17 June 2008 - NeutraHealth today announces the acquisition of the entire issued share capital of Perrigo UK Limited ("Perrigo UK") a manufacturer and supplier of private label vitamins, minerals and supplements to multiple retailers across the UK.
At the same time, NeutraHealth is disposing of its over the counter ("OTC") medicines business and announcing changes to the NeutraHealth Board.
Summary
Acquisition of vitamin & supplements manufacturing business with £14.9m revenues in 2007 for purchase price of £6.4 million
Disposal of NeutraHealth's over the counter medicines business for £6.2m, reporting a profit on disposal of £2.4m net of exceptional costs
Substantial earnings enhancement in 2009 through synergies
Appointment of Mr Ray Myers as Chief Executive with immediate effect
Mr Michael Toxvaerd appointed Deputy Chairman
Mr Martin Gatto to step down as Chairman
Acquisition of Perrigo UK Limited for £6.4 million
Perrigo UK Limited owns and operates an MHRA approved manufacturing facility in Swadlincote, Derbyshire. The business manufactures and packages vitamins, minerals, supplements, and licensed medicines for supply to major UK high street retailers including Tesco, Sainsbury and Superdrug. In the year to May 2007, turnover was £14.9 million and EBITDA was £0.2 million.
The purchase price of £6.4 million, net of cash and debt, represents the net asset value of Perrigo UK. The transaction is being funded by the disposal of NeutraHealth's existing over the counter medicine business (see below) in the UK and existing cash resources. Following the acquisition, Perrigo UK has been renamed Brunel Healthcare Manufacturing Limited ("Brunel Manufacturing") and will trade under the Brunel Healthcare name. The acquisition makes NeutraHealth the largest provider of private label vitamins and supplements in the UK, and NeutraHealth expects to extract significant synergies in product sourcing and manufacturing cost reduction across the group.
Disposal of OTC business for £6.2 million
NeutraHealth also announces today the disposal of its OTC business to Perrigo UK Acquisitions Limited ("Perrigo"), a subsidiary of US firm Perrigo Inc, and the vendor of Perrigo UK Limited. The transaction is being effected by splitting NeutraHealth group company Brunel Healthcare into two limited companies supplying VMS and OTC products respectively, and selling the OTC business to Perrigo UK Acquisitions Limited for £6.2 million. The funds received will be used to finance the acquisition of Perrigo UK (see above). NeutraHealth will recognise a profit of approximately £2.4 million, net of exceptional costs, on the sale in the financial year to 31 December 2008. Brunel Healthcare will continue to be owned by NeutraHealth and supply VMS products to major high street retailers.
In the year to 31st December 2007, the NeutraHealth OTC business generated £5.7m in turnover and £0.5m in operating profit. Following NeutraHealth's entry into the OTC market through the Brunel Healthcare acquisition, the Board has continued to review the attractiveness of the sector. As a result of recent transactions within the OTC market, the Board concluded that the strategic focus of the business should be the VMS market.
Summary Impact
The Board considers that the potential growth and synergies created by the Perrigo UK Limited acquisition will provide the opportunity to generate profits that significantly exceed the profits of the disposed OTC business, and will lead to substantial enhancement of earnings in 2009.
Board Changes
The newly enlarged NeutraHealth group will have a greater focus on manufacturing and operational effectiveness. To maximize the opportunities presented by the changes to the Group, the Board has appointed Mr Ray Myers, 47, as Chief Executive with immediate effect.
Mr Myers was most recently Group Managing Director of Galpharm Healthcare, a UK based supplier of OTC products to high street retailers that demonstrated significant growth in revenue and value during his tenure. Mr Myers has over 25 years of manufacturing and senior executive experience in the Healthcare sector covering research-based pharmaceuticals, generic prescription products, OTC medicines and related products.
Mr Michael Toxvaerd, the founding Chief Executive of NeutraHealth, has been appointed Deputy Chairman with immediate effect.
At the same time Mr Martin Gatto, the Chairman of NeutraHealth, has indicated his desire to step down from the Board at the end of August 2008, having guided the Company through its first phase as a public company. The company has initiated a search for a replacement.
Issue of Share Options
Following his appointment, Mr Myers has been granted performance related options over 3,200,000 Ordinary Shares of 10p each in the Company ("Ordinary Shares"). This grant was made on 16 June 2008.
All of the options granted are exercisable at the nominal value of 10p and are subject to a performance condition of the market value of the Company's shares being 20p for the 10 consecutive business days prior to the date of exercise. The options can only be exercised at least two years from the date of grant, and the grants represent Mr Myer's entire holding of options over Ordinary Shares.
Following the grant of options, the aggregate number of Ordinary Shares under option pursuant to any Company option scheme is within the limit described further in the admission document relating to the re-admission of NeutraHealth to AIM on 31 August 2005 following completion of the acquisition of BioCare Limited. The total number of options over Ordinary Shares which have been granted pursuant to the Company's option schemes is 30,569,582 and the number of new shares issuable pursuant to such options represents 17.4% of the Company's issued Ordinary Share capital. These include options over 4,213,500 Ordinary shares representing 2.4% of the Company's issued Ordinary Share capital which are exempt from the limits described in the admission document referred to above.
Current Trading
The Company continues to make progress and expects to report results in line with market expectations. The interim results will be announced on 22nd July 2008.
Michael Toxvaerd, NeutraHealth Deputy Chairman, commented:
"This is a significant development for NeutraHealth. By acquiring Perrigo UK and disposing of the OTC business, we are creating a formidable business focused on the UK VMS market. We are well placed to deliver significant improvements to our profitability over the next 18 months, and we have a group structure that can easily support further significant acquisitions.
At the same time, we wish to thank Martin for the invaluable contribution he has made to NeutraHealth. Martin joined the Company as Chairman at its inception, and has helped oversee the Company's transformation from a cash shell with an unproven strategy to a Company that continues to deliver on promises made to shareholders. The Board wishes him well in his future ventures."