Animalcare Grp Regulatory News (ANCR)

Animalcare Group plc

("Animalcare" or the "Group" or the "Company")

Unaudited Interim Results for the six months ended 31 December 2011

Animalcare, the supplier of pharmaceutical and other premium products and services to the veterinary industry, announces its interim results for the six months ended 31st December 2011. Unless otherwise indicated, comparative data relates to the six months ended 31st December 2010.

As stated in the update issued in late January, trading continues to be in line with market expectations for the full year. The core veterinary medicines business has performed well in spite of the expected supply issues affecting certain product sales during the first half, while the general economic environment has also impacted trading in sales of companion animal identification microchips and related services.

Animalcare is debt free with strong cash generation and the Board proposes an improved interim dividend of 1.5p per ordinary share.

Animalcare continues its focus on the supply of products to veterinary professionals principally for use in companion animal markets.

Financial Highlights (Continuing Operations except EPS)

·; H1 revenue levels reflect the temporary supply disruptions with our key product, Buprecare, and reductions in sales volumes in microchip identification products and related services.

·; Driven by new product introductions licensed veterinary medicine sales excluding Buprecare increased by 14% compared to the same period last year .

·; Basic underlying earnings per share from total operations of 4.7p (2010: 5.0p) have been supported by a change in the sales mix towards higher margin veterinary medicines, good overall cost management and benefit in the current period of research and development tax credits (see below) reducing the effective tax rate.

·; Cash generation from operations has remained strong (at around £1.3m) and the Group's net cash position has improved to £1.75m as at 31 December 2011 (2010: £0.43m).

Financial Summary

* 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 3 to these financial statements.

Operational Highlights

·; New products launched in previous year showing good growth above expectations.

·; Four new product launches during the period hitting the annual target for new product launches by the end of October.

·; Reintroduction of Buprecare based products achieved in France in December 2011 and planned for other key markets, including the UK, in Q3. Single dose ampoule being re-introduced in Q4 or early in the next financial year.

·; Product development pipeline remains on track with Quattro and Stone 1 passing significant milestones.

·; Appointment of Chris Brewster as Chief Financial Officer with effect from 31 May 2012.

Commenting on the performance and outlook, James Lambert, Chairman of Animalcare, said:

"During the first six months of this financial year we have overcome the temporary loss of supply of one of our key products, Buprecare ampoules. Reduced consumer confidence is however significantly affecting our companion animal identification business, but the strength of our portfolio of licensed veterinary medicines continues to deliver growth greater than the overall market. Whilst the second half of the year presents challenges, the Board believes that overall trading for the full year will be in line with market expectations."

CHAIRMAN'S STATEMENT

The first six months of the current financial year have been impacted by two factors. First, the temporary loss of production of one of our key licensed medicines, Buprecare single dose ampoules, resulted in revenue for this product which was £323K lower than in the comparable period in the prior financial year. Second, reduced sales of our companion animal identification products and services contributed a further £483K shortfall against the comparable period, largely due to the impact of reduced consumer spending and the discontinuation of sales of microchip activated cat flaps.

However, significant progress has been made in continuing to grow our veterinary medicines business with the launch of four new products during the first half of the financial year, achieving our annual target well before the half year stage. When excluding Buprecare this contributed to an increase of 14% in sales of licensed veterinary medicines during the period (3% when including Buprecare) and together with continued sales growth from products launched last year, this trend is expected to be maintained during the second half of the year.

Although overall revenues have decreased by 10%, the change in sales mix, with increased sales of higher margin veterinary medicines, has resulted in only a 4% reduction in fully diluted underlying earnings per share from total operations from 4.9p to 4.7p. Cash generation has been excellent with net cash rising from £0.43m at 31st December 2010 and £1.18m at 30th June 2011 to £1.75m at 31st December 2011.

Last year was the first time your company paid an interim dividend and your board is proposing to pay 1.5p per share on the 4th May 2012 to all shareholders on the register on the 10th April 2012 (2010: 1.0p).

As previously announced, we have taken steps to strengthen your board and I am delighted Raymond Harding has joined as a Non-Executive Director. He was, until its sale in 2010, the owner and CEO of Cyton Biosciences Limited, a multi-service consultancy of both animal health and pharmaceutical industries and is a leading expert on the regulation of animal health products.

We also announced that Chris Brewster will become Chief Financial Officer, with effect from 31st May 2012. Chris joins us from Findus where he is Group Accounting Manager and was previously a senior manager in the audit group at KPMG. Further to the announcement made on 26 January, we can confirm that there is no further information that is required to be disclosed under Schedule 2(g) of the AIM Rules in connection with Mr. Brewster's appointment.

The outlook for the second half is positive with the re-introduction of Buprecare in a multi dose form already underway and the single dose ampoule re-introduction towards the end of the period or early in the next financial year. Your board believes that your company will deliver results in line with market expectations.

James Lambert

Chairman

FINANCIAL REVIEW

Operations

Group revenue from continuing operations of Animalcare Ltd (previously the Companion Animal Division), fell by 10% to £5.40m during the six months ended 31 December 2011 (2010: £5.99m), principally reflecting volume losses in our microchip and related services business and the previously reported supply interruption of Buprecare single dose ampoules. Gross profit fell by 9% to £2.94m in the same period (2010: £3.22m). Gross profit margin for the six months ended 31 December 2011 increased to 54.5% (2010: 53.8%), reflecting increased sales from recently launched, higher margin, licensed veterinary medicines during the period and a concurrent reduction in sales of certain lower margin products.

Distribution costs fell to £0.13m (2010: £0.15m) as a consequence of reduced sales volumes and administrative expenses rose marginally to £1.60m (2010: £1.58m). A reduction in total salary costs was offset by an increase in development expenditure on new products and increased regulatory maintenance costs for our expanding licensed veterinary medicines portfolio.

Overall operating profit from continuing operations reduced to £1.09m (2010: £1.43m).

Taxation

The tax charge for the current period is expected to be 25%, reflecting the reduction in the headline rate of corporation tax from April 2012. The Group has, however, also negotiated a substantial research and development tax credit relating to its new product development programme. This research tax credit is in respect of financial years from 2008 onwards and the whole of the retrospective benefit will fall in the current year, as prudently we had not recognised any of the credit until negotiations with HMRC had been successful concluded. The effect of this credit has been to reduce our effective tax rate for this year to 19% (2010: 27%).

Cash Flow

EBITDA (earnings before interest, taxation, depreciation and amortisation) was £1.24m for the first half (2010: £1.58m), reflecting the reduction in operating profit. The charge for depreciation fell to £0.01m (2010: £0.08m) following the sale of the bulk of the Group's property, plant and equipment during the previous financial year. Working capital showed a net reduction of £0.17m (2010: £0.01m), an increase in payables and a decrease in receivables being partially offset by a marginal increase in inventories. Income taxes paid were £0.12m (2010: £0.41m), as we took advantage of the research and development tax credits referred to previously in order to reduce our instalment payments. Net interest paid was £nil (2010: £0.11m), as the Group now has no borrowings and a positive cash balance. Overall, net cash flow from operating activities was £1.30m (2010: £1.33m).

Capital expenditure was £0.19m (2010: £0.04m), principally on developed intangible assets and the rewriting of our pet owner database. Share proceeds generated £0.07m (2009: £0.14m) with the issue of 136,493 ordinary shares in respect of approved employee share options. A dividend of £0.62m (2010: £0.61m) was paid in November 2011. At 31 December 2011 the Group had net cash balances of £1.75m (2010: £0.43m).

Stephen Wildridge

Chief Executive Officer

1. GENERAL INFORMATION

Animalcare Group plc ("the Group") 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 the Chairman's Statement.

This Interim Report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The information contained herein has not been reviewed by the Group's auditors.

The prior year comparatives are derived from the audited financial information as set out in the Group's Annual Report for the year ended 30 June 2011 and the unaudited financial information in the Group's Interim Report for the six months ended 30 December 2010. The comparative figures for the financial year ended 30 June 2011 are not the Group's statutory accounts. Those accounts have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified, did not include any reference to matters to which the auditors drew attention without qualifying their report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

This Interim Report for the six months ended 31 December 2011 was approved by the Board of Directors on 20 February 2012.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The interim financial information has been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards as adopted by the EU ("IFRS") as at 31 December 2011 that are effective (or available for early adoption) as at 30 June 2012. Based on these adopted IFRSs, the directors have applied the accounting policies, as set out below, which they expect to apply to the annual IFRS financial statements for the year ending 30 June 2012. However, the adopted IFRSs that will be effective (or available for early adoption) in the annual financial statements for the year ending 30 June 2012 are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period will be determined finally only when the annual financial statements are prepared for the year ending 30 June 2012.

Accounting policies

The accounting policies applied to the Interim Results for the six months ended 31 December 2011 are consistent with those of the Company's annual accounts for the year ended 30 June 2011.

Going concern

The principal risks and uncertainties facing the Group remain those set out in the latest Annual Report.

The Group has an undrawn overdraft facility of £100,000 which is available for general corporate and working capital requirements. At 31 December 2011 the Group had cash on hand of £1.75 million (30 June 2011: £1.18 million). 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.

4. REVENUE AND OPERATING SEGMENTS

During the current period, the principal activities of the Group were the supply and distribution of veterinary medicines, identification and other welfare products to veterinary markets. Together, these activities comprise the Group's Companion Animal Division.

The Chief Operating Decision Maker ("CODM") considers the Companion Animal Division to constitute one operating and reporting segment as defined under IFRS 8. The CODM reviews the performance of the Group by reference to group-wide results against budget. The group-wide profit measures are gross profit and operating profit, both disclosed on the face of the consolidated statement of comprehensive income. Accordingly, no separate segmental analysis is provided.

5. INCOME TAX EXPENSE

Tax for the period ended 31 December 2011 is charged at 25% (year ended 30 June 2011: 21%, 6 months ended 31 December 2010: 27%).

The charge for taxation is based on an estimate of the likely effective tax rate for the year ending 30 June 2012 of 19% (year ended 30 June 2011: 21%, 6 months ended 31 December 2010: 27%) after application of research and development tax relief in relation to prior years.

8. CAUTIONARY STATEMENT

This Interim Management Report ("IMR") consists of the Chairman's Statement and Financial Review, which have been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied upon by any other party or for any other purpose.

The IMR contains a number of forward looking statements. These statements are made by the directors in good faith based upon the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking information.

This IMR has been prepared for the Group as a whole and therefore emphasises those matters which are significant to Animalcare Group plc and its subsidiaries when viewed as a whole.

9. INTERIM REPORT

The Group's Interim Report for the six months ended 31 December 2011 is expected to be posted to shareholders on 20 February 2012 and will be available to download from its website www.animalcaregroup.co.uk. Copies will also be available from the Group's registered office at Common Road, Dunnington, York, YO19 5RU.