Animalcare Group plc

Good morning all. This is the Animal Care Group interim results presentation. Attendees are just filtering through now we've started. The presentation will be with Jenny Winter, the CEO, and Chris Brewster, the CFO. For questions, if you have questions, please hit the raise hand icon and that will show me that you've asked a question. I will then unmute you to be able to ask us.

Thank you.

Okay. So you're very welcome to this morning's presentation. As Helen very kindly said, you've got myself and Chris. I think from looking down the list, most of you are familiar with Animal Care Group. And so hopefully what we can do this morning is just give you a bit of an update of the first half for us and a bit of a sentiment for where we're going next. So Those of you who follow the animal health market will know that it's a pretty dynamic growing sector. We see it as quite competitive, but it's got really attractive long term fundamentals. Some key points that we see about the market in the first half of this year is we're seeing the market growth returning to what we would call more pre-COVID levels, which is really positive growth. but not quite the growth that we saw, which was really significant just during those COVID years. And so we see it as a real positive. It's a good place to be operating. For us, we definitely recognise that the companion animal part of the market, the dogs and cats, is definitely the main driver of the growth that we're seeing. And despite what you tend to read, particularly in the UK, more so than in any of our other countries, that pet ownership is becoming squeezed by inflation, we're not really seeing that. And you can see in some of the other animal health companies that they're seeing growth of pet ownership and growth in the spend per pet. So we also see that. And we're seeing a change in customer base. And here you're seeing different demands. We're seeing a bit more of a switch to OTC and certainly a bit more buying online. If you look at the pharmaceutical, the sort of prescription market, which about 80% of our business is in this piece in the market, we see that novel, innovative products are driving the growth. These are products that are sustainable for the future, that have, whilst they have competition, they don't have direct competition from generics. And so these are the products that are really driving higher margins. Particularly in the UK, we see a continued influence of the veterinary corporates. They all seem to be doing something slightly different, but we're seeing a bigger influence. And that for us is a positive and a negative. If you win in a corporate, you get the volume growth, but you tend to get it at slightly lower margins. So we see the influence of veterinary corporates in the UK as something that is a fundamental part of our business moving forward. We see some changes around Europe. There's some legislation changes in France. There is some appetite for growth from the corporates around the other countries where we operate. We're not seeing that in the same way that we see it currently in the UK. And as I'm sure you're all aware, the CMA is currently looking at the corporates, which we aren't particularly involved in. And that is going on in the UK at the moment. The final point is interesting because this is just a perception of ours at the moment, is that we kind of feel that people are waking up again and really starting to explore M&A of all types. So this might be distribution deals, license deals and full M&A activities. And so I think from from our team in the first half of this year, that felt like it was really gaining some momentum. So on the whole, we see it as a really positive place to be doing business, really excited about what the future might look like. For those of you who are less familiar with us, I think just as a reminder, you know, what are we? We're a profitable cash generating business with strong margins, low level of debt. And what this really means is that we have the financial opportunity and we have huge ambition to invest in both organic and M&A growth. And so that's that's kind of us in a nutshell and just wanted to remind people of the fundamentals of our business. These five things are the things that those of you who've been following us for a while know. This is now, we're five years into this. And whilst things change along the route and we're constantly flexing to make sure that we're working with the market dynamics, these five things are still the most important. Making sure that our finances are strong, revenue, cash conversion, EPS, et cetera, really fundamentally so that we can continue to invest in healthy growth for the future. Our portfolio is looking more attractive. What we and others see is that always at the bottom of our portfolio, you've got products that come out, either through greater genericization and price pressure, through changes in technology or in vet practices. Some distribution products go back to their owner, but we are compensating as far as we can, and we'll talk about that later, to move to higher margin, much more sustainable brands and products and services. And so that growth portfolio continues to be important for us. Business development. We'll talk a lot about this. This is really we see the opportunity for inorganic growth as critical for our future success. Our pipeline at the moment, we have a fairly limited pipeline and strengthening that is a real focus and will continue to be so. And we are continuing to make sure that we've got the organisation in the right shape to make the most of the opportunities. Just looking at highlights from the first half. We again have seen our margins improve. We've got one and a half percent improvement. And that for us is really important to continue that journey. Cash conversion has improved, reducing our net debt to 3.8 as of June 30th. And clearly, and you'll hear us talk about this time and time again, the reason why we have the strong financial platform is we are desperately keen and driven to find the right opportunities for future growth. We launched Plactive in 2022. We've had great response from the market. The reps in all our markets really love selling Plactive. We have Orizyme historically, which is still growing. And so this dental market for us is a really important place. We're looking forward to a good future with that. Identica, again, we're going to talk more about this, continues its strong sales and profit momentum. Daxacox is gaining prescribers in our direct sales markets. This is the once weekly non-steroidal. We see on the downside production animals have been affected by some phasing of orders. The production animal orders tend to be sort of big orders in the limited number of times a year. We're seeing a bit of that. We're also seeing some impact of generic competition in the production animal business. In Equine, the main benefit we're seeing is we took back one of our distribution products that was previously on distribution. We took it back into the UK. That's Danilon, and that's a really important driver for our UK business. From a business development, in the first half, we've been, as always, highly active. But actually, we've increased our activity in M&A and partnering opportunities. We've put more resources behind it. We're actually now that, you know, Congress is a normal and they're actually face to face again. We're much more present and we're seeing that the impact of that coming through sort of post the first half. where our funnel that we describe of opportunities that we're assessing is just increasing significantly. And for us, we know that if we can increase the number of products and opportunities, we're looking at the chance of landing one and being successful and bringing one through is increasing as well. You will have hopefully or maybe seen that our joint venture partner, Kane Biotech, who had a 66% share in our STEM joint venture, they are having a strategic review which could or may or may not result in a sale of their share. We actually have a very strong contract with, as part of that STEM JV. So we are also having a look at what opportunities this might give us. for future growth of the STEM products. So we see that as a really positive thing, depending on where Kane decide to go with it. Either they stay, either they sell their share, whatever the outcome, we are working closely with them and we're quite excited about the opportunity. In our pipeline during the first half, nothing very exciting to share in terms of actual detail, but I can tell you that we're really positive about the VHH antibody technology. This, for those of you who haven't followed our journey, is really a platform technology. I have some really, really exciting antibodies that have a number of potential of different indications. And we have two candidates at the moment. We're looking at a third. So that that's exciting. And to see that long term, it's a long term opportunity, but it's good to see the number of opportunities coming through there. And as I mentioned on the business development slide, we have realigned our resources. And so we've got more people out there talking about opportunities in M&A. And we also have just made sure that we're continuing to drive the organisation to be resourced in the right way to achieve future growth. So pleased with how the first half has gone and recognising the changes in the marketplace. So I'm going to hand over to Chris to talk in a bit more detail about the finances.