New look Animalcare (ANCR) – which was formed in July 2017 following the reverse takeover of European veterinary company Ecuphar by its UK-listed peer – has decided to focus is operations on high-margin animal medicines. It’s a strategy that has already seen it dispose of its wholesale venture Medini, whose poor margins dragged group adjusted cash profit (Ebitda) margins down to 13.3 per cent in the first half of 2018. Without the discontinued operations, Ebitda margins were 17.6 per cent and underlying operating profit rose by nearly two-thirds to £5.2m.
But investors still seem to be having a hard time digesting the new group's numbers. The shares dropped by more than a tenth on results day, even though revenues and Ebitda rose 6.4 per cent and 5.1 per cent, respectively, on a pro-forma basis.
Perhaps the problem is that the Animalcare/Ecuphar combination doesn’t generate nearly as much cash as the old UK business did. Net cash from operations was a measly £1.6m, or just 31 per cent of underlying operating profits= in the first half (although the poor performance of the Medini division can be partly blamed for that). The rate at which the group is getting through senior managers is also slightly concerning – in October, Jenny Winter will take over from Ecuphar’s founder as chief executive. Broker Panmure Gordon lowered its annual EPS guidance to 12.3p, still up from 11p in 2017.
| ANIMALCARE (ANCR) | ||||
| ORD PRICE: | 196p | MARKET VALUE: | £118m | |
| TOUCH: | 192-200p | 12-MONTH HIGH: | 373p | LOW: 150p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | na | |
| NET ASSET VALUE: | 150p* | NET DEBT: | 29% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017** | 26.3 | 1.25 | 4.3 | na |
| 2018 | 36.1 | 1.18 | 0.1 | 2.0 |
| % change | +37 | -6 | -98 | - |
| Ex-div: | tba | |||
| Payment: | tba | |||
| *Includes intangible assets of £103m, or 172p a share | ||||
| **Pre-merger Ecuphar numbers | ||||
