Final Results

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.