24942.04 13/10/2016 Proof 6www.animalcaregroup.co.ukStock Code: ANCRSupplying & SupportingVeterinary Professionals throughout the UKAnimalcare Group plcAnnual Reportfor the year ended 30th June 2016Animalcare-AR2016-Proof 6.indd 217/10/2016 17:04:05 WELCOME TO
ANIMALCARE GROUP PLC
Animalcare Group plc is focused
on growing its veterinary business.
We are a leading supplier of generic
veterinary medicines and 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
FormoreinformationseeGroupataGlanceon
pages04and05
SeeourInvestmentcaseonpage03
Contents
01
01
02
03
04
06
08
STRATEGIC REPORT
Our Business
Financial Highlights
Operational Highlights
Chairman’s Statement
Investment Case
Group at a Glance
Business Model
Strategy
Our Performance
Key Performance Indicators
10
Chief Executive’s Review
11
Chief Financial Officer’s Review 14
Principal Risks
16
OUR GOVERNANCE
Board of Directors
Corporate Governance
Directors’ Report
Statement of Directors’
Responsibilities
18
20
21
23
25
OUR FINANCIALS
Independent Auditor’s Report 24
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
26
27
28
29
59
IBC
Readaboutourperformanceat:
www.animalcaregroup.co.uk/year-in-review
LOOK OUT FOR THESE ICONS WHEN NAVIGATING THIS REPORT
See further content online
at www.animalcaregroup.co.uk
View more content
withinthisreport
24942.04 13/10/2016 Proof 6
FINANCIALHIGHLIGHTS
01
*
Underlying
Operating Profit
£m
+2.6%
at £3.2m
Dividend
Per Share
Pence
+6.6%
at 6.5p
ReadmoreaboutourChiefExecutiveOfficer’s
Reviewonpages12to13
View our Financial Highlights online at:
www.animalcaregroup.co.uk/year-in-review
12.9
13.5
14.7
Revenue
£m
3.1
3.2
2.8
2014
2015
2016
12.6
13.0
10.8
2014
2015
2016
+8.6%
at £14.7m
Underlying
*
Basic EPS
Pence
+3.2%
at 13.0p
2014
2015
2016
6.5
6.1
5.5
2014
2015
2016
*Underlying measures are before the effect of exceptional and other items as analysed in note 4
OPERATIONALHIGHLIGHTS
■ Strong financial performance with underlying operating profit
and underlying basic EPS slightly ahead of recently revised market
forecasts of £3.1m and 12.6p per share respectively.
■ 7.2% increase in sales of Licensed Veterinary Medicines, with
associated export revenues increasing by 22.5%.
■ Advantage taken from compulsory microchipping for dogs
opportunity resulting in an incremental revenue benefit of c£0.3m.
■ Cash generation remains strong which enabled the business to
propose a 6.6% increase in the total dividend to 6.5p per share during
our investment phase.
■ Strong momentum in building value within our product development
pipeline with investment increasing by 100% to £1.6m.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCRSTRATEGIC REPORT Our Business 02
CHAIRMAN’SSTATEMENT
Animalcare has performed well during
the financial year, particularly during
the second half, with growth from
all three product groups: Licensed
Veterinary Medicines, Companion Animal
Identification, and Animal Welfare
Products. The core medicines group
achieved increased sales of c8.0% during
the year.
Financial Trading
Group revenue increased by 8.6%
from £13.5m to £14.7m. This was
achieved principally by increasing
sales of Licensed Veterinary Medicines
both in the UK and Export markets by
over £650,000 combined. Incremental
revenue of approximately £300,000 was
also recognised from the introduction
of compulsory microchipping in dogs
during April which benefited the second
half performance. Basic EPS increased
from 12.1p to 12.5p. Cash generation
has remained strong, with year end
cash increasing from £5.8m to £7.1m.
This has been achieved during a period
of significant investment in product
development to £1.6m together with
recruiting more colleagues in all areas of
the business to help drive future growth.
People
These good results are testament to the
strength of our Senior Management Team
which continues to flourish under the able
leadership of our CEO Iain Menneer. We
have further strengthened our product
development, marketing, sales and
distribution teams in order to continue to
grow your business in the future.
ProductDevelopment
Our European partners have more than
filled the gap we had in our development
pipeline during this financial year. This
allowed your Company to increase sales
of its generic drugs whilst we continued
to progress our own development
programme. The first products from our
renewed development pipeline have been
licensed and launched in the year and we
expect further launches over the following
two years.
Dividend
Given the strong cash generation during
the financial year your Board proposes to
increase the final dividend to 4.7 pence per
share. With 1.8 pence paid as the interim
dividend this takes the total for the year to
6.5 pence per share representing growth of
c7%. from 6.1 pence last year. This is well
covered by both increased earnings and
cash flow and still leaves sufficient cash to
invest in our future.
Prospects
Given the pipeline from both our in-house
product development and that of our
European partners, plus a much improved
export business, your Board looks forward
to continuing your Company’s record of
consistent growth. This is being delivered
by a stronger, more capable management
team and committed and hard-working
colleagues. I would like to personally thank
them all for their dedication and hard work
to the success of your business.
JAMES LAMBERT
Non-Executive Chairman
“Our strategy is
on track to build a
strong business and
invest in product
development
and geographic
expansion.”
JAMES LAMBERT Chairman
24942.04 13/10/2016 Proof 6 INVESTMENT CASE
03
Animalcare Group plc is a sales and marketing
and product development company.
The UK pet medicines market has grown
consistently over the last ten years at a
Compound Annual Growth Rate of 5.2%
demonstrating remarkable resilience in the
challenging economic climate of the last
eight years.
It is a highly regulated and specialist
market with significant intellectual and
financial barriers to entry. In addition,
consolidation of pharmaceutical suppliers
has made our significant and skilled
sales and marketing function a rare and
valuable asset.
As a result we believe there are four
compelling reasons to invest in Animalcare
Group plc:
y Animalcare is a sustainable growing
business (revenue +6.8% CAGR) in a
growing market (+5.2% CAGR over ten
years)
y Animalcare is cash generative and
debt-free
y Animalcare is dividend paying and
expects to maintain its current dividend
policy during its investment phase
y Animalcare is implementing a clear
strategy to accelerate its growth over
the next three to five years
ANIMALCARE
Timeline
Formed Vet Drug Company
(veterinary wholesaler)
Genus plc formed from
the break up of the
Milk Marketing Board
Animal Health Division
divested (excluding
Animalcare)
Original Ritchey
businesses divested
to focus solely on the
veterinary operations
of Animalcare Ltd
1958
1988
1994
1999
2006
2008
2010
Vet Drug Company forms
product development
company Animalcare Ltd
Vet Drug Company and
Animalcare acquired
by Genus plc to form
Animal Health Division
Ritchey plc acquires
Animalcare Ltd. The
enlarged group subsequently
commenced trading on
AIM under the name of
Animalcare Group plc
Animalcare Group plc Annual Report 2016
www.animalcaregroup.co.uk
Stock Code: ANCR
24942.04 13/10/2016 Proof 6STRATEGIC REPORT Our Business 04
GROUPATAGLANCE
Animalcare is a
sales, marketing and
product development
business operating
from its head office in
York, North Yorkshire.
Animalcareemploys63
people;withasalesteamof22
supportedbyamarketingteam
of5.Thetechnicalandproduct
developmentteamnowtotals7.
Animalcare does not manufacture
anyofitsproducts,thesebeing
contract manufactured on its
behalfbyarangeofcompanies
locatedpredominantlyin
mainlandEurope.
Animalcare’smainmarketisthe
UKwithexportsalestotalling8%
ofrevenues,derivedfromsaleson
distributioninIreland,Germany,
France,Spain,theNetherlands,
Portugal,BelgiumandItaly.
POTENTIAL NEW DISTRIBUTION TERRITORIES
OUR MAIN LOCATION
Our head office and warehousing
operation are both located in York, UK.
OUR DISTRIBUTION POINTS
Animalcare is building a strong network
of distribution and development partners.
24942.04 13/10/2016 Proof 6 The product portfolio is divided into three groups; pharmaceuticals (Licensed
Veterinary Medicines); pet microchips (Companion Animal Identification); and
consumable items (Animal Welfare Products).
05
LICENSED
VETERINARY
MEDICINES
COMPANION
ANIMAL
IDENTIFICATION
ANIMAL WELFARE
PRODUCTS
63%
18%
19%
Revenue
£9.2m
63% (2015) 61% (2014)
Revenue
£2.7m
17% (2015) 19% (2014)
Revenue
£2.8m
20% (2015) 20% (2014)
Market Overview
Total UK veterinary medicines market is
worth approximately £625m, of which
£344m is for companion animals (dogs,
cats, horses and small mammals), with
the whole animal medicines market
growing by a little over 1% and a little
under 1% for companion animals
(www.noah.co.uk).
OperationalAchievements
f Strongsalesofthefivenewproducts
launchedlateinFY15
f LeadingpositionintheUKanaesthetic
and analgesic market by breadth and
volumeofsales.
f Threeproductlicencesgrantedfrom
productdevelopmentpipeline.
Market Overview
Annual UK sales volume estimated to
reduce from approximately 1,300,000
microchips for companion animals
(excluding equine) to 810,000 in the
aftermath of compulsory microchipping.
Two main microchip database providers
servicing the UK (The Kennel Club’s
Petlog ~7.7m pets, Animalcare’s Anibase
~4.8m pets), with several much smaller
operators.
OperationalAchievements
f Tookfulladvantageofcompulsory
microchippingfordogsopportunity
withmicrochipsalesup15%.
f Anibase,microchipdatabase,received
c1,100callsaday,threetimesnormal
levels,withservicelevelsmaintained
throughout.
f LaunchofnewIdentichipUltra,a
smallermicrochip,toaddresschange
inmarkettowardssmallermicrochips.
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.
OperationalAchievements
f Strongrevenuegrowth(+10%)of
infusion accessories range to further
complementourmarketleadingI.V.
fluidpharmaceuticals.
f Newimprovedhardsurfacecleaning
productslaunchedintheperiodand
contributingtohygienerangesales
increaseof12.5%.
ReadmoreaboutourStrategyonpages08to09
Read more online at:
www.animalcaregroup.co.uk
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCRSTRATEGIC REPORT Our Business
06
BUSINESSMODEL
“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 (dogs, cats, horses
and small mammals).
Products and services: Licensed Veterinary Medicines, Companion
Animal Identification and Animal Welfare Products.
Geographic reach: Currently 92% revenue in the UK; 8% in EU
with expansion plans to further penetrate the EU and ROW.
y Robust process of identification of generic pharmaceuticals
y Core competence in pharmaceutical licence applications
y Broad experience of pharmaceutical formulation and contract
manufacturers
y Strong EU partner network for pharmaceutical co-development
projects and quid pro quo distribution
y Extensive reach of sales and marketing into UK veterinary
practice customer-base
STRENGTH THROUGH
Our People
DevelopmentTeam
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.
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 partners to distribute in their home
territories in Europe and ROW.
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.
PetMicrochipDatabase
Our database staff receive over 100,000 calls a year from owners
updating their contact details and animal welfare professionals
wanting to reunite lost pets.
24942.04 13/10/2016 Proof 6 07
Talent Management
PROGRAMME
The TMP is designed to recognise, develop
and appreciate all the various talents we
have and to build on them, to make us
even more successful
IN-HOUSE
PRODUCT
DEVELOPMENT
PIPELINE
PRODUCT
ACQUISITION
RECRUITMENT &
INDUCTION
CAREER &
SUCCESSION
PLANNING
PERFORMANCE
MANAGEMENT
REWARD &
RECOGNITION
PEOPLE
DEVELOPMENT
ANIMALCARE-
OWNED PRODUCTS
PRODUCTS ON
DISTRIBUTION
UK VETERINARY
WHOLESALERS
DISTRIBUTED IN EU
& ROW THROUGH
PARTNER NETWORK
UK VETERINARY
PRACTICES
PET OWNERS
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCRSTRATEGIC REPORT Our Business 08
STRATEGY
Introduction
The UK veterinary market, whilst still
relatively fragmented, is consolidating at an
increasing rate. In the last decade we have
experienced the inception of the corporate
consolidator, be it stock market or private
equity financed. The early players have
increased significantly in size and now
there are several smaller players entering
the market. Over that ten year period
we have also witnessed the saturation of
the buying group model, where practices
maintain their independence but join a
group to improve their buying power. The
buying groups offer additional central
functions to differentiate themselves. As
this space has become saturated it is now
commonplace to see practices lured from
one buying group to another. An example
of the market maturing further, in the
last 12 months one leading corporate
has acquired a buying group and one of
the main UK veterinary wholesalers has
acquired two of the largest buying groups.
As in the human pharmaceutical arena,
there are fewer and fewer original
medicines being discovered and registered.
The knock-on effect is that there are
subsequently fewer products of which to
make a generic. Also, as seen in human
pharma, as opportunities become scarcer,
global players acquire or launch their own
range of generics.
For example, Animalcare was the first
company in Europe to launch a generic
buprenorphine in 2008 into a sub-£2m
market. There are now five generic
competitors in that market.
CurrentMarketDevelopments
Two years ago saw the acquisition of
Novartis Animal Health by Ely Lilly/Elanco.
This year we are awaiting the expected
regulatory clearance for the asset swap
that will see Sanofi’s animal health
business, Merial, taken over by Boehringer
Ingelheim, catapulting the latter from
number six to the second biggest in the
world with a combined annual turnover of
approximately £3.3 billion; and the largest
animal health business in Europe.
The effect of this M&A activity is mixed for
Animalcare. Whilst it is clear that the larger
and larger global companies do not and
cannot focus on the tail of their expanding
product ranges, the sheer size of the
newly combined product range is hard to
compete against. It has also been hard to
gain access to the product disposal fall-out
from the M&A.
There are many examples in business that
show the space and fertile environment
created when consolidation occurs at the
top end of a market. There is still a place
and space for Animalcare in this evolving
market but it was these market dynamics
that made it clear that we had to invest
in our product pipeline in order to offer
our customers extensive product ranges
and to renew the range as products move
though their product life cycles. Investing
in enhanced generics and furthermore in
innovative, novel products will strengthen
Animalcare’s position in the market and
in commercial transactions, moving the
discussion away from price. The additional
time to develop such products requires
Animalcare to invest in these projects now.
Even before the referendum vote in June,
it was clear that Animalcare had great
potential to open up to markets further
south and east in Europe but importantly
beyond our continent.
In conclusion we are making the most of
what we have and doing what we do, only
better.
24942.04 13/10/2016 Proof 6 Strategic Objectives
We have developed four strategic themes to maximise
Animalcare’s growth in these market conditions.
Our strategy for 2016 to 2018 is to:
1
2
3
4
Identify product candidates to
maintain flow into and through
development pipeline
Increase efforts to license in new
pharmaceutical products
Assess opportunities to innovate
and strengthen Companion
Animal Identification group
Increase the sales of our current
products outside the UK
Progress Against Strategic Themes
Product Development Pipeline
1
The diagram right highlights the number of projects
at each stage of the development pipeline. Progress is
evident by the comparison to the number at the same
time one year ago.
Identifying Novel
2
Pharmaceuticals to License
The investment in the technical and product
development team has given us the extra capacity to
actively search out novel, ideally patent protected,
products to acquire or license. Several such
opportunities have progressed to co-development
projects or commercial negotiation during the period.
Innovating in Companion
3
Animal Identification
In preparation for the recent implementation of
compulsory microchipping of dogs in England,
Scotland and Wales, and the anticipated disruption
to the market, we have reviewed our entire business
model. As a result one project has started detailed
planning in Q1 of the new financial year and another
will be executed in Q3.
Increasing Sales Outside the UK
4
We have had a very successful first year implementing
our planned expansion into more territories in Europe
and the ROW, with revenues increased by 23%.
Further progress will be made during the next two
years as we gain the regulatory certification in each
new territory.
Animalcare Group plc Annual Report 2016
www.animalcaregroup.co.uk
Stock Code: ANCR
Identification
Candidate identification and selection
2016: 14 Projects
2015: 28 Projects
09
Feasibility
Investment case prepared based on
development, contract manufacturing, active
ingredient source and market intelligence
2016: 10 Projects
2015: 9 Projects
Development
Data generated from manufacturing
and clinical trials
2016: 12 Projects
2015: 7 Projects
Regulatory
Licence application dossier
prepared and submitted
2016: 2 NPD + 3 EPD Projects
2015: 4 NPD + 3 EPD Projects
Commercial
New product launched
2016: 3 Projects
2015: 0 Projects
2–3 years
to maturity
Read more online at: www.animalcaregroup.co.uk
24942.04 13/10/2016 Proof 6STRATEGIC REPORT Our Business 10
KEY PERFORMANCE INDICATORS
The Group utilises the following Key Performance Indicators
(KPIs) to measure and monitor progress against our strategic
and financial targets.
KPI
Why this is important
Past performance
Link to strategy
Turnover growth
8.6%
Revenue growth encompasses all aspects of our
strategy and demonstrates our success in key
areas including increasing flow into and through
our development pipeline and increasing sales
both inside and outside the UK.
12.9
13.5
14.7
1
2
3
4
2014
2015
2016
Basic Underlying
Earnings per share
(“EPS”)
13.0p
Cash generated
by operations
£4.6m
Product
development
expenditure
£1.6m
Underlying EPS is a key measure of our overall
performance and the return we generate for
shareholders before exceptional items.
12.6
13.0
1
2
3
4
10.9
Cash generation is a measure of the quality of
earnings and having strong operating cash flow
enables the business to generate the funds
needed to invest in our product development
pipeline, maintain its strong balance sheet and
deliver dividend flow through our investment
phase.
It is critical that Animalcare reinvests its free
cash to develop and advance our product
development pipeline to support future organic
growth in line with the strategic objectives.
2014
2015
2016
4.5
4.6
1
2
3
1.6
2014
2015
2016
1.6
1
0.8
0.2
2014
2015
2016
24942.04 13/10/2016 Proof 6
CHIEFEXECUTIVE’SREVIEW
11
“We have made
great progress
in the year with
increased revenues,
our development
pipeline delivering,
exports growing and
exploring exciting
opportunities to
invest in innovation.”
IAIN MENNEER Chief Executive Officer
CompanionAnimalIdentification
Compulsory microchipping of dogs became
law in England, Scotland and Wales in April
2016. Not only is it a legal requirement for
all dogs over the age of eight weeks to be
microchipped it is also mandatory for the
dog’s keeper’s name and contact details
to be registered on a DEFRA approved
database. We did not experience any uplift
in microchip sales or database registrations
until April when we had an unprecedented
surge in both. Through careful planning
and the considerable efforts of our staff
and suppliers we managed to supply all
our veterinary customers and ensure all
registrations were fulfilled in a timely
manner, unlike several of our competitors.
It is too soon after the disruption to the
market caused by this legislative change
to conclude the long-term impact, but we
believe there will be a lasting reduction
in realised prices and microchip volumes.
This was predicted and so plans are in the
advanced stage to evolve our business
models and market offering.
Introduction
I am very pleased with the progress we
have made this year. Our revenues have
continued to grow, +8.6% to £14.7m (2015:
£13.5m). Our export strategy is already
making early gains from ‘low hanging
fruit’ with more to follow once product
registrations have been made in the
various territories we serve.
We have been in an investment phase for
almost three years now. As expected the
products from that investment are now
starting to flow from the development
pipeline and, at the same time, our core
business continues to perform well in a
tough commercial environment. Projects
further back in the development pipeline
are also progressing well in accordance
with plan.
Our shareholders can be assured that our
plans are on track and we are confident
they we will continue to deliver.
Momentum in the period has been
supported by further work to ensure the
business has a strong platform for growth.
BusinessReview
Growth has come from all areas of the
business.
Licensed Veterinary Medicines
The Licensed Veterinary Medicines group
continued to grow strongly in the financial
year increasing by 7.7% to over £9.2m
(2015: £8.6m). In general the new products
we have launched over the last five years
continue to gain market share and grow
revenues, while the older products in the
final phases of their product life cycles are
being eroded by commercial pressures
and by substitution. However, five new
pharmaceutical products were launched
on distribution late in the prior year. With
no new products to launch in this period
this allowed us to focus on consolidating
our market position for these products; the
combined revenues of these five products
increased by 262% to £0.95m (2015:
£0.26m).
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCRSTRATEGIC REPORT Our Performance 12
CHIEFEXECUTIVE’SREVIEWCONTINUED
Animal Welfare Products
The Animal Welfare Product group grew
again in the period with an increase of
5.1% to £2.8m (2015: £2.6m). Our Infusion
Accessories range grew by almost 10% as
a result of sales and marketing focus and
withdrawal of a modest competitor during
the year. The Hygiene Products range grew
too as a result of renewed focus following
the launch of a new range of hard surface
cleaners in the period which increased by
12% to £0.67m.
Export
Martin Gore joined Animalcare on 1st
July 2015 in the role of Head of Export
Development to focus on growing our
product distribution in existing and
new territories in Europe as this had
underperformed in the past due to lack of
focus. A year on, this has proved to be a
great success not only growing revenues of
existing products in existing territories
but also sales of existing over-the-counter
veterinary medicines products in new
territories. This has resulted in export sales
growth of almost 23% on the prior period.
Martin has signed distribution agreements
for some of our veterinary licensed
products in territories well beyond Europe.
Being regulated products there will be a
modest delay until first sales while local
licences are secured.
People
Animalcare, like any organisation, is only
as good as its employees. Therefore we
have worked hard over the last three
years during our investment phase to
make sure we have the right people in the
right roles to deliver our plan. We are well
through this process to ensure we have the
necessary roles covered and have made
further important progress during the
period. Underpinning the changes we have
made to our team was the introduction
of a Talent Management Programme
which is a framework to make sure we
recruit, develop, reward and engage all our
employees as best we can.
In addition to recruitment in export
sales, we have further strengthened our
product development and registration
team with appointments in both areas. To
reflect the evolution of the UK veterinary
customers towards consolidated corporate
customers and buying groups we have
strengthened our sales team yet further
with experienced key account specialists
now on the team.
We have conducted a review of our supply
chain and identified key areas to improve
supplier performance and demand
planning. Consequently we have started to
build a specialist supply chain team late in
the period.
24942.04 13/10/2016 Proof 6 13
Summary and Outlook
I am confident that we have built a strong
and scalable platform in the business.
We will continue to focus hard on our
in-house development pipeline and our
efforts to source novel products. The
strong progress made on our distribution
territory expansion will be cemented
and we will make further progress with
regulatory registrations through the year.
We recognise that it is vital for the future
of the business that we identify the right
products and invest in novel products.
Animalcare will continue to be active on
this key strategic front.
Whilst the animal health industry evolves
with customer consolidations and supplier
M&A we have shown that we can continue
to grow organically through launching new
products and providing a superior service
to our customers.
With the first products successfully through
our development pipeline we will start
to see early revenue growth with more
significant impact in subsequent periods.
More product registrations are expected in
the current period.
In summary, Animalcare is in good health,
generating strong cash flows to invest in
the business and at such a rate that we
are in a position to step up our investment
in products and wider opportunities to
provide the long-term success of the
business.
IAIN MENNEER
Chief Executive Officer
ProductDevelopment
Three years ago we overhauled our
product development activities and
embarked on a large number of new
projects. These projects were expected to
take approximately three years to reach
commercial launch. It is therefore very
satisfying to see the successful registration
of three products in the period, right on
target.
Two years ago Animalcare took the
decision to move the contract manufacture
of its largest product, Aqupharm I.V. Fluids,
away from a global manufacturer to one
better suited in terms of flexibility, cost,
size and culture. This was the largest
development and regulatory project
tackled to date. I am pleased to report
that the project went smoothly and was
fully implemented in H2 FY16 with no
product supply disruption or impact on our
customers.
The impact of the contract manufacturing
move detailed above meant the loss
of UK distribution rights for a general
anaesthetic, Isocare. We embarked on a
project to register our own product. The
product was successfully registered in
H2 and has since been launched to the
market, again with no disruption, in Q1
FY17.
Both these products were solely UK
licensed so we took the opportunity to
extend the product authorisations to
several European territories.
Another product successfully registered
in H2 was Acecare, a premedicant to
complement our extensive anaesthetic
and analgesic range. It is the first generic
acepromazine on the UK veterinary market.
In all we submitted five licence applications
during the period, a record number for
Animalcare. Furthermore, during the
period we prepared, entirely in-house,
Animalcare’s first dossier submission to
the veterinary regulatory authorities. Until
now we have relied to a varying degree on
external consultancies. This is a measure
of the level of experience and quality of
personnel that now work in the technical
and regulatory team.
The further strengthening of our product
development and registration function
gives us greater capacity to uncover novel
and more complex product opportunities
by expanding our network. We have
a growing database of such ideas. We
are also attracting more distribution
opportunities from a wider pool of animal
health companies, most from outside the
UK.
Brexit
The referendum result in June 2016
will inevitably have an impact on our
business, although the extent of this is,
of course, still unclear. The timing of the
result allowed us to put plans in place to
incorporate the initial currency instability
into our new financial year and we will
continue to monitor the situation and take
necessary and available action.
The encouraging early progress of our
sales in territories outside Europe will go
some way to diversifying our markets in
the short-term. The launch of products will
take one to two years to materialise due
to the various pharmaceutical regulatory
requirements in place.
Subsequent changes to the European
pharmaceutical regulatory framework are
of course currently unknown but we will
monitor this closely and put plans in place
to protect our business.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCRSTRATEGIC REPORT Our Performance 14
CHIEFFINANCIALOFFICER’SREVIEW
“2016 was a strong
year for the Group
achieving underlying
operating profit
ahead of market
expectations .”
CHRIS BREWSTER Chief Financial Officer
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 of Financial Results
The Group has delivered another year of
strong top line growth whilst we continue
to invest in our business. Underlying
operating profit increased by 2.6%
compared with previous year to £3.2m,
slightly ahead of recently revised market
forecasts of £3.1m.
We have maintained sound financial
discipline and our balance sheet strength
continues to build, reflecting the cash
generative nature of our operations. Group
cash balances increased to £7.1m as at
30th June 2016, providing the business
with the funds we need to continue the
momentum of our product development
pipeline and support future growth.
Revenue
£’000
Licensed Veterinary Medicines
Companion Animal Identification
Animal Welfare Products
Total Revenue
2016
9,238
2,680
2,783
2015
8,579
2,309
2,648
14,701
13,536
% change
7.7%
16.1%
5.1%
8.6%
Revenue increased by 8.6% to £14.7m
(2015: £13.5m) driven by growth in the UK
of 7.2% and outside the UK of 25.8%. As a
result export revenues contributed 8.2%
(2015: 7.1%) of Group revenues.
The Licensed Veterinary Medicines group,
which represents 63% of total revenue,
continued its strong track record of growth,
with sales up 7.7% to £9.2m, primarily
reflecting full year sales of new products
launched during FY15 which increased
by £0.7m. Like-for-like sales declined by
0.3% with growth in our export business
offsetting the prior year UK c£0.2m non-
recurring first half benefit from sales of
Buprecare in the UK as a result of supply
issues with a competitor.
Companion Animal Identification sales
increased by 16.1%. Legislation has been
implemented making it compulsory to
microchip dogs in the UK from April 2016
resulting in an incremental sales benefit
of c£0.3m. Price competition amongst
suppliers has adversely impacted gross
margins as noted below.
Our Animal Welfare Products group grew
by 5.1% driven by our growing Infusion
Accessories range, which represents
around 56% of the £2.8m sales.
The financial performance of each product
group is reviewed in more detail within
the Business Review section of the Chief
Executive’s Review.
24942.04 13/10/2016 Proof 6 15
GrossProfit
Gross Profit (£’000)
Gross Margin (%)
2016
7,999
54.4%
2015
7,573
56.0%
% change
5.6%
(1.6ppts)
The strong sales performance led to gross profit increasing by 5.6% on prior year to
£8.0m however our gross margin decreased from 56.0% to 54.4%. Microchip pricing was
particularly competitive throughout the majority of the financial year in the run up to
compulsory microchipping. Within our Licensed Veterinary Medicines group, overall gross
margin has remained consistent with prior year.
We anticipate gross margins to improve across the business during FY17 through a
combination of favourable sales mix and cost of goods initiatives.
OperatingResults
£’000
Underlying operating profit
Exceptional and other items
Reported operating profit
Operating margin %
Reported profit after tax
Basic underlying EPS (p)
Basic EPS (p)
Underlying operating profit increased by
2.6% to £3.2m and our operating margin
reduced by 170 basis points to 20.5%, the
latter reflecting the continuing investment
in our business, in particular our people for
which employee costs increased by £0.3m,
to position the business for future growth.
Exceptional and other items principally
incorporate the amortisation of acquired
intangibles as detailed in note 4.
Our effective tax rate has reduced from
15.8% to 14.6% as a result of the significant
increase in product development
investment on which research and
development tax credits are claimed for
qualifying expenditure.
Reflecting all of the above, reported profit
after tax was up 4.0% to £2.6m (2015:
£2.5m).
Basic underlying EPS improved by 3.2% to
13.0 pence (2015: 12.6 pence). Basic EPS,
which incorporates non-underlying items,
rose by approximately the same amount to
12.5 pence (2015: 12.1 pence).
2016
3,190
(173)
3,017
20.5%
2,634
13.0
12.5
2015
3,110
(110)
3,000
22.2%
2,534
12.6
12.1
% change
2.6%
0.6%
(1.7ppts)
4.0%
3.2%
3.3%
Dividends
The Board is proposing a final dividend in
respect of the year of 4.7 pence per share,
giving a total dividend of 6.5 pence per
share for 2016 (2015: 6.1 pence per share).
This final dividend is subject to shareholder
approval at the Annual General Meeting
on 15th November 2016 and will be paid
on 25th November 2016 to shareholders
on the register at the close of business on
21st October 2016.
The ordinary shares will become ex-
dividend on 20th October 2016.
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.
Cash Flow
The Group cash position grew by £1.3m
to £7.1m as at 30th June 2016, with the
business continuing to generate strong
levels of operating cash. We maintain focus
on robust working capital management
however expect a net investment within
working capital during FY17 to support
growth.
The strong momentum in building value
within our product development pipeline
continues, with planned investment
substantially increasing as shown in the
chart below.
1.6
Product
Development
Expenditure
£m
0.8
0.2
2014
2015
2016
Summary and Outlook
Whilst the decision by the people of the
UK to leave the EU has not as yet resulted
in any current legal or regulatory change,
it is clear there are immediate secondary
effects of this decision, in particular
political and economic uncertainty, as
well as significant exchange rate volatility.
Nevertheless, as yet we have not observed
major disruption to our operating activities
and our strategic objectives remain at this
present time unchanged – we will continue
to invest in our business for future
growth. Sterling weakness has impacted
on our costs of goods, in particular our
pharmaceutical products imported from
mainland Europe. The business is taking
steps to mitigate certain of this exposure
and the growth in our export business
will provide some natural hedge. Our
strong balance sheet will help absorb
the uncertainty in the macroeconomic
environment.
Overall the Group continues to make
good progress in executing its strategy
to drive future growth, which is reflected
in our financial performance and level of
investment in the business.
CHRIS BREWSTER
Chief Financial Officer
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCRSTRATEGIC REPORT Our Performance 16
PRINCIPAL RISKS
Risk Management Framework
The Board is responsible for maintaining and reviewing the effectiveness of our risk management activities, intended to monitor and
mitigate, rather than eliminate, the significant risks that the Group is exposed to. Animalcare has implemented policies and procedures
to address risk including with respect to product development, operations and regulatory compliance.
In accordance with our governance practices, the Audit Committee supports the Board of Directors in monitoring the Group’s risk
appetite and exposures, and is responsible for reviewing the effectiveness of the risk management and internal control systems.
Our Risks
A summary of the principal risks together with an explanation of how the Group mitigates each risk their trend and linkage to our
strategy are set out in the table below.
Risk
Alignment to strategy
Potential impact
Mitigation
Trend
1
2
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.
1
2
3
4
The growth of corporate
customers and buying
groups presents an
opportunity for growth
but at the expense of
margins.
The Group
continues and
plans to commit
significant
resources
to expand
our product
portfolio.
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.
We continue to develop
and strengthen our sales
and marketing teams in
respect of key account
support and achieve our
goal to better serve our
changing customer-base.
Product
developmentrisk
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.
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.
Key
Up
Down
Same
24942.04 13/10/2016 Proof 6
17
Risk
Alignment to strategy
Potential impact
Mitigation
Trend
1
3
4
Distribution risk
The supply of products to
our customers in a timely
manner is vital to the
success of the Group.
The Group does not
manufacture any of
its own products and
is solely reliant on an
increasing third party
supplier and contract
manufacturer base across
the UK and Europe.
Any disruption to the
relationship with our
key supply partners or
interruption to the supply
chain could result in
significant loss of revenue
and damage the Group’s
reputation with its
customers.
1
2
4
Peoplerisk
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.
Given the increasing
complexity and diversity
in our supply chain, we
have identified the need
for increased specialist
resource in this area, the
recruitment for which is
ongoing.
Supply chain risk
mitigation strategies
include close monitoring
of supplier performance
and maintenance of
adequate inventories,
including safety
stock held by our
suppliers, based on risk
assessments.
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.
Furthermore, we have
introduced a Talent
Management Programme
to help engage all of our
employees.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCRSTRATEGIC REPORT Our Performance
18
BOARDOFDIRECTORS
James Lambert
Non-Executive Chairman
Nick Downshire
Non-Executive Director
Ray Harding
Non-Executive Director
Length of service
8 years; appointed to the Board in 2008
Length of service
8 years; appointed to the Board in 2008
Length of service
5 years; appointed to the Board in 2011
Committeemembership
Audit Committee and Nomination
Committee
Committeemembership
Chair of the Audit Committee and
Remuneration Committee
Keyskillsandexperience
James was appointed Chairman of
Animalcare in 2008 when it was acquired
by Ritchey plc for whom he was Chairman
from 2005 and a NED from 2003. Before
this, in 1985, he was Co-Founder and CEO
for 28 years of R&R Ice Cream and retired
as Executive Chairman in 2014, which
during this time became one of Britain’s
most successful businesses. James was
appointed Chairman of Burton’s Biscuits in
2013, Chairman of Inspired Pet Nutrition
in 2015, Chairman of Whitman Howard in
2016 and NED of Story Homes in 2016. He
also won the EY UK Entrepreneur of the
Year award in 2014 and represented the
UK in the world finals. James has spent a
lifetime helping build, develop and manage
successful businesses enabling them to
reach their full potential and give them
strategic direction.
Keyskillsandexperience
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 worked in corporate finance and
venture capital before becoming the
finance director of a software company.
He has held non-executive directorships
in a diverse range of businesses in the
insurance, agricultural, hospitality,
education and technology sectors. He
runs an estate in Yorkshire and is also
Chairman of the CLA for Yorkshire and
also chairs their Agriculture and Land Use
national committee, as well as acting as
a Trustee for a number of charitable and
land related trusts. His experience with
other organisations and his professional
background assist him to chair the audit
committee and bring objectivity and
analysis to the remuneration committee.
Committeemembership
Chair of the Nomination Committee and
Remuneration Committee
Keyskillsandexperience
A qualified veterinarian Ray has worked
in the veterinary pharmaceutical industry
since 1979 in a number of technical
and product development roles in
several major, global, research-based
companies. He established the team
at Cyton Biosciences Ltd in 1997 to
provide specialist services in new product
development and registration of veterinary
medicines in Europe. He left the company
in 2012 to take the role of independent
consultant. Appointed in 2011, he brings a
unique technical expertise to the board of
Animalcare with his extensive international
experience of the development and
regulation of veterinary medicines and
the commercial environment in which
the company operates. In addition he
provides an independent and objective role
as chair of the Board Remuneration and
Nomination Committees.
24942.04 13/10/2016 Proof 6 19
Iain Menneer
Chief Executive Officer
Chris Brewster
Chief Financial Officer
and Company Secretary
Length of service
4 years; appointed to the Board in 2012
Committeemembership
By invitation
Keyskillsandexperience
Chris joined the Board as Chief Financial
Officer in June 2012. He has a broad
range of experience gained during his
ten years’ working across a number of
functions at KPMG and through his role
as Group Accounting Manager at Findus
Group. Since joining, Chris has developed
the systems, controls and management
information needed to support the growth
and strategy of the business. More recently
Chris has taken responsibility for leading
the changes required within the supply
chain function to provide a robust platform
for growth.
Length of service
13 years; appointed to the Board in 2011
Committeemembership
Secretary of the Nomination Committee
and Remuneration Committee by invitation
Keyskillsandexperience
Iain gained his PhD in chemistry in 1996.
He worked in product and technical
development in the brewing industry,
first at an independent consultancy
then at Bass Brewers Ltd before
moving to the University of York in a
business development role in their
technology transfer department. Iain
joined Animalcare in 2003 and has since
held positions in marketing, business
development and sales, 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 Ltd in March
2012 and subsequently Chief Executive
Officer in January 2013. Iain has
extensive experience of the Animalcare
business, the animal health industry and
pharmaceutical development. Iain has
lead the transformation of the business
infrastructure over the last three years.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR GOVERNANCE 20
CORPORATEGOVERNANCE
Whilst the Group is listed on AIM, it is not required to comply with the provisions of the UK Corporate Governance Code (“the Code”).
The Board, however, is committed to a high standard of corporate governance across the Group, recognising that it is important in
protecting shareholders’ interests and the long-term success of the Group. It has therefore adopted some of the principles of the Code
so far as the Board consider practicable and appropriate to the size of the Group.
BoardandCommitteeStructure
TO BE DRAWN
BoardofDirectors
The Board, which is headed by the Chairman, comprises five
Directors, three of whom are non-executive. Directors’ profiles are
detailed on pages 18 and 19. The Board meet at least seven times
throughout the year, with further ad hoc meetings as required.
Audit Committee
Through the Audit Committee, the Directors ensure the integrity
of financial information, the effectiveness of the financial controls
and the internal control and risk management systems. The Audit
Committee is composed of two Non-Executive Directors including
Nick Downshire who has been appointed Chairman. The Chief
Financial Officer and external auditors attend by invitation.
Nomination Committee
The Company has established a Nomination Committee currently
composed of two Non-Executive Directors including Ray Harding
as Chair. Meetings are arranged as necessary. The Committee
is responsible for nominating candidates (both Executive and
Non-Executive) for the approval of the Board, to fill vacancies or
appoint additional persons to the Board.
All Directors are required to seek election by shareholders at
the first opportunity after their appointment and must stand for
re-election to the Board every three years under the Company’s
Articles of Association.
Remuneration Committee
The members of the Remuneration Committee are Ray
Harding (Chairman) and Nick Downshire. Under its Terms of
Reference, the Remuneration Committee is required to meet
at least twice a year and at such times as the Chairman of the
Committee shall think fit.
The Committee’s primary responsibilities are to set key
performance targets for Executive Directors, assess executive
remuneration against targets, and ensure that remuneration
standards at the Company are in line with best practice and
guidance. During 2016, the Committee sought external guidance
for the setting of FY17 remuneration. Further, during 2014 the
advice of KPMG LLP was taken to provide guidance on the Group’s
Long Term Incentive Plan. The Remuneration Committee reports
on its activities to the Board meeting immediately following the
committee’s meetings.
Senior Management Team
This comprises six senior managers and the CFO and is chaired
by the CEO. The SMT meet monthly to consider in particular
strategic and operational plans, monitor operating and financial
performance and assess and manage business risk.
24942.04 13/10/2016 Proof 6AuditSeniorManagement TeamBoard of DirectorsCEO DIRECTORS’REPORT
21
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 2016.
PrincipalActivities
The principal activity of the Group during the year was the
development, sale and distribution of licensed veterinary
pharmaceuticals and identification products and services to
companion animal veterinary markets.
BusinessReviewandFutureDevelopments
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.
ResearchandDevelopment
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 2016 the
Group incurred research and development expense of £156,000
(2015: £143,000) and a further £1,563,000 (2015: £768,000) was
capitalised as development costs.
Dividends
Subject to shareholder approval at the Annual General Meeting on
15th November 2016, the Board proposes paying a final dividend
of 4.7 pence per share on 25th November 2016 to shareholders on
the register on 21st October 2016. This will make a total dividend
of 6.5 pence per share for 2016.
CapitalStructure
The Company’s issued share capital as at 30th June 2016 was
21,059,636 ordinary shares of 20 pence each, each credited as
fully paid.
Directors
The following Directors held office during the year ended
30th June 2016 and subsequently:
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 2016 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 2016 was 59 days (2015: 44 days).
CorporateGovernance
The Group’s approach and policies surrounding Corporate
Governance, which this Director’s Report comprises, are shown on
page 20.
Charitable and Political Donations
During the year the Group made charitable donations of £71
(2015: £325). No political donations were made during the year
(2015: £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.
C J Brewster
Lord Downshire
R B Harding
J S Lambert
Dr I D Menneer
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR GOVERNANCE 22
DIRECTORS’REPORTCONTINUED
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
2016, a date not more than one month before the date of the
notice of the Annual General Meeting:
Name of holder
Liontrust Asset Management
Unicorn Asset Management
Octopus Investments
Lord Downshire**
Mr J S Lambert
Investec Wealth & Investment
Hargreave Hale
Lazard Freres Gestion
No. of
ordinary
shares
2,732,413
1,681,900
1,425,384
1,420,029
1,313,691
1,280,933
1,221,792
1,160,000
%
holding
12.9%
8.0%
6.8%
6.7%
6.2%
6.1%
5.8%
5.5%
** Lord Downshire’s interest includes a non-beneficial interest in 310,446 ordinary
shares
GoingConcern
The principal risks and uncertainties facing the Group are set out
on page 16.
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 2016 the Group had cash on hand of £7.1m
(30th June 2015: £5.8m).
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.
Auditor
Each of the persons who is a Director at the date of this Annual
Report confirms that:
y So far as the Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware; and
y 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 reappoint 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
11th October 2016
24942.04 13/10/2016 Proof 6 STATEMENTOFDIRECTORS’RESPONSIBILITIES
in respect of the Annual Report and the
Financial Statements for the year ended 30ᵗʰ June 2016
23
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:
y select suitable accounting policies and then apply them
consistently;
y make judgements and estimates that are reasonable and
prudent;
y state whether they have been prepared in accordance with
IFRSs as adopted by the EU; and
y 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.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR GOVERNANCE 24
INDEPENDENTAUDITOR’SREPORT
We have audited the financial statements of Animalcare Group
plc for the year ended 30th June 2016 set out on pages 25 to 58.
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.
RespectiveresponsibilitiesofDirectorsand
auditor
As explained more fully in the Statement of Directors’
Responsibilities set out on page 23, 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.
Scopeoftheauditofthefinancialstatements
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.
Opiniononfinancialstatements
In our opinion:
y 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
2016 and of the Group’s profit for the year then ended;
y the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the EU;
y 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
y the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opiniononothermattersprescribedbythe
CompaniesAct2006
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.
Mattersonwhichwearerequiredtoreportby
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:
y 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
y the parent Company financial statements are not in agreement
with the accounting records and returns; or
y certain disclosures of Directors’ remuneration specified by law
are not made; or
y we have not received all the information and explanations we
require for our audit.
CLAIRE NEEDHAM (SENIOR STATUTORY AUDITOR)
For and on behalf of
KPMG LLP
Statutory Auditor
Chartered Accountants
1 Sovereign Square, Sovereign Street
Leeds
LS1 4DA
11th October 2016
24942.04 13/10/2016 Proof 6 CONSOLIDATED STATEMENT OF PROFIT AND LOSS
AND COMPREHENSIVE INCOME
Year ended 30ᵗʰ June 2016
25
Underlying
results before
exceptional
and
other items
2016
£'000
Exceptional
and
other items
2016
£'000
14,701
(6,702)
7,999
(255)
(4,398)
(156)
3,190
33
—
3,223
(479)
—
—
—
—
(173)
—
(173)
36
—
(137)
27
Underlying
results before
exceptional
and
other items
2015
£'000
Exceptional
and
other items
2015
£'000
13,536
(5,963)
7,573
(279)
(4,041)
(143)
3,110
27
—
3,137
(502)
—
—
—
—
(110)
—
(110)
—
(17)
(127)
26
Total
2016
£'000
14,701
(6,702)
7,999
(255)
(4,571)
(156)
3,017
69
—
3,086
(452)
Total
2015
£'000
13,536
(5,963)
7,573
(279)
(4,151)
(143)
3,000
27
(17)
3,010
(476)
2,744
(110)
2,634
2,635
(101)
2,534
13.0p
12.8p
12.5p
12.3p
12.6p
12.5p
12.1p
12.0p
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
9
4,6
10
12
12
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.
Total comprehensive income/(loss)for the year is attributable to the equity holders of the parent.
The notes 1 to 26 form part of these financial statements.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 26
STATEMENTSOFCHANGESINSHAREHOLDERS’EQUITY
Year ended 30ᵗʰ June 2016
GROUP
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 1st July 2015
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 2016
COMPANY
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 1st July 2015
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 2016
Note
11
23
25
11
23
25
Note
11
23
25
11
23
25
Share
capital
£'000
4,192
—
—
12
—
Share
premium
account
£'000
6,391
—
—
70
—
4,204
6,461
—
—
8
—
—
—
45
—
Retained
earnings
£'000
8,870
2,534
Total
£'000
19,453
2,534
(1,217)
(1,217)
—
139
10,326
2,634
82
139
20,991
2,634
(1,283)
(1,283)
—
120
53
120
4,212
6,506
11,797
22,515
Share
capital
£'000
4,192
—
—
12
—
Share
premium
account
£'000
6,391
—
—
70
—
4,204
6,461
—
—
8
—
—
—
45
—
4,212
6,506
Retained
earnings
£'000
3,548
(327)
Total
£'000
14,131
(327)
(1,217)
(1,217)
—
74
2,078
(399)
82
74
12,743
(399)
(1,283)
(1,283)
—
47
443
53
47
11,161
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.
24942.04 13/10/2016 Proof 6 BALANCESHEETS
Year ended 30ᵗʰ June 2016
27
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
The notes 1 to 26 form part of these financial statements.
13
14
15
16
22
17
18
18
19
21
21
22
23
Group
2016
£'000
Note
2015
£'000
12,711
1,780
306
—
—
12,711
2,968
281
—
—
15,960
14,797
1,604
2,189
7,118
10,911
26,871
(3,027)
(101)
(220)
(3,348)
7,563
(762)
(246)
(1,008)
(4,356)
22,515
4,212
6,506
11,797
22,515
1,653
2,247
5,777
9,677
24,474
(2,186)
(212)
(234)
(2,632)
7,045
(724)
(127)
(851)
(3,483)
20,991
4,204
6,461
10,326
20,991
Company
2016
£'000
—
4
—
14,361
105
14,470
—
332
1,576
1,908
16,378
2015
£'000
—
6
—
14,361
88
14,455
—
238
1,576
1,814
16,269
(5,217)
(3,526)
—
—
(5217)
(3,309)
—
—
—
(5217)
11,161
4,212
6,506
443
11,161
—
—
(3,526)
(1,712)
—
—
—
(3,526)
12,743
4,204
6,461
2,078
12,743
The financial statements of Animalcare Group plc, registered number 1058015, were approved by the Board of Directors and authorised
for issue on 12th October 2016. They were signed on its behalf by:
CHRIS BREWSTER
Chief Financial Officer
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 28
CASH FLOW STATEMENTS
Year ended 30ᵗʰ June 2016
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
Net deferral/(release) of deferred income
Operating cash flows before movements in working capital
Decrease in inventories
Decrease/(increase) in receivables
Increase 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
Disposal of intangible assets
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
15
14
9
25
21
14
15
14
11
Group
Company
2016
£'000
3,086
66
369
(33)
120
24
3,632
49
77
822
4,580
(444)
4,136
2015
£'000
3,010
73
359
(27)
139
(14)
3,540
767
(392)
608
4,523
(631)
3,892
(1,604)
(812)
(41)
47
33
(7)
—
27
(1,565)
(792)
53
(1,283)
(1,230)
1,341
5,777
7,118
82
(1,217)
(1,135)
1,965
3,812
5,777
2016
£'000
(507)
—
2
(11)
47
—
(469)
—
(3)
1,691
1,219
—
1,219
—
—
—
11
11
53
(1,283)
(1,230)
—
1,576
1,576
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
18
7,118
5,777
1,576
1,576
24942.04 13/10/2016 Proof 6 NOTES TO THE ACCOUNTS
Year ended 30ᵗʰ June 2016
29
1.GeneralInformation
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.
New,revisedorchangestoexistingaccountingstandards
The following standards and amendments have been published, 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
unless otherwise indicated.
International Financial Reporting Standards
IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments
IFRS 16 Leases – this new standard will result in previously recognised
operating leases, as disclosed in note 24, being treated on-balance sheet
similar to current finance lease accounting.
Applies to periods beginning after
1st January 2018
1st January 2018
1st January 2019
2.SignificantAccountingPolicies
Basisofpreparation
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.
Goingconcern
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 pages 16 and 17.
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 2016 the Group had cash on hand of £7.1m (30th June 2015: £5.8m).
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.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 30
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
Basisofconsolidation
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. The Group controls an entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns through its power over the entity.
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.
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.
Exceptionalandotheritems
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 instruments.
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
24942.04 13/10/2016 Proof 6 31
Researchanddevelopmentcosts
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:
y an asset is created that can be identified (such as a new pharmaceutical product);
y it is probable that the asset created will generate future economic benefits; and
y the development cost of the asset can be measured reliably.
Internally generated intangible assets are amortised on a straight-line basis over their estimated economic lives. Where no internally
generated intangible asset can be recognised, development expenditure is recognised as an expense in the year in which it is incurred.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and
services provided in the normal course of business, net of discounts, VAT and other sales related taxes.
Revenue from the sale of goods is recognised when the risks and rewards of ownership are transferred which is generally when goods
are delivered.
Income received in relation to long-term service contracts is deferred and subsequently recognised over the life of the relevant
contracts. Further details are contained in note 21.
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.
Employeebenefits-Pensions
The Group operates a stakeholder pension scheme available to all eligible employees. Payments to this scheme are charged as an
expense as they fall due.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 32
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
Investments in subsidiaries
Investments in Group companies are stated at cost less provisions for impairment losses.
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.
Segmentreporting
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.
Share-basedpayments
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.
24942.04 13/10/2016 Proof 6 33
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,plantandequipment
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.
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.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 34
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
Impairmentoftangibleandintangibleassetsexcludinggoodwill
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.
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.
Finance income and expense
Finance income comprises interest receivable on funds invested and foreign exchange gains on hedging instruments that are recognised
in the income statement (see note 9). Finance expenses comprise foreign exchange losses on hedging instruments that are recognised
in the income statement (see note 9).
Derivative financial instruments
The Group uses derivative financial instruments to manage its exposure to foreign exchange risk. Derivatives are initially recognised at
fair value and the gain or loss recognised on remeasurement to fair value recognised in profit or loss.
24942.04 13/10/2016 Proof 6 35
3.CriticalAccountingJudgementsandKeySourcesofEstimationUncertainty
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 9.4% (2015:
13.2%). 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 1.8% (2015: 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.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 36
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
4.ExceptionalandOtherItems
Amortisation of acquired intangible assets
Supplier legal dispute – dividend received
Strategic review
Interest rate swap refund
Fair value movements on foreign currency hedging
Total exceptional and other items
Note
14
9
2016
£'000
118
—
55
—
(36)
137
2015
£'000
119
(9)
—
(18)
35
127
The amortisation charge totalling £119,000 (2015: £119,000) relates to brand and customer relationship intangible assets recognised on
the acquisition of Animalcare Ltd in January 2008.
5.RevenueandOperatingSegments
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
Animalcare
2016
£'000
Note
14,701
7,999
3,190
(119)
(54)
3,017
69
—
3,086
4
4
9
9
Animalcare
2015
£'000
13,536
7,573
3,110
(119)
9
3,000
27
(17)
3,010
24942.04 13/10/2016 Proof 6 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
37
Animalcare
2016
£'000
Animalcare
2015
£'000
Note
14
15
14,15
9,238
2,680
2,783
8,579
2,309
2,648
14,701
13,536
1,604
41
435
26,871
(4,356)
22,515
2016
£'000
3
81%
812
7
432
24,474
(3,483)
20,991
2015
£'000
3
82%
Key customers, all within the Animalcare segment, represent the three largest UK veterinary wholesalers as described in the Our
Business section page 7. Individual customer revenues represent 33%/28%/21% (2015: 33%/28%/22%) of total revenue.
Geographical market
United Kingdom
Europe and Rest of World
2016
£'000
13,490
1,211
14,701
2015
£'000
12,573
963
13,536
All the Group assets are wholly located in the United Kingdom and accordingly no geographical analysis of assets and liabilities is
presented.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 38
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
An analysis of total Group revenue is as follows:
Revenue from sale of goods
Revenue from provision of services
Finance income
6.TotalComprehensiveIncomefortheYear
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 inventories
2016
£'000
13,609
1,092
14,701
33
14,734
2015
£'000
12,590
946
13,536
27
13,563
2016
£'000
2015
£'000
6,515
5,831
66
369
156
211
43
9
73
359
143
199
1
23
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
2016
£'000
2015
£'000
13
21
34
11
—
11
45
13
20
33
11
16
27
60
24942.04 13/10/2016 Proof 6 39
7.Directors’RemunerationandInterests
Emoluments
The various elements of remuneration received by each Director were as follows:
Year ended 30th June 2016
J S Lambert*
Lord Downshire*
R B Harding*
Dr I D Menneer
C J Brewster
Total
Year ended 30th June 2015
J S Lambert*
Lord Downshire*
R B Harding*
Dr I D Menneer
C J Brewster
Total
* Indicates Non-Executive Directors.
Salary
£'000
Bonus
£'000
Company
pension
contributions
£'000
Benefits
£'000
Total
£'000
35
23
23
143
102
326
34
23
23
140
102
322
—
—
—
18
17
35
—
—
—
16
11
27
—
—
—
17
12
29
—
—
—
17
12
29
—
3
—
7
6
16
—
1
—
8
6
15
35
26
23
186
137
406
34
24
23
181
131
393
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.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 40
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
Shareoptions
The Directors had the following beneficial options:
I D Menneer
Scheme
Exercise Price
Date of Grant
EMI
EMI
EMI Unapproved
SAYE
Unapproved
£1.675
14th
October
2011
£1.30
2nd
August
2012
£1.325
£1.40
£1.03
£1.415
20th
November
2012
21st
February
2013
22nd
May
2013
20th
June
2013
28th
November
2014
Total
SAYE
£1.05
Outstanding at 30th June 2015 and
30th June 2016
60,000
60,000
50,000
90,000
4,377
90,000
5,142
359,519
C J Brewster
Scheme
Exercise Price
Date of Grant
EMI
£1.30
22nd
June
2012
EMI
SAYE
EMI
£1.30
£1.03
£1.415
SAYE
£1.05
Total
2nd
August
2012
22nd
May
2013
20th
June
2013
28th
November
2014
Outstanding at 30th June 2015 and 30th June 2016
30,000
30,000
8,754
40,000
8,571
117,325
During FY15, 3,358 shares were allotted to Dr Menneer following exercise under the Animalcare Group Save As You Earn scheme. The
exercise price was equal to market value at that time hence no gain or loss arose.
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
In addition to the above, Lord Downshire had a non-beneficial interest in 310,446 shares.
2016
2015
Ordinary
shares of 20p
Ordinary
shares of 20p
1,313,691
1,413,691
1,109,583
1,109,583
17,739
4,079
17,739
4,079
24942.04 13/10/2016 Proof 6 41
LongTermIncentivePlan(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, the subsidiary of the Company, are as follows:
y 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
y 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.
The total cash subscriptions were, based on independent valuation, considered to be equal to fair value at the time of acquisition.
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”). Their rights to sell the 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 A Shares do not have a right to receive a dividend, except for any amounts distributed on the winding up of the
Company or on an asset sale.
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. The B Shares have a right to an annual dividend (on a non-fixed
coupon basis), calculated by applying a rate of LIBOR + 2% to the nominal value of the B Shares.
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 www.animalcaregroup.co.uk.
8.StaffCosts
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
2016
2015
4
59
63
2016
£'000
2,195
224
139
2,558
4
56
60
2015
£'000
2,024
187
78
2,289
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 42
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
9.FinanceCostsandFinanceIncome
Fair value losses on financial instruments*
Interest rate swap refund
Finance costs
Other net finance income:
Fair value gains on financial instruments
Interest income on bank deposits
Finance income
Net finance income
2016
£'000
—
—
—
(36)
(33)
(69)
(69)
2015
£'000
35
(18)
17
—
(27)
(27)
(10)
* Finance gains and losses arising from derivatives held at fair value through profit and loss relate to fair value movements on the Group’s foreign exchange hedges. These gains
and losses are included within “other items” on the face of the statement of comprehensive income.
10.IncomeTaxExpense
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 20.0% (2015: 20.75%)
Effect of expenses not deductible
Effect of share-based deductions
Innovation related tax credits
Depreciation in excess of capital allowances
Effect of adjustments in respect of prior years
Note
22
22
2016
£'000
481
(148)
333
121
(2)
119
452
2,634
452
3,086
617
41
(6)
(65)
15
(150)
452
2015
£'000
601
(143)
458
(99)
117
18
476
2,534
476
3,010
625
42
(88)
(77)
—
(26)
476
24942.04 13/10/2016 Proof 6 43
The tax credit of £27,000 (2015: £26,000) shown within “exceptional and other items” on the face of the statement of comprehensive
income, which forms part of the overall tax charge of £452,000 (2015: £476,000) relates to the items analysed in note 4.
The prior year current tax credits in respect of both 2016 and 2015 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 Government has announced that it intends to reduce the rate of corporation tax to 17% with effect from 1st April 2020. This 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 Finance Act 2015 (No 2) was substantively enacted on 26th October 2015 which will reduce the rate of corporation tax
to 19% with effect from 1st April 2017 and 18% from 1st April 2020. This will reduce the Group’s future current tax charge accordingly.
Deferred tax balances at 30th June 2016 have been calculated based on these rates.
11.Dividends
Ordinary final dividend paid in respect of prior year
Ordinary interim dividend paid
2016
£'000
904
379
1,283
2015
£'000
839
378
1,217
The final dividend paid during the year ended 30th June 2016 was 4.3 pence per share (2015: 4.0 pence per share). The interim dividend
paid during the year ended 30th June 2016 was 1.8 pence per share (2015: 1.8 pence per share).
The proposed final dividend of 4.7 pence per share, which is subject to approval of shareholders at the Annual General Meeting, results
in a total dividend for the year of 6.5 pence per share. The proposed dividend has not been included as a liability as at 30th June 2016, in
accordance with IAS 10 “Events After the Balance Sheet Date”.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 44
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
12.EarningsperShare
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:
Total comprehensive income attributable to equity holders of the
Company
Basic weighted average number of shares
Dilutive potential Ordinary Shares
Earnings per share:
Basic
Fully diluted
Underlying
earnings
before
exceptional
and
other items
2016
£’000
Underlying
earnings
before
exceptional
and
other items
2015
£’000
2,744
2016
No.
2,635
2015
No.
Total
earnings
2016
£’000
2,634
2016
No.
Total
earnings
2015
£’000
2,534
2015
No.
21,043,846
20,982,367
21,043,846
20,982,367
319,863
123,127
319,863
123,127
21,363,079
21,105,494
21,363,079
21,105,494
13.0p
12.8p
12.6p
12.5p
12.5p
12.3p
12.1p
12.0p
24942.04 13/10/2016 Proof 6 13.Goodwill
Cost
At 1st July 2014, 1st July 2015 and 30th June 2016
Accumulated impairment losses
At 1st July 2014, 1st July 2015 and 30th June 2016
Net book value
At 30th June 2016 and 30th June 2015
45
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 Animalcare 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 1.8% (2015: 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
9.4% (2015: 13.2%).
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.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 46
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
14.OtherIntangibleAssets
Group
Cost
At 1st July 2014
Additions
Disposals
At 30th June 2015
Additions
Disposals
At 30th June 2016
Amortisation
At 1st July 2014
Charge for the year
Disposals
At 30th June 2015
Charge for the year
At 30th June 2016
Carrying value
At 30th June 2016
At 30th June 2015
Acquired
brands
£’000
Acquired
customer
relationships
£'000
New product
development
costs
£'000
Capitalised
software
£'000
524
—
—
524
—
—
524
227
35
—
262
35
297
227
262
837
—
—
837
—
—
837
545
84
—
629
83
712
125
208
1,647
768
—
2,415
1,563
(47)
3,931
990
195
—
1,185
196
1,381
2,550
1,230
165
44
(31)
178
41
—
219
84
45
(31)
98
55
153
66
80
Total
£'000
3,173
812
(31)
3,954
1,604
(47)
5,511
1,846
359
(31)
2,174
369
2,543
2,968
1,780
Veterinary medicine product development costs are amortised over four to seven years. £2.4m of the total £3.9m cost is currently not
being amortised. 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 2015 and 30th June 2016
Amortisation
At 1st July 2014
Charge for the year
At 30th June 2015
Charge for the year
At 30th June 2016
Carrying value
At 30th June 2016
At 30th June 2015
Capitalised
software
£'000
Total
£'000
7
—
1
1
2
3
4
6
7
—
1
1
2
3
4
6
24942.04 13/10/2016 Proof 6 47
15.Property,PlantandEquipment
Group
Cost
At 1st July 2014
Additions
Disposals
At 1st July 2015
Additions
At 30th June 2016
Depreciation
At 1st July 2014
Charge for the year
Disposals
At 1st July 2015
Charge for the year
At 30th June 2016
Net book value
At 30th June 2016
At 30th June 2015
Leasehold
improvements
£'000
Plant and
equipment
£'000
Office
furniture and
equipment
£'000
184
—
—
184
—
184
22
19
—
41
18
59
125
143
134
2
(17)
119
32
151
56
18
(17)
57
31
88
63
62
268
5
(129)
144
9
153
136
36
(129)
43
17
60
93
101
Total
£'000
586
7
(146)
447
41
488
214
73
(146)
141
66
207
281
306
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 48
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
16.InvestmentsinSubsidiaries
Subsidiary undertakings
Cost and net book value
At 1st July 2014, 2015 and 30th June 2016
The sole subsidiary undertaking of the Company is detailed below.
Animalcare Ltd
* In substance 100% ownership, see note 7 for further details.
Company
2016
£'000
2015
£'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.
17.Inventories
Finished goods and goods for resale
Group
2016
£'000
1,604
2015
£'000
1,653
In the Directors’ opinion, the replacement cost of inventories is not materially different from their balance sheet value.
24942.04 13/10/2016 Proof 6 18.OtherFinancialAssets
Trade and other receivables
Trade receivables
Amounts receivable from subsidiaries
Corporation tax – Group relief
Other receivables
Derivative financial instruments
Prepayments and accrued income
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Movement in allowance for doubtful debts
Group
2016
£'000
15
(1)
14
2015
£'000
15
—
15
Balance at 1st July
Impairment losses recognised
Balance at 30th June
Ageingofpastduebutnotimpairedreceivables
1–30 days past due
31–90 days past due
91 days and more
49
Group
Company
2016
£'000
1,782
—
—
7
18
382
2,189
2015
£'000
1,924
—
—
6
—
317
2,247
2016
£'000
—
—
308
7
—
17
332
Company
2016
£'000
—
—
—
Group
2016
£'000
4
—
—
4
2015
£'000
—
—
217
6
—
15
238
2015
£'000
—
—
—
2015
£'000
—
1
—
1
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 50
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
Cash and cash equivalents
Cash and cash equivalents
Group
Company
2016
£'000
7,118
2015
£'000
5,777
2016
£'000
1,576
2015
£'000
1,576
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 33 days (2015: 31 days). No interest has been charged on overdue receivables.
19.OtherFinancialLiabilities
Trade payables
Amounts payable to subsidiaries
Other taxes and social security costs
Other creditors
Derivative financial instruments (see note 20)
Accruals
Group
Company
2016
£'000
1,513
—
448
468
—
598
2015
£'000
936
—
450
386
18
396
2016
£'000
97
4,991
56
20
—
53
2015
£'000
73
3,385
46
18
—
4
3,027
2,186
5,217
3,526
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
24942.04 13/10/2016 Proof 6 51
20.FinancialInstruments
Capitalandliquidityriskmanagement
At 30th June the Group was contractually obliged to make repayments of principal and payments of interest as detailed below:
2016
Trade and other payables
2015
Trade and other payables
Within one
year or on
demand
£'000
3,027
2,186
Categories and fair value of financial instruments carrying value
1–2 years
£'000
3–5 years
£'000
More than
5 years
£'000
—
—
—
—
—
—
2016
£'000
Total
£'000
3,027
2,186
2015
£'000
Financial assets
Trade and other receivables (including cash and cash equivalents)
8,925
7,707
Financial liabilities
Trade and other payables
(3,027)
(2,186)
The fair values of the Group’s financial assets and liabilities are not materially different from their carrying values.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 52
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
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
2016
£'000
276
4
2015
£'000
446
264
2016
£'000
109
96
2015
£'000
153
—
Foreign currency sensitivity analysis
At 30th June 2016 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 2016. 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
(15)
8
18
(10)
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 two (2015: three) open foreign exchange contracts at 30th June 2016. The values are shown below:
Principal value
Fair value
2016
£'000
200
18
2015
£'000
338
(18)
Capitalmanagement
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.
24942.04 13/10/2016 Proof 6 53
21.DeferredIncome
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
2016
£'000
958
263
(239)
982
2016
£'000
220
762
982
2016
£'000
282
(263)
239
258
2015
£'000
972
241
(255)
958
2015
£'000
234
724
958
2015
£'000
227
(241)
255
241
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 54
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
22.DeferredTax
Group
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 2014
Charge/(credit) to income
Balance at 30th June 2015
Charge/(credit) to income
Balance at 30th June 2016
Property, plant
and equipment
£'000
Share-based
payments
£'000
Intangible fixed
assets
£'000
Other
£'000
41
(4)
37
(1)
36
(43)
(111)
(154)
(22)
(176)
(7)
(1)
(8)
—
(8)
118
134
252
142
394
Total
£'000
109
18
127
119
246
Deferred tax balances have been calculated at an effective rate of 18%, being the substantively enacted rate at 30th June 2016.
Company
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 2014
Charge/(credit) to income
Balance at 30th June 2015
Charge/(credit) to income
At 30th June 2016
Accelerated
tax
depreciation
£'000
Share-based
payments
£'000
(12)
3
(9)
2
(7)
(25)
(52)
(77)
(19)
(96)
Other
£'000
(2)
—
(2)
—
(2)
Total
£'000
(39)
(49)
(88)
(17)
(105)
Deferred tax balances have been calculated at an effective rate of 18%, being the substantively enacted rate at 30th June 2016.
24942.04 13/10/2016 Proof 6 23.ShareCapital
Allotted, called up and fully paid Ordinary Shares of 20p each
Allotted, called up and fully paid Ordinary Shares of 20p each
55
2016
No.
2015
No.
21,059,636
21,019,636
2016
£’000
4,212
2015
£’000
4,204
During the year £8,000 (2015: £11,886) of Ordinary Shares were issued for proceeds of £52,525 (2015: £81,814) resulting in a share
premium of £44,525 (2015: £69,928).
24.OperatingLeaseArrangements
TheGroupaslessee
Lease payments under operating leases recognised as an expense in the year
2016
£'000
211
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
2016
£'000
187
240
45
472
2015
£'000
199
2015
£'000
168
298
78
544
Operating lease payments principally represent rentals payable by the Group for its office and warehouse properties and motor vehicles.
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 56
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
25.Share-basedPayments
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:
AnimalcareGroupplcExecutiveShareOptionScheme
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.
SAYEOptionScheme
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:
Outstanding at beginning of year
Granted during the year
Lapsed during the year
Exercised during the year
Open at 30th June 2016
Exercisable at the end of the year
EMI
SAYE
Unapproved
Options
495,000
110,000
(15,000)
(40,000)
550,000
325,000
Price
£
1.446
2.157
2.175
1.313
1.578
1.400
Options
206,102
—
(13,640)
—
200,491
—
Price
£
1.041
—
1.029
—
1.0422
—
Options
180,000
—
—
—
180,000
180,000
Price
£
1.408
—
—
—
1.408
1.408
24942.04 13/10/2016 Proof 6 57
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
EMI
Scheme
162p
162p
51%
SAYE
Scheme
Unapproved
Scheme
130p
104p
50%
141p
141p
56%
3.0 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 (2015: £nil).
The Group recognised a total charge in respect of share based payments of £120,000 (2015 : £139,000) within administrative expenses.
The respective Company charges were £47,000 (2015: £74,000).
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:
y 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
y 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 (2015: £nil).
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS 58
NOTES TO THE ACCOUNTS CONTINUED
Year ended 30ᵗʰ June 2016
26.RelatedPartyTransactions
Trading transactions
During the year ended 30th June, the following trading transactions took place between the Company and its subsidiary listed in note 16:
2016
Management charges levied
2015
Management charges levied
Animalcare Ltd
£’000
240
Animalcare Ltd
£’000
240
Total
£’000
240
Total
£’000
240
Remunerationofkeymanagementpersonnel
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.
24942.04 13/10/2016 Proof 6 FIVE YEAR SUMMARY
59
Consolidated Statement of Comprehensive Income
2016
2015
2014
2013
2012
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
14,701
3,506
3,190
3,086
13.0p
12.8p
6.5p
15,960
10,911
(3,348)
(1,008)
22,515
4,136
(1,565)
(1,230)
1,341
13,536
12,881
12,118
10,856
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
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
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS
60
24942.04 13/10/2016 Proof 6 ADVISERS
IBC
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 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
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
24942.04 13/10/2016 Proof 6Animalcare Group plc Annual Report 2016www.animalcaregroup.co.ukStock Code: ANCROUR FINANCIALS ADDRESS
10GreatNorthWay
YorkBusinessPark,York
YO266RB
CONTACT
T: +44(0)1904487687
F: +44(0)1904487611
E:Investors@animalcare.co.uk
W:www.animalcaregroup.co.uk
24942.04 13/10/2016 Proof 6