Financial sustainability through revenue growth, strong cash conversion, EPS growth and EBITDA margin growth

Revenue growth

key initiatives

  • Focus on segments and products with highest potential
  • New product launches
  • Leverage strengths across all our direct markets
  • Maximise opportunities in other high growth markets through partnerships or selective acquisition

progress

  • New product sales of £2.2m (2020: £2.2m)
  • Successful launch of Daxocox in H2, contributing £1.2m in revenue
  • 8.3% growth in revenue generated by top 40 products in portfolio

2022 priorities

  • Continue to scale up in fast-growing countries
  • Maximise growth potential of Daxocox in dynamic market
  • Successful launch of STEM biofilm dental range in H1

Cash conversion and net debt

key initiatives

  • Maintain net debt to underlying EBITDA leverage ratio between 1 to 2 times
  • Optimise inventory
  • Tax efficiency

progress

  • Strong underlying cash conversion of 108.8%
  • £5.3m net debt at year end; reduced by 60% over course of 2020
  • Net debt comfortably below target range

2022 priorities

  • Support investment in growth strategy by maintaining strong cash conversion within 90%-100% range
  • Maintain EBITDA leverage in the range of 1 to 2 times

Underlying EBITDA margin and EPS growth

key initiatives

  • Focus on higher margin products
  • Operating efficiency and leverage

progress

  • Total number of brands in portfolio close to steady state target of 150. Reduced from c.330 at time of merger
  • Underlying EBITDA margin increased to 18.2% even allowing for absorption of higher SG&A investment in people
  • Underlying EPS of 12.0 pence

2022 priorities

  • Investment in new product launches, other growth opportunities and capability development while maintaining focus on operational efficiency

Organisation for success; leadership strength and core capabilities

Attract, retain and develop talented people

key initiatives

  • Build leadership capabilities
  • Align reward to performance
  • One-team culture
  • Drive effective communication and collaboration
  • Improve diversity

progress

  • Well ahead of Gallup's average benchmark of European companies despite slight decline (down 4%) in annual employee engagement score
  • Strengthened sales and marketing capabilities
  • Wellbeing programme available for all employees
  • Launch of leadership development and talent management programme

2022 priorities

  • Implement actions from employee engagement survey
  • Continue to improve two-way employee communication
  • Embed leadership development “high challenge, high support” principles

Organisation for growth

key initiatives

  • Reorganisation to drive growth agenda with clear leadership accountabilities

progress

  • Regional structure and Senior Executive Team (SET) supporting focus on performance and growth opportunities
  • Sandra Single appointed Strategic Product and Portfolio Director and joined SET (February 2022)

2022 priorities

  • ontinue adoption of regional and Group model

Focused portfolio in key therapy areas in growing market segments

Focus on existing core brands that generate sustainable growth and margins

key initiatives

  • Improve quality of portfolio; focus on smaller number of bigger-selling, higher-margin brands

progress

  • Increased management focus on top 40 products; tail further reduced
  • £2.2m of new product sales supported by launches such as Daxocox
  • Strengthened sales and marketing excellence

2022 priorities

  • Drive growth in Companion Animals and maintain strong presence in Production Animals
  • Continued focus on bigger-selling, higher-margin products
  • Further investment in product launch capability

Work with partners to build a pipeline of products that meets our criteria for growth

In-license or acquire products and develop network partnerships

key initiatives

  • In-license or acquire innovative pipeline or market-ready products
  • Establish Animalcare as partner of choice, especially for companies selling into Europe
  • Build partnerships to exploit growing global markets

progress

  • Secured distribution partnership with Virbac for Daxocox in most European countries outside Group’s direct markets
  • UK Identibase business carved out to facilitate growth opportunities. Entrepreneurial leader appointed

2022 priorities

  • Continue to pursue value-creating partnerships and in-licensing opportunities

Building a pipeline of novel and differentiated products

Launch new products and develop differentiated and innovative pipeline of products for the future

key initiatives

  • Strengthen internal pipeline of differentiated products through partnerships, in-licensing and acquisitions
  • Prioritise and accelerate in-house R&D projects

progress

  • EU and UK authorities approve Daxocox for canine OA-related pain
  • Early-stage pipeline licence and collaboration deal signed with Orthros Medical to develop innovative therapies using VHH antibodies (March 2022)
  • Advancement of life cycle management (LCM) programmes for Daxocox and STEM biofilm technology

2022 priorities

  • Increase investment in pipeline versus 2021 (as percentage of revenues)
  • Execute clinical and regulatory programme for Daxocox LCM
  • Identify potential development opportunities from STEM joint venture
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