Pet drugs firm lifted by new rules over tagging

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Pet drugs firm Animalcare said its micro-chipping business has returned to growth ahead of new laws that will make it compulsory for all dogs to be tagged from April 2016.

The York-based firm said its Companion Animal Identification business delivered a return to revenue growth in the six months to December 31 and the group is well placed to benefit from the new legislation.

The group also said that its vet medicines division is outperforming the market thanks to a number of new drug launches.

While the UK licensed veterinary medicines market has shown single digit growth in recent months, Animalcare said that its sales are “comfortably ahead” of the wider market.

The firm added that trading in its first six months has been in line with management expectations with revenues for the first half of the year up by 5.9 per cent to £6.5m.

The Companion Animal Identification business reported higher revenues from both microchip sales and database services.

Rationalisation of older, lower margin Animal Welfare division resulted in a reduction in revenue, but the revamp improved gross profits.

Animalcare said that recently launched products from its pipeline of licensed veterinary medicines drove sales growth and three new products were launched on schedule in the first half.

In the first quarter it launched a new version of Phenoleptil, which prevents epileptic seizures in dogs.

Chairman James Lambert said the new version makes it easier to give dogs the right dosage.

In the second quarter it launched Marbocare and Thiafeline tablets.

Marbocare is an antibiotic for dogs and cats to treat skin, respiratory and urinary tract infections and is the result of a co-development project with one of the group’s European partners. Animalcare said the divisible tablets offer improved accuracy of dosing.

Thiafeline is licensed for the management of hyperthyroidism in cats, a common condition believed to affect 12 per cent of the 2.9 million cats over the age of nine years in the UK, which is around 350,000 cats.

The group said that its strong cash position will fund the significant new product development investment identified in its strategic plan.

Cash balances at the end of December were £3.6m, up from £3.0m in December 2012.

The group said it is pleased with the “solid first half performance” and is confident about the prospects and outcome for the full year.

Analyst Savvas Neophytou, at Panmure Gordon, said: “The most salient points of the trading update were above market growth in veterinary pharmaceuticals, growth in microchip sales and uplift in the gross margin of the Animal Welfare products busi- ness.

“Overall, the business reported 5.9 per cent growth to £6.5m, compared to our forecast of £6.3m, which allows us to push through a small upgrade to full year 2014 earnings per share to 10.12p from 10.08p and re-iterate our overall ‘buy’ recommendation.”

The UK veterinary pharmaceutical market is worth some £565m and Animalcare has a 1.3 per cent market share.

The group is changing its focus towards branded veterinary products.

At the end of September, Animalcare posted record sales and said it has returned to growth.

Animalcare has been through a year of transition with a move to new premises at York Business Park and a new chief executive, Iain Menneer.

Despite the upheaval, it said there had been no disruption to trading caused by the move.