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Annual Report for the year ended
31 December 2021
Animalcare Group plc is an international, development-
focused sales and marketing organisation driven by a
collective belief that healthy animals can have a hugely
beneficial effect on their owners and wider society.
Listed on the UK’s AIM market, Animalcare has a direct commercial
presence in seven European countries and exports to around 40
countries in Europe and worldwide. The Group is focused on growing
its business over the long term by bringing new and innovative animal
health products to market through its own development pipeline,
partnerships and via acquisition.
Why Animalcare?
Well positioned in attractive markets: The market for animal
pharmaceuticals has enjoyed robust global growth in recent years.
While the Production Animals segment continues to benefit from
increasing demand for protein, Companion Animals is growing at
a faster rate, largely driven by higher levels of pet ownership and
a greater willingness to spend on health and wellbeing. In 2021,
we derived around 70% of Group revenues from Companion
Animals and Equine. Consequently, Animalcare is structurally well
positioned to benefit from this fast-growing and attractive market
with strong long-term fundamentals.
Pipeline of novel products: We have shifted our R&D and
business development focus from branded generics to novel,
differentiated products with higher margin and growth potential.
Daxocox, our COX-2 inhibitor pain product for dogs, received
marketing authorisation for the EU and the UK in April 2021 and
launched in the second half of the year. In 2020, we in-licensed
two novel Companion Animal products from Kane Biotech as
well as establishing a joint venture for the development of future
products. The Group’s pipeline was further strengthened in March
2022 through a long-term licensing and collaboration agreement
with Orthros Medical to develop innovative antibody-based
therapies.
Financial flexibility enabling growth: Our focus on strengthening
the Group’s financial position in recent years has improved
operating cash flow and significantly reduced net debt levels. As
a result, the Group has the capacity to invest in value-creating
opportunities that will add to our pipeline or can be leveraged
more immediately across our European operations and network of
partners to accelerate growth.
One team
• Trusts and supports colleagues
to deliver shared goals across
functions and across countries
•
Listens first and respects
diversity and opinions of others
• Puts “weˮ before “me”
Passion
•
•
Is enthusiastic and energetic
with a winning mindset
Is self-motivated and
inspires others
• Strives to make a difference and
embraces change
OUR VALUES AND
BEHAVIOURS
Integrity
• Does the right thing even when
faced with opposition and
challenge
• Gives and keeps commitments
•
Is objective, honest and
respectful to others in every
situation
Taking ownership
• Gets the job done
• Takes pride in the outcome of
their work
• Takes responsibility in all
situations
FINANCIAL HIGHLIGHTS
Positive trading performance helped by resurgent Companion Animals demand
further strengthens financial position in pursuit of Group’s growth strategy.
Revenue
Underlying* EBITDA
£74.0m
5.0%
£13.5m
11.3%
21
20
19
£74.0m
£70.5m
£71.1m
21
20
19
£13.5m
£12.1m
£13.1m
Underlying* EPS
Net debt
12.0p
13.2%
£5.3m £8.3m
00
Underlying EBITDA leverage ratio approximately 0.4 times
21
20
19
12.0p
10.6p
12.0p
£5.3m
21
20
19
£13.6m
£17.8m
Strategic and operational highlights
• Daxocox approved in EU and UK and launched successfully across all markets,
generating £1.2m in second half sales
• 8.3% increase in revenues generated by top 40 brands through continuing focus on
optimisation of portfolio
• Sandra Single joins Senior Executive Team in new role of Strategic Product and
Portfolio Director
• Roll out of Group-wide leadership development programme
• Continuing investment in people with focus on sales and marketing excellence
• Pipeline strengthened post year end through early-stage licensing and collaboration
deal with Orthros Medical for innovative antibody therapy
* A reconciliation of underlying to reported results can be found on page 24.
CONTENTS
Business Overview
Highlights
Our Group at a glance
Our geographic presence
Chairman’s Statement
Our marketplace
Strategic Report
Our strategy
Our Key Performance Indicators
Business Model
Chief Executive Officer’s Review
Chief Financial Officer’s Review
Our principal risks
Our stakeholders
Sustainability
Our Governance
Board of Directors
Corporate Governance
Statement
Corporate Governance Report
Audit and Risk Committee
Report
Remuneration and Nomination
Committee Report
Directors’ Remuneration
Report
Directors’ Report
Statement of Directors'
Responsibilities
Our Financials
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Financial Position
Consolidated Statement
of Changes in Equity
Consolidated Cash Flow
Statement
Notes to the Consolidated
Financial Statements
Company Statement of
Financial Position
Company Statement of Changes
in Equity
Company Cash Flow Statement
Notes to Financial Statements
Advisers
01
02
03
04
06
10
14
16
18
22
27
34
38
42
46
49
56
60
62
66
70
72
80
81
82
83
84
86
127
128
129
130
IBC
01
BUSINESS OVERVIEWAnnual Report 2021 Animalcare Group plc Our Group at a glance
WHAT WE DO
OUR MARKETPLACE
OUR PRODUCT PORTFOLIO
• We develop and commercialise
trusted prescription and over-the-
counter pharmaceutical products
that improve animal health and
wellbeing. These are developed
in-house, acquired from other
companies or in-licensed from our
partners.
• We manufacture to high quality
standards through a network of
CMO partners.
• We manage an extensive
international supply chain,
including specialist veterinary
wholesalers and distributors.
• We partner with companies to
commercialise products across
Europe.
We operate in three categories within
the veterinary market: Companion
Animals, Equine and Production
Animals. Over the long term, we
believe that the biggest growth
opportunities for the Group lie in
Companion Animals and Equine.
For Production Animals, we aim to
maintain our important presence in
our chosen markets. These priorities
are mirrored in our R&D and business
development targets.
We focus our people and product
investment on three main therapy
areas: pain management, dermatology
and non-antibiotic anti-infectives.
• We sell products to veterinary
Companion Animals
practices and veterinary groups
through our own highly skilled
sales force.
69%
Production Animals
23%
Equine
8%
Introduce new differentiated products
In recent years our R&D and business
development focus has shifted from
branded generics to novel, differentiated
and more sustainable products with
higher margin and growth potential. As a
consequence, we expect the percentage
contribution from this category of our
overall portfolio to grow over time.
We intend to increase investment in
our pipeline in 2022 compared to the
prior year.
Maintain the competitiveness of our
existing portfolio
Cash generated by our base portfolio
supports investment in growth
opportunities, including differentiated
products. To reinforce and improve
the quality of our base portfolio we
are continuing to reduce the number
of smaller “tail” lower value brands so
we can concentrate our commercial
resources on bigger products with better
growth prospects and higher margins.
Revenues generated by the top 40
products grew by 8.3% in 2021.
In 2017, the portfolio consisted of
approximately 330 brands. By the end of
2021 we had succeeded in reducing the
total number of brands in our portfolio to
around 150, close to our target figure.
02
Annual Report 2021 Animalcare Group plc Our geographic presence
We have a direct commercial presence
in seven European countries and export
to around 40 countries in Europe and
worldwide. Animalcare is also a partner
for companies looking to sell products
into and across Europe.
This map depicts the revenue
percentage by country:
87%
l Our operations
13%
l Our network partners
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
UK
18%
BENELUX
8%
GERMANY
14%
ITALY
12%
PORTUGAL
6%
SPAIN
29%
REST OF THE WORLD
13%
03
Annual Report 2021 Animalcare Group plc
Chairman’s Statement
JAN BOONE
JAN BOONE
Non-Executive Chairman
Non-Executive Chairman
I am delighted to report that 2021
was a year of delivery for Animalcare.
Positive trading performance on the
back of resurgent demand further
strengthened our financial platform
as we continued to make significant
progress against our strategic
priorities.
After a particularly challenging
2020, in which the Animalcare team
demonstrated resilience and agility in
the face of the COVID-19 pandemic,
we delivered a healthy level of growth
across the year.
At £74.0m, total revenues were 5.0%
ahead of the prior year, an increase
of 8.0% at constant exchange rates.
The principal driver of growth was
the recovery in the Companion
Animals market with demand boosted
by positive fundamentals such as
increased pet ownership and the
relative relaxation of pandemic
controls on the operation of veterinary
practices. Our Companion Animals
segment, which also benefited from
newly introduced products, grew by
14.6% over the period.
Underlying EBITDA, a key measure
of profit, increased at a double-digit
percentage rate to £13.5m as margins
benefited from a favourable product
mix, even accounting for an increase
in SG&A-related investment in our
people. The ongoing management of
our product portfolio is also having
a positive impact; efforts to retire
smaller “tail” products continue,
concentrating management attention
on bigger selling brands with higher
returns and higher potential. After
underlying adjustments totalling
£8.6m (2020: £7.8m), the profit before
tax on a reported basis was £0.9m
(2020: £0.2m).
Cash generation was again a feature
of our performance with a particularly
strong cash conversion rate of 108.8%
helping to reduce net debt to £5.3m
by year end. This represents a 60%
improvement for the year (2020:
£13.6m), placing us well below our
target leverage range and further
equipping us with the financial muscle
to invest in pipeline and commercial
growth opportunities.
The Group’s positive trading
performance, robust financial position
and confident outlook have supported
the Board’s decision to propose a final
dividend of 2.4 pence per share (2020:
2.0 pence per share).
Organisationally, the move to a
regional management structure
Positive trading
performance and
significant progress
against our strategic
priorities – 2021 was
a year of delivery for
Animalcare.”
04
Annual Report 2021 Animalcare Group plc at the beginning of the year has
had a positive impact, enabling
a more focused Senior Executive
Team to concentrate decision-
making on performance and growth
opportunities. Investment in our
people remains a priority so the roll
out of a new leadership development
programme that will provide a
consistent approach is an important
step for the Group.
This has been a significant year for our
internal pipeline with the launch of
Daxocox, our novel COX-2 inhibitor for
the treatment of osteoarthritis-related
pain in dogs. We received marketing
approval in the EU and the UK in April
and commenced launch activities
across our markets in the second half
of the year. We’re still at an early stage
with Daxocox but are encouraged by
progress to date and remain confident
that this product can have a growing,
positive impact on animals and their
owners for years to come. Life cycle
management projects are under way
to extend the potential of Daxocox into
new indications and new territories.
Consistent with our strategy, we
continue to focus on external business
development opportunities: from
pipeline partnerships with long-term
potential to commercial deals that
deliver earnings growth in the nearer
term. STEM Animal Health Inc., the
joint venture we established with Kane
Biotech in September 2020, is soon
to reach our markets with the launch
of the first Plaqtiv+ range of dental
treatment products that exploit the
benefits of anti-biofilm technology to
combat oral infections. Additionally,
in a post-period event, we reached a
research and development partnership
with Netherlands-based Orthros
Medical to explore the promising
therapeutic potential of novel
antibodies in a veterinary setting. This
collaboration and R&D agreement give
us access to innovative VHH antibody
technology, thereby substantially
strengthening our early-stage pipeline,
a key building block of our long-term
growth strategy.
Animalcare has always strived to be a
good corporate citizen wherever we
operate. Historically, we have viewed
this through a local lens. But as we
grow, so do the expectations of a
widening set of stakeholders. In our
Annual Report we lay out the steps
we will take to create a meaningful,
achievable and measurable Group-
wide plan that ensures we operate
sustainably across our markets in a
co-ordinated manner.
Looking to the future, we believe the
attractive fundamentals that helped
fuel demand during 2021 will continue
to support growth in 2022; sales in the
early part of the year provide grounds
for optimism on that score while we
navigate and manage headwinds,
notably in the form of inflation and
foreign exchange. Overall, however,
the long-term positives of the animal
health market and the strong position
of the Group continue to give us
confidence to invest in value-creating
growth opportunities.
I’d like to take this opportunity to
welcome Dr Douglas Hutchens to
the Board of Animalcare Group
plc whose appointment as Non-
Executive Director was announced on
10 February 2022. Douglas’s expertise
in veterinary medicine and R&D
combined with his extensive network
will prove invaluable as we pursue our
long-term growth strategy.
On behalf of the Board, I’d also like to
recognise our employees for delivering
such a positive performance in 2021
and thank our shareholders for their
continuing support.
JAN BOONE
Non-Executive Chairman
05
BUSINESS OVERVIEWAnnual Report 2021 Animalcare Group plc Investment in new product
launches, including Daxocox
and Plaqtiv+, and development
projects in high growth areas such
as dental, dermatology and disease
prevention.
Link to strategic priority:
Increased adoption of digital tools
and other remote promotional
techniques to maintain information
flow with stakeholders.
Link to strategic priority:
Our marketplace
We monitor the market trends to understand the opportunities for Animalcare. We are
focused on therapeutic areas with good growth potential and where we have expertise,
such as pain management, dermatology and anti-infectives.
Trend
What’s happening?
What this means for Animalcare
How we are responding
The market for
animal health
continues
to grow
With many countries emerging from
the economic slowdown caused by
the pandemic, the sector continues to
expand with estimated growth rates
of between 4% and 8%.
A stable and robust veterinary
market provides confidence
to invest in new products and
technology.
Increased number of stakeholders are
working remotely or in different ways
using digital tools.
Veterinary practices, suppliers,
distributors and other
stakeholders less willing to
meet face-to-face, reducing
opportunities to promote
novel products.
Lasting effect
of COVID-19
on operation
of veterinary
practices,
suppliers and
distributors
across Europe
Customers are
consolidating
across Europe
Increasing focus
on health and
wellbeing; new
technologies
prolonging
and increasing
quality of life
Increase in
diagnostic
and digital
technology
Changes in the
use of antibiotics
Established corporate vet practices
are expanding across Europe.
Consolidation is also seen among
wholesalers who are offering
additional services.
“Humanisation” of animals with
pets increasingly seen as part of
the family. Greater awareness of
wellbeing and health while improved
medication and veterinary care are
helping animals live longer.
COVID-19 has sped up adoption
of digital technologies; at least
five major industry initiatives in
telemedicine gained pace in 2020.
Remote diagnostics and online
supply of veterinary medicines using
vet-to-owner or alternative channels
of supply for all classes of medicines.
Sales of antimicrobials have
decreased by 43% between 2011
and 2020 in Europe with this trend
expected to continue due to the
focus on drug resistance.1,2
Fewer and larger veterinary
practices in key markets with
specific demands beyond the
provision of products.
Established dedicated group to
support needs of pan-European
corporate vet practices and
provide internal best practice.
Link to strategic priority:
We are well placed with an
attractive veterinary product
mix for surgery, geriatric pets
and wellbeing.
Increased focus on wellbeing and
preventative brands related to the
growing Companion Animal dental
and microbiome markets.
Link to strategic priority:
Diagnostics improve accuracy
and speed of diagnosis while
telemedicine increases
availability of veterinary
support. Increased adoption of
technology by both vets and
pet owners.
Identicare pet reunification
business carved out under new
leadership to maximise potential
of our database and direct
communication with pet owners.
Link to strategic priority:
Decreasing demand for
antibiotics in the Animalcare
portfolio, especially in
Production Animals.
Increase focus on prevention
and new technologies including
Procanicare for gut health and
investment in biofilm-targeting
technology through STEM joint
venture.
Link to strategic priority:
Investment in business
development to support move to
novel and differentiated products
and focus on niche segments such
as dental.
Link to strategic priority:
Competitive
landscape
Continued consolidation of big
animal pharma, increase in number
of companies selling generic
products and the move to white
label for veterinary corporates.
Pricing pressure in traditional
non-differentiated generic
market.
06
Annual Report 2021 Animalcare Group plc THERAPEUTIC MARKETS
Pain management
The global market for animal pain control
products in 2020 was estimated to be
approximately $750m and comprises three
key segments: acute pain control, chronic
pain control and acute/chronic pain control
combined. The acute/chronic segment
accounts for around 60% of the market
while the remaining 40% is equally split
between chronic and acute only products.
The pain product market is forecast to grow
by nearly 8%, above the animal health
average of 5%. The single largest category
in this segment is Non-Steroidal Anti-
Inflammatory Drugs (NSAIDs) with a mix
of generics and newer, more innovative,
patent protected products. The 2021
registration in Europe of Nerve Growth
Factors (NGF1) inhibiting monoclonal
antibody therapies for dogs and cats is a
notable development in the category.
The market is driven by canine pain
associated with osteoarthritis (OA). The
estimated prevalence of OA in dogs ranges
from 5% to 40% in western Europe and
the USA, the number of recorded cases
increasing as diagnostic methods and
awareness improve.
Treatment compliance is the second
key driver. As most animals require
daily medication, owner compliance is a
significant risk to long-term pain control
in pets.
Innovation is a key driver in the market.
Newer products help to drive awareness of
pain management and greater compliance
in use. These innovative treatments are
expected to command higher margins and
earnings per patient group.
In future, we expect to see the
development of formulations specifically
designed for cats where routine daily
tableting is a challenge.
Dermatology
Anti-infectives
The dermatology market is driven by
the clinical presentation in dogs ranging
from mild cases to severe dermatitis, skin
damage and related secondary infections.
In most cases, owners are very aware of
itching by the dog and often associate the
initial signs with parasitological disease
such as tick or flea infestations.
The desire for speedy resolution of
clinical signs is a major driver in the
market with owners expecting quick
relief for their pet’s discomfort and
associated unpleasant effects. Unresolved
or unresponsive cases often lead
to specialist referrals or recourse to
alternative general vet practitioners. As
a consequence, medicalisation rates are
high and therapies quickly adopted.
Innovation is a strong market driver. New
therapies from immune-modulation using
cyclosporin (early 2000s), oclacitinib
(2014) and lokivetmab (2017) have all
yielded significant market growth. While
these therapies control the effects of
the allergic skin disease they do not
necessarily cure the cause of allergy and,
therefore, are often used long term to
control clinical signs.
Future innovation is expected in the
form of vaccination by protecting against
specific causative antigens or through
immune-modulation of cytokine and
related inflammatory pathways. Secondly,
inhibitory molecules (from human use,
for example) have potential to target
inflammatory pathways leading to canine
atopic dermatitis (CAD). Thirdly, as CAD
has a genetic disorder component,
CRISPR technology may prove an
effective, convenient long-term therapy.
Anti-infectives are used to treat or prevent
infection and include antibiotics, antivirals,
antifungals, antimalarials, antiprotozoals,
anthelmintics and antituberculosis.
Sales of veterinary antimicrobials have
decreased by 43% between 2011 and
20201,2 in Europe, with this trend expected
to continue due to the focus on reducing
drug resistance. Infections caused by gram-
negative bacteria are widely seen as one
of the biggest threats to global health3 as
their cell structure and ability to develop
resistance to commonly used antibiotics
make them hard to treat.
As sales of antimicrobials have decreased,
the search for non-antimicrobial anti-
infective solutions, especially preventative
measures, has become more important.
Key therapy classes include microbiome,
vaccines and biofilms.
Biofilms can form a protective barrier
making bacteria up to 1,000 times more
resistant to antibiotics, antimicrobial
agents, disinfectants and the host immune
system.
Gastrointestinal (GI) microbes play a
fundamental role in the health and
disease of animals. In Production Animals
innovation is focused on replacing
medicated feeds, improving productive
efficiency and even reducing methane.
In Companion Animals we expect to see
developments in microbiome linked to
obesity, dental and diabetes as well as
traditional GI diseases.
Longer term, opportunities exist for more
sustainable use of antibiotics in association
with other technologies.
Strategic priority
Strong finances
Key leadership
Growth portfolio
Business development
Innovative pipeline
07
BUSINESS OVERVIEWAnnual Report 2021 Animalcare Group plc Our marketplace
CONTINUED
Companion Animals
Production Animals
Equine
Approximately 42% of sales in
Europe are Companion Animals
and include dog, cat, small
mammals, aquatics and non-food
producing avian4.
Growth drivers
•
Increasing number of pets
• Higher life expectancy
• Humanisation of pets
Livestock (cattle, sheep and pigs)
account for 30% of European
sales. Poultry and avian account
for just under 11%.
Growth drivers
•
•
•
Increasing global demand for
protein
Increasing industrialisation of
meat and milk production
Food safety concerns
encouraging prevention
Equine accounts for just under 3%
of animal health spend.
Growth drivers
•
•
•
•
Equine customers demand
Increasingly specialised
services
Increasing demand for
medical care for horses
Increasing disposable income
of horse owners
Overview of our
geographic markets
Our primary market is Europe, the
second largest animal medicines
market in the world. Europe
represents around one-third of
the global market with a value in
2021 estimated at €7.4bn5. Around
88 million households in Europe are
estimated to own at least one pet with
26% of households owning a cat and
24% owning a dog.
Vaccines and parasiticides continue to
dominate the market and accounted
for over 61% of sales in Europe5 in
2021. Antimicrobials continue to
decline as a share of the overall
market and now account for around
11% of sales, a drop from 17% in the
space of nine years.
Trends in the animal
health market:
1 Increasing pet ownership, especially
among millennials, accelerated due
to COVID-19 with an estimated
2.1m people collecting a new pet in
the UK alone during lockdown6. This
trend has been mirrored across
Europe with the VDH estimating
20% more dogs were purchased in
2020 in Germany7. Outside of the
developing economies pet
ownership is also increasing. Direct
correlations between rising GDP per
head and pet ownership are
recorded, led by cats and smaller
dog breeds.
2 The percentage of household
income spent on animals and
animal health continues to rise with
the launches of newer innovative
medicines and new technologies8.
3 Increasing focus on sustainability
and the environmental impact of
the animal health and production
industries. Food production of
animal-based protein is expected to
decline per capita, though the total
global output should remain
constant or increase due to
population growth. Sources of
protein are likely to change too. The
poultry and aqua industries should
see increased demand, with the
swine and ruminant industries
experiencing declines in relative
terms. Another key factor is the
reduction in antibiotic use across all
species which we expect will drive
an increase in vaccine use and a
move to less intense production
systems.
4 In Companion Animals, the shift to
smaller dog breeds will continue
and more animals will be
medicalised as disposable incomes
recover from the economic effects
of the pandemic. With smaller
breeds, the dosing of active
ingredients per head will be
reduced. However, margins should
be maintained. In Companion
Animals we anticipate increased
testing in the use of anti-infectives
and a move to adopt vaccine
prophylaxis for viral and bacterial
diseases. This will result in greater
focus on the therapies suited to
aging Companion Animals.
5 Telemedicine and digital health
enjoyed significant activity in recent
years. This is predicted to continue
in the post-pandemic era with a
focus on new forms of engagement
08
Annual Report 2021 Animalcare Group plc with vets, suppliers and owners.
This will change the nature of
supply to the industry, diagnosis by
the veterinarian, engagement with
the animal owner and supply and
prescription of medicines and
services. This trend is being led
from North America and is
expected to be part of a global shift
through the mid-term.
How we are responding
1 We continue to supply a portfolio of
key medical and surgical
pharmaceutical products, primarily
in the Companion Animal sector.
Animalcare is actively engaged in
finding and developing partnerships
with distributors both inside and
outside Europe as channel supplier
to the market. Animalcare is also
working with partners to identify
innovative technologies that we can
develop and launch with exclusivity
in the Companion Animal
pharmaceutical segments.
2 Reducing our portfolio reliance on
antibiotics is a key strategy which
led to the recent investment in
STEM Animal Health Inc. to exploit
biofilm-targeting technologies in
anti-infective roles. This technology
has potential in Companion Animals
(for example, dental care, otitis,
skin care) and Production Animals
(for example, managing gut
microbiome to combat enteric
infections).
3 Animalcare has launched Daxocox,
a new therapeutic medicine in the
key market area of osteoarthritis-
related pain in dogs. And we
continue to deliver innovation in
other important areas of veterinary
health, such as the $1.6bn global
dental health market for dogs
and cats.
1 https://fve.org/publications/antimicrobial-use-in-
animals-in-the-eu-almost-halved-in-last-10-years-due-
to-strong-commitment-of-the-animal-health-sector/
2 https://www.ema.europa.eu/en/documents/
report/sales-veterinary-antimicrobial-agents-31-
european-countries-2019-2020-trends-2010-2020-
eleventh_en.pdf
3 Schaalje J. Medical terminology: Gram positive
vs. Gram negative bacteria. American College of
Healthcare Sciences. April 12 2013. Available at:
http://info.achs.edu/blog/bid/282924/Medical-
Terminology-Gram-Positive-vs-Gram-Negative-
Bacteria
4 https://annual-report.animalhealtheurope.eu/about-
us/2021-2/key-figures/
5 Animalhealth Europe Report 2021
6 https://www.pfma.org.uk/news/pfma-confirms-
dramatic-rise-in-pet-acquisition-among-millennials-
7 https://www.dw.com/en/covid-demand-for-dogs-
and-cats-surges-in-germany/a-56318208
8 Animal Health New and Animal Health
Economics 2020
MARKET GROWTH
OPPORTUNITIES
1 Innovation in immunotherapy
within Companion Animals
(for example pain and
osteoarthritis, pain
management and
dermatology)
2 Non-antibiotic anti-infectives
including microbiome and
anti-biofilm
3 Veterinary ophthalmology,
bringing human eye care
options to veterinary
medicine
4 Anti-zoonotic disease control,
intervention and bio-
protection
5 Complementary diagnostics
and therapy monitoring, for
example in pain and
anaesthesia
09
BUSINESS OVERVIEWAnnual Report 2021 Animalcare Group plc Our strategy
We continue to pursue our strategic ambition of becoming a leading player in all our
chosen markets. 2021 proved to be a very positive year for Animalcare with strong
revenue and profit growth and progress against our short-term and long-term priorities
as set out in the five pillars of our growth strategy.
STRONG FINANCES
Financial sustainability through revenue growth, strong cash conversion, EPS growth and EBITDA margin growth
Revenue growth
Cash conversion and net debt
Underlying EBITDA margin
and EPS growth
Key initiatives
Key initiatives
Key initiatives
• Focus on segments and products with
• Maintain net debt to underlying
highest potential
• New product launches
•
Leverage strengths across all our direct
markets
• Maximise opportunities in other high
growth markets through partnerships
or selective acquisition
EBITDA leverage ratio between 1 to
2 times
• Optimise inventory
• Tax efficiency
• Focus on higher margin products
• Operating efficiency and leverage
Progress
Progress
Progress
• New product sales of £2.2m
• Strong underlying cash conversion
(2020: £2.2m)
of 108.8%
• Successful launch of Daxocox in H2,
contributing £1.2m in revenue
• 8.3% growth in revenue generated by
top 40 products in portfolio
• £5.3m net debt at year end; reduced
by 60% over course of 2021
• Net debt comfortably below
target range
• Total number of brands in portfolio
close to steady state target of 150.
Reduced from c.330 at time of merger
• Underlying EBITDA margin increased to
18.2% even allowing for absorption of
higher SG&A investment in people
• Underlying EPS of 12.0 pence
2022 priorities
2022 priorities
2022 priorities
• Continue to scale up in fast-growing
countries
• Maximise growth potential of Daxocox
• Support investment in growth strategy
by maintaining strong cash conversion
within 90%-100% range
•
in dynamic market
• Maintain EBITDA leverage in the range
• Successful launch of STEM biofilm
dental range in H1
of 1 to 2 times
Investment in new product launches,
other growth opportunities and
capability development while
maintaining focus on operational
efficiency
Link to risks
Link to KPIs
Link to risks
Link to KPIs
Link to risks
Link to KPIs
Revenue growth
Underlying EBITDA
margin
C
E
F
Underlying
EBITDA margin
Underlying cash
conversion
Net debt to
underlying EBITDA
leverage
C
E
F
Underlying
EBITDA margin
Basic underlying
earnings per share
(“EPS”)
A
G
10
Annual Report 2021 Animalcare Group plc
KEY LEADERSHIP
Organisation for success; leadership strength and core capabilities
Attract, retain and develop
talented people
Organisation for growth
Key initiatives
Key initiatives
• Build leadership capabilities
• Align reward to performance
• One-team culture
• Drive effective communication and
collaboration
Improve diversity
•
• Reorganisation to drive growth agenda
with clear leadership accountabilities
Progress
Progress
• Well ahead of Gallup's average
• Regional structure and Senior
benchmark of European companies
despite slight decline (down 4%) in
annual employee engagement score
• Strengthened sales and marketing
capabilities
• Wellbeing programme available for all
•
employees
Launch of leadership development and
talent management programme
Executive Team (SET) supporting
focus on performance and growth
opportunities
• Sandra Single appointed Strategic
Product and Portfolio Director and
joined SET (February 2022)
2022 priorities
2022 priorities
•
Implement actions from employee
engagement survey
• Continue to improve two-way
employee communication
• Embed leadership development “high
challenge, high support” principles
• Continue adoption of regional and
Group model
Link to risks
Link to KPIs
Link to risks
Link to KPIs
Employee
engagement
C
D
J
B
G
I
Employee
engagement
Risks key
A
B
C
D
E
F
G
H
I
J
Market risk
Competitor risk
Portfolio risk
Product
development risk
Financing/Treasury
risk
Foreign exchange
translation risk
Supply chain risk
IT systems and
cyber security risk
Regulatory risk
People risk
11
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT
Our strategy
CONTINUED
GROWTH PORTFOLIO
Focused portfolio in key therapy areas
in growing market segments
BUSINESS DEVELOPMENT
Work with partners to build a pipeline
of products that meets our criteria
for growth
INNOVATIVE PIPELINE
Building a pipeline of novel and
differentiated products
Focus on existing core brands
that generate sustainable
growth and margins
In-license or acquire products
and develop network
partnerships
Key initiatives
Key initiatives
Launch new products and
develop differentiated and
innovative pipeline of products
for the future
Key initiatives
•
Improve quality of portfolio; focus
on smaller number of bigger-selling,
higher-margin brands
•
In-license or acquire innovative
pipeline or market-ready products
• Establish Animalcare as partner of
choice, especially for companies selling
into Europe
• Strengthen internal pipeline of
differentiated products through
partnerships, in-licensing and
acquisitions
• Prioritise and accelerate in-house R&D
• Build partnerships to exploit growing
projects
Progress
global markets
Progress
•
Increased management focus on top
40 products; tail further reduced
• £2.2m of new product sales supported
by launches such as Daxocox
• Strengthened sales and marketing
excellence
• Secured distribution partnership with
Virbac for Daxocox in most European
countries outside Group’s direct
markets
• UK Identibase business carved out
to facilitate growth opportunities.
Entrepreneurial leader appointed
Progress
• EU and UK authorities approve
Daxocox for canine OA-related pain
• Early-stage pipeline licence and
collaboration deal signed with Orthros
Medical to develop innovative
therapies using VHH antibodies
(March 2022)
• Advancement of life cycle management
(LCM) programmes for Daxocox and
STEM biofilm technology
2022 priorities
2022 priorities
2022 priorities
• Drive growth in Companion Animals
and maintain strong presence in
Production Animals
• Continued focus on bigger-selling,
higher-margin products
• Further investment in product launch
capability
• Continue to pursue value-creating
partnerships and in-licensing
opportunities
•
Increase investment in pipeline versus
2021 (as percentage of revenues)
• Execute clinical and regulatory
programme for Daxocox LCM
Identify potential development
opportunities from STEM joint venture
•
Link to risks
Link to KPIs
Link to risks
Link to KPIs
Link to risks
Link to KPIs
Revenue growth
Underlying
EBITDA margin
Basic underlying
earnings per share
("EPS")
B
G
I
Revenue growth
New product
revenue
A
E
Revenue growth
Basic underlying
earnings per share
(“EPS”)
New product
revenue
C
D
12
Annual Report 2021 Animalcare Group plc
Risks key
A
B
C
D
E
F
G
H
I
J
Market risk
Competitor risk
Portfolio risk
Product
development risk
Financing/Treasury
risk
Foreign exchange
translation risk
Supply chain risk
IT systems and
cyber security risk
Regulatory risk
People risk
13
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Our Key Performance Indicators
FINANCIAL KPIS
REVENUE GROWTH
UNDERLYING CASH CONVERSION
21
20
19
£74.0m
£70.5m
£71.1m
£74.0m
Link to Strategy
21
20
19
108.8%
Link to Strategy
108.8%
102.9%
118.4%
Definition
Organic revenue growth: including new products versus
prior year, excluding the impact of acquisitions and
disposals
Why we measure this
Revenue growth is an important barometer of the Group’s
success in delivering its strategy and is a key component of
growing our profits and cash flow
Commentary on performance
Revenue for the year was £74.0m (2020: £70.5m), an
increase of 5% (8% at CER). Sales from new products
launched in the year was £2.2m (2020: £2.2m)
Definition
Underlying cash generated from operations as a percentage
of underlying EBITDA
Why we measure this
Our quality of earnings is reflected in our ability to turn
underlying EBITDA into cash, an important enabler of
investment in our growth strategy
Commentary on performance
Underlying cash conversion has averaged over 100% since
2019 demonstrating our ability to generate strong and
sustained levels of cash
UNDERLYING EBITDA MARGIN
NEW PRODUCT REVENUE
21
20
19
18.2%
Link to Strategy
18.2%
17.2%
18.5%
21
20
19
£2.2m
£2.2m
£1.8m
£2.2m
Link to Strategy
Definition
Underlying EBITDA as a percentage of sales
Why we measure this
This is a measure of the operating efficiency of the Group
with focus on translation of sales growth to profit
Commentary on performance
Underlying EBITDA margin increased to 18.2% reflecting
strong revenue growth, improved gross margins and
increased investment in people, and sales and marketing
activities
Definition
Revenue from new products launched in the last
financial year
Why we measure this
New products revenues are a key driver of growth in
Companion Animals and maintaining our strong presence in
Production Animals
Commentary on performance
Growth from newly introduced products contributed £2.2m
of sales principally driven by Daxocox
14
21
20
19
21
20
19
BASIC UNDERLYING EARNINGS
PER SHARE (“EPS”)
12.0p
Link to Strategy
12.0p
10.6p
12.0p
Definition
number of shares
Underlying profit after tax divided by the weighted average
Why we measure this
Underlying EPS is a key indicator of our performance and
the return we generate for our stakeholders
Commentary on performance
Underlying EPS increased to 12.0 pence reflecting the
strong trading performance and higher effective tax rate
NET DEBT TO UNDERLYING EBITDA
LEVERAGE
0.4x
0.4x
Link to Strategy
1.1x
1.4x
Leverage is net debt (total debt less cash balances) divided
Definition
by underlying EBITDA
Why we measure this
We seek to maintain a strong balance sheet with EBITDA
leverage in the range of 1 to 2 times to allow capacity for
investment in future growth
Commentary on performance
Net debt to underlying EBITDA leverage ratio significantly
reduced during 2021 to 0.4 times, strengthening our
capacity to invest in our long-term growth strategy
Annual Report 2021 Animalcare Group plc 21
20
19
21
20
19
Definition
disposals
Why we measure this
Why we measure this
Our quality of earnings is reflected in our ability to turn
Revenue growth is an important barometer of the Group’s
underlying EBITDA into cash, an important enabler of
success in delivering its strategy and is a key component of
investment in our growth strategy
growing our profits and cash flow
Commentary on performance
Commentary on performance
Underlying cash conversion has averaged over 100% since
Revenue for the year was £74.0m (2020: £70.5m), an
2019 demonstrating our ability to generate strong and
increase of 5% (8% at CER). Sales from new products
sustained levels of cash
launched in the year was £2.2m (2020: £2.2m)
UNDERLYING EBITDA MARGIN
NEW PRODUCT REVENUE
18.2%
Link to Strategy
18.2%
17.2%
18.5%
21
20
19
£2.2m
£2.2m
£1.8m
£2.2m
Link to Strategy
Underlying EBITDA as a percentage of sales
Revenue from new products launched in the last
Definition
Why we measure this
Definition
financial year
This is a measure of the operating efficiency of the Group
Why we measure this
with focus on translation of sales growth to profit
New products revenues are a key driver of growth in
Companion Animals and maintaining our strong presence in
Commentary on performance
Underlying EBITDA margin increased to 18.2% reflecting
strong revenue growth, improved gross margins and
activities
Production Animals
Commentary on performance
of sales principally driven by Daxocox
increased investment in people, and sales and marketing
Growth from newly introduced products contributed £2.2m
REVENUE GROWTH
UNDERLYING CASH CONVERSION
BASIC UNDERLYING EARNINGS
PER SHARE (“EPS”)
NON-FINANCIAL KPIS
EMPLOYEE ENGAGEMENT
£74.0m
£70.5m
£71.1m
£74.0m
Link to Strategy
21
20
19
108.8%
Link to Strategy
108.8%
102.9%
118.4%
21
20
19
12.0p
Link to Strategy
12.0p
10.6p
12.0p
21
20
19
3.96*
Link to Strategy
3.96*
4.17*
3.71*
T
R
O
P
E
R
C
I
G
E
T
A
R
T
S
Organic revenue growth: including new products versus
Underlying cash generated from operations as a percentage
prior year, excluding the impact of acquisitions and
of underlying EBITDA
Definition
Definition
Underlying profit after tax divided by the weighted average
number of shares
Definition
A measure of employee engagement based on the
well-established Gallup Q12 index.
Why we measure this
Underlying EPS is a key indicator of our performance and
the return we generate for our stakeholders
Commentary on performance
Underlying EPS increased to 12.0 pence reflecting the
strong trading performance and higher effective tax rate
NET DEBT TO UNDERLYING EBITDA
LEVERAGE
0.4x
21
20
19
1.1x
1.4x
0.4x
Link to Strategy
Definition
Leverage is net debt (total debt less cash balances) divided
by underlying EBITDA
Why we measure this
We seek to maintain a strong balance sheet with EBITDA
leverage in the range of 1 to 2 times to allow capacity for
investment in future growth
Commentary on performance
Net debt to underlying EBITDA leverage ratio significantly
reduced during 2021 to 0.4 times, strengthening our
capacity to invest in our long-term growth strategy
Why we measure this
Employee engagement surveys enable comparison
between the Group and other companies. The
primary purpose of the survey is to guide leadership
about how best to improve employee engagement.
Commentary on performance
Following on from an exceptionally positive survey
result in 2020, the overall engagement measure for
2021 was down 5%. Animalcare continues to be well
ahead of Gallup’s average engagement benchmark for
European companies.
*Gallup Q12 engagement score
Strategic priorities
Strong finances
Key leadership
Growth portfolio
Business development
Innovative pipeline
Annual Report 2021 Animalcare Group plc
15
Business Model
By focusing our resources on the development, supply and marketing of products and
services to the veterinary profession, our business model creates value for a range of
stakeholders.
KEY RESOURCES
OUR KEY ACTIVITIES
People
Having the right people, capabilities and engagement across
the organisation is fundamental to delivering our strategy
and the long-term success of the Group. Our ongoing
objective is to create a high-performing, agile business
driven by a skilled, unified and committed team.
Industry knowledge
We have extensive knowledge of the Companion Animal,
Equine and Production Animal markets in which we operate
and the regulations that govern them. More than 20% of
our people are qualified vets.
Customer relationships
The relationships with the individual vets and veterinary
groups that are our core customers are key and our sales
force has extensive experience and knowledge of their
markets and products to support the needs of these
customers.
Partnerships
The Group has developed a series of partnerships that help
support the success and smooth running of the business.
These range from joint ventures that strengthen our
pipeline and commercialisation agreements that increase
the reach of innovative products through to long-standing
relationships with contract research and manufacturing
organisations.
Balanced portfolio
Animalcare operates a portfolio of around 150 brands
with particular strengths in our core therapy areas of
pain management, dermatology and non-antibiotic anti-
infectives. We continue to increase the quality of our
portfolio through the development of novel differentiated
products and a focus on a smaller number of bigger, higher-
margin brands with growth potential.
Financial platform
Critical to our future growth is the further development
of our product portfolio. Our solid financial platform, with
improved cash generation and reduced net debt, enables
us to increase investment and leverage our stronger base to
deliver future growth and value to our shareholders.
16
Our core activities combine to create sustainable growth
and long-term value for our stakeholders.
• We develop and commercialise novel pharmaceutical
products for the animal health market. These are
developed in-house, acquired from other companies or
in-licensed from partners.
• Outside our direct markets we seek to commercialise
our own products through international partnerships.
• We manufacture our products through a network of
specialist contract manufacturing organisations.
• We manage an extensive international supply chain,
including specialist veterinary wholesalers.
• Through our close relationship with stakeholders and
our sales and marketing capabilities, we sell products to
veterinary practices and veterinary groups.
• The cash we generate from these activities helps
fund investment in our pipeline of new products and
supports the continuing development of our sales and
marketing capabilities.
In all our activities we seek to have a positive impact on
the world around us and the communities in which we
operate. With that aim in mind, we are committed to the
environmental, social and governance (ESG) pillars of
sustainable development.
Annual Report 2021 Animalcare Group plc OUR PEOPLE REPRESENT A
COMPETITIVE ADVANTAGE
Agility: Our agility, expertise and local
knowledge mean we know our markets and
are able to adapt to evolving needs.
Trust: We have built trusted relationships
with individual veterinary practices and
larger veterinary groups.
Innovation: We are increasingly focused on
differentiated therapies that can meet the
needs of our customers while delivering
sustainable above-sector growth.
Partner of choice: We are positioned
as a preferred international partner for
companies that want to develop new
treatments or bring their innovative
products into our markets.
VALUE CREATED FOR STAKEHOLDERS
Employees
Employees benefit from the ability to improve their skills
and work in a challenging, expanding and forward-thinking
international organisation.
Customers
Animalcare seeks to provide a choice of innovative and
trusted products and services to support veterinary
professionals and other stakeholders. Our agile business
model and close customer relationships help ensure we are
aligned with the changing needs of our markets.
Keepers of animals
Our veterinary products and services help maintain or
improve the health and wellbeing of animals across our
markets. That brings huge benefits to owners and wider
society.
Suppliers
The Group does not own manufacturing assets so it works
with third-party manufacturers to supply finished products.
We engage with suppliers to develop and maintain trusting
long-term relationships and to create mutual value.
Partners
Our partnerships are wide ranging in scope and help ensure
the success and effective operation of our business. We
create value through long-term collaborations on mutually
agreed terms.
Shareholders
Through execution of our
growth strategy, we aim to
consistently deliver a strong
financial performance for our
shareholders and generate
attractive returns over the
long term.
17
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Chief Executive Officer’s Review
JAN BOONE
JENNIFER WINTER
CHIEF EXECUTIVE OFFICER
Non-Executive Chairman
2021 was a year to celebrate for
Animalcare. The continuing evolution
of our product portfolio, which
saw significant contributions from
new products such as Daxocox,
helped deliver positive results in a
growing and dynamic animal health
market. This performance further
strengthened the Group’s financial
position, equipping us with the
firepower to invest in opportunities
that are consistent with our growth
strategy.
Organisationally, we continued to build
the scalable and sustainable business
platform required to support delivery
of our long-term ambitions.
STRONG FINANCES
Pleasingly, we delivered positive
results against all our key financial
parameters.
Revenues for the year were £74.0m,
an increase of 5.0% on the prior
year, or 8.0% at constant exchange
rates. Group sales performance
largely mirrored the strong uptick in
demand seen across the Companion
Animals market which was propelled
by attractive fundamentals such
as increased pet ownership and a
loosening of COVID-related restrictions
on veterinary practices during the
year. The rapid recovery in trading
conditions was visible in exceptionally
strong Q1 revenues compared to the
same period in 2020. We expect to see
a more normal pattern of sales for the
opening months of 2022.
Benefiting from a favourable product
mix, our gross margin of 53.3% was
ahead of the prior year (2020: 51.9%).
This contributed to underlying EBITDA
of £13.5m (2020: £12.1m) which grew
ahead of revenue even allowing for
the absorption of increased SG&A
costs chiefly related to investment in
our people and sales and marketing
excellence. After underlying
adjustments totalling £8.6m (2020:
£7.8m) the profit before tax on a
reported basis was £0.9m (2020:
£0.2m).
The Group’s very strong cash
conversion rate of 108.8% helped
drive net debt lower to £5.3m as of
31 December 2021, a remarkable 60%
reduction over the 12 months.
This was a significant achievement
and an important milestone. After
several years of concerted effort to
improve our balance sheet, we are
now comfortably below our stated
Animalcare’s positive
performance in a
dynamic market
further strengthened
our financial position,
enabling us to
invest in growth
opportunities that
are consistent with
our strategy.”
18
Annual Report 2021 Animalcare Group plc target leverage range of 1 to 2 times
underlying EBITDA. This increases our
investment capacity and flexibility in
the continued pursuit of pipeline and
business development opportunities
that support our long-term growth
strategy.
KEY LEADERSHIP
In 2021 we made important strides
to further align our capabilities and
structure with our growth strategy.
At the beginning of the year, we
adopted a regional model overseen
by a slimmed down Senior Executive
Team (SET). Built around the South
Region (Spain, Portugal and Italy)
and North Region (UK, Germany,
Belgium and Netherlands), the new
structure has increased management
focus on performance and growth
opportunities while streamlining
decision-making.
To help embed this approach we
have deployed a number of our key
people to regional or Group roles.
That has the effect of improving
operational efficiency and consistency
as we continue to build a scalable
organisation that can adapt and flex
as we grow. We are also investing in
Company-wide skills development,
most notably in the area of sales and
marketing excellence. It’s vital that
we continue to forge capability in this
space as we introduce innovative new
products in increasingly competitive
and dynamic veterinary markets that
have seen changes in ways of working,
often accelerated by the pandemic.
More broadly, we are implementing
a Company-wide initiative to develop
the cadre of leaders that will steer
Animalcare to a successful future.
Built around the proven principles of
“high challenge, high support”, this
programme will help us to nurture the
strong talent that exists at all levels
across the Group.
Our annual Gallup employee survey is
a valuable management tool that helps
us pinpoint opportunities to maintain
and build levels of engagement across
the business. Following on from an
exceptionally positive survey result in
2020, we saw a slight (5%) decrease
in the overall engagement measure
for 2021. Naturally, we would like
to see that score improve year on
year. But we also recognise that this
rating keeps us well ahead of Gallup’s
European average benchmark of
companies.
Through the survey, employees told us
that they felt more of a “One Team”
spirit, noticed an improvement in
communication and cross-country
collaboration and appreciated
increased training and development
opportunities.
They have also helped us set
priorities for 2022 including better
understanding of our strategic pillars
in a changing marketplace, improved
internal communication process and
associated use of digital tools and the
roll out of our leadership programme.
GROWTH PORTFOLIO
Maintaining a high quality and
competitive portfolio is key to our
future success. It serves as both a solid
foundation and an engine of growth.
In 2021, we continued with our efforts
to rationalise the number of smaller
“tail” products, thereby concentrating
management and sales and marketing
attention on bigger-selling, higher-
margin products. Collectively, our
top 40 selling brands accounted for
approximately 75% of total revenue,
an increase of 8.3% compared with
the prior year.
In 2021 we were delighted to see
Daxocox enter that top 40 category.
Our novel treatment for osteoarthritis-
related pain in dogs was introduced in
the second half and generated £1.2m
STRATEGIC PRODUCT
AND PORTFOLIO
DIRECTOR
We’re delighted to welcome
Sandra Single to the Animalcare
team who has joined us as
Strategic Product and Portfolio
Director and as a member of the
Group’s Senior Executive Team.
In the newly created role Sandra
is accountable for the alignment
of internally and externally
sourced products to drive future
growth. She leads the Technical,
R&D, Quality, Regulatory and
Project Management teams and
works alongside the Group’s
specialist Business Development
resource on potential deals.
Sandra brings a wealth of
research, development, portfolio
management and licensing
experience to the Group.
in sales. Though we are launching into
a vigorous marketplace, increasingly
characterised by large corporate
veterinary groups, we remain
confident Daxocox will be our biggest-
selling product within the next five to
ten years.
19
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Chief Executive Officer’s Review
CONTINUED
We continue to see the greatest
growth potential in the Companion
Animals and Equine segments of our
business, particularly over the longer
term. Consequently, that’s where
we direct most of our investment.
However, our retained Production
Animals business continues to enjoy
positive fundamentals and generate
attractive returns. Indeed, while the
revenues derived from this product
category declined by 13.9% versus
2020, adjusting for the previously
mentioned discontinuation of a legacy
distribution agreement in Belgium at
the beginning of 2021, our Production
Animals business grew sales and
margins over the year.
BUSINESS DEVELOPMENT
Seeking out pipeline and business
development opportunities through
partnerships or acquisitions is a central
element of our growth strategy. It’s
never an easy task, but there are
attractive opportunities. Indeed, I
don’t recall many occasions during the
last year when we were not involved
in talks over one or more promising
agreements.
Animalcare’s strong balance sheet,
backed by an experienced business
development team, equips us with
20
the financial resources and skills to
convert these opportunities into
reality. It’s particularly satisfying,
therefore, to have struck an early-
stage research and development
agreement with Netherlands-based
Orthros Medical. Announced on
24 March 2022, the licensing and
collaboration deal seeks to unlock the
exciting therapeutic potential of VHH
antibodies, initially for the treatment
of canine osteoarthritis. This
agreement represents a key building
block in our long-term growth strategy
in an area of therapeutic focus and
significant market growth.
In addition, the first products from
STEM Animal Health Inc. – our joint
venture with Kane Biotech signed
in September 2020 – are soon to
hit the market following completion
of manufacturing transfer and the
start of listing negotiations with key
customers. We have also extended
our commercial reach through a
distribution agreement with Virbac
to market and sell Daxocox in
most European countries outside
Animalcare’s direct territories.
INNOVATIVE PIPELINE
Daxocox received marketing
authorisation for EU countries and
the UK in April 2021. Launch activities
kicked off at the end of the first half
of the financial year and are under
way across all our markets. R&D life
cycle management programmes for
Daxocox have been initiated to target
new indications, new formulations
and geographic expansion. For the
STEM joint venture, coactive+ biofilm
and Dispersin B pipeline projects have
been initiated, with a particular focus
on otitis.
Our early-stage agreement with
Orthros Medical provides an important
new dimension to our growing
pipeline as we pursue the potential for
novel VHH antibody technology that
we believe will become an increasing
feature of veterinary treatment.
To support delivery of pipeline
opportunities, total R&D investment
reached £1.3m. We expect this to
increase in 2022 as we invest in our
VHH antibodies partnership with
Orthros Medical and other future
growth opportunities.
SUMMARY AND OUTLOOK
We entered 2021 at pace with
exceptional revenue and profit growth
rates in the first quarter driven by a
post-pandemic recovery in Companion
Animals demand. And while we saw
a return to more normal trading
levels across the rest of the year,
we delivered a very positive overall
performance and a further significant
improvement in the Group’s financial
position, enabling us to continue
investing in our long-term growth
strategy.
Early sales activity in 2022 is in line
with management expectations,
although compared to 2021 we
anticipate a more even balance
between the first and second halves
as the grip of COVID-19 loosens over
time. Across the full year, we expect
our revenue and growth momentum
to continue while we navigate
inflationary and foreign exchange
headwinds. Whatever conditions
we encounter, I know that we can
continue to call on the commitment,
agility, focus and professionalism of
the Animalcare team on our journey
to become a leading company in our
chosen markets.
I’d like to thank each of our employees
for their hard work and dedication. It’s
hugely appreciated by all members of
the senior management team.
JENNY WINTER
Chief Executive Officer
Annual Report 2021 Animalcare Group plc 21
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Chief Financial Officer's Review
JAN BOONE
CHRIS BREWSTER
CHIEF FINANCIAL OFFICER
Non-Executive Chairman
UNDERLYING AND STATUTORY RESULTS
To provide comparability across reporting periods, the Group presents its results
on both an underlying and statutory (IFRS) basis. The Directors believe that
presenting our financial results on an underlying basis, which excludes non-
underlying items, offers a clearer picture of business performance. IFRS results
include these items to provide the statutory results. All figures are reported at
actual exchange rates (AER) unless otherwise stated. Commentary will include
references to constant exchange rates (CER) to identify the impact of foreign
exchange movements. A reconciliation between underlying and statutory results
is provided at the end of this financial review.
OVERVIEW OF UNDERLYING FINANCIAL RESULTS
2021
£’000
74,024
39,418
53.3%
10,593
13,455
18.2%
12.0p
2020
£’000
70,494
36,559
51.9%
8,561
12,091
17.2%
10.6p
% Change at
AER
5.0%
7.8%
1.4%
23.7%
11.3%
1.0%
13.2%
Revenue
Gross Profit
Gross Margin %
Underlying Operating Profit
Underlying EBITDA
Underlying EBITDA margin %
Underlying Basic EPS (p)
We are pleased to report a positive trading performance with revenue growth
and improved gross margins leading to a double-digit increase in underlying
EBITDA. The Group delivered very strong cash conversion which drove a
significant reduction in net debt during the year, further strengthening our
capacity to invest in our long-term growth strategy.
Revenues grew to £74.0m (2020: £70.5m), up 5.0% on the prior year (8.0% at
CER). As anticipated, revenue growth was weighted towards the first half as a
result of exceptional veterinary demand in Q1 and markets returning to more
normal levels over the course of the financial year.
We are pleased to
report a positive
trading performance
in 2021. The further
strengthening of
our balance sheet
provides us with
increased capacity to
invest in long-term
growth.”
22
Annual Report 2021 Animalcare Group plc Revenue by product category is shown in the table below:
Companion Animals
Production Animals
Equine & other
Total
2021
£’000
51,326
16,980
5,718
74,024
2020
£’000
44,808
19,720
5,966
70,494
% Change at
AER
14.5%
(13.9%)
(4.1%)
5.0%
Companion Animals revenue, which represented approximately 69% of Group
turnover, is the key driver of our overall revenue growth, increasing by 14.5% to
£51.3m. This growth can be attributed to strong in-year market dynamics across
Europe, in particular during the first half of the year, newly introduced products,
which contributed £2.2m (2020: £1.9m) and continued focus on driving value
from our key (top 40) brands. Daxocox, our novel COX-2 inhibitor pain treatment
for dogs, added £1.2m to revenue, predominantly during the second half.
In contrast, Production Animals revenue declined by 13.9% versus the prior year
to £17.0m. This is primarily driven by the discontinuation of a legacy distribution
contract of several antibiotics and other lower-margin products within the
Group’s Belgium subsidiary. Production Animals remains an important part of our
South Region business, accounting for approximately 40% of regional revenues.
Within this region, Production Animals sales increased by 3.0% compared
to 2020.
As expected, Equine and other sales decreased by 4.1% to £5.7m primarily due
to prior year stock build within our international partner channel in advance of
the manufacturing transfer of Danilon, which was completed during the year.
During 2021, we maintained our emphasis on optimising our portfolio to reduce
fragmentation and drive commercial focus towards our larger-selling, higher-
margin brands. As a result, we entered 2022 with a portfolio that is close to our
target of approximately 150 brands. Revenues from the top 40 brands grew by
8.3%, predominantly driven by new product launches during 2021 and 2020,
while improving our gross margins.
The strong revenue growth and
higher-margin product mix drove
a significant improvement in our
operating profitability with underlying
EBITDA at £13.5m (2020: £12.1m),
an increase of 11.3% versus prior
year. SG&A costs increased during
the year to £26.0m (2020: £24.5m)
principally driven by investments in
sales and marketing activities and our
people. As a result, SG&A expenses as
a percentage of revenue increased to
35.1% (2020: 34.7%).
The underlying effective tax rate of
24.4% (2020: 20.1%) has increased
versus prior year primarily reflecting
the geographic mix of profits and the
one-off impact of the substantively
enacted increase in corporate tax rates
in the UK (from 19% to 25% effective
1 April 2023) on deferred tax balances.
We continue to optimise research and
development tax credits.
Reflecting the points noted
above, underlying basic EPS
increased by 13.2% to 12.0 pence
(2020: 10.6 pence).
23
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Chief Financial Officer's Review
CONTINUED
OVERVIEW OF REPORTED FINANCIAL RESULTS
Reported Group loss after tax for the year (after accounting for the non-underlying items shown in the table and discussed
below) was £0.1m (2020: £0.2m profit), with reported loss per share at 0.1 pence (2020: 0.4 pence earnings per share).
Revenue
Gross profit
Selling, general & administrative expenses
Research & development expenses
Net other operating income/(expense)
Operating profit/(loss)
Net finance expenses
Share in net loss of joint ventures
Profit/(loss) before tax
Taxation
Profit/(loss) for the year
Basic earnings/(loss) per share (p)
2021
Underlying
results
£’000
74,024
39,418
(26,759)
(2,181)
115
10,593
(856)
(188)
9,542
(2,325)
7,224
12.0p
Amortisation
and
impairment of
intangibles
£’000
-
-
(4,580)
(951)
(2,761)
(8,292)
-
-
(8,292)
1,256
(7,036)
-
Acquisition,
restructuring,
integration
and other
costs
£’000
-
-
-
-
(312)
(312)
-
-
(312)
47
(265)
-
2021
Reported
results
£’000
74,024
39,418
(31,339)
(3,132)
(2,958)
1,989
(856)
(188)
945
(1,022)
(77)
(0.1p)
2020
Reported
results
£’000
70,494
36,559
(30,427)
(3,486)
(1,843)
803
(511)
(93)
199
35
234
0.4p
Non-underlying items totalling £8.6m (2020: £7.8m) relating to profit before tax have been incurred in the year, as set out
in Note 4. These principally comprise:
1. Amortisation and impairment of acquisition-related intangibles of £8.3m (2020: £5.9m). This charge primarily comprises
amortisation in relation to the reverse acquisition of Ecuphar NV and previous acquisitions made by Ecuphar NV. The
increase versus 2020 primarily reflects the non-cash impairment of four projects that formed part of the acquired
development pipeline, the principal drivers for which are:
•
•
the recall and suspension of all products containing ranitidine for human use by European and US authorities.
Consequently, Animalcare has ceased development of ranitidine for animal use; and
technical and manufacturing issues that have significantly impacted the timing of supply and expected commercial
returns of an equine product.
2. Expenses relating to acquisition, business development, integration, restructuring and other costs of £0.8m
(2020: £1.5m) including the carve out and partnership of Identicare Ltd, our microchipping and database services
business, with effect from 1 January 2022, reorganisation and restructuring of our Belgium and UK logistic operations
and relocation of our Spanish office.
3. £0.5m income in respect of product divestments as we continue to focus on our core higher margin brands.
DIVIDENDS
An interim dividend of 2.0 pence per share was paid in November 2021.
The Board is proposing a final dividend of 2.4 pence per share (2020: 2.0 pence per share) in line with pre-COVID levels.
Subject to shareholder approval at the Annual General Meeting to be held on 7 June 2022, the final dividend will be paid
on 8 July 2022 to shareholders whose names are on the Register of Members at close of business on 10 June 2022. The
ordinary shares will become ex-dividend on 9 June 2022.
The Board continues to closely monitor the dividend policy, recognising the Group’s need for investment to drive future
growth and dividend flow to deliver overall value to our shareholders.
24
Annual Report 2021 Animalcare Group plc CASH FLOW AND NET DEBT
We have made significant progress during 2021 in reducing our debt and
increasing our financial capacity for M&A and pipeline opportunities that
support our long-term growth. The main driver for this was our very strong cash
conversion performance as set out in the table below:
Underlying EBITDA
Net cash flow from operations
Non-underlying items
Underlying net cash flow from operations
Underlying cash conversion %
2021
£’000
13,455
14,023
611
14,634
108.8%
2020
£’000
12,091
11,117
1,324
12,441
102.9%
Net cash flow generated by our operations increased to £14.0m (2020: £11.2m).
Net working capital reduced by £2.2m primarily due to lower than expected
receivables as a result of phasing of trading towards year end. Inventories
reduced by £1.4m driven by delayed supply, a large proportion of which came
into stock during Q1. The reduction in net working capital was in part offset by
a £1.8m increase in cash taxes mainly due to a combination of geographic mix
of profits, phasing of payments, settlement of prior year taxes and reduced cash
receipts in respect of R&D tax credits.
As we expect trading and inventory patterns to be more balanced over the
current financial year ending 31 December 2022, we anticipate cash conversion
to be lower in 2022, but remain on average within the target 90-100% range over
2021 and 2022.
Net debt reduced by £8.3m over the full year and stood at £5.3m on
31 December 2021. This significant improvement was largely driven by the very
strong cash conversion noted above. Exchange rate variations benefited the net
debt position by £1.1m.
Net debt at 1 January 2021
Net cash generated from
operations
Net capital expenditure
Investments in joint venture
Net finance expenses
Issue of share options
Dividends paid
Foreign exchange on cash
and borrowings
Movement in IFRS 16 lease
liabilities
Net debt at 31 December
2021
£’000
(13,618)
14,023
(2,675)
(289)
(1,684)
76
(2,403)
1,148
92
(5,330)
Net capital expenditure of £2.7m
(2020: £1.5m) largely comprises
investment in our product
development pipeline of £1.3m, the
most significant components of which
relate to Daxocox and milestone
licence payments to STEM Animal
Health Inc., together with £1.0m of
expenditure relating to continuing
investment in our IT infrastructure,
including new regulatory and quality
management systems and website
and platform development relating to
Identicare Ltd.
The net debt to underlying EBITDA
leverage ratio was approximately 0.4
times (FY20: 1.1 times), comfortably
below the Group’s stated target range
of 1 to 2 times underlying EBITDA.
25
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Chief Financial Officer's Review
CONTINUED
BORROWING FACILITIES
During the first half of the year, we
completed an exercise with our four
syndicate banks to extend our existing
banking facilities from 31 March 2022
to 31 March 2025.
The Group’s financing arrangements
consist of a committed revolving
credit facility of €41.5m and a €10m
acquisition line, which cannot be
utilised to fund our operations. The
investment loan facility was repaid in
full at the time of renewal.
The facilities remain subject to the
following covenants which are in
operation at all times:
• Net debt to underlying EBITDA
ratio of 3.5 times;
• Underlying EBITDA to interest ratio
of minimum 4 times; and
• Solvency (total assets less
goodwill/total equity less goodwill)
greater than 25%.
As at 31 December 2021 and
throughout the financial year, all
covenant requirements were met with
significant headroom across all three
measures.
At 31 December 2021, total facilities
were £43.3m, of which £3.6m, net of
cash balances, was utilised, leaving
headroom of £39.7m.
GOING CONCERN
The Directors have prepared cashflow
forecasts for a period of at least 12
months from the date of signing
of these financial statements (the
going concern assessment period).
These forecasts indicate that the
Group will have sufficient funds to
meet its obligations as they fall due,
taking into account the potential
impact of “severe but plausible”
downside scenarios to factor in a
range of downside revenue estimates,
including further unexpected COVID
disruptions, and higher than expected
inflation across our cost base, with
corresponding mitigating actions.
The output from these scenarios
shows the Group has adequate
levels of liquidity from its committed
facilities and complies with all its
banking covenants throughout the
going concern assessment period.
Accordingly, the Directors continue
to adopt the going concern basis of
preparation.
SUMMARY AND OUTLOOK
We delivered a strong set of results
driven by growing demand in our
Companion Animals segment,
underpinned by strong market
fundamentals which have moderated
as we progressed through the financial
year. Demand levels in the early part
of 2022 are encouraging and in line
with expectations that revenue and
profit delivery will be more balanced
over the current financial year
compared to 2021.
Our very strong underlying cash
conversion led to a significant
reduction in net debt and the net debt
to underlying EBITDA leverage ratio.
Hence, we enter 2022 with increased
capacity and flexibility to pursue
business and product development
opportunities. Our licensing and
collaboration agreement with Orthros
Medical, announced on 24 March
2022, is the first step towards
increasing investment in our product
development pipeline.
CHRIS BREWSTER
Chief Financial Officer
26
Annual Report 2021 Animalcare Group plc Our principal risks
MANAGING OUR RISKS
The Board of Directors has overall
responsibility for the Group’s risk
appetite and risk management
strategy. In doing so, the objective of
the Board is to foster and embed an
organisational culture of strong risk
management to effectively execute
the Company’s strategy.
As part of our commitment to strong
governance and risk management,
during 2020 the Board requested a
review of its governance structure
with a focus on risk reporting. We
completed that exercise and in
2021 rolled out our enhanced Risk
Management Framework (RMF). In
order to ensure the new RMF was fully
embedded, the exercise involved the
Board, the Audit and Risk Committee
(A&RC) and senior management
from all countries and disciplines. In
conjunction with this, we created the
Risk and Compliance Manager role,
with resource allocated from within
the Group. This role is designed to
provide independent assurance over
the operation of risk management
processes, serving as part of Risk
Monitoring within our RMF.
The RMF is based on an industry
standard three lines of defence model
(3LoD) and includes updated risk
inventory, metrics and thresholds.
The 3LoD model is combined with an
approach to Assess, Monitor, Manage,
Respond and Communicate the
Company’s critical risks.
To be effective, risk management
relies on the engagement of all parts
of the business, which, as mentioned,
is an integral part of our framework
and culture. The RMF has been built
in support of our newly regionalised
organisational structure – Northern
and Southern Europe. Within that
structure, our regional leaders,
their country managers as well as
Group function heads are expected
to identify, manage and mitigate
risks in their part of the business.
They manage this process through
a consistently applied Risk and
Control Self Assessment (RCSA). This
process includes assessing each risk
for its impact and likelihood, scored
both before and after applying key
controls. A standardised risk-scoring
methodology and template is now
used to ensure a consistent approach
t
n
e
m
n
o
r
i
v
n
E
k
s
i
R
g
n
i
r
o
t
i
n
o
M
k
s
i
R
t
n
e
m
s
s
e
s
s
A
k
s
i
R
Board
Risk Appetite
Third Line of Defence
Independent review by Audit and Risk
Committee
Strategic Risk
Heatmap
Second Line of Defence
Review and Horizon Scan Group
Horizon Scan
First Line of Defence
Business Team Meetings
RCSA –
Risk and Control
Self Assessments
across the Group. This part of our
framework represents the First Line of
Defence.
In rolling out the RMF, we identified
the need for dedicated, skilled risk
management resources to lead our
risk assessments, maintain the RMF
and liaise with business leaders across
the Group. As a result, we created a
small team to work alongside local
finance managers and Group functions
to lead the assessment and validation
of all RCSAs from the business. This
team prepares consolidated risk
reporting in the form of a Horizon Scan
across the organisation which, in turn,
ensures independent oversight and
consistency. This stage of assessment
represents our Second Line of
Defence.
The Horizon Scan is reviewed by the
Executive team and mapped against
the five core components of the
Group’s strategy in the form of a
Strategic Risk Heatmap.
In accordance with our governance
practices, oversight of risk
management and risk assessment is
undertaken by the A&RC which, in
turn, provides reports to the Board
three times per annum to make sure
the Board is fully cognisant of critical
and emerging risks. The A&RC bases its
reports on both the Horizon Scan and
Strategic Risk Heatmap thus forming
our Third Line of Defence in order to
provide assurance to the Board.
We believe the developments made
during 2021 strengthen our RMF and
our ability to monitor, manage and
mitigate the most critical risks inherent
in our strategic plan, to the benefit of
our stakeholders.
27
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT
Our principal risks
CONTINUED
EMERGING RISKS
Emerging risks are new risks that are
unlikely to impact the business in the
next year but have the potential to
evolve rapidly over a longer term and
could have a significant impact on our
ability to achieve our objectives. They
may develop into key risks or may not
arise at all.
During 2020, we designated climate
change as a global issue that has
implications for our customers,
employees, suppliers, partners and,
therefore, the Group. This year,
while we recognise that we are at
the early stages of our sustainability
journey, we have begun work to
identify associated material issues of
importance to our stakeholders and
their potential impact on our business
in the coming years.
COVID-19
We have continued to monitor the
operational impact of COVID-19 on
the business during the financial year.
While the virus has had an impact
on how we conduct our day-to-day
activities, our trading performance
during 2021 has been strong.
Economic and market uncertainty
remain due to COVID-19 and we will
continue to monitor and respond to
further changes where required.
PRINCIPAL RISKS
We map all aspects of our risks against
six categories that best outline our
key challenges, namely: strategic,
financial, operational (operations and
technology), regulatory compliance,
legal and people.
We believe that our most significant
challenges are strategic in nature.
Our strategic plans for the business
are based on organic and inorganic
growth as we continue to seek
geographical expansion and new
product opportunities. The table
below describes the current principal
strategic and other risks and
uncertainties facing the Group. In
addition to summarising the strategic
risks and uncertainties, the table
below gives examples of how we
mitigate those risks.
Risk
level
L
Trend
➞➞
M ➞
Link to
strategy
Potential impact
Mitigation
The emergence and
growth of corporate
customers and buying
groups represents an
opportunity for sales
volume growth but
may result in reduced
margins.
Revenues and gross
margins may be
adversely affected
should competitors
launch competing
generic or superior
(novel) products.
Operating costs may
increase to protect
market share.
We continue to develop and
strengthen our sales and marketing
teams in respect of key account
support to better serve our
changing customer base, both on a
national and a European basis.
We are increasing focus on life cycle
management strategies for our key
brands.
We monitor new product
registrations and competitor
launches and develop commercial
and marketing responses
accordingly to mitigate competitor
impact.
We are continuing to seek to
strengthen our product portfolio
through strategic partnerships
and we are exploring a number
of opportunities, including novel
pharmaceuticals.
Risk
MARKET RISK
In certain territories,
the veterinary market
continues to see the
emergence and growth
of corporate customers
and buying groups who
are looking for value
from the products and
services we provide.
COMPETITOR
RISK
Launch of competitor
products against our
key brands, for example
other generic or more
innovative products.
Although our product
portfolio is broad,
the Top 40 products
include a mix of some
strong brands and
well-established mature
products, for which the
market may be attractive
to competitors.
28
Annual Report 2021 Animalcare Group plc Strategic priorities
Strong finances
Key leadership
Growth portfolio
Business
development
Innovative pipeline
Risk key
Trend key
L
M
Low
Medium
H
High
➞
Up
➞➞
Flat
➞
Down
Risk
level
M
Trend
➞➞
M
➞➞
Risk
PORTFOLIO RISK
Approximately 44% of
the Group’s revenues are
derived from products
sourced from our
distribution partners,
which are heavily driven
by the associated
contractual terms.
PRODUCT
DEVELOPMENT
RISK
Failure to successfully
register and launch
products from our
pipeline.
Projects that initially
appear promising may
be delayed or fail to
meet expected clinical or
commercial expectations
or face delays in
regulatory approval.
Link to
strategy
Potential impact
Mitigation
Loss of one or more
distribution contracts
may reduce overall
sales.
Where we are successful
in developing and
growing the market, the
distribution partner may
terminate the contract,
resulting in lost sales.
Distribution may cease
due to change of control
of the contracting
parties.
Significant delay or
failure in launching a
product from our own
pipeline could adversely
affect our ability
to deliver revenue
expectations.
Failure of a development
project would result in
impairment of intangible
assets.
A New Product Opportunity
process is in place to provide
robust commercial and contractual
assessment of new partner
products.
Low quality distribution products
remain subject to the portfolio
optimisation.
Significant contracts are reviewed
to assess and mitigate business
continuity risks.
Robust pipeline monitoring
processes are in place. The pipeline
is discussed regularly by senior
management, including the CEO
and CFO.
The Group’s objective is to create
a balanced pipeline in terms of
risk and reward and to establish a
broader investment approach to
launching new products other than
from our own pipeline.
Product development risk was
subject to a detailed review as part
of our enhanced RMF.
29
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Our principal risks
CONTINUED
OTHER RISKS
Beyond strategic risks as outlined above, the following tables show other key risks that are potentially impactful in executing
our strategic plan. It is our perspective that in order to execute successfully we need to maintain strong finances and an
efficient operation that is compliant with the laws and regulations of each country of business – all of which needs to be
supported by the best people with the right skills to execute against our strategic plan.
Financial strength
We carefully track our financial performance against a wide range of financial measures – including capital, liquidity and
margin. We also recognise that our results are subject to foreign exchange translation exposure, which is closely monitored
and reported. We acknowledge that our future growth is highly dependent on a solid financial platform and strong balance
sheet and have a range of risk assessments associated with both, including:
Risk
level
L
Trend
➞➞
M
➞➞
Link to
strategy
Potential impact
Mitigation
Investing for growth
constrained by lack
of access to capital/
financial resource and/
or reduced profitability.
We continue to focus on
maintaining both strong cash
conversion and a strong balance
sheet with a target net debt to
underlying EBITDA leverage within
the 1 to 2 times range.
During the first half of the year, we
completed an exercise with our
four syndicate banks to extend our
existing banking facilities from 31
March 2022 to 31 March 2025.
There may be variability
in our reported results
caused by significant
fluctuations in the
GBP:EUR exchange rate.
This may impact our net
debt to EBITDA leverage
covenant depending on
volatility and timing as
the income statement
and balance sheet
may be translated at
different rates.
We carry out a central review of
foreign currency exposures and we
assess possible hedging strategies
to mitigate risk via derivatives.
Matching currency flows and
financing will limit the covenant
exposure.
The Group presents key financial
measures on a CER basis to enable
shareholders to assess performance
with the impact of foreign exchange
eliminated.
Risk
FINANCING/
TREASURY RISK
Debt facilities are
committed for a finite
period and we need
to plan to renew our
facilities before they
mature and guard
against default. Our
loan agreements
also contain various
covenants with which
we must comply.
FOREIGN
EXCHANGE
TRANSLATION
RISK
The majority of the
Group’s revenues are
denominated in euros.
However, the Group’s
presentational currency
is sterling and therefore
the reported revenues,
profits and net debt
levels will be impacted
by exchange rates
prevailing during the
relevant financial period.
30
Annual Report 2021 Animalcare Group plc Strategic priorities
Strong finances
Key leadership
Growth portfolio
Business
development
Innovative pipeline
Risk key
Trend key
L
M
Low
Medium
H
High
➞
Up
➞➞
Flat
➞
Down
OPERATIONAL PERFORMANCE
The success of our operation relies heavily on both our supply chain and technology platforms, therefore we highlight
below how we manage, monitor and mitigate those risks.
Risk
level
H
Trend
➞➞
H ➞
Risk
SUPPLY CHAIN
RISK
As the Group does not
own any manufacturing
assets, it relies
extensively on a large
base of third-party
manufacturers for
supply of finished
products, whether our
own brands or those
sold on behalf of our
partners via distribution
arrangements.
IT SYSTEMS AND
CYBER SECURITY
RISK
The Group relies
heavily on information
technology and key
systems to support the
business.
The risk of cyber
attacks that cause
system disruption and
the potential for data
and financial fraud, is
increasing.
Link to
strategy
Potential impact
Mitigation
Any disruption,
interruption or failure of
supply from our third-
party suppliers, whether
COVID-19 related or
otherwise, could result
in lost sales and damage
the Group’s reputation
with its customers.
Manufacturing transfers
to resolve longer-term
supply issues may require
additional regulatory
approvals, which could
result in additional costs
and/or delays.
A general outage of
our IT systems may
cause disruption to, or
prevention of, normal
operations, and/or
additional costs.
Cyber attacks could
result in system and
business disruption and/
or availability of data.
Failure to adequately
protect customer (and
others’) data may
result in a breach of
GDPR legislation and/or
financial fraud.
In 2021 we restructured the supply
chain function to include dedicated
demand planning resource for
the regions. This is supported by
investment in SAP.
Our supplier base has continually
been reduced, consolidating our
key products with reliable suppliers.
We work with these suppliers to
gain mutual understanding and
develop risk mitigation strategies
end to end.
We also continue to invest in
“Partner Management” which will
strengthen ties with our existing
supplier base.
The Group has maintained focus
on mitigating the increasing cyber
threat while accommodating
remote working practices, including:
• Continued investment in our
cloud-based IT systems and
security tools to safeguard the
IT infrastructure.
• Engagement with security-
•
aware, reliable and certified IT
service global providers.
Internal policies surrounding
security, user access, change
control and the ability to
download and install software.
• We hold global cyber insurance
which provides specialist
technical and legal support in
the event of a cyber incident.
During 2021 we have conducted
wide-scale security testing to reduce
our risk to phishing attacks. We have
also implemented a critical data
task-force to categorise our data and
recommend appropriate safeguards.
31
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Our principal risks
CONTINUED
REGULATORY COMPLIANCE
Given we operate in a highly regulated market, it is evident that the success of our business is dependent on compliance
with product regulations in each country of operation, therefore, we highlight below how we manage, monitor and mitigate
those risks.
Risk
level
M
Trend
➞➞
Risk
REGULATORY
RISK
We operate in a highly
regulated animal health
environment which is
designed to ensure the
safety, efficacy, quality
and ethical promotion of
pharmaceutical products.
Failure to meet or adhere
to regulatory standards
could affect our ability to
register, manufacture or
promote our products.
Link to
strategy
Potential impact
Mitigation
Non-compliance with
regulatory requirements
may result in delays to
supply and/or lost sales.
Delays in regulatory
reviews and approvals
could impact the timing
of a product launch and
impact sales.
Brexit has resulted in
additional regulatory
and quality control
requirements and
associated costs.
The Group Technical and Regulatory
team have established systems,
which were upgraded during 2021,
and procedures to monitor and
maintain compliance which are
subject to regular internal and
external audits.
Regular dialogue is maintained with
relevant authorities in each country
to ensure we maintain a thorough
understanding of regulatory
changes.
32
Annual Report 2021 Animalcare Group plc Strategic priorities
Risk key
Trend key
Strong finances
Key leadership
Business
development
Growth portfolio
Innovative pipeline
L
M
Low
Medium
H
High
➞
Up
➞➞
Flat
➞
Down
PEOPLE
In order to successfully deliver our growth strategy in a highly regulated business, we need to attract and retain a high-
calibre and diverse pool of talent. Our people risk is managed, monitored and mitigated as follows:
Risk
PEOPLE RISK
Failure to structure and
resource the business
properly to deliver our
strategy.
We may not be able
to attract, develop
and retain high-
calibre, diverse and
experienced individuals
in key roles.
Risk
level
M
Trend
➞➞
Link to
strategy
Potential impact
Mitigation
Failure to structure and
resource our business
properly could result in:
• Loss of expertise.
• Potential business
•
disruption.
Insufficient
resources to deliver
strategy.
• High cost of
organisational
restructuring in
certain countries.
We want to focus on key areas
that will maximise individual
potential and increase
organisational capability so that
we can position Animalcare as an
“Employer of choice”.
This includes:
• A strong performance
management process.
• A competitive rewards
strategy with a consistent
and objective benchmarking
process.
• Personal and team
development programmes.
• A global leadership
mindset “High Challenge
High Support” model and
programme.
• Use of highly skilled contract
staff to bridge short-term
gaps in key resource areas.
Recognising the impact of
COVID-19 on the workforce, we
rolled out a Global Employee
Assistance Programme
to support mental and
physical wellbeing as well as
personal development. With
the finalisation of a global
recruitment and onboarding
policy we take diversity and
inclusion into account.
33
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Our stakeholders
OUR KEY STAKEHOLDERS AND HOW WE ENGAGE WITH THEM
The Board considers its key stakeholders to be its employees, its customers, its suppliers and partners, its shareholders, and
the communities and environment in which we operate.
SUPPLIERS AND
PARTNERS
As the Group does not own any
manufacturing assets, it relies
extensively on a large base of third-
party manufacturers for supply of
finished products, whether our
own brands or those sold on behalf
of our partners via distribution
arrangements. We need to maintain
trusting relationships with suppliers
and partners for mutual benefit and to
ensure they are meeting our standards
and conducting business ethically.
Stakeholder key interests
• Quality management
• Cost-efficiency
• Long-term relationships
• Responsible procurement, trust
and ethics
How we engage
•
Implementation of key partner
management programme
• Meetings with specialist veterinary
wholesalers and distributors
• Meetings with key suppliers that
represent 70% of purchasing spend
• Supplier forums and networking
meetings
• Quality management reviews
OUR PEOPLE
CUSTOMERS
Having the right people, capabilities
and engagement across the
organisation is fundamental to
delivering our strategy and the
long-term success of the Group.
Our ongoing objective is to create a
high performing business driven by a
skilled, unified and committed team.
Stakeholder key interests
• Career development
• Reward and recognition
• Engagement
• Training and development
• Wellbeing
• Health and safety
How we engage
• Leadership development
programmes
• Financial incentives related to
performances in the form of
annual bonuses
• Employee incentive plans
• Annual employee engagement
survey
• Enhanced internal communications
via our “People Portal”
As the veterinary market continues
to evolve, understanding the needs
of our customers enables us to
support them as a trusted partner.
We continue to work closely with
veterinary professionals and other
stakeholders to ensure we are aligned
with their changing needs.
Stakeholder key interests
• Safety, quality and reliability
• Product availability and
effectiveness
• Competitiveness
• Our availability and responsiveness
• Customer relationships
• Compliance
• Range of products
How we engage
• Visits, virtual meetings and
telephone calls with veterinary
practices and veterinary groups
• Participation in industry forums
and events
• Product launch events
• Technical support and training
• Social media and commercial
• Wellbeing programme – Smile@
websites
• Contract negotiation,
implementation and management
of ongoing relationships
Animalcare
• Global employee assistance
programme – 24/7 confidential
counselling and information
service
• Online teambuilding activities
Insights Discovery sessions to
•
receive local feedback
• Personal and team development
sessions
• Workplace ambassador
programme
• Mentoring programme
34
Annual Report 2021 Animalcare Group plc COMMUNITIES AND
ENVIRONMENT
Animalcare is committed to
being a responsible member of
our community and consider
the environmental impact of our
operations.
Stakeholder key interests
• Sustainability
• Animal welfare
• Community
How we engage
• More sustainable business
practices, including reducing travel
• Member of animal and health
trade associations
• Supporting local and national
charity partnerships
• Employee-matched fundraising
SHAREHOLDERS
Trust from our shareholders is key
to delivering our strategy as access
to capital will be important to the
long-term success of our business. We
ensure that we provide fair, balanced
and understandable information to
shareholders, potential investors
and investment analysts and work
to ensure that they have a strong
understanding of our strategy and
performance.
Stakeholder key interests
• Financial performance
• Governance and transparency
• Operating and financial
information
• Confidence and trust in the
Group’s leadership team
• Total shareholder returns
How we engage
• Regular market updates
•
Investor roadshows, meetings and
presentations
• Dedicated investor section on
corporate website
• Shareholder consultations
35
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Our stakeholders
CONTINUED
S172 STATEMENT
The Directors are well aware of their
duty under Section 172(1) of the
Company Act 2006, to act in the way
they consider, in good faith, would be
most likely to promote the success
of the Company for the benefit of its
members as a whole, and in doing so
have regard (among other matters) to:
• The likely consequence of any
decision in the long term
• The interests of the Company’s
employees
• The need to foster the Company’s
business relationships with
suppliers, customers and others
• The impact of the Company’s
operations on the community and
the environment
• The desirability of the Company
maintaining a reputation for high
standards of business conduct
• The need to act fairly between
members of the Company.
The following disclosure describes
how the Directors have had regard to
the matters set out in Section 172(1)
(a) to (f) and forms the Directors’
statement under section 414CZA of
The Companies Act 2006.
36
Key Board discussions and decisions
The Board received trading, financial and operational updates from the CEO
and CFO and updates on team wellbeing, engagement and interactions with the
Group’s customers, suppliers and investors. An update was received from the
Remuneration and Nomination Committee on progress with the selection of a
new Non-Executive Director. The Audit and Risk Committee provided an update
on changes to the Group’s risk management framework with the inclusion of
climate change as an evolving risk and an outline of the Group’s plan for its
sustainability journey. Key discussions, decisions and considerations during the
year to 31 December 2021 are set out below:
MARCH
JULY
The Board reviewed the results of the
employee engagement survey and
implemented initiatives to be carried
out in response to the survey findings.
Considerations
Consideration of the feedback
provided by employees who
completed the survey and taking
appropriate actions is critical for
employees to engage in the process
and for positive changes to be
implemented. When determining
which actions would be implemented,
the Board considered the financial
consequences and the impact on
long-term value and growth for the
shareholders.
The Board received a report on new
product opportunities.
Considerations
The need to consider growth
opportunities for the long-term
success of the company.
The Board approved the release of the
2020 Full Year Results.
Considerations
The need to provide transparent and
accurate information to the market.
The Board agreed the final dividend
for 2020 of 2.0 pence per share.
Considerations
The need to address the interests of
shareholders in the context of the long
term, whilst maintaining appropriate
levels of reserves to run the business
effectively.
The Board approved the announcement
of a trading update to the market.
Considerations
The need to provide transparent and
accurate information to the market.
SEPTEMBER
The Board approved release of the
Interim Results for the six months
ended 30 June 2021.
Considerations
The need to provide transparent and
accurate information to the market.
The Board agreed the interim dividend
of 2.0 pence per share.
Considerations
The need to address the interests of
shareholders in the context of the long
term, whilst maintaining appropriate
levels of reserves to run the business
effectively.
The Board held a Group Strategy
session with presentations from
members of the Senior Executive
Team and Business Development and
Marketing teams.
Considerations
The need to consider the strategy to
ensure for the long-term success of the
Company for all stakeholders.
The Board considered Board
composition following the resignation
of a Non-Executive Director.
Considerations
The need to ensure an appropriate
balance between Executive and Non-
Executive Directors.
Annual Report 2021 Animalcare Group plc NOVEMBER
The Board approved the grant
of options to Executive Directors
and other members of the Senior
Executive Team under the LTIP, subject
to agreed performance criteria.
Considerations
The need to provide performance-
related awards to incentivise senior
management to successfully deliver
our strategic plan.
DECEMBER
The Board considered the Budget for
FY 2022.
Considerations
The need to consider all stakeholders
so that they all benefit from the
successful delivery of our plan.
The Board received a report on
the business plan and strategy to
accelerate growth of the Identichip
and Identibase brands.
Considerations
The need to consider growth
opportunities for the long-term
success of the company.
37
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Sustainability
Animalcare Group is committed
to the environmental, social
and governance (ESG) pillars of
sustainable development.
In 2020, under the umbrella of our strengthened
Risk Management Framework, we designated
climate change as a global issue that has potential
implications for the Group. Our initial work in this
area has addressed the carbon footprint of our UK
operations.
From a Group perspective, we recognise that we are
at the early stages of our sustainability journey. With
that in mind, a small team, led by the Chief Financial
Officer, met in November 2021 to discuss the
broader issue of sustainability and relevant Company-
wide ESG issues. Subsequently, we have begun work
to identify these material issues of importance to
our stakeholders and their potential impact on our
business. This will help guide our approach in the
coming years.
To provide a useful baseline, we have categorised
current activities under each of the three pillars of
sustainability.
38
Annual Report 2021 Animalcare Group plc
ENVIRONMENT
Climate change and greenhouse gas emissions
In the UK, Animalcare Ltd has achieved carbon neutral
status as part of a commitment to run our business
sustainably. We undertook a detailed assessment of our
carbon emissions (UK-based operations) in 2020 and have
worked to reduce them, while also instituting offsetting
measures.
Carbon footprint UK operations
Greenhouse gas emissions and kWh consumption
CO2e
2021
kWh
CO2e
2020
kWh
14.0
59,260
20.2
83,998
16.0
75,259
10.3
44,127
Scope
Scope 1
Scope 2
Activity
Company
car travel
Grid-
supplied
electricity
Energy intensity measure
Tonnes CO2 per £m revenue
Tonnes CO2e
2021 2.0
2020 2.1
We have used the UK Government GHG Conversion Factors
for Company Reporting to calculate our total CO2 emissions
figures.
Carbon offset
To help offset emissions, we participated in the Brazil
Verified Carbon Standard REED project. In April 2021,
Animalcare planted more than 200 native British
broad-leaved trees at a primary school close to our UK
headquarters.
Supply chain and greenhouse gas emissions
The Group works with third parties to manufacture finished
products while engaging with other partners to fully enable
our international supply chain. Upstream emissions include
those generated by a supplier’s distribution activities and
the production of raw materials or components bought by
the Company. Downstream covers emissions generated
by the use or disposal of end product, as well as business
travel.
AMR is a systemic risk that will impact
multiple sectors including food
and agriculture, pharmaceuticals,
healthcare, and insurance industries.
According to the World Bank, by 2050
AMR could shrink global GDP by as
much as 3.8% while global animal
production could decline by between
2.6% and 7.5% per year. Within
the Europe animal health market,
antimicrobials now account for 11% of
sales compared to 19% in 2010.
Reducing our portfolio reliance on
antibiotics is a key focus which led to
the recent investment in STEM Animal
Health Inc. to exploit biofilm-targeting
technologies in anti-infective roles.
A glue-like substance that provides
protection from the environment,
biofilms can make bacteria up to 1,000
times more resistant to antibiotics,
antimicrobial agents, disinfectants,
and the host immune system. Anti-
biofilm technology can overcome
these barriers, making conventional
treatments more effective, potentially
at more sparing doses.
Value chain emissions (Scope 3)
represent a much greater proportion
of our carbon footprint than
operational emissions (Scope 1 and
Scope 2). Calculating then eliminating
these emissions is a challenging
undertaking that requires effective
partnerships built on trust. As we
move forward and develop our
sustainability strategy we will consider
further efforts to estimate and reduce
our value chain emissions.
Packaging and plastic offsetting
Flexible packaging keeps
pharmaceuticals and medicinal
products sterile and protected while
safeguarding against tampering and
counterfeiting. But, though useful and
resource-efficient in many ways, its
low volume and low weight properties
present a challenge once this
packaging becomes waste.
We recognise the environmental
impact caused by use of plastics in
our business and supply chain and
are taking steps to develop more
sustainable packaging. We are also
exploring plastic offsetting as an
interim solution while we explore
opportunities to move away from
virgin plastic and mitigate plastic
waste, where plastic remains the most
viable packaging solution.
Antimicrobial resistance
Antimicrobial resistance (AMR) occurs
when bacteria, viruses, fungi, and
parasites evolve over time and learn
to dodge the effect of medicines. As a
result, treatments become ineffective
and infections persist, increasing the
risk of spread to others. The overuse
and misuse of antibiotics in both
humans and animals have accelerated
the process by which bacteria become
resistant to antibiotics, threatening the
ability to treat common infections.
39
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Sustainability in Animalcare Group
We are also positioning Animalcare as
an “Employer of choice” by:
• A strong performance
management process
• A competitive rewards strategy
• Personal and team development
programmes
• A global leadership mindset: “High
challenge High support” model
Wellbeing:
To support our teams, the Group has
launched an employee assistance
programme: Smile@Animalcare. This
includes a confidential around-the-
clock counselling and information
service to assist employees with
personal or work-related challenges
that may affect health, wellbeing, or
performance.
Diversity and inclusion:
Animalcare Group recognises the
benefits of diversity, including
gender balance, and is committed
to creating an inclusive culture, free
from discrimination of any kind. This
extends to Board appointments.
Board gender diversity
14%
86%
Female
Male
Senior Executive Team
43%
57%
Female
Male
The Board currently consists of 86%
(six) male and 14% (one) female
members. The Senior Executive Team
currently consists of 43% (three) male
and 57% (four) female members.
Future appointments will continue
to be made on merit, with due
consideration given to the need
for diversity, and to complement
the existing balance of skills and
experience on the Board.
SOCIAL
Our people
Talent attraction:
We aim to attract, develop, and
retain talented people, building
leadership capabilities, creating a
one-team culture, driving effective
communication and collaboration, and
improving diversity.
After an exceptionally positive
employee engagement survey in 2020,
the Group saw a slight decrease in the
overall measure in 2021. Nevertheless,
our 2021 rating still puts Animalcare
well ahead of Gallup's European
average benchmark of companies.
During 2021 we continued to build
a skilled and high performing team
driven by a shared sense of purpose
and values. The Group further
expanded our employee engagement
efforts by conducting focus groups to
identify what a “Great place to work”
means to our teams and how best to
achieve that goal.
40
Annual Report 2021 Animalcare Group plc
GOVERNANCE
Our evolving approach to sustainability
is led by the Chief Financial Officer
and sponsored by the Chief
Executive Officer. A cross functional
“Sustainability Task Force” is in the
early stages of formation and will
participate in a materiality assessment.
Sales and Marketing:
Our values and behaviours (one team,
integrity, passion, taking ownership)
guide employee conduct along
with the Group’s Code of Conduct
and supporting policies which help
us ensure we do business in the
right way.
Supply chain and responsible
procurement:
We work with key suppliers to
understand and develop risk
mitigation strategies end to end.
We are also investing in “Partner
Management” to strengthen ties with
our existing supplier base and we hold
regular engagement meetings with
key suppliers that represent 70% of
purchasing spend.
41
Annual Report 2021 Animalcare Group plcSTRATEGIC REPORT Board of Directors
We continue to
develop our Board
structure and
remain committed
to evolving our
governance structure
to support the
Group’s long-term
success and strategy
for growth.”
JAN BOONE
Non-Executive Chairman
42
JAN BOONE
JAN BOONE
JENNIFER WINTER
JAN BOONE
Non-Executive Chairman
Chief Executive Officer
Appointment:
Jan has been Non-Executive Chairman
of the Group since 2017 following the
acquisition of Ecuphar NV.
Committee membership:
Member of the Audit and Risk
Committee and the Remuneration and
Nomination Committee.
Responsibilities, relevant skills and
experience:
As Chairman, Jan provides leadership
of the Board, promoting a culture of
openness and debate.
He is Chief Executive Officer of
Lotus Bakeries which is listed
on Euronext Brussels and brings
significant experience of M&A,
strategic development and change
management.
Jan started his career at
PricewaterhouseCoopers and holds a
master’s degree in Applied Economics
from KU Leuven and a master’s
degree in Audit from the University of
Mons-Hainaut in Belgium. Between
2000 and 2005, Jan served as Head of
Corporate Controlling and Member of
the Executive Committee of Omega
Pharma NV. He became Managing
Director of Lotus Bakeries in 2005 and
Chief Executive Officer in 2011.
Jan also serves as a Non-Executive
Director of Club Brugge KV.
Appointment:
Jennifer was appointed as Chief
Executive Officer of the Group in 2018.
Committee membership:
N/A; attends some Committee
meetings by invitation.
Responsibilities, relevant skills and
experience:
As CEO, Jennifer has responsibility
for developing and executing Group
strategy as approved by the Board
and drives the performance and
results of the Group. She manages
Group operations in conjunction
with the Leadership Team. With her
background in the healthcare sector,
including senior commercial roles at
AstraZeneca and GlaxoSmithKline,
she brings significant experience
of product development, change
management, marketing and
communications. On 1 February 2022,
she was appointed as a Non-Executive
Director of EKF Diagnostics Holdings
plc, an AIM listed point-of-care, central
lab devices and chemistry reagents
business.
Jennifer has a BSc in Physiology and
Pharmacology from the University of
Southampton.
She was a Non-Executive Director
of Allied Irish Bank from 2004 to
2010, and Chief Executive Officer
of Barretstown from 2003 to 2007,
transforming it into a successful,
leading children’s charity.
Annual Report 2021 Animalcare Group plc CHRIS BREWSTER
JAN BOONE
MARC COUCKE
JAN BOONE
Chief Financial Officer and Company
Secretary
Appointment:
Chris was appointed Chief Financial
Officer in 2012.
Committee membership:
N/A; attends the Audit and Risk
Committee by invitation.
Responsibilities, relevant skills and
experience:
As CFO, Chris has responsibility for
financial planning and reporting,
managing financial risk and overseeing
risk management, treasury and
internal controls. He develops
and executes Group strategy in
collaboration with the CEO, leading on
the financial side of M&A and investor
relations. He is also responsible for
Group IT, Legal and more recently ESG.
As a Chartered Accountant, Chris
brings significant financial experience
gained during his ten years at KPMG
and as Group Accounting Manager
at Findus and has gained significant
animal health sector experience
during his time with the Group.
Non-Executive Director
Appointment:
Marc was appointed as a Non-
Executive Director in 2017.
Committee membership:
Member of the Remuneration and
Nomination Committee.
Relevant skills and experience:
As a Non-Executive Director, Marc
brings significant experience of
maximising value creation and
developing strategy. Marc founded
Omega Pharma NV in 1987,
developing the company into a
leading pan-European OTC health and
personal care business and serving as
both Chairman and Chief Executive
Officer. Following the sale of Omega
Pharma in 2015, he invested, via
his private investment firm Alychlo
NV, in several listed and non-listed
companies. He currently serves as
Non-Executive Director of Fagron,
Greenyard and Smartphoto Group,
all Belgian companies, in addition
to a number of private companies.
Marc was awarded the EY Flemish
Entrepreneur of the Year in 2002.
Committee membership
Audit and Risk Committee
Remuneration and
Nomination Committee
Chair of committee
By invitation
43
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Board of Directors
CONTINUED
NICK DOWNSHIRE
JAN BOONE
DR DOUG HUTCHENS
JAN BOONE
ED TORR
JAN BOONE
Independent Non-Executive Director
Independent Non-Executive Director
Appointment:
Nick joined the Board of Animalcare
in 2008 when it was acquired by
Ritchey plc.
Committee membership:
Chairman of the Audit and Risk
Committee.
Relevant skills and experience:
As a Non-Executive Director, Nick
brings significant financial and audit
experience and provides objectivity
and analysis in chairing the Audit and
Risk Committee. Nick is a qualified
chartered accountant and 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.
Nick runs a rural estate in Yorkshire
and is Chair of Audit and Risk for
the CLA (Country Land and Business
Association), as well as acting as a
Trustee for a number of charitable
and land-related trusts. He is a council
member and chairs the Audit and Risk
Committee for the Duchy of Lancaster.
44
Appointment:
Doug was appointed to the Board
of Animalcare Group plc as an
independent Non-Executive Director
on 10 February 2022.
Committee membership:
To be confirmed; the Board will review
the composition of the Committees in
conjunction with the appointment of
another Non-Executive Director.
Relevant skills and experience:
Doug has held several senior positions
in research and development (R&D)
and regulatory affairs at leading global
animal health companies. As part of
the executive team at Bayer Animal
Health, he was an Executive Vice
President and Chief Veterinary Officer
where he led both drug discovery
and product development on a global
basis. He holds positions on several
R&D advisory boards and is a director
of Crenae Therapeutics, Inc.
Before joining the animal health
pharmaceutical industry, Doug was an
Assistant Professor at the University of
Illinois College of Veterinary Medicine
where he conducted studies for most
of the major animal health companies
and participated in the development of
multiple new products for companion
and production animals. Early in his
career, he was a practising veterinarian.
He holds a Doctor of Veterinary Medicine
degree and a PhD in pathobiology with
an emphasis in immuno-parasitology
from the University of Illinois.
Independent Non-Executive Director
Senior Independent Director
Appointment:
Ed was appointed to the Board
in 2017.
Committee membership:
Chairman of the Remuneration and
Nomination Committee and member
of the Audit and Risk Committee.
Relevant skills and experience:
As Senior Independent Director,
Ed brings significant experience of
business development and product
development in the animal health
sector.
He was part of the management
buyout team that set up Dechra
Veterinary Products in 1997 and
an Executive Director on the board
of Dechra Pharmaceuticals plc
from 2000 until 2013, responsible
for business development and
managing the European business
unit and instrumental in setting up
the US business. Since 2014, Ed
has independently advised various
companies on sales and marketing
structures, M&A opportunities, "in"
and “out” licensing of products and
investment opportunities within the
veterinary and animal health sector.
He is a Non-Executive Director of
Intervacc AB, a Swedish biotechnology
company listed on Nasdaq Stockholm.
Annual Report 2021 Animalcare Group plc Committee membership
Audit and Risk Committee
Remuneration and
Nomination Committee
Chair of committee
By invitation
45
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Corporate Governance Statement
JAN BOONE
JAN BOONE
NON-EXECUTIVE CHAIRMAN
Non-Executive Chairman
Dear shareholder,
I am pleased to present the Corporate
Governance Report for 2021. The
Board values strong governance and
recognises its importance in building
a successful business. We have
developed our governance structure
to promote sustainable long-term
growth and to assist in delivering
against the Group’s strategy, as set by
the Board.
THE PRINCIPLES OF
CORPORATE GOVERNANCE
Compliance with the QCA
Corporate Governance Code
(the “QCA Code”)
We continued to apply the principles
of the QCA Code during the year
under review and the Board believes
that we apply all ten principles of
the QCA Code. We recognise the
need for our governance practices
and disclosures to evolve in order to
ensure that they continue to support
the growth and strategic progress
of the Group and the effective
application of the principles. Our
governance structure provides a
framework of clearly established roles,
policies and procedures designed
to support our compliance with the
QCA Code, the AIM Rules and other
legal, regulatory and compliance
requirements which apply to the
Group. The Board regularly reviews
the structure to ensure that it
develops in line with the growth and
strategic plans of the Group. Further
details of our corporate governance
structure and activities are set out in
our Corporate Governance Report on
pages 49 to 55.
Supporting strategy through
effective governance
The Board has collective responsibility
for setting the strategic aims and
objectives of the Group and our
strategy is articulated on pages 10 to
12 of this report and on our website,
along with our business model on
pages 16 and 17. In the course of
implementing our strategic aims, the
Board considers expectations of the
Company’s shareholder base and its
wider stakeholder and corporate social
responsibilities.
The Board also has responsibility for
the Group’s internal control and risk
management systems. The Board
regularly considers and reviews the
business’ principal and emerging
risks as well as opportunities and
ensures that the mitigation strategies
in place are the most effective and
appropriate to the Group’s operations.
The Board provides
effective leadership
in promoting the
sustainable long-
term success of the
Group.”
46
Annual Report 2021 Animalcare Group plc During the year, we have continued to
develop the Group’s risk management
framework and details of our
framework are set out in our Principal
Risks section on pages 27 to 33.
Stakeholder engagement and
corporate culture
The Board highly values effective
engagement with its key stakeholders
and strives to understand their
views and interests so that these
can be appropriately reflected in its
decision-making.
Our statement setting out how the
Directors have discharged their duty
under s172 of the Companies Act
2006, which includes a description
of how the Company has engaged
with its key stakeholders and how
their views were incorporated into
decision-making, is set out on page
34 of the Strategic Report. The
challenges presented by the COVID-19
pandemic continued to affect the
business and the activities of the
Board throughout the year, with travel
restrictions and the requirement for
COVID-19 safe working environments.
However, our positive culture and
robust governance framework have
enabled the Board to act quickly and
support the Executive team in making
important decisions.
The Company operates an open
and inclusive culture, and this is
reflected in the way that the Board
conducts itself. Prior to the COVID-19
pandemic, the Non-Executive
Directors attended the Group’s
offices and other Group events.
Since the lifting of COVID-19-related
restrictions, I am pleased to report
that the Board has now been able to
meet in person at the Group’s offices
and we will continue to do this when
practical, using video conferencing
facilities for some meetings when
that is more appropriate. With a
relatively small employee base, such
interactions are important and enable
the Board to promote and assess
the desired corporate culture. The
Board recognises the importance
of promoting an ethical culture by
leading from the top. The Group’s
Code of Conduct, which is applicable
to the Board and all employees, is
our guide to doing business in the
right way. It is complemented by
more detailed rules and guidelines
which are included in policies that
cover the following areas: Good
Business Practice, Respecting People,
Safeguarding Information and Use of
Information Technology. The Board
also recognises the need to maintain
a proactive focus on culture as the
Group grows and we will continue
our focus on corporate culture in
the coming year. A more detailed
explanation of the Board’s monitoring
of culture is explained on page 54.
Board appointments and
succession planning
Chris Cardon stepped down from
the Board on 8 July 2021 and
subsequently sold his indirect
shareholding in the Company via a
secondary placing. On behalf of the
Board, I would like to thank Chris for
his contributions during his four-year
tenure and wish him all the best for
the future.
I am very pleased to welcome Dr Doug
Hutchens who was appointed to the
Board on 10 February 2022 following
a formal selection process. The
current balance of skills, experience
and expertise on the Board was
considered extensively as part of
the process. There is also a selection
process currently underway to recruit
a Non-Executive Director to replace
Nick Downshire who will stand down
from the Board during 2022. Future
appointments will continue to be
on merit, with due consideration
47
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Corporate Governance Statement
CONTINUED
Board evaluation
The Board underwent a formal
internal evaluation process during the
year, which aimed to identify strengths
and development opportunities for
the Board and its Committees, as well
as an action plan to be implemented
by the Board during the year ahead.
Further details on the evaluation
process can be found on page 53.
JAN BOONE
Non-Executive Chair
29 March 2022
Board capabilities
The Board consists of seven
experienced Directors who collectively
have considerable expertise in the
following areas:
• Strong animal health and
pharmaceuticals sector experience
• Leading organisational change and
integration
• Managing a global supply chain
• New product development
• Business planning and
development
• Corporate finance and mergers
and acquisitions
• Financial and audit
• Marketing
• Governance and legal
given to the need for diversity, and to
complement the existing balance of
skills and experience on the Board.
As Chairman, I consider the operation
of the Board as a whole and the
performance of the Directors
individually. We are currently
conducting a Board evaluation
process. The Board will review and
discuss the responses received and
agree an action plan to take forward
any recommendations.
Build trust
The Board recognises the importance
of disseminating clear and
understandable information about
the Group and its activities and
maintaining regular dialogue with
our stakeholders to ensure, and in
turn to receive and consider, the
views of our stakeholders. The Board
receives information on the Group’s
employee engagement programme,
including details of the results of
the annual employee engagement
survey, and regular feedback from the
Executive team on their discussions
with shareholders, potential investors,
suppliers, partners and customers.
We will continue to monitor our
application of the QCA Code
and ensure that our governance
framework continues to evolve in
line with the strategic development
of the Group and to understand the
expectations of our stakeholders.
48
Annual Report 2021 Animalcare Group plc Corporate Governance Report
COMPOSITION OF THE BOARD AND ITS COMMITTEES
Board composition
The Company maintains a robust framework of corporate governance, with
clearly defined roles and responsibilities on the Board and formally constituted
Board Committees, as detailed below. This ensures the safeguarding of long-term
shareholder value as well as the provision of a robust platform upon which to
deliver the Group’s strategy.
A breakdown by gender of the Board
and the Senior Executive Team is
provided below.
Board gender diversity
14%
Board
Board of Directors
Responsible for establishing the
Company’s strategic direction and
overseeing a robust framework of
governance.
Executive Directors
Responsible for day-to-day
management of the Company’s
operations and delivery of Group
strategy.
Non-Executive Directors
Providing independent challenge
to, and oversight of, the
performance of the Executive
Directors.
Board Committees
Jan Boone
Independent Non-Executive Chair
Jennifer Winter
Chief Executive Officer
Chris Brewster
Marc Coucke
Nick Downshire
Ed Torr
Doug Hutchens
Chief Financial Officer and Company
Secretary
Non-Independent Non-Executive
Director
Independent Non-Executive Director
Senior Independent Director/
Independent Non-Executive Director
Independent Non-Executive Director
86%
Female
Male
Senior Executive Team
Audit and Risk Committee
Remuneration and Nomination Committee
Responsible for monitoring the integrity
of the Company’s financial statements
and overseeing the effectiveness of the
Company’s systems of risk management
and internal control. The Audit and Risk
Committee Report can be found on pages
56 to 59.
Responsible for the structure, size, composition
and succession planning of the Board, as
well as setting fixed and variable Executive
Director remuneration and monitoring senior
management remuneration levels. The
Remuneration and Nomination Committee
Report can be found on pages 60 to 61.
The composition of the Board has been structured to ensure that no one
individual can dominate its decision-making processes.
The Board currently comprises two Executive Directors and five Non-Executive
Directors. Director biographies can be found on pages 42 to 44.
Collectively, the Non-Executive Directors bring an appropriate balance of functional
and sector skills and experience such that they are able to provide constructive
support and challenge to the Executive Directors. The Directors believe that,
collectively, the Board as a whole possesses the necessary mix of skills, experience,
capabilities and personal qualities to deliver the strategy of the Group for the benefit
of the shareholders and its wider stakeholders over the medium to long term.
The Board also recognises that, as the Group evolves, the mix of experience and
skills on the Board may change and the Board composition will need to reflect
that change. The Remuneration and Nomination Committee has responsibility
for succession planning for Board Directors and other Senior Executives and will
increase its focus on this area as the Board and Senior Executive Team develop.
Members of the Senior Executive Team and wider management team are invited
to present at Board meetings throughout the year.
43%
57%
Female
Male
The Board recognises the benefits of
diversity, including gender balance,
and is committed to creating
an inclusive culture, free from
discrimination of any kind, and this
extends to Board appointments.
49
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE
Corporate Governance Report
CONTINUED
The Non-Executive Directors attend
external events and seminars to
receive updates on matters such as
financial reporting requirements and
corporate governance. The Company
Secretary also ensures that the Board
is updated as to developments to
corporate governance practice and
forthcoming changes to legislation or
regulation which may impact on the
Company.
Independence
The Non-Executive Chairman, Jan
Boone, and Senior Independent
Director, Ed Torr, are considered
independent and therefore the Board
is compliant with the QCA Code,
having at least two independent
Non-Executive Directors. Although
Nick Downshire has been a Director
of the Company for more than ten
years, the Board also considers him
to be independent in character and
judgement.
Following the acquisition of Ecuphar
NV in July 2017, 23.1% of the issued
share capital of the Company was
held by Ecuphar Invest NV, an entity
controlled by Chris Cardon, who
served as a non-independent Non-
Executive Director of the Company.
Chris stepped down from the Board
on 8 July 2021 and sold his 23.1%
indirect shareholding in the Company
via placement.
A further 24.2% of the issued share
capital is still held by Alychlo NV, an
entity wholly owned by Marc Coucke,
non-independent Non-Executive
Director.
Appointments to the Board
and re-election
The Board has delegated to the
combined Remuneration and
Nomination Committee the tasks
of reviewing Board composition,
searching for appropriate candidates
50
and making recommendations to the
Board on candidates to be appointed
as Directors.
• The approval of significant
contracts and expenditure
• Effective communication with
Dr Doug Hutchens was appointed
to the Board on 10 February 2022
following a formal selection process.
A selection process is currently
underway to recruit a Non-Executive
Director to replace Nick Downshire
who will stand down from the
Board during 2022. Further details
on the role of the Remuneration
and Nomination Committee and its
activities during the year are set out in
its report on pages 60 to 61.
The Directors have the power to
appoint Directors during the year but
any person so appointed must stand
for election at the next Annual General
Meeting (“AGM”), as required by the
Company’s Articles of Association
(“Articles”).
In accordance with corporate
governance best practice, all Directors
retire and offer themselves for re-
election at the AGM each year. The
Board considers that each of the
Directors continues to make a valuable
contribution to the Board and to
demonstrate commitment to the
Group.
How the Board operates
The Board is responsible for the
Group’s strategy and for its overall
management. The operation of the
Board is documented in a formal
schedule of matters reserved for its
approval, which sets out the Board’s
responsibilities.
These include matters relating to:
• The Group’s strategic aims and
objectives
• The structure and capital of the
Group financial reporting, financial
controls and dividend policy
Internal control, risk and the
Group’s risk appetite
•
shareholders
• Changes to Board membership or
structure
Board meetings
The Board met formally four times
during the year. Non-Executive
Directors maintain a direct and regular
line of communication with Executive
Directors and senior management
between formal Board meetings and
Board members are also invited to a
budget review meeting with senior
management held in November
each year.
Directors are expected to attend
all meetings of the Board and the
Committees on which they sit, and
to devote sufficient time to the
Group’s affairs to enable them to
fulfil their duties as Directors. This
requirement is also included in their
letters of appointment. In the event
that Directors are unable to attend a
meeting, their comments on papers to
be considered at the meeting will be
discussed in advance with the Chair so
that their contribution can be included
in the wider Board discussion. The
Board is satisfied that each of the Non-
Executive Directors devotes sufficient
time to the business, in accordance
with the time commitment
requirements set out in their Letters of
Appointment.
Directors are encouraged to question
and voice any concerns they may
have on any topic put to the Board for
debate.
The Board is supported in its work
by Board Committees, which are
responsible for a variety of tasks
delegated by the Board. There is also
a Leadership Team composed of the
CEO, the CFO and representatives
Annual Report 2021 Animalcare Group plc from senior management whose responsibilities are to implement the decisions
of the Board and review the key business objectives and status of projects.
The table below shows Directors’ attendance at formal scheduled Board and
Committee meetings during the year:
Director
Jan Boone
Chris Brewster1
Chris Cardon2
Marc Coucke3
Nick Downshire
Ed Torr
Jennifer Winter
Board Audit and Risk Committee
3/3
–
–
–
3/3
3/3
–
4/4
4/4
2/4
4/4
4/4
4/4
4/4
Remuneration and
Nomination Committee
2/2
–
–
1/2
–
2/2
–
1 Chris Brewster attends the Audit and Risk Committee by invitation.
2 Chris Cardon stepped down from the Board on 8 July 2021.
3 Marc Coucke was unable to attend a Remuneration and Nomination Committee meeting in December 2021 due
to other business commitments.
Board decisions and activity during the year
The Board has an agreed schedule of activity for the financial year covering
regular business updates and operational, financial and governance issues. Each
Board Committee also has an agreed schedule of activity. This ensures that all
areas for which the Board has overall responsibility are addressed during the
year. These schedules of activity are reviewed at least once a year to ensure that
matters are considered at an appropriate time.
Board and Committee agendas and papers are circulated to the Board in good
time in advance of the meetings and each meeting is minuted.
The Board agenda includes the CEO’s report and operations reports, financial
reports, consideration of reports from the Board Committees and investor
relations updates. In addition, key areas put to the Board for consideration and
review during the year included:
Strategy
Performance
Governance
Stakeholders
New product development and opportunities
Dedicated half-day strategy session
Trading updates
Review of budgets and forecasts
Going concern and cash flow
Presentations from members of the Senior Executive Team
Approval of annual and half-year report and financial statements
Internal Board performance evaluation
Review of conflicts of interest
Share Dealing Code
Investor relations and share register analysis
Review of AGM business
Details of the Board’s key discussions and stakeholder considerations are set out
in the Strategic Report on pages 34 to 37.
The Board Committees
The Board has delegated specific
responsibilities to its two Board
Committees, the Audit and Risk
Committee and the Remuneration
and Nomination Committee, which
are each comprised of at least two
independent Non-Executive Directors,
in accordance with the QCA Code.
Each Board Committee has written
Terms of Reference setting out their
duties, authority and reporting
responsibilities. These Terms of
Reference were reviewed and
approved by the Board during the year
and are available on the Company’s
website (www.animalcaregroup.com).
Details of the operation of the Board
Committees are set out in their
respective reports below. Each of the
Board Committees is authorised to
obtain, at the Company’s expense,
professional advice on any matter
within their Terms of Reference and to
have access to sufficient resources in
order to carry out their duties.
Leadership / Senior Executive
Team
As detailed in last year’s Annual
Report, in January 2021, we unveiled
a new organisation structure designed
to support delivery of our growth
strategy, resulting in the move to a
smaller and highly experienced Senior
Executive Team (SET) comprising the
CEO, CFO, North and South Region
Directors, Group HR Director, Group
Commercial Director and the newly
created role of Strategic Product
and Portfolio Director, for which an
appointment was made after the year
end. The team meets weekly, monthly
and quarterly and its responsibilities
include tracking financial performance,
progress against our strategic and
operational objectives, leadership
51
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Corporate Governance Report
CONTINUED
three times a year. In 2020, the Audit
and Risk Committee recommended
a review of the risk management
structure with a focus on risk
reporting and oversaw its continued
implementation during 2021. Further
details regarding the implementation
are set out in the Audit and Risk
Committee Report on page 56 and
in Our Principal Risks in the Strategic
Report on pages 27 to 33.
Internal controls
The Board has ultimate responsibility
for the Group’s system of internal
controls and for the ongoing review of
their effectiveness.
Systems of internal control can
only identify and manage risks and
not eliminate them entirely. As a
result, such controls cannot provide
an absolute assurance against
misstatement or loss. The Board
considers that the internal controls
that have been established and
implemented are appropriate for the
size, complexity and risk profile of
the Group.
The main elements of the Group’s
internal control system include:
• Close management of the day-
to-day activities and financial
performance of the Group by the
Senior Executive Team and other
senior management
• An organisational and IT systems
structure with defined levels of
responsibility and user access
development, improving employee
engagement and all aspects of
the operational leadership of the
organisation.
External advisers
The Board seeks advice on various
matters from its nominated adviser
and joint broker, and corporate finance
adviser, Stifel Nicolaus Europe Limited,
from its lawyers, Squire Patton Boggs
(UK) LLP, and from its corporate
governance and company secretarial
adviser, Prism Cosec, which also
provides company secretarial support.
On 1 February 2021, Stifel Nicolaus
Europe Limited was appointed as the
Company’s nominated adviser and
joint broker. Panmure Gordon & Co
continues to act as joint broker.
Development, information and
support
The Company Secretary ensures
that all Directors are kept abreast
of changes in relevant legislation
and regulations, with the assistance
of the Company’s advisers where
appropriate. Executive Directors are
subject to the Company’s performance
development review process through
which their performance against
predetermined objectives is reviewed
and their personal and professional
development needs considered. Non-
Executive Directors are encouraged
to raise any personal development
or training needs with the Chair or
Company Secretary.
Risk management
The Board has ultimate responsibility
for setting the Group’s risk appetite
and risk management strategy and
for reviewing the effectiveness
of the Group’s framework for risk
management and internal control.
Oversight of risk management is
undertaken by the Audit and Risk
Committee which reports to the Board
52
Annual Report 2021 Animalcare Group plc • Specified contract approval levels
and financial authority limits
• An annual budgeting process which
is approved by the Board
• A monthly and quarterly
reforecasting process which forms
part of the financial performance
review cycle
• Controls to ensure that the assets
of the Group are safeguarded
and that appropriate accounting
records are maintained
The Board continues to review the
system of internal controls to ensure
it is fit for purpose and appropriate for
the size and nature of the Company’s
operations and resources. The internal
control procedures were in place
throughout the financial year and up
to the date of approval of this report.
Board evaluation
The Board conducted a formal internal
performance evaluation process
during the year, by way of a detailed
questionnaire completed by each
member of the Board to obtain the
Directors’ views on the effectiveness
of the Board, its committees and on
key governance areas. The responses
were collated and reviewed by
the Chair and Senior Independent
Director and a summary of the key
themes were presented to the Board.
A number of actions were agreed
including:
• Strengthening Board composition
with the appointment of
two new independent, Non-
Executive Directors to improve
independence, gender diversity
and international and new product
development experience on
the Board
• Re-instating Board visits to
European offices in the annual
Board calendar, as pandemic-
related restrictions are lifted
• Further interaction between
the Non-Executive Directors
and members of the Senior
Leadership Team
• Enhancements to the Board’s
oversight of the Group’s risk
management framework
The Board has made progress with
these actions with the appointment
of Dr Doug Hutchens and a selection
process for a new independent
Non-Executive Director, a visit to
the Company’s Belgian office, and
management presentations to the
Board and Audit and Risk Committee
with a focus on the improved
risk management framework and
processes. Progress will continue to be
monitored during 2022.
53
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Corporate Governance Report
CONTINUED
Succession planning
The Remuneration and Nomination
Committee considers the issue of
succession planning. Further details
can be found in the Committee’s
report on page 60.
Conflicts of interest
At each meeting of the Board or
its Committees, the Directors are
required to declare any interests in
the matters to be discussed and are
regularly reminded of their duty to
notify any actual or potential conflicts
of interest. The Company’s Articles
provide for the Board to authorise any
actual or potential conflicts of interest
if deemed appropriate to do so.
Independent professional
advice
Directors have access to independent
professional advice at the Company’s
expense. In addition, they have access
to the advice and services of the
Company Secretary who is responsible
for advice on corporate governance
matters to the Board and the Group’s
corporate governance and company
secretarial adviser, Prism Cosec.
Directors’ and officers’ liability
insurance
The Company has Directors’ and
officers’ liability insurance in place, as
permitted by the Company’s Articles.
Culture
The Board sets clear expectations
concerning the Group’s culture and
values.
We believe that by encouraging the
right way of thinking and behaving
across the Group, we will reinforce
our corporate governance culture,
enabling us to conduct business
ethically and responsibly, drive our
growth- and customer-focused,
people-led strategy and deliver value
for our shareholders.
The Board understands how important
it is that it leads by example. The
Group’s Code of Conduct which
is applicable to the Board and all
employees is our guide to doing
business in the right way. It is
complemented by more detailed rules
and guidelines which are included in
policies that cover the following areas:
Good Business Practice, Respecting
People, Safeguarding Information and
Use of Information Technology.
Board meetings take place at the
offices of different business units at
various times during the year, which
gives the Board the opportunity
to engage with members of the
management team and the wider
employee base both formally and
informally, at meetings, lunches and
dinners. This practice continued to
be impacted by COVID-19 restrictions
during 2021, however, it is intended
to resume meetings at the Group’s
offices at certain times of the year.
The Board will continue to utilise
opportunities to engage with
managers and the wider team as such
interactions provide an invaluable
opportunity to engage with, and
ascertain the views and interests of,
a key stakeholder, the workforce. It
also allows a valuable insight into
our corporate culture and assists the
Board in monitoring and promoting
a healthy culture throughout the
business by setting a positive tone
from the top.
54
Annual Report 2021 Animalcare Group plc The Board also received a report
on key people initiatives being
undertaken during the year which
included updates to the performance
management process, compensation
and benefits benchmarking, the
introduction of personal and team
development sessions, the launch of a
leadership development programme
and employee engagement and
wellbeing support provided via the
Group’s global employee assistance
programme. The report also covers
the results of the annual employee
engagement survey and the actions
planned to address any issues raised
and the focus for the following year.
We recognise the need to maintain
a proactive focus on culture as the
Group grows and it will remain a focus
during the coming year.
Relations with shareholders
The Group maintains communication
with institutional shareholders through
individual meetings with Executive
Directors, particularly following
publication of the Group’s interim and
full year results. We encourage our
shareholders to attend our AGM and
we give them the opportunity to pose
questions to our Directors.
General information about the Group
is also available on the Group’s
website (www.animalcaregroup.com).
This includes an overview of activities
of the Group and details of all recent
Group announcements. The Non-
Executive Directors are available
to discuss any matter stakeholders
might wish to raise, and the Chair and
independent Non-Executive Directors
will attend meetings with investors
and analysts as required.
A review of the share register is a
regular item on the Board’s agenda.
Due to the Company’s relatively small
employee base, the Non-Executive
Directors are able to engage directly
with employees. Pre-COVID-19
restrictions, they attended meetings
and dinners with members of the
team and while this practice continued
to be hindered during 2021 due to
continuing restrictions, it is intended
that this will resume in 2022.
Employee engagement
After an exceptionally positive score
in 2020, the Group’s 2021 employee
survey, carried out using the Gallup
Q12 methodology, showed a slight
decline of 4% in overall engagement.
Nevertheless, the overall rating
for 2021 keeps Animalcare well
ahead of Gallup’s European average
engagement benchmark of companies.
In particular, positive results were
recorded for our “One Team” spirit,
improving communication and
cross-country collaboration as well
as opportunities for training and
development.
To aid personal and team
development, Insights Discovery
sessions are arranged to facilitate
and develop an environment of
trust where people speak up and
give honest feedback and learn
about self-awareness and team
awareness, helping to improve team
communication and performance.
The Group has a global employee
assistance programme to assist
team wellbeing, which includes
a confidential counselling and
information service to assist
employees with personal or work-
related challenges that may affect
health, wellbeing or performance.
This service offers employees 24
hours a day, 365 days a year access to
telephone counselling, information
services and free access to short-
term face-to-face counselling with
a professional counsellor. Regular
communications are also shared with
teams providing advice and guidance
on how to support individuals’ physical
and mental wellbeing.
Key focus areas for 2022 include
the development of our talent
management programme including
the launch of a talent mapping
process, the roll out of the leadership
development programme to develop
senior leaders and role model
leadership excellence, further rollout
of our Insights Discovery sessions
and further supporting employee
wellbeing and engagement of our
teams through our global employee
assistance programme, with regular
keynotes and webinars around
wellbeing, our annual survey and
in-country focus groups to provide
an insight into what motivates our
employees.
AGM
The Company’s AGM is scheduled
to be held on Tuesday 7 June 2022.
Further details of the arrangements
for the AGM can be found in the
Notice of 2022 AGM which is
available on the Company’s website
www.animalcaregroup.com/investors/
shareholder-centre/agm/
55
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Audit and Risk Committee Report
As Chair of the Audit
and Risk Committee,
I am pleased
to present the
Committee’s report
for the year ended 31
December 2021.”
NICK DOWNSHIRE
JAN BOONE
CHAIRMAN OF THE AUDIT
Non-Executive Chairman
AND RISK COMMITTEE
I am pleased to present the Audit and
Risk Committee’s report for the year
ended 31 December 2021.
The Audit and Risk Committee
is responsible for ensuring that
the financial performance of the
Group is properly reported on
and monitored. Its role includes
monitoring the integrity of the Group’s
financial statements, reviewing
significant financial reporting issues,
monitoring the effectiveness of the
Company’s internal controls, and the
appropriateness and effectiveness
of the risk management framework
and risk management systems, and
overseeing the relationship with the
external auditor. It is also responsible
for establishing, monitoring and
reviewing procedures and controls
for ensuring compliance with the
AIM Rules.
MEMBERS OF THE AUDIT
AND RISK COMMITTEE
The Committee comprises three
independent Non-Executive Directors:
• Nick Downshire (Chairman)
•
• Ed Torr
Jan Boone
The Board is satisfied that Nick
Downshire, as Chairman of the
Committee, who is a qualified
Chartered Accountant having worked
in corporate finance and venture
capital and is an experienced Non-
Executive Director and Audit and
Risk Committee chair, has recent
and relevant financial experience.
A selection process is currently
underway to recruit a Non-Executive
Director with suitable experience to
replace Nick as he intends to stand
down from the Board during 2022.
56
Annual Report 2021 Animalcare Group plc DUTIES
The main duties of the Committee
are set out in its Terms of Reference
which are available on the Company’s
website (www.animalcaregroup.com)
and include the following:
• To monitor the integrity of the
financial statements of the
Company, including its annual
and half-yearly reports, trading
statements and any other formal
announcements relating to its
financial performance, reviewing
significant financial reporting
issues and judgements that they
contain
• To review the adequacy and
effectiveness of the Company’s
internal financial controls and
internal controls
• To review the adequacy and
effectiveness of risk management
systems to identify, assess, manage
and monitor financial risks,
including the appropriateness
and effectiveness of the risk
management framework
• To consider annually whether the
Company’s size and activities are
such that an internal audit function
should be established and, if so,
determine its remit and make a
recommendation to the Board
• To consider and make
recommendations to the Board, to
be put to shareholders for approval
at the AGM, in relation to the
appointment, reappointment and
removal of the Company’s external
auditor
• To monitor and review the external
auditor’s independence and
objectivity, taking into account
relevant statutory, professional and
regulatory requirements and the
relationship with the auditor as a
whole, including the provision of
any non-audit services
• To develop and implement a policy
on the supply of non-audit services
by the external auditor to avoid
any threat to auditor objectivity
and independence, taking into
account any relevant statutory,
professional and regulatory
requirements on the matter
• To review the arrangements
for whistleblowing, enabling its
employees and contractors to raise
concerns, in confidence, about
possible wrongdoing in financial
reporting or other matters
• To report formally to the Board on
its proceedings after each meeting
on all matters within its duties and
responsibilities
The Committee reviews its Terms of
Reference annually and the Board
approved the current Terms of
Reference on 15 December 2021.
The Committee oversees the Group’s
and its subsidiaries’ internal financial
controls and risk management
systems, recommends the half and
full year financial results to the Board
and monitors the integrity of all formal
reports and announcements relating
to the Group’s financial performance.
The Committee challenges both the
external auditor and the management
of the Group and reports the findings
and recommendations of the external
auditor to the Board. The Committee
meets to review the proposed
audit work, review the results of
the audit work and consider any
recommendations arising from the
audit.
ACTIVITIES UNDERTAKEN BY
THE COMMITTEE DURING
THE YEAR
The Committee met three times
during the year and on one occasion
since the year end and will continue
to meet at appropriate times in the
reporting and audit cycle and at
such other times as is necessary to
discharge its duties. Although only
57
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Audit and Risk Committee Report
CONTINUED
members of the Committee have the
right to attend meetings, the Chief
Executive Officer, Chief Financial
Officer, members of the finance and
other internal teams and external
advisers are invited to attend some
meetings for all or part of the meeting.
Attendance at the meetings held
during the year is set out in the
Corporate Governance Report on
page 51.
The main activities of the Committee
during the year are set out below:
ANNUAL AND INTERIM
FINANCIAL STATEMENTS
The Committee has reviewed
the full year and interim financial
statements including consideration
of significant audit risks identified
by the external auditor, and the key
accounting judgements and estimates
(the Committee’s response to the
significant accounting judgements
and estimates in respect of the 2021
financial statements is set out below).
The Committee also reviewed the
principal risks and uncertainties
disclosures.
REVIEW OF AND
MONITORING OF THE
GROUP RISK MANAGEMENT
FRAMEWORK
Following the successful
implementation of a robust Enterprise
Risk Management Framework
across the Group, with advice from
The Value Circle, an advisory firm
specialising in risk, the Committee
continued to review and monitor the
development of the Group’s enhanced
risk management framework. At each
meeting, the Committee received
a report on the development and
implementation of a Risk and Control
Self-Assessment process across
the Group, and details of key risks
identified and mitigating actions put
in place. At their December meeting,
58
the Committee received a report on
progress during the year from the
recently appointed Group Risk and
Compliance Manager whose role is
designed to provide independent
assurance over the operation of risk
management processes. Further
details of the approach and how the
framework has been strengthened
are set out in Our Principal Risks
on pages 27 to 33. The Committee
reviews the Strategic Risk Heatmap
and Horizon Scan and reports to the
Board on its review three times a
year. The Committee is satisfied that
the strengthened risk management
framework will enable the Board to
monitor, manage and mitigate the
critical risks in our strategic plan to the
benefit of our stakeholders.
GOING CONCERN AND
LIQUIDITY
The Committee is responsible for
reviewing statements and disclosures
made in respect of Going Concern,
as outlined in the Chief Financial
Officer’s review and Note 3 Summary
of Significant Accounting Policies.
In considering such disclosures, the
Committee paid particular attention
to the robustness of stress testing
scenarios, the cash flows forecast by
the Group, bank covenant compliance
and the committed bank facilities
available in the period under review
and beyond. The external auditor
reviewed management’s assessment
and discussed this review with the
Committee.
ROLE OF THE EXTERNAL
AUDITOR
The Committee oversees the
relationship with the external auditor,
PricewaterhouseCoopers LLP, to
ensure that auditor independence and
objectivity are maintained. As part of
its review, the Committee monitors
the provision of non-audit services by
the external auditor. The breakdown
of fees between audit and non-audit
services is provided in Note 25 to
the Group’s Consolidated Financial
Statements.
Having reviewed and assessed
the auditor’s independence and
performance, the Committee
recommended to the Board
that a resolution to reappoint
PricewaterhouseCoopers LLP as the
Group’s external auditor be proposed
at the forthcoming Annual General
Meeting.
AUDIT PROCESS
At the outset of the audit process, the
Committee receives from the auditors
a detailed audit plan, identifying
their assessment of the key audit
matters and their intended areas
of focus. This plan is reviewed and
agreed in advance by the Committee.
Following the audit, the external
auditor presented its findings to the
Committee for discussion. No major
areas of concern were highlighted
by the external auditor during the
year; however, areas of significant risk
and other matters of audit relevance
are regularly communicated. The
Committee met with the external
auditor without management present.
The Committee also reviews the
effectiveness of the external process
on an annual basis, with the review
including considering the views of
both the external audit team, and
the CFO, as well as assessing the
Committee’s own interactions with
the external auditor. The Committee
reviewed the effectiveness of the 2020
year-end audit process during the year,
and concluded that it was effective.
It will review the 2021 year-end audit
process during the course of 2022.
Annual Report 2021 Animalcare Group plc INTERNAL AUDIT
The Committee has undertaken its annual review of the need for an internal
audit function and continues to be of the view that, given the size and nature
of the Group’s operations and finance team, there is no current requirement to
establish a separate internal audit function.
SIGNIFICANT ISSUES CONSIDERED IN RELATION TO THE
FINANCIAL STATEMENTS
As part of the monitoring of the integrity of the financial statements, significant
issues and accounting judgements identified by the finance team, and the
external audit process, are reviewed by the Committee and reported to the
Board. The key matters considered by the Committee in respect of the year
ended 31 December 2021 are set out below:
Carrying value of
goodwill and intangible
assets and carrying
value of investments
(Company only)
Consideration of the carrying value of goodwill and
intangibles assets and the assumptions underlying
the impairment review. The judgements in relation
to the valuation primarily relate to the assumptions
underlying the cash flows of the long-term business
plans, including revenues from the R&D pipeline, the
discount rate and the long-term growth rate. The
assumptions are sensitised to demonstrate there is
adequate headroom between the recoverable amount
and the carrying value of the asset being tested for
impairment.
Recognition
and valuation of
judgemental provisions
Determining the appropriateness of the assumptions
used in the recognition and valuation of judgemental
provisions which relate mainly to inventory and
customer rebates.
Presentation of
underlying profit
adjustments
A review of the appropriateness of items disclosed
as non-recurring items, including amortisation and
impairment of acquired intangibles, acquisition and
integration costs.
The Committee was satisfied that each of the matters set out above had been
fully and adequately addressed by the Executive Directors, appropriately tested
by the external auditor and that the disclosures made in this Annual Report and
Accounts were appropriate.
RISK MANAGEMENT AND
INTERNAL CONTROLS
The Committee is responsible for
reviewing the risk management
and internal control framework and
ensuring that it operates effectively.
As explained above, the Group
has continued to strengthen its
risk management framework and
procedures during the year. Further
details of the Group’s system of
internal controls can be found in the
Corporate Governance Report on
page 52. The Committee is satisfied
that the risk management framework
and internal control systems are
operating effectively.
SHARE DEALING
The Group operates a share
dealing code in conformity with the
requirements of Rule 21 of the AIM
Rules. All employees, including new
joiners, are required to agree to
comply with this code.
WHISTLEBLOWING
The Group has in place whistleblowing
procedures under which staff may
report any suspicion of fraud, financial
irregularity or other malpractice; these
were reviewed and updated during
the year.
ANTI-BRIBERY AND
CORRUPTION POLICY
The Committee has also reviewed the
Group’s anti-bribery and corruption
policy (which states the Company’s
commitment to open and transparent
conduct of business, and zero-
tolerance approach towards bribery)
and agreed that no changes to the
policy were required.
NICK DOWNSHIRE
Chairman of the Audit
and Risk Committee
29 March 2022
59
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Remuneration and Nomination
Committee Report
I am pleased to present our
Remuneration and Nomination
Committee Report which sets out
details of the composition, structure
and operation of the Committee,
our work during the year, our
remuneration policy and remuneration
paid to Directors during the year.
MEMBERS OF THE
REMUNERATION AND
NOMINATION COMMITTEE
The Committee comprises three
Directors, two of which are
independent:
• Ed Torr (Chairman)
•
Jan Boone
• Marc Coucke
Committee membership will be
reviewed when a new independent
Non-Executive Director has been
appointed and it is anticipated that
Marc Coucke will stand down from the
Committee during 2022.
The Committee considers Group
strategy when recommending the
appointment of Directors and setting
and reviewing remuneration.
The Committee meets at least twice
a year and at such other times during
the year as is necessary to discharge
its duties. Although only members
of the Committee have the right to
attend meetings, other individuals,
such as the Chief Executive and
external advisers, may be invited to
attend for all or part of any meeting.
DUTIES
The Committee works closely with the
Board to consider Board composition,
formulate remuneration policy and
to consider succession plans and
possible internal candidates for
future Board roles, having regard
to the views of shareholders and
the recommendations of the QCA
Corporate Governance Code and the
60
AIM Rules for Companies. The main
duties of the Committee are set out
in its Terms of Reference, which are
available on the Company’s website
(www.animalcaregroup.co.uk) and
include the following responsibilities:
NOMINATION
• Reviewing the structure, size
and composition (including the
skills, knowledge, experience
and diversity) of the Board and
making recommendations to the
Board with regard to any changes
necessary;
• Considering succession planning
for Directors and other senior
executives, taking into account
the challenges and opportunities
facing the Company; and
• Leading the process for all
potential appointments
to the Board and making
recommendations to the Board in
relation to potential appointments.
REMUNERATION
• Setting remuneration for the
Executive Directors, including
pension rights and any
compensation payments;
• Approving the design of,
and determining targets, for
performance-related pay schemes
and approving the total annual
payments made under these
schemes; and
• Recommending and monitoring
the level and structure of
remuneration for senior
management.
The Committee reviews its Terms of
Reference annually and the Board
approved the current Terms of
Reference on 15 December 2021.
PRINCIPAL ACTIVITIES
DURING THE YEAR
The Committee approved the
appointment of an executive search
advisory firm, Ridgeway Partners,
to assist the Committee with the
selection of two new Non-Executive
Directors. It was agreed that one role
would require specialist healthcare
sector expertise and the other
role would require expertise in
financial management and audit,
with candidates having the potential
to step into the Chair of the Audit
and Risk Committee role when Nick
Downshire steps down from the
Board. After a detailed selection
process, involving consideration of a
short list of candidates, interviews and
due diligence checks, the Committee
recommended the appointment of
Dr Doug Hutchens to the Board and
he was appointed with effect from 10
February 2022. An induction process
for Doug has been agreed and is
underway. Further details are set out
on page 61. The search for a suitable
candidate with appropriate financial
and audit experience is continuing and
an appointment will be announced in
due course.
The Committee considered the
results of a benchmarking exercise
and review of the remuneration of
members of the newly formed Senior
Executive Team conducted by the
Group HR Director with the Chair
of the Committee. The Committee
considered the proposals put forward
and recommended adjustments
to salary and bonus awards for
some members of the Senior
Executive Team.
Later in the year, the Committee
conducted a review of the
remuneration of the Executive
Directors with input from an
external adviser and reference
to current guidance in respect of
executive remuneration for AIM
listed companies. The Committee
was mindful to consider a proposed
increase against the average increase
for the wider workforce and noted
that it was in line with the average
Annual Report 2021 Animalcare Group plc performance criteria and personal
objectives had been met in full and
agreed to award 100% of the bonus
award for FY21. Further details on
the annual bonus are set out in the
Directors’ Remuneration Report on
page 62.
Further consideration will be given to
succession planning for the Executive
Directors and Senior Executive Team
and the Committee will conduct a
review of Non-Executive Directors’
fees during the year.
INDUCTION AND
DEVELOPMENT
On his appointment, an induction
programme was agreed for Doug
Hutchens including meetings with
each of the Directors and members
of the Senior Executive Team to be
briefed on Animalcare’s operations.
In addition, the Company’s nominated
adviser and joint broker, Stifel Nicolaus
Europe Limited, provided briefings for
the Directors on their legal duties and
responsibilities as directors of an AIM
company.
We are confident that Board members
have the knowledge, ability and
experience to perform the functions
required of a director of a listed
company.
DIVERSITY AND INCLUSION
The Company’s policy is that
recruitment, promotion and any other
selection exercises will be conducted
on the basis of merit against objective
criteria that avoid discrimination. No
individual should be discriminated
against on the grounds of race,
colour, ethnicity, religious belief,
political affiliation, gender, age or
disability, and this extends to Board
appointments.
The Board recognises the benefits of
diversity, including gender diversity, on
the Board. Appointments will be made
on merit but with due consideration
to the need for diversity and to ensure
there is an appropriate balance of
skills and experience within the Board.
The Board currently consists of 86%
(six) male and 14% (one) female
members. The Senior Executive Team
currently consists of 43% (three) male
and 57% (four) female members.
ED TORR
Chairman of the Remuneration
and Nomination Committee
29 March 2022
increase approved earlier in the year
for certain members of the Senior
Executive Team. The Committee
agreed that it was important to
maintain competitive remuneration
packages to retain and incentivise key
members of the Executive team to
drive the growth of the business, and
after careful consideration, approved
salary increases for the Executive
Directors, Jennifer Winter and Chris
Brewster, with effect from 1 January
2022. Further details are set out in the
Directors’ Remuneration Report on
page 62.
The Committee also considered the
following matters:
• Consideration of Non-Executive
Directors’ fees
• Performance criteria for the Long
Term Incentive Plan (“LTIP”) and
awards under the LTIP
• Review of performance of the
Executive Directors
• Succession planning for the
Executive Directors
• Review of Group pension
arrangements
• Board evaluation
• Re-election of Directors at
the AGM
• Review of the Committee’s Terms
of Reference
• Training and development
requirements of Directors
• Review of Non-Executive Directors’
time commitment
• Review of Committee plan for 2022
ACTIVITIES IN 2022
The Committee has considered the
FY21 bonus awards for the Executive
Directors and reviewed performance
against Group financial performance
targets (75% weighting) and personal
objectives (25% weighting) relevant
to their own areas of responsibility.
The Committee noted that financial
61
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Directors’ Remuneration Report
The following disclosures are made
in accordance with best practice
governance standards as an AIM
company and to provide transparency
about how our Directors are rewarded.
EXECUTIVE DIRECTORS
Current components of the Executive
Directors’ remuneration are base
salary, annual bonus and share-based
incentive schemes.
This report covers the financial year
ended 31 December 2021.
THE REMUNERATION AND
NOMINATION COMMITTEE
The Board has delegated certain
responsibilities for executive
remuneration to the Remuneration
and Nomination Committee
(“the Committee”). Details of the
Committee, its remit and its activities
are set out on page 60.
The Committee is, among other
things, responsible for setting the
remuneration policy for Executive
Directors and the Chairman, and
recommending and monitoring the
level and structure of remuneration
for senior management.
REMUNERATION POLICY
The objective of the remuneration
policy is to promote the long-term
success of the Company, having regard
to the views of shareholders and
stakeholders.
In formulating remuneration policy
for the Executive Directors, the
Committee considers a number of
factors designed to:
• Have regard to the Director’s
experience and the nature and
complexity of their work in order
to pay a competitive salary, in line
with comparable companies, that
attracts and retains Directors of
the highest quality;
• Reflect the Director’s personal
performance; and
• Link individual remuneration
packages to the Group’s long-
term performance and continued
success of the Group through
the award of annual bonuses and
share-based incentive schemes.
62
BASE SALARY
Base salary is reviewed annually by the
Committee. There were no changes in
base salary during the year.
As reported in the Remuneration and
Nomination Committee Report on
page 61, following benchmarking and
review of executive remuneration in
2021, the CEO’s salary was increased
from £306,000 to £336,000 and the
CFO’s salary was increased from
£209,000 to £230,000 with effect from
1 January 2022.
ANNUAL BONUS
The Committee has agreed
performance conditions for the annual
bonus of the Executive Directors
based on the achievement of certain
financial and operational KPIs. Each
Executive Director has performance
conditions related to the profitable
growth of the Group and additional
performance conditions relevant to
their own areas of responsibility.
For the CEO, 75% of the bonus
award is aligned to achievement
of Group financial performance
targets (budgeted revenue (37.5 %)
and EBITDA (37.5 %)) and 25%
is dependent on achievement of
personal objectives. The maximum
bonus opportunity is 50% of salary.
For the CFO, 75% of the bonus
award is aligned to achievement of
Group financial performance targets
(budgeted revenue (30%), EBITDA
(30%) and cash conversion (15%)) and
25% is dependent on achievement of
personal objectives. The maximum
bonus opportunity is 40% of salary.
Malus and clawback provisions will
apply to enable the Company to
recover sums paid or withhold the
payment of any sum in the event of
a material misstatement resulting
in an adjustment to the audited
consolidated accounts of the Group
or action or conduct which, in the
reasonable opinion of the Board,
amounts to employee misbehaviour,
fraud or gross misconduct.
LONG TERM INCENTIVE PLAN
A Long Term Incentive Plan, the
Animalcare Group plc Long Term
Incentive Plan 2017 (“the LTIP”),
was approved by the Board in
June 2017. A summary of the LTIP
was set out in the circular sent to
shareholders on 24 June 2017 which
is available on the Company’s website
(www.animalcaregroup.com).
On 5 November 2021, the Board
approved the grant of nil-cost
options under the LTIP over a total
of 264,981 ordinary shares with a
nominal value of 20.0 pence per share
(“the Options”) awarded to certain
members of the Senior Executive Team
and to members of the Leadership
Team. Details of the nil-cost options
granted to the Executive Directors
are set out on page 65. The LTIP
awards will vest three years after the
date of grant subject to the following
performance criteria being met over
the three-year financial period ending
31 December 2024. The Options
will vest to the extent the following
performance conditions based on EPS
and TSR are met:
Extent to which EPS
tranche will vest
0%
25%
100%
Earnings Per Share
growth
Less than 3%
3%
10%
Between 3% and 10% Between 25% and
100% on a straight-
line basis
Annual Report 2021 Animalcare Group plc Rank of the
Company’s TSR
compared to the
Comparator Group
Upper quartile or
above
Between median and
upper quartile
Median
Below median
Extent to which the
TSR tranche will vest
100%
Pro rata between
25% and 100% on a
ranking basis
25%
0%
50% of the option award will be
subject to the EPS performance
condition and the remaining 50% will
be subject to the TSR performance
condition. Accordingly, if one of the
performance conditions is met but
the other is not, the Option award will
vest in part. The details of the LTIP are
set out in Note 26 to the consolidated
financial statements.
Non-Executive Directors are not
eligible to participate in the LTIP.
OTHER BENEFITS
A range of benefits may be provided
including company car allowance,
private medical insurance, life
assurance, travel insurance, general
employee benefits and travel and
related expenses. The Committee
also retains the discretion to offer
additional benefits as appropriate,
such as assistance with relocation,
tax equalisation and overseas tax
advisory fees.
SERVICE AGREEMENTS AND TERMINATION PAYMENTS
Details of the Executive Directors’ service agreements are set out below.
Director
Chris Brewster
Jennifer Winter
Date of contract Unexpired term
Rolling contract
24 January 2012
Rolling contract
2 August 2018
Notice period
by Company
6 months
6 months
Notice period
by Director
6 months
6 months
The Executive Directors may be put on gardening leave during their notice
period, and the Company can elect to terminate their employment by making a
payment in lieu of notice of up to the applicable notice period.
LETTERS OF APPOINTMENTS
Details of the Non-Executive Directors’ letters of appointment are set out below.
Director
17 June 2017
Jan Boone
17 June 2017
Nick Downshire
17 June 2017
Ed Torr
17 June 2017
Marc Coucke
Doug Hutchens 10 February 2022
Date of contract Renewed on
30 June 2020
30 June 2020
30 June 2020
30 June 2020
-
Term expires
2023 AGM
2023 AGM
2023 AGM
2023 AGM
2025 AGM
Notice
period by
Company
3 months
3 months
3 months
3 months
3 months
Notice
period by
Director
3 months
3 months
3 months
3 months
3 months
EMPLOYEES’ PAY
Employees’ pay and conditions across the Group are considered when reviewing
remuneration policy for Executive Directors.
NON-EXECUTIVE DIRECTORS
The remuneration payable to Non-Executive Directors (other than the Chairman)
is decided by the Chairman and Executive Directors.
Fees are designed to ensure the Company attracts and retains high-calibre
individuals. They are reviewed on an annual basis and account is taken of the
level of fees paid by other companies of a similar size and complexity. Non-
Executive Directors do not participate in any annual bonus, share options or
pension arrangements. The Company repays the reasonable expenses that Non-
Executive Directors incur in carrying out their duties as Directors. There were
no changes to the fees payable to the Chairman or Non-Executive Directors in
the year.
63
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Directors’ Remuneration Report
CONTINUED
REMUNERATION POLICY FOR 2022
The remuneration policy for 2022 will operate as follows:
Role
Basic salary/fee
£’000s
Maximum bonus potential
Executive
Jennifer Winter1
Chris Brewster2
Non-Executive
Jan Boone
Nick Downshire
Ed Torr
Marc Coucke
Doug Hutchens
Chief Executive Officer
Chief Financial Officer
Chair
Chair of Audit and Risk Committee
Chair of Remuneration and
Nomination Committee
Non-Executive Director
Non-Executive Director
337
230
70
40
45
40
40
50%
40%
–
–
–
–
–
STATUTORY INFORMATION
The following information includes disclosures required by the AIM Rules and UK company law in respect of Directors who
served during the year to 31 December 2021.
DIRECTORS’ REMUNERATION
The following table summarises the gross aggregate remuneration of the Directors who served during the year to 31
December 2021:
£’000
Executive
Jennifer Winter1
Chris Brewster2
Non-Executive
Jan Boone
Chris Cardon3
Marc Coucke
Nick Downshire
Ed Torr4
Total
Salary and fees
Annual bonus
Benefits
Pension
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
306
300
209
205
70
70
18
35
40
40
40
40
45
43
728
733
153
94
84
51
–
–
–
–
–
–
–
–
–
–
237
145
14
14
12
13
–
–
–
–
–
–
–
–
–
–
26
27
–
–
23
25
–
–
–
–
–
–
–
–
–
–
23
25
Total
473
408
328
294
70
70
18
35
40
40
40
40
45
43
1,014
930
1
Jennifer Winter's benefits comprise a car allowance (£10k) and private medical insurance (£4k).
2 Chris Brewster's benefits comprise a car allowance (£10k) and private medical insurance (£2k).
3 Chris Cardon resigned as a Director on 8 July 2021. His annual fee of £35,000 was pro-rated to his date of resignation; the pro-rated fee was £18,356. This fee was calculated
in GBP and, as previous practice, paid in euros at a rate fixed at the time of his appointment as Non-Executive Director.
4 Ed Torr receives an annual fee of £40,000 and an additional fee of £5,000 for his chairmanship of the Remuneration and Nomination Committee.
64
Annual Report 2021 Animalcare Group plc SHARE OPTIONS
The individual interests of the Executive Directors under the LTIP are set out below:
Jennifer Winter
Chris Brewster
Date of grant
06/06/19
17/11/20
05/11/21
06/06/19
17/11/20
05/11/21
First exercise
date
06/06/22
31/12/23
31/12/24
06/06/22
31/12/23
31/12/24
Number of LTIP nil cost
options awarded
177,750
165,761
106,844
76,636
66,848
43,806
Total options held
450,175
187,290
During the year, a total of 114,331 options over ordinary shares were also granted to members of the Senior Executive Team
and other members of the Leadership Team.
DIRECTORS’ INTERESTS IN THE SHARE CAPITAL OF THE COMPANY
The Directors’ interests in the share capital of the Company as at 31 December 2021 and the movements during the year
are set out below:
Director
Jan Boone
Chris Brewster
Chris Cardon
Marc Coucke
Nick Downshire
Edwin Torr
Jennifer Winter
Number of shares held as
at 1 January 2021
50,171
280,513
13,857,213
13,857,213
1,050,029
107,455
–
Acquired/ (disposed)
during the period
87,719
–
(13,857,213)
701,761
38,409
–
7,000
Number of shares held as
at 31 December 2021
137,890
280,513
–
14,558,974
1,011,620
107,455
7,000
Percentage of ISC as at 31
December 2021
0.23
0.47
–
24.23
1.68
0.18
0.01
As at 1 January 2021, Nick Downshire had a non-beneficial interest of 190,446 shares; during the year, he sold 38,409
shares and as at 31 December 2021, he had a non-beneficial interest of 152,037 shares.
Doug Hutchens does not have an interest in the share capital of the Company.
There were no changes in the Directors’ interests in shares between 31 December 2021 and 29 March 2022.
ED TORR
Chairman of the Remuneration and Nomination Committee
29 March 2022
65
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Directors’ Report
Environmental disclosures can be
found under Sustainability on pages
38 to 41.
Section 172 statement, the key issues
and stakeholder considerations
discussed by the Board during the year
and how the Company engages with
its stakeholders are set out on page 47
of the Strategic Report.
Directors’ responsibility statements on
page 70.
Likely future events are disclosed
within the Strategic Report on pages
10 to 41.
Post balance sheet events are set out
in the Strategic Report on page 26 and
in Note 29.
DIVIDEND
An interim dividend of 2.0 pence per
share was paid on 19 November 2021
to shareholders whose names were on
the Register of Members at close of
business on 22 October 2021.
Reflecting its continued confidence
in the Group, as well as the positive
performance for the year ended
31 December 2021, the Board is
recommending a final dividend of 2.4
pence per share (2020: 2.0 pence per
share), giving a total dividend for the
year of 4.4 pence (2020: 4.0 pence per
share) which is in line with pre-COVID
levels. Subject to shareholder approval
at the Annual General Meeting to be
held on Tuesday 7 June 2022, the final
dividend will be paid on Friday 8 July
2022 to shareholders whose names
are on the Register of Members at
close of business on Monday 6 June
2022. The ordinary shares will become
ex-dividend on Wednesday 1 June
2022, due to the Jubilee Bank Holiday
on Thursday 2 and Friday 3 June 2022.
DIRECTORS
The names of the current Directors of
the Company and their biographical
details are shown on pages 42
to 44. There were no changes to
directorships during the reporting
period. Dr Doug Hutchens was
appointed on 10 February 2022.
SHARE CAPITAL STRUCTURE
The Company’s issued share
capital as at 31 December 2021
was £12,018,432.20 divided into
60,092,161 ordinary shares of 20.0
pence each. Following the exercise
of options by employees, there were
two share allotments during the year,
on 17 June 2021 and 30 June 2021.
Full details relating to the Company’s
issued share capital and allotments
during the year can be found in Note
22 to the Consolidated Financial
Statements on page 117.
The Company’s ordinary shares rank
pari passu in all respects with each
other, including for voting purposes
and for all dividends. Ordinary
shareholders are entitled to receive
notice of, and to attend and speak at,
any general meeting of the Company.
On a show of hands, every shareholder
present in person or by proxy (or
being a corporation represented by a
duly authorised representative) shall
have one vote, and on a poll, every
shareholder who is present in person
or by proxy shall have one vote for
every share they hold. The Notice
of Annual General Meeting specifies
deadlines for exercising voting rights
and appointing a proxy or proxies.
Further information on the voting
and other rights of shareholders are
set out in the Company’s Articles
of Association, which are available
on the Company’s website
(www.animalcaregroup.com).
The Directors present their report,
together with the audited financial
statements of the Group and the
Company for the year ended 31
December 2021.
PRINCIPAL ACTIVITIES
Animalcare Group plc is a public
limited company incorporated in
England and Wales with registered
number 01058015, which is listed on
AIM, London Stock Exchange.
The principal activity of the
Group during the period was the
development, sale and distribution of
licensed veterinary pharmaceuticals
and identification products and
services to Companion Animal,
Production Animal and Equine
veterinary markets.
STATUTORY INFORMATION
CONTAINED ELSEWHERE IN
THE ANNUAL REPORT
Information required to be part of
the Directors’ Report can be found
elsewhere in this document, as
indicated, and is incorporated into this
report by reference:
Results in the Chief Financial Officer’s
review on pages 22 to 26.
The Corporate Governance statement
on page 46.
The Group’s financial risk management
objectives in the Corporate
Governance Report on pages 49 to 55.
The Directors’ Remuneration Report
can be found on pages 62 to 65.
Details of the Company’s exposure to
price risk, credit risk, liquidity risk and
cash flow risk can be found in Note 24
of the Financial Statements.
Details of the salaries, bonuses,
benefits and share interests
of Directors in the Directors’
Remuneration Report on pages
62 to 65.
66
Annual Report 2021 Animalcare Group plc additions to intangibles of £4.5m
(2020: £4.0m).
ARTICLES OF ASSOCIATION
The rules governing the appointment
and replacement of Directors are
set out in the Company’s Articles
of Association. Amendments to the
Articles of Association of the Company
may be made by Special Resolution of
the shareholders.
FINANCIAL INSTRUMENTS
AND RISK MANAGEMENT
Disclosures regarding risk
management and financial
instruments are provided within the
Strategic Report and in Note 24 to the
Consolidated Financial Statements on
page 120.
DIRECTORS’ INDEMNITIES
AND LIABILITY INSURANCE
The Company’s Articles of Association
(the “Articles”) provide, subject to
the provisions of UK legislation, an
indemnity for Directors and officers
of the Company and the Group in
respect of liabilities they may incur in
the discharge of their duties or in the
exercise of their powers. The Company
has made qualifying third-party
indemnity provisions for the benefit
of its Directors during the period and
these remain in force at the date of
this report.
The Group purchases and maintains
directors’ and officers’ liability
insurance for the benefit of its
Directors, which was in place
throughout the year ended 31
December 2021 and remains in
place at the date of this report. The
Company reviews its level of cover
annually.
POLITICAL DONATIONS
No political donations were made
during the year (2020: £nil).
MODERN SLAVERY
In compliance with the Modern
Slavery Act 2015, the Company’s
Modern Slavery Statement can be
found on the Company’s website at
www.animalcaregroup.com.
STAKEHOLDER ENGAGEMENT
AND KEY DECISIONS
Details of the key decisions and
discussions of the Board during the
year and the main stakeholder inputs
into those decisions are set out in the
Strategic Report on pages 34 to 37.
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
senior management contribution
through the use of long-term incentive
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.
Other than the general provisions
of the Articles of Association (and
prevailing legislation), there are no
specific restrictions on the size of
a holding or on the transfer of any
class of shares in the Company. No
shareholder holds securities carrying
any special rights or control over the
Company’s share capital.
AUTHORITY FOR THE
COMPANY TO PURCHASE ITS
OWN SHARES
Subject to authorisation by
shareholder resolution, the Company
may purchase its own shares in
accordance with the Act. Any shares
which have been bought back may be
held as treasury shares or cancelled
immediately upon completion of the
purchase.
At the AGM on 9 June 2021,
the Company was generally and
unconditionally authorised by
its shareholders to make market
purchases (within the meaning
of section 693 of the Companies
Act 2006) of up to a maximum of
6,005,716 of its ordinary shares.
The Company has not repurchased
any of its ordinary shares under this
authority, which is due to expire on
the date of this year’s AGM.
RESEARCH AND
DEVELOPMENT
Our new product development
programme is key to the future
long-term growth and success of the
Group and we are committed to the
development of new and innovative
products to meet the needs of our
customers. Further information in
relation to product development
can be found in the Chief Executive
Officer’s Review on pages 18 to 20.
During the period under review,
the Group incurred research and
development expenditure, including
67
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Directors’ Report
CONTINUED
SIGNIFICANT SHAREHOLDINGS
The Company has been notified of the following interests or is otherwise aware
of the following interests, representing 3% or more of the issued share capital of
the Company as at 28 February 2022:
Name of holder
Alychlo NV
Liontrust Asset Management
SEB Investment Management AB
BlackRock Investment Management
BGF Investment Management Limited
Octopus Investments Nominees Limited
Canaccord Genuity Wealth Management
No. of ordinary shares
14,558,974
7,301,724
5,120,740
4,347,312
3,556,839
2,740,498
2,519,131
% Holding1
24.23
12.15
8.52
7.23
5.92
4.56
4.19
1 Please note that percentage holdings are shown to two decimal places; full details of holdings can be found on
the Animalcare Group page on the London Stock Exchange website.
RELATIONSHIP AGREEMENT
On 23 June 2017, on the announcement of the proposed acquisition of Ecuphar
NV, the Company entered into a relationship agreement (“the Relationship
Agreement”) with Panmure Gordon, the Company’s nominated adviser and
broker as at the date of the agreement and Alychlo NV and Ecuphar Invest
NV (“the Substantial Shareholders”). The Substantial Shareholders together
owned more than 40% of the Group’s total issued share capital, with 23.1%
held by Ecuphar Invest NV, an entity controlled by Chris Cardon, who served
as a non-independent Non-Executive Director of the Company. Chris stepped
down from the Board on 8 July 2021 and sold his 23.1% indirect shareholding
in the Company via placement. The Substantial Shareholders as defined in the
Relationship Agreement therefore no longer own more than 40% of the issued
share capital of the Company and, instead, Alychlo NV owns 24.2% as at 8 July
2021 and therefore the Relationship Agreement terminated.
GOING CONCERN
The Directors have, at the time of
approving the financial statements,
a reasonable expectation that the
Company and the Group have
adequate resources to continue
in operational existence for the
foreseeable future. The going concern
basis of accounting has therefore
continued to be adopted in preparing
the financial statements.
In reaching this conclusion the
Directors have undertaken an
assessment of the future prospects
of the Group, taking into account the
Group’s current financial position and
principal risks. This review considered
forecasts of future trading, including
working capital and investment
requirements for 12 months from the
reporting date that take into account
reasonably possible changes in trading
performance, in particular a “severe
but plausible” downside scenario
to factor in a range of downside
revenue estimates, including further
unexpected COVID disruptions, and
higher than expected inflation across
our cost base, with corresponding
mitigating actions. Further details are
included in the statement on going
concern in Note 3 on page 86.
68
Annual Report 2021 Animalcare Group plc APPROVAL
The Strategic Report on pages 10 to 41 and this Directors’
Report on pages 66 to 69 were approved by the Board on
29 March 2022 and signed on its behalf by
CHRIS BREWSTER
Chief Financial Officer and Company Secretary
29 March 2022
DISCLOSURE OF
INFORMATION TO THE
AUDITOR
Each of the persons who is a Director
at the date of this Annual Report
confirms that:
• So far as the Directors are
aware, there is no relevant
audit information of which
the Company’s auditors are
unaware; and
• The Directors have taken all the
steps that they ought to have
taken as Directors in order to make
themselves aware of any relevant
audit information and to establish
that the Group’s auditors are
aware of that information.
This confirmation is given and should
be interpreted in accordance with the
provisions of s418 of the Companies
Act 2006.
PricewaterhouseCoopers LLP have
indicated their willingness to continue
in office and resolutions seeking to
reappoint them and to authorise
the Directors to determine their
remuneration will be proposed at the
forthcoming Annual General Meeting.
ANNUAL GENERAL MEETING
The Company’s Annual General
Meeting is scheduled to be held on
Tuesday 7 June 2022. The Notice
of 2022 Annual General Meeting,
including the resolutions to be
proposed, is set out in a separate
Notice of Meeting which accompanies
this report and is available
on the Company’s website
www.animalcaregroup.com/investors/
shareholder-centre/agm/
69
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Statement of Directors’ Responsibilities in
respect of the financial statements
The directors are responsible for the
maintenance and integrity of the
company’s website. Legislation in
the United Kingdom governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
CHRIS BREWSTER
Chief Financial Officer and
Company Secretary
29 March 2022
The directors are responsible for
preparing the Annual Report and the
financial statements in accordance
with applicable law and regulation.
Company law requires the directors
to prepare financial statements for
each financial year. Under that law
the directors have prepared the group
and the company financial statements
in accordance with UK-adopted
international accounting standards.
Under company law, 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 company and
of the profit or loss of the group for
that period.
In preparing the financial statements,
the directors are required to:
• select suitable accounting policies
and then apply them consistently;
• state whether applicable UK-
adopted international accounting
standards have been followed,
subject to any material departures
disclosed and explained in the
financial statements;
• make judgements and accounting
estimates that are reasonable and
prudent; and
• prepare the financial statements
on the going concern basis unless
it is inappropriate to presume
that the group and company will
continue in business.
The directors are responsible for
safeguarding the assets of the group
and company and hence for taking
reasonable steps for the prevention
and detection of fraud and other
irregularities.
The directors are also responsible
for keeping adequate accounting
records that are sufficient to show and
explain the group’s and company’s
transactions and disclose with
reasonable accuracy at any time the
financial position of the group and
company and enable them to ensure
that the financial statements comply
with the Companies Act 2006.
70
Annual Report 2021 Animalcare Group plc 71
Annual Report 2021 Animalcare Group plc OUR GOVERNANCE Independent Auditors’ Report
to the members of Animalcare Group plc
the audit evidence we have obtained
is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the
Group in accordance with the ethical
requirements that are relevant to
our audit of the financial statements
in the UK, which includes the FRC’s
Ethical Standard, as applicable to
listed entities, and we have fulfilled
our other ethical responsibilities in
accordance with these requirements.
REPORT ON
THE AUDIT OF
THE FINANCIAL
STATEMENTS
Opinion
In our opinion, Animalcare Group
plc’s Group financial statements and
Company financial statements (the
“financial statements”):
• give a true and fair view of
the state of the Group’s and
of the Company’s affairs as at
31 December 2021 and of the
Group’s loss and the Group’s and
Company’s cash flows for the year
then ended;
• have been properly prepared
in accordance with UK-adopted
international accounting
standards; and
• have been prepared in accordance
with the requirements of the
Companies Act 2006.
We have audited the financial
statements, included within the
Annual Report, which comprise:
the consolidated and Company
statements of financial position as at
31 December 2021; the consolidated
income statement, the consolidated
statement of comprehensive income,
the consolidated and Company
statements of changes in equity
and the consolidated and Company
cash flow statements for the year
then ended; and the notes to the
financial statements, which include
a description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance
with International Standards on
Auditing (UK) (“ISAs (UK)”) and
applicable law. Our responsibilities
under ISAs (UK) are further described
in the auditors’ responsibilities for
the audit of the financial statements
section of our report. We believe that
72
Annual Report 2021 Animalcare Group plc Our audit approach
Overview
Audit scope
• The Group is organised into 13 reporting components and the Group financial statements are a consolidation of these reporting
components. The reporting components vary in size.
• We identified five components that required a full scope audit of their financial information due to either their size or risk
characteristics. Of these, Animalcare Group plc and Animalcare Ltd were audited by the Group engagement team. Ecuphar N.V.,
Ecuphar Veterinaria S.L. and Ecuphar GmbH were audited by PwC component auditors. STEM Animal Health Inc. was also included
for a full scope audit due to material disclosures with respect to its financial position and results that are included within the
consolidated financial statements. This audit was undertaken by a non-PwC component auditor. The Group engagement team also
audited material consolidation journals.
• One reporting component, Ecuphar Italia Srl., was also subject to audit procedures performed by the Group engagement team over
specific balances due to its contribution to the overall financial statement line items cash and cash equivalents, and payroll -related
liabilities in the consolidated financial statements.
• As a result of this scoping we obtained coverage over 78% of the Group’s revenues and 91% of the Group’s Earnings before Interest,
Tax, Depreciation and Amortisation (EBITDA), adjusted for non-recurring items.
Key audit matters
• Carrying value of intangibles may be impaired (Group)
• Risk of impairment of investments in subsidiary companies (Company)
Materiality
• Overall Group materiality: £336,000 (2020: £302,000) based on 2.5% of Earnings Before Interest, Tax, Depreciation and Amortisation,
adjusted for non-recurring items.
• Overall Company materiality: £210,000 (2020: £210,000) based on 1% of total assets (capped below Group materiality).
• Performance materiality: £252,000 (2020: £226,500) (Group) and £157,500 (2020: £157,500) (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit
of the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Carrying value of intangibles may be impaired (Group) is a new key audit matter this year. Impact of COVID-19 (Group
and Company) and Risk of impairment to assets – Goodwill and acquired intangible assets (Group), which were key audit
matters last year, are no longer included because of: the reduced impact of COVID-19 in relation to the going concern basis
of preparation and risk of material misstatement of the financial statements as a consequence of COVID-19 on the Group
and Company; and because of the reduced risk of material misstatement of the goodwill and acquired intangible assets
balances on the Group. Otherwise, the key audit matters below are consistent with last year.
73
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Independent Auditors’ Report
to the members of Animalcare Group plc
CONTINUED
How our audit addressed the key audit matter
We have reviewed the forecast financial performance of the
projects within the product development related intangibles
and held discussions with management to understand their
assessment of potential impairment indicators.
With respect to the assessments supporting the carrying
values our procedures included the following:
• We tested the mathematical accuracy of the impairment
models and agreed the carrying values of the assets
being assessed for impairment to the balance sheet;
• We compared the assumed forecast sales and margins by
product to historical actuals for those products;
• We considered the accuracy of previous forecasts;
• We challenged management’s calculated group weighted
average cost of capital (WACC) used for discounting
future cash flows within the impairment models for
the acquired intangibles, utilising valuation experts to
assess the cost of capital for the Group and comparable
organisations;
• We assessed the long -term growth rate used by
comparing it to third -party forecast long -term growth
rates utilising valuation experts; and
• Where an impairment was required, we gained an
understanding over the facts and circumstances that
resulted in the impairment.
Based on the procedures performed, no issues have been
noted with the carrying value of product development
related intangibles. The impairment charge recorded
during the year and the associated disclosures within the
consolidated financial statements are considered to be
appropriate.
Key audit matter
Carrying value of intangibles may be impaired (Group)
The Group has a significant amount of product
development related intangible assets, with a net book
value as at 31 December 2021 of £28.5 million (2020:
£37.0 million). This intangibles category comprises product
portfolios and development costs, in-process research and
development costs and patents, distribution rights and
licences.
These intangible assets include both assets acquired in
either business combinations or individual transactions, and
internally generated intangibles capitalised in accordance
with the accounting policies set out in the summary
of significant accounting policies in the notes to the
consolidated financial statements (Note 3).
These assets are reviewed annually for impairment
indicators with an impairment review performed where
necessary. During the year, impairment indicators were
noted on various product development related projects,
with the subsequent impairment assessment resulting in an
impairment charge of £2.8 million.
For those assets relating to acquired intangibles where
an impairment assessment is required to support the
carrying value of the assets associated with each project,
management have prepared discounted cash flows to
support the carrying value of the project. The discounted
cash flows include a number of estimates, with the key
assumptions being:
• The forecast cash flows of the individual products;
• The long -term growth rate used within the
forecasts; and
• The discount rate applied to the cash flows.
For those assets relating to capitalised in -process research
and development costs, patents, distribution rights and
licences and product portfolios and product development
costs, where an impairment assessment is required to
support the carrying value of the assets associated with
each project, management have prepared forecasts of
future sales and margins which involve estimates.
See the summary of significant accounting policies section
within the financial statements for disclosure of the related
accounting policies, judgements and estimates and Note 16
within the consolidated financial statements for details of
intangible assets.
74
Annual Report 2021 Animalcare Group plc
Key audit matter
Risk of impairment of investments in subsidiary companies
(Company)
The parent company has investments in subsidiary
companies of £147.7 million (2020: £147.7 million),
which is reviewed annually for impairment indicators
with an impairment review performed where necessary.
The impairment review is performed in conjunction with
the annual impairment review of goodwill and acquired
intangible assets at a Group level. No impairment charge
has been recorded by management in the current year with
respect to the carrying value of the investments balance
within Animalcare Group plc. The risk we have focused on is
that the investments in subsidiary companies balance could
be overstated and an impairment charge may be required.
We focused on this area because the determination of
whether or not the investments in subsidiary companies
are impaired involves estimates about the future results
and cash flows of the business.
The headroom for the carrying value of investments is
calculated by comparing the value in use of the Group
with the carrying value of the investments in subsidiary
companies balance. The determination of the value in use
includes a number of key assumptions which include:
• Forecast cash flows for the next five years;
• A long-term (terminal) growth rate applied beyond the
end of the five -year forecast period; and
• A discount rate applied to the model.
See the significant accounting policies section within the
financial statements for disclosure of the related accounting
policies, judgements and estimates and Note 6 within
the Company only financial statements for details of the
investments in subsidiary companies.
How our audit addressed the key audit matter
We understood and evaluated management’s budgeting and
forecasting process. We obtained the impairment analysis
and undertook the following:
• We tested the mathematical accuracy of the impairment
model and agreed the carrying value of the investments
balance to the balance sheet;
• We challenged management’s calculated Group
weighted average cost of capital (WACC) used for
discounting future cash flows within the impairment
model, utilising valuation experts to assess the cost of
capital for the Group and comparable organisations;
• We traced the forecast financial information within the
model to the latest Board approved budget. We have
also compared FY21 actuals to the FY22–FY26 forecasts
and challenged management to provide support to
corroborate trading and growth assumptions, support
for capital expenditure and considered the accuracy of
previous forecasts;
• We assessed the long -term growth rate used by
comparing it to third -party forecast long -term growth
rates utilising valuation experts; and
• We performed sensitivity analyses to ascertain
the impact of reasonably possible changes in key
assumptions.
In summary, we found, based on our audit work, the carrying
value of investments in subsidiaries to be reasonable.
How we tailored the audit scope
We tailored the scope of our audit to
ensure that we performed enough
work to be able to give an opinion on
the financial statements as a whole,
taking into account the structure of
the Group and the Company, the
accounting processes and controls,
and the industry in which they
operate.
The Group is organised into 13
reporting components and the
Group financial statements are a
consolidation of these reporting
components. The reporting
components vary in size. Our audit
scope was determined by considering
the significance of each component’s
contribution to EBITDA, adjusted
for non-recurring items, as well as
considering the level of coverage
obtained for each individual financial
statement line item.
We identified five components that
required a full scope audit of their
financial information due to either
their size or risk characteristics. Of
these, Animalcare Group plc and
Animalcare Ltd were audited by the
Group engagement team. Ecuphar
N.V., Ecuphar Veterinaria S.L. and
Ecuphar GmbH were audited by PwC
component auditors. STEM Animal
Health Inc. was also included for
a full scope audit due to material
disclosures with respect to its financial
position and results that are included
75
Annual Report 2021 Animalcare Group plcOUR FINANCIALS
Independent Auditors’ Report
to the members of Animalcare Group plc
CONTINUED
within the consolidated financial
statements. This audit was undertaken
by a non-PwC component auditor. The
Group engagement team also audited
material consolidation journals.
One reporting component, Ecuphar
Italia Srl., was also subject to audit
procedures performed by the Group
engagement team over specific
balances due to its contribution to
the overall financial statement line
items cash and cash equivalents
and payroll- related liabilities in the
consolidated financial statements.
The Group audit team supervised the
direction and execution of the audit
procedures performed by the PwC
component teams.
Our involvement in their audit process,
including attending component
clearance meetings, review of their
reporting results and their supporting
working papers, together with the
additional procedures performed at
Group level, gave us the evidence
required for our opinion on the
financial statements as a whole.
As part of our audit we made enquiries
of management to understand the
process they have adopted to assess
the extent of the potential impact of
climate change risk on the Group’s
financial statements. Management
consider that the impact of climate
change does not give rise to a material
financial statement impact.
We used our knowledge of the
Group to evaluate management’s
assessment. We particularly
considered how climate change
risks would impact the assumptions
made in the forecasts prepared
by management used in their
impairment analyses. We discussed
with management the ways in which
climate change disclosures should
continue to evolve as the Group
continues to develop its response
to the impact of climate change.
We also considered the consistency
of the disclosures in relation to
climate change made in the other
information within the Annual Report
with the financial statements and our
knowledge from our audit.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall
materiality
How we
determined it
Rationale for
benchmark
applied
Financial statements – Group
Financial statements – Company
£336,000 (2020: £302,000).
£210,000 (2020: £210,000).
2.5% of Earnings Before Interest, Tax,
Depreciation and Amortisation, adjusted for non-
recurring items.
1% of total assets (capped below group
materiality).
Based on the benchmarks used in the Annual
Report, EBITDA, adjusted for non-recurring items,
is the primary measure used by the shareholders
in assessing the performance of the Group, and is
a generally accepted auditing benchmark.
We believe that total assets are considered to be
appropriate as the entity is not a profit-oriented
company. The Company is a holding company only
and total assets is a generally accepted auditing
benchmark.
For each component in the scope
of our Group audit, we allocated
a materiality that is less than our
overall Group materiality. The range
of materiality allocated across
components was £70,000 to £280,000.
Certain components were audited to
a local statutory audit materiality that
was also less than our overall Group
materiality.
We use performance materiality
to reduce to an appropriately
low level the probability that the
aggregate of uncorrected and
undetected misstatements exceeds
overall materiality. Specifically, we
use performance materiality in
determining the scope of our audit
and the nature and extent of our
testing of account balances, classes
of transactions and disclosures, for
example in determining sample sizes.
Our performance materiality was 75%
(2020: 75%) of overall materiality,
amounting to £252,000 (2020:
£226,500) for the Group financial
statements and £157,500 (2020:
£157,500) for the Company financial
statements.
76
Annual Report 2021 Animalcare Group plc
In determining the performance
materiality, we considered a
number of factors – the history of
misstatements, risk assessment and
aggregation risk and the effectiveness
of controls – and concluded that
an amount at the upper end of our
normal range was appropriate.
We agreed with those charged with
governance that we would report to
them misstatements identified during
our audit above £16,800 (Group
audit) (2020: £15,100) and £10,500
(Company audit) (2020: £10,500) as
well as misstatements below those
amounts that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to
going concern
Our evaluation of the Directors’
assessment of the Group’s and the
Company’s ability to continue to adopt
the going concern basis of accounting
included:
• We assessed management’s base
case forecast, as well as their
severe but plausible downside
scenario, which have formed the
basis for the Group’s assessment
and conclusions with respect to
their ability to continue as a going
concern;
• We evaluated the historical
accuracy of the budgeting process
to assess the reliability of the data;
• We held discussions with
management to understand and
challenge the rationale behind
the assumptions made, using our
knowledge of the business and
industry;
• We compared the latest trading
results for the year to date in 2022
to management’s budget; and
• We reviewed the disclosures within
the Annual Report with respect to
going concern.
Based on the work we have
performed, we have not identified
any material uncertainties relating to
events or conditions that, individually
or collectively, may cast significant
doubt on the Group’s and the
Company’s ability to continue as
a going concern for a period of at
least twelve months from when the
financial statements are authorised
for issue.
In auditing the financial statements,
we have concluded that the Directors’
use of the going concern basis of
accounting in the preparation of the
financial statements is appropriate.
However, because not all future events
or conditions can be predicted, this
conclusion is not a guarantee as to the
Group’s and the Company’s ability to
continue as a going concern.
Our responsibilities and the
responsibilities of the Directors with
respect to going concern are described
in the relevant sections of this report.
Reporting on other
information
The other information comprises all of
the information in the Annual Report
other than the financial statements
and our auditors’ report thereon.
The Directors are responsible for the
other information. Our opinion on
the financial statements does not
cover the other information and,
accordingly, we do not express an
audit opinion or, except to the extent
otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the
financial statements, our responsibility
is to read the other information
and, in doing so, consider whether
the other information is materially
inconsistent with the financial
statements or our knowledge obtained
in the audit, or otherwise appears to
be materially misstated. If we identify
an apparent material inconsistency
or material misstatement, we are
required to perform procedures to
conclude whether there is a material
misstatement of the financial
statements or a material misstatement
of the other information. If, based
on the work we have performed,
we conclude that there is a
material misstatement of this other
information, we are required to report
that fact. We have nothing to report
based on these responsibilities.
With respect to the Strategic Report
and Directors’ Report, we also
considered whether the disclosures
required by the UK Companies Act
2006 have been included.
Based on our work undertaken in the
course of the audit, the Companies
Act 2006 requires us also to report
certain opinions and matters as
described below.
Strategic Report and Directors’
Report
In our opinion, based on the work
undertaken in the course of the
audit, the information given in the
Strategic Report and Directors’ Report
for the year ended 31 December
2021 is consistent with the financial
statements and has been prepared
in accordance with applicable legal
requirements.
In light of the knowledge and
understanding of the Group and
Company and their environment
obtained in the course of the audit,
we did not identify any material
misstatements in the Strategic Report
and Directors’ Report.
77
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Independent Auditors’ Report
to the members of Animalcare Group plc
CONTINUED
material if, individually or in the
aggregate, they could reasonably be
expected to influence the economic
decisions of users taken on the basis
of these financial statements.
Irregularities, including fraud, are
instances of non-compliance with laws
and regulations. We design procedures
in line with our responsibilities,
outlined above, to detect material
misstatements in respect of
irregularities, including fraud. The
extent to which our procedures are
capable of detecting irregularities,
including fraud, is detailed below.
Based on our understanding of the
Group and industry, we identified that
the principal risks of non-compliance
with laws and regulations related
to tax legislation, employment
regulations, and other legislation
specific to the veterinary sector in
which the Group operates (such as
the Veterinary Medicines Regulations
2013), and we considered the extent
to which non-compliance might have
a material effect on the financial
statements. We also considered
those laws and regulations that
have a direct impact on the financial
statements such as the Companies Act
2006. We evaluated management’s
incentives and opportunities for
fraudulent manipulation of the
financial statements (including the
risk of override of controls), and
determined that the principal risks
were related to posting inappropriate
journal entries to increase revenue,
reduce expenditure or reclassify items
above or below the EBITDA line to
manipulate the financial performance
of the business, and management
bias in accounting estimates. The
Group engagement team shared this
risk assessment with the component
auditors so that they could include
appropriate audit procedures in
response to such risks in their work.
Audit procedures performed by the
Group engagement team and/or
component auditors included:
• Discussions with management
and the Group’s legal counsel,
including consideration of
known or suspected instances of
non-compliance with laws and
regulation and fraud;
• Enquiries with component
auditors;
• Review of correspondence with
•
legal advisers;
Identifying and testing unusual
journal entries which increase
revenue, reduce expenditure or
reclassify items above or below
the EBITDA line to manipulate
the financial performance of the
business; and
• Assessing key judgements and
estimates made by management
for evidence of inappropriate bias.
The key judgements and estimates
for the Group relate to the carrying
value of investments, carrying
value of goodwill and acquired
intangible assets and capitalisation
and carrying value of intangibles.
There are inherent limitations in the
audit procedures described above.
We are less likely to become aware of
instances of non-compliance with laws
and regulations that are not closely
related to events and transactions
reflected in the financial statements.
Also, the risk of not detecting a
material misstatement due to fraud is
higher than the risk of not detecting
one resulting from error, as fraud may
involve deliberate concealment by,
for example, forgery or intentional
misrepresentations, or through
collusion.
Responsibilities for the
financial statements and
the audit
Responsibilities of the Directors for
the financial statements
As explained more fully in
the Statement of Directors’
Responsibilities in respect of the
financial statements, the Directors are
responsible for the preparation of the
financial statements in accordance
with the applicable framework and for
being satisfied that they give a true
and fair view. The Directors are also
responsible for such internal control
as they determine is necessary to
enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud
or error.
In preparing the financial statements,
the Directors are responsible for
assessing the Group’s and the
Company’s ability to continue as
a going concern, disclosing, as
applicable, matters related to going
concern and using the going concern
basis of accounting unless the
Directors either intend to liquidate
the Group or the Company or to
cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the
audit of the financial statements
Our objectives are to obtain
reasonable assurance about whether
the financial statements as a whole
are free from material misstatement,
whether due to fraud or error, and to
issue an auditors’ report that includes
our opinion. Reasonable assurance is
a high level of assurance, but is not a
guarantee that an audit conducted in
accordance with ISAs (UK) will always
detect a material misstatement when
it exists. Misstatements can arise from
fraud or error and are considered
78
Annual Report 2021 Animalcare Group plc Our audit testing might include
testing complete populations of
certain transactions and balances,
possibly using data auditing
techniques. However, it typically
involves selecting a limited number
of items for testing, rather than
testing complete populations. We
will often seek to target particular
items for testing based on their size
or risk characteristics. In other cases,
we will use audit sampling to enable
us to draw a conclusion about the
population from which the sample is
selected.
A further description of our
responsibilities for the audit of the
financial statements is located on
the FRC’s website at: www.frc.org.
uk/auditorsresponsibilities. This
description forms part of our auditors’
report.
Use of this report
This report, including the opinions,
has been prepared for and only for
the Company’s members as a body in
accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no
other purpose. We do not, in giving
these opinions, accept or assume
responsibility for any other purpose
or to any other person to whom this
report is shown or into whose hands
it may come save where expressly
agreed by our prior consent in writing.
OTHER REQUIRED
REPORTING
Companies Act 2006 exception
reporting
Under the Companies Act 2006 we
are required to report to you if, in our
opinion:
• we have not obtained all the
information and explanations we
require for our audit; or
• adequate accounting records have
not been kept by the Company,
or returns adequate for our audit
have not been received from
branches not visited by us; or
• certain disclosures of Directors’
•
remuneration specified by law are
not made; or
the Company financial statements
are not in agreement with the
accounting records and returns.
We have no exceptions to report
arising from this responsibility.
IAN MORRISON
(Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and
Statutory Auditors
Leeds
29 March 2022
79
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Consolidated Income Statement
YEAR ENDED 31 DECEMBER 2021
Non-
Underlying
(Note 4)
2021
£’000
−
−
−
(951)
−
(4,580)
(3,073)
(8,604)
−
−
−
−
(8,604)
1,303
(7,301)
Underlying
2021
£’000
74,024
(34,606)
39,418
(2,181)
(12,277)
(14,482)
115
10,593
(2,613)
1,757
(856)
(188)
9,549
(2,325)
7,224
Notes
5
6.1
6.2
6.3
6.4
6.5
6.8
6.9
11
6.10
For the year ended 31 December
Total
2021
£’000
74,024
(34,606)
39,418
(3,132)
(12,277)
(19,062)
(2,958)
1,989
(2,613)
1,757
(856)
(188)
945
(1,022)
(77)
Underlying
2020
£’000
70,494
(33,935)
36,559
(2,386)
(12,325)
(13,302)
15
8,561
(1,051)
540
(511)
(93)
7,957
(1,604)
6,353
Non-
Underlying
(Note 5)
2020
£’000
−
−
−
(1,100)
−
(4,800)
(1,858)
(7,758)
−
−
−
−
(7,758)
1,639
(6,119)
7,224
(7,301)
(77)
6,353
(6,119)
7
7
12.0p
12.0p
−
−
(0.1p)
(0.1p)
10.6p
10.6p
−
−
Revenue
Cost of sales
Gross profit
Research and development expenses
Selling and marketing expenses
General and administrative expenses
Net other operating (expense)/
income
Operating profit/(loss)
Financial expenses
Financial income
Financial expenses net
Share in net loss of joint ventures
accounted for using the equity
method
Profit/(loss) before tax
Income tax
(Loss)/profit for the year
Net profit/(loss) attributable to:
The owners of the parent
Earnings per share for profit/(loss)
attributable to the ordinary equity
holders of the Company:
Basic earnings per share
Diluted earnings per share
Total
2020
£’000
70,494
(33,935)
36,559
(3,486)
(12,325)
(18,102)
(1,843)
803
(1,051)
540
(511)
(93)
199
35
234
234
0.4p
0.4p
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. The accompanying notes form an integral part of these consolidated financial statements.
80
Annual Report 2021 Animalcare Group plc Consolidated Statement of Comprehensive Income
YEAR ENDED 31 DECEMBER 2021
(Loss)/ profit for the year
Other comprehensive income
Cumulative translation differences *
Other comprehensive (loss)/ income, net of tax
Total comprehensive (loss)/ income for the year, net of tax
Total comprehensive (loss)/ income attributable to:
The owners of the parent
* May be reclassified subsequently to profit and loss
For the year ended
31 December
2021
£’000
(77)
2020
£’000
234
(638)
(638)
(715)
(715)
508
508
742
742
81
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Consolidated Statement of Financial Position
YEAR ENDED 31 DECEMBER 2021
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use-assets
Investments in joint ventures
Deferred tax assets
Other financial assets
Other non-current assets
Total non-current assets
Current assets
Inventories
Trade receivables
Other current assets
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Borrowings
Lease liabilities
Trade payables
Tax payables
Accrued charges and deferred income
Other current liabilities
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred tax liabilities
Contract liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Reverse acquisition reserve
Accumulated losses
Other reserves
Equity attributable to the owners of the parent
Total equity
Notes
8
9
10
23
11
6.10
13
12
13
13
14
16
23
15
19
20
16
23
6.10
19
17
18
22
22
22
For the year ended
31 December
2021
£’000
2020
£’000
50,337
29,719
626
1,658
1,290
1,963
90
24
85,707
10,328
7,135
1,200
5,633
24,296
110,003
−
(723)
(10,021)
(471)
(1,083)
(2,156)
(14,454)
(9,243)
(996)
(4,271)
(675)
(408)
(1,157)
(16,750)
(31,204)
78,799
12,019
132,798
(56,762)
(11,676)
2,420
78,799
78,799
50,987
37,812
265
1,790
1,457
2,220
63
48
94,642
12,797
10,142
1,589
5,265
29,793
124,435
(637)
(951)
(11,348)
(553)
(2,686)
(3,202)
(19,377)
(16,432)
(861)
(4,804)
(556)
(96)
(717)
(23,466)
(42,843)
81,592
12,012
132,729
(56,762)
(9,445)
3,058
81,592
81,592
The accompanying notes on pages 86 to 126 form an integral part of these consolidated financial statements.
The financial statements of Animalcare Group plc on pages 127 to 141, registered number 01058015, were approved by the
Board of Directors and authorised for issue on 29 March 2022. They were signed on their behalf by:
JENNIFER WINTER
Chief Executive Officer
CHRIS BREWSTER
Chief Financial Officer
82
Annual Report 2021 Animalcare Group plc Consolidated Statement of Changes in Equity
YEAR ENDED 31 DECEMBER 2021
At 1 January 2021
Loss for the year
Other comprehensive expense
Total comprehensive expense
Dividends paid
Exercise of share options
Share -based payments
At 31 December 2021
At 1 January 2020
Profit for the year
Other comprehensive income
Total comprehensive expense
Dividends paid
Share -based payments
At 31 December 2020
Attributable to the owners of the parents
Share
capital
£’000
12,012
−
−
−
−
7
−
12,019
Share
premium
£’000
132,729
−
−
−
−
69
−
132,798
Retained
earnings/
Accumulated
losses
£’000
(9,445)
(77)
−
(77)
(2,403)
−
249
(11,676)
Reverse
acquisition
reserve
£’000
(56,762)
−
−
−
−
−
−
(56,762)
Other
reserve
£’000
3,058
−
(638)
(638)
−
−
−
2,420
Attributable to the owners of the parents
Share
capital
£’000
12,012
−
−
−
−
−
12,012
Share
premium
£’000
132,729
−
−
−
−
−
132,729
Retained
earnings/
Accumulated
losses
£’000
(8,640)
234
−
234
(1,201)
162
(9,445)
Reverse
acquisition
reserve
£’000
(56,762)
−
−
−
−
−
(56,762)
Other
reserve
£’000
2,550
−
508
508
−
−
3,058
Total
£’000
81,592
(77)
(638)
(715)
(2,403)
76
249
78,799
Total
£’000
81,889
234
508
742
(1,201)
162
81,592
Reverse acquisition reserve
Reverse acquisition reserve represents the reserve that has been created upon the reverse acquisition of Animalcare
Group plc.
Other reserve
Other reserve mainly relates to currency translation differences. These exchange differences arise on the translation of
subsidiaries with a functional currency other than Sterling.
83
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Consolidated Cash Flow Statement
YEAR ENDED 31 DECEMBER 2021
For the year ended
31 December
2021
£’000
2020
£’000
945
188
1,185
7,217
2,761
249
(396)
120
760
(459)
1,221
88
(17)
3,541
1,356
(2,698)
(2,038)
14,023
(557)
(2,658)
540
(289)
(2,964)
(6,952)
(1,024)
76
(2,403)
(447)
(213)
(10,963)
96
5,265
272
5,633
199
93
1,243
8,149
19
162
(16)
534
509
(219)
815
(82)
−
640
(1,615)
882
(196)
11,117
(177)
(2,258)
122
(593)
(2,906)
(6,007)
(1,081)
−
(1,201)
(516)
(53)
(8,858)
(647)
6,165
(253)
5,265
Notes
11
10/23
9
9
26
10
9
11
23
22
14
14
Operating activities
Profit before tax
Non-cash and operational adjustments
Share in net loss of joint ventures
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of intangible assets
Share-based payment expense
(Gain)/loss on disposal of fixed assets
Non-cash movement in provisions
Movement allowance for bad debt and inventories
Financial income
Financial expense
Impact of foreign currencies
Fair value adjustment contingent consideration
Movements in working capital
Decrease in trade receivables
Decrease/(increase) in inventories
(Decrease)/increase in payables
Income tax paid
Net cash flow from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from the sale of property, plant and equipment (net)
Capital contribution in joint venture
Net cash flow used in investing activities
Financing activities
Repayment of loans and borrowings
Repayment of IFRS16 lease liability
Receipts from issue of share capital
Dividends paid
Interest paid
Other financial (expense)/income
Net cash flow used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange rate differences on cash and cash equivalents
Cash and cash equivalents at end of year
84
Annual Report 2021 Animalcare Group plc Reconciliation of net cash flow to movement in net debt
Net increase in cash and cash equivalents in the year
Cash flow from decrease in debt financing
Foreign exchange differences on cash and borrowings
Movement in net debt during the year
Net debt at the start of the year
Movement in lease liabilities during the year
Net debt at the end of the year
For the year ended
31 December
2021
£’000
2020
£’000
96
6,952
1,148
8,196
(13,618)
92
(5,330)
(647)
6,007
(1,290)
4,070
(17,812)
124
(13,618)
Notes
23
85
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements
YEAR ENDED 31 DECEMBER 2021
1 FINANCIAL INFORMATION
Animalcare Group plc (“the
Company”) is a public company
incorporated in the United Kingdom
under the Companies Act 2006 and
is domiciled in the United Kingdom.
The address of its registered office
is Unit 7, 10 Great North Way, York
Business Park, York, YO26 6RB. The
Group comprises Animalcare Group
plc and its subsidiaries. The nature
of the Group’s operations and its
principal activities are set out within
the Directors’ Report. Details of the
subsidiaries can be found in Note 27.
2 BASIS OF PREPARATION
The Group financial statements have
been prepared and approved by the
Directors, except for the revaluation
of certain financial instruments, as
explained in Note 10, in accordance
with UK-adopted international
accounting standards (“IFRS”) and the
applicable legal requirements of the
Companies Act 2006. They have also
been prepared in accordance with the
requirements of the AIM Rules.
The consolidated financial statements
are presented in thousands of pound
sterling (£k or thousands of £) and all
“currency” values are rounded to the
nearest thousand (£000), except when
otherwise indicated.
Note that Animalcare Group plc has
provided a guarantee under section
479a of the Companies Act 2006 to
Identicare Ltd for the Company to take
exemption from audit.
The preparation of financial
statements in compliance with
adopted IFRS requires the use of
certain critical accounting estimates.
It also requires Group management
to exercise judgement in applying
the Group’s accounting policies. The
areas where significant judgements
and estimates have been made in
preparing the financial statements and
their effect are disclosed in Note 3.
The accounting policies have been
applied consistently.
Changes to significant accounting
policies are described in Note 3.
The consolidated financial statements
cover the year ended 31 December
2021 and compromise the
consolidated results of the Group
described in Note 1.
In preparing the financial statements
of the Group we have considered
the impact of climate change, with
reference to our principal risks and
the environmental disclosures made
in the Sustainability Report on page
38. There has been no material impact
on the financial statements for the
current year, including estimates
and judgements made in respect
of impairment and going concern
analyses. The Directors have also
assessed climate change is not
expected to have a meaningful impact
on the Group in the medium term.
The Group’s analysis on the impact of
climate change continues to evolve as
part of our ESG agenda.
3 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Going concern
The Directors have prepared cash
flow forecasts for a period of at least
12 months from the date of signing
of these financial statements (the
going concern assessment period).
These forecasts indicate that the
Group will have sufficient funds to
meet its obligations as they fall due,
taking into account the potential
impact of “severe but plausible”
downside scenarios to factor in a
range of downside revenue estimates,
including further unexpected COVID
disruptions, and higher than expected
inflation across our cost base, with
corresponding mitigating actions.
The output from these scenarios
shows the Group has adequate
levels of liquidity from its committed
facilities and complies with all its
banking covenants throughout the
going concern assessment period.
Accordingly, the Directors continue
to adopt the going concern basis of
preparation.
The Group’s financing arrangements
consist of a committed revolving
credit facility of €41.5m and a €10m
acquisition line, which cannot be
utilised to fund our operations.
The facilities remain subject to the
following covenants which are in
operation at all times:
Net debt to underlying EBITDA ratio
of 3.5 times; underlying EBITDA to
interest ratio of minimum 4 times; and
solvency (total assets less goodwill/
total equity less goodwill) greater
than 25%. As at 31 December 2021
and throughout the financial year, all
covenant requirements were met with
significant headroom across all three
measures. The principal risks and
uncertainties facing the Group are set
out in the Strategic Report on pages
27 to 33.
Basis for consolidation
The consolidated financial statements
comprise the financial statements of
the Group and its subsidiaries.
Entities are fully consolidated from the
date of acquisition, which is the date
when the Group obtains control, and
continue to be consolidated until the
date when such control ceases. The
financial statements of the entities
are prepared for the same reporting
period as the parent Company, using
consistent accounting policies. All
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Annual Report 2021 Animalcare Group plc intra-Group balances, transactions,
unrealised gains and losses resulting
from intra-Group transactions and
dividends are fully eliminated.
The Group attributes profit or loss
and each component of other
comprehensive income to the owners
of the parent Company and to the
non-controlling interest based on
present ownership interests, even
if the results in the non-controlling
interest have a negative balance.
A change in the ownership interest
of a subsidiary, without a loss of
control, is accounted for as an equity
transaction. If the Group loses control
over the subsidiary, it will derecognise
the assets (including goodwill) and
liabilities of the subsidiary, any non-
controlling interest and the other
components that are equity related
to the subsidiary. Any surplus or
deficit arising from the loss of control
is recognised in profit or loss. If the
Group retains an interest in the
previous subsidiary, then such interest
is measured at fair value at the date
the control is lost.
The proportion allocated to the
parent and non-controlling interests
in preparing the consolidated financial
statements is determined based solely
on present ownership interests.
Note that Animalcare Group plc has
provided a guarantee under section
479a of the Companies Act 2006 to
Identicare Ltd for the Company to take
exemption from audit.
Non-underlying items
Non-underlying 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 as exceptional items.
Other items relates 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 financial statements
to better understand the elements of
trading performance during the year
and hence to better assess trends in
that performance.
Segment reporting
Operating segments are reported
in a manner consistent with the
internal reporting provided to the
chief operating decision-maker. The
chief operating decision-maker,
who is responsible for allocating
resources and assessing performance
of the operating segments, has been
identified as the Executive Committee.
Operating segments are aggregated
when they have similar economic
characteristics which is the case
when there is similarity in terms
of: (a) the nature of the products
and services; (b) the nature of the
production processes; (c) the type or
class of customer for their products
and services; (d) the methods used to
distribute their products or provide
their services; and (e) if applicable, the
nature of the regulatory environment.
Foreign currency translation
Functional and presentation currency
The Group’s consolidated financial
statements are presented in Pounds
Sterling (GBP) which is the Group’s
presentational currency. For each
entity, the Group determines the
functional currency, and items
included in the financial statements
of each entity are measured using the
functional currency. The functional
currency of most subsidiaries of
the Group is Euros. The statement
of financial position is translated
into GBP at the closing rate on the
reporting date and their income
statement is translated at the average
exchange rate at month-end for both
the years ended December 2020 and
2021. Differences resulting from the
translation of the financial statements
of the parent and the subsidiaries are
recognised in other comprehensive
income as “cumulative translation
differences”.
Foreign currency transactions
Transactions denominated in foreign
currencies are translated into
functional currency at the exchange
rate at the end of the previous month-
end. Monetary items in the statement
of financial position are translated
at the closing rate at each reporting
date and the relevant translation
adjustments are recognised in
financial or operating result depending
on its nature.
Property, plant and equipment
Property, plant and equipment is
stated at cost, net of accumulated
depreciation and/or accumulated
impairment losses, if any. When
significant parts of property, plant and
equipment are required to be replaced
at intervals, the Group recognises
such parts as individual assets with
specific useful lives and depreciates
them accordingly. Likewise, when a
major inspection is performed, its cost
is recognised in the carrying amount
of the property, plant and equipment
as a replacement if the recognition
criteria are satisfied. All other repair
and maintenance costs are recognised
in the income statement as incurred.
87
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
Depreciation is calculated on a
straight-line basis over the estimated
useful lives of the assets as follows:
5 years
• Equipment
• Office furniture 3-5 years or
lease term if
shorter
5 years or lease
term if shorter
and office
equipment
• Leasehold
improvements
Land is not depreciated.
An item of property, plant and
equipment and any significant part
initially recognised is derecognised
upon disposal or when no future
economic benefits are expected
from its use or disposal. Any gain or
loss arising on derecognition of the
asset (calculated as the difference
between the net disposal proceeds
and the carrying amount of the asset)
is included in the income statement
when the asset is derecognised. The
assets’ residual values, useful lives and
methods of depreciation are reviewed
at each financial year end and
adjusted prospectively, if appropriate.
Leases
The Group leases various vehicles
and buildings. Rental contracts are
typically made for fixed periods of
one year to ten years but may have
extension options. Contracts may
contain both lease and non-lease
components. However, for lease of
real estate for which the Group is a
lessee, it has elected not to separate
lease and non-lease components and
instead accounts for these as a single
lease component. Lease terms are
negotiated on an individual basis and
contain a wide range of different terms
and conditions. The lease agreements
do not impose any covenants, but
leased assets may not be used as
security for borrowing purposes.
88
Assets and liabilities arising from
a lease are initially measured on a
present value basis. Lease liabilities
include the net present value of the
following lease payments:
•
fixed payments, less any lease
incentives receivable;
• amounts expected to be payable
•
by the Group under residual value
guarantees;
the exercise price of a purchase
option if the Group is reasonably
certain to exercise that option; and
• payments of penalties for
terminating the lease, if the lease
term reflects the Group exercising
that option.
Lease payments to be made under
reasonably certain extension options
are also included in the measurement
of the liability. The lease payments
are discounted using the lessee’s
incremental borrowing rate, which
is the rate that the individual lessee
would have to pay to borrow the funds
necessary to obtain an asset of similar
value to the right-of -use asset in a
similar economic environment with
similar terms, security and conditions.
To determine the incremental
borrowing rate, the Group:
• where possible, uses recent
third-party financing received by
the individual lessee as a starting
point, adjusted to reflect changes
in financing conditions since
third-party financing was received;
• uses a build-up approach that
starts with a risk-free interest
rate adjusted for credit risk for
leases held by the Group, which
does not have recent third-party
financing; and
• makes adjustments specific to the
lease, e.g. term, country, currency
and security.
If a readily observable amortising loan
rate is available to the individual lessee
(through recent financing or market
data) which has a similar payment
profile to the lease, then the Group
entities use that rate as a starting
point to determine the incremental
borrowing rate.
The Group is exposed to potential
future increases in variable lease
payments based on an index or rate,
which are not included in the lease
liability until they take effect. When
adjustments to lease payments
based on an index or rate take effect,
the lease liability is reassessed and
adjusted against the right-of-use asset.
Lease payments are allocated between
principal and finance cost. The finance
cost is charged to profit or loss over
the lease period so as to produce a
constant periodic rate of interest on
the remaining balance of the liability
for each period.
Right-of-use assets are measured at
cost comprising the following:
•
the amount of the initial
measurement of lease liability;
• any lease payments made at or
before the commencement date
less any lease incentives received;
• any initial direct costs; and
•
restoration costs.
Right-of-use assets are generally
depreciated over the shorter of the
asset’s useful life and the lease term
on a straight-line basis. If the Group
is reasonably certain to exercise a
purchase option, the right-of-use asset
is depreciated over the underlying
asset’s useful life. The term varies
between 4 to 5 years. While the Group
revalues its land and buildings that are
presented within property, plant and
equipment, it has chosen not to do so
for the right-of-use buildings held by
the Group.
Annual Report 2021 Animalcare Group plc Payments associated with short-term
leases of equipment and vehicles
and all leases of low-value assets are
recognised on a straight-line basis as
an expense in profit or loss. Short-
term leases are leases with a lease
term of 12 months or less. Low-value
assets comprise IT equipment and
small items of office furniture.
Extension and termination options
are included in a number of property
and equipment leases across the
Group. These are used to maximise
operational flexibility in terms of
managing the assets used in the
Group’s operations. The majority of
extension and termination options
held are exercisable only by the Group
and not by the respective lessor.
Intangible assets
Intangible assets comprise the
acquired product portfolios, in-process
research and development, licensing
and distribution rights and customers
acquired in connection with business
combinations, product portfolios
and product development costs and
capitalised software.
The useful life of the intangible assets
is as follows:
• Capitalised software 5 years
• Patents, distribution
rights and licenses 7-12 years
• Product portfolios
and product
development
In -process research
and development
•
• Goodwill
7-15 years
not amortised
not amortised
Intangible assets acquired separately
Intangible assets with finite useful
lives which are acquired separately
are carried at cost less accumulated
amortisation and accumulated
impairment losses. Intangible assets
with finite lives are amortised over
their useful economic lives and
assessed for impairment whenever
there is an indication that the
intangible asset may be impaired.
The amortisation period and the
amortisation method for an intangible
asset with a finite useful life are
reviewed at least at the end of each
reporting period. The amortisation
expense on intangible assets with
finite lives is recognised in the
consolidated income statement based
on its function which may be “cost of
sales”, “sales and marketing expenses”,
“research and development expenses”
and “general and administrative
expenses”.
Intangible assets with indefinite useful
lives that are acquired separately
are carried at cost less accumulated
impairment losses.
Goodwill
Goodwill is not amortised but it is
tested for impairment annually, or
more frequently if events or changes
in circumstances indicate that it might
be impaired, and is carried at cost
less accumulated impairment losses.
Gains and losses on the disposal of
an entity include the carrying amount
of goodwill relating to the entity
sold. Goodwill is allocated to cash-
generating units for the purpose of
impairment testing. The allocation is
made to those cash generating units
or groups of cash-generating units
that are expected to benefit from the
business combination in which the
goodwill arose. The units or groups of
units are identified at the lowest level
at which goodwill is monitored for
internal management purposes, being
the operating segments.
Internally generated intangible
assets – research and development
expenditures
Research and development includes
the costs incurred by activities related
to the development of software
solutions (new products, updates and
enhancements), guides and other
products. Expenditures in research
and development activities are
recognised as an expense in the period
in which they are incurred.
Development activities involve the
application of research findings or
other knowledge to a plan or a design
of new or substantially improved
(software) products before the start of
the commercial use.
Internal development expenditures on
an individual project are recognised
as an intangible asset when the Group
can demonstrate:
•
the technical feasibility of
completing the intangible asset so
that the asset will be available for
use or sale;
its intention to complete and its
ability to use or sell the asset;
• how the asset will generate future
•
•
•
economic benefits;
the availability of resources to
complete the asset;
the ability to measure reliably the
expenditure during development.
Internal development expenditures
not satisfying the above criteria and
expenditures on the research phase
are recognised in the consolidated
income statement as incurred.
Subsequent to initial recognition,
internally generated intangible assets
are reported at cost less accumulated
amortisation and accumulated
impairment losses, on the same basis
as intangible assets which are acquired
separately.
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Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
Intangible assets acquired in a
business combination
Intangible assets acquired in a
business combination and recognised
separately from goodwill are initially
recognised at their fair value at the
acquisition date (which is regarded
as their cost). Subsequent to initial
recognition, intangible assets acquired
in a business combination are
measured at cost less accumulated
amortisation and accumulated
impairment losses, on the same basis
as intangible assets which are acquired
separately.
Impairment of non-financial assets
Impairment tests on goodwill and
other intangible assets with indefinite
useful economic lives are undertaken
annually at the financial year end.
Other non-financial assets are subject
to impairment tests whenever events
or changes in circumstances indicate
that their carrying amount may not be
recoverable. Where the carrying value
of an asset exceeds its recoverable
amount (i.e. the higher of value in use
and fair value less costs to sell), the
asset is written down accordingly.
Where it is not possible to estimate
the recoverable amount of an
individual asset, the impairment test
is carried out on the smallest group of
assets to which it belongs for which
there are separately identifiable
cash flows; its cash-generating units
(“CGUs”). Goodwill is allocated on
initial recognition to each of the
Group’s CGUs that are expected
to benefit from the synergies of
the combination giving rise to the
goodwill.
The Group bases its impairment
calculation on detailed budgets and
forecast calculations, which are
prepared separately for each of the
Group’s CGUs to which the individual
assets are allocated. These budgets
90
and forecast calculations generally
cover a period of five years. For longer
periods, a long-term growth rate is
calculated and applied to future cash
flows projected after the fifth year.
Impairment charges are included
in profit or loss, except, where
applicable, to the extent they
reverse gains previously recognised
in other comprehensive income.
An impairment loss recognised for
goodwill is not reversed.
Where goodwill forms part of a
cash-generating unit and part of the
operation within that unit is disposed
of, the goodwill associated with the
operation disposed of is included in
the carrying amount of the operation
when determining the gain or loss on
disposal of the operation. Goodwill
disposed of in this circumstance is
measured based on the relative values
of the operation disposed of and the
portion of the cash-generating unit
retained.
Investments in joint ventures
The Group carries an investment in
a joint venture (Stem Animal Health
Inc.). The Group’s investment in its
joint venture is accounted for using
the equity method.
Under the equity method, the
investment in the joint venture
was initially recognised at cost. The
carrying amount of the investment is
adjusted to recognise changes in the
Group’s share of net assets of the joint
venture since the acquisition date.
Goodwill relating to the joint venture
is included in the carrying amount of
the investment and is not tested for
impairment individually.
The income statement reflects
the Group’s share of the results of
operations of the joint venture. Any
change in other comprehensive
income of the joint venture is
presented as part of the Group’s other
comprehensive income. In addition,
when there has been a change
recognised directly in the equity of the
joint venture, the Group recognises its
share of the change in the statement
of changes in equity. Unrealised gains
and losses resulting from transactions
between the Group and the joint
venture are eliminated to the extent of
the interest in the joint venture.
After application of the equity
method, the Group determines
whether it is necessary to recognise an
impairment loss on its investment in
its joint venture.
At each reporting date, the Group
determines whether there is objective
evidence that the investment in the
joint venture is impaired. If there is
such evidence, the Group calculates
the amount of impairment as the
difference between the recoverable
amount of the Group’s interest in the
joint venture (higher of value in use
and fair value less costs to sell), and
then recognises the loss as “Share of
profit or loss of joint ventures” in the
income statement.
Inventories
Inventories are valued at the lower of
cost and net realisable value.
Costs incurred in bringing each
product to its present location and
condition are accounted for as follows:
• Raw materials: purchase cost on a
first in, first out basis;
• Goods purchased for resale:
purchase cost on a first in, first out
basis.
Net realisable value is the estimated
selling price in the ordinary course
of business, less estimated costs of
completion and the estimated costs
necessary to make the sale.
Annual Report 2021 Animalcare Group plc Financial assets
Financial assets are classified at
initial recognition, and subsequently
measured at amortised cost, fair value
through other comprehensive income
(OCI), and fair value through profit
or loss.
The classification of financial assets
at initial recognition depends on
the financial asset’s contractual
cash flow characteristics and the
Group’s business model for managing
them. With the exception of trade
receivables that do not contain a
significant financing component or
for which the Group has applied the
practical expedient, the Group initially
measures a financial asset at its fair
value plus transaction costs, in the
case of a financial asset not at fair
value through profit or loss or OCI.
Trade receivables that do not contain
a significant financing component or
for which the Group has applied the
practical expedient are measured at
the transaction price.
For purposes of subsequent
measurement, financial assets are
classified in two categories:
• Financial assets at amortised
cost; and
• Financial assets at fair value
through profit or loss.
Financial assets measured at
amortised cost
This category is the most relevant
to the Group. The Group measures
financial assets at amortised cost
if both of the following conditions
are met:
• The financial asset is held within a
business model with the objective
to hold financial assets in order to
collect contractual cash flows; and
•
The contractual terms of the
financial asset give rise on
specified dates to cash flows that
are solely payments of principal
and interest on the principal
amount outstanding.
Financial assets, trade and other
receivables, cash and cash equivalents
at amortised cost are subsequently
measured using the effective interest
rate (EIR) method and are subject
to impairment. Gains and losses are
recognised in profit or loss when the
asset is derecognised, modified or
impaired.
Financial instruments measured at
fair value through profit or loss
The Group does have the following
financial assets classified as financial
assets at fair value through profit
or loss:
• A call option on an additional stake
in STEM as disclosed in Note 4 on
investments in joint ventures.
Those financial assets are carried in
the statement of financial position at
fair value with changes recognised
in the income statement in the lines
financial income/expense.
Derecognition
A financial asset is derecognised when:
• The rights to receive cash flows
from the asset have expired, or
• The Group has transferred its
rights to receive cash flows from
the assets.
Impairment of financial assets
The Group assesses at each reporting
date whether there is any objective
evidence that a financial asset or a
group of financial assets is impaired. A
financial asset or a group of financial
assets is to be impaired if there is
objective evidence of impairment as a
result of one or more events that has
occurred after the initial recognition
of the asset (an incurred “loss event”)
and that loss event has an impact on
the estimated future cash flows of the
financial asset or the group of financial
assets that can be reliably estimated.
The Group recognises an allowance
for expected credit losses (ECLs) for all
debt instruments not held at fair value
through profit or loss.
For trade receivables and contract
assets, the Group applies a simplified
approach in calculating ECLs. A loss
allowance is recognised at each
reporting date based on lifetime ECLs.
The Group established a provision
matrix that is based on its historical
loss experience, adjusted for forward-
looking factors specific to the debtors
and the economic environment.
For all other receivables, ECLs are
based on the difference between
the contractual cash flows due in
accordance with the contract and
all the cash flows that the Group
expects to receive, discounted at an
approximation of the original effective
interest rate. The expected cash
flows will include cash flows from the
sale of collateral held or other credit
enhancements that are integral to the
contractual terms. ECLs are recognised
in two stages. For credit exposures for
which there has not been a significant
increase in credit risk since initial
recognition, ECLs are provided for
credit losses that result from default
events that are possible within the
next 12 months (a 12-month ECL).
For those credit exposures for which
there has been a significant increase
in credit risk since initial recognition,
a loss allowance is required for credit
losses expected over the remaining
life of the exposure, irrespective of the
timing of the default (a lifetime ECL).
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Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
Financial liabilities
The Group has financial liabilities
measured at amortised cost which
include loans and borrowings, trade
payables and other payables and
financial liabilities resulting from an
interest rate swap (classified as held
for trading).
Financial liabilities at amortised cost
Those financial liabilities are
recognised initially at fair value plus
directly attributable transaction
costs and are measured at amortised
cost using the effective interest
rate method. Gains and losses are
recognised in the income statement
when the liabilities are derecognised
as well as through the effective
interest rate method amortisation
process.
Derivative financial liabilities
The Group uses derivative financial
instruments to hedge the exposure to
changes in interest rates, however the
use of derivatives is limited and does
not represent significant amounts.
Derivative financial instruments
are initially measured at fair value.
After initial recognition, the financial
instruments are measured at fair value
through profit or loss.
Such hedging transactions do not
qualify for hedge accounting criteria,
although they offer economic hedging
according to the Group’s risk policy.
Changes in the fair value of such
instruments are recognised directly in
the consolidated statement of profit
or loss.
Derecognition
A financial liability is derecognised
when the obligation under the liability
is discharged or cancelled or expires.
Offsetting of financial
instruments
Financial assets and financial liabilities
are offset and the net amount
is reported in the consolidated
statement of financial position if there
is a currently enforceable legal right
to offset the recognised amounts and
there is an intention to settle on a
net basis, or to realise the assets and
settle the liabilities simultaneously.
Share capital
Financial instruments issued by the
Group are classified as share capital
only to the extent that they do not
meet the definition of a financial
liability or financial asset. The Group’s
ordinary shares are classified as equity
instruments.
Dividends
Dividends paid are recognised within
the statement of changes in equity
only when an obligation to pay the
dividends arises prior to the year end.
Share-based payments
The Group issues equity-settled
share-based payments to certain
employees. Equity-settled share-based
payments are measured at fair value
(excluding the effect of non-market-
based vesting conditions) at the date
of grant. The fair value determined at
the grant date of such equity-settled
share-based payments is expensed on
a straight-line basis over the vesting
period, based on the Group’s estimate
of shares that will eventually vest and
adjusted for the effect of non-market-
based vesting conditions (with a
corresponding movement in equity).
Fair value is measured by use of the
Black–Scholes model. The expected
life used in the model has been
adjusted, based on management’s
best estimate, for the effects of non-
transferability, exercise restrictions,
and behavioural considerations.
The fair value of the shares issued
under the new Long Term Incentive
Plan were valued on a discounted
cash flow basis in conjunction with a
third-party valuation specialist.
Provisions
Provisions are recognised when the
Group has a present obligation (legal
or constructive) as a result of a past
event. It is probable that an outflow
of resources embodying economic
benefits will be required to settle the
obligation and a reliable estimate
can be made of the amount of the
obligation.
Employee benefits
Short-term employee benefits
The Group has short-term employee
benefits which are recognised
when the service is performed as a
liability and expense. The short-term
employee benefit is the undiscounted
amount expected to be paid.
Management incentive plans
The Group has implemented an
incentive plan for some of its
employees. The liability recognised is
the undiscounted amount expected to
be paid.
Post-employment benefits
The Group has a defined contribution
obligation where the Group pays
contributions based on salaries to an
insurance company, in accordance
with the laws and agreements in each
country.
The Belgian defined contribution
pension plans are by the law of
April, 2008 related to supplementary
pension plans, subject to minimum
guaranteed rates of return, 3.25% on
employer contributions and 3.75% on
employee contributions. As a result of
the law of December 18, 2015 aiming
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Annual Report 2021 Animalcare Group plc to guarantee the sustainability and the
social nature of the supplementary
pension plans these minimum
guaranteed rates of return have been
adjusted. These rate are effective for
contributions paid as from 2016 to a
new variable minimum return based
on the Belgian government bonds,
with a minimum of 1.75% and a
maximum of 3.75%.
These plans qualify as a defined
benefit plan as from 1st January
2016 considering the modified law.
Previously, the Group has adopted
a retrospective approach whereby
the net liability recognised in the
statement of financial position is
based on the sum of the positive
differences, determined by individual
plan participant, between the
minimum guaranteed reserves and the
benefits accrued at the closing date
based on the actual rates of return.
Contributions are recognised as
expenses for the period in which
employees perform the corresponding
services. Outstanding payments at the
end of the year are shown as other
current liabilities.
Employee benefits – 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.
Revenue recognition
Revenue is recognised in a manner
that depicts the pattern of transfer of
goods and services to our customers.
The amount recognised reflects the
amount to which the Group expects
to be entitled in exchange for those
goods and services. The Group applies
the five-step model to account for
revenue arising from contracts with
customers.
Sales of goods and services
Revenue is recognised when the
performance obligation (the promise
to transfer a good or service to
a customer) is satisfied. In case
of product sales, satisfaction of
performance obligations and related
revenues recognition takes place
at a point in time which takes place
when the control of these goods are
transferred to the customer, generally
on delivery of the goods.
The Group recognises service
revenue by reference to the stage of
completion, as there is no contractual
restriction on the amount of times the
customer makes use of the services. 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 between eight
and 14 years.
Up-front income received in relation to
long-term service contracts is deferred
and subsequently recognised over the
life of the relevant contracts.
Interest income
For all financial instruments measured
at amortised cost, interest income
would be recorded using the effective
interest rate, which is the rate that
exactly discounts the estimated
future cash payments or receipts
over the expected life of the financial
instrument or a shorter period, where
appropriate, to the net carrying
amount of the financial asset or
liability. Interest income would be
included under financial income in the
income statement.
Financing costs
Financing costs relate to interests and
other costs incurred by the Group
related to the borrowing of funds.
Such costs mostly relate to interest
charges on short- and long-term
borrowings as well as the amortisation
of additional costs incurred on the
issuance of the related debt. Financing
costs are recognised in profit and loss
for the year or capitalised in case they
are related to a qualifying asset.
Other financial income and
expenses
Other financial income and expenses
include mainly foreign currency gains
or losses on financial transactions and
bank related expenses.
Taxes
Current income tax
Income tax assets and liabilities
for the current year are measured
at the amount expected to be
recovered from or paid to the
taxation authorities. The tax rates
and tax laws used to compute the
amount are those that are enacted
or substantively enacted, at the
reporting date.
Current income tax relating to
items that are recognised directly
in equity is recognised in equity
and not in the income statement.
Management periodically evaluates
positions taken in the tax returns
with respect to situations in which
applicable tax regulations are subject
to interpretation and establishes
provisions where appropriate.
Deferred tax
Deferred tax is calculated using
the liability method on temporary
differences at the reporting date
between the tax bases of assets and
liabilities and their carrying amounts
for financial reporting purposes.
Deferred tax liabilities are recognised
for all taxable temporary differences.
Deferred tax assets are recognised for
93
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
all deductible temporary differences,
carry forward of unused tax credits
and unused tax losses, to the extent
that it is probable that taxable profit
will be available against which the
deductible temporary differences, and
the carry forward of unused tax credits
and unused tax losses can be utilised.
The carrying amount of deferred tax
assets is reviewed at each reporting
date and reduced to the extent that
it is no longer probable that sufficient
taxable profit will be available to allow
all or part of the deferred tax asset
to be utilised. Unrecognised deferred
tax assets are reassessed at each
reporting date and are recognised
to the extent that it has become
probable that future taxable profits
will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are
measured at the tax rates that are
expected to apply in the year when
the asset is realised or the liability
is settled, based on tax rates (and
tax laws) that have been enacted
or substantively enacted at the
reporting date.
Deferred tax assets and deferred
tax liabilities are offset, if a legally
enforceable right exists to set off
current tax assets against current
income tax liabilities and the deferred
taxes relate to the same taxable entity
and the same taxation authority.
Fair value measurements
Fair value is the price that would
be received to sell an asset or paid
to transfer a liability in an orderly
transaction between market
participants at the measurement
date. The fair value measurement is
based on the presumption that the
transaction to sell the asset or transfer
the liability takes place either in the
principal market for the asset or
liability or in the absence of a principal
market, in the most advantageous
market for the asset or liability. The
principal or the most advantageous
market must be accessible by the
Group. The fair value of an asset
or a liability is measured using the
assumptions that market participants
would use when pricing the asset
or liability, assuming that market
participants act in their best economic
interest.
All assets and liabilities for which fair
value is measured or disclosed in the
financial statements are categorised
within the fair value hierarchy,
described as follows, based on the
lowest level input that is significant
to the fair value measurement as a
whole:
• Level 1 — Quoted (unadjusted)
market prices in active markets for
identical assets or liabilities
• Level 2 — Valuation techniques
for which the lowest level input
that is significant to the fair
value measurement is directly or
indirectly observable
• Level 3 — Valuation techniques
for which the lowest level input
that is significant to the fair value
measurement is unobservable
Events after balance sheet date
Events after the balance sheet date
which provide additional information
about the Company’s position as at
the balance sheet date (adjusting
events) are reflected in the financial
statements. Events after the balance
sheet date which are not adjusting
events are disclosed in the notes if
material.
New standards adopted as
of 2021
Standards and interpretations
applicable for the annual period
beginning on or after 1 January 2021:
• Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16 Interest
Rate Benchmark Reform – Phase
2 (applicable for annual periods
beginning on or after 1 January 2021)
• Amendments to IFRS 4 Insurance
Contracts – deferral of IFRS 9, effective
1 January 2021
• Amendment to IFRS 16 Leases COVID-
19-Related Rent Concessions , effective
1 June 2020, with early application
permitted
The Group has no transactions that
would be affected by the newly
effective standards or its accounting
policies are already consistent with the
new requirements. The Group has not
early adopted any standards.
Standards and interpretations
published, but not yet
applicable for the annual period
beginning on 1 January 2021
The IFRS accounting standards and
interpretations that are issued, but
net yet effective, up to the date of
issuance of the Group’s financial
statements are disclosed below.
The Group intends to adopt these
standards and interpretations, if
applicable, when they become
effective. These new standards will
have no material impact on the
Group’s financial statements.
• Amendment to IFRS 16 Leases
COVID-19-Related Rent
Concessions beyond 30 June 2021
(effective 1 April 2021, with early
application permitted)
94
Annual Report 2021 Animalcare Group plc • Amendments to IAS 1 Presentation
of Financial Statements:
Classification of Liabilities as
Current or Non-current effective 1
January 2023
• Amendments to IFRS 3 Business
Combinations; IAS 16 Property,
Plant and Equipment; IAS 37
Provisions, Contingent Liabilities
and Contingent Assets as well as
Annual Improvements, effective 1
January 2022
• Amendments to IAS 1 Presentation
of Financial Statements and IFRS
Practice Statement 2: Disclosure
of Accounting policies, effective 1
January 2023
IFRS 17 Insurance contracts
effective 1 January 2023
•
• Amendments to IAS 8 Accounting
policies, Changes in Accounting
Estimates and Errors: Definition of
Accounting Estimates, effective 1
January 2023
• Amendments to IAS 12 Income
Taxes: Deferred Tax related to
Assets and Liabilities arising from
a Single Transaction, effective 1
January 2023
Significant accounting
judgements, estimates and
assumptions
The preparation of the Group’s
consolidated financial statements
requires management to make
judgements, estimates and
assumptions that affect the reported
amounts of revenue, expenses, assets
and liabilities, and the accompanying
disclosures. Uncertainty about these
assumptions and estimates could
result in outcomes that require a
material adjustment to the carrying
amount of assets or liabilities for the
next financial year.
On an ongoing basis, the Group
evaluates its estimates, assumptions
and judgements, including those
related to revenue recognition,
development expenses, income taxes,
impairment of goodwill, intangible
assets and property, plant and
equipment and investments in joint
ventures.
The Group based its assumptions and
estimates on parameters available
when the consolidated financial
statements were prepared. Existing
circumstances and assumptions about
future developments, however, may
change due to market changes or
circumstances arising beyond the
control of the Group. Such changes
are reflected in the assumptions when
they occur.
Internally-developed intangible
assets
Under IAS 38, internally generated
intangible assets from the
development phase are recognised
if certain conditions are met. These
conditions include the technical
feasibility, intention to complete, the
ability to use or sell the asset under
development, and the demonstration
of how the asset will generate
probable future economic benefits.
The cost of a recognised internally
generated intangible asset comprises
all directly attributable cost necessary
to make the asset capable of being
used as intended by management. In
contrast, all expenditures arising from
the research phase are expensed as
incurred.
Determining whether internally
generated intangible assets from
development are to be recognised
as intangible assets requires
significant judgement, particularly in
determining whether the activities
are considered research activities or
development activities, whether the
product enhancement is substantial,
whether the completion of the asset
is technically feasible considering
a Company-specific approach, and
the probability of future economic
benefits from the sale or use.
Management has determined that the
conditions for recognising internally
generated intangible assets from
product development activities are not
met until shortly before the developed
products are available for sale. This
assessment is monitored by the Group
on a regular basis.
Income taxes
Deferred tax assets are recognised for
unused tax losses to the extent that it
is probable that taxable profit will be
available against which the losses can
be utilised. Significant management
judgement is required to determine
the amount of deferred tax assets that
can be recognised, based upon the
likely timing and the level of future
taxable profits together with future tax
planning strategies.
As at 31 December 2021, the Group
had £1,749k (2020: £1,929k) of tax
losses carried forward and other tax
credits such as investment tax credits
and notional interest deduction. These
losses relate to the subsidiaries that
have a history of losses, do not expire
and may not be used to offset taxable
income elsewhere in the Group.
95
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
Accordingly, the investment in
STEM is accounted for through the
equity method in the consolidated
statements.
Separately, we also announced that
we had entered into a licensing
agreement, under which we will invest
a further CA$2m, consisting of an
initial payment along with a series of
potential payments linked to various
milestones, for rights to commercialise
products in global veterinary markets
outside the Americas.
Both the remaining equity investment
in STEM and the licensing fee are
expected to be paid from existing cash
resources.
During the financial year the Group
made its first license payment of
CA$0.5m. The following payment is
due in 2023, therefore only a long-
term payable of CA$1.3m or £766k
is remaining. Further, for the capital
contribution, the outstanding short-
term liability is £277k (2020: £272k),
shown in the balance sheet as other
current liability. The outstanding
long-term liability is £502k (2020:
£717k ), shown in the balance sheet as
other non-current liability. The Group
expect the agreement to be earnings
enhancing in 2022.
In determining the appropriate
accounting treatment for STEM,
management applied significant
judgement. If management’s
judgements were to change, this
would result in consolidating STEM.
The following are the key
considerations and judgements
applied by management in concluding:
• STEM established during 2020 with
a global license over Kane Biotech’s
existing range of animal health oral
care products, where Kane grants
STEM an irrevocable, exclusive,
fully paid up, royalty-free, right
and license in the market and,
to develop, manufacture and
commercialise the products and to
practice the licensed intellectual
property.
• Management is of the view
that the Group doesn’t have
control over STEM, exposure,
or rights, to variable returns
from its involvement with STEM.
Management consider that the
call option is not substantive and
not favourable as of 31 December
2021 in terms of future benefits
and the value attached with the
option.
• The Group will continuously,
and on an annual basis, monitor
whether the call option is
substantive or not. As such, it
is possible that, in the future,
management may have to
conclude that the potential voting
rights become substantive and
that the potential voting rights
together with the existing voting
rights provide the Group control
over STEM.
•
• Management is of the view that,
based on the nature of the pre-
agreed decisions which require
special consent listed in the
shareholders’ agreement, both the
Group and Kane have joint control
over STEM.
It was agreed between both
parties that STEM will benefit
from predetermined mark-up
on the products STEM produce,
which will be distributed to both
parties through dividends and
that the Group doesn’t have
access to STEM assets or to incur
liabilities on behalf of STEM.
Accordingly, management is of the
view that based on the IFRS 11
Joint Arrangement flow chart, the
nature of the arrangement consists
of a joint venture rather than joint
operations.
Impairment of goodwill
The Group has goodwill for a total
amount of £50,337k (2020: £50,987k)
which has been subject to an
impairment test. The goodwill is tested
for impairment based on the value
in use (VIU). The key assumptions for
the VIU calculations are disclosed and
further explained in Note 8.
Impairment of slow-moving and
obsolete inventory
The Group performs regular
stockholding 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.
Stem Animal Health Inc. – joint
control
On 28 September 2020 the Group
announced that it has entered into
an agreement with Canada-based
biotech company Kane Biotech Inc.
under which the parties formed
STEM Animal Health Inc. (“STEM”),
a company dedicated to treating
biofilm-related ailments in animals.
The Group acquired, via its 100%
subsidiary Ecuphar NV, 33.34% in
STEM for a cash consideration of
CA$3m, of which CA$1m was paid in
2020, CA$0.5m during the financial
year and CA$1.5m still payable
over 34 months. The Group has an
option, for a period of five years, to
acquire an additional one-sixth stake
in STEM for CA$4 million. Based on
the existing voting rights (33.34%)
and other contractual arrangements,
the Group does not have power
over the investee. Further disclosure
is provided in Note 3 significant
accounting judgements, estimates and
assumptions.
96
Annual Report 2021 Animalcare Group plc 4 NON-UNDERLYING ITEMS
Amortisation and impairment of acquisition-related intangibles
Classified within research and development expenses
Classified within general and administrative expenses
Classified within net other operating expenses
Total amortisation and impairment of acquisition-related intangibles
Restructuring costs
Acquisition and integration costs
Brexit-related costs
Divestments and business disposals
COVID-19
Other non-underlying items
Total non-underlying items before taxes
Tax impact
Total non-underlying items after taxes
For the year ended
31 December
2021
£’000
2020
£’000
951
4,580
2,761
8,292
17
188
–
(462)
11
558
8,604
(1,303)
7,301
1,100
4,800
–
5,900
415
698
5
85
283
372
7,758
(1,639)
6,119
The amortisation charge of acquisition-related intangibles largely relates to the Esteve acquisition of £1,980k
(2020: £2,047k), the Riemser acquisition of £212k (2020: £373k) and the reverse acquisition of Animalcare Group plc of
£3,375k (2020: £3,479k).
The impairment charge of £2,761k. (2020: £nil) primarily reflects the non-cash impairment of four projects that formed part
of the acquired development pipeline, the principal drivers for which are:
•
•
the recall and suspension of all products containing ranitidine for human use by European and US authorities.
Consequently, Animalcare has ceased development of ranitidine for animal use; and
technical and manufacturing issues that have significantly impacted the timing of supply and expected commercial
returns of an equine product.
Expenses relating to acquisition, business development, integration, restructuring and other costs of £0.8m (2020: £1.5m)
include the carve out and partnership of Identicare Ltd, our microchipping and database services business, with effect
from 1 January 2022, reorganisation and restructuring of our Belgium and UK logistic operations and the relocation of our
Spanish office.
Finally, strong focus on core higher margin brands have led to several product divestments with associated income on sale
of £462k (2020:£85k).
The non-underlying items are excluded for KPI purposes as shown in the section on Key Performance Indicators on page 14.
97
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
5 SEGMENT INFORMATION
The pharmaceutical segment is active in the development and marketing of innovative pharmaceutical products that
provide significant benefits to animal health.
The measurement principles used by the Group in preparing this segment reporting are also the basis for segment
performance assessment. The Board of Directors of the Group acts as the Chief Operating Decision Maker. As a
performance indicator, the Chief Operating Decision Maker controls performance by the Group’s revenue, gross margin,
underlying EBITDA and EBITDA. EBITDA is defined by the Group as net profit plus finance expenses, less financial income,
plus income taxes and deferred taxes, plus depreciation, amortisation and impairment. Underlying EBITDA equals EBITDA
plus non-underlying items.
The following table summarises the segment reporting from continuing operations for 2021 and 2020. As management’s
controlling instrument is mainly revenue-based, the reporting information does not include assets and liabilities by segment
and is, as such, not presented per segment.
For the year ended
31 December
2021
£’000
2020
£’000
74,024
39,418
53%
13,455
18%
13,143
18%
70,494
36,559
52%
12,091
17%
10,231
15%
For the year ended
31 December
2021
£’000
13,143
(11,154)
1,989
(2,613)
1,757
(188)
(1,371)
349
(77)
2020
£’000
10,231
(9,428)
803
(1,051)
540
(93)
(985)
1,020
234
Pharma
Revenues
Gross profit
Gross profit %
Segment underlying EBITDA
Segment underlying EBITDA %
Segment EBITDA
Segment EBITDA %
The segment EBITDA is reconciled with the consolidated net profit/(loss) of the year as follows:
EBITDA
Depreciation, amortisation and impairment
Operating profit/(loss)
Financial expenses
Financial income
Share in net profit/(loss) of joint ventures
Income taxes
Deferred taxes
(Loss)/profit for the year
98
Annual Report 2021 Animalcare Group plc Segment assets excluding deferred tax assets and financial instruments located in Belgium, Spain, Portugal, the United
Kingdom and other geographies are as follows:
Belgium
Spain
Portugal
UK
Other
Non-current assets excluding deferred tax assets and financial instruments
Revenue by product category
Companion animals
Production animals
Horses
Other
Total
Revenue by geographical area
Belgium
The Netherlands
United Kingdom
Germany
Spain
Italy
Portugal
European Union – other
Asia
Middle East Africa
Other
Total
Revenue by category
Product sales
Services sales
Total
For the year ended
31 December
2021
£’000
8,834
2,811
4,061
62,157
5,881
83,744
2020
£’000
11,353
2,476
4,276
68,042
6,275
92,422
For the year ended
31 December
2021
£’000
51,326
16,980
5,637
81
74,024
2020
£’000
44,808
19,720
5,947
19
70,494
For the year ended
31 December
2021
£’000
4,023
1,769
15,471
10,373
21,035
8,885
4,193
6,971
681
1
622
74,024
2020
£’000
9,502
1,326
11,553
10,746
17,990
7,935
4,554
5,621
782
81
404
70,494
For the year ended
31 December
2021
£’000
72,651
1,373
74,024
2020
£’000
69,443
1,051
70,494
Product revenue is recognised when the performance obligation is satisfied at a point in time. Service revenue is recognised
by reference to the stage of completion.
99
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
6 INCOME AND EXPENSES
6.1 Cost of sales
Cost of sales includes the following expenses:
Purchase of goods and services
Inventory and other write-downs
Cost (reversal) stock devaluation
Payroll expenses
Other expenses
Total
6.2 Research and development expenses
Research and development expenses include the following:
Amortisation and depreciation
Payroll expenses
Other R&D expenses
Total
6.3 Selling and marketing expenses
Selling and marketing expenses include the following:
Transport costs of sold goods
Promotion costs
Payroll expenses
Amortisation and depreciation
Other
Total
6.4 General and administrative expenses
General and administrative expenses include the following:
Amortisation and depreciation
Payroll expenses
Other
Total
For the year ended
31 December
2021
£’000
33,016
154
227
439
770
34,606
2020
£’000
33,286
161
(340)
378
450
33,935
For the year ended
31 December
2021
£’000
1,681
1,361
90
3,132
2020
£’000
1,807
1,411
268
3,486
For the year ended
31 December
2021
£’000
823
2,792
7,545
2
1,115
12,277
2020
£’000
914
1,832
8,653
6
920
12,325
For the year ended
31 December
2021
£’000
6,705
4,430
7,927
19,062
2020
£’000
7,575
4,068
6,459
18,102
The expenses in other mainly relate to fees paid for services, training and seminars, IT and software related costs, and travel
and representation.
100
Annual Report 2021 Animalcare Group plc 6.5 Net other operating expenses
The net other operating expenses can be detailed as follows:
Re-invoicing costs
Gains/losses on disposals of fixed assets
Other operating income
Impairments
Other operating expenses
Total
For the year ended
31 December
2021
£’000
(53)
(16)
(441)
2,761
707
2,958
2020
£’000
(7)
(16)
(124)
19
1,971
1,843
The current year non-cash impairment charge of £2,761k relates to impairment of acquired or in-process R&D due to
regulatory and technical issues.
Other operating expenses for 2021 and 2020 principally relate to restructuring and integration costs.
6.6 Expenses by nature
Other operating lease rentals/short -term leases
Employee expenses
Depreciation and amortisation
Transport costs sold goods
Promotion costs
Other operating expense/(income) – Note 6.5
Other expenses
Total expenses
6.7 Payroll expenses
The following table shows the breakdown of payroll expenses for 2021 and 2020:
Wages and salaries
Social security costs
Other pension costs
Total
The monthly average number of employees during the year was as follows:
Sales and administration
Distribution
For the year ended
31 December
2021
£’000
646
13,336
8,402
823
2,643
2,958
8,621
37,429
2020
£’000
682
14,132
9,388
914
1,832
1,843
6,965
35,756
For the year ended
31 December
2021
£’000
11,775
1,788
212
13,775
2020
£’000
12,529
1,762
219
14,510
207
4
205
6
The payroll expenses for the year are impacted by the share-based payments. For more information refer to Note 26.
101
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
6 INCOME AND EXPENSES CONTINUED
6.8 Financial expenses
Financial expenses include the following elements:
Interest expense
Foreign currency losses
Change in fair value – losses on financial instruments
Other financial expenses
Total
6.9 Financial income
Financial income includes the following elements:
Foreign currency exchange gains
Income from financial assets
Other financial income
Total
6.10 Income tax
Income tax
The following table shows the breakdown of the tax expense for 2021 and 2020:
Current tax charge
Tax adjustments in respect of previous years
Total current tax charge
Deferred tax – origination and reversal of temporary differences
Deferred tax – adjustments in respect of previous years
Total deferred tax credit
Total tax (expense)/income for the year
For the year ended
31 December
2021
£’000
447
1,912
85
169
2,613
2020
£’000
516
418
17
100
1,051
For the year ended
31 December
2021
£’000
1,754
1
2
1,757
2020
£’000
518
13
9
540
For the year ended
31 December
2021
£’000
(1,371)
–
(1,371)
458
(109)
349
(1,022)
2020
£’000
(830)
(155)
(985)
950
70
1,020
35
102
Annual Report 2021 Animalcare Group plc The total tax expense can be reconciled to the accounting profit as follows:
Profit before tax
Share in net loss/(profit) of joint ventures
Profit before tax, excl. Share in net loss of joint ventures
Tax at 19% (2020: 19%)
Effect of:
Overseas tax rates
Non-deductible expenses
Other taxes
Use of tax losses previously not recognised
Changes in statutory enacted tax rate
Tax adjustments in respect of previous year
Non -recognition of deferred tax on current year losses
Recognition of formerly non-recognised deferred tax assets on TLCF
R&D relief
Other
Income tax (expense)/income as reported in the consolidated income statement
For the year ended
31 December
2021
£’000
945
(188)
1,133
(215)
2020
£’000
199
(93)
292
(55)
(386)
(180)
−
76
(273)
(109)
(105)
50
200
(80)
(1,022)
(262)
(109)
(7)
181
(4)
(85)
(423)
821
44
(66)
35
The tax credit of £1,303k (2020: £1,639k) shown within “non-underlying items” on the face of the consolidated income
statement, which forms part of the overall tax charge of £1,022k (2020: £35k credit) relates to the items in Note 4.
The tax rates used for the 2021 and 2020 reconciliation above are the corporate tax rates of 25% (Belgium), 15% (the
Netherlands), 30.7% (Germany), 33% (France), 25% (Spain), 24% (Italy), 21% (Portugal) and 19% (the United Kingdom).
These taxes are payable by corporate entities in the above -mentioned countries on taxable profits under tax law in that
jurisdiction.
The March 2021 Budget resulted in an increase in the UK standard rate of corporation tax to 25% from 1 April 2023. Given
the legislation was enacted during the year, deferred taxes have been adjusted accordingly, reflecting the increase of the tax
rate in the future, resulting in a deferred tax charge of £273k.
Deferred taxes at the balance sheet date have been measured using the enacted tax rates and reflected in these financial
statements.
Income tax payable
Tax payable relates to income taxes of £471k (2020: £553k).
103
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
6 INCOME AND EXPENSES CONTINUED
Deferred tax
(a) Recognised deferred tax assets and liabilities
Assets
Liabilities
Total
2021
£’000
(125)
243
(186)
1
(11)
94
182
3
13
1,749
1,963
2020
£’000
(150)
275
(309)
1
(22)
120
272
−
104
1,929
2,220
2021
£’000
(923)
(3,435)
(195)
−
(40)
59
223
−
40
−
(4,271)
Balance at
1 January
2021
£’000
(935)
(3,773)
(439)
1
(41)
166
104
404
−
1,929
(2,584)
Balance at
1 January
2020
£’000
(772)
(3,771)
(399)
1
(29)
2
6
407
903
(3,652)
2020
£’000
(785)
(4,048)
(130)
−
(19)
46
132
−
−
−
(4,804)
2021
£’000
(1,048)
(3,192)
(381)
1
(51)
153
405
3
53
1,749
(2,308)
2020
£’000
(935)
(3,773)
(439)
1
(41)
166
404
−
104
1,929
(2,584)
Recognised
in income
£’000
(174)
600
34
−
(13)
(11)
(44)
27
−
(70)
349
Recognised
in income
£’000
(118)
(37)
(21)
−
(10)
165
97
(24)
968
1,020
Foreign
exchange
adjustments
£’000
61
(19)
24
−
3
(2)
(7)
(26)
3
(110)
(73)
Foreign
exchange
adjustments
£’000
(45)
35
(19)
−
(2)
(1)
1
21
58
48
Balance at
31 December
2021
£’000
(1,048)
(3,192)
(381)
1
(51)
153
53
405
3
1,749
(2,308)
Balance at
31 December
2020
£’000
(935)
(3,773)
(439)
1
(41)
166
104
404
1,929
(2,584)
Goodwill
Intangible assets
Property, plant and equipment
Financial fixed assets
Inventory
Trade and other payables/receivables
Borrowings
Provisions
Accruals and deferred income
Tax losses carried forward
Total
(b) Movements during the year
Movement of deferred taxes during 2021:
Goodwill
Intangible assets
Property, plant and equipment
Financial fixed assets
Inventory
Trade and other payables/receivables
Accruals and deferred income
Borrowings
Provisions
Tax losses carried forward and other tax benefits
Net deferred tax
Movement of deferred taxes during 2020:
Goodwill
Intangible assets
Property, plant and equipment
Financial fixed assets
Inventory
Trade and other payables/receivables
Accruals and deferred income
Borrowings
Tax losses carried forward and other tax benefits
Net deferred tax
104
Annual Report 2021 Animalcare Group plc Tax losses
The Group has unused tax losses, tax credits and notional interest deduction available in an amount of £7,435k for 2021
(2020: £7,532k).
Deferred tax assets have been recognised on available tax losses carried forward for some legal entities, resulting in
amounts recognised of £1,749k (2020: £1,929k). This was based on management’s estimate that sufficient positive taxable
basis will be generated in the near future for the related legal entities with fiscal losses.
After re-evaluation it was decided that Ecuphar NV will not recognise new deferred tax assets of £118k in 2021.
7 EARNINGS PER SHARE
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of
the parent Company by the weighted average number of ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would be issued on conversion of all potential dilutive ordinary shares.
The following income and share data were used in the earnings per share computations:
Profit/(loss) before continuing operations
Net profit/(loss) for the year
Net profit/loss attributable to ordinary equity holders of the parent
adjusted for the effect of dilution
Average number of shares (basic and diluted)
Number of shares
Weighted average number of ordinary shares for basic earnings per share
Dilutive potential ordinary share options
Weighted average number of ordinary shares adjusted for effect of dilution
Basic earnings/(loss) per share
From operations attributable to the ordinary equity holders of the Company
Total basic earnings per share attributable to the ordinary equity holders
of the Company
Diluted earnings/(loss) per share
From operations attributable to the ordinary equity holders of the Company
Total basic earnings per share attributable to the ordinary equity holders
of the Company
For the year ended 31 December
2021
Underlying
£’000
7,224
2020
Underlying
£’000
6,353
7,224
6,353
2021
Total
£’000
(77)
(77)
2020
Total
£’000
234
234
2021
Underlying
60,081,167
376,836
60,458,003
For the year ended 31 December
2021
Total
60,081,167
376,836
60,458,003
2020
Underlying
60,057,161
42,581
60,099,742
2020
Total
60,057,161
42,581
60,099,742
For the year ended 31 December
2021
Underlying
in pence
12.0
2020
Underlying
in pence
10.6
2021
Total
in pence
(0.1)
2020
Total
in pence
0.4
12.0
10.6
(0.1)
0.4
For the year ended 31 December
2021
Underlying
in pence
12.0
2020
Underlying
in pence
10.6
2021
Total
in pence
(0.1)
2020
Total
in pence
0.4
12.0
10.6
(0.1)
0.4
105
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
8 GOODWILL
On acquisition, goodwill acquired in a business combination is allocated to the cash-generating units which are expected
to benefit from that business combination. This cash-generating unit corresponds to the nature of the business, being
Pharmaceuticals. The goodwill has been allocated to the cash-generating unit “CGU” as follows:
CGU: Pharmaceuticals
Total
For the year ended
31 December
2021
£’000
50,337
50,337
2020
£’000
50,987
50,987
The changes in the carrying value of the goodwill can be presented as follows for the years 2021 and 2020:
At 1 January 2020
Currency translation
At 31 December 2020
Currency translation
At 31 December 2021
Total
£’000
50,454
534
50,988
(651)
50,337
Goodwill allocated to the Pharmaceuticals CGU includes goodwill recognised as a result of past business combinations
of Esteve, Equipharma NV, Ecuphar BV, Cardon Pharmaceuticals NV and the reverse acquisition of Animalcare Group plc
in 2017.
The discount rate and growth rate (in perpetuity) used for value -in -use calculations are as follows:
Discount rate (pre-tax) %
Growth rate (in perpetuity) %
2021
11.8
1.9
2020
11.2
2.0
In the prior year the discount rate (pre-tax) was incorrectly disclosed as 10.2%. This has been restated to disclose the actual
pre-tax rate used in 2020 of 11.2%.
Cash flow forecasts are prepared using the current operating budget approved by the Directors, which covers a five-year
period and an appropriate extrapolation of cash flows beyond this. The cash flow forecasts assume revenue and profit
growth in line with our strategic priorities. Further, we have assessed the potential impact of climate change, with reference
to our principal risks and the environmental disclosures made in the Sustainability Report on page 38 and consider that the
impact on the valuation of goodwill is limited.
The Group’s impairment review is sensitive to change in assumptions used, most notably the discount rates and the
perpetuity growth rates.
A 1% increase in discount rates would cause the value in use of the CGU to reduce by £19.9m but would not give rise to an
impairment. A 1% reduction in perpetuity growth rates would cause the value in use of the CGU to reduce by £15.3m, but
would not give rise to an impairment.
The CGU is robust to small reductions in short-term cash flows, whether driven by lower sales growth, lower operating
profits or lower cash conversion. A 57% reduction in total annual cash flows would give rise to an impairment of £100k.
An increase in discount rates to 20.1% or a reduction in perpetuity growth rates to (18.6%) would each give rise to an
impairment in the CGU of £100k.
106
Annual Report 2021 Animalcare Group plc 9 INTANGIBLE ASSETS
The changes in the carrying value of the intangible assets can be presented as follows for the years 2021 and 2020:
Acquisition value/ cost
At 1 January 2020
Additions
Disposals
Currency translation
At 31 December 2020
At 1 January 2021
Additions
Disposals
Transfers
Currency translation
At 31 December 2021
Patents,
distribution
rights and
licences
£’000
Product
portfolios
and product
development
costs
£’000
In-process
R&D
£’000
Capitalised
software
£’000
17,921
1,592
(1,104)
246
18,655
18,655
1,247
(4,934)
(2,195)
(327)
12,446
18,438
39
−
789
19,266
19,266
−
(57)
−
(961)
18,248
38,606
51
(1,957)
916
37,616
37,616
1,030
(134)
2,195
(1,140)
39,567
1,516
573
(14)
74
2,149
2,149
1,080
(20)
−
(119)
3,090
Total
£’000
76,481
2,255
(3,075)
2,025
77,686
77,686
3,357
(5,145)
−
(2,547)
73,351
107
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
9 INTANGIBLE ASSETS CONTINUED
Amortisation
At 1 January 2020
Amortisation
Disposals
Impairments
Transfers
Currency translation
At 31 December 2020
At 1 January 2021
Amortisation
Disposals
Impairments
Currency translation
At 31 December 2021
Net carrying value
At 31 December 2021
At 31 December 2020
Patents,
distribution
rights and
licences
£’000
Product
portfolios
and product
development
costs
£’000
In-process
R&D
£’000
Capitalised
software
£’000
(4,813)
(1,473)
1,080
−
44
(93)
(5,255)
(5,255)
(1,387)
4,211
(2,671)
147
(4,955)
7,491
13,400
(9,969)
(2,805)
−
(19)
−
(511)
(13,304)
(13,304)
(1,897)
57
−
770
(14,374)
3,874
5,962
(17,769)
(3,508)
1,958
−
−
(619)
(19,938)
(19,938)
(3,303)
46
(77)
855
(22,417)
17,150
17,678
(930)
(363)
14
−
(44)
(54)
(1,377)
(1,377)
(630)
55
(13)
79
(1,886)
1,204
772
Total
£’000
(33,481)
(8,149)
3,052
(19)
−
(1,277)
(39,874)
(39,874)
(7,217)
4,369
(2,761)
1,851
(43,632)
29,719
37,812
In-process research and development relates to acquired development projects as part of the Esteve business combination
in 2015, the reverse acquisition of Animalcare Group plc in 2017 and external and internal in-process R&D costs for which
the capitalisation criteria are met. Patents, distribution rights and licences include amounts paid for exclusive distribution
rights as well as distribution rights acquired as part of the Esteve business combination in 2015 and the reverse acquisition
of Animalcare Group plc in 2017.
Product portfolios and product development costs relate to amounts paid for acquired brands as well as external and
internal product development costs capitalised on the development projects in the pipeline for which the capitalisation
criteria are met.
The capitalised software includes an IT driven by accelerated CRM software investment and website and platform
development relating to Identicare Ltd.
The total amortisation charge for 2021 is £7,217k (2020: £8,149k) which is included in lines cost of sales, research and
development expenses, sales and marketing expenses and general and administrative expenses of the consolidated income
statement. Included in the total amortisation and impairment charge is £8,292k (2020: £5,900k) relating to acquisition
related intangibles.
Further, an impairment charge of £2,761k (2020: £19k) was recorded during the financial year.
In 2021, the Group has invested in intangibles for an amount of £3,357k, which is £699k higher than the additions reported
in the cash flow (£2,658k). This is the result of the licence payable to STEM, which is only taken into capex for the actual
cash out part.
108
Annual Report 2021 Animalcare Group plc 10 PROPERTY, PLANT AND EQUIPMENT
The changes in the carrying value of the property, plant and equipment can be presented as follows for 2021 and 2020:
Acquisition value/ cost
At 1 January 2020
Additions
Disposals
Currency Translation
At 31 December 2020
Additions
Disposals
Currency Translation
At 31 December 2021
Depreciation
At 1 January 2020
Depreciation charge for the year
Disposals
Currency Translation
At 31 December 2020
Depreciation charge for the year
Disposals
Currency translation
At 31 December 2021
Net book value
At 31 December 2021
At 31 December 2020
Office
furniture and
equipment
£’000
Warehouse
and office
fitting
£’000
Leasehold
improvements
£’000
Fixed assets
under
construction
£’000
Equipment
£’000
393
5
−
13
411
1
(141)
(17)
254
(338)
(26)
−
(12)
(376)
(19)
130
16
(249)
5
35
1,589
48
(59)
66
1,644
51
(63)
(79)
1,553
(1,439)
(84)
58
(60)
(1,525)
(75)
62
72
(1,466)
87
119
184
−
−
−
184
−
(15)
−
169
(124)
(19)
−
−
(143)
(19)
13
−
(149)
20
41
299
−
−
18
317
6
−
(21)
302
(252)
(31)
−
(15)
(298)
(6)
−
22
(282)
20
19
−
124
(81)
8
51
499
(43)
(13)
494
−
−
−
−
−
−
−
−
−
494
51
Total
£’000
2,465
177
(140)
105
2,607
557
(262)
(130)
2,772
(2,153)
(160)
58
(87)
(2,342)
(119)
205
110
(2,146)
626
265
The investment in property, plant and equipment in 2021 amounted to £557k (2020: £177k) and mainly related to the
acquisitions of IT and office equipment.
The Group realised a net gain on disposals of property, plant and equipment of £396k in 2021 (2020: £ nil). No impairment
of property, plant and equipment was recorded in 2020.
Borrowing costs
No borrowing costs were capitalised during the year ended 31 December 2021 or 31 December 2020.
109
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
11 INVESTMENTS IN JOINT VENTURES
On 28 September 2020 the Group announced that it has entered into an agreement with Canada-based biotech company
Kane Biotech Inc. under which the parties formed STEM Animal Health Inc. (“STEM”), a company dedicated to treating
biofilm-related ailments in animals. The Group acquired, via its 100% subsidiary Ecuphar NV, 33.34% in STEM for a cash
consideration of CA$3m, of which CA$1m was paid in 2020, CA$0.5m during the financial year and CA$1.5m still payable
over 34 months. The Group has an option, for a period of five years, to acquire an additional one-sixth stake in STEM
for CA$4 million. Based on the existing voting rights (33.34%) and other contractual arrangements, the Group does not
have power over the investee. Further disclosure is provided in Note 3 Significant accounting judgements, estimates and
assumptions. Accordingly, the investment in STEM is accounted for through the equity method in the consolidated financial
statements.
Separately, we also announced that we had entered into a licensing agreement, under which we will invest a further
CA$2m, consisting of an initial payment along with a series of potential payments linked to various milestones, for rights to
commercialise products in global veterinary markets outside the Americas.
Both the remaining equity investment in STEM and the licensing fee are expected to be paid from existing cash resources.
During the financial year the Group made its first licence payment of CA$0.5m. The following payment is due in 2023,
therefore only a long-term payable of CA$1.3m (£766k) is remaining. Further, for the capital contribution, the outstanding
short-term liability is £277k (2020: £272k), shown in the balance sheet as other current liability. The outstanding long-term
liability is £502k (2020: £717k), shown in the balance sheet as other non-current liability. The Group expects the licensing
agreement to be earnings enhancing in 2022.
Place of
business/
country of
incorporation
Canada
% of ownership
interest
2021
%
33.34%
Nature of
relationship
2020
%
33.34%
Measurement
method
Joint venture
Carrying
amount
Equity method
Carrying amount
2021
£’000
1,290
2020
£’000
1457
Name of entity
STEM Animal Health Inc.
The tables below provide summarised financial information for the joint venture in STEM Animal Health Inc. which is
material to the Group. The information disclosed first reflects the amounts presented in the financial statements of the
relevant joint venture followed by Animalcare’s share of those amounts.
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Net assets
The table below shows the Animalcare group share at 33%:
Net assets
Goodwill
Fair value identified intangibles
Deferred tax liability
Investment value in joint venture
110
For the year
ended
31 December
2021
£’000
547
945
1,492
For the year
ended
31 December
2020
£’000
760
911
1,671
0
525
525
967
322
561
554
(147)
1,290
0
297
297
1,374
458
552
608
(161)
1,457
Annual Report 2021 Animalcare Group plc Summarised statement of comprehensive income:
Sales
Operating expenses
Financial result, net
Net (loss)/profit for the year
Group share in net (loss)/profit for the year
Depreciation on fair value adjustments on intangible fixed assets (net of deferred tax)
Total Group share in net (loss)/profit for the year
Other comprehensive income
Group share in total comprehensive income
For the year
ended
31 December
2021
£’000
856
(1,338)
55
(427)
(142)
(46)
(188)
21
(167)
For the year
ended
31 December
2020
£’000
134
(378)
(1)
(245)
(82)
(11)
(93)
(18)
(111)
Reconciliation of the aforementioned financial information with the net carrying amount of the investment of STEM Animal
Health Inc. in the consolidated financial statements:
As at 1 January
Acquisition in joint venture
Group share of net (loss)/profit for the year
Foreign currency translation differences
As at 31 December
12 INVENTORIES
Inventories include the following:
Raw materials
Goods purchased for resale
Total inventories (at cost or net realisable value)
1,457
−
(188)
21
1,290
−
1,568
(93)
(18)
1,457
For the year ended
31 December
2021
£’000
1,249
9,079
10,328
2020
£’000
1,400
11,397
12,797
The amount of inventory recognised as an expense during 2021 amounts to £33,016k (2020: £33,286k). Inventory write-
downs during 2021 amounted to £499k (2020: £573k). These costs are classified as a part of the costs of goods sold.
13 AMOUNTS RECEIVABLE AND OTHER NON-CURRENT ASSETS
Trade receivables include the following:
Trade receivables
Expected credit loss
Total
For the year ended
31 December
2021
£’000
7,212
(77)
7,135
2020
£’000
10,226
(84)
10,142
The Group applied the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables based on historical losses. Trade receivables are non-interest-bearing and are generally
on payment terms of between 30 to 90 days.
As at 31 December 2021, trade receivables of an initial value of £77k (2020: £84k) were impaired and fully provided for. The
table below shows the changes in the allowance of receivables.
111
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
13 AMOUNTS RECEIVABLE AND OTHER NON-CURRENT ASSETS CONTINUED
At 1 January 2020
Additional impairments
Reversal impairment
Exchange difference
At 31 December 2020
Additional impairments
Reversal impairment
Exchange difference
At 31 December 2021
Other current assets include the following:
Other receivables
Deferred charges
Total
£’000
(80)
(37)
37
(4)
(84)
(2)
3
6
(77)
For the year ended
31 December
2021
£’000
868
332
1,200
2020
£’000
1,228
361
1,589
Other current assets amount to £1,200k (2020: £1,589k) at the end of the reporting year and mainly include reclaimable
taxes and a receivable resulting from the sale of the Wholesaling business. On 3 September 2018, Ecuphar NV sold the
wholesale business Medini NV to Vetdis Holding NV (Vetdis) under a Share Purchase Agreement (SPA). In June 2019, Vetdis
sent a letter to Ecuphar claiming that Ecuphar had breached the SPA. Ecuphar disputes the majority of the claim, however
Ecuphar considers it likely that a part of the claim, amounting to €126,430, may be valid. Following various discussions and
correspondence, during which the parties were unable to reach any agreement, Vetdis issued formal court papers on 29
May 2020. A full court hearing to consider the case took place in the Commercial Court in Bruges on 2 March 2021. The
court did not decide on the merits of the claim, instead it appointed an expert auditor to examine the documents and
advise the court on the claim. The court however ordered Vetdis to pay the current account debt plus interest at 8%, and
on 4 May 2021, Vetdis made a payment of €432,762. The process involving the expert auditor is ongoing. Other than the
€126,430, which may be valid, no further provision in respect of this matter has been included in the financial statements
as the Directors consider this to be a contingent liability.
Deferred charges mainly include charges to be carried forward totaling £332K (2020: £361K prepayments).
For the year ended
31 December
2021
£’000
24
2020
£’000
48
Other non-current assets
112
Annual Report 2021 Animalcare Group plc 14 CASH AND CASH EQUIVALENTS
Cash and cash equivalents include the following:
Cash at bank
Total
For the year ended
31 December
2021
£’000
5,633
5,633
2020
£’000
5,265
5,265
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less.
There were no restrictions on cash during 2021 and 2020.
15 TRADE PAYABLES
Trade payables
Total
The Directors consider that the carrying amount of trade payables approximates to their fair value.
16 BORROWINGS
The loans and borrowings include the following:
Revolving credit facilities
Rollover investment facility
Acquisition loan
Lease liabilities
Total loans and borrowings
Of which
Non-current
Current
Interest
rate
Euribor +1.50%
Euribor +1.50%
Euribor +1.75%
See Note 22
Maturity
March 25
March 25
March 25
For the year ended
31 December
2021
£’000
10,021
10,021
2020
£’000
11,348
11,348
For the year ended
31 December
2021
£’000
5,462
−
3,781
1,719
10,962
2020
£’000
12,227
797
4,045
1,812
18,881
10,239
723
17,293
1,588
Revolving credit facilities and rollover investment facilities
The Group’s financing arrangements are split equally among four syndicate banks. The current agreements consist of:
• €41.5m revolving credit facilities
• €10m available acquisition financing
The loans have a variable, Euribor-based interest rate, increased with a margin of 1.5% or 1.75%. The revolving credit
facilities and the acquisition financing have a bullet maturity in March 2025.
113
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
17 PROVISIONS
Provisions consist of the following:
Service warranties
Contingent liability
Other
For the year ended
31 December
2021
£’000
126
208
74
408
2020
£’000
34
–
62
96
Provision is made for estimated indemnities in respect of products sold which are still under warranty. Contingent liability
relates to an onerous contract with a customer.
Carrying amount at start of the year
Additional provision
Charged/(credited) to P&L
- additional provision
- unused amounts reversed
- unwinding of discount
Amounts used during the year
Carrying amount at end of the year
Service
warranties
£’000
Contingent
liability
£’000
34
81
–
12
-1
–
–
126
–
208
–
–
–
–
–
208
Other
£’000
62
53
–
–
-41
–
–
74
Total
£’000
96
342
–
12
-42
–
–
408
The assessment of the accounting treatment of the Belgian employee benefit contribution plans with a minimal guaranteed
return was based on actuarial calculations which resulted in an immaterial impact as only a limited number of individuals
can benefit from the plan given the limited fixed amount which is being covered per covered individual. No provision has
been recognised as at 31 December 2021 and 2020. As a result no further disclosures have been provided.
Contingent liability relating to the sale of Medini NV
On 3 September 2018, Ecuphar NV sold the wholesale business Medini NV to Vetdis Holding NV (Vetdis) under a Share
Purchase Agreement (SPA). In June 2019, Vetdis sent a letter to Ecuphar claiming that Ecuphar had breached the SPA.
Ecuphar disputes the majority of the claim, however Ecuphar considers it likely that a part of the claim, amounting to
€126,430, may be valid. Following various discussions and correspondence, during which the parties were unable to reach
any agreement, Vetdis issued formal court papers on 29 May 2020. A full court hearing to consider the case took place in
the Commercial Court in Bruges on 2 March 2021. The court did not decide on the merits of the claim, instead it appointed
an expert auditor to examine the documents and advise the court on the claim. The court however ordered Vetdis to
pay the current account debt plus interest at 8%, and on 4 May 2021, Vetdis made a payment of €432,762. The process
involving the expert auditor is ongoing. Other than the €126,430, which may be valid, no further provision in respect of this
matter has been included in the financial statements.
18 OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consist of the fair value of the long-term capital contribution in STEM that hasn’t been paid yet.
Non-current liabilities
Total
114
For the year ended
31 December
2021
£’000
1,157
1,157
2020
£’000
717
717
Annual Report 2021 Animalcare Group plc
19 ACCRUED CHARGES AND CONTRACT LIABILITIES
Accrued charges and contract liabilities consists of the following:
Accrued charges
Contract liabilities – due within one year
Other
Total due within one year
Contract liabilities – due after one year
For the year ended
31 December
2021
£’000
923
168
(8)
1,083
675
2020
£’000
2,450
234
2
2,686
556
Accrued charges of £923k (2020: £2,450k) mainly include Ecuphar Veterinaria (£451k), Ecuphar NV (£138k) and Belphar
(£266k) and are mostly related to payroll and accrued bank interest costs.
Contract liabilities arise from certain services sold by the Group’s subsidiary Identicare Ltd. Historically, and in return for
a single upfront payment, Identicare Ltd committed to providing certain database, pet reunification and other support
services to customers over the life of the pet. There is no contractual restriction on the amount of times the customer
makes use of the services. 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 between eight and 14 years.
Throughout 2021, Identicare Ltd also operated both monthly and annual subscription-based services to pet owners, with
income recognised accordingly over the period of the subscription.
Movements in the Group’s contract liabilities:
Balance at the beginning of the year
Contract liabilities to following years
Release of contract liabilities from previous years
Balance at the end of the year
The contract liabilities fall due as follows:
Within one year
After one year
Balance at the end of the year
For the year ended
31 December
2021
£’000
790
170
(117)
843
2020
£’000
772
201
(183)
790
For the year ended
31 December
2021
£’000
168
675
843
2020
£’000
234
556
790
115
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
20 OTHER CURRENT LIABILITIES
Other current liabilities include the following:
Payroll-related liabilities
Indirect taxes payable
Other current liabilities
Total
For the year ended
31 December
2021
£’000
1,356
547
253
2,156
2020
£’000
1,288
1,658
256
3,202
The Group acquired a one-third stake in STEM Animal Health Inc. on 28 September 2020, for a cash consideration of
CA$3m, payable over 48 months, of which CA$1.0m was paid in 2020 and CA$0.5m (£0.3m) was paid during the current
financial year. As at 31 December 2021 other current liabilities relate to CA$0.5m (£0.3m) which becomes payable
during 2022.
21 FAIR VALUE
Financial assets
The carrying value and fair value of the financial assets for 31 December 2021 and 2020 are presented as follows:
Financial assets measured at amortised cost
Trade and other receivables (current)
Trade and other receivables (non-current)
Other financial assets (non-current)
Other current assets
Cash and cash equivalents
Total financial assets measured at amortised cost
Carrying value
2021
£’000
2020
£’000
7,135
24
90
1,199
5,633
14,081
10,142
48
63
1,589
5,265
17,107
Fair value
2021
£’000
7,135
24
90
1,199
5,633
14,081
2020
£’000
10,142
48
63
1,589
5,265
17,107
The fair value of the financial assets has been determined on the basis of the following methods and assumptions:
• The carrying value of the cash and cash equivalents and the current receivables approximate their fair value due to their
short-term character.
• Trade and other receivables are being evaluated on the basis of their credit risk and interest rate. Their fair value is not
different from their carrying value on 31 December 2021 and 2020.
Call option to acquire an additional 18% share in joint venture Stem Animal Health Inc.
• The Group has a call option to acquire an additional 18% share in its joint venture Stem Animal Health Inc. exercisable
for a period of six years. The call option is valued at fair value through Profit and Loss and has a carrying value of £nil
as of 31 December 2021 and will be remeasured every year. The call option is considered at level 3 in the fair value
hierarchy. Further disclosure is provided in Note 3 Significant accounting judgements, estimates and assumptions.
116
Annual Report 2021 Animalcare Group plc
Financial liabilities
The carrying value and fair value of the financial liabilities for 31 December 2021 and 2020 are presented as follows:
Financial liabilities measured at amortised cost
Borrowings
Lease liabilities
Trade payables
Other liabilities
Total financial liabilities measured at amortised cost
Total non-current
Total current
Carrying value
2021
£’000
2020
£’000
10,401
1,719
10,021
4,385
26,526
11,396
15,130
17,787
1,812
11,348
6,996
37,943
18,010
19,933
Fair value
2021
£’000
10,401
1,719
10,021
4,385
26,526
11,396
15,130
2020
£’000
17,787
1,812
11,348
6,996
37,943
18,010
19,933
The fair value of the financial liabilities has been determined on the basis of the following methods and assumptions:
• The carrying value of trade payables and other liabilities approximates their fair value due to the short-term character of
these instruments.
• Loans and borrowings are evaluated based on their interest rates and maturity date. Most interest-bearing debts have
floating interest rates and their fair value approximates to their amortised cost value.
Fair value hierarchy
The fair value hierarchy is described in Note 3. The financial liabilities are calculated based on level 1.
22 EQUITY
Share capital
Number of shares
Allotted, called up and fully paid Ordinary Shares of 20p each
Allotted, called up and fully paid Ordinary Shares of 20p each
The following share transactions have taken place during the year ended 31 December 2021:
At 1 January 2021
Exercise of share options
At 31 December 2021
For the year ended
31 December
2021
60,092,161
2020
60,057,161
For the year ended
31 December
2021
£’000
12,019
2020
£’000
12,012
For the year ended
31 December
Number of
shares
60,057,161
35,000
60,092,161
£’000
12,012
7
12,019
117
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
22 EQUITY CONTINUED
Dividends
Ordinary interim dividend paid for the year ended 31 December 2020 of 2.0p per share
Ordinary final dividend for the year ended 31 December 2020 of 2.0p per share
Ordinary interim dividend paid for the period ended 31 December 2021 of 2.0p per share
23 IFRS 16 LEASES
The balance sheet shows the following amounts relating to leases as at 31 December 2021:
Buildings
Vehicles
Other
Total right-of-use assets
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
For the year ended
31 December
2021
£’000
−
1,201
1,202
2,403
2020
£’000
1,201
−
−
1,201
31 December
2021
£’000
579
1,079
–
1,658
723
996
1,719
1 January
2021
£’000
831
957
1
1,789
951
861
1,812
118
Annual Report 2021 Animalcare Group plc 23 IFRS 16 LEASES CONTINUED
Below are the carrying amounts of right-of-use assets recognised and the movements during the year:
Land and
buildings
£’000
Vehicles
£’000
Other
£’000
Acquisition value/ cost
At 1 January 2020
Additions
Disposals and contract modifications
Transfers
Currency Translation
Other
At 31 December 2020
Additions
Disposals and contract modifications
Transfers
Currency Translation
Other
At 31 December 2021
Depreciation
At 1 January 2020
Depreciation charge for the year
Disposals
Transfers
Currency translation
At 31 December 2020
Depreciation charge for the year
Disposals and contract modifications
Transfers
Currency translation
At 31 December 2021
Net book value
At 31 December 2021
Below are the values for the movements in lease liability during the year:
At 1 January 2021
Additions
Disposals
Interest expense
Payments
Modifications
CTA
At 31 December 2021
1,271
343
(30)
(71)
57
–
1,570
336
(286)
3
(84)
(12)
1,527
(378)
(433)
22
71
(21)
(739)
(428)
182
(6)
43
(948)
1,587
583
(225)
–
84
–
2,029
881
(425)
–
(134)
(61)
2,290
(598)
(619)
181
–
(35)
(1,071)
(634)
424
–
70
(1,211)
81
–
(2)
–
5
–
84
–
(63)
(3)
(2)
–
16
(46)
(31)
(3)
–
(3)
(83)
(4)
63
6
2
(16)
Total
£’000
2,939
926
(257)
(71)
146
–
3,683
1,217
(774)
–
(220)
(73)
3,833
(1,022)
(1,083)
200
71
(59)
(1,893)
(1,066)
669
–
115
(2,175)
579
1,079
–
1,658
Lease liability
£’000
1,812
1,217
(118)
53
(1,077)
(61)
(107)
1,719
119
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
23 IFRS 16 LEASES CONTINUED
The following amounts are recognised in the income statement:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases and low-value assets
Total amount recognised in the income statement
Cash flows relating to leases are presented as follows:
For the year
ended
31 December
2021
£’000
(1,066)
(53)
(159)
(1,278)
• Cash payments for the principal portion of the lease liabilities as cash flows from financing activities;
• Cash payments for the interest portion consistent with presentation of interest payments chosen by the Group, and;
• Short-term lease payments, payments for leases of low-value assets and variable lease payments that are not included
in the measurement of the lease liabilities as cash flows from operating activities.
24 RISKS
In the exercise of its business activity, the Group is exposed to credit, liquidity and market risks.
Credit risk
As at 31 December 2021 the Group’s maximum exposure to credit risk is £7,135k, which is the amount of the trade
receivables in the consolidated financial statements (2020: £10,142k).
To control this risk, the Group has set up a strict credit collection process. Historically, no major bad debts have been
recorded. The Group has no individual customers who represent a significant part of the consolidated turnover, nor of the
trade receivables at year end.
The following is an aging schedule of trade receivables:
31 December 2021
31 December 2020
Total
£’000
7,135
10,142
Non-due
£’000
6,725
10,151
< 30 days
£’000
429
(92)
31-60 days
£’000
23
56
61-90 days
£’000
13
5
91-180 days
£’000
(57)
(50)
> 181 days
£’000
2
72
Expected
loss rate
0%
0%
Liquidity risk
Liquidity risk is the risk that the Company may not be able to meet its financial obligations as they fall due. The Group
expects to meet its obligations related to the financing agreements through operating cash flows. Additionally, the Group
ensures there is sufficient headroom on the existing credit lines to have an additional working capital buffer. As at 31
December 2021, the Group had the following sources of liquidity available:
• Cash and cash equivalents: £5,633k
• Undrawn credit facilities with several banks: £29,409k
• Undrawn acquisition financing: £4,621k
120
Annual Report 2021 Animalcare Group plc The table below provides an analysis of the maturity dates of the financial liabilities:
At 31 December 2021
Borrowings
Lease liabilities
Trade payables
Other current liabilities
Total
At 31 December 2020
Borrowings
Lease liabilities
Trade payables
Other current liabilities
Total
< 1 year
£’000
1 to 3 years
£’000
4-5 years
£’000
> 5 years
£’000
−
(723)
(10,021)
(2,156)
(12,900)
(9,243)
(1,451)
−
−
(10,694)
−
(301)
−
−
(301)
−
(490)
−
−
(490)
< 1 year
£’000
1 to 3 years
£’000
4-5 years
£’000
> 5 years
£’000
(637)
(951)
(11,348)
(3,202)
(16,138)
(17,296)
(1,151)
−
−
(18,447)
−
(607)
−
−
(607)
−
−
−
−
−
Total
£’000
(9,243)
(2,965)
(10,021)
(2,156)
(24,385)
Total
£’000
(17,933)
(2,709)
(11,348)
(3,202)
(35,192)
The amounts disclosed in the table above are the contractual undiscounted cash flows. The lease liabilities are translated at
closing rate. Balances due within one year equal their carrying balances as the impact of discounting is not significant.
The Group’s indebtedness and its restrictions and covenants agreed upon in the financing agreements may adversely affect
the Group’s liquidity position. Any breach of covenants can lead to loans being immediately due and payable.
The Company has an international cash pool with different banks to limit excess cash. The Company closely monitors cash
balances within the Group and uses short-term withdrawals on the credit lines to minimise the cash balances.
Foreign exchange risk
The Group undertakes transactions denominated in foreign currencies which give 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 values of the Group’s
foreign currency assets and liabilities including intercompany balances at the reporting date were:
EUR/GBP
GBP/EUR
EUR/USD
GBP/USD
EUR/DKK
EUR/CAD
EUR/SEK
For the year ended 31 December
Assets
2020
£’000
13,166
8,920
−
−
−
−
7
Liabilities
2021
£’000
27,589
18,361
101
117
−
1,545
−
Liabilities
2020
£’000
17,131
13,602
435
61
2
1,457
−
Assets
2021
£’000
18,911
16,322
−
−
−
−
6
The cumulative effect of the foreign currency translation effects is reported under other comprehensive income in the
statement of financial position and amounts to £2,311k (2020: £3,058k).
At the end of the reporting year, the Group is mainly exposed to the EUR, the USD and the CAD. The following table details
the effect of a 10% increase and decrease in the exchange rate of these currencies against the functional currencies
GBP and EUR when applied to outstanding monetary items denominated in foreign currency as at 31 December 2021. A
positive number indicates that an increase in profit would arise from a 10% change in value of sterling or EUR against these
currencies, a negative number indicates that a decrease would arise.
121
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
24 RISKS CONTINUED
EUR/GBP
GBP/EUR
EUR/USD
GBP/USD
EUR/CAD
Strengthening
£’000
868
204
10
12
154
Weakening
£’000
(868)
(204)
(10)
(12)
(154)
Interest rate risk
The maturity dates and interest rates of the financial debts and liabilities are detailed in Note 16. The exposure to interest
rate risks is mainly related to existing borrowing facilities. The current loans of credit institutions have variable interest rates.
There are no significant differences between the nominal interest rates as listed in Note 16 and the effective interest rates
of the loans.
If the interest rates would have been 100 bp higher/lower, the financial result would have been £108k lower/higher in 2021
and £175k lower/higher in 2020.
Capital management
The primary objective of the Group’s shareholders’ capital management strategy is to ensure it maintains healthy capital
ratios to support its business and maximise shareholder value. Additionally, minimum solvency ratios are agreed upon
in the financing agreements. Capital is defined as the Group shareholder’s equity which amounts to £78,799k as at
31 December 2021 (2020: £81,592k).
The Group consistently reviews its capital structure and makes adjustments in light of changing economic conditions and
performances of the Group. The Group made no changes to its capital management objectives, policies or processes during
the years ended 31 December 2021 and 2020.
25 REMUNERATION PAID TO THE COMPANY’S AUDITORS
Fees payable to the Company's auditors for the audit of the Company's annual financial statements
The audit of the Company's subsidiaries pursuant to legislation
Total audit fees
Other services
Total non-audit services
Total auditors' remuneration
For the year ended
31 December
2021
£’000
110
156
266
2
2
2020
£’000
95
123
218
2
2
268
220
The non-audit services relate to assurance procedures in relation to an annual declaration required by a subsidiary company.
26 SHARE-BASED PAYMENTS
The Group operates a number of equity-settled share-based payment programmes that allow employees to acquire shares in
the Group. The Group also operates Long Term Incentive Plans for certain members of the Senior Executive Team and other
members of the Leadership Team. 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).
The fair value of the options issued under the Long Term Incentive Plan have been determined using both the Black–Scholes
and Monte Carlo simulation model, in conjunction with a third-party valuation specialist.
The fair values of options granted under all other share option schemes have been determined using the Black–Scholes option
pricing model.
122
Annual Report 2021 Animalcare Group plc Animalcare Group plc Executive Share Option Scheme
Under this scheme, options may be granted to certain Executives and senior employees of the Group to subscribe for new
shares in the Company at a fixed price equal to the market value at the time of grant. The options are exercisable three
years after the date of grant. Once vested, options must be exercised within six years of the date of grant. The exercise of
these options is not subject to any performance criteria.
Details of the movement in this share option scheme during the year is as follows:
Outstanding at 1 January 2021
Exercised during the period
Lapsed during the year
Open at 31 December 2021
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
Options
52,500
(35,000)
(17,500)
−
Price £
2.17
2.18
2.15
–
EMI
Scheme
216p
216p
41.00%
3.0 years
0.50%
Expected volatility was determined by calculating the historical volatility of the Company’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.
Long Term Incentive Plan (“LTIP”)
The Group has made a number of awards pursuant to the Long Term Incentive Plan as follows:
2021 LTIP Options
On 5 November 2021, nil-cost options over a total of 264,981 ordinary shares with a nominal value of 20.0 pence per share
were awarded to certain members of the Senior Executive Team and Group Leadership Team. The awards will normally vest
three years after the date of grant subject to the following performance criteria being met over the three-year financial
period ending 31 December 2024:
Earnings Per Share growth
Less than 3%
3%
10%
Between 3% and 10%
Extent to which EPS tranche will vest
0%
25%
100%
Between 25% and 100% on a straight -line basis
Rank of the Company's TSR compared to the Comparator Group
Upper quartile or above
Between median and upper quartile
Median
Below median
Extent to which the TSR tranche will vest
100%
Pro rata between 25% and 100% on a ranking basis
25%
0%
50% of the option award will be subject to the EPS performance condition and the remaining 50% will be subject to the TSR
performance condition. Accordingly, if one of the performance conditions is met but the other is not, the Option award will
vest in part.
123
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
26 SHARE-BASED PAYMENTS CONTINUED
The fair value of the options issued under the Long Term Incentive Plan have been determined using both the Black–Scholes
and Monte Carlo simulation models, in conjunction with a third-party valuation specialist.
Inputs into the option pricing models were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Expected dividend yield
Fair value per option – EPS tranche
Fair value per option – TSR tranche
Risk-free rate
£3.62
£Nil
32.0%
3.2 years
1.10%
£3.50
£2.56
0.39%
2020 LTIP Options
On 17 November 2020, nil-cost options over a total of 377,120 ordinary shares with a nominal value of 20.0 pence per
share were awarded to certain members of the Senior Executive Team and Group Leadership Team. During the year under
review, 16,555 of the options lapsed due to cessation of employment, leaving 360,565 options outstanding.
The awards will normally vest three years after the date of grant subject to the following performance criteria being met
over the three-year financial period ending 31 December 2023:
Earnings Per Share growth
Less than 3%
3%
8%
Between 3% and 8%
Extent to which EPS tranche will vest
0%
25%
100%
Between 25% and 100% on a straight-line basis
Rank of the Company’s TSR compared to the Comparator Group
Upper quartile or above
Between median and upper quartile
Median
Below median
Extent to which the TSR tranche will vest
100%
Pro rata between 25% and 100% on a ranking basis
25%
0%
50% of the option award will be subject to the EPS performance condition and the remaining 50% will be subject to the TSR
performance condition. Accordingly, if one of the performance conditions is met but the other is not, the Option award will
vest in part.
The fair value of the options issued under the Long Term Incentive Plan have been determined using both the Black–Scholes
and Monte Carlo simulation models, in conjunction with a third-party valuation specialist.
Inputs into the option pricing models were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Expected dividend yield
Fair value per option – EPS tranche
Fair value per option – TSR tranche
Risk-free rate
124
£1.72
£Nil
29.0%
3.1 years
2.30%
£1.60
£1.25
0.50%
Annual Report 2021 Animalcare Group plc 26 SHARE-BASED PAYMENTS CONTINUED
2019 LTIP Options
On 6 June 2019, nil-cost options over a total of 425,279 ordinary shares with a nominal value of 20.0 pence per share were
awarded to certain members of the Senior Executive Team and Group Leadership Team. On 29 June 2020, a further grant
of 14,076 ordinary shares was made to a member of the Group Leadership Team pursuant to the same performance and
vesting criteria as the 2019 LTIP options. During 2020, 56,488 of the options lapsed due to cessation of employment. During
2021, a further 18,589 options lapsed, leaving 364,278 options outstanding.
The awards will normally vest three years after the date of grant subject to the performance criteria being met over the
three-year financial period ended 31 December 2021. The performance conditions associated with the 2019 LTIP Options
are the same as those for the 2020 LTIP Options noted above.
The fair value of the options issued under the Long Term Incentive Plan have been determined using both the Black–Scholes
and Monte Carlo simulation model, in conjunction with a third-party valuation specialist.
Inputs into the option pricing models were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Expected dividend yield
Fair value per option – EPS tranche
Fair value per option – TSR tranche
Risk-free rate
£1.60
£Nil
30.5%
3.0 years
2.80%
£1.47
£0.98
0.50%
The Group recognised a total charge in respect of share-based payments of £249k (2020: £162k).
27 RELATED PARTY TRANSACTIONS
This disclosure provides an overview of all transactions with related parties. Interests in subsidiaries are disclosed in
Note 28.
Transactions between the Company and its subsidiaries, which are related parties, are eliminated in the consolidated
financial statements and no information is provided hereon in this section. The Group carries an investment in a joint
venture (Stem Animal Health Inc.). The Group’s investment in its joint venture is accounted for using the equity method.
Remuneration of the Directors, who are the key management personnel of the Group, is included in the Directors’
Remuneration Report on page 62.
125
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Consolidated Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
28 OVERVIEW OF CONSOLIDATED ENTITIES
Registered address
Legeweg 157i, 8020 Oostkamp
Legeweg 157i, 8020 Oostkamp
Country of
incorporation
Name
Belgium
Ecuphar NV
Belgium
Orthopaedics.be NV
Ecuphar BV
The Netherlands Verlengde Poolseweg 16, 4818 CL Breda
Ecuphar Veterinary Products BV The Netherlands Verlengde Poolseweg 16, 4818 CL Breda
Ornis SA
Ecuphar GmbH
Euracon Pharma Consulting und
Trading GmbH
Ecuphar Veterinaria SA
Rue de Roubaix 33, 59200 Tourcoing
Brandteichstraße 20, 17489 Greifswald
Max-Planck Str. 11, 85716 Unterschleißheim
France
Germany
Germany
Spain
Ecuphar Italia
Belphar
Italy
Portugal
C/ Cerdanya, 10-12, pl 6. 08173 Sant Cugat
del Vallés Barcelona
Viale Francesco Restelli, 3/7, piano 1, 20124
Milano
R. Carlos Alberto da Mota Pinto, Nº 17 - 3ºA,
1070-313 Lisabon
Animalcare Group plc
United Kingdom Unit 7, 10 Great North Way, York Business
Park, Nether Poppleton, York, YO26 6RB
Animalcare Ltd
United Kingdom Unit 7, 10 Great North Way, York Business
Park, Nether Poppleton, York, YO26 6RB
Identicare Ltd.
United Kingdom Unit 7, 10 Great North Way, York Business
STEM Animal Health Inc.
Canada
Park, Nether Poppleton, York, YO26 6RB
Innovation Drive Winnipeg 162-196,
Manitoba, R3T 2N2
% equity interest
2021
100%
100%
100%
100%
100%
100%
100%
Consolidation
2020
method
100% Fully consolidated
100% Fully consolidated
100% Fully consolidated
100% Fully consolidated
100% Fully consolidated
100% Fully consolidated
100% Fully consolidated
100%
100%
100%
100%
100%
100%
33%
100% Fully consolidated
100% Fully consolidated
100% Fully consolidated
100% Fully consolidated
100% Fully consolidated
0% Fully consolidated
33%
Equity method
29 EVENTS AFTER BALANCE SHEET DATE
On 1 January 2022, we entered into a partnership with an entrepreneur to develop and drive growth within Identicare Ltd,
the Group’s pet microchipping and consumer-focused services business. In connection with this partnership, a growth share
plan has been put in place based on certain equity value-based performance criteria.
On 24 March 2022, the Group announced that it has entered into two early-stage agreements with Netherlands-based
Orthros Medical, a company focused on the research and early development of VHH antibodies, also known as small single
chain antibody fragments. Under the terms of the deal, Animalcare will make upfront payments to Orthros Medical totalling
€500,000 and will fund some early research activities as part of the collaboration. As the two licensed preclinical candidates
progress, Orthros Medical may receive development, regulatory and commercial milestone payments up to a total value of
€11 million as well as single digit royalties on net sales of the products. These payments are expected to be paid out of the
Group’s operating cash flow.
126
Annual Report 2021 Animalcare Group plc Company Statement of Financial Position
AS AT 31 DECEMBER 2021
Non-current assets
Investments in subsidiary companies
Deferred tax asset
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Net current assets
Total liabilities
Net assets
Capital and reserves
Called-up share capital
Share premium account
Retained earnings
Equity attributable to equity holders of the parent
* Restated as detailed in Note 14
Notes
6
10
7
8
9
11
For the year ended
31 December
2021
£’000
147,743
44
147,787
8,502
6
8,508
156,295
(2,869)
(2,869)
5,639
(2,869)
153,426
12,019
132,798
8,609
153,426
As restated
2020*
£’000
147,743
5
147,748
4,110
60
4,170
151,918
(2,974)
(2,974)
1,196
(2,974)
148,944
12,012
132,729
4,203
148,944
1 January
As restated
2020*
£’000
147,743
5
147,748
6,347
553
6,900
154,648
(3,957)
(3,957)
2,943
(3,957)
150,691
12,012
132,729
5,950
150,691
Under section 408 of the Companies Act 2006 the Company is exempt from the requirement to present a separate Profit
and Loss account in these separate financial statements. The profit dealt with in the financial statements of the Company
was £6,574k (2020: £694k loss).
The financial statements of Animalcare Group plc, registered number 1058025, were approved by the Board of Directors
and authorised for issue on 29 March 2022. They were signed on their behalf by:
JENNIFER WINTER
Chief Executive Officer
CHRIS BREWSTER
Chief Financial Officer
127
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Company Statement of Changes in Equity
YEAR ENDED 31 DECEMBER 2021
Balance at 1 January 2020
Total comprehensive loss for the period
Transactions with owners of the Company, recognised in equity:
Dividends paid
Share-based payments
Balance at 1 January 2021
Total comprehensive profit for the period
Transactions with owners of the Company, recognised in equity:
Dividends paid
Share-based payments
Exercise of share options
Balance at 31 December 2021
Note
3
5
12
11
Share
capital
£’000
12,012
–
–
–
12,012
–
–
–
7
12,019
Share
premium
£’000
132,729
–
–
–
132,729
–
–
–
69
132,798
Retained
earnings
£’000
5,950
(694)
(1,201)
148
4,203
6,574
(2,403)
235
–
8,609
Total
equity
£’000
150,691
(694)
(1,201)
148
148,944
6,574
(2,403)
235
76
153,426
128
Annual Report 2021 Animalcare Group plc Company Cash Flow Statement
YEAR ENDED 31 DECEMBER 2021
Comprehensive income/ (loss) for the year before tax
Adjustments for:
Finance (income)/cost
Proceeds from dividends of subsidiaries
Share-based payment expense
Operating cash flows before movements in working capital
(Increase)/decrease in receivables
Decrease/(increase) in payables
New cash flow from operating activities
Financing:
Receipts from issue of share capital
Interest (paid)/received
Equity dividends paid
Net cash used in financing activities
Net 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
* Restated as detailed in Note 14
Note
31 December
2021
£’000
6,080
As restated
31 December
2020*
£’000
(710)
12
7
9
11
5
696
(8,091)
235
(1,080)
3,550
(135)
2,335
76
46
(2,403)
(2,281)
(54)
60
6
425
148
(138)
(2,501)
3,785
1,146
(425)
(1,201)
(1,626)
(480)
553
60
8
6
60
129
Annual Report 2021 Animalcare Group plcOUR FINANCIALS
Notes to the Company Financial Statements
YEAR ENDED 31 DECEMBER 2021
1 SIGNIFICANT ACCOUNTING
POLICIES
The following accounting policies have
been applied consistently in dealing
with items which are considered
material in relation to the financial
statements of the Company.
Basis of preparation
The Company financial statements
cover the period of 12 months from
1 January 2021 to 31 December 2021.
The 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 UK-adopted
international accounting standards
(“IFRS”) and in conformity with the
requirements of 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.
Under section 408 of the Companies
Act 2006 the Company is exempt
from the requirement to present a
separate Profit and Loss account in
these separate financial statements.
The profit dealt with in the financial
statements of the Company was
£6,574 (2020: £694k loss).
The accounting policies of the
Company are the same as for the
Group, where applicable.
Going concern
The Directors have prepared forecasts
including cash flow forecasts for a
period of at least 12 months from
the date of signing of these financial
statements (the going concern
assessment period). These forecasts
indicate that the Company will have
sufficient funds to meet its obligations
as they fall due, taking into account
the potential impact of “severe
but plausible” downside scenarios
130
to factor in a range of downside
revenue estimates, including further
unexpected COVID disruptions, and
higher than expected inflation across
our cost base, with corresponding
mitigating actions.
The output from these scenarios
shows the Company has adequate
levels of liquidity from its committed
facilities and complies with all its
banking covenants throughout the
going concern assessment period.
Accordingly, the Directors continue
to adopt the going concern basis of
preparation.
The Group’s financing arrangements
consist of a committed revolving
credit facility of €41.5m and a €10m
acquisition line, which cannot be
utilised to fund our operations.
The facilities remain subject to the
following covenants which are in
operation at all times:
Net debt to underlying EBITDA ratio
of 3.5 times; underlying EBITDA to
interest ratio of minimum 4 times; and
solvency (total assets less goodwill/
total equity less goodwill) greater
than 25%. As at 31 December 2021
and throughout the financial year, all
covenant requirements were met with
significant headroom across all three
measures.
Employee benefits – pensions
The Company operates a stakeholder
pension scheme available to all eligible
employees. Payments to this scheme
are charged as an expense as they
fall due.
Investments in subsidiaries
Investments in Group companies
are stated at cost less provisions for
impairment losses.
Impairment indicator assessments are
undertaken annually at the financial
year end.
Whenever events or changes in
circumstances indicate that the
carrying amount of investments may
not be recoverable, they are subject to
impairment tests.
Where the carrying value of
investments exceeds its recoverable
amount (i.e. the higher of value in
use and fair value less costs to sell),
the investments are written down
accordingly.
The Company bases its impairment
calculation on detailed budgets and
forecast calculations, which generally
cover a period of five years. For longer
periods, a long-term growth rate is
calculated and applied to future cash
flows projected after the fifth year.
Impairment charges are included in
profit or loss.
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-based payments
The Company operates a number of
equity-settled share-based payment
programmes that allow employees to
acquire shares of the Company. The
Company also operates Long Term
Incentive Plans for certain members
of the Leadership Team and Executive
Directors. 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 Company’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).
Annual Report 2021 Animalcare Group plc The fair value of the options issued
under the Long Term Incentive Plan
has been determined using both
the Black–Scholes and Monte Carlo
simulation models, in conjunction with
a third-party valuation specialist.
The fair values of options granted
under all other share option schemes
have been determined using the
Black–Scholes option pricing model.
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 Company’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 Company intends to settle its
current tax assets and liabilities on a
net basis.
Financial instruments
Financial assets and financial liabilities
are recognised in the Company’s
balance sheet when the Company
becomes a party to the contractual
provisions of the instrument.
Where the Company enters into
financial guarantee contracts to
guarantee the indebtness of other
companies within its group, the
Company considers these to be
insurance arrangements and accounts
for them as such. In this respect,
the Company treats the guarantee
contract as a contingent liability until
such time as it becomes probable that
the Company will be required to make
a payment under the guarantee.
The Company measures loss
allowances at an amount equal to
lifetime ECL, except for bank balances
for which credit risk (i.e. risk of default
occurring over the expected life of the
financial instrument) has not increased
significantly since initial recognition
which are measured as 12-month ECL.
Loss allowances for trade receivables
and contract assets are always
measured at an amount equal to
lifetime ECL.
When determining whether the
credit risk of a financial asset has
increased significantly since initial
recognition and when estimating ECL,
the Company considers reasonable
and supportable information that
is relevant and available without
undue cost or effort. This includes
both quantitative and qualitative
information and analysis, based on
the Company’s historical experience
and informed credit assessment and
including forward-looking information.
Measurement of ECLs
ECLs are a probability-weighted
estimate of credit losses. Credit
losses are measured as the present
value of all cash shortfalls (i.e. the
difference between the cash flows due
to the entity in accordance with the
contract and the cash flows that the
Company expects to receive). ECLs
are discounted at the effective interest
rate of the financial asset.
Write-offs
The gross carrying amount of a
financial asset is written off (either
partially or in full) to the extent
that there is no realistic prospect of
recovery.
131
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Company Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
Cash and cash equivalents
Cash and cash equivalents comprise cash in 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 Company after
deducting all of its liabilities.
Finance income and expense
Finance income comprises interest receivable on funds invested that are recognised in the income statement.
New standards adopted as of 2021
Standards and interpretations applicable for the annual period beginning on or after 1 January 2021:
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 (applicable for
annual periods beginning on or after January 1, 2021)
• Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9, effective January 1, 2021
• Amendment to IFRS 16 Leases COVID-19-Related Rent Concessions , effective June 1, 2020, with early application
permitted
The Company has no transactions that would be affected by the newly effective standards or its accounting policies are
already consistent with the new requirements. The Company has not early adopted any standards.
Significant accounting judgements, estimates and assumptions
Carrying value of investments
Investments in subsidiaries are reviewed annually for impairment when indicators for impairment are identified.
Determining whether the Company’s investments in subsidiaries have been impaired requires estimations of the
investments’ values in use or consideration of the net asset value of the entity. The value in use calculations require the
entity to estimate the future cash flows, expected to arise from the investments and suitable discount rates in order to
calculate present values. Such calculations are prepared in conjunction with the impairment test in relation to goodwill,
details of which are provided in Note 8 of the consolidated financial statements.
2 NON-RECURRING ITEMS
Restructuring and integration costs
Other exceptional costs
Total exceptional and other items
2021
£’000
–
109
109
The Company presents certain items as exceptional income or expense that, in the judgement of the Directors, merit
separate disclosure by virtue of their nature, size and incidence.
Restructuring and integration costs incurred during 2020 of £180,000 mainly relate to professional fees in respect of
Group-wide employment, legal and tax structuring advice.
3 TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR
Total comprehensive income/(loss) for the year has been arrived at after charging/(crediting):
Finance costs
Dividend income received from subsidiary – Ecuphar NV
2021
£’000
696
8,091
2020
£’000
180
–
180
2020
£’000
425
–
The above items are those charged/credited to total comprehensive income/(loss) only. Full details on items charged to
non-recurring items are contained in Note 2.
132
Annual Report 2021 Animalcare Group plc 3 TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR CONTINUED
The analysis of remuneration paid to the Company’s auditors for the audit of the Company’s financial statements is as follows:
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Total audit fees
2021
£’000
110
110
2020
£’000
95
95
4 DIRECTORS’ REMUNERATION AND INTERESTS
Emoluments
There were no employees of the Company. The various elements of remuneration received by each Director were as
follows:
Year ended 31 December 2021
J Boone*
C Brewster
C Cardon1
M Coucke*
N Downshire*
E Torr*
J Winter
Total
Year ended 31 December 2020
J Boone*
C Brewster
C Cardon1
M Coucke*
N Downshire*
E Torr*
J Winter
Total
* Indicates Non-Executive Directors
1 Resigned 8 July 2021
Company
pension
contributions
£’000
–
23
–
–
–
–
–
23
Company
pension
contributions
£’000
–
25
–
–
–
–
–
25
Bonus
£’000
–
84
–
–
–
–
153
237
Bonus
£’000
–
51
–
–
–
–
94
145
Compensation
for loss of
office
£’000
–
–
–
–
–
–
–
–
Compensation
for loss of
office
£’000
–
–
–
–
–
–
–
–
Benefits
£’000
–
12
–
–
–
–
14
26
Benefits
£’000
–
13
–
–
–
–
14
27
Salary
£’000
70
209
18
40
40
45
306
728
Salary
£’000
70
205
35
40
40
45
300
735
Total
£’000
70
328
18
40
40
45
473
1,014
Total
£’000
70
294
35
40
40
45
408
932
The approved bonus awards to C Brewster and J Winter in respect of the 2021 financial year were accrued as at 31
December 2021 and will be settled post year end.
All Company pension contributions relate to defined contribution pension schemes. Benefits consist of company car and
private medical insurance.
Share options
On 5 November 2021, nil-cost options over a total of 150,650 ordinary shares with a nominal value of 20.0 pence per share
(“the Options”) were awarded to the Executive Directors of the Company pursuant to the Company’s Long Term Incentive
Plan (“the LTIP”). Full details of the LTIP are disclosed in Note 12.
After the grant of the Options, the Executive Directors set out below held the following Options:
PDMR
Jennifer Winter
Chris Brewster
Options
awarded
106,844
43,806
Total
Options
450,175
187,290
133
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Company Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
5 DIVIDENDS
Ordinary interim dividend for the year ended 31 December 2020 of 2.0p per share
Ordinary final dividend paid for the year ended 31 December 2020 of 2.0p per share
Ordinary interim dividend paid for the year ended 31 December 2021 of 2.0p per share
2021
£’000
–
1,201
1,202
2,403
2020
£’000
1,201
–
–
1,201
The proposed final dividend of 2.4 pence per share is subject to approval of shareholders at the Annual General Meeting
and has not been included as a liability as at 31 December 2021, in accordance with IAS 10 Events After the Balance
Sheet Date
6 INVESTMENTS IN SUBSIDIARIES
Subsidiary undertakings
Cost
At 1 January 2021 and 31 December 2021
2021
£’000
147,743
The Directors consider that the carrying value of the investments are supported by future cash flows of the subsidiaries. A
list of the subsidiary undertakings, all of which are wholly owned, is given below.
Country of
registration or
incorporation
Belgium
Registered address
Legeweg 157i, 8020 Oostkamp
Principal activity
Holding company, marketer of veterinary
pharmaceuticals
Developer and marketer of
veterinary pharmaceuticals
Belgium
The Netherlands
Microchipping and other associated
services
United Kingdom Unit 7, 10 Great North Way, York
Business Park, Nether Poppleton,
York YO26 6RB
United Kingdom Unit 7, 10 Great North Way, York
Business Park, Nether Poppleton,
York YO26 6RB
Legeweg 157i, 8020 Oostkamp
Verlengde Poolseweg 16, 4818
CL Breda
Verlengde Poolseweg 16, 4818
CL Breda
Rue de Roubaix 33, 59200 Tourcoing
Brandteichstraße 20, 17489 Greifswald Marketer of veterinary pharmaceuticals
Max-Planck Str. 11, 85716
Unterschleißheim
Wholesale of veterinary products
Marketer of veterinary pharmaceuticals
France
Germany
Germany
The Netherlands
Non-trading
Non-trading
Non-trading
Avenida Río de Janeiro, 60 – 66,
planta 13, 08016 Barcelona
Viale Francesco Restelli, 3/7,
piano 1, 20124 Milano
R. Carlos Alberto da Mota Pinto,
Nº 17 - 3ºA, 1070-313 Lisbon
Developer and marketer of
veterinary pharmaceuticals
Marketer of veterinary pharmaceuticals
Marketer of veterinary pharmaceuticals
Ordinary
Class
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Name
Ecuphar NV
Animalcare Ltd
Identicare Ltd
Orthopaedics.be NV
Ecuphar BV
Ecuphar Veterinary
Products BV
Ornis SARL
Ecuphar GmbH
Euracon Pharma
Consulting & Trading
GmbH
Ecuphar Veterinaria SL
Spain
Ecuphar Italia SRL
Italy
Belphar IDA
Portugal
134
Annual Report 2021 Animalcare Group plc 7 OTHER FINANCIAL ASSETS
Trade and other receivables
Corporation tax – Group relief
Other receivables
Prepayments and accrued income
Amounts due from subsidiaries
2021
£’000
485
–
65
7,953
8,502
As restated
2020*
£’000
29
30
57
4,024
4,140
* Restatement as described in company statement of financial position
The Directors consider that the carrying amount of other receivables approximates to their fair value.
Amounts due by Group undertakings at 31 December 2021 are unsecured, interest free, have no fixed date of repayment
and are repayable on demand.
8 CASH AND CASH EQUIVALENTS
Cash and cash equivalents
2021
£’000
6
2020
£’000
60
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less.
9 OTHER FINANCIAL LIABILITIES
Trade payables
Other taxes and social security costs
Other creditors
Amounts payable to subsidiaries
Accruals
2021
£’000
342
52
7
2,106
362
2,869
As restated
2020*
£’000
284
64
18
2,372
266
3,004
* Restatement as described in company statement of financial position
The Directors consider that the carrying amount of trade and other payables approximates to their fair value. The amount
payable to subsidiaries is repayable on demand.
10 DEFERRED TAX
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 31 December 2020
Credit to income
At 31 December 2021
Accelerated
tax
depreciation
£’000
(1)
–
(1)
Share-based
payments
£’000
–
–
–
Other
£’000
(2)
(41)
(43)
Total
£’000
(5)
(41)
(44)
In the Spring Budget 2021, the UK Government announced that from 1 April 2023 the corporation tax rate would move to
25% (rather than remain at 19%, as previously enacted). Deferred taxes as at the balance sheet date have been measured
using these enacted tax rates and reflected in these financial statements.
135
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Company Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
11 SHARE CAPITAL
Allotted, called up and fully paid at 31 December 2020
Exercise of share options
Allotted, called up and fully paid at 31 December 2021
No.
60,057,161
35,000
60,092,161
£’000
12,012
7
12,019
Exercise of share options was under the EMI scheme referred to in Note 12.
12 SHARE-BASED PAYMENTS
During the year the Company operated three share option schemes as described below:
Animalcare Group plc Executive Share Option Scheme
Under this scheme, options may be granted to certain Executives and senior employees of the Group to subscribe for new
shares in the Company at a fixed price equal to the market value at the time of grant. The options are exercisable three
years after the date of grant. Once vested, options must be exercised within six years of the date of grant. The exercise of
these options is not subject to any performance criteria.
Details of the movement in this share option scheme during the year is as follows:
Outstanding at 1 January 2021
Exercised during the year
Lapsed during the year
Open at 31 December 2021
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
Options
52,500
(35,000)
(17,500)
–
Price
£
2.17
2.18
2.15
–
EMI
Scheme
£2.16
£2.16
41.0%
3.0 years
0.5%
Expected volatility was determined by calculating the historical volatility of the Company’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.
136
Annual Report 2021 Animalcare Group plc Long Term Incentive Plan (“LTIP”)
The Company has made a number of awards pursuant to the Long Term Incentive Plan as follows:
2021 LTIP Options
On 5 November 2021, nil-cost options over a total of 264,981 ordinary shares with a nominal value of 20.0 pence per share
(“the Options”) were awarded to certain members of the Senior Executive Team and Group Leadership Team pursuant to
the Company’s Long Term Incentive Plan. The awards will normally vest three years after the date of grant subject to the
following performance criteria being met over the three -year financial period ending 31 December 2024.
Earnings Per Share growth
Less than 3%
3%
10%
Between 3% and 10%
Extent to which EPS tranche will vest
0%
25%
100%
Between 25% and 100% on a straight-line basis
Rank of the Company’s TSR compared to the Comparator Group
Upper quartile or above
Between median and upper quartile
Median
Below median
Extent to which the TSR tranche will vest
100%
Pro rata between 25% and 100% on a ranking basis
25%
0%
Fifty per cent of the option award will be subject to the EPS performance condition and the remaining 50% will be subject
to the TSR performance condition. Accordingly, if one of the performance conditions is met but the other is not, the Option
award will vest in part.
The fair value of the options issued under the Long-Term Incentive Plan has been determined using both the Black–Scholes
and Monte Carlo simulation models, in conjunction with a third-party valuation specialist.
Inputs into the option pricing models were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Expected dividend yield
Fair value per option – EPS tranche
Fair value per option – TSR tranche
Risk-free rate
£3.62
£nil
32.0%
3.2 years
1.10%
£3.50
£2.56
0.39%
2020 LTIP Options
On 17 November 2020, nil-cost options over a total of 377,120 ordinary shares with a nominal value of 20.0 pence per
share (“the Options”) were awarded to certain Executive Directors and PDMRs of the Company and to members of the
Group Leadership Team pursuant to the Company’s Long Term Incentive Plan. During the year under review, 16,555 of the
options lapsed due to cessation of employment, leaving 360,565 options outstanding.
137
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Company Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
12 SHARE-BASED PAYMENTS CONTINUED
The awards will normally vest three years after the date of grant subject to the following performance criteria being
met over the three -year financial period ending 31 December 2023. The Options will vest to the extent the following
performance conditions based on EPS and TSR are met:
Earnings Per Share growth
Less than 3%
3%
8%
Between 3% and 8%
Extent to which EPS tranche will vest
0%
25%
100%
Between 25% and 100% on a straight-line basis
Rank of the Company’s TSR compared to the Comparator Group
Upper quartile or above
Between median and upper quartile
Median
Below median
Extent to which the TSR tranche will vest
100%
Pro rata between 25% and 100% on a ranking basis
25%
0%
Fifty per cent of the option award will be subject to the EPS performance condition and the remaining 50% will be subject
to the TSR performance condition. Accordingly, if one of the performance conditions is met but the other is not, the Option
award will vest in part.
The fair value of the options issued under the Long Term Incentive Plan has been determined using both the Black–Scholes
and Monte Carlo simulation models, in conjunction with a third-party valuation specialist.
Inputs into the option pricing models were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Expected dividend yield
Fair value per option – EPS tranche
Fair value per option – TSR tranche
Risk-free rate
£1.72
£nil
29.0%
3.1 years
2.3%
£1.60
£1.25
0.5%
2019 LTIP Options
On 6 June 2019, nil-cost options over a total of 425,279 ordinary shares with a nominal value of 20.0 pence per share
(“the Options”) were awarded to certain Executive Directors and PDMRs of the Company and to members of the Group
Leadership Team pursuant to the Company’s Long Term Incentive Plan. On 29 June 2020, a further grant of 14,076 ordinary
shares was made to a member of the Group Leadership Team pursuant to the same performance and vesting criteria as
the 2019 LTIP options. During 2020, 56,488 of the options lapsed due to cessation of employment. During 2021, a further
18,589 options lapsed, leaving 364,278 options outstanding.
The awards will normally vest three years after the date of grant subject to the performance criteria being met over the
three-year financial period ended 31 December 2021. The performance conditions associated with the 2019 LTIP Options
are the same as those for the 2020 LTIP Options noted above.
The fair value of the options issued under the Long Term Incentive Plan have been determined using both the Black–Scholes
and Monte Carlo simulation models, in conjunction with a third-party valuation specialist.
138
Annual Report 2021 Animalcare Group plc Inputs into the option pricing models were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Expected dividend yield
Fair value per option – EPS tranche
Fair value per option – TSR tranche
Risk-free rate
£1.60
£nil
30.5%
3.0 years
2.8%
£1.47
£0.98
0.5%
The Company recognised a total charge in respect of share-based payments of £235,000 (2020: £148,000).
13 RELATED PARTY TRANSACTIONS
Trading transactions
During the years ended 31 December 2021 and 31 December 2020, the following trading transactions took place between
the Company and its subsidiaries, Animalcare Ltd and Ecuphar NV.
2021
Management charges levied
2020
Management charges levied
Ecuphar NV
£’000
109
Ecuphar NV
£’000
928
Total
£’000
109
Total
£’000
928
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel, is provided in Note 4.
139
Annual Report 2021 Animalcare Group plcOUR FINANCIALS Notes to the Company Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2021
14 RESTATEMENT OF COMPARATIVE FIGURES
“Trade and other receivables” and “trade and other payables” have been restated to present “Amounts due from
subsidiaries” and “Amounts due to subsidiaries” that were previously presented on a net basis, on a gross basis. Amounts
included within “Other receivables”, “Other creditors” and “Trade payables” have also been reclassed to “Amounts due
from subsidiaries” and “Amounts due to subsidiaries”. The impact on the balances for the year ended 31 December 2020
and 1 January 2020 is as follows:
£’000
Previously stated
Trade and other receivables
Amounts due from subsidiaries
Other receivables
Trade and other payables
Trade payables
Other creditors
Amounts payable to subsidiaries
Adjusted
Trade and other receivables
Amounts due from subsidiaries
Other receivables
Trade and other payables
Trade payables
Other creditors
Amounts payable to subsidiaries
Restated
Trade and other receivables
Amounts due from subsidiaries
Other receivables
Trade and other payables
Trade payables
Other creditors
Amounts payable to subsidiaries
31 December
2020
1 January
2020
510
1,140
282
19
–
3,514
(1,140)
(3)
1
(2,372)
4,024
–
284
18
2,372
766
871
248
11
–
4,433
(844)
(27)
(8)
(3,554)
5,199
27
275
19
3,554
The cash flow statement has been restated to reflect the updated movements in Trade and other receivables and Trade and
other payables, as follows:
£’000
Previously stated
(Increase)/decrease in receivables
Increase/(decrease in payables)
Adjusted
(Increase)/decrease in receivables
Increase/(decrease in payables)
Restated
Trade and other receivables
(Increase)/decrease in receivables
Increase/(decrease in payables)
140
31 December
2020
(128)
1,411
(2,373)
2,373
(2,501)
3,784
Annual Report 2021 Animalcare Group plc
Directors and Advisers
DIRECTORS
D Hutchens (appointed 10
February 2022)
C J Brewster
E Torr
J Boone
J Winter
Lord N Downshire
M Coucke
SECRETARY
C J Brewster
COMPANY NUMBER
1058015
REGISTERED OFFICE
Unit 7, 10 Great North Way
York Business Park
Nether Poppleton
York
YO26 6RB
AUDITOR
PricewaterhouseCoopers LLP
Central Square
29 Wellington Street
Leeds
LS1 4DL
BANKERS
KBC UK
Corporate centre
111 Old Broad Street
EC2N 1BR
SOLICITORS
Squire Pattern Boggs (UK) LLP
6 Wellington Place
Leeds
LS1 4AP
NOMINATED ADVISER AND
JOINT BROKER
Stifel Nicolaus Europe Ltd
150 Cheapside
London
EC2V 6ET
JOINT BROKER
Panmure Gordon & Co
One New Change
London
EC4M 9AF
REGISTRARS
Link Asset Services
34 Beckenham Road
Beckenham
Kent
BR3 4TU
10 Great North Way
York Business Park
York YO26 6RB
UK
T: +44 (0) 1904 487687
F: +44 (0) 1904 487611
communications@animalcaregroup.com
www.animalcaregroup.com
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