I loved the following quote contained in today's results for Animalcare
Jan Boone, Chairman of Animalcare Group plc, said: "2017 was a transformational year for Animalcare Group plc."
I think most shareholders would agree with Mr. Boone that 2017 was indeed a transformational year for Animalcare and that is why the share price fell by over 50%.
If only the transformation had not taken place and Animalcare had retained its independence.
I think the concerns expressed by gamesinvestor and me almost a year ago have proven to be justified as it is now clear that Ecuphar has ruined Animalcare through its reverse takeover and this is reflected in the share price collapse and the many negative comments from investors on the various discussion boards. I am concerned to see Iain Menneer, Animalcare's former CEO, leaving the company suddenly a couple of weeks ago and the company's house broker commenting recently that it would be quite keen to see Animalcare's May (15th May) prelims to garner "further detail and granularity". It sounds as if even the house broker remains somewhat in the dark about how the company is doing. The results could of course be OK, it's just that there seems to be quite a bit of uncertainty here. However, the fundamental problem is that Ecuphar's business has unsatisfactory profit margins and I can see no evidence that Ecuphar's management know how to build a growth company.
pharma -- whilst initially it's presented as a kind of reverse takeover, in reality Animalcare has or is about to be bought. The Animalcare management have taken a screw and are now back seat drivers.
Ecuphar and quite indebted, whereas Animalcare was debt free.
I think today's share price fall is an appropriate response to the Ecuphar transaction. Animalcare was doing fine without Ecuphar and its profit margins are better than those of Ecuphar and I don't buy the argument that big is better. It seems to me that both Animalcare and Ecuphar need to develop the regulatory expertise to enter the huge US market and this merger does not help in that regard and has a weak strategic rationale. As a shareholder, I would not support this merger.
Very pleased to see that the company's financial performance is better than expectations. This is all the more impressive as Animalcare continues to invest significant sums in new product development and continues to have a strong balance sheet. I would suggest that today's share price rise is justified.
My guess is that the company will continue to expand its range of products over the next five or so years and will then sell out to a larger company able to exploit many of Animalcare's products in the US, but this is of course just speculation.
"I'm going to get drawn into a whinge today, because I drove all the way to York for LSE:ANCR:Animalcare's AGM, mostly to find out how much it has agreed to pay its two executive directors. It is far from clear, at least to me, from the company's ..."
Trading update - this RNS was also released yesterday. The company is a supplier of veterinary medicines. Note from the usual Stockopedia graphics on the right that it has high quality scores - in particular an excellent operating profit margin, indicating pricing power.
Also note that it has a high StockRank of 97.
Ed has explained in the past that a high StockRank is no guarantee of success, but picking a basket of high StockRank shares should, over time, out-perform a basket of low StockRank shares, and the performance stats validate that.
So personally I always get a warm glow when a share that appeals to me on fundamentals also has a high StockRank - it's almost like having a robot friend that is checking my work & giving me a reasonableness check. I try to keep low StockRank shares to a minimum in my portfolio, as the odds of success are lower, so selection has to be very careful, and higher conviction, to make me take the additional risk.
Trading in H1 (to 31 Dec 2015) sounds OK, if unexciting - revenue up 2.7% to £7.1m, although that rises to 5.6% if a one-off £0.2m sale in the prior year is excluded.
What concerns me is that the PER has risen from about 12 in 2014, to 17.4 today. Therefore the share price appreciation since I last looked at it in Oct 2014 has been all about expansion of the earnings multiple, rather than the business doing much in terms of growth.
This is a general problem with small caps. We used to be able to buy good companies on a PER of about 12. Now we have to pay 15-20 for similar companies. Maybe that is a function of ultra-low interest rates for an extended period? Assets become inflated in price. Remember the concept of mean reversion - what goes up will eventually come down again.
Cash - this has risen to £6.1m, and the historic figures show nice cash generation, with the company hoarding a growing cash pile. Cash represents 14.3% of the market cap, so it's fairly significant. It would be interesting to find out what the company intends doing with its cash pile - acquisitions, or a special divi perhaps? Given its stable, and high operating margin, the company doesn't need to hoard cash, and could actually run with say £4m or more of net debt. So there is scope to release about £10m in cash for other purposes, in my view - giving potential upside for investors.
New products - details are given about new products being developed, so I think this is the key area to research, if looking into this company in more detail. If it has good growth in the pipeline, then the shares might end up looking cheap in a year or two perhaps? I like the concept of cash generative companies funding their own growth, through new products, or acquisitions.
Dividends - a nice progression of well-covered divis has been paid out in recent years. The forecast yield is currently about 3%.
Outlook - sounds confident;
Following the solid trading performance in the first half, particularly across the Licensed Veterinary Medicines and Animal Welfare Product groups, the Board remains confident about the prospects and outcome for the full year.
My opinion - this is only a brief review, as usual, so more in-depth research is always necessary. On the face of it, this share looks perhaps priced about right, or possibly a little too expensive? It's difficult to justify a PER of 17 for a company with pedestrian growth, although adjusting out the cash would bring the PER down to nearer 15, not outrageously high, but hardly a bargain.
If you think the new products are set to generate significant growth in profit, then it might be worth pursuing.
It looks a good company, and has a lot of features I like - high profit margin, decent & growing divis, net cash, stable & predictable profitability, I'm just not convinced the current valuation stacks up.
Another point to consider is whether customers might squeeze its m
Market has re-acted very bullish to these results and good to see Broker share price target in this example has been reached today. It will be interesting to see if Panmure Gordon revise this 2.45 target based on today's figures.
"LSE:ANCR:Animalcare sells lots of pet drugs and ID microchips to vets up and down the country. Decent growth over the past few years has ignited interest in the shares, and latest full-year results triggered a 6% rally Wednesday. Broker Panmure ..."
Veterinary medicines business Animalcare (ANCR) grew pre-tax profits by 28% to 1.76 million pounds in the six months to December, prompting it to hike the interim dividend by 20% to 1.8p per share. Driving the numbers was strong revenue growth of 10.6% in the Licensed Veterinary Medicines business and an increase in margins. Cash generation was stronger than expected, with the firm ending the period with net cash of just over 5 million pounds. Broker Panmure Gordon has a 245p target on the shares, which rose by 7p to 192p.
"Animalcare is a good company at an attractive price. Two good reasons to add it to the portfolio.Iâm adding Animalcare because its a profitable company with a credible strategy to improve profitability through the development of more ..."
"Animalcareâs annual report is a model for other smaller companies. Not only does it have answers, but the answers are reassuring.Reading through the report, I couldnât help but compare it to ECO Animal Healthâs. The two companies are in similar ..."
The information seems to be on the website now.....and Western Europe is spelt correctly.
Animalcare is focused on growing its licensed veterinary medicines product group. This will be achieved through implementation of our new product development strategy, Project Sustain.
Through Project Sustain we will select well-established veterinary medicines and reformulate them to create a new range of enhanced generics. This will create the opportunity to deliver protectable products with increased margins and greater market share.
We will utilise our strong cash flow to invest in Sustain projects. The more complex development and regulatory requirements will result in a time to market of 4 to 5 years compared with an undifferentiated generic typically taking 3 years. We will manage the development risk by focusing on enhanced generic medicines based on known active ingredients or common delivery platforms.
I monitor quite a few microcaps and small cap companies for possible inclusion in my portfolio. One of the many factors I look at is the quality of the web site. I viewed Animalcare's "Key Company Information" section on their web site yesterday and found that they can't even spell Western Europe correctly, the line spacing is wrong, and the capitalisation is inconsistent. They also mention that their development strategy is "Project Sustain" without explaining what this involves! I sent a polite email to the email address of their Head Office which appears on the same web page suggesting some corrections and I received back a message saying "Delivery to the following recipient failed permanently: [email protected]" How on earth can the management of this company expect to be taken seriously by investors when they can't even organise their own web site properly.
Important message from the Financial Conduct Authority:
Posting inside information that is not public knowledge, or information that is false or misleading, may constitute market abuse.
This could lead to an unlimited fine and up to seven years in prison.
If you have any information, concerns or queries about market abuse, click here.
The content of the messages posted represents the opinions of the author, and does not represent the opinions of Interactive Investor Trading Limited or its affiliates and has not been approved or issued by Interactive Investor Trading Limited.
You should be aware that the other participants of the above discussion group are strangers to you and may make statements which may be misleading, deceptive or wrong.
Please remember that the value of investments or income from them may go down as well as up and that the past performance of an investment is not a guide to its performance in the future.
The discussion boards on this site are intended to be an information sharing forum and is not intended to address your particular requirements.
Whilst information provided on them can help with your investment research you need to consider carefully whether you should make (or refraining from making) investment or other decisions based on what you see without doing further research on investments you are interested in.
Participating in this forum cannot be a substitute for obtaining advice from an appropriate expert independent adviser who takes into account your circumstances and specific investment needs in selected investments that are appropriate for you.