Anpario plc (AIM: ANP)

Anpario plc, the international producer and distributor of natural feed additives for animal health, hygiene and nutrition is pleased to announce its results for the twelve months to 31 December 2013.

Financial Highlights

  • 12% uplift in sales revenue to 26.3m (2012: 23.5m)
  • 20% improvement in gross profit to 9.2m (2012: 7.7m)
  • 12% rise in adjusted EBITDA1 to 3.5m (2012: 3.1m)
  • 17% increase in the proposed final dividend to 3.5p per share (2012: 3.0p)
  • Cash balances of 4.8m at year end (2012: 3.7m)

Operational Highlights

  • Double-digit growth in gross profit delivered in all geographic regions
  • Significant advances in revenue achieved in Brazil and China
  • Establishment of regional office in Malaysia supports revenue growth of 31% in Asia Pacific
  • Toxin binder range delivers revenue growth of 59%
  • Formation of USA operation well underway

Richard Rose, Chairman, commented:

Anpario has delivered a good performance in the twelve months to 31 December 2013 reflecting the success of a number of ongoing strategic initiatives. The balance sheet remains strong with no debt and the cash generative nature of the business gives us the means to make acquisitions, at the right price, should the opportunity arise. The outlook for global agricultural markets presents exciting opportunities and Anpario is well placed to maintain its strong growth record. We look forward with confidence, as the Company benefits from the natural ingredients in its products and their increasing importance and acceptance in world markets.

Chairman’s Statement

Anpario delivered a good performance in the twelve months to 31 December 2013 with further advances in sales revenue, profit and market share across its key geographic market areas. These results reflect the success of a number of initiatives that are enabling the Group to direct its investment and resources to expanding market share within the geographic regions that offer the greatest potential.

During the year we built upon our strategy of establishing local operations in key territories. The establishment and success of our subsidiary in China is most encouraging as we continue to develop the business in that important market. In the second quarter of the year we formed a subsidiary in Brazil and also began to establish operations in the United States, which together with China, are the three largest pig and poultry producing countries in the world, accounting for more than half world output.

Anpario was also granted approval by the Malaysian authorities to form a regional office in Kuala Lumpur to provide local sales and technical support for customers in the Asia Pacific region. The creation of this regional presence is consistent with the Group’s aim to drive growth by broadening its customer base and product offering through local operations. The impressive revenue increase during the year within Asia Pacific validates the Company?s strategy and also highlights the significant potential of the region.

Financial Review

In 2013 Anpario achieved another year of earnings growth. Profit after tax for the year to 31 December 2013 increased by 21% to 2.6m (2012: 2.1m) on sales up by 12% at 26.3m (2012: 23.5m). Good like for like progress has been achieved in our key target regions with Asia leading the way with an increase in revenues from the region of 31%.

Adjusted EBITDA1 advanced by 12% to 3.5m (2012: 3.1m) with gross profit increasing 20% to 9.2m (2012: 7.7m) reflecting organic growth and production efficiencies.

The flat underlying earnings per share2 13.06p per share (2012: 13.32p per share), reflects planned investment in key technical and sales resources to strengthen our business and support further expansion. This has included the setting up of operations in in Brazil, Malaysia and the USA. The increase in administrative expenses is also linked to the Group’s Meriden acquisition.

Tax credits in 2012 and 2013 have arisen from the utilisation of historic losses and research and development tax credits.

The balance sheet remains strong and is debt free. Cash generation continues to be a strong feature of the group, with a year-end cash balance of 4.8m (2012 3.7m). The group has invested 0.9m which includes plant automation and also significant expenditure in protecting its brands by securing international trademark protection as appropriate.

The Board is recommending a final dividend of 3.50 pence per share an increase of 17% over last year’s dividend. This continues our progressive dividend policy and reflects the Board’s confidence in Anpario’s future development. It is proposed that the final dividend will be paid on 25 July 2014 to shareholders on the register at the close of business on 11 July 2014.

Operations – International Agriculture

A key strategy of the Division is to concentrate on those countries and products which offer the greatest potential for sales and profit growth. This has enabled our management to improve their knowledge of these markets, raise customer service levels and increase sales and market share.

Good sales growth was achieved in a number of important territories, including the major markets of Brazil and China. The Asia Pacific region is of particular importance to Anpario and we achieved double-digit revenue growth, compared with the previous year, in Bangladesh, India, Malaysia, the Philippines, South Korea, Thailand and Vietnam. The establishment of a regional office in Kuala Lumpur has enabled the Company to invest in local resource, strengthening its presence in the region, enabling a deeper understanding of the countries and a closer working relationship with our distributors and customers. This investment has already started to deliver benefits and this should continue as the team becomes further embedded in the region.

Investment in local sales and technical support teams is vital to provide a strong link between customers and the Company and during the year we made further advances. Investment is focused on the core regions of Latin America and Asia Pacific as well as the United States, where our operation is in start-up phase. The timing of our investment in the United States is aligned with the continued tightening of national legislation regarding the banning of antibiotics from the food chain. The US Food and Drug Administration announced in early 2014 that the use of antibiotics to promote animal growth will be phased out by 2017. This requirement will provide a significant opportunity for Anpario’s natural feed additives. Meriden launched its Orego-Stim feed additive at the International Production and Processing Expo held in Atlanta in January 2014. There was strong interest from a range of existing and potential customers and the product was well received. A full sales and marketing campaign is now underway in the United States to promote the benefits of our natural feed products through a series of customer trials.

Europe continues to set the pace in terms of legislation regarding the use of antibiotics and new laws are impacting those countries supplying the EU. Brazil is the largest supplier of poultry to the EU and therefore has to ensure that its producers use natural feed additives, thereby creating greater opportunities for Anpario in Brazil.

Demand for meat protein is growing worldwide and food producers, particularly in a number of developing countries, are under pressure to ensure production is aligned with best practice. Anpario’s broad range of nutritional and biosecurity led products offer farmers a comprehensive solution to their problems. Meriden had a strong year and benefitted from its entry into a number of new markets in Africa where Orego-Stim has been well received.

Anpario’s natural feed additives protect animals from disease and enhance growth and this has been demonstrated through many trials undertaken by the Group in a number of countries. Trials are often a necessary part of the sales process to prove the efficacy of products to potential customers. They have been fundamental to our success in Brazil, where we have demonstrated that Anpario’s products improve protection from disease in the parent stock and also ensure that the offspring receive the same benefit.

The Division is well positioned for the year ahead and with the marketing and technical teams in place; the focus is on implementing our strategy to work with local distributors to build sales and market penetration while remaining close to the customer.

Operations – UK Agriculture

The transformation of the UK Agriculture Division continued throughout 2013 resulting in double-digit growth in gross profit. The Division now concentrates on the added value benefits of its specialty feed additive ranges and has moved away from commodity type products. The successful launch during the year of the important new toxin binders Ultrabond and Neutox will help to drive progress for the Division.

The UK organic animal feed market continued to be affected by weak trading conditions and this impacted the progress of Vitrition, our Organic Division, as it continued to manage uncertainty within the customer base. It is encouraging to report that following the year end there are early signs that some optimism is returning to this market. The Division remains very well placed to strengthen its share and address the challenges in the market.

Central Operations

There has been significant investment during the year in the important areas of technical and product development, marketing and quality control. This expenditure will support the Group’s growth, including its strategy of getting closer to markets and customers through enhanced levels of service and local technical and marketing support.

The strengthening of the technical function will raise further the skill level of our sales teams and distributors whilst also ensuring the effective promotion of our product offering to existing and potential customers through trials, seminars and visits. It will also provide additional support for innovation, research and development and the creation of new products. The appointment of managers responsible for marketing each of the Company’s trading brands will ensure that technical developments are brought to market speedily and effectively. This process is designed to create a consistent and continuous message and help to develop the distinctive features of each of our key products across the global marketplace. This strategy will not only strengthen Anpario’s identity in its markets but also create value for stakeholders.

The objective of our investment in quality control is to ensure that the Group and particularly the manufacturing facility are focused on efficiency and process improvement. Maintaining the highest quality standards is essential for our customers and with volumes increasing, creates the opportunity to maximise the Group’s operational gearing and contribute significantly to profit.

Outlook

The current year has started well with the Group’s performance in line with management’s expectations. The successful establishment of subsidiaries in the three largest meat producing markets provides Anpario with a sound platform from which to continue to grow the business.

The balance sheet remains strong with no debt and the cash generative nature of the business gives us the means to make acquisitions, at the right price, should the opportunity arise. The outlook for global agricultural markets presents exciting opportunities and Anpario is well placed to maintain its strong growth record. We look forward with confidence, as the Company benefits from the natural ingredients in its products and their increasing importance and acceptance in world markets.

Richard S Rose

Chairman

2 April 2014

1 Adjusted EBITDA represents operating profit 2.9m (2012: 1.6m) adjusted for: share based payments 0.2m (2012: 0.1m); acquisition and restructuring costs of nil (2012: 0.4m); and depreciation, amortisation and impairment charges of 0.4m (2012: 1.0m).

2 Underlying earnings per share represents profit for the year 2.6m (2012: 2.1m) before: acquisition and restructuring related costs nil (2012: 0.4m); impairment of intangibles nil (2012: 0.7m); unwinding of discount on contingent consideration 0.1m (2012: 0.1m); and prior year tax credits 0.3m (2012: 0.9m) divided by the weighted average number of shares in issue.

Unaudited consolidated income statement
for the year ended 31 December 2013
2013 2012
Notes £000 £000
Revenue 3 26,264 23,509
Cost of sales (17,045) (15,849)
Gross profit 9,219 7,660
Administrative expenses (6,306) (4,910)
Exceptional items

5

(1,157)
Operating profit 2,913 1,593
Finance income 50 39
Finance cost of contingent consideration (78) (110)
Profit before income tax 2,885 1,522
Income tax (expense)/credit (329) 582
Profit for the year from continuing operations 2,556 2,104
Profit attributable to:
Owners of the parent 2,556 2,104
Profit for the year from continuing operations 2,556 2,104
The consolidated income statement has been prepared on the basis that all operations are continuing operations.
Basic earnings per share 4

14.00p

11.62p
Diluted earnings per share 4

13.04p

11.11p
Unaudited consolidated statement of comprehensive income
for the year ended 31 December 2013
2013 2012
£000 £000
Profit for the year 2,556 2,104
Items that may be subsequently reclassified to profit or loss:
Exchange difference on translating foreign operations (9) 24
Total comprehensive income for the year 2,547 2,128
Attributable to the owners of the parent: 2,547 2,128
Non-controlling interests
Total comprehensive income for the year 2,547 2,128
Unaudited consolidated balance sheet
as at 31 December 2013
2013 2012
Notes £000 £000
Intangible assets 6 9,302 9,076
Property, plant and equipment 7 3,054 2,784
Deferred tax assets 204 228
Non-current assets 12,560 12,088
Inventories 1,883 1,632
Trade and other receivables 6,874 6,993
Cash and cash equivalents 4,797 3,694
Current assets 13,554 12,319
Total assets 26,114 24,407
Called up share capital 4,573 4,555
Share premium 3,922 3,884
Other reserves (336) (496)
Retained earnings 11,930 9,942
Equity attributable to owners of the parent company 20,089 17,885
Non-controlling interest
Total equity 20,089 17,885
Trade and other payables 425
Deferred tax liabilities 1,000 1,044
Non-current liabilities 1,000 1,469
Trade and other payables 4,713 4,912
Current income tax liabilities 312 141
Current liabilities 5,025 5,053
Total liabilities 6,025 6,522
Total equity and liabilities 26,114 24,407
Unaudited consolidated statement of changes in equity
for the year ended 31 December 2013
Called up share capital Share premium Other reserves Retained earnings Non-controlling interest Total equity
£000 £000 £000 £000 £000 £000
Balance at 1st January 2012 4,555 3,828 (695) 8,264 50 16,002
Profit for the year 2,104 2,104
Currency translation differences 24 24
Total comprehensive income for the year 24 2,104 2,128
Sale of treasury shares 56 97 153
Share-based payment adjustments 78 78
Dividends relating to 2011 (436) (436)
Acquisition of interest in subsidiary from non-controlling interest 10 (50) (40)
Transactions with owners 56 175 (426) (50) (245)
Balance at 31 December 2012 4,555 3,884 (496) 9,942 17,885
Profit for the year 2,556 2,556
Currency translation differences (9) (9)
Total comprehensive income for the year (9) 2,556 2,547
Issue of share capital 18 38 56
Share-based payment adjustments 169 169
Dividends relating to 2012 (568) (568)
Transactions with owners 18 38 169 (568) (343)
Balance at 31 December 2013 4,573 3,922 (336) 11,930 20,089
Unaudited consolidated statements of cash flows
for the year ended 31 December 2013
2013 2012
£000 £000
Cash generated from operating activities 3,095 1,740
Income tax (paid)/refunded (176) 430
Net cash generated from operating activities 2,919 2,170
Acquisition of subsidiary, net of cash acquired (429) (2,276)
Purchases of property, plant and equipment (470) (117)
Proceeds from disposal of property, plant and equipment 18
Payments to acquire intangible assets (401) (166)
Interest received 50 39
Net cash used in investing activities (1,250) (2,502)
Sale of treasury shares 153
Proceeds from issuance of shares 56
Dividend paid to company’s shareholders (568) (436)
Acquisition of interest in subsidiary from non-controlling interest (40)
Net cash used in financing activities (512) (323)
Net increase/(decrease) in cash & cash equivalents 1,157 (655)
Effect of exchange rate changes (54) (8)
Cash and cash equivalents at the beginning of the year 3,694 4,357
Cash and cash equivalents at the end of the year 4,797 3,694
2013 2012
Cash generated from operating activities £000 £000
Profit before income tax 2,885 1,522
Net finance cost 28 71
Depreciation, amortisation and impairment 375 1,005
Loss on disposal of property, plant and equipment 2
Share-based payments 169 78
Changes in working capital:
Inventories (271) (330)
Trade and other receivables 87 (1,192)
Trade and other payables (178) 584
Net cash generated from operating activities 3,095 1,740
Notes to the financial statements
1. General information
Anpario plc (“the company”) and its subsidiaries (together “the group”) manufacture and supply high performance natural feed additives for the agricultural market with products to improve the health and output of animals.
The company is traded on the London Stock Exchange Aim market and is incorporated and domiciled in the UK. The address of the registered office is Manton Wood Enterprise Park, Worksop, Nottinghamshire, S80 2RS.
2. Basis of preparation
The consolidated financial information comprises the accounts of the company and its subsidiaries drawn up to 31 December 2013.
The consolidated financial information has been prepared on the basis of the accounting policies set out in the group’s financial statements for the year ended 31 December 2012, which are available on the company’s web site at www.anpario.com.
Of the new standards, amendments and interpretations that are in issue and mandatory for the financial year ending to 31 December 2013, there is no financial impact on this consolidated financial information.
The consolidated financial information included in the preliminary announcement does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2012 were approved by the Board of Directors on 17 April 2013 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006. Statutory accounts for the year ended 31 December 2013 will be delivered in due course.
The consolidated financial information for the year ended 31 December 2013 is neither audited nor reviewed.
3. Segment information
UK and Eire International Total
£000 £000 £000
for the year ended 31 December 2013
Total segmental revenue 6,314 20,671 26,985
Inter-segment revenue (721) (721)
Revenue from external customers 6,314 19,950 26,264
Adjusted EBITDA 312 3,167 3,479
Depreciation, amortisation and impairment charges (44) (331) (375)
Income tax credit (22) (307) (329)
Total assets 7,505 18,609 26,114
Total liabilities (1,484) (4,541) (6,025)
for the year ended 31 December 2012
Total segmental revenue 6,874 17,114 23,988
Inter-segment revenue (479) (479)
Revenue from external customers 6,874 16,635 23,509
Adjusted EBITDA 305 2,804 3,109
Depreciation, amortisation and impairment charges (26) (979) (1,005)
Income tax credit 97 485 582
Total assets 7,352 17,055 24,407
Total liabilities (1,529) (4,993) (6,522)
A reconciliation of adjusted EBITDA to profit before income tax is provided as follows:
2013 2012
£000 £000
Adjusted EBITDA for reportable segments 3,479 3,109
Depreciation, amortisation and impairment charges (375) (1,005)
Share-based payment charges (191) (99)
Finance income 50 39
Finance cost of contingent consideration (78) (110)
Closure and restructuring costs (55)
Acquisition costs (357)
Profit before income tax 2,885 1,522
4. Earnings per share
2013 2012
Weighted average number of shares in issue (000’s) 18,260 18,110
Adjusted for effects of dilutive potential ordinary shares (000’s) 1,341 832
Weighted average number for diluted earnings per share (000’s) 19,601 18,942
Profit attributable to owners of the Parent (£000’s) 2,556 2,104
Basic earnings per share 14.00p 11.62p
Diluted earnings per share 13.04p 11.11p
2013 2012
£000 £000
Underlying profit attributable to owners of the parent
Profit attributable to owners of the parent 2,556 2,104
Exceptional items 1,157
Unwinding of discount on contingent consideration 78 110
Prior year tax adjustments (250) (959)
Underlying profit 2,384 2,412
Underlying earnings per share 13.06p 13.32p
Diluted underlying earnings per share 12.16p 12.73p
5. Exceptional items
2013 2012
£000 £000
Closure and restructuring costs 55
Acquisition costs 357
Impairment provision 745
1,157
6. Intangible assets
Group Goodwill Brands

Customer

relationships

Patents,

trademarks

and

registrations

Development

costs

Total
£000 £000 £000 £000 £000 £000
Cost
As at 1 January 2012 4,144 1,501 176 64 1,487 7,372
Additions 31 135 166
Acquisition of subsidiary 1,346 709 510 21 2,586
As at 31 December 2012 5,490 2,210 686 116 1,622 10,124
Additions 132 269 401
As at 31 December 2013 5,490 2,210 686 248 1,891 10,525
Accumulated amortisation/impairment
As at 1 January 2012 36 16 159 211
Charge for the year 27 55 10 92
Impairment provision 745 745
As at 31 December 2012 27 91 26 904 1,048
Charge for the period 35 68 14 8 125
Impairment provision 50 50
As at 31 December 2013 62 159 40 962 1,223
Net book value
As at 31 December 2013 5,490 2,148 527 208 929 9,302
As at 31 December 2012 5,490 2,183 595 90 718 9,076
As at 1 January 2012 4,144 1,501 140 48 1,328 7,161
7. Property, plant and equipment
Group

Land and

buildings

Plant and

machinery

Fixtures,

fittings

and equipment

Assets in the

course of

construction

Total
000 000 000 000 000
Cost
As at 1 January 2012 2,007 940 355 3,302
Additions 27 70 20 117
Acquisition of subsidiary 15 15
Disposals (110) (3) (113)
As at 31 December 2012 2,034 900 387 3,321
Additions 3 226 78 163 470
Disposals (5) (53) (1) (59)
As at 31 December 2013 2,032 1,073 464 163 3,732
Accumulated depreciation
As at 1 January 2012 136 230 96 462
Charge for the year 26 98 44 168
Disposals (82) (11) (93)
As at 31 December 2012 162 246 129 537
Charge for the period 28 116 56 200
Disposals (5) (53) (1) (59)
As at 31 December 2013 185 309 184 678
Net book value
As at 31 December 2013 1,847 764 280 163 3,054
As at 31 December 2012 1,872 654 258 2,784
As at 1 January 2012 1,871 710 259 2,840
Anpario plc:

David Bullen, Chief Executive Officer

+44 (0)791 955 2040

Karen Prior, Group Finance Director +44 (0) 1909 537 380
Peel Hunt: +44 (0) 207 418 8900

Dan Webster

Richard Brown

Richard Kauffer