Animalcare Group plc Annual Report for the year ended 30th June 2015 Supplying & Supporting Veterinary Professionals throughout the UK www.animalcaregroup.co.uk Stock Code: ANCR 24171.04 21 October 2015 1:21 PM Proof 10 WelCome to AnimAl CAre GroUP Pl C Animalcare Group plc is focused on growing its veterinary business. We are a leading supplier of generic veterinary medicines and animal identification products to companion animal veterinary markets. We develop and sell goods and services to veterinary professionals principally for use in companion animals; operating through UK wholesalers and distribution and development partners in key markets in Western Europe. We have three product groups: ■ licensed Veterinary medicines ■ Companion Animal Identification ■ Animal Welfare Products Formoreinformationseepages04 and 05 inVestment CAse ■ Animalcare is a sustainable business in a growing market. In the year ended 30th June 2015 Animalcare recorded revenue and gross profit growth of 5.1% and 6.0% respectively; continuing its track record of topline growth ■ Animalcare is cash generative and debt free, hence in a strong financial position to invest in future growth ■ Animalcare is dividend paying and given its strong balance sheet expects to maintain its current dividend policy during the investment phase ■ Animalcare has a clear strategy for growth by investing in the development of enhanced veterinary generic pharmaceuticals to accelerate its progress over the next three to five years looK oUt For these iCons See further content for the Annual Report and Accounts 2015 online at : animalcare.annualreport2015.com View more content within this report 24171.04 21 October 2015 1:21 PM Proof 10 FinAnCiAl hiGhliGhts reVenUe £m UnderlyinG oPerAtinG ProFit £m UnderlyinG BAsiC ePs Pence diVidend Per shAre Pence 13.5 12.9 12.1 2.8 2.7 3.1 12.6 6.1 10.8 10.5 5.5 5.3 2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015 +5.1% +11.0% +16.7% +10.9% at £13.5m at £3.1m at 12.6p at 6.1p Readmoreaboutourfinancialperformance,definitionof underlyinganddividendpershareintheChiefFinancialOfficer’s review on pages 13 and 14. View our Financial Highlights online at: animalcare.annualreport2015.com CONTENTS strAteGiC rePort our Business Financial Highlights Operational Highlights Chairman’s Statement Group at a Glance Business Model Strategy our Performance Chief Executive’s Review 10 Chief Financial Officer’s Review 13 Principal Risks and Uncertainties 01 02 03 04 06 08 15 oUr GoVernAnCe Board of Directors Directors’ Report Statement of Directors’ Responsibilities 16 18 20 22 oUr FinAnCiAls Independent Auditor’s Report 21 Consolidated Statement of Profit and Loss and Comprehensive Income Statements of Changes in Shareholders’ Equity Balance Sheets Cash Flow Statements Notes to the Accounts Five Year Summary Advisers 23 24 25 26 52 iBC 24171.04 21 October 2015 1:21 PM Proof 10 01 01 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCRStrategic ReportOur Business oPerAtionAl hiGhliGhts ■ Strong increase in sales of Licensed Veterinary Medicines, by 8.8% ■ Volume of microchips sold increased in the period with revenues impacted by the timing of a horse microchip tender ■ Revenues from the Animal Welfare Products range increased slightly in the year, 2.6% ■ Investment in product development pipeline has increased substantially in the period. 3 development projects progressed to regulatory submission, of which 1 licence has been granted ■ A new post of European Development Manager has been successfully filled to focus entirely on expanding potential from territories outside the UK ReadmoreaboutourChiefExecutiveOfficer’s Review on pages 10 to 12 View our Financial Highlights online at: animalcare.annualreport2015.com 02 24171.04 21 October 2015 1:21 PM Proof 10 ChAirmAn’s stAtement “The three areas of the business have performed well during the year; in particular the continued growth of Licensed Veterinary Medicines” James lambert Chairman Animalcare remains focused on three product groups: Licensed Veterinary Medicines, Companion Animal Identification and Animal Welfare Products; all sold through veterinary practices. The three areas of the business have performed well during the year; in particular the continued growth of Licensed Veterinary Medicines by 8.8% is very pleasing and follows a strong year in 2014. Financial trading Group revenues increased by 5.1% from £12.9m to £13.5m principally due to the growth in sales of Licensed Veterinary Medicines by £696k to £8.6m. This good performance has led to pre-tax profits increasing by 12.7% during the year and over 30% in the past two years. Basic earnings per share have increased from 10.3p to 12.1p, up 17.5% in the period and 33% in the past two years. Cash generation has remained very strong, with cash increasing from £3.8m to £5.8m. People The senior management of your business has been further strengthened during the year with high calibre individuals from the human and animal pharmaceutical industry. A Senior Management Team meeting made up of all the heads of departments is chaired monthly by our CEO Iain Menneer, setting and monitoring budgets, and running the business day-to-day. The plc Board, which meets eight times a year, is chaired by myself as Non-Executive Chairman, having held CEO and Chairman roles for thirty years. Nick Downshire also has wide business experience and is a qualified accountant and chairs the Audit Committee. Ray Harding is a qualified veterinary surgeon and set up and ran a successful pharmaceutical regulatory consultancy for fifteen years and is Chairman of the Remuneration and the Nomination Committees. Along with the CEO and CFO your Board sets the strategy to enhance shareholder value in all three main operating areas of the business. I believe the success and the long-term growth of Animalcare are well served by a stable, experienced, well balanced and challenging Board. This coupled with an able, talented hard working management team gives your Company real opportunity for continued growth over the coming years. Product development Pipeline Progress has been made during the period developing new products in our in-house development pipeline. Our investment in product development and in regulatory assessment fees has grown significantly during the year to almost £800k, an area which is core to our growth strategy. Further information is available on pages 8 and 9. dividend Your Board proposes, subject to shareholder approval, an increased final dividend of 4.3 pence per share. With 1.8 pence per share paid as the interim dividend this brings the total for the year to 6.1 pence per share, representing growth of 10.9% (2014: 5.5 pence per share), which is in line with underlying operating profit and is well covered by the increase in cash balances. Prospects With the significant increase in investment in new product development and in the infrastructure across all areas of its business, Animalcare is well positioned and delivering its strategy for growth in sales from 2017 onwards. Your Company possesses not only an experienced, talented and well balanced leadership team but also a capable hard working workforce. I would like to thank them all for their commitment during the year, which continues to deliver an exciting growing business. James lambert Non-Executive Chairman 24171.04 21 October 2015 1:21 PM Proof 10 03 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCRStrategic ReportOur Business GroUP At A GlAnCe oUr mAin l oCAtion Our head office and increased warehousing operation are both located in York, UK. oUr d istriBUtion Points Animalcare has a strong network of distribution and development partners across Western Europe. 04 24171.04 21 October 2015 1:21 PM Proof 10 liCensed VeterinAry mediCines ComPAnion AnimAl identiFiCAtion AnimAl WelFAre ProdUCts reVenUe £8.6m 63% licensed Veterinary medicines Market Overview Total UK veterinary medicines market is worth £610m, of which £332m is for companion animals (dogs, cats, horses and small mammals). In the year to March 2015 the whole medicines market grew by 1.5% and 1.1% for companion animals (www.noah.co.uk). 61% (2014) 59% (2013) Read more online at: www.animalcaregroup.co.uk Operational Achievements » Successful launch of 5 new products in the period » Focus on anaesthetics and analgesics range has driven market penetration for these key products » Product development pipeline has gained momentum reVenUe £2.3m 17% Companion Animal identification Market Overview Annual UK sales volume currently estimated to be approximately 960,000 microchips for companion animals (excluding equine). Two main microchip database providers servicing the UK (The Kennel Club’s Petlog ~7.7m pets, Animalcare’s Anibase ~4.2m pets), with several much smaller operators. 19% (2014) 19% (2013) Read more online at: www.animalcaregroup.co.uk Operational Achievements » Volume of Identichip units sold increased by 1.7% in the period » Operational efficiencies implemented in pet owner database during the year offering cost savings whilst maintaining service levels » New microchip launched just after the year end offering slimmer form factor for smaller pets but without losing all the performance features reVenUe £2.6m 20% Animal Welfare Products Market Overview This grouping covers a wide range of products and consequently suppliers. Accessing the veterinary market through different channels for example established veterinary and human healthcare wholesalers, internet providers and ad hoc local suppliers. Accordingly this fragmented market is very hard to quantify with any certainty. 20% (2014) 22% (2013) Read more online at: www.animalcaregroup.co.uk Operational Achievements » Infusion Accessories range continuing to grow » Preparations nearing completion for our hygiene range ahead of implementation of stringent EU Biocides Regulations 24171.04 21 October 2015 1:21 PM Proof 10 05 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCRStrategic ReportOur Business BUsiness model “This is the Animalcare Group plc Business Model, which seeks to outline how we create, deliver and capture shareholder value.” Primary markets: Supply of goods and services to veterinary professionals. Animal types: Primarily companion animals. Products and services: Licensed Veterinary Medicines, Companion Animal Identification and Animal Welfare Products. Geographic reach: Currently 93% revenue in the UK; 7% in EU with expansion plans to further penetrate the EU. ■ Robust process of identification of generic pharmaceuticals ■ Core competence in pharmaceutical licence applications ■ Broad experience of pharmaceutical formulation and contract manufacturers ■ Strong EU partner network for pharmaceutical co- development projects and quid pro quo distribution ■ Extensive reach of sales and marketing into UK veterinary customer base deVeloPment teAm Our in-house and partner developers identify pharmaceutical products to develop undifferentiated, differentiated and enhanced generics. each project is assessed against technical and commercial criteria to determine its suitability to become a full development project. our development pipeline has generated in excess of £25m revenue since 2006. distriBUtion Animalcare sells its products to veterinary wholesalers in bulk. these products are then sold by the wholesalers to their veterinary practice customers. Similarly, some pharmaceutical products are sold to our European partners to distribute in their home territories. sAles And mArKetinG teAm Our marketing team provides promotional literature for our sales team and support materials to help veterinary professionals explain medical conditions and therapies to their pet owning clients. our highly trained sales team call on veterinary practices across the UK to promote our products and services, thereby pulling demand through the veterinary wholesalers. the regular visits from our sales representatives mean we have first hand experience of what our customers need, and can channel their feedback back to our development team. our european partners distribute in their home territories. Pet miCroChiP dAtABAse Our database staff receives over 100,000 calls a year from owners updating their contact details and animal welfare professionals wanting to reunite lost pets. strenGth throUGh oUr PeoPle 06 24171.04 21 October 2015 1:21 PM Proof 10 nPd IN-HOUSE ProdUCts WholesAlers VeterinAry PrACtiCes Pet oWners eU distriBUtion & deVeloPment PArtners eU sUPPly ChAin ComPAny CUltUre stAFF deVeloPment KnoWledGe & eXPertise stronG eXternAl relAtionshiPs 24171.04 21 October 2015 1:21 PM Proof 10 07 hEADINGstraplineAnimalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCRStrategic ReportOur Business strAteGy In recent years UK veterinary practices have consolidated; be it by corporate acquisition or joint-venture partnership, joining buying groups and growth of the charitable sector. The veterinary pharmaceutical sector has seen increased competition through numbers of suppliers and generic products. Conversely, in part through M & A activity, there are now fewer high quality routes to market for those pharmaceutical licence holders without domestic sales channels. We have developed our internal capability, expertise and cash position to take advantage of these market conditions and opportunities to focus our strategy in the following areas. our strategy for 2015 to 2018 is to: 1 identify product candidates to maintain flow into and through development pipeline 2 increase efforts to license in new pharmaceutical products 3 Assess opportunities to innovate and strengthen Companion Animal Identification group 4 increase the sales of our current products outside the UK 08 neW ProdUCt deVeloPment (NPD) PrOCESS identification Candidate identification andselection Feasibility Investment case prepared based on development, contract manufacturing, activeingredientsource and market intelligence 28 Candidates 9 Projects Feasibility Ifanopportunitysatisfiesthese criteria the team assemble a projectfilethatwillincludethe regulatory strategy and a shortlist offacilitiesabletodevelopand manufacture the product. Early stage feasibility work may be undertaken. The investment proposalissubmittedtotheBoard to gain their approval. identification Animalcare draws on many areas to identifyproductstobeconsidered for the pipeline. Our experienced staffusetheirmarketandpractical knowledge as a great source of ideas andinnovationalongwithmarket research with veterinary customers. Each project is assessed against criteria to determine its suitability. The main criteria include: ■ size of market ■ technical and regulatory feasibility ■ number of competitors ■ competitor profile ■ fit to existing and future range nPd Pipeline monitoring Regular project meetings are held with in-house teams and external partners, with progress monitored against the project timeline and budget using project management software. The development pipeline is reviewed by the Board at all Board meetings. 24171.04 21 October 2015 1:21 PM Proof 10 The varied nature of product development dictates that the exact process can be different for each project; however the diagram below explains some of the key steps in the Animalcare process. Read more online at: www.animalcaregroup.co.uk development Data generated from manufacturing and clinical trials regulatory Licenceapplication dossier prepared and submitted Commercial New product launched First Product Launches Planned H2 FY16 7 Projects 4 nPd + 4 ePd Projects development In most cases the product will be developed at the Contract ManufacturingOrganisation (CMO)whichwillultimately manufacture the product. Work will start immediately to source theActivePharmaceutical Ingredient (API) and develop analyticalmethods.Smallscale development batches will be manufacturedforsettingasideon stability and for use in any clinical studies. regulatory The dossier is assembled and submittedtotheregulatory authoritiesandismonitored through the process by the Animalcare team. The regulatory assessment process is controlled byastricttimetable;formost of our projects this is 210 days. In our experience it takes 12 monthsfromsubmittingthe dossier to launching the product on the UK market. launch Oncethemarketingauthorisation is received, and packaging layouts have been approved by the authorities,launchbatchescan be manufactured and packed ready for commercial launch. In all, the process outlined above maytakebetweenthreeandfive yearsdependingontheproject’s complexity and the development and clinical trials required. 2-3 years to maturity Existing Product development Whilst the model and stages outlined above are followed for new product development, fromtimetotimeweidentify an opportunity to modify an existingpharmaceuticalproduct in our range, which would provideadditionalfeaturesto increase sales or prolong the product life cycle. These types ofprojectsaretermedExisting Product Development (EPD) and necessitate trials, studies and regulatory fees, therefore an investmentproposalwouldstillbe considered by the Board as with the NPD process. 24171.04 21 October 2015 1:21 PM Proof 10 09 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCRStrategic ReportOur Business ChieF eXeCUtiVe’s reVieW “I am very pleased to report that good progress has been made in our product development pipeline.” iain menneer Chief Executive Officer introduction I am very pleased to report increased sales for the business during a period of investment. Revenues have grown in the period by 5.1% to £13.5m (2014: £12.8m). During the last two years we have been building a business that provides a strong platform from which to launch a new period of growth. This has been based on bringing together the best team possible and giving them the right environment to deliver our key strategic objectives. I am very happy with the progress we are making to deliver that growth. Business review The veterinary market continues to evolve, presenting new opportunities to work differently with a customer base that is consolidating and looking for increasing value from the products and services we provide. Latest industry figures show that dog numbers in the UK have declined by 4.7% to 8.5m and cats by 6.8% to 7.4m (Pet Food Manufacturers’ Association, www.pfma. co.uk), with this trend appearing to reflect across other pet species too. There are no clear reasons for this change at a time when the economy is getting stronger in the UK after several years of recession. The national dog and cat charities believe these changes are as a result of their campaigns promoting responsible pet ownership. We believe we have limited exposure to these changes in pet population due to the clinical nature of our product portfolio and the demographic of veterinary customers likely to have been affected by changes in pet ownership. licensed Veterinary medicines The Licensed Veterinary Medicines group again generated strong sales, growing by 8.8%. During the first half of the period the main competitor to our product Buprecare (an analgesic and controlled drug) was absent from the market for a period of several months allowing Animalcare to benefit from non-recurring sales estimated at £0.2m. In the first half of the year we launched the Pet Remedy range of over the counter products on distribution in the UK and Ireland. Pet Remedy is based on a patented formulation containing valerian at a specific level to calm pets. It can be used across all species and has proved very popular and effective in many domestic and veterinary settings. During the second half we launched four new pharmaceutical products, all on distribution from an EU partner. Synthadon and Anaestamine both complemented our growing anaesthetic and analgesic range; Clavubactin and Fungiconazole are an antibiotic and antifungal product respectively. All are focused on the companion animal market. Whilst in the first few months of their launch phase, sales of each are progressing well. Encouragingly, our pharmaceutical products are growing above market rates in comparison to the most recent UK market data which show a 1.1% increase for companion animal medicines revenues in the 12 months to March 2015 (National Office of Animal Health, www.noah.co.uk). 10 24171.04 21 October 2015 1:21 PM Proof 10 Companion Animal identification The sales volume of our Identichip microchips increased in the period by 1.7%, however UK revenues decreased by 2.2%, like for like. A significant equine order fulfilled late in the prior period adversely affected revenues from the equine channel in this reporting period. In April 2016 it will be a legal requirement for all dogs in England to be microchipped and in addition it will be an offence if the owners’ details are not kept up to date on the associated microchip database. The Scottish Parliament and Welsh Assembly have recently followed suit in introducing similar legislation, effective April 2016. This impending change in the law has not had a dramatic effect on the uptake of microchipping. However, our veterinary customers have become more price sensitive and responsive to short-term promotional campaigns. We have plans underway to bring value back into the market once it settles down. Pleasingly through this period our revenues from services derived from the microchip database have continued to rise. Animal Welfare Products The Animal Welfare Products group grew by 2.6% in the period. The infusion accessories range complements our prescription medicine intravenous fluids range and grew in the period by 5.3%, representing over 50% of the product group. Other categories in this group achieved revenues meeting our expectations with very modest levels of commercial support. As stated before, we continue to assess our product portfolio not only to rationalise poor performing or lower margin items but to selectively invest in new opportunities that complement our existing ranges to enhance revenue growth and profit generation. People General Animalcare is a great place to work and we pride ourselves on the positive and supportive culture. I have highlighted in previous reports that changes have been made to bring the personnel systems up to date and to a level befitting a company of its size and stature. I am very pleased that further progress has been made during the year to incentivise and reward colleagues better. Attention has now focused on staff engagement by improving company-wide communication and awareness raising. These efforts are having a positive effect in all areas of the business; and I am pleased that this year we have again experienced more staff promotions into new and responsible positions. management Senior management changes during the financial year have resulted in a stronger, more capable leadership team. Sarah McKenzie joined as Head of Marketing from a senior commercial position at Teva UK, the global generic pharmaceutical company. Sarah brings directly applicable skills and experience from some very similar dynamics in the human generics market. More recently, Martin Gore, formerly of Novartis Animal Health’s leadership team in the UK, was appointed to a newly created position to focus on European development. Martin has a wealth of commercial skills gained in the animal and human health sector and has recent experience as a country manager in Ireland. sales During the period we have concluded the reorganisation of our sales team. It is divided into two regions addressing the north and south of the UK. A structure has been introduced to support sales management. This change allows us to reward and motivate senior representatives more effectively. Field sales have been supported by the successful introduction of a telesales team. The final development is the strengthening of our key account support necessitated by the increase in corporate and buying group customers. Structural changes have been complemented by significant investment in training and development of our sales team. It is our goal to better serve our customers’ changing requirements and build a team that is capable of fully exploiting the new products and services that our product pipeline will bring to market. Product Pipeline I am very pleased to report that good progress has been made in our product development pipeline. Development work has focused on identifying new product opportunities and also ways to significantly enhance the commercial potential of existing pharmaceutical products. Four new and four existing product development projects reached the ‘Regulatory’ stage of our pipeline (see page 9), three being submitted to the authorities for assessment. One of these products has already been approved and will be launched to the UK market early in the second half of the current financial year. The other two are currently progressing through regulatory assessment successfully to date. 24171.04 21 October 2015 1:21 PM Proof 10 11 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCRStrategic ReportOur Performance ChieF eXeCUtiVe’s reVieW CONTINUED These submissions are a clear sign that the strengthening of the development process is having an effect and that progress is being made; evidence of which will be in their launch from January 2016 onwards. Furthermore, other submissions will be made during the current financial year. europe Animalcare’s sales outside the UK have been broadly constant for several years, averaging 8% of total turnover. The growth in our home UK market has not been reflected in mainland Europe. Therefore one of Animalcare’s stated strategic objectives is to increase sales outside the UK and reach the potential that patently exists. A major step forward was the creation of a new post with the sole responsibility to achieve this. As outlined above, Martin Gore was appointed Head of Export Development late in the period. Martin will assess current distribution arrangements in existing territories, offering support and insight from our central technical and marketing functions as required. In addition he will also identify new territory and distribution partner opportunities. In doing so Martin will increase our exposure in Europe with the intention to stimulate more inward product opportunities too. operations supply Chain During the year our operations function has started a structured programme to manage the supply chain more robustly, including monitoring supplier performance and developing more informed forecasting models. It is believed that both of these elements will improve product supply and tighten control of stock levels. outlook Over the past two financial years significant effort has been made to build a strong platform to launch into a new growth phase in Animalcare’s history. I believe the essential ingredients are now in place and are already delivering progress in key areas of sales, product development and European growth. During the past six months significant progress has been made increasing networks and contacts in an effort to source products to acquire or in-license. Whilst still in the early stages, there are some exciting opportunities under discussion. Our business is strongly cash generative giving us the necessary resources to invest significantly in our product pipeline. We will continue to invest in and develop our enthusiastic and committed Animalcare team who are at the core of everything we do. iain menneer Chief Executive Officer 12 24171.04 21 October 2015 1:21 PM Proof 10 ChieF FinAnCiAl oFFiCer’s reVieW “The Group continues to make good progress which is reflected in our financial performance.” Chris Brewster Chief Financial Officer £3.1m. This reflects our strong operational performance, both in revenue and margin terms, while continuing to make the necessary investment in our business to support future growth. Our balance sheet strength continues to build, with Group cash balances of £5.8m at 30th June 2015. The Group’s consistent profitable growth has enabled us to generate the funds we need to invest in our product development pipeline, a key part of our organic growth strategy. Presentation of results We present our financial results on two bases. Underlying results show the performance of the business before exceptional and other items since the Directors believe this provides a clearer understanding of business performance. IFRS results include these items to give the statutory results. overview We delivered another solid performance during the financial year to 30th June 2015, with underlying operating profit increasing by 11.0% compared with previous year to revenue and gross profit Revenue £’000 Licensed Veterinary Medicines Companion Animal Identification Animal Welfare Products 2015 8,579 2,309 2,648 2014 7,883 2,418 2,580 % change 8.8% (4.5%) 2.6% 5.1% TOTAL 13,536 12,881 Overall revenues grew by 5.1% to £13.5m (2014: £12.8m). Our Licensed Veterinary Medicines group, which represents 63% of total revenue, again delivered good growth of 8.8%, 5.5% of which is like-for-like growth. As we noted in our Interim Report dated 31st December 2014, this includes a circa £0.2m non-recurring first half benefit from sales of Buprecare as a result of supply issues with a competitor product. The remaining growth is largely driven by sales of recently launched new products. The strong performance in Licensed Veterinary Medicines was offset by a decline in Companion Animal Identification sales, mostly due to the phasing of export equine chip sales. Our Animal Welfare Products group grew modestly driven by our growing infusion accessories range, which represents around 50% of the £2.6m sales. Gross profit increased by 6.0% to £7.6m (2014: £7.1m). Our gross margins improved to 55.9% (2014: 55.4%), primarily due to the non-recurring Buprecare benefit noted above. Due to favourable sales mix, underlying gross margins remain comparable with the prior year. The financial performance of each product group is reviewed in more detail within the Business Review section of the Chief Executive’s Review. 13 24171.04 21 October 2015 1:21 PM Proof 10 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCRStrategic ReportOur Performance ChieF FinAnCiAl oFFiCer’s reVieW CONTINUED operating results Revenue £’000 Underlying EBITDA Depreciation & amortisation Underlying operating profit Profit before tax Underlying operating profit increased by 11.0% to £3.1m and our operating margin improved by 120 basis points to 23% (2014: 21.8%). Overheads, excluding research and development expenses, increased by £0.2m to £4.3m, as we continue to make the necessary investment, in particular in our management and support teams, to position the business for future growth. Research and development costs, which incorporate a share of the salaries of the product development team, have decreased by £0.1m against last year, reflecting the largely capital nature of the overall spend on our product pipeline. Non-underlying items principally incorporate the amortisation of acquired intangibles as detailed in note 4 on page 32. Reflecting all of the above, Group profit before tax was up 12.7% to £3.0m (2014: £2.7m). Cash flow Our Group cash position grew by £2.0m to £5.8m as at 30th June 2015. Cash generated by operations was very strong at £4.5m (2014: £1.6m). We have focused on optimising our stock position following the peak seen in FY14 which has, to date, delivered a reduction of £0.8m. This project continues to ensure we maintain the necessary focus on our supply chain and the resulting impact of streamlining our working capital. It is of primary importance that the Group reinvests the free cash in our business to support future growth and, as planned, during the year we have substantially increased our expenditure in our product development pipeline as shown in the chart below: CAPitAlised deVeloPment Costs £m 0.8 0.1 2013 0.2 2014 2015 The four-fold increase in expenditure vs 2014 highlights the progress made in our pharmaceutical pipeline, as a result of the decisions made during FY14 to recruit additional resource within our Technical and Business Development teams. earnings per share (“ePs”) Basic underlying EPS improved by 16.7% to 12.6 pence (2014: 10.8 pence). Basic EPS rose by 17.5% to 12.1 pence (2014: 10.3 pence) reflecting the lower cost of exceptional items incurred during 2015. 2015 3,423 (313) 3,110 3,010 2014 3,162 (360) 2,802 2,672 % change 8.3% 11.0% 12.7% dividends Since 2008 we have returned £5.5m to shareholders or 26.6 pence per share. This reflects the consistent and continuing strength of our operations, our balance sheet and cash position. The Board is proposing a final dividend in respect of the year of 4.3 pence per share, giving a total dividend of 6.1 pence per share for 2015 (2014: 5.5 pence per share). This final dividend is subject to shareholder approval at the Annual General Meeting on 17th November 2015 and will be paid on 27th November 2015 to shareholders on the register at the close of business on 23rd October 2015. The Ordinary shares will become ex-dividend on 22nd October 2015. The Board will continue to monitor the Group’s cash position to ensure an appropriate balance between investment for future growth and dividend flow to deliver overall value for our shareholders. summary The Group continues to make good progress which is reflected in our financial performance. We enter the 2016 financial year with a strong cash position, placing our business in an excellent position to take advantage of investment opportunities as and when they arise. Focused investment will continue, both within our employee base and product development pipeline, to deliver sustainable profitable growth in the coming years. Chris Brewster Chief Financial Officer 14 24171.04 21 October 2015 1:21 PM Proof 10 PrinCiPAl risKs And UnCertAinties risk description and potential impact mitigation trend Product development risk Pharmaceutical development is complex, involving technical, regulatory and financial risk. Failure to successfully deliver new product development projects could have a material impact on the Group’s results and damage our market position and relationship with our customers. Complete failure of a project or failure to meet commercial expectations due to for example competitor launches (generic or novel) would result in impairment of capitalised development costs. Following careful selection of development strategy, each new product development project undergoes rigorous review by the cross-discipline senior management team with final sign off by the Board. The pipeline is reviewed regularly, with corresponding updates provided to the Board, to ensure each project is progressing according to plan. External consultants, where deemed necessary, are employed to aid effective management of the development and regulatory process. the Group plans to commit significantly higher resources to expand our portfolio. market risk The veterinary market continues to see a customer base that is consolidating via the emergence of buying groups and corporate customers who are looking for value from the products and services we provide. This presents an opportunity for growth but potentially at the expense of margins. supply chain risk People risk The Group purchases goods for resale under contract manufacturer supply and distribution agreements. Any disruption to the relationship with our key supply partners or interruption to the supply chain could result in significant loss of Group revenue. Generally, it is not in the commercial interests of the Group to implement dual sourcing for finished product. The Group has a small Executive and senior management team whose skills, knowledge, experience and performance make a large contribution to the success of the Group. Failure to retain and attract high calibre individuals could impact the successful implementation of our strategy. The reorganisation of the sales team completed in the financial year was in part driven by our strategy to strengthen key account support and achieve our goal to better serve our changing customer base. Our marketing offering is also evolving via more tailored propositions to further strengthen support to our sales team, veterinary practices and their customers. Supply chain risk mitigation strategies include close monitoring of supplier performance, dual sourcing of raw material and the maintenance of contingency stocks where appropriate. Succession planning for the Board is overseen by the Nomination Committee. Planning for key senior management positions is given consideration by the Board. Remuneration packages are reviewed annually to help ensure that the Group has the right mix of base salary, short-term and long-term incentives to attract, retain and reward key employees to execute our growth strategy. increase decrease Unchanged 24171.04 21 October 2015 1:21 PM Proof 10 15 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCRStrategic ReportOur Performance BoArd oF direCtors James lambert oBe Non-Executive Chairman lord downshire Non-Executive Director ray harding Non-Executive Director Length of service 7 years; appointed to the Board in 2008 Length of service 7 years; appointed to the Board in 2008 Length of service 4 years; appointed to the Board in 2011 Committee membership Nomination Committee Key skills and experience James was appointed Chairman of Animalcare in 2008 when Animalcare was acquired by Ritchey plc for whom he was chairman since 2005 and non-executive director since 2003. Under James’ leadership, R&R Ice Cream made a series of acquisitions to become the largest ice cream manufacturer by volume in the UK. James is now chairman of Burton’s Biscuits, a company he helped Ontario Teachers’ Pension Plan acquire in 2013. He was also awarded the EY UK Entrepreneur of the Year award in 2014. Committee membership Audit Committee and Remuneration Committee Key skills and experience Nick joined the Board of Animalcare when it was acquired by Ritchey plc for whom he acted as a director since 1998. Nick is a qualified chartered accountant who has worked in corporate finance and venture capital, plus holding non- executive directorships in a diverse range of businesses in the insurance, agricultural, hospitality, education and technology sectors. He runs an estate in Yorkshire with a range of activities including quarrying, renewables, forestry and a hotel as well as agriculture and property. He is also Chairman of the CLA for Yorkshire and sits on their national policy committee, as well as acting as a Trustee for a number of charitable and land related trusts. Committee membership Chair of the Nomination Committee and Remuneration Committee Key skills and experience Ray has worked in the veterinary pharmaceutical industry since 1979 in many technical and product related roles for several international ‘blue chip’ companies. He established Cyton Biosciences Ltd in 1997 to provide specialist services in new product development and registration for bioscience industries in Europe. Ray left Cyton in 2012 and is now an independent consultant. Being a qualified veterinary surgeon Ray brings unique technical expertise to the Board. He has extensive experience in the development of veterinary medicines and in the European regulatory environment. His knowledge encompasses the complete range of veterinary medicines and the market in which they compete in Europe. 16 24171.04 21 October 2015 1:21 PM Proof 10 iain menneer Chief Executive Officer Length of service 12 years; appointed to the Board in 2011 Committee membership Secretary of the Nomination Committee and Remuneration Committee and by invitation Key skills and experience Iain joined Animalcare Ltd in 2003, working in sales, marketing and business development roles, including an instrumental role in the new product development pipeline. Iain was promoted to the Board as Director of Marketing in July 2011. Iain was appointed Managing Director of Animalcare Limited in March 2012 and subsequently Chief Executive Officer in January 2013. Chris Brewster Chief Financial Officer and Company Secretary Length of service 3 years; appointed to the Board in 2012 Committee membership By invitation Key skills and experience Chris has been Chief Financial Officer since June 2012. He qualified as a chartered accountant in 2003 and spent ten years at KPMG, working across a number of functions including Audit, Transaction Services and Corporate Finance, gaining a broad range of experience across a diversified portfolio of clients. Prior to joining Animalcare, Chris was Group Accounting Manager at Findus Group where he was responsible for the UK and European financial accounting, taxation and reporting requirements. 24171.04 21 October 2015 1:21 PM Proof 10 17 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Governance direCtor’s rePort The Directors present their Annual Report on the affairs of the Group together with the financial statements and auditor’s report for the year ended 30th June 2015. Principal Activities The principal activity of the Group during the year was the sale and distribution of licensed veterinary pharmaceuticals and identification products and services to companion animal veterinary markets. Business review and Future developments A review of the business and future developments is provided in the Chairman’s Statement, Chief Executive’s Review and Chief Financial Officer’s Review. research and development Our new product development programme is key to the future long-term growth and success of the Group and we are committed to the development of new and innovative products to meet the needs of our customers. Further information in relation to product development can be found in the Our Business and Strategy section of this report. During the year to 30th June 2015 the Group incurred research and development expenses of £143,000 (2014: £260,000) and a further £768,000 (2014: £156,000) was capitalised as development costs. dividends Subject to shareholder approval at the Annual General Meeting on 17th November 2015, the Board proposes paying a final dividend of 4.3 pence per share on 27th November 2015 to shareholders on the register on 23rd October 2015. This will make a total dividend of 6.1 pence per share for 2015. Capital structure The Company’s issued share capital as at 30th June 2015 was 21,019,636 ordinary shares of 20 pence each, each credited as fully paid. directors The following Directors held office during the year ended 30th June 2015 and subsequently: C J Brewster Lord Downshire G Gunn (appointed 9th February 2015, resigned 2nd June 2015) R B Harding J S Lambert I D Menneer Details of Directors’ share options and long-term incentive plans are provided in note 7 to the financial statements. The Company maintains Directors’ and Officers’ liability insurance for the benefit of its Directors, which was in place throughout the year ended 30th June 2015 and remains in place at the date of this report. Creditor Payment Policy We endeavour to maintain strong trading relationships with our suppliers. Terms of payment are agreed with suppliers in advance and it is the Group’s policy to settle its liabilities in accordance with these terms. The number of days purchases included in trade creditors at 30th June 2015 was 44 days (2014: 54 days). Corporate Governance The Directors support the underlying principles of the UK Corporate Governance Code, notwithstanding that the Group is not required to comply with all of the Code’s recommendations. The Board recognises its overall responsibility for the Group’s systems of internal control and their effective operation and it has sought to comply with those provisions of the Code judged appropriate for the current size and nature of the Group, being the establishment of an audit committee, a remuneration committee and a nominations committee. Formally constituted audit, remuneration and nominations committees, with membership comprising two of the Group’s three Non-Executive Directors, were established on the Group’s admission to AIM and are active in the conduct of internal financial control, Executive performance and remuneration and Board appointments respectively. Charitable and Political donations During the year the Group made charitable donations of £325 (2014: £100). No political donations were made during the year (2014: £nil). employees The Board recognises that the Group’s performance and success are directly related to our ability to attract, retain and motivate high calibre employees. We are committed to linking reward to business and individual performance, thereby giving employees the opportunity to share in the financial success of the Group. Employees are typically provided with financial incentives related to the performance of the Group in the form of annual bonuses. The Board also recognises employees for their contribution through the use of employee incentive plans and share plans within overall remuneration. Applications for employment by disabled persons are given full and fair consideration. When existing employees become disabled every effort is made to provide continuing employment wherever possible. 18 24171.04 21 October 2015 1:21 PM Proof 10 Auditor Each of the persons who is a Director at the date of this Annual Report confirms that: • So far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and • The Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Group’s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. A resolution to re-appoint KPMG LLP as auditors and to authorise the Directors to determine their remuneration will be put to the members at the forthcoming Annual General Meeting. Animalcare Group plc By order of the Board, Chris Brewster Company Secretary 13th October 2015 substantial shareholdings In accordance with the Disclosure Rules and Transparency Rules, the Company has been notified of the following interests exceeding the 3% notification threshold as at 30th September 2015, a date not more than one month before the date of the notice of the Annual General Meeting: Name of holder Investec Wealth Management Limited including the beneficial shareholding of S F Riddell of 863,500 shares (4.1%)* Liontrust Asset Management Octopus Investments Lord Downshire** Mr J S Lambert Unicorn Asset Management Lazard Freres Gestion Hargreave Hale No. of ordinary shares % holding 2,259,497 2,059,251 1,424,984 1,420,029 1,413,691 1,250,800 1,174,000 1,148,474 10.7% 9.8% 6.8% 6.8% 6.7% 6.0% 5.6% 5.5% * S F Riddell’s shareholding includes a non-beneficial interest in 596,000 ordinary shares ** Lord Downshire’s interest includes a non-beneficial interest in 310,446 ordinary shares Going Concern The principal risks and uncertainties facing the Group are set out on page 15. 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 2015 the Group had cash on hand of £5.8m (30th June 2014: £3.8m). Overall, the Directors believe the Group is well placed to manage its business risks successfully and continue to be profitable and cash generative. 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. 24171.04 21 October 2015 1:21 PM Proof 10 19 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Governance stAtement oF direCtors’ resPonsiBilities in respect of the Annual report and the Financial Statements for the year ended 30ᵗʰ June 2015 The Directors are responsible for preparing the Strategic Report, the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent Company financial statements on the same basis. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs as adopted by the EU; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent Company will continue in business The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 20 24171.04 21 October 2015 1:21 PM Proof 10 indePendent AUditor’s rePort We have audited the financial statements of Animalcare Group plc for the year ended 30th June 2015 set out on pages 22 to 51. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. respective responsibilities of directors and auditor As explained more fully in the Statement of Directors’ Responsibilities the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 30th June 2015 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU; • the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006 and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. lindsey Crossland (senior statutory Auditor) For and on behalf of KPMG LLP Statutory Auditor Chartered Accountants 1 The Embankment Leeds LS1 4DW 13th October 2015 24171.04 21 October 2015 1:21 PM Proof 10 21 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials ConsolidAted stAtement oF ProFit And loss And ComPrehensiVe inCome Year ended 30ᵗʰ June 2015 Underlying results before exceptional and other items 2015 £'000 exceptional and other items(i) 2015 £'000 13,536 (5,963) 7,573 (279) (4,041) (143) 3,110 27 — 3,137 (502) — — — — (110) — (110) — (17) (127) 26 Underlying results before exceptional and other items 2014 £'000 Exceptional and other items(i) 2014 £'000 12,881 (5,739) 7,142 (257) (3,823) (260) 2,802 27 — 2,829 (570) — — — — (119) — (119) — (38) (157) 35 total 2015 £'000 13,536 (5,963) 7,573 (279) (4,151) (143) 3,000 27 (17) 3,010 (476) Total 2014 £'000 12,881 (5,739) 7,142 (257) (3,942) (260) 2,683 27 (38) 2,672 (535) 2,635 (101) 2,534 2,259 (122) 2,137 12.6p 12.5p 12.1p 12.0p 10.8p 10.8p 10.3p 10.2p revenue Cost of sales Gross profit Distribution costs Administrative expenses Research & development expenses operating profit/(loss) Finance income Finance expense Profit/(loss) before tax Income tax (expense)/credit total comprehensive income/ (loss) for the year earnings per share Basic Fully diluted Note 5 4, 6 9 4, 6 10 12 12 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. 22 24171.04 21 October 2015 1:21 PM Proof 10 stAtements oF ChAnGes in shAreholders’ eqUity Year ended 30ᵗʰ June 2015 Group Balance at 1st July 2013 Total comprehensive profit for the year Transactions with owners of the Company, recognised in equity: Dividends paid Issue of share capital Share-based payments Balance at 1st July 2014 Total comprehensive profit for the year Transactions with owners of the Company, recognised in equity: Dividends paid Issue of share capital Share-based payments Balance at 30th June 2015 Company Balance at 1st July 2013 Total comprehensive profit for the year Transactions with owners of the Company, recognised in equity: Dividends paid Issue of share capital Share-based payments Balance at 1st July 2014 Total comprehensive loss for the year Transactions with owners of the Company, recognised in equity: Dividends paid Issue of share capital Share-based payments Balance at 30th June 2015 Note 11 23 25 11 23 25 Note 11 23 25 11 23 25 Share Capital £'000 4,149 — — 43 — Share Premium Account £'000 6,192 — — 199 — 4,192 6,391 — — 12 — — — 70 — Retained Earnings £'000 7,621 2,137 Total £'000 17,962 2,137 (1,103) (1,103) — 215 8,870 2,534 242 215 19,453 2,534 (1,217) (1,217) — 139 82 139 4,204 6,461 10,326 20,991 Share Capital £'000 4,149 — — 43 — Share Premium Account £'000 6,192 — — 199 — 4,192 6,391 — — 12 — — — 70 — Retained Earnings £'000 2,399 2,166 Total £'000 12,740 2,166 (1,103) (1,103) — 86 3,548 (327) 242 86 14,131 (327) (1,217) (1,217) — 74 82 74 4,204 6,461 2,078 12,743 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. 24171.04 21 October 2015 1:21 PM Proof 10 23 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials BAlAnCe sheets Year ended 30ᵗʰ June 2015 non-current assets Goodwill Other intangible assets Property, plant and equipment Investments in subsidiary companies Deferred tax asset Current assets Inventories Trade and other receivables Cash and cash equivalents total assets Current liabilities Trade and other payables Current tax liabilities Deferred income net current assets/(liabilities) non-current liabilities Deferred income Deferred tax liabilities total liabilities net assets Capital and reserves Called up share capital Share premium account Retained earnings equity attributable to equity holders of the parent Group 2015 £'000 Note 13 14 15 16 22 17 18 19 19 21 21 22 23 2014 £'000 12,711 1,327 372 — — 12,711 1,780 306 — — 14,797 14,410 1,653 2,247 5,777 9,677 2,420 1,883 3,812 8,115 24,474 22,525 (2,186) (212) (234) (2,632) 7,045 (724) (127) (851) (3,483) 20,991 4,204 6,461 10,326 20,991 (1,606) (385) (242) (2,233) 5,882 (730) (109) (839) (3,072) 19,453 4,192 6,391 8,870 19,453 Company 2015 £'000 2014 £'000 — 6 — 14,361 88 14,455 — 238 1,576 1,814 16,269 — — — 14,361 39 14,400 — 144 1,315 1,459 15,859 (3,526) (1,728) — — (3,526) (1,712) — — — (3,526) 12,743 4,204 6,461 2,078 12,743 — — (1,728) (269) — — — (1,728) 14,131 4,192 6,391 3,548 14,131 The financial statements of Animalcare Group plc, registered number 1058015, were approved by the Board of Directors and authorised for issue on 13th October 2015. They were signed on its behalf by: Chris Brewster Chief Financial Officer 24 24171.04 21 October 2015 1:21 PM Proof 10 CAsh FloW stAtements Year ended 30ᵗʰ June 2015 Comprehensive income/(loss) for the year before tax Adjustments for: Depreciation of property, plant and equipment Amortisation of intangible assets Finance income Share-based payment expense Release of deferred income Operating cash flows before movements in working capital Decrease/(increase) in inventories (Increase)/decrease in receivables Increase/(decrease) in payables Cash generated by operations Income taxes (paid)/received net cash flow from operating activities investing activities: Payments to acquire intangible assets Payments to acquire property, plant and equipment Receipts from sale of property, plant and equipment Dividends received Interest received net cash (used in)/generated by investing activities Financing: Receipts from issue of share capital Equity dividends paid net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at start of year Cash and cash equivalents at end of year Comprising: Cash and cash equivalents Note 10 15 14 9 25 21 17 18 19 14 15 11 Group Company 2015 £'000 3,010 73 359 (27) 139 (14) 3,540 767 (392) 608 4,523 (631) 3,892 (812) (7) — — 27 2014 £'000 2,672 69 410 (27) 152 (49) 3,227 (1,002) (221) (376) 1,628 (561) 1,067 (199) (32) 2 — 27 (792) (202) 82 (1,217) (1,135) 1.965 3,812 5,777 305 (1,103) (798) 67 3,745 3,812 2015 £'000 (464) — 1 (15) 74 — (404) — (6) 1,798 1,388 — 1,388 (7) — — — 15 8 82 (1,217) (1,135) 261 1,315 1,576 2014 £'000 (519) — — (20) 86 — (453) — 7 (2,294) (2,740) 552 (2,188) — — — 2,553 20 2,573 242 (1,103) (861) (476) 1,791 1,315 18 5,777 3,812 1,576 1,315 24171.04 21 October 2015 1:21 PM Proof 10 25 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts Year ended 30ᵗʰ June 2015 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 subsidiary, Animalcare Ltd. The nature of the Group’s operations and its principal activities are set out in note 5 and within the Directors’ Report. The following new standards and amendments to standards are mandatory for the first time for financial periods beginning on or after 1st January 2014. Their effect has been limited to disclosure amendments. IFRS 10: Consolidated Financial Statements IAS 27: Separate Financial Statements Amendments to IAS 32: Financial Instruments: Disclosures - Offsetting Financial Assets & Liabilities Amendments to IAS 36: Recoverable Amount Disclosures for non-Financial Assets 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. International Financial Reporting Standards Annual Improvements to IFRSs 2010-2012 Cycle Annual Improvements to IFRSs 2011-2013 Cycle Applies to periods beginning after 1st February 2015 1st February 2015 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. 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 Chief Financial Officer’s Review. The principal risks and uncertainties facing the Group are set out in the Strategic Report on page 15. 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 2015 the Group had cash on hand of £5.8m (30th June 2014: £3.8m). Overall, the Directors believe the Group is well placed to manage its business risks successfully. 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 the entity controlled by the Company (its subsidiary) 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 a subsidiary 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. 26 24171.04 21 October 2015 1:21 PM Proof 10 Where necessary, adjustments are made to the financial statements of the subsidiary 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 trading performance during the year and hence to better assess trends in that 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: Customer relationships Brands Software 10 years 15 years Estimated useful life, normally 2–4 years New product development costs & marketing authorisations Estimated economic life, normally 5–7 years 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. 24171.04 21 October 2015 1:21 PM Proof 10 27 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 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 Board 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. 28 24171.04 21 October 2015 1:21 PM Proof 10 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 Leasehold improvements Plant and equipment Office furniture and equipment 10 years 4–7 years 3–5 years 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. 24171.04 21 October 2015 1:21 PM Proof 10 29 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 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. 30 24171.04 21 October 2015 1:21 PM Proof 10 3. Critical Accounting Judgements and Key sources of estimation Uncertainty CriticaljudgementsinapplyingtheGroup’saccountingpolicies 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 11.1% (2014: 10.2%). 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% (2014: 2%). 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 stock holding 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. 24171.04 21 October 2015 1:21 PM Proof 10 31 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 4. exceptional and other items Amortisation of acquired intangible assets Supplier legal dispute - dividend received Interest rate swap refund Fair value movements on foreign currency hedging total exceptional and other items Note 14 9 2015 £'000 119 (9) (18) 35 127 2014 £'000 119 — — 38 157 The amortisation charge totalling £119,000 (2014: £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 Board of Directors of Animalcare Group plc. Performance assessment is primarily based on underlying operating profit and cash generation. The Group solely comprises one reportable segment, being Animalcare. revenue Gross Profit Underlying Operating Profit Other Items Exceptional items operating Profit Finance income Finance expense Profit before tax Note Animalcare 2015 £'000 13,536 4 4 9 9 7,573 3,110 (119) 9 3,000 27 (17) 3,010 Animalcare 2014 £'000 12,881 7,142 2,802 (119) — 2,683 27 (38) 2,672 32 24171.04 21 October 2015 1:21 PM Proof 10 Animalcare 2015 £'000 Animalcare 2014 £'000 Note Products and services Licensed Veterinary Medicines Companion Animal Identification Animal Welfare other information Intangible asset additions Property, plant and equipment additions Depreciation and amortisation Consolidated assets Consolidated liabilities Consolidated net assets Key customers Number Percentage of total revenue 14 15 14,15 Key customers, all within the Animalcare segment, are those responsible for 10% or more of segmental revenue. Geographical market United Kingdom Europe and Rest of World 8,579 2,309 2,648 13,536 812 7 432 24,474 (3,483) 20,991 2015 £'000 3 91% 2015 £'000 7,883 2,418 2,580 12,881 199 32 479 22,525 (3,072) 19,453 2014 £'000 3 82% 2014 £'000 12,573 963 13,536 11,557 1,324 12,881 All the Group assets are wholly located in the United Kingdom and accordingly no geographical analysis of assets and liabilities is presented. 24171.04 21 October 2015 1:21 PM Proof 10 33 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 An analysis of total Group revenue is as follows: Revenue from sale of goods Revenue from provision of services Finance income 6. total Comprehensive income for the year Total comprehensive income for the year has been arrived at after charging: Cost of inventories recognised as expense Depreciation of tangible assets Amortisation of intangible assets Research and development Operating lease rentals Foreign exchange losses Increase in provision for receivables Increase in provision for inventories 2015 £'000 12,590 946 13,536 27 13,563 2014 £'000 11,951 930 12,881 27 12,908 2015 £'000 2014 £'000 5,831 5,639 73 359 143 199 1 — 23 69 410 260 187 21 9 34 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: Fees payable to the Company's auditor for the audit of the Company's annual accounts The audit of the Company's subsidiaries pursuant to legislation Total audit fees Tax services Other services Total non-audit fees Total auditors' remuneration 2015 £'000 2014 £'000 13 20 33 11 16 27 60 12 20 32 16 44 60 92 34 24171.04 21 October 2015 1:21 PM Proof 10 7. directors’ remuneration and interests Emoluments The various elements of remuneration received by each Director were as follows: year ended 30th June 2015 J S Lambert* Lord Downshire* R B Harding* Dr I D Menneer C J Brewster total Year ended 30th June 2014 J S Lambert* Lord Downshire* R B Harding* S M Wildridge (resigned 31st October 2013) Dr I D Menneer C J Brewster Total * Indicates Non-Executive Directors. salary £'000 Bonus £'000 Company pension contributions £'000 Compensation for loss of office £'000 Benefits £'000 34 23 23 140 102 322 33 22 22 30 135 102 344 — — — 16 11 27 — — — 34 23 16 73 — — — 17 12 29 — — — — 16 11 27 — 1 — 8 6 15 — 2 — — 7 1 10 — — — — — — — — — 66 — — 66 total £'000 34 24 23 181 131 393 33 24 22 130 181 130 520 Mr George Gunn was appointed to the Board as a Non-Executive Director on 9th February 2015 and subsequently resigned on 2nd June 2015. Mr Gunn received no remuneration during this period. 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: I D Menneer scheme Exercise Price Date of Grant Outstanding at 30th June 2014 SAYE EMI EMI EMI Unapproved SAYE Unapproved SAYE Total £1.34 4th October 2011 £1.675 14th October 2011 £1.30 2nd August 2012 £1.325 20th November 2012 £1.40 21st February 2013 £1.03 22nd May 2013 £1.415 20th June 2013 £1.05 28th November 2014 3,358 60,000 60,000 50,000 90,000 4,377 90,000 — 357,735 Granted during the year — Exercised during the year (3,358) — — — — — — — — — — — — 5,142 5,142 — (3,358) outstanding at 30th June 2015 — 60,000 60,000 50,000 90,000 4,377 90,000 5,142 359,519 24171.04 21 October 2015 1:21 PM Proof 10 35 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 C J Brewster scheme Exercise Price Date of Grant Outstanding at 30th June 2014 Granted during the year outstanding at 30th June 2015 EMI £1.30 22nd June 2012 30,000 — 30,000 EMI £1.30 2nd August 2012 30,000 — 30,000 SAYE £1.03 22nd May 2013 8,754 — 8,754 EMI £1.415 20th June 2013 40,000 — 40,000 SAYE Total £1.05 28th November 2014 — 108,754 8,571 8,571 8,571 117,325 The Directors’ interests in the shares of the Company as at 30th June are set out below: J S Lambert Lord Downshire I D Menneer C J Brewster 2015 2014 ordinary shares of 20p Ordinary shares of 20p 1,413,691 1,109,583 17,739 4,079 1,413,691 1,109,583 14,381 4,079 In addition to the above, Lord Downshire had a non-beneficial interest in 310,446 shares. Long Term Incentive Plan (LTIP) The Animalcare Group plc LTIP was introduced in June 2014 to provide an effective mechanism for senior executives to participate in the Company’s equity at a meaningful level, aligning their interests with those of shareholders. The Directors’ interests in the LTIP, which was implemented via a subscription for growth shares in the capital of Animalcare Ltd, a subsidiary of the Company, are 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. 36 24171.04 21 October 2015 1:21 PM Proof 10 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 within the Investors section (constitutional documents) of the Company’s website at http://www.animalcaregroup. co.uk. 8. staff Costs number of employees The average monthly number of employees (including Directors) during the year was: Production and distribution Selling and administration related costs Wages and salaries Social security costs Other pension costs 9. Finance Costs and Finance income Fair value losses on financial instruments* Interest rate swap refund Finance costs Other net finance income: Interest income on bank deposits Finance income Net finance (income)/costs 2015 2014 4 56 60 2015 £'000 2,024 187 78 2,289 2015 £'000 35 (18) 17 (27) (27) (10) 4 53 57 2014 £'000 1,820 166 89 2,075 2014 £'000 38 — 38 (27) (27) 11 * 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. 24171.04 21 October 2015 1:21 PM Proof 10 37 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 10. income tax expense The income tax expense comprises: Current tax expense Adjustment in the current year in relation to prior years The deferred tax (credit)/expense comprises: Origination and reversal of temporary differences Adjustment in the current year in relation to prior years total tax expense for the year The total tax charge can be reconciled to the accounting profit as follows: Total comprehensive income for the year Total tax expense Profit before tax Income tax calculated at 20.75% (2014: 22.5%) Effect of expenses not deductible Effect of share-based deductions Innovation related tax credits Change in UK tax rate Effect of adjustments in respect of prior years Note 22 22 2015 £'000 601 (143) 458 (99) 117 18 476 2,534 476 3,010 625 42 (88) (77) — (26) 476 2014 £'000 690 (105) 585 (70) 20 (50) 535 2,137 535 2,672 601 55 (13) — (23) (85) 535 The tax credit of £26,000 (2014: £35,000) shown within “exceptional and other items” on the face of the statement of comprehensive income, which forms part of the overall tax charge of £476,000 (2014: £535,000) relates to the items analysed in note 4. The prior year current tax credits in respect of both 2015 and 2014 primarily relate to research and development tax credits. The prior year deferred tax charge in 2015 of £117,000 relates to the first time recognition of deferred tax in relation to capitalised development costs. The Budget on 8th July 2015 announced that the UK corporation tax rate will reduce to 19% by 2017. The change in rates was not substantively enacted at the balance sheet date and therefore has not been reflected in the tax rates used for deferred tax purposes. The future rate reductions will affect the Group’s future current tax charges. 38 24171.04 21 October 2015 1:21 PM Proof 10 11. dividends Ordinary final dividend paid in respect of prior year Ordinary interim dividend paid 2015 £'000 839 378 1,217 2014 £'000 788 315 1,103 The final dividend paid during the year ended 30th June 2015 was 4.0 pence per share (2014: 3.8 pence per share). The interim dividend paid during the year ended 30th June 2015 was 1.8 pence per share (2014: 1.5 pence per share). The proposed final dividend of 4.3 pence per share, which is subject to approval of shareholders at the Annual General Meeting, results in a total dividend for the year of 6.1 pence per share. The proposed dividend has not been included as a liability as at 30th June 2015, 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: Underlying earnings before exceptional and other items 2015 £’00 Underlying earnings before exceptional and other items 2014 £’000 total earnings 2015 £’000 Total earnings 2014 £’000 Total comprehensive income attributable to equity holders of the Company 2,634 2,259 2,534 2,137 Basic weighted average number of shares Dilutive potential ordinary shares earnings per share: Basic Fully diluted 2015 No. 2014 No. 2015 No. 2014 No. 20,982,367 20,824,931 20,982,367 20,824,931 123,127 126,980 123,127 126,980 21,105,494 20,951,911 21,105,494 20,951,911 12.6p 12.5p 10.8p 10.8p 12.1p 12.0p 10.3p 10.2p 24171.04 21 October 2015 1:21 PM Proof 10 39 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 13. Goodwill Cost At 1st July 2013, 1st July 2014 and 30th June 2015 Accumulated impairment losses At 1st July 2013, 1st July 2014 and 30th June 2015 net book value At 30th June 2015 and 30th June 2014 Group £'000 12,711 — 12,711 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% (2014: 2.0%). 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 principal geographic area in which Animalcare operates. 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 11.1% (2014: 10.2%). 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. 40 24171.04 21 October 2015 1:21 PM Proof 10 14. other intangible Assets Group Cost At 1st July 2013 Additions At 30th June 2014 Additions Disposals At 30th June 2015 Amortisation At 1st July 2013 Charge for the year At 30th June 2014 Charge for the year Disposals At 30th June 2015 Carrying value At 30th June 2015 At 30th June 2014 Acquired brands and customer relationships £'000 New product development costs £'000 Capitalised software £'000 1,361 — 1,361 — — 1,361 653 119 772 119 — 891 470 589 1,491 156 1,647 768 — 2,415 737 253 990 195 — 1,185 1,230 657 122 43 165 44 (31) 178 46 38 84 45 (31) 98 80 81 Total £'000 2,974 199 3,173 812 (31) 3,954 1,436 410 1,846 359 (31) 2,174 1,780 1,327 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 Anibase pet database, is four years. Company Cost At 1st July 2014 Additions At 30th June 2015 Amortisation At 1st July 2014 Charge for the year Carrying value At 30th June 2015 At 30th June 2014 Capitalised software £'000 Total £'000 — 7 7 — 1 6 - — 7 7 — 1 6 - 41 24171.04 21 October 2015 1:21 PM Proof 10 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 15. Property, Plant And Equipment Group Cost At 1st July 2013 Additions Disposals At 1st July 2014 Additions Disposals At 30th June 2015 depreciation At 1st July 2013 Charge for the year At 1st July 2014 Charge for the year Disposals At 30th June 2015 net book value At 30th June 2015 At 30th June 2014 Leasehold improvements £'000 Plant and equipment £'000 Office furniture and equipment £'000 187 — (3) 184 — — 184 3 19 22 19 — 41 143 162 107 27 — 134 2 (17) 119 42 14 56 18 (17) 57 62 78 263 5 — 268 5 (129) 144 100 36 136 36 (129) 43 101 132 Total £'000 557 32 (3) 586 7 (146) 447 145 69 214 73 (146) 141 306 372 16. investments in subsidiaries Subsidiary undertakings Cost and net book value At 1st July 2013, 2014 and 30th June 2015 The sole subsidiary undertaking of the Company is detailed below. Animalcare Ltd Company 2015 £'000 2014 £'000 14,361 14,361 Country of registration or incorporation Class Shares held % England Ordinary 90 The principal activity of this undertaking for the last financial year was the sale of companion animal products and related services. 42 24171.04 21 October 2015 1:21 PM Proof 10 17. inventories Finished goods and goods for resale Group 2015 £'000 1,653 2014 £'000 2,420 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 Trade receivables Amounts receivable from subsidiaries Corporation tax – Group relief Other receivables Prepayments and accrued income Group Company 2015 £'000 1,924 — — 6 317 2,247 2014 £'000 1,577 — — 4 302 1,883 2015 £'000 — — 217 6 15 238 The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. Movement in allowance for doubtful debts Group Company Balance at 1st July Impairment losses recognised Balance at 30th June Ageing of past due but not impaired receivables 1–30 days past due 31–90 days past due 91 days and more 2015 £'000 15 — 15 2014 £'000 6 9 15 2015 £'000 — — — Group 2015 £'000 — 1 — 1 2014 £'000 — — 129 4 11 144 2014 £'000 — — — 2014 £'000 59 — — 59 43 24171.04 21 October 2015 1:21 PM Proof 10 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 Cash and cash equivalents Cash and cash equivalents Group Company 2015 £'000 5,777 2014 £'000 3,812 2015 £'000 1,576 2014 £'000 1,315 Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. 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 31 days (2014: 36 days). No interest has been charged on overdue receivables. 19. other Financial liabilities Trade payables Amounts payable to subsidiaries Other taxes and social security costs Other creditors Derivative financial instruments (see note 20) Accruals Group Company 2015 £'000 936 — 450 386 18 396 2014 £'000 858 — 226 299 28 195 2015 £'000 73 3,385 46 18 — 4 2014 £'000 63 1,570 40 15 — 40 2,186 1,606 3,526 1,728 The Directors consider that the carrying amount of trade and other payables approximates to their fair value. 44 24171.04 21 October 2015 1:21 PM Proof 10 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: 2015 Trade and other payables 2014 Trade and other payables Within one year or on demand £'000 1–2 years £'000 3–5 years £'000 More than 5 years £'000 2,186 1,606 — — — — — — Total £'000 2,186 1,606 Categories and Fair Value of Financial Instruments Carrying value Financial assets Trade and other receivables (including cash and cash equivalents) Financial liabilities Trade and other payables 2015 £'000 2014 £'000 7,707 5,393 (2,186) (1,606) The fair values of the Group’s financial assets and liabilities are not materially different from their carrying values. 24171.04 21 October 2015 1:21 PM Proof 10 45 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 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 contracts. The carrying value of the Group’s foreign currency assets and liabilities at the reporting date was: Euro US Dollar Assets Liabilities 2015 £'000 446 264 2014 £'000 459 34 2015 £'000 153 — 2014 £'000 51 65 Foreign Currency Sensitivity Analysis At 30th June 2015 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 2015. A positive number indicates that an increase in profit would arise from a 10% change in value of Sterling against these currencies, a negative number indicates that a decrease would arise. Euro US Dollar Strengthening £'000 Weakening £'000 (27) (24) 33 29 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 three (2014: four) open foreign exchange contracts at 30th June 2015. The values are shown below: Principal value Fair value 2015 £'000 338 (18) 2014 £'000 752 (28) 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. 46 24171.04 21 October 2015 1:21 PM Proof 10 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: Balance at the beginning of the period Income deferred to future periods Release of income deferred from previous periods Balance at end of the period The deferred income liabilities fall due as follows: Within one year After one year Income recognised during the year is set out below: Income received Income deferred to future periods Release of income deferred from previous periods Income recognised in the year 2015 £'000 972 241 (255) 958 2015 £'000 234 724 958 2015 £'000 227 (241) 255 241 2014 £'000 1,021 182 (231) 972 2014 £'000 242 730 972 2014 £'000 195 (182) 231 244 24171.04 21 October 2015 1:21 PM Proof 10 47 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 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. Balance at 1st July 2013 Charge/(credit) to income Balance at 30th June 2014 Charge/(credit) to income Balance at 30th June 2015 Property, Plant and Equipment £'000 Share-based payments £'000 Intangible fixed assets £'000 Other £'000 27 14 41 (4) 37 (24) (19) (43) (111) (154) (7) — (7) (1) (8) 163 (45) 118 134 252 Total £'000 159 (50) 109 18 127 Deferred tax balances have been calculated at an effective rate of 20%, being the substantively enacted rate at 30th June 2015. 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: Balance at 1st July 2013 Charge/(credit) to income Balance at 30th June 2014 Charge/(credit) to income At 30th June 2015 Accelerated tax depreciation £'000 Share-based payments £'000 (17) 5 (12) 3 (9) (13) (12) (25) (52) (77) Other £'000 (2) — (2) — (2) Total £'000 (32) (7) (39) (49) (88) Deferred tax balances have been calculated at an effective rate of 20%, being the substantively enacted rate at 30th June 2015. 48 24171.04 21 October 2015 1:21 PM Proof 10 23. share Capital Allotted, called up and fully paid ordinary shares of 20p each Allotted, called up and fully paid ordinary shares of 20p each 2015 no. 2014 No. 21,019,636 20,960,204 2015 £’000 4,204 2014 £’000 4,192 During the year £11,886 (2014: £43,000) of ordinary shares were issued for proceeds of £81,814 (2014: £242,125) resulting in a share premium of £69,928 (2014: £199,125). 24. operating lease Arrangements The Group as lessee Lease payments under operating leases recognised as an expense in the year 2015 £'000 199 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: Within one year In the second to fifth years inclusive After five years 2015 £'000 168 298 78 544 2014 £'000 187 2014 £'000 162 252 110 524 Operating lease payments principally represent rentals payable by the Group for its office and warehouse properties and motor vehicles. 24171.04 21 October 2015 1:21 PM Proof 10 49 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials notes to the ACCoUnts CONTINUED Year ended 30ᵗʰ June 2015 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: EMI SAYE Unapproved Outstanding at beginning of year Granted during the year Lapsed during the year Exercised during the year open at 30th June 2015 exercisable at the end of the year Options 560,000 20,000 (30,000) (55,000) 495,000 90,000 Price £ 1.413 1.725 1.355 1.380 1.432 1.55 Options 112,172 120,673 (22,311) (4,432) 206,102 — The weighted average inputs into the Black–Scholes model at the time of grant were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk-free rate Price £ 1.084 1.050 1.218 1.340 1.041 — EMI Scheme 144p 144p 53% Options 180,000 — — — 180,000 — Price £ 1.408 — — — 1.408 — SAYE Scheme Unapproved Scheme 130p 104p 50% 141p 141p 56% 3.1 years 3.1 years 3.0 years 0.5% 0.5% 0.5% 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 (2014: £nil). The Group recognised a total charge in respect of share based payments of £139,000 (2014 : £152,000) within administrative expenses. 50 24171.04 21 October 2015 1:21 PM Proof 10 Long Term Incentive Plan The Animalcare Group plc LTIP was introduced in June 2014 to provide an effective mechanism for senior executives to participate in the Company’s equity at a meaningful level, aligning their interests with those of shareholders. The Directors’ interests in the LTIP, which was implemented via a subscription for growth shares in the capital of Animalcare Ltd, a subsidiary of the Company, are 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 (2014: £nil). 26. related Party transactions Trading transactions During the year ended 30th June, the following trading transactions took place between the Company and its subsidiary listed in note 16: 2015 Management Charges levied 2014 Management Charges levied Animalcare ltd £’000 240 Animalcare Ltd £’000 240 total £’000 240 Total £’000 240 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. 24171.04 21 October 2015 1:21 PM Proof 10 51 Animalcare Group plc Annual Report 2015www.animalcaregroup.co.ukStock Code: ANCROur Financials FiVe yeAr sUmmAry Consolidated statement of Comprehensive income Revenue Underlying EBITDA Underlying operating profit Profit before tax Underlying earnings per share basic diluted Dividend per share Balance sheets Non-current assets Current assets Current liabilities Non-current liabilities Shareholders' funds Cash Flow statements Net cash flow from operating activities Net cash used in investing activities Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents 2015 2014 2013 2012 2011 13,536 3,423 3,110 3,010 12.6p 12.5p 6.1p 14,797 9,677 (2,632) (851) 20,991 3,892 (792) (1,135) 1,965 12,881 12,118 10,856 11,825 3,162 2,802 2,672 10.8p 10.8p 5.5p 14,410 8,115 (2,233) (839) 19,453 1,067 (202) (798) 67 2,916 2,684 2,330 10.5p 10.4p 5.3p 14,661 6,825 (2,575) (949) 17,962 2,831 (483) (908) 1,440 2,501 2,294 2,106 9.3p 9.2p 4.5p 14,522 5,022 (1,692) (1,015) 16,837 2,123 (268) (729) 1,126 3,267 3,053 2,885 11.3p 11.2p 4.0p 14,578 4,206 (2,068) (927) 15,789 2,145 2,559 (5,089) (385) 52 24171.04 21 October 2015 1:21 PM Proof 10 AdVisers directors secretary J S Lambert Lord Downshire I D Menneer C J Brewster R B Harding C J Brewster Company number 1058015 registered office Auditor Bankers solicitors nominated Advisor and Broker registrars Unit 7, 10 Great North Way York Business Park Nether Poppleton York YO26 6RB KPMG LLP 1 The Embankment Neville Street Leeds LS1 4DW Barclays Bank PLC PO Box 190 1 Park Row Leeds LS1 5WU Langleys Queens House Micklegate York YO1 6WG Panmure Gordon & Co One New Change London EC4M 9AF Capita Asset Services 34 Beckenham Road Beckenham Kent BR3 4TU Animalcare Group plc Annual report 2015 www.animalcaregroup.co.uk Stock Code: ANCR IBC 24171.04 21 October 2015 1:21 PM Proof 10 Our Financials Address 10 Great North Way York Business Park, York YO26 6RB ContACt t: +44 (0) 1904 487687 F: +44 (0) 1904 487611 e: Investors@animalcare.co.uk W: www.animalcaregroup.co.uk 24171.04 21 October 2015 1:21 PM Proof 10