Eco Animal Regulatory News (EAH)

26 Jul 2006 07:01

Lawrence PLC26 July 2006 LAWRENCE plc26 July 2006 Lawrence plc Preliminary Results for the year ended 31 March 2006 HIGHLIGHTS - Turnover on continuing operations up over 19 % to £20.3m (2005: £17.0m) - EBITDA before exceptionals increases by over 20 % to £3.4m (2005: £2.8m) - ECO Group operating profit more than doubles - ECO Group sales advance by over 30 % - Significant increase in Aivlosin profit contribution - Total dividend for year raised 9.4 per cent to 7.0 pence per share (2005: 6.4 pence) - Continued focus on core animal health and feed businesses Peter Lawrence, Chairman of Lawrence plc, commented: "The rate of regulatory approvals for our animal health products is gatheringpace and we expect a further significant rise in sales during the current year,which has started well. While the approval timetable remains out of our hands weare confident that we are fast approaching the time when Aivlosin sales willstart to make a major and very positive impact on our trading performance" Contacts: Lawrence plc Peter Lawrence 020 8336 6190 Spiro Financial Anthony Spiro 020 8336 6196 Charles Stanley Securities Philip Davies 020 7149 6224 Lawrence plc is a leader in the development, manufacture and distribution ofprincipally specialist chemical and pharmaceutical products for the animalhealth and farming markets worldwide. Our products for these growth marketsincorporate natural ingredients to promote well-being and sustainability. Weachieve our financial goals through the careful and responsible application ofscience to generate value for our shareholders. CHAIRMAN'S STATEMENT Our results for the year to 31 March 2006 are for the first twelve month periodfollowing the series of strategic disposals which is transforming Lawrence plcinto a focussed business serving the animal pharmaceutical markets worldwide.With a significant part of the corporate activity now behind us, we are able toconcentrate virtually exclusively on the development of our core activities. Thebusinesses sold were all sound and profitable so it is inevitable that withoutthem, in the short term, our profits will dip. We are confident that enhancedreturns will be generated by redirecting the cash proceeds from the disposalsinto our core operations to capitalise on their growth potential. Turnover in the year from continuing operations rose over 19 per cent to £20.3million, up from £17.0 million in the previous twelve months. As mentioned inthe Interim statement, profit comparison with earlier periods is distorted bythe disposals and the ECO Animal Health minority, which we bought out in October2004. Next year's results will be easier to evaluate and should allow comparisonon a like for like basis, which will be clearer and more meaningful. During thistransition period our performance can be better measured by the growth inearnings before interest, tax, depreciation and amortisation (EBITDA) oncontinuing operations. EBITDA before exceptionals for the year to end March 2006was £3.4 million, an increase of over twenty per cent when compared with the£2.8 million of the previous year. Amortisation rose significantly during theyear reflecting the high level of investment in new drug registrations and alsothe impact of goodwill on the purchase of the fifty percent minority in ECOAnimal Health that we did not already own. Both these amortisation items arenon-cash and have no effect on our underlying trading performance. We propose raising the final dividend to 5.45 pence (net) per share making atotal dividend for the year of 7.0 pence (net) per share, an increase of 9.4 percent over last year's total payment of 6.4 pence (net) per share. Thetransitional nature of the Company in the year under review has resulted inearnings not covering the dividend. We are confident that the current level ofearnings is temporary and therefore the dividend increase can be justified.Shareholder approval will be sought at the Annual General Meeting on 5 October2006 to pay the final dividend on 1 November 2006 to shareholders on theregister on 11 August 2006. We remain committed to disposing of Aquarium Products; our US based petaccessory operation and are currently in talks with a potential buyer. ECO GROUP Our core animal health business moved forward strongly; sales for the yearapproached a record £14 million, over 30 per cent ahead of the previous twelvemonths. Operating profits more than doubled with a substantial widening ofmargins. This significant advance in trading reflects the grant of moreregulatory approvals around the world and a strong performance by our majorinternational distributors. It is disappointing when milestone target dates are missed, but we have grownaccustomed to delays in the receipt of regulatory approvals caused by increaseddemands for additional safety work. The granting of an approval, even if it is alittle later than expected, is still an important milestone and provides thebasis for future growth in sales and profit. The barriers to entry into thelucrative drug markets for farm animals and pets continue to rise and we remaincommitted to investing in the registration process. There has been considerablepress comment in the United States about the Food and Drug Administration'sdelays in approving a huge influx of files for human generic drugs seekingmarketing approval and their failure to increase staff levels to cope with somany more applications. This has also impacted on companies seeking approvalsfor animal health products and delays of up to two years are now standard.Nevertheless, the rewards remain considerable and we will continue to focusclosely on those drugs which provide the fastest returns; this includestreatments for domestic and companion animals. China is an important territory for ECO and the investment in the Eco-BiokChinese joint venture has made good progress during its first year of commercialtrading. Important milestones include achieving Good Manufacturing Practice(GMP) approval of a premix/water soluble manufacturing plant (to add to theexisting approved sterile injectable plant) and the successful launch of thefirst five product lines, which include Aivlosin and Ecomectin. Sales growth andimproved profitability in 2006 will be driven by the growth of existing productsand a number of new ones that are on track to be licensed during the year. Theinvestment in the Eco-Biok joint venture is well positioned to capitalise on theimproved market accessibility that will result from the rationalisation of theChinese animal health industry. This rationalisation, which begins in the secondhalf of 2006 with the implementation of GMP requirements, will continue over thenext few years and is expected to completely transform what is potentially oneof the largest animal health markets in the world. In addition, agreement hasbeen reached with Schering Plough for the marketing of Aivlosin againstmycoplasma in swine and poultry in Japan and Korea, territories from which wehave until now, been excluded. Further approvals for additional indications inboth species in these countries are currently being progressed. With the grant of additional claims for Aivlosin and Ecomectin in Europe we areexpecting a significant increase in sales through our distributor,Schering-Plough Animal Health. This should materialise following the launch tothe most important veterinarians supervising pig production throughout the EU.There is an inevitable start up delay in delivering product following the grantof marketing approvals. Product labels have to be approved in the local languageby the relevant regulatory bodies in each of the EU member states. We have beenthrough this process before and we therefore anticipate a faster time to marketthan we have experienced in the past. As our business expands globally, our management team has been strengthened by anumber of senior marketing appointments and we are well placed to efficientlymanage the anticipated increase in business. There is still much to accomplishto achieve our target portfolio of drugs and this will require significantfurther investment in drug registrations, which we expect to peak next year.Meanwhile, we currently own a strong and diverse portfolio of drugregistrations, amounting to almost 400, which provides us with a solid base loadof business. AGIL Agil delivered another solid performance with good sales growth. The business isin a strong position to take advantage of a worldwide trend in animal farmingwhich is demanding both the more efficient use of feed and a move away fromantibiotic growth promoters. The global demand for sustainable crops, such asgrain and cereals, has driven up prices largely because of the move to ethanolproduction as an alternative to fossil fuels. Feed additives are now crucial tothe improved efficiency of the animal production industry whether it is fish,poultry, eggs, pork or beef. Agil's range of natural feed additives improvesfood conversion and efficiency of feeds for both pigs and poultry, which allowsfarmers and integrators to increase their profits. There has been considerable pressure on the pet food industry to eliminatesynthetic anti oxidants on health grounds. Agil's range of natural anti oxidantsis regarded as the leader in that industry. In addition, Agil's range of naturalmineral pesticides for grain storage and application onto live birds for thecontrol of mites, beetles and weevils is gaining acceptance worldwide. Credence, our water disinfectant product, has also launched well and has beenaccepted as a good complementary product to our range of on farm bio- securitysystems. Good progress has been made establishing new territories for the sale of ourproducts, including Algeria, China, Costa Rica, Estonia, Macedonia and parts ofRussia. Furthermore, there has been significant sales growth in Brazil, Bulgariaand Croatia; territories where Agil has registered and launched products forswine. Avian influenza continues to have a mixed effect on poultry producers around theworld but there is growing evidence that this virus will be controlled as it islikely to be a hazard for many years to come. Farmers in Thailand have alreadystepped up production of cooked poultry in preference to exporting raw meat.Avian influenza continues to be a major media talking point but the poultryindustry is coming to the conclusion that it is something that the industry willneed to live with. In aquaculture, we have experienced increasing demand for our Aquacube, which isa waterproof, stable binder for fish feeds and especially useful for shrimpproduction. Feed losses in aquaculture result in high biological oxygen demandwhich depletes the oxygen available to the fish and eventually kills them.Consequently, it is essential that fish feed and shrimp pellets remain solid forup to four hours in water so as to minimise their decay which causes harmfuloxygen depletion. Last year I reported our approval under the Universal Feed Assurance Scheme(UFAS) and the Feed Additive Manufactures Assurance Scheme (FEMAS) and we havebeen audited with negligible action points. This indicates that our qualityassurance systems are working well and it is these accreditations that permit usto sell our range of feed additives to animal feed blenders around the world.Companies without these approvals are no longer permitted to sell products tofeed manufacturers. People After the year end two directors retired. Michael Brent worked with me fornearly 25 years and was a director of the Company since 1986; he has made anenormous contribution to the development of Lawrence plc. Michael Sanders was afounder of our ECO animal health business in 1993. On behalf of shareholders Iwould like to express our gratitude for all that they have done and wish them along and happy retirement. I would also like to thank all our employees and associates for the contributionthey have made. We are still a relatively small team so the commitment and hardwork of staff at all levels is particularly important and appreciated. Outlook The rate of regulatory approvals for our animal health products is gatheringpace and we expect a further significant rise in sales during the current year,which has started well. While the approval timetable remains out of our hands weare confident that we are fast approaching the time when Aivlosin sales willstart to make a major and very positive impact on our trading performance. Peter LawrenceChairman 26 July 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTYear Ended 31 MARCH 2006 Notes 2006 2005 £ £ As Restated TURNOVER 20,332,752 17,797,369Continuing operations 20,332,752 17,030,853Discontinued operations - 766,516 Cost of sales (13,752,749) (11,309,637) GROSS PROFIT 6,580,003 6,487,732 Net operating expenses excludingamortisation (3,340,840) (3,596,680)Amortisation of intangible assets (1,185,246) (835,732)Amortisation of goodwill (1,021,112) (5,547,198) (533,212) (4,965,624) OPERATING PROFIT 1,032,805 1,522,108Continuing operations 1,032,805 1,333,421Discontinued operations - 188,687 Write off of investment 8 (713,294) -Exceptional writeback of goodwill - 674,644Profit on sale of fixed assets - 8,351Profit on sale of a division and sale - 1,070,819of fixed assetsNet interest (282,878) (996,172) 114,339 1,868,153 PROFIT ON ORDINARY ACTIVITIES BEFORETAXATION 36,633 3,390,261 Tax on profit on ordinary activities 24,859 (505,587) PROFIT ON ORDINARY ACTIVITIES AFTERTAXATION 61,492 2,884,674 Minority interest - equity - (37,785) PROFIT FOR THE FINANCIAL YEAR 61,492 2,846,889 EARNINGS PER SHARE ON CONTINUINGOPERATIONS 0.197p 10.03p DILUTED EARNINGS PER SHARE ONCONTINUED OPERATIONS 0.195p 10p EARNINGS PER SHARE ON DISCONTINUEDOPERATIONS - 0.47p DILUTED EARNINGS PER SHARE ONDISCONTINUED OPERATIONS - 0.46p 2006 2005 £'000 £'000EARNINGS BEFORE INTEREST, TAX,DEPRECIATION AND AMORTISATIONON CONTINUING OPERATIONS ( EBITDA) 3,361 2,878 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESYear Ended 31 March 2006 2006 2005 £ £ As Restated PROFIT FOR THE FINANCIAL YEAR 61,492 2,846,889Exchanges differences 10,467 (200,404)Actuarial losses on pension scheme (16,000) (20,000)Revaluation reserve 428,532 -TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE YEAR 484,491 2,626,485 Prior year adjustment 1,213,997 TOTAL RECOGNISED GAINS AND LOSSES SINCE LAST FINANCIALSTATEMENTS 1,698,488 CONSOLIDATED BALANCE SHEETAs at 31 March 2006 2006 2005 £ £ As restated FIXED ASSETSIntangible assets 28,799,870 26,818,044Tangible assets 1,375,813 880,933Investments 569,271 1,282,565 30,744,954 28,981,542 CURRENT ASSETSStocks 3,626,256 3,374,837Debtors 10,626,685 10,228,333Cash at bank and in hand 1,299,195 1,324,159 15,552,136 14,927,329 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (8,025,312) (5,316,506) NET CURRENT ASSETS 7,526,824 9,610,823 TOTAL ASSETS LESS CURRENT LIABILITIES 38,271,778 38,592,365 CREDITORS: AMOUNTS FALLING DUE AFTERMORE THAN ONE YEAR (3,082,497) (2,047,120)PENSION SCHEME LIABILITY (338,000) (334,000) 34,851,281 36,211,245 CAPITAL AND RESERVESCalled up share capital 1,556,011 1,547,997Share premium account 21,271,961 21,036,776Capital redemption reserve 105,829 105,829Revaluation reserve 428,532 -Profit and loss account 11,486,473 13,518,168 EQUITY SHAREHOLDERS' FUNDS 34,848,806 36,208,770 Minority interest - equity 2,475 2,475 34,851,281 36,211,245 The financial statements were approved by the Board of Directors on 25 July2006. CONSOLIDATED CASHFLOW STATEMENTYear ended 31 March 2006 2006 2005 £ £ As RestatedNET CASH INFLOW FROM OPERATING ACTIVITIES 2,968,979 15,192,339 RETURNS ON INVESTMENTS AND SERVICING OF FINANCEInterest paid (347,808) (204,159)Interest received 64,930 318,498 NET CASH (OUTFLOW)/INFLOW FROM RETURNS ON INVESTMENTSAND SERVICING OF FINANCE (282,878) 114,339 TAXATION 27,306 (705,190) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTPurchase of intangible fixed assets (4,188,184) (4,705,047)Purchase of tangible fixed assets (188,092) (118,912)Purchase of investments - (6,969,417)Sale of tangible fixed assets - 14,254 NET CASH OUTFLOW FROM CAPITAL EXPENDITUREAND FINANCIAL INVESTMENT (4,376,276) (11,779,122) EQUITY DIVIDENDS PAID (1,982,987) (1,870,206) FINANCINGIssue of shares 243,199 1,311,289Increase in borrowing 1,035,377 728,101 NET CASH INFLOW FROM FINANCING 1,278,576 2,039,390 (Decrease)/increase in cash (2,367,280) 2,991,550 NOTES 1. NET OPERATING EXPENSES Total Total 2006 2005 £ £ As RestatedDistribution costs - 134,376Administrative expenses 5,948,473 5,143,106Other operating income (401,275) (311,858) 5,547,198 4,965,624 2. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION The profit on ordinary activities before taxation is stated after charging: 2006 2005 £ £Loss on foreign currency transactions - 108,166Write off of investment 713,294 -Depreciation - owned assets 121,744 84,797Amortisation of intangible assets 2,206,358 1,368,944Auditors' remuneration- audit services 41,000 25,000- non audit services 3,000 20,035R & D expenditure 70,092 -Operating lease rentals- land and buildings 56,027 74,992Operating lease rentals- plant and machinery 123,345 84,420 The profit on ordinary activities before taxation is statedafter crediting: Gain on foreign currency transactions 10,467 - DISCONTINUED OPERATIONS ( BLACKFAST CHEMICALS) Details relating to the operations that were discontinued during the previousyear are as follows: 2005 £ Turnover 766,516Cost of sales (273,847)Net operating expenses (303,982) Operating profit 188,687 3. DIVIDENDS PAID AND PROPOSED 2006 2005 £ £ As restatedEquity dividends: Final dividend for the period ended 31 March 2004 of 4.425p perordinary share - 1,187,235Exceptional dividend paid for the period ended 31 March 2004 0f 1.3pper ordinary share - 347,716Interim dividend for the period ended 31 March 2005 of 1.4p perordinary share - 375,586Final dividend for the period ended 31 March 2005 of 5p per ordinaryshare 1,547,997 -Interim dividend for the period ended 31 March 2006 of 1.55p perordinary share 482,364 - Under provision for the period ended 31 March 2005 57,294 - 2,087,655 1,910,537 Proposed final dividend for the period ended 31 March 2006 of 5.45p perordinary share (2005: 5p) 1,696,052 1,547,997 The proposed final dividend for the period ended 31 March 2006 is subject toshareholders' approval at the Annual General Meeting and has not been includedas a liability in these financial statements in accordance with FRS 21 PostBalance Sheet Events. 4. EARNINGS PER SHARE The calculation of earnings per share is based upon the profit for the financialyear divided by the weighted average number of ordinary shares in issue duringthe year. The calculation of diluted earnings per share is based on the basic earnings pershare, adjusted to allow for the issue of shares and the post tax effect ofdividends, on the assumed conversion of all dilutive options and other dilutivepotential ordinary shares. 2006 2005 Weighted Weighted average Per average Per number of share Earnings number of share Earnings shares amount shares amount £'000 '000 (pence) £'000 '000 (pence) As RestatedBasic earnings per shareEarnings attributable to ordinary shareholders oncontinuing operations 61 31,042 0.197 2,847 28,389 10.03 Dilutive effect of securities options oncontinuing operations 251 (0.002) 85 (0.03) 61 31,293 0.195 2,847 28,474 10.00 5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group 2006 2005 £ £ As restated Profit for the financial year 61,492 2,846,889Dividends declared (2,087,655) (1,910,537) (2,026,163) 936,352Other recognised gains and losses 412,532 (20,000)Exchange differences 10,468 (200,403)Increase in shares 243,199 13,311,290Net (decrease)/increase in shareholders' funds (1,359,964) 14,027,239 Shareholders' funds at the start of the year 36,208,770 20,897,579Prior year adjustment - 1,283,952 36,208,770 22,181,531 Shareholders' funds at the end of the year 34,848,806 36,208,770 Company 2006 2005 £ £ As restated (Loss)/profit for the financial year (345,545) 3,171,434Dividends declared (2,087,655) (1,910,537) (2,433,200) 1,260,897Other recognised gains and losses 412,532 (20,000)Exchange differences (73,554) (27,030)Increase in shares 243,199 13,311,290Net (decrease)/increase in shareholders' funds (1,851,023) 14,525,157 Shareholders' funds at the start of the year 34,377,804 18,568,695Prior year adjustment - 1,283,952 34,377,804 19,852,647 Shareholders' funds at the end of the year 32,526,781 34,377,804 6. NET CASH INFLOW FROM OPERATING ACTIVITIES 2006 2005 2005 2005 Total Continuing Discontinued Total £ As Restated £ Operating profit 1,032,805 1,333,421 188,687 1,522,108Exchange (loss) - (173,374) - (173,374)Actuarial pension losses (16,000) (414,000) (414,000)Depreciation 121,744 79,220 5,577 84,797Amortisation charge 2,206,358 1,368,944 - 1,368,944Increase in stocks (251,419) (1,125,659) (20,081) (1,145,740)(Increase)/decrease in debtors (400,800) 14,848,641 (10,338) 14,838,303Increase/(decrease) in creditors 276,291 (917,208) 28,509 (888,699) Net cash inflow from continuing operatingactivities 2,968,979 14,999,985 14,999,985Net cash inflow from discontinued activities 192,354 192,354 Net cash inflow from operating activities 2,968,979 14,999,985 192,354 15,192,339 7. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2006 2005 £ £(Decrease)/increase in cash in the year (2,367,280) 2,991,550(Increase) in debt (1,035,377) (728,101) Change in net debt resulting from cash flows (3,402,657) 2,263,449Effect of foreign exchange differences 10,467 (27,030) Movement in net debt in the year (3,392,190) 2,236,419Net debt at the start of the year (1,513,762) (3,750,181) Net debt at the end of the year (4,905,952) (1,513,762) 8. WRITE OFF OF INVESTMENT The unlisted investments include a holding of loan notes at a book value of£713,294 arising from the disposal, several years ago, of part of the group'snon core business. The purchasers have attempted to redeem these for a sumsubstantially below their market value based on independent valuationscommissioned by the directors and in accordance with best practice these havebeen provided against in full. The directors have taken legal advice and havecommenced the process of taking legal action for compensation to recover theirfull market value. 9. PRIOR YEAR ADJUSTMENT Changes in accounting policy The prior year adjustment made as a result of the changes in accounting policieswhich is reported in the Statement of Total recognised Gains and Losses andadjusted to opening reserves in note 21 is analysed as follows: 2006 £ FRS 21 - Dividends proposed for 2005 declared in 2006 1,547,997FRS 17 - Increase in pension liability in 2005 (net of deferred Tax) (83,000)FRS 17 - Increase in pension liability in 2004 (net of deferred Tax) (251,000) 1,213,997 The effect of these changes in the accounting policies is to decrease the current yearsretained profit as set out below: 2006 £ FRS 21 - Dividends proposed for 2005 declared in 2006 (1,547,997)FRS 17 - Increase in pension liability in 2006 (net of deferred tax) (4,000) (1,551,997) The effect of these changes in the accounting policies on the comparative profit and lossaccount is set out below: 2005 £ FRS 21 - Dividends proposed for 2004 declared in 2005 (1,534,951)FRS 21 - Dividends proposed for 2005 declared in 2006 1,547,997FRS 17 - Increase in pension liability in 2005 (net of deferred tax) (83,000) (69,954) 10. 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 2006 and the summarised profit and lossaccount, summarised cash flow statement and summarised statement of totalrecognized gains and losses and associated notes for the year then ended havebeen extracted from the Group's 2006 audited statutory financial statements. Copies of the financial statements for the Group for the year ended 31 March2006 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