Animalcare Group plc

Animal Care Group PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Jenny Winter, CEO. Good afternoon.

Good afternoon and thank you very much. And you're very welcome to our interim results 2025 presentation. You have myself and Chris Brewster. I know that we've met several of you previously and looking forward to taking you through the short presentation and answering any questions you may have. For those of you who haven't listened to one of our presentations before, who aren't familiar with us, We're an international veterinary pharmaceutical company. The majority of our products are prescription products. So they're either used by the vet in the vet surgery. So anesthesia, analgesic, anesthetics, et cetera. They're prescribed to a pet owner. So the vet writes a prescription. Very often we'll sell the product based on that prescription. And in some of our products, they don't need a prescription, but the vet will send the pet owner home with a product. We operate in all three segments of the veterinary pharmaceutical market. Companion animals, so dogs and cats mainly. And that's the biggest part of our business, as you can see on the right hand side. That's growing at about 4 percent. Difficult to get very accurate data, but around 4 percent. Equine is a strong part of our business. You can see equine and the other segment production animals are about equal in size now. And this has been significantly strengthened in the last year by the acquisition of an Australia, New Zealand and UAE Asia pack business called Rand Lab. We also have a very strong, large product within our existing portfolio called Danalon. We see equine growing healthily at around that 8%. And that's driven by the equine business being slightly less competitive, but also the willingness to pay is higher and the money spent on horses is more significant. Difficult to get exact data of production animal market growth. We think this is growing, but probably at a lower rate than the other two. Our production animal business is predominantly in Southern Europe, so Spain, Italy and Portugal. That's really for some historical reasons. Equine portfolio is predominantly in Australia, New Zealand, UAE and Asia-Pac, as well as quite a significant business in the UK. Companion Animals is everywhere, excluding Australia, New Zealand, UAE, Asia-Pac apart. Really important part of our success is because we have very strong relationships with the vet. So they're our customers. And we have good relationships. Many of our representatives have been calling on that customer for a long time. So they're talking about the product. The decision for the vet is usually based on efficacy, safety, relationship with the customer. And price comes a bit further down the track. On the right hand side, you can see the multi-stranded growth strategy. And those of you who've met us before know that we've always focused on these three strands. Firstly, making sure our organic business is growing and healthy. Secondly, that we are looking at acquisitions, licensing, development to build that footprint, to build scale. And thirdly, looking for new product development. And we'll talk about all of those three strands as we move forwards. Looking at our portfolio, this is the top, on the right hand side, you've got the top 10 products in our existing portfolio. And we, over the years, have been making that stronger and stronger portfolio predominantly in two ways. One of which is we used to have products that we distributed for somebody else. And they were always inherently a little bit more risky because the owner of them could take them back. They manufactured them. We had less control over the supply chain. And we're moving that to more products that we either have a license or we own the intellectual property. And so moving in that direction is really a very positive step forward, gives us more sustainability and more certainty. We're also moving from what was historically five years ago, more generic portfolio. So that's something that hasn't got intellectual property or a significant differentiator. We're moving into more novel products that have something about them that means that nobody else has the same thing. On the right-hand side, you can see that our portfolio in the top 10, we've got some really important products that are still growing very healthily. And this is a mix of some older products and some newer products. You can see at number five, for example, that's the leading product from Rand Lab coming in now to our top 10. It's why we haven't got comparative data for the first half, because we've only owned it since January. But it's an important move forwards. And then you can see the two really critical products for us, Daxacox at number six and Plactive at number nine. And those are important for us because they're relatively new launches. They're on a significant growth trajectory. They're high margin and they're ours. And so those are two of our important products. We would expect those to continue to move up through the top 10 towards the top. Also important when we look at the top 10 is that we recognize that Orizyme, Danilon, Aquafarm and Dinalogen are there at the top. And those products are mature products, but they're really super strong brands and they don't really have a great deal of competition for Orizyme and Danilon. For Aquafarm, this is the water and the fluid that they use for injection. There's a relatively large amount of competition around there. There's also globally, there's been some supply channel challenges and people going out of stock coming back in, which is why you just see a small decline there, which we are addressing through a new supply arrangement, etc. Just moving down, the only other products I'll just mention, because you can see the decline is Seponva, Seponva Plus. This is a product that's phenomenally seasonal. And unfortunately, due to a bit of a supply quality issue, we were late in delivery. So you miss a bit of that seasonal piece, but we're pretty confident that will come back. So for us, having that really strong top 10 where we focus and we're driving growth is super important. The accounts for about 40% of the sales, the top 20 accounts for 60% and the top 40 accounts for 80%. So you can see that this 40% of business is really important for us. What we're really pleased about in the half year was that whilst we were focused on the strategic execution, bringing RanLab into the group, making sure that we drove the existing product portfolio, looking at some more opportunities, You may have seen that we bought a stake in an Australian companion animal business called InVetro. We've also done some licensing deals and we bought the rights to our own antibody. So we've had quite significant strategic progress. Importantly, the financial performance has continued to be strong with revenue up 18.3%. So that for us is really important to get the balance between those two areas. Chris is going to talk a little bit more about the financial performance, so I won't dwell on that. Suffice to say that we're pleased that we had the right balance between those two areas. Just a few comments about RanLab. We completed this deal on the 3rd of January, and our expectation was that we'd be sitting here talking about the progress of integration, what we'd learned, maybe things that we'd had to address. Actually, what we're sitting here doing is looking at a growth of 14%, which is excellent. We're really pleased with that. But also a business that was able to pivot relatively quickly from a very strong controlling founder to being part of the animal care group. So we're really pleased about that. And our discussions with the team at Ran Lab now is much more about growth opportunities, future growth. How can we drive the business differently? And we're already looking at three main areas. One of which is we brought in an export manager who's doing a super job of professionalizing some of the export that was going on previously, but was a little bit of a second thought. She's already up and running. looking at Japan, which is a big market and other countries around Asia. So that's been really good. And she's paying back already very quickly to to being positive contributor. Secondly, we're strengthening our UAE GCC function. There's been a small footprint there. But the opportunity is very significant. So we've actually strengthened that with a new leader in there. And the third one is just literally in Australia, we recognised that there was an opportunity by bringing one more sales team member in to really drive that growth, particularly in New South Wales, actually, the state that Sydney's in. So we're delighted about that. It's really moving forward. Just in terms of the future opportunities, we're still working on some of these. Most of them involve regulatory filings, so it takes a little bit longer. Looking at some products that we have in Europe that we can take into the Australia and New Zealand business for equines and some of the business that's in Australia and New Zealand, how we can bring it to Europe. We've already done one on a special license, but we're still looking at that. We're also tapping into a lot of the equine experience. we talk about pipeline you'll see that we've got some products that are in the equine area and there's some superb expertise actually in the round lab business that we've been tapping into and that's been very helpful to get a global view and for the development i'm going to hand over to chris at that point to go through the financial review thanks jenny good afternoon everyone um i'm just going to start on this slide which is an overall

a summary of the financial performance so as you can see clearly on here and particularly on the p l kpis the significant contribution from ran lab um i think what's pleasing for us is that the half year gives us the first opportunity to demonstrate all the value that we saw at the time of the deal when we when we finished that in in january and i'll come on to more details on on each of those but You can see our margin, so the accretion there is largely driven by Randler. And just to give you a feel, so the Randler portfolio is at 73% gross margin. That's exactly in line with expectations that we had at the time of the deal, so a really profitable equine portfolio at gross margin level. And you can see that translating into EBITDA. So the EBITDA delivery of RunLab, again, in line with expectations, was at 47%. That actually is better than we expected on the basis that we had accelerated some investment into the business. I think, as Jenny said, we quickly moved from integration into looking at opportunities for growth with the senior management team over there. And we've done some investment, accelerated some investment in the commercial footprint, both in Australia and from an export basis. Whilst there's a lot of, rightly a lot of focus on RAN Lab, we'll come on to this, but the underpin of all of this is obviously the continuing performance of our existing operations at Animal Care. And we'll see that that's continued to grow steadily. from an organic perspective, notwithstanding a couple of headwinds that I'll come on to. And then finally on cash conversion, we're at 70% at the half year stage. We have a target of 80, and we're really confident that we're going to hit that for the full year based on where we are at the half year. I'm going to use this slide just to touch on a few things from an organic perspective. So if we set the scene for animal care, We've always targeted organic growth around market, which from Jenny's slides earlier, you can see that they're around 4% to 5% market growth. We're around 1% organic growth, and there's a couple of reasons for that. So you can see, firstly, about 1% has been lost on translation effects. So as a reminder, around 75% of our Sales are in euros, excluding Ranlab, and the strong Sterling's had an adverse impact on that. And then secondly, you'll have seen that the trading update, but also in the finals that we've mentioned a particular circumstance and situation around Conofita, which I'll just, I'll give you the impact and then give you some background. So the half year, Conofita has impacted sales in Spain by around a million. So that's around 3% organic growth from last year. So it's quite a big product in Spain. The sales last year were quite heavily weighted to the first half, about 70-30. So the impact's more marked first half and second half. The reason why we've been impacted is that in Spain, they've had an electronic prescription system called PresVet that's been operating in production animals and the authorities have had to put that in place across companion animals by 2030, and they decided to do that from the 1st of January this year with very, very little notice. Those kind of guidelines are really targeted at standard antibiotics, and they give a classification of A to D. A is the one that is really hard to prescribe for obvious reasons, and D is more freely prescribed. to prescribe. And Conofita, that's a topical product, where we've seen similar things put in place across other countries, it's been diagnosed or determined as a D, and we've gone in at B for unknown reasons. So where we are now and where we since the start is that our team and lots of our other pigments have been lobbying the two authorities. So the Ministry of Agriculture and the Veterinary Association to change that classification. And where we are today versus the half year, I think, is we're more confident of a resolution. We unfortunately don't have a timing of that resolution, but our best guess at the moment is that we're hoping that kind of feeder sales will resume at a normal level, probably from the beginning of next year. On gross margins, we talked about Randall's very high margin portfolio. On a like-for-like basis, we're about a percent down year on year. So that's around 50% FX, again, the GDP euro impact. and then there is and then a net cox inflation in production animals largely. Production animals has a higher percentage of products on distribution. Those products are less in our control in terms of cost of goods. So we have some significant inflation there. The price increases are quite static in terms of when they're enacted. They're in Spain from the 1st of April, so hopefully we'll be catching up some of that price increase during the course of the year. On EBITDA, we said that animal care is broadly in line with last year. There's a little bit of the revenue and margin mix that I've just talked about in that EBITDA, and you can see that the increase in SG&A cost is very small. It's about 200,000. So we've got a very well-controlled cost base, as always, and we continue to invest in people. On EPS, a couple of things to point out here as to the reasons why that's a much bigger increase than EBITDA. The first is on finance income, so that's unrealised foreign exchange gains into companies. Again, there's a GBP euro at play here. We'll see where that gets to at the year end, so that will probably move in line with FX rates. The one that's locked in, so the benefit that's locked in, is in the tax. So very briefly, we've been operating for years with quite significant losses in our Belgium entity. We've not been able to unlock and we've structured the RANLA deal to be able to unlock that because we've got financing, structuring a finance income into Belgium. So we've been able to unlock those losses, which is great news. So my summary for the full year is that I think EPS will be higher than EBITDA growth, but probably a little bit less because of our FX movements. It's coming on to an overview of the product categories. So Jenny's touched on a few of these brands. So I'll give a canter through on here. So on companion animals, revenues up about 2%. We mentioned on here Dapsacox in the dental range. Jenny's going to come on to a bit more detail about what the future looks like for those because we're really pleased with the historical growth.