Chairman's Statement
I am pleased to report an excellent performance by the Group during the period. We have achieved good growth in revenue and profitability from our UK businesses, increased market share at NVS, significantly increased US revenues, achieved further penetration of our products in Europe and launched new products in the UK. Furthermore, we have made an acquisition, VetXX Holdings A/S (“VetXX”), which materially increases our pharmaceutical portfolio and provides a strong European footprint to market the enlarged product range and future developed products. The development of our own branded veterinary pharmaceutical portfolio is progressing to schedule, with the launch of a key product for the US market, Vetoryl, planned for January 2009.
Financial Highlights
Group revenue increased 19.9% from £253.8 million to £304.4 million. Adjusted operating profit increased by 38.0% to £19.1 million (2007: £13.9 million). Adjusted profit before taxation rose 33.3% to £16.9 million (2007: £12.6 million). Operating profit after deducting rationalisation costs and amortisation of acquired intangibles was £14.1 million (2007: £13.8 million). Profit before taxation on the same basis was £11.7 million (2007: £12.6 million). Adjusted basic earnings per share was 20.81p, up 23.2% from the 16.89p achieved in 2007. Earnings per share after rationalisation costs and amortisation of acquired intangibles was 14.20p (2007: 16.86p).
We have achieved good growth in revenue and profitability from our UK businesses, increased market share at National Veterinary Services, significantly increased US revenues, achieved further penetration of our products in Europe and launched new products in the UK.
Total cash investment in product development was £3.7 million (2007: £3.3 million), of which £2.4 million was charged to the income statement (2007: £1.6 million). Cash flow continued to be strong with cash flow from operations being 114% of operating profit. As at 30 June 2008, the Group had net borrowings of £27.0 million compared to net funds of £1.0 million at 30 June 2007, the increase being the new borrowings taken out to partially fund the acquisition of VetXX. Net debt to EBITDA on an adjusted basis was 1.3 times. Interest cover on adjusted operating profit was 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 5.50p per share (2007: 5.00p per share). This, together with the interim dividend of 2.75p per share (2007: 2.50p per share), makes a total dividend for the year of 8.25p per share (2007: 7.50p per share), a 10% increase.
The total dividend is covered 2.0 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 7 November 2008, will be paid on 12 December 2008 to Shareholders on the Register at 14 November 2008.
People
On behalf of the Board and all our Shareholders I would like to welcome all VetXX and other 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
The Group’s current trading is in line with the Board’s expectations. International companion animal markets continue to grow; our core businesses continue to perform well; our acquisition, VetXX, is meeting our expectations; and our key products continue to show good growth. The business will be further enhanced with new product introductions, particularly the launch of Vetoryl and Felimazole in the US in the second half of the 2009 financial year. We therefore remain confident in our future.
Michael Redmond
Chairman
2 September 2008
