19 September 2017

 

Anpario plc (AIM: ANP)

(“Anpario” or “the Company”)

 

Anpario plc, the international producer and distributor of natural animal feed additives for animal health, nutrition and biosecurity is pleased to announce its interim results for the six months to 30 June 2017.

 

Financial and operational highlights

 

Financial highlights

 

  • 39% increase in revenue to £14.8m (2016: £10.7m)
  • 42% rise in gross profits to £7.3m (2016: £5.1m)
  • 31% improvement in adjusted EBITDA1 to £2.6m (2016: £2.0)
  • 22% enhancement in adjusted earnings per share to 9.1p (2016: 7.5p)
  • Introduction of interim dividend of 2.0p per share (2016: nil)
  • Cash balances of £12.6m at 30 June 2017 (31 December 2016: £11.1m)

 

Operational highlights

 

  • Sales growth achieved reflects strong performances in Asia, the Americas and Middle East
  • Implementation of our strategy starting to deliver planned benefits
  • Anpario global branding raising the international profile of the company
  • New subsidiaries set-up in Thailand and Indonesia
  • Acquisition of Australian distributor completed in February 2017 and integration progressing well

 

Peter Lawrence, Chairman, commented:

 

“We are delighted by the first half performance driven by the implementation of our strategy to build strong commercial relationships with end users. The second half of the year has started well. Our strong balance sheet and positive cash generation give Anpario a sound platform from which to make selective earnings enhancing acquisitions and to further invest in recruitment and infrastructure to accelerate the profitable growth of the business”.

 

Chairman’s statement

 

In my first statement as Chairman, I would like to thank my predecessor, Richard Rose, for his 12 years of service to Anpario and his leadership and guidance of the Board, during which time significant shareholder value has been created.

 

Anpario has delivered an excellent performance for the six months to 30 June 2017. The Board is pleased to declare a maiden interim dividend of 2.0p per ordinary share payable on 1 December 2017 to shareholders on the register at close of business on 17 November 2017. The introduction of an interim dividend reflects the Board’s confidence in the growth prospects of the Company.

 

These results reflect the enhanced focus on the implementation of our strategy. The recruitment of regional commercial teams and the decision to rebrand under the Anpario name have raised the company’s international profile. These factors, along with improved product technology and service capabilities, have been of great benefit to end user customers.

 

The transformation of our sales and distribution channels is still in its early stages, but getting closer to our production customers and working with key partner distributors has clearly helped to drive sales growth during the period. Distribution has been further extended during the period through the acquisition of Cobbett, our Australian distributor, and the formation of subsidiaries in Thailand and Indonesia.

 

Financial review

 

Revenue in the first half of the year increased by 39% to £14.8m (2016: £10.7m). Gross profit advanced by over 42% to £7.3m (2016: £5.1m). Increased volumes and a higher proportion of end customer sales have enabled us to maintain our overall gross margins and helped offset some raw material price inflation.

 

Administrative expenses in the period rose 51% to £5.1m (2016: £3.4m). Foreign exchange losses, included in administrative expenses, were £0.4m in the period compared to gains of £0.3m in 2016. As such, the underlying increase in administrative expenses was £1.0m, the majority of which relates to investment in new appointments and the associated costs. This increase is a result of internal restructuring and the set-up of new operations. This process is still underway and is expected to continue through 2017, as evidenced by some further exceptional items of £0.3m (2016: £0.2m). This investment is already contributing to the increase in revenue but it will take time for the full impact to be felt.

 

Adjusted EBITDA1 was ahead by 31% to £2.6m (2016: £2.0m). The growth in profit after tax of 21% to £1.6m (2016: £1.3m) was achieved after increases to the depreciation and amortisation charges resulting from recent capital expenditure and higher share-based payments and income tax charges.

 

Basic earnings per share increased by 19% to 7.80p (2016: 6.55p) and adjusted earnings per share grew by 22% to 9.13p (2016: 7.49p).

 

The balance sheet is strong and debt free with further positive cash generation of £1.5m. The cash balance at the period end was £12.6m (31 December 2016: £11.1m) after expending £0.5m on the purchase of Cobbett, our Australian distributor, in February 2017.

 

Operations

 

Our key target regions delivered exceptionally strong performances during the period with increases of 58%, 56% and 46% from Asia, the Americas and the Middle East, respectively over the equivalent period last year. This overall strong organic sales growth totalling £3.13m results directly from the strategic initiatives implemented in 2016. In addition, favourable currency movements contributed just under £1m to like for like sales. In Asia, there were strong performances from Bangladesh, Malaysia, Philippines, South Korea, and Thailand. China delivered sales growth of 42% helped by the successful relaunch of Orego-Stim, which is now branded as Meriden-Stim.

 

In Australia, Cobbett contributed to the region’s sales performance. A new regional manager for Australasia has been recruited, responsible for our business in Australia, New Zealand and the South Pacific territories. In Asia, territory managers were recruited for Thailand, Indonesia, and the Philippines. Employing local commercial teams, who are closer to our end user customers, gives us better insight into opportunities, including local pricing and also keeps the Anpario brand at the forefront of customers’ minds.

 

The standout performer in the Americas region was the United States, which accounted for 7% of total group revenue and where sales have accelerated in the dairy sector, organic egg layers and supplying poultry integrators for both conventional and antibiotic free production. It is anticipated that sales will expand across the United States, reflecting increasing recognition of our natural feed additives.

 

Brazil and Mexico, our two key markets in Latin America, also saw good sales growth. New distributors were appointed in Chile and Peru to strengthen our presence in these areas.

 

Despite the ongoing geopolitical events in the region, the Middle East returned to growth with strong performances from Israel, Lebanon and Turkey. The outturn in Turkey contrasts with the first half of 2016 when reduced stockholdings began at the start of last year. A new technical sales manager has also been recruited to support development in this area.

 

Our operations in the UK and Ireland, which account for 11% of total sales, did well growing sales by 15%. The recovery in milk prices helped to strengthen demand for Ultrabond and Optomega, which improve fertility in dairy cows. Our UK team is working, in partnership with industry specialists, offering turnkey solutions for the egg laying industry by demonstrating the benefits of Anpario products to farmers, who are keen to maximise the profitability of their egg laying stock.

 

Our main product groups of eubiotics (gut health) and mycotoxin binders delivered encouraging performances with our leading product brands: Orego-Stim, Salkil, Salgard, Ultrabond and Prefect all contributing to the growth.

 

Innovation and development

 

Over the past 12 months we have recruited a new central technical team to manage new product development and technical support for our customers. One of the team’s principal tasks is to demonstrate that our products can help farmers’ profitability by improving performance when regulatory changes dictate that certain treatments, such as antibiotic growth promoters, or other industry practices, can no longer be used in meat production. One recent opportunity is the phased banning of zinc oxide in pig diets across the European Union and in some other countries. A number of customers have successfully replaced zinc oxide in diets with our organic acid based eubiotic products, which promote development of the gut microbiota. In order to scientifically support our field experiences, we carried out successful trials at leading institutions in Canada and Thailand.

 

Our technical team has also been strengthened through the recruitment of species specialists in ruminant, swine and aquaculture. This group will support our commercial teams and work with marketing to help communicate our solution driven approach to customers’ problems. The teams, working collaboratively, have also developed a number of feed additive programmes to show customers how to use our products in a combined approach through the life stages of their animals. The preventative nature of our feed additives helps present a robust response from animals during periods of growth and disease. Anpario’s natural additives also reduce the use of antibiotic growth promoters, which is an important element in the move towards antibiotic free protein production. Our products have also performed strongly in trials carried out in China when removing colistin sulphate, a widely used antibiotic, from weaning piglet diets.

 

Outlook

 

The second half of the year has started well. Our focus remains on implementing the strategy that is successfully transforming our sales and distribution channels by building stronger and closer relationships with customers. Our strong balance sheet and positive cash generation give Anpario a sound platform from which to make selective earnings enhancing acquisitions and to further invest in recruitment and infrastructure to accelerate the profitable growth of the business.

 

Peter Lawrence

Chairman

19 September 2017

 

 

1. Adjusted EBITDA represents operating profit £1.860m (2016: £1.480m) adjusted for: share based payments £0.161m (2016: £0.047m); depreciation, amortisation and impairment charges of £0.347m (2016: £0.254m) and closure and restructuring costs £0.269m (2016: £0.235m).

 

 

Unaudited consolidated income statement

for the six months ended 30 June 2017

 

six months to

six months to

year ended

30/06/2017

30/06/2016

31/12/2016

Notes

£000

£000

£000

Revenue

3

14,803

10,687

24,340

Cost of sales

(7,528)

(5,561)

(12,895)

Gross profit

7,275

5,126

11,445

Administrative expenses

(5,146)

(3,411)

(7,603)

Exceptional items

(269)

(235)

(1,221)

Operating profit

1,860

1,480

2,621

Finance income

17

34

59

Profit before income tax

1,877

1,514

2,680

Income tax expense

(292)

(203)

(100)

Profit for the period

1,585

1,311

2,580

Profit attributable to:

Owners of the parent

1,584

1,311

2,580

Non-controlling interests

1

Profit for the period

1,585

1,311

2,580

 

 

Basic earnings per share

4

7.80p

6.55p

12.79p

Diluted earnings per share

4

7.62p

6.42p

12.58p

Adjusted earnings per share

4

9.13p

7.49p

16.90p

Diluted adjusted earnings per share

4

8.92p

7.35p

16.62p

 

Unaudited consolidated statement of comprehensive income

for the six months ended 30 June 2017

 

six months to

six months to

year ended

30/06/2017

30/06/2016

31/12/2016

£000

£000

£000

Profit for the period

1,585

1,311

2,580

Items that may be subsequently reclassified to profit or loss:

Exchange difference on translating foreign operations

54

(19)

(87)

Total comprehensive income for the period

1,639

1,292

2,493

Attributable to the owners of the parent:

1,638

1,292

2,493

Non-controlling interests

1

Total comprehensive income for the period

1,639

1,292

2,493

 

Unaudited consolidated statement of financial position

as at 30 June 2017

 

as at

as at

as at

30/06/2017

30/06/2016

31/12/2016

Notes

£000

£000

£000

Intangible assets

5

10,851

10,390

10,132

Property, plant and equipment

6

3,442

3,289

3,539

Deferred tax assets

338

307

286

Non-current assets

14,631

13,986

13,957

Inventories

2,315

2,014

2,246

Trade and other receivables

6,921

6,379

6,733

Cash and cash equivalents

12,611

10,870

11,112

Current assets

21,847

19,263

20,091

Total assets

36,478

33,249

34,048

Called up share capital

5,292

5,095

5,291

Share premium

9,518

7,796

9,515

Other reserves

(4,801)

(3,331)

(5,112)

Retained earnings

20,428

18,598

18,843

Equity attributable to owners of the parent company

30,437

28,158

20,129

Non-controlling interest

(1)

Total equity

30,436

28,158

28,537

Deferred tax liabilities

974

1,176

1,014

Non-current liabilities

974

1,176

1,014

Trade and other payables

4,602

3,759

4,351

Current income tax liabilities

466

156

146

Current liabilities

5,068

3,915

4,497

Total liabilities

6,042

5,091

5,511

Total equity and liabilities

36,478

33,249

34,048

 

Unaudited consolidated statement of changes in equity

for the six months ended 30 June 2017

 

Called up
share capital

Share premium

Other reserves

Retained earnings

Non- controlling

interest

Total equity

£000

£000

£000

£000

£000

£000

Balance at 1 January 2016

5,058

7,613

(3,374)

17,287

26,584

Profit for the period

1,311

1,311

Currency translation differences

(19)

(19)

Total comprehensive income for the period

(19)

1,311

1,292

Issue of share capital

37

183

220

Share-based payment adjustments

62

62

Transactions with owners

37

183

62

282

Balance at 30 June 2016

5,095

7,796

(3,331)

18,598

28,158

Profit for the period

1,269

1,269

Currency translation differences

(68)

(68)

Total comprehensive income for the period

(68)

1,269

1,201

Issue of share capital

196

1,719

1,915

Deferred tax regarding share–based payments

(128)

(128)

Cash flow hedge reserve

37

37

Joint share ownership plan

(1,760)

(1,760)

Share-based payment adjustments

138

138

Dividends relating to 2015

(1,024)

(1,024)

Transactions with owners

196

1,719

(1,713)

(1,024)

(822)

Balance at 31 December 2016

5,291

9,515

(5,112)

18,843

28,537

Profit for the period

1,585

(1)

1,584

Currency translation differences

54

54

Total comprehensive income for the period

54

1,585

(1)

1,638

Issue of share capital

1

3

4

Cash flow hedge reserve

123

123

Share-based payment adjustments

134

134

Transactions with owners

1

3

257

261

Balance at 30 June 2017

5,292

9,518

(4,801)

20,428

(1)

30,436

 

Unaudited consolidated statement of cash flows

for the six months ended 30 June 2017

 

six months to

six months to

year ended

30/06/2017

30/06/2016

31/12/2016

£000

£000

£000

Cash generated from operating activities

2,448

1,943

3,957

Income tax paid

(73)

(13)

(159)

Net cash generated from operating activities

2,375

1,930

3,798

Investment in subsidiary

(514)

Purchases of property, plant and equipment

(69)

(367)

(729)

Proceeds from disposal of property, plant and equipment

1

4

Payments to acquire intangible assets

(298)

(354)

(831)

Interest received

17

34

59

Net cash used in investing activities

(863)

(687)

(1,497)

Joint share ownership plan

(1,760)

Proceeds from issuance of shares

4

220

2,135

Dividend paid to Company’s shareholders

(1,024)

Net cash used in financing activities

4

220

(649)

Net increase in cash and cash equivalents

1,516

1,463

1,652

Effect of exchange rate changes

(17)

70

123

Cash and cash equivalents at the beginning of the period

11,112

9,337

9,337

Cash and cash equivalents at the end of the period

12,611

10,870

11,112

six months to

six months to

year ended

30/06/2017

30/06/2016

31/12/2016

£000

£000

£000

Cash generated from operating activities

Profit before income tax

1,877

1,514

2,680

Net finance income

(17)

(34)

(59)

Depreciation, amortisation and impairment

348

254

1,130

(Profit)/Loss on disposal of property, plant and equipment

7

(4)

Share-based payments

134

62

200

Changes in working capital:

Inventories

(38)

28

(218)

Trade and other receivables

(212)

430

55

Trade and other payables

349

(311)

173

Net cash generated from operating activities

2,448

1,943

3,957

 

 

 

Notes to the financial statements

for the six months ended 30 June 2017

 

 

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 statements comprise the accounts of the Company and its subsidiaries drawn up to 30 June 2017.

 

The Group has presented its financial statements in accordance with International Reporting Standards (“IFRS’s”), as endorsed by the European Union, IFRS IC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. Full details on the basis of the accounting policies used are set out in the Group’s financial statements for the year ended 31 December 2016, which are available on the Company’s website at www.anpario.com.

 

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2016 were approved by the Board of Directors on 8 March 2017 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.

 

The consolidated interim financial information for the period ended 30 June 2017 is neither audited nor reviewed.

 

 

3. Segment information

 

Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions. The Board considers the business from a geographic perspective. Management considers adjusted EBITDA to assess the performance of the operating segments, which comprises profit before interest, tax, depreciation and amortisation adjusted for share-based payments and exceptional items.

 

Americas

Asia

Europe

MEA

Head Office

Total

£000

£000

£000

£000

£000

£000

for the six months ended 30 June 2017

Total segmental revenue

2,859

6,588

5,124

2,136

16,707

Inter-segment revenue

(1,904)

(1,904)

Revenue from external customers

2,859

6,588

3,220

2,136

14,803

Adjusted EBITDA

994

2,057

1,217

833

(2,464)

2,637

Depreciation and amortisation

(7)

(4)

(336)

(347)

Net finance income

1

1

15

17

Share-based payments

(161)

(161)

Exceptional items

(165)

(19)

(85)

(269)

Income tax

31

8

(1)

(330)

(292)

Profit for the period

1,019

1,896

1,217

814

(3,361)

1,585

Total assets

36,478

36,478

Total liabilities

(6,042)

(6,042)

Americas

Asia

Europe

MEA

Head Office

Total

£000

£000

£000

£000

£000

£000

for the six months ended 30 June 2016

Total segmental revenue

1,832

4,177

3,975

1,465

11,449

Inter-segment revenue

(762)

(762)

Revenue from external customers

1,832

4,177

3,213

1,465

10,687

Adjusted EBITDA

655

1,397

1,243

681

(1,960)

2,016

Depreciation and amortisation

(4)

(1)

(2)

(247)

(254)

Net finance income

34

34

Share-based payments

(47)

(47)

Exceptional items

(21)

(6)

(25)

(183)

(235)

Income tax

1

(204)

(203)

Profit for the period

630

1,391

1,241

656

(2,607)

1,311

Total assets

33,249

33,249

Total liabilities

(5,091)

(5,091)

Americas

Asia

Europe

MEA

Head Office

Total

£000

£000

£000

£000

£000

£000

for the year ended 31 Dec 2016

Total segmental revenue

4,491

10,351

8,450

2,953

26,245

Inter-segment revenue

(1,905)

(1,905)

Revenue from external customers

4,491

10,351

6,545

2,953

24,340

Adjusted EBITDA

1,373

3,507

2,510

1,247

(4,026)

4,611

Depreciation and amortisation

(10)

(6)

(3)

(540)

(559)

Net finance (income)/expense

1

58

59

Share-based payments

(210)

(210)

Exceptional items

(93)

(107)

(32)

(989)

(1,221)

Income tax

156

29

(3)

(282)

(100)

Profit for the year

1,426

3,424

2,507

1,212

(5,989)

2,580

Total assets

34,048

34,048

Total liabilities

(5,511)

(5,511)

 

4. Earnings per share

 

 

six months to

six months to

year ended

30/06/2017

30/06/2016

31/12/2016

Weighted average number of shares in Issue (000’s)

20,313

20,024

20,166

Adjusted for effects of dilutive potential Ordinary shares (000’s)

473

381

340

Weighted average number for diluted earnings per share (000’s)

20,786

20,405

20,506

Profit attributable to owners of the Parent (£000’s)

1,584

1,311

2,580

Basic earnings per share

7.80p

6.55p

12.79p

Diluted earnings per share

7.62p

6.42p

12.58p

six months to

six months to

year ended

30/06/2017

30/06/2016

31/12/2016

£000

£000

£000

Adjusted profit attributable to owners of the Parent

Profit attributable to owners of the Parent

1,584

1,311

2,580

Exceptional items (net of tax)

269

188

1,113

Prior year tax adjustments

(285)

Adjusted profit attributable to owners of the Parent

1,853

1,499

3,408

Adjusted earnings per share

9.13p

7.49p

16.90p

Diluted adjusted earnings per share

8.92p

7.35p

16.62p

 

 

 

5. Intangible assets

 

 

Goodwill

Brands

Customer relationships

Patents, trademarks

and

registrations

Development

costs

Software

and

Licences

Total

£000

£000

£000

£000

£000

£000

£000

Cost

As at 1 January 2017

5,490

2,768

686

1,050

2,198

521

12,713

Additions

470

43

100

147

96

55

911

Disposals

(10)

(10)

Foreign exchange

(1)

(1)

As at 30 June 2017

5,960

2,811

786

1,186

2,294

576

13,613

Accumulated amortisation/impairment

As at 1 January 2017

227

365

232

1,661

96

2,581

Charge for the period

42

34

67

5

36

184

Disposals

(3)

(3)

As at 30 June 2017

269

399

296

1,666

132

2,762

Net book value

As at 30 June 2017

5,960

2,542

387

890

628

444

10,851

As at 1 January 2017

5,490

2,541

321

818

537

425

10,132

 

 

 

6. Tangible assets

 

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 2017

2,180

1,904

545

101

4,730

Additions

1

12

12

44

69

Disposals

(2)

(2)

Transfer of assets in construction

131

(131)

Foreign exchange

(2)

(1)

(3)

As at 30 June 2017

2,181

2,043

556

14

4,794

Accumulated depreciation

As at 1 January 2017

276

583

332

1,191

Charge for the period

16

108

39

163

Disposals

(1)

(1)

Foreign exchange

(1)

(1)

As at 30 June 2017

292

689

371

1,352

Net book value

As at 30 June 2017

1,889

1,354

185

14

3,442

As at 1 January 2017

1,904

1,321

213

101

3,539

 

 

 

7. Business combinations

 

On 3 February 2017, the Group acquired the business and inventory of Cobbett Pty Ltd (“Cobbett”). Cobbett has been Anpario’s distributor since 1987 and the acquisition is in line with our strategy to strengthen sales and distribution channels and develop closer relationships with end users of our products.

On completion, the fair value of the net assets and liabilities of Cobbett equalled £228,000 and consequently gives rise to goodwill on the transaction of £470,000. The acquired business contributed revenues of £390,000 and a net profit before tax of £41,000 to the Group for the period from 3 February 2017 to 30 June 2017.

A contingent consideration arrangement exists that requires the Group to pay in cash, to the former owners of Cobbett, up to AUD $300,000 (£184,000) after one year, based on certain performance criteria being met.

Details of net assets acquired and goodwill are as follows:

£000

Purchase consideration

429

Inventory

85

Contingent consideration

184

Total consideration

698

The assets and liabilities at 3 February 2017 arising from the acquisition are as follows:

Acquiree’s

Fair value

Carrying Value

£000

£000

Brands

43

Customer relationships

100

Inventory

85

85

Fair value of assets

228

85

Goodwill

470

Total purchase consideration

698

Cash outflow on acquisition

514

 

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations.

Enquiries

Anpario plc
Richard Edwards Chief Executive Officer      +44(0) 777 6417 129
Karen Prior Finance Director                          +44(0) 1909 537380

Peel Hunt LLP
Adrian Trimmings, George Sellar                   +44 (0)207 418 8900