Better animal health
Annual Report for the year ended 31 December 2022
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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?
Pipeline of novel products
The Group has shifted its R&D and business
development focus from branded generics to
novel, differentiated products with higher margin
and growth potential. Daxocox, our medication
for osteoarthritis-related pain in dogs, successfully
emerged from our pipeline in 2021 while Plaqtiv+
dental health range reached the market with a
series of launches in 2022. Adding to a series of life
cycle management projects designed to expand
the value of marketed brands, the Group further
strengthened the pipeline in March 2022 through an
early-stage licensing and collaboration agreement
with Orthros Medical to develop innovative VHH
antibody-based therapies.
Read more on our strategy on page 10
Read more on our strategy in action on page 15
Streamlined portfolio
Rationalisation of the Group’s product portfolio in
recent years has delivered positive results. Focusing
attention on the larger selling, higher potential Top
40 brands while disposing of several smaller, lower
value “tail” products has created a more streamlined
and manageable portfolio with improved margins.
Read more on our strategy on page 12
Well positioned in attractive
markets
The market for animal pharmaceuticals has enjoyed
a period of robust global growth, a trend that is
widely forecast to continue. While the Production
Animals segment is benefiting from increasing
demand for protein, the Companion Animals
sector is growing at a faster rate, largely driven
by exceptionally high levels of pet ownership
and a greater willingness to spend on health and
wellbeing. In 2022, we derived approximately
78% (2021: 77%) from Companion Animals and
Equine. Consequently, Animalcare is structurally
well positioned in a fast-growing and attractive
market with strong long-term fundamentals.
Read more on marketplace on page 04
Financial flexibility enabling
growth
Our focus on strengthening the Group’s financial
position in recent years has 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.
Read more on performance on page 20
Financial highlights
Animalcare’s performance in 2022 highlighted the resilience of our business and
of the animal health markets in which we operate. Good cash generation helped
maintain our strong balance sheet with the leverage ratio at 0.4 times remaining
well below the Group’s target range of one to two times underlying EBITDA.
£71.6m
REVENUE
3.3%
£13.1m
UNDERLYING* EBITDA
2.4%
22
21
22
21
20
£71.6m
£74.0m
£70.5m
22
21
20
£13.1m
£13.5m
£12.1m
12.6p
UNDERLYING EPS
5.0%
£5.4m
NET DEBT
£0.1m
22
21
20
12.6p
12.0p
10.6p
£5.4m
£5.3m
22
21
20
£13.6m
* Alternative Performance Measures (APMs) are reconciled to reported results in the Chief Financial Officer’s review
and within the notes to the consolidated financial statements.
Strategic and operational highlights
• Continuing focus on Top 40 brands contributes to strong increase in
gross margins
• Daxocox becomes a top 10 selling product in the Group’s portfolio
• Plaqtiv+ dental range launched after accreditation from influential
Veterinary Oral Health Council
• Preclinical pipeline projects initiated following licensing and collaboration
agreement with Orthros Medical to explore potential of VHH antibodies
• Tailored talent management programme implemented to identify and
develop future leaders
• Doug Hutchens and Sylvia Metayer join the Group Board as
Non-Executive Directors
• Sustainability Task Force established to develop and drive Group-wide
ESG strategy
BUSINESS OVERVIEW
Financial highlights
Chair’s Statement
STRATEGIC REPORT
Our Marketplace
Business Model
Our Strategy
Our Key Performance Indicators
Chief Executive Officer’s Review
Chief Financial Officer’s Review
Our Principal Risks
Our Stakeholders
Sustainability
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
FINANCIALS STATEMENT
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 the Company Financial
Statements
Directors and Advisers
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25
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36
42
46
49
56
60
62
67
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72
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86
131
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134
IBC
01
Animalcare Group plc Annual Report 2022BUSINESS OVERVIEW Chair’s Statement
Animalcare’s
performance in
2022 highlighted
the resilience of our
business and of the
animal health markets
in which we operate
JAN BOONE
Non-Executive Chair
Animalcare’s performance in 2022
highlighted the resilience of our
business and the markets in which
we operate as we continued to
make progress against our
strategic priorities.
Revenues for the full year were
£71.6m, a 3.3% decline that reflects a
moderation in post-pandemic demand
combined with factors such as the
conclusion of product distribution
agreements and the application of
EU laws in Spain designed to reduce
antibiotic usage.
At £13.1m, underlying EBITDA
declined broadly in line with revenues
thanks to a favourable product mix
and disciplined management of SG&A
costs. After adjusting for underlying
items totalling £6.5m (2021: £8.6m),
profit before tax on a reported basis
was £2.5m (2021: £0.9m).
A good cash conversion rate of
78% (2021: 109%) maintained the
healthy state of the Group’s financial
platform with net debt standing at
£5.4m (2021: £5.3m) by the year end
and leverage well below our stated
target range of one to two times
underlying EBITDA. This solid balance
sheet position continues to support
the Group’s pursuit of value-creating
opportunities that have the potential
to grow our business over the
coming years.
In March 2022 we reached an
agreement with Netherlands-based
Orthros Medical to secure a global
licence for innovative VHH antibody
candidates, initially addressing canine
osteoarthritis. This exciting early-
stage research and development
collaboration helps build our pipeline
in a fast-growing disease area that we
know well. Elsewhere, we continue to
seek out investments that can extend
our geographic footprint and add to
our product line-up in the shorter
term, whether through M&A
or partnerships.
02
Animalcare Group plc Annual Report 2022 While recognising that we are at
the early stage of our journey in this
area, we have established important
foundations with the creation of a
dedicated Sustainability Task Force
chaired by CFO Chris Brewster to
advise on aspects of sustainability,
including identification of material
issues to our stakeholders and the
potential impact on our business.
Despite the uncertain economic
environment, we see reasons for
optimism as we look ahead. The
attractive fundamentals of our animal
health markets and the strong position
of the Group provide us with the
confidence to continue investing in
our long-term growth strategy.
Following the appointment of Doug
Hutchens as a Non-Executive Director
at the beginning of the year, we
welcomed Sylvia Metayer to the Board
in May 2022. Subsequently, she took
over as Chair of the Audit and Risk
Committee at the Group’s AGM.
Sylvia brings a wealth of financial and
commercial experience gained most
recently at Sodexo SA, a global leader
in food and facility management
outsourcing. I know that Sylvia
will be of huge value as the Group
continues to implement its long-term
growth strategy.
No review of the year would be
complete without recognition for
the skills and commitment of the
Animalcare team across all our
markets. Our progress in 2022
was made possible through their
efforts. I’d also like to thank you, our
shareholders, for your continued
support in our Company as we strive
to achieve better animal health.
JAN BOONE
Non-Executive Chair
Rationalisation of the Group’s
portfolio, which is now materially
complete, continues to bear fruit.
Management focus on larger more
profitable products, combined
with the discontinuation of several
lower value “tail” treatments, has
concentrated our firepower to
the benefit of our gross margins.
Against this backdrop it was
particularly satisfying to see Daxocox,
our innovative treatment for
osteoarthritis-related pain in dogs,
enter the top 10 selling products in
our portfolio less than two years
after coming to market. It was
also pleasing to see the Plaqtiv+
dental range contribute to earnings
following planned launches in the
second quarter.
The Group’s proven resilience and
robust financial position support the
Board’s decision to propose a final
dividend of 2.4 pence per share
(2021: 2.4 pence per share).
The experience and skills of the
Animalcare team drive our business
forward. It’s vital, therefore, that we
continue to build the capabilities we
need, now and into the future. In 2022
we rolled out a tailored programme to
develop the next generation of leaders
across the Group. We also invested
in the sales and marketing excellence
required to succeed in this dynamic and
increasingly innovation-driven market.
In our previous Annual Report, we
laid out our Group-wide approach
to the environmental, social and
governance (ESG) pillars of sustainable
development. During the last 12
months we have noted an increasing
interest in ESG-related topics among a
number of our stakeholders.
03
Animalcare Group plc Annual Report 2022BUSINESS OVERVIEW Our Marketplace
Overview of our marketplace
The Group operates in three categories
within the veterinary market: Companion
Animals, Equine and Production Animals.
We are focused on therapeutic areas with
strong growth potential and where we
have expertise, such as pain management,
dental health and anti-infectives.
After exceptional growth in 2021, fuelled by the lifting
of pandemic restrictions and increased levels of pet
ownership, demand moderated across Europe over the
course of 2022. Historically, the animal health industry has
been resilient in previous economic downturns compared
to other industries and we believe companies with products
used by vets predominately in the vet practice are in a good
position to see out any downturn.
Parasiticides and vaccines accounted for over 60% of
the market with vaccines maintaining their number one
position. The launch of novel products for cats and dogs
has driven the pain management market to new highs with
few signs of a slow-up in demand. Antimicrobials, which
continued to decline in 2022 compared to the overall
European animal health sector, have seen market share
decrease by more than 50% over the last 10 years1.
GEOGRAPHIC MARKETS
Europe, which accounted for 98% of our revenue in 2022, is
the second largest market for animal health and represents
about a third of global sales2. We sell our products either
through our direct sales teams or distributors in all EU
countries as well as the UK, Switzerland and Norway. We
export to 15 countries outside Europe including Australia,
New Zealand, Japan, Korea, Hong Kong, Brazil and Israel and
are actively looking to increase our global footprint in the
coming years.
88%
OUR OPERATIONS
12%
OUR NETWORK
PARTNERS
UK
21%
BENELUX
7%
GERMANY
14%
ITALY
12%
PORTUGAL
6%
SPAIN
28%
THERAPEUTIC MARKETS
Pain management
The global market for animal pain control products in 2020
was approximately US$750m and comprises three key
segments: acute pain control, chronic pain control and
acute/chronic pain control combined. The acute/chronic
segment represents around 60% of the market while the
remaining 40% is equally split between chronic only and
acute only products.
The pain market is forecast to grow annually by nearly 8%,
compared with 5% for animal health overall. 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 such
as the Group’s Daxocox treatment. The 2021 approval
in Europe of Nerve Growth Factors (NGF1) inhibiting
monoclonal antibody therapies for dogs and cats has
proved to be a notable source of growth.
The market is characterised by canine pain associated
with osteoarthritis. Increased pet ownership during the
pandemic should expand the market, especially when the
current cohort of two and three year old dogs enters the
geriatric phase.
Treatment compliance is another important factor.
As most animals require daily medication, dosing by owners
is a significant risk to long-term pain control in pets. New
weekly and monthly options have become available in
recent years which should improve treatment outcomes.
Innovation is also a key driver in this market. Newer
products help to drive awareness of pain management
and, consequently, greater compliance in use. These
innovative treatments are expected to command higher
margins and earnings.
04
Animalcare Group plc Annual Report 2022 Dental
Periodontal disease in dogs is a progressive condition
caused by bacteria that damages gums, bone and other
supportive structures of the teeth. It is estimated that more
than 80% of dogs over the age of three years have some
form of periodontal disease6.
Most pet dental products are sold through non-veterinary
channels and the market is fragmented. With the increased
humanisation of pets and overall improvements to pet
welfare, we view the veterinary dental market as a growth
opportunity. Simple diagnostic tools to encourage dental
conversations with pet owners will be key to identify the
non-visible signs of periodontal disease and help drive
dental sales in veterinary practice.
Innovative science-based products and the introduction of
treatments for cats are expected to further drive the market
in the near future.
Anti-infectives
Anti-infectives are used to treat or prevent infection and
include antibiotics, antivirals, antifungals, antimalarials,
antiprotozoals, anthelmintics and antituberculosis.
In Europe, sales of veterinary antimicrobials decreased by
47% between 2011 and 20217, a trend that is expected to
continue due to the focus on reducing drug resistance and
new EU regulations from January 2022 that ban the routine
use of antibiotics in farmed animals. The new regulations
mean only sick, individual animals (and not whole herds)
may be administered antibiotics.
As sales of antimicrobials have decreased the search for
effective alternatives, especially preventative measures, has
become more of a priority. Among these therapy classes are
microbiome, vaccines and anti-biofilms.
Gastrointestinal (GI) microbes play a fundamental role
in animal health. In Production Animals, GI innovation is
focused on the replacement of medicated feeds, improving
production and even reducing methane. In Companion
Animals we expect to see developments in microbiome
treatments targeted at obesity, dental conditions and
diabetes as well as more traditional GI diseases.
Longer term, opportunities exist for more sustainable use of
antibiotics in association with other technologies.
Companion Animals
This category includes dogs,
cats, small mammals, aquatic
and non-food producing avian
and accounts for approximately
47% of sales in animal health in
Europe3, a significant increase
over 2021 reflecting the growth
in pet numbers during COVID-194
Demand drivers
• Pandemic-related increase
in the number of pets
• Longer life expectancy
of pets
• Move to smaller breeds
•
of dogs
Increased “humanisation”
of pets
ANIMAL SECTORS
Production Animals
Livestock (cattle, sheep, pigs,
etc) account for approximately
27% of spend; poultry and
avian around 10% of sales
Demand drivers
• Human population growth
increasing global demand
for protein
• Decrease in pig meat
production due to reduced
export opportunities, strict
environmental laws and
African Swine Fever5
Increasing industrialisation
of meat and milk production
combined with heightened
animal welfare expectations
•
1 https://animalhealtheurope.eu/about-us/annual-
3 https://animalhealtheurope.eu/about-us/annual-
reports/2022-2/key-figures-2022/
reports/2022-2/key-figures-2022/
2 https://animalhealtheurope.eu/about-us/annual-
4 https://animalhealtheurope.eu/about-us/annual-
reports/2022-2/key-figures-2022/
reports/2022-2/key-figures-2022/
Equine
Equine accounts for just under
3% of the European market
Demand drivers
• Equine owners demand
increasingly specialised
services
•
•
Increasing demand for
medical care for horses
Impact of inflation on costs
of ownership
5 https://agriculture.ec.europa.eu/data-and-analysis/
markets/outlook/medium-term_en
6 https://onlinelibrary.wiley.com/doi/epdf/10.1111/
jsap.13132
7 https://www.ema.europa.eu/en/veterinary-
regulatory/overview/antimicrobial-resistance/
european-surveillance-veterinary-antimicrobial-
consumption-esvac
05
Animalcare Group plc Annual Report 2022STRATEGIC REPORT Our Marketplace continued
Trends in the animal health market:
TREND
HOW WE ARE RESPONDING
1. High levels of pet ownership
It is estimated that 90 million European households (46%)
own a companion animal8, with cats proving the most popular
(113 million) followed by dogs (92 million) and birds (48 million).
In the UK, pet ownership reached a record high of 62% of
households in 2021/22, likely as a result of more time spent at
home due to the pandemic. The increase in puppies and kittens
should create a geriatric “boom” in six or seven years when many
of these animals will require more veterinary treatment for the
likes of pain management related to osteoarthritis, cancer, heart
disease and kidney disease.
2. Growth in pet expenditure
The percentage of household income spent on animals and
animal health continues to rise as launches of newer innovative
medicines and new technologies9 become available. While
there is evidence that inflationary pressures are being felt by
some owners, the overall effect has been small, highlighting the
resilience of the pet industry.
3. Sustainability
While food production of animal-based protein is expected
to decline per capita, the total global output should remain
constant or increase due to human 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 declining in relative terms. We also
expect that a reduction in antibiotic use across all species will
drive an increase in vaccination and a move to less intense
production systems.
4. Smaller dog breeds
Smaller dogs will continue to be popular and more animals will
be treated for medical conditions. Though dosing per head will
reduce in smaller breeds, margins should be maintained. In
Companion Animals we anticipate increased testing in the use
of anti-infectives and increased adoption of vaccine prophylaxis
for viral and bacterial diseases. This will result in greater focus on
the therapies suited to ageing Companion Animals.
Animalcare is actively seeking potential partners that possess
innovative technologies which we can develop and launch
with exclusivity in the Companion Animals segment. In March
2022 we signed an exclusive licence agreement with Orthros
Medical centred on two preclinical VHH antibody candidates.
The initial focus of this collaboration is canine osteoarthritis,
one of the leading reasons geriatric dogs visit the vet. Along
with Daxocox, we aim to increase our market share of this
large, growing market.
Link to strategic priority:
We continue to supply a portfolio of key medical and surgical
pharmaceutical products, primarily in the Companion Animals
sector, and look to launch innovative and novel products to
create sustainable growth. In some instances, we have been
affected by significant increases to our cost of goods during
2022. As a result, we have taken mitigating pricing actions where
possible while remaining mindful of market competitiveness.
Link to strategic priority:
Reducing our portfolio reliance on antibiotics is an important
element of our strategy; this was a key rationale for our
investment in STEM Animal Health Inc. which is enabling us
to exploit biofilm-targeting technologies in anti-infective roles.
Further information on antimicrobial resistance is provided
in the Sustainability Report.
Link to strategic priority:
Smaller dogs tend to live longer than larger breeds so
preventative products such as Plaqtiv+ and future microbiome
treatments have a longer potential life span in such animals.
Additionally, an ageing dog population should increase demand
for future and existing products that have particular utility in the
treatment of geriatric-related conditions, such as osteoarthritis.
Link to strategic priority:
STRATEGIC PRIORITIES
Strong Finances
Key Leadership
Growth Portfolio
Business Development
Innovative Pipeline
06
Animalcare Group plc Annual Report 2022
TREND
HOW WE ARE RESPONDING
5. Humanisation of pets
More time spent at home due to coronavirus restrictions
has strengthened bonds between pets and their owners.
According to a study in 202110, 71% of owners regarded their
pets as part of the family. Humanisation tends to elevate pet care
on an owner’s list of spending priorities, making them essential
rather than discretionary.
In 2022, Animalcare launched Plaqtiv+, an innovative range
of dental products, and OraStripDx, a simple diagnostic tool
designed to identify periodontal disease. These products can
enable dogs and cats to achieve improved dental health and
wellbeing by helping manage plaque and combat bad breath.
Future launches of microbiome-based products in 2023 will
focus on wellbeing issues such as canine “scooting” and
unbalanced gut microbiota.
Link to strategic priority:
6. Customer consolidation
With corporate veterinary businesses now accounting for almost
60% of practices in the UK, established corporate vet groups are
expanding across Europe to drive future growth. These groups
are showing first signs of operating on a pan-European basis
with at least one initiating a Europe-wide tender process.
This creates both opportunities and risks for animal health
companies and increases the importance of being in multiple
countries across Europe.
Animalcare has upped headcount in the dedicated corporate
accounts team and has moved reporting to Group level to get
closer to our key customers, better co-ordinate our resources
and ultimately maximise opportunities across Europe. Taking
Danilon into the UK business gives the Group more control
over pricing of this equine non-steroidal treatment as well as
providing an established and trusted brand to further engage
with corporate customers.
Link to strategic priority:
7. Competitive landscape
The takeover of several mid-sized players in 2022 pointed to
a continued appetite for consolidation in the animal health
pharmaceutical industry. Additionally, by making multiple,
smaller acquisitions, some well-financed companies have begun
to challenge a few of the more established players. The number
of companies selling generics is increasing with some big animal
pharma players seeing this class of product as an opportunity
to generate relatively cheap top line growth. Additionally, the
corporate vet groups are registering their own generics or
creating “white label” products with a generic partner.
8. Increase in digital and online
In light of COVID-19 and with the economic downturn, pet
owners are increasingly going online to look for advice11 or
products before visiting a vet. Younger pet owners are more
likely to purchase pet care items online via subscription than
their older counterparts12.
The Group continues to invest in business development
opportunities that support our focus on novel and differentiated
products and the pursuit of growth in niche areas such as dental.
We are also strengthening our understanding of the decision-
making drivers for corporate white label generics and are
assessing potential pan-European opportunities.
Link to strategic priority:
Identicare, the Group’s pet microchipping and pet owner
services company, was carved out of the UK pharmaceuticals
business in 2021. Under new digitally focused and experienced
management, we are seeking to grow the overall online
subscription-based service to pet owners centred around
pet protection.
Link to strategic priority:
1 https://animalhealtheurope.eu/about-us/annual-reports/2022-2/key-figures-2022/
2 https://animalhealtheurope.eu/about-us/annual-reports/2022-2/key-figures-2022/
3 https://animalhealtheurope.eu/about-us/annual-reports/2022-2/key-figures-2022/
4 https://animalhealtheurope.eu/about-us/annual-reports/2022-2/key-figures-2022/
5 https://agriculture.ec.europa.eu/data-and-analysis/markets/outlook/medium-term_en
6 https://onlinelibrary.wiley.com/doi/epdf/10.1111/jsap.13132
7 https://www.ema.europa.eu/en/veterinary-regulatory/overview/antimicrobial-resistance/european-surveillance-veterinary-antimicrobial-consumption-esvachttps://
europeanpetfood.org/about/statistics/
8 https://www.euromonitor.com/article/humanisation-a-key-driver-of-pet-product-sales#:~:text=The%20humanisation%20trend%20is%20driving,areas%20such%20as%20
pet%20healthcare.
9 https://www.statista.com/statistics/308235/estimated-pet-ownership-in-the-united-kingdom-uk/
10 https://www.veterinary-practice.com/2022/demand-for-remote-veterinary-care-continues-to-rise
11 https://www.americanpetproducts.org/press_releasedetail.asp?id=1252
07
Animalcare Group plc Annual Report 2022STRATEGIC REPORT
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.
OUR KEY RESOURCES
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.
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 represent our core customers are key. Our sales
force has extensive experience and knowledge of their
markets and products.
Partnerships
The Group has developed a series of critical partnerships
that help us strengthen our pipeline, commercialise
innovative products and establish research and
manufacturing capabilities and capacity.
Balanced portfolio
Animalcare operates a portfolio of around 150 brands. We
aim to increase the quality of this portfolio by focusing on
a smaller number of bigger, higher-margin brands with
significant growth potential.
Financial platform
Our solid financial platform enables us to increase
investment and leverage our stronger base to deliver future
growth and value to our shareholders.
Manufacturing
through
third par�es
Products
provided
via wholesales,
distributors
or direct
supply
Invest in pipeline
and por�olio
Invest in
our people
Rela�onships with
customers and
stakeholders
Sales and
marke�ng
OUR KEY ACTIVITIES
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 with
the help of contract research organisations, acquired from other
companies or in-licensed from partners.
• Outside our direct geographic operations we seek to commercialise
our products through international partnerships.
• We manufacture our products through a network of specialist
contract manufacturing organisations.
• We supply products direct to our customers and via a network of
specialist veterinary wholesalers and distributors.
• Using 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 people and in the pipeline of new products.
We are a business driven by our
values, which are at the core of
our key activities.
08
One team
Passion
Animalcare Group plc Annual Report 2022 VALUE CREATED FOR STAKEHOLDERS
Employees
Employees benefit from the ability to improve their skills
and work in a challenging, innovation-driven and forward-
thinking organisation.
Customers
Animalcare seeks to provide a choice of innovative
and trusted products and services to support veterinary
professionals and other customer stakeholders. Our agile
business model and close customer relationships help
ensure we are aligned with the changing needs of
our markets.
Shareholders
Through execution of our growth strategy, we aim
to consistently deliver a strong and resilient financial
performance for our shareholders, generating attractive
returns over the long term.
Keepers of animals
Our veterinary products and services – including the
Group’s pet reunification service provided by Identicare
– help maintain or improve the health and wellbeing of
animals across our markets. That brings huge benefits to
owners and wider society.
Suppliers
As the Group does not own manufacturing assets 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.
Integrity
Taking ownership
Have fun
09
Animalcare Group plc Annual Report 2022STRATEGIC REPORT Our Strategy
We are pursuing our strategic ambition of becoming a leading player in all our markets. In 2022
we continued to focus on the five pillars of our growth strategy.
Financial sustainability through revenue growth, strong cash conversion, EPS growth and EBITDA margin growth
STRONG FINANCES
Revenue growth
Cash conversion and net debt
Underlying EBITDA margin
and EPS growth
Key initiatives
• Focus on higher margin products
• Operating efficiency and leverage
Key initiatives
• Maintain net debt to underlying
EBITDA leverage ratio between
one and two times
• Optimise inventory turnover
• Tax efficiency
Key initiatives
• Focus on segments and products
with highest potential
• New product launches
• Leverage strengths across all our
direct markets
• Maximise opportunities in other
high growth markets through
partnerships or acquisition
Progress
• New product sales of £2.1m
(2021: £2.2m) predominantly
driven by Daxocox and launch
of Plaqtiv+ (from the STEM
biofilm range)
• 0.9% revenue decline in the
Top 40 products due to loss of
distribution and changes in the
antibiotic market
Progress
• Good underlying cash conversion
of 78.3% (2021: 108.8%)
Progress
• Total number of brands in portfolio
close to steady state target of 150
• Strong balance sheet maintained
with net debt at year end of £5.4m
(2021: £5.3m)
• Net debt comfortably below
target range
• Underlying EBITDA margin
approximately in line with
prior year supported by strong
improvement in gross margins
while managing SG&A investment
• Underlying EPS of 12.6 pence
(2021: 12.0 pence)
2023 Priorities
• Continue to drive operational
excellence in sales and marketing
• Evolve and align the organisation
to the external market and
internal opportunities to maximise
effectiveness and efficiencies in
order to scale profitability
2023 Priorities
• Continue to drive operational
excellence in sales and marketing
• Maximise growth potential of
Daxocox in dynamic market and
drive growth of Plaqtiv+ range
in all markets
2023 Priorities
• Support investment in growth
strategy by sustaining strong
cash conversion within a
80%-100% range
• Maintain EBITDA leverage in the
range of one to two times
LINKS TO RISKS
A B C G
LINKS TO KPIs
1 4 5
10
LINKS TO RISKS
C E F
LINKS TO KPIs
2 6
LINKS TO RISKS
C E F
LINKS TO KPIs
3 4
Animalcare Group plc Annual Report 2022
KEY LEADERSHIP
Organisation for success; leadership strength and core capabilities
RISKS KEY
Attract, retain and develop
talented people
Key initiatives
• Strengthen leadership capabilities
• Align reward to performance
• One-team culture
• Drive effective communication and
collaboration
Improve diversity
•
Organisation for growth
A Market risk
Key initiatives
• Create an organisation to drive
B Competitor risk
C Portfolio risk
sustainable and profitable growth
D Product development risk
Progress
• Sandra Single joined SET as Strategic
Progress
• Senior Executive Team (SET)
Product and Portfolio Director
focused on delivery
• Embedded “High Challenge,
High Support” leadership
programme and implemented
“Pioneering Professional” talent
management process
• Annual mean employee
engagement score of 3.88
(2021: 3.96)
• Wellbeing programme uptake in
line with expectations
2023 Priorities
•
Implement actions from employee
engagement survey
• New Global People Portal intranet
launched to improve two-way
communication
• Roll out of our own-branded
commercial excellence
programme, supported by
Group-wide CRM implementation
2023 Priorities
• Evolve and align the organisation
to the external market and
internal opportunities to maximise
effectiveness and efficiencies in
order to scale profitability
• Sustain strong momentum in
embedding commercial excellence
across all markets
LINKS TO RISKS
C D
J
LINKS TO KPIs
7
LINKS TO RISKS
B G
I
LINKS TO KPIs
1 7
E Financing/Treasury risk
F Foreign exchange translation risk
G Supply chain risk
H IT systems and cyber security risk
I
J
Regulatory risk
People risk
KPI KEY
1 Revenue growth
2 Underlying cash conversion
3 Basic underlying earning per share (“EPS”)
4 Underlying EBITDA margin
5 New product revenue
6 Net debt to underlying EBITDA leverage
7 Employee engagement
11
Animalcare Group plc Annual Report 2022STRATEGIC REPORT
Our Strategy continued
GROWTH PORTFOLIO
BUSINESS DEVELOPMENT
INNOVATIVE PIPELINE
Focused portfolio in key therapy areas
in growing market segments
Work with partners to build a
pipeline of products that meets our
criteria for growth
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
•
Improve quality of portfolio; focus
on smaller number of bigger-
selling, higher-margin brands
Key initiatives
•
In-license or acquire innovative
pipeline or market-ready products
• Establish Animalcare as partner of
choice, especially for companies
selling into Europe
• Build partnerships to exploit
growing global markets
Launch new products and
develop differentiated and
innovative pipeline of products
for the future
Key initiatives
• Strengthen internal pipeline of
differentiated products through
partnerships, in-licensing and
acquisitions
• Prioritise and accelerate in-house
R&D projects
Progress
• Focus on Top 40 products
contributed to strengthened gross
margins
• Daxocox is now a Top 10 selling
Animalcare product and we
have successfully launched the
Plaqtiv+ range
Progress
• Ongoing distribution partnership
with Virbac for Daxocox extended
to additional markets globally
• UK Identibase business continues
to develop and grow post carve
out with focus on services centred
around pet protection
Progress
• Research collaboration with
Orthros Medical progressing well –
focus on lead candidates and new
indications for the VHH antibody
technology
• Daxocox clinical studies in new
indications on track
2023 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
2023 Priorities
• Continue to pursue value-creating
partnerships and in-licensing
opportunities
LINKS TO RISKS
C D
LINKS TO KPIs
1 3 4
LINKS TO RISKS
B G
I
LINKS TO KPIs
1 5
For strategy and risks key please see page 11
2023 Priorities
• Continued development of
lead indications for the Orthros
technology including initiation of
clinical programmes
• Pursue potential additional
indications for the Orthros
technology
LINKS TO RISKS
A D E
I
LINKS TO KPIs
1 3 5
12
Animalcare Group plc Annual Report 2022 Our Strategy in Action
Orthros Medical – Delivering on our strategy
In March 2022 we took a major step forward in the
development of our longer-term pipeline through a
collaboration and licensing deal with Orthros Medical,
a Netherlands-based company focused on novel VHH
antibody technology.
VHH antibodies have been shown to possess a number of
clinical uses that are relevant in animal health. Indeed, VHH
antibody products have received regulatory approval for use
in human medicine.
Under the terms of our agreement, Animalcare is
working in a research partnership with Orthros Medical
to develop VHH antibodies in animal health indications.
This collaboration provides Animalcare with access to the
excellent scientists at Orthros Medical and the project is run
through a joint steering committee. Animalcare will have
the opportunity to license and commercialise animal health
products that result from this partnership. While there is
much to do to bring any new product from early stage to
launch, we see significant opportunities to develop our
longer-term growth portfolio through this agreement.
The licensing deal with Orthros Medical focuses on the
development and launch of specific products that have
already been identified.
In recognition of the inherent risks associated with new
product development, we have built in milestones and
“stage gates” to ensure that the level of investment is
aligned to the phase of development. Consequently,
investment is designed to step up as we approach and pass
through regulatory approval and launch.
This is an exciting advance for Animalcare. We are
delighted with how the relationship with Orthros Medical
is working and the progress made in the initial phase of the
collaboration. One year into our agreement, it’s clear that
supporting earlier stage research in tandem with experts
in the field fits our model well and provides an opportunity
to develop innovative products that can deliver sustainable
future growth.
Animalcare Group plc Annual Report 2022
13
Derived from llamas, VHH antibodies have been
shown to possess a number of clinical uses.
STRATEGIC REPORT Our Key Performance Indicators
Financial KPIs
REVENUE GROWTH
UNDERLYING CASH CONVERSION
BASIC UNDERLYING EARNINGS PER SHARE
22
21
20
£71.6m
£74.0m
£70.5m
£71.6m
22
21
20
78.3%
108.8%
102.9%
78.3%
Definition
Organic revenue growth including: new products
versus prior year, excluding the impact of acquisitions
and disposals
Definition
Cash generated from operations as a percentage of
underlying EBITDA
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
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 innovative pipeline and people
Commentary on performance
Revenue for the year was £71.6m (2021: £74.0m),
a decrease of 3.3% at AER (2.5% at CER)
Commentary on performance
Underlying cash conversion has averaged more than 90%
over the last three financial years demonstrating our
ability to generate strong and sustained levels of cash
LINKS TO STRATEGY
LINKS TO STRATEGY
LINKS TO STRATEGY
NEW PRODUCT REVENUE
NET DEBT TO UNDERLYING EBITDA LEVERAGE
UNDERLYING EBITDA MARGIN
22
21
20
£2.1m
£2.2m
£2.2m
0.4x
0.4x
22
21
20
£2.1m
1.1x
0.4x
Definition
Revenue from new products launched in the last two
financial years
Definition
Leverage is net debt (total debt less cash balances)
divided by underlying EBITDA
Why we measure this
New product revenues are a key driver of growth in
Companion Animals and support our strong presence in
Production Animals
Why we measure this
We seek to maintain a strong balance sheet with EBITDA
leverage in the range of one to two times to allow
capacity for investment in future growth
Commentary on performance
Growth from newly introduced products contributed
£2.1m of sales principally driven by Daxocox and Plaqtiv+
Commentary on performance
Net debt to underlying EBITDA leverage ratio maintained
at 0.4 times
LINKS TO STRATEGY
LINKS TO STRATEGY
LINKS TO STRATEGY
14
22
21
20
12.6p
12.0p
10.6p
12.6p
Definition
Underlying profit after tax divided by the weighted
average number of shares
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 5.0% ahead of 2021 at 12.6p benefiting
from a lower effective tax rate
22
21
20
18.3%
18.2%
17.2%
18.3%
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 is approximately in line with
prior year at 18.3% reflecting improved gross margins and
managing investment in our cost base
Animalcare Group plc Annual Report 2022
Financial KPIs
£71.6m
£74.0m
£70.5m
Definition
and disposals
£71.6m
78.3%
22
21
20
78.3%
108.8%
102.9%
Definition
Organic revenue growth including: new products
Cash generated from operations as a percentage of
versus prior year, excluding the impact of acquisitions
underlying EBITDA
Why we measure this
Why we measure this
Revenue growth is an important barometer of the Group’s
Our quality of earnings is reflected in our ability to turn
success in delivering its strategy and is a key component of
underlying EBITDA into cash, an important enabler of
growing our profits and cash flow
investment in our innovative pipeline and people
Commentary on performance
Commentary on performance
Revenue for the year was £71.6m (2021: £74.0m),
Underlying cash conversion has averaged more than 90%
a decrease of 3.3% at AER (2.5% at CER)
over the last three financial years demonstrating our
ability to generate strong and sustained levels of cash
22
21
20
22
21
20
REVENUE GROWTH
UNDERLYING CASH CONVERSION
BASIC UNDERLYING EARNINGS PER SHARE
EMPLOYEE ENGAGEMENT
Non-financial KPIs
22
21
20
12.6p
12.0p
10.6p
12.6p
22
21
20
3.88*
3.96*
4.17*
3.88*
Definition
Underlying profit after tax divided by the weighted
average number of shares
Definition
Measure of employee engagement based on well
established Gallup Q12 process
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 5.0% ahead of 2021 at 12.6p benefiting
from a lower effective tax rate
LINKS TO STRATEGY
LINKS TO STRATEGY
LINKS TO STRATEGY
NEW PRODUCT REVENUE
NET DEBT TO UNDERLYING EBITDA LEVERAGE
UNDERLYING EBITDA MARGIN
£2.1m
1.1x
0.4x
Revenue from new products launched in the last two
Leverage is net debt (total debt less cash balances)
0.4x
0.4x
22
21
20
Definition
divided by underlying EBITDA
Why we measure this
£2.1m
£2.2m
£2.2m
Definition
financial years
Why we measure this
New product revenues are a key driver of growth in
We seek to maintain a strong balance sheet with EBITDA
Companion Animals and support our strong presence in
leverage in the range of one to two times to allow
Production Animals
capacity for investment in future growth
Commentary on performance
Commentary on performance
Growth from newly introduced products contributed
Net debt to underlying EBITDA leverage ratio maintained
£2.1m of sales principally driven by Daxocox and Plaqtiv+
at 0.4 times
22
21
20
18.3%
18.2%
17.2%
18.3%
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 is approximately in line with
prior year at 18.3% reflecting improved gross margins and
managing investment in our cost base
LINKS TO STRATEGY
LINKS TO STRATEGY
LINKS TO 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
The Group’s 2022 engagement score declined by 2% on
the prior year. The survey highlighted a positive view
among employees about their ability to deliver high
quality work as well as opportunities to further develop
and progress in their roles
*Gallup Q12 engagement score
LINKS TO STRATEGY
STRATEGIC PRIORITIES
Strong Finances
Key Leadership
Growth Portfolio
Business Development
Innovative Pipeline
15
Animalcare Group plc Annual Report 2022STRATEGIC REPORT
Chief Executive Officer’s Review
JENNY WINTER
Chief Executive Officer
Looking back at 2022, we have reasons
to be pleased with several of our key
indicators – not least positive margin
growth and good cash conversion –
as we continue to benefit from a
strong balance sheet in the pursuit
of our long-term growth strategy.
Strong finances
Revenues for the full year reflected
a moderation in demand after the
pronounced spike in post-pandemic
veterinary activity seen in 2021
across Europe. Termination of certain
Companion Animals distribution
agreements and the application of
EU regulations in Spain designed
to reduce the widespread use of
antibiotics in Production Animals,
exerted further downward pressure
on overall revenues. As a result, the
headline sales figure of £71.6m was
down 3.3% at actual exchange rates
(2.5% at constant exchange rates).
Our focus on bigger-selling, more
profitable products in our portfolio
continued to deliver results, driving
much improved gross margins of 56.8%
(2021: 53.3%). Carefully targeted
interventions on pricing also helped us
mitigate the impact of inventory and
logistics inflation.
56.8%
GROSS MARGIN
Following on from the significant
progress we have made in recent years
to reduce our debt and improve our
balance sheet, the Group delivered
positive cash conversion in line with
our goals. As a result, net debt stood
at £5.4m at the year end with leverage
well below the target range of one to
two times underlying EBITDA (0.4 times
underlying EBITDA). Maintaining such
a strong financial platform is critical
to our strategy, enabling us to pursue
value-creating opportunities through a
combination of M&A, partnerships and
pipeline projects.
Key leadership
In 2022 we continued to invest in
building the skills and behaviours
that will drive our business forward.
Identifying and developing the next
generation of leaders has been a clear
theme over the course of the year
with the introduction of a consistent
approach to the management of our
talent. This initiative is also designed
to dovetail with our branded “High
Challenge High Support” programme
of behavioural development.
In 2022, the Group
stepped up R&D
investment as we
continued to build
an innovative pipeline
that is capable
of generating
sustainable growth
16
Animalcare Group plc Annual Report 2022 Growth portfolio
Our product portfolio acts as both a
solid platform and a driver of growth.
In recent years we have refined
our product line-up, concentrating
attention on larger-selling, higher
margin brands while disposing of
smaller “tail” products, some of which
offered little more than a distraction.
This rationalisation programme
is now effectively complete with
approximately 150 brands offering
a comprehensive yet manageable
portfolio. Though our Production
Animals business remains a valuable
part of the overall mix, it is evident
that the Companion Animals segment
offers greater growth potential.
Consequently, that’s where we direct
more of our investment.
In 2022, our top 40 selling brands
accounted for approximately 78% of
total product sales, marginally down
on the prior year. It was particularly
satisfying to see Daxocox, our novel
treatment for osteoarthritis-related
pain in dogs, comfortably enter the
top 10 ranking of Animalcare products.
Additionally, our Plaqtiv+ dental health
range, the first product to emerge
from the STEM joint venture with Kane
Biotech Inc., contributed to earnings
following the later than expected
accreditation from the influential
Veterinary Oral Health Council (VOHC).
Identicare Ltd, the Group’s UK-based
pet microchipping and pet owner-
focused services company, which we
carved out from our pharmaceutical
business under specialist leadership
during 2021, delivered double-digit
revenue growth over the period.
Market data show that innovative
products are driving much of the
growth in the animal health sector.
This dynamic is hard-wired into
our business strategy. It’s crucial,
therefore, that our people are
equipped with industry-leading skills
to engage with customers and explain
how these new technologies can
benefit animal health and wellbeing
in the appropriate settings. That’s why
we intensified our focus on sales and
marketing excellence during 2022.
3.88
ENGAGEMENT SCORE
In partnership with Gallup, we carry
out an annual survey of employee
engagement. Recognising that we
recorded a decline of 2% in our
overall 2022 score, the data we gather
through this process provides us with
a rich source of insights as we seek to
identify areas for improvement down
to team level.
We extended a warm welcome to two
new Non-Executive Directors to the
Company in 2022. Doug Hutchens
joined the company in February while
Sylvia Metayer assumed her role in
May. Doug’s impressive background
in veterinary medicine and R&D
and Sylvia’s senior level commercial
leadership experience are already
making a positive mark on the Group.
17
Animalcare Group plc Annual Report 2022STRATEGIC REPORT Chief Executive Officer’s Review continued
Business development
Achieving growth via inorganic
business development routes is a
core strategic objective for the Group.
This is made possible by a financial
platform that has been materially
strengthened in recent years. Over
the course of 2022 our dedicated
business development team focused
their efforts on the identification and
pursuit of value-creating deals that can
build our pipeline, add to revenues
at attractive levels of profitability and
extend our operational footprint and
sales and marketing reach.
Our agreement with Netherlands-
based Orthros Medical, signed in
March 2022, secured an exclusive
licence for VHH antibody technology,
with an initial focus on canine
osteoarthritis. Though still in the early
stages, the partnership has all the
hallmarks of a collaborative template
for our business.
Innovative pipeline
In 2022 the Group stepped up R&D
investment as we continued to build
an innovative pipeline that is capable
of generating sustainable growth; we
expect to further increase spend as a
proportion of sales in 2023.
The aforementioned licencing and
collaboration agreement with Orthros
Medical has generated a number
of preclinical projects exploring the
potential for VHH antibodies, initially
for the treatment of osteoarthritis-
related pain in dogs. This is an
expanding area of the market in which
we are recognised for our knowledge
and expertise. Following the European
approval of Daxocox in 2021, we
are also leveraging our product
development capability to pursue
life cycle management opportunities
that can extend the therapeutic and
commercial reach of our long-acting
COX-2 inhibitor.
Summary and outlook
Though the Group fell short of its
revenue expectations in 2022 due to
a combination of moderating market
demand and other more specific
factors, we made positive progress on
gross margins, helping us maintain our
strong financial position, and with it our
ability to invest in growth opportunities.
Looking ahead, we remain confident in
the resilience of our business and the
wider animal health market which has
seen record levels of pet ownership
in many countries. We continue
to be mindful of macroeconomic
uncertainties, including inflationary
pressures, but we anticipate a return
to revenue growth for the full year.
Our people deserve huge credit for the
commitment they have shown in 2022.
I’d like to record my thanks for their
hard work as we continue to deliver on
our long-term growth strategy.
JENNY WINTER
Chief Executive Officer
18
Animalcare Group plc Annual Report 2022 19
Animalcare Group plc Annual Report 2022STRATEGIC REPORT Chief Financial Officer’s Review
CHRIS BREWSTER
Chief Financial Officer
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
Revenue
Gross Profit
Gross Margin %
Underlying Operating Profit
Underlying EBITDA
Underlying EBITDA margin %
Underlying Basic EPS (p)
2022
£’000
71,616
40,659
56.8%
9,753
13,131
18.3%
12.6p
2021
£’000
74,024
39,418
53.3%
10,593
13,455
18.2%
12.0p
% Change at
AER
(3.3%)
3.2%
3.5%
(7.9%)
(2.4%)
0.1%
5.0%
Trading activity in 2022 reflected the continued moderation of market growth
across Europe from the exceptionally high levels of post pandemic-related
demand in 2021. The continuing commercial focus on our larger, higher margin
brands was the main driver of much-improved gross margins. The Group’s strong
balance sheet and good levels of cash generation allow us to continue to invest
to support future growth.
With our strong
balance sheet, the
Group remains well
placed to deliver
on our long-term
growth strategy
and we continue to
explore business and
product development
opportunities
20
Animalcare Group plc Annual Report 2022 Revenues declined to £71.6m (2021: £74.0m), a decline of 3.3% at AER (2.5% at
CER). An analysis by product category is shown in the table below:
Companion Animals
Production Animals
Equine & other
Total
Companion Animals revenue, which
continues to represent around 70%
of Group turnover, declined by 2.2%
to £50.2m, impacted by moderating
demand levels across Europe as
noted above together with the loss
of distribution rights of certain key
brands. In part, this was offset by sales
growth from new products, which
contributed £2.1m (2021: £2.2m),
predominantly driven by Daxocox and
Plaqtiv+, the latter launching during
Q2 following the later than expected
VOHC (Veterinary Oral Health Council)
accreditation. In addition, Identicare,
the Group’s small but growing
UK-based pet microchipping and pet
owner-focused services business,
delivered 13% revenue growth over
the period. One year on from bringing
in specialist leadership, we are
pleased with the progress in
transitioning the business to a
subscription-based services model
with recurring revenues.
Production Animal revenues, which
are largely generated by our South
Region business, declined by 7.7%
2022
£’000
50,217
15,674
5,725
71,616
2021
£’000
51,326
16,980
5,718
74,024
% Change at
AER
(2.2%)
(7.7%)
0.1%
(3.3%)
versus the prior year to £15.7m,
predominantly due to the application
of EU laws in Spain designed to
further reduce the widespread
use of antibiotics.
Equine and other sales were broadly
flat versus 2021 at £5.7m during a
period in which we took Danilon,
one of our largest brands, back into
the UK business, giving the Group
more control over supply and our
commercial offering.
Revenues generated by our Top
40 brands, collectively accounting for
approximately 78% of sales, reduced
by 0.9%, predominantly impacted
by the conclusion of distribution
rights within our Companion Animals
portfolio as noted earlier. The
continuing commercial focus on
these larger, higher-margin brands,
together with a more favourable
sales mix, are the key drivers of
the 3.5% improvement in our gross
margins. While the Group has been
affected by inventory and logistic price
increases, the net impact on gross
and EBITDA margins during the year
has not been significant as we have
taken mitigating pricing actions where
possible. However, we remain alert to
the accelerating inflationary pressures
impacting our overall cost base as we
progress into 2023.
Underlying EBITDA declined by 2.4% to
£13.1m, broadly in line with revenues.
Disciplined management of SG&A
costs in the light of the moderating
revenues enabled us to deliver EBITDA
margins at approximately the same
level as the prior year. SG&A expenses
increased during the year to £27.5m
(2021: £26.0m) as we continue to
invest in our people and drivers of
future growth such as new products
and pipeline projects, the latter
including R&D expenditure related
to the early-stage collaboration with
Orthros Medical.
The underlying effective tax rate of
16.4% (2021: 24.4%) has decreased
versus 2021 primarily reflecting the
geographic mix of profits and the prior
year one-off impact of the enactment
of the 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 was 5.0%
ahead of prior year at 12.6 pence
(2021: 12.0 pence).
21
Animalcare Group plc Annual Report 2022STRATEGIC REPORT Chief Financial Officer’s Review continued
Overview of reported financial results
Reported Group profit after tax for the year (after accounting for the non-underlying items shown in the table and discussed
below) was £2.2m (2021: £0.1m loss), with reported earnings per share at 3.7 pence (2021: 0.1 pence loss per share).
Revenue
Gross profit
Selling, general & administrative expenses
Research & development expenses
Net other operating income/(expense)
Impairment losses
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)
2022
Underlying
results
£’000
71,616
40,659
(28,547)
(2,363)
4
–
9,753
(642)
(52)
9,059
(1,487)
7,572
12.6p
Amortisation
and
impairment of
intangibles
£’000
–
–
(3,794)
(667)
–
(918)
(5,379)
–
–
(5,379)
725
(4,654)
–
Acquisition,
restructuring,
integration
and other
costs
£’000
–
–
(219)
–
(919)
–
(1,138)
–
–
(1,138)
185
(953)
–
2022
Reported
results
£’000
71,616
40,659
(32,560)
(3,030)
(915)
(918)
3,236
(642)
(52)
2,542
(577)
1,965
3.3p
2021
Reported
results
£’000
74,024
39,418
(31,339)
(3,132)
(197)
(2,761)
1,989
(856)
(188)
945
(1,022)
(77)
(0.1p)
Underlying EBITDA is reconciled to the statutory measures in the table above within the notes to the consolidated
financial statements.
Non-underlying items totalling £6.5m (2021: £8.6m) 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 £5.4m (2021: £8.3m). The current year charge
primarily comprises amortisation in relation to the reverse acquisition of Ecuphar NV and previous acquisitions made
by Ecuphar NV (£4.5m) and a non-cash impairment charge on Research & Development assets that formed part of the
acquired development pipeline, the principal driver for which was manufacturing challenges that have significantly
impacted the timing and costs to resume supply with appropriate commercial returns.
2. Expenses relating to acquisition, business development, integration, restructuring and other costs of £1.1m
(2021: £0.3m) including the reorganisation and restructuring of our Benelux and UK operations, the latter relating
to the carve-out of Identicare in 2021, manufacturing transfers and relocation of our Spain and UK offices.
Dividends
An interim dividend of 2.0 pence per share was paid in November 2022.
The Board is proposing a final dividend of 2.4 pence per share (2021: 2.4 pence per share). Subject to shareholder approval
at the Annual General Meeting to be held on 13 June 2023, the final dividend will be paid on 14 July 2023 to shareholders
whose names are on the Register of Members at close of business on 16 June 2023. The ordinary shares will become ex-
dividend on 15 June 2023.
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.
22
Animalcare Group plc Annual Report 2022 Cash flow and net debt
We entered 2022 in a healthy position following the significant progress made during 2021 in reducing our debt and
increasing the Group’s financial strength. With the net debt to underlying EBITDA leverage ratio comfortably below our
stated target range of one to two times, we continue to pursue value-creating opportunities through M&A, partnerships
and pipeline projects.
The Group delivered good cash generation during the year following the very strong cash conversion performance in 2021.
In line with our expectations, our cash conversion moderated during the financial year, while remaining on average within
the previous target 90-100% range over 2021 and 2022.
Underlying EBITDA
Net cash flow from operations
Non-underlying items
Underlying net cash flow from operations
Underlying cash conversion %
2022
£’000
13,131
9,429
847
10,276
78.3%
2021
£’000
13,455
14,023
611
14,634
108.8%
Net cash flow generated by our operations reduced to £9.4m (2021: £14.0m). Working capital increased by £1.9m in the
year compared to a £2.2m reduction during 2021. This movement, chiefly attributable to significantly higher receivables as
a result of revenue phasing towards the year end, was largely offset by increased payables. Inventories increased by £2.7m
from the lower than expected position at the end of 2021, primarily driven by normalisation of our stock profile following
restocking of delayed supply together with some investment in strategic inventories to maintain strong service levels. The
increase in working capital was in part offset by a £0.7m reduction in cash taxes mainly due to a combination of geographic
mix of profits and lower settlement of prior year taxes.
We are targeting a year-on-year improvement in cash conversion for the financial year ending 31 December 2023, with a
profile broadly consistent with the first and second halves of 2022.
Net debt at 1 January 2022
Net cash flow from operations
Net capital expenditure
Investments in joint venture
Net finance expenses
Dividends paid
Foreign exchange on cash and borrowings
Movement in IFRS 16 lease liabilities
Net debt at 31 December 2022
£’000
(5,330)
9,429
(2,794)
(325)
(1,732)
(2,644)
(715)
(1,291)
(5,402)
Net capital expenditure of £2.8m (2021: £2.7m) largely comprises investment in our product development pipeline of
£1.3m, including £0.4m in relation to the first licence milestone payment to Orthros Medical. The balance of expenditure
relates chiefly to investment in our business systems, including CRM, ERP and IT infrastructure within Identicare, and the
relocation of our UK office.
The net debt to underlying EBITDA leverage ratio was approximately 0.4 times, consistent with 2021 and comfortably below
the Group’s stated target range of one to two times underlying EBITDA.
23
Animalcare Group plc Annual Report 2022STRATEGIC REPORT Chief Financial Officer’s Review continued
not as strong as expected, the Group
has made positive progress on gross
margins and demonstrated agility in
managing our cost base in line with
trading levels. Good levels of cash
conversion have also maintained our
strong financial platform.
Mindful of the current economic
environment, we are confident in
the resilience of the Group and the
animal health sector, underpinned
by historically high levels of pet
ownership.
With our strong balance sheet, we
believe the Group remains well placed
to deliver on our long-term growth
strategy and we continue to explore
business and product development
opportunities.
CHRIS BREWSTER
Chief Financial Officer
Borrowing facilities
The Group has total facilities of
€51.5m (£45.7m) to 31 March 2025,
provided by a syndicate of four banks
comprising a committed revolving
credit facility (RCF) of €41.5m
(£36.8m) and a €10.0m (£8.9m)
acquisition line, the latter of which
cannot be utilised to fund operations.
The Group manages its banking
arrangements centrally through
cross-currency cash pooling. Funds
are swept daily from its various bank
accounts into central bank accounts
to optimise the Group’s net interest
payable position.
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%.
Net of cash balances totalling £6.0m,
£4.4m of the RCF was utilised at
the year end, leaving headroom of
£38.4m.
As at 31 December 2022 and
throughout the financial year, all
covenant requirements were met with
significant headroom across all three
measures.
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 and
liquidity to meet its obligations as
they fall due, taking into consideration
market conditions, the profile of cash
generation, the Group’s financial
position (including the level of
headroom available within the bank
facilities and compliance with the
financial covenants associated with
these facilities), bank facility maturity
and principal risks.
Accordingly, the Directors continue
to adopt the going concern basis in
preparing the financial statements.
Summary and outlook
While our revenue performance,
which was impacted by a combination
of external and internal factors, was
24
Animalcare Group plc Annual Report 2022 Our Principal Risks
Managing our risks
The Board 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 Group’s strategy.
The day-to-day identification,
management and mitigation of
risk is delegated to the Group’s
management, executed through our
Risk Management Framework (RMF).
In 2022 the RMF was broadened with
the formal set-up of the Sustainability
Task Force (STF) to manage and
address the Group’s sustainability
and climate-related risks as set out in
the Sustainability section. In addition,
and with guidance from the external
advisors who supported the initial
implementation of the RMF, a review
is underway to further develop
and refine the RMF for adoption
during 2023, with emphasis on R&D,
commensurate to our strategy to
develop differentiated and innovative
products for the future.
We believe the developments and
refinements made during 2022
and planned for 2023 will further
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.
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
Group’s critical risks.
To be effective, risk management
relies on the engagement of all parts
of the business, which is an integral
part of our framework and culture.
The RMF has been built in support of
our regional model – Northern and
Southern Europe, overseen by the
Senior Executive Team. Within that
structure, our regional management
teams as well as Group function heads
are expected to identify, manage
and mitigate risks in their part of the
business. They manage this process
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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
First Line of Defence
Business Team Meetings
Horizon Scan
RCSA –
Risk and Control
Self Assessments
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
across the Group. This part of our
framework represents the First Line of
Defence.
Our Second Line of Defence is
executed through a small centralised
team working 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 an Horizon Scan
across the organisation which in turn
ensures independent oversight and
consistency.
The Horizon Scan is reviewed by
the executive team and mapped
against the five pillars 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,
operating as our Third Line of Defence,
provides updates and reports to the
Board, based on the Horizon Scan
and Strategic Risk Heatmap, to assist
the Board in fulfilling its corporate
governance duties and oversees
responsibilities in relation to financial
reporting, internal control and risk
management.
25
Animalcare Group plc Annual Report 2022STRATEGIC REPORT
Our Principal Risks continued
COVID-19
We have continued to monitor the
operational impact of COVID-19 on
the business during the financial year.
While the virus has not had a material
impact on our trading performance
during 2022, the pandemic has
had, and may continue to have, an
adverse effect on our supply chain as
we experience disruptions or delays
in shipments of certain products or
components of our products.
Ukraine
Russia’s invasion of Ukraine has had
little direct impact on our revenues.
Our sales to Russia, while not material,
were ceased. However, the conflict has
created some additional supply chain
uncertainty which we will continue
to monitor.
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 pursue
geographical expansion and seek
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.
Sustainability and
climate change
As noted above, the Board has overall
responsibility for ensuring risk is
appropriately managed across the
Group. This includes risks relating to
Environmental, Social and Governance
(ESG) matters and climate change.
In 2021 we commenced our
sustainability journey and identified
issues of importance to our
stakeholders and business. Through
the STF, established in 2022, and
in conjunction with our external
ESG advisor, we have conducted a
materiality assessment and developed
a sustainability materiality matrix
to help us identify and prioritise
the issues that matter most to our
business and stakeholders.
The STF has assisted in the
identification of climate-related risks
and has overseen modifications to
our RMF, to ensure that it captures
climate-related risks.
26
Animalcare Group plc Annual Report 2022 STRATEGIC PRIORITIES
Strong Finances
Growth Portfolio
Innovative Pipeline
Key Leadership
Business Development
TREND KEY
RISK KEY
❯ Up
❯ Down
L Low
M Medium
❯ No change
H High
1 MARKET AND ECONOMIC RISK
M ❯
Detailed Risk
Animal health market growth has moderated across
Europe during 2022 – there is a risk of further decline in
the market driven by macroeconomic uncertainty.
Potential Impact
Reduction in consumer confidence and spending on
veterinary products and services in light of inflationary
pressures.
In certain territories the veterinary market continues to
trend towards consolidation and growth of corporate
customers and buying groups who are looking for value
from the products and services we provide.
The continuing emergence and growth of corporate
customers and buying groups represents an opportunity
for sales volume growth but may result in reduced margins
through leverage of buying power.
Existing Mitigation Controls
Veterinary is considered to be an essential service and our product portfolio largely consists of pharmaceuticals used in
the vet practice which are less prone to pet owner discretionary spending pressure.
We continue to develop and strengthen our relationships with our larger customers, managed through dedicated key
account teams, with support from the Sustainability Task Force in regard to ESG, to better serve our changing customer
base and their evolving requirements, both on a national and a European basis.
2 COMPETITOR RISK
M ❯
Detailed 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.
Potential Impact
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.
Existing Mitigation Controls
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.
27
Animalcare Group plc Annual Report 2022STRATEGIC REPORT
Our Principal Risks continued
3 PORTFOLIO RISK
Detailed Risk
Approximately 36% of the Group’s revenues are
derived from products sourced from our distribution
partners, which are heavily driven by the associated
contractual terms.
M ❯
Potential Impact
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 through geographic expansion of their own
footprint or a different route to market, resulting in
lost sales.
Distribution may cease due to change of control of the
contracting parties.
Existing Mitigation Controls
Continue to explore and secure new distribution opportunities. 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 portfolio optimisation.
Significant existing contracts are reviewed to assess and mitigate business continuity risks, where possible.
Build and grow our owned and long-term licence product portfolio to reduce reliance on third-party distribution partners.
4 PRODUCT DEVELOPMENT RISK
M ❯
Detailed Risk
Failure to successfully register and launch products from
our pipeline, including those that we develop through
license.
Potential Impact
Significant delay or failure in launching a product from
our pipeline could adversely affect our ability to deliver
revenue and meet shareholder expectations.
Projects that initially appear promising may be delayed
or fail to meet clinical or commercial expectations or face
delays in regulatory approval.
Failure of a project in the development phase, or where
we are unable to recover the costs incurred in developing
and launching a product, would result in impairment of
recognised intangible assets.
Existing Mitigation Controls
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.
In respect of significant new product launches, detailed sales and marketing plans are established and evolved over time,
with progress regularly monitored against these plans by our commercial teams.
28
Animalcare Group plc Annual Report 2022
STRATEGIC PRIORITIES
Strong Finances
Growth Portfolio
Innovative Pipeline
Key Leadership
Business Development
TREND KEY
RISK KEY
❯ Up
❯ Down
L Low
M Medium
❯ No change
H High
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:
5 FINANCING/TREASURY RISK
Detailed 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.
L ❯
Potential Impact
Investing for growth constrained by lack of access to
capital/financial resource and/or reduced profitability.
Existing Mitigation Controls
We continue to focus on maintaining both strong cash conversion and a strong balance sheet with a target net debt to
EBITDA leverage within the one to two times range, reducing the risk of non-compliance with covenants.
Our existing banking facilities through a syndicate of four banks, with whom we have strong relationships, are in place
until 31 March 2025. A review of our facilities will be conducted during FY23 with the intention to renew well in advance
of the 31 March 2025 maturity date.
6 FOREIGN EXCHANGE TRANSLATION RISK
Detailed 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.
M ❯
Potential Impact
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.
Existing Mitigation Controls
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.
29
Animalcare Group plc Annual Report 2022STRATEGIC REPORT
Our Principal Risks continued
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.
7 SUPPLY CHAIN RISK
M ❯
Detailed 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.
Potential Impact
Any disruption, interruption or failure of supply from
our third-party suppliers, whether pandemic-related
or otherwise, could result in lost sales and damage the
Group’s reputation with its customers.
Rising inflation impacting cost of product and adversely
affecting margins.
Manufacturing transfers to resolve longer-term supply
issues may require additional regulatory approvals, which
could result in additional costs and/or delays.
Existing Mitigation Controls
Our supplier base is continually under review with the objective of consolidating our key products with reliable suppliers.
Under the umbrella of the Group’s key partner management programme we continue to invest resource in strengthening
ties with our existing supplier base, together with managing and supporting our suppliers to deliver quality products on
time and in full to our regulatory specifications.
We have allocated more dedicated finance resource to the monitoring and impact of inflation during 2022 and have
taken mitigating pricing actions where possible.
8 IT SYSTEMS AND CYBER SECURITY RISK
H ❯
Detailed 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.
Potential Impact
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 impact availability of data.
Failure to adequately protect customer (and others’)
data may result in a breach of GDPR legislation and/or
financial fraud.
Existing Mitigation Controls
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.
• We engage 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 2022 we have conducted wide-scale security testing to reduce our risk of phishing attacks. We have conducted a
critical data assessment to categorise our data and recommend appropriate safeguards.
30
Animalcare Group plc Annual Report 2022
STRATEGIC PRIORITIES
Strong Finances
Growth Portfolio
Innovative Pipeline
Key Leadership
Business Development
TREND KEY
RISK KEY
❯ Up
❯ Down
L Low
M Medium
❯ No change
H High
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.
9 REGULATORY RISK
M ❯
Detailed 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.
Potential Impact
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.
Existing Mitigation Controls
The Group Technical and Regulatory team has established systems, which were subject to significant investment 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 retain a thorough understanding
of regulatory changes.
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, therefore, our people risk is managed, monitored and mitigated as follows.
10 PEOPLE RISK
M ❯
Detailed Risk
Failure to structure and resource the business properly to
deliver our strategy.
Potential Impact
Failure to structure and resource our business properly
could result in:
We may not be able to attract, develop and retain high-
calibre, diverse and experienced individuals in key roles.
• Loss of expertise.
• Potential business disruption.
Insufficient resources to deliver strategy.
•
• High cost of organisational restructuring in
certain countries.
Existing Mitigation Controls
We want to focus on key areas that will maximise individual potential and increase organisational capability so that we
can position Animalcare as a “Great Place to Work”.
This includes:
• A strong performance management process supported by our Competency Framework.
• Competitive rewards and benefits through regular benchmarking.
• Focused development including our “High Challenge High Support” leadership and “Pioneering Professional” programmes.
• New Global Recruitment and Onboarding framework.
• Global employee assistance programme to support mental and physical wellbeing as well as personal development.
We continue to use a team of highly skilled contractors to bridge short-term gaps in key resource areas and support key
project delivery.
31
Animalcare Group plc Annual Report 2022STRATEGIC REPORT
Our Stakeholders
Our key stakeholders and how we engage with them
The Board considers its key stakeholders to be the Group’s employees, customers, the Company’s shareholders, suppliers,
the communities and environment in which we operate.
OUR PEOPLE
CUSTOMERS
SHAREHOLDERS
PARTNERS
SUPPLIERS
COMMUNITIES AND
ENVIRONMENT
Why we engage
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
The Group provides regular updates to
the market in line with AIM requirements
and encourages an ongoing dialogue
through investor roadshows, meetings
and presentations as well as consulting
on relevant topics. The dedicated investor
section of the Company’s website
provides valuable information for existing
shareholders and potential investors.
Why we engage
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.
Why we engage
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
• Sustainability of products and business
practices
How we engage
Regular meetings with veterinary
practices and larger veterinary groups
help us understand the evolving needs
and attitudes of our customers as well
as providing a platform for commercial
contract negotiations. Product launch and
training events keep customers abreast
of innovative new treatments. We also
provide information about our business
through a range of digital channels and
participate in industry forums and events
to engage with a range of customer types.
Stakeholder key interests
• Career development
• Reward and recognition
• Engagement
• Training and development
• Wellbeing
• Health and safety
How we engage
We seek our people’s views on a regular
basis, notably through our annual Gallup
survey which identifies opportunities for
improvement and allows us to track the
evolution of engagement from year to year.
Employees are compensated through
incentives related to performance targets
while individual and team development
programmes create an environment that
fosters continuing learning and growth.
Recognising the importance of mental and
physical health, we provide a confidential
counselling and information service
alongside a tailored programme to support
wellbeing.
The increasing role of digital tools provides
another opportunity to engage with our
people. An enhanced Company intranet is
helping to inform and connect our team.
32
Why we engage
Why we engage
Why we engage
A central aim of our Company strategy
As the Group does not own any
Animalcare is committed to being a
is to bring innovation to our customers
manufacturing facilities, it relies
responsible member of our community
through development of new products.
extensively on a large base of third-party
and considers the environmental impact of
With this in mind we engage with partners
manufacturers for supply of finished
our operations.
– and potential partners – that possess
products, whether our own brands or
new technologies which promise to
those sold on behalf of our partners
complement our R&D pipeline or existing
via distribution arrangements. We
portfolio of animal health treatments.
need to maintain trusting relationships
Recent examples include the STEM joint
with suppliers and partners for mutual
venture with Kane Biotech Inc., and
benefit and to ensure they are meeting
the early-stage licence agreement with
our standards and conducting business
Orthros Medical to research VHH antibody
ethically.
candidates, initially in canine osteoarthritis.
Stakeholder key interests
Stakeholder key interests
Stakeholder key interests
• R&D capability
• Quality management
• Animal health regulatory experience
• Cost-efficiency
• Track record of commercialising new
• Long-term relationships
•
Sustainability
• Animal welfare
• Community
• Attractive returns on successful market
and ethics
• Responsible procurement, trust
products
penetration
• Long-term trusting relationships
How we engage
How we engage
How we engage
Key members of the Animalcare team are
Under the umbrella of the Group’s key
We aim to conduct our business in
involved in scanning for and assessing the
partner management programme, we
a sustainable way, in line with the
potential of pipeline and portfolio partners.
meet with specialist veterinary wholesalers
expectations of the communities in which
We apply a range of methods to identify
and distributors as well as key suppliers
we live and work. Active membership
these opportunities including industry
that between them represent 70% of
of animal and health trade associations
networks, investor conferences and through
purchasing spend. We carry out quality
provides the Group with an important
links with the financial community. Once
management reviews and facilitate
voice on key industry topics and we
partnerships have been struck, we regularly
supplier forums and networking meetings.
support local and national charitable
engage through meetings and other forums
that foster collaboration and co-ordination
between the parties.
partnerships, including through employee-
matched fundraising.
Animalcare Group plc Annual Report 2022 Why we engage
Why we engage
Why we engage
Having the right people, capabilities and
As the veterinary market continues to
Trust from our shareholders is key to
engagement across the organisation is
evolve, understanding the needs of our
delivering our strategy as access to capital
fundamental to delivering our strategy
customers enables us to support them as
will be important to the long-term success
and the long-term success of the Group.
a trusted partner. We continue to work
of our business. We ensure that we
Our ongoing objective is to create a high
closely with veterinary professionals
provide fair, balanced and understandable
performing business driven by a skilled,
and other stakeholders to ensure we are
information to shareholders, potential
unified and committed team.
aligned with their changing needs.
investors and investment analysts and
work to ensure that they have a strong
understanding of our strategy and
performance.
Stakeholder key interests
Stakeholder key interests
Stakeholder key interests
• Career development
• Reward and recognition
• Engagement
• Training and development
• Wellbeing
• Health and safety
• Safety, quality and reliability
• Financial performance
• Product availability and effectiveness
• Governance and transparency
• Competitiveness
• Operating and financial information
• Our availability and responsiveness
• Confidence and trust in the Group’s
• Customer relationships
• Compliance
• Range of products
• Sustainability of products and business
practices
leadership team
• Total shareholder returns
How we engage
How we engage
How we engage
We seek our people’s views on a regular
Regular meetings with veterinary
The Group provides regular updates to
basis, notably through our annual Gallup
practices and larger veterinary groups
the market in line with AIM requirements
survey which identifies opportunities for
help us understand the evolving needs
and encourages an ongoing dialogue
improvement and allows us to track the
and attitudes of our customers as well
through investor roadshows, meetings
evolution of engagement from year to year.
as providing a platform for commercial
and presentations as well as consulting
contract negotiations. Product launch and
on relevant topics. The dedicated investor
training events keep customers abreast
section of the Company’s website
of innovative new treatments. We also
provides valuable information for existing
provide information about our business
shareholders and potential investors.
through a range of digital channels and
participate in industry forums and events
to engage with a range of customer types.
Employees are compensated through
incentives related to performance targets
while individual and team development
programmes create an environment that
fosters continuing learning and growth.
Recognising the importance of mental and
physical health, we provide a confidential
counselling and information service
alongside a tailored programme to support
wellbeing.
The increasing role of digital tools provides
another opportunity to engage with our
people. An enhanced Company intranet is
helping to inform and connect our team.
OUR PEOPLE
CUSTOMERS
SHAREHOLDERS
PARTNERS
SUPPLIERS
Why we engage
A central aim of our Company strategy
is to bring innovation to our customers
through development of new products.
With this in mind we engage with partners
– and potential partners – that possess
new technologies which promise to
complement our R&D pipeline or existing
portfolio of animal health treatments.
Recent examples include the STEM joint
venture with Kane Biotech Inc., and
the early-stage licence agreement with
Orthros Medical to research VHH antibody
candidates, initially in canine osteoarthritis.
Why we engage
As the Group does not own any
manufacturing facilities, 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
• R&D capability
• Animal health regulatory experience
• Track record of commercialising new
products
Stakeholder key interests
• Quality management
• Cost-efficiency
• Long-term relationships
• Responsible procurement, trust
• Attractive returns on successful market
and ethics
penetration
• Long-term trusting relationships
COMMUNITIES AND
ENVIRONMENT
Why we engage
Animalcare is committed to being a
responsible member of our community
and considers the environmental impact of
our operations.
Stakeholder key interests
•
Sustainability
• Animal welfare
• Community
How we engage
Key members of the Animalcare team are
involved in scanning for and assessing the
potential of pipeline and portfolio partners.
We apply a range of methods to identify
these opportunities including industry
networks, investor conferences and through
links with the financial community. Once
partnerships have been struck, we regularly
engage through meetings and other forums
that foster collaboration and co-ordination
between the parties.
How we engage
Under the umbrella of the Group’s key
partner management programme, we
meet with specialist veterinary wholesalers
and distributors as well as key suppliers
that between them represent 70% of
purchasing spend. We carry out quality
management reviews and facilitate
supplier forums and networking meetings.
How we engage
We aim to conduct our business in
a sustainable way, in line with the
expectations of the communities in which
we live and work. Active membership
of animal and health trade associations
provides the Group with an important
voice on key industry topics and we
support local and national charitable
partnerships, including through employee-
matched fundraising.
33
Animalcare Group plc Annual Report 2022STRATEGIC REPORT Our Stakeholders continued
s172 Statement
The following describes how the Directors have
regard to the matters set out in Section 172(1)
of the Companies 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
consider (among other matters):
• 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.
This section forms the Directors’ statement under
section 414CZA of The Companies Act 2006.
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 an independent Non-
Executive Director, resulting in a recommendation to
the Board to appoint Sylvia Metayer. The Audit and
Risk Committee provided updates on 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 2022
are set out below:
EMPLOYEE ENGAGEMENT
The Board received and considered a presentation on the
results of the employee engagement survey and the areas
of focus and action to be led by the People and Culture
team for the coming year.
Considerations
Knowing that the Board will review and discuss the
feedback provided by employees who completed the survey
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.
APPOINTMENT OF NEW
NON-EXECUTIVE DIRECTOR
The Board approved, in principle, the appointment of a new
Non-Executive Director.
Considerations
It is important to shareholders and potential investors that
the Company is led by a Board with the right combination
of skills and experience to support the Company’s strategic
plans. After a rigorous selection process, the Board was able
to appoint a candidate with the requisite level of financial
and audit experience.
34
Animalcare Group plc Annual Report 2022 ORTHROS MEDICAL COLLABORATION
The Board approved the Group entering into two early-
stage agreements with Orthros Medical, a company focused
on the research and early development of VHH antibodies.
Considerations
The partnership represents a key building block in the
Group’s long-term growth strategy, offering the potential
to expand product ranges to meet evolving customer needs.
DIVIDEND
The Board agreed the final dividend for 2021 of 2.4 pence
per share and in September it agreed an interim dividend of
2.0 pence per share.
Considerations
The Board considered the Company’s capital position
and financial performance, together with the long-term
investment needs of the business, while taking into account
dividend flow to deliver overall value to our shareholders.
EXECUTION OF STRATEGY DURING FY 2023
The Board received presentations from senior management
including on the Budget for FY 2023 and potential M&A
opportunities.
Considerations
The Board considered the forecast financial performance,
in particular cash generation and net debt to underlying
EBITDA leverage ratios, while assessing M&A opportunities
to support delivery of our strategy and long-term growth.
35
Animalcare Group plc Annual Report 2022STRATEGIC REPORT Sustainability
Animalcare is committed to the environmental, social and governance (ESG)
pillars of sustainable development.
From a Group perspective we are at the early stages of our sustainability journey. In November
2021, a small team led by the Chief Financial Officer met to discuss the broader issue of
sustainability and relevant Company-wide ESG issues. This year we have created a separate,
dedicated Sustainability Task Force (STF). This body advises on aspects of environmental and
social sustainability while taking responsibility for the Group’s sustainability agenda and strategy.
Subsequently, we have begun to identify material issues of importance to our stakeholders and
their potential impact on our business. This will help guide our approach in the coming years.
We have categorised activities under each of the three pillars of sustainability.
ENVIRONMENT
Climate change and greenhouse
gas emissions
In 2020, under the umbrella of our strengthened Risk
Management Framework, we designated climate change as
a global issue with potential implications for the Group. Our
initial work in this area addressed the carbon footprint of
our UK operations. 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) and have
made reductions while also instituting offsetting measures.
Building upon this work, we broadened our approach
in 2022 to include Scope 1 and Scope 2 greenhouse gas
emissions for Group-wide operations in Europe.
Our Group1 energy usage and
carbon emissions
STREAMLINED ENERGY AND
CARBON REPORTING (SECR)
Scope
Scope 1
Scope 2
Activity
Company car
travel
Grid supplied
electricity
Intensity ratio
(tCO2e per £m revenue)
2022
kWh
2021 (restated1)
kWh
CO2e
CO2e
449 1,662,021
391 1,444,344
33
125,489
55
207,880
6.7
6.0
1
(Germany, Italy, Portugal, Spain, UK, Belgium. 2021 restated to include
these countries)
We have used the EU-27 factor 2020 to calculate our total
CO2e emissions figures.
The increase in Scope 1 emissions is driven by a return to
regular business travel, in particular our field sales teams,
following the COVID-19 pandemic. The STF will review and
recommend actions in the light of this increase during 2023.
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 offices.
SUPPLY CHAIN AND GREENHOUSE GAS EMISSIONS
Animalcare works with third parties to manufacture finished
products while engaging with other partners to enable our
international supply chain. Upstream emissions include
those generated by a supplier’s distribution activities and
the production of raw materials or components purchased
by the Company. Downstream covers emissions generated
by the use or disposal of end products, as well as business
travel.
Value chain emissions (Scope 3) represent a significantly
higher proportion of our carbon footprint than operational
emissions (Scope 1 and Scope 2). Calculating then
eliminating these emissions is a challenge that requires
effective partnerships built on trust. As we develop our
sustainability strategy, we will consider further actions to
estimate and reduce our value chain emissions.
36
Animalcare Group plc Annual Report 2022 Packaging and plastic offsetting
Flexible packaging keeps pharmaceuticals and medicinal
products sterile and protected while safeguarding against
tampering and counterfeiting. However, 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. Where plastic
remains the most viable packaging solution, we are also
exploring offsetting as an interim solution while we explore
opportunities to move away from virgin plastic and mitigate
plastic waste.
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 this important class
of drugs, threatening the ability to treat common infections.
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 European animal health
market, sales of veterinary antimicrobials decreased by 47%
between 2011 and 2021.
Reducing our portfolio reliance on antibiotics, both in
Production and Companion Animals, is a key focus which
led to our 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’s immune system. Anti-
biofilm technology can overcome these barriers, making
conventional treatments more effective, potentially at more
sparing doses.
37
Animalcare Group plc Annual Report 2022STRATEGIC REPORT Sustainability continued
SOCIAL
Our people
TALENT MANAGEMENT AND PEOPLE
DEVELOPMENT
We aim to attract, develop, and retain talented people,
building leadership capabilities, creating a one-team culture
and driving effective communication and collaboration.
During 2022, we began to implement our Talent Review
Process supported by our competency framework.
This will enable us to define what success looks like
in each role and identify strengths and development
needs so we can support everyone to become the best
version of themselves. This framework will also help us
identify high potential employees who could fit into
future leadership positions.
Our branded “High Challenge High Support” leadership
programme will continue to support our leaders by
challenging the comfortable and comforting the challenge
so they can model excellence within our organisation and
offer the right balance of support to their team members.
To help develop our next generation of senior leaders we
kicked off with the launch of our “Pioneering Professional”
programme. This is based on the central mindset of
“Responsible Initiative” with a set of seven key skills. These
“Pioneering Professionals” will be allocated to cross-country
and cross-departmental projects to help further develop
their potential and grow into senior executive roles within
Animalcare Group.
38
WELLBEING
To support our teams, during 2021 the Group 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.
We will further focus on activities to support our team
members’ personal resilience and wellbeing. This includes
the launch of our Global Wellbeing & Resilience Strategy,
We Care, in order to support our team members with
personal resilience.
DIVERSITY AND INCLUSION
Animalcare 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.
Animalcare Group plc Annual Report 2022 Recognising that diverse and inclusive workplaces earn
deeper trust and more commitment from their employees,
a Diversity and Inclusion Task Force has been created
to review our current approach, build on activities and
implement a formal strategy across the Group.
Following the 2022 appointment of Sylvia Metayer and
Doug Hutchens, and the retirement of Nick Downshire, the
Board currently consists of 71% (five) male and 29% (two)
female members. The Senior Executive Team is made up 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.
BOARD GENDER DIVERSITY
29%
71%
Female Male
SENIOR EXECUTIVE TEAM
43%
57%
Female Male
39
Animalcare Group plc Annual Report 2022STRATEGIC REPORT Sustainability continued
GOVERNANCE STRUCTURE
In September 2022 we held the first meeting of our
Sustainability Task Force (STF) made up of Chris Brewster,
our CFO, and a cross section of employees representing key
functions and our geographical presence.
The composition of the STF is built upon a foundation that
aligns with and complements the existing business model
and organisational structures. This kind of governance
structure is typically more successful.
BOARD
SENIOR
EXECUTIVE TEAM
SUSTAINABILITY
TASK FORCE
Members of the STF will take collective responsibility for
the Group’s sustainability agenda, the implementation of
a sustainability action plan linked to the delivery of our
strategy and will review the internal sustainability scorecard
each quarter.
Stakeholder engagement
Throughout the year we utilised the Animalcare
Group materiality assessment as a vehicle with several
stakeholders to address their concerns, explore
sustainability areas of mutual interest and share priorities.
This informal dialogue showed that there is increasing
demand from stakeholders to understand our
environmental strategy, including our approach to climate
change, responsible animal testing and ethical procurement
and sales.
We plan to engage with stakeholders more formally
during 2023 and continue to embed sustainability into
our business in an agile and prioritised way.
SALES AND MARKETING
Our values and behaviours (one team, passion, integrity,
taking ownership, have fun) 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.
40
Animalcare Group plc Annual Report 2022 OUR MATERIALITY ASSESSMENT
Materiality
To guide and support the development of our sustainability
strategy, we undertook an initial materiality assessment via
an internal employee focus group and informal stakeholder
engagement. From this, we have identified the material
issues of importance to our stakeholders and their potential
impact on our business.
MATERIALITY MATRIX
A
B
C
D
G
H
E
F
Sustainability objectives and development of
a Sustainability Action Plan
From the materiality assessment we prioritised six initial
high-level objectives to help build the foundations of our
sustainability strategy.
SUSTAINABILITY STRATEGY
Objective 1: Create a formal governance structure with
remit and terms of reference to effectively implement
sustainability strategy across the business.
Objective 2: Develop and publish an Animalcare Group
sustainability action plan (and supporting internal
scorecard) for 2023 and beyond.
CLIMATE CHANGE AND CARBON FOOTPRINT
Objective 3: Expand reporting of Scope 1 and Scope 2
greenhouse gas emissions for Animalcare Group
beyond that of Animalcare’s UK trading subsidiary.
Initiate Scope 3 reporting.
Objective 4: Assess the feasibility of achieving carbon
neutral status for the Animalcare Group by end of financial
year 2025. Post the feasibility assessment, initiate roll out of
a regional phased approach.
T
S
E
R
E
T
N
I
R
E
D
L
O
H
E
K
A
T
S
SUPPLY CHAIN AND RESPONSIBLE PROCUREMENT
Objective 5: Establish a screening process across
Animalcare Group’s major suppliers to highlight any risks
associated with modern-day slavery and human rights.
SUSTAINABLE PACKAGING
Objective 6: Develop a Group-wide approach to sustainable
packaging with both reduction and recycling.
The above goals will act as the starting point for a formal
framework that will implement our corporate commitments
and develop a relevant Sustainability Action Plan (SAP),
ultimately helping create value for the Group in line with
our business strategy. As the SAP evolves it will address
internal risk drivers identified within our risk management
framework and define the Group’s actions to respond
to external stakeholder expectations, including those of
potential investors and shareholders.
IMPACT ON BUSINESS
A Climate change, energy and water management
B Animal testing (animal welfare, 3Rs – replacement,
reduction, refinement)
C Antimicrobial resistance
D Diversity and inclusion
E Supply chain and responsible procurement
F Packaging
G Employee wellbeing, health and safety
H Sales and marketing ethics
This will help guide our strategy by identifying the issues
that matter most to Animalcare and our stakeholders and
shows where we can have the most positive impact.
41
Animalcare Group plc Annual Report 2022STRATEGIC REPORT
Board of Directors
The changes to our
Board in 2022 have
further strengthened
its independence and
we are well-positioned
for long-term growth
JAN BOONE
Non-Executive Chair
42
JAN BOONE
JENNIFER WINTER
Non-Executive Chair
Chief Executive Officer
Appointment:
Jan has been Non-Executive Chair of
the Group since 2017 following the
acquisition of Ecuphar NV.
Committee membership:
Member of the Remuneration and
Nomination Committee.
Responsibilities, relevant skills
and experience:
As Chair, 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. Jan was appointed
Managing Director of Lotus Bakeries
in 2005 and Chief Executive Officer
in 2011.
Key external appointments:
Jan is Chief Executive Officer of Lotus
Bakeries Corporate NV. He also serves
as Vice-President 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 the Group’s
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, Jennifer brings
significant experience of product
development, change management,
marketing and communications.
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.
Jennifer has a BSc in Physiology and
Pharmacology from the University of
Southampton.
Key external appointments:
Jennifer was appointed as Non-Executive
Director of EKF Diagnostics Holdings plc
on 1 February 2022 and as a Trustee
Director and Chair of the Trustees of
Royal Brompton and Harefield Hospitals
Charity in April 2022.
Animalcare Group plc Annual Report 2022 CHRIS BREWSTER
MARC COUCKE
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:
Since joining Animalcare in 2012, Chris
has gained significant animal health
sector experience and works alongside
Jennifer in developing and executing
the Group strategy. His responsibilities
cover finance, risk management,
Group IT and legal. Chris is the Board
member responsible for Sustainability.
Chris is a Chartered Accountant,
having qualified with KPMG in 2003.
Before joining Animalcare he worked
as Group Accounting Manager at
Findus.
Key external appointments:
None
Non-Executive Director
Appointment:
Marc was appointed as a
Non-Executive Director in 2017.
Committee membership:
N/A
Responsibilities, 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.
Key external appointments:
Marc currently serves as Non-
Executive Director of Smartphoto
Group NV, a Belgian company, in
addition to a number of private
companies.
COMMITTEE MEMBERSHIP
Audit and Risk Committee
Remuneration and
Nomination Committee
By invitation
Chair of committee
43
Animalcare Group plc Annual Report 2022GOVERNANCE Board of Directors continued
DR DOUG HUTCHENS
SYLVIA METAYER
ED TORR
Independent Non-Executive Director
Independent Non-Executive Director
Senior Independent Director
Appointment:
Ed was appointed to the Board in 2017.
Committee membership:
Chair of the Remuneration and
Nomination Committee and member of
the Audit and Risk Committee.
Responsibilities, 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.
Key external appointments:
Ed is a Non-Executive Director of
Intervacc AB, a Swedish biotechnology
company listed on Nasdaq Stockholm.
Appointment:
Doug was appointed to the Board on
10 February 2022.
Appointment:
Sylvia was appointed to the Board on
3 May 2022.
Committee membership:
Doug became a Member of the
Remuneration and Nomination
Committee and the Audit and Risk
Committee following the Company’s
AGM on 7 June 2022.
Responsibilities, 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.
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.
Key external appointments:
Doug is Chief Scientific Officer at
Animol Discovery, Inc in the US and
on the advisory board of ClinGlobal
Limited, which is based in Mauritius.
Committee membership:
Sylvia became Chair of the Audit
and Risk Committee following the
Company’s AGM on 7 June 2022.
Responsibilities, relevant skills
and experience:
After beginning her career as an
auditor, Sylvia has gone on to build
a highly successful career, initially
holding key financial roles in leading
international organisations and then
in customer-focused commercial
senior leadership roles, most recently
at Sodexo. She joined Sodexo in 2006
as Group Financial Controller and was
appointed CFO for Europe in 2008,
President International Large Accounts
in 2010, and CEO of Sodexo’s Corporate
Services Worldwide segment, the
largest business in Sodexo in 2014.
Before joining Sodexo, Sylvia was COO
at Houghton Mifflin, a Boston-based
educational publisher. Sylvia gained a
business degree from the French École
des Hautes Études Commerciales (HEC)
and is a graduate of both Queen’s
University, Canada and of the University
of Ottawa, Canada.
Key external appointments:
Sylvia is an independent Non-Executive
Director for PageGroup plc, and an
independent Non-Executive of Groupe
ADP (Aéroports de Paris SA), chairing
their Nomination and Remuneration
Committees. She is also a member
of the Supervisory Board of Keolis,
SAS and Chair of the Audit and
Compliance Committee.
44
Animalcare Group plc Annual Report 2022 COMMITTEE MEMBERSHIP
Audit and Risk Committee
Remuneration and
Nomination Committee
By invitation
Chair of committee
45
Animalcare Group plc Annual Report 2022GOVERNANCE Corporate Governance Statement
JAN BOONE
Non-Executive Chair
Dear shareholder,
I am pleased to present the Corporate
Governance Report for 2022. Our
corporate governance arrangements
continued to evolve with a number
of changes to the Board during the
year. Dr Doug Hutchens and Sylvia
Metayer were appointed, bringing
additional independent perspective
to Board discussions and enabling
us to refresh the composition of the
Board’s committees. In May 2022,
we announced the resignation of
Nick Downshire, who decided not to
seek re-election to the Board at the
Company’s Annual General Meeting.
The principles of
corporate governance
Compliance with the QCA
Corporate Governance Code
(the “QCA Code”)
The Board followed all 10 principles
of the QCA Code during the year
under review. We recognise the need
for our governance practices and
disclosures to continue to evolve in
order to ensure that they support the
growth and strategic progress of the
Group and the effective application
of these principles. Our approach to
governance 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 our approach
to governance to ensure that it
develops in line with the Group’s
strategic plans. Further details of our
corporate governance framework and
activities are set out in our Corporate
Governance Report.
Supporting strategy
through effective
governance
The Board has collective responsibility
for setting the Group’s strategic
aims and objectives. Our strategy is
articulated in the Strategic Report
section of this report and on our
website, along with our business
model. The Board considers the
expectations of the Company’s
shareholder base and its wider
stakeholder and corporate social
responsibilities when making decisions
in furtherance of the Group’s
strategic aims.
The Board provides
effective leadership
in promoting
the sustainable
long-term success
of the Group
46
Animalcare Group plc Annual Report 2022 The Board also has oversight of the
Group’s internal control and risk
management systems. Alongside
evaluating commercial opportunities,
the Board regularly considers and
reviews the business’ principal and
emerging risks and ensures that
effective and appropriate mitigation
strategies are in place. 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.
Stakeholder engagement
and corporate culture
The Board places great importance
on effective engagement with key
stakeholders and aims to understand
the views and interests of stakeholders
so that these can be appropriately
considered as part of its decision-
making. The Strategic Report includes
a description of how this engagement
has worked in practice during the year
under review and a statement about
how the Directors have discharged
their duty under s172 of the
Companies Act 2006.
The Company’s open and inclusive
culture is reflected in the way that
the Board conducts itself. While
we continued to make use of
video-conferencing facilities when
appropriate, we ensured that some
Board meetings were held in person at
the Company’s offices in Belgium. We
value the opportunity this presents for
the Board to interact with employees,
thereby helping to promote 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 continues to grow. A more
detailed explanation of the Board’s
monitoring of culture is given in the
Corporate Governance Report.
47
Animalcare Group plc Annual Report 2022GOVERNANCE Corporate Governance Statement continued
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.
Board capabilities
The Board comprises seven
experienced Directors who collectively
have considerable expertise in the
following areas:
• Strong industry experience and
knowledge of the animal health
and pharmaceuticals sector
• Leading organisational change and
integration
• Managing a global supply chain
• Research and development
• Business planning and
development
• Corporate finance and mergers
and acquisitions
• Financial
• Risk management
• Governance
Board evaluation
Following the internal Board
evaluation process conducted in 2021
which identified a number of actions
to further strengthen the Board and
its Committees, progress against
the agreed actions was monitored
during 2022. We are in the process of
carrying out another internal Board
evaluation, the outcome of which
will be discussed by the Board and
actions taken during the year. Further
details can be found in the Corporate
Governance Report.
JAN BOONE
Non-Executive Chair
15 May 2023
Board appointments and
succession planning
We welcomed two new Independent
Non-Executive Directors to the Board
in 2022. As previously reported, Dr
Doug Hutchens was appointed in
February 2022 and Sylvia Metayer was
appointed in May 2022. In both cases,
the appointments were the result
of a formal selection process which
gave due consideration to the need
for diversity and took into account
the balance of skills, experience and
expertise on the Board. As previously
announced, Nick Downshire stood
down from the Board at the 2022
Annual General Meeting and we
extend our thanks to him for his many
years of commitment to the Company.
As Chair, I consider the operation
of the Board as a whole and the
performance of the Directors
individually. The appointments
referred to above, were actions agreed
by the Board following its most recent
formal evaluation process, conducted
in March 2021. During the year, the
Board continued to monitor progress
against all agreed actions.
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 their views are
understood and considered. 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
48
Animalcare Group plc Annual Report 2022 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 for the Board and its formally
constituted 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
29%
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.
Jan Boone
Independent Non-Executive Chair
Jennifer Winter
Chris Brewster
Chief Executive Officer
Chief Financial Officer and Company
Secretary
71%
Female
Male
Marc Coucke
Non-Independent Non-Executive Director
SENIOR EXECUTIVE TEAM
Ed Torr
Senior Independent Director
Doug Hutchens
Independent Non-Executive Director
Sylvia Metayer
Independent Non-Executive Director
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.
Board Committees
Audit and Risk
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 is within
the Our Governance section of the
Annual Report.
Remuneration and Nomination
Committee
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 is within the
Our Governance section of the
Annual Report.
The Board’s composition is designed to ensure that no one individual can
dominate decision-making processes.
The Board currently comprises two Executive Directors and five Non-Executive
Directors. Directors’ biographies can be found in the Board of Directors section of
the Annual Report.
Collectively, the Non-Executive Directors have an appropriate balance of skills
and experience such that they are able to provide constructive support and
challenge to the Executive Directors. The Directors believe that the Board as a
whole possesses the necessary combination of skills, experience, capabilities
and personal qualities to deliver the Group’s strategy for the benefit of the
Company’s shareholders and wider stakeholders over the medium to long term.
49
Animalcare Group plc Annual Report 2022GOVERNANCE
Corporate Governance Report continued
The Board keeps under review
the mix of experience and skills
that are needed on the Board as
the Group continues to grow so
that Board composition can be
adjusted if necessary over time.
The Remuneration and Nomination
Committee is responsible for
succession planning for Board
Directors and other Senior Executives.
Members of the Senior Executive
Team and wider management team
are invited to present at Board
meetings throughout the year.
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 provides updates to the Board
about developments in corporate
governance practice and forthcoming
changes to legislation or regulation
which may impact on the Company.
Independence
The Non-Executive Chair, Jan Boone,
Senior Independent Director, Ed Torr
and Non-Executive Directors Dr Doug
Hutchens and Sylvia Metayer, are all
considered to be independent. The
Board is therefore compliant with the
QCA Code, having four independent
Non-Executive Directors.
24.2% of the issued share capital is
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 and making
recommendations to the Board on
candidates to be appointed as Directors.
As reported elsewhere, there were
three changes to the Board in
2022: the appointments of Dr Doug
Hutchens and Sylvia Metayer in
February and May 2022 respectively,
and Nick Downshire standing down
from the Board at the 2022 Annual
General Meeting. Further details
on the role of the Remuneration
and Nomination Committee and its
activities during the year are set out in
its report within the Our Governance
section of the Annual Report.
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
election or 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 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 and covers a number
of areas including:
• The Group’s strategic aims and
objectives
• The structure and capital of the
Group, and dividend policy
• Financial reporting and internal
controls
• Risk and the Group’s risk
management
• The approval of significant
contracts and expenditure
• Effective communication with
shareholders
• Board structure, size and composition
The schedule of matters reserved
for Board approval is available on
the Company’s website (www.
animalcaregroup.com).
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.
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 made clear 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 Senior Executive Team composed of
the CEO, the CFO and representatives
from senior management whose
responsibilities are to implement the
decisions of the Board and review the
key business objectives and status
of projects.
50
Animalcare Group plc Annual Report 2022 The table below shows Directors’ attendance at formal scheduled Board and
Committee meetings during the year:
Director
Jan Boone1
Chris Brewster2
Marc Coucke3
Nick Downshire4
Doug Hutchens
Sylvia Metayer5
Ed Torr
Jennifer Winter
Audit and Risk
Committee
1/1
–
–
1/1
3/3
2/2
3/3
–
Remuneration
and Nomination
Committee
2/2
–
1/1
–
1/1
–
2/2
–
Board
4/4
4/4
4/4
2/2
4/4
3/3
4/4
4/4
1
Jan Boone stood down from the Audit and Risk Committee on 7 June 2022.
2 Chris Brewster attends the Audit and Risk Committee by invitation.
3 Marc Coucke stood down from the Remuneration and Nomination Committee on 7 June 2022.
4 Nick Downshire ceased to be Chair of the Audit and Risk Committee when he stood down from the Board on
7 June 2022.
5 Sylvia Metayer joined the Board on 3 May 2022 and became Chair of the Audit and Risk Committee on 7 June 2022.
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 a Business Review covering progress against
strategy, financial performance, key business initiatives, leadership activities
and new product development. Investor relations updates, financial reports
and consideration of reports from the Board Committees are also covered on
the Board agenda. In addition, key areas put to the Board for consideration and
review during the year included:
Strategy
Performance
Governance
Stakeholders
New product development and M&A opportunities
Board strategy discussions
Trading updates
Review of budgets and forecasts
Going concern and cash flow
Presentations from members of the Senior Executive Team
Approval of 2021 Annual Report, final dividend recommendation, 2022
Interim Results and interim dividend
Review of progress on actions identified as part of the internal Board
performance evaluation
Review of Board composition and search for and appointment of Non-
Executive Directors
Review of conflicts of interest
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.
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.
Senior Executive Team
The Senior Executive Team (SET)
comprises the CEO, CFO, North and
South Region Directors, Group HR
Director, Group Commercial Director
and, from February 2022, the newly
created role of Strategic Product and
Portfolio Director. The team meets
weekly, monthly and quarterly and
its responsibilities include tracking
financial performance, progress
against our strategic and operational
objectives, leadership development,
improving employee engagement
and all aspects of the operational
leadership of the organisation.
External advisers
The Board seeks advice on various
matters from Stifel Nicolaus Europe
Ltd, its nominated adviser, corporate
51
Animalcare Group plc Annual Report 2022GOVERNANCE Corporate Governance Report continued
Audit and Risk Committee Report and
in Our Principal Risks in the Strategic
Report.
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
• Specified contract approval levels
and financial authority limits
• An annual budgeting process which
is approved by the Board
• A 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
finance adviser and joint broker (with
Panmure Gordon & Co). Advice is also
provided by the Company’s lawyers,
Squire Patton Boggs (UK) LLP, and by
its corporate governance and company
secretarial adviser, Prism Cosec, which
also provides company secretarial
support.
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 external 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 three times a year. Following
the implementation of an improved
risk management structure during
2021, the Audit and Risk Committee
continued to review the adequacy
and effectiveness of the risk
management structure during the
year, with a continued focus on risk
reporting. Further details regarding
the implementation are set out in the
52
Animalcare Group plc Annual Report 2022 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
As reported in the 2021 Annual
Report, the Board conducted a formal
internal performance evaluation
process in 2021. The output was
discussed by the Board and a number
of actions were agreed in late 2021
and early 2022 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
• Reinstating Board visits to
European offices in the annual
Board calendar
• Further interaction between
the Non-Executive Directors
and members of the Senior
Executive Team
• Enhancements to the Board’s
oversight of the Group’s risk
management framework
Preliminary progress against these
actions was reported in the 2021
Annual Report and the Board
continued to monitor progress in
2022. In addition to the appointment
of Dr Doug Hutchens as an
independent Non-Executive Director
in February 2022, Board composition
was further strengthened by the
appointment of Sylvia Metayer as an
independent Non-Executive Director
in May 2022. The Board met at the
Company’s offices in Belgium in
September and intends to meet at
other offices when appropriate; this
facilitates further interaction between
the Non-Executive Directors and the
members of the Senior Management
Team. Enhancements to the Board’s
oversight of the Group’s risk
management framework is addressed
in the Audit and Risk Committee
Report.
The Chair has recently held individual
meetings with each member of the
Board to discuss how the Board
operates and the output from these
meetings will be discussed by the
Board, with actions agreed and
monitored during 2023.
Succession planning
The Remuneration and Nomination
Committee considers succession
planning in its work and formulates
plans for the succession of all
Directors. Further details can be found
in the Committee’s report.
Conflicts of interest
The Company has procedures in place
for managing conflicts of interest.
These include a requirement for
Directors to declare any interests
in the matters to be discussed at
each Board or Committee meeting.
Directors also have a continuing duty
to notify the Company of any changes
to their potential or actual conflicts
53
Animalcare Group plc Annual Report 2022GOVERNANCE Corporate Governance Report continued
and are regularly reminded of this.
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 can receive
guidance from 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 for it to lead by
example. The Group’s Code of
Conduct, which applies to the Board
and all employees, is our guide to
doing business in the right way. It is
supplemented by detailed policies
covering the following areas: Good
Business Practice, Respecting People,
Safeguarding Information and Use of
Information Technology.
When possible, Board meetings
take place at the offices of different
business units, which gives the Board
the opportunity to engage with
members of the management team
and the wider employee base formally
and informally, at meetings, lunches
and dinners. 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.
The Board also received a report on
the results of the annual employee
engagement survey and the actions
planned to address any issues raised
and the focus for the following
year. It also covered key people
initiatives being undertaken during
the year which included the talent
management process, learning and
development initiatives and the
leadership development programme.
Due to the Company’s relatively small
employee base, the Non-Executive
Directors are able to engage directly
with employees in their special areas
of interest.
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, generally
following publication of the Group’s
interim and full year results. We
encourage our shareholders to
attend our AGM and we give them
54
Animalcare Group plc Annual Report 2022 the opportunity to pose questions
to our Directors. Information about
the Group is available on the Group’s
website (www.animalcaregroup.com),
including an overview of the Group’s
activities 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
circulated to the Board on a quarterly
basis and key changes are discussed by
the Board.
Employee engagement
As in previous years, we conducted
a Company-wide employee survey
using the Gallup Q12 methodology.
Measured against Gallup’s European
benchmark of companies, the Group
again performed well despite a
decline of 2% in overall engagement.
The survey highlighted a particularly
positive view among employees about
their ability to deliver high quality work
as well as opportunities to further
develop and progress in their roles.
A major theme in 2022 was further
development of our people to lead
and drive future business success. The
introduction of a Group-wide talent
management process, supported by a
common competency framework, will
help identify and develop high potential
employees as candidates for leadership
positions. In addition, we are reinforcing
relevant leadership behaviours through
the launch of a branded Animalcare
“High Challenge High Support”
development programme.
Our surveys have identified internal
communication as an area for
improvement. In response, we
launched a communication working
group to engage and inform our teams
more efficiently and effectively through
the use of digital tools, including the
development of a new intranet.
the launch of a learning and
development strategy and the further
implementation of our leadership
development programme.
AGM
The Company’s AGM is scheduled
for Tuesday 13 June 2023. Further
details of the AGM arrangements can
be found in the Notice of 2023 AGM,
which is available on the Company’s
website www.animalcaregroup.com/
investors/shareholder-centre/agm/
To facilitate recruitment and on-
boarding, we have created a global
policy to support line managers
as they help future talent absorb
Animalcare’s core culture, values,
behaviours and expectations.
Guided by the findings from our
annual employee survey, we are
accelerating our journey to become “A
Great Place to Work”. This includes a
further focus on employee wellbeing
underpinned by our external employee
assistance provider programme.
With business success the guiding
objective, our main focus for 2023 will
be the roll-out of our talent review
process and competency framework to
our sales and marketing organisation,
55
Animalcare Group plc Annual Report 2022GOVERNANCE Audit and Risk Committee Report
As the new Chair, I am
pleased to present my
first Audit and Risk
Committee report
SYLVIA METAYER
Chair of the Audit
and Risk Committee
I am pleased to present the Audit and
Risk Committee’s report for the year
ended 31 December 2022. I would
like to extend the Committee’s thanks
to Nick Downshire who chaired the
Committee until he stood down from
the Board in June 2022.
The Audit and Risk Committee is
responsible for ensuring that the
financial performance of the Group
is properly monitored and reported
on. 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 auditors. 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
during the year
During the year, the Committee
comprised the following independent
Non-Executive Directors:
• Nick Downshire (Chair) (stood
down on 7 June 2022)
•
Jan Boone (stood down on
7 June 2022)
• Sylvia Metayer (Chair) (appointed
to the Committee on 7 June 2022)
• Doug Hutchens (appointed to the
Committee on 7 June 2022)
• Ed Torr
The Committee comprises three
independent Non-Executive Directors.
Sylvia Metayer became Chair of
the Audit and Risk Committee on 7
June 2022 following the Company’s
Annual General Meeting, at which
the former Committee Chair, Nick
Downshire, stood down as a Director
after many years of commitment
to the Group. On the same date,
56
Animalcare Group plc Annual Report 2022 we welcomed Doug Hutchens to
the Committee and Jan Boone, our
Chair, ceased to be a member. The
relevant skills and experience of the
Committee members are set out in
their biographies within the Board
of Directors section. The Board is
satisfied that Sylvia Metayer has recent
and relevant financial experience.
Sylvia began her career as an auditor
and since then has held a variety of
key financial and commercial positions
in leading international groups. She
is also a highly experienced Non-
Executive Director.
Only Committee members have
the right to attend meetings. Other
individuals, such as the Chief Financial
Officer, other members of the finance
team and members of other internal
teams are invited to attend meetings,
for all or part of the meeting as
appropriate. Representatives from
the external auditors attend at least
two Committee meetings during the
year to present their audit and their
audit plan for the following year. Other
advisers may be invited to attend
meetings on occasion.
Key responsibilities
The role and responsibilities of the
Committee are set out in its Terms
of Reference which are reviewed
annually, taking into account relevant
regulatory changes and recommended
best practice. The current Terms of
Reference were approved by the
Board on 12 December 2022 and are
available on the Company’s website
(www.animalcaregroup.com).
The main duties of the Committee
include:
• Maintaining and monitoring the
quality and integrity of the Group’s
financial statements, including its
annual and half-yearly reports,
and other formal announcements
relating to financial performance,
and reviewing significant financial
reporting issues and judgements
• Reviewing the adequacy and
effectiveness of the Company’s
internal controls and risk
management
• Overseeing the relationship
with the external auditors,
reviewing performance and
advising the Board members on
the auditor’s appointment and
remuneration; and
• Reporting formally to the Board on
its proceedings after each meeting
on all matters within its duties and
responsibilities
The Committee challenges both
the external auditors and the
management of the Group and reports
the findings and recommendations
of the external auditors 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.
57
Animalcare Group plc Annual Report 2022GOVERNANCE Audit and Risk Committee Report continued
Activities undertaken by
the Committee during
the year
The duties contained in the Terms
of Reference form the basis for the
Committee’s focus and scope of work
across each financial year and the
Committee meets at appropriate times
in the reporting and audit cycle and
at such other times as is necessary to
discharge its duties. The Committee
met three times during the year and
on one occasion since the year end.
Committee meetings are arranged to
coincide with key dates in the financial
reporting calendar and audit cycle.
Committee members’ attendance at
the meetings held during the year is
set out in the Corporate Governance
Report; every Committee member
attended all scheduled Committee
meetings during 2022.
The main activities of the Committee
during the year are set out below.
Annual and interim
financial statements
The Committee reviewed the full
year and interim financial statements
including consideration of significant
audit risks identified by the external
auditors, and the key accounting
judgements and estimates. The
Committee’s response to the significant
accounting judgements and estimates in
respect of the 2022 financial statements
is set out below. The Committee also
reviewed the principal risks’ disclosures.
Risk Management
Framework
In 2022, the Committee’s focus moved
on from overseeing implementation
of the Group’s new Risk Management
Framework (RMF) during 2021 to
monitoring how the system was
operating in practice as processes
became more internally embedded.
This entailed receiving and reviewing
the internal risk management reports
and considering the appropriateness
of the Group’s RMF, taking into
account the Group’s strategic plans.
The Committee is satisfied that the
Group’s RMF enables the Board to
monitor, manage and mitigate the key
risks in the Group’s strategic plan for
the benefit of stakeholders.
Review of provisions and
contingent liabilities
The Committee receives a report on
current potential contingent liabilities
at each scheduled Committee meeting
and considers the appropriateness of
the disclosures and provisions in the
financial statements.
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 the Note to the Consolidated
Financial Statements which provides
a 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 auditors
reviewed management’s assessment
and discussed this review with
the Committee.
Role of the external
auditors
The Committee oversees the
relationship with the external
auditors, PricewaterhouseCoopers
LLP (PwC), to ensure that the auditors’
independence, objectivity and
effectiveness are maintained.
The Committee takes into account
a number of areas when reviewing
the external auditors’ appointment,
including the auditors’ performance in
discharging the audit, the scope of the
audit, the terms of engagement, and
its independence and objectiveness.
PwC were first appointed as the Group’s
external auditors in 2018 as the result
of a competitive tender process. In
accordance with audit regulation, PwC
operates a policy of rotating the Audit
Partner every five years and following
completion of the 2021 audit, Ian
Morrison was rotated off and replaced
by Kate Finn as the Group’s Audit Partner.
As part of its review, the Committee
also considers the fees payable to PwC
and monitors the provision of non-
audit services. On occasion there may
be advantages in using the external
auditors to provide non-audit services
given their knowledge of the business.
A business case would need to be
made to use the auditors rather than
another provider and Committee sign-
off would be required to ensure there
is no impact on the auditors’ objectivity
and independence. The breakdown
of fees between audit and non-audit
services is provided in the Notes to the
Consolidated Financial Statements.
The Committee also reviews the
external auditors’ management letter
and detailed presentations are made
to the Committee by the auditors at
least twice a year. There is an active
ongoing discussion between the
Committee and the auditors on any
recommendations to improve the
efficiency of the audit process.
Having reviewed and assessed the
auditors’ independence and performance,
the Committee recommended to the
Board that a resolution to reappoint
PwC as the Group’s external auditors
be proposed at the forthcoming Annual
General Meeting.
As a company listed on AIM, the
Company is not required to re-tender
its audit every 10 years. The Committee
will make a recommendation about
timing of the next tender process when
it feels the time is appropriate.
58
Animalcare Group plc Annual Report 2022 Audit process
The audit process commences each year when 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.
The Committee reviews the quality and effectiveness of the external audit
process on an annual basis, considering the views of both the external audit
team, and the CFO, as well as assessing the Committee’s own interactions with
the external auditors. As part of the review of the 2021 year-end audit, the
Committee and the Group’s Audit Partner discussed the process and agreed that,
while effective, certain refinements would be made to improve the efficiency of
the external audit process for the 2022 year end. It will review the 2022 year-end
audit process during the course of 2023.
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 2022 are set out below:
Carrying value of
goodwill and intangible
assets (Group) and
carrying value of
investments
(Company only)
Recognition
and valuation of
judgemental provisions
Presentation of
underlying profit
adjustments
Consideration of the carrying value of goodwill and intangible 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.
Determining the appropriateness of the assumptions used in the
recognition and valuation of judgemental provisions which relate
mainly to inventory, customer rebates and contingent liabilities.
A review of the appropriateness of items disclosed as non-underlying
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 auditors and that the disclosures made in this Annual Report and
Accounts were appropriate.
Risk management, internal controls and key
activities for 2023
The Committee is responsible for reviewing the risk management and internal
control framework and ensuring that it operates effectively. As explained above,
during 2021 the Group implemented
its new and strengthened Risk
Management Framework (RMF),
which has been consistently applied
during 2022. In the second half of
the financial year, the Committee
undertook a review of the RMF and
is currently working alongside the
Chief Financial Officer, with guidance
from the external advisers who
supported the initial implementation,
to further develop and refine the
RMF for adoption during 2023, with
emphasis on R&D commensurate to
our strategy to develop differentiated
and innovative products for the future.
Further details of the Group’s system
of internal controls can be found in
Our Principal Risks. The Committee
is satisfied that the risk management
framework and internal control
systems are operating effectively.
Activities in 2023
We will continue to refine and
strengthen our internal control
framework where required in
response to changes in our risk
profile and the business. Supply chain
processes, including how these impact
on cash conversion, will be a focus
area for 2023.
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.
SYLVIA METAYER
Chair of the Audit and Risk
Committee
15 May 2023
59
Animalcare Group plc Annual Report 2022GOVERNANCE Remuneration and Nomination
Committee Report
ED TORR
Senior Independent Director
• Marc Coucke (stood down from the
Committee on 7 June 2022)
• Doug Hutchens (appointed to the
Committee on 7 June 2022)
Marc Coucke was a member of the
Committee until 7 June 2022 when
he stood down as part of a review of
Committee memberships following
the appointment of Dr Doug Hutchens
and Sylvia Metayer as independent
Non-Executive Directors in February
and May 2022 respectively. Doug
Hutchens became a member of the
Committee from 7 June 2022.
The Committee now comprises three
independent Non-Executive Directors.
Key responsibilities
The Committee considers Group
strategy when recommending the
appointment of Directors and setting
and reviewing remuneration. The
Committee works closely with the
Board to consider Board composition,
to 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
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.
com) 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 necessary
changes;
• Considering succession planning
for Directors and other senior
executives, taking into account
the challenges and opportunities
facing the Company; and
• Leading the process and making
recommendations for all potential
appointments to the Board.
Remuneration
• Setting remuneration for the
Executive Directors, including
pension allowance and awards
under the Long-Term Incentive
Plan (LTIP);
• Approving the design of, and
determining targets for the annual
performance-related bonus
The Committee
considers Group
strategy when
recommending
the appointment
of Directors and
setting and reviewing
remuneration.
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
during the year
During the year, the Committee
comprised the following
Non-Executive Directors:
• Ed Torr (Chair)
•
Jan Boone
60
Animalcare Group plc Annual Report 2022 schemes and LTIP and approving
the total payments or awards
made under these schemes; and
• Recommending and monitoring
the level and structure of
remuneration for the Senior
Executive Team.
The Committee reports formally to
the Board on its proceedings after
each meeting on all matters within its
duties and responsibilities.
Terms of Reference are reviewed
annually and the Board approved the
current Terms of Reference on 12
December 2022.
Activities during the year
The duties contained in the Terms
of Reference form the basis for the
Committee’s work plan across each
financial year and the Committee
meets at such times as is necessary to
discharge its duties. The Committee
met twice during the year and on one
occasion since the year end. Committee
members’ attendance at the meetings
held during the year is set out in the
Corporate Governance Report.
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.
The Committee continued and
completed the work it began during
2021, with the assistance of Ridgeway
Partners, to select two new Non-
Executive Directors. Following on
from the appointment of Dr Doug
Hutchens in February 2022, the
Committee continued its search for
a candidate with financial and audit
experience. After a detailed selection
process, which entailed drawing up
a short list of candidates, interviews
with Committee Members and due
diligence checks, the Committee
considered and approved a proposal
to recommend to the Board the
appointment of Sylvia Metayer. Sylvia
was subsequently appointed as an
independent Non-Executive Director
with effect from 3 May 2022 and
received a bespoke induction.
In March 2022, the Committee
considered bonus entitlement for 2021
considering the financial performance
in that year, the performance targets
for the 2022 bonus scheme, grant of
new LTIP awards in April 2022 and the
vesting of the 2019 LTIP awards. Full
details are set out in the Directors’
Remuneration Report.
Later in the financial year,
the Committee discussed the
remuneration of the Directors and
after due consideration, it was agreed
that Executive Directors’ salaries and
Non-Executive Directors’ fees would
remain unchanged for 2023. The
Committee reviewed performance
targets for the Executive Directors’
FY 2022 bonus and confirmed that
these had not been achieved. The
Committee also reviewed the LTIP
and agreed that no material changes
were required to its overall structure
for 2023.
After considering the approach to the
Board evaluation process for 2023,
the Committee agreed that the Chair
would hold individual meetings with
each member of the Board to discuss
how the Board operates and the
output from these meetings would be
discussed by the Board, with actions
agreed and monitored during the year.
Induction and
development
On appointment, an induction
programme was agreed for Doug
Hutchens and Sylvia Metayer including
meetings with each of the Directors
and members of the Senior Executive
Team to develop their knowledge
and understanding of Animalcare’s
operations.
In addition, the Company’s nominated
adviser and joint broker, Stifel Nicolaus
Europe Ltd, provided briefings for the
newly appointed Directors on their
legal duties and responsibilities as
directors of an AIM company.
We are confident that all Board
members have the knowledge,
ability and experience to perform the
functions required of a director of an
AIM 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,
both on the Board and Senior
Executive Team. 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. The
Board currently consists of 71% (five)
male and 29% (two) female members.
The Senior Executive Team currently
consists of 43% (three) male and 57%
(four) female members.
ED TORR
Chair of the Remuneration
and Nomination Committee
15 May 2023
61
Animalcare Group plc Annual Report 2022GOVERNANCE 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.
This report covers the financial year
ended 31 December 2022.
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 in the Remuneration and
Nomination Committee Report.
The Committee is, among other
things, responsible for setting the
remuneration policy for Executive
Directors and the Chair, 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 other
stakeholders.
In formulating remuneration policy
for the Executive Directors, the
Committee considers a number of
factors designed to:
• Have regard to the Directors’
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 Directors’ personal
performance; and
• Link individual remuneration
packages to the Group’s long-
term performance and continued
success through the award of
annual bonuses and share-based
incentive schemes.
Executive Directors
Current components of the Executive
Directors’ remuneration are base
salary, annual bonus and share-based
incentive schemes.
Base salary
Base salary is reviewed annually by
the Committee.
As reported in the Remuneration and
Nomination Committee Report, the
Committee agreed that the Executive
Directors’ salaries for 2023 would
remain at the same levels as 2022.
Annual bonus
The Committee has agreed
performance conditions for the
Executive Directors’ annual bonus
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
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 28 April 2022, the Board approved
the grant of nil-cost options under the
LTIP over a total of 302,037 ordinary
shares with a nominal value of
20.0 pence per share (“the Options”)
which were awarded to the Company’s
Executive Directors and certain
members of the Senior Executive
Team and Leadership Team. Details
of the nil-cost options granted to the
Executive Directors are set out under
Statutory Information – Share Options
below. The LTIP awards will vest on
1 July 2025 subject to the following
performance criteria being met over
the three-year financial period ending
30 June 2025. The Options will vest to
the extent the following performance
conditions based on EPS and TSR
are met:
62
Animalcare Group plc Annual Report 2022 Earnings Per Share growth
Less than 3%
Extent to which EPS tranche will vest
0%
3%
10%
25%
100%
Between 3% and 10%
Between 25% and 100% on a straight–line basis
Rank of the Company’s TSR compared
to the Comparator Group
Upper quartile or above
Extent to which the TSR tranche will vest
100%
Between median and upper quartile
Pro rata between 25% and 100% on a ranking basis
Median
Below median
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 Notes to the
Consolidated Financial Statements.
Non-Executive Directors are not eligible to participate in the LTIP.
On 6 June 2022, 145,382 options granted on 6 June 2019 vested. Details of the
awards vested are set out in Statutory Information – Share Options below.
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
Notice period
by Company
6 months
Notice period
by Director
6 months
2 August 2018
Rolling contract
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 appointment
Details of the Non-Executive Directors’ letters of appointment are set out below.
Director
Jan Boone
Marc Coucke
Date of contract Renewed on Term expires
2023 AGM
17 June 2017 30 June 2020
17 June 2017 30 June 2020
2023 AGM
17 June 2022 30 June 2020
Ed Torr
Doug Hutchens 10 February 2022
Sylvia Metayer
3 May 2022
2023 AGM
2025 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
63
Animalcare Group plc Annual Report 2022GOVERNANCE Directors’ Remuneration Report continued
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 Chair) is decided by the Chair and Executive Directors.
Fees are designed to ensure the Company attracts and retains high-calibre individuals. They are reviewed annually,
taking account of the level of fees paid by 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 Chair or Non-Executive Directors in the year.
Remuneration policy for 2023
Executive Directors’ salary and bonus structure and Non-Executive Directors’ fees remain at the same levels as 2022.
The remuneration policy for 2023 will operate as follows:
Role
Basic salary/fee
£’000
Maximum bonus potential
Executive
Jennifer Winter
Chris Brewster
Non-Executive
Jan Boone
Sylvia Metayer
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
336
230
70
45
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 2022.
64
Animalcare Group plc Annual Report 2022 Directors’ remuneration
The following table summarises the gross aggregate remuneration of the Directors who served during the year to
31 December 2022:
£’000
Executive
Jennifer Winter1
Chris Brewster2
Non-Executive
Jan Boone
Marc Coucke
Nick Downshire3
Doug Hutchens4
Sylvia Metayer5
Ed Torr6
Total
Salary and
fees Annual bonus
Benefits
Pension
Total
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
336
306
230
209
70
70
40
40
17
40
38
–
30
–
45
45
806
710
–
153
–
84
–
–
–
–
–
–
–
–
–
–
–
–
–
237
15
14
14
12
–
–
–
–
–
–
–
–
–
–
–
–
29
26
–
–
22
23
–
–
–
–
–
–
–
–
–
–
–
–
22
23
351
473
266
328
70
70
40
40
17
40
38
–
30
–
45
45
857
996
1
Jennifer Winter’s benefits comprise a car allowance (£10,500) and private medical insurance (£4,400).
2 Chris Brewster’s benefits comprise a car allowance pro-rated to 31 August (£7,000) which was replaced by a company car from 1 September, with a pro-rated lease cost of
£4,600 from 1 September to 31 December, and private medical insurance (£2,400).
3 Nick Downshire ceased to be a Director on 7 June 2022. His annual fee of £40,000 was pro-rated to his date of resignation; the pro-rated fee for 2022 was £17,436.
4 Doug Hutchens was appointed as a Director on 10 February 2022 for an annual fee of £40,000. He was appointed to the two Board committees on 7 June 2022 and his annual
fee was increased to £45,000. Annual fees were pro-rated from the dates of appointment; the total fee paid in 2022 was £38,096.
5 Sylvia Metayer was appointed as a Director with effect from 3 May 2022. Her annual fee of £40,000, and an additional annual fee of £5,000 for her role as Chair of the Audit
& Risk Committee, were pro-rated from her date of appointment. The pro-rated fee for 2022 was £29,885.
6 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.
Share options
The individual interests of the Executive Directors under the LTIP are set out below:
Jennifer Winter
Chris Brewster
End of
three-year
performance
period
06/06/22
31/12/23
31/12/24
01/07/25
06/06/22
31/12/23
31/12/24
01/07/25
Number
of LTIP nil
cost options
awarded
177,570
165,761
106,844
130,620
76,636
66,848
43,806
53,488
Date of grant
06/06/19
17/11/20
05/11/21
28/04/22
06/06/19
17/11/20
05/11/21
28/04/22
Vested during
the year
73,732
–
–
–
31,821
–
–
–
Lapsed during
the year
103,838
–
–
–
44,815
–
–
–
Total
remaining
73,732
165,761
106,844
130,620
31,821
66,848
43,806
53,488
During the year, a total of 117,929 options over ordinary shares were also granted to certain members of the Senior
Executive Team and Leadership Team.
On 6 June 2022, 73,732 and 31,821 options granted on 6 June 2019 vested to the CEO and CFO respectively.
65
Animalcare Group plc Annual Report 2022GOVERNANCE Directors’ Remuneration Report continued
Details of the performance targets set and actual achievement against them in respect of the 2019 LTIP awards vesting,
based on three-year performance to 31 December 2021, are set out in the table below:
Performance
measure
Underlying EPS
TSR
Weighting Performance period end
31 December 2021
31 December 2021
50%
50%
Threshold (25%
vesting)
12.8p
Median
Maximum (100%
vesting)
14.7p
Actual
12.0p
Upper quartile Between median
and upper
quartile
% vesting for
this part of the
award
0%
83%
These options have yet to be exercised; the participants have seven years in which to exercise these options.
Directors’ interests in the share capital of the Company
The Directors’ interests in the share capital of the Company as at 31 December 2022 and the movements during the year
are set out below:
Director
Jan Boone
Chris Brewster
Marc Coucke
Ed Torr
Jennifer Winter
Number of shares held as
at 1 January 2022
137,890
280,513
14,558,974
107,455
7,000
Acquired/(disposed)
during the period
–
–
–
–
–
Number of shares held as
at 31 December 2022
137,890
280,513
14,558,974
107,455
7,000
Percentage of ISC as at
31 December 2022
0.23
0.47
24.23
0.18
0.01
As at 1 January 2022, Nick Downshire had a beneficial interest in 1,011,620 shares and a non-beneficial interest of 152,037
shares; this number was the same when he ceased to be a Director on 7 June 2022.
Neither Doug Hutchens nor Sylvia Metayer has an interest in the share capital of the Company.
There were no changes in the Directors’ interests in shares between 31 December 2022 and 15 May 2023.
ED TORR
Chair of the Remuneration and Nomination Committee
15 May 2023
66
Animalcare Group plc Annual Report 2022 Directors’ Report
Environmental disclosures can be
found under the Sustainability part of
the Strategic Report.
Details of the key issues and
stakeholder considerations discussed by
the Board during the year and how the
Company engages with its stakeholders
are set out in the Strategic Report,
which includes the s172 Statement.
The Statement of Directors’
Responsibilities is included elsewhere
in the Governance section.
Likely future events are disclosed
within the Strategic Report.
There are no post balance sheet
events.
Dividend
An interim dividend of 2.0 pence per
share was paid on 18 November 2022
to shareholders whose names were on
the Register of Members at close of
business on 21 October 2022.
Reflecting its continued confidence
in the long-term prospects of the
Group, the Board is recommending a
final dividend of 2.4 pence per share
(2021: 2.4 pence per share), giving
a total dividend for the year of 4.4
pence (2021: 4.4 pence per share).
Subject to shareholder approval at the
Annual General Meeting to be held
on Tuesday 13 June 2023, the final
dividend will be paid on 14 July 2023
to shareholders whose names are
on the Register of Members at close
of business on Friday 16 June 2023.
The ordinary shares will become ex-
dividend on Thursday 15 June 2023.
The Directors present their
report, together with the audited
financial statements of the
Group and the Company for the
year ended 31 December 2022.
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 contained within the Strategic
Report.
The Corporate Governance statement.
The Group’s financial risk management
objectives in the Corporate
Governance Report.
The Directors’ Remuneration Report.
Details of the Company’s exposure
to price risk, credit risk, liquidity risk
and cash flow risk can be found in the
Notes to the Consolidated Financial
Statements.
Details of the salaries, bonuses,
benefits and share interests
of Directors in the Directors’
Remuneration Report.
Directors
The names of the current Directors
of the Company up to the date of
signing the financial statements and
their biographical details are shown
in the Board of Directors section. As
reported in last year’s Annual Report,
Dr Doug Hutchens was appointed on
10 February 2022. There were two
further changes during the reporting
period, the appointment of Sylvia
Metayer on 3 May 2022 and the
resignation of Nick Downshire on
7 June 2022.
Share capital structure
The Company’s issued share
capital as at 31 December 2022
was £12,018,432.20 divided into
60,092,161 ordinary shares of
20.0 pence each. Full details relating
to the Company’s issued share capital
can be found in the Notes to the
Consolidated Financial Statements.
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).
67
Animalcare Group plc Annual Report 2022GOVERNANCE Directors’ Report continued
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 7 June 2022,
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
6,009,216 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. During
the period under review, the Group
incurred research and development
expenditure, including additions to
intangibles of £4.1m (2021: £4.5m).
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 the Notes to
the Consolidated Financial Statements.
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 2022 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 (2021: £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 Our Stakeholders part of the
Strategic Report.
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.
68
Animalcare Group plc Annual Report 2022 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 31 March 2023:
Name of holder
Alychlo NV
Liontrust Asset Management
SEB Investment Management AB
BlackRock, Inc.
Canaccord Genuity Wealth Management Inc
BGF Investment Management Ltd
No. of ordinary shares
14,558,974
% Holding1
24.23
7,583,585
4,864,630
4,414,981
3,961,090
3,556,839
12.62
8.10
7.35
6.59
5.92
1 Please note that percentage holdings are shown to two decimal places; full details of holdings can be found in the notifications of major holdings available on the London
Stock Exchange website.
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, and higher than expected inflation across our cost base, with corresponding
mitigating actions. Further details are included in the statement on going concern in the Notes to the Consolidated
Financial Statements.
69
Animalcare Group plc Annual Report 2022GOVERNANCE Directors’ Report continued
Disclosure of
information to the
auditors
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 13 June 2023. The Notice
of 2023 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/
Approval
The Strategic Report and this
Directors’ Report were approved by
the Board on 15 May 2023 and signed
on its behalf by
CHRIS BREWSTER
Chief Financial Officer and Company
Secretary
15 May 2023
70
Animalcare Group plc Annual Report 2022 Statement of Directors’ Responsibilities in
respect of the financial statements
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.
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
15 May 2023
71
Animalcare Group plc Annual Report 2022GOVERNANCE Independent Auditors’ Report
to the members of Animalcare Group plc
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 2022 and of the
group’s profit 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
as applied in accordance with the
provisions of the Companies Act
2006; 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:
Consolidated and Company
statements of financial position as at
31 December 2022; 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
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.
Our audit approach
Overview
AUDIT SCOPE
• The Group is organised into 14
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.
• Additionally, STEM Animal Health
Inc. was 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.
• Two reporting components
were also subject to audit
procedures performed by the
Group engagement team. Belphar
IDA required procedures over
income tax liabilities and deferred
taxes and Identicare Limited
required procedures over service
sales, right-of-use assets, lease
liabilities, provisions and contract
liabilities due to the contribution
to the overall financial statement
line items in the consolidated
financial statements. The Group
engagement team also audited
material consolidation journals.
• As a result of this scoping we
obtained coverage over 79% of the
Group’s revenues and 83% of the
Group’s underlying EBITDA.
KEY AUDIT MATTERS
• Carrying value of intangibles
relating to products in
development (group)
• Classification of items as non-
underlying (group)
• Risk of impairment of investments
in subsidiaries (parent)
MATERIALITY
• Overall group materiality:
£325,000 (2021: £336,000) based
on 2.5% of underlying Earnings
Before Interest, Tax, Depreciation
and Amortisation, adjusted for
non-underlying items (‘underlying
EBITDA’).
• Overall company materiality:
£290,000 (2021: £210,000) based
on 1% of total assets (capped
below Group materiality).
• Performance materiality: £243,750
(2021: £252,000) (group) and
£217,500 (2021: £157,500)
(company).
72
Animalcare Group plc Annual Report 2022 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 relating to products in development (group) and Classification of non-underlying items are new
key audit matters this year. Carrying value of intangibles may be impaired (Group), which was a key audit matter last year, is
no longer included because of a refinement of the assessed risk concluding that only intangible assets relating to products
in development presented a heightened risk. Otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Carrying value of intangibles relating to products in
development (group)
The Group has a significant amount of product development
related intangible assets of which a net book value of £1.5
million as at 31 December 2022 (2021: £1.6 million) relates
to products which are not currently commercialised and
therefore not amortised. This amount is spread across
multiple intangible asset categories.
Intangible assets not yet available for use are assessed
annually for impairment. Management has prepared
forecasts of future sales and margins which involve
estimates, concluding that no impairment is required on
these assets in the current year.
See the summary of significant accounting policies section
within the Consolidated financial statements for disclosure
of the related accounting policies and Note 9 within the
Consolidated financial statements for details of intangible
assets.
We considered whether management’s conclusion in
relation to there being no impairment is appropriate
through performing the following procedures:
• We agreed the carrying values of the assets being
assessed for impairment to the balance sheet and
assessed the completeness of the assets categorised as
not yet commercialised;
• We reviewed the forecast financial performance of
the projects not currently commercialised, tracing
the forecast financial information to the latest Board
approved budget and product development business
cases, where applicable;
• We held discussions with management to understand
and challenge their forecasts;
• We considered any contradictory evidence from related
investment impairment reviews; and
• We considered the accuracy of previous management
forecasts.
Based on the procedures performed, no issues have been
noted with the carrying value of intangible assets relating to
projects not currently commercialised. The carrying value
and the associated disclosures within the consolidated
financial statements are considered appropriate.
73
Animalcare Group plc Annual Report 2022FINANCIALS
Independent Auditors’ Report
to the members of Animalcare Group plc continued
Key audit matter
How our audit addressed the key audit matter
Classification of items as non-underlying (group)
‘Underlying EBITDA’ is one of the Group’s Alternative
Performance Measures. Management uses this measure
to improve the transparency and clarity of the Group’s
financial performance.
We considered whether the classification of non-underlying
items was appropriate. We performed the following
procedures:
• We reviewed management’s definition and classification
Non-underlying items before taxes total £6.5 million (2021:
£8.6 million) representing:
of non-underlying items, including the sub-
categorisation of these items;
• We obtained supporting evidence to corroborate the
accuracy and completeness of non-underlying items;
• We challenged management on the classification of
non-underlying items through consideration of the
application of the accounting policy including those
items classified as ‘other non-underlying items’; and
• We challenged management over disclosures relating
to non-underlying items to ensure that these were
appropriate and consistent with the individual
exceptional items and the work performed.
Based on the procedures performed, we found no material
issues and the non-underlying items are appropriately
classified in accordance with the stated accounting policy.
• Amortisation and impairment of acquired intangible
assets (£5.36 million);
• Restructuring costs (£0.28 million);
• Acquisition and integration costs (£0.34 million);
• Charges relating to a long-term incentive plan (£0.22
million);
•
Income relating to divestments and business disposals
(£0.15 million);
• Costs associated with office relocations (£0.18 million);
• Other non-underlying items where Management
considers their nature and expected frequency of events
giving rise to them, merit separate disclosure
(£0.28 million).
The risk we have focussed on is that the determination of
which items are to be excluded from underlying results
is subject to judgement and therefore the users of the
Group financial statements could be misled if amounts are
not classified and disclosed in a transparent manner and
consistently with the Group’s accounting policy.
See the summary of significant accounting policies section
within the Consolidated financial statements for disclosure
of the related accounting policies and Note 4 within the
Consolidated financial statements for details of non-
underlying items.
74
Animalcare Group plc Annual Report 2022
Key audit matter
How our audit addressed the key audit matter
Risk of impairment of investments in subsidiaries (parent)
The parent company has investments in subsidiary
companies of £147.9 million (2021: £147.7 million),
which is reviewed annually for impairment indicators with
an impairment review performed where necessary. An
impairment trigger has been identified due to the market
capitalisation of the Group falling below the investment
carrying value. No impairment charge has been recorded
by management in the current year with respect to the
carrying value of the investments in subsidiary companies
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
significant assumptions about the future results and cash
flows of the business and these assumptions are highly
sensitive to reasonably possible changes.
The headroom for the carrying value of investments
is calculated by comparing the value in use of the
Group, adjusted by net debt 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
We understood and evaluated management’s budgeting
and forecasting process. We obtained the impairment
analysis and performed the following procedures:
• 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 benchmarking this against
comparable organisations;
• We traced the forecast financial information within the
model to the latest Board approved budget. We have
also compared FY22 actuals to the FY23–FY27 forecasts
and challenged management to provide support to
corroborate trading and growth assumptions, support
for operating and capital expenditure, including where
required for new products, 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;
• We performed sensitivity analysis to ascertain
the impact of reasonably possible changes in key
assumptions; and
end of the five -year forecast period; and
• We challenged management over disclosures to ensure
• A discount rate applied to the model.
See the significant accounting policies section within the
Company only 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, including
sensitivities for the impact of reasonably possible change in
assumptions.
that these were appropriate and reflective of the
sensitivity of key assumptions.
In summary, we found, based on our audit work, the
carrying value of investments in subsidiaries to be
reasonable, albeit the assessment is highly sensitive to
reasonably possible changes in assumptions, as disclosed
within Note 6 within the Company only financial statements.
75
Animalcare Group plc Annual Report 2022FINANCIALS
Independent Auditors’ Report
to the members of Animalcare Group plc continued
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 14
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 underlying EBITDA,
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.
Additionally, STEM Animal Health Inc.
was 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.
Two reporting components were also
subject to audit procedures performed
by the Group engagement team.
Belphar IDA required procedures
over income tax and deferred taxes
and Identicare Limited required
procedures over service sales,
right-of-use assets, lease liabilities,
provisions and contract liabilities due
to the contribution to the overall
financial statement line items in the
consolidated financial statements. The
Group engagement team also audited
material consolidation journals.
The Group audit team supervised the
direction and execution of the audit
procedures performed by the PwC and
non-PwC component audit teams.
Our involvement in their audit
process, including reviewing their risk
assessment, attending component
clearance meetings, review of their
reporting results and review of the
supporting working papers for the
five components in scope due to
either their size or risk characteristics,
together with the additional
procedures performed at Group level,
gave us the evidence required for our
opinion on the consolidated financial
statements as a whole.
The impact of climate risk on
our audit
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
considers 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.
Our procedures did not identify any
material impact in the context of our
audit of the financial statements as a
whole, or our key audit matters for the
year ended 31 December 2022.
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.
76
Animalcare Group plc Annual Report 2022 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
£325,000 (2021: £336,000).
Financial statements - company
£290,000 (2021: £210,000).
2.5% of underlying Earnings Before Interest, Tax,
Depreciation and Amortisation, adjusted for non-
underlying items (‘underlying EBITDA’)
Based on the benchmarks used in the Annual Report,
underlying EBITDA, is the primary measure used by the
shareholders in assessing the performance of the Group,
and is a generally accepted auditing benchmark.
1% of total assets (capped below Group materiality)
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 £308,000.
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%
(2021: 75%) of overall materiality,
amounting to £243,750 (2021:
£252,000) for the group financial
statements and £217,500 (2021:
£157,500) for the company financial
statements.
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 £16,250 (group
audit) (2021: £16,800) and £16,250
(company audit) (2021: £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
basecase 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 have considered the availability
of bank facilities and compliance
with the related covenants over the
going concern period;
• We evaluated the historical
accuracy of the budgeting process
to assess the reliability of the
forecasts;
• 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 2023
to management’s forecast; 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.
77
Animalcare Group plc Annual Report 2022FINANCIALS
Independent Auditors’ Report
to the members of Animalcare Group plc continued
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 2022
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.
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
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 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
78
Animalcare Group plc Annual Report 2022 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 and tax legislation. 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;
• Obtaining direct confirmations
from 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, or contain certain
unusual key words such as
fraud; 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,
the carrying value of intangible
assets and the classification on
non-underlying items.
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.
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.
KATE FINN
(SENIOR STATUTORY AUDITOR)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory
Auditors
Leeds
15 May 2023
79
Animalcare Group plc Annual Report 2022FINANCIALS Consolidated Income Statement
YEAR ENDED 31 DECEMBER 2022
For the year ended 31 December
Non-
Underlying
(note 4)
2022
£’000
−
−
−
(667)
−
(4,013)
(918)
Underlying
2022
£’000
71,616
(30,957)
40,659
(2,363)
(13,547)
(15,000)
−
Total
2022
£’000
71,616
(30,957)
40,659
(3,030)
(13,547)
(19,013)
(918)
Underlying
2021
£’000
74,024
(34,606)
39,418
(2,181)
(12,277)
(14,482)
−
Non-
Underlying
(note 4)
2021
£’000
−
−
−
(951)
−
(4,580)
(2,761)
Total
2021
£’000
74,024
(34,606)
39,418
(3,132)
(12,277)
(19,062)
(2,761)
4
(919)
(915)
115
(312)
(197)
9,753
(1,752)
1,110
(642)
(52)
9,059
(1,487)
7,572
(6,517)
−
−
−
−
(6,517)
910
(5,607)
3,236
(1,752)
1,110
(642)
(52)
2,542
(577)
1,965
10,593
(2,613)
1,757
(856)
(188)
9,549
(2,325)
7,224
(8,604)
−
−
−
−
(8,604)
1,303
(7,301)
1,989
(2,613)
1,757
(856)
(188)
945
(1,022)
(77)
7,572
(5,607)
1,965
7,224
(7,301)
(77)
Notes
6.1
6.2
6.3
6.4
6.5
6.8
6.9
11
6.10
7
7
12.6p
12.5p
−
−
3.3p
3.2p
12.0p
12.0p
−
−
(0.1p)
(0.1p)
Revenue
Cost of sales
Gross profit
Research and development expenses
Selling and marketing expenses
General and administrative expenses
Impairment losses
Net other operating income/
(expense)
Operating profit/(loss)
Finance costs
Finance income
Finance costs net
Share of net loss of joint venture
accounted for using the equity
method
Profit/(loss) before tax
Income tax expense
Profit/(loss) for the period
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
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 categorised as ‘non-underlying’ and
are analysed in detail in note 4 to these financial statements. The accompanying notes form an integral part of these
consolidated financial statements.
80
Animalcare Group plc Annual Report 2022 Consolidated Statement
of Comprehensive Income
YEAR ENDED 31 DECEMBER 2022
Profit/(loss)
Other comprehensive income/(expense)
Exchange differences on translation of foreign operations
Other comprehensive income/(expense), net of tax
Total comprehensive income/(expense) for the year, net of tax
Total comprehensive income/(expense) attributable to:
The owners of the parent
* May be reclassified subsequently to profit and loss
For the year ended
31 December
2022
£’000
1,965
2021
£’000
(77)
488
488
2,453
2,453
(638)
(638)
(715)
(715)
81
Animalcare Group plc Annual Report 2022FINANCIALS Consolidated Statement of Financial Position
AS AT 31 DECEMBER 2022
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
Lease liabilities
Trade payables
Current tax liabilities
Accrued charges and contract liabilities
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
* Restated as detailed in Note 29
Notes
8
9
10
23
11
6.10
13
12
13
13
14
23
15
6.10
19
20
16
23
6.10
19
17
18
22
22
22
As at 31 December
2022
£’000
50,853
25,283
448
2,924
1,305
3,567
70
−
84,450
13,474
13,568
715
6,035
33,792
118,242
(852)
(15,497)
(623)
(1,276)
(4,027)
(22,275)
(8,426)
(2,159)
(4,773)
(372)
(340)
(911)
(16,981)
(39,256)
78,986
12,019
132,798
(56,762)
(11,977)
2,908
78,986
78,986
restated*
2021
£’000
50,337
30,213
132
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
The accompanying notes on pages 86 to 130 form an integral part of these consolidated financial statements.
The financial statements on pages 80 to 130 were approved by the board of directors and authorised for issue on 15 May 2023.
They were signed on their behalf by:
JENNIFER WINTER
Chief Executive Officer
CHRIS BREWSTER
Chief Financial Officer
82
Animalcare Group plc Annual Report 2022 Consolidated Statement of Changes in Equity
YEAR ENDED 31 DECEMBER 2022
At 1 January 2022
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid
Share-based payments
At 31 December 2022
At 1 January 2021
Loss of the year
Other comprehensive expense
Total comprehensive expense
Dividends paid
Exercise of share options
Share-based payments
At 31 December 2021
Attributable to the owners of the parents
Share
premium
£’000
132,798
−
−
−
−
−
132,798
Accumulated
losses
£’000
(11,676)
1,965
−
1,965
(2,644)
378
(11,977)
Reverse
acquisition
reserve
£’000
(56,762)
−
−
−
−
−
(56,762)
Attributable to the owners of the parents
Share
premium
£’000
132,729
−
−
−
−
69
−
132,798
Accumulated
losses
£’000
(9,445)
(77)
−
(77)
(2,403)
−
249
(11,676)
Reverse
acquisition
reserve
£’000
(56,762)
−
−
−
−
−
−
(56,762)
Other
reserve
£’000
2,420
−
488
488
−
−
2,908
Other
reserve
£’000
3,058
−
(638)
(638)
−
−
−
2,420
Share
capital
£’000
12,019
−
−
−
−
−
12,019
Share
capital
£’000
12,012
−
−
−
−
7
−
12,019
Total
equity
£’000
78,799
1,965
488
2,453
(2,644)
378
78,986
Total
equity
£’000
81,592
(77)
(638)
(715)
(2,403)
76
249
78,799
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
Animalcare Group plc Annual Report 2022FINANCIALS
Consolidated Cash Flow Statement
YEAR ENDED 31 DECEMBER 2022
For the year ended
31 December
2022
£’000
2,542
52
1,118
6,685
918
542
(146)
202
105
(260)
1,001
(235)
140
(6)
(5,875)
(2,735)
6,706
(1,325)
9,429
(407)
(2,540)
153
(325)
(3,119)
(1,320)
(996)
−
(2,644)
(444)
(292)
(5,696)
614
5,633
(212)
6,035
restated*
2021
£’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
(58)
(3,157)
540
(289)
(2,964)
(6,952)
(1,024)
76
(2,403)
(447)
(213)
(10,963)
96
5,265
272
5,633
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 venture
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of intangible assets
Share-based payment expense
Gain on disposal of intangible assets
Non-cash movement in provisions
Movement allowance for bad debt and inventories
Finance income
Finance expense
Impact of foreign currencies
Fair value adjustment contingent consideration
Non-cash movement in IFRS16 liability
Movements in working capital
(Increase)/decrease in trade receivables
(Increase)/decrease in inventories
Increase/(decrease) 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 intangible assets
Capital contribution in joint venture
Net cash flow used in investing activities
Financing activities
Repayment of loans and borrowings
Repayment of IFRS 16 lease liability
Receipts from issue of share capital
Dividends paid
Interest paid
Other financial expense
Net cash flow used in financing activities
Net increase of 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
Animalcare Group plc Annual Report 2022 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
* Restated as detailed in Note 29
For the year ended
31 December
2022
£’000
614
1,320
(715)
1,219
(5,330)
(1,291)
(5,402)
restated*
2021
£’000
96
6,952
1,146
8,194
(13,616)
92
(5,330)
Notes
23
85
Animalcare Group plc Annual Report 2022FINANCIALS Notes to the Consolidated
Financial Statements
YEAR ENDED 31 DECEMBER 2022
1. Financial information
Animalcare Group plc (“the Company”)
is a public company limited by shares
incorporated in the United Kingdom
under the Companies Act 2006 and
is domiciled in the United Kingdom.
The address of its registered office is
Moorside, Monks Cross, York, YO32
9LB. 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 28.
2. Basis of preparation
The Group financial statements have
been prepared and approved by the
Directors in accordance with UK-
adopted international accounting
standards (“IFRS”) and the applicable
legal requirements of the Companies
Act 2006 under the historical cost
convention. 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 Limited for the company to
take exemption from audit.
The preparation of financial
statements in compliance with 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
2022 and comprise the consolidated
results of the Group.
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. 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.
Going concern
The Group’s financing arrangements
consist of a committed revolving credit
facility of €41.5m (£36.8m) and a
€10.0m (£8.9m) acquisition line, the
latter of 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 2022
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.
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 and
liquidity 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 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.
3. Summary of
significant accounting
policies
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
intra-Group balances, transactions,
unrealised gains and losses resulting
from intra-Group transactions and
dividends are fully eliminated.
86
Animalcare Group plc Annual Report 2022 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.
Non-underlying items
The Directors believe that presenting
the Group’s financial results on an
underlying basis, which excludes
non-underlying items, offers a clearer
picture of business performance and
hence provides useful information
for shareholders. These measures are
used by the Board and management
for planning, internal reporting and
setting Director and management
incentive arrangements. In addition
they are used by the investor analyst
community and are aligned to
our strategy and KPIs. Underlying
measures are not intended to be a
substitute for, or superior to, IFRS
results which include non-underlying
items to provide the statutory results.
Non-underlying items are items of
income or expense which, because of
either their nature and/or the expected
frequency of the events giving rise to
them, merit separate presentation and
disclosure as detailed in note 4. The
following key items are adjusted for in
the calculation of underlying operating
profit:
• Amortisation and impairment
of acquired intangible assets –
these items are a result of past
transactions, principally the
reverse acquisition of Animalcare
Group plc and the pre-reverse
acquisition of Esteve, and therefore
although they are recorded as a
cost to the Group each financial
year, do not reflect the current
or future business performance
and cash outflows. Impairment is
classified as non-underlying due
to the significance and one-off
nature.
• Acquisition and integration costs
– these items principally relate
to acquisition and subsequent
integration activity which we
view as strategic in nature, and
therefore they are excluded
from underlying EBITDA, hence
underlying operating profit, as this
is principally used to manage the
performance of our operations
• Restructuring costs – the Group
has recognised restructuring costs
in a number of financial years
since the reverse acquisition in
2017 and we expect such costs
will likely arise in future as the
Group develops and evolves.
Certain of the more significant
historic restructuring activities
have spanned financial years,
while in more recent years,
notwithstanding costs are
presented in the current and prior
period, the costs are associated
with separate and unrelated
organisational restructuring
and rationalisation activities. As
such, the specific nature of the
activities will be explained in
note 4 or its future equivalent. As
with acquisition and integration
costs, we consider restructuring
costs strategic in nature, and
therefore they are excluded
from underlying EBITDA, hence
underlying operating profit, as this
is principally used to manage the
performance of our operations
• Gains and losses on divestment of
fixed and intangible assets – the
Group has made certain product
divestments while undertaking a
strategic review and rationalisation
of our product portfolio. Gains
and losses arising from such
divestments are excluded from
underlying results given their
infrequency and non-trading nature
• Share based payments in respect
of Identicare Ltd (see note 26)
– while the Group continues to
recognise share-based payment
costs in relation to the Long-Term-
Incentive-Plan within its underlying
results, the charge in relation to
the new Identicare share-based
payment arrangement incepted on
1 January 2022 has been treated
as non-underlying. The key driver
of this treatment and presentation
is that the growth shares issued
deliver value to the holder based
on either the sale of Identicare, or
after five years, the market value
via a put option. As such, the plan
is connected to the future value of
Identicare and not trading (as the
Group does not have a history of
trading investments). In addition,
as part of the arrangement is
treated as cash-settled, this will
likely create volatility in our results
arising from movements in the fair
value of this arrangement.
87
Animalcare Group plc Annual Report 2022FINANCIALS 3. Summary of
significant accounting
policies (continued)
Non-controlling interests
The Group has the choice, on a
transaction-by-transaction basis, to
initially recognise any non-controlling
interest in the acquiree which is
a present ownership interest and
entitles its holders to a proportionate
share, of the entity’s net assets in
the event of liquidation at either
acquisition date fair value or, at the
present ownership instruments’
proportionate share in the recognised
amounts of the acquiree’s identifiable
net assets. Other components
of non-controlling interest such
as outstanding share options are
generally measured at fair value.
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 31 December 2021 and
2022. Differences resulting from the
translation of the financial statements
of the parent and the subsidiaries are
recognised in other comprehensive
income as “Exchange differences on
translation of foreign operations”.
FOREIGN CURRENCY
TRANSACTIONS
Transactions denominated in foreign
currencies are translated into
functional currency at spot rate at the
transaction date. 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. Repair and
maintenance costs are recognised in
the income statement as incurred.
Depreciation is calculated on a
straight-line basis over the estimated
useful lives of the assets as follows:
• Equipment
• Office furniture
and office
equipment
• Leasehold
improvements
• Warehouse and
office fittings
5 years
3–5 years or lease
term if shorter
5 years or lease
term if shorter
5–10 years
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
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 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.
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 attributable to one cash-
generating unit for the purpose of
impairment testing, being the lowest
level at which business operations are
monitored for internal management
purposes.
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:
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;
• where possible, uses recent
• any initial direct costs; and
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.
•
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 four to five years.
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
89
Animalcare Group plc Annual Report 2022FINANCIALS 3. Summary of
significant accounting
policies (continued)
Intangible assets
Intangible assets comprise the
acquired product portfolio’s, Research
& Development assets, licensing
and distribution rights, customers
acquired in connection with business
combinations, product portfolios
and product development costs,
capitalised software and assets under
construction related to intangible
assets.
The useful life of the intangible assets
is as follows:
• Capitalised software
• Patents, distribution
rights and licenses
• Product portfolios and
5 years
7–12 years
product development 10 years
• Research &
Development assets
10 years
Intangible assets not yet available
for use are assessed annually for
impairment. Assets under construction
are 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”.
Further, the Group has acquired
certain intangible assets related to
licenses with a fixed and variable
consideration contingent upon the
realisation of certain milestones and
sales volumes. Due to the recognition
of this license asset, the group extends
its accounting policies on intangible
assets as follows:
The Group recognises an intangible
asset for licenses obtained initially
measured at the fixed consideration
paid. The variable consideration
subject to the realisation of the
milestones will only be recognised
when the milestones are met and will
be recognised as an addition to the
intangible license asset to the extent
the milestone represents additional
license consideration. Once market
authorisation is obtained, the Group
will start amortising the intangible
asset over its useful life and recognise
any future milestone payments as a
cost of sale.
The Group recognises an intangible
asset for licenses obtained initially
measured at the fixed consideration
paid. The variable consideration
subject to the realisation of the
milestones will only be recognised
when the milestones are met and will
be recognised as an addition to the
intangible license asset. Once market
authorisation is obtained, the Group
will start amortising the intangible
asset over its useful life and recognise
any future milestone payments as a
cost of sale.
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.
90
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 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 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
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. (‘STEM’). The Group’s investments
in its joint venture are 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.
91
Animalcare Group plc Annual Report 2022FINANCIALS 3. Summary of
significant accounting
policies (continued)
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
• 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 has 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 11 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.
cost; and
DERECOGNITION
• Financial assets at fair value
A financial asset is derecognised when:
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 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 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).
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.
92
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 FINANCIAL LIABILITIES AT
AMORTISED COST
net basis, or to realise the assets and
settle the liabilities simultaneously.
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
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.
For cash-settled share-based
payments, a liability is recognised
for the goods and services acquired,
measured initially at the fair value of
the liability. At the balance sheet date
until the liability is settled, and at the
date of settlement, the fair value of
the liability is remeasured, with any
changes in fair value recognised in
profit or loss for the period. Shares
already in issue subject to potential
redemption by the Group are held as
liabilities, measured at the present
value of the redemption amount.
Details of the arrangements in place
are given in note 26, along with details
of the derivation of fair value.
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.
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.
93
Animalcare Group plc Annual Report 2022FINANCIALS 3. Summary of
significant accounting
policies (continued)
Revenue recognition
Revenue from the sale of goods is
measured at the fair value of the
consideration and excludes intra-group
sales and value added and similar
taxes. The primary performance
obligation is the transfer of goods to
the customer. Revenue from the sale
of goods is recognised when control
of the goods is transferred to the
customer, at an amount that reflects
the consideration to which an entity
expects to be entitled in exchange for
those goods.
As sales arrangements differ from
time to time (for example by customer
and by territory), each arrangement
is reviewed to ensure that revenue
is recognised when control of the
goods has passed to the customer.
This review and the corresponding
recognition of revenue encompass a
number of factors which includes, but
is not limited to, reviewing delivery
arrangements and whether the
buyer has accepted title, recognising
revenue at the point at which full title
has passed.
Provision for rebates and discounts
is reflected in the transaction price
at the point of recognition to the
extent that it is highly probable there
will not be a significant reversal. The
methodology and assumptions used
to estimate rebates and discounts
are based on contractual and legal
obligations, and historical trends and
averages based on the last 12 months.
SALES OF SERVICES
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. Service sales
includes commission income which is
recognised at a point in time.
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
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
94
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 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 economic best
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
2022
Standards and interpretations
applicable for the annual period
beginning on or after 1 January 2022:
• Amendment to IFRS 16 Leases:
COVID-19-Related Rent
Concessions beyond 30 June 2021
(applicable for annual periods
beginning on or after 1 April 2021)
• Amendments to IAS 16 Property,
Plant and Equipment: Proceeds
before Intended Use (applicable
for annual periods beginning on or
after 1 January 2022)
• Amendments to IAS 37 Provisions,
Contingent Liabilities and
Contingent Assets: Onerous
Contracts — Cost of Fulfilling a
Contract (applicable for annual
periods beginning on or after 1
January 2022)
• Amendments to IFRS 3 Business
Combinations: Reference to the
Conceptual Framework (applicable
for annual periods beginning on or
after 1 January 2022)
• Annual Improvements to IFRS
Standards 2018–2020 (applicable
for annual periods beginning on or
after 1 January 2022)
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 2022
The IFRS accounting standards and
interpretations that are issued, but
not 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.
• Amendments to IAS 1 Presentation
of Financial Statements:
Classification of Liabilities as
Current or Non-current (applicable
for annual periods beginning on or
after 1 January 2024 or later, but
not yet endorsed in the UK)
• Amendments to IAS 1 Presentation
of Financial Statements and IFRS
Practice Statement 2: Disclosure
of Accounting Policies (applicable
for annual periods beginning on or
after 1 January 2023)
95
Animalcare Group plc Annual Report 2022FINANCIALS 3. Summary of
significant accounting
policies (continued)
• Amendments to IAS 8 Accounting
policies, Changes in Accounting
Estimates and Errors: Definition of
Accounting Estimates (applicable
for annual periods beginning on or
after 1 January 2023)
• Amendments to IAS 12 Income
Taxes: Deferred Tax related to
Assets and Liabilities arising from
a Single Transaction (applicable
for annual periods beginning on or
after 1 January 2023)
• Amendments to IFRS 16 Leases:
Lease Liability in a Sale and
Leaseback (applicable for annual
periods beginning on or after
1 January 2024, but not yet
endorsed in the UK)
Significant accounting
judgements
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
future periods.
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 costs 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 2022, the Group
had £2,565k (2021: £1,749k) 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.
IMPAIRMENT OF GOODWILL
The Group has goodwill for a total
amount of £50,853k (2021: £50,337k)
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.
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
96
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 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$1.5m was already paid in prior
years, CA$0.5m during the financial
year and CA$1.0m still payable over 20
months.
£254k (2021: £502k), shown in the
balance sheet as other non-current
liability.
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 Group has a call option, for a
period until September 28 2026,
to acquire an additional 18.0% 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. Accordingly, the investment
in STEM is accounted through the
equity method in the consolidated
financial statements.
Separately, the Group also entered
into a licensing agreement under
which it 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.
In the prior year, the Group made its
first license payment of CA$0.5m. The
following payment is due in 2023,
resulting in a short-term payment of
CA$692k or £425k, and a long-term
payable of CA$748k or £459k.
Further, for the capital contribution,
the outstanding short-term liability
is £292k (2021: £277k), shown in the
balance sheet as other current liability.
The outstanding long-term liability is
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 considers that the
call option is not substantive and
not favourable as of 31 December
2022 in terms of future benefits
and the value attached to 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.
Significant accounting
estimates and assumptions
CASH-SETTLED AND EQUITY-
SETTLED SHARE- BASED
PAYMENT ARRANGEMENTS
The Group has entered into an
arrangement whereby growth shares
have been issued in a subsidiary with
ties to employment, and which could
be obligated to be bought back by
the Group in certain instances. The
Directors have determined that this
share-based payment arrangement
is partially cash-settled and partially
equity-settled. Details of the
arrangement and its valuation are
provided in note 26.
97
Animalcare Group plc Annual Report 2022FINANCIALS 4. Non-underlying items
Amortisation and impairment of acquisition related intangibles
Classified within research and development expenses
Classified within general and administrative expenses
Impairment losses
Total amortisation and impairment of acquisition-related intangibles
Restructuring costs
Acquisition and integration costs
Impairment on intangibles
Divestments and business disposals
COVID-19
Long-term incentive plan (see Note 26)
UK and Spain office relocation costs
Other non-underlying items
Total non-underlying items before taxes
Tax impact
Total non-underlying items after taxes
For the year ended
31 December
2022
£’000
2021
£’000
667
3,794
895
5,356
282
335
23
(146)
2
220
182
263
6,517
(910)
5,607
951
4,580
2,761
8,292
17
188
–
(462)
11
–
111
447
8,604
(1,303)
7,301
The following table shows the breakdown of non-underlying items before taxes by category for 2022 and 2021:
Classified within research and development expenses
Classified within general and administrative expenses
Classified within net other operating (income)/expense
Impairment losses
Total non-underlying items before taxes
For the year ended
31 December
2022
£’000
667
4,013
919
918
6,517
2021
£’000
951
4,580
312
2,761
8,604
The 2022 £4,013k general and administrative expenses principally encompass amortisation and impairment of acquisition
related intangibles of £3,794k plus the £220k long-term incentive plan charge.
Non-underlying items totalling £6,516k (2021: £8,604k) relating to profit before tax have been incurred in the year.
These principally comprise:
• Amortisation and impairment of acquisition-related intangibles of £5,356k (2021: £8,292k). The current year charge
primarily comprises amortisation in relation to the reverse acquisition of Ecuphar NV and previous acquisitions made
by Ecuphar NV of £4,461k (2021: £5,531k) and a non-cash impairment charge of Research & Development assets
(£895k; 2021: £ 2,761k) that formed part of the acquired development pipeline, the principal driver for which was
manufacturing challenges that have significantly impacted the timing and costs to resume supply with appropriate
commercial returns. The assets in question are now written down to nil. Impairment losses have been presented
separately on the face of the consolidated income statement, however the entire amount of £918k would be
attributable to net other operating expenses.
• Expenses relating to restructuring costs of £282k (2021: £17k) principally relate to the closure of our warehouse
in Belgium and subsequent out-sourcing to a third-party logistics provider, together with costs associated with the
reorganisation of our UK operations following the carve-out of Identicare in 2021.
98
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022
• Acquisition and integration costs of £335k (2021: £188k) primarily relate to costs associated with manufacturing
transfers and the cessation of production animals sales in Benelux.
• Costs associated with the relocation of our Spain and UK operations totalling £182k (2021: £111k) include one-off move
costs and dilapidation provisions.
The non-underlying items are excluded for KPI purposes as shown in the section on Key Performance Indicators.
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 finance income,
plus income taxes and deferred taxes, plus depreciation, amortisation and impairment and is an alternative performance
measure. Underlying EBITDA equals EBITDA plus non-underlying items and is an alternative performance measure. EBITDA
and underlying EBITDA are reconciled to statutory measures below.
The following table summarises the segment reporting from continuing operations for 2022 and 2021. As management’s
internal reporting structure is principally revenue and profit-based, the reporting information does not include assets and
liabilities by segment and is as such not presented per segment.
Revenues
Gross Profit
Gross Profit %
Segment underlying EBITDA
Segment underlying EBITDA %
Segment EBITDA
Segment EBITDA %
For the year ended
31 December
2022
£’000
71,616
40,659
57%
13,131
18%
11,993
17%
2021
£’000
74,024
39,418
53%
13,455
18%
13,143
18%
The underlying and segment EBITDA is reconciled with the consolidated net profit/(loss) for the year as follows:
Underlying EBITDA
Non-recurring expenses (excluding amortisation and impairment)
EBITDA
Depreciation, amortisation and impairment
Operating profit
Finance costs
Finance income
Share of net loss of joint venture accounted for using the equity method
Income taxes
Deferred taxes
Profit/(loss) for the period
For the year ended
31 December
2022
£’000
13,131
(1,138)
11,993
(8,757)
3,236
(1,752)
1,110
(52)
(1,637)
1,060
1,965
2021
£’000
13,455
(312)
13,143
(11,154)
1,989
(2,613)
1,757
(188)
(1,371)
349
(77)
99
Animalcare Group plc Annual Report 2022FINANCIALS 5. Segment information (continued)
Segment assets excluding deferred tax assets 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
Revenue by product category
Companion animals
Production animals
Equine
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
As at 31 December
2022
£’000
7,510
3,695
4,234
59,184
6,260
80,883
2021
£’000
8,834
2,811
4,061
62,157
5,881
83,744
For the year ended
31 December
2022
£’000
50,217
15,674
5,698
27
71,616
2021
£’000
51,326
16,980
5,637
81
74,024
For the year ended
31 December
2022
£’000
3,354
1,627
15,257
10,056
19,724
8,404
4,215
7,199
494
17
1,269
71,616
2021
£’000
4,023
1,769
15,471
10,373
21,035
8,885
4,193
6,971
681
1
622
74,024
For the year ended
31 December
2022
£’000
69,642
1,974
71,616
2021
£’000
72,651
1,373
74,024
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. Services sales includes £407k (2021: £593k) of commission income recognised at a
point in time.
100
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 6. Income and expenses
6.1. Cost of sales
Cost of sales includes the following expenses:
Purchase of goods and services
Stock write off
Movement in stock provision
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
2022
£’000
29,780
462
(349)
174
890
30,957
2021
£’000
33,016
154
227
439
770
34,606
For the year ended
31 December
2022
£’000
1,239
1,403
388
3,030
2021
£’000
1,681
1,361
90
3,132
For the year ended
31 December
2022
£’000
1,023
2,035
9,220
1
1,268
13,547
2021
£’000
823
2,792
7,545
2
1,115
12,277
For the year ended
31 December
2022
£’000
6,561
4,904
7,548
19,013
2021
£’000
6,705
4,430
7,927
19,062
The expenses in other mainly relate to fees paid for services, training and seminars, IT and software-related costs, and travel
and representation.
101
Animalcare Group plc Annual Report 2022FINANCIALS 6. Income and expenses (continued)
6.5. Net other operating expenses
The net other operating (income)/expenses can be detailed as follows:
`
Re-invoicing of costs
Non-cash movement in IFRS16 liability
Other operating income
Other operating expenses
Total
For the year ended
31 December
2022
£’000
(8)
(6)
(243)
1,172
915
2021
£’000
(53)
(16)
(441)
707
197
Other operating expenses of £1,172k (2021: £707k) principally relate to the non-underlying items, excluding amortisation
and impairment of acquisition-related intangibles, disclosed in note 4.
Other operating income in 2022 and 2021 mainly relates to income on sale of several product divestments in connection
with the cessation of the production animals range in Benelux.
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 – note 6.5
Impairment losses
Other expenses
Total expenses
6.7. Payroll expenses
The following table shows the breakdown of payroll expenses for 2022 and 2021:
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
2022
£’000
946
15,527
7,803
1,023
2,035
915
918
8,256
37,423
2021
£’000
646
13,336
8,402
823
2,643
197
2,761
8,621
37,429
For the year ended
31 December
2022
£’000
13,450
2,002
249
15,701
2021
£’000
11,775
1,788
212
13,775
219
1
207
4
The payroll expenses for the year are impacted by the share-based payments amounting to £204k (2021: £149k). For more
information refer to note 26.
Director’s remuneration is detailed in the Director’s remuneration report in the Governance section.
102
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 6.8. Finance costs
Finance costs include the following elements:
Interest expense
Foreign currency losses
Unwind of discount on other liabilities
Other finance costs
Total
6.9. Finance income
Finance income includes the following elements:
Foreign currency exchange gains
Income from financial assets
Other finance income
Total
6.10. Income tax
CURRENT TAX LIABILITIES
The tax payable relates to the income taxes of £623k (2021: £471k).
INCOME TAX EXPENSE
The following table shows the breakdown of the tax expense for 2022 and 2021:
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 for the year
For the year ended
31 December
2022
£’000
444
985
124
199
1,752
2021
£’000
447
1,912
85
169
2,613
For the year ended
31 December
2022
£’000
1,060
39
11
1,110
2021
£’000
1,754
1
2
1,757
For the year ended
31 December
2022
£’000
(1,685)
48
(1,637)
774
286
1,060
(577)
2021
£’000
(1,371)
−
(1,371)
458
(109)
349
(1,022)
103
Animalcare Group plc Annual Report 2022FINANCIALS
6. Income and expenses (continued)
The total tax expense can be reconciled to the accounting profit as follows:
Profit before tax
Share of net loss of joint ventures
Profit before tax, excl. Share in net loss of joint venture
Tax at 19.00% (2021: 19.00%)
Effect of:
Overseas tax rates
Non-deductible expenses
Adjustment to 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
Usage of formerly non-recognised deferred tax assets on timing differences
R&D relief
Other
Income tax expense as reported in the consolidated income statement
For the year ended
31 December
2022
£’000
2,542
52
2,594
(493)
2021
£’000
945
188
1,133
(215)
(389)
(99)
(24)
93
334
(21)
15
53
(46)
(577)
(386)
(180)
76
(273)
(109)
(105)
50
200
(80)
(1,022)
The tax credit of £910k (2021: £1,303k) shown within “non-underlying items” on the face of the consolidated income
statement, which forms part of the overall tax charge of £577k (2021: £1,022k), relates to the items in note 4.
The tax rates used for the 2022 and 2021 reconciliation above are the corporate tax rates of 25.00% (Belgium), 19.00%
(the Netherlands), 30.70% (Germany), 33.00% (France), 25.00% (Spain), 24.00% (Italy), 21.00% (Portugal) and 19.00% (the
United Kingdom). These taxes are payable by corporate entities in the above-mentioned countries on taxable profits under
tax law in that jurisdiction.
Deferred taxes at the balance sheet date have been measured using the UK enacted tax rate, being 25% from 1 April 2023.
DEFERRED TAX
(a) Recognised deferred tax assets and liabilities
Goodwill
Intangible assets
Property, plant and equipment
Financial fixed assets
Inventory
Trade and other receivables/(payables)
Borrowings
Provisions
Accruals and deferred income
Tax losses carried forward
Total
Assets
Liabilities
Total
2022
£’000
−
329
−
1
−
71
565
4
32
2,565
3,567
2021
£’000
(125)
243
(186)
1
(11)
94
182
3
13
1,749
1,963
2022
£’000
(1,290)
(2,722)
(707)
−
(54)
−
−
−
−
−
(4,773)
2021
£’000
(923)
(3,435)
(195)
−
(40)
59
223
−
40
−
(4,271)
2022
£’000
(1,290)
(2,393)
(707)
1
(54)
71
565
4
32
2,565
(1,206)
2021
£’000
(1,048)
(3,192)
(381)
1
(51)
153
405
3
53
1,749
(2,308)
104
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 (b) Movements during the year
Movement of deferred taxes during 2022:
Goodwill
Intangible assets
Property, plant and equipment
Financial fixed assets
Inventory
Trade and other receivables/(payables)
Accruals and deferred income
Borrowings
Provisions
Tax losses carry forward and other tax benefits
Net deferred tax
Movement of deferred taxes during 2021:
Goodwill
Intangible assets
Property, plant and equipment
Financial fixed assets
Inventory
Trade and other receivables/(payables)
Accruals and deferred income
Borrowings
Provisions
Tax losses carry forward and other tax benefits
Net deferred tax
TAX LOSSES
Balance as at
1 January
2022
£’000
(1,048)
(3,192)
(381)
1
(51)
153
53
405
3
1,749
(2,308)
Recognised
in income
£’000
(176)
782
(296)
−
−
(62)
(23)
133
−
702
1,060
Foreign
exchange
adjustments
£’000
(66)
17
(30)
−
(3)
(20)
2
27
1
114
42
Balance as at
31 December
2022
£’000
(1,290)
(2,393)
(707)
1
(54)
71
32
565
4
2,565
(1,206)
Balance at
1 January
2021
£’000
(935)
(3,773)
(439)
1
(41)
166
104
404
−
1,929
(2,584)
Recognised in
income
£’000
(174)
600
34
−
(13)
(11)
(44)
27
−
(70)
349
Foreign
exchange
adjustments
£’000
61
(19)
24
−
3
(2)
(7)
(26)
3
(110)
(73)
Balance at
31 December
2021
£’000
(1,048)
(3,192)
(381)
1
(51)
153
53
405
3
1,749
(2,308)
The Group has unused tax losses, tax credits and notional interest deduction available in an amount of £11,361k for 2022
(2021: £7,435k).
Deferred tax assets have been recognised on available tax losses carried forward for some legal entities, resulting in
amounts recognised of £ 2,565k (2021: £ 1,749k). This was based on management’s estimate that sufficient positive taxable
profits will be generated in the near future for the related legal entities with fiscal losses. It is expected that £32k of the
deferred tax asset will be recovered within the next 12 months and the remaining £2,533k of the deferred tax asset will be
recovered after 12 months.
The non-recognised deferred tax assets of Ecuphar NV on temporary differences decreased by £15k in 2022 (2021: £50k).
105
Animalcare Group plc Annual Report 2022FINANCIALS 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 was used in the earnings per share computations:
Profit/(loss) for the period
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
As at 31 December
2022
Underlying
£’000
7,572
2021
Underlying
£’000
7,224
7,572
7,224
2022
Total
£’000
1,965
1,965
2021
Total
£’000
(77)
(77)
As at 31 December
2022
Underlying
2021
Underlying
2022
Total
2021
Total
60,175,407
629,087
60,081,167
376,836
60,175,407
629,087
60,081,167
376,836
60,804,494
60,458,003
60,804,494
60,458,003
As at 31 December
2022
Underlying
in pence
2021
Underlying
in pence
2022
Total
in pence
2021
Total
in pence
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
12.6
12.6
12.0
12.0
3.3
3.3
(0.1)
(0.1)
Diluted earnings/(loss) per share
From operations attributable to the ordinary equity holders of the Company
Total diluted earnings per share attributable to the ordinary equity holders
of the Company
As at 31 December
2022
Underlying
in pence
12.5
2021
Underlying
in pence
12.0
2022
Total
in pence
3.2
2021
Total
in pence
(0.1)
12.5
12.0
3.2
(0.1)
106
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 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:
As at 31 December
CGU: Pharmaceuticals
Total
2022
£’000
50,853
50,853
The changes in the carrying value of the goodwill can be presented as follows for the years 2022 and 2021:
As at 1 January 2021
Currency translation
As at 31 December 2021
As at 1 January 2022
Currency translation
As at 31 December 2022
2021
£’000
50,337
50,337
Total
£’000
50,988
(651)
50,337
50,337
516
50,853
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 more significantly following the reverse acquisition of
Animalcare Group plc in 2017 which gave rise to goodwill of £41,048k.
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) %
2022
14.2
2.0
2021
11.8
1.9
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, using the long-term growth rate, 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 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 1.0% increase in discount rates would cause the value in use of the CGU to reduce by £15.5m but would not give rise to
an impairment. A 1.0% reduction in perpetuity growth rates would cause the value in use of the CGU to reduce by £11.6m
but would not give rise to an impairment.
107
Animalcare Group plc Annual Report 2022FINANCIALS 9. Intangible assets
The changes in the carrying value of the intangible assets can be presented as follows for the years 2022 and 2021:
Patents,
distribution
rights and
licenses
£’000
Product
portfolios
and product
development
costs
£’000
Research &
Development
assets
£’000
Capitalised
software
£’000
Assets under
construction*
£’000
As restated
Total*
£’000
18,655
1,247
(4,934)
(2,195)
(327)
12,446
719
(982)
375
241
12,799
(5,255)
(1,387)
4,211
(2,671)
147
(4,955)
(1,239)
676
(868)
(151)
(6,537)
6,262
7,491
19,266
–
(57)
–
(961)
18,248
–
–
–
760
19,008
(13,304)
(1,897)
57
–
770
(14,374)
(1,325)
–
–
(693)
(16,392)
2,616
3,874
37,616
1,030
(134)
2,195
(1,140)
39,567
603
(90)
–
978
41,058
(19,938)
(3,303)
46
(77)
855
(22,417)
(3,233)
89
(32)
(753)
(26,346)
14,712
17,150
2,149
1,080
(20)
–
(119)
3,090
1,218
(55)
–
146
4,399
(1,377)
(630)
55
(13)
79
(1,886)
(888)
61
(18)
(102)
(2,833)
1,566
1,204
51
499
(43)
–
(13)
494
–
(4)
(375)
12
127
–
–
–
–
–
–
–
–
–
–
–
127
494
77,737
3,856
(5,188)
–
(2,560)
73,845
2,540
(1,131)
–
2,137
77,391
(39,874)
(7,217)
4,369
(2,761)
1,851
(43,632)
(6,685)
826
(918)
(1,699)
(52,108)
25,283
30,213
Acquisition value/cost
As at 1 January 2021
Additions
Disposals
Transfers
Currency translation
As at 31 December 2021 (restated*)
Additions
Disposals
Transfers
Currency translation
As at 31 December 2022
Amortisation
As at 1 January 2021
Amortisation
Disposals
Impairments
Currency translation
As at 31 December 2021 (restated*)
Amortisation
Disposals
Impairments
Currency translation
As at 31 December 2022
Net carrying value
As at 31 December 2022
As at 31 December 2021 (restated*)
* Restatement as described in note 29
Research & Development assets relate 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 R&D costs for which the
capitalisation criteria are met. Patents, distribution rights and licenses 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 net book value of non-commercialised development projects is £1,513k (2021: £1,644k) split over Research &
Development assets for £977k and Product Portfolios and product development costs for £328k. No amortisation was
charged.
The capitalised software includes IT driven by accelerated CRM software investment and website and platform development
relating to Identicare Ltd.
108
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 The total amortisation charge for 2022 is £6,685k (2021: £7,217k) which is included in lines research and development
expenses, selling and marketing expenses and general and administrative expenses of the consolidated income statement.
Included in the total amortisation charge is £4,461k (2021: £5,531k) relating to acquisition-related intangibles and £2,224k
(2021: £1,686k) relating to other intangibles.
A total impairment charge of £918k (2021: £2,761k) was recorded during the financial year. Thereof £895k (2021: £2,761k)
is related to a non-cash impairment charge of acquisition-related intangibles of Research & Development assets. Further
details of this impairment are provided in note 4. In 2022, Animalcare Group plc invested in intangibles for an amount of
£2,540k (2021 £3,357k).
On 24 March 2022, the Group 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, and during the period, Animalcare made upfront payments to Orthros Medical
totalling €500k. These are included as intangible asset “product portfolios and product development costs”. 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, a significant proportion of which are linked to successful commercialisation. In
addition, single digit royalties will be due on the net sales of the products. These payments are expected to be paid out of
the Group’s operating cash flow.
10. Property, plant and equipment
The changes in the carrying value of the property, plant and equipment can be presented as follows for 2022 and 2021:
Acquisition value/cost
As at 1 January 2021
Additions
Disposals
Currency Translation
As at 31 December 2021 (restated*)
As at 1 January 2022
Additions
Disposals
Currency Translation
As at 31 December 2022
Depreciation
As at 1 January 2021
Depreciation charge for the year
Disposals
Currency Translation
As at 31 December 2021 (restated*)
Depreciation charge for the year
Disposals
Currency Translation
As at 31 December 2022
Net book value
As at 31 December 2022
As at 31 December 2021 (restated*)
* Restatement as described in note 29
Office
furniture and
equipment
£’000
Warehouse
and office
fittings
£’000
Equipment
£’000
Leasehold
improvements
£’000
As restated
Total*
£’000
411
1
(141)
(17)
254
254
99
(100)
15
268
(376)
(19)
130
16
(249)
(11)
99
(10)
(171)
97
5
1,644
51
(63)
(79)
1,553
1,553
166
(97)
65
1,687
(1,525)
(75)
62
72
(1,466)
(59)
94
(59)
(1,490)
197
87
184
−
(15)
−
169
169
142
(169)
−
142
(143)
(19)
13
−
(149)
(21)
165
−
(5)
137
20
317
6
−
(21)
302
302
−
(32)
15
285
(298)
(6)
−
22
(282)
(4)
32
(14)
(268)
17
20
2,556
58
(219)
(117)
2,278
2,278
407
(398)
95
2,382
(2,342)
(119)
205
110
(2,146)
(95)
390
(83)
(1,934)
448
132
109
Animalcare Group plc Annual Report 2022FINANCIALS 10. Property, plant and equipment (continued)
The investment in property, plant and equipment in 2022 amounted to £407k (2021: £58k) and mainly related to the
acquisitions of IT and office equipment.
The Group realised a net gain on disposal of property, plant and equipment of £390k in 2022 (2021: £205k). No impairment
of property, plant and equipment was recorded in 2022.
Borrowing costs
No borrowing costs were capitalised during the year ended 31 December 2022 or 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$1.5m was already paid in prior years, CA$0.5m during the financial year and CA$1.0m
still payable over 20 months.
The Group has a call option, for a period until 28 September 2026, to acquire an additional 18% 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.
In the prior year, the Group made its first license payment of CA$0.5m. The following payment is due in 2023, resulting in a
short-term payment of CA$692k or £425k, and a long-term payable of CA$748k or £459k.
Further, for the capital contribution, the outstanding short-term liability is £292k (2021: £277k), shown in the balance sheet
as other current liability. The outstanding long-term liability is £254k (2021: £502k), shown in the balance sheet as other
non-current liability.
% of ownership interest
2022
%
33.34%
2021
%
Measurement
method
33.34% Joint Venture Equity method
Nature of
relationship
Carrying amount
2022
£’000
1,305
2021
£’000
1,290
Name of entity
STEM Animal Health Inc.
Place of
business/
country of
incorporation
Canada
110
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 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
Current liabilities
Total liabilities
Net assets
The below table shows the Animalcare group share at 33%:
Net assets
Goodwill
Fair value identified intangibles
Deferred tax liability
Investment value in joint venture
Summarised statement of comprehensive income:
Sales
Operating expenses
Financial result, net
Net loss for the year
The below table shows the Animalcare group share at 33.34%:
Group share in net loss for the year
Depreciation on fair value adjustments on intangible fixed assets (net of deferred tax)
Total Group share in net loss for the year
Other comprehensive income
Group share in total comprehensive income/ (expense)
As at 31
December
2022
£’000
321
1,511
1,832
825
825
1,007
As at 31
December
2021
£’000
547
945
1,492
525
525
967
336
561
555
(147)
1,305
322
561
554
(147)
1,290
As at 31
December
2022
£’000
1,581
(1,651)
65
(5)
As at 31
December
2021
£’000
856
(1,338)
55
(427)
(2)
(50)
(52)
67
15
(142)
(46)
(188)
21
(167)
111
Animalcare Group plc Annual Report 2022FINANCIALS 11. Investments in joint ventures (continued)
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 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)
As at 31
December
2022
£’000
1,290
−
(52)
67
1,305
As at 31
December
2021
£’000
1,457
−
(188)
21
1,290
As at 31 December
2022
£’000
2,179
11,295
13,474
2021
£’000
1,249
9,079
10,328
The amount of inventory recognised as an expense during 2022 amounts to £29,780k (2021: £33,016k). The inventory
includes a provision for write-off of £354k (2021: £617k). Inventory write-downs during 2022 amounted to £462k
(2021: £499k). These costs are classified as part of the costs of goods sold.
13. Trade receivables, other current assets and other non-current assets
Trade receivables include the following:
Trade receivables
Expected credit loss
Total
As at 31 December
2022
£’000
13,631
(63)
13,568
2021
£’000
7,212
(77)
7,135
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 and 90 days.
As at 31 December 2022, trade receivables of an initial value of £63k (2021: £77k) were impaired and fully provided for. The
table below shows the changes in the allowance of receivables.
As at 1 January 2021
Additional impairments
Reversal impairment
Exchange difference
As at 31 December 2021
Additional impairments
Reversal impairment
Exchange difference
As at 31 December 2022
112
£’000
(84)
(2)
3
6
(77)
−
19
(5)
(63)
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 Other current assets include the following:
Other receivables
Deferred charges
Total
As at 31 December
2022
£’000
688
27
715
2021
£’000
868
332
1,200
Other current assets amount to £715k (2021: £1,200k) at the end of the reporting year and mainly include reclaimable taxes.
Deferred charges mainly include charges to be carried forward totalling £27k (2021: £332k).
Other non-current assets
14. Cash and cash equivalents
Cash and cash equivalents include the following:
Cash at bank
Cash equivalents
Total
As at 31 December
2022
£’000
−
2021
£’000
24
As at 31 December
2022
£’000
5,976
59
6,035
2021
£’000
5,633
−
5,633
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 2022 and 2021.
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
Acquisition loan
Lease liabilities
Total loans and borrowings
Of which
Non-current
Current
Interest
rate
Euribor +1.50%
Euribor +1.75%
See note 23
Maturity
March–25
March–25
As at 31 December
2022
£’000
15,497
15,497
2021
£’000
10,021
10,021
As at 31 December
2022
£’000
4,435
3,991
3,011
11,437
10,585
852
2021
£’000
5,462
3,781
1,719
10,962
10,239
723
113
Animalcare Group plc Annual Report 2022FINANCIALS 16. Borrowings (continued)
Borrowing facilities
The Group has total facilities of €51.5m to 31 March 2025, provided by a syndicate of four banks, comprising a committed
revolving credit facility (RCF) of €41.5m and a €10.0m acquisition line, the latter of which cannot be utilised to fund
operations.
The loans have a variable, Euribor-based interest rate, increased with a margin of 1.50% or 1.75%. The revolving credit
facilities and the acquisition financing have a bullet maturity in March 2025.
The Group manages its banking arrangements centrally through cross-currency cash pooling. Funds are swept daily from its
various bank accounts into central bank accounts to optimise the Group’s net interest payable position.
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%.
Net of cash balances totalling £6.0m, £4.4m of the RCF was utilised at the year end, leaving headroom of £38.4m.
As at 31 December 2022 and throughout the financial year, all covenant requirements were met with significant headroom
across all three measures.
Net debt reconciliation
Net debt
Cash and cash equivalents
Borrowings
Lease liabilities
Total
Net debt as at 1 January 2020
Financing cash flows
New leases
Foreign exchange adjustments
Other charges
Interest expense
Net debt as at 31 December 2021
Financing cash flows
New leases
Foreign exchange adjustments
Interest expense
Net debt as at 31 December 2022
114
As at 31 December
2022
£’000
6,035
(8,426)
(3,011)
(5,402)
Other assets
Cash
£’000
5,265
96
−
272
−
−
5,633
614
−
(212)
−
6,035
2021
£’000
5,633
(9,244)
(1,719)
(5,330)
Total
£’000
(13,616)
8,125
(1,037)
1,643
(1)
(445)
(5,331)
3,020
(2,142)
(506)
(444)
(5,402)
Liabilities from financing
activities
Borrowings
£’000
(17,069)
6,952
−
1,266
(1)
(392)
(9,244)
1,320
−
(148)
(354)
(8,426)
Leases
£’000
(1,812)
1,077
(1,037)
105
−
(53)
(1,720)
1,086
(2,142)
(145)
(90)
(3,011)
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 17. Provisions
Provisions consist of the following:
Service warranties
Onerous contract
Severance payments
Other
Total
As at 31 December
2022
£’000
106
108
104
22
340
2021
£’000
126
128
80
74
408
Service warranties provision relate to claims in respect of products sold which are still under warranty at the end of the
reporting period. These claims are expected to be settled in the next financial year. Onerous contract provision relates
to one specific customer contract, operating to September 2023, where the costs of meeting the obligations under the
contract exceed the economic benefits expected to be received. Severance payment provisions relate to legal obligations
towards commercial agents in Italy.
Carrying amount at start of the year
Charged/(Credited) to Profit and Loss
– Additional provision
– Unused amounts reversed
Amounts used during the year
Exchange difference
Carrying amount at end of the year
Service
warranties
£’000
126
Onerous
contract
£’000
128
Severance
payments
£’000
80
60
(80)
–
–
106
–
–
(20)
–
108
26
(6)
–
4
104
Other
£’000
74
–
(56)
–
4
22
Total
£’000
408
86
(142)
(20)
8
340
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 part of the claim, amounting to
€157,836 (£139,988), may be valid. Following various discussions and correspondence, during which the parties were
unable to reach an 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
(£383,824). The process involving the expert auditor is ongoing. Other than the €157,836 (£139,988), which may be valid,
and is written off from the outstanding other receivables from Vetdis, no further provision in respect of this matter has
been included in the financial statements.
115
Animalcare Group plc Annual Report 2022FINANCIALS 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
(£254k including the discount unwinding effect) and the outstanding payable of the STEM licensing agreement (£459k). For
more information refer to note 11. A liability with regards to Identicare share-based payment arrangement (£198k) is also
included in the other non-current liabilities. For more information refer to note 26.
Non-current liabilities
Total
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
As at 31 December
2022
£’000
911
911
2021
£’000
1,157
1,157
As at 31 December
2022
£’000
777
512
(13)
1,276
372
2021
£’000
923
168
(8)
1,083
675
Accrued charges of £777k (2021: £923k) mainly include Ecuphar Veterinaria (£406k), Ecuphar NV (£64k), Belphar (£235k)
and UK (£70k) and are mostly related to payroll and accrued bank interest costs.
Contract liabilities are liabilities that arise from certain services sold by the Group’s subsidiary Identicare Limited.
Historically, and in return for a single upfront payment, Identicare Limited 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 2022, Identicare Limited 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 tables outstanding:
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
As at 31 December
2022
£’000
843
418
(377)
884
2021
£’000
790
170
(117)
843
116
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 The contract liabilities fall due as follows:
Within one year
After one year
Balance at the end of the year
20. Other current liabilities
Other current liabilities include the following:
Payroll-related liabilities
Indirect taxes payable
Other current liabilities
Total
As at 31 December
2022
£’000
512
372
884
2021
£’000
168
675
843
As at 31 December
2022
£’000
1,715
1,552
760
4,027
2021
£’000
1,356
547
253
2,156
The Group acquired a one-third stake in STEM Animal Health Inc. on 28 September 2020, for a cash consideration of
CA$3m, of which CA$1.5m was already paid in prior years, CA$0.5m during the financial year and CA$1.0m still payable
over 20 months.
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.
In the prior year, the Group made its first license payment of CA$0.5m. The following payment is due in 2023, resulting in
a short-term payment of £425k. Further, for the capital contribution, the outstanding short-term liability is £292k including
the discount unwinding effect (2021: £277k), shown in the balance sheet as other current liability.
Indirect taxes payable increased by £1,005k mainly due to the increase in outstanding VAT payable of the UK entities.
117
Animalcare Group plc Annual Report 2022FINANCIALS 21. Fair value
Financial assets
The carrying value and fair value of the financial assets as at 31 December 2022 and 2021 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
2022
£’000
2021
£’000
13,568
−
70
715
6,035
20,388
7,135
24
90
1,199
5,633
14,081
Fair value
2022
£’000
13,568
−
70
715
6,035
20,388
2021
£’000
7,135
24
90
1,199
5,633
14,081
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 2022 and 2021.
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% stake in its joint venture STEM Animal Health Inc. exercisable
for a period of six years until September 28 2026. The call option is valued at fair value through Profit and Loss and is
remeasured every year. As at 31 December 2022 the call option has a carrying value of £nil as it is has been assessed
as not substantive and not favourable when considering the future forecasts of STEM Animal Health Inc. and therefore
the value attached to the option. 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.
Financial liabilities
The carrying value and fair value of the financial liabilities as at 31 December 2022 and 2021 are presented as follows:
Financial liabilities measured at amortised cost
Borrowings
Lease liabilities
Trade payables
Other non-current liabilities
Other current liabilities
Total financial liabilities measured at amortised cost
Total non-current
Total current
Carrying value
2022
£’000
2021
£’000
8,426
3,011
15,497
911
6,297
34,142
11,496
22,646
9,244
1,719
10,021
1,157
4,385
26,526
11,396
15,130
Fair value
2022
£’000
8,426
3,011
15,497
911
6,297
34,142
11,496
22,646
2021
£’000
9,244
1,719
10,021
1,157
4,385
26,526
11,396
15,130
118
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022
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.
22. 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 Company does not have a limited amount of authorised share capital.
The following share transactions have taken place during the year ended 31 December 2022:
At 1 January 2022
At 31 December 2022
Dividends
Ordinary final dividend as at 31 December 2020 of 2.0p per share
Ordinary interim dividend paid as at 31 December 2021 of 2.0p per share
Ordinary final dividend as at 31 December 2021 of 2.4p per share
Ordinary interim dividend paid as at 31 December 2022 of 2.0p per share
As at 31 December
2022
60,092,161
2021
60,092,161
As at 31 December
2022
£’000
12,019
2021
£’000
12,019
As at 31 December
2022
Number of
shares
60,092,161
60,092,161
£’000
12,019
12,019
As at 31 December
2022
£’000
−
−
1,442
1,202
2,644
2021
£’000
1,201
1,202
−
−
2,403
An interim dividend of 2.0 pence per share was paid in November 2022.
The Board is proposing a final dividend of 2.4 pence per share (2021: 2.4 pence per share). Subject to shareholder approval
at the Annual General Meeting to be held on 13 June 2023, the final dividend will be paid on 14 July 2023 to shareholders
whose names are on the Register of Members at close of business on 16 June 2023. The ordinary shares will become
ex-dividend on 15 June 2023.
119
Animalcare Group plc Annual Report 2022FINANCIALS 23. IFRS 16 Leases
The balance sheet shows the following amounts relating to leases as at 31 December 2022:
Buildings
Vehicles
Other
Total right-of-use assets
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
As at
31 December
2022
£’000
1,639
1,257
28
2,924
As at
31 December
2021
£’000
579
1,079
–
1,658
852
2,159
3,011
Below are the carrying amounts of right-of-use assets recognised and the movements during the year:
723
996
1,719
Total
£’000
3,683
1,217
(774)
–
(220)
(73)
3,833
2,051
(1,284)
233
70
4,903
(1,893)
(1,066)
629
–
40
115
(2,175)
(1,023)
1,284
27
(92)
(1,979)
Land and
buildings
£’000
Vehicles
£’000
Other
£’000
1,570
336
(286)
3
(84)
(12)
1,527
1,343
(855)
104
(5)
2,114
(739)
(428)
173
(6)
9
43
(948)
(358)
855
–
(24)
(475)
2,029
881
(425)
–
(134)
(61)
2,290
678
(415)
128
75
2,756
(1,071)
(634)
393
–
31
70
(1,211)
(662)
415
27
(68)
(1,499)
84
–
(63)
(3)
(2)
–
16
30
(14)
1
–
33
(83)
(4)
63
6
–
2
(16)
(3)
14
–
–
(5)
1,639
1,257
28
2,924
Acquisition value/cost
As at 1 January 2021
Additions
Disposals
Transfers
Currency Translation
Contract modifications
As at 31 December 2021
Additions
Disposals
Currency Translation
Contract modifications
As at 31 December 2022
Depreciation
As at 1 January 2021
Depreciation charge for the year
Disposals
Transfers
Contract modifications
Currency translation
As at 31 December 2021
Depreciation charge for the year
Disposals
Contract modifications
Currency translation
As at 31 December 2022
Net book value
At 31 December 2022
120
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 Below are the values for the movements in lease liability during the year:
As at 1 January 2022
Additions
Disposals
Interest expense
Payments
Modifications
Currency translation adjustment
As at 31 December 2022
The following amounts are recognised in the income statement:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Gain on disposal of IFRS 16 assets
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:
Lease Liability
£’000
1,719
2,066
(6)
90
(1,086)
82
146
3,011
For the year
ended
31 December
2022
£’000
(1,023)
(90)
6
(108)
(1,215)
• 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 2022 the Group’s maximum exposure to credit risk is £13,568k, which is the amount of the trade
receivables in the consolidated financial statements (2021: £7,135k).
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 ageing schedule of trade receivables:
31 December 2022
Receivables
Expected credit loss
31 December 2021
Receivables
Expected credit loss
Total
£’000
13,568
13,631
(63)
7,135
7,208
(73)
Non-due
£’000
12,989
12,989
−
6,725
6,725
−
< 30 days
£’000
681
681
−
31–60 days
£’000
32
32
−
61–90 days
£’000
(70)
(70)
−
91–180 days
£’000
16
16
−
> 181 days
£’000
(80)
(17)
(63)
Expected
loss rate
0.5%
429
429
−
23
23
−
13
13
−
(57)
(57)
−
2
75
(73)
1.0%
121
Animalcare Group plc Annual Report 2022FINANCIALS 24. Risks (continued)
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 2022, the Group had the following sources of liquidity available:
• Cash and cash equivalents: £6,035k
• Undrawn credit facilities with several banks: £32,373k
• Undrawn acquisition financing: £4,878k
The table below provides an analysis of the maturity dates of the financial liabilities:
At 31 December 2022
Borrowings
Lease liabilities
Trade payables
Other current liabilities
Total
At 31 December 2021
Borrowings
Lease liabilities
Trade payables
Other current liabilities
Total
< 1 year
£’000
1 to 3 years
£’000
4–5 years
£’000
> 5 years
£’000
−
(852)
(15,497)
(4,027)
(20,376)
(8,426)
(1,553)
−
−
(9,979)
−
(394)
−
−
(394)
−
(439)
−
−
(439)
< 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)
Total
£’000
(8,426)
(3,238)
(15,497)
(4,027)
(31,188)
Total
£’000
(9,243)
(2,965)
(10,021)
(2,156)
(24,385)
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.
122
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 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/HUF
EUR/CAD
EUR/SEK
Assets
2022
£’000
26,471
18,494
(108)
(14)
−
−
7
As at 31 December
Assets
2021
£’000
18,911
16,322
−
−
−
−
6
Liabilities
2022
£’000
38,335
29,020
297
138
4
1,533
−
Liabilities
2021
£’000
27,589
18,361
101
117
−
1,545
−
The cumulative effect of the foreign currency translation effects is reported under other comprehensive income in the
statement of financial position and amounts to £2,908k (2021: £2,311k).
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 10.00% increase and decrease in the exchange rate of these currencies against the functional currencies
sterling and EUR when applied to outstanding monetary items denominated in foreign currency as at 31 December 2022.
A positive number indicates that an increase in profit would arise from a 10.00% change in value of sterling or EUR against
these currencies; a negative number indicates that a decrease would arise.
EUR/GBP
GBP/EUR
EUR/USD
GBP/USD
EUR/CAD
Strengthening
£’000
1,186
1,053
41
15
153
Weakening
£’000
(1,186)
(1,053)
(41)
(15)
(153)
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 £78k lower/higher in 2022
and £108k lower/higher in 2021.
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 shareholders’ equity which amounts to £79,172k as at 31 December
2022 (2021: £78,799k).
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 2022 and 2021.
123
Animalcare Group plc Annual Report 2022FINANCIALS 25. Remuneration paid to the Company’s auditors
Fees payable to the Company’s auditor 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 fees
Total auditors’ remuneration
For the year ended
31 December
2022
£’000
120
227
347
8
8
2021
£’000
110
156
266
2
2
355
268
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 models, in conjunction with a third-party valuation specialist.
Long-Term Incentive Plan (“LTIP”)
The Group has made a number of awards pursuant to the Long-Term Incentive Plan as follows:
Outstanding at 1 January 2022
Granted during the year
Vested during the year
Lapsed during the year
Outstanding at 31 December 2022
Exercisable at 31 December 2022
2022
LTIP option
−
302,037
−
−
302,037
–
2021
LTIP option
264,981
−
−
(9,231)
255,750
–
2020
LTIP option
360,565
−
−
(17,978)
342,587
–
2019
LTIP option
364,278
−
(145,382)
(218,896)
−
145,382
The options outstanding and exercisable at the year-end have a weighted average remaining contractual life of 8.34 years.
The options granted in 2022 and 2021 will vest subject to the following performance conditions based on EPS being met:
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
The 2020 and 2019 options were subject to the following performance conditions based on EPS being 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
124
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 All options granted are subject to the same TSR performance criteria as per the table below:
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%
2022 LTIP Options
On 28 April 2022, the Board approved the grant of nil-cost options under the LTIP over a total of 302,037 ordinary shares
with a nominal value of 20.0 pence per share which were awarded to the Company’s Executive Directors and certain
members of the Senior Executive Team and Leadership Team. The LTIP awards will vest on 1 July 2025 subject to the
performance criteria being met over the three-year financial period ending 30 June 2025. On vesting, awards can be
exercised until 28 April 2032, being the tenth anniversary of the date of grant.
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 LTIP 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
£3.23
£Nil
30.1%
3.2 years
1.24%
£3.10
£2.57
1.58%
2021 LTIP Options
On 5 November 2021, nil-cost options over a total of 264,981 ordinary shares with a nominal value of 20p per share were
awarded to certain members of the Senior Executive Team and Group Leadership Team. During the year 9,231 of the
options lapsed due to cessation of employment, leaving 255,750 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 ending 31 December 2024. On vesting, awards can be exercised until 5 November 2031, being
the tenth anniversary of the date of grant.
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 LTIP was determined using both the Black–Scholes and Monte Carlo
simulation models, in conjunction with a third-party valuation specialist.
125
Animalcare Group plc Annual Report 2022FINANCIALS 26. Share-based payments (continued)
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 20p per share were
awarded to certain members of the Senior Executive Team and Group Leadership Team. During 2021, 16,555 of the options
lapsed due to cessation of employment. During 2022, a further 17,978 options lapsed, leaving 342,587 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 ending 31 December 2023. On vesting, awards can be exercised until 17 November 2030, being
the tenth anniversary of the date of grant.
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 LTIP was 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
2.30%
£1.60
£1.25
0.50%
2019 LTIP Options
On 6 June 2019, nil-cost options over a total of 425,279 ordinary shares with a nominal value of 20p 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 and 2021, 56,488 and 18,589 options lapsed respectively due to
cessation of employment, leaving 364,278 options outstanding as at 1 January 2022.
On 23 March 2022, 20,187 options lapsed due to cessation of employment. On 6 June 2022, 145,382 options granted
on 6 June 2019 vested, with the remaining 198,709 options lapsed. These vested options have yet to be exercised; the
participants have 6.4 years in which to exercise these options.
126
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 Details of the performance targets set and actual achievement against them in respect of the 2019 LTIP awards vesting,
based on three-year performance to 31 December 2021, are set out in the table below:
Performance measure
Underlying EPS
TSR
Weighting
50%
50%
Performance
period end
31 December 2021
31 December 2021
Threshold
(25% vesting)
12.8p
Maximum
(100%
vesting)
14.7p
Median Upper quartile
% vesting for
this part of
the
award
0%
83.0%
Actual
12.0p
Between median
and upper quartile
Identicare share-based payment arrangement
During the year, the Group entered into a share-based payments arrangement in respect of growth shares issued in its
subsidiary, Identicare Limited (“Identicare”). The ownership of the shares requires ongoing employment and carries value
to the holder on either the sale of Identicare, or after five years the holder can obligate the Group to repurchase the shares
at market value via a put option. The Group can also obligate the holder to sell the shares to the Group at market value via
a call option. The shares carry preferential rights to return upon the sale of Identicare with an increasing ratchet depending
on the value of Identicare.
The exit terms on the shares qualify for value at 15% of proceeds if the equity value on sale or market value is less than
£20m, 17% in the range £20m–£40m, and 20% above £40m. The shares were acquired on the arrangement’s inception
date of 1 January 2022 for unrestricted market value as determined at that date. The shares carry no voting rights nor rights
to distributions from Identicare. The arrangement carries a cash repurchase requirement by the Group at the acquisition
cost within five years from the inception of the agreement should the employee cease to be employed. This represents an
event outside of the Group’s control for which a future payment may need to be made, and therefore a liability of £33k is
recognised within non-current liabilities.
127
Animalcare Group plc Annual Report 2022FINANCIALS 26. Share-based payments (continued)
Given the terms applied to the shares, the Group has accounted for these as equivalent to redeemable shares, and as
a result of the requirement for ongoing employment have applied the principles of IFRS 2 ‘Share-based payments’ to
the arrangement. The arrangement stipulates that a minimum of 50% of the shares are to be purchased in cash upon
redemption, with the remaining 50% having choice of settlement, at the discretion of the Group, to either issue shares in
the Group or purchase with further cash. In line with IFRS 2, 50% of the arrangement has therefore been accounted for as a
cash-settled share-based payment arrangement, reflecting the Group’s potential obligation to repurchase the shares in the
event that no exit occurs, with the other 50% of the arrangement being treated as an equity-settled share-based payment
due to there being no present obligation to settle in cash.
FAIR VALUE – CASH SETTLED PORTION
As at 31 December 2022 the arrangement has been valued using a Monte Carlo simulation, reflecting the ratchet nature of
potential exit outcomes. The following inputs have been used to determine the fair value of the arrangement:
Starting value of Identicare
Expected volatility
Risk-free rate
Expected dividend yields
Expected remaining life
At 31.12.22
£4.1m
38.91%
3.60%
0.00%
4 years
The resulting fair value of the scheme is £1,646k as at the year end, and this represents the total expected liquidity risk to
the Group as at the year end. As the arrangement has only been in place for one year of its expected five-year life, the value
as at the year end reflects this proportion.
The fair value of the arrangement, based on 50% being cash-settled, is £165k, being a liability held at fair value through
profit and loss. The liability is included in the Consolidated Statement of Financial Position under other non-current
liabilities however is carried currently at £165k plus the original £33k paid for the shares totalling £198k. The charge to
profit and loss is included as a non-underlying item in the Consolidated Income Statement, and disclosed separately in note
4, to reflect the potential volatility arising from movements in the value of this arrangement. No non-market conditions
have been included in the calculation of the charge to profit and loss.
FAIR VALUE – EQUITY SETTLED PORTION
The fair value of the equity-settled portion of the arrangement (50%) was £547k, determined at the date of issue of the
shares using a Monte Carlo simulation, in conjunction with a third-party valuation specialist, taking into account the exit
terms noted earlier.
The following inputs have been used to determine the fair value:
Valuation date
Starting enterprise value
Closing net debt
Expected volatility
Risk-free rate
Expected dividend yield
Expected life
1 January
2022
£6.9m
£3.3m
32.75%
0.72%
0.00%
3 years
The Group recognised a total charge in respect of share-based payments, including £220k non-underlying items, of £542k
(2021: £249k).
128
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022 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 thereon 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.
Transactions with investments in joint venture is described in note 11.
Remuneration of the Executive Directors, who are the key management personnel of the Group, is included in the Directors’
Remuneration Report, and further disclosed below:
Short term employment benefits
Post employment benefits
Share-based payments
Total remuneration
For the year ended
31 December
2022
£’000
672
22
204
898
2021
£’000
887
23
235
1,145
Short term employment benefits comprise £566k salaries (2021: £515k), £nil annual bonus (2021: £237k), £29k of benefits
(2021: £26k) and £77k of employer social security contributions (2021: £109k).
28. Overview of consolidated entities
Country of
incorporation
Belgium
Belgium
The Netherlands
Name
Ecuphar NV
Orthopaedics.be NV
Ecuphar BV
Registered address
Legeweg 157i, 8020 Oostkamp
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
Max-Planck Str. 11, 85716
Unterschleißheim
C/ Cerdanya, 10-12, pl 6. 08173 Sant
Cugat del Vallés Barcelona
Viale Francesco Restelli, 3/7, piano 1,
20124 Milano
Sintra Business Park, Edifício 1,
Escritório 2K 2710-089 Sintra
Moorside, Monks Cross, York,
YO32 9LB
Moorside, Monks Cross, York,
YO32 9LB
Moorside, Monks Cross, York,
YO32 9LB
Innovation Drive Winnipeg 162-196,
Manitoba, R3T 2N2
% equity interest
2022
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
33%
2021
100%
100%
Consolidation
method
Fully consolidated
Fully consolidated*
100%
Fully consolidated
100%
100%
Fully consolidated
Fully consolidated
100%
Fully consolidated
100%
Fully consolidated
100%
Fully consolidated
100%
Fully consolidated
100%
Fully consolidated
100%
Fully consolidated
100%
Fully consolidated
100%
33%
Fully consolidated
Equity method
Ecuphar Veterinary
Products BV
Ornis SA
Ecuphar GmbH
Euracon Pharma Consulting
und Trading GmbH
Ecuphar Veterinaria SA
Ecuphar Italia
The Netherlands
France
Germany
Germany
Spain
Italy
Belphar IDA
Portugal
Animalcare Group plc
United Kingdom
Animalcare Ltd
United Kingdom
Identicare Ltd.
United Kingdom
STEM Animal Health Inc.
Canada
* As per 23 December 2022, the extraordinary shareholders meeting of Orthopaedics.be NV decided upon the dissolution and liquidation of the company.
129
Animalcare Group plc Annual Report 2022FINANCIALS 29. Restatement of comparative figures
Intangible Assets (note 9) and Property, Plant and Equipment (note 10) have been restated to reclassify ‘Assets under
construction’ that were previously presented as Property, Plant and Equipment as Intangible Assets as they related to
research and development. The impact on the net book value for the year ended 31 December 2021 and 1 January 2022 is
as follows:
Previously stated
Intangible assets
Property, plant and equipment
Adjusted
Intangible assets
Property, plant and equipment
Restated
Intangible assets
Property, plant and equipment
As at
31 December
2021
£’000
29,719
626
494
(494)
30,213
132
The cash flow statement has been restated to reflect the updated movements in Purchase of property, plant and equipment
and Purchase of intangible assets, as follows:
As at
31 December
2021
£’000
(557)
(2,658)
499
(499)
(58)
(3,157)
Previously stated
Purchase of property, plant and equipment
Purchase of intangible assets
Adjusted
Purchase of property, plant and equipment
Purchase of intangible assets
Restated
Purchase of property, plant and equipment
Purchase of intangible assets
130
Notes to the Consolidated Financial Statements CONTINUEDYEAR ENDED 31 DECEMBER 2022Animalcare Group plc Annual Report 2022
Company Statement of Financial Position
AS AT 31 DECEMBER 2022
Non-current assets
Right-of-use-assets
Investments in subsidiary companies
Deferred tax asset
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Lease liabilities
Trade and other payables
Net current assets
Non-current liabilities
Lease liabilities
Total liabilities
Net assets
Capital and reserves
Called-up share capital
Share premium account
Retained earnings
Total shareholders’ funds
Note
10
6
11
7
8
10
9
10
12
As at 31 December
2022
£’000
44
147,917
662
148,623
4,376
24
4,400
153,023
(12)
(456)
(468)
3,931
(32)
(32)
(500)
152,523
12,019
132,798
7,706
152,523
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
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 £1,363k (2021: £6,574k profit).
The financial statements of Animalcare Group plc, registered number 01058015, were approved by the Board of Directors
and authorised for issue on 15 May 2023. They were signed on their behalf by:
JENNIFER WINTER
Chief Executive Officer
CHRIS BREWSTER
Chief Financial Officer
131
Animalcare Group plc Annual Report 2022FINANCIALS
Company Statement of Changes in Equity
YEAR ENDED 31 DECEMBER 2022
Balance at 1 January 2021
Total comprehensive income 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 and 1 January 2022
Total comprehensive income for the period
Transactions with owners of the Company, recognised in
equity:
Dividends paid
Share-based payments
Balance at 31 December 2022
Share
capital
£’000
12,012
–
–
–
7
12,019
–
–
–
12,019
Share
premium
£’000
132,729
–
–
–
69
132,798
–
–
–
132,798
Retained
earnings
£’000
4,203
6,574
Total
Shareholders’
Funds
£’000
148,944
6,574
(2,403)
235
–
8,609
1,363
(2,644)
378
7,706
(2,403)
235
76
153,426
1,363
(2,644)
378
152,523
Note
3
5
13
3
5
13
132
Animalcare Group plc Annual Report 2022
Company Cash Flow Statement
YEAR ENDED 31 DECEMBER 2022
Comprehensive (loss)/income for the year before tax
Adjustments for:
Depreciation
Finance (income)/cost
Proceeds from dividends of subsidiaries
Share-based payment expense
Operating cash flows before movements in working capital
(Increase)/decrease in receivables
Increase/(decrease) in payables
Net cash flow from operating activities
Investing:
Acquisition of property, plant and equipment ROU asset
Net cash used in investing activities
Financing:
Receipts from issue of share capital
Payments of lease liabilities
Interest (paid)/received
Equity dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
Comprising:
Cash and cash equivalents
As at 31 December
2022
£’000
(35)
4
(956)
–
378
(609)
5,965
(2,636)
2,720
(48)
(48)
–
(5)
(5)
(2,644)
(2,654)
18
6
24
2021
£’000
6,080
–
696
(8,091)
235
(1,080)
3,550
(135)
2,335
–
–
76
–
46
(2,403)
(2,281)
(54)
60
6
24
6
Note
13
7
9
5
8
133
Animalcare Group plc Annual Report 2022FINANCIALS
Notes to the Company
Financial Statements
YEAR ENDED 31 DECEMBER 2022
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 2022 to 31 December 2022.
The financial statements have been
prepared and approved by the
Directors under the historical cost
convention, 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
£1,363k (2021: £6,574k profit).
The accounting policies of the
Company are the same as for the
Group, where applicable.
Going concern
The Group’s financing arrangements
consist of a committed revolving credit
facility of €41.5m (£36.8m) and a
€10.0m (£8.9m) acquisition line, the
latter of 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 2022
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
4 to 41.
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 Company
and Group will have sufficient funds
and liquidity 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 and higher than expected
inflation across our cost base, with
corresponding mitigating actions.
The output from these scenarios
shows the Company and Group have
adequate levels of liquidity from the
committed facilities and complies with
all banking covenants throughout the
going concern assessment period.
Accordingly, the Directors continue
to adopt the going concern basis of
preparation.
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 via a
Long Term Incentive Plan 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
134
Animalcare Group plc Annual Report 2022 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).
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.
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 indebtedness 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.
135
Animalcare Group plc Annual Report 2022FINANCIALS Notes to the Company
Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2022
1. Significant accounting
policies (continued)
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.
Non-recurring items
Non-recurring items are 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.
The separate presentation of
exceptional 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.
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
2022
Standards and interpretations
applicable for the annual period
beginning on or after 1 January 2022:
• Amendment to IFRS 16 Leases:
COVID-19-Related Rent
Concessions beyond 30 June 2021
(applicable for annual periods
beginning on or after 1 April 2021)
• Amendments to IAS 16 Property,
Plant and Equipment: Proceeds
before Intended Use (applicable
for annual periods beginning on or
after 1 January 2022)
• Amendments to IAS 37 Provisions,
Contingent Liabilities and
Contingent Assets: Onerous
Contracts — Cost of Fulfilling a
Contract (applicable for annual
periods beginning on or after 1
January 2022)
• Amendments to IFRS 3 Business
Combinations: Reference to the
Conceptual Framework (applicable
for annual periods beginning on or
after 1 January 2022)
• Annual Improvements to IFRS
Standards 2018–2020 (applicable
for annual periods beginning on or
after 1 January 2022)
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.
Standards and
interpretations published,
but not yet applicable for the
annual period beginning on 1
January 2022
The IFRS accounting standards and
interpretations that are issued, but
not yet effective, up to the date of
issuance of the Company’s financial
136
statements are disclosed below. The
Company intends to adopt these
standards and interpretations, if
applicable, when they become
effective. These new standards will
have no material impact on the
Company’s financial statements.
• Amendments to IAS 1 Presentation
of Financial Statements:
Classification of Liabilities as
Current or Non-current (applicable
for annual periods beginning on or
after 1 January 2024 or later, but
not yet endorsed in the UK)
• Amendments to IAS 1 Presentation
of Financial Statements and IFRS
Practice Statement 2: Disclosure
of Accounting Policies (applicable
for annual periods beginning on or
after 1 January 2023)
• Amendments to IAS 8 Accounting
policies, Changes in Accounting
Estimates and Errors: Definition of
Accounting Estimates (applicable
for annual periods beginning on or
after 1 January 2023)
• Amendments to IAS 12 Income
Taxes: Deferred Tax related to
Assets and Liabilities arising from
a Single Transaction (applicable
for annual periods beginning on or
after 1 January 2023)
• Amendments to IFRS 16 Leases:
Lease Liability in a Sale and
Leaseback (applicable for annual
periods beginning on or after
1 January 2024, but not yet
endorsed in the UK)
Animalcare Group plc Annual Report 2022 Significant accounting judgements, estimates and assumptions
CARRYING VALUE OF INVESTMENTS IN SUBSIDIARY COMPANIES
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-underlying items
Acquisition and integration costs
Other exceptional costs
Total exceptional and other items
For the year ended
31 December
2022
£’000
85
–
85
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.
Acquisition & integration costs during 2022 of £85k mainly relate to professional fees in respect of legal and tax structuring
advice.
3. Total comprehensive income for the year
Total comprehensive income for the year has been arrived at after charging/(crediting):
Finance income
Finance costs
Dividend income received from subsidiary – Ecuphar NV
For the year ended
31 December
2022
£’000
2021
£’000
(1,230)
274
–
–
696
8,091
The above items are those charged/(credited) to total comprehensive income only. Full details on items charged to non-
underlying items are contained in Note 2.
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 auditors for the audit of the Company’s annual accounts
Total audit fees
For the year ended
31 December
2022
£’000
120
120
2021
£’000
110
110
137
Animalcare Group plc Annual Report 2022FINANCIALS Notes to the Company
Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2022
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 2022
J Boone*
C Brewster²
M Coucke*
N Downshire*³
D Hutchens4
S Metayer5
E Torr*6
J Winter1
Total
* Indicates Non-Executive Directors
Company
pension
contributions
£’000
–
22
–
–
–
–
–
–
22
Bonus
£’000
–
–
–
–
–
–
–
–
–
Compensation
for loss of
office
£’000
–
–
–
–
–
–
–
–
–
Benefits
£’000
–
14
–
–
–
–
–
15
29
Salary
£’000
70
230
40
17
38
30
45
336
806
Total
£’000
70
266
40
17
38
30
45
351
857
1
Jennifer Winter’s benefits comprise a car allowance (£10.5k) and private medical insurance (£4.4k).
2 Chris Brewster’s benefits comprise a car allowance pro-rated to 31 August (£7.0k) which was replaced by a company car from 1 September, with a pro-rated lease cost of
£4.5k from 1 September to 31 December, and private medical insurance (£2.4k).
3 Nick Downshire ceased to be a Director on 7 June 2022. His annual fee of £40.0k was pro-rated to his date of resignation; the pro-rated fee for 2022 was £17.4k.
4 Doug Hutchens was appointed as a Director on 10 February 2022 for an annual fee of £40.0k. He was appointed to the two Board committees on 7 June 2022 and his annual
fee was increased to £45k. Annual fees were pro-rated from the dates of appointment; the total fee paid in 2022 was £38.1k.
5 Sylvia Metayer was appointed as a Director with effect from 3 May 2022. Her annual fee of £40.0k, and an additional annual fee of £5.0k for her role as Chair of the Audit &
Risk Committee, were pro-rated from her date of appointment. The pro-rated fee for 2022 was £29.9k.
6 Ed Torr receives an annual fee of £40.0k and an additional fee of £5.0k for his chairmanship of the Remuneration and Nomination Committee.
Year ended 31 December 2021
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
Bonus
£’000
–
84
–
–
–
–
153
237
Compensation
for loss of
office
£’000
–
–
–
–
–
–
–
–
Benefits
£’000
–
12
–
–
–
–
14
26
Total
£’000
70
328
18
40
40
45
473
1,014
Salary
£’000
70
209
18
40
40
45
306
728
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 were settled during 2022. All Company pension contributions relate to defined contribution pension
schemes. Benefits consist of company car and private medical insurance.
Information relating to Directors’ share options, including awards made during the financial year, is set out in the Directors’
Remuneration Report.
138
Animalcare Group plc Annual Report 2022 5. Dividends
Ordinary final dividend As at 31 December 2020 of 2.0p per share
Ordinary interim dividend paid for the period ended 31 December 2021 of 2.0p per share
Ordinary final dividend As at 31 December 2021 of 2.4p per share
Ordinary interim dividend paid for the period ended 31 December 2022 of 2.0p per share
For the year ended
31 December
2022
£’000
−
−
1,442
1,202
2,644
2021
£’000
1,201
1,202
−
−
2,403
An interim dividend of 2.0 pence per share was paid in November 2022. The Board is proposing a final dividend of 2.4
pence per share (2021: 2.4 pence per share). Subject to shareholder approval at the Annual General Meeting to be held on
13 June 2023, the final dividend will be paid on 14 July 2023 to shareholders whose names are on the Register of Members
at close of business on 16 June 2023. The ordinary shares will become ex-dividend on 15 June 2023.
6. Investments in subsidiaries
Subsidiary undertakings
Cost
At 1 January 2022
LTIP granted to employees of subsidiaries
At 31 December 2022
2022
£’000
147,743
174
147,917
Investments in subsidiaries are assessed annually to determine if there is any indication that these may be impaired.
The recoverable amount of investments in subsidiaries was determined based on a value in-use calculation. The discount
rate and growth rate (in perpetuity) used for these calculations are as follows:
Discount rate (pre-tax) %
Growth rate (in perpetuity) %
2022
14.2
2.0
2021
11.8
1.9
Cash flow forecasts are prepared using the current financial budget approved by the Directors, which covers a five-year period.
Cash flows beyond the five-year period are extrapolated using an estimated long-term growth rate. The cash flow forecasts
assume revenue and profit growth in line with the five pillars of our growth strategy. The key assumptions surrounding revenue
growth incorporate an average annual growth rate over the five-year forecast period for the existing core brands, based on
past performance and expectations of the animal health market development, together with well above-market growth for
recently launched and expected to be launched new products and services. 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 and
consider that the impact on the valuation of investments in subsidiaries is limited.
The Group’s impairment review is sensitive to change in assumptions used, most notably the expected future cash flows arising
from growth in new products and services, discount rates and the perpetuity growth rates.
If the expected revenue growth and related cost of sales in the five year forecast period in relation to recently launched and
expected to be launched new products and services (as explained in Our Strategy within the Annual Report) was 5% lower than
management’s estimates, with prudently, no corresponding mitigation in SG&A costs, the value in use would reduce by £5.7m
but would not give rise to an impairment. A 10% reduction in the forecast revenues and related cost of sales for these products
and services across the five year forecast period would result in the Company having to recognise an impairment against the
carrying value of investments of £2.0m. A 1.0% increase in discount rate would cause the value in use to reduce by £17.1m
and give rise to an impairment of £7.8m. A 2.0% increase in discount rate would lead to an impairment of £21.9m. A 1.0%
reduction in perpetuity growth rates would reduce the value in use by £13.3m, and give rise to an impairment of £4.0m while
reducing the long-term growth to 0.0% would result in a £15.0m impairment. Overall forecast compound revenue growth
over the five-year period for all products is 6.4%. Headroom is reduced to nil if this rate falls to 5.8%, assuming gross margin
percentages remain consistent with forecast and with no corresponding mitigation in SG&A costs.
139
Animalcare Group plc Annual Report 2022FINANCIALS
Notes to the Company
Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2022
6. Investments in subsidiaries (continued)
A list of the subsidiary undertakings, all of which are wholly owned, is given below.
Name
Ecuphar NV
Country of
registration or
incorporation
Belgium
Registered address
Legeweg 157i, 8020 Oostkamp
Animalcare Limited2
United Kingdom Moorside, Monks Cross,
York YO32 9LB
Identicare Limited2
United Kingdom Moorside, Monks Cross,
Orthopaedics.be NV1,2
Ecuphar BV2
York YO32 9LB
Legeweg 157i, 8020 Oostkamp
Belgium
The Netherlands Verlengde Poolseweg 16, 4818
CL Breda
The Netherlands Verlengde Poolseweg 16, 4818
CL Breda
Rue de Roubaix 33, 59200 Tourcoing
Brandteichstraße 20, 17489 Greifswald
Max-Planck Str. 11, 85716
Unterschleißheim
Ecuphar Veterinary
Products BV2
Ornis SARL2
Ecuphar GmbH2
Euracon Pharma
Consulting & Trading
GmbH2
Ecuphar Veterinaria SL2 Spain
France
Germany
Germany
Ecuphar Italia SRL2
Italy
Belphar IDA2
Portugal
Principal activity
Holding company, marketer of veterinary
pharmaceuticals
Developer and marketer of
veterinary pharmaceuticals
Microchipping and other associated
services
Non-trading
Marketer of veterinary pharmaceuticals
Non-trading
Non-trading
Marketer of veterinary pharmaceuticals
Non-trading
Class
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Carrer Cerdanya, 10, 12, 08173 Sant Cugat
del Vallès, Barcelona
Viale Francesco Restelli, 3/7,
piano 1, 20124 Milano
Sintra Business Park , nº 7, Edifício 1 -
Escritório 2K, 2710 089 Sintra
Developer and marketer of
veterinary pharmaceuticals
Marketer of veterinary pharmaceuticals
Ordinary
Ordinary
Marketer of veterinary pharmaceuticals
Ordinary
1 As per 23 December 2022, the extraordinary shareholders meeting of Orthopaedics.be NV decided upon the dissolution and liquidation of the company.
2 These subsidiaries are indirectly owned through related undertakings in the list.
7. Trade and other receivables
Corporation tax – Group relief
Prepayments and accrued income
Amounts due from subsidiaries
As at 31 December
2022
£’000
1,265
86
3,024
4,375
2021
£’000
485
65
7,953
8,502
The Directors consider that the carrying amount of other receivables approximates to their fair value.
Amounts due by Group undertakings at 31 December 2022 are unsecured, have no fixed date of repayment and are
repayable on demand.
8. Cash and cash equivalents
Cash and cash equivalents
As at 31 December
2022
£’000
24
2021
£’000
6
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less.
140
Animalcare Group plc Annual Report 2022 9. Other financial liabilities
Current liabilities
Trade payables
Lease liabilities
Other taxes and social security costs
Other creditors
Amounts payable to subsidiaries
Accruals
Non-Current liabilities
Lease liabilities
As at 31 December
2022
£’000
468
354
12
33
11
–
58
31
31
499
2021
£’000
2,869
342
–
52
7
2,106
362
–
–
2,869
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. IFRS 16 Leases
The balance sheet shows the following amounts relating to leases as at 31 December:
Vehicles
Total right-of-use assets
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
Below are the carrying amounts of right-of-use assets recognised and the movements during the year:
2022
£’000
44
44
12
32
44
2021
£’000
–
–
–
–
–
Acquisition value/cost
At 1 January 2022
Additions
At 31 December 2022
Depreciation
At 1 January 2022
Depreciation charge for the year
At 31 December 2022
Net book value
At 31 December 2022
Vehicles
£’000
Total
£’000
–
48
48
–
(4)
(4)
44
–
48
48
–
(4)
(4)
44
141
Animalcare Group plc Annual Report 2022FINANCIALS Notes to the Company
Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2022
10. IFRS 16 Leases (continued)
The following amounts are recognised in the income statement:
Depreciation expense of right-of-use assets
Total amount recognised in the income statement
For the year
ended
31 December
2022
£’000
(4)
(4)
11. 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 1 January 2022
(Credit)/charge to income
At 31 December 2022
Accelerated
tax
depreciation
£’000
(1)
(1)
(2)
Tax
losses
£’000
–
(633)
(633)
Other
£’000
(43)
16
(27)
Total
£’000
(44)
(618)
(662)
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.
12. Number of shares to be disclosed
Share capital
Allotted, called up and fully paid at 1 January 2022 and 31 December 2022
No.
60,092,161
£’000
12,019
13. Share-based payments
During the year the Company operated a Long Term Incentive Plan (“LTIP”) where options are granted to subscribe for new
shares in the Company for to certain members of the Group’s 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 models, in conjunction with a third-party valuation specialist.
142
Animalcare Group plc Annual Report 2022 Long Term Incentive Plan (“LTIP”)
The Group has made a number of awards pursuant to the LTIP.
Outstanding at 1 January 2022
Granted during the year
Vested during the year
Lapsed during the year
Outstanding at 31 December 2022
Exercisable at 31 December 2022
2022
LTIP option
−
302,037
−
−
302,037
–
2021
LTIP option
264,981
−
−
(9,231)
255,750
–
2020
LTIP option
360,565
−
−
(17,978)
342,587
–
2019
LTIP option
364,278
−
(145,382)
(218,896)
−
145,382
The options outstanding and exercisable at the year-end have a weighted average remaining contractual life of 8.34 years.
The options granted in 2022 and 2021 will vest subject to the following performance conditions based on EPS being met:
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
The 2020 and 2019 options were subject to the following performance conditions based on EPS being 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
All options granted are subject to the same TSR performance criteria as per the table below:
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%
143
Animalcare Group plc Annual Report 2022FINANCIALS Notes to the Company
Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2022
13. Share-based payments (continued)
2022 LTIP Options
On 28 April 2022, the Board approved the grant of nil-cost options under the LTIP over a total of 302,037 ordinary shares
with a nominal value of 20.0 pence per share which were awarded to the Company’s Executive Directors and certain
members of the Senior Executive Team and Leadership Team. The LTIP awards will vest on 1 July 2025 subject to the
performance criteria being met over the three-year financial period ending 30 June 2025. On vesting, awards can be
exercised until 28 April 2032, being the tenth anniversary of the date of grant.
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 LTIP 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
£3.23
£Nil
30.1%
3.2 years
1.24%
£3.10
£2.57
1.58%
2021 LTIP Options
On 5 November 2021, nil-cost options over a total of 264,981 ordinary shares with a nominal value of 20p per share were
awarded to certain members of the Senior Executive Team and Group Leadership Team. During the year 9,231 of the
options lapsed due to cessation of employment, leaving 255,750 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 ending 31 December 2024. On vesting, awards can be exercised until 5 November 2031, being
the tenth anniversary of the date of grant.
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 LTIP was 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
144
£3.62
£Nil
32.0%
3.2 years
1.10%
£3.50
£2.56
0.39%
Animalcare Group plc Annual Report 2022 2020 LTIP Options
On 17 November 2020, nil-cost options over a total of 377,120 ordinary shares with a nominal value of 20p per share were
awarded to certain members of the Senior Executive Team and Group Leadership Team. During 2021, 16,555 of the options
lapsed due to cessation of employment. During 2022, a further 17,978 options lapsed, leaving 342,587 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 ending 31 December 2023. On vesting, awards can be exercised until 17 November 2030, being
the tenth anniversary of the date of grant.
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 LTIP was 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
2.30%
£1.60
£1.25
0.50%
2019 LTIP Options
On 6 June 2019, nil-cost options over a total of 425,279 ordinary shares with a nominal value of 20p 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 and 2021, 56,488 and 18,589 options lapsed respectively due to
cessation of employment, leaving 364,278 options outstanding as at 1 January 2022.
On 23 March 2022, 20,187 options lapsed due to cessation of employment. On 6 June 2022, 145,382 options granted
on 6 June 2019 vested, with the remaining 198,709 options lapsed. These vested options have yet to be exercised; the
participants have 6.4 years in which to exercise these options.
Details of the performance targets set and actual achievement against them in respect of the 2019 LTIP awards vesting,
based on three-year performance to 31 December 2021, are set out in the table below:
Performance measure
Underlying EPS
TSR
Weighting
50%
50%
Performance
period end
31 December 2021
31 December 2021
Threshold
(25% vesting)
12.8p
Maximum
(100%
vesting)
14.7p
Median Upper quartile
% vesting for
this part of
the
award
0%
83.0%
Actual
12.0p
Between median
and upper quartile
145
Animalcare Group plc Annual Report 2022FINANCIALS Notes to the Company
Financial Statements CONTINUED
YEAR ENDED 31 DECEMBER 2022
13. Share-based payments (continued)
Identicare share-based payment arrangement
As disclosed and detailed within note 26 to the Consolidated Financial Statements, during the year, the Group entered into
a share-based payments arrangement in respect of growth shares issued in its subsidiary, Identicare Limited (“Identicare”).
Given the terms applied to the shares, the Group has accounted for these as equivalent to redeemable shares, and as
a result of the requirement for ongoing employment have applied the principles of IFRS 2 ‘Share-based payments’ to
the arrangement. The arrangement stipulates that a minimum of 50% of the shares are to be purchased in cash upon
redemption, with the remaining 50% having choice of settlement, at the discretion of the Group, to either issue shares in
the Group or purchase with further cash. In line with IFRS 2, 50% of the arrangement has therefore been accounted for as a
cash-settled share-based payment arrangement, reflecting the Group’s potential obligation to repurchase the shares in the
event that no exit occurs, with the other 50% of the arrangement being treated as an equity-settled share-based payment
due to there being no present obligation to settle in cash.
In the Company financial statements, the equity-settled element of the arrangement has been recognised with a
corresponding credit to equity as the employing subsidiary, Identicare, receives services from employees as consideration
for equity instruments in Animalcare Group plc.
The fair value of the equity-settled portion of the arrangement was £547k, determined at the date of issue of the shares
using a Monte Carlo simulation, in conjunction with a third-party valuation specialist, taking into account the exit terms
noted earlier.
The following inputs have been used to determine the fair value:
Valuation date
Starting enterprise value
Closing net debt
Expected volatility
Risk-free rate
Expected dividend yield
Expected life
1 January
2022
£6.9m
£3.3m
32.75%
0.72%
0.00%
3 years
The Company recognised a total charge in relation to share-based payments in respect of the Company’s employees of
£204,000 (2021: £235,000).
146
Animalcare Group plc Annual Report 2022 14 Related party transactions
Trading transactions
During the years ended 31 December 2022 and 31 December 2021, the following trading transactions took place between
the Company and its subsidiaries.
2022
Management charges
levied/(received)
Current account interests
levied/(received)
Other levied
Total
20221
Management charges
levied/(received)
Current account interests
levied/(received)
Other levied
Total
Ecuphar
NV
£’000
Ecuphar
BV
£’000
Animalcare
Limited
£’000
Identicare
Limited
£’000
Ecuphar
GmbH
£’000
Ecuphar
Veterinaria
SA
£’000
Ecuphar
Italia
£’000
Belphar
IDA
£’000
915
66
5
986
–
–
1
1
(9)
(7)
–
(16)
–
–
–
–
–
4
–
4
57
–
–
57
27
–
–
27
7
–
8
15
Ecuphar
NV
£’000
Ecuphar
BV
£’000
Animalcare
Limited
£’000
Identicare
Limited
£’000
Ecuphar
GmbH
£’000
Ecuphar
Veterinaria
SA
£’000
Ecuphar
Italia
£’000
Belphar
IDA
£’000
933
9
2
944
–
–
–
–
42
(35)
–
7
–
–
–
–
–
–
–
–
9
–
–
9
15
–
–
15
9
–
–
9
Total
£’000
997
63
14
1,074
Total
£’000
1,008
(26)
2
984
Remuneration of key management personnel
Remuneration of the Executive Directors, who are the key management personnel, is provided in Note 4 and further
disclosed below:
Short term employment benefits
Post employment benefits
Share-based payments
Total remuneration
For the year ended
31 December
2022
£’000
672
22
204
898
2021
£’000
887
23
235
1,145
Short term employment benefits comprise £566k salaries (2021: £515k), £nil annual bonus (2021: £237k), £29k of benefits
(2021: £26k) and £77k of employer social security contributions (2021: £109k).
147
Animalcare Group plc Annual Report 2022FINANCIALS Shareholder Notes
148
Animalcare Group plc Annual Report 2022 Directors and Advisers
Directors
D Hutchens
(appointed 10 February 2022)
C J Brewster
E Torr
J Boone
J Winter
Lord N Downshire
(ceased to be a Director on 7 June 2022)
M Coucke
Sylvia Metayer (appointed 3 May 2022)
Secretary
C J Brewster
Company Number
1058015
Registered Office
Moorside, Monks Cross
York
YO32 9LB
Independent Auditors
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
The production of this report supports the work of the Woodland Trust,
the UK’s leading woodland conservation charity. Each tree planted will
grow into a vital carbon store, helping to reduce environmental impact as
well as creating natural havens for wildlife and people.
Animalcare Group plc Annual Report 2022 A
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Moorside
Monks Cross Drive
York
YO32 9LB, UK
T: +44 (0) 1904 487687
F: +44 (0) 1904 487611
communications@animalcaregroup.com
www.animalcaregroup.com