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Animalcare Group

  • BY: Andrew Hore |
  • POSTED: 01/03/2010 |

Strong growth in medicines for pets fuelled Animalcare Group’s growth in the first half.

The veterinary medicines and livestock products supplier reported a 15% increase in revenues to £8.93m in the six months to December 2009. The revenues of the vet medicines division grew 51% to £2.51m with a similar increase in profit contribution. Underlying group profits improved from £375,000 to £894,000.

The vet medicines business is benefiting from new product launches and growing sales from existing drugs. Management expects to obtain at least two more marketing authorisations for drugs before the end of this financial year.

Livestock identification is a relatively mature market and there has not been the expected positive effect from EU legislation mandating the tagging of sheep. It will take time for the market for sheep tagging to settle down but this should make a bigger contribution next year. Identichip selling prices are falling but Animalcare is one of the largest suppliers in the UK and it can still make relatively high margins.

The animal welfare division, which effectively sells additional products to the customer bases of the other two divisions, was hit by the movement in the New Zealand dollar increasing the buying cost of the products. Operating margins have fallen.

Net debt is being reduced through operational cash generation. The figure has fallen by more than £1m to £3.82m over the past 12 months. House broker Brewin Dolphin expects the figure to be down to £3m by June 2010 and £1.7m one year later.

Animalcare says unquoted small company valuations are still unrealistic. The company is looking for acquisitions that fit with its existing operations.

At 117.5p a share, Animalcare is valued at £23.4m. The share price is more than double the level at which the company joined Aim in January 2008.

Brewin Dolphin forecasts a rise in underlying profits from £2m to £2.6m in the year to June 2010. The shares are trading on 13 times prospective earnings for 2009-10.

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