Eco Animal Regulatory News (EAH)

23 Jul 2007 07:00

Lawrence PLC20 July 2007 21 July 2007 Lawrence plc Preliminary Results for the year ended 31 March 2007 HIGHLIGHTS • Strategy to dispose of non-core activities nears completion following £5.5 million sale of Agil division • Group now focused principally on ECO Animal Health, its global veterinary pharmaceutical products business • Turnover on continuing operations £18.3 million (2005: £20.3million) • Profit before interest, tax, depreciation, amortisation and impairments was £5.8 million (2006: £3.4 million) and includes the contribution from discontinued activities and the profit on disposal of Agil • Aivlosin(R) sales over 30 per cent ahead of same period last year • Total dividend raised to 7.15 pence (net) per share (2006: 7.0 pence) • Collaborative research with Cambridge University at its Department of Pathology, suggests that Aivlosin(R) may have a far wider reach than was previously thought Peter Lawrence, Executive Chairman of Lawrence plc, commented: "We have transformed the Company over the last four years through the disposalof our non-core activities and I am confident that ECO, our key business, isevolving to become a truly major force in the animal health industry." Contacts: Lawrence plcPeter Lawrence 020 8336 6190 Spiro FinancialAnthony Spiro 020 8336 6196 Nominated Adviser & BrokerCharles Stanley SecuritiesPhilip Davies / Russell Cook 020 7149 6000 Lawrence plc is a leader in the development, manufacture and distribution ofprincipally specialist chemical and pharmaceutical products for the animalhealth and farming markets worldwide. We achieve our financial goals through thecareful and responsible application of science to generate value for ourshareholders. CHAIRMAN'S STATEMENT The year to 31 March 2007 saw the near completion of our strategy to dispose ofnon-core businesses, which means that well over 90 per cent of Lawrence's salesare now attributable to our ECO animal health operation. In view of this,authorisation will be sought at the Annual General Meeting to change the name ofthe Company to ECO Animal Health Group plc. Group turnover reached a satisfactory £18.3 million. Comparison with theprevious year's figure of £20.3 million is distorted by the sale, in November2006, of our Agil natural animal feed additive business, as its contribution isonly included for eight months in the year under review. Agil has a seasonalbias towards the winter months and therefore its disposal further skewscomparison between the year just ended and the previous twelve months. Inaddition, the US dollar weakened by 8.5 per cent against sterling during thefinancial year and as the majority of sales are invoiced in dollars, this had anegative translational impact on our results. Profit before interest, tax, depreciation, amortisation and impairment for theyear to 31 March 2007 was £5.8 million (2006: £3.4 million) and includesdiscontinued activities and the profit on the Agil disposal. Amortisation roseduring the year from £2.2 million to £2.6 million reflecting the high level ofinvestment in new drug registrations. The amortisation figure reflects theCompany's investment in the future of the Eco business. Amortisation is anon-cash item and has no effect on our underlying trading performance. Profit before tax for the year ended 31 March 2007 was £2.4 million, whichincluded discontinued activities and the profit on the Agil disposal (2006: loss£66,741), while the earnings per share were 5.77p (2006: loss 0.135p). ECO has successfully obtained in excess of 600 marketing authorisations (alsoknown as drug registrations), in over 70 countries. Marketing authorisations area pre requisite in every country before sales can begin. The regulatoryauthorities granting these authorisations have become increasingly stringent inorder to ensure the safety of the animals treated and also that of the consumersand the environment. These ever-rising standards have inevitably led to longerdevelopment lead times and increased costs in obtaining registrations. Within this very tight global regulatory framework, we have invested some £20million since 1994 applying for and obtaining marketing authorisations. Inaddition, applications for approximately 100 further approvals have beensubmitted or trial work is being undertaken. This is a huge achievement for acompany the size of Lawrence, which has to date funded all the work from its ownresources. At a recent animal health conference, a speaker suggested that thecost of achieving marketing approval for a new drug today is now approaching£100 million and the process can take up to 15 years. Our total investment inintangible assets (drug registrations) could represent exceptional value, whichwe believe is not reflected in the stock market capitalisation of the Company. On 27 November 2006 we sold the business and assets of the Agil division toKiotech International plc for a total consideration of up to £5.5 million.Lawrence received a cash payment of £4,695,000 and 8,333,334 new ordinaryKiotech shares. A further payment of up to £555,000 is due to Lawrence by May2008. To enable management to accelerate further and expand the Company's veterinarydrug development programmes we have today announced a placing of 2,718,500 newordinary shares with a number of institutional and other investors to raise,subject to shareholder approval at an Extraordinary General Meeting to be heldon 14 August 2007, £5.44 million before expenses. Details of the EGM are set outin a circular, which has been sent to shareholders. The effect of this placingwill be to bring forward our anticipated profit growth. Over the past few years we have successfully implemented a strategy to sell ourmature businesses to focus on animal health, which we are confident will delivera far superior long-term performance. Mature businesses tend to be more cashgenerative because they require less investment than fast growing operations. Webelieve it is right to forego this short-term cash benefit for the longer-termattractions of the animal health industry. The Board considers it is nowappropriate to rebase the dividend so that the Company's cash resources are usedto maximum effect in building long-term value for shareholders. We thereforerecommend a final dividend of 5.45 pence (net) per share, the same as for theequivalent period last year, making a total for the year of 7.15 pence (net) pershare (2006: total dividend 7.0 pence). Shareholder approval will be sought atthe Annual General Meeting on 20 September 2007 to pay the final dividend on 5November 2007 to shareholders on the register on 19 October 2007. In futureyears the Board's policy will be to grow the dividend in line with earnings. ECO Group Our core animal health business continued to make good progress with sales in USdollars some five per cent ahead of the previous year. Aivlosin(R), our patentedmacrolide antibiotic, increased its global revenues by almost 33 per centcompared with the previous year. This significant advance demonstrates thegrowing acceptance of Aivlosin(R), which now contributes close to half of totalECO sales, as a premium position drug. Aivlosin(R) sales in Europe were ahead by70 per cent year on year albeit from a low base, while sales outside Europe andthe USA (where registration is not expected for another couple of years) were upby one quarter over the same period. Although sales of Aivlosin(R) in Europe advanced, the rate of progress was belowour expectations. Under the very strict EU rules, a higher than anticipated doserate was approved for the treatment of swine enteric diseases; this hastreatment cost implications. However the higher dose rate results in a fasterreturn to health for the animal and virtually no impact on productivity, therebyjustifying its premium pricing. We are confident that, with the provision ofadditional data, we will be able to support the use of Aivlosin(R) at a lowerand even more cost-effective dose rate. This will provide our Europeandistributors, principally Schering Plough, with a product capable of securing asignificant market share. It is encouraging that sales in several EU countrieshave been good, although late launches in some, resulting from delays inagreeing labelling requirements, have meant that only a few weeks sales areincluded in these results. We are delighted that Aivlosin(R), which was a new molecule in Europe when weintroduced it in 2004, has been approved for use in pigs and we shall continueto work closely with Schering Plough and our other European distributors, togain higher sales and profits in line with our targets. An application for the use of Aivlosin(R) for treating mycoplasmosis in poultryhas been submitted to the European Agency for the Evaluation of MedicinalProducts (EMEA) and it is hoped that marketing authorisations will be gainedbefore the end of 2007. Sales should commence in individual EU member countriessome six months after the approval of local labelling requirements. Thisapproval should allow non-EU poultry producers in countries where Aivlosin isalready approved, to export their products to the EU. Only drugs licensed withinthe EU can be used outside the EU for production animals destined for theEuropean market. We expect a commensurate rise in sales in those exportingcountries to reflect this. Additional important new Aivlosin(R) approvals areexpected before the financial year-end in Australia, India and Japan, wheresubmissions have already been made. In Europe, further submissions to the EMEAwill be made shortly for other presentations and dosage levels of Aivlosin(R). Sales of Ecomectin(R), our antiparasitic treatment for all grazing animals, werein aggregate some ten per cent ahead of the previous year in markets outside theUSA. Sales in the USA were significantly lower, principally as a result of ourdistributor, Schering Plough, withdrawing from the market segment. As the USA isa significant market for Ecomectin(R), the disappointing performance in thatcountry resulted in total Ecomectin(R) sales falling below the level of theprevious year. Further new Ecomectin(R) marketing authorisations are expected inEurope and Japan before the end of 2007. Our success over the years in obtaining drug approvals is attributable to thequality, knowledge and experience of our product development and registrationdepartment. Within our traditional drug markets for production animals our teamhas identified several immediate new opportunities, including the pet medicationsector and also one for Aivlosin(R) in swine. Whilst sales of these new products will build over a period of years, we expectthat the margins attaching to them will be very attractive. In addition, inorder to complete the work in progress in our production animal drugs programme,we estimate a further £8.3 million will be spent over the next three years.These new registrations, together with our on-going work with the Center forVeterinary Medicine in America, should complete our current development andregistration programme and as a consequence result in a progressive reduction inour cash spend. In my Interim Statement of November 2006 I referred to a collaborative researchagreement with Cambridge University's Department of Pathology to investigate newindications for Aivlosin(R). The results suggest that Aivlosin(R) may have a farwider reach than was previously thought and be suitable for treating additionaldiseases in pigs and poultry. Subsequent related studies by Iowa StateUniversity have indicated significant results. Our joint venture company in China continues to make progress, with productionnow growing apace and several new marketing authorisations have been obtained.In April 2007, after the year-end, we increased our shareholding and now havecontrol of this company; as a result we expect to enjoy faster growth in thisvery large and fast growing market. In Japan, we have launched Ecopharma.com, aninnovative web based sales and marketing platform for our medications, whichgives customers direct access to this important market. People We currently employ close to 70 people in our 16 offices around the world, theirhard work and dedication to growing our Company is never underestimated. Theyunderpin the development of the Company and are committed to generating greatervalue for both our shareholders and themselves, through our share optionincentive programme. Outlook The year has commenced in line with our expectations. We have transformed theCompany over the last four years through the disposal of our non-core activitiesand I am confident that ECO, now our key business, is evolving to become a trulymajor force in the animal health industry. Peter A Lawrence Executive Chairman 21 July 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 March 2007 Notes 2007 2006 £ £ As RestatedTURNOVERContinuing operations 14,702,667 20,332,832Discontinued operations 3,593,165 - 18,295,832 20,332,752Cost of sales (12,367,047) (13,752,749) GROSS PROFIT 5,928,785 6,580,003 Administrative expense (6,459,584) (6,051,847)Other operating income 432,275 401,275 OPERATING LOSS / PROFIT 2Continuing operations (593,674) 929,431Discontinued operations 495,150 - (98,524) 929,431Profit on sale of a division 2,895,875 -Amounts written off investments (40,449) (713,294) PROFIT ON ORDINARY ACTIVITIES BEFORE 2,756,902 216,137INTEREST Other interest receivable and similar 89,667 64,930incomeInterest payable and similar charges (476,624) (347,808) PROFIT / (LOSS) ON ORDINARY ACTIVITIES 2,369,945 (66,741)BEFORE TAXATION Tax on profit/(loss) on ordinary (571,286) 24,859activities PROFIT / (LOSS) ON ORDINARY ACTIVITIES 1,798,659 (41,882)AFTER TAXATION EARNINGS PER SHARE 4 2007 2006 Basic Diluted Basic Diluted Continuing operations (3.27p) (3.26p) (0.135p) (0.134p)Discontinued activities 9.04p 8.99p - - Total 5.77p 5.73p (0.135p) (0.134p) STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESYear Ended 31 March 2007 2007 2006 As restated £ £ PROFIT / (LOSS) FOR THE FINANCIAL YEAR 1,798,659 (41,882) Revaluation reserve - 428,532Actuarial gain/ (loss) on pension scheme 173,500 (16,000)Currency translation differences on foreign currency net 271,264 10,467investments TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE YEAR 2,243,423 381,117 Prior year adjustment (218,389) 1,098,982 TOTAL RECOGNISED GAINS AND LOSSES SINCE LAST FINANCIAL 2,025,034 1,480,099STATEMENTS BALANCE SHEETAs at 31 March 2007 Group Company 2007 2006 2007 2006 as restated as restated Notes £ £ £ £FIXED ASSETSIntangible assets 31,119,408 28,799,870 - 18,475Tangible assets 942,883 1,375,813 665,384 1,039,667Investments 778,822 569,271 21,462,912 21,212,912 32,841,113 30,744,954 22,128,296 22,271,054 CURRENT ASSETSStocks 3,356,703 3,626,256 - 308,828Debtors 9,442,453 10,626,685 18,149,518 17,419,759Cash at bank and in hand 935,911 1,299,196 778,005 1,042,555 13,735,067 15,552,137 18,927,523 18,771,142 CREDITORS: AMOUNTS FALLING DUE WITHIN (10,649,255) (8,025,311) (7,496,848) (5,094,918)ONE YEAR NET CURRENT ASSETS 3,085,812 7,526,826 11,430,675 13,676,224 TOTAL ASSETS LESS CURRENT LIABILITIES 35,926,925 38,271,780 33,558,971 35,947,278 CREDITORS: AMOUNTS FALLING DUE AFTER (630,098) (3,082,497) (630,098) (3,082,497)MORE THAN ONE YEAR Provisions for liabilities (110,500) (338,000) (110,500) (338,000) 35,186,327 34,851,283 32,818,373 32,526,781 CAPITAL AND RESERVESCalled up share capital 1,559,011 1,556,011 1,559,011 1,556,011Share premium account 21,367,211 21,271,961 21,367,211 21,271,961Revaluation reserve 256,237 428,532 256,237 428,532Other reserves 548,231 324,218 548,231 324,218Profit and loss account 11,453,162 11,268,086 9,087,683 8,946,059 EQUITY SHAREHOLDERS' FUNDS 5 35,183,852 34,848,808 32,818,373 32,526,781 Minority interest - equity 2,475 2,475 - - 35,186,327 34,851,283 32,818,373 32,526,781 The financial statements were approved by the Board of Directors on 20 July2007. CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 March 2007 2007 2006 Notes £ £ £ £ NET CASH INFLOW FROM OPERATING 6 5,650,044 2,968,979ACTIVITIES RETURNS ON INVESTMENTS AND SERVICING OFFINANCEInterest received 89,667 64,930Interest paid (476,624) (347,808) NET CASH (OUTFLOW)/INFLOW FROM RETURNS (386,957) (282,878)ON INVESTMENTS AND SERVICING OF FINANCE TAXATION (51,210) 27,306 CAPITAL EXPENDITUREPayments to acquire intangible assets (4,969,912) (4,188,184)Payments to acquire tangible assets (56,582) (188,092) NET CASH OUTFLOW FROM CAPITAL (5,026,494) (4,376,276)EXPENDITURE Sale of division 3,031,786 -- NET CASH INFLOW FOR ACQUISITIONS AND 3,031,786 -DISPOSALSEQUITY DIVIDEND PAID (2,177,454) (1,982,987) NET CASH INFLOW/(OUTFLOW) BEFORE 1,039,715 (3,645,856)MANAGEMENT OF LIQUID RESOURCES ANDFINANCING FINANCINGIssue of ordinary share capital 98,250 243,199(Decrease)/increase in borrowing (2,452,398) 1,035,377 NET CASH (OUTFLOW)/INFLOW FROM (2,354,148) 1,278,576FINANCING (Decrease)/increase in cash 7 (1,314,433) (2,367,280) NOTES 1. COST OF SALES AND NET OPERATING EXPENSES 2007 2006 Continuing Discontinued Total Continuing Discontinued Total £ £ £ £ £ £ Cost of sales 9,889,482 2,477,565 12,367,047 13,752,749 - 13,752,749Administrative 5,839,134 620,450 6,459,584 6,051,847 - 6,051,847expensesOther operating (432,275) - (432,275) (401,275) - (401,275)income 15,296,341 3,098,015 18,394,356 19,403,321 - 19,403,321 2. OPERATING (LOSS)/PROFIT 2007 2006 £ £ Operating (loss)/profit is stated after changing:Depreciation of intangible assets 2,634,193 2,206,358Depreciation of tangible assets 116,892 121,745Research and development 15,781 70,093Operating lease rentals 100,611 179,372Auditors' remuneration (company £20,575; 2006: £28,729) 45,000 41,000Remuneration of auditors non-audit work 11,757 3,000and after crediting:Profit on foreign exchange transactions - 10,467 3. DIVIDENDS 2007 2006 £ £ Final dividend for the period ended 31 March 2005 of 5p per ordinary share - 1,547,997Interim dividend for the period ended 31 March 2006 of 1.55p per ordinary - 482,364shareUnder provision for the period ended 31 March 2005 - 57,294Final dividend for the period ended 31 March 2006 of 5.45p per ordinary share 530,064 -Interim dividend for the period ended 31 March 2007 of 1.7p per ordinary share 1,697,687 - 2,227,751 2,087,6554. EARNINGS PER SHARE Basic earnings per share is calculated upon the result of the continuingactivities for the financial year shown in the profit and loss account dividedby the weighted average number of ordinary shares in issue during the year. Diluted earnings per share takes into account the dilutive effect of shareoptions. 2007 2006 Number Earnings Number Earning Earnings of shares per share Earnings of shares per share £'000 '000 (pence) £'000 '000 (pence) Basic (1,021) 31,202 (3.27) (42) 31,042 (0.135) Dilutive effect of share 152 0.01 251 0.001options Diluted (1,021) 31,354 (3.26) (42) 31,293 (0.134) The earnings per share relating to discontinued activities is calculated afteradjustment to include the profit on the sale of a division less applicablecorporation tax. The total earnings per share is presented combining continuing operations anddiscontinued activities to assist shareholders in understanding the overallperformance of the Group's business. 5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group 2007 2006 £ £ Profit/(Loss) for the financial year 1,798,659 (41,882)Dividends (2,227,751) - (429,092) (41,882)Other recognised gains and losses 444,764 438,999Proceeds from issue of shares 98,250 -Cost of share options granted 224,013 103,374Write back of depreciation (2,891) - Net addition to shareholders' funds 335,044 500,491Opening shareholders' funds 34,848,808 34,348,317 Closing shareholders' funds 35,183,852 34,848,808 6. RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH INFLOW FROM OPERATINGACTIVITIES 2007 2006 £ £Operating (loss)/profit (98,524) 929,431Depreciation of tangible assets 116,892 121,744Amortisation of intangible assets 2,634,193 2,206,358Actuarial pension losses (54,000) (16,000)Cost of granting share options 224,014 103,374Decrease/(increase) in stocks 269,553 (251,419)Decrease/(increase) in debtors 1,294,699 (400,800)Increase/(decrease) in creditors within one year 1,219,453 (61,709)Net effect of foreign exchange differences 271,264 -(Decrease)/increase in pension provision (227,500) 338,000Net cash inflow from operating activities 5,650,044 2,968,979 7. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2007 2006 £ £ Decrease in cash in the year (1,314,433) (2,367,280)Cash outflow/(inflow) from decrease/(increase) in debt 2,452,396 (1,035,377)Net effect of foreign exchange differences - 10,467 Movement in net debt in the year 1,137,963 (3,392,190)Opening net debt (4,905,952) (1,513,762) Closing net debt (3,767,989) (4,905,952) 8. REPORT AND FINANCIAL INFORMATION The financial information set out in this preliminary announcement does notconstitute accounts as defined in section 240 of the Companies Act 1985. The summarised balance sheet at 31 March 2007 and the summarised profit and lossaccount, summarised cash flow statement and summarised statement of totalrecognised gains and losses and associated notes for the year then ended havebeen extracted from the Group's 2007 audited statutory financial statements. Copies of the financial statements for the Group for the year ended 31 March2007 will be available from the Company's registered office and will be postedto shareholders in due course. This information is provided by RNS The company news service from the London Stock Exchange