TIDMEAH
RNS Number : 6708X
Eco Animal Health Group PLC
31 August 2022
31 August 2022
ECO Animal Health Group plc ("ECO", the "Company" or the
"Group")
(AIM: EAH)
Results for the year ended 31 March 2022
Solid performance in a very challenging market
HIGHLIGHTS
Financials
-- Group sales down 22% at GBP82.2m (2021: GBP105.6m)
- China and Japan sales declined significantly to GBP28.4m
(2021: GBP58.9m)
- ROW sales increased by 15% to GBP53.8m (2021: GBP46.7m)
-- Gross margin at 43% (2021 restated: 50%)
-- EBITDA decreased to GBP6.4m (2021 restated: GBP21.3m) which
includes an exchange rate gain of GBP1m (2021: loss GBP2.2m)
-- Administrative expenses excluding foreign exchange and
exceptional items were constant at GBP23.4m
-- New product development expenditure 12% higher at GBP10.2m
(2021: GBP9.1m) reflecting maturing pipeline
-- Loss per share of 1.01p (2021 restated: profit per share of 10.86p)
-- Net cash at the end of the period GBP14.3m (2021: GBP19.5m)
-- New GBP10m Bank RCF facility agreed after the end of the period, which remains undrawn
Operations
-- Aivlosin(R) demand remains robust with increasing market share in key markets
o Strong growth in USA and Canada from stable domestic
demand
o Strong export driven growth in Latin America
o Strong growth in South and South East Asia, particularly
Thailand
-- Two new Aivlosin Regulatory approvals
o The first zero day drug withdrawal period anti-microbial for
poultry in China
o New swine respiratory disease marketing authorisation in
China
-- Two new poultry vaccine projects progressed to full development in the year
o Addressing a disease which costs the poultry industry over
GBP600m per annum
o First marketing approvals expected end of 2023
-- New ESG report provides baseline metrics
-- Appointment of new Chief Executive, David Hallas, on 1 April
2022 and new Non-Executive Director, Tracey James, during the
year
David Hallas, CEO of ECO Animal Health Group plc, commented: "I
am delighted to have joined ECO in April this year and I have seen
so many promising signs within the Company since I have arrived.
Whilst the well documented China revenue performance has
disappointed due to the extensively depressed pork prices, the
underlying growth and continuing gains in other markets is
impressive. We expect that China will remain subdued for another
quarter or two but the recent improvement in pork to feed price
ratio provides the foundation for a stronger end to the financial
year. I am particularly excited about our new technologies and the
innovative products which will add to our expanding portfolio of
products in the coming years. Our approach, our current and future
assets and above all our team provide the Company with a solid base
for sustainable, profitable growth in the years ahead."
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014 ("MAR") as it forms part
of United Kingdom domestic law by virtue of the European Union
(Withdrawal) Act 2018. Upon the publication of this announcement
via a Regulatory Information Service ("RIS"), this inside
information is now considered to be in the public domain.
Forward-Looking Statements
This announcement contains certain forward-looking statements.
The forward-looking statements reflect the knowledge and
information available to the Company and Group during preparation
and up to the publication of this announcement. By their very
nature, these statements depend upon circumstances and relate to
events that may occur in the future and thereby involving a degree
of uncertainty. Therefore, nothing in this announcement should be
construed as a profit forecast by the Company or Group.
Contacts
ECO Animal Health Group plc
David Hallas (Chief Executive)
Christopher Wilks (Finance Director) 020 8447 8899
IFC Advisory
Graham Herring
Zach Cohen 020 3934 6630
Singer Capital Markets (Nominated Adviser
& Joint Broker)
Mark Taylor
George Tzimas 020 7496 3000
Investec (Joint Broker)
Gary Clarence
Brough Ransom 020 7597 5970
Carlo Spingardi
Peel Hunt LLP (Joint Broker)
Dr Christopher Golden
James Steel 020 7418 8900
Equity Development
Hannah Crowe
Matt Evans 020 7065 2692
CHAIRMAN'S STATEMENT
FOR THE YEARED 31 MARCH 2022
I am pleased to report that ECO continues to make strong
progress on its journey towards building a broader and long term
sustainable business.
Sales of our core Aivlosin business delivered strong growth in
North America, South East Asia and Latin America. Sales in Europe
were slightly down due to supply chain and post Brexit importation
difficulties. China, however, saw a major reduction in sales due to
a very rapid and steep down cycle in the overall pig market. Market
cycles are a feature of our market, and looking through these, we
believe there are opportunities for continued growth of our core
Aivlosin business in the coming years.
The combination of the impact of the China market decline and
our continued substantial investment in R&D has resulted in a
significant reduction in bottom line performance for the year. The
Board believes that the significant investment in R&D is the
most effective use of our cash flow and expects it to lead to a
substantial and sustainable increase in shareholder value.
Our substantial investment in R&D has created a broad
portfolio of vaccines and biologicals projects that offer
competitive advantages over existing solutions in the market. Some
of these projects moved into advanced stages of development during
the year and, based on current plans, the first projects are likely
to receive regulatory approval before the end of calendar year 2023
. We made an initial presentation of the portfolio and its
potential future value at our Capital Markets Day in January 2022.
The Board is excited about the transformative potential of the
portfolio to drive a major increase in shareholder value. Further
updates on R&D progress will be provided at the appropriate
time in the coming year.
As we committed last year, we have laid out further information
on our approach to ESG and will continue to develop and embed our
strategy in this important area in the coming year.
We announced in July 2021 that Marc Loomes, the former Chief
Executive ("CEO") of ECO, had informed the Board of his wish to
retire by the end of 2022. Marc joined ECO in 2004 and the
contribution his leadership has made to the growth and development
of the business cannot be understated. We sincerely thank him and
wish him every success and happiness in the next phase of his
life.
We announced in January 2022 the appointment, effective 1 April
2022, of David Hallas as the new CEO of ECO. David has more than 30
years of experience in the animal health sector and we are
delighted to have been able to attract such a high calibre
individual to lead ECO through the next phase of its
development.
We were delighted to welcome Tracey James to the Board; she has
now taken over as Chair of Audit Committee and will build on the
foundations put in place by Tony Rawlinson who resigned from the
Board as a Non-Executive Director. After nearly eight years'
service to the Board of ECO, I would like to personally thank him
for his support and wisdom and wish him well for the future. We
will in due course seek to add a further Non-Executive Director to
the Board.
The Board recognises the value of dividends to shareholders and
balancing the need for prudent management of cash resources as well
as funding the exciting pipeline of new products. We have however
decided that the best use of the Group's cash at the current time
is in the new product development initiatives and accordingly no
dividend will be recommended in respect of the year ended 31 March
2022.
COVID-19 has remained a challenge during the year. We are very
appreciative and recognise that our people have shown great
commitment and flexibility to keep ECO operating and
progressing.
Finally, on behalf of the Board, I sincerely thank all our
shareholders and stakeholders for the continued support you give to
ECO, it is much valued and appreciated as we build out the next
exciting phase for ECO.
Outlook
As anticipated, the first three months of the new financial year
has seen Chinese revenue at a subdued level when compared with the
record sales of the equivalent prior year period. This quarter
coincided with a policy of extended urban lock-down within China in
an attempt to control the spread of COVID-19. This reduced pork
consumption, prolonging the period during which major producers
were trading at a loss and therefore dampened demand for Aivlosin
(R) . However, gross margins in China were stronger due to the
favourable customer mix and demand for Aivlosin (R) in this period
was at a similar level to that experienced before the ASF
outbreak.
Recently the Chinese pork to feed price ratio has increased to
greater than 5; this is the first occasion in the last year and is
a primary indicator of improved profitability within the ECO
customer base and an improved trading environment. We believe that
customers will remain cautious for the remainder of the calendar
year; as winter disease outbreaks occur and the normal seasonal
demand for pork increases, which is expected to lead to an increase
in the demand for Aivlosin (R) in during fourth quarter.
Outside of China, the first quarter of our financial year ending
31 March 2023 saw strong year-on-year growth. This growth is
particularly strong in our newer markets of South East Asia
supported by the trends in USA and Brazil, which we currently
expect to continue.
Like many businesses we are monitoring costs closely as the
impact of increasing energy costs and general inflationary
pressures will be felt by the business throughout this year. We
remain committed to a focused programme of new product development
and are excited with the progress we are making. We continue to
focus our R&D activities on initiatives which will provide the
greatest shareholder value whilst balancing the cost, return, risk
and time to market.
We look forward to the rest of this financial year with cautious
optimism and confidence.
Dr Andrew Jones
Non-Executive Chairman
CHIEF EXECUTIVE'S REPORT
FOR THE YEARED 31 MARCH 2022
This is my first report as Chief Executive, having succeeded
Marc Loomes in April 2022. I am grateful to Marc for his leadership
and considerable contributions to the growth and development of
ECO.
The Group confronted a series of operational challenges during a
year dominated by pork price volatility in China, and the global
COVID-19 related disruption of work locations, international travel
and supply chains. Despite the significant reduction in revenue
from China, business in most other major markets advanced and the
Group continued to invest in critical organisation development and
strategically important R&D projects.
Operational Review
The difficult trading conditions in China which were primarily
caused by low pork prices and subsequent negative profitability for
swine producers, significantly impacted the Group's performance as
global revenue declined by 22% to GBP82.2m. Excluding China and
Japan, revenue advanced by 15% to GBP53.8m reflecting the value of
ECO's global footprint (selling in more than seventy countries) and
was an excellent and noteworthy performance.
Sales of Aivlosin(R), our patented antimicrobial which is used
under veterinary prescription for the treatment of economically
important respiratory and gastrointestinal diseases in pigs and
poultry, reduced by 17% to GBP72.9m (2021: GBP87.5m) due to reduced
Chinese sales and accounting for 89% of total revenue.
Sales of the smaller Ecomectin(R) anti-parasitic range increased
by 31% to GBP5.5m (2021: GBP4.2m) and represented 7% of the Group's
revenue.
Sales of all other products were GBP3.7m (2021: GBP13.8m) and
mainly comprised a range of supportive antimicrobial products for
pigs in China.
Exposure to Russia and Ukraine is minimal with remaining Russian
orders being fulfilled on a payment before collection basis.
Product Approvals
Two Aivlosin(R) marketing authorisations were obtained from the
Ministry of Agriculture and Rural Affairs ("MOA") of the People's
Republic of China for the use of Aivlosin(R) Water Soluble
Granules. The first approval allows for the treatment of
respiratory disease caused by Mycoplasma and other sensitive
bacteria, in chickens laying eggs for human consumption and in
breeding chickens. Aivlosin(R) is the first antimicrobial to be
licensed by the Chinese MOA for laying birds with a zero day drug
withdrawal period for eggs. China is the world's largest producer
of table eggs and accounts for more than a third of the world's
laying birds. The second approval was for swine respiratory disease
("SRD") adding three important bacterial respiratory pathogens of
swine, Haemophilus parasuis, Pasteurella multocida, and
Streptococcus suis to the existing Mycoplasma hyopneumoniae
registration. Aivlosin(R) is approved for the treatment of SRD in
other markets; it occurs worldwide and causes major economic losses
to the pig industry due to mortality, reduction in growth rates and
decreased feed efficiency.
Innovation through Research and Development
ECO started a programme of significant investment in vaccine
R&D and in building our capability and expertise around four
years ago and has seen encouraging progress within the portfolio of
projects.
Two poultry vaccine projects progressed to full development
during the year. These vaccines protect against respiratory disease
estimated to cost the poultry industry over GBP600m and will enter
a vaccine market segment currently worth over GBP100m. First
approvals are expected towards the end of calendar 2023.
The Company's early-stage research and proof of concept
activities are managed through collaborations with leading research
institutions and universities with later stage full development
work managed by ECO's experienced project leaders through contract
research organisations. This model mitigates the significant costs
associated with in-house laboratories and Company owned research
facilities.
ECO has a formidable team of scientists and is building a
significant product portfolio pipeline with a mix of
well-established concepts and novel, highly competitive
technologies and approaches with the emphasis on vaccines and other
new products to complement our existing antimicrobial business. The
pipeline is focused on providing solutions to respiratory and
gastrointestinal (gut) diseases of major economic importance in
pigs and poultry and is constantly refreshed as new opportunities
are identified.
New product development expenditure in the year was GBP10.2m
(2021: GBP9.1m) ensuring the acceleration of key projects.
A successful Capital Markets Day in early 2022 provided details
of the significant commercial value that exists within ECO's
pipeline of over 12 active projects with the first two late-stage
development vaccines set to achieve approvals by the end of 2023,
and several programmes expected to progress to clinical proof of
concept and early development in 2022 and 2023.
Sustainable future and our ESG approach
We have made significant progress over the year on climate goals
and on equity, diversity and inclusion. We include for the first
time an ESG report. We have collected baseline metrics and will use
these to track progress and to develop credible performance targets
as part of a measurable climate transition plan.
By providing medicines and vaccines to pig and poultry
producers, we improve the lives of both animals and the people who
rely on them. The healthy animals that we help to produce assists
the world with its sustainability goals of the alleviation of
poverty and hunger.
COVID-19 Impact
The COVID-19 related restrictions on free movement have limited
access to customers, most notably in China where travel remains
severely curtailed, and created considerable supply chain
disruption and uncertainty. Despite these constraints, the Company
has successfully adopted a hybrid working model and has mitigated
most COVID-19 related challenges through innovative ways of
working.
People
Our people have demonstrated superb commitment and flexibility
during a particularly challenging period for the business. We
remain exceedingly grateful to our colleagues, customers, and
suppliers in showing considerable resilience and engagement during
a time of rapid and considerable change.
David Hallas
Chief Executive
FINANCE DIRECTOR'S REPORT
FOR THE YEARED 31 MARCH 2022
Introduction
The year ended 31 March 2022 has seen ECO further develop its
long term aim of becoming a leader in the field of animal health,
through the development of new and effective products that meet the
needs of veterinary professionals caring for livestock. Targeted
and effective research and development remains essential to
achieving these goals. A Capital Markets Day, held earlier this
year, presented more detail around the Group's R&D
activity.
Supporting the commercial performance of our existing portfolio
of businesses whilst ensuring a robust controls environment is in
place to safeguard and maximise the return on assets is central to
the ambition of the finance team, as well as supporting the
strategic growth ambitions of the Group.
Trading
Previous years have seen a pattern of stronger trading in the
second half of the year. This is associated with disease prevalence
in pigs during the Northern Hemisphere winter. We finished the last
quarter of the year ended 31 March 2021 very strongly and the
record pork prices in China continued into the first quarter of
this financial year resulting in a strong start to the year ended
31 March 2022. Our outlook statement last year signalled a slowdown
in China in the latter part of the year and, as a result the second
half weighting was less evident with 53% of revenue in the second
half (the Group's second half revenue accounts for 60% of the total
in the year ended 31 March 21).
A geographical analysis of revenue is as follows:
Revenue Summary Year ended 31 March
2022 2021 % change
(GBP'm) (GBP'm)
China and Japan 28.4 58.9 (52%)
North America (USA and Canada) 16.4 13.9 18%
South and South East Asia 11.8 9.1 30%
Latin America 15.8 14.3 10%
Europe 6.4 6.6 (3%)
Rest of World and UK 3.4 2.8 21%
82.2 105.6 (22%)
------------------------------- ---------- --------- --------
Revenue from China and Japan in the second half of the year was
GBP12.7m compared to the first six months ended 30 September 2021
of GBP15.7m. This unusual pattern of trading in China (second half
at 45% of full year) underscores the extent of the slowdown in the
China swine industry and the economic difficulties that producers
have faced. Japan represents less than 5% of the combined
revenues.
Aside from China and Japan, most other markets have demonstrated
sustained revenue growth, arising from improving market share and
relatively stable producer margins. The total revenue excluding
China and Japan increased by 15% to GBP53.8m in the year ended 31
March 2022 compared with GBP46.7m in the year ended 31 March
2021.
Revenue in our key market of China (including Japan) was sharply
down at GBP28.4m (2021: GBP58.9m) largely due to the record pork
prices in 2021 resulting in record ECO Group revenue in 2021
followed by a sharp decline in pork prices and consequent difficult
trading conditions for our customers. Revenue in China and Japan in
the last full year of trading before the outbreak of African Swine
Fever ("ASF") (the year ended 31 March 2018) was GBP27.6m. The pork
commodity price cycle in the last few years in China has exhibited
more extreme peaks and troughs over a compressed timeline and this
arose from the ASF outbreak in 2019. The restructuring of the
Chinese pork production industry over the period from 2019 resulted
in over capacity and over supply which exceeded the immediate
consumer demand. This cycle had started to correct itself during
the final quarter of our financial year, but a policy of COVID-19
lockdowns within major Chinese cities reduced demand for pork,
extending the period of low pork prices. Recently pork prices
appear to be increasing and we look forward with cautious
optimismto stronger trading in China.
North America and Latin America demonstrated continued strong
growth of 14% in the year; stable markets in the USA provided
opportunity for market share expansion and Brazil, in particular,
benefitted from exports to China in the early part of the year.
The sales performance in South and South East Asia has again
been strong; despite both ASF and COVID-19 impacting these markets.
Notably strong revenues were recorded in Thailand (an increase from
GBP4.5m to GBP7.1m). In addition, recovery in the Indian poultry
market is signalled by some material orders received in the last
quarter of the financial year.
Gross margins were 43% in the year ended 31 March 2022 (2021
restated: 50%). This decline arose due to the combined effects of
less volume through our key China market (certain elements of fixed
cost within cost of sales) as well as less revenue from a high
margin market. China and Japan represented 35% of the Group's
revenue in the year ended 31 March 2022 (2021: 56%).
Administrative expenses, at GBP22.9m, were lower than the year
ended 31 March 2021 (GBP25.5m). Wages and salaries declined to
GBP12.3m (2021: GBP13.8m) reflecting lower bonus accruals -
specifically in China and in respect of the Executive Directors.
Foreign exchange gains of GBP1.0m were recorded in the year (2021:
foreign exchange loss of GBP2.2m). This arose in the main from the
weakening of sterling compared with the US Dollar and the Chinese
RMB. Excluding the foreign exchange effects from administrative
expenses the costs in the year were slightly higher than the prior
year at GBP23.9m (2021: GBP23.3m).
As described in the Group's Interim Report, two development
projects, which had previously been capitalised, were impaired in
the year resulting in a charge to the income statement of GBP2.1m.
This impairment arose due to the prioritisation of certain other
more promising R&D programmes.
Total expenditure on research and development in the year was
GBP10.2m (2021: GBP9.1m). The total expenditure in R&D can be
analysed as follows:
Year ended 31 March
2022 2021
GBP000's GBP000's
Research and development expenses - expensed
in period 8,762 8,072
Development expenditure - capitalised in intangible
assets 1,421 986
Total expenditure 10,183 9,058
Overall R&D expenditure in the year increased both in
absolute terms (an increase of 12%) and as a percentage of revenue
- cash expenditure was 12.4% of revenue in the year ended 31 March
2022 (2021: 8.6%). This increase in expenditure reflects the
Group's stated intention to invest in its promising pipeline of new
technologies and new products. It should also be noted that the
proportion of R&D expenditure capitalised in the year has
increased from 11% to 14% as more programmes have moved from the
early research phase into the later development phase. In
particular, the Group's poultry mycoplasma vaccines have entered
the final development phase and expenditure has begun to be
capitalised.
EBITDA has historically represented a key performance measure
for the Group; the removal of amortisation (which is a significant
annual non-cash charge to profits), depreciation and exceptional
items provides a good indication of the underlying cash trading
performance of the business. The charge for amortisation of
intangible assets in the year was GBP1.1m (2021: GBP0.9m). The
adjusted EBITDA margin (excluding foreign exchange movements and
expressed as a percentage of revenue in the period) was 6.6% in the
year ended 31 March 2022 compared with 22.3% in the year ended 31
March 2021 (restated). This decline in the adjusted EBITDA margin
arises principally due to weaker sales in China; the operational
gearing from decreasing revenue with largely fixed overheads.
Profit before income tax has decreased to GBP1.4m in the year
ended 31 March 2022 (2021 restated: GBP19.3m), due principally to
the same reasons - EBITDA is weaker, as well as the one off impact
of the R&D impairment (GBP2.1m).
The Group continues to benefit from a low effective tax rate in
the UK due to the significant expenditure in the R&D programme
for which R&D tax credits are claimed. Historic tax losses
result in zero tax payable in the UK in the year. For the Group
overall, in the year ended 31 March 2022 the effective tax rate was
-151% (2021 restated: 18%), reflecting the impairment charge for
which no tax deduction is received, higher tax rates in overseas
jurisdictions as well as withholding tax on dividends and royalties
set against low overall profit before tax.
Loss after tax was GBP0.7m in the year ended 31 March 2022 (2021
restated profit: GBP15.8m). Earnings per share ("EPS") has declined
from 10.86 pence in the year ended 31 March 2021 (restated) to a
loss per share of 1.01 pence in the year ended 31 March 2022; the
decrease in EPS arises from the decline in the Group portion of
post-tax profits.
The consolidated cash position in the Group has decreased from
GBP19.5m at 31 March 2021 to GBP14.3m at 31 March 2022. This
consolidated cash position at 31 March 2022 includes GBP6.1m (2021:
GBP13.7m) which is held in the Group's subsidiary in China. A
portion of this cash is repatriated from China once per annum by
dividend declaration; the Group's share of the China cash
distribution which is received in the UK is 51%. During the year
the dividend received from the Group's holding in the China
subsidiary was GBP2.3m - related to the China profitability in the
year ended 31 December 2020 (2021: GBP0.6m - related to year ended
31 December 2019).
The cash generated from operations was significantly lower in
the year ended 31 March 2022 at GBP2.5m (2021: GBP15.8m) reflecting
the decreased profitability of the Group and an increase in Group
inventories of GBP8.6m. The increase in Group inventories arose
from a slowdown in the efficiency of international shipping during
the year; this affected all businesses trading globally during 2021
and 2022, particularly those with procurement in China.
Additionally, the inventories in China started to increase before
the year end in preparation for production stoppage over the summer
of 2022 when production is switched to the new factory in China.
This project will be complete by November 2022 and the excess stock
holding is planned to unwind during the production stoppage period.
Trade receivables declined by 24% reflecting the reduction in Group
revenues and an unwind of an exceptionally high closing debtors
position as at 31 March 2021. From operating cashflow, income tax
of GBP3.0m was paid, GBP1.6m of property, plant and equipment was
purchased, development expenditure of GBP1.3m was capitalised,
dividends were paid to the minority interest in China and ECO
Animal Health Group plc shareholders (GBP2.9m in total), the US
Dollar and other foreign denominated cash balances generated a
foreign exchange gain of GBP1.3m and other sundry cash outflows of
GBP0.3m resulted in an overall net cash decline of GBP5.2m and a
cash balance at 31 March 2022 of GBP14.3m. The Group's GBP5m
overdraft facility (undrawn at the year end) remains in place.
Prior Year Adjustment
It recently came to our attention that certain aspects of a
sales tax related to imported products in a foreign jurisdiction
where we operate through a subsidiary company, might have been
applicable. ECO has been importing an increasing volume of product
into this country in recent years. This issue is at an early stage
and no tax payment has yet been determined. However, it is likely
that a substantial tax settlement could be required in due course
and an estimated sum of GBP2.5m has been provided for in the
Statement of Financial Position. The sum has been apportioned to
appropriate years, disclosed in Note 3 and charged to cost of sales
within the Consolidated Income Statement. The impact of this item
in the year ended 31 March 2022 was an increase in cost of sales of
GBP0.9m (2021 restated: GBP0.9m).
Exceptional items
In the Group's Interim Report, we described the impairment of
previously capitalised R&D expenditure in relation to two
projects which were paused during the year. This impairment is
shown as exceptional. Additionally, we have created a provision for
probable settlement of personnel related disputes. These disputes
are not expected to settle for some time.
Audit
The tax issue leading to the prior year adjustment and the
exceptional items caused a delay to the finalisation of our audit
this year.
The limitation in scope qualification in respect of
non-attendance at stock takes at 31 March 2020 remains in the audit
report this year because 31 March 2020 reflected the opening
position for the comparative year ended 31 March 2021. We expect
this to be the last year in which this qualification arises.
Post balance sheet events
Marc Loomes, who joined ECO in 2004, became Managing Director in
2005 and CEO in 2010, retired from the Board of Directors on 1
April 2022. David Hallas joined ECO Animal Health Group plc as CEO
on 1 April 2022. Tony Rawlinson, Non-Executive Director, resigned
from the Board on 9 August 2022 to pursue other business
opportunities.
The Group put in place a GBP10m revolving credit facility with
NatWest Bank on 9 July 2022. This facility is committed, subject to
half yearly covenant compliance checks and bears interest at a
fixed margin over SONIA base rate. The facility expires on 30 June
2026.
Christopher Wilks
Finance Director
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 MARCH 2022
2022 2021
(restated)
Notes GBP000's GBP000's
Revenue 4 82,195 105,607
Cost of sales (47,059) (52,858)
--------- ------------
Gross profit 35,136 52,749
Other income 5 65 319
Research and development expenses 6 (8,762) (8,072)
Administrative expenses (22,914) (25,547)
Impairment of intangible assets 12 (2,085) -
Profit from operating activities 6 1,440 19,449
Finance income 7 190 129
Finance costs 7 (284) (302)
--------- ------------
Net finance expense (94) (173)
--------- ------------
Share of profit of associate 16 43 38
43 38
--------- ------------
Profit before income tax 1,389 19,314
Income tax charge 9 (2,094) (3,486)
--------- ------------
(Loss)/Profit for the year (705) 15,828
========= ============
(Loss)/Profit attributable to:
Owners of the parent Company (686) 7,337
Non-controlling interest 27 (19) 8,491
--------- ------------
(Loss)/Profit for the year (705) 15,828
========= ============
(Loss)/earnings per share (pence) 8 (1.01) 10.86
========= ============
Diluted (loss)/earnings per share (pence) 8 (1.01) 10.85
========= ============
Earnings before Interest, Tax, Depreciation,
Amortisation, Revaluation, Impairment, Legal
provision, Share Based Payments and Foreign
Exchange Differences 6 5,406 23,532
========= ============
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
2022 2021
restated
Notes GBP000's GBP000's
(Loss)/Profit for the year (705) 15,828
Other comprehensive income/(losses):
Items that may be reclassified to profit
or loss:
Foreign currency translation differences 2,195 11
Items that will not be reclassified to
profit or loss:
Deferred tax on property revaluations 1 84
Remeasurement of defined benefit pension
schemes 24 24 (32)
Other comprehensive income/(losses) for
the year 2,220 63
--------- ----------
Total comprehensive income for the year 1,515 15,891
Attributable to:
Owners of the parent Company 435 7,681
Non-controlling interest 27 1,080 8,210
--------- ----------
1,515 15,891
========= ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2022
Share Share Revaluation Other Foreign Retained Total Non- Total
Capital Premium Reserve Reserves Exchange Earnings controlling Equity
Account Reserve Interest
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Balance
as at 31
March 2020
(restated) 3,377 62,882 572 106 800 5,982 73,719 5,766 79,485
Profit for
the year
(restated) - - - - - 7,337 7,337 8,491 15,828
Other
comprehensive
income:
Foreign
currency
differences - - - - 292 - 292 (281) 11
Deferred
tax on
property
revaluations - - 84 - - - 84 - 84
Actuarial
gains on
pension
scheme
assets - - - - - (32) (32) - (32)
Total
comprehensive
income for
the year - - 84 - 292 7,305 7,681 8,210 15,891
Transactions
with owners:
Issue of
shares in
the year 2 376 - - - - 378 - 378
Share-based
payments - - - - - 123 123 - 123
Dividends - - - - - - - (562) (562)
Transactions
with owners 2 376 - - - 123 501 (562) (61)
Balance
as at 31
March 2021
(restated) 3,379 63,258 656 106 1,092 13,410 81,901 13,414 95,315
========= ========= ============ ========= ========= ========= ========= ============ =========
Loss for
the year - - - - - (686) (686) (19) (705)
Other
comprehensive
income:
Foreign
currency
differences - - - - 1,096 - 1,096 1,099 2,195
Deferred
tax on
property
revaluations - - 1 - - - 1 - 1
Actuarial
gains on
pension
scheme
assets - - - - - 24 24 - 24
Total
comprehensive
income for
the year - - 1 - 1,096 (662) 435 1,080 1,515
Transactions
with owners:
Issue of
shares in
the year 2 61 - - - - 63 - 63
Share-based
payments - - - - - 342 342 - 342
Dividends - - - - - (677) (677) (2,210) (2,887)
Transactions
with owners 2 61 - - - (335) (272) (2,210) (2,482)
Balance
as at 31
March 2022 3,381 63,319 657 106 2,188 12,413 82,064 12,284 94,348
========= ========= ============ ========= ========= ========= ========= ============ =========
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2022
Company
Share Share Revaluation Other Retained Total
Capital Premium Reserve Reserves Earnings
Account
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Balance as at 31 March
2020 3,377 62,882 302 106 11,138 77,805
Loss for the year - - - - (903) (903)
Other comprehensive income:
Deferred tax on property
revaluations - - 83 - - 83
Actuarial loss on pension
scheme assets - - - - (32) (32)
--------- --------- ------------ --------- --------- ---------
Total comprehensive loss
for the year - - 83 - (935) (852)
--------- --------- ------------ --------- --------- ---------
Transactions with owners
Issue of shares in the
year 2 376 - - - 378
Share-based payments - - - - 123 123
Dividends - - - - - -
--------- --------- ------------ --------- --------- ---------
Transactions with owners 2 376 - - 123 501
--------- --------- ------------ --------- --------- ---------
Balance as at 31 March
2021 3,379 63,258 385 106 10,326 77,454
========= ========= ============ ========= ========= =========
Loss for the year - - - - (1,586) (1,586)
Other comprehensive income:
Deferred tax on property
revaluations - - 1 - - 1
Actuarial loss on pension
scheme assets - - - - 24 24
---------
Total comprehensive loss
for the year - - 1 - (1,562) (1,561)
--------- --------- ------------ --------- --------- ---------
Transactions with owners
Issue of shares in the
year 2 61 - - - 63
Share-based payments - - - - 342 342
Dividends - - - - (677) (677)
---------
Transactions with owners 2 61 - - (335) (272)
--------- --------- ------------ --------- --------- ---------
Balance as at 31 March
2022 3,381 63,319 386 106 8,429 75,621
========= ========= ============ ========= ========= =========
STATEMENTS OF FINANCIAL POSITION (CO. NUMBER: 01818170)
AS AT 31 MARCH 2022
Group Company
2022 2021 2020 2022 2021
Notes GBP000's GBP000's GBP000's GBP000's GBP000's
Restated Restated
Non-current assets
Intangible assets 12 34,304 36,108 36,020 - -
Property, plant and equipment 13 3,465 2,181 2,426 748 651
Investment property 14 227 305 305 227 305
Right-of-use assets 15 1,773 1,399 1,658 59 37
Investments 16 212 180 166 20,032 20,032
Amounts due from subsidiary
Company 18 - - - 53,940 55,909
Deferred tax assets 523 266 164 50 -
Total non-current assets 40,504 40,439 40,739 75,056 76,934
Current assets
Inventories 17 30,142 20,504 17,264 - -
Trade and other receivables 18 25,969 32,452 28,353 338 281
Income tax recoverable 1,596 3,475 1,265 - -
Other taxes and social
security 1,075 496 652 386 27
Cash and cash equivalents 20 14,314 19,523 11,877 279 819
--------- --------- --------- ------- -------
Total current assets 73,096 76,450 59,411 1,003 1,127
--------- --------- --------- ------- -------
TOTAL ASSETS 113,600 116,889 100,150 76,059 78,061
Current Liabilities
Trade and other payables 21 (12,954) (14,521) (14,486) (326) (524)
Provisions (3,875) (1,782) (1,128) - -
Borrowings - - (2,032) - -
Income tax payable (224) (3,015) (940) - -
Other taxes and social
security (239) (501) - - -
Lease liabilities 22 (397) (311) (342) (13) (7)
Dividends (50) (50) (50) (50) (50)
--------- --------- --------- ------- -------
Current liabilities (17,739) (20,180) (18,978) (389) (581)
--------- --------- --------- ------- -------
Net current assets 55,357 56,270 40,433 614 546
--------- --------- --------- ------- -------
Total assets less current
liabilities 95,861 96,709 81,172 75,670 77,480
Non-current liabilities
Deferred tax 19 - (183) (263) - 6
Lease liabilities 22 (1,513) (1,211) (1,424) (49) (32)
TOTAL ASSETS LESS TOTAL
LIABILITIES 94,348 95,315 79,485 75,621 77,454
========= ========= ========= ======= =======
EQUITY
Issued share capital 26 3,381 3,379 3,377 3,381 3,379
Share premium account 63,319 63,258 62,882 63,319 63,258
Revaluation reserve 657 656 572 386 385
Other reserves 28 106 106 106 106 106
Foreign exchange reserve 28 2,188 1,092 800 - -
Retained earnings 12,413 13,410 5,982 8,429 10,326
--------- --------- --------- ------- -------
Shareholders' funds 82,064 81,901 73,719 75,621 77,454
Non-controlling interests 27 12,284 13,414 5,766 - -
--------- --------- --------- ------- -------
Total equity 94,348 95,315 79,485 75,621 77,454
========= ========= ========= ======= =======
STATEMENTS OF CASH FLOWS
FOR THE YEARED 31 MARCH 2022
Group Company
2022 2021 2022 2021
(restated) restated
Notes GBP000's GBP000's GBP000's GBP000's
Cash flows from operating
activities
Profit/(loss) before income
tax 1,389 19,314 (1,611) (916)
Adjustment for:
Finance income 7 (190) (129) (832) (875)
Finance cost 7 284 302 71 65
Foreign exchange (gain)/loss (989) 559 (2) (3)
Depreciation 13 455 430 28 15
Amortisation of right-of-use
assets 15 398 403 16 24
Revaluation of investment
property 14 78 - 78 -
Amortisation of intangible
assets 12 1,140 898 - -
Impairment of intangible
assets 12 2,085 - - -
Share of associate's results 16 (43) (38) - -
Share based payment charge 342 123 342 8
Dividends received - - (177) (46)
Operating cash flows before
movements in working capital 4,949 21,862 (2,087) (1,728)
Change in inventories (8,585) (3,698) - -
Change in receivables 7,630 (3,959) 2,385 4,044
Change in payables (2,868) 753 (174) 33
Movement in provisions 23 1,392 868 - -
-------- -------- -------- --------
Cash generated from/(used
in) operations 2,518 15,826 124 2,349
Interest paid (106) (79) (60) (54)
Income tax (2,960) (3,766) (17) (5)
-------- -------- -------- --------
Net cash (used in) /from
operating activities (548) 11,981 47 2,290
-------- -------- -------- --------
Cash flows from investing
activities
Acquisition of property,
plant and equipment 13 (1,624) (212) (125) (37)
Disposal of property, plant
and equipment 13 3 11 - -
Purchase of intangibles 12 (1,263) (861) - -
Finance income 7 190 129 - -
Dividends received - - 177 46
-------- -------- -------- --------
Net cash (used in)/from
investing activities (2,694) (933) 52 9
-------- -------- -------- --------
Cash flows from financing
activities
Proceeds from issue of share
capital 63 378 63 378
Interest paid on lease liabilities 22 (111) (122) (11) (11)
Principal paid on lease liabilities 22 (371) (378) (14) (23)
Dividends paid (2,886) (562) (677) -
-------- -------- -------- --------
Net cash (used in)/from
financing activities (3,305) (684) (639) 344
-------- -------- -------- --------
Net (decrease)/increase
in cash and cash equivalents (6,547) 10,364 (540) 2,643
Foreign exchange movements 1,338 (686) - -
Balance at the beginning
of the period 19,523 9,845 819 (1,824)
Balance at the end of the
period 20 14,314 19,523 279 819
======== ======== ======== ========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 MARCH 2022
1. General information
ECO Animal Health Group plc ("the Company") and its subsidiaries
(together "the Group") manufacture and supply animal health
products globally.
The Company is traded on the AIM market of the London Stock
Exchange and is incorporated and domiciled in the UK. The address
of its registered office is 78 Coombe Road, New Malden, Surrey, KT3
4QS.
The financial information set out in the announcement does not
constitute the Group's statutory accounts for the year ended 31
March 2022 or 31 March 2021. The auditors reported on those
accounts and their report (i) was qualified at both year ends by
virtue of limitation in scope in respect of non-attendance at
certain physical inventory counts on 31 March 2020; (ii) did not
include references to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and
(iii) did not contain statements under section 498 (2) or (3) of
the Companies Act 2006. The statutory accounts for the year ended
31 March 2022 have not yet been delivered to the Registrar of
Companies.
2. Summary of the Group and Company's significant accounting policies
2.1 Basis of preparation
These financial statements have been prepared in accordance with
UK adopted International Financial Reporting Standards. There were
no changes to accounting policies on adoption of UK IFRSs.
The preparation of financial statements, in accordance with
UK-adopted international accounting standards, requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting
period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results
ultimately may differ from those estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
Further details of estimates and judgements are provided in note
2.30 .
The principal accounting policies are set out below and have
been applied consistently in dealing with items which are
considered material in relation to the financial statements. They
are prepared under the historical cost convention with the
exception of certain items which are measured at fair value as
described in the accounting policies below.
Going Concern
After making appropriate enquiries, the Directors have, at the
time of approving the financial statements, formed a judgement that
there is a reasonable expectation that the Company and Group have
adequate resources to continue in operational existence for the
foreseeable future. For this reason, the Directors continue to
adopt the going concern basis in preparing the financial
statements.
This conclusion is based on a review of the resources available
to the Group, taking account of the Group's financial projections
together with available cash and committed borrowing facilities,
which include a GBP10m Revolving Credit Facility effective from
July 2022 to June 2026 on top of the existing GBP5m overdraft
facility The Directors have performed a reverse stress test on the
business, by considering what quantum of revenue and gross margin
reduction would be required to exhaust all available funds within
12 months of the date of approving the accounts. The Directors
concluded that the likelihood of such a reduction was remote, and
therefore that no material uncertainty exists with respect of going
concern.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.2 Adoption of new and revised standards
The following new standards, amendments and interpretations for
existing standards became effective in the financial year. These
standards have been applied in preparing these financial statements
but did not have a material effect.
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments
to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS
3).
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that have been adopted
early.
The following standard is effective from 1 January 2023.
-- IFRS 17 - Insurance Contracts
The following amendments are effective for the period beginning
1 January 2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2;
-- Classification of Liabilities as Current or Non-current
(Amendments to IAS 1);
-- Definition of Accounting Estimates (Amendments to IAS 8);
and
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
The Directors do not expect that the adoption of the Standards
and Interpretations listed above will have a material impact on the
financial statements in future periods.
Beyond the information above, it is not practicable to provide a
reasonable estimate of the effect of these standards until a
detailed review has been completed.
2.3 Basis of consolidation
The consolidated financial statements comprise the accounts of
the Company and its subsidiaries drawn up to 31 March 2022.
An entity is classed as a subsidiary of the Company when as a
result of contractual arrangements, the Company has the power to
govern its financial and operating policies so as to obtain
benefits from its activities.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group. The cost of an
acquisition is measured, as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at
the date of exchange. Identifiable assets acquired and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date,
irrespective of the extent of any non-controlling interest. The
excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded
as goodwill. If the cost of acquisition is less than the fair
value, the difference is recognised directly in the income
statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.3 Basis of consolidation (continued)
Accounting policies of subsidiaries have been changed where
material to ensure consistency with the policies adopted by the
Group. Although the subsidiaries in Brazil and China and the joint
operations in the USA and Canada all have December year ends, the
Group uses management accounts to the end of March to prepare the
Group accounts.
Subsidiaries are wholly consolidated from the date on which
control is transferred to the Group. They are deconsolidated from
the date that control ceases.
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated on
consolidation.
The Group initially recognised any non-controlling interest in
the acquiree at the non-controlling interest's proportionate share
of the acquiree's net assets. For each business combination, the
Group elects whether to measure the non-controlling interests in
the acquiree at fair value or at the proportionate share of the
acquiree's identifiable net assets. Acquisition-related costs are
expensed as incurred and included in administrative expenses. The
Group has not elected to take the option to use fair value in
acquisitions completed to date.
Profit or loss and each component of Other Comprehensive Income
are attributed to the equity holders of the parent of the Group and
to the non-controlling interests, even if this results in the
non-controlling interests having a deficit balance.
2.4 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting to the chief operating decision-maker. The chief
operating decision-maker who is responsible for allocating
resources and assessing performance of the operating segments has
been identified as the Board.
2.5 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ("functional
currency"). The consolidated and company financial statements are
presented in Pounds Sterling, which is the Company's functional
currency.
(b) Transactions and balances
Monetary assets and liabilities denominated in foreign
currencies are translated into Pounds Sterling at the rates of
exchange ruling at the date of the financial statements.
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the date of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at period
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the income statement within
administrative expenses.
Foreign exchange gains and losses that relate to borrowing and
cash and cash equivalents are presented in the income statement
within administrative expenses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.5 Foreign currency translation (continued)
(c) Group companies
The results and financial position of all Group entities that
have a functional currency different from the Group's functional
and presentation currency are translated into the Group's
functional and presentation currency as follows:
-- assets and liabilities for each Statement of financial
position presented are translated at the closing exchange rate at
the date of the Statement of financial position;
-- income and expenses for each income statement are translated
at average exchange rates unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case the income and expenses are
translated at the rate on the dates of the transaction; and
-- all resulting exchange differences are recognised through
other comprehensive income as a separate component of equity.
When a foreign operation is partially disposed or sold, exchange
differences that were recognised in equity are recognised in the
income statement as part of the gain or loss on sale. Goodwill and
fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity
and translated at the closing exchange rate.
2.6 Financial instruments
Financial assets
Financial assets comprise mainly trade and other receivables and
cash and cash equivalents in the consolidated statement of
financial position. These financial assets arise principally from
the provision of goods to customers and are measured at amortised
cost.
Impairment provisions for current and non-current trade
receivables are recognised based on the simplified approach within
IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. During this process, the
probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the
expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss being recognised
within Administrative expenses in the consolidated income
statement. On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is written off
against the associated provision.
Impairment provisions for receivables from related parties and
loans to related parties are recognised based on a forward looking
expected credit loss model. The methodology used to determine the
amount of the provision is based on whether there has been a
significant increase in credit risk since initial recognition of
the financial asset. For those where the credit risk has not
increased significantly since initial recognition of the financial
asset, twelve month expected credit losses along with gross
interest income are recognised. For those for which credit risk has
increased significantly, lifetime expected credit losses along with
the gross interest income are recognised. For those that are
determined to be credit impaired, lifetime expected credit losses
along with interest income on a net basis are recognised.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.6 Financial instruments (continued)
Financial liabilities
Financial liabilities comprise mainly trade and other payables
and bank overdrafts in the consolidated statement of financial
position. These financial liabilities are initially recognised at
fair value and subsequently measured at amortised cost in
accordance with IFRS 9.
2.7 Goodwill
Goodwill arising on the acquisition of an entity represents the
excess of the costs of acquisition over the Group's interest in the
net fair value of the identifiable assets, liabilities and
contingent liabilities of the entity recognised at the date of
acquisition.
Goodwill is initially recognised as an asset at cost and is
subsequently measured at cost less any accumulated impairment
losses. Goodwill is not subject to amortisation but is tested for
impairment annually.
Negative goodwill arising on an acquisition is recognised
directly in the income statement. On disposal of a subsidiary or a
jointly controlled entity, the attributable amount of goodwill is
included in the determination of the profit or loss recognised in
the income statement on disposal. Goodwill arising before the date
of transition to IFRS, on 1 April 2004, has been retained at the
previous UK GAAP amounts, subject to being tested for impairment at
that date. Goodwill written off to reserves under UK GAAP prior to
1998 has not been reinstated and is not included in determining any
subsequent profit or loss on disposal.
2.8 Other intangible assets
IAS 38 - Intangible Assets includes guidance on the accounting
for Research and Development expenditure. Such an intangible asset
is a resource that is controlled by the entity as a result of past
events (for example, purchase or self-creation) and from which
future economic benefits (inflows of cash or other assets) are
expected. The three critical attributes of an intangible asset
are:
-- Identifiability;
-- control (power to obtain benefits from the asset); and
-- future economic benefits (such as revenues or reduced future costs).
Identifiability
An intangible asset is identifiable when it:
-- is separable (capable of being separated and sold,
transferred, licensed, rented, or exchanged, either individually or
together with a related contract); or
-- arises from contractual or other legal rights, regardless of
whether those rights are transferable or separable from the entity
or from other rights and obligations.
Development expenditure - whether purchased or self-created
(internally generated) is an example of an intangible asset,
governed under IAS 38.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.8 Other intangible assets (continued)
Recognition criteria
IAS 38 requires an entity to recognise an intangible asset (at
cost) if, and only if:
-- it is probable that the future economic benefits that are
attributable to the asset will flow to the entity; and
-- the cost of the asset can be measured reliably.
IAS 38 includes additional recognition criteria for internally
generated intangible assets.
Expenditure on the research phase of an internal project is
expensed as incurred. Expenditure in the development phase of an
internal project is capitalised if the entity can demonstrate:
a) the technical feasibility of completing the intangible asset
so that it will be available for use or sale.
b) its intention to complete the intangible asset and use or sell it.
c) its ability to use or sell the intangible asset.
d) how the intangible asset will generate probable future
economic benefits. Among other things, the entity can demonstrate
the existence of a market for the output of the intangible asset or
the intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset.
e) the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset.
f) its ability to measure reliably the expenditure attributable
to the intangible asset during its development.
The probability of future economic benefits must be based on
reasonable and supportable assumptions about conditions that will
exist over the life of the asset.
If an entity cannot distinguish the research phase of an
internal project to create an intangible asset from the development
phase, the entity treats the expenditure for that project as if it
were incurred in the research phase only.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.8 Other intangible assets (continued)
The Group context of IAS 38
Since the early start-up stages of the business, the Group has
and continues to invest significant expenditure in research and
development into new animal treatments and therapies. This has
resulted in a significant family of pharmaceutical treatments for
pigs and poultry. Branded as Aivlosin, this product has developed
over 20 years into treatments for multiple respiratory and
intestinal infections - each of which have separate regulatory and
marketing approvals in each target market. The work to bring
Aivlosin from the laboratory to the commercial farm has moved
through the classical phases of pharmaceutical development and the
ECO Animal Health R&D model can be described by the following
broad phases:
-- The discovery phase - in vitro, in laboratory.
-- The proof of concept phase - key efficacy trials in small groups of animals.
-- The exploratory development phase - optimisation of dose, economic validation.
-- The full development phase - building the data set for dossier submission.
-- Submission of an application for regulatory approval.
-- Marketing and regulatory approval granted - commercial revenue begins.
The application of the principles of IAS 38 to the above model
is to treat expenditure on Research and Development as an expense
until the likely commercial benefits that will flow from the
project can be judged to be highly probable. This means that the
technical feasibility (judged by reference to efficacy) must be
certain, the economic feasibility (judged by reference to
manufacturing methodology, market intelligence, overall programme
cost) has to be highly probable and the likelihood of gaining
regulatory approval must be judged to be highly probable. The
Directors consider that capitalisation will generally commence once
a project enters the full development phase.
In practice, work that is undertaken to build towards regulatory
approval for a new treatment claim using Aivlosin, existing
approved vaccines or other technologies, or an approval for
marketing existing technologies or applications in a new
geographical market can be viewed as starting at the full
development phase and are likely to meet the capitalisation
criteria whereas costs in relation to some of the Group's recently
announced projects, on vaccine development, for example, are likely
to meet the capitalisation requirements once they are approved
internally to commence the full development phase, subject to
careful consideration of residual technical feasibility/risk.
Amortisation of capitalised expenditure is determined with
reference to the point at which regulatory approval is given to the
product to which the expenditure relates. For historic periods, the
approach adopted has been to amalgamate the expenditure incurred on
all projects relating to the same product, since the last
regulatory approval and then identify the next nearest regulatory
approval given for that product in either the same or a subsequent
half-year. Amortisation begins in the half-year following the
receipt of regulatory approval. A full six months of amortisation
is charged in the first half-year for which costs are
amortised.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.8 Other intangible assets (continued)
Where the Group has capitalised costs which relate to multiple
products, a proportional method is adopted to determined what ratio
of costs capitalised to date should be subject to amortisation.
This method first looks at capitalised costs that relate to
specific products and identifies the proportion of such costs that
are subject to amortisation at the end of any given half-year
period. The ratio thus calculated is then applied to those costs
that relate to multiple products to determine the portion that
should be subject to amortisation.
These approaches have been modified where it is possible to
allocate an individual capitalised cost to a single identifiable
project. In these cases the start date for amortisation is the
half-year following the half-year period in which the project
receives regulatory approval. Where regulatory approval has not
been received for a project, the amortisation has not started.
Amortisation is provided at rates calculated to write off the
cost less estimated residual value of each asset over its expected
useful life, as follows:
Aivlosin 5% on cost
Ecomectin 10% on cost
Vaccines 5% on cost
Trade marks and patents 10% on cost
2.9 Property, plant and equipment and depreciation
Plant and equipment are stated at cost less depreciation.
Depreciation is provided at rates calculated to write off the cost
less estimated residual value of each asset over its expected
useful life, as follows:
Plant and machinery 10%-20 % on cost
Fixtures, fittings and equipment 10%-20 % on cost
Motor vehicles 25 % on cost
Leasehold Improvement 18%-25% on cost
Freehold land and buildings valuations are measured as a level 3
recurring fair value measurement. The property is professionally
valued by a qualified surveyor at least once every three years.
Surpluses (which are not reversals of previous deficits) arising
from the periodic valuations are taken to other comprehensive
income, and deficits (which are not reversals of previous
surpluses) are taken to the income statement within administrative
expenses. Depreciation is provided at a rate calculated to expense
the valuation less estimated residual value over the remaining
useful life of the building at a rate of 2% per annum on a straight
line basis. Land is not depreciated.
2.10 Impairment of non-financial assets
The carrying amounts of assets are reviewed at each year end, to
determine whether there is any indication of impairment. If any
such indication exists, the asset's recoverable amount is estimated
in order to determine the impairment loss if any. The recoverable
amount is the higher of its fair value and its value in use. For
intangible assets with an indefinite useful life or not available
for use, an impairment test is performed at each year end.
In assessing value in use, the expected future cashflows from
the asset are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.10 Impairment of non-financial assets (continued)
An impairment loss is recognised in the income statement
whenever the carrying amount of an asset or its cash-generating
unit exceeds its recoverable amount.
A previously recognised impairment loss for costs other than
goodwill is reversed if the recoverable amount increases as a
result of a change in the estimates used to determine the
recoverable amount, but not to an amount higher than the carrying
amount that would have been determined (net of depreciation) had no
impairment loss been recognised in prior years and no reversal of
impairment losses recognised on goodwill.
2.11 Investment property
Investment property is held either to earn rental income or for
capital appreciation or for both, but not for sale in the ordinary
course of business, use in the production or supply of goods or
services or for administrative purposes. Investment property is
measured at fair value as a level 3 recurring fair value
measurement.
The property is professionally valued by a qualified surveyor at
least once every three years. Surpluses and deficits arising from
the periodic valuations are taken to the income statement within
administrative expenses.
2.12 Investments in subsidiaries
An investment in a subsidiary is where the Group own a
controlling interest in an entity. Investments in subsidiaries are
stated at cost less impairment in the Parent Company's statement of
financial position.
Other non-current asset investments are stated at fair value.
They are recognised or derecognised on the date when the contract
for acquisition or disposal requires the delivery of that
investment.
Investments are assessed for impairment at the end of each
reporting period. An impairment is recognised in profit or loss
when the recoverable amount of an asset is less than its carrying
amount, with the value of any impairment being the difference
between the recoverable amount and carrying amount .
Impairments can be reversed in subsequent periods where there is
any indication that the impairment loss recognised in a prior
period may no longer exist or have decreased.
2.13 Joint Arrangements
A joint arrangement is a contractual arrangement whereby the
Group and other parties undertake an economic activity that is
subject to joint control; that is, when the strategic financial and
operating policy decisions relating to the activities require the
unanimous consent of the parties sharing control.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.13 Joint Arrangements (continued)
The group classifies its interests in joint arrangements as
either:
- Joint ventures: where the group has rights to only the net assets of the joint arrangement.
- Joint operations: where the group has both the rights to
assets and obligations for the liabilities of the joint
arrangement.
In assessing the classification of interests in joint
arrangements, the Group considers:
- The structure of the joint arrangement.
- The legal form of joint arrangements structured through a separate vehicle.
- The contractual terms of the joint arrangement agreement.
- Any other facts and circumstances (including any other contractual arrangements).
The Group has interests in joint operations. The Group
recognises its share of the assets, liabilities, income, expenses
and cashflows of joint operations combined with the equivalent
items in the consolidated financial statements on a line by line
basis.
2.14 Investments in Associates
An associate is an entity in which an investor has significant
influence but not control or joint control. Significant influence
is defined as "the power to participate in the financial and
operating policy decisions but not to control them".
The Group reports its interests in associates using the equity
method of accounting. Under this method, an equity investment is
initially recorded at cost (subject to initial fair value
adjustment if acquired as part of the acquisition of a subsidiary)
and is subsequently adjusted to reflect the Group's share of the
net profit or loss of the associate. If the Group's share of losses
of an associate equals or exceeds its "interest in the associate",
the Group discontinues recognising its share of further losses. If
the associate subsequently reports profits, the investor resumes
recognising its share of those profits only after its share of the
profits equals the share of losses not recognised.
2.15 Leasing
The Group assesses at contract inception whether a contract is,
or contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration.
The Group applies a single recognition and measurement approach
for all leases under IFRS 16, except for short-term leases and
leases of low-value assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease, which is the date the underlying asset is
available for use. Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses, and adjusted
for any re-measurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made
at or before the commencement date, less any lease incentives
received. Right-of-use assets are depreciated on a straight-line
basis over the lease term.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.15 Leasing (continued)
If ownership of the leased asset transfers to the Group at the
end of the lease term or the cost reflects the exercise of a
purchase option, depreciation is calculated using the estimated
useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to
the accounting policies in the section 2.10 for further
details.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of the lease
payments to be made over the lease term. The lease liabilities
include the present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- variable lease payments that are based on an index or a rate,
initially measured using the index or rate as at the commencement
date;
-- amounts expected to be payable by the Group under residual value guarantees;
-- the exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
the lessee's incremental borrowing rate is used, being the rate
that the individual lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms,
security and conditions. In addition, the carrying amount of lease
liabilities is re-measured if there is a modification, a change in
the lease term, a change in the lease payments (for example,
changes to future payments resulting from a change in an index or
rate used to determine such lease payments) or a change in the
assessment of an option to purchase the underlying asset.
The Group is exposed to potential future increases in variable
lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to
lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the right-of-use
asset.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease period
to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Extension and termination options
Extension and termination options are included in a number of
property and equipment leases across the Group. These are used to
maximise operational flexibility in terms of managing the assets
used in the Group's operations. The majority of extension and
termination options held are exercisable only by the Group and not
by the respective lessor.
The Group applies judgement in evaluating whether it is
reasonably certain whether or not to exercise the option to renew
or terminate the lease. That is, it considers all relevant factors
that create an economic incentive for it to exercise either the
renewal or termination. After the commencement date, the Group
reassesses the lease term if there is a significant event or change
in circumstances that is within its control and affects its ability
to exercise or not to exercise the option to renew or to
terminate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.15 Leasing (continued)
Recognition exemptions
The Group applies the short-term lease recognition exemption to
its short-term leases, being those leases that have a lease term of
twelve months or less from the commencement date and do not contain
a purchase option.
The Group also applies the recognition exemption to leases of
which the underlying asset is of low value, comprising assets below
the Group's capitalisation threshold. Lease payments on short-term
leases and leases of low-value assets are recognised as an expense
on a straight-line basis over the lease term.
Practical expedients
The Group applies a single discount rate to a portfolio of
leases with reasonably similar characteristics.
2.16 Inventories
Inventories are valued at the lower of cost and net realisable
value. Cost is determined using the historical batch price of the
principal raw materials and the weighted average cost for other
ingredients and other product costs. The cost of finished goods
comprises raw materials, packaging costs and sub-contracted
manufacturing costs. Net realisable value is the estimated selling
price in the ordinary course of business, less any costs which
would be incurred in completing the goods ready for sale.
2.17 Trade receivables
Trade receivables are initially measured at fair value and are
subsequently measured at amortised cost using the effective
interest rate method. Trade receivables are presented net of
discounts or other variable consideration adjustments earned, where
the expectation and intention is to settle the balance net.
Impairment provisions are recognised based on the simplified
approach in accordance with IFRS 9 using a provision matrix in the
determination of the lifetime expected credit losses. See
impairment section in section '2.6 Financial instruments' for more
details.
2.18 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on
call with banks, other short--term highly liquid investments with
original maturities of three months or less. For the purpose of the
statement of cash flows, bank overdrafts are included in the
presentation of cash and cash equivalents.
2.19 Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in assets after deducting all of its
liabilities.
2.20 Bank borrowings and loans
Interest-bearing bank loans and overdrafts are recorded as the
proceeds received, net of direct issue costs (which equate to fair
value). Finance charges including premiums payable on settlement or
redemption and direct issue costs are accounted for on an amortised
cost basis in profit or loss using the effective interest rate
method and are added to the carrying amount of the instrument to
the extent that they are not settled in the period in which they
arise.
2.21 Trade payables
Trade payables are initially measured at fair value and are
subsequently measured at amortised cost using the effective
interest rate method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.22 Provisions
Provisions are recognised when there is a present obligation as
a result of a past event and it is probable that the an outflow of
resources will be required to settle the obligation. Provisions are
measured at the Directors' best estimate of the expenditure
required to settle the obligation outstanding at the year end and
are discounted to present value where the effect is material.
2.23 Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the sale of goods in the ordinary course of the
Group's activities. The Group's revenue is principally derived from
selling goods with revenue recognised at a point in time when
control of the goods has transferred to the customer.
Revenue is shown net of value added tax, returns, rebates and
discounts and after eliminating sales within the Group. Transaction
price is determined by the contract and variable consideration
relating to discounts, free goods or volume rebates have been
constrained in estimating contract revenue that is highly probable
by using the most likely amount method.
The Group's contracts for delivery of goods are less than 12
months, there are no warranties within its sales contracts.
Revenue is recognised when the performance obligation is
fulfilled and the amount can be measured reliably. The performance
obligation is fulfilled when control of the goods passes to the
customer, which is normally in accordance with Incoterms or receipt
by customer. No goods are dispatched on a sale or return basis.
Distributors trade on their own account and not as agents.
The Group also receives interest and royalty income, which are
recognised on an accruals basis.
2.24 Pensions
Defined Contribution Scheme
The pension costs charged against operating profits represent
the amount of the contributions payable to the schemes in respect
of the accounting period.
Defined Benefit Scheme
The regular cost of providing retirement pensions and related
benefits is charged to the income statement over the employees'
service lives on the basis of a constant percentage of earnings.
The present value of the defined benefit obligation less the fair
value of the plan assets is disclosed as an asset or liability in
the statement of financial position in accordance with IAS 19. The
disclosure of a net defined benefit asset is limited to the present
value of any economic benefit available in the form of refunds from
the plan or reductions in future contributions to the plan.
Actuarial gains or losses are recognised through other
comprehensive income.
2.25 Share-based payments
The Group issues equity-settled share options to certain
employees in exchange for services from those employees.
Equity-settled share options are measured at fair value (excluding
the effect of non -market based vesting conditions) at the date of
grant.
The fair value determined at the grant date of such
equity-settled share options is expensed on a straight-line basis
over the vesting period, based on the Group's estimate of shares
that will eventually vest and adjusted for the effect of non-market
based vesting conditions (with a corresponding movement in
equity).
Fair value is measured by use of the Black-Scholes model for
those options granted with non-market performance conditions. The
expected life used in the model has been established based on
management's best estimate of the effects of non-transferability,
exercise restrictions and behaviour considerations.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.25 Share-based payments (continued)
In addition a Monte Carlo simulation model has been used to
model future market outcomes for those options granted with a
market performance condition.
Further details of the inputs to the Black-Scholes and Monte
Carlo simulation models can be found in note 25 to the
accounts.
Share-based payment charges are credited to retained
earnings.
2.26 Taxation
Tax expense for the period comprises current and deferred
tax.
Current tax, including UK corporation tax and foreign tax is
provided at amounts expected to be paid (or recovered) using the
tax rates and laws that have been enacted or substantially enacted
by the year end. Tax expenses are recognised in profit or loss or
other comprehensive income according to the treatment of the
transactions which give rise to them.
Deferred income tax is recognised, using the liability method,
on temporary differences arising between the tax basis of assets
and liabilities and their carrying amount in the financial
statements.
Deferred income tax is determined using tax rates (and laws)
that have been enacted, or substantially enacted, by the date of
the statement of financial position and are expected to apply when
the related deferred tax asset is realised or deferred tax
liability is settled.
Deferred tax assets are recognised only to the extent that it is
probable that future taxable profits will be available against
which the temporary differences can be utilised.
IFRIC 23 Uncertainty over Income Tax Treatments
IFIRC 23 provides guidance on the accounting for current and
deferred tax liabilities and assets in circumstances in which there
is uncertainty over income tax treatments. The interpretation
requires:
-- the Group to determine whether uncertain tax treatments
should be considered separately, or together as a group, based on
which approach provides better predictions of the resolution;
-- the Group to determine if it is probable that the tax
authorities will accept the uncertain tax treatment; and
-- if it is not probable that the uncertain tax treatment will
be accepted, measure the tax uncertainty based on the most likely
amount or expected value, depending on whichever method better
predicts the resolution of the uncertainty. The measurement is
required to be based on the assumption that each of the tax
authorities will examine amounts they have a right to examine and
have full knowledge of all related information when making those
examinations.
2.27 Equity
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Amounts arising on the restructuring of equity and reserves to
protect creditor interests are credited to the capital redemption
reserve.
Amounts arising from share-based payment expenses are recorded
within retained earnings.
The cost of its own shares bought into treasury is debited to
retained earnings as required by the Companies Act 2006. A
subsequent sale of these shares would result in this entry being
wholly or partly reversed with any profit on the sale being
credited to Share Premium.
Amounts arising from the revaluation of non-monetary assets and
liabilities held in foreign subsidiaries, and joint operations are
held within the foreign exchange revaluation reserve.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.28 Non-controlling interest
For each business combination, the Group elects to measure any
non-controlling interest in the acquiree either at fair value or at
their proportionate share of the acquiree's identifiable net
assets. Changes in the Group's interest in a subsidiary that do not
result in a loss of control are accounted for as transactions with
owners in their capacity as owner. Adjustments to non-controlling
interests are based on a proportionate amount of the net assets of
the subsidiary. No adjustments are made to goodwill and no gain or
loss is recognised in the statement of profit or loss.
2.29 Dividend distribution
Dividends are recorded when they become a legal obligation of
the Company. For final dividends, this will be when they are
approved by the shareholders at the AGM. For interim dividends,
this will be when they have been paid.
2.30 Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. 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 as follows:
Capitalisation and impairment review of intangible assets
The Group assesses development costs incurred for capitalisation
in accordance with the requirements of IAS38 and the Group's
accounting policy described in note 2.8. The stage of development
and assessment of technical and commercial feasibility, in
particular, require the use of judgements and estimates in
consultation with the new product development team.
The Group tests annually whether intangible assets with
indefinite life, or not yet available for use, have suffered any
impairment. Other intangible assets are reviewed for impairment
when an indication of potential impairment exists. Impairment
provisions are recorded as applicable based on Directors' estimates
of recoverable values.
The recoverable amounts of the Cash Generating Units (CGU's) to
which intangible assets are allocated are determined from value in
use calculations. The key assumptions for the value in use
calculations are those regarding discount rates, growth rates and
the estimated remaining useful life of the asset. The Group also
reviews and quantifies the tax implications related to any
recognised impairments and these are included within tax
calculations as appropriate.
Further details of the impairment reviews performed can be found
in note 12 of the financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.30 Critical accounting estimates and judgements (continued)
Income taxes
The Group is subject to income taxes in all jurisdictions in
which it operates.
Significant judgements are required in determining the provision
for income taxes including the use of tax losses and in estimating
deferred tax assets arising from unused tax losses or credits.
There are some transactions and calculations for which the ultimate
tax determination is uncertain, including tax credits for research
and development expenditures, the treatment of some specific
overseas transactions, and tax impact of the price of goods traded
between group entities. Therefore the Group recognises assets and
liabilities based on estimates of the final agreed position.
Where the final tax outcome of these matters is different from
the amounts that were initially recorded, such differences will
impact the income tax and deferred tax provisions in the period in
which such determination is made.
Deferred tax assets on timing differences are recognised to the
extent by which the Directors estimate that future profits will be
generated to utilise the underlying costs or losses to which they
relate.
Pension scheme
The Group maintains one defined benefit pension scheme which has
been accounted for according to the provisions of IAS 19. Although
the assumptions were determined by a qualified actuary, any change
in those assumptions may materially impact the financial position
and results of the Group. Details of the assumptions used can be
found in note 23 of the financial statements.
Share-based payments
The charge to the Income Statement in respect of share-based
payments has been externally calculated using management's best
estimates of the amount of options expected to vest and various
other inputs to the Black-Scholes and Monte Carlo simulation
valuation models, as disclosed in note 25 . Variations in those
assumptions in the model may have a material impact on the Group's
results and financial position at the time of valuation.
Leases - estimating the incremental borrowing rate
Where the Group cannot readily determine the interest rate
implicit in the lease, it uses its incremental borrowing rate (IBR)
to measure lease liabilities. The IBR is the rate of interest that
the Group would have to pay to borrow over a similar term, and with
a similar security, the funds necessary to obtain an asset of a
similar value to the right-of-use asset in a similar economic
environment. The IBR therefore reflects what the Group 'would have
to pay', which requires estimation when no observable rates are
available or when they need to be adjusted to reflect the terms and
conditions of the lease.
In practice, the Group considered the following aspects in the
assessment of IBR. Once decided, the IBR will remain unchanged
unless there are modifications in lease terms or changes in the
assessment of an option to purchase the underlying asset.
A base rate that reflects economic environment and the term of
the lease. This is mainly derived from the yield of a government
bond issued by the country in which the Group has in scope leases.
Where the term of the lease does not conform with the maturity
period of the bond, the Group considered other available
information such as yields on the bonds with the nearest maturity
period, or the yield curve published by the country's treasury
department. Considering there is often a difference in the cash
flow profile between a lease and government bond, the Group has
decided to reduce the base rate by 0.05% to 0.10%.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
2.30 Critical accounting estimates and judgements (continued)
Financing factors that reflect the lessee companies' risk
premium on borrowing. Management considered the financial strength
and credit risk of the lessee companies and has estimated the
credit spread to be in the range of 1.50% to 5.00%.
Asset factors that reflect the quality of hypothetical security.
Depending on the location and type of underlying assets, the Group
expects the quality of security in this hypothetical borrowing
transaction to vary. For example, the right to use a warehouse in
rural areas may provide less relevant security compared to
commercial office in a major city's central business district.
Based on the Group's assessment, the asset factor ranges between -
0.45% to - 0.50%.
The weighted average of the discount rates applied by the Group
is as follows:
2022 2021
Property 4.3% 5.9%
Vehicle 29.0% 29.0%
Other 4.0% 4.0%
Weighted average 5.7% 7.2%
Fair value measurement
A number of assets and liabilities included in the Group's
financial statements require measurement, and/or disclosure of,
fair value.
The fair value measurement of the Group's financial and
non-financial assets and liabilities utilises market observable
inputs and data as far as possible. Inputs used in determining fair
value measurements are categorised into different levels based on
how observable the inputs used in the valuation technique utilised
are (the 'fair value hierarchy'):
- Level 1 : Quoted prices in active markets for identical items (unadjusted).
- Level 2 : Observable direct or indirect inputs other than Level 1 inputs.
- Level 3 : Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on
the lowest level of inputs used that has a significant effect on
the fair value measurement of the item.
The Group measures a number of items at fair value,
including:
-- land and buildings (note 13 );
-- investment property (note 14 );
-- Pension and other post-retirement benefit commitments (note
23)
-- share-based payments (note 25 ); and
-- initial recognition of financial instruments (note 32 ).
For more detailed information in relation to the fair value
measurement of the items above please refer to the applicable
notes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
3. Prior Year Restatement
The Group has become aware of tax liabilities in a foreign
jurisdiction associated with the importation of goods and which
would have fallen due in previous periods. The Group had not
previously recognised a liability, nor had it recognised a cost, in
the financial records for the years ended 31 March 2021, 31 March
2020 or periods prior.
The Group has estimated the total liabilities, the related
foreign corporation tax impact, and their effect on the prior
periods' consolidated financial statements. As the Group has only
recently become aware of the liability, it has yet to confirm the
exact amounts payable and it is not clear when a settlement of
these obligations will occur, however precedent suggests that this
may be up to 7 years.
The tax is related to the importation of goods and therefore
charged to cost of sales. The associated corporation tax impact is
shown in the Group's corporation tax charge and deferred tax
asset.
The prior years' restatement in respect of these tax liabilities
did not have an effect on the individual financial statements of
the Company.
The impact of the prior years' restatement on the Group's
financial statements is detailed below.
Impact on the Group consolidated income statement for the year
to 31 March 2021
As reported Adjustments 2021 (restated)
GBP000's GBP000's GBP000's
Revenue 105,607 - 105,607
Cost of sales (51,990) (868) (52,858)
------------ ------------ ----------------
Gross profit 53,617 (868) 52,749
Other income 319 - 319
Research and development expenses (8,072) - (8,072)
Administrative expenses (25,547) - (25,547)
Profit from operating activities 20,317 (868) 19,449
Finance income 129 - 129
Finance costs (200) (102) (302)
------------ ------------ ----------------
Net finance expense (71) (102) (173)
------------ ------------ ----------------
Share of profit of associate 38 - 38
38 - 38
------------ ------------ ----------------
Profit before income tax 20,284 (970) 19,314
Income tax charge (3,635) 149 (3,486)
------------ ------------ ----------------
Profit for the year 16,649 (821) 15,828
============ ============ ================
Profit attributable to:
Owners of the parent Company 8,158 (821) 7,337
Non-controlling interest 8,491 - 8,491
------------ ------------ ----------------
Profit for the year 16,649 (821) 15,828
============ ============ ================
Earnings per share (pence) 12.08 (1.22) 10.86
============ ============ ================
Diluted earnings per share
(pence) 12.07 (1.22) 10.85
============ ============ ================
Earnings before Interest, Tax,
Depreciation, Amortisation,
Share Based Payments and Foreign
Exchange Differences 24,400 (868) 23,532
============ ============ ================
Impact on the Group statement of comprehensive income for the
year to 31 March 2021
CONSOLIDATED STATEMENT OF As reported Adjustments 2021 (restated)
COMPREHENSIVE INCOME
GBP000's GBP000's GBP000's
Profit for the year 16,649 (821) 15,828
Other comprehensive income/(losses):
Items that may be reclassified
to profit or loss:
Foreign currency translation
differences (258) 269 11
Items that will not be reclassified
to profit or loss:
Deferred tax on property revaluations 84 - 84
Remeasurement of defined benefit
pension schemes (32) - (32)
Other comprehensive income/(losses)
for the year (206) 269 63
------------ ------------ ----------------
Total comprehensive income
for the year 16,443 (552) 15,891
Attributable to:
Owners of the parent Company 8,233 (552) 7,681
Non-controlling interest 8,210 - 8,210
------------ ------------ ----------------
16,443 (552) 15,891
============ ============ ================
Impact on consolidated statement of financial position
2021 Adjustments 2021 2020 Adjustments 2020
As reported As restated As reported As restated
GBP000's GBP000's GBP000's GBP000's GBP000's
Non-current assets
Intangible assets 36,108 - 36,108 36,020 - 36,020
Property, plant
and equipment 2,181 - 2,181 2,426 - 2,426
Investment property 305 - 305 305 - 305
Right-of-use assets 1,399 - 1,399 1,658 - 1,658
Investments 180 - 180 166 - 166
Amounts due from - - - - - -
subsidiary Company
Deferred tax assets - 266 266 - 164 164
Total non-current
assets 40,173 266 40,439 40,575 164 40,739
Current assets
Inventories 20,504 - 20,504 17,264 - 17,264
Trade and other
receivables 32,452 - 32,452 28,353 - 28,353
Income tax recoverable 3,475 - 3,475 1,265 - 1,265
Other taxes and
social security 496 - 496 652 - 652
Cash and cash
equivalents 19,523 - 19,523 11,877 - 11,877
------------- ------------ ------------- ------------- ------------ -------------
Total current
assets 76,450 - 76,450 59,411 - 59,411
------------- ------------ ------------- ------------- ------------ -------------
TOTAL ASSETS 116,623 266 116,889 99,986 164 100,150
Current Liabilities
Trade and other
payables (14,521) - (14,521) (14,486) - (14,486)
Provisions - (1,782) (1,782) - (1,128) (1,128)
Borrowings - - - (2,032) - (2,032)
Income tax payable (3,015) - (3,015) (940) - (940)
Other taxes and
social security (501) - (501) - - -
Lease liabilities (311) - (311) (342) - (342)
Dividends (50) - (50) (50) - (50)
------------- ------------ ------------- ------------- ------------ -------------
Current liabilities (18,398) (1,782) (20,180) (17,850) (1,128) (18,978)
------------- ------------ ------------- ------------- ------------ -------------
Net current assets 58,052 (1,782) 56,270 41,561 (1,128) 40,433
------------- ------------ ------------- ------------- ------------ -------------
Total assets
less current liabilities 98,225 (1,516) 96,709 82,136 (964) 81,172
Non-current liabilities
Deferred tax (183) - (183) (263) - (263)
Lease liabilities (1,211) - (1,211) (1,424) - (1,424)
TOTAL ASSETS
LESS TOTAL LIABILITIES 96,831 (1,516) 95,315 80,449 (964) 79,485
============= ============ ============= ============= ============ =============
EQUITY
Issued share capital 3,379 - 3,379 3,377 - 3,377
Share premium
account 63,258 - 63,258 62,882 - 62,882
Revaluation reserve 656 - 656 572 - 572
Other reserves 106 - 106 106 - 106
Foreign exchange
reserve 549 543 1,092 526 274 800
Retained earnings 15,469 (2,059) 13,410 7,220 (1,238) 5,982
------------- ------------ ------------- ------------- ------------ -------------
Shareholders'
funds 83,417 (1,516) 81,901 74,683 (964) 73,719
Non-controlling
interests 13,414 - 13,414 5,766 - 5,766
------------- ------------ ------------- ------------- ------------ -------------
Total equity 96,831 (1,516) 95,315 80,449 (964) 79,485
============= ============ ============= ============= ============ =============
Impact on consolidated statement of cashflows
2021 Adjustments 2021
As reported restated
GBP000's GBP000's GBP000's
Cash flows from operating
activities
Profit/(loss) before income
tax 20,284 (970) 19,314
Adjustment for:
Finance income (129) - (129)
Finance cost 200 102 302
Foreign exchange (gain)/loss 559 - 559
Depreciation 430 - 430
Amortisation of right-of-use
assets 403 - 403
Revaluation of investment - - -
property
Amortisation of intangible
assets 898 - 898
Impairment of intangible - - -
assets
Share of associate's results (38) - (38)
Share based payment charge 123 - 123
Dividends received - - -
Operating cash flows before
movements in working capital 22,730 (868) 21,862
Change in inventories (3,698) - (3,698)
Change in receivables (3,959) - (3,959)
Change in payables 753 - 753
Movement in provisions - 868 868
------------- ------------ ----------
Cash generated from/(used
in) operations 15,826 - 15,826
Interest paid (79) - (79)
Income tax (3,766) - (3,766)
------------- ------------ ----------
Net cash from operating
activities 11,981 - 11,981
------------- ------------ ----------
Cash flows from investing
activities
Acquisition of property,
plant and equipment (212) - (212)
Disposal of property, plant
and equipment 11 - 11
Purchase of intangibles (861) - (861)
Finance income 129 - 129
Dividends received - - -
------------- ------------ ----------
Net cash (used in)/from
investing activities (933) - (933)
------------- ------------ ----------
Cash flows from financing
activities
Proceeds from issue of share
capital 378 - 378
Interest paid on lease liabilities (122) - (122)
Principal paid on lease liabilities (378) - (378)
Dividends paid (562) - (562)
------------- ------------ ----------
Net cash (used in)/from
financing activities (684) - (684)
------------- ------------ ----------
Net (decrease)/increase
in cash and cash equivalents 10,364 - 10,364
Foreign exchange movements (686) - (686)
Balance at the beginning
of the period 9,845 - 9,845
Balance at the end of the
period 19,523 - 19,523
============= ============ ==========
Impact on consolidated statement of changes in equity
Share Share Revaluation Other Foreign Retained Total Non- Total
Capital Premium Reserve Reserves Exchange Earnings controlling Equity
Account Reserve Interest
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Balance
as at 31
March 2020
(restated) 3,377 62,882 572 106 800 5,982 73,719 5,766 79,485
Profit for
the year - - - - - 8,158 8,158 8,491 16,649
Adjustment
for overseas
sales taxes - - - - (821) (821) - (821)
Profit for
the year
(restated) - - - - - 7,337 7,337 8,491 15,828
Other
comprehensive
income:
Foreign
currency
differences
(restated) - - - - 292 - 292 (281) 11
Deferred
tax on
property
revaluations - - 84 - - - 84 - 84
Actuarial
gains on
pension
scheme
assets - - - - - (32) (32) - (32)
Total
comprehensive
income for
the year - - 84 - 292 7,305 7,681 8,210 15,891
Transactions
with owners:
Issue of
shares in
the year 2 376 - - - - 378 - 378
Share-based
payments - - - - - 123 123 - 123
Dividends - - - - - - - (562) (562)
Transactions
with owners 2 376 - - - 123 501 (562) (61)
Balance
as at 31
March 2021 3,379 63,258 656 106 1,092 13,410 81,901 13,414 95,315
========= ========= ============ ========= ========= ========= ========= ============ =========
Management have identified a misclassification in the cash flow
statement of the Company for finance income that was accrued rather
than received as cash. There was no impact on the Company profit or
statement of financial position.
The impact on the Company statement of cashflows
2021 Adjustments 2021
As reported restated
GBP000's GBP000's GBP000's
Cash flows from operating
activities
Profit/(loss) before income
tax (916) - (916)
Adjustment for:
Finance income (875) - (875)
Finance cost 65 - 65
Foreign exchange (gain)/loss (3) - (3)
Depreciation 15 - 15
Amortisation of right-of-use
assets 24 - 24
Revaluation of investment - - -
property
Amortisation of intangible - - -
assets
Impairment of intangible - -
assets
Movement in provisions - - -
Share of associate's results - - -
Share based payment charge 8 - 8
Dividends received (46) - (46)
Operating cash flows before
movements in working capital (1,728) - (1,728)
Change in inventories - - -
Change in receivables 3,169 875 4,044
Change in payables 33 - 33
------------- ------------ ----------
Cash generated from/(used
in) operations 1,474 875 2,349
Interest paid (54) - (54)
Income tax (5) - (5)
------------- ------------ ----------
Net cash from operating
activities 1,415 875 2,290
------------- ------------ ----------
Cash flows from investing
activities
Acquisition of property,
plant and equipment (37) - (37)
Disposal of property, plant - - -
and equipment
Purchase of intangibles - - -
Finance income 875 (875) -
Dividends received 46 - 46
------------- ------------ ----------
Net cash (used in)/from
investing activities 884 (875) 9
------------- ------------ ----------
Cash flows from financing
activities
Proceeds from issue of share
capital 378 - 378
Interest paid on lease liabilities (11) - (11)
Principal paid on lease liabilities (23) - (23)
Dividends paid - - -
------------- ------------ ----------
Net cash (used in)/from
financing activities 344 - 344
------------- ------------ ----------
Net (decrease)/increase
in cash and cash equivalents 2,643 - 2,643
Foreign exchange movements - - -
Balance at the beginning
of the period (1,824) - (1,824)
Balance at the end of the
period 819 - 819
============= ============ ==========
4. Segment information
Management has determined the operating segments based on the
reports reviewed by the Board to make strategic decisions. The
Board considers the business from a geographical perspective.
Geographically, management considers the performance in the
Corporate/UK, China and Japan, North America, South and South East
Asia, Latin America, Europe and the Rest of the World.
Revenues are geographically allocated by the destination of
customer.
The performance of these geographical segments is measured using
Earnings before Interest, Tax, Depreciation and Amortisation
("Adjusted EBITDA*"), adjusted to exclude share based payments,
revaluation, impairment and p ersonnel related litigation matters
.
Corporate China North S & Latin Europe Rest Total
/U.K. & Japan America SE Asia America of World
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Year ended 31
March 2022
Revenue from external
customers 1,525 28,385 16,402 11,816 15,775 6,430 1,862 82,195
Sale of goods 1,525 28,385 16,402 11,816 15,775 6,430 1,623 81,956
Royalties - - - - - - 239 239
---------- --------- --------- --------- --------- --------- ---------- ---------
1,525 28,385 16,402 11,816 15,775 6,430 1,862 82,195
---------- --------- --------- --------- --------- --------- ---------- ---------
Adjusted EBITDA** (18,623) 10,260 5,546 4,632 3,035 841 704 6,395
Total Assets 30,040 50,526 11,958 4,978 13,653 2,684 (239) 113,600
========== ========= ========= ========= ========= ========= ========== =========
Year ended 31
March 2021
Revenue from external
customers 1,471 58,906 13,887 9,118 14,265 6,580 1,380 105,607
---------- --------- --------- --------- --------- --------- ---------- ---------
Sale of goods 1,471 58,906 13,887 9,118 14,265 6,580 1,204 105,431
Royalties - - - - - - 176 176
---------- --------- --------- --------- --------- --------- ---------- ---------
1,471 58,906 13,887 9,118 14,265 6,580 1,380 105,607
---------- --------- --------- --------- --------- --------- ---------- ---------
Adjusted EBITDA**
(restated) (17,644) 26,080 4,973 3,390 2,392 1,597 515 21,303
Total Assets 33,136 59,568 8,109 3,165 9,641 2,250 754 116,623
========== ========= ========= ========= ========= ========= ========== =========
During the year ended 31 March 2021 the revenue from sales to
one particular customer in the 'China & Japan' segment was
GBP15,692,000, which was greater than 10 percent of the revenue of
the Group. There have been no similar cases in the Group in the
current financial year.
Goodwill and other intangible assets are initially allocated to
the geographical segments on the basis of the proportion of sales
achieved by each segment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
4. Segment information (continued)
A reconciliation of adjusted EBITDA for reportable segments to
profit from operating activities is provided as follows:
2022 2021
(restated)
GBP000's GBP000's
Adjusted EBITDA for reportable
segments 6,395 21,303
Depreciation (455) (430)
Amortisation of right-of-use assets (398) (403)
Revaluation of investment property (78) -
Personnel related litigation matters (457) -
Amortisation (1,140) (898)
Impairment (2,085) -
Share-based payment charges (342) (123)
Profit from operating activities 1,440 19,449
======== =======
**Adjusted EBITDA reported for the segments includes foreign
exchange gains and losses. The Adjusted EBITDA for the Group is
presented in note 6 .
Product Revenues
2022 2021
GBP000's GBP000's
Aivlosin 72,939 87,549
Ecomectin 5,543 4,234
Others 3,713 13,824
Total 82,195 105,607
========= =========
Contract Balances
2022 2021
Within one year or on demand GBP000's GBP000's
At 1 April 2,155 594
--------- ---------
Amounts included in contract liabilities
that was recognised as revenue during
the period (2,155) (594)
Cash received in advance of performance
and not recognised as revenue during
the period 203 2,155
At 31 March 203 2,155
========= =========
The Group recognised contract liabilities of GBP203,000 at 31
March 2022 (2021: GBP2,155,000). The Group does not hold any long
term sales contracts and any rebates, discounts or free goods
incentives are settled and recognised as revenue within the next
accounting period. Contract balances are reported within trade and
other payables on the Statement of Financial Position.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
5. Other income
2022 2021
GBP000's GBP000's
Sundry income 65 319
65 319
--------- ---------
6. Result from operating activities
2022 2021
Notes GBP000's GBP000's
Result from operating activities is stated
after charging/(crediting):
Cost of inventories recognised as an expense 46,482 51,864
Employee benefits expenses 30 14,054 14,867
Amortisation of intangible assets 11 1,140 898
Depreciation 12 455 430
Amortisation of right-of-use assets 14 398 403
Revaluation of investment property 13 78 -
Gain/(Loss) on foreign exchange transactions 989 (2,229)
Research and development 8,762 8,072
Impairment losses on trade receivables 17 (167) (65)
Fees payable to the Company's auditor for
the audit of the parent Company and Group
annual accounts 452 442
Fees payable to the Company's auditor and
its associates for the audit of the Company's
subsidiaries 41 475
Total fees payable to the Company's auditor for the audit of the
parent Company and Group annual accounts, for the year ended 31
March 2022, were GBP581,000 (2021: GBP350,000), and total fees
payable to the Company's auditor and its associates for the audit
of the Company's subsidiaries were GBP26,000 (2021: GBP48,000).
2022 2021
(Restated)
GBP000's GBP000's
Earnings before interest, tax, depreciation,
amortisation, revaluation, impairment, Personnel
related litigation matters, share-based
payments and foreign exchange differences
(adjusted EBITDA)
Profit from operating activities 1,440 19,449
Depreciation 455 430
Amortisation of right-of-use assets 398 403
Revaluation of investment property 78 -
Amortisation 1,140 898
Impairment 2,085 -
Personnel related litigation matters 457 -
Share-based payments 342 123
--------- -------------
6,395 21,303
Foreign exchange differences (989) 2,229
--------- -------------
Adjusted EBITDA 5,406 23,532
--------- -------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
6 . Result from operating activities (continued)
Management believe that adjusted EBITDA is an appropriate
measure of the Group's performance as it is the initial source for
all re-investment and for all returns to shareholders. Investors,
bankers and analysts all focus on this important measure of
underlying performance because it enables them to make judgements
about the Group's ability to generate sufficient cash to meet all
the re-investment needs of the business while still providing
adequate returns to shareholders. Therefore, adjusted EBITDA has a
direct relationship with the value of the Group and is seen by our
investors as a Key Performance Indicator for management.
The following items are adjusted for in the calculation of
adjusted EBITDA as defined by the Group.
Item Rationale for Adjustment
Depreciation and Amortisation These items are a result of
past investments and therefore,
although they are correctly
recorded as a cost of the business,
they do not reflect current
or future cash outflows.
Additionally, Depreciation and
Amortisation calculations are
subject to judgement regarding
useful lives and residual values
of particular assets and the
adjustment removes the element
of judgement.
Revaluation of Investment Property These are subject to judgement
and do not reflect cash flows.
Gains and Losses on Disposal These items are a result of
of Fixed Assets and Impairment past investments and therefore,
of Intangibles although they are correctly
recorded as income or cost of
the business, they do not reflect
current or future cash outflows.
Personnel related litigation Amount in respect of a probable
matters settlement of p ersonnel related
litigation matters
Share Based Payments This item is subject to judgement
and will never be reflected
in the Group's cash flows.
Foreign Exchange differences Since the key driver of this
figure is the revaluation of
monetary assets denominated
in foreign currency at the period
end, which may reverse prior
to settlement, taking this figure
out of the EBITDA figure removes
volatility from the performance
measure. Foreign exchange movements
are largely outside of the Group's
control, so this gives a better
measure of the Group's progress
than statutory profit measures
which include them.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
7. Finance income/(expense)
2022 2021
GBP000's GBP000's
Finance income
Interest received on short term bank deposits 190 129
Finance costs
Interest paid (173) (181)
Interest paid on lease liabilities (111) (121)
(284) (302)
--------- ---------
Net finance costs (94) (173)
========= =========
8. Earnings per share
The calculation of basic earnings per share is based on the
post-tax profit for the year divided by the weighted average number
of shares in issue during the year.
2022 2021
Earnings Weighted Per Earnings Weighted Per
average share average share
number amount number amount
of shares of shares
GBP000's 000's pence GBP000's 000's pence
Earnings attributable
to ordinary shareholders
on continuing operations
after tax (686) 67,717 (1.01) 7,337 67,559 10.86
Dilutive effect of
share options - - - - 44 (0.01)
Diluted earnings per
share (686) 67,717 (1.01) 7,337 67,603 10.85
--------- ----------- -------- --------- ----------- --------
Diluted earnings per share takes into account the dilutive
effect of share options. As the Group's result for the year ending
31 March 2022 was a loss there is no dilutive effect on the
earnings per share.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
9. Taxation
2022 2021
GBP000's GBP000's
Current tax
Foreign corporation tax on profits for the
year 3,284 5,772
Foreign withholding tax 406 31
Research and development tax credits claimed
in the year (1,594) (1,569)
Research and development tax credits - adjustment
for prior year 437 (752)
Deferred tax
Origination and reversal of temporary differences (439) 4
Income tax charge 2,094 3,486
========= =========
2022 2021
GBP000's GBP000's
Factors affecting the tax charge for the
year
Profit on ordinary activities before taxation 1,389 19,314
========= =========
Profit on ordinary activities before taxation
multiplied by the applicable rate of UK
corporation tax of 19% (2021: 19%) 264 3,669
Effects of:
Non-deductible expenses 1,345 374
Non-chargeable credits (69) (141)
Right-of-use assets depreciation (37) (40)
Withholding tax on inter-company dividends 406 31
Enhanced allowance on research and development
expenditure (1,208) (1,741)
Adjustment in respect of prior years 456 -
Different tax rate for foreign subsidiaries 844 1,261
Origination and reversal of temporary differences 114 (116)
Unused tax losses carried forward (109) 189
Tax effect of share based payments 88 -
Income tax charge 2,094 3,486
========= =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
9 . Taxation (continued)
2022 2021
% %
Applicable tax rate per UK legislation 19.00 19.00
Effects of:
Non-deductible expenses 96.84 1.93
Non-chargeable credits (4.97) (0.73)
Right-of-use assets depreciation (2.66) (0.21)
Withholding tax on inter-company dividends 29.23 0.16
Enhanced allowance on research and development
expenditure (86.97) (9.01)
Adjustment in respect of prior years 32.83 -
Different tax rate for foreign subsidiaries 60.76 6.53
Origination and reversal of temporary differences 8.21 (0.60)
Unused tax losses carried forward (7.85) 0.98
Tax effect of share based payment arrangements 6.34 -
-------- -------
Income tax charge 150.76 18.05
======== =======
Future tax changes
On 5 March 2021 it was announced that the rate of UK corporation
tax would be increased to 25% from 1 April 2023. This change was
substantively enacted in April 2021 and as the UK deferred tax
assets and liabilities have been calculated based on the enacted
rate of 25% (2021: 19%).
At the year ended 31 March 2022 the Group had unused overseas
tax losses amounting to GBP1,003,000 (2021: GBPnil) for which no
deferred tax asset has been recognised.
10. Loss for the financial year
2022 2021
GBP000's GBP000's
Parent Company's (loss) for the financial
year (1,586) (903)
========= =========
The Company has elected to take the exemption under Section 408
of the Companies Act 2006 not to present the Parent Company income
statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
11. Dividends
2022 2021
GBP000's GBP000's
Cash dividends on ordinary shares declared
and paid:
Final dividend for the year end 31 March 677 -
2021 at 1.0p per ordinary share (settled
22 October 2021)
========= =========
The Board of Directors does not propose that a dividend be paid
for the year ended 31 March 2022 (2021: GBP0.01).
Proposed dividends on ordinary shares are subject to approval at
the annual general meeting and are not recognised as a liability as
at the date of the Statement of Financial Position.
12. Intangible fixed assets
Group Goodwill Distribution Drug registrations, Total
rights patents
and licence
costs
GBP000's GBP000's GBP000's GBP000's
Cost
At 31 March 2020 17,930 407 22,977 41,314
Additions - - 986 986
At 31 March 2021 17,930 407 23,963 42,300
Additions - - 1,421 1,421
Impairment - - (2,092) (2,092)
At 31 March 2022 17,930 407 23,292 41,629
--------- ------------- -------------------- ---------
Amortisation
At 31 March 2020 - (120) (5,174) (5,294)
Charge for the year - (19) (879) (898)
At 31 March 2021 - (139) (6,053) (6,192)
Charge for the year - (19) (1,121) (1,140)
Written back on impairment - - 7 7
At 31 March 2022 - (158) (7,167) (7,325)
--------- ------------- -------------------- ---------
Net Book Value
At 31 March 2022 17,930 249 16,125 34,304
========= ============= ==================== =========
At 31 March 2021 17,930 268 17,910 36,108
========= ============= ==================== =========
At 31 March 2020 17,930 287 17,803 36,020
========= ============= ==================== =========
The amortisation and impairment charges are included within
administrative expenses in the income statement.
Distribution rights are amortised over their estimated useful
life of 20 years and reviewed for impairment when any indication of
potential impairment exists. The remaining amortisation period at
the date of the financial statements ranged from 4 to 20 years.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
12 . Intangible fixed assets (continued)
The carrying value of goodwill is attributable to the following
cash generating units:
Entity Date of acquisition 2022 & 2021
GBP000's
ECO Animal Health Limited 1 October 2004 17,359
Zhejiang Eco Biok Animal Health Products
Limited 1 April 2007 94
24 December
ECO Animal Health Japan Inc 2009 477
17,930
============
Goodwill acquired in a business combination is allocated at
acquisition to the cash generating units (CGU's) that are expected
to benefit from the business combination.
The recoverable amounts of the CGU's are determined from value
in use calculations. The key assumptions for the value in use
calculations are those regarding discount rates, growth rates and
the estimated remaining useful life of the asset.
The Group prepares cashflow forecasts that cover the two year
period after the Statement of Financial Position date and then
extrapolates them assuming a 3 % annual growth rate which is well
below the past performance of the business. Forecasts for new
products under development have been included based on board
approved plans for the next five years. The Directors believe that
the long-term growth rate assumed does not exceed the average
long-term growth rate for the relevant markets.
Management estimates discount rates using the pre-tax rates that
reflect current market assessments of the time value of money and
the risks specific to the CGU's. In the current year management
estimated the applicable rate to be 7 % (2021: 8%) due to changes
in the relative weighting of elements of the Group's capital
structure . Management considers that there is adequate headroom
when comparing the net present value of the cashflows to the
carrying value of goodwill to conclude that no impairment is
necessary this year. The Directors consider that no reasonably
possible change in assumptions, requiring disclosure, would result
in impairment.
The net book value of Drug registrations, patents and licence
costs can be broken down as follows:
2022 2021
GBP GBP
000's 000's
Aivlosin 13,945 15,161
Ecomectin 754 2,466
Vaccines 1,296 267
Others 130 16
16,125 17,910
======= =======
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
12 . Intangible fixed assets (continued)
Aivlosin is a highly effective antibiotic that treats a range of
specific enteric (gut) and respiratory diseases in pigs and
poultry, ensuring a rapid return to health. In addition to the
welfare benefits, healthy animals gain weight faster, digest food
more efficiently and get to market earlier which all bring economic
benefit to the farmer. Substantial ongoing product development
covering more formulations, species and diseases is expected to
substantially further increase its revenue generating potential.
The remaining useful life is from 4 to 20 years.
Ecomectin is an endectocide that controls worms, ticks, lice and
mange in grazing stock and pigs. The remaining useful life is 0 to
10 years.
At 31 March 2022 Intangible assets included GBP3,355,000 (2021:
GBP5,791,000) of assets capitalised that had not commenced their
useful life, of which approximately GBP2,044,000 (2021:
GBP4,909,000) were Aivlosin related products.
Drug registrations and licences are amortised over their
estimated useful lives of 10 to 20 years, which is the Directors'
estimate of the time it would take to develop a new product
allowing for the Group's patent protection and the exclusivity
period which comes with certain registrations. All such costs are
recorded in the UK/Corporate reporting segment.
The Group continuously reviews the status of its research and
development activity, paying close attention to the likelihood of
technical success and the commercial viability of development
projects. In the year to March 2022 there were indications that
certain development projects for which costs have previously been
capitalised were unlikely to achieve technical success or
commercial viability. Net capitalised costs of GBP2,085,000 in
respect of these projects have been impaired through the income
statement during the period reducing the carrying value of the
impaired assets to nil. The capitalised costs had previously been
recognised within the Group's UK/Corporate segment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
13. Property, plant and equipment
Group Freehold Leasehold Plant Fixtures, Motor Total
Land improvements and Machinery Fittings Vehicles
and Buildings and Equipment
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Cost or valuation
At 31 March 2020 668 555 986 1,650 311 4,170
Additions - - 64 153 2 219
Disposals - - (247) (34) (29) (310)
Foreign exchange movements (1) - (16) (21) (15) (53)
At 31 March 2021 667 555 787 1,748 269 4,026
Additions 36 50 1,305 233 - 1,624
Disposals - - (19) (26) - (45)
Foreign exchange movements 6 - 114 57 18 195
At 31 March 2022 709 605 2,187 2,012 287 5,800
--------------- -------------- --------------- --------------- ---------- ---------
Depreciation
At 31 March 2020 (9) - (710) (812) (213) (1,744)
Charge for the year (14) (103) (47) (238) (28) (430)
Disposals - - 244 29 26 299
Foreign exchange movements - - 10 10 10 30
At 31 March 2021 (23) (103) (503) (1,011) (205) (1,845)
Charge for the year (16) (112) (54) (250) (24) (456)
Disposals - - 17 24 - 41
Foreign exchange movements (1) - (31) (26) (17) (75)
At 31 March 2021 (40) (215) (571) (1,263) (246) (2,335)
--------------- -------------- --------------- --------------- ---------- ---------
Net Book Value
At 31 March 2022 669 390 1,616 749 41 3,465
=============== ============== =============== =============== ========== =========
At 31 March 2021 644 452 284 737 64 2,181
=============== ============== =============== =============== ========== =========
At 31 March 2020 659 555 276 838 98 2,426
=============== ============== =============== =============== ========== =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
13 . Property, plant and equipment (continued)
The freehold land and buildings at Coombe Road, New Malden was
valued at GBP615,000 at 31 March 2020 by Colliers International
Valuation UK LLP (external independent qualified valuers). The fair
value of the freehold property was determined by applying a 7.5 %
discount rate to the annual rental value of the property as
determined by local market conditions. The Group considers the fair
value of the property determined. This property will continue to be
valued on a regular basis.
Valuation Technique Significant unobservable Inter-relationship
used inputs between key unobservable
inputs and fair value
RICS Valuation - Global Reduced marketability
Standards ('Red Book * Estimated market rent and hence rent achievable
Global Standards') by the property.
* Capital Value
* Price per square foot in local market.
* Yield in local market
* General condition
* Statutory searches
* Environmental matters
---------------------------------------------- ---------------------------
In determining the fair value of freehold land and buildings
level-3 fair value inputs are used. The significant unobservable
inputs used in establishing the fair value of freehold land and
buildings are the estimated market rent and capital value. The
Directors believe that the fair value of freehold land and
buildings reflects the carrying value and a significant change in
unobservable inputs would not significantly increase or reduce the
fair value of the freehold land and buildings.
The freehold property of 78 Coombe Road, New Malden is subject
to a legal charge held by the Company's bankers dated 20 March
1987.
The value of the freehold property would have been recorded at
GBP229,000 (2021: GBP239,000) on a historical cost basis.
Depreciation has been included in the administrative expenses
line in the income statement, except for GBP158,000 (2021:
GBP118,000) of depreciation of production equipment in the Chinese
subsidiary ECO Biok and for GBP7,000 (2021: GBP6,000) of
depreciation in Pharmgate Animal Health USA LLC, which are included
within cost of sales.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
13 . Property, plant and equipment (continued)
Company Freehold Fixtures, Total
Land Fittings
and Buildings and Equipment
GBP000's GBP000's GBP000's
Cost or valuation
At 31 March 2020 615 14 629
Additions - 44 44
At 31 March 2021 615 58 673
Additions - 125 125
At 31 March 2022 615 183 798
--------------- --------------- ---------
Depreciation
At 31 March 2020 - (7) (7)
Charge for the year (12) (3) (15)
At 31 March 2021 (12) (10) (22)
Charge for the year (12) (16) (28)
At 31 March 2022 (24) (26) (50)
--------------- --------------- ---------
Net Book Value
At 31 March 2022 591 157 748
=============== =============== =========
At 31 March 2021 603 48 651
=============== =============== =========
At 31 March 2020 615 7 622
=============== =============== =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
14. Investment property
Group and Company Freehold
Land
and Buildings
GBP000's
At 31 March 2020 305
Revaluation in 2021 -
At 31 March 2021 305
Revaluation in 2022 (78)
At 31 March 2022 227
===============
The property in Western Road, Mitcham was valued at GBP305,000
as at 31 March 2020 by Colliers International Valuation UK LLP
(external independent qualified valuer). The fair value of the
investment property was determined by applying a 7.75 % discount
rate to the annual rental value of the property as determined by
local market conditions.
The value of the investment property would have been recorded at
GBP130,000 on a historical cost basis.
Valuation Technique Significant unobservable Inter-relationship
used inputs between key unobservable
inputs and fair value
RICS Valuation - Global Reduced marketability
Standards ('Red Book * Estimated market rent and hence rent achievable
Global Standards') by the property.
* Capital value
* Price per square foot in local market.
* Yield in local market
* General condition
* Statutory searches
* Environmental matters
---------------------------------------------- ---------------------------
In determining the fair value of investment property level-3
fair value inputs are used. The significant unobservable inputs
used in establishing the fair value of investment property are the
estimated market rent and capital value. The Directors believe that
the fair value of investment property reflects the carrying value
and a significant change in unobservable inputs would not
significantly increase or reduce the fair value of the investment
property.
Following the year end, the Group decided to dispose of the
property and agreed to sell the property for consideration of
GBP227,000. This value is lower than the carrying value at the
balance sheet date and as such indicated that the property should
be revalued. This revaluation is noted as a post balance sheet
event in Note 32 to these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
15. Right-of-use assets
Group Property Vehicles Other Total
GBP000's GBP000's GBP000's GBP000's
Cost or valuation
At 31 March 2020 2,113 198 23 2,334
Additions 129 58 - 187
Disposals - (109) - (109)
Foreign exchange movements (41) - (1) (42)
At 31 March 2021 2,201 147 22 2,370
Additions 615 66 7 688
Disposals (366) (18) (22) (406)
Foreign exchange movements 105 - - 105
At 31 March 2022 2,555 195 7 2,757
--------- --------- --------- ---------
Depreciation
At 31 March 2020 (542) (119) (15) (676)
Charge for the year (347) (52) (4) (403)
Disposals - 96 - 96
Foreign exchange movements 11 - 1 12
At 31 March 2021 (878) (75) (18) (971)
Charge for the year (355) (38) (5) (398)
Disposals 366 18 22 406
Foreign exchange movements (21) - - (21)
At 31 March 2022 (888) (95) (1) (984)
--------- --------- --------- ---------
Net Book Value
At 31 March 2022 1,667 100 6 1,773
========= ========= ========= =========
At 31 March 2021 1,323 72 4 1,399
========= ========= ========= =========
At 31 March 2020 1,571 79 8 1,658
========= ========= ========= =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
15 . Right of use assets (continued)
Company Vehicles Other Total
GBP000's GBP000's GBP000's
Cost or valuation
At 31 March 2020 95 7 102
Additions 40 - 40
Disposals (67) - (67)
Foreign exchange movements - - -
At 31 March 2021 68 7 75
Additions 38 - 38
Disposals - (7) (7)
Foreign exchange movements - - -
At 31 March 2022 106 - 106
--------- --------- ---------
Depreciation
At 31 March 2020 (72) (5) (77)
Charge for the year (23) (1) (24)
Disposals 63 - 63
Foreign exchange movements - - -
At 31 March 2021 (32) (6) (38)
Charge for the year (16) - (16)
Disposals - 7 7
Foreign exchange movements - - -
At 31 March 2022 (48) 1 (47)
--------- --------- ---------
Net Book Value
At 31 March 2022 58 1 59
========= ========= =========
At 31 March 2021 36 1 37
========= ========= =========
At 31 March 2020 23 2 25
========= ========= =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
16. Fixed asset investments
Group Investment Unlisted Total
in Associate investments
GBP000's GBP000's GBP000's
At 31 March 2020 157 9 166
Share of associate's result
for the year 38 - 38
Foreign exchange differences (24) - (24)
At 31 March 2021 171 9 180
Share of associate's result
for the year 43 - 43
Foreign exchange differences (11) - (11)
At 31 March 2022 203 9 212
============== ================ =========
Company Unlisted Total
investments
(subsidiaries)
GBP000's GBP000's
Cost
At 31 March 2020 20,077 20,077
Disposed (25) (25)
At 31 March 2021 20,052 20,052
Disposed - -
At 31 March 2022 20,052 20,052
================ =========
Impairment
At 31 March 2020 (45) (45)
Impairment charge - -
Disposal 25 25
At 31 March 2021 (20) (20)
Impairment charge - -
Disposal - -
At 31 March 2022 (20) (20)
================ =========
Net Book Value
At 31 March 2022 20,032 20,032
At 31 March 2021 20,032 20,032
================ =========
At 31 March 2020 20,032 20,032
================ =========
The Company holds more than 20 % of the share capital of the
following companies:
Subsidiary undertakings held by the Company
Company Registered office address Country Class Shares
of registration held
or incorporation %
Zhejiang ECO Biok
Animal Health Products Zhongguan Industrial Area,
Limited Deqing, Zhejiang Province P. R. China Ordinary 3*
ECO Animal Health 78 Coombe Road, New Malden,
Limited Surrey, KT3 4QS Great Britain Ordinary 100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
16 . Fixed asset investments (continued)
Subsidiary undertakings held by the Group
Company Registered office address Country Class Shares
of registration held
or incorporation %
ECO Animal Health
Southern Africa 228 Athol Road, Highlands
(Pty) Limited. North, Johannesburg 2192 South Africa Ordinary 100
Zhejiang ECO Biok
Animal Health Products Zhongguan Industrial Area,
Limited. Deqing, Zhejiang Province P. R. China Ordinary 51*
Shanghai ECO Biok
Veterinary Drug
Sale Company Ltd.
(via Zhejiang ECO Room 1502-3, Imago Plaza,
Biok Animal Products No. 99 Wuning Road, Ptro
Ltd.) District, Shanghai 200063 P. R. China Ordinary 51
Zhejiang ECO Animal Zhongguan Industrial Area,
Health Limited Deqing, Zhejiang Province P. R. China Ordinary 100
ECO Animal Health
do Brasil Comercio Av. Dr. Cardoso de Melo,
de Produtos Veterinarios 1470, Cl311, Villa Olimpia,
Ltda. CEP 04548-005, Sao Paulo Brazil Ordinary 100
ECO Animal Health 1-2-1, Hamamatsu-cho,
Japan Inc. Minato-Ku, Tokyo Japan Ordinary 100
ECO Animal Health 344 Nassau Street, Princeton,
USA Corp. New Jersey, 08540 U.S.A. Ordinary 100
3775 Columbia Pike, Ellicott
Interpet LLC. City, Maryland, 21043 U.S.A. Ordinary 100
ECO Animal Health Av Techologico Sur 134-4,
de Mexico, S de Unidad Habitacional Moderna,
R.L. de C.V. Queretaro, 76030 Mexico Ordinary 100
Calle 4 E 43/44 N: 581
ECO Animal Health P.6 D:B La Plata, Buenos
de Argentina S.A. Aires Argentina Ordinary 100
10(th) Floor, Menara Hap
Seng, No 1 & 3, Jalan
ECO Animal Health P Ramlee, 50250 Kuala
Malaysia Sdn. Bhd. Lumpur Malaysia Ordinary 100
No 33/5, Second Floor,
Mount Kailash Building,
ECO Animal Health Meanee Avenue Road, Ulsoor
India (Private) Bangalore, Karnataka,
Ltd 560042 India Ordinary 100
ECO Animal Health 6 Northbrook Road, Dublin Republic
Europe Ltd 6, Eire of Ireland Ordinary 100
*The Group's control over its China based subsidiary Zhejiang
ECO Biok Animal Health Products Limited is achieved via a joint
holding of 51% of the entity's Ordinary share capital between the
Company (3%) and its UK based trading subsidiary ECO Animal Health
Limited (48%).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
16 . Fixed asset investments (continued)
Subsidiary undertakings held by the Group (continued)
The principal activity of these undertakings for the last
relevant financial year was as follows:
Company Name Principal activity
ECO Animal Health Limited Distribution of animal
drugs
ECO Animal Health Southern Africa (Pty) Non-trading
Limited
Zhejiang ECO Biok Animal Health Products Manufacture of animal
Limited drugs
Shanghai ECO Biok Veterinary Drug Sale Company Distribution of animal
Ltd. drugs
Zhejiang ECO Animal Health Limited Procurement of raw
materials
ECO Animal Health do Brasil Comercio de Distribution of animal
Produtos Veterinarios Ltda drugs
ECO Animal Health Japan Inc. Distribution of animal
drugs
ECO Animal Health USA Corp. Distribution of animal
drugs
Interpret LLC Non-trading
ECO Animal Health de Mexico , S. de R. L. Distribution of animal
de C. V. drugs
ECO Animal Health de Argentina S.A. Non-trading
ECO Animal Health Malaysia Sdn. Bhd Non-trading
ECO Animal Health India (Private) Ltd Non-trading
ECO Animal Health Europe Ltd Non-trading
The aggregate amount of capital and reserves and the results of
these undertakings for the last relevant financial year were:
2022 2021 (restated)
Equity Profit/ Equity Profit/(loss
(loss) )
for the for the
year year
GBP 000's GBP 000's GBP 000's GBP 000's
(5,088
ECO Animal Health Limited (5,461) (373) ) (1,816)
ECO Animal Health Southern
Africa (Pty) Limited 315 35 280 4
Zhejiang ECO Biok Animal Health
Products Ltd 25,069 (37) 27,384 17,340
Zhejiang ECO Animal Health
Limited 6,196 4,886 - -
ECO Animal Health do Brasil
Comercio de Produtos Veterinarios
Ltda. (691) 473 (963) (26)
ECO Animal Health Japan Inc. 1,300 (103) 1,398 (16)
ECO Animal Health de Mexico,
S. de R. L. de C. V. 729 124 578 151
(1,382
ECO Animal Health USA Corp. (1,029) 411 ) 111
ECO Animal Health India (Private
) Ltd (13) (12) (1 ) (2 )
ECO Animal Health Europe Ltd - - - -
The equity and results of Shanghai ECO Biok Veterinary Drug Sale
Company Ltd are included within those disclosed for Zhejiang ECO
Biok Animal Health Products Limited.
All of the subsidiaries listed above were included in the
consolidation for the year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
16 . Fixed asset investments (continued)
Zhejiang ECO Biok Animal Health Products Limited, Zhejiang ECO
Animal Health Limited and ECO Animal Health do Brasil Comercio de
Produtos Veterinarios Ltda all have 31 December year ends. The
Group receives management accounts for the three months to 31 March
for these subsidiaries for use in preparing the consolidated
financial statements.
Interpet LLC has been excluded from consolidation as it holds no
assets or liabilities and has ceased trading.
The following trading subsidiaries have no requirement for audit
under local legislation:
ECO Animal Health do Brasil Comercio de Produtos Veterinarios
Ltda.
ECO Animal Health Japan Inc.
ECO Animal Health USA Corp.
ECO Animal Health de Mexico, S. de R. L. de C. V.
ECO Animal Health Group PLC has given statutory guarantees
against all the outstanding liabilities of ECO Animal Health Ltd,
thereby allowing its subsidiary to be exempt from the annual audit
requirement under Section 479A of the Companies Act, for the year
ended 31 March 2022.
Non-controlling interests
Zhejiang ECO Biok Animal Health Products Limited (Zhejiang ECO
Biok) and Shanghai ECO Biok Veterinary Drug Sale Company Limited
(Shanghai ECO Biok), both 51% owned subsidiaries of the Group, have
material non-controlling interests (NCI). Summarised financial
information in relation to these two subsidiaries is presented
below together with amounts attributable to NCI.
Please note that as Shanghai ECO Biok is a 100% owned subsidiary
of Zhejiang ECO Biok, the summarised results below are consolidated
on Zhejiang ECO Biok level, before wider group eliminations.
Summarised statement of comprehensive
income 2022 2021
For the year ended 31 March GBP000's GBP000's
Revenue 26,803 56,179
Cost of sales (17,192) (25,527)
Gross Profit 9,611 30,652
Administrative expenses (8,875) (7,619)
Operating (loss)/profit 736 23,033
Other income 34 6
Finance income 84 31
(Loss)/profit before tax 854 23,070
Tax expense (891) (5,730)
(Loss)/profit after tax (37) 17,340
(Loss)/profit allocated to
NCI (19) 8,491
Other comprehensive income/(loss)
allocated to NCI 1,099 (281)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
16 . Fixed asset investments (continued)
Summarised balance sheet 2022 2021
As at 31 March GBP000's GBP000's
Assets:
Property, plant and equipment 1,960 626
Right-of-use assets 1,080 755
Deferred tax assets 3 -
Inventories 14,081 4,967
Trade and other receivables 6,300 18,161
Cash and cash equivalents 6,148 13,651
29,572 38,160
Liabilities:
Trade and other payables 4,489 7,785
Contract liabilities 11 2,155
Lease liabilities - short
term 144 82
Lease liabilities - long term 1,040 753
5,684 10,775
Summarised cash flows 2022 2021
For the year ended 31 March GBP000's GBP000's
Cash flows from operating
activities (2,818) 10,359
Cash flows from investing
activities (810) 20
Cash flows from financing
activities (4,565) (1,310)
Foreign exchange movements 690 (757)
Net (decrease)/increase in cash and
cash equivalents (7,503) 8,312
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
16 . Fixed asset investments (continued)
Joint Operations
The Group also holds (by means of its ownership of ECO Animal
Health USA Corp.), a 50 % interest in Pharmgate Animal Health LLC,
which is resident in the U.S.A. Pharmgate Animal Health LLC
distributes the Group's products in the U.S.A.
The Group also holds (by means of its ownership of ECO Animal
Health Ltd) a 50 % interest in Pharmgate Animal Health Canada Inc,
which distributes its products into Canada.
The Group also holds (by means of its ownership of ECO Animal
Health Europe Ltd) a 50 % interest in ECO-Pharm Limited, based in
the Republic of Ireland. ECO-Pharm Limited has not yet commenced
trading.
Both Pharmgate Animal Health LLC and Pharmgate Animal Health
Canada Inc. have accounting years which end on 31 December.
The Group's holdings in each of the joint operations' share
capital is given in the table below:
Pharmgate Animal Health Canada Inc Holding Shares Holding
(shares) in issue %
Common Shares 100 200 50
Class A Shares 100 100 100
Class B Shares - 100 -
Pharmgate Animal Health USA LLC Holding Shares Holding
(shares) in issue %
Common Shares 100 200 50
Class A Shares 100 100 100
Class B Shares - 100 -
ECO-Pharm Limited Holding Shares Holding
(shares) in issue %
Common Shares 25,000 50,000 50
Class A Shares 1 1 100
Class B Shares - 1 -
In the case of Pharmgate Animal Health Canada Inc and Pharmgate
Animal Health USA LLC, A shares carry the rights to dividends
payable out of profits attributable to the Group. These are made up
of profits made by products supplied by the ECO Group plus 50 % of
any profit relating to new products developed jointly by the
partners to the joint operation.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
16 . Fixed asset investments (continued)
In the case of ECO-Pharm Limited, profits attributable to the
Group are made up of profits made by products supplied by the ECO
Group plus 33 % of any profit relating to new products developed
jointly by the partners to the joint operation.
The following amounts included in the Group's financial
statements are related to its interest in these joint
operations.
Pharmgate Animal Pharmgate Animal
Health LLC Health Canada
Inc
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Non-current assets 11 18 - -
Current assets 1,871 1,055 631 545
Current liabilities (1,855) (1,047) (630) (544)
Sales 12,640 10,745 3,756 3,300
Profit after tax - - - -
Associated Company
The Group also holds (by means of its ownership of ECO Animal
Health Japan Inc.) a 47.62 % interest in EcoPharma.com which is
resident in Japan. This Company distributes Animal Health products
and other general merchandise within Japan.
ECO Animal Health Japan Inc's holding in EcoPharma.com is
10,000,000 shares out of a total of 21,000,000 shares.
The following amounts included in the Group's financial
statements are related to its interests in this associated
Company.
2022 2021
GBP000's GBP000's
Investments (share of net
assets)
At 1 April 171 157
Share of results for the year 43 38
Foreign exchange movement (10) (24)
At 31 March 204 171
--------- ---------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
16 . Fixed asset investments (continued)
2022 2021
Summarised financial information GBP GBP
000's 000's
At 31 March
Current assets 744 938
Non-current assets 27 44
Current liabilities ( 222) ( 208)
Non-current liabilities (120) (415)
Net assets (100%) 429 359
Group share of net assets
(47.62%) 204 171
Year ended 31 March
Revenue 1,897 1,704
Net profit 90 80
17. Inventories
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Raw materials and consumables 9,772 11,488 - -
Finished goods and goods for
resale 13,277 5,433 - -
Work in progress 7,093 3,583 - -
--------- --------- --------- ---------
30,142 20,504 - -
========= ========= ========= =========
The cost of inventories recognised as an expense and included in
cost of sales in the financial year amounted to GBP46,782,000
(2021: GBP51,864,000 ).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
18. Trade and other receivables
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Non-current:
Amounts owed by group undertakings - - 53,940 55,909
========= ========= ========= =========
The intercompany debt is due on demand, however the company has
classified the receivable as a non-current asset as it does not
expect to realise the asset within 12 months after the reporting
period.
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Current:
Trade receivables 23,388 29,838 - -
Other receivables 660 1,688 80 69
Amounts owed by group undertakings - - 48 -
Prepayments and accrued income 1,921 926 210 212
25,969 32,452 338 281
========= ========= ========= =========
As at 31 March 2022, trade receivables of GBP2,733,000 (2021:
GBP3,170,000) due to the Group and GBPnil (2021: GBPnil) due to the
Company were past due but not impaired. These relate to long
standing distributors with whom we have agreed settlement terms and
with whom there is no history of default. The ageing analysis of
these trade receivables is as follows:
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Up to 3 months past due 1,772 2,098 - -
3 to 6 months past due 346 468 - -
Over 6 months past due 615 604 - -
2,733 3,170 - -
========= ========= ========= =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
18 . Trade and other receivables (continued)
As at 31 March 2022, impairment provisions of GBP194,000 on
gross receivables of GBP889,000 (2021: GBP351,000 on gross
receivables of GBP729,000) were recognised. The impaired
receivables mainly relate to debt for which recovery is still being
sought. The Group mitigates its exposure to credit risk by
extensive use of commercial credit reference agencies, close
management of its customers' trading against terms offered and use
of retention of title clauses wherever possible.
The Group has experienced minimal bad debt history and
considered this in arriving at the impairment provision recognised.
This consideration includes the potential risks arising from COVID
on its customers. Its experience with customers since 31 March
2022, is consistent with those considerations that credit risk has
not increased. No collateral is held against customer receivable
balances.
The ageing analysis of the impaired balances is as follows:
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Current debt - 6
Up to 3 months past due 21 97 - -
3 to 6 months past due - 1 - -
Over 6 months past due 173 247 - -
194 351 - -
========= ========= ========= =========
Movement on the Group provision for impairment of trade
receivables is as follows:
Group 2022 2021
GBP000's GBP000's
Balance at 1 April 351 419
Additional provision made 13 71
Recovered in the year (59) (136)
Written off during the year (121) -
Foreign exchange movements 10 (3)
Balance at 31 March 194 351
========= =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
18 . Trade and other receivables (continued)
The carrying amounts of trade and other receivables are
denominated in the following currencies:
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
British Pounds Sterling 1,776 1,192 288 281
U S Dollars 9,743 8,067 - -
Euros 2,072 1,749 - -
Chinese RMB 6,300 18,161 - -
Japanese Yen 622 175 - -
Brazilian Real 1,970 363 - -
Canadian dollars 630 545 - -
Mexican Pesos 2,701 1,997 - -
Other currencies 155 203 - -
25,969 32,452 288 281
========= ========= ========= =========
The carrying amounts of trade and other receivables are not
significantly different to their fair values.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
19. Deferred tax
Group
Deferred tax assets and liabilities are attributable to the
following:
Net
2022 2021
restated
GBP000's GBP000's
Trade related temporary differences (2,586) (2,294)
Overseas trade related temporary
differences 3 3
Freehold property 9 8
Investment property 18 (1)
Plant and equipment (109) (12)
Deferred tax on share options 43 120
Tax losses carried forward 3,145 2,259
Amount receivable/(payable) after
more than one year 523 83
========= ==========
The movement on the deferred tax account can be summarised as
follows:
Trade-related Tax Freehold Investment Plant Share Total
temporary losses property property and machinery options
differences carried
forward
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
At 31 March 2021
- as restated (2,291) 2,259 8 (1) (12) 120 83
(Charge) for
the year through
income statement (292) - - - (97) (77) (466)
Credit for the
year through
income statement 886 - 19 - - 905
Credit for the
year through
reserves - 1 - - - 1
At 31 March 2022 (2,583) 3,145 9 18 (109) 43 523
============== ========= ========== =========== =============== ========= =========
Trade related temporary differences relate predominantly to
research and development tax deductions claimed in advance of
expense recognition in the income statement, carried forward
trading losses and a provision for unrealised profit arising on
consolidation. The tax losses carried forward are not expected to
expire under current legislation.
Any future dividend received from the Chinese subsidiary
Zhejiang ECO Biok Animal Health Products Limited will be subject to
a 5 % withholding tax. The deferred tax liability in respect of
this has not been recognised.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
19 . Deferred tax (continued)
Company Freehold Investment Share Total
property property options
GBP000's GBP000's GBP000's GBP000's
At 31 March 2020 (76) (19) - (95)
Credit for the year through
income statement - 17 - 17
Credit for the year through
reserves 84 - - 84
At 31 March 2021 8 (2) - 6
---------- ----------- --------- ---------
Credit for the year through
income statement - 20 23 43
Credit for the year through
reserves 1 - - 1
At 31 March 2022 9 18 23 50
========== =========== ========= =========
At the year ended 31 March 2022 the Group has an unrecognised
deferred tax asset in relation to unused overseas tax losses
amounting to GBP1,003,000 (2021: GBPnil), and unused UK tax losses
amounting to GBP2,725,000 (2021: GBP1,082,000). These tax losses
are not expected to expire.
20. Cash and cash equivalents
Cash and cash equivalents comprise cash, short-term deposits
held by the Group net of amounts outstanding on bank overdraft. The
carrying amount of these assets are not significantly different to
their fair value.
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Cash and cash equivalents 14,314 19,523 279 819
Cash and cash equivalents presented
in the statement of cash flows 14,314 19,523 279 819
========= ========= ========= =========
Balances drawn on the bank overdraft facility are repayable on
demand and form an integral part of the cash management of the
Group and Company. In the statement of cash flows, the Group and
the Company have presented cash and cash equivalents net of
balances outstanding on bank overdrafts. Amounts drawn and repaid
on the overdraft facility are therefore considered as part of
changes in cash and cash equivalents and are not presented as
financing cash flows.
As at 31 March 2022, none of the Group's facilities were
drawn.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
20 . Cash and cash equivalents (continued)
Significant non-cash transactions from investing activities are
as follows:
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Acquisition of property, plant
and equipment by means of leases
or not yet paid at year end 688 187 38 40
Acquisition of intangible assets
not yet paid at year end 158 125 - -
21. Trade and other payables
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Trade payables 9,415 7,918 50 58
Contract liabilities 203 2,155 - -
Other payables 926 683 70 147
Accruals and deferred income 2,410 3,765 206 319
12,954 14,521 326 524
========= ========= ========= =========
22. Borrowings
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Cash and cash equivalents 14,314 19,523 279 819
Lease liabilities (1,910) (1,522) (62) (39)
Net Cash 12,404 18,001 217 780
========= ========= ========= =========
The Group has an overdraft facility in certain currencies in
respect of a pool of bank accounts held with NatWest Bank plc.
The interest rate for all currency overdrafts is 1.8% over the
relevant currency base rate and the borrowings are secured by two
debentures held over the assets of the Group. Any drawdown of this
facility is repayable on demand. The Company and ECO Animal Health
Limited have each given a guarantee to the Group's bankers for the
overdraft facility. The facility has a gross and net limit of
GBP5,000,000, which may be borrowed and repaid at will.
At 31 March 2022, the undrawn facility was GBP5,000,000 (2021:
GBP5,000,000).
The Group put in place a GBP10m revolving credit facility with
Natwest bank on 9 July 2022. This facility is interest bearing and
can be drawn by the Group on demand, The facility expires on 30
June 2026. This has been disclosed in Note 33, Post Balance Sheet
Events.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
22. Borrowings (continued)
Reconciliation of Lease Liabilities
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Opening lease liabilities (1,522) (1,766) (39) (29)
========= ========= ========= =========
New lease liabilities ( 672) (188) ( 37) (43 )
Repayment 482 500 25 35
Lease liabilities interest ( 111) (122) ( 11) (11)
Disposal - 18 - 6
Foreign exchange ( 87) 36 - 3
Closing lease Liabilities (1,910) (1,522) (62) (39)
========= ========= ========= =========
Current lease liabilities (397) (311) (13) (7)
Non-current lease liabilities (1,513) (1,211) (49) (32)
========= ========= ========= =========
The Group leases a number of properties and motor vehicles in
the jurisdictions it operates in. At 31 March 2022 there were no
termination or extension options on leases.
The Group expensed GBP64,000 for the year ended 31 March 2022
(2021: GBP55,000) for short term leases.
Group Leases Maturity
At 31 March 2022 the Group held the following number of leases
in each of the maturity categories below.
At 31 March 2022 Property Vehicle Other Total
Number Number Number Number
Up to 1 year 1 3 - 4
Between 1 - 5 years 9 2 1 12
Over 5 years 2 - - 2
Total number of leases 12 5 1 18
========= ======== ======= =======
Average remaining lease term
(in years) 6.5 1.6 4.7 4.9
At 31 March 2021 Property Vehicle Other Total
Number Number Number Number
Up to 1 year 5 5 3 13
Between 1 - 5 years 2 5 - 7
Over 5 years 2 - - 2
Total number of leases 9 10 3 22
========= ======== ======= =======
Average remaining lease term
(in years) 7.1 1.3 0.7 3.6
The weighted average incremental borrowing rate applied to lease
liabilities recognised in the statement of financial position was
7.49% at 31 March 2022 (2021: 7.20%).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
Borrowings (continued)
Weighted average incremental borrowing rate :
Group 2022 2021
6.25
Property % 5.9 %
Vehicle 29.0% 29.0%
Other 4.0% 4.0%
Weighted average 7.49% 7.2%
------ ------
Amounts payable under lease arrangements for the Group
The undiscounted contractual cash flows payable under the
existing lease arrangements at 31 March are analysed into the
following maturity categories.
Group 2022 2021
GBP000's GBP000's
Up to 1 year 523 415
Between 1 - 5 years 1,104 768
Over 5 years 1,391 768
Total 3,018 1,951
========= =========
23. Provisions
Group Personnel Overseas Total
related tax liabilities
litigation
matters
GBP000's GBP000's GBP000's
At 31 March 2020 - 1,128 1,128
Charge for the year through income
statement - 970 970
Foreign exchange - (316) (316)
At 31 March 2021 - 1,782 1,782
------------ ----------------- ---------
Charge for the year through income
statement 456 1,003 1,459
Foreign exchange - 634 634
At 31 March 2022 456 3,419 3,875
============ ================= =========
Provisions include an amount of GBP456,000 in respect of
personnel related litigation matters . Management has assessed the
range of possible outcomes to these claims and the provision made
represents a best estimate and is mid-range of the possible
outcomes, having taken legal advice. ECO management is vigorously
defending the claims and the timing of any settlement is uncertain
due to the varying nature of the claims and the availability of the
relevant courts if required.
Provisions also include an amount of GBP3,419,000. in respect of
overseas tax liabilities. The Group has estimated the total
liabilities that may be due. As the Group has only recently become
aware of the liability, it has yet to confirm the exact amounts
that may be payable and it is not clear when a settlement of these
obligations will occur, however precedent suggests that this may be
up to 7 years.
24. Pension and other post-retirement benefit commitments
Defined Contribution Pension Scheme
The Group operates defined contribution pension schemes. The
assets of the schemes are held separately from the Group and
independently administered by insurance companies. The pension cost
charge represents contributions payable to the funds in the year
and amounted to GBP96,850
(2021: GBP105,000).
Defined Benefit Pension Scheme
The Group operates a defined benefit scheme in the UK for a
number of ex-employees which is closed to new members. A full
actuarial valuation was carried out at 6 April 2021 and updated to
31 March 2022 for IAS 19 purposes by a qualified independent
actuary. The major assumptions used by the actuary were:
31-Mar 31-Mar
2022 2021
Discount rate 2.75% 1.90%
Pension revaluation 3.95% 3.40%
Inflation assumption with a maximum
of 5% p.a. 3.95% 3.40%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
24. Pension and other post-retirement benefit commitments (continued)
Mortality rates
No pre-retirement mortality is assumed (2021: none). Post
retirement mortality is based on 100 % of the SAPS "S2" normal
tables, based on the members' year of birth, improving in line with
CMI 2021 projections with a 1.25 % long term trend rate (2021:
1.25% ).
U nder these mortality assumptions, the expected future lifetime
for a member retiring at age 65 at the year-end would be 22.2 years
for males (2021: 22.1 years) and 24.3 years for females (2021: 24.2
years). For members retiring in 20 years' time, the expectation of
life would be 23.5 years for males (2021: 23.4 years) and 25.8
years for females (2021: 25.7 years).
The weighted average term of the liabilities is 11 years (2021:
10 years).
The scheme is exposed to a number of risks including:
-- Interest rate risk: Movements in the discount rate used could
affect the present value of the defined benefit pension
obligations.
-- Longevity risk: Changes in the estimated mortality rates of
former employees could affect the present value of the defined
benefit pension obligations.
-- Investment risk: Variations in the actual return from the
scheme's investments could affect the scheme's ability to meet its
future pension obligations
2022 2021
GBP000's GBP000's
Assets at start of year 1,795 1,787
Defined benefit obligation
at start of year (1,799) (1,814)
Net (liability) at 1 April (4) (27)
Return on assets 33 42
Interest cost (33) (42)
Past service cost - (4)
--------- ---------
- (4)
Gain/(loss) on asset return (5) (4)
(Loss)/gain on changes in assumptions 29 (28)
--------- ---------
Statement of other comprehensive
income 24 (32)
Employer contributions (gross) 59 59
Net asset/(liability) at 31
March 79 (4)
Actual assets at end of year 1,648 1,795
Actual defined benefit obligation
at end of year (1,569) (1,799)
Gain/(loss) on changes in assumptions was nil (2021: GBP3,000
gain) relating to changes in demographic assumptions and a gain of
GBP29,000 (2021: GBP31,000 loss) relating to changes in financial
assumptions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
24. Pension and other post-retirement benefit commitments (continued)
The pension fund assets (principally made up of annuities for
the benefit of active pensioners) are all held within a policy
managed by an insurance company regulated by the Financial Conduct
Authority of the United Kingdom and the United Kingdom Pensions
Regulator. By law, the trustees are required to act in the best
interests of participants to the schemes. Responsibility for
governance of the plans - including investment decisions and
contributions schedules lies with trustees.
Reconciliation of changes in the asset value during the year
2022 2021
GBP000's GBP000's
Fair value of assets at 1
April 1,795 1,787
Return on assets 33 42
Gain/(loss) on asset return (5) (4)
Employer contributions (gross) 59 59
(Decrease)/increase in secured
pensioners' value due to scheme
experience (234) (89)
Benefits paid - -
--------- ---------
Fair value of assets at 31
March 1,648 1,795
Reconciliation of changes in the liability
value during the year
Defined benefit obligation
at 1 April 1,799 1,814
Interest cost 33 42
Past service cost - 4
(Gain)/loss on changes in
assumptions (29) 28
(Decrease)/increase in secured
pensioners' value due to scheme
experience (234) (89)
Benefits paid - -
--------- ---------
Defined benefit obligation
at 31 March 1,569 1,799
The amount of annual contribution to be paid by the employer of
GBP59,000 (2021: GBP59,000) is expected to continue until December
2022.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
24. Pension and other post-retirement benefit commitments (continued)
Year ended 31 March 2022 2021 2020 2019 2018
GBP000's GBP000's GBP000's GBP000's GBP000's
Fair value of plan assets 1,648 1,795 1,787 1,802 2,503
Present value of defined benefit
obligation 1,569 1,799 1,814 1,899 2,603
(Deficit)/Surplus in plan 79 (4) (27) (97) (100)
Experience (losses)/gains
on plan liabilities - - (2) (38) (7)
Plan Assets
2022 2021
GBP000's GBP000's
Assets under management 259 205
Annuities 1,389 1,590
Total 1,648 1,795
========= =========
Assets under management composition
2022 2021
Corporate Bonds 42.6% 43.4%
Overseas Equities 27.7% 28.4%
UK Equities 17.8% 17.8%
Property 10.5% 8.9%
Cash 1.4% 1.2%
Derivatives - 0.3%
Gilts - -
100.0% 100.0%
======= =======
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
24. Pension and other post-retirement benefit commitments (continued)
Defined benefit obligation - sensitivity analysis
The following amounts are the effect (on the defined benefit
obligation) of reasonably possible changes to the key actuarial
assumptions, as required by IAS 19.
Actuarial assumptions - Reasonably (Decrease)/Increase in
Possible Change Defined Benefit Obligation
2022 2021
GBP000's GBP000's GBP000's GBP000's
Discount rate: +/- 0.1% (15) 15 (20) 20
Members' life expectancy: +/-
1 year (81) 84 (100) 100
The above sensitivity analyses are based on a change in an
assumption while holding all other assumptions constant. In
practice, this is unlikely to occur, and changes in some of the
assumptions may be correlated. When calculating the sensitivity of
the defined benefit obligation to significant actuarial assumptions
the same method (present value of the defined benefit obligation
calculated with the projected unit credit method at the end of the
reporting period) has been applied as when calculating the defined
benefit liability recognised in the Statement of financial
position.
The methods and types of assumptions used in preparing the
sensitivity analysis did not change compared to the prior
period.
The Company has given a floating charge dated 1 December 2006
over all of its assets to the trustees of the pension fund to
secure all present and future obligations and liabilities to the
pension fund.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
25. Share-based payments
The expense recognised for share-based payments made during the
year is shown in the following table:
Group Company
2022 2021 2022 2021
GBP000's GBP000's GBP000's GBP000's
Total expense arising from equity
settled share-based payments transactions 342 123 120 8
========= ========= ========= =========
The share-based payment plans are described below:
Movements in issued share options during the year
The following table illustrates the number and weighted average
exercise prices (WAEP) of, and movements in, share options during
the period:
Options Options
2022 2022 2021 2021
000's WAEP 000's WAEP
(GBP) (GBP)
Outstanding at 1 April 3,370 3.73 3,519 3.68
Granted during the year - Employee
scheme 327 3.50 - -
Granted during the year - LTIPs 279 0.05 - -
Granted during the year - Deferred
bonus 38 0.05 - -
Cancelled during the period ( 122) 2.01 - -
Exercised during the period ( 26) 2.42 (149) 2.54
Outstanding at 31 March 3,866 3.47 3,370 3.73
======= ======= ====== =======
3,223,400 options were exercisable at 31 March 2022 (2021:
3,004,500). The WAEP of exercisable options at 31 March 2022 was
381.0p (2021: 372.0p).
The average share price during the year was 272.4p (2021:
253.1p).
The maximum aggregate number of shares over which options may
currently be granted cannot exceed 10% of the nominal share capital
of the Company on the grant date. The options outstanding at 31
March 2022 had a weighted average exercise price of GBP3.47 (2021:
GBP3.73) and a weighted average remaining contractual life of 2.8
years (2021: 2.6 years).
ECO Animal Health Group plc Executive Share Option Scheme
In accordance with the Executive Share Option Scheme, approved
and unapproved share options are granted to Directors and employees
who devote at least 25 hours per week to the performance of duties
or employment with the Company.
326,679 share options have been granted in the year under this
scheme (2021: none). In addition 278,500 options have been issued
under the group's Long Term Incentive Plan (2021: none) and 37,755
under the group's deferred bonus arrangements (2021: none).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
25 . Share-based payments (continued)
The exercise price of the options is equal to the market price
of the shares at the date of grant. The options vest three years
from the date of grant and if the option holder ceases to be a
Director or employee of the Company due to injury, disability,
redundancy or retirement on reaching pensionable age or any other
age at which they are bound to retire at in accordance with the
terms of their contract of employment, the option may be exercised
within a period of six months after the option holders so ceasing,
although the Board may, at its discretion, extend this period by up
to 36 months after the date of cessation.
If the option holder ceases employment for any other reason, the
option may not be exercised unless the Board permits. The approved
and unapproved options will be forfeited where they remain
unexercised at the end of their respective contractual lives of ten
and seven years respectively.
An analysis of the expiry dates of the outstanding options at 31
March 2022 is given below:
Date of grant Unapproved Approved Exercise Expiry date
price
09 October 2013 11,100 GBP 1.960 09 October 2023
21 August 2014 14,400 GBP 1.615 21 August 2024
13 February 2015 34,500 GBP 2.005 13 February 2025
26 August 2015 24,850 GBP 2.650 26 August 2025
26 August 2015 511,650 GBP 2.650 26 August 2022
18 December 2015 600,000 GBP 3.125 18 December 2022
19 January 2016 10,200 GBP 3.150 19 January 2026
19 January 2016 240,800 GBP 3.150 19 January 2023
17 February 2016 19,600 GBP 3.125 17 February 2026
17 February 2016 400 GBP 3.125 17 February 2023
01 March 2016 9,600 GBP 3.125 01 March 2026
01 March 2016 40,400 GBP 3.125 01 March 2023
12 September 12 September
2016 25,100 GBP 4.325 2026
12 September 12 September
2016 423,900 GBP 4.325 2023
15 September 15 September
2016 5,900 GBP 4.350 2026
15 September 15 September
2016 544,100 GBP 4.350 2023
21 September 21 September
2017 53,475 GBP 6.200 2027
21 September 21 September
2017 287,525 GBP 6.200 2024
12 April 2018 3,900 GBP 5.450 12 April 2028
23 October 2018 75,200 GBP 3.800 23 October 2028
23 October 2018 276,800 GBP 3.800 23 October 2025
19 December 2018 7,800 GBP 3.800 19 December 2028
19 December 2018 2,200 GBP 3.800 19 December 2025
28 April 2021 326,679 GBP 0.050 28 April 2031
28 April 2021 154,149 GBP 3.495 28 April 2031
28 April 2021 124,351 GBP 3.495 28 April 2028
24 September 24 September
2021 37,755 GBP 0.050 2031
3,416,560 449,774
============= ============
The market price of the shares at 31 March 2022 was 165.0p
(2021: 322.5p) with a range in the year of 127.5p to 395.0p (2021:
198.0p to 371.0p).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
25. Share-based payments (continued)
The Company uses a Black-Scholes model to value share-based
payments for options with service conditions and/or non-market
performance conditions and the following table lists the inputs to
this model for the last five years.
2022 2021 2020 2019 2018
Vesting period (years) 3 - 4 n /a n /a 3 3
Option expiry (years) 7 - 10 7 - 10 7 - 10
1.00 1.90 1.10
Dividends expected on the shares % % %
0.18
Risk free rate (average) % 1.00% 1.00%
Volatility of share price 40 % 20.00% 20.00%
Weighted average fair value 101.0
(pence) - 316.0 51.0 98.6
The risk-free rate has been based on the yield from UK
Government Treasury coupons. The volatility of the share price was
estimated based on standard deviation calculations on the historic
share price.
Long term incentive plan
Under this plan share options may be granted to certain
Executive Directors and members of the Company's Executive
Leadership Team. The share options awarded under the LTIP are
subject to an exercise price of GBP0.05 per share and performance
conditions being achieved that have been set by the Remuneration
Committee and relate to total shareholder return (TSR) and research
and development targets.
Subject to the performance conditions being met, the share
Options will vest after the end of a three year vesting period from
1 April 2021 to 31 March 2024. The proportion of share options
relating to each performance condition is: (i) 75% in relation to
the TSR conditions; and (ii) 25% in relation to the R&D
targets.
The TSR conditions mean that the share options subject to these
conditions will vest subject to the following: (i) 25% of the share
options will vest if the annual compound TSR over the performance
period equals 7.5% ; (ii) 50% of the share options will vest if the
annual compound TSR over the performance period equals 10% ; and
(iii) 100% of the share options will vest if the annual compound
TSR over the performance period equals 20% .
The R&D targets mean that the share options subject to these
targets will vest subject to the following: (i) 25% of the shares
options will vest if specified R&D targets agreed between
Executive Management and the Remuneration Committee during the
performance period are achieved; and (ii) 100% of the shares
options will vest if specified R&D targets agreed between
Executive Management and the Remuneration Committee during the
performance period are achieved.
A Monte Carlo simulation model has been used to value these
share options.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
26. Share capital
2022 2021
GBP000's GBP000's
Authorised
68,100,000 ordinary shares of 5p each 3,405 3,405
10,790 deferred ordinary shares of
10p each 1 1
32,334 convertible preference shares
of GBP1 each 32 32
3,438 3,438
========= =========
Allotted, called up and fully
paid
67,721,916 (2021: 67,696,416) ordinary
shares of 5p each 3,381 3,379
========= =========
During the year 25,500 shares were issued at a premium of
GBP61,000 as a result of the exercise of options by employees.
(2021: 148,790 shares at a premium of GBP367,000).
All share issued are non-redeemable and rank equally in terms of
voting rights (one vote per share); rights to participate in all
approved dividend distribution for that class of shares; and right
to participate in any capital distribution on winding up.
The shares in the original or any increased capital of the
Company may be issued with such preferred, deferred or other
special rights or restrictions, whether in regard to dividend,
voting, return of capital as the Company may from time to time
determine.
27. Non-controlling (minority) interests
Group
2022 2021
GBP000's GBP000's
Balance as at 1 April 13,414 5,766
Share of subsidiary's (loss)/profit for
the year (19) 8,491
Share of foreign exchange gain/(loss) on
net investment 1,099 (281)
1,080 8,210
Share of dividend paid by subsidiary (2,210) (562)
Balance as at 31 March 12,284 13,414
======== =======
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
28. Other reserves
The Group and Company held a Capital redemption reserve of
GBP106,000 as at 31 March 2022 (2021: GBP106,000).
Included in the Group's foreign exchange reserve are the
following exchange movements on consolidation of the subsidiaries
and joint operations listed below:
At Movement At
31 March in the 31 March
2021 year 2022
GBP000's GBP000's GBP000's
In respect of:
Zhejiang ECO Biok Animal Health Products
Limited 635 750 1,385
Zhejiang ECO Animal Health Limited - 186 186
ECO Animal Health do Brasil Comercio
de Produtos Veterinarios Ltda 131 180 311
ECO Animal Health Japan Inc. 4 10 14
ECO Animal Health USA Corp. 88 (37) 51
ECO Animal Health de Mexico, S. de R.
L. de C. V. 226 11 237
Pharmgate LLC 8 (4) 4
Foreign exchange reserve movements charged
to Consolidated Statement of Comprehensive
Income 1,092 1,096 2,188
====== ====== ======
29. Directors' emoluments
2022 2021
GBP000's GBP000's
Emoluments for qualifying services 793 1,086
Company pension contributions to money
purchase schemes 32 34
Share-based payments 112 1
Benefits in kind 4 5
941 1,126
========= =========
During the year no directors exercised share options (2021:
none) realising a gain of GBPnil (2021: GBPnil).
The highest paid director received GBP430,000 (2021: GBP541,000)
including GBP65,000 (2021: GBP1,000) of share-based payments and
GBP9,000 (2021: GBP10,000) of pension contributions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
30. Employees
Number of employees
The average number of employees (including Directors) during the
year was:
2022 2021
Number Number
Directors 5 5
Production and development 72 66
Administration 49 48
Sales 95 88
221 207
======= =======
Employment costs (including amounts capitalised)
2022 2021
GBP000's GBP000's
Wages and salaries 12,251 13,776
Share-based payments 341 123
Social security costs 1,185 863
Other pension costs 277 105
14,054 14,867
========= =========
31. Related party transactions
In the year ended 31 March 2021, former director Julia Trouse
repaid GBP322,109 to the group following an internal audit
investigation on unauthorised cash withdraws. This was recognised
as other income in the group's consolidated income statement of the
same period.
During the year Mr P Lawrence (a significant shareholder) and
his family received dividends to the value of GBP2,926 (2021:
GBPnil).
The other Directors and their families received dividends to the
value of GBPnil (2021: GBPnil).
Interest and management charges from Parent to the other Group
companies
During the year the Company made management charges on an arm's
length basis to ECO Animal Health Limited amounting to GBP687,267
(2021: GBP775,000) and charged interest of GBP832,000 (2021:
GBP875,000) to the subsidiary company. Both of these transactions
were made through the inter-company account and were eliminated on
consolidation.
During the year Zhejiang ECO Biok Animal Health Products Limited
paid dividends of GBP176,717 (RMB 1,489,600) to ECO Animal Health
Group plc (2021: GBP45,000) and GBP2,122,406 (RMB 17,890,400) to
ECO Animal Health Limited (2021: GBP540,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
Related party transactions (continued)
Key management compensation
The Group regards the Board of Directors as its key
management.
2022 2021
GBP000's GBP000's
Salaries and short-term benefits 797 1,091
Retirement benefits 32 34
Share-based payments 112 1
941 1,126
========= =========
The number of Directors for which retirement benefits were
accruing was 2 (2021: 2).
32. Financial instruments
The Group uses financial instruments comprising borrowings, cash
and cash equivalents and various items, such as trade receivables,
trade payables etc. that arise directly from its operations. The
main purpose of these financial instruments is to raise finance for
the Group's operations. The Directors are responsible for the
overall risk management.
The main risks arising from the Group's use of financial
instruments are capital and liquidity risk, credit risk and foreign
currency risks and they are summarised below. The policies have
remained unchanged throughout the year.
Capital and liquidity risk
The Group manages its capital to ensure continuity as a going
concern whilst maximising returns through the optimisation of debt
and equity. As part of this, the Board considers the cost and risk
associated with each class of capital. The capital structure of the
Group consists of cash and cash equivalents in note 20 , borrowings
in note 22 and equity attributable to equity holders of the parent
comprising issued capital, reserves and retained earnings as
disclosed in the Group's statement of changes in equity.
Liquidity risk is managed by maintaining adequate reserves and
banking facilities with continuous monitoring of the latest
developments by management.
The Group's objectives when maintaining capital are:
- to safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
- to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
32 . Financial instruments (continued )
The Group sets the amount of capital it requires in proportion
to risk. The group manages its capital structure and makes
adjustments to it in the light of changes in economic conditions
and the risk characteristics of the underlying assets. In order to
maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to
shareholders, issue new shares, or sell assets to reduce debt.
As an AIM quoted company, our governance framework is
underpinned by the AIM Rules and the Quoted Companies Alliance
(QCA) Corporate Governance Code 2018 (the 'QCA Code'). In addition
to the QCA Code, we monitor developments and guidance in the UK
Corporate Governance Code, applicable to main market listed
companies, to keep abreast of matters which we feel could also be
embedded as best practice as part of a progressive approach. We
also review the Investment Association guidelines and seek to
comply with these where applicable.
At 31 March 2022, the Group was contractually obliged to make
repayments as detailed below:
2022 2021
Within one year or on GBP000's GBP000's
demand
Trade payables 9,415 7,918
Other payables 926 683
Accruals 2, 3,765
12,751 12,366
========= =========
Credit Risk
Credit risk is that of financial loss as a result of default by
a counterparty on its contractual obligations. The Group's exposure
to credit risk arises principally in relation to trade receivables
from customers and on short term bank deposits. Customers'
creditworthiness is wherever possible checked against independent
rating databases and filing authorities, or otherwise assessed on
the basis of trade knowledge and experience. Exposure and customer
credit limits are continually monitored both on specific debts and
overall.
The credit risk in relation to short term bank deposits is
limited because the counterparties are banks with good credit
ratings.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2022
32 . Financial instruments (continued )
The Group operates in certain geographical areas which are from
time to time subject to restrictions in the free movement of funds.
The Board seeks to minimise the Group's exposure to these markets
but the nature of our business makes it impossible to eliminate
this exposure completely.
None of those receivables has been subject to a significant
increase in credit risk since initial recognition and,
consequently, 12-month expected credit losses have been recognised,
and there are no non-current receivable balances lifetime expected
credit losses.
Currency risk
The Group operates in overseas markets particularly through its
subsidiaries in China, Brazil, Mexico, the USA and Japan as well as
its joint operation in Canada and is therefore subject to currency
exposure on transactions undertaken during the year. The Group does
some simple economic hedging of receivables when the Board feels it
is appropriate to do so and foreign exchange differences on
retranslation of foreign monetary items are recorded in
administrative expenses in the income statement.
The table below shows the extent to which the Group companies
have monetary assets and liabilities in currencies other than in
Sterling
US Dollar Euros Chinese RMB Japanese Brazilian Canadian Mexican Peso Other
Yen Real Dollar
2022 GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Trade and
other
receivables 9,027 2,068 6,789 123 1,964 806 2,648 108
Trade and
other
payables (3,912) (425) (4,701) (158) (97) (426) (350) (67)
Cash and
cash
equivalents 4,752 366 8,261 120 145 208 311 92
Total 9,867 2,009 10,349 85 2,012 588 2,609 133
========== ========= ============ ============ ============ ============ ============= =========
US Dollar Euros Chinese RMB Japanese Brazilian Canadian Mexican Peso Other
Yen Real Dollar
2021 GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Trade and
other
receivables 8,063 1,749 17,783 160 359 533 1,849 175
Trade and
other
payables (3,773) (757) (5,273) (64) (74) (498) (87) (134)
Cash and
cash
equivalents 2,331 248 14,140 271 1,165 305 217 58
Total 6,621 1,240 26,650 367 1,450 340 1,979 99
========== ========= ============ ============ ============ ============ ============= =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
32 . Financial instruments (continued )
At 31 March 2022 the Group was mainly exposed to the US Dollar,
Euro, Chinese RMB, Japanese Yen, Brazilian Real, Canadian Dollar
and Mexican Peso. The following table details the effect of a 10%
movement in the exchange rate of these currencies against sterling
when applied to outstanding monetary items denominated in foreign
currency as at 31 March 2022.
2022 2021
GBP000's GBP000's
U S Dollar 1,096 736
Euro 223 138
Chinese RMB 1,150 2,961
Japanese Yen 9 41
Brazilian Real 224 161
Canadian Dollar 65 38
Mexican Peso 290 220
Analysis of financial instruments by category
Group Financial Financial Total
assets liabilities
2022 GBP000's GBP000's GBP000's
Trade and other receivables 24,048 - 24,048
Cash and cash equivalents 14,314 - 14,314
Trade and other payables - (12,801) (12,801)
Amounts due under
leases - (1,910) (1,910)
2021 GBP000's GBP000's GBP000's
Trade and other receivables 31,526 - 31,526
Cash and cash equivalents 19,523 - 19,523
Trade and other payables - (12,416) (12,416)
Amounts due under
leases - (1,522) (1,522)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
32 . Financial instruments (Continued)
Analysis of financial instruments by category (continued)
Company
Financial Financial Total
assets liabilities
2022 GBP000's GBP000's GBP000's
Trade and other receivables 128 - 128
Cash and cash equivalents 279 - 279
Trade and other payables - (376) (377)
Amounts due under leases - (62) (62)
Amounts due from group undertakings 53,940 - 53,940
2021 GBP000's GBP000's GBP000's
Trade and other receivables 69 - 69
Cash and cash equivalents 819 - 819
Trade and other payables - (574) (574)
Amounts due under leases - (39) (39)
Amounts due from group undertakings 55,909 - 55,909
All financial assets and liabilities in the Group's and
Company's statements of financial position are classified as held
at amortised cost for both the current and previous year.
33. Post balance sheet events
Valuation of investment property in Mitcham
The Group agreed in principle to sell the investment property
located at Western road, Mitcham for around GBP227,000. As at 31
March 2022 the carrying value of the property has been reduced from
GBP305,000 to GBP227,000 with a corresponding expense in the
Group's income statement.
Retirement of the Chief Executive Officer and appointment of a
new Chief Executive Officer
Marc Loomes, who joined ECO Animal Health Group plc in 2004,
became Managing Director in 2005 and CEO in 2010, stepped down on 1
April 2022. David Hallas joined ECO Animal Health Group plc as CEO
on 1 April 2022.
Establishment of Revolving Credit Facility
The Group put in place a GBP10m revolving credit facility with
Natwest bank on 9 July 2022. This facility is interest bearing and
can be drawn by the Group on demand, The facility expires on 30
June 2026.
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END
FR DBGDIUSXDGDG
(END) Dow Jones Newswires
August 31, 2022 02:01 ET (06:01 GMT)
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