TIDMANP
RNS Number : 2325M
Anpario PLC
13 September 2023
Anpario plc
("Anpario", the "Group"
or the "Company")
Interim results
Anpario plc (AIM:ANP), the independent manufacturer of natural
sustainable animal feed additives for animal health, nutrition and
biosecurity is pleased to announce its unaudited interim results
for the six months to 30 June 2023 ("H1 2023").
Highlights
Financial highlights
- 7% decrease in sales to GBP15.3m (H1 2022: GBP16.5m) as sales
growth in the United States and Australasia was offset by declines
across Asia Pacific, Europe and Latin America.
- Gross profits fell by a lower amount of 3% due to an increase
in gross margins to 43.9% (H1 2022: 41.9%)
- 37% decrease in adjusted EBITDA(1) to GBP1.9m (H1 2022: GBP3.0m)
- 42% decrease in profit before tax to GBP1.4m (H1 2022: GBP2.4m)
- Diluted adjusted earnings per share down 42% to 5.66p (H1 2022: 9.81p)
- 2% increase in interim dividend to 3.20p (H1 2022: 3.15p) per share
- Cash balances, including short-term investments, of GBP7.3m at
30 Jun 2023 (31 Dec 2022: GBP13.6m), after GBP9.1m transferred to
an escrow account ahead of the completion of the tender offer in
July.
Operational highlights
- Sales price increases helped soften the reduction in volumes
and recovered gross margins previously impacted by raw material
price inflation.
- Sales growth of Orego-Stim(R) and pHorce(R) benefiting from
the trend to reduce antibiotic use and demand for anti-viral feed
mitigants.
- Strong growth of sustainably sourced omega 3 supplement brand Optomega(R) Algae.
- Received first ever King's Award for Enterprise for Sustainable Development.
Outlook
- Further improvement of gross margin expected in H2 2023
through an anticipated further reduction in the cost of raw
materials and recovery in sales volumes.
- Benefits of mitigating cost reductions and efficiency
improvements implemented in H1 2023 expected to feed into the
latter part of H2 2023 and more fully realised in 2024.
- Some signs of the recent challenges faced across the global
agriculture industry are beginning to alleviate.
- Regulatory environment continues to move towards natural and
sustainable feed additive solutions giving the Board confidence in
the long-term profitable development of the company.
Matthew Robinson, Chairman, commented:
"In my first statement as Chairman, I would like to thank my
predecessor, Kate Allum, for her two years of service to Anpario
and the significant contribution she made in her leadership and
guidance of the Board.
The Board reports the Group's performance during what has been a
difficult and challenging first half of the year for the global
agricultural industry. Group sales declined by 7% to GBP15.3m
compared to the prior year period of GBP16.5m, as meat protein
producers came under significant margin pressure due to high feed
and overhead costs, weak consumption as consumers reacted to the
effects of increased cost of living and in some regions an
oversupply of poultry, pork and shrimp. These difficulties
inevitably led to a reduction in the use of speciality feed
additives as producers scaled back production and looked to reduce
input costs. Our biggest region, Asia, suffered the most, further
affected by disease outbreaks of avian influenza and African swine
fever (ASF).
The actions taken to recover raw material price inflation helped
to increase gross margins by 2.0% to 43.9% compared to the same
period last year, which would have been higher but for an under
recovery of production overhead costs due to lower volumes. Our
weighted average selling price increased by 25% driven by necessary
price increases and a higher value-add product mix.
Adjusted EBITDA(1) declined by 37% to GBP1.9m compared to the
same period last year of GBP3.0m. Action has already been taken to
reduce overhead costs and the automation investment in the
production facility has improved efficiency at lower volume levels.
The benefit of these actions will be partially felt in the final
quarter and more fully in 2024. The difficult decisions taken would
not have been possible without the efforts and support of our staff
across the globe who have remained resolute throughout difficult
trading conditions and remain focused on implementing our
strategy.
The geographic and product diversity of the Group continues to
serve us well but the synchronised challenges currently impacting
global agriculture and most species are highly unusual. Our
strategy to offer sustainable and environmentally friendly products
which help customers transition away from using antibiotics and
some of the harsher chemical treatments positions Anpario to take
advantage of current and future trends.
The recovery in our markets is taking longer than we anticipated
at the beginning of the year and is also exacerbated by high
inventory levels throughout the industry. However, our sales teams
are focused on offering high value differentiated solutions which
deliver significant benefits to the producer across the four main
species groups of poultry, swine, ruminant and aquaculture. There
are signs that some of these challenges are alleviating for our
customers, not least, the expectation of further falls in animal
feed prices in the second half of this year. The second half has
started at a similar level as the first, but we anticipate that as
conditions in the industry improve and our business development
initiatives prove successful, sales growth will return as the year
progresses and into 2024.
We were pleased to return GBP9m in cash to shareholders by way
of the tender offer. After this corporate action the Group retains
a strong balance sheet and healthy cash balance with which to
deliver on its growth objectives."
Matthew Robinson, Chairman
(1) Adjusted EBITDA represents operating profit for the period
of GBP1.195m (H1 2022: GBP2.313m) adjusted for: share based
payments and associated costs GBP0.120m (H1 2022: GBP0.091m); and
depreciation and amortisation charges of GBP0.590m (H1 2022:
GBP0.604m)
Enquiries:
Anpario plc:
Richard Edwards, CEO +44(0)7776 417 129
Marc Wilson, Group Finance
Director +44(0)1909 537 380
Shore Capital:
(Nominated Adviser and Broker): +44 (0) 20 7408 4090
Stephane Auton Corporate Advisory
David Coaten
Tom Knibbs
Henry Willcocks Corporate Broking
Chief Executive Officer's statement
Overview
Group sales for the six months to 30 June 2023 declined by 7% to
GBP15.3m (H1 2022: GBP16.5m), impacted by the numerous challenges
affecting the global agricultural industry. Brazil and the United
States (US) delivered strong sales growth of 18% and 27%
respectively, reflecting the strength of their home agricultural
and energy markets which enable them to be competitive exporters of
meat protein to the other regions of the world. However, Asia, our
biggest region, accounting for more than a third of Group sales
during the period, experienced sales and volume declines of 18% and
29% respectively.
Our higher value differentiated product brands Orego-Stim(R),
pHorce(R) and Optomega(R) Algae delivered sales growth of 4%, 42%
and 117% respectively, but these performances were offset by
declines of more competitive product areas in organic acids,
mycotoxin binders and antioxidants. Group product volumes declined
by 26% with the biggest impact being in these lower value-added
price sensitive products. Volume declines, however, were tempered
by an increase in weighted average selling price of 25% compared to
the same period last year, which illustrates the extent to which
raw material price inflation has been passed on in selling prices
and the strength of our leading product brands.
Gross profit decreased by 3% to GBP6.7m (H1 2022: GBP6.9m) for
the six months to 30 June 2023, reflecting lower volumes sold.
Encouragingly, gross margins increased from 41.9% to 43.9%,
primarily due to passing on raw material price inflation in prices,
combined with declining raw material and logistics costs during the
period. Historically high inventory levels, which we are now
reducing, means that some of the cost reductions will continue to
work their way through to benefit cost of goods sold, which is also
dependent on production volumes through the factory reflecting the
Company's high operational gearing.
pHorce(R) continues to perform well in the North American swine
market not only as an anti-viral feed mitigant but also improving
the performance and productivity of the animal. In addition,
pHorce(R) is undergoing trials with a significant poultry
integrator where it has already proven to be effective at
controlling salmonella in antibiotic free formulations. Our new
Orego-Stim Forte(R) product for aquaculture, which contains several
natural phytogenic compounds, has proved to be highly effective at
preventing and controlling necrotic enteritis when administered
through the drinking lines for poultry in an easy-to-use
water-soluble form. We have developed a number of product
extensions for Orego-Stim(R) to customise the product for specific
applications tailored to market requirements.
The first half of the year has undoubtedly been the toughest to
navigate where industry specific and geopolitical challenges have
coalesced to make the trading environment very difficult. The 37%
decline in EBITDA(1) to GBP1.9m compared to the same period last
year (H1 2022: GBP3.0m) is disappointing and reflects market
challenging conditions. However, the team's priorities remain on
profitable sales growth but equally it has been necessary to reduce
our overheads to match current trading levels. There are some
positive signs in our markets and with our customers but these are
volatile times and so we remain cautious but optimistic that our
markets are beginning to improve from what was a very testing first
half.
Operational review
Americas
Overall, the segment grew sales by 7% due to increased sales in
Brazil and the United States delivering growth of 18% and 27%
respectively compared to the same period last year. Brazil's
poultry industry was a big beneficiary of export trade, with a 17%
increase in the first quarter of 2023. Whether this level of export
activity continues will depend on how successful the industry is at
limiting the impact of high pathogenicity avian influenza (HPAI)
which has now reached some poultry producing southern states
although it appears to be limited to wild birds and smaller
farms.
The US delivered strong sales and volume growth from both
Orego-Stim(R) and pHorce(R). Orego-Stim(R) had a successful launch
to the young cattle market for inclusion in calf milk delivering
healthier better performing calves, reduced medication costs and
reducing antimicrobial resistance as proven by our research with
the University of Reading and the granting of the UK patent for
this specific claim. We have also combined Orego-Stim(R) and our
mycotoxin binder product to produce a 2-in-1 solution for the US
dairy market and are working with a distributor to the poultry
industry on a water-soluble combination product for preventing and
controlling necrotic enteritis as demonstrated in trial work
undertaken in the US last year.
Historically Argentina has been a consistent market for Anpario
but in recent times the economy has been under increasing strain
with a weak currency, high inflation and central bank currency
controls which have impacted our sales to the country with a
decline of 22% compared to the same period last year.
Sales to the Latin America region declined by 9% and, although
Colombia and Mexico delivered good sales growth with products
including Optomega(R) Algae and pHorce(R), the overall performance
of the region was impacted by a drop in pellet binder sales to
Ecuador.
Asia
The segment, which includes Australasia, China and South-East
Asia accounts for just over one third of Group sales. Sales
declined by 18% in this segment compared to the same period last
year with volumes 29% lower of which two thirds can be attributed
to the Philippines, which has been badly affected by African swine
fever such that pork production is still 23% lower than in the
first quarter of 2021. In addition, producer profit margins have
been squeezed by high feed and overhead costs. The decline in
volumes tended to come from more price sensitive and lower margin
products such as antioxidants where the price of a key raw material
ingredient increased exponentially across Europe due to supply
constraints following Russia's invasion of Ukraine.
The other notable decline in sales performance was Malaysia,
which suffered from high feed prices and a number of outbreaks of
avian influenza. The expectation is that lower feed cost levels,
albeit still historically high, in the second half will support
producers in improving their margins.
Australasia and Indonesia delivered strong sales performances of
18% and 49% respectively compared to the same period last year. The
tough markets in South-East Asia have also been exacerbated by high
inventory levels throughout the supply chain following the rapid
opening up of economies post pandemic; this placed increased
pressure on global logistics prompting feed additive suppliers,
distributors and feed mills to build up inventory only to be
confronted shortly afterwards by a drop in meat protein production
as consumption waned. The unwinding of this situation is taking
longer than expected but is and will continue to improve with
time.
China which accounts for just under 13% of Group sales declined
by 9% due to the difficulties experienced in the swine market
driven by weaker than expected pork consumption, while continuous
herd liquidation added more supply resulting in lower pork prices.
Furthermore, outbreaks of African swine fever in some provinces
have seen short-term disruptions and this uncertainty and months of
losses is forcing smaller producers to exit production. Pork prices
have improved in recent weeks, but it remains to be seen whether
this is sustainable given the weak economy. Our China business is
redirecting its efforts towards the dairy and aquaculture sectors,
with success, which we believe have better growth opportunities in
the medium term and will reduce our dependency on the swine
market.
The Middle East, Africa and India
Despite sales and volumes declining by 4% and 37% respectively
compared to the same period last year, we are encouraged by the
progress the sales team has made in selling our higher value add
products such that the weighted average selling price improved by a
hugely significant 52%. Most of the drop in volumes are attributed
to lower margin mycotoxin and pellet binders, which are often
subject to tender bidding processes leaving little opportunity to
differentiate. In contrast, Optomega(R) Algae has been well
received by customers looking to improve dairy cow fertility. There
was also good growth in Turkey with Genex(R) Poultry which is an
acid-based eubiotic and phytogenic combination.
Sales of Orego-Stim(R) to India increased by 28% as our
long-term partner expanded the market opportunities for the
product. We consider India to be a good opportunity for Anpario's
product range and will be working more closely with our local
partner in the future.
Europe
Overall sales and volumes declined by 8% and 20% respectively
compared to the same period last year. However, the first quarter
of last year had some residual sales from the UK feed hygiene
customer lost due to significant cost inflation in organic acids;
excluding this customer loss, the sales across the segment would
have grown by 3% with volumes declining by a lessor 9%. The
weighted average selling price across the segment increased by 15%
reflecting actions taken to recover raw material cost
inflation.
Pork production across Europe has been in decline over the past
year with a year-on-year decline of 10% in the first four months of
2023 with the UK and Spain, the latter being Europe's largest pig
meat producer, experiencing declines of 17% and 7% respectively.
The contraction in supply has helped to increase pork prices and
with feed prices dropping more efficient producers have returned to
profitability. The improvement in market conditions for producers
means they are more receptive to using speciality feed additives
which is borne out by our improved performance in Spain, Poland and
the Baltic States.
The European poultry market is performing relatively well with a
drop in feed prices helping producer profitability and strong
market conditions for poultry as its value compares favourably with
competing animal proteins such as pork where prices have increased
by 25% since the start of the year. Poultry imports to Europe were
up 10%, mainly from Brazil and Ukraine. Certain countries were
affected by avian influenza outbreaks during the period, but cases
continue to drop in commercial farms. Sales of our leading product
brands are expected to benefit as producer profitability improves
and regulatory tailwinds such as zinc oxide removal from piglet
diets and the trend to reduce antibiotic use continue to take
effect.
Innovation and development
More recently our innovation and development activities have
been undertaken in conjunction with major commercial companies who
are looking for specific solutions to their problems or who want to
remove some of the harsher chemical treatments used in production
and who are also looking for more sustainable and environmentally
friendly approaches.
One example is Orego-Stim(R) Forte recently developed for the
aquaculture market, which combines a number of plant extracts with
our 100% natural oregano essential oil (OEO) to produce a
water-soluble version for use in aquafeed or direct to fish farms.
We are now trialling Orego-Stim(R) Forte with a commercial partner
for use in poultry shed drinking lines to prevent and control
necrotic enteritis. We also have several shrimp trials underway to
support the sales and marketing of the product in the Asia Pacific
and Latin America regions.
In an initiative to reduce packaging, wastage and improve
efficiency in logistics and warehousing we have developed higher
concentrations of our products including Orego-Stim(R) in liquid
form which is available in a number of concentrations to suit the
customer. pHorce(R) is another example being a high strength
acid-based eubiotic, which is only possible due to its unique
mineral carrier system and production process such that it is very
effective in eliminating harmful pathogens and why it is successful
in controlling bacteria such as salmonella infections in the
absence of antibiotics.
In another stride to enhance factory efficiency and manage
demand volatility, we installed a state-of-the-art fully automated
palletiser, representing GBP0.2m capital investment in our
production facility. Automation has been a crucial part of our
strategy and fundamental to responding to growing customer demands
and the continual drive towards sustainable and efficient
operations. This recent investment has improved output capacity and
also halved the level of manual handling in the factory.
Outlook
It is evident that Asia being the largest segment has had an
outsized effect on our performance during the period under review.
However, the reduction in volumes has tended to be in products
characterised as lower value add and more price sensitive. It is
encouraging, therefore, that our higher value differentiated
products exhibited some growth even in difficult markets. The
combination of passing on raw material cost inflation through
selling prices and the recent softening of these input prices has
helped to increase gross margins with further improvement expected
as cheaper raw materials work their way through the system and as
our sales volumes recover. We have taken action to reduce overheads
given the drop in sales; the benefits of which will be partially
felt in the final quarter of this year and more fully in 2024.
Although the second half has started in a similar vein as the
first, there are some positive signs that challenges across the
global agriculture industry are beginning to alleviate although it
is geography dependent. Producer farm margins have begun to improve
as excess supply due to reduced meat protein consumption is
tightening, leading to increased pricing for farmers. In addition,
the cost of animal feed is expected to fall further albeit still at
relatively high levels. The ideal scenario for Anpario is a
balanced supply of meat protein such that producers are profitable,
and the price is affordable for consumers to increase consumption
of meat products. We anticipate markets to be volatile but are
optimistic that the direction of travel will support our business
development initiatives which are gaining traction.
Our leading products consistently demonstrate their resilience
precisely because they deliver the expected return on investment in
our customers' operations. The growth drivers across the meat
protein industry remain intact and the regulatory environment is
continually moving towards natural and sustainable feed additive
solutions, which gives us confidence in the long-term profitable
development of the company.
Richard Edwards
Chief Executive Officer
13 September 2023
Key performance indicators
Financial
H1 2023 H1 2022
Note GBP000 GBP000 change % change
------------------------------------- ----- -------- -------- ------- ---------
Revenue 3 15,273 16,471 -1,198 -7%
Gross profit 6,699 6,900 -201 -3%
Gross margin 43.9% 41.9% +2.0%
Adjusted EBITDA 4 1,905 3,008 -1,103 -37%
Profit before tax 1,364 2,361 -997 -42%
Diluted adjusted earnings per share 6 5.66p 9.81p -4.15p -42%
Interim dividend 3.20p 3.15p +0.05p +2%
Cash and cash equivalents 7,298 13,320 -6,022 -45%
Net assets 43,059 41,973 +1,086 +3%
Financial review
Revenue and gross profits
Revenue for the period fell by 7% to GBP15.3m (H1 2022:
GBP16.5m), on a constant exchange rate basis the fall is similar at
8%. Performance through the second quarter has been stronger in
both sales and gross margin terms. Volumes overall were 26% lower
than the prior year. The more competitive product segments such as
Antioxidants, Binders and some of our Acid-based range contributing
to almost all of this volume decline, and more than all of the
revenue reduction. This is due to a combination of lower demand due
to reduced levels of meat production and price pressures leading
some producers to switch to lower quality and cheaper alternatives.
As animal protein production increases and producers return to
profitability then we expect to see this volume reduction reverse
as our products in this segment are more efficacious, longer
lasting and of a higher quality than the more commoditised
alternatives.
Excluding these more competitive product segments, sales across
other products grew by 11% over the same period last year. These
products including our market leading phytogenic Orego-Stim(TM)
alongside Optomega(TM) Algae and pHorce were able to grow despite
the difficult market context due to their more novel applications,
the result of continuing research and development efforts, and
their higher and more differentiated value add to producers. As a
result of this change in sales mix, and a whole period contribution
of sales price rises previously implemented to offset input cost
inflation, then the average selling price per tonne increased by
25%.
Sales performance was strong in the USA, with revenue up 27%
over the prior period, contributing to an overall geographic
segment increase for the Americas of 7%. This offset a slight
reduction in revenue across MEA and Europe, down 4% and 8%
respectively. However, the largest factor in the overall sales
decline was in Asia, with revenue down GBP1.2m for the region, the
same as the overall Group reduction. Sales in South-East Asia were
down 28% and a smaller decline in sales in China of 9% was almost
fully offset by revenue growth in Australasia, which was up by 18%.
Detailed commentary on the performance of the operating segments is
available in the Chief Executive Officer's Statement.
During the period there was a 3% decrease in gross profit to
GBP6.7m (H1 2022: GBP6.9m), this was lower in percentage terms to
the revenue decline due to a welcome increase in gross margins
43.9% (H1 2022: 41.9%). Whilst some of the factors that have been
negatively impacting our margins have stabilised or improved, there
are still several others limiting the recovery of our gross margins
to their previous levels. Input costs are stabilising and falling
slightly across some raw materials, but they are still at very high
levels compared to where they were historically. Sales price rises
have been implemented fully, but we are still absorbing some margin
pressures to try to mitigate against any further decline in
volumes. We are anticipating that input costs will continue to
gradually fall, which will enable margins to return to more
normalised levels across those product ranges most affected, such
as Acid-based Eubiotics.
The change in sales mix towards products such as Orego-Stim(R)
alongside Optomega(R) Algae and pHorce, away from the higher volume
and comparatively lower contribution products, has meant that the
gross profit per tonne has increased by 31% over the prior period.
Whilst this mix change is helping to increase margins through
higher profitability per tonne, the related reduction in sales
volumes is also reducing margins through the under-recovery of
production costs. The highly automated and low staffing levels
required in production means that we can scale up volumes very
efficiently, however, when volumes are lower there is a largely
fixed operating cost base spread across a reduced level of output.
We have implemented a number of cost reduction measures, including
a reduction in operating hours and other efficiency improvements.
However, the key to reversing the margin reduction impact of this
under-recovery will be through an increase in sales volumes.
Administrative expenses
Administrative expenses were 20% higher at GBP5.5m (H1 2022:
GBP4.6m). This comparative difference is almost fully accounted for
by favourable amounts in the prior year's first half period related
to foreign exchange gains, a release of doubtful debt provisions
that were no longer required and higher than typical levels of
staff capitalisation for research and development. In the first
half of the current year those same items cumulatively represent
expenses of just GBP26,000, but in H1 2022 they represented a net
gain/reduction of administrative costs of GBP0.8m.
Excluding the items mentioned above, core administrative costs
for the first half of last year were GBP5.4m. Against a backdrop of
materially high inflation across the board, most notably in travel
expenditure, then these core administrative costs rose only
slightly in the period by 2% (GBP0.1m) to GBP5.5m. This also
represents a reduction of 4% (GBP0.2m) when compared to the second
half of 2022.
The inflationary pressures and reduced profitability have led to
a greater focus and emphasis on optimising expenditure and
operating more efficiently and the hard work and efforts by staff
in this regard have been greatly appreciated. However, despite
these efforts it has been necessary to implement a restructuring
and redundancy process and we have regrettably needed to reduce
headcount and external resource in several areas of the business to
right-size the operations for the current reduced volumes and
levels of profitability. This process has now concluded and the
related reduction in costs, felt to a small degree through the
first half, should contribute to a decline in comparable
administrative expenses for the second half and give a full year
contribution in 2024.
Foreign exchange
As previously mentioned, hedging contracts are in place to
mitigate the downside-risks related to adverse GBP/USD exchange
rate movements, which represents the principal foreign exchange
risk to the Group. The weighted average forward rate of these
contracts was higher than the spot rate at 30 June 2023 (1.271) and
as such their net fair value represented a liability of GBP0.4m, a
significant decrease from a liability GBP1.3m at 31 December 2022
when the spot rate was lower at 1.210. The majority of this amount
and the movement thereof is deferred in equity in accordance with
cash-flow hedge accounting.
Taxation
Effective from April 2023 UK corporation tax rates increased to
25% from 19%, despite this, the effective tax rate for the period
was similar to last year at 10.6% (H1 2022: 10.5%). Anpario
benefits from R&D tax allowances due to the development work
related to new products and applications. In addition to this,
Anpario benefits from a reduction in the tax charged on the profits
generated by our market leading phytogenic product Orego-Stim(R)
due to the application of the Patent Box scheme which allows
companies to apply a lower rate of corporation tax to profits
attributable to qualifying patents.
Profitability and earnings per share
Resulting from the GBP0.2m reduction in gross profits and
combined with the GBP0.9m increase in administrative costs, of
which GBP0.8m was a credit in the prior period, then adjusted
EBITDA for the period decreased by GBP1.1m to GBP1.9m (H1 2022:
GBP3.0m). Profit before tax decreased by 42% to GBP1.4m (H1 2022:
GBP2.4m). Basic earnings per share decreased 43% to 5.91p (H1 2022:
10.33p) and diluted adjusted earnings per share decreased by a
similar amount of 42% to 5.66p (H1 2022: 9.81p).
Tender offer
As announced in June 2023, Anpario launched a GBP9.0m tender
offer to purchase its own shares at a price of 225p per ordinary
share. Valid tenders were received in respect of 107 per cent of
the total number of share subject to the tender offer and as such
the company purchased the full 4,000,000 ordinary shares. The
actual repurchase and settlement of the transaction occurred in
early July 2023 and as such is not reflected in these financial
statements, other than to show the GBP9.1m held in escrow with a
third-party as a separate line item of the statement of financial
position.
Following the conclusion of the Tender Offer, the 4,000,000
shares repurchased, together a further 440,388 shares that were
already held in Treasury were subsequently cancelled. As this took
place after 30 Jun 2023, the earnings per share calculation in note
6 does not reflect any impact of this transaction. There will be a
partial benefit to FY 2023 as the transaction occurred half-way
through the year, by a way of a reduction in the number of weighted
average shares in issue, however the full year impact will only be
felt through 2024.
Cash flow
Cash generated by operations during the period was GBP2.6m, this
compares to an outflow of cash during the same period last year of
GBP1.1m. Operating cash flows before changes in working capital
were lower as a result of the reduced levels of profitability at
GBP1.6m (H1 2022: GBP3.4m). However, this was more than offset by a
release of working capital of GBP0.9m compared to an absorption of
GBP4.5m over the same prior period.
Included in the release of working capital was a decrease in
inventories of GBP2.1m, with finished goods and raw materials
levels both down equally from the year end as we continued to
reduce the level of raw materials held as part of supply chain
contingencies and also lowering the level of safety stock held in
our subsidiaries to cover logistics concerns. There was a slight
increase in trade receivables of GBP0.2m and a reduction in trade
payables of GBP1.0m, which relates to the payment of raw materials
strategically purchased at the end of the prior year.
The corporation tax debtor at the year end relating to
overpayments and the application of the Patent Box scheme tax
deductions was repaid in the period and as such there was a net
income tax refund of GBP0.7m. This further helped to generate net
cash from operating activities of GBP3.2m during the period (H1
2022: GBP1.5m outflow).
Capital expenditure in the period was GBP0.5m (H1 2022:
GBP1.1m), with only a small investment in an automated palletiser
of GBP0.2m and a reduced level of expenditure on development
projects. The automated palletiser represents the last stage of a
wider programme of CAPEX projects to increase efficiency and
throughput of the production facilities that started in 2016.
Net cash used in financing activities of GBP9.1m primarily
relates to the tender offer, as at 30 June 2023 these amounts were
held in escrow with a third-party ahead of the conclusion of the
tender offer in early July 2023.
As at the year end, cash and cash equivalents as shown on the
statement of financial position and on the cash flow statement
exclude short-term investments which represent cash held in notice
accounts for more than 90 days in order to maximise interest
received. Including these amounts, cash, cash equivalents and
short-term investments declined by GBP6.3m to GBP7.3m (31 December
2022: GBP13.6m). However, this includes the GBP9.1m outflow for the
tender offer, excluding which cash would have increased by
GBP2.9m.
Dividend
The Board has approved an interim dividend of 3.20 pence per
share (H1 2022: 3.15 pence per share), an increase of 2%. This
dividend, payable on 24 November 2023 to shareholders on the
register on 10 November 2023, reflects the Board's continued
confidence in the Group and its ability to generate cash.
Anpario has increased the dividend per share for 16 years since
its maiden dividend in 2007. Despite the current reduced level of
profitability, it is the current intention of the Board to continue
to demonstrate an increase in the dividend per share year on
year.
Marc Wilson
Group Finance Director
13 September 2023
Consolidated statement of comprehensive income
for the six months ended 30 June 2023
six months to six months to year ended
30 June 30 June 31 December
2023 2022 2022
Note GBP000 GBP000 GBP000
---------------------------------------------------------------- ------ -------------- -------------- ------------
Revenue 3 15,273 16,471 33,103
Cost of sales (8,574) (9,571) (18,967)
---------------------------------------------------------------- ------ -------------- -------------- ------------
Gross profit 6,699 6,900 14,136
Administrative expenses (5,504) (4,587) (10,576)
Operating profit 1,195 2,313 3,560
Depreciation and amortisation 590 604 1,225
Adjusting items 4 120 91 423
Adjusted EBITDA 4 1,905 3,008 5,208
---------------------------------------------------------------- ------ -------------- -------------- ------------
Net finance income 5 169 48 121
---------------------------------------------------------------- ------ -------------- -------------- ------------
Profit before tax 1,364 2,361 3,681
Income tax (144) (249) (378)
---------------------------------------------------------------- ------ -------------- -------------- ------------
Profit for the period 1,220 2,112 3,303
---------------------------------------------------------------- ------ -------------- -------------- ------------
Items that may be subsequently reclassified to profit or loss:
Exchange difference on translating foreign operations (185) 423 387
Cashflow hedge movements (net of deferred tax) 477 (967) (902)
Total comprehensive income for the period 1,512 1,568 2,788
---------------------------------------------------------------- ------ -------------- -------------- ------------
Basic earnings per share 6 5.91p 10.33p 16.13p
Diluted earnings per share 6 5.88p 9.60p 15.10p
Adjusted earnings per share 6 5.68p 10.56p 17.81p
Diluted adjusted earnings per share 6 5.66p 9.81p 16.67p
---------------------------------------------------------------- ------ -------------- -------------- ------------
Consolidated statement of financial position
As at 30 June 2023
as at as at as at
30 June 30 June 31 December
2023 2022 2022
Note GBP000 GBP000 GBP000
--------------------------------------------------- ------ --------- -------- ------------
Intangible assets 7 11,390 11,360 11,375
Property, plant and equipment 8 4,827 5,066 4,864
Right of use assets 9 107 52 50
Deferred tax assets 736 1,622 859
Derivative financial instruments 233 26 153
Non-current assets 17,293 18,126 17,301
Inventories 10 7,535 10,426 9,867
Trade and other receivables 7,042 7,323 7,003
Tender offer funds held in escrow 9,144 - -
Derivative financial instruments 5 17 21
Current income tax assets - 120 774
Short-term investments 143 1,809 1,828
Cash and cash equivalents 7,155 11,511 11,739
--------------------------------------------------- ------ --------- -------- ------------
Cash, cash equivalents and short-term investments 7,298 13,320 13,567
Current assets 31,024 31,206 31,232
Total assets 48,317 49,332 48,533
--------------------------------------------------- ------ --------- -------- ------------
Lease liabilities (75) (23) (17)
Derivative financial instruments (562) (1,249) (825)
Deferred tax liabilities (1,701) (2,063) (1,724)
Non-current liabilities (2,338) (3,335) (2,566)
Trade and other payables (2,683) (3,868) (3,983)
Lease liabilities (34) (32) (35)
Derivative financial instruments (102) (124) (638)
Current income tax liabilities (101) - -
Current liabilities (2,920) (4,024) (4,656)
Total liabilities (5,258) (7,359) (7,222)
--------------------------------------------------- ------ --------- -------- ------------
Net assets 43,059 41,973 41,311
--------------------------------------------------- ------ --------- -------- ------------
Called up share capital 5,636 5,448 5,624
Share premium 15,040 11,577 14,934
Other reserves (10,051) (7,261) (10,461)
Retained earnings 32,434 32,209 31,214
Total equity 43,059 41,973 41,311
--------------------------------------------------- ------ --------- -------- ------------
Consolidated statement of changes in equity
for the six months ended 30 June 2023
Called up Share Other Retained Total
share capital premium reserves earnings equity
---------------------------------------------
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------------- --------------- --------- ---------- ---------- --------
Balance at 1 Jan 2022 5,446 11,547 (6,788) 30,097 40,302
--------------------------------------------- --------------- --------- ---------- ---------- --------
Profit for the period - - - 2,112 2,112
Currency translation differences - - 423 - 423
Cash flow hedge reserve - - (967) - (967)
Total comprehensive income for the period - - (544) 2,112 1,568
--------------------------------------------- --------------- --------- ---------- ---------- --------
Issue of share capital 2 30 - - 32
Share-based payment adjustments - - 71 - 71
Transactions with owners 2 30 71 - 103
--------------------------------------------- --------------- --------- ---------- ---------- --------
Balance at 30 Jun 2022 5,448 11,577 (7,261) 32,209 41,973
--------------------------------------------- --------------- --------- ---------- ---------- --------
Profit for the period - - - 1,191 1,191
Currency translation differences - - (36) - (36)
Cash flow hedge reserve - - 65 - 65
Total comprehensive income for the period - - 29 1,191 1,220
--------------------------------------------- --------------- --------- ---------- ---------- --------
Issue of share capital 176 3,357 - - 3,533
Joint-share ownership plan - - (3,270) - (3,270)
Share-based payment adjustments - - 112 - 112
Deferred tax regarding share-based payments - - (71) - (71)
Final dividend relating to 2021 - - - (1,512) (1,512)
Interim dividend relating to 2022 - - - (674) (674)
Transactions with owners 176 3,357 (3,229) (2,186) (1,882)
--------------------------------------------- --------------- --------- ---------- ---------- --------
Balance at 31 Dec 2022 5,624 14,934 (10,461) 31,214 41,311
--------------------------------------------- --------------- --------- ---------- ---------- --------
Profit for the period - - - 1,220 1,220
Currency translation differences - - (185) - (185)
Cash flow hedge reserve - - 477 - 477
Total comprehensive income for the year - - 292 1,220 1,512
--------------------------------------------- --------------- --------- ---------- ---------- --------
Issue of share capital 12 106 - - 118
Share-based payment adjustments - - 110 - 110
Deferred tax regarding share-based payments - - 8 - 8
Transactions with owners 12 106 118 - 236
--------------------------------------------- --------------- --------- ---------- ---------- --------
Balance at 30 Jun 2023 5,636 15,040 (10,051) 32,434 43,059
--------------------------------------------- --------------- --------- ---------- ---------- --------
Consolidated statement of cash flows
for the six months ended 30 June 2023
six months to six months to year ended
30 June 30 June 31 December
2023 2022 2022
Note GBP000 GBP000 GBP000
---------------------------------------------------------- ------ -------------- -------------- ------------
Operating profit for the period 1,195 2,313 3,560
Depreciation, amortisation and impairment 4 590 604 1,225
Loss on disposal of intangible assets 7 - - 45
Loss on disposal of property, plant and equipment 8 - - 1
Share-based payments 110 71 183
Fair value adjustment to derivatives (246) 419 395
Operating cash flows before changes in working capital 1,649 3,407 5,409
Decrease/(increase) in inventories 2,098 (2,137) (1,661)
(Increase)/decrease in trade and other receivables (193) (249) 254
Decrease in trade and other payables (969) (2,125) (2,171)
Changes in working capital 936 (4,511) (3,578)
Cash generated by operations 2,585 (1,104) 1,831
---------------------------------------------------------- ------ -------------- -------------- ------------
Income tax refunded/(paid) 688 (361) (744)
Net cash from operating activities 3,273 (1,465) 1,087
---------------------------------------------------------- ------ -------------- -------------- ------------
Purchases of property, plant and equipment 8 (220) (701) (809)
Payments to acquire intangible assets 7 (313) (395) (731)
Interest received 5 172 49 124
Movement in short-term investments 1,685 (6) (25)
Net cash used in investing activities 1,324 (1,053) (1,441)
Funds placed in escrow for tender offer (9,144) - -
Joint share ownership plan - - (3,270)
Proceeds from issuance of shares 118 32 3,565
Cash payments in relation to lease liabilities (35) (32) (70)
Operating lease interest paid 5 (3) (1) (3)
Dividend paid to Company's shareholders - - (2,186)
Net cash from financing activities (9,064) (1) (1,964)
Net (decrease)/increase in cash and cash equivalents (4,467) (2,519) (2,318)
---------------------------------------------------------- ------ -------------- -------------- ------------
Effect of exchange rate changes (117) 288 315
Cash and cash equivalents at the beginning of the period 11,739 13,742 13,742
Cash and cash equivalents at the end of the period 7,155 11,511 11,739
---------------------------------------------------------- ------ -------------- -------------- ------------
1. General information
Anpario plc ("the Company") and its Subsidiaries (together "the
Group") produce and distribute natural feed additives for animal
health, hygiene and nutrition. Anpario plc is a public company
traded on the Alternative Investment Market ("AIM") of the London
Stock Exchange and is incorporated in the United Kingdom and
registered in England and Wales. The address of its registered
office is Unit 5 Manton Wood Enterprise Park, Worksop,
Nottinghamshire, S80 2RS. The presentation currency of the Group is
pounds sterling.
2. Basis of preparation
The unaudited consolidated financial statements comprise the
accounts of the Company and its subsidiaries drawn up to 30 June
2023.
The Group has presented its financial statements in accordance
with UK adopted International Financial Reporting Standards
("IFRSs").
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 2022, which are available on the Company's website at
www.anpario.com. There are not expected to be any changes to the
accounting policies and the same policies are expected to be
applicable for the year ended 31 December 2023.
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 2022 were approved by the Board of Directors on 22 March
2023 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 2023 is neither audited nor reviewed.
3. Operating segments
Management has determined the operating segments based on the
information that is reported internally to the Chief Operating
Decision Maker, the Board of Directors, to make strategic
decisions. The Board considers the business from a geographic
perspective and is organised into four geographical operating
divisions: Americas, Asia, Europe, Middle-East and Africa (MEA) and
Head Office.
All revenues from external customers are derived from the sale
of goods and services in the ordinary course of business to the
agricultural markets and are measured in a manner consistent with
that in the income statement. Inter-segment revenue is charged at
prevailing market prices or in accordance with local transfer
pricing regulations.
Americas Asia Europe MEA Head Office Total
--------------------------------------
for the six months ended 30 Jun 2023 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------- --------- ------- -------- ------- ------------ --------
Total segmental revenue 4,709 5,356 7,126 1,713 - 18,904
Inter-segment revenue - - (3,631) - - (3,631)
Revenue from external customers 4,709 5,356 3,495 1,713 - 15,273
-------------------------------------- --------- ------- -------- ------- ------------ --------
Depreciation and amortisation (2) (25) (7) (2) (554) (590)
Net finance income - - - - 169 169
Exceptional items - - - - - -
Profit before tax 1,226 1,323 1,136 514 (2,835) 1,364
-------------------------------------- --------- ------- -------- ------- ------------ --------
Americas Asia Europe MEA Head Office Total
--------------------------------------
for the six months ended 30 Jun 2022 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------- --------- ------- -------- ------- ------------ --------
Total segmental revenue 4,390 6,568 8,967 1,792 - 21,717
Inter-segment revenue - - (5,246) - - (5,246)
Revenue from external customers 4,390 6,568 3,721 1,792 - 16,471
-------------------------------------- --------- ------- -------- ------- ------------ --------
Depreciation and amortisation (2) (27) (6) (2) (567) (604)
Net finance income - - - - 48 48
Exceptional items - - - - - -
-------------------------------------- --------- ------- -------- ------- ------------ --------
Profit before tax 2,162 1,763 1,274 384 (3,222) 2,361
-------------------------------------- --------- ------- -------- ------- ------------ --------
Americas Asia Europe MEA Head Office Total
--------------------------------------
for the year ended 31 Dec 2022 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------- --------- ------- -------- ------- ------------ --------
Total segmental revenue 9,149 12,617 16,071 3,848 - 41,685
Inter-segment revenue - - (8,582) - - (8,582)
Revenue from external customers 9,149 12,617 7,489 3,848 - 33,103
-------------------------------------- --------- ------- -------- ------- ------------ --------
Depreciation and amortisation (3) (55) (13) (4) (1,150) (1,225)
Net finance income - 1 - - 120 121
Profit before tax 3,301 3,530 2,641 972 (6,763) 3,681
-------------------------------------- --------- ------- -------- ------- ------------ --------
4. Alternative performance measures
In reporting financial information, the Group presents
alternative performance measures (APMs), which are not defined or
specified under the requirements of IFRS. The Group believes that
these APMs, which are not considered to be a substitute for or
superior to IFRS measures, provide depth and understanding to the
users of the financial statements to allow for further assessment
of the underlying performance of the Group.
The Board considers that adjusted EBITDA is the most appropriate
profit measure by which users of the financial statements can
assess the ongoing performance of the Group. EBITDA is a commonly
used measure in which earnings are stated before net finance
income, amortisation and depreciation. The Group makes further
adjustments to remove items that are non-recurring or are not
reflective of the underlying operational performance either due to
their nature or the level of volatility.
six months to six months to year ended
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
---------------------------------- -------------- -------------- ------------
Operating profit 1,195 2,313 3,560
---------------------------------- -------------- -------------- ------------
Non-recurring acquisition costs - - 210
Share-based payments 120 91 213
Total adjustments 120 91 423
Adjusted operating profit 1,315 2,404 3,983
---------------------------------- -------------- -------------- ------------
Depreciation and amortisation 590 604 1,225
Adjusted EBITDA 1,905 3,008 5,208
---------------------------------- -------------- -------------- ------------
six months to six months to year ended
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
---------------------------------- -------------- -------------- ------------
Adjusted operating profit 1,315 2,404 3,983
---------------------------------- -------------- -------------- ------------
Income tax expense (144) (249) (378)
Income tax impact of adjustments 2 4 42
Adjusted profit after tax 1,173 2,159 3,647
---------------------------------- -------------- -------------- ------------
5. Net finance income
six months to six months to year ended
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
------------------------------------------------- -------------- -------------- ------------
Interest receivable on short-term bank deposits 172 49 124
------------------------------------------------- -------------- -------------- ------------
Finance income 172 49 124
Lease interest paid (3) (1) (3)
------------------------------------------------- -------------- -------------- ------------
Finance costs (3) (1) (3)
Net finance income 169 48 121
------------------------------------------------- -------------- -------------- ------------
6. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
six months to six months to year ended
30 June 30 June 31 December
2023 2022 2022
-------------------------------------------------------- -------------- -------------- ------------
Profit for the year (GBP000's) 1,220 2,112 3,303
--------------------------------------------------------- -------------- -------------- ------------
Weighted average number of shares in issue 20,648,766 20,445,907 20,481,713
--------------------------------------------------------- -------------- -------------- ------------
Number of dilutive shares 90,890 1,553,198 1,392,327
Weighted average number for diluted earnings per share 20,739,656 21,999,105 21,874,040
--------------------------------------------------------- -------------- -------------- ------------
Basic earnings per share 5.91p 10.33p 16.13p
Diluted earnings per share 5.88p 9.60p 15.10p
--------------------------------------------------------- -------------- -------------- ------------
The calculation of the adjusted and diluted adjusted earnings
per share is based on the following data:
six months to six months to year ended
30 June 30 June 31 December
Note 2023 2022 2022
---------------------------------------------------------------- ------ -------------- -------------- ------------
Adjusted profit attributable to owners of the Parent (GBP000's) 4 1,173 2,159 3,647
---------------------------------------------------------------- ------ -------------- -------------- ------------
Weighted average number of shares in issue 20,648,766 20,445,907 20,481,713
---------------------------------------------------------------- ------ -------------- -------------- ------------
Number of dilutive shares 90,890 1,553,198 1,392,327
Weighted average number for diluted earnings per share 20,739,656 21,999,105 21,874,040
---------------------------------------------------------------- ------ -------------- -------------- ------------
Adjusted earnings per share 5.68p 10.56p 17.81p
Diluted adjusted earnings per share 5.66p 9.81p 16.67p
---------------------------------------------------------------- ------ -------------- -------------- ------------
7. Intangible assets
Patents,
Brands and trademarks
developed Customer and Development Software
Goodwill products relationships registrations costs and Licenses Total
-------------------
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- --------- ------------- -------------- -------------- -------------- -------------- -------
Cost
As at 1 January
2023 5,960 4,766 786 1,924 1,154 943 15,533
Additions - 30 - 103 177 3 313
Reclassifications - 365 - - (365) - -
Disposals - - - - - (2) (2)
As at 30 June 2023 5,960 5,161 786 2,027 966 944 15,844
------------------- --------- ------------- -------------- -------------- -------------- -------------- -------
Accumulated
amortisation
As at 1 January
2023 - 1,318 745 1,263 - 832 4,158
Charge for the
year - 171 4 89 - 34 298
Reclassifications - - - - - - -
Disposals - - - - - (2) (2)
As at 30 June 2023 - 1,489 749 1,352 - 864 4,454
------------------- --------- ------------- -------------- -------------- -------------- -------------- -------
Net book value
As at 1 January
2023 5,960 3,448 41 661 1,154 111 11,375
As at 30 June 2023 5,960 3,672 37 675 966 80 11,390
------------------- --------- ------------- -------------- -------------- -------------- -------------- -------
8. Property, plant and equipment
Land and Fixtures, fittings Assets in the course
buildings Plant and machinery and equipment of construction Total
------------------------------
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ----------- -------------------- ------------------- --------------------- -------
Cost
As at 1 January 2023 2,251 5,017 395 48 7,711
Additions - - 5 215 220
Transfer of assets in
construction - - 9 (9) -
Disposals - (1) (21) - (22)
Foreign exchange - - (4) - (4)
As at 30 June 2023 2,251 5,016 384 254 7,905
------------------------------ ----------- -------------------- ------------------- --------------------- -------
Accumulated depreciation
As at 1 January 2023 350 2,187 310 - 2,847
Charge for the year 25 211 21 - 257
Disposals - (1) (21) - (22)
Foreign exchange - - (4) - (4)
As at 30 June 2023 375 2,397 306 - 3,078
------------------------------ ----------- -------------------- ------------------- --------------------- -------
Net book value
As at 1 January 2023 1,901 2,830 85 48 4,864
As at 30 June 2023 1,876 2,619 78 254 4,827
------------------------------ ----------- -------------------- ------------------- --------------------- -------
9. Right-of-use assets
Land and Plant and Fixtures, fittings
buildings machinery and equipment Total
-----------------------------
GBP000 GBP000 GBP000 GBP000
----------------------------- ----------- ----------- ------------------- -------
Cost
As at 1 January 2023 296 23 3 322
Additions - 11 - 11
Modification to lease terms 85 - - 85
Foreign exchange (23) - - (23)
As at 30 June 2023 358 34 3 395
----------------------------- ----------- ----------- ------------------- -------
Accumulated depreciation
As at 1 January 2023 269 1 2 272
Charge for the year 32 3 - 35
Foreign exchange (19) - - (19)
As at 30 June 2023 282 4 2 288
----------------------------- ----------- ----------- ------------------- -------
Net book value
As at 1 January 2023 27 22 1 50
As at 30 June 2023 76 30 1 107
----------------------------- ----------- ----------- ------------------- -------
10. Inventories
six months to six months to year ended
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
------------------------------------- -------------- -------------- ------------
Raw materials and consumables 3,476 3,562 4,664
Finished goods and goods for resale 4,059 6,864 5,203
Inventory 7,535 10,426 9,867
------------------------------------- -------------- -------------- ------------
11. Post balance sheet event
In a circular dated 7 June 2023, the Company proposed a tender
offer to shareholders. This exercise was completed on 7 July 2023
and had the effect of reducing cash reserves by approximately
GBP9.1m. All 4,000,000 Ordinary Shares purchased, together with
treasury shares already held of 440,388, were cancelled on 7 July
2023.
There are no other post balance sheet events.
12. Interim results
Copies of this notice are available to the public from the
registered office at Manton Wood Enterprise Park, Worksop,
Nottinghamshire, S80 2RS, and on the Company's website at
www.anpario.com.
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END
IR GZGMLGZKGFZZ
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September 13, 2023 02:00 ET (06:00 GMT)
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