2005 Annual report - Virbac

37
Consolidated balance sheet and financing
The Group’s cash flow from operations amounted to €39.9
million compared to €29 million in 2004, representing an
increase of 37.4% on the back of an improvement in the Group’s
profitability. Net debt at 31 December 2005 fell sharply and now
only represents €14.8 million (-60.9%). This improvement largely
stems from the improvement in cash flow from operations,
combined with tight controls on working capital requirements
and low level of investment during 2005. Net debt at end 2005
only represented 0.4 times cash flow from operations and 8.2%
of total shareholders’ equity and provisions (including minority
interests).
The increase in goodwill largely stems from the acquisition of the
Greek distributor in July 2005. The acquisition of intangible assets
amounted to €3.7 million in 2005, €2.6 million of which was
for IS projects which were largely acquired or developed within
the parent company (€2.5 million). Other acquisitions relate to
licences, trademarks and similar rights.
The Group’s tangible investments amounted to €5.9 million in
2005 and were largely for the improvement of the production
units.
The equity securities accounted for by the equity method relate to
two small European companies in which Virbac SA has minority
stakes.
The working capital requirement rose by €9.3 million on the
previous financial year. This change largely stems from the
increase in trade receivables resulting from the high level of sales
in the fourth quarter as well as by the rise in the exchange rate of
certain currencies at the end of 2005 compared to the end of
2004.
On 23 December 2003, Virbac SA opened a credit line with a
pool of banks for a period of 7 years and a maximum amount of
€100 million.
In this regard, the Group must fulfil two types of undertakings:
◆ undertaking to respect financial ratios:
- consolidated net debt/cash flow from operations;
- consolidated net debt/shareholders’ equity;
◆ undertaking to publish financial statements.
This credit line was scarcely used at end 2005 and the Group fully
complied with its contractual undertakings.
Parent company financial statements
The company first applied CRC regulation 2002-10 on
amortisation and impairment and CRC regulation 2004-06
on assets in the 2005 financial year.
CRC regulation 2002-10 on amortisation and impairment:
the translation method applied as from 1 January 2005 was
the “reallocation of net carrying amounts” method, limited
to assets with a net carrying amount in excess of
€30 thousand at that date.
The company proceeded as follows:
◆ breakdown of constructions into components (buildings
and fittings & fixtures),
◆ breakdown of industrial equipment with a gross amount
in excess of €150 thousand into components,
◆ redefinition of amortisation schedules on the basis of
useful lives.
The amortisation resulting from the application of these
useful lives being deemed to be economic amortisation.
The company nevertheless continued to employ the use
periods set out by the tax authorities and where possible
applied the diminishing balance amortisation method.
The differences resulting from the application of specific
amortisation methods and periods are recognised in
accelerated amortisation.
CRC regulation 2004-06 on assets:
Pursuant to CRC regulation 2004-06 deferred charges for a
total of €168 thousand, relating to seed stock control
expenses (general non-recurring expenditure with a
beneficial impact over a number of years) were reclassified
on 1 January 2005 as retained earnings.
Expenses relating to internally produced brands were
reversed in the balance sheet. As a result of a change in
accounting regulations, this reversal (for the portion
capitalised prior to 2005) was recognised as retained
earnings net of tax, namely €953 thousand.
Moreover, in 2005, the tax authorities audited the 2002 and
2003 financial statements of Virbac SA. The company was
notified of a restatement for the 2002 financial year. This
audit gave rise to a provision of €544 thousand. The audit
of the 2003 financial statements had not been completed as
of the drawing up of the financial statements.
Income trends
At 31 December 2005, sales in the Virbac SA parent
company amounted to €133.5 million, up 12.3% on
the previous year after having fallen for two straight years.
The bulk of this growth is due to sales with Group
companies that account for 89% of total sales (compared
to 87% in 2004). Sales at Asian and Latin American
subsidiaries declined slightly whereas sales in North
American, Oceanian, South African and European
subsidiaries rose sharply (these sales representing 91% of
the sales of Group subsidiaries).