Chairman's Statement
“Despite the current uncertain economic outlook, the majority of the markets in which we trade continue to show growth although at a slower rate than historically . . . The Group’s current performance is in line with the Board’s expectations”
Introduction
I am pleased to report an increase in revenue and profitability at both our Pharmaceuticals and Services Divisions. Furthermore, the Group has made progress in its pharmaceutical strategy with key products licensed and launched in the US, Canada and the EU and new product development opportunities identified.
Financial Highlights
Group revenue increased 15.0% from £304.4 million to £350.0 million.
Adjusted operating profit increased by 30.5% to £25.0 million (2008: £19.1 million). Adjusted profit before taxation rose 38.9% to £23.4 million (2008: £16.9 million). Operating profit after deducting exceptional costs and amortisation of acquired intangibles was £17.7 million (2008: £14.1 million). Profit before taxation on the same basis was £16.1 million (2008: £11.7 million).
Adjusted basic earnings per share was 25.61p, up 23.1% from the 20.81p achieved in 2008. Earnings per share after exceptional costs and amortisation of acquired intangibles was 17.27p (2008: 14.20p).
Total cash investment in product development was £4.2 million (2008: £3.7 million), of which £3.4 million was charged to the income statement (2008: £2.4 million). In addition, a payment of £470,000 was made to acquire technology for our product development programme. This has been shown as an exceptional cost due to its size and infrequency.
During the year, Group cash flow was strong with cash flow from operations being 156.0% of operating profit (2008: 114.1%). Group net borrowings were reduced by £11.5 million in the year from £27.0 million at 30 June 2008 to £15.5 million at 30 June 2009. This was despite an adverse currency impact of £1.5 million. The Group has committed bank facilities totalling £52.5 million.
Net borrowings to EBITDA on an adjusted basis was 0.57 times (2008: 1.3 times). Interest cover on adjusted operating profit was 16.0 times (2008: 8.4 times).
Further details are contained in the Business Review.
Dividend
In line with our progressive dividend policy and our confidence in the business, the Directors are recommending an increase in the final dividend to 6.10p per share (2008: 5.50p per share). This, together with the interim dividend of 3.00p per share (2008: 2.75p per share), makes a total dividend for the year of 9.10p per share (2008: 8.25p per share), a 10.3% increase.
The total dividend is covered 2.8 times by profit after taxation but after adding back amortisation of acquired intangibles.
The final dividend, which is subject to Shareholder approval at our Annual General Meeting to be held on Friday 6 November 2009, will be paid on 11 December 2009 to Shareholders on the Register at 13 November 2009.
People
On behalf of the Board and all our Shareholders I welcome all new employees to the Group. I would also like to thank all employees for their hard work, dedication and innovation in contributing to our successful year.
Prospects
Despite the current uncertain economic outlook, the majority of the markets in which we trade continue to show growth although at a slower rate than historically. Within the UK, current market growth has been as a result of price inflation rather than volume growth, with livestock products outperforming the companion animal sector. The Group’s current performance, however, is in line with the Board’s expectations. The Group will be enhanced by new product launches and by growth from our existing portfolio. Additionally, we are realising good month on month growth from Vetoryl within the USA and our European specialist pet diets business is exceeding our expectations. We therefore remain confident in our future.
Michael Redmond
Chairman
1 September 2009