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Anpario plc  -  ANP   

Half-year Report

Released 07:00 19-Sep-2017

Half-year Report

LONDON--(BUSINESS WIRE)--

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

Operational highlights

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

Anpario plc

Source: Anpario plc


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Half-year Report - RNS