TIDMEAH
RNS Number : 2733H
Eco Animal Health Group PLC
23 November 2022
ECO Animal Health Group plc
("ECO" or the "Group") (AIM: EAH)
Results for the six months ended 30 September 2022
"In line with full year expectations"
HIGHLIGHTS
Financials
-- Group Sales at GBP34.9 million (H1 2021: GBP38.5 million)
- China and Japan sales declined to GBP8.5 million (H1 2021:
GBP15.7 million)
- Excluding China and Japan, revenues in aggregate increased by
16% to GBP26.4 million (H1 2021: GBP22.8 million)
-- Gross margins at 45% remained consistent with the prior year period
-- Adjusted EBITDA at GBP1.7 million (H1 2021 restated*: GBP3.4 million)
-- Profit before taxation of GBP3.0 million including a GBP2.6
million foreign exchange gain (H1 2021 restated profit*: GBP0.5
million, including GBP0.3 million gain)
-- Earnings per share of 1.96p (H1 2021: restated loss per share*: (0.92)p)
-- Cash generated by operations of GBP3.0 m (H1 2021 restated*: GBP6.1 m)
* Prior period figures have been restated to reflect adjustments
arising from the March 2022 audit
Operations
-- Sales in Latin America increased by 25% to GBP7.9 million (H1 2021: GBP6.3 million)
-- Sales in South and Southeast Asia increased by 23% to GBP7.4
million (H1 2021: GBP6.0 million)
-- China revenue represented 24% of total Group revenues (H1
2021: 41%) which declined significantly as a result of reduced
sales from the Group's largest customers in the region and
continued impact of COVID restrictions
-- New R&D collaborations with Imperial College for saRNA
technology and Moredun Research Institute for the development of a
poultry red mite vaccine
-- Two Mycoplasma vaccines for poultry expected to be submitted
for regulatory approval in late 2023 and early 2024
Dr Andrew Jones, Non-Executive Chairman of ECO Animal Health
Group plc, commented:
"We are delighted with the continuing growth in all markets
outside of China and the increasing market penetration experienced
by Aivlosin(R) in its multiple formulations. The China swine
industry has been slow during the first half of this year; the
socio-economic reasons for this are well publicised and understood.
Nevertheless, we are pleased to retain our strong market position
and we expect a return to healthy markets in China during the
course of this next year.
We are excited by the progress in our new product developments
and it is particularly pleasing that some ground breaking
technologies are being explored in new collaborations announced in
the last few months. We are on track for submission of our new
Mycoplasma poultry vaccines at the end of 2023 and we expect
marketing approval to be received shortly afterwards. The rest of
the portfolio is demonstrating good progression.
Our recent annual strategy review endorsed the vision,
objectives and direction for the Group and we look forward with
cautious optimism to reporting the full year numbers in line with
market expectations."
Contacts:
ECO Animal Health Group plc
David Hallas (CEO)
Christopher Wilks (CFO) 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
Daniel Adams
Carlo Spingardi 020 7597 5970
Equity Development
Hannah Crowe
Matt Evans 020 7065 2692
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"). Upon the publication of
this announcement via a Regulatory Information Service ("RIS"), this
inside information is now considered to be in the public domain.
About ECO Animal Health
ECO Animal Health Group plc researches, develops and commercialises
products for livestock. Our business strategy is to generate shareholder
value by achieving the maximum sales potential from the existing product
portfolio whilst investing in research and development ("R&D") for new
products, particularly vaccines, and seeking to in-license new products.
Chairman's statement
I am pleased to present the results for the Group for the six
months ended 30 September 2022 ("H1 2022"). During the first half
of our financial year, we experienced positive sales momentum in
all our major markets outside of China. Furthermore, our very
promising new product development pipeline is progressing well
towards product registration.
Financial Performance
Group revenue was 9% lower in H1 2022 at GBP34.9 million (H1
2021: GBP38.5 million), as a result of a decline in revenues from
China. China and Japan revenue of GBP8.5 million represented 24% of
Group revenue (H1 2021: 41%). Excluding China and Japan, revenue
from other markets grew by 16%, in aggregate, to GBP26.4 million
(H1 2021: GBP22.8 million).
The gross margin in H1 2022 was 45% (H1 2021: 45%). Despite the
significant reduction in higher margin China revenues, gross
margins were maintained as a result of favourable exchange rates
and cost control within the Group.
Administrative expenses at GBP11.9 million were 9% higher than
the comparative period last year (H1 2021: GBP10.9 million). This
arose from further investment in sales and marketing, a return to
travel after the easing of COVID restrictions and a
reclassification of technical support costs previously included as
an R&D expense (in the H1 2021 results) but now shown as
administrative expenses.
Research and development ("R&D") expenses shown in the
income statement together with the amounts capitalised were in
aggregate a cash investment of GBP4.2 million (H1 2021: GBP4.0
million); for comparative purposes this represented 12.0% of
revenue generated in the period (H1 2021: 10.4%).
Earnings before interest, tax, depreciation, amortisation and
impairment, share based payments and foreign exchange movements
("Adjusted EBITDA") were GBP1.7 million (H1 2021 restated: GBP3.4
million). This reduction was due to the fall in revenues in
China.
Cash generated from operations was GBP3.0 million (H1 2021
restated: GBP6.1 million). Improved receivables and management of
payables partly offset the reduced profitability in the period.
This cash generation after allowing for tax payments of GBP1.0
million, resulted in cash balances at the period end of GBP12.9
million (31 March 2022: GBP14.3 million), of which GBP4.0 million
(31 March 2022: GBP6.1 million) was held in the Group's 51% owned
subsidiary in China. The Group repatriates cash from China by
dividend declaration, accordingly only 51% is received by the Group
and is subject to withholding taxes. Additionally, the Group has a
wholly owned subsidiary in China, the cash in this company is
repatriated annually by dividend. On a day-to-day basis, the Board
considers the cash held in the Group's joint venture subsidiary in
China to be unavailable to the Group outside of China; accordingly,
cash management and funds available for investment in R&D is
based upon the cash balances outside of the China JV, which at 30
September 2022 was GBP8.9 million (31 March 2022: GBP8.2
million).
Subsequent to the period end, two dividends totalling GBP5.7
million were received from China.
The Group's committed banking facilities remain at GBP15.0
million, being a GBP5.0 million overdraft facility and a GBP10
million revolving credit facility. These facilities expire on 30
June 2026 and were undrawn as at 30 September 2022.
Basic EPS in the six months ended 30 September 2022 was 1.96p
(H1 2021 restated: loss per share 0.92p). EPS benefited from the
exchange rate gain reported in the period of GBP2.6 million (H1
2021: GBP0.3 million) and the prior period loss per share was
adversely affected by the impairment of intangible assets recorded
in the six months ended 30 September 2021. The dilutive effect of
unexercised share options has reduced earnings per share to 1.95p
in the six months ended 30 September 2022 (H1 2021 restated: no
change).
Business Performance
The geographical analysis of the Group's revenue in the six
months ended 30 September 2022 compared to the prior period in 2021
and the full year ended 31 March 2022 was as follows:
6 months ended 30
Revenue Summary September Year ended
H1 2022
vs H1 31 March
2022 2021 2021 2022
(GBP'm) (GBP'm) % Change (GBP'm)
China and Japan 8.5 15.7 (46%) 28.4
North America (USA and
Canada) 6.5 6.0 8% 16.4
South and Southeast Asia 7.4 6.0 23% 11.8
Latin America 7.9 6.3 25% 15.8
Europe 2.9 2.9 - 6.4
Rest of World and UK 1.7 1.6 6% 3.4
Total Group 34.9 38.5 (9%) 82.2
---------------------------- --------- --------- --------- -----------
Group revenue reduced by 9% to GBP34.9 million (H1 2021: GBP38.5
million). The overall reduction in Group revenue in the six months
ended 30 September 2022 was caused by a 46% reduction in revenue
from China and Japan; excluding China and Japan revenues in
aggregate increased by 16% to GBP26.4 million (H1 2021: GBP22.8
million). Travel restrictions during H1 2022 were largely lifted in
most of the Group's markets, with the exception of China, enabling
sales and marketing efforts to return to the in-person support that
has historically characterised the Group's approach to its
customers and market place.
As previously indicated, trading in China was subdued during the
first quarter of the current financial year and therefore the
Board's outlook for the Chinese market in 2022 was cautious. Many
of the Group's larger customers needed to repair their respective
balance sheets which had been damaged by extended periods of
trading at a loss and reduced their purchases of Aivlosin(R) in the
period. However, the Group enjoyed good trading with its mid-tier
customers in China who, in the main, were less expansive during the
re-stocking phase in 2020/2021. We also noted in our Annual Report
and Accounts for the year ended 31 March 2022 that the pork to
grain price ratio had for the first time in over a year risen above
5 in August; the China National Reform and Development Commission
reported that the ratio on 16 November 2022 was 8.78. This provides
the Board with some optimism for improved trading conditions in
China.
Revenue in North America, in particular the USA, has been
broadly consistent; farm hog prices in the USA and Canada have been
generally stable throughout 2022 and this has resulted in
continuing strong market conditions. Aivlosin(R) continues to gain
market share.
The growth seen in Southeast Asia during the last three or four
years has continued during 2022. The poor poultry market in India
in recent years has recovered with revenue increasing to GBP2.2
million (H1 2021: GBP0.4 million). Thailand remained the largest
single market for the Group's products in this region with revenue
increasing to GBP3.5 million (H1 2021: GBP4.0 million), supported
with good sales into Pakistan, Malaysia and Vietnam of GBP1.6
million (H1 2021: GBP1.6 million).
Revenue in Latin America grew 25% to GBP7.9 million (H1 2021:
GBP6.3 million), with Brazil representing the largest market at
GBP4.2 million (H1 2021: GBP3.0 million). Brazil's exports of pork
to China continued strongly during the period providing strong
demand for Aivlosin(R). Mexico revenue in H1 2022 was GBP0.5
million higher than the equivalent period last year and the
remaining counties in Latin America were broadly consistent year on
year.
Revenue derived from Europe was consistent at GBP2.9 million.
Within the continent, Spain remained the largest single market with
revenues of GBP1.0 million in the six months ended 30 September
2022 (H1 2021: GBP1.1 million) .
Research and development
Work on the Group's promising pipeline of new products has
continued at pace during the first half of this financial year with
GBP4.2 million (H1 2021: GBP4.0 million) spent during the period.
This is in line with plan and the first two Mycoplasma vaccines for
poultry are expected to be submitted for regulatory approval in
late 2023 and early 2024, with marketing authorisation expected to
be gained shortly thereafter.
In June 2022 we announced a very exciting collaboration with
Imperial College to assess the veterinary application of
self-amplifying RNA technology. This technology represents the next
generation of RNA delivered medicines and is particularly
interesting for veterinary medication because it implies fewer
doses, lower dose rates, a broader range of applications and cost
savings for the producer compared with conventional mRNA
approaches. Work is underway on key proof of concept studies.
In July 2022 the Group signed a partnership agreement with the
Moredun Research Institute to research and develop an effective
first in class vaccine solution for the sustainable control of
poultry red mite ("PRM"). Red mite infestation in poultry is one of
the emerging and important causes of production losses in laying
hens and has a major impact on animal welfare. Poultry red mites
also serve as vectors for several disease-causing bacteria and
viruses in poultry. Their ubiquitous presence threatens the poultry
industry globally, as there are no effective non-chemical solutions
available for the prevention of PRM infestation in poultry. If this
programme is successful, ECO may take the option of developing,
registering and commercialising the vaccine under a worldwide
exclusive license from the Moredun Research Institute.
Management plans to hold another Capital Markets Day during the
first quarter of 2023 during which an update will be provided on
the new product development portfolio.
Strategy
During the Autumn, the leadership team and the Board undertook a
refresh of the Group's strategy. This involved an analysis of the
vision for the Group, and assessment of the key internal and
external elements available to the Group to achieve this vision, as
well as an appraisal of the risks and threats to the success of the
strategy. The exercise endorsed the Group's direction: to maximise
the commercial opportunity in the Group's existing products, to
bring forward the exciting array of new vaccine and biologicals
products programmes, continuing to focus on swine and poultry. The
Group is open to and will pursue further collaboration including
technical partnering, licensing and M&A activity.
Dividend
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. It has however
decided that the best use of the Group's cash is in the new product
development initiatives and accordingly no dividend is recommended
at the current time.
Auditors
The Company announced on 14 November 2022 that BDO resigned as
auditors to the Group and we are delighted to have appointed
Haysmacintyre LLP to be the Group's auditors. Transitionary
arrangements are underway, and we look forward to their first audit
for the year ending 31 March 2023.
Change of advisers
The Group also announces that from 23 November 2022, Singer
Capital Markets and Investec, will be retained and will act as the
Group's nominated adviser and joint broker, and joint broker,
respectively.
Outlook
The China pork price has improved from less than CNY13/kg in
March 2022 to in excess of CNY27/kg by the end of October 2022.
This increase in pork price prompted the Ministry of Agriculture to
release frozen pork onto the market ahead of the National Day on 1
October - the first time it has done so during 2022. The Group has
experienced improving trading conditions in China with October's
revenue greater than any other month recorded during this financial
year. Whilst this is a promising start to the second half, we
remain cautious on China's revenue recovery until January 2023 and
the period of strong pork demand associated with Chinese New Year
and national holidays. The containment policy in relation to COVID
also provides short term reason to be cautious regarding pork
demand.
We expect continuing growth in our markets outside of China.
Seasonally occurring disease is anticipated to drive demand in the
second half of the financial year. This seasonal effect, together
with expected stronger trading in China in our fourth quarter is
expected to result in the customary second half weighting to our
revenue. In the event Sterling weakness continues, this would
provide further upside in revenue opportunity. Cost control in
relation to manufacturing costs has served us well during 2022 and
we are cautiously optimistic in relation to the 2023 contractual
price negotiations.
The Board is excited about the continuing results from our new
product development programme and we look forward to providing an
update at a Capital Markets Day in the first quarter next year.
We look forward with cautious optimism to reporting the full
year numbers in line with market expectations.
Dr Andrew Jones
Non-Executive Chairman
23 November 2022
CONSOLIDATED INCOME STATEMENT
Six months Six months Year ended
to 30.09.22 to 30.09.21 31.03.22
Notes (unaudited) (unaudited) (audited)
GBP000's GBP000's GBP000's
Restated*
Revenue 4 34,859 38,474 82,195
Cost of sales (19,063) (21,335) (47,059)
------------ ------------ -----------
Gross Profit 15,796 17,139 35,136
Other income 242 16 65
Administrative expenses (11,884) (10,852) (22,421)
Research and development expenses (2,923) (3,309) (8,762)
Foreign exchange gains 2,573 274 989
Amortisation of intangible assets (546) (586) (1,140)
Share based payments (175) (83) (342)
Impairment of intangible assets 8 - (2,085) (2,085)
Profit from operating activities: 3,083 514 1,440
Net finance cost (95) (89) (94)
Share of profit of associate 51 47 43
Profit before income tax 3,039 472 1,389
Income tax charge 7 (929) (828) (2,094)
------------ ------------ -----------
Profit/(loss) for the period 2,110 (356) (705)
============ ============ ===========
Attributable to:
Owners of the parent company 1,325 (621) (686)
Non-controlling interest 785 265 (19)
------------ ------------ -----------
2,110 (356) (705)
============ ============ ===========
Basic earnings per share (pence) 6 1.96 (0.92) (1.01)
Diluted earnings per share (pence) 6 1.95 (0.92) (1.01)
Earnings before interest, taxation,
depreciation,
amortisation and share based payments
(EBITDA) 4,243 1,593 6,395
Exclude foreign exchange differences
and impairment (2,573) 1,811 (989)
------------ ------------ -----------
Adjusted EBITDA 1,670 3,404 5,406
============ ============ ===========
*Details of the restatement, which is unaudited, are presented
in note 3.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year ended
to 30.09.22 to 30.09.21 31.03.22
(unaudited) (unaudited) (audited)
GBP000's GBP000's GBP000's
Restated*
Profit/(loss) for the period 2,110 (356) (705)
Other Comprehensive income/(loss) (net
of related tax effects):
Items that will or may be reclassified
to profit/(loss):
Foreign currency translation differences 276 136 2,195
Items that will not be reclassified:
Deferred tax on property revaluations - 2 1
Defined benefit plan - actuarial losses - - 24
Other comprehensive income/(loss) for
the period 276 138 2,220
Total comprehensive income for the period 2,386 (218) 1,515
Attributable to:
Owners of the parent Company 1,506 (560) 435
Non-controlling interest 880 342 1,080
*Details of the restatement, which is unaudited, are presented
in note 3.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Revaluation Other Foreign Retained Total Minority Total
Capital Premium Reserves Reserves Exchange Earnings Interest Equity
Account Account Reserve
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
FOR THE YEARED
31 MARCH 2022
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/(loss)
for
the year - - 1 - 1,096 (662) 435 1,080 1,515
--------- --------- ------------ --------- --------- ---------- --------- --------- ---------
Transactions
with
owners
recorded
directly
in equity:
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
========= ========= ============ ========= ========= ========== ========= ========= =========
FOR THE SIX
MONTHSED 30
SEPTEMBER
2022
Profit for the
period - - - - - 1,325 1,325 785 2,110
Other
comprehensive
income:
Foreign
currency
differences - - - - 181 - 181 95 276
Total
comprehensive
income for
the period - - - - 181 1,325 1,506 880 2,386
Transactions
with
owners
recorded
directly
in equity:
Issue of - - - - - - - - -
shares in
the period
Share-based
payments - - - - - 175 175 - 175
Dividends - - - - - - - (1,810) (1,810)
Total
transactions
with owners - - - - - 175 175 (1,810) (1,635)
--------- --------- ------------ --------- --------- ---------- --------- --------- ---------
Balance as at
30
September
2022 3,381 63,319 657 106 2,369 13,913 83,745 11,354 95,099
========= ========= ============ ========= ========= ========== ========= ========= =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Foreign
Capital Premium Revaluation Other Exchange Retained Minority Total
Account Account Reserves Reserves Reserve Earnings Total Interest Equity
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
FOR THE YEARED
31 MARCH 2021
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
(restated) - - - - 292 - 292 (281) 11
Deferred tax
on property
revaluations - - 84 - - - 84 - 84
Actuarial
losses 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
recorded
directly
in equity:
Issue of
shares in
the year 2 376 - - - - 378 - 378
Share-based
payments - - - - - 123 123 - 123
Deferred tax
on share-based
payments - - - - - - - - -
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
========= ========= ============ ========= ========= ========== ========= ========= =========
FOR THE SIX
MONTHSED 30
SEPTEMBER
2021
(Loss)/profit
for
the period -
*restated - - - - - (621) (621) 265 (356)
Other
comprehensive
income:
Foreign
currency
differences
(restated) - - - - 59 - 59 77 136
Deferred tax
on property
revaluations - - 1 - - - 1 - 1
Total
comprehensive
income for
the period - - 1 - 59 (621) (561) 342 (219)
--------- --------- ------------ --------- --------- ---------- --------- --------- ---------
Transactions
with
owners
recorded
directly
in equity:
Issue of
shares in
the period 2 61 - - - - 63 - 63
Share-based
payments - - - - - 83 83 - 83
Total
transactions
with owners 2 61 - - - 83 146 - 146
--------- --------- ------------ --------- --------- ---------- --------- --------- ---------
Balance as at
30
September
2021 -
restated* 3,381 63,319 657 106 1,151 12,872 81,486 13,756 95,242
========= ========= ============ ========= ========= ========== ========= ========= =========
*Details of the restatement, which is unaudited, are presented
in note 3.
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
As at As at As at
30.09.22 30.09.21 31.03.22
(unaudited) (unaudited) (audited)
Notes GBP000's GBP000's GBP000's
Restated*
Non-current assets
Intangible assets 8 35,058 34,126 34,304
Property, plant and equipment 4,835 2,220 3,465
Investment property 227 305 227
Right-of-use assets 1,635 1,275 1,773
Investments 264 229 212
Deferred tax assets 523 352 523
Total non-current assets 42,542 38,507 40,504
Current assets
Inventories 32,853 26,492 30,142
Trade and other receivables 24,832 27,252 25,969
Income tax recoverable 1,598 3,358 1,596
Other taxes and social security 801 748 1,075
Cash and cash equivalents 12,883 22,892 14,314
Total current assets 72,967 80,742 73,096
Total assets 115,509 119,249 113,600
Current liabilities
Trade and other payables (13,242) (18,466) (12,954)
Provisions (4,512) (2,333) (3,875)
Income tax (351) (1,683) (224)
Other taxes and social security (481) (47) (239)
Amounts due under leases (97) (874) (397)
Dividends (50) (50) (50)
------------ -------------- ----------
Total current liabilities (18,733) (23,453) (17,739)
------------ -------------- ----------
Net current assets 54,234 57,289 55,357
------------ -------------- ----------
Total assets less current liabilities 96,776 95,796 95,861
Non-current liabilities
Amounts due under leases (1,677) (554) (1,513)
------------ -------------- ----------
Total assets less total liabilities 95,099 95,242 94,348
------------ -------------- ----------
Equity
Capital and reserves
Issued share capital 3,381 3,381 3,381
Share premium account 63,319 63,319 63,319
Revaluation reserve 657 657 657
Other reserves 106 106 106
Foreign exchange reserve 2,369 1,151 2,188
Retained earnings 13,913 12,872 12,413
Shareholders' funds 83,745 81,486 82,064
Non-controlling interests 11,354 13,756 12,284
Total equity 95,099 95,242 94,348
============ ============== ==========
*Details of the restatement, which is unaudited, are presented
in note 3.
CONSOLIDATED STATEMENT OF CASH
FLOWS
Six months Year ended
to 30.09.22 to 30.09.21 31.03.22
(unaudited) (unaudited) (audited)
GBP000's GBP000's GBP000's
Restated*
Cash flows from operating activities
Profit/(loss) before income tax 3,039 472 1,389
Adjustment for: - - -
Finance income (42) (83) (190)
Finance cost 137 172 284
Foreign exchange (gain)/loss (2,573) (654) (989)
Depreciation 162 215 455
Amortisation of right-of-use assets 196 198 398
Revaluation of investment property - - 78
Amortisation of intangible assets 546 586 1,140
Impairment of intangible assets - 2,085 2,085
Share of associate's results (51) (47) (43)
Share based payment charge 175 83 342
Operating cash flows before movements
in working capital 1,589 3,027 4,949
Change in inventories (1,671) (5,660) (8,585)
Change in receivables 4,153 5,217 7,630
Change in payables (1,593) 3,091 (2,868)
Change in provisions 502 376 1,392
Cash generated from operations 2,980 6,051 2,518
Finance costs (71) (68) (106)
Income tax (1,039) (2,288) (2,960)
Net cash from/(used in) operating
activities 1,870 3,695 (548)
------------ ------------ -----------
Cash flows from investing activities
Acquisition of property, plant and
equipment (1,255) (223) (1,624)
Disposal of property, plant and
equipment - 1 3
Purchase of intangibles (1,300) (689) (1,263)
Finance income 40 83 190
Net cash (used in)/from investing
activities (2,515) (828) (2,694)
------------ ------------ -----------
Cash flows from financing activities
Proceeds from issue of share capital - 62 63
Interest paid on lease liabilities (67) (67) (111)
Principal paid on lease liabilities (202) (195) (371)
Dividends paid (1,810) - (2,886)
Net cash (used in)/from financing
activities (2,079) (200) (3,305)
Net increase/(decrease) in cash
and cash equivalents (2,724) 2,667 (6,547)
Foreign exchange movements 1,293 702 1,338
Balance at the beginning of the
period 14,314 19,523 19,523
Balance at the end of the period 12,883 22,892 14,314
============ ============ ===========
*Details of the restatement, which is unaudited, are presented
in note 3.
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30
SEPTEMBER 2022
1. Basis of preparation
The financial information for the period to 30 September 2022
does not constitute statutory accounts as defined by Section 435 of
the Companies Act 2006. It has been prepared in accordance with the
accounting policies set out in, and is consistent with, the audited
financial statements for year ended 31 March 2022.
The Group applies revised IAS 1 "Presentation of Financial
Statements (2007)". As a result, the Group presents all non-owner
changes in equity in consolidated statements of comprehensive
income and all owner changes in equity in consolidated statements
of changes in equity.
This Interim Statement has not been audited or reviewed by the
Group's auditors.
2. Statement of compliance
This Interim Statement is prepared in accordance with IAS 34
"Interim Financial Reporting". Accordingly, whilst the Interim
Statement has been prepared in accordance with IFRS, and the
primary statements follow the format of the annual financial
statements, only selected notes are included - those that provide
an explanation of events and transactions that are significant to
an understanding of the changes in financial position and
performance of the Group since the last annual reporting date. IAS
34 states a presumption that anyone who reads the Group's Interim
Statement will also have access to its most recent annual report.
Accordingly, annual disclosures are not repeated in this Interim
Statement.
3. Changes to significant accounting policies and other restatements
The principal accounting policies which are adopted by the Group
in the preparation of its financial statements are set out in in
the consolidated financial statements of the Group for the year
ended 31 March 2022. These policies have been consistently applied
to all prior years. Where necessary, and as detailed in the
consolidated financial statements of the Group for the year ended
31 March 2022, any corrections to the application of the Group's
accounting policies to comply with International Financial
Reporting Standards have been made as restatements of prior period
financial statements for the correction of errors in accordance
with IAS8 . The Group's accounting policies have been consistently
applied in accordance with IFRS continued into the six months ended
30 September 2022.
For the March 2022 Annual Report and Accounts, the Group became
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 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 seven 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.
Full details are given in the Annual Report and Accounts for the
year ended 31 March 2022, but the financial effect on the interim
consolidated financial statements is summarised below.
Impact on the Balance Sheet and Income Statement
Balance sheet As reported Adjustment Adjustment As restated
as at to reserves through as at
30.09.21 Income Statement 30.09.21
Net assets: GBP000's GBP000's GBP000's GBP000's
Deferred tax assets 134 287 (69) 352
Provisions - (1,921) (412) (2,333)
Reserves:
Foreign exchange reserve 726 425 - 1,151
Retained earnings 15,412 (2,059) (481) 12,872
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30
SEPTEMBER 2022 (Continued)
3. Changes to significant accounting policies and other restatements (continued)
Income Statement As reported Adjustment As restated
for 6 months for 6 months
ended 30.09.21 ended 30.09.21
GBP000's GBP000's GBP000's
Cost of sales (20,959) (376) (21,335)
Net finance cost (53) (36) (89)
Income tax (759) (69) (828)
4. Revenue is derived from the Group's animal pharmaceutical businesses.
5. Principal risks and uncertainties
The principal risks and uncertainties relating to the Group were
set out on pages 20-22 of the Group's Annual Report and Accounts
for the year ended 31 March 2022. The key exposures are to foreign
currency exchange rates, potential delays in obtaining marketing
authorisations, single sources of supply for some raw materials,
disease impact on growth, and trade debtor recovery and have
remained unchanged since the year end.
6. Earnings per share
Six months Six months Year ended
to 30.09.22 to 30.09.21 31.03.22
(unaudited) (unaudited) (audited)
Restated
Weighted average number of shares in issue
(000's) 67,722 67,712 67,717
Fully diluted weighted average number of
shares in issue (000's) 68,071 67,712 67,717
Profit/(loss) attributable to equity holders
of the company (GBP000's) 1,325 (621) (686)
Basic earnings/(loss) per share (pence) 1.96 (0.92) (1.01)
Diluted earnings/(loss) per share (pence) 1.95 (0.92) (1.01)
Diluted earnings per share takes into account the dilutive
effect of share options. As the Group's result for the six months
ended 30 September 2021 and the year ended 31 March 2022 were
losses, there was no dilutive effect on the earnings per share in
those periods.
7. Taxation
The effective rate of the tax charge in the six months to 30
September 2022 is 31%, which is lower than the effective rate in
the six months to 30 September 2021 of 175%. This reflects
non-deductible tax expenses during the prior period, of which the
impairment of intangibles was the most significant.
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30
SEPTEMBER 2022 (Continued)
8. Intangible non-current assets
Group Goodwill Distribution Drug registrations, Total
rights patents
and licence
costs
GBP000's GBP000's GBP000's GBP000's
Cost
At 1 April 2021 17,930 407 23,963 42,300
Additions - - 689 689
Impairment - - (2,092) (2,092)
--------- ------------- -------------------- ---------
At 30 September 2021 17,930 407 22,560 40,897
Additions - - 732 732
--------- ------------- -------------------- ---------
At 31 March 2022 17,930 407 23,292 41,629
Additions - - 1,300 1,300
At 30 September 2022 17,930 407 24,592 42,929
========= ============= ==================== =========
Amortisation
At 1 April 2021 - 139 6,053 6,192
Charge for the period - 9 577 586
Written back on impairment - - (7) (7)
--------- ------------- -------------------- ---------
At 30 September 2021 - 148 6,623 6,771
Charge for the period - 10 544 554
--------- ------------- -------------------- ---------
At 31 March 2022 - 158 7,167 7,325
Charge for the period - 10 536 546
At 30 September 2022 - 168 7,703 7,871
========= ============= ==================== =========
Net Book Value
At 30 September 2022 17,930 239 16,889 35,058
========= ============= ==================== =========
At 31 March 2022 17,930 249 16,125 34,304
========= ============= ==================== =========
At 30 September 2021 17,930 259 15,937 34,126
========= ============= ==================== =========
At 1 April 2021 17,930 268 17,910 36,108
========= ============= ==================== =========
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 period to September 2021 there were indications
that certain development projects for which costs have previously
been capitalised were unlikely to achieve technical success or
commercial viability. The capitalised costs in respect of these
projects were impaired through the income statement during the
period to 30 September 2021.
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30
SEPTEMBER 2022 (Continued)
This financial information was approved by the board on 23
November 2022.
This interim statement is available on the Group's website.
DIRECTORS AND OFFICERS Andrew Jones (Non-Executive Chairman)
David Hallas (Chief Executive)
Chris Wilks (Chief Financial Officer)
Tracey James (Non-Executive Director)
Frank Armstrong (Non-Executive Director)
REGISTERED OFFICE 78 Coombe Road, New Malden, Surrey, KT3 4QS
Tel: 020 8447 8899
COMPANY NUMBER 01818170
INFORMATION AT www.ecoanimalhealthgroupplc.com
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