Interim Results
Anpario plc (AIM:ANP), the international producer and distributor of natural animal feed additives for animal health, nutrition and biosecurity, is pleased to announce its interim results for the six months to 30 June 2020.
Highlights
Financial highlights
- 13% increase in revenue to £16.2m (2019: £14.3m)
- 20% increase in gross profit to £8.5m (2019: £7.1m)
- 24% improvement in adjusted EBITDA1 to £3.4m (2019: £2.7m)
- 34% increase in diluted adjusted earnings per share to 11.74p (2019: 8.73p)
- 10% increase in interim dividend to 2.75p (2019: 2.5p) per share
- Cash balances of £13.2m at 30 June 2020 (Dec 2019: £13.8m)
Operational highlights
- Covid-19 contingency plans have ensured minimal disruption to operations
- Strong double-digit sales performances in most regions
- Product registrations in Indonesia resulting in new business and growing sales
- Strong sales growth in phytogenics and acid-based eubiotic products
Peter Lawrence, Chairman, commented:
“The Board is delighted with the strong sales and profit performance delivered in the first half of 2020. The period was extremely challenging as we faced the unprecedented impact of the Covid-19 (coronavirus) global pandemic. These results are a testament to the commitment, flexibility and supreme efforts of our team and the resilience of the company’s systems and operational procedures. In addition to our staff, the Board would like to thank all stakeholders including our customers and suppliers. The health and safety of our staff around the world is a priority and, as such, we envisage continuing most of our contingency measures for a further period.
Looking forward, we will continue the on-line and direct marketing tactics that produced such a strong first half performance. Additionally, we will be able to build upon new business gained from those competitors unable to supply during lock-down. As a result, we remain confident of continuing the profitable development of the Group.
Our strong balance sheet provides Anpario with the resources to expand our global reach and to undertake earnings enhancing and complementary acquisitions which may arise in these uncertain times.”
1 Adjusted EBITDA represents operating profit for the period £2.317m (2019: £2.211m) adjusted for: share based payments and associated costs £0.029m (2019: £0.071m); foreign exchange losses £0.434m (2019: £0.059m gain); and depreciation, amortisation and impairment charges of £0.613m (2019: £0.523m). H1 2019 comparatives have been restated, see note 4 for details.
Chairman’s statement
Anpario is pleased to report a strong performance with sales and profit growth achieved during an extraordinary period as the Covid-19 (coronavirus) pandemic impacts countries around the world. The Group reacted quickly by implementing its contingency plans which included: a split production system, remote working and using communication technology to support our global sales team and customers. The result has been very positive, and the Group has been able to grow sales volumes and meet the requirements of our customers. We intend to keep most of these contingency measures in place for the time being and continue to monitor the global situation, as it will inevitably present challenges whilst the pandemic is still affecting trade and life in general.
Group sales for the six months to 30 June 2020 grew by 13% to £16.2m with strong performances in most of the regions in which the Group trades.
Gross profit improved by 20% to £8.5m reflecting the positive effect of selling higher value-added products and also the contribution from our investment in the liquid bottling plant commissioned in July 2019, enabling the Group to bring previously toll-manufactured products in-house. Our flexibility in being able to offer a variety of packaging options and sizes, especially for the Anpario Direct channel and for customers who prefer to work with them, further supports our value-added proposition to the markets we serve.
The pandemic led to the suspension of travel and industry trade exhibitions scheduled for 2020 and this delivered a cost saving. Although business development initiatives will require a resumption of travel activities, some valuable lessons have been learnt in how technology can be used to operate more efficiently.
The Group maintains a strong balance sheet with a period end cash balance of £13.2m (Dec 2019: £13.8m). The Board has approved an interim dividend of 2.75p per share (2019: 2.50p), an increase of 10%, payable on 27 November to shareholders on the register on 13 November.
Americas
Latin America continued its strong performance with sales growth of 16% compared with the same period last year. Brazil delivered sales growth of 38% driven by strong volumes in Orego-Stim® and Salkil®. Ecuador achieved growth of 33%, where our products are largely used in the aquaculture industry. There are further opportunities in aquaculture in this region and we expect to capitalise on recent product registration approvals.
US growth picked up in the first half delivering a 13% improvement in sales compared with the same period last year. The agriculture market has been affected by both Covid-19 and the continuing US – China trade dispute. We continued with our business development activity adding a number of new customers. The dairy industry has turned around since the early months of the pandemic with milk prices having strengthened significantly. We supply our Anpro® range of mycotoxin control products to this market.
Sales of Orego-Stim®, the market leading phytogenics product, delivered 20% growth compared to the same period last year and we have further opportunities supplying the poultry broiler and layer markets.
The swine sector was weak but we have strengthened our sales resource to take advantage of any turnaround in the market and to promote pHorce® which is our high strength acid-based eubiotic, proven to be highly effective as an in-feed anti-viral product.
Asia
Sales were ahead by 28% compared to the same period last year. This includes China with flat sales growth but gross profit advanced 14%, as we focused on selling high value-add products such as Orego-Stim® and Prefect, which are our leading gut health products. China was the first country into lockdown in the first quarter of this year and this, combined with Chinese New Year celebrations, meant that sales activity only really started in the second quarter.
The swine industry is now showing encouraging signs of recovery as farmers re-stock following the African Swine Fever epidemic. The ban on the use of antibiotic growth promoters in animal feed, introduced after the period end, will be positive for Anpario.
South East Asia delivered the strongest performance of all regions with excellent sales and gross profit advances in the Philippines, Malaysia, South Korea and Indonesia. The region benefited from a number of business development initiatives including receiving important product registrations for our Indonesian subsidiary, which now allows our local sales team to market our products directly to buyers.
We expect that there could be some slowdown in the second half as the Covid-19 pandemic affects protein consumption habits but this should only be short-lived as many countries in the region appear to have managed the situation effectively. In order to help mitigate the impact of this slowdown, our sales team is beginning to target the regional aquaculture market with products which have proved successful for Anpario in Latin America.
Australasia saw modest sales growth compared to the same period last year, with the performance in both Australia and New Zealand offsetting a reduction in business in Papua New Guinea because of a customer suffering financial difficulty.
The Middle East and Africa
After last year’s strong performance, the region saw a decline in sales compared to the same period last year. The Middle East has been severely impacted by the Covid-19 pandemic as a result of cancelled religious celebrations and pilgrimages, a fall in tourism and redundancies of foreign workers in the region. Nevertheless, there have been some bright spots with good growth of our pellet binder, Mastercube™ and new business gained with our Optomega® omega-3 product for dairy cow fertility. We do not expect a significant turnaround this year but our sales team is targeting several opportunities, including trying to capitalise on competitors who are unable to supply customers in the region.
Europe
The region showed strong sales and gross profit growth. Most countries had modest increases but the UK delivered a very strong performance through greater demand for our raw materials and feed hygiene products. Further opportunities are being targeted as Anpario has unique products and can offer a quick turnaround of supply in contrast to most mainland European suppliers.
Spain and Italy suffered with sales declines, both countries were badly affected by Covid-19.
Sales through the Anpario Direct online platform continue to grow, albeit from a low base, as we engage with target customers through the various social media forums. Our field sales team will also be encouraging customers to place smaller orders online using new functionality which allows for customer specific pricing; this is an important feature where a large customer has multiple locations requiring smaller deliveries but on aggregate the volumes are significant.
As mentioned earlier customer support and business development activities have continued electronically during the lockdown but as restrictions are relaxed, we anticipate more customer visits and exhibitions taking place where it is safe to do so. Obviously, there are some countries around the world around where customer visits will not happen for some time.
Brexit
We also face the challenges of Brexit and have prepared plans but, until the final details of our future trading relationship with Europe are determined, it is difficult to assess the impact. In the first half of the year our sales to EU member states, excluding the UK, accounted for 9.5% of total sales and 36% of purchases. Anpario’s products and processes comply with EU regulations and the Group will continue to supply the same high standard of products to all jurisdictions around the world.
Innovation and development
We have recently launched Orego-Stim® for the aquaculture market and early commercial trials in Latin America are very encouraging. Commercial production replacing commonly used antibiotics, are demonstrating the real potential to grow shrimp and fish in an antibiotic free manner. Additionally, we are seeing increased success with our eubiotic products where customers experience improved growth, reduced mortality and the resulting significant financial benefits. These positive developments are all being achieved from Anpario’s development programme that is based around leveraging our existing technology in new markets and applications.
People
Our people have risen to the challenges presented by the exceptional circumstances resulting from the impact of COVID-19 and they have shown extraordinary resilience and commitment, the Company has not and does not expect to use any of the UK Governments financial support measures.
Anpario also recognises the heroic contribution made by NHS staff and key workers in recent months and as a way of expressing our thanks and giving back to our local communities, donations were made to local hospital charities. In addition, we have used our experience in international trade and logistics to source medical grade face masks for donation to local care homes in the collective effort to reduce the spread of COVID-19.
Outlook
Looking forward, we will continue the on-line and direct marketing tactics that produced such a strong first half performance. Additionally, we will be able to build upon new business gained from those competitors unable to supply during lock-down. As a result, we remain confident of continuing the profitable development of the Group.
Our strong balance sheet provides Anpario with the resources to expand our global reach and to undertake earnings enhancing and complementary acquisitions which may arise in these uncertain times.
Peter Lawrence
Chairman
9 September 2020 anpario