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RNS
Anpario PLC  -  ANP   

Half-year Report

Released 07:00 05-Sep-2018

RNS Number : 7517Z
Anpario PLC
05 September 2018
 

5 September 2018

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 underlying1 increase 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

 

 


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Half-year Report - RNS