Animalcare acts to combat the drop in sales of pet microchips

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Pet drugs company Animalcare is hoping to boost sales with the launch of a number of new products including a GPS locator system to track down lost pets.

The York-based group is keen to find new revenue streams after it saw a steep fall in pet microchip sales.

The economic downturn has deterred many pet owners from getting their cats and dogs microchipped, a process that allows vets to trace lost animals back to their owners.

Animalcare’s chief executive Stephen Wildridge said: “The recession has deterred some people from replacing their pets so that has hit sales.

“At the same time new pet owners are looking at essential costs like vaccinations and are asking whether microchipping is an essential cost.”

He added that many pet owners are delaying the purchase of a microchip and relying on less reliable methods such as collars which can easily be lost.

The group is conducting a full review of its microchip business which is due for completion next Wednesday.

While microchip sales remain difficult, the group said it is making progress in launching new products and services using its recently updated registration database.

These include the GPS locator system to track down lost pets and other services such as a list of dog friendly hotels and self-accommodation.

“If you want to take your dog on holiday we can offer directories of pet-friendly hotels or cottages,” said Mr Wildridge.

Animalcare receives a commission from the hotel or cottage company if people use the service. In a trading update ahead of its results for the year to June 30, Animalcare said its results are expected to be broadly in line with recently revised expectations.

The company issued a profits warning on May 24 on the back of a steep fall in dog and cat microchip sales.

At the time it said microchip revenues would be down 32 per cent over the year, but revised this up to a decline of 29 per cent yesterday.

Mr Wildridge said that revenues from its core licensed veterinary medicines business remains strong.

Excluding the impact of a temporary disruption to the supply of Buprecare ampoules, revenues in this area are 17 per cent ahead of last year.

When the effects of the Buprecare supply disruption are included, revenues for the business are two per cent ahead of last year.

Mr Wildridge said: “The drugs business is performing very well, we’re very pleased.”

The group had set itself a target of launching four new licensed veterinary medicines, but surpassed this with the launch of five.

These included Torphasol, an analgesic for horses; Detonervin, a horse sedative; Emdocam Equine, an anti-inflammatory for horses; Tilmodil, an antibiotic for cattle, and Buprecare multidose, an analgesic for cats and dogs.

The group said that while sales of identification microchips and associated services are not expected to show an immediate rebound, the new database initiatives will boost revenues and cost efficiencies.

“It’s been a difficult year with some one-off trading issues such as the Buprecare supply disruption,” said Mr Wildridge.

“But I believe next year will be quite a strong year. We’re cash generative.”

The group said it is confident the licensed veterinary medicines business will continue to strengthen.

Analyst Chris Glasper, at house broker N+1 Brewin, said: “The investment case rests on Animalcare continuing to bring new products to market and grow market share, and we are encouraged by continued progress on this front.

“In light of this statement, we have modestly adjusted our full-year forecasts, which now show revenues of £10.9m, pre-tax profits of £2.4m and earnings per share of 9.3p, a 3.9 per cent down-grade.

“Given the outlook and continuing challenging macro backdrop, we believe it is prudent to take a more cautious stance going forwards.”

The group’s share price was unchanged at 130p.

N+1 Brewin’s revised 12-month share price target is 146p and it is upgrading its recommendation from ‘hold’ to ‘add’.

Animalcare’s full year results are expected to be announced on October 4.