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Animalcare boosted by higher margin sales mix

The veterinary pharma group has been boosted by rising Southern European demand
September 28, 2021
  • Sale of Ecuphar Invest NV holding 
  • Upgraded earnings expectations

Anecdotal evidence would suggest that pet ownership increased during the lockdown periods, though this stands at odds with a recent report revealing that visits to the vet by pet owners in the US have declined slightly.

Whatever the reality, Animalcare (ANCR) has confirmed that it expects its full-year underlying cash profits and earnings will outstrip current market expectations. The group, a developer of licensed veterinary pharmaceuticals and identification products, saw underlying profits rise in the first half due to a higher margin sales mix.

The Companion Animals segment, which accounts for around two-thirds of group sales, registered a 29.1 per cent sales growth rate over the corresponding period last year, partly due to strengthened trading in Southern Europe, while the gross margin increased by 2.6 percentage points to 54.6 per cent.

The group remains on track to deliver on its targeted 90 to 100 per cent cash conversion rate for the full year. Efficiencies in this area are also reflected in a reduction in net debt, which now stands at approximately 0.7 times ebitda.

In tandem with the results, it was announced that Christiaan Cardon is to stand down as a director, after Ecuphar Invest – which he founded - sold its entire shareholding, representing around 23 per cent of Animalcare’s share capital. Animalcare was formed in 2017 through the reverse takeover of Ecuphar.

Sales should improve through the granting of marketing authorisation for canine osteoarthritis product Daxocox, but the shares, trading at 38 times consensus earnings, adequately reflect commercial prospects and further upgrades. Hold.  

Last IC view: Hold, 196p, 25 Sep 2018

ANIMALCARE (ANCR)   
ORD PRICE:430pMARKET VALUE:£258m
TOUCH:420-430p12-MONTH HIGH:430pLOW: 150p
DIVIDEND YIELD:0.5%PE RATIO:42
NET ASSET VALUE:136p*NET DEBT:13%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
202034.50.760.82.00
202139.10.790.52.00
% change+13+4-38-
Ex-div:21 Oct   
Payment:19 Nov   
*Includes intangible assets of £84m, or 140p a share