Final Results

The Board is recommending a final dividend of 5.5 pence per share (2018: 5.0 pence) making a total of 8.0 pence per share for the year (2018: 7.2 pence), an increase of 11%. This dividend, payable on 31 July to shareholders on the register on 17 July, continues to reflect the Board’s continued confidence in the Group and its ability to generate cash.

Americas

Latin America delivered a very strong performance with sales growth of 39% compared with the same period last year. Further progress has been made with our customers helping to drive growth in Brazil to 123% compared to last year. Argentina also experienced a recovery from a poor 2018 with sales growth of 78%.

The initial results of extensive trials undertaken with North Carolina State University on improved egg laying performance when using Orego-Stim®, have been well received in Brazil, with indications of improved production through additional eggs per laying hen and more consistent egg sizes.

Our second largest market in Latin America is Mexico which achieved 30% sales growth. We have been developing our business in a number of other Central American countries and have also been targeting the aquaculture market, which is beginning to exhibit some early promise following recent product registrations.

Some of our Latin American customers are supplying the Chinese market to help overcome the shortfall resulting from African Swine Fever. We believe these sales will continue and therefore continue to deliver good growth.

US growth slowed in the second half with sales flat compared with the same period last year. The US agriculture market has been affected by the US – China trade dispute and a poor dairy industry, which has seen the bankruptcy of America’s largest dairy producer. Anpario’s US business experienced a decline in lower value-added acidifier sales but encouragingly, continues to grow Orego-Stim® and other premium brands such as Anpro®. We have recently strengthened and expanded our sales team in the US as this represents our largest sales region and provides an opportunity for future growth working with some of the world’s largest food producers.

Anpario’s success in the USA has come from the poultry and dairy sectors and we are now investing in additional sales resource to target the swine sector. Recent extensive trials with one of the leading swine veterinary companies in the country showed that our phytogenic formulations support sows in delivering more pigs at weaning stage, using less feed and reducing the need for other types of antimicrobial interventions. These USA trials match our experience in similar trials performed in China and the UK giving us a strong platform to target the USA swine market where antibiotic free production continues to increase in momentum.

Asia

In China sales declined 9% compared to the same period last year with gross profit down only 5%, this is a very creditable performance, given the impact of ASF. This performance arises from our decision, two years ago, to target the Chinese poultry market. More recently we have accelerated our efforts which has helped to diversify our business in China. We have had success in selling our acid based eubiotic products for both broilers and layers and, in particular, pHorce® which is our high strength low inclusion acidifier on a unique carrier matrix.

The positive results in the USA for swine performance and intestinal health will benefit our Chinese customers as they start to re-stock with improved biosecurity and housekeeping to produce pork to meet strong domestic demand following ASF.

The Anpario Direct team is working closely with our Chinese colleagues to launch some of our products on one of China’s leading Internet platforms. This will target the smaller users of these products such as pigeon enthusiasts, which is a large and valuable market segment.

S E Asia delivered a strong recovery in the second half, ending the year with sales only 8% below the same period last year. In the first half, the region was down 30%. If the non-core and low margin product sales to the Philippines, a market we exited in 2018 are excluded, then sales declined by just 2% and gross profit increased by 3% for the region. Thailand, Bangladesh and Taiwan experienced the strongest performances with sales growth of 83%, 45% and 55% respectively. It is encouraging that in countries where we have formed new subsidiaries and local sales teams such as Thailand and Indonesia, sales and profit growth is starting to accelerate as we build relationships and take Anpario’s products direct to end users. The weakest country was South Korea, where the local swine market was badly affected by the USA – China trade dispute.

We have launched our new Anpro® mycotoxin binder range in Asia. These products have been shown to outperform our competitors’ products. We have developed a new natural pellet binder in our Mastercube ™ range for the aquaculture market in Asia, which has superior performance over urea-formaldehyde, a substance customers are moving away from due to its formaldehyde toxicity characteristics.

Australasia saw a small decline in sales compared to last year’s outstanding performance. The main markets of Australia and New Zealand increased by 13% and 15% respectively. This growth was offset by Papua New Guinea, where a significant customer had financial difficulties which has impacted sales, all amounts outstanding have been recovered. Australia is experiencing severe climatic conditions, including drought, which is making conditions for agriculture extremely tough especially in the dairy and beef cattle industries. However, our subsidiary has a number of business development initiatives underway including targeting the pet food industry. In addition, we recently launched a more direct sales channel to target the smaller farmers and other niche segments such as pigeons and the backyard layer market.

The Middle East and Africa

Middle East and Africa delivered a strong performance with sales growth of 19% compared with the same period last year with major contributions from Iraq, Israel, Syria and the UAE. Growth was driven by increased sales of Orego-Stim® as customers look to reduce and ultimately replace antibiotics and seek out performance benefits to improve the profitability of their operations. Other products which contributed to growth included Mastercube ™ and Genex ® our pellet binder and phyto-acid combination product. Turkey continued to disappoint due to the challenging economic situation and Saudi Arabia experienced difficult trading conditions.

We launched a natural insecticide to combat red mite and other insects, supplying applicators for dusting grain silos and poultry houses. Red mite is becoming an increasing problem around the world especially in free range layers, where they are more susceptible to insect infestation as the birds have more freedom to roam around in cage free systems.

The geopolitical tensions in the region present challenges, so we are also focusing on new territories, which we hope will help offset any headwinds.

Europe

Sales in Europe declined by 5% reflecting withdrawal from low margin non-core business. Excluding this lost business, which in total accounted for almost £1m in sales during 2018, the region delivered underlying growth. In general, the UK market was stable and we have recently seen an increase in demand for our organic acid products for feed and raw material hygiene applications where we have been able to supply customers with a quick turnaround as they seek to decontaminate raw material imports. Territories that delivered strong performances included Belgium and Italy, the latter benefiting from our ability to supply products in smaller package sizes for which we are being increasingly asked by our customers.

The Anpario Direct online platform is increasing its presence and customers order online not only through the website but also via social media sites such as Facebook and Twitter. We have recently agreed a deal with a disinfectant company to market one of their products on our website enabling their sales team to offer a simple, fast and efficient way for their smaller farm customers to order. These customers will also be able to purchase the whole range on the Anpario Direct platform. We hope to expand other supplier relationships as we seek to broaden the range in line with our online value proposition.

A German subsidiary has been incorporated and recently recruited a business manager to help establish our direct sales presence in other German speaking markets. Our strategy is to develop direct end user relationships through account management but supported by the Anpario Direct online platform to target the smaller farmer segment. This is similar in characteristics to the UK and we intend to launch the German Anpario Direct version towards the end of this year.

Brexit

We are closely monitoring the next stage of negotiations as well as providing input to various government departments while putting contingency arrangements in place. Anpario’s products and processes comply with European Union regulations and Anpario will continue to supply the same high standard of products to all jurisdictions around the world. The ideal outcome is that both the UK and EU agree to an equivalence or common arrangement for agricultural products, similar to the way we currently supply our USA subsidiary and its customers. In the event that such arrangements are not achieved, then we shall work with our EU customers and suppliers to minimise any disruption.

Innovation and development

The recent launch of Anpro® has seen early successes in the USA and Europe with extensive global registrations underway. Our new aqua product is gaining acceptance in targeted Latin American markets. Groundbreaking development of a new dietary supplement for calves focused on antibiotic reduction and gut health benefits has resulted in a patent filing.

Our product development activity continues apace with new formulations and extensive trial work with leading universities and producers to demonstrate the capabilities of our technology in delivering health, production and ultimately performance benefits for customers. These capabilities include being able to reduce and replace antibiotics as part of a biosecurity solution. Our customers face many challenges and by understanding their business better we can help them continuously improve their outputs and meet the increasing demands of the consumer.

People

This has been a challenging year, yet it is testament to the Anpario way of working and to our staff across the globe that we have been able to deliver sales and profit growth and still invest in our people and initiatives to support future growth. The commitment and dedication of all our people is greatly appreciated.

Outlook

There has been a solid start to trading in the current year and we look forward to implementing a number of business development initiatives to maintain this momentum. Investing and developing our sales and marketing channels around the world remains a priority, as does finding an earnings enhancing and complementary acquisition. Our strong balance sheet and cash generation provide Anpario with the confidence to grow its business across the many markets we serve and also the financial strength to capitalise on any opportunities which may arise provided they are aligned with our strategy.

The outbreak and subsequent spread of Covid-19 (coronavirus) is causing concerns to all industries. Anpario’s regional sales network is enabling the Group to continue to support local customers and at this stage, we are confident we can manage any disruption which may be temporary in nature. Currently, there are travel restrictions to certain countries and a number of industry trade events have been cancelled. There may be some disruptions to shipping around the world but as most of our raw material supplies come from Europe, we expect to be able to fulfil orders effectively. With governmental financial support offered to the agriculture industry to ensure continuity of food supplies, Anpario is well positioned to take full advantage of the situation during the recovery period from Covid-19 and beyond and continue its work worldwide, in establishing natural additives for biosecure, efficient and profitable protein production to feed the world’s fast growing population. While we have not yet experienced any material impact on our business, we continue to monitor the situation closely.

Anpario is at the forefront of changing attitudes to intensive farming around the world using natural ingredients. The demand for our products is expected to continue to increase due to their effects of enhancing biosecurity, replacing non therapeutic antibiotics and improving production efficiency which is exactly what is now expected from consumers and farmers. As ever, with a global business there are a number of challenges but the quality and ambition of our employees and our return to sales growth gives me confidence that we can successfully build on last year’s result.

Peter Lawrence
Chairman
18 March 2020

Financial Review

Revenues for the year rose by 3% to £29.0m (2018: £28.3m). Prior year sales included £0.4m of non-core and low margin business to the Philippines, the negative impact of this planned strategic withdrawal was offset by realised foreign exchange gains.

Gross profit was 7% higher than last year at £14.5m (2018: £13.5m), with gross margins increasing to 50% (2018: 48%). Margins were helped by a number of factors including the focus on marketing higher value-added products and withdrawing from low-margin business, developing more direct routes to market that contribute higher margins and the benefit of cost savings from reduced use of external manufacturers.

Total administrative expenses rose during the year by £1.1m. Excluding foreign exchange amounts, the underlying increase was £0.5m (6%). This included increases of £0.2m in employment costs and £0.1m in marketing costs as we continue to invest in our sales channels to support future sales growth.

Depreciation charges in the year increased by £0.1m, this relates to previously completed plant-automation projects and the completion in the second half of the year of the £1m investment in a bottling plant. The positive impact of which are being seen through the reduction in external manufacturing costs and the ability to extend our product range and reach new customers and markets with enhanced packaging options.

The increase in the value of sterling during the year has impacted the income statement as realised exchange gains £0.1m (2018: losses £0.2m) have been materially outweighed by unrealised losses £0.5m (2018: gains £0.4m). These uncrystallised amounts primarily arise on the revaluation of unsettled trading balances and intercompany debtors at spot rates at period ends and are generated by the investments in subsidiaries such as USA, Brazil, Indonesia and Thailand to better access direct supply channels. The GBPUSD exchange rate at 31 December 2019 was 1.3268 (2018: 1.2760).

The scale and volatility of recent foreign exchange movements from one reporting date to the next can cause difficulty for the user of these financial statements in assessing the underlying operational performance of the Group in the period. Accordingly, these financial statements include amendments to the calculation of adjusted EBITDA, adjusted profit and adjusted earnings per share, prior year comparatives have been restated and more information is contained in note 6.

Foreign exchange risk is extensively monitored and strategies and actions taken to mitigate its short and long-term impacts. At the year end the Group has recognised a £0.5m financial asset (2018: £nil), of which £0.3m (2018: £nil) has been recognised in the income statement. This is in relation to hedges in place against changes in the value of future US Dollar sales receipts totalling $18.6m (2018: $2.4m). This consists of a number of hedging contracts that extend into 2022 with further detail provided in note 19. Also during the year, the Group took steps to reduce the income statement exposure to foreign exchange risk from intercompany debtors by converting balances owed by the US Subsidiary into equity.

Adjusted EBITDA for the year increased by 6% to £5.7m (2018: £5.3m) and diluted adjusted earnings per share increased by 7% to 18.61p per share (2018: 17.33p). Conversely, in large part due to the £0.6m adverse swing in foreign exchange charges, profit before tax fell by £0.2m to £4.4m (2018: £4.6m) and basic earnings per share fell 7% to 18.10p per share (2018: 19.54p).

The balance sheet remains strong and debt free, with a year end cash balance of £13.8m (2018: £12.9m).

The Board is recommending a final dividend of 5.5 pence per share (2018: 5.0 pence) making a total of 8.0 pence per share for the year (2018: 7.2 pence), an increase of 11%.

Key performance indicators – Non-financial

Health and safety – there were no major accidents reportable to the Board in the year (2018: nil).

The Group also regards growth of business in key target markets and the on-going achievement of product registrations and quality assurance accreditations as other KPIs.

¹ Prior period comparatives have been restated following the adoption of IFRS 16 as disclosed in note 29.

Our business model and strategy

Business Model

Anpario is an international producer and distributor of high performance natural feed additives for animal health, hygiene and nutrition. Our products work in harmony with the natural aspects of the animal’s biology; and Anpario’s expertise is focused on intestinal and animal health, and utilizing this understanding to improve animal performance and customer profitability.

Anpario supplies its customers with quality assured products manufactured in the United Kingdom and has an established global sales and distribution network in over 70 countries.

Anpario was built up through a combination of acquisitions and organic growth by establishing wholly owned subsidiaries in a number of key meat producing countries. The portfolio of products has been developed with the customer and the animal in mind, taking into account the life stages of the animal and the periods when they will be more challenged.

Anpario is well positioned to benefit from the trends in growth of the world’s population, the increasing demand for meat and fish protein in developing countries and the tightening of global regulation which favours more natural feed additive solutions. Seizing these opportunities is how Anpario intends to deliver long-term shareholder value.

Our business model is based on:

• Products – high quality efficacious products presented well;
• Channel – control the sales channel to ensure we develop strong technical and commercial relationships with the end users of Anpario products;
• Story – powerful value add proposition demonstrating the financial and performance benefits of our product solutions;
• Branding – build an impeccable Anpario brand which global customers can trust as having innovative, high quality and effective solutions for customers;
• Quality – throughout supply chain and manufacturing processes; and
• Efficiency – efficient automated production with high operational gearing.

Strategy

• Regional focus
  • Developing local commercial and technical relationships across the world
  • Delivered through:
    • regional sales structure;
    • local language speakers;
    • resource that understands local market needs and challenges; and
    • closer relationships with key end customers.
  • Actions in 2019:
    • launch of Anpario Direct in the UK market to target the smaller farm segment;
    • Indonesia import licence obtained to enable commencement of direct supplies; and
    • set up of new subsidiary operations to serve local markets.
  • Future plans:
    • rollout of Anpario Direct to other suitable territories; and
    • further selective recruitment of high calibre regional resource.

• Technical & Products
  • Add value by developing products that help overcome the challenges of modern day farming
  • Delivered through:
    • scientific research and development, working closely with the end customers’ meat protein operations, to help improve gut function leading to improved animal performance;
    • support the producer through prevention rather than treatment; and
    • help the customer meet disease and regulatory challenges.
  • Actions in 2019:
    • further research and development of Orego-Stim in helping to support gut health and improve productivity through disease challenge;
    • launch of Orego-stim milk supplementation for dairy calves in reducing development of anti-microbial resistance;
    • extensive pullet layer trials at North Carolina State University showing encouraging results;
    • development of a new product Orego-Stim® TD – ‘’top dress’’ and trials demonstrate feed supplemented with Orego-Stim® improves sow and weaned piglet performance development; and
    • further aquaculture trials in Latin America of new aqua products.
  • Future plans:
    • continue to retain and recruit technical and animal production experts;
    • continued investment in research and development working closely with key global customers and respected institutions; and
    • look for product opportunities which broaden our range and species opportunities.

• Acquisitions
  • Growth through complementary and earnings enhancing acquisitions.
  • Delivered through:
    • successful integration to derive both operational and financial synergies;
    • specific searches to identify suitable targets in the specialty feed additive market; and
    • applying strict acquisition and valuation criteria; targets must either complement our current product range, offer market consolidation opportunities or strengthen our sales and distribution channels.
  • Actions in 2019:
    • evaluated a number of acquisition opportunities; and
    • updated Board strategy on acquisition target criteria.
  • Future plans
    • continue active search for acquisition opportunities within defined criteria.

• Operations
  • High quality, consistent and efficient manufacturing.
  • Delivered through:
    • automated production facilities;
    • key industry quality accreditations; and
    • quality supply partners.
  • Actions in 2019:
    • automated liquid bottling plant; and
    • production in smaller pack sizes.
  • Future plans:
    • evaluating further production investment opportunities;
    • continued expansion of packaging options; and
    • developing enhanced production contingency plans.

Corporate governance

Chairman’s introduction

The Company’s shares are traded on the Alternative Investment Market (“AIM”) of the London Stock Exchange. Anpario applies the Quoted Companies Alliance Corporate Governance Code (“QCA Code”).

Anpario offers natural solutions to the food farming industry which work in harmony with the natural aspects of an animal’s biology to promote healthy growth at the least cost to the environment and the producer. Our products enable the production of top quality protein that partners future farming practice around the world. This objective and our engagement with stakeholders, ensures that we act in a manner that is responsible and beneficial to all.

The board and staff at the Company are committed to behaving professionally and responsibly to ensure that the highest standards of honesty, integrity and corporate governance are maintained. Enshrining these values through the Company’s culture, objectives and processes is essential to support the success of the Company in creating long-term shareholder value.

Principle 1: Our strategy and business model to promote long-term value for shareholders

Anpario is well positioned to benefit from the trends in growth of the world’s population, the increasing demand for meat and fish protein in developing countries and the tightening of global regulation which favours more natural feed additive solutions. Seizing these opportunities is how Anpario intends to deliver long-term shareholder value. More information is included in the Strategic Report.

Anpario has specific resource and processes in place to proactively identify and manage risk to protect the continued growth and long-term future that is possible as outlined above. Our annual report details specific financial and non-financial risks and uncertainties facing the business and measures in place to mitigate them.

Principle 2: Understanding and meeting shareholder needs and expectation

Communications with shareholders are given high priority and Anpario recognises the importance and value in reciprocal and open communication with its many investors. This is key to ensure alignment between the motivations and expectations of our shareholders and our strategy and business model.

This communication takes place in many forms to serve different purposes. Our Interim Statements and Annual Reports contain detailed information for shareholders to understand our performance, strategy and future plans. Between these disclosures, the Company also issues RNS announcements, as required, which serve to keep shareholders updated about regulatory matters or changes that they should be notified of. These RNS announcements, as well as wider news articles about the Company, are available on our website www.anpario.com.

The Annual General Meeting (“AGM”) is the main opportunity for all shareholders to engage with Anpario. Shareholders are notified in advance of the date and location of the meeting as well as the resolutions that are to be voted on. At the meeting, the Board and key personnel give a presentation about the most recent published results and our strategy; they are also available to answer any questions that shareholders may have.

The Directors actively seek to build strong relationships with institutional investors and investment analysts. Presentations are given immediately following Interim Statement and Annual Report announcements. Feedback directly from shareholders via the Company’s advisers after these regular analyst and shareholder meetings ensures that the Board understands shareholder views. The Board as a whole are kept informed of the views and concerns of major shareholders and are made aware of any significant investment reports from analysts.

Shareholders are encouraged to contact the Company should they have any questions or concerns and can do so using a dedicated email address [email protected]. This is actively used by our Shareholders and successfully enables them to engage with the Board in addition to attaining assistance on individual shareholder specific matters with which we may be able to help. The Chairman and other Directors will meet or have contact with major shareholders as necessary.

The Executive Directors hold shares and participate in incentive plans in the Company which ensures that their interests are fully aligned with those of other shareholders.

Principal 3: Corporate social responsibilities and wider stakeholders

Anpario seeks to ensure a sustainable business, behaving socially, ethically and environmentally responsibly and engaging with all of its key stakeholders, including the communities in which the Company operates, its people and the environment. As we evolve our business model and strategy we ensure that we identify any new stakeholders and seek to understand them alongside existing stakeholders. Some of the key stakeholders are discussed below.

Employees

Anpario is an inclusive organisation where everyone is treated equally irrespective of gender, nationality, marital status, colour, race, ethnic origin, creed, sexual orientation or disability. Employees embody Anpario’s key values of “Integrity,Teamwork, Innovation and Leadership”.

Over 100 employees work for Anpario in the UK and its global operations. It is the Group’s policy to involve colleagues in the business and to ensure that matters of concern to them, including the Group’s aims and objectives and its financial performance, are communicated in an open way. Where appropriate and permitted, employees are offered the opportunity to become shareholders in order to promote active participation in, and commitment to, the Group’s success.

The Employee handbook which applies globally and includes detailed policies and guides for employees which cover:

• Behaviour – Equal Opportunities and Dignity at Work, Anti-Bribery and Anti-Corruption, Communications and Privacy.
• Family – Parental, Dependents, Maternity, Paternity, Flexible working, Adoption.
• General – Grievance, Whistle blowing, Discrimination and Bullying, and Disciplinary.
• Safety – Health and Safety handbook, Occupational Health Policy, Drug and Alcohol abuse.

Specific training is given to all employees in respect of key policies including online training videos on the Company’s intranet and appropriate health and safety training.

Employees are encouraged to further develop their skills and the Group will provide appropriate training in order to support our people and grow organisational capabilities. Anpario currently:

• has several apprentices places;
• recruits graduates and doctorates in disciplines such as biosciences, accountancy, law and HR.
• works closely with several global universities on joint scientific initiatives;
• provides ongoing professional training support, extensive coaching and management development programmes; and
• provides financial and study leave for professional and work related qualifications.

The Company has a bonus scheme in place for its employees with targets aligned with shareholders as appropriate to their roles and responsibilities.

Anpario supports local community initiatives and employee charity work including supporting a local school to care for chickens.

An analysis of Directors, senior managers and other employees by gender as at 31 December 2020 is as follows:

Environment

The Group recognises the importance of good environmental controls. It is the Group’s policy to comply with environmental legislation currently in place, adopt responsible sustainable practices and give consideration to minimising the impact of its operations on the environment.

Material supply:

• fish & marine oils used for our products are processed by-products from farmed fish productions for human consumption or sourced from suppliers certified for sustainable fishing;
• raw materials used within products are primarily common minerals in high grade quality from plentiful natural resources; and
• pre-used reconditioned & cleaned intermediate bulk containers are used for packaging & supply of bulk liquids.

Environmental Controls & good practices:

• 90% of carrier and materials are supplied in bulk and added directly into production to minimise packaging waste and labour requirements;
• 100% liquid bulk ingredients are stored in bunded storage silos; liquid bulk deliveries are accepted only when the site drainage system is blocked with a bung to prevent accidental spills from entering into the general sewerage system;
• A dust extraction system is used to minimise dust in the production area and prevent dust from being emitted into the environment;
• Manufacturing processes generate 2.5% of the production volume as product and material waste due to manufacturing and cleaning activities. This product and material waste is collected by a waste contractor to be environmentally recycled as far as possible;
• Digital marketing brochures are created that can easily be emailed or viewed via the website as opposed to being printed and posted out;
• Travel is managed to ensure trips are multi-purpose or alternatively using telephones, Skype and conference centres and webinars; and
• A paperless office policy is encouraged.

Sustainability

Anpario’s Responsibilities

All of Anpario’s activities are dedicated to providing innovative solutions which contribute to sustainable development of new products, protecting precious resources and enabling farmers to produce healthy and productive food producing animals. Through our cutting-edge natural products, innovations and collaborations, Anpario:

• seeks to contribute to feeding a growing global population in a world with finite resources;
• contributes to the more efficient use of feed ingredients to reduce environmental footprints and ensures responsibly produced food;
• creates good health and nutrition from feed to farm; and
• helps to prevent and manage animal diseases that can destroy animals, livelihoods and food supplies.

Our innovative products work in harmony with the animals’ biology to promote healthy growth and demonstrate value:

• to the animals fed directly through all life stages;
• indirectly to their progeny; and
• and ultimately within the human food chain.

Sustainability Embedded into Company Culture

Our people are passionate about sustainability. Our team are motivated to create programmes to lead and educate consumers because of the global challenges facing the world health, food sources and biosecurity.

Through our initiatives and education programmes we work closely with external vets and nutritionists to help, and where possible, responsibly reduce, remove and replace antibiotics by changing animal diets to include our products. Anpario are committed to extensive field trial work over several months and years to find cost effective solutions for farmers.

The Anpario ‘Green Team’, with representatives from all departments, initiate improved ways of working which are more sustainable for our environment.

Anpario’s Sustainable Development Goals

Sustainable development should meet the needs of the present without compromising the ability of future generations to meet their own needs. Our global responsibility is inherent throughout our company values and reflected in Anpario’s own goals. These are in tune with the United Nations Sustainable Development Goals 17 Sustainable Development Goals (SDGs).

Goal 2: Zero Hunger

Agriculture and fisheries can provide nutritious food for all and generate decent incomes, while supporting people-centered rural development and protecting the environment. Anpario’s products work in tune with nature’s inherent processes within each of the animal species to support production of safe and affordable food for a growing population and can help to:

• conserve, protect and enhance natural resources;
• improve rural livelihood, equity and social well-being through productive farming; and
• enhance resilience of people, communities and ecosystems.

Goal 3: Good Health and Well-being

The misuse of antibiotics in agricultural production is a significant threat to veterinary and human health. Anpario provides products and guidance to support farmers to:

• improve animal gut health;
• defend against mycotoxin;
• reduce and where possible remove the unnecessary use of antibiotics; and
• safeguard the use of antibiotics for effective treatment of sick animals.

We are leading in work in collaboration with major feed producers to successfully reduce the unnecessary use of antibiotics and other substances such as zinc oxide and urea-formaldehyde to promote optimal animal health and welfare. Anpario has spearheaded the 4 R’s campaign globally to Review, Reduce and Replace antibiotics Responsibly to help manage gut health and support healthier livestock through the use of natural products.

Goal 12: Responsible Consumption and Production

Anpario’s products help improve biosecurity and prevent animal diseases, which can eliminate significant animal populations, leading to devastating losses of food producing animals (e.g. Coccidiosis, Necrotic Enteritis, Porcine Epidemic Diarrhoea (PEDV), and African Swine Fever (ASF)). Anpario’s products are proven to work effectively alongside vaccines to aid in disease control.

Goal 6: Clean Water and Sanitation

Clean water is vital to both animal and human health. Our product portfolio includes a highly efficacious effervescent water-soluble tablet (Credence) that kills harmful moulds, fungi, bacteria and viruses in water as a cost effective one-step process on farm.

Goal 13: Climate Action

Our products help farmers to feed more nutritious diets with a lower environmental footprint to their animals which reduce negative environmental impacts such as:

• nutrient loss;
• greenhouse gas and ammonia emissions; and
• degradation of ecosystems.

Goal 14: Life Below Water

Our 100% natural, aquaculture products work on the same principles as for land animals and are effective for shrimp and other farmed fish such as Salmon and Tilapia. We work with aquaculture experts on new formulations for sustainable fish production.

Impact of Anpario’s products

Anpario has a substantial portfolio of proven products that make a difference to animal and ultimately human health. Some of our key innovations and animal health programmes with significant qualitative and measurable benefits which are working to achieve SDG’s include:

• Antibiotic free and Pathogen control
  The solution to eliminating antibiotic dependency requires programmes that are multifaceted in their approach combining biosecurity, management and nutrition. Anpario’s gut health products have beneficial effects including: reduction of E.coli; increased levels of lactobacillus creating a favourable microbial environment and increase in levels of energy sources (propionate and butyrate); improved animal strength, body weight gain and reduction in mortality rate. This results in reduced energy costs and improved dietary utilisation, aiding animal performance and helping to ensure they are more robust and better able to resist pathogen challenges.

  Anpario phytogenic products contain natural oregano oil with actives carvacrol and thymol which are natural antimicrobials. It regulates gut microbiota; has anti-inflammatory and antioxidant properties, and stimulates appetite for efficient feed conversion. Its benefits are proven in fighting intestinal diseases such as coccidiosis in poultry and ileitis in pigs, which infects 96% of US and 90% of EU pig farms.

  Anpario’s market leading acid-based gut health products comprise of organic acids blended on a unique mineral carrier system using our sophisticated proprietary blending processes. They work inside the gastrointestinal tract of the animal and promote the proliferation of beneficial bacteria, enabling it to develop a well-balanced gut microflora population (lactobacillus) which naturally decreases the number of viable enteropathogens, such as Salmonella, E Coli, and Campylobacter. Proven to increase breeder fertility, hatchability and egg weight, and also progeny have been found to have significantly increased weight gain and improved feed conversion rate.

• Mycotoxin Binders
  Mycotoxins are toxic chemicals produced by moulds. Their presence in animal feed can have a detrimental effect including: reduced growth rates; lower fertility and abortions; impaired resistance and secondary infections; kidney and liver toxicities resulting in organ failure; and potentially death. Products such as Anpro® range have demonstrated efficacy when independently tested over various species and generate many positive health benefits.

• Zinc Oxide replacement
  Traditionally, zinc oxide has been included at high levels in a piglet’s diet under veterinary prescription, to control E. coli infections which cause post-weaning scours and has been linked to environmental pollution and antibiotic resistance. Anpario eubiotic products can support piglet performance in the absence of therapeutic levels of zinc oxide and increase the amount of pig meat produced per year for the unit.

Suppliers, Customers and Regulators

Anpario supplies products to many countries and aims to enhance animal health and nutrition. Internal quality control ensures: the safety of its products; transparency and traceability.

Anpario sources 100% natural oregano oil which is organically grown and produced in a carbon neutral European factory.

Anpario retain key industry quality accreditations in particular UFAS and FEMAS certifications. The Group is committed to achieving a safe and secure working environment in all locations operating an established Group health and safety policy applicable to all employees. Other measures include:

• responsible procurement policies are in place to source raw materials to high specification and rigorous quality standards. Anpario seeks to partner suppliers operating to highest standards of honesty and integrity. These ethics include through responsible procurement and due diligence, ensuring: suppliers operate rigorous quality standards and comply with all applicable ethical labour and, trade laws and regulations, including the requirements of The Modern Slavery Act 2015;
• the operation of manufacturing facilities to the highest standards; compliance with recognised quality standards; and a safe and secure working environment in all our locations;
• compliance with environmental legislation and responsible practices minimising the impact of its operations on the environment;
• absolute transparency and traceability of raw materials and compliance with international regulations; and
• zero tolerance of bribery and corruption.

The Group adopts a clear Code of Conduct setting out the behaviour expected from all employees and business partners (including suppliers, customers, consultants, agents and representatives). It shall not knowingly take any actions which violate any applicable national and international anti-bribery and corruption legislation, including the UK Bribery Act 2010.

Principle 4: Effective Risk Management

Anpario has specific resource and processes in place to proactively identify and manage risk to protect the continued growth and long-term future. However, any such system of internal control can provide only reasonable, but not absolute, assurance against material misstatement or loss. The Board considers that the internal controls in place are appropriate for the size, complexity and risk profile of the Company and that they balance exploiting opportunities and protecting against threats. The Principal Risks and Uncertainties section of this annual report details specific financial and non-financial risks and uncertainties facing the business and where possible the measures in place to mitigate them.

Risk management and control

Effective risk analysis is fundamental to the execution of Anpario’s business strategy and objectives.

Our risk management and control processes are designed to make management of risk an integrated part of the organisation. The framework is used to identify, evaluate, mitigate and monitor significant risks; and to provide reasonable but not absolute assurance that the Group will be successful in achieving its objectives.

The focus is on significant risks that, if they materialise, could substantially and adversely affect the Group’s business, viability, prospects and share price.

The requirement for an Internal Audit function is to be kept under review.

Risk management process

We recognise that a level of risk taking is inherent within a commercial business; our risk management process is designed to identify, evaluate and mitigate the risks and uncertainties we face.

The CEO is the ultimate Risk Manager. The Board establishes our risk appetite; oversees the risk management and internal control framework and monitors the Group’s exposure to principal risks.

The Executive Management Board (EMB) owns the risk management process and is responsible for managing specific risks. The EMB members are also responsible for embedding rigorous risk management in operational processes and performance management and review.

The EMB members are responsible for the risk analysis, controls and mitigation plans for their individual section of the business.

The Audit Committee reviews the effectiveness of the risk management process and the internal control framework and ensures appropriate executive ownership for all key risks.

These processes ensure that all Directors receive detailed reports from management and are able to discuss the risks, controls and mitigations in place and therefore satisfy themselves that key risks are being effectively managed.

Internal control framework

Anpario’s internal control framework is designed to ensure the:

• effectiveness and efficiency of business operations;
• reliability of financial reporting;
• compliance with all applicable laws and regulations; and
• assignment of Authority and Responsibility.

Anpario’s values underpin the control framework and it is the Board’s aim that these values drive the behaviours and actions of all employees. The key elements of the control framework are:

Management Structure

The Board sets formal authorisation levels and controls that allow it to delegate authority to the EMB and other Managers in the Group. The management structure has clearly defined reporting lines and operating standards.

Strategy and Business Planning

• Anpario has a strategic plan which is developed by the EMB and endorsed by the Board.
• Business objectives and performance measures are defined annually, together with budgets and forecasts.
• Monthly business performance reviews are conducted at both Group and business unit levels.

Policies and Procedures

Our key financial, legal and compliance policies and procedures that apply across the Group are:

• Code of Conduct;
• levels of designated authorities and approvals;
• Ways of Working (WOWs);
• Anti-Bribery and Corruption Policy;
• GDPR and Privacy Policy; and
• Due diligence processes including rigorous sanctions checks.

Operational controls

Our operational control processes include:

• Product Pipeline Review: product pipeline is reviewed regularly to consider new product ideas and determine the fit with our product portfolio. We assess if the products in development are progressing according to plan and evaluate the expected commercial return on new products;
• Lifecycle Management: lifecycle management activities are managed and reviewed for our key products to meet the changing needs of our customers, environmental and regulatory standards;
• Quality Assurance: a manufacturing facility with an established Quality Management System operating under FEMAS and UFAS and designed to ensure that all products are manufactured to a consistently high standard in compliance with all relevant regulatory requirements;
• Product Registration: a robust system operated by our regulatory team to ensure all products are correctly registered within the jurisdiction in which they are sold; and
• Pricing: a pricing structure which is managed and monitored to provide equitable pricing for all customer groups and compliance with regulatory authorities.

Financial controls

Our financial controls are designed to prevent and detect financial misstatement or fraud. This provides reasonable, but not absolute, assurance against material misstatement or loss. They include:

• a formalised reporting structure which incorporates the setting of detailed annual budgets and key performance indicators which are updated on a regular basis to form forecasts;
• management and Board meetings where all key aspects of the business are presented, reviewed and discussed including comparison of current and historical performance as well as budgets and forecasts;
• defined authorisation levels for expenditure; the placing of orders and contracts; and signing authorities;
• transactional level controls operated on a day-to-day basis;
• daily reconciliation and monitoring of cash movements by the finance department and the Group’s cash flow is monitored;
• segregation of accounting duties;
• reconciliation and review of financial statements and judgements;
• internal and external training to ensure staff are aware of the latest standards and best practice; and
• membership of professional bodies and compliance with associated code of ethics.

Principle 5: The Board

The Board of Directors is collectively responsible and accountable to shareholders for the long-term success of the Company. The Board provides leadership within a framework of prudent and effective controls designed to ensure strong corporate governance and enable risk to be assessed and managed.

The Board regularly reviews the operational performance and plans of the Company and determines the Company’s strategy, ensuring that the necessary financial and human resources are in place in order to meet the Company’s objectives. The Board also sets the Company’s values and standards, mindful of its obligations to shareholders and other stakeholders.

Full details and biographies of the Board are available on our website, the Board comprises of two independent Non-Executive Directors and two Executive Directors.

Executive Directors

Independent Non-Executive Directors

Audit = Audit Committee, Nom. = Nomination Committee, Rem. = Remuneration Committee
C = Chair, M = Member

The Board considers that Peter Lawrence and Richard Wood are independent. In Peter Lawrence’s case the Board has specifically considered his length of service on the Board and determined that in terms of interest, perspective and judgement he remains independent.

All Directors are subject to reappointment by shareholders at the first AGM following their appointment and thereafter by rotation.

The Board delegates its authority for certain matters to its Audit, Remuneration and Nomination Committees. The Board approves and reviews the terms of reference of each of the Committees which are available on the Company’s website, http://www.anpario.com/aim-26/.

The Board meets formally at least four times per annum. All Board members receive agendas and comprehensive papers prior to each Board meeting. The Group Finance Director is also the Company Secretary and is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are adhered to.

In addition to formal Board and Committee meetings, ad hoc decisions of the Board and Committees are taken after discussion throughout the financial year as necessary through the form of written resolutions.

All Directors in office at the time of the various committee meetings were in attendance for all of the meetings convened between 7 March 2019 and 18 March 2020. A list of the meetings convened during the year is set out below.

The Chief Executive Officer works full time for the Group. The Group Finance Director is contractually employed for a four day week, however, additional hours are worked to ensure the roles and responsibilities of the position are fully met. The Non-executive Directors have commitments outside of Anpario plc. They are summarised on the Board biographies available from https://www.anpario.com/investor/aim-26/. All the Non-Executive Directors give the appropriate amount of time required to fulfil their responsibilities to Anpario.

Principal 6: Ensuring Directors have between them the necessary up-to-date experience, skills and capabilities

The Nomination Committee aims to ensure that composition of the Board reflects appropriate balance of skills and experience required to ensure long-term shareholder value and manage risk. Details of the role of the Nomination Committee and the activities it performs in relation to these matters is included in the “Maintaining Governance Structures” section later on in this document.

The Board biographies available on the website give an indication of their breadth of skills and experience. Each member of the Board takes responsibility for maintaining their own skill set, which includes roles and experience with other boards and organisations as well as formal training and seminars.

Principal 7: Evaluating Board Performance

The performance of the Board is evaluated formally on an annual basis, following the conclusion of the annual Audit and finalisation of the Annual Report. The Chairman leads this process which looks at the effectiveness of both the Board as a unit and its individual members.

When addressing overall Board performance the factors considered, include but are not limited to, underlying group financial performance, the success of new strategy implementation and the effectiveness of risk and control measures. This process further looks at the performance of each member and considers their individual successes, commitment and alignment to the overall Group strategy. As appropriate, it will also look to confirm that members have maintained their independence.

The Nomination Committee is responsible for determining Board level appointments, details of its role and terms of reference are provided later in this document. The Executive Board members determine the appointments to the Executive Management team, in line with Board approval procedures.

Succession planning is a key part in ensuring the long-term success of the Company. The Executive team ensure that potential successors are in place within the business and are given the required support and guidance to develop further. At the required time, it is the Nomination Committee’s role to make decisions about future appointments to the Board.

Principle 8: Promoting a corporate culture based on ethical values and behaviours

Anpario has a strong ethical culture, the Board is responsible for setting and promoting this throughout our processes and behaviours. The policies related to these matters are regularly reviewed and updated and distributed to employees and other stakeholders as appropriate. Further, specific training is given to keep staff updated on relevant changes, these sessions are often recorded for future reference and new staff.

A copy of our Code of Conduct is available on our website, http://www.anpario.com/code-of-conduct/. Anpario has stated policies on Corporate Social Responsibility and Anti-Bribery and Anti-Corruption and a whistleblowing policy that is applicable to all our employees, other workers, our suppliers and those providing services to our organisation.

Principal 9: Maintaining governance structures

Anpario is confident that the governance structures in place in the Company are appropriate for its size and individual circumstances whilst ensuring they are fit for purpose and support good decision making by the Board.

The Board defines a series of matters reserved for its decision. These include strategy, finance, corporate governance, approval of significant capital expenditure, appointment of key personnel and compliance with legal and regulatory requirements.

There is clear segregation of responsibility within the Board. The Non-Executive Chairman is responsible for providing leadership to and managing the business of the Board, in particular ensuring strong Corporate Governance policies and values. The role of Chief-Executive Officer is concerned with the formulation and implementation of the strategy of the Company and is responsible for all operational aspects of the business. The role of the Group Finance Director is to provide strategic and financial guidance and to develop the necessary policies and procedures to ensure sound financial management and control of the Company. The Group Finance Director also acts as Company Secretary and is further responsible for advising on corporate governance matters and ensuring compliance with relevant legislative and legal requirements.

Details of the key committees are set out below, the terms of reference for each are available on our website as part of the committee section of the AIM 26 disclosures http://www.anpario.com/aim-26/.

Audit Committee

Details are contained within the Audit Committee Report section of this Annual Report.

Remuneration Committee

Details are contained within the Remuneration Committee Report section of this Annual Report.

Nomination Committee

The Nomination Committee is comprised of the two Non-Executive Directors and the Chief Executive Officer and is chaired by Peter Lawrence. Meetings are held as required by the Chairman. The role of the committee is as follows.

• regularly review the structure, size and composition (including the skills, knowledge, experience and diversity) of the Board and make recommendations to the Board with regard to any changes;
• give full consideration to succession planning for Directors and other senior executives taking into account the challenges and opportunities facing the Company, and the skills and expertise needed on the Board in the future;
• keep under review the leadership needs of the organisation, both executive and non-executive, with a view to ensuring the continued ability of the organisation to compete effectively in the marketplace;
• keep up to date and informed about strategic issues and commercial changes affecting the Company and the market in which it operates;
• review and approve selection procedures for potential Board members, whether executive or non-executive, whether for immediate appointment to the Board or after a probationary period;
• be responsible for identifying and nominating for approval of the Board, candidates to fill Board vacancies as they arise;
• ensure that on appointment to the Board, non-executive Directors receive a formal letter of appointment setting out clearly what is expected of them in terms of time commitment, committee service and involvement outside Board meetings;
• ensure that following appointment to the Board, Directors undergo an appropriate induction programme; and
• make recommendations to the Board on membership of the Board’s committees, in consultation with the chair of such committees; the reappointment of any non-executive at the conclusion of their specified term of office; the reappointment by shareholders of Directors under the Company’s rotation requirements taking into account the need for progressive refreshing of the Board.

Before any appointment is made by the Board, evaluate the balance of skills, knowledge, experience and diversity on the Board, and, in the light of this evaluation, prepare a description of the role and capabilities required for a particular appointment.

For the appointment of a Chairman, the committee shall produce a job specification, including the time commitment expected. A proposed Chairman’s other significant commitments should be disclosed to the Board before appointment and any changes to the Chairman’s commitments should be reported to the Board as they arise.

Prior to the appointment of a Director, the proposed appointee should be required to disclose any other business interests that may result in a conflict of interests and be required to report any future business interests that could result in a conflict of interest.

Principal 10: Communicating governance and performance matters with shareholders and wider stakeholders

Communications with shareholders are given high priority and we proactively promote engagement through a range of measures. More details of which are provided earlier in this document about how Anpario seek to engage with and understand Shareholders and wider Stakeholders.

The most recent AGM took place on 27 June 2019, full details of which are included in the 2018 annual report available from our Website. The results of the AGM are set out below. None of the resolutions had a significant number of votes cast against it.

Our Company website includes historical Annual Reports and Interim Statements; both in RNS format as part of its News section, and the published documents are available from https://www.anpario.com/investor/annual-reports/. Included within these documents are the notices of previous AGMs, the results of which are released as RNS announcements and can be found in the News Releases section of our website http://www.anpario.com/.

Board of Directors

Peter A Lawrence, MSc, BSc, DIC, ACGI.
Non-Executive Chairman (A, N, R)

Peter joined the Board in August 2005 as a Non-Executive Director and became Non-Executive Chairman in 2017. Peter is the founder of ECO Animal Health Group plc from which he retired in March 2019 as the Non-Executive Chairman, having been an Executive Director ever since its formation in 1972. Peter is the Non-Executive Chairman of Baronsmead Venture Trust plc and Amati AIM VCT plc.

Richard K Wood, BSc, C Eng.
Senior Independent Director (A, N, R)

Richard joined the Board in November 2017 as a Senior Independent Director. Richard has considerable global animal health experience having built Genus plc from a small company privatised by the government, into a world leading animal genetics company. More recently, Richard was a senior independent non-executive director of Avon Rubber plc and was also chairman of Ocean Harvest Technology Inc., a small manufacturer of therapeutic animal feeds using seaweeds.

Richard has previously held the position of Chairman at Atlantic Pharmaceuticals plc, Innovis (a sheep genetics company) and Silent Herdsman Limited (Farming Technology) and was interim Chairman of ECO Animal Health Group plc in early 2019.

Richard P Edwards, B Eng (Hons), C Eng, MBA.
Chief Executive Officer (N)

Richard Edwards joined the Board in November 2006 as Chief Executive following the acquisition of Agil. He was appointed Executive Vice-Chairman in April 2011 with specific responsibility for implementing acquisition strategy. In January 2016, Richard was appointed to the position of CEO.

Richard has extensive general management and corporate strategy experience gained in the sales and distribution sector both in the UK and internationally. Previously he was Director and General Manager of WF Electrical, a £140 million turnover division of Hagemeyer (UK) plc, a distributor of industrial products, and gained significant experience in corporate development at Saint Gobain UK building materials business.

Karen L Prior, BSc (Hons), FCA.
Group Finance Director

Karen joined the board in October 2009 as Group Finance Director. Previously, Karen has had roles as Finance Director of Town Centre Securities PLC, a listed property group and UK Finance Director of Q-Park, where she was instrumental in its establishment and growth in the UK.

Karen has also been Financial Controller of train builders Bombardier Transportation and spent 10 years of her early career with Ernst and Young specialising in providing audit and business services to entrepreneurial businesses.

Key

A: Audit Committee N: Nomination Committee R: Remuneration Committee

The Terms of Reference of the Audit, Nomination and Remuneration Committees are available on the Company’s website: www.anpario.com/aim-26/.

Directors’ report

The Directors present their annual report and audited consolidated financial statements for the year ended 31 December 2019.

Results and dividends

The profit for the year after tax was £3.7m (2018: £4.0m). The Directors propose a final dividend of 5.5p per share (2018: 5.0p) making a total of 8.0p per share for the year (2018: 7.2p), amounting to a total dividend of £1.7m (2018: £1.5m).

Directors

The Directors during the year under review and subsequently and up to the date of this report were:

The Board regards the Non-Executive Directors as being independent. The biographies and roles of all Directors and their roles on the Audit, Remuneration and Nomination Committees are set out earlier in this report.

Details of the Directors’ interests in the shares of the Company are provided in the Directors’ remuneration report.

Substantial shareholdings

At 28 February 2020, analysis of the share register showed the following holdings of 3 per cent or more of its issued share capital:

Review of the business and future developments

A full review of the year, together with an indication of future developments, is given in the Chairman’s statement.

Group research and development activities

The Group is continually researching into and developing new products. Details of expenditure incurred and impaired or written off during the year are shown in the note 4 of the Group financial statements.

Share capital

During the year 50,000 (2018: 41,853) Ordinary shares of 23p each were issued pursuant to the exercise of share options. During the year the Company issued 100,000 (2018: nil) Ordinary shares of 23p at market price to the Trustees of The Anpario plc Employees’ Share Trust.

A Special Resolution will be proposed at our AGM to renew the Directors’ limited authority last granted in 2019 to make market purchases of Ordinary shares in the capital of the Company.

As at 31 December 2019, the Company holds 143,042 (2018: 143,042) Ordinary shares of 23p in treasury. On 5 February 2020, the Company announced a Share Buyback Programme. . On 12 March 2020 the Company completed the Buyback Programme and in total purchased 297,346 additional Ordinary shares of 23p to be held in treasury, taking the total number of treasury shares to 440,388 shares.

Independent auditor

The auditor, Deloitte LLP, have indicated their willingness to continue in office, and a resolution that they be re-appointed will be proposed at the AGM.

Stockbrokers

Peel Hunt LLP is the Company’s stockbroker and nominated adviser.

The closing share price on 31 December 2019 was 340p per share (2018: 325p per share).

Indemnities

By virtue of, and subject to, Article 172 of the current Articles of Association of the Company, the Company has granted an indemnity to every Director, alternate Director, Secretary or other officer of the Company. Such provisions remain in force at the date of this report. The Group has arranged appropriate insurance cover for any legal action against the Directors and officers.

Financial risk management

Details of the Company’s financial risk management policy are set out in note 2.21 of the financial statements.

The Directors’ report was approved by the Board of Directors on 18 March 2020 and is signed on its behalf by:

Karen Prior
Company Secretary

Statement of Directors’ responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial period. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 101 ‘Reduced Disclosure Framework’. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the Parent Company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:

• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
• make an assessment of the Company’s ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
• the Strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
• the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.

Statement of disclosure to auditor

So far as the Directors are aware:

• there is no relevant audit information of which the Company’s auditor is unaware; and
• they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

This responsibility statement was approved by the Board of Directors on 18 March 2020 and is signed on its behalf by:

Karen Prior
Company Secretary

Report of the Remuneration Committee

Introduction

On behalf of the Remuneration Committee, I am pleased to present the Remuneration Report for the year ended 31 December 2019. The Committee seeks to provide a framework that is aligned to the strategy and values of the Company and to the interests of shareholders. It recognises the need to recruit, retain and appropriately incentivise high calibre directors and managers to deliver the Company’s strategy.

Overview

The Remuneration Committee is responsible for reviewing the performance of Executive Directors as well as determining the scale and structure of their remuneration, their terms and conditions of service and the grant of share awards, having due regard to the interests of shareholders.

The Committee is also responsible for reviewing the overall policy in respect of remuneration of all other employees of the Company and establishing the Company’s policy and operation of share incentive schemes.

In determining the remuneration of senior executives, the Committee seeks to enable the Company to attract and retain executives of the highest calibre. The Committee also makes recommendations to the Board concerning the allocations of options to executives under the long-term incentive plan and for the administration of the scheme.

The terms of reference of the Remuneration committee can be found on the Company’s website http://www.anpario.com/aim-26/.

Composition and meetings

The Remuneration Committee comprises Richard Wood, Senior Non-Executive Director and Committee Chairman, and Peter Lawrence, Non-Executive Chairman of the Board. Executive Directors are invited to attend meetings as required if thought advantageous for consideration of a particular agenda item. The Remuneration Committee meets as necessary to fulfil its objectives but as a minimum, at least once a year. The committee met once during the year ended 31 December 2019 with full attendance by the Committee members.

AIM requirements

As an AIM company, Anpario plc, is not required to comply with schedule 8 of the large and medium-sized companies’ regulations 2008. However, it is moving towards this full level of reporting and disclosures in this report reflect this.

Directors’ remuneration

The remuneration of the Chairman and each Director during the year ended 31 December 2019 is set out in the tables below. The detail contained in this summary has been expanded this year, as such the prior year figures have been re-presented.

The comparative figures for the previous year is shown below

* The bonuses to Directors are determined and paid after the publication of annual results, so the above figures are awards made for the previous financial year. No bonus has been accrued for 2019.

** The payment of the Chairman’s remuneration changed during 2018 and is now paid as a salary directly as an employee of Anpario plc. Previously these amounts were paid to ECO Animal Health Group plc. For clarity and consistency, the salary figure above includes these amounts.

Key Activities

During the year, the Committee:

• reviewed the salary and bonus arrangements to the Executive Directors and approved cost of living increases, where appropriate, for staff. No cost of living adjustment has been made for Executive and Non-Executive Directors;
• Reviewed the allocation of issued share capital for all incentive schemes;
• Reviewed proposals for the grant of share related incentive schemes; and
• Approved recommended proposals for short-term bonus incentives.

Remuneration Policy and Advisors

The objectives of the remuneration policy are to ensure that the overall remuneration of senior executives is aligned with the performance of the Company and preserves an appropriate balance of annual profit delivery and longer term shareholder value.

The Committee keeps the remuneration policy, in particular the need for share ownership guidelines for Executive Directors, regularly under review and will take action whenever deemed necessary to ensure that remuneration is aligned with the overall strategic objectives of the Company.

The Committee seeks advice, if appropriate, from independent advisors where required on remuneration related matters.

Long Term Incentive Plans

The Executive Directors receive remuneration under three long term incentive plans: Enterprise Management Scheme (“EMI” which is now closed; Joint Share Ownership Plan (“JSOP”); and Save As You Earn Scheme (“SAYE”).

Under the Company’s EMI and SAYE Scheme the following Directors have the right to acquire Ordinary shares of 23p each as follows:

* These right to purchase these shares was exercised on 5 February 2020, and as of 18 March 2020 they have added to the respective Directors’ interests as listed in relevant section below.

Joint Share Ownership Plan

The Joint Share Ownership Plan (“JSOP”) and the Anpario plc Employees Shares Trust (“the Trust”) were established and approved by resolution of the Non-Executive Directors on 26 September 2011. The JSOP provides for the acquisition by employees, including Executive Directors, of beneficial interests as joint owners (with the Trust) of Ordinary Shares in the Company upon the terms of a Joint Ownership Agreement (“JOA”).

The terms of the JOAs provide, inter alia, that if jointly owned shares become vested and are sold, the proceeds of sale will be divided between the joint owners so that the participating Director receives an amount equal to any growth in the market value of the jointly owned Ordinary shares above the initial market value, less a “carrying cost” (equivalent to simple interest at 4.5 per cent per annum on the initial market value) and the Trust receives the initial market value of the jointly owned shares plus the carrying cost. Jointly owned Ordinary shares will become vested if the participant remains with the Company for a minimum period of 3 years.

The Directors interests in the JSOP shares are as follows:

Directors’ interests

The interests of the Directors who served during the period, as at 31 December 2019, in the ordinary shares of the Company were as follows: –

On 5 June 2019, Karen Prior purchased 5,000 ordinary shares of 23p each in the Company (“Ordinary Shares”) at a price of 356.5p.

Directors’ interests between 31 December 2019 and 18 March 2020 have changed, reflecting the exercise by Richard Edwards and Karen Prior of SAYE options of 224.13p per share totalling 4,015 shares each. As such at the 18 March 2020, Directors’ interests are as follows, Richard Edwards 210,702 and Karen Prior 215,815.

Non-Executive Directors and Chairman

Remuneration of the Non-Executive directors is determined by the Chairman and the Chief Executive Officer. The Non-Executive Directors are not entitled to annual bonuses or employee benefits and their fees are subject to annual review.

The Chairman’s remuneration is determined by Remuneration Committee in conjunction with the Chief Executive Officer. However, the Chairman is not entitled to vote on the matter.

Each of the Chairman and Non-Executive Director have a letter of appointment stating their annual fee and termination terms.

The Chairman and Non-Executive Director appointments are for a period of three years from the date of the letter of appointment. The appointments are terminable on three months written notice at any time by either the Company or the Non-Executive Director.

Executive Directors

The Executive Directors remuneration is determined by the Committee. They are eligible to participate in a discretionary annual bonus scheme which is based on annual target profit measures and corporate activities including acquisitions and disposals aligned with shareholder returns.

The Executive Directors are also eligible to participate in the employee long term incentive plans as mentioned above.

Richard Edwards

Richard Edwards is engaged as Chief Executive Officer of the Company under a service agreement dated 5 November 2006. His appointment is terminable by the Company on 12 months’ written notice and the Executive on 6 months’ notice.

Karen Prior

Karen Prior is engaged as Group Finance Director of the Company under a service agreement dated 1 October 2009. Her appointment is terminable by the Company on 12 months’ written notice and the Executive on 6 months’ notice.

Richard Wood
Chairman, Remuneration Committee
18 March 2020

Audit committee report

Composition and meetings of the Audit Committee

The Audit Committee is comprised of the two Non-Executive Directors, whom the Board considers to be independent and is chaired by Peter Lawrence. Meetings are also attended, by invitation, by the Finance Director, external auditors and other management as appropriate.

The Committee meets at least twice each financial year with the external auditors and considers any issues that are identified during the course of their audit work. The Board is satisfied that the Committee members have recent and relevant financial experience.

The Committee met twice during the year ended 31 December 2019 with full attendance by the Committee members.

Role, responsibilities and terms of reference

The Audit Committee’s role is to assist the Board in the effective discharge of its responsibilities for financial reporting and internal control. The Audit Committee’s responsibilities include:

Financial reporting

Monitor the integrity of the financial statements of the Company, and any formal announcements relating to the Company’s financial performance, reviewing significant financial reporting judgments contained in them focusing particularly on:

• the consistency of and any changes to accounting policies and practices;
• the methods used to account for significant or unusual transactions where different approaches are possible;
• whether the Company has followed appropriate accounting standards and made appropriate estimates and judgments, taking into account the views of the external auditor; and
• the clarity of disclosure in the Company’s financial reports and the context in which statements are made.

Internal controls and risk management

• Keep under review the adequacy and effectiveness of the Company’s internal financial controls and internal control and risk management systems; and
• review and approve the statements to be included in the annual report concerning internal controls and risk management.

Compliance, whistleblowing and fraud

• Review the Company’s arrangements for its employees to raise concerns, in confidence, about possible wrong doing in financial reporting or other matters so as to ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action; and
• review the Company’s systems and controls for the detection of fraud and prevention of bribery.

External audit

Consider and make recommendations to the Board, to be put to shareholders for approval at the AGM, in relation to the appointment, re-appointment and removal of the external auditor. The Committee shall oversee the selection process for a new auditor and if an auditor resigns, the Committee shall investigate the issues leading to this and decide whether any action is required. Oversee the relationship with the external auditor including (but not limited to):

• recommendations on their remuneration, whether fees for audit or non-audit services and that the level of fees is appropriate to enable an adequate audit to be conducted;
• approval of their terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit;
• assessing annually the external auditor’s independence and objectivity taking into account relevant UK professional and regulatory requirements and the relationship as a whole, including the provision of any non-audit services;
• satisfying itself that there are no relationships (such as family, employment, investment, financial or business) between the auditor and the Company (other than in the ordinary course of business);
• monitoring the auditor’s compliance with relevant ethical and professional guidance on the rotation of audit partner;
• assessing annually the qualifications, expertise and resources of the auditor and the effectiveness of the audit process which shall include a report from the external auditor on their own internal quality procedures;
• develop and implement a policy on the engagement of the external auditor to supply non-audit services;
• discuss with the external auditor(s) before the audit commences the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved;
• review the findings of the audit, discussing any major issues which arose during the audit, any problems and reservations arising from the Interim and Final audits, and any matters the auditors may wish to discuss (in the absence of management where necessary); and
• review the external auditor’s management letter and management’s response.

The Committee regularly reviews its terms of reference and makes recommendations to the Board for any changes as appropriate. The current terms of reference are available on the Company’s website.

Independence of external auditor

The Committee reviews the independence of the external auditor, Deloitte LLP on an annual basis. It receives a detailed audit plan, from Deloitte LLP, identifying their assessment of the key risks. The Committee assesses the effectiveness of the audit process in addressing these matters through the reporting it receives from Deloitte LLP.

Peter Lawrence
Chairman, Audit Committee
18 March 2020

Risk management

We have examined in detail key risks and evaluated the likelihood and potential impact. These risks are the most significant but not necessarily the only ones associated with the Group and its businesses. In common with all businesses, we face risks of a generic nature, for example failure of projects, foreign exchange, supply chain disruption and the recruitment, development and retention of employees. The following table shows some of the risks that are more specific to our business together with details of the controls and mitigation in place to manage our exposure. More information on our risk management framework can be found in the Corporate Governance Statement.

Risk Management

What has been successful?

The implementation of our direct customer sales strategy, set up of new subsidiaries and launch of new products has mitigated global challenges, reduced key customer reliance and created a platform for future growth.

During 2019 we have:

• established new operations:
  • established subsidiaries in Mexico and Germany;
  • gained export licences for Indonesia;
  • launch of Anpario Direct to access end users in UK; and
  • new global registrations obtained for Anpro and Optomega plus;
• innovated, developed and created new products;
• conducted successful trials with a number of well-known universities;
• progressed international product registrations; and
• successfully implemented a liquid bottling plant to bring manufacturing in-house.

We continually endeavour to improve our key control processes. During 2019 we have:

• updated our Business Continuity Plan designed to ensure that critical functions and services undertaken by Anpario are able to continue under all circumstances; and
• developed and coached key managers and staff.

What can be improved?

We will continue to review our internal control framework and improve our risk management capabilities. We will revise our processes in response to new or emerging risks and to any improvements recommended by management, external auditors and advisors.

Brexit contingency planning

In the absence of clarity on post Brexit trading arrangements, we set out below some of the key steps being taken to plan for and mitigate any disruption resulting from changes to the way in which we currently conduct business. Anpario has been proactively engaged in understanding the potential scenarios and drawing up plans to mitigate any future risks to the business. We have appointed a steering group of experienced cross-functional professional managers who are working together with our stakeholders to manage the process and challenges we face.

Business continuity

Anpario is a global business with a long history of both exporting and importing from EU and non-EU countries. We have Anpario subsidiaries in ten countries with representation in every continent. We continually review, explore options and implement planning decisions to optimise this representation and recruit key management to ensure continuity and growth of the business. The Group seeks to minimise reliance on key territories and individual customers and distributors by increasing geographic spread and market penetration.

We have incorporated a wholly owned subsidiary in Germany as part of our Brexit strategy; this will give us a base within the EU if we need it for manufacturing, warehousing, product registration or other purpose.

Import of raw materials and packaging

Anpario import a significant proportion of raw materials and packaging from the EU. We potentially face congestion in ports and temporary import delays by customs agents and freight forwarders struggling with new or unclear legislation in 2021.

In 2019, the value of raw materials and packaging purchased from the EU 27 was £5.2m representing 43% of total purchasing. Our EU partners are equally concerned to ensure that supply chains are not disrupted. Meetings and discussions have therefore been ongoing with key suppliers regarding planning for Brexit implications and potential outcomes. We have received assurances from our acid supplier that buffer stocks will be stored in the UK.

Where possible, we have purchased key raw materials and these are already in stock at our premises and a third party warehouse. We hold approximately one-month’s raw material requirements. Anpario also imports goods from other territories outside of the EU and has a long history of dealing with import freight clearance and working with agents who provide effective professional customs clearance services. If necessary, this will enable us to purchase raw materials and packaging from alternative suppliers outside the EU.

Export of Anpario products

Anpario is a long established business, which has developed through exports and currently supplies more than 70 countries across the world. In 2019, £3.4m, approximately 12% of our sales were to EU 27 countries. We continue to review sales strategy and resources to create expansion across all regions and target growth territories both within and outside the EU.

Product regulatory requirements

All Anpario products conform to current EU standards and we expect this to continue. Our products are on the EU register of safe to use and do not require registration in EU. There is a risk that we may have to register products or that a certificate of free sale will be required after Brexit.

The Group has clearly established quality systems and procedures in place to obtain required regulatory approvals and always strives to meet or exceed regulatory requirements and ensure that its employees have detailed experience and knowledge of the regulations. The compliance and legal teams liaise closely with government bodies who oversee the industry standards such as DEFRA and remain constantly updated in respect of proposed and actual changes in order to ensure that the business is equipped to deal with and adhere to such changes.

Where any changes are identified which could affect our ability to continue to market and sell any of our products, a response team will be dedicated to mitigate such risk and to retain effective communication with the relevant regulators.

Trade tariffs

In the absence of a trade agreement between the EU and the UK, trade tariffs may be applied on goods we import from the EU, which could affect future prices of Anpario products. They may also increase prices to our EU customers by the addition of any duties imposed on their purchases from our operations in the UK. We already continually review our pricing and will take action to control our cost base and to ensure that we remain as competitive as possible. We will communicate any potential impact to our customers directly and as soon as possible if they are likely to be affected.

Exchange rate

Anpario’s businesses could be affected by significant currency fluctuations. As a consequence of Anpario’s extensive international dealings, Board approved hedging policies have been in place for many years. We have a number of options in place to sell USD/buy GBP. Exchange rates are continually monitored and action will be taken as far as possible to mitigate negative effects and anticipated exposures through implementation of our hedging policy and entering into financial instrument contracts.

Employees

We have EU citizens based in the UK who have been employed for a number of years; they have applied, or will be applying, for settled status. The deadline to apply under the EU Settlement Scheme to continue living in the UK is 30 June 2021. We do not anticipate any difficulties caused by the lack of free movement. We also employ people in several EU countries under direct local employment contracts.

Conclusion

Whilst it is not currently possible to fully understand and gauge the future obstacles facing UK & EU businesses we have continually been very active in making our views known to senior government ministers.

We are also actively working with government departments such as the Department for International Trade and DEFRA on issues such as trade barriers and regulations.

Anpario will continue to monitor developments and take whatever steps are necessary to protect our operations and minimise any disruption to our business. The final agreement between the UK and the EU may impose tariffs and additional administrative burden on our business but the UK will be able to conclude Free Trade Agreements with other countries that will provide us with opportunities in other markets.

Independent auditors’ report to the members of

Anpario plc

Report on the audit of the financial statements

1. Opinion

In our opinion:

• the financial statements of Anpario plc (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2019 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, which comprise:

• the consolidated statement of comprehensive income;
• the consolidated and parent statement of financial position;
• the consolidated and parent company statements of changes in equity;
• the consolidated statement of cash flows;
• the related notes 1 to 46.

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).

2. Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.

We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

3. Summary of our audit approach

4. Conclusions relating to going concern

5. Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

5.1. Existence and valuation of intangible assets in relation to product brands

6. Our application of materiality

6.1. Materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

6.2. Performance materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set at 70% of group materiality for the 2019 audit (2018: 70%). In determining performance materiality, we considered the low level of uncorrected misstatements identified in previous audits.

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £9k (2018: £11k), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

7. An overview of the scope of our audit
7.1. Identification and scoping of components

The group operates predominantly in the UK with a number of distribution entities around the world in locations such as Asia, the US and Australia. A full scope audit was performed on the UK entity, which represents 70% (2018: 78%) of the group’s total external revenue.

Audit work to respond to the risks of material misstatement, including the consolidation, was performed directly by the group audit engagement team. Due to the nature of the group, we have undertaken specific procedures on certain balances within the overseas subsidiaries, specifically in relation to the entity in the USA. Audit work to respond to the risks of material misstatement in these subsidiaries was undertaken at a component materiality that was 50% (2018: 40%) of the group’s materiality. Component materiality ranged between £97k and £209k in the current year.

8. Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact.

We have nothing to report in respect of these matters.

9. Responsibilities of directors

As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

10. Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Report on other legal and regulatory requirements

11. Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.

12. Matters on which we are required to report by exception
12.1. Adequacy of explanations received and accounting records

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

12.2. Directors’ remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been made.

We have nothing to report in respect of this matter.

13. Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Matthew Hughes BSc (Hons) ACA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Leeds, United Kingdom
18 March 2020

Consolidated statement of comprehensive income
for the year ended 31 December 2019

¹ Prior period comparatives have been restated following the adoption of IFRS 16 as disclosed in note 29. This footnote has been referenced throughout the notes to the accounts.

Consolidated statement of financial position
as at 31 December 2019

¹ Prior period comparatives have been restated following the adoption of IFRS 16 as disclosed in note 29. This footnote has been referenced throughout the notes to the accounts.

The Company has elected to take the exemption under Section 408 of the Companies Act 2006 to not present the Parent Company income statement. The profit for the Parent Company for the year was £4,814,000 (2018: £5,099,000).

The financial statements were approved by the Board and authorised for issue on 18 March 2020.

Consolidated statement of changes in equity
for the year ended 31 December 2019