Final Results

Lawrence PLC 29 July 2005 LAWRENCE plc 29 July 2005 Lawrence plc Preliminary Results for the year ended 31 March 2005 HIGHLIGHTS - Turnover on continuing operations £17m (2004: £16.1m) - Final dividend raised 13 per cent to 5.0 pence per share - EBITDA £4.7m - Strong cash generation - Corporate activity during the year included: - purchase of the 50% of ECO Animal Health not already owned - disposal of Blackfast Chemicals - Enhanced focus on core animal health and feed businesses - Aivlosin sales doubled - Positive start to the current financial year Peter Lawrence, Chairman of Lawrence plc, commented: 'Lawrence plc has continued to transform itself from a small group of diverse businesses to one focused on serving animal pharmaceutical and feed markets worldwide. With Aivlosin sales gathering momentum and further important registrations expected this year, we are in good heart and remain confident that these strategic changes will be of long lasting benefit to our shareholders.' Contacts: Lawrence plc Peter Lawrence 020 8336 2900 Spiro Financial Anthony Spiro 020 8336 6196 Charles Stanley & Co Ltd Philip Davies 020 7739 8200 CHAIRMAN'S STATEMENT Over the past eighteen months Lawrence plc has transformed itself from a small group of diverse businesses to one focused on serving animal pharmaceutical and feed markets worldwide. I am pleased to report a profit before tax and goodwill adjustments of £4.0 million for the year to 31 March 2005. Our increased focus was achieved through a series of transactions. In March 2004 we sold our Interpet pet products business; in October 2004 we purchased the 50 per cent of ECO Group, which we did not already own, and in March 2005 reached agreement to sell our Blackfast Chemicals operation. The ECO transaction is of particular importance as it eliminates the minority element from our accounts and gives us the full benefit of the exciting growth potential of that business. Turnover in the year from continuing operations reached £17.0 million, up from £16.1 million in the previous year; some 90 per cent of our turnover is generated overseas. Operating profit was lower, influenced by the timing of the corporate activity and reflecting the transition within the company. The weakness of the US dollar, which fell an average of eight per cent against sterling during the year, has once again masked an impressive sales advance particularly at ECO Group, which invoices predominately in dollars. Nevertheless, with the huge amount of drug registration work that we have done and which will secure the licence authorisations in both Europe and America for our Aivlosin and Ecomectin products, we are confident that our sales expectations for those products will deliver the growth in earnings that will justify the structural changes we have made. Earnings per share before amortisation of goodwill were 12.13 pence. We propose raising the final dividend by 13.0 per cent to 5.0 pence (net) per share making a total dividend for the year of 6.4 pence (net) per share, an increase of 12.3 per cent over last year's payment of 5.7 pence (net) per share. Last year's figure comparative excludes the one-off special dividend of 1.3 pence (net) per share which related to the disposal of Interpet. Shareholder approval will be sought at the Annual General Meeting on 29 September 2005 to pay the final dividend on 1 November 2005 to shareholders on the register on 12 August 2005. It is still our intention to sell Aquarium Products, our US based pet accessory business, and discussions continue. The business increased sales during the year, boosted by the successful launch of a range of ornamental fish medication. Some ten years ago, in September 1995, Lawrence plc was one of the first companies to list on the new AiM market in London. The market has been a great success and today it has over 1,200 members. We are proud to be part of AiM and as one of the largest companies on the market we have been included in the new FTSE AiM 50 index. AiM has encouraged us to grow Lawrence plc financially and in share price terms within an appropriate regulatory discipline. ECO Group: Sales of ECO products were significantly ahead of last year. I am pleased to report that our distributor, Schering-Plough Animal Health, has now launched Aivlosin in Europe following the delay caused by the regulatory authorities' labelling requirements. The product is being sold in most EU countries although there is a delay in France, Germany and Poland where the national authorities require different strength and dosage registration applications. These have now been submitted and will in due course allow us access to these important markets. We continue to receive positive feedback from veterinarians who are prescribing Aivlosin for swine pneumonia. Repeat orders are already being processed, which is encouraging. Much work has been done to complete the registration dossiers required for Aivlosin authorisations for further pig indications and also for poultry. We are optimistic that many of these licences will be granted by the end of the calendar year and we expect to launch Aivlosin for these new indications before the end of the current financial year. Nevertheless we have learned from experience to take a cautious approach regarding the timing of authorisations. Global sales of Aivosin have more than doubled in the last year, which is very encouraging and underlines our optimistic expectations for Europe and America. Production of Aivlosin at our new plant has been excellent and it has the capacity to produce all our future requirements for both Europe and the USA when our registrations are granted. Sales outside Europe have been fulfilled from the plant since December 2004. Approval has been sought from the European regulatory authorities to add our plant to the current Aivlosin licence for pigs and this should be granted later in the year. Aivlosin sales in Latin America continue to increase and new registrations are now expected in Chile and Venezuela, which will add significant growth to sales and profit in those territories in the second half of the current year. The registration authorities worldwide are rightly taking an increasingly strict approach to ensure that products licensed for animal health and in particular for food table animals are thoroughly tested and investigated before granting a licence. We support this development, which mirrors the testing discipline standard in drugs for human application. These barriers to entry into the animal health markets worldwide strengthen our position as a supplier of high quality, rigorously tested pharmaceuticals for animals. The US Food and Drug Administration is aligning itself with the latest international regulatory guidelines and the regulatory hurdles remain in constant flux, which has further burdened an already busy authority and continues to delay the registration process in that country. The shorter registration times for pet products has encouraged us to develop a new generation of remedies for that market and we hope to launch these within two years. We still have over three hundred registrations outstanding for our current product range and our registration department now exceeds twenty-five full time specialists located at our facilities in England, China, South Africa and the United States. Our investment in drug registrations has never been higher. During the year ECO strengthened its management team with a number of key appointments. A new managing director was recruited in view of the incumbent's pending retirement. He is a qualified veterinarian and comes with a strong record of experience and success in the industry. His responsibilities will include spearheading the sales and marketing campaign for the coming years. A new appointment of general manager was made at our ECO-Biok Animal Health joint venture in China; the new manager has considerable experience of the animal antibiotics industry in China. Another important appointment was the head of new product development who brings extensive experience of the animal health industry and regulatory environments worldwide. China is expected to become the fastest growing and largest market for our animal health range of treatments. In 2006, only some 25 per cent of Chinese companies in that market will be permitted to continue to produce now that the demanding GMP manufacturing standard is mandatory. This, combined with agricultural intensification and changes to consumer preferences now that meat has become more affordable, should put ECO-Biok in a very strong position. Agil: Agil has continued to make good progress in sales with an increase of more than eight per cent over last year. This has been achieved despite the outbreak of avian influenza in South East Asia, which decimated poultry stocks in Malaysia and Thailand and consequently affected sales of our salmonella control additives. An increase in the awareness and willingness of poultry and pig producers around the world to reduce antibiotic consumption for growth promotion has benefited Agil and sales of its natural additives have increased. These products provide monogastric species with bio-security to the feed and a unique bacterial control system within their digestive system. Agil will continue to benefit from the ongoing changes in farming methods and is working closely with its distributors around the world by training their salesmen. Recent successes include new distribution agreements in Bulgaria, Peru and Vietnam as more producers switch to natural products. Agil's markets in Latin America have continued to improve with sales now growing strongly. Eastern European countries have also started to buy Agil products, notably in Bulgaria, Croatia, eastern Germany and Hungary. In western Europe new products for young pigs have stimulated sales in Denmark and Germany, two traditionally strong markets for Agil. Credence, our new water disinfectant, has been successfully registered by a number of our distributors and sales are growing. Employees: I would like to express my thanks to all employees and everyone associated with the company. Currently we employ some 100 people around the world and it is their hard work, enthusiasm and loyalty, which enable the business to continue to flourish. Outlook: The new financial year has started well with sales comfortably ahead of last year. Our budgets reflect the growing importance of Aivlosin, which should make a progressively increasing contribution through the year as sales gather momentum. Overall we are in good heart and remain confident that the strategic changes and increased focus of the past year will be beneficial for the company and its shareholders. Peter Lawrence Chairman 29 July 2005 PROFIT AND LOSS ACCOUNT For the year ended 31 March 2005 2005 2004 £ £ TURNOVER 17,797,369 33,330,767 Continuing Operations 17,030,853 16,128,118 Discontinued Operations 766,516 17,202,649 ========== ========== Cost of sales (11,309,637) (19,876,277) ----------------- ----------------- GROSS PROFIT 6,487,732 13,454,490 Net operating expenses (4,924,624) (10,787,836) ----------------- ----------------- OPERATING PROFIT 1,563,108 2,666,654 Continuing Operations 1,374,421 770,215 Discontinued Operations 188,687 1,896,439 ========== ========== Exceptional writeback/(down) of goodwill 674,644 (674,488) Loss on sale of listed investments - (5,901) Exceptional bonus provisions - (1,080,504) Income from listed fixed asset investments - 64,115 Profit on sale of fixed assets 8,351 - Profit on sale of a division and sale of fixed assets 1,070,819 4,543,826 Net interest 136,339 1,890,153 (158,957) ----------------- ----------------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 3,453,261 5,354,745 Tax on profit on ordinary activities (505,587) (677,199) ----------------- ----------------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 2,947,674 4,677,546 Minority interest - equity (37,785) (382,545) ----------------- ----------------- PROFIT FOR THE FINANCIAL YEAR 2,909,889 4,295,001 Dividends - equity (1,923,582) (1,753,491) ----------------- ----------------- RETAINED PROFIT TRANSFERRED TO RESERVES 986,307 2,541,510 ----------------- ----------------- EARNINGS PER SHARE 10.25p 16.26p DILUTED EARNINGS PER SHARE 10.22p 15.97p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year Ended 31 March 2005 2005 2004 £ £ PROFIT FOR THE FINANCIAL PERIOD 2,909,889 4,295,001 Exchange differences (200,404) (164,371) ----------------- ----------------- TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR 2,709,485 4,130,630 ----------------- ----------------- BALANCE SHEET As at 31 March 2005 2005 2004 £ £ FIXED ASSETS Intangible assets 26,818,044 5,660,510 Tangible assets 880,933 864,669 Investments 1,282,565 713,252 ---------------- ---------------- 28,981,542 7,238,431 CURRENT ASSETS Stocks 3,374,837 2,316,261 Debtors 10,228,333 23,924,648 Cash at bank and in hand 1,324,159 524,265 ---------------- ---------------- 14,927,329 26,765,174 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (6,864,503) (10,596,031) ---------------- ---------------- NET CURRENT ASSETS 8,062,826 16,169,143 ---------------- ---------------- TOTAL ASSETS LESS CURRENT LIABILITIES 37,044,368 23,407,574 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (2,047,120) (1,291,989) ---------------- ---------------- 34,997,248 22,115,585 ---------------- ---------------- CAPITAL AND RESERVES Called up share capital 1,547,997 1,337,368 Share premium account 21,036,776 7,936,115 Capital redemption reserve 105,829 105,829 Profit and loss account 12,304,171 11,518,267 ---------------- ---------------- EQUITY SHAREHOLDERS' FUNDS 34,994,773 20,897,579 Minority interest - equity 2,475 1,218,006 ---------------- ---------------- 34,997,248 22,115,585 ---------------- ---------------- CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 March 2004 2005 2004 £ £ NET CASH INFLOW FROM OPERATING ACTIVITIES 15,170,339 3,381,368 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 318,498 95,343 Interest paid (182,159) (254,300) Dividends received - 64,115 ---------------- ---------------- NET CASH INFLOW/(OUTFLOW) FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE 136,339 (94,842) ---------------- ---------------- TAXATION (705,190) (801,672) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of intangible fixed assets (4,705,047) (2,870,852) Purchase of tangible fixed assets (118,912) (246,671) Purchase of investments (6,969,417) Sale of tangible fixed assets 14,254 20,773 Sale of investments - 86,170 ---------------- ---------------- NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (11,779,122) (3,010,580) ---------------- ---------------- ACQUISITIONS AND DISPOSALS - (59,139) ---------------- ---------------- EQUITY DIVIDENDS PAID (1,870,206) (1,333,684) FINANCING Issue of shares 1,311,289 773,295 Increase in/(repayment of) borrowing (net) 728,101 (17,434) ---------------- ---------------- NET CASH INFLOW FROM FINANCING 2,039,390 755,861 ---------------- ---------------- Increase/(decrease) in cash 2,991,550 (1,162,688) ---------------- ---------------- NOTES 1. NET OPERATING EXPENSES Total Total 2005 2004 £ £ Distribution costs 134,376 499,961 Administrative expenses 5,102,106 10,350,278 Other operating income (311,858) (62,403) ------------------- ------------------- 4,924,624 10,787,836 ------------------- ------------------- 2. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION The profit on ordinary activities before taxation is stated after: 2005 2004 £ £ Hire of plant and machinery - 38,901 Loss on foreign currency transactions 108,166 170,684 Depreciation - owned assets 84,797 307,776 Amortisation of intangible assets 1,368,944 922,794 Auditors' remuneration - audit services 25,000 28,000 - non audit services 20,035 17,475 ------------------ ------------------ Discontinued operations Details relating to the operations that were discontinued during the year are as follows: 2005 2004 £ £ Turnover 766,516 17,202,649 Cost of sales (273,847) (9,033,395) Net operating expenses (303,982) (6,272,815) ------------------ ------------------ Operating profit 188,687 1,896,439 ========== ========== 3. DIVIDENDS 2005 2004 £ £ Equity dividends: Ordinary shares Interim dividend of 1.4p per Ordinary 5p share (2004 : 1.275p) 375,586 337,364 Proposed final dividend of 5.0p per Ordinary 5p share (2004 : 4.425p) 1,547,996 1,187,235 Proposed exceptional dividend of 1.3p per Ordinary 5p share - 347,716 Over-provision in 2003 - (118,824) ------------- ------------- 1,923,582 1,753,491 ------------- ------------- The final dividend of 5p per Ordinary Share will be paid on 1 November 2005, to shareholders on the register as at close of business on 12 August 2005. 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. 2005 2004 Weighted Weighted average Per average Per number of share Earnings number of share Earnings shares amount shares amount £'000 000 (pence) £'000 000 (pence) Basic earnings per share Earnings attributable to ordinary shareholders 2,910 28,389 10.25 4,295 26,420 16.26 Dilutive effect of securities options 85 (0.03) 469 (0.29) ------------ ------------ ------------ ------------ ------------ ------------ 2,910 28,474 10.22 4,295 26,889 15.97 ------------ ------------ ------------ ------------ ------------ ------------ 5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group 2005 2004 £ £ Profit for the financial year 2,909,889 4,295,001 Dividends (1,923,582) (1,753,491) --------------- --------------- 986,307 2,541,510 Exchange differences (200,404) (164,371) Increase in shares 13,311,290 773,295 --------------- --------------- Net increase in shareholders' funds 14,097,193 3,150,434 Shareholders' funds at 1 April 2004 20,897,579 17,747,145 --------------- --------------- Shareholders' funds at 31 March 2005 34,994,773 20,897,579 --------------- --------------- 6. NET CASH INFLOW FROM OPERATING ACTIVITIES 2005 2005 2005 2004 Continuing Discontinued Total £ £ £ £ Operating profit 1,374,421 188,687 1,563,108 2,666,654 Exchange loss (173,374) - (173,374) (66,287) Depreciation 79,220 5,577 84,797 307,776 Amortisation charge 1,368,944 - 1,368,944 922,794 Increase in stocks (1,125,659) (20,081) (1,145,740) (1,467,878) Decrease/(Increase) in debtors 14,848,641 (10,338) 14,838,303 1,113,848 (Decrease)/Increase in creditors (1,394,208) 28,509 (1,365,699) (95,539) --------------- --------------- --------------- --------------- Net cash inflow from continuing operating activities 14,977,985 Net cash inflow from discontinued activities 192,354 --------------- --------------- Net cash inflow from operating 15,170,339 3,381,368 activities ========= ========= 7. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2005 2004 £ £ Increase/(Decrease) in cash in the year 2,991,550 (1,162,688) (Increase)/Decrease in debt (728,101) 17,434 ------------------ ------------------ Change in net debt resulting from cash flows 2,263,449 (1,145,254) Effect of foreign exchange differences (27,030) (104,602) ------------------ ------------------ Movement in net debt in the year 2,236,419 (1,249,856) Net debt at 1 April 2004 (3,750,181) (2,500,325) ------------------ ------------------ Net debt at 31 March 2005 (1,513,762) (3,750,181) ========== ========== 8. 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 2005 and the summarised profit and loss account, summarised cash flow statement and summarised statement of total recognised gains and losses and associated notes for the year then ended have been extracted from the Group's 2005 audited statutory financial statements. Copies of the financial statements for the Group for the year ended 31 March 2005 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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