 10.2% (2013: 11.9%).

The Directors modelled a range of different scenarios by applying sensitivities to both the cash flow assumptions and the discount rate. Based on this sensitivity analysis there is significant headroom between the value in use calculation and the carrying value of the CGU.

14. Other Intangible Assets

Veterinary medicine product development costs are amortised over four to seven years, acquired brands are amortised over 15 years and acquired customer relationships are amortised over ten years. The amortisation period for capitalised software, which principally relates to the bespoke online ordering system, is four years.

15. Property, Plant And Equipment

16. Investments in Subsidiaries

Subsidiary undertakings

The principal subsidiary undertakings of the Company are summarised below. The companies listed include all those which principally affected the earnings and assets of the Group.

The principal activity of these undertakings for the last financial year was as follows:

17. Inventories

In the Directors' opinion, the replacement cost of inventories is not materially different from their balance sheet value.

18. Other Financial Assets

Trade and other receivables

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

Movement in allowance for doubtful debts

Ageing of past due but not impaired receivables

Cash and cash equivalents

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less.

The carrying amount of these assets approximates to their fair value.

Credit risk

The Company's principal financial assets are bank balances and cash, and trade and other receivables. The Company's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The allowance for doubtful debts represents the difference between the carrying value of the specific trade receivables and the present value of the expected recoverable amount.

The average credit period on sales of goods is 36 days (2013 : 32days). No interest has been charged on overdue receivables.

19. Other Financial Liabilities

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

20. Financial Instruments

Capital and liquidity risk management

At 30th June the Group was contractually obliged to make repayments of principal and payments of interest as detailed below:

Categories and Fair Value of Financial Instruments Carrying value

The fair values of the Group's financial assets and liabilities are not materially different from their carrying values.

Foreign Currency Risk Management

The Group undertakes transactions denominated in foreign currencies which gives rise to the risks associated with currency exchange rate fluctuations. Exposures are managed by a combination of matching foreign currency income and expenditure, maintaining foreign currency deposits and the use of forward exchange contracts. The carrying value of the Group's foreign currency assets and liabilities at the reporting date was:

Foreign Currency Sensitivity Analysis

At 30th June 2014 the Group is mainly exposed to the Euro and the US Dollar. The following table details the effect of a 10% increase and decrease in the exchange rate of these currencies against Sterling when applied to outstanding monetary items denominated in foreign currency as at 30th June 2014. A positive number indicates that an increase in profit would arise from a 10% strengthening of Sterling against these currencies, a negative number indicates that a decrease would arise.

Interest Rate Sensitivity Analysis

This sensitivity analysis was not performed as the Group had no exposure to interest rates for either derivatives or non-derivative instruments at the balance sheet date.

Forward Foreign Exchange Contracts

The Group had four (2013 - nine) open foreign exchange contracts at 30th June 2014. The values are shown below:

Capital Management

In line with the disclosure requirements of IAS 1, "Presentation of Financial Statements", the Company regards its capital as being the issued share capital together with its banking facilities, used to manage short-term working capital requirements. Note 23 to the financial statements provides details regarding the Company's share capital and movements in the period. There were no breaches of any requirements with regard to any relevant conditions imposed by the Company's Articles of Association during the periods under review.

21. Deferred Income

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 recognised evenly over the term of the contract, currently eight years.

Movements in the Group's deferred income liabilities during the current and prior reporting period are as follows:

The deferred income liabilities fall due as follows:

Income recognised during the year is set out below:

22. Deferred Tax Liabilities

The following are the major components of the deferred tax liabilities/(assets) recognised by the Group, and the movements thereon, during the current and prior reporting period.

As set out in note 10 deferred tax balances have been calculated at an effective rate of 20%, being the substantively enacted rate at 30th June 2014.

The following are the major components of the deferred tax assets recognised by the Company, and the movements thereon, during the current and prior reporting period:

As set out in note 10 deferred tax balances have been calculated at an effective rate of 20%, being the substantively enacted rate at 30th June 2014.

23. Share Capital

During the year £43,000 (2013 : £5,000) of ordinary shares were issued for proceeds of £242,125 (2013 : £24,375) resulting in a share premium of £199,125 (2013 : £19,375).

24. Operating Lease Arrangements

The Group as lessee

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Operating lease payments principally represent rentals payable by the Group for its office and warehouse properties and motor vehicles.

25. Share-based Payments

During the year the Group operated the Animalcare Group plc Executive Share Option Scheme, the Save As You Earn (SAYE) Share Option Scheme and the new Long Term Incentive Plan as described below:

Animalcare Group plc Executive Share Option Scheme

Under this scheme, options may be granted to certain Executives and senior employees of the Group to subscribe for new shares in the Company at a fixed price equal to the market value at the time of grant. The options are exercisable three years after the date of grant. Once vested, options must be exercised within six years of the date of grant. The exercise of these options is not subject to any performance criteria.

SAYE Option Scheme 

This scheme is open to all UK employees to encourage share ownership. Share options are granted at an option price fixed at a 20% discount to the market value at the start of the savings period. The SAYE options vest and are exercisable three years after the date of grant and must ordinarily be exercised within six months of the completion of the relevant savings period.

Details of the movement in all share option schemes during the year are as follows:

The weighted average inputs into the Black-Scholes model at the time of grant were as follows:

Expected volatility was determined by calculating the historical volatility of the Group's share price over the previous three years. The expected lives used in the model were estimated based on management's best estimate for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The aggregate estimated fair value of the options granted during the year was £nil (2013: £nil).

The Group recognised total expenses of £152,000 (2013: £149,000), £152,000 (2013 : £110,000) within administrative expenses and £nil (2013: £39,000) within exceptional and other items as disclosed in note 4.

New Long Term Incentive Plan

On 20th June 2014, the Board approved the Company's new senior executive Long Term Incentive Plan (the "Plan"). On 27th June 2014, Iain Menneer, Chief Executive Officer, and Chris Brewster, Chief Financial Officer, subscribed for growth shares in the capital of Animalcare Ltd, a subsidiary of the Company, under the Plan as follows:

· Iain Menneer - 31,955 A Ordinary Shares of £1.00 each ("A Shares") for a total cash subscription of £31,955, representing 5.2% of Animalcare Ltd's issued share capital; and

· Chris Brewster - 19,173 A Shares, representing 3% of Animalcare Ltd's issued share capital and 11,800 B Ordinary Shares of £1.00 each ("B Shares"), representing a further 2% of Animalcare Ltd's issued share capital, for a total cash subscription of £30,973.

Further details of the Plan are provided in note 7.

The charge for the year to the income statement in respect of the Plan is £nil.

26. Related Party Transactions

Trading transactions

During the year ended 30th June, the following trading transactions took place between the Company and its subsidiaries listed in note 16:

Remuneration of key management personnel

The remuneration of the Directors, who are the key management personnel of the Group, is set out in aggregate for each of the categories specified in IAS 24 "Related Party Disclosures". Further information about the remuneration of Directors is provided in note 7.

The Directors' interests in the shares of the Company are contained in note 7.

27. Annual Report

The Group's Annual Report and Financial Statements for the year ended 30th June 2014 were approved 14th October 2014 and are expected to be posted to shareholders during the week commencing 27th October 2014. 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 head office at 10 Great North Way, York Business Park, Nether Poppleton, York, YO26. 6RB.