Interim Results for six months ended 31 March 2017

PREMIER VETERINARY GROUP PLC

("PVG", the "Company")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2017

London, UK, 23 May 2017 - Premier Veterinary Group plc ("PVG" or the "Company") today announces its unaudited interim results for the six months ended 31 March 2017.

HIGHLIGHTS

· 38% increase in total number of pets on fee-generating pet care plans under PVG's preventative healthcare programme for pets branded "Premier Pet Care Plan" ("PPCP") to 161,000 (31 March 2016: 117,000).

· 35% increase in PVG's total continuing revenues to £1.2m for the six months to 31 March 2017 (31 March 2016: £0.9m).

· 16% increase in UK PPCP revenues to £0.9m for the six months to 31 March 2017 (31 March 2016: £0.8m).

· 144% increase in PPCP overseas revenues to £0.3m for the six months to 31 March 2017 (31 March 2016: £0.1m).

· Significant investment in expansion of overseas operations, especially in the US.

· Co-operation agreement signed in February 2017 with Midwest Veterinary Supply, Inc, a major veterinary distributor based out of Minnesota, US.

· Investec Bank plc appointed as the Company's sole corporate broker and financial adviser.

· Loss after tax from continuing operations to 31 March 2017 £2.1m (31 March 2016: £1.5m).

· Cash and short term deposits of £0.7m as at 31 March 2017 (at 31 March 2016: £1.6m, excluding £1m then held in escrow).

Post period events

· Sale of the business trade and assets of the Premier Buying Group to Animal Healthcare Services Limited, a subsidiary of Henry Schein Inc. for a cash consideration of £6.3m. The net cash proceeds are estimated at £4.8m, subject to finalisation of expenses and of the taxation charge arising on the disposal, will be used to repay all existing debt of £1.25m and further fund PVG's international growth plans for PPCP business in both the USA and Europe.

· Actions are being implemented to address identified differences between UK and US markets. Consequentially, as announced on 2 May 2017, further period of six months may be required to achieve critical mass in US market.

Dominic Tonner, CEO of PVG commented:

"The Company has made significant progress over the last 6 months in UK, Europe and the US and the Board is confident that substantial shareholder value will be achieved.

Continued investment in the global transaction platform and portal will add new functionality and enhance the customer experience and, in so doing, will help create additional competitive advantage and barriers to entry. Management are confident in their ability to identify quickly any changes that may be required to the operation of PPCP, and to execute the solutions market by market in order to maintain the momentum built up over the last 12 months.

Following the disposal of the PBG, the Board remains confident in the Group's prospects and in its ability to deliver the expansion strategy."

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.

For further information, please contact:

Premier Veterinary Group plc Tel: +44 (0)117 970 4130

Dominic Tonner, Chief Executive Officer

Will Evans, Chief Financial Officer

INTERIM MANAGEMENT REPORT

To the members of Premier Veterinary Group plc

Cautionary statement

This Interim Management Report ("IMR") has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.

The IMR contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report, but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.

This interim management report has been prepared for the Group as a whole and, therefore, gives greater emphasis to those matters which are significant to Premier Veterinary Group plc and its subsidiary undertakings when viewed as a whole.

Introduction

Premier Veterinary Group plc provides its services to third party veterinary practices through its wholly-owned subsidiary, Premier Vet Alliance Limited ("PVA"). The Company also operates a number of wholly-owned overseas subsidiaries to market its services in the respective country.

During the six months ended 31 March 2017, and in previous periods, PVA operated a buying group "Premier Buying Group" (the "PBG") in the UK and Ireland, which offered enhanced discounts to member practices on pharmaceutical and consumable spending. On 30 April 2017, the Group announced the sale of the PBG, and the results of the PBG are treated as discontinued in this IMR.

Following the disposal of PBG, the principal activity of the Group is the administration and support of a preventative healthcare programme for pets branded "Premier Pet Care Plan" ("PPCP"). PPCP is a structured, preventative healthcare programme for cats, dogs and rabbits, and is available only through veterinary practices. The programme is seen as a way of providing gold standard care for pets at an affordable price for the pet owner, by way of fixed monthly payments.

In these results, references to "continuing" operations are in relation to the PPCP business.

Overview and strategic update

As stated in the Annual Report and Accounts for the year ended 30 September 2016 (the "2016 Annual Report"), the Company's objectives are to:

· leverage the success of the PVA business; and

· develop other new opportunities for growth.

The Board has continued to evaluate how best to achieve these objectives. The growth opportunities for PPCP, especially in the US, are significant and require continued investment to fulfil their potential. In order that the additional funding required for the PPCP expansion is available, and to allow the management of PVG to focus the entirety of their efforts on the PPCP business, the Board announced in March 2017 its intention to dispose of the PBG. On 30 April 2017, the Group completed the sale of the business, trade and assets of the PBG to Animal Healthcare Services Limited, a subsidiary of Henry Schein, Inc. for a cash consideration of £6.3million.

The net cash proceeds, which are estimated at £4.8m and are subject to finalisation of expenses and of the taxation charge arising on the disposal, will be used to repay all existing debt of £1.25m and further fund PVG's international growth plans for its PPCP business in both the US and Europe.

Over the last 6 months, the Company has grown its PPCP businesses in the UK, Europe & US. The number of clinics and hospitals contracted to sell preventative health programmes continues to increase, and the rate at which pets are joining PPCP gives management the confidence that the opportunity continues to be exciting in all territories. Further key relationships with major industry players remains a focus as a means of bringing more clinics into the PPCP network, illustrated by the latest five-year co-operation agreement entered into with Midwest Veterinary Supply, Inc in US in February 2017.

Further investment in people has been an important part of positioning the Company for growth, with the US seeing the headcount grow from 8 employees at the end of September 2016 to 14 at the end of March 2017, with an additional 3 people added in April 2017. The Netherlands now has a Country Manager who has clear plans to deliver the continued growth in pets on plan that management expect. Additional support has been added to the finance team, as well as to the IT department to ensure the business delivers the right level of customer experience, and to improve technical competitive advantage.

As reported in our trading update on 2 May 2017, the Company has identified a number of differences between the UK and US markets necessitating a different approach to certain elements of the provision of preventative healthcare programmes in the US. Changes to the business model have been identified and are being actioned. As a consequence, it is estimated that a further period of six months may be required until critical mass is achieved in the US.

Regional focus

UK

In the UK, the number of pets on plan has increased by 28% to 137,000 as at 31 March 2017 (31 March 2016: 107,000). In the comparative period, 5,500 pets on plan related to PVG's vet business which was sold in December 2015. These pets were only part of PPCP for a six-month period from January 2016 to June 2016 whilst the acquirer made arrangements to transfer the pets to their own wellness programme. Removing these pets from the comparative number increases the year on year growth to 35%. The pipeline of opportunities to sign new clinics on to PPCP remains strong.

As part of the Group's strategy to implement a standard global processing portal, all of the UK customer base has been migrated onto the global portal. The new portal enables customers to access more real time information on the performance of PPCP in their clinic.

Europe

The number of pets on plan in Europe has increased by 120% to 22,000 (31 March 2016: 10,000). The Company has recently also successfully migrated practices in Europe across to the Group's global portal, and this has delivered significant improvements to the customer service experience.

The performance in Europe continues to be driven by the success of Huisdieren Zorg Plan ("HZP"), the brand name of PPCP in the Netherlands, where the recent appointment of a Country Manager has contributed to the sign up of practices, and the business is estimated to control in excess of 12% of the available market.

In France, PPCP, branded "Premier Vetoplan", is showing encouraging signs in what is a new market and, on the back of some good early successes working in partnership with one of the largest pharmaceutical companies in the region, the business is now performing ahead of expectations, albeit that it is still early days. This territory represents a large and significant opportunity, and the uptake from pet owners in the initial practices that have been launched has been positive.

Denmark remains a small market, when compared to other parts of the business, however the management team believes that an opportunity remains to grow PPCP in this part of Europe.

US

The business started its services in the US in September 2016. The number of pets on plan at 31 March 2017 was 2,000.

In February of this year, a 5 year referral agreement was signed with Midwest Veterinary Supply, Inc, which is one of the country's largest regional distributors with a client base of 10,000 hospitals across the Mid West and South East of the US. This partnership which covers the referral of leads from the Midwest sales team to PPCP sales managers has necessitated a significant upscaling of resource across the US, where the Company now has 17 full time employees. Contracts for the delivery of PPCP to practices have now been signed in 16 States across the US, and a number of other third party relationships are in the process of being established to enhance further the opportunities in this key market.

The Company has identified a number of differences between the UK and US markets which has slowed down the initial progress in the US market. Solutions to these differences have been identified and are being implemented.

Financial and non-financial key performance indicators ("KPIs")

As set out in the 2016 Annual Report, the Company monitors its performance in implementing the Company's strategy with reference to four KPIs. The KPIs are applied on a Group-wide basis. Performance against those KPIs in the six months ended 31 March 2017 for the continuing business, excluding Premier Buying Group, was as follows:

Sales volume and revenue growth

A key element underpinning the Group's strategy is to deliver sales volume growth and revenue growth PPCP. Sales volume growth is measured by the number of direct debits processed under PPCP.

PPCP fees are generated from the collection and management of direct debits on behalf of veterinary practices external to the Group and are recognised on a receipts basis. A flat fee is received for every direct debit collected.

PVA's revenues for the continuing business for the six months ended 31 March 2017 increased by 35% to £1.2m (31 March 2016: £0.9m). These revenues arise entirely from the PPCP business in the UK, Europe and the US.

The total number of direct debits processed increased to 937,000 in the six month period to 31 March 2017 (31 March 2016: 630,000), an increase of 49%.

Number of member clinics

Management recognises the value of its relationships with clinics and monitors the number of member clinics as a KPI. This is tracked and reviewed in each territory on a monthly basis. Management has concluded that shareholder value will be derived from this KPI and recognises the need to achieve growth in this KPI within a cost-base suited to the business. An individual customer (or practice) may operate a number of clinics.

At 31 March 2017, the number of PPCP member clinics in each region was:

Pets on Plan

Whilst clinic relationships indicate the future growth potential for the Group, it is also important to monitor the number of pets on plan as this is the key revenue driver. This KPI enables management to ensure member clinics are achieving the levels of penetration that are expected and to focus attention on clinics that are underperforming.

The number of fee generating pets on plan represents those pets on plan where a fee has been generated for the Group in that month, ie a direct debit (or equivalent) has been processed for that pet. Due to the time required by banking protocols to set up these transactions, there will be joiners and leavers in a month who are not included in this measure as they have not yet been processed by (or removed from) the system.

The following table shows the quarterly growth in the number of pets on plan over the last 12 months.

Overall, the number of pets administered by PPCP has increased by 38% to 161,000 as at 31 March 2017 (31 March 2016: 117,000). In the UK, the number of pets on plan has increased by 28% to 137,000 as at 31 March 2017 (31 March 2016: 107,000). The number of pets on plan in Europe has increased by 120% to 22,000 (31 March 2016: 10,000).

The business started its services in the US in September 2016. The number of pets on plan at 31 March 2017 was 2,000.

Cash processed through the platform

Member clinic numbers and pets on plan are internal points of reference for the Group. By monitoring cash (inclusive of sales tax) processed through the platform management is able to monitor the benefit to partners of the Group's member clinics operating PPCPs. The table below shows the value of transactions processed in the six months to 31 March 2017 compared to the same period last year.

Results for the six months ended 31 March 2017

The Group's total continuing revenues increased by 35% to £1.2m for the six months ended 31 March 2017 (£0.9m six months ended 31 March 2016). The operating loss for the six months ended 31 March 2017 was £2.1m (31 March 2016: £1.3m). The number of pets covered by PPCP on behalf of third party practices has increased by 38% to 161,000 as at March 2017 (117,000 as at March 2016).

The table below shows the performance of the continuing business between the UK and overseas.

The continuing Group's loss after tax for the six months ended 31 March 2017 was £2.1m (six months ended 31 March 2016: a loss after tax of £1.5m).

PPCP in the UK has performed well with a 16% growth in revenue and 54% growth in operating profit. In comparison to the same period last year, a modest investment in people has been required to provide the correct level of capacity to support the development and maintenance of our IT systems.

In Europe, the Company has invested an additional £0.3m in people and other business development expenditure in comparison to the same period last year. This investment in PPCP in the region has generated strong revenue growth of 127%.

As previously announced significant investment in the US was planned to capture the market opportunity that has been identified. This investment accounts for £0.8m of the cost increase in comparison to the same period last year. Headcount increases account for half of the cost increases, with increased travel and other operating costs accounting for the balance.

At 31 March 2017, the staff headcount was 57 (31 March 2016: 40).

Central costs are down on the same period last year as executive bonuses were paid in the six months ended March 2016 in connection with the disposal of the veterinary practices in December 2015.

The share-based compensation charge for the period was £Nil (six months ended 31 March 2016: £12k).

Discontinued operations

The Board announced on 30 April 2017 that it had sold the PBG. Whilst this transaction completed after 31 March 2017, it is treated as a discontinued operation in the condensed consolidated statement of comprehensive income.

For the six months ended 31 March 2017, the PBG generated profits from its operations of £321k (2016: £390k).

The prior year comparative for discontinued operations also includes £163k of profits generated by the veterinary practices that were sold in December 2015.

Dividend and dividend policy

It is, at present, intended that no dividends will be paid by the Company. The position will be reviewed if future operations lead to significant levels of distributable profits, taking into account any earnings, of which there can be no assurance, to be reinvested in the Group's business.

Financial position

Net liabilities were £0.1m at 31 March 2017 (31 March 2016: net assets £2.9m).

Cash and short-term deposits were £0.7m as at 31 March 2017 (at 31 March 2016: £1.6m). Net borrowings at 31 March 2017 were £0.5m (at 31 March 2016: net cash of £1.6m).

Proceeds from the sale of the PBG will be used to repay outstanding loan notes.

Cash flow

Net cash outflow from continuing operating activities for the six months ended 31 March 2017 was £2.1m (six months ended 31 March 2016: £1.6m). The increase in cash outflow is a direct result of the investment in international expansion.

Post-retirement benefits

The PVG Group operates a defined contribution pension scheme and the pension charge represents the amounts payable by the PVG Group to the fund and into personal arrangements in respect of the period. 

Events after balance sheet date

As already noted, the Group disposed of the PBG on 30 April 2017. The net proceeds on disposal of the PBG are estimated at £4.8m subject to finalisation of expenses and of the taxation charge arising on the disposal. The net assets subject to the disposal are £0.08m at 31 March 2017 and the consequent gain on disposal is estimated at £4.7m.

Company secretary change

Following her resignation, Sue Steven, Company Secretary will step down on 2 June 2017 and Will Evans, the Group's Chief Financial Officer, will take on the role of Group Company Secretary with effect from 3 June 2017.

Related party transactions

Related party transactions are disclosed in note 8 to the condensed set of financial statements.

Risk and uncertainties

The principal risks and uncertainties affecting the business activities of the Group were identified under the heading "Risk management and principal risks" in the Strategic Report on pages 12 and 13 of the 2016 Annual Report, a copy of which is available on the Company's website www.premiervetgroup.co.uk.

These comprise:

· A decline in consumer spending or a change in consumer preference

· Increased corporate veterinary activity

· Competition with existing and potential future competitors

· Reputation

· Potential complaints and litigation

· Failure to expand the pet healthcare services or launch new initiatives

· The viability of the PBG as a result of factors outside the Group's control*

· PVA's status as a Direct Debit originator being revoked

· Information security and data protection

· Attraction and retention of key employees

· Continuity of operations

· Effective management of growth and expansion

· International expansion risk

In the view of the Board, the key risks and uncertainties for the remaining six months of the financial year continue to be those set out in the 2016 Annual Report, with the exception of the viability risk relating to the PBG.

Going concern

As stated in note 2 to the condensed financial statements, the Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Outlook

The outlook for the global preventative pet care market continues to be positive. The Company has made significant progress over the last 6 months in UK, Europe and the US and the Board is confident that substantial shareholder value will be achieved.

Continued investment in the global transaction platform and portal will add new functionality and enhance the customer experience and, in so doing, will help create additional competitive advantage and barriers to entry. Management are confident in their ability to identify quickly any changes that may be required to the operation of PPCP, and to execute the solutions market by market in order to maintain the momentum built up over the last 12 months.

Following the disposal of the PBG, the Board remains confident in the Group's prospects and in its ability to deliver the expansion strategy.

We look forward to announcing future developments in due course.

RESPONSIBILITY STATEMENT

For the six months ended 31 March 2017, we confirm to the best of our knowledge that:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

 (b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that have done so).

By order of the Board

Condensed consolidated statement of comprehensive income

For the six months ended 31 March 2017 (unaudited)

Condensed consolidated statement of financial position

As at 31 March 2017 (unaudited)

Condensed consolidated statement of changes in equity

For the six months ended 31 March 2017 (unaudited)

Condensed consolidated statement of cash flows

For the six months ended 31 March 2017 (unaudited)

Notes to the financial information

1 General information

This interim financial information was authorised for issue on 22 May 2017. The information for the period ended 31 March 2017 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. They have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required in annual financial statements in accordance with IFRS.

2 Significant accounting policies

The financial statements have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as adopted by the European Union.

The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are set out below.

Basis of preparation

The half-year condensed consolidated financial statements for the six months ended 31 March 2017 have been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Services Authority and with IAS 34 'Interim Financial Reporting'. The half-year condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 30 September 2016, which have been prepared in accordance with IFRS as adopted by the European Union.

This half-year condensed consolidated financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2016 were approved by the Board of Directors on 28 November 2016. These accounts, which contained an unqualified audit report under Section 495 of the Companies Act 2006 and which did not make any statements under Section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

There have been no significant changes to estimates of amounts reported in prior financial years.

The accounting policies adopted in the preparation of the half-year condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 30 September 2016.

Going concern

The Group made a loss from continuing operations for the period of £2.1m (6 months ended 31 March 2016: £1.5m) and had net liabilities of £0.1m (31 March 2016: net assets of £2.9m). The Group had cash balances of £0.7m (2016: £1.6m). On 30 April 2017, the Group completed the sale of the business, trade and assets of the PBG for a cash consideration of £6.3m and is estimated to generate net proceeds of £4.8m, subject to finalisation of expenses and of the taxation charge arising on the disposal. The proceeds will be used to repay £1.25m of loan notes outstanding as at 31 March 2017, and the residual will be used to fund the international expansion strategy.

The Directors consider that with its current cash reserves, the Group has sufficient resources to meet all current liabilities as they fall due. After consideration of market conditions, the Group's financial position, the Group's forecasts and projections, which allow for reasonable possible changes in trading performance and after making enquiries, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. For these reasons, the Directors continue to adopt the going concern basis in preparing the financial statements.

Basis of consolidation

The condensed consolidated financial statements consolidate those of the parent company and all of its subsidiaries as of 31 March 2017.

All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.

Revenue

Revenue for the Group is measured at the fair value of the consideration received or receivable. The Group recognises revenue for services provided when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity. All intercompany revenues are eliminated on consolidation.

The Group had the following two income streams:

· Premier Pet Care Plan ("PPCP"): Fees received for the collection and management of direct debits and related services are recognised on a receipts basis. A flat fee is received for every direct debit collected. An admin fee for setting up each member practice is charged.

· Premier Buying Group ("PBG"): Management fees are earned when a member practice purchases goods and becomes entitled to negotiated rebates and discounts. These are recognised once there is a legal entitlement to receive. In general, this is during the month in which the PBG members' spend occurs.

PBG revenues and expenses are included in discontinued activities.

Expenditure

Expenditure is recognised in respect of goods and services received when supplied in accordance with contractual terms. Provision is made when an obligation exists for a future liability relating to a past event and where the amount of the obligation can be reliably estimated.

The Group classifies its financial assets into the categories, discussed below, due to the purpose for which the asset was acquired.

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers (eg trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transactions costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

The Group's loans and receivables comprise of trade and other receivables included within the consolidated statement of financial position.

Cash and cash equivalents include cash held at bank and bank deposits available on demand.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the income statement. On confirmation that the trade receivables will not be collectable, the gross carrying value of the asset is written off against the associated provision.

The Group classifies its financial liabilities as other financial liabilities which include the following:

· Loans which are initially recognised at fair value net any of transaction costs directly attributable to the issue of the instrument. Where the terms of a loan facility are re-arranged, associated fees are expensed up front when the re-arrangement is a substantial modification. Such interest-bearing liabilities are subsequently measured at amortised cost ensuring the interest element of the borrowing is expensed over the repayment period at a constant rate.

· Trade payables, other borrowings and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

· Finance charges, including premiums payable on settlement or redemption, are accounted for on an accruals basis and are calculated using the effective interest method and are added to the carrying amount of the liability to the extent that they are not settled in the period in which they arise.

· Where a financial instrument contains an embedded derivative within a non-derivative host contract and the embedded derivative is not closely related to the host contract the derivative component is accounted for separately as a fair value through profit and loss financial instrument. The fair value of the instrument is recognised on the statement of financial position with gains and losses through the income statement. No hedge accounting is applied.

Certain of the disclosures about fair value of financial instruments include the classification of fair values within a three-level hierarchy. The three levels are defined based on the observably of significant inputs into the measurements as follows:

· Level 1: Quoted prices, in active markets

· Level 2: Level 1 quoted prices are not available but fair value is based on observable market data

· Level 3: Inputs that are not based on observable market data.

Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Group's ordinary shares are classified as equity instruments.

The share premium reserve represents the surplus of consideration paid for shares above their nominal value.

Share-based payments

The cost of equity-se-ttled transactions is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period which ends on the date on which the relevant party become fully entitled to the award. Fair value is determined by using the Black-Scholes pricing model. No account is taken of any vesting conditions other than conditions linked to the price of shares of the Company in measuring fair value.

At each period end date before vesting, the cumulative expense is calculated; representing the extent to which the vesting period has expired and Management's best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest. The movement in cumulative expenses since the previous period end date is recognised in the income statement with a corresponding entry in the statement of financial position.

Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team (excluding Non-Executive Directors) including the Chief Executive Officer.

Management review revenue and gross profit of two continuing separate operating segments against budget. The remaining costs, including administrative costs and finance expenses, are reviewed in total. Assets and liabilities of the Group are not allocated to an operating segment.

Non-current assets held for sale and disposal groups

Non-current assets and disposal groups are classified as held for sale when:

· they are available for immediate sale;

· management is committed to a plan to sell;

· it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;

· an active programme to locate a buyer has been initiated;

· the asset or disposal group is being marketed at a reasonable price in relation to its fair value; and

· a sale is expected to complete within 12 months from the date of classification.

Non-current assets and disposal groups classified as held for sale are measured at the lower of:

· their carrying amount immediately prior to being classified as held for sale in accordance with the group's accounting policy; and

· fair value less costs of disposal.

Following their classification as held for sale, non-current assets (including those in a disposal group) are not depreciated.

The results of operations disposed during the year are included in the consolidated statement of comprehensive income up to the date of disposal.

Profit or loss from discontinued operations

A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale. Profit or loss from discontinued operations comprises the post-tax profit or loss of discontinued operations and the post-tax gain or loss resulting from the measurement and disposal of assets classified as held for sale.

Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including the expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Software development

Software development is amortised over the useful lives of the assets. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are reviewed annually for continued appropriateness. The carrying values are tested for impairment when there is an indication that the value of the assets might be impaired. When carrying out impairment tests these would be based upon future cash flow forecasts and these forecasts would be based upon management judgement. Future events could cause the assumptions to change, therefore this could have an adverse effect on the future results of the Group.

3 Loss per share

The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period

From continuing and discontinued operations

The calculation of the basic and diluted earnings per share is based on the following data:

4 Segmental reporting

Management have defined operating segments as those on which results are considered by the Chief Executive Officer. Administrative expenses (including amortisation, impairment and depreciation), finance costs and income tax expenses are monitored centrally and are not allocated to operating segments. Further to this, assets and liabilities are not allocated to operating segments as they are shared by the Group. These operating segments are monitored and strategic decisions are made on the basis of adjusted segment operating results. The categorised as follows:

All revenue is derived from external customers.

5 Share capital

On 31 August 2016 the merger reserve, included within the reverse acquisition reserve, was capitalised by a bonus issue of deferred shares with a nominal value of 90 pence. Following an application to the High Court an order was passed to complete a capital restructure which cancelled 3,782,766 deferred shares held at a value of £3,404,000 and cancelled share premium held at a value of £118,947,000.

6 Share-based payments - equity-settled share option schemes, LTIPs

Options over ordinary shares were granted on 3 March 2017 under the 2014 Ark Therapeutics Group plc* Enterprise Management Incentive Share Option Plan and the 2014 Ark Therapeutics Group plc* Unapproved Share Option Plan (together, the "Plans") at an exercise price of 238.75 pence per share.

Subject to the achievement of pre-determined performance criteria, the options granted under the Plans are exercisable three years from the date of grant.

* Ark Therapeutics Group plc changed its name to Premier Veterinary Group plc in March 2015.

Options and warrants outstanding

Options exercisable

The fair value of share options expense recognised in the period is determined using the Black-Scholes model which takes into account the terms and conditions upon which the shares were awarded. The Company recognised a charge £Nil (2016: £12,000) in relation to share based payment.

7 Fair value measurement of financial instruments

The loan repayment option recorded in the comparative was an embedded derivative. The policy was to hold at it fair value.

8 Related party transactions

The Group operates the Ark Therapeutics Group plc Family Benefit Trust ("FBT"). Amounts due from the FBT were £Nil (31 March 2016: £982,000, 30 September 2016: £Nil)). No interest was charged on this balance.

Bybrook Financial Services Limited ("BFSL") is under control of a director of the Company, Raj Uppal. On 31 January 2017, loan notes of £350,000 were issued to BFSL at an interest rate of 1% per month. This loan note was repayable on 31 January 2019 and had other normal early repayment events including a disposal of a major part of the business or early repayment of other loan notes. In the event of early repayment, the interest for any unexpired period to the end of the full term would become payable. At 31 March 2017, amounts owed to BFSL were £350,000 (31 March 2016: £Nil, 30 September 2016: £Nil). Interest and arrangement fees charged during the period were £7,000 (2016: £204,000). Following disposal of the PBG, the outstanding loan notes to BFSL at 31 March 2017 have been repaid in full as well as early repayment fees of £74,000, being interest on the unexpired period.

Juliet Thompson is non-executive director and Chairman of the Company. Loan notes of £100,000 were issued to Juliet Thompson and loan notes of £200,000 were issued to her spouse, Timothy Thompson, in September 2016, at an interest rate of 1% per month. These loan notes are repayable by 15 March 2018 or at the option of the Company. At 31 March 2017, amounts owed to Juliet Thompson and Timothy Thompson were £100,000 (31 March 2016: £Nil, 30 September 2016: £100,000) and £200,000 (31 March 2016: £Nil, 30 September 2016: £200,000) respectively. Interest charged by Juliet Thompson and Timothy Thompson during the period was £6,000 (2016: £Nil) and £12,000 (2016: £Nil) respectively.

9 Disposal group

At the period ended 31 March 2017, the Board were in active discussions to dispose of the PBG business. The assets and liabilities of this disposal group are classified as held for sale.

In the comparative period, the veterinary practice was disposed of. Full details of the disposal were included in the annual report for the year ended 30 September 2016.

10 Post balance sheet event

The Group disposed of the PBG on 30 April 2017. Gross proceeds were £6.3m. The net proceeds on disposal of the PBG are estimated at £4.8m and are subject to finalisation of expenses and the taxation charge arising on the disposal. The net assets subject to the disposal are £0.08m at 31 March 2017, and the consequent gain on disposal is estimated at £4.7m.

Independent review report to the members of Premier Veterinary Group plc

Introduction

We have reviewed the condensed set of financial statements in the half-yearly financial report of Premier Veterinary Group plc for the six months ended 31 March 2017 which comprises the Condensed consolidated statement of comprehensive income, the Condensed consolidated statement of financial position, Condensed consolidated statement of changes in equity, Condensed consolidated statement of cash flows and the related notes. We have read the other information contained in the half-yearly financial report which comprises only the interim management report and the responsibility statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company's members, as a body, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review 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 independent review 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 review work, for this report, or for the conclusion we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

GRANT THORNTON UK LLP

AUDITOR

Bristol

22 May 2017