Pet drugs firm puts a ‘horrible year’ behind it

The York-based company is upbeat about the year ahead after overcoming a number of one-off problems.

Animalcare’s chief executive Stephen Wildridge said: “This year has been disappointing. A number of issues that we couldn’t control hit us at the same time. We’re well on our way to solving the problems.

“This first quarter is comfortably ahead of last year. This will be a positive year,” he added.

The group suffered a steep fall in the pet microchip business with sales down 28 per cent in the year to June 30.

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.

There was also disruption after the group ceased distribution of a microchip operated cat flap, which produced margins that were considered too low.

In addition, microchip sales for thoroughbred racehorses have fallen following a downturn in the racing industry due to the recession.

Mr Wildridge said there are signs that the thoroughbred market has bottomed out.

“We’re at the bottom of the trough,” he said. “We think the market will pick up this year. A lot of the problems were one-off.”

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.

Animalcare receives a commission from the hotel or cottage company if people use the service.

The group also saw a nine per cent reduction in sales of animal welfare products as pet owners put off buying a new pet until the economy picks up.

The new financial year has been much stronger following the launch of five new vet medicines.

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’s managing director Iain Menneer said: “Our target is to launch four new medicines a year which gives us enough time to develop them without swamping the sales team.”

Another drug to perk up ageing dogs was launched last month.

Vitofyllin is a central nervous system stimulant for older dogs suffering from dullness, poor demeanour and unwillingness to exercise.

Animalcare believes the market for Vitofyllin in the UK and Ireland is worth around £1.5m a year.

The company said the drug will fit in well with its growing portfolio of products to treat chronic diseases and old age conditions in pets.

The overall licensed veterinary medicines market fell by 1.3 per cent last year so Animalcare’s 3.3 per cent gain was ahead of the market.

Mr Wildridge said the business would have shown an increase of 16.8 per cent without the impact of a temporary disruption to the supply of Buprecare ampoules.

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

Analyst Chris Glasper, at house broker N+1 Singer, said: “After a difficult 12 months, the group looks to be getting back on track, with current trading reported to be ‘comfortably above’ the same period last year.

“Post period-end, one new product has been launched and one approved and the internal pipeline now comprises 12 different projects.

“2012 was something of an annus horribilis for Animalcare, with a number of factors conspiring against the group.

“Signs are that we are now through the worst of it and, whilst the macro environment remains challenging, the outlook is more positive.”

He said that the key to the investment case is organic growth in the veterinary medicines category, with underlying growth continuing at 17 per cent, well ahead of the market.

“The regulatory approval already of the first two of a planned four new products in the year bodes well for sustaining this momentum and the re-launch of Buprecare in 2013 should help further.”

He said that Animalcare’s full year results were in line with the expectations that were revised in May and July. Revenues of £10.9m were down 8.2 per cent, reflecting the temporary issues with the supply of Buprecare ampoules and the drop-off in the Companion Animal ID segment.

Gross margins were steady at 54.0 per cent and operating costs increased by seven per cent, reflecting an investment in personnel. Underlying pre-tax profits from continuing operations fell 21.7 per cent to £2.3m. The full-year dividend was raised by 12.5 per cent to 4.5p.

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