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 announces its interim results for the six months to 30 June 2018.

Financial highlights
  • Sales of £14.8m (2017: £14.8m), excluding currency movements increased by 5%1
  • 19% advance in profit before tax to £2.2m (2017: £1.9m)
  • 14% uplift in diluted earnings per share to 8.7p (2017: 7.6p)
  • 2% improvement in adjusted ebitda2 to £2.7m (2017: £2.6m)
  • 10% increase in interim dividend of 2.2p per share (2017: 2.0p)
  • Cash balances of £12.6m at 30 June 2018 (31 December 2017: £13.6m)

 

Operational highlights
  • Strong sales growth in UK, Europe, China and US markets.
  • In line with business development strategy:
    • Continued investment in routes to market and product development
    • New range of feed security products and Omega 3 supplement launched.
    • Renewed focus on Latin American aquaculture market delivering benefits.

 

Peter Lawrence, Chairman, commented:

“Our business development strategy will progressively improve sales and distribution, while control of costs will ensure that they do not move ahead of the growth we achieve. Our strong balance sheet and consistent cash generation provide Anpario with a sound platform from which to make selective earnings enhancing acquisitions and to further invest in new product development for the future. With a favourable foreign exchange environment more likely in the second half year, I look forward to reporting good progress from the above initiatives early next year.”

Chairman’s statement

Anpario has delivered another sound performance in the six months to 30 June 2018 and made further good progress in its main markets.

The focus on end users and working closely with major partner distributors has helped to increase the proportion of direct business and this has contributed to a further increase in underlying1 gross margins. The transformation of our sales and distribution channels is still the key focus, with continued investment in regional commercial teams and product development, while managing costs in line with profit growth.

Anpario’s consistent cash generation means the Board is pleased to increase the interim dividend by 10% to 2.2p per ordinary share payable on 30 November 2018 to shareholders on the register at close of business on 16 November 2018.

Financial review

Anpario trades in international markets and currency fluctuations are a normal part of its business. We hedge our currency risk as effectively as we can without taking speculative positions. Compared with the prior year, the period under review saw sterling strengthening against the US dollar and that has impacted our reported results but not our underlying performance which has improved.

 Sales in the first half were unchanged at £14.8m (2017: £14.8m) and gross profit was lower at £7.0m (2017: £7.3m). If foreign exchange movements are stripped out, sales and gross profit growth would have been 5% and 6% respectively. The gross margin was 47.3% (2017: 49.1%), however the underlying1 result was an increase to 50.0%. This underlyingincrease reflects the continuation of the margin growth seen in recent years through higher sales volumes directly to end users.

Despite the strategic enhancements made in sales and product development, administrative expenses fell in the period by 7% to £4.8m (2017: £5.1m). Foreign exchange gains, included in administrative expenses, were £0.2m in the period compared to losses of £0.4m in 2017.

Adjusted EBITDA2 was ahead by 2% at £2.7m (2017: £2.6m). Profit after tax grew by 18% to £1.9m (2017: £1.6m), there were no exceptional costs during the period (2017: £0.3m).

Basic earnings per share increased by 17% to 9.16p (2017: 7.80p) and diluted earnings per share grew by 14% to 8.66p (2017: 7.62p).

Investment in stock levels at subsidiary locations to support direct sales has increased working capital requirements, the balance sheet remains strong and debt free, cash at the period end was £12.6m (31 December 2017: £13.6m).

Operations

Our operations in the UK and Europe delivered an excellent result with sales growth of 14% compared with the same period last year. The recovery in milk prices helped strengthen demand for Ultrabond and we achieved good sales growth of Optomega Plus, which is our sustainable Omega 3 supplement and helps improve fertility in dairy cows and is also used for enrichment of eggs. Optomega Plus will play an increasingly important role for both these applications in the UK and elsewhere.

Orego-Stim® continued to grow its share of the UK market with a number of veterinary organisations recommending it and leading poultry integrators incorporating its use in their production processes. We are working with industry specialists, offering turnkey solutions for the egg laying industry, and have delivered significant benefits to farmers, who are keen to maximise the profitability of their egg laying stock.

The United States increased sales by 8%, an encouraging result as we continue to penetrate this major market.  Orego-Stim® is now being used by a number of poultry integrators for various applications, including anti-biotic free bird production. It is being evaluated by more poultry and swine customers and veterinary organisations. Our product ranges continue to make progress in the US and we launched Anpro Advance, a superior next generation toxin binder, at the World Pork Exhibition in Des Moines, Iowa in June.

China achieved a 7% increase in sales and continued to focus on Meriden-Stim and our toxin binder range. This result is particularly commendable as pig prices dropped significantly in the first half of the year, partly as a result of over rapid expansion by producers.  While progress in China will be affected in the short term by this market contraction, we are already seeing encouraging signs of improvement. In March China’s Appeal Court ruled that Anpario is the rightful owner of the Orego-Stim® trademark in China. This is a very important and pleasing conclusion to a lengthy legal battle with a competitor and will help build sales of Orego-Stim®

A strong performance in Australia helped that region increase sales by 84%. There are a number of local initiatives underway to expand our market share across all species including the pet sector.

In Asia, sales declined by £0.5m, this was mainly attributable to our decision to terminate non-core and low margin product sales to the Philippines.  Malaysia and South Korea continue to perform strongly and we expect more progress later this year in Thailand, Indonesia and the Philippines. Our local sales teams are working with some large end users in the region where, having overcome some product registrations issues, we are encouraged by the opportunities.

Latin America experienced a disappointing first half. Sales were affected by the economic situation and the strengthening of the US dollar against local currencies, particularly in Brazil, Mexico and Argentina. Despite these challenges, sales of Orego-Stim® have been increasing in both the poultry and dairy markets in Brazil. We also achieved our first sales, and started trials with a number of our products, in the aquaculture markets of Ecuador and Brazil. We appointed new distributors in Chile and Peru last year and this has temporarily affected sales as a consequence we have had to re-register a number of products. Business has now started to move ahead with recent orders received and shipped.

Despite continued geopolitical events in the region and an outbreak of avian influenza, our Middle East sales declined by a modest 2%. There were successes selling Salkil, our salmonella inhibitor, direct to end users in Turkey. The introduction of more products from our range should help drive growth in this volatile region.

Innovation and development

As anti-biotic free meat production grows, vaccines and natural feed additives will play an increasingly important role in supporting the effort to reduce drug use. Through extensive trial work, Orego-Stim® has already proved its value in coccidial immunity in poultry following vaccination. Further research has started to demonstrate its compatibility with salmonella vaccination in poultry.

Feedback from UK dairy farmers using Optomega Plus, our new Omega 3 product, for fertility, has been very positive. It is also used as a supplement in the egg laying industry to enrich eggs in Omega 3 for human consumption.

This research and development programme is just a small part of the work our technical team is undertaking in order to support the intellectual property inherent in our products.

Outlook

Our business development strategy will progressively improve sales and distribution, while control of costs will ensure that they do not move ahead of the growth we achieve. Our strong balance sheet and consistent cash generation provide Anpario with a sound platform from which to make selective earnings enhancing acquisitions and to further invest in new product development for the future. With a favourable foreign exchange environment more likely in the second half year, I look forward to reporting good progress from the above initiatives early next year.

Peter Lawrence

Chairman

5 September 2018

 

  1. Underlying growth represents the results for the period adjusted for CER and excluding foreign exchange variances. Constant exchange rates (“CER”) growth is calculated by applying the applicable prior period average exchange rates to the Company’s actual performance in the respective period.
  2. Adjusted EBITDA represents operating profit £2.206m (2017: £1.860m) adjusted for: share based payments £0.112m (2017: £0.161m); depreciation, amortisation and impairment charges of £0.378m (2017: £0.347m) and closure and restructuring costs £nil (2017: £0.269m).

 

Unaudited consolidated income statement

for the six months ended 30 June 2018

 

six months to six months to year ended
30/06/2018 30/06/2017 31/12/2017
Notes £000 £000 £000
Revenue 3 14,773 14,803 29,241
Cost of sales (7,779) (7,528) (14,895)
Gross profit 6,994 7,275 14,346
Administrative expenses (4,788) (5,146) (10,358)
Exceptional items (269) (627)
Operating profit 2,206 1,860 3,361
Finance income 35 17 42
Profit before income tax 2,241 1,877 3,403
Income tax expense (366) (292) (418)
Profit for the period 1,875 1,585 2,985
Profit attributable to:
Owners of the parent 1,874 1,584 2,985
Non-controlling interests 1 1
Profit for the period 1,875 1,585 2,985
Basic earnings per share 4 9.16p 7.80p 14.66p
Diluted earnings per share 4 8.66p 7.62p 14.17p
Adjusted earnings per share 4 9.16p 9.13p 16.74p
Diluted adjusted earnings per share 4 8.66p 8.92p 16.17p

 

 

Unaudited consolidated statement of comprehensive income

for the six months ended 30 June 2018

 

six months to six months to year ended
30/06/2018 30/06/2017 31/12/2017
£000 £000 £000
Profit for the period 1,875 1,585 2,985
Items that may be subsequently reclassified to profit or loss:
Exchange difference on translating foreign operations 76 54 109
Cashflow hedge movements (net of deferred tax) (107) 162
Total comprehensive income for the period 1,844 1,639 3,256
Attributable to the owners of the parent: 1,843 1,638 3,256
Non-controlling interests 1 1
Total comprehensive income for the period 1,844 1,639 3,256

 

 

Unaudited consolidated statement of financial position

as at 30 June 2018

 

as at as at as at
30/06/2018 30/06/2017 31/12/2017
Notes £000 £000 £000
Intangible assets 5 10,954 10,851 10,820
Property, plant and equipment 6 3,319 3,442 3,347
Deferred tax assets 451 338 447
Non-current assets 14,724 14,631 14,614
Inventories 3,852 2,315 3,088
Trade and other receivables 6,821 6,921 5,720
Derivative financial instruments 76 220
Cash and cash equivalents 12,647 12,611 13,559
Current assets 23,396 21,847 22,587
Total assets 38,120 36,478 37,201
Called up share capital 5,357 5,292 5,350
Share premium 10,397 9,518 10,330
Other reserves (5,346) (4,801) (5,406)
Retained earnings 22,123 20,428 20,248
Equity attributable to owners of the parent company 32,531 30,437 30,522
Non-controlling interest (1) (1)
Total equity 32,530 30,436 30,522
Deferred tax liabilities 1,045 974 1,044
Non-current liabilities 1,045 974 1,044
Trade and other payables 4,149 4,602 5,348
Current income tax liabilities 396 466 287
Current liabilities 4,545 5,068 5,635
Total liabilities 5,590 6,042 6,679
Total equity and liabilities 38,120 36,478 37,201

 

Unaudited consolidated statement of changes in equity

for the six months ended 30 June 2018

 

  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 2017 5,291 9,515 (5,112) 18,843 28,537
Profit for the period 1,585 (1) 1,584
Currency translation differences 54 54
Cash flow hedge reserve 123 123
Total comprehensive income for the period 177 1,585 (1) 1,761
Issue of share capital 1 3 4
Share-based payment adjustments 134 134
Transactions with owners 1 3 134 138
Balance at 30 June 2017 5,292 9,518 (4,801) 20,428 (1) 30,436
Profit for the period 1,400 1 1,401
Currency translation differences 55 55
Cash flow hedge reserve 39 39
Total comprehensive income for the period 94 1,400 1 1,495
Issue of share capital 58 812 870
Deferred tax regarding share–based payments 71 71
Joint share ownership plan (825) (825)
Share-based payment adjustments 55 55
Dividends relating to 2016 (1,580) (1,580)
Transactions with owners 58 812 (699) (1,580) (1,409)
Balance at 31 December 2017 5,350 10,330 (5,406) 20,248 30,522
Profit for the period 1,875 (1) 1,874
Currency translation differences 76 76
Cash flow hedge reserve (107) (107)
Total comprehensive income for the period (31) 1,875 (1) 1,843
Issue of share capital 7 67 74
Share-based payment adjustments 91 91
Transactions with owners 7 67 91 165
Balance at 30 June 2018 5,357 10,397 (5,346) 22,123 (1) 32,530

 

Unaudited consolidated statement of cash flows

for the six months ended 30 June 2018

 

six months to six months to year ended
30/06/2018 30/06/2017 31/12/2017
£000 £000 £000
   
Cash generated from operating activities (229) 2,448 5,583
Income tax paid (257) (73) (349)
Net cash generated from operating activities (486) 2,375 5,234
Investment in subsidiary (514) (514)
Purchases of property, plant and equipment (130) (69) (151)
Proceeds from disposal of property, plant and equipment 1 44
Payments to acquire intangible assets (354) (298) (624)
Interest received 35 17 42
Net cash used in investing activities (449) (863) (1,203)
Joint share ownership plan (825)
Proceeds from issuance of shares 74 4 874
Dividend paid to Company’s shareholders (1,580)
Net cash used in financing activities 74 4 (1,531)
Net increase in cash and cash equivalents (861) 1,516 2,500
Effect of exchange rate changes (51) (17) (53)
Cash and cash equivalents at the beginning of the period 13,559 11,112 11,112
Cash and cash equivalents at the end of the period 12,647 12,611 13,559

 

 

six months to

 

 

six months to

 

 

year ended

30/06/2018 30/06/2017 31/12/2017
£000 £000 £000
Cash generated from operating activities  
Profit before income tax 2,241 1,877 3,403
Net finance income (35) (17) (42)
Depreciation, amortisation and impairment 378 348 825
(Profit)/Loss on disposal of property, plant and equipment 7 19
Share-based payments 91 134 189
Fair value adjustment to derivatives 37 (44)
Changes in working capital:  
Inventories (783) (38) (855)
Trade and other receivables (1,130) (212) 965
Trade and other payables (1,028) 349 1,123
Net cash generated from operating activities (229) 2,448 5,583

 

Notes to the financial statements

for the six months ended 30 June 2018

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 2018.

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 2017, 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 2017 were approved by the Board of Directors on 7 March 2018 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 2018 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 2018            
Total segmental revenue 2,678 6,401 6,366 2,068 17,513
Inter-segment revenue (2,740) (2,740)
Revenue from external customers 2,678 6,401 3,626 2,068 14,773
             
Adjusted EBITDA 568 2,118 1,410 645 (2,045) 2,696
Depreciation and amortisation (4) (6) (368) (378)
Net finance income 1 34 35
Share-based payments (112) (112)
Profit before income tax 564 2,112 1,410 646 (2,491) 2,241
Income tax (366) (366)
Profit for the period 564 2,112 1,410 646 (2,857) 1,875
             
Total assets         38,120 38,120
Total liabilities         (5,590) (5,590)

 

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)
Profit before income tax 988 1,888 1,217 815 (3,031) 1,877
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 year ended 31 Dec 2017
Total segmental revenue 6,013 12,461 10,967 3,984 33,425
Inter-segment revenue (4,184) (4,184)
Revenue from external customers 6,013 12,461 6,783 3,984 29,241
Adjusted EBITDA 1,818 3,775 2,641 1,528 (4,690) 5,072
Depreciation and amortisation (13) (10) (802) (825)
Net finance (income)/expense 1 1 2 38 42
Share-based payments (259) (259)
Exceptional items (36) (254) (3) (42) (292) (627)
Profit before income tax 1,770 3,512 2,638 1,488 (6,005) 3,403
Income tax 17 (31) (1) (403) (418)
Profit for the year 1,787 3,481 2,638 1,487 (6,408) 2,985
Total assets 37,201 37,201
Total liabilities (6,679) (6,679)
4.    Earnings per share
six months to six months to year ended
30/06/2018 30/06/2017 31/12/2017
   
Weighted average number of shares in Issue (000’s) 20,472 20,313 20,361
Adjusted for effects of dilutive potential Ordinary shares (000’s) 1,183 473 709
Weighted average number for diluted earnings per share (000’s) 21,655 20,786 21,070
 
Profit attributable to owners of the Parent (£000’s) 1,875 1,585 2,985
   
Basic earnings per share 9.16p 7.80p 14.66p
Diluted earnings per share 8.66p 7.62p 14.17p

 

six months to

 

six months to

 

year ended

30/06/2018 30/06/2017 31/12/2017
£000 £000 £000
Adjusted profit attributable to owners of the Parent  
Profit attributable to owners of the Parent 1,875 1,585 2,985
Exceptional items (net of tax) 269 544
Prior year tax adjustments (121)
Adjusted profit attributable to owners of the Parent 1,875 1,854 3,408
   
Adjusted earnings per share 9.16p 9.13p 16.74p
Diluted adjusted earnings per share 8.66p 8.92p 16.17p
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 2018 5,960 2,768 786 1,346 2,447 589 13,896
Additions 159 158 37 354
Foreign exchange (1) (1)
As at 30 June 2018 5,960 2,768 786 1,504 2,605 626 14,249
 
Accumulated amortisation/impairment
As at 1 January 2018 310 443 395 1,758 170 3,076
Charge for the period 42 40 100 37 219
As at 30 June 2018 352 483 495 1,758 207 3,295
               
Net book value              
As at 30 June 2018 5,960 2,416 303 1,009 847 419 10,954
As at 1 January 2018 5,960 2,458 343 951 689 419 10,820
6.    Tangible assets

 

Land and buildings

 

Plant and machinery

Fixtures, fittings and equipment

 

Total

£000 £000 £000 £000
Cost
As at 1 January 2018 2,181 2,088 430 4,699
Additions 97 33 130
Foreign exchange 1 1
As at 30 June 2018 2,181 2,186 463 4,830
 
Accumulated depreciation
As at 1 January 2018 308 776 268 1,352
Charge for the period 16 108 35 159
As at 30 June 2018 324 884 303 1,511
 
Net book value
As at 30 June 2018 1,857 1,302 160 3,319
As at 1 January 2018 1,873 1,312 162 3,347

 

 

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