Financial highlights
- 20% increase in revenue to £29.2m (2016: £24.3m)
- 25% rise in gross profits to £14.3m (2016: £11.4m)
- 10% improvement in adjusted EBITDA1 to £5.1m (2016: £4.6m)
- Proposed final dividend of 4.5p (2016: 5.5p) per share, total dividend for the year 6.5p (2016: 5.5p) an increase of 18%.
- Cash balances of £13.6m at the year-end (2016: £11.1m)
Operational highlights
- Sales growth achieved across all regions
- Implementation of our strategy starting to deliver planned benefits
- Wholly-owned subsidiaries setup in Thailand and Indonesia
- Australian distributor, acquired in early 2017, performing well
Peter Lawrence, Chairman, commented:
“The Company is maintaining the progress of last year. However, as Anpario is an international business it is not immune to the effects of currency movements. The recent strengthening of sterling against some major currencies has created a headwind and we are cautiously watching the movement in raw material prices which might be mitigated by both our production automation and route to market. Our strong balance sheet and reliable cash generation provide Anpario with a platform to invest in growth for the future and to seek out selective earning enhancing acquisitions. Overall, I remain optimistic and look forward with confidence to reporting further progress in our interim results.”
1 Adjusted EBITDA represents profit for the period before tax £3.403m (2016: £2.680m) adjusted for: share based payments £0.259m (2016: £0.210m); net finance income £0.042m (2016: £0.059m); depreciation, amortisation and impairment charges of £0.825m (2016: £0.559m) and exceptional items of £0.627m (2016: £1.221m).
Chairman’s statement
Anpario delivered a very strong performance for the twelve months to 31 December 2017 with growth in both revenue and profit. These results endorse our strategy of recruiting regional commercial teams and unifying our brands under the Anpario name. It is encouraging to see sales growth across all our regions and improved gross margin as the proportion of sales direct to the end user has increased through using our wholly owned subsidiaries. Moreover, our average sales price has risen as the proportion of sales of higher value added products has increased reflecting the success of our more targeted sales initiatives.
The integration of our Australian distributor is now complete and the business is performing well. Our subsidiary in Thailand, established during the period, has now made its first sales to end users in that country.
The board is recommending a final dividend of 4.5 pence per share making a total of 6.5 pence per share for the year, an increase of 18%. This dividend, payable on 27 July to shareholders on the register on 13 July, will be Anpario’s tenth consecutive year of increased dividend payments to shareholders and continues to reflect the Company’s confidence in the future and its ability to generate cash.
Financial Review
Revenues for the year increased by 20% to £29.2m (2016: £24.3m) with strong growth across all regions. This significant progression is justification for, and the realisation of the efforts of all staff and the investment made over the past two years to redirect the strategy and push the Group forward.
Gross profits have advanced by 25% to £14.3m (2016: £11.4m). Despite underlying raw material price inflation, we have been able to maintain our overall Group margins through increased volumes and a higher proportion of end customer sales.
To support the revenue growth and strategic initiatives, administrative expenses have risen by 36% to £10.4m (2016: £7.6m). This increase is primarily through higher employment and associated costs. Foreign exchange losses during the year totalled £0.6m. This compares with a gain of £0.2m in 2016 and represents an adverse variance of £0.8m. When the impact of foreign exchange is excluded, the comparative increase in underlying and continuing administrative expenses of 25% was lower.
Adjusted EBITDA, increased by 10% to £5.1m (2016: £4.6m), this positive advance was after taking into account currency effects.
Exceptional items in the year totalled £0.6m (2016: £1.2m), which have been incurred as part of the restructuring of the business, which we consider is substantially complete.
Profit before income tax has increased significantly by 27% to £3.4m (2016: £2.7m). Basic earnings per share increased by 15% to 14.66 pence per share (2016: 12.79 pence) and diluted earnings per share increased by 13% to 14.17 pence per share (2016: 12.58 pence).
The balance sheet is strong and debt free, with positive net cash generated from operating activities of £5.2m (2016: £3.8m). An overall net cash increase after investment and dividend payments of £2.5m (2016: £1.7m), resulting in a year-end cash balance of £13.6m (2016: £11.1m).
On 3 February 2017, the Group acquired the business and inventory of our Australian distributor, Cobbett. The initial cash outflow was £0.5m, with a further contingent consideration amount of £0.2m provided for. In the period since acquisition, the business has contributed revenues of £0.9m and profit before tax of £0.1m.
Operations
All regions delivered sales growth during the period with particularly strong performances in South East Asia, China, Middle East and the United States. Growth achieved in the United States was from a low base; however, the region now accounts for 7% of Group revenue and 10% of gross profit reflecting the high proportion of sales direct to the end user. Overall, organic sales growth totalled £4.0m. This advance reflects our strategy of transforming Anpario’s sales channels to getting closer to the end user and increasing the proportion of higher value added products.
The United States continued to be the standout performer where sales have accelerated in the dairy sector and to organic egg layers and supplying poultry integrators for both conventional and antibiotic free production. Orego-Stim and our feed safety products are being well received by customers, who are benefitting from the significant return on investment and the products help to achieve sustainable antibiotic free production. The United States presents a significant opportunity and we are actively recruiting a number of new sales people to build sales across this very large market. Inevitably, these overhead costs will be incurred before additional revenue is generated, however, we are confident on delivery over the coming year.
China benefited from the relaunch of Orego-Stim and this product accounts for around a quarter of our Chinese business. Anpario is the only supplier of Orego-Stim in China but currently sells under the Meriden-Stim brand. Litigation has continued with a former distributor over the trademark ownership, which we successfully regained in a recent court judgement. However, this has now been referred to the Court of Appeal. China’s sales were modestly affected by delays in renewing local registrations but this issue was resolved towards the end of the period.
The integration of Cobbett and its rebranding as Anpario Australia is complete. Group finance and information systems have been installed, which give our finance and operation teams in the UK head office full visibility of how the business is progressing. A new regional manager has been appointed and is developing relationships with the extensive customer base.
In South East Asia, our wholly owned subsidiary in Thailand started trading and has now achieved its first sales direct to key end users. Two additional regional account managers have also been appointed to help drive sales growth.
Latin America achieved sales growth of 8% during the period with the two key markets, Brazil and Mexico, delivering strong performances. A change of team in Brazil combined with selling direct to the end users has helped to drive a turnaround there. Sales to customers in Chile and Peru were affected by changing distributors in those countries; we expect the benefit of these changes to come through during 2018.
The Middle East returned to growth with strong performances from Israel and Turkey and the start of sales in Kuwait. Sales in Egypt were impacted towards the end of the year as avian influenza hit production. We continue to build our sales force in the region including appointing a ruminant specialist in the United Arab Emirates.
Sales to Europe increased by 9%. The United Kingdom and Ireland were particularly good markets with sales ahead by 16% compared to the previous year. The principal reason for this excellent performance was the general improvement in the dairy sector and our initiatives focused on selling our range of gut health products and mycotoxin binders.
Production
The investment in our production plant in Manton Wood in recent years has improved productivity and enabled a quicker throughput of our products. We have also recently made modifications to enable us to produce smaller pack sizes often requested by specific customers, and we intend to evaluate further opportunities where we can market smaller liquid and powder pack sizes.
We have been experiencing some raw material price increases, especially where there has been a disruption in production of specific raw materials. Anpario has strong relationships with its suppliers and although we have not been able to counter the price rises we have ensured continuity of supply. We have passed some increases on to customers but we believe our investment in automation and growth in direct business will help us to mitigate the effect of these input price rises and to maintain our margins.
Innovation and development
We have now completed the recruitment of our central technical team and its members have been designing and running trials to support the development of our product range. In addition to the zinc oxide trials mentioned at the half year; further trials include fertility improvement in dairy cows using Optomega and the use of Orego-Stim in relation to the development of coccidial immunity following vaccination. These trials have been undertaken in leading institutions around the world.
We have recently recruited a corporate development director to direct our strategic marketing plans and to help our sales teams when launching new products and to more effectively communicate the benefits to customers.
Board
I would like to welcome Richard Wood to the Board, he joined as Senior Independent Director in November 2017. We look forward to working with Richard and benefiting from his experience in the global animal health sector having built Genus plc into one of the world’s leading animal genetics companies.
People
Anpario’s growth and development is a reflection of its people across the globe. They are motivated by a desire to be leaders in their markets, delivering excellence to customers and helping build an international business that is known for its quality and success. Their commitment and dedication is greatly appreciated.
Outlook
The Company is maintaining the progress of last year. However, as Anpario is an international business it is not immune to the effects of currency movements. The recent strengthening of sterling against some major currencies has created a headwind and we are cautiously watching the movement in raw material prices which, as I mentioned above, might be mitigated by both our production automation and route to market. Our strong balance sheet and reliable cash generation provide Anpario with a platform to invest in growth for the future and to seek out selective earning enhancing acquisitions. Overall, I remain optimistic and look forward with confidence to reporting further progress in our interim results.
Peter Lawrence
Chairman
7 March 2018