Final Results

28JULY 2004 Lawrence plc Preliminary Results for the year ended 31 March 2004 HIGHLIGHTS - Extensive corporate activity during the year: - disposal of Interpet for £14.5 million cash - reorganisation of South African marketing arrangements realises £1.7 million - Disposals allow enhanced focus on animal health and feed core businesses - Aivlosin receives marketing approval for Europe after year end - Earnings per share reach 16.26p (2003:11.33p) - Net assets are record £22.1 million - Final dividend raised 12.0 per cent to 4.475 pence - Strong cash position allows additional one-off dividend payment of 1.30 pence - Discussions commenced to purchase the 50 per cent. of ECO Animal Health not already owned - Positive start to the current financial year Peter Lawrence, Chairman of Lawrence plc, commented: "I am pleased to report on one of the most significant periods in the strategic development of your company. Our exit from the UK pet industry emphasises our commitment to our core business, we are now sharply focused on our future as a leading supplier to the animal food farming industry worldwide. We expect ECO to grow strongly in the years ahead and be boosted by the grant of further valuable marketing authorisations for Aivlosin and other new products. I look forward to reporting further progress to shareholders". Contacts: Lawrence plc Peter Lawrence 020 8336 2900 07919 552055 Charles Stanley & Co Ltd 020 7739 8200 Philip Davies Robert Corden Redleaf Communications Limited 020 7955 1410 Emma Kane Spiro Financial Anthony Spiro 020 8949 0428 Lawrence plc is a leader in the development, manufacture and distribution of principally specialist chemical and pharmaceutical products for the animal health and farming markets worldwide. Our products for these growth markets incorporate natural ingredients to promote well-being and sustainability. We achieve our financial goals through the careful and responsible application of science to generate value for our shareholders. CHAIRMAN'S STATEMENT I am pleased to report on one of the most significant periods in the strategic development of your company. After the year-end, in the space of six weeks in April and May 2004, we announced two extremely important events, which will shape the future of the company for many years to come; the disposal of Interpet, our UK pet business, and a positive opinion on Aivlosin, our exciting patented veterinary antibiotic. Pre-tax profit for the year to 31 March 2004 was £5.4 million, which includes goodwill adjustments arising from the corporate activity. This Group result compares with a pre tax profit of £4.7 million in the previous year. Earnings per share advanced to 16.3 pence. The strongest sales months for Interpet are February and March, the last two months of our financial year, as customers stock up for the outdoor pond and gardening season. The reorganisation of our animal health trading arrangements in South Africa, which was effective from 1 March 2004, meant that we did not include its March sales, which are normally the highest of the year as they include pesticide tenders. The absence of these sales is reflected in the group turnover figure of £33.3 million, which is below the £36.3 million achieved in the previous twelve months. The sale of Interpet for £14.5 million in cash and the reorganisation in South Africa, which realised cash of £1.7 million, have together had a very positive impact on the group. Our cash position is the strongest it has ever been and net assets are in excess of £22.1 million, some £3.5 million above the previous year's record level. The proceeds from these two transactions were received after the year end and have been treated as a post balance sheet event. The current strength of our balance sheet allows us to return surplus cash to our shareholders, which we plan to achieve through a specially enhanced dividend payment. At the Annual General Meeting on 23 September 2004 shareholders will be asked to approve a payment of 5.725 pence (net) per share, which comprises a final ordinary dividend of 4.425 pence plus a one off payment of 1.30 pence (net) per share. This makes a total dividend for the year, including the one off payment, of 7.00 pence (net) per share. The underlying final dividend of 4.425p (net) per share is 12.0 per cent above last year's final dividend of 3.95 pence (net) and maintains our progressive payment record. The total payment of 5.725 pence (net) per share will be made on 1 November 2004 to shareholders on the register on 6 August 2004. The payment of 1.30 pence (net) allows us to reward shareholders without impairing the efficient capital structure of the company going forward. The balance of our cash will continue to be used to finance the expansion of the company through organic growth and by strategic acquisitions. This includes our intention to purchase the 50 per cent of the shares of ECO Animal Health, which the company does not own, and discussions with the ECO shareholders have already commenced. The sale of our Interpet pet business to Central Garden and Pet Company Limited marks the end of one of the traditional areas of business of your company. Over 30 years ago, we began by introducing cat litter to the UK pet industry and this led to the creation of MOR Products Ltd, our pet wholesale business and to our retail operation, Petworld Superstores Ltd. We subsequently sold these businesses and in 1997 acquired Interpet, which grew strongly under our ownership; turnover increased fourfold and profit twelve fold. I would like to offer my good wishes and thanks to the excellent staff, past and present of Interpet and wish them success in their exciting future with Central Garden and Pet. Our exit from the pet industry emphasises our commitment to our core business, animal health and animal feed additives. We are now sharply focused on our future as a leading supplier to the animal food farming industry worldwide. The sale of our US business, Aquarium Products, has not yet been concluded; we continue to make every effort to complete this transaction in line with our original agreement with Central Garden and Pet. In order to facilitate improved dealings in our shares, approval was given by shareholders at an EGM on 2 July 2004 for our shares to be traded through CREST as uncertificated securities. ECO GROUP: ECO's animal health business delivered another strong performance with sales and profit ahead of the previous year. Ecomectin, our endectocide range for all grazing animals, completed its first full year of sales in the USA and is being very well received in this important market. The pour-on product for cattle, sold under the Coopermec name by Schering Plough, has rapidly established itself as a leading brand. Sales of Ecomectins in Europe and Japan also progressed well. We expect further growth in sales in the current year, particularly in Europe where the recent expansion of the EU has created a larger market opportunity. During the last year, we were granted over 40 new registrations for a range of our products both in Europe and the rest of the world which brings our current number of registrations to over 350 with a further 250 grants still pending. Following the year-end, on 12 May 2004, ECO was awarded a European marketing authorisation for Aivlosin for the treatment and prevention of swine pneumonia. The registration process started over ten years ago and it is expected that further registrations for Aivlosin for different diseases in other species of animals and geographic territories will be forthcoming over the next few years. We expect to commence sales of Aivlosin in Europe in the autumn through distribution arrangements, which have been recently finalised. Further European registrations for Aivlosin for use in treating other conditions in pigs and for its use with chickens, turkeys and other poultry should follow over the coming months. Earlier this month, the Committee for Medicinal Products for Veterinary Use adopted a further opinion recommending the establishment of Provisional maximum residue limits for Aivlosin in poultry species. This is another major hurdle that has been overcome and we expect to complete our full documentation for regulatory approval for poultry before the end of the year. Submission of our registration dossiers to the Food and Drug Administration in the USA for Aivlosin should be made towards the end of 2004 with a view to receiving a marketing authorisation some twelve months later. As has always been the case, forecasting the precise timing of the grant of drug registrations is impossible, but now that the first European authorisation is in place we look forward to a sharply increasing level of sales and profit over the coming years. We already have registrations for Aivlosin and Ecomectin in China and in June 2004 ECO signed a joint venture agreement with Zheijang Shenghua BIOK Biology Co. Ltd. to manufacture these and other animal health products for this fast expanding market. Our joint venture partner is a first class business and is one of the very few Chinese pharmaceutical manufacturers to have achieved the essential GMP (Good Manufacturing Practice) accreditation standard. The day-to- day management and expansion of our business in China continues to be controlled from our Shanghai office, which we opened in 1996. Following the sale of our trading business in South Africa to Afrivet Business Management earlier this year, ECO has retained all its drug registrations and has agreed to their exclusive use by Afrivet. ECO will receive a continuing payment based on Afrivet's total sales, which should enhance the profitability of ECO. We have further strengthened our sales, management and registration teams at ECO Animal Health to ensure we are able to cope efficiently with the increasing workload that these additional registrations and projects generate. A number of second and third generation anti parasitic and anti infective products have completed their testing and the registration process has already begun. First sales of these products were made in South Africa this year and we expect that other parts of the world should start selling them during the next financial year and will be followed by sales in Europe and the USA. a year later. AGIL: Agil's performance improved steadily over the course of the year and the company has benefited significantly from the strong ties it has built with its worldwide distributors. It is rewarding to see business recovering in South East Asia following SARS and avian flu. Agil introduced a number of new products during the year including Credence, a treatment for animal drinking water supplies and veterinary disinfectants that has been well received. Agil will continue to add new and innovative products to its range including one with a novel approach to the administration of vitamins to growing animals. A new market for Agil is in crop protection systems for stored grains for brewing and malting. Demeter, our chemical free pesticide, has recently been approved by the Central Scientific Laboratory and Home Grown Cereals Authority in the UK as a replacement for traditional organophosphate insecticides. This could prove to be an exciting new business area for us. The biggest opportunity for Agil remains the expected heavy use of natural digestion improvers to replace antibiotic growth promoters in Europe when they are banned at the end of 2005. Agil is well placed for this change, having sold its range of Prefect, Salkil and Bact-A-Cid antibiotic free products to the pig and poultry industry for some years. It is particularly encouraging that many poultry and pork exporters outside the EU and America are now adopting a regime of drugs and additives, which meet European and FDA standards for meat products. This will benefit Agil and we expect continuing growth and success in this area. BLACKFAST: Blackfast Chemicals enjoyed a record year with exports continuing to account for more than half of total sales. A second sales manager has been appointed to help support and supervise the many distributors we have around the world. It is encouraging to note an increase in the number of larger automated installations that are now using our room temperature ecologically favourable process in place of traditional hot blacking methods. INTERPET: This business performed well during the ten months prior to its sale, with a good advance in profit and improvement in operating margin. EMPLOYEES: I would like to express my thanks to all employees and everyone associated with the company without whose hard work and loyalty we could not continue to flourish. OUTLOOK: The current year has started well and while the future looks very different in its turnover and profit makeup from the past, we have good reason to be confident. We expect ECO to grow strongly in the years ahead and be boosted by the grant of further valuable marketing authorisations for Aivlosin and other new products. I look forward to reporting further progress to shareholders. Peter Lawrence July 2004 PROFIT AND LOSS ACCOUNT For the year ended 31 March 2004 2004 2003 £ £ TURNOVER 33,330,767 36,264,380 Continuing operations 16,128,11 8 Discontinued operations 17,202,64 9 ========= == Cost of sales (2019,876, (21,397,46 277) 5) ---------- ---------- ---------- ---------- GROSS PROFIT 13,454,490 14,866,915 Net operating expenses (10,787,83 (10,179,00 6) 6) ---------- ---------- ---------- ---------- OPERATING PROFIT 2,666,654 4,687,909 Continuing Operations 770,215 Discontinued Operations 1,896,439 ========== = Loss on sale of listed (5,901) investments Exceptional write down of (674,488) goodwill Exceptional bonus (1,080,504 provisions ) Income from listed fixed 64,115 64,115 asset investments Profit on Sale of a 4,543,826 - Division Net interest (158,957) 2,688,091 (204,961) ---------- ---------- ---------- ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 5,354,745 4,547,063 Tax on profit on ordinary (677,199) (1,170,167 activities ) ---------- ---------- ---------- ---------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 4,667,546 3,376,896 Minority interest - equity (382,545) (459,789) ---------- ---------- ---------- ---------- PROFIT FOR THE FINANCIAL 4,295,001 2,917,107 YEAR Dividends - equity (1,753,491 (1,414,208 ) ) ---------- ---------- ---------- ---------- RETAINED PROFIT TRANSFERRED TO RESERVES 2,541,510 1,502,899 ---------- ---------- ---------- ---------- EARNINGS PER SHARE 16.26p 11.33p DILUTED EARNINGS PER SHARE 15.97p 11.17p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year Ended 31 March 2004 2004 2003 £ £ PROFIT FOR THE FINANCIAL 4,295,001 2,917,107 PERIOD Exchange differences (164,371) (312,699) ---------- ----------- ---------- --------- TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR 4,130,630 2,604,408 ---------- ---------- ---------- ---------- BALANCE SHEET As at 31 March 2004 2004 2003 £ £ FIXED ASSETS Intangible assets 5,660,510 7,314,157 Tangible assets 864,669 1,455,979 Investments 713,252 805,324 --------- --------- -------- -------- 7,238,431 9,575,460 CURRENT ASSETS Stocks 2,316,261 7,829,666 Debtors 23,924,64 12,762,40 8 7 Cash at bank and in hand 524,265 581,463 --------- --------- -------- -------- 26,765,17 21,173,53 4 6 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (10,596,0 (10,955,0 31) 51) --------- --------- -------- -------- NET CURRENT ASSETS 16,169,14 10,218,48 3 5 --------- --------- -------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES 23,407,57 19,793,94 4 5 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (1,291,98 (1,204,81 9) 9) 22,115,58 18,589,12 5 6 --------- --------- -------- -------- CAPITAL AND RESERVES Called up share capital 1,337,368 1,300,948 Share premium account 7,936,115 7,199,240 Capital redemption reserve 105,829 105,829 Profit and loss account 11,518,26 9,141,128 7 --------- --------- -------- -------- EQUITY SHAREHOLDERS' FUNDS 20,897,57 17,747,14 9 5 Minority interest - equity 1,218,006 841,981 --------- --------- -------- -------- 22,115,58 18,589,12 5 6 --------- --------- -------- -------- CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 March 2004 2004 2003 £ £ NET CASH INFLOW FROM OPERATING 3,381,368 5,167,786 ACTIVITIES RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 95,343 59,221 Interest paid (254,300) (264,182) Dividends received 64,115 64,115 --------- --------- --------- --------- NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (94,842) (140,846) --------- --------- --------- --------- TAXATION (801,672) (1,546,25 6) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of intangible fixed assets (2,870,85 (2,461,96 2) 6) Purchase of tangible fixed assets (246,671) (211,096) Sale of tangible fixed assets 20,773 18,120 Sale of Investments 86,170 244,211 --------- --------- --------- --------- NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (3,010,58 (2,410,73 0) 1) --------- --------- --------- --------- Acquisitions and disposals (59,139) - --------- --------- --------- --------- EQUITY DIVIDENDS PAID (1,333,68 (1,144,97 4) 9) FINANCING Issue of shares 773,295 394,238 (Repayment of) borrowing (net) (17,434) (199,744) --------- --------- --------- --------- NET CASH INFLOW FROM FINANCING 755,861 194,494 --------- --------- --------- --------- (Decrease)/Increase in cash (1,162,68 119,468 8) --------- --------- --------- --------- NOTES 1. NET OPERATING EXPENSES Total Total 2004 2003 £ £ Distribution costs 499,961 550,964 Administrative 10,350,278 9,921,571 expenses Other operating (62,403) (293,529) income ----------- ----------- -------- -------- 10,787,836 10,179,006 ----------- ----------- -------- -------- 2. EARNINGS PER SHARE The calculation of earnings per share is based upon the profit for the financial year divided by the weighted average number of ordinary shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends, on the assumed conversion of all dilutive options and other dilutive potential ordinary shares. 2004 2003 Weight Weight ed ed averag Per averag Per e e number share Earnin number share of gs of Earnin shares amount shares amount gs 000 (pence £'000 000 (pence £'000 ) ) Basic earnings per share Earnings attributable to ordinary 4,295 26,420 16.26 2,917 25,748 shareholders 11.33 Dilutive effect of securities options 469 372 (0.29) (0.16) 4,295 26,889 15.97 2,917 26,120 11.17 3. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group 2004 2003 £ £ Profit for the financial year 4,295,00 2,917,10 1 7 Dividends (1,753,4 (1,414,2 91) 08) 2,541,51 1,502,89 0 9 Exchange differences (164,371 (312,699 ) ) Increase in shares 394,238 773,295 Net increase in shareholders' funds 3,150,43 1,584,43 4 8 Shareholders' funds at 1 April 2003 16,162,7 17,747,1 07 45 Shareholders' funds at 31 March 2004 20,897,5 17,747,1 79 45 The cumulative amount of goodwill arising from acquisitions which has been written off to reserves has not been disclosed as the information cannot be obtained without unreasonable expense and delay. ANALYSIS OF CHANGES IN NET DEBT At 31 Exchange At 31 March March 2003 Cash movement 2004 flow £ £ £ £ Cash at bank and in hand - 524,265 581,463 (57,198 ) Overdraft - (1,636,0 (1,346, (2,982, 05) 452) 457) - (1,054,5 (1,403, (2,458, 42) 650) 192) Debt (1,445,7 258,396 (104,602) (1,291, 83) 989) (2,500,3 (1,145, (104,602) (3,750, 25) 254) 181) SALE OF BUSINESSES Eco South Interpet Africa Total Net assets disposed of Fixed Assets - 3,141,90 3,141,901 1 Stocks 5,284,34 1,696,9 6,981,282 5 37 Debtors 3,474,80 748,901 4,223,701 0 Creditors (1,579,7 (417,49 (1,997,28 95) 0) 5) 10,321,2 2,028,3 12,349,59 51 48 9 Sales costs - 263,919 263,919 Profit on disposal - 4,543,83 4,543,830 0 Sales proceeds outstanding at the year end - to be satisfied 15,129,0 2,028,3 17,157,34 in cash. 00 48 8 4.REPORT AND FINANCIAL INFORMATION The financial information set out in this preliminary announcement does not constitute accounts as defined in section 240 of the Companies Act 1985. The summarised balance sheet at 31 March 2004 and the summarised profit and loss account, summarised cash flow statement and summarised statement of total recognized gains and losses and associated notes for the year then ended have been extracted from the Group's 2004 audited statutory financial statements. Copies of the financial statements for the Group for the year ended 31 March 2004 will be available from the offices of Charles Stanley & Company Limited, 25 Luke Street, London, EC2A 4AR and will be posted to shareholders in due course

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