Animalcare

Vet pharmaceuticals-to-livestock products play Animalcare is nurturing resilient organic growth, whilst staying alert to acquisitive possibilities.

Bossed by CEO Simon Riddell, Animalcare supplies veterinary medicines, identification and welfare products to the companion animal market and the livestock industry, where the supply of sheep ear tags represents an important income stream.

Interim results to December showed sales up 15%, all delivered organically, to £8.93m, driven by 51% growth in the veterinary medicines business. Adjusted pre-tax profits and earnings per share both more than doubled, to £900,000 and 2.9p and net debt was reduced from just under £5m to £3.82m.

Veterinary medicines proved the key growth driver, with generic pharmaceuticals launched over the last 18 months delivering good returns. Products to note here are Benazacare, a generic canine heart failure treatment, for which authorisation for use in cats was received last May, Buprecare, an analgesic for operation-related pain in companion animals and also Cephacare, used to treat dog and cat skin complaints.

Modest sales growth was delivered in the livestock business, although margin pressure, a sharp fall in the New Zealand dollar-to-sterling exchange rate, meaning product costs increased, led livestock into losses. Progress was also impeded as the market sat on its hands ahead of the introduction of electronic sheep tagging.

We remain fond of Animalcare, which offers good growth potential in the resilient companion animal market and remains keen on complementary acquisitions at sensible prices. For June 2010, pre-tax profits should rise from £2.1m to £2.5m, producing increased earnings and dividends of 8.6p (2009: 7.2p) and 2.8p (2009: 2.5p) respectively.

Very pleasing performers – 88% above our original 62.5p recommendation price – the shares should have further to go, although if you have yet to bank at least a bit of profit, then do so now.