Final Results

Lawrence PLC 26 July 2006 LAWRENCE plc 26 July 2006 Lawrence plc Preliminary Results for the year ended 31 March 2006 HIGHLIGHTS - Turnover on continuing operations up over 19 % to Â£20.3m (2005: Â£17.0m) - EBITDA before exceptionals increases by over 20 % to Â£3.4m (2005: Â£2.8m) - ECO Group operating profit more than doubles - ECO Group sales advance by over 30 % - Significant increase in Aivlosin profit contribution - Total dividend for year raised 9.4 per cent to 7.0 pence per share (2005: 6.4 pence) - Continued focus on core animal health and feed businesses Peter Lawrence, Chairman of Lawrence plc, commented: 'The rate of regulatory approvals for our animal health products is gathering pace and we expect a further significant rise in sales during the current year, which has started well. While the approval timetable remains out of our hands we are confident that we are fast approaching the time when Aivlosin sales will start to make a major and very positive impact on our trading performance' Contacts: Lawrence plc Peter Lawrence 020 8336 6190 Spiro Financial Anthony Spiro 020 8336 6196 Charles Stanley Securities Philip Davies 020 7149 6224 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 Our results for the year to 31 March 2006 are for the first twelve month period following the series of strategic disposals which is transforming Lawrence plc into a focussed business serving the animal pharmaceutical markets worldwide. With a significant part of the corporate activity now behind us, we are able to concentrate virtually exclusively on the development of our core activities. The businesses sold were all sound and profitable so it is inevitable that without them, in the short term, our profits will dip. We are confident that enhanced returns will be generated by redirecting the cash proceeds from the disposals into our core operations to capitalise on their growth potential. Turnover in the year from continuing operations rose over 19 per cent to Â£20.3 million, up from Â£17.0 million in the previous twelve months. As mentioned in the Interim statement, profit comparison with earlier periods is distorted by the disposals and the ECO Animal Health minority, which we bought out in October 2004. Next year's results will be easier to evaluate and should allow comparison on a like for like basis, which will be clearer and more meaningful. During this transition period our performance can be better measured by the growth in earnings before interest, tax, depreciation and amortisation (EBITDA) on continuing operations. EBITDA before exceptionals for the year to end March 2006 was Â£3.4 million, an increase of over twenty per cent when compared with the Â£2.8 million of the previous year. Amortisation rose significantly during the year reflecting the high level of investment in new drug registrations and also the impact of goodwill on the purchase of the fifty percent minority in ECO Animal Health that we did not already own. Both these amortisation items are non-cash and have no effect on our underlying trading performance. We propose raising the final dividend to 5.45 pence (net) per share making a total dividend for the year of 7.0 pence (net) per share, an increase of 9.4 per cent over last year's total payment of 6.4 pence (net) per share. The transitional nature of the Company in the year under review has resulted in earnings not covering the dividend. We are confident that the current level of earnings is temporary and therefore the dividend increase can be justified. Shareholder approval will be sought at the Annual General Meeting on 5 October 2006 to pay the final dividend on 1 November 2006 to shareholders on the register on 11 August 2006. We remain committed to disposing of Aquarium Products; our US based pet accessory operation and are currently in talks with a potential buyer. ECO GROUP Our core animal health business moved forward strongly; sales for the year approached a record Â£14 million, over 30 per cent ahead of the previous twelve months. Operating profits more than doubled with a substantial widening of margins. This significant advance in trading reflects the grant of more regulatory approvals around the world and a strong performance by our major international distributors. It is disappointing when milestone target dates are missed, but we have grown accustomed to delays in the receipt of regulatory approvals caused by increased demands for additional safety work. The granting of an approval, even if it is a little later than expected, is still an important milestone and provides the basis for future growth in sales and profit. The barriers to entry into the lucrative drug markets for farm animals and pets continue to rise and we remain committed to investing in the registration process. There has been considerable press comment in the United States about the Food and Drug Administration's delays in approving a huge influx of files for human generic drugs seeking marketing approval and their failure to increase staff levels to cope with so many more applications. This has also impacted on companies seeking approvals for animal health products and delays of up to two years are now standard. Nevertheless, the rewards remain considerable and we will continue to focus closely on those drugs which provide the fastest returns; this includes treatments for domestic and companion animals. China is an important territory for ECO and the investment in the Eco-Biok Chinese joint venture has made good progress during its first year of commercial trading. Important milestones include achieving Good Manufacturing Practice (GMP) approval of a premix/water soluble manufacturing plant (to add to the existing approved sterile injectable plant) and the successful launch of the first five product lines, which include Aivlosin and Ecomectin. Sales growth and improved profitability in 2006 will be driven by the growth of existing products and a number of new ones that are on track to be licensed during the year. The investment in the Eco-Biok joint venture is well positioned to capitalise on the improved market accessibility that will result from the rationalisation of the Chinese animal health industry. This rationalisation, which begins in the second half of 2006 with the implementation of GMP requirements, will continue over the next few years and is expected to completely transform what is potentially one of the largest animal health markets in the world. In addition, agreement has been reached with Schering Plough for the marketing of Aivlosin against mycoplasma in swine and poultry in Japan and Korea, territories from which we have until now, been excluded. Further approvals for additional indications in both species in these countries are currently being progressed. With the grant of additional claims for Aivlosin and Ecomectin in Europe we are expecting a significant increase in sales through our distributor, Schering-Plough Animal Health. This should materialise following the launch to the most important veterinarians supervising pig production throughout the EU. There is an inevitable start up delay in delivering product following the grant of marketing approvals. Product labels have to be approved in the local language by the relevant regulatory bodies in each of the EU member states. We have been through this process before and we therefore anticipate a faster time to market than we have experienced in the past. As our business expands globally, our management team has been strengthened by a number of senior marketing appointments and we are well placed to efficiently manage the anticipated increase in business. There is still much to accomplish to achieve our target portfolio of drugs and this will require significant further investment in drug registrations, which we expect to peak next year. Meanwhile, we currently own a strong and diverse portfolio of drug registrations, amounting to almost 400, which provides us with a solid base load of business. AGIL Agil delivered another solid performance with good sales growth. The business is in a strong position to take advantage of a worldwide trend in animal farming which is demanding both the more efficient use of feed and a move away from antibiotic growth promoters. The global demand for sustainable crops, such as grain and cereals, has driven up prices largely because of the move to ethanol production as an alternative to fossil fuels. Feed additives are now crucial to the improved efficiency of the animal production industry whether it is fish, poultry, eggs, pork or beef. Agil's range of natural feed additives improves food conversion and efficiency of feeds for both pigs and poultry, which allows farmers and integrators to increase their profits. There has been considerable pressure on the pet food industry to eliminate synthetic anti oxidants on health grounds. Agil's range of natural anti oxidants is regarded as the leader in that industry. In addition, Agil's range of natural mineral pesticides for grain storage and application onto live birds for the control of mites, beetles and weevils is gaining acceptance worldwide. Credence, our water disinfectant product, has also launched well and has been accepted as a good complementary product to our range of on farm bio- security systems. Good progress has been made establishing new territories for the sale of our products, including Algeria, China, Costa Rica, Estonia, Macedonia and parts of Russia. Furthermore, there has been significant sales growth in Brazil, Bulgaria and Croatia; territories where Agil has registered and launched products for swine. Avian influenza continues to have a mixed effect on poultry producers around the world but there is growing evidence that this virus will be controlled as it is likely to be a hazard for many years to come. Farmers in Thailand have already stepped up production of cooked poultry in preference to exporting raw meat. Avian influenza continues to be a major media talking point but the poultry industry is coming to the conclusion that it is something that the industry will need to live with. In aquaculture, we have experienced increasing demand for our Aquacube, which is a waterproof, stable binder for fish feeds and especially useful for shrimp production. Feed losses in aquaculture result in high biological oxygen demand which depletes the oxygen available to the fish and eventually kills them. Consequently, it is essential that fish feed and shrimp pellets remain solid for up to four hours in water so as to minimise their decay which causes harmful oxygen depletion. Last year I reported our approval under the Universal Feed Assurance Scheme (UFAS) and the Feed Additive Manufactures Assurance Scheme (FEMAS) and we have been audited with negligible action points. This indicates that our quality assurance systems are working well and it is these accreditations that permit us to sell our range of feed additives to animal feed blenders around the world. Companies without these approvals are no longer permitted to sell products to feed manufacturers. People After the year end two directors retired. Michael Brent worked with me for nearly 25 years and was a director of the Company since 1986; he has made an enormous contribution to the development of Lawrence plc. Michael Sanders was a founder of our ECO animal health business in 1993. On behalf of shareholders I would like to express our gratitude for all that they have done and wish them a long and happy retirement. I would also like to thank all our employees and associates for the contribution they have made. We are still a relatively small team so the commitment and hard work of staff at all levels is particularly important and appreciated. Outlook The rate of regulatory approvals for our animal health products is gathering pace and we expect a further significant rise in sales during the current year, which has started well. While the approval timetable remains out of our hands we are confident that we are fast approaching the time when Aivlosin sales will start to make a major and very positive impact on our trading performance. Peter Lawrence Chairman 26 July 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT Year Ended 31 MARCH 2006 Notes 2006 2005 Â£ Â£ As Restated TURNOVER 20,332,752 17,797,369 Continuing operations 20,332,752 17,030,853 Discontinued operations - 766,516 Cost of sales (13,752,749) (11,309,637) GROSS PROFIT 6,580,003 6,487,732 Net operating expenses excluding amortisation (3,340,840) (3,596,680) Amortisation of intangible assets (1,185,246) (835,732) Amortisation of goodwill (1,021,112) (5,547,198) (533,212) (4,965,624) OPERATING PROFIT 1,032,805 1,522,108 Continuing operations 1,032,805 1,333,421 Discontinued operations - 188,687 Write off of investment 8 (713,294) - Exceptional writeback of goodwill - 674,644 Profit on sale of fixed assets - 8,351 Profit on sale of a division and sale - 1,070,819 of fixed assets Net interest (282,878) (996,172) 114,339 1,868,153 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 36,633 3,390,261 Tax on profit on ordinary activities 24,859 (505,587) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 61,492 2,884,674 Minority interest - equity - (37,785) PROFIT FOR THE FINANCIAL YEAR 61,492 2,846,889 EARNINGS PER SHARE ON CONTINUING OPERATIONS 0.197p 10.03p DILUTED EARNINGS PER SHARE ON CONTINUED OPERATIONS 0.195p 10p EARNINGS PER SHARE ON DISCONTINUED OPERATIONS - 0.47p DILUTED EARNINGS PER SHARE ON DISCONTINUED OPERATIONS - 0.46p 2006 2005 Â£'000 Â£'000 EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION ON CONTINUING OPERATIONS ( EBITDA) 3,361 2,878 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year Ended 31 March 2006 2006 2005 Â£ Â£ As Restated PROFIT FOR THE FINANCIAL YEAR 61,492 2,846,889 Exchanges differences 10,467 (200,404) Actuarial losses on pension scheme (16,000) (20,000) Revaluation reserve 428,532 - TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE YEAR 484,491 2,626,485 Prior year adjustment 1,213,997 TOTAL RECOGNISED GAINS AND LOSSES SINCE LAST FINANCIAL STATEMENTS 1,698,488 CONSOLIDATED BALANCE SHEET As at 31 March 2006 2006 2005 Â£ Â£ As restated FIXED ASSETS Intangible assets 28,799,870 26,818,044 Tangible assets 1,375,813 880,933 Investments 569,271 1,282,565 30,744,954 28,981,542 CURRENT ASSETS Stocks 3,626,256 3,374,837 Debtors 10,626,685 10,228,333 Cash at bank and in hand 1,299,195 1,324,159 15,552,136 14,927,329 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (8,025,312) (5,316,506) NET CURRENT ASSETS 7,526,824 9,610,823 TOTAL ASSETS LESS CURRENT LIABILITIES 38,271,778 38,592,365 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (3,082,497) (2,047,120) PENSION SCHEME LIABILITY (338,000) (334,000) 34,851,281 36,211,245 CAPITAL AND RESERVES Called up share capital 1,556,011 1,547,997 Share premium account 21,271,961 21,036,776 Capital redemption reserve 105,829 105,829 Revaluation reserve 428,532 - Profit and loss account 11,486,473 13,518,168 EQUITY SHAREHOLDERS' FUNDS 34,848,806 36,208,770 Minority interest - equity 2,475 2,475 34,851,281 36,211,245 The financial statements were approved by the Board of Directors on 25 July 2006. CONSOLIDATED CASHFLOW STATEMENT Year ended 31 March 2006 2006 2005 Â£ Â£ As Restated NET CASH INFLOW FROM OPERATING ACTIVITIES 2,968,979 15,192,339 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest paid (347,808) (204,159) Interest received 64,930 318,498 NET CASH (OUTFLOW)/INFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (282,878) 114,339 TAXATION 27,306 (705,190) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of intangible fixed assets (4,188,184) (4,705,047) Purchase of tangible fixed assets (188,092) (118,912) Purchase of investments - (6,969,417) Sale of tangible fixed assets - 14,254 NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (4,376,276) (11,779,122) EQUITY DIVIDENDS PAID (1,982,987) (1,870,206) FINANCING Issue of shares 243,199 1,311,289 Increase in borrowing 1,035,377 728,101 NET CASH INFLOW FROM FINANCING 1,278,576 2,039,390 (Decrease)/increase in cash (2,367,280) 2,991,550 NOTES 1. NET OPERATING EXPENSES Total Total 2006 2005 Â£ Â£ As Restated Distribution costs - 134,376 Administrative expenses 5,948,473 5,143,106 Other operating income (401,275) (311,858) 5,547,198 4,965,624 2. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION The profit on ordinary activities before taxation is stated after charging: 2006 2005 Â£ Â£ Loss on foreign currency transactions - 108,166 Write off of investment 713,294 - Depreciation - owned assets 121,744 84,797 Amortisation of intangible assets 2,206,358 1,368,944 Auditors' remuneration - audit services 41,000 25,000 - non audit services 3,000 20,035 R & D expenditure 70,092 - Operating lease rentals- land and buildings 56,027 74,992 Operating lease rentals- plant and machinery 123,345 84,420 The profit on ordinary activities before taxation is stated after crediting: Gain on foreign currency transactions 10,467 - DISCONTINUED OPERATIONS ( BLACKFAST CHEMICALS) Details relating to the operations that were discontinued during the previous year are as follows: 2005 Â£ Turnover 766,516 Cost of sales (273,847) Net operating expenses (303,982) Operating profit 188,687 3. DIVIDENDS PAID AND PROPOSED 2006 2005 Â£ Â£ As restated Equity dividends: Final dividend for the period ended 31 March 2004 of 4.425p per ordinary share - 1,187,235 Exceptional dividend paid for the period ended 31 March 2004 0f 1.3p per ordinary share - 347,716 Interim dividend for the period ended 31 March 2005 of 1.4p per ordinary share - 375,586 Final dividend for the period ended 31 March 2005 of 5p per ordinary share 1,547,997 - Interim dividend for the period ended 31 March 2006 of 1.55p per ordinary share 482,364 - Under provision for the period ended 31 March 2005 57,294 - 2,087,655 1,910,537 Proposed final dividend for the period ended 31 March 2006 of 5.45p per ordinary share (2005: 5p) 1,696,052 1,547,997 The proposed final dividend for the period ended 31 March 2006 is subject to shareholders' approval at the Annual General Meeting and has not been included as a liability in these financial statements in accordance with FRS 21 Post Balance Sheet Events. 4. 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. 2006 2005 Weighted Weighted average Per average Per number of share Earnings number of share Earnings shares amount shares amount Â£'000 '000 (pence) Â£'000 '000 (pence) As Restated Basic earnings per share Earnings attributable to ordinary shareholders on continuing operations 61 31,042 0.197 2,847 28,389 10.03 Dilutive effect of securities options on continuing operations 251 (0.002) 85 (0.03) 61 31,293 0.195 2,847 28,474 10.00 5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group 2006 2005 Â£ Â£ As restated Profit for the financial year 61,492 2,846,889 Dividends declared (2,087,655) (1,910,537) (2,026,163) 936,352 Other recognised gains and losses 412,532 (20,000) Exchange differences 10,468 (200,403) Increase in shares 243,199 13,311,290 Net (decrease)/increase in shareholders' funds (1,359,964) 14,027,239 Shareholders' funds at the start of the year 36,208,770 20,897,579 Prior year adjustment - 1,283,952 36,208,770 22,181,531 Shareholders' funds at the end of the year 34,848,806 36,208,770 Company 2006 2005 Â£ Â£ As restated (Loss)/profit for the financial year (345,545) 3,171,434 Dividends declared (2,087,655) (1,910,537) (2,433,200) 1,260,897 Other recognised gains and losses 412,532 (20,000) Exchange differences (73,554) (27,030) Increase in shares 243,199 13,311,290 Net (decrease)/increase in shareholders' funds (1,851,023) 14,525,157 Shareholders' funds at the start of the year 34,377,804 18,568,695 Prior year adjustment - 1,283,952 34,377,804 19,852,647 Shareholders' funds at the end of the year 32,526,781 34,377,804 6. NET CASH INFLOW FROM OPERATING ACTIVITIES 2006 2005 2005 2005 Total Continuing Discontinued Total Â£ As Restated Â£ Operating profit 1,032,805 1,333,421 188,687 1,522,108 Exchange (loss) - (173,374) - (173,374) Actuarial pension losses (16,000) (414,000) (414,000) Depreciation 121,744 79,220 5,577 84,797 Amortisation charge 2,206,358 1,368,944 - 1,368,944 Increase in stocks (251,419) (1,125,659) (20,081) (1,145,740) (Increase)/decrease in debtors (400,800) 14,848,641 (10,338) 14,838,303 Increase/(decrease) in creditors 276,291 (917,208) 28,509 (888,699) Net cash inflow from continuing operating activities 2,968,979 14,999,985 14,999,985 Net cash inflow from discontinued activities 192,354 192,354 Net cash inflow from operating activities 2,968,979 14,999,985 192,354 15,192,339 7. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2006 2005 Â£ Â£ (Decrease)/increase in cash in the year (2,367,280) 2,991,550 (Increase) in debt (1,035,377) (728,101) Change in net debt resulting from cash flows (3,402,657) 2,263,449 Effect of foreign exchange differences 10,467 (27,030) Movement in net debt in the year (3,392,190) 2,236,419 Net debt at the start of the year (1,513,762) (3,750,181) Net debt at the end of the year (4,905,952) (1,513,762) 8. WRITE OFF OF INVESTMENT The unlisted investments include a holding of loan notes at a book value of Â£713,294 arising from the disposal, several years ago, of part of the group's non core business. The purchasers have attempted to redeem these for a sum substantially below their market value based on independent valuations commissioned by the directors and in accordance with best practice these have been provided against in full. The directors have taken legal advice and have commenced the process of taking legal action for compensation to recover their full market value. 9. PRIOR YEAR ADJUSTMENT Changes in accounting policy The prior year adjustment made as a result of the changes in accounting policies which is reported in the Statement of Total recognised Gains and Losses and adjusted to opening reserves in note 21 is analysed as follows: 2006 Â£ FRS 21 - Dividends proposed for 2005 declared in 2006 1,547,997 FRS 17 - Increase in pension liability in 2005 (net of deferred Tax) (83,000) FRS 17 - Increase in pension liability in 2004 (net of deferred Tax) (251,000) 1,213,997 The effect of these changes in the accounting policies is to decrease the current years retained profit as set out below: 2006 Â£ FRS 21 - Dividends proposed for 2005 declared in 2006 (1,547,997) FRS 17 - Increase in pension liability in 2006 (net of deferred tax) (4,000) (1,551,997) The effect of these changes in the accounting policies on the comparative profit and loss account is set out below: 2005 Â£ FRS 21 - Dividends proposed for 2004 declared in 2005 (1,534,951) FRS 21 - Dividends proposed for 2005 declared in 2006 1,547,997 FRS 17 - Increase in pension liability in 2005 (net of deferred tax) (83,000) (69,954) 10. 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 2006 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 2006 audited statutory financial statements. Copies of the financial statements for the Group for the year ended 31 March 2006 will be available from the Company's registered office and will be posted to shareholders in due course. This information is provided by RNS The company news service from the London Stock Exchange

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