TIDMEAH
RNS Number : 9847N
Eco Animal Health Group PLC
04 February 2021
ECO Animal Health Group plc ("ECO")
(AIM: EAH)
Results for the year ended 31 March 2020
ECO REPORTS A RESILIENT PERFORMANCE
HIGHLIGHTS
Financials
-- Sales 7% higher at GBP72.1m (2019 restated: GBP67.3m)
-- Gross margin consistent to within 1% (2020 46%, 2019 47%)
-- Increased R&D investment results in adjusted EBITDA 33%
lower at GBP8.4m (2019 restated: GBP12.5m)
-- Earnings per share 65% lower at 3.82p (2019 restated: 10.86p)
-- Strong cash generation from operations of GBP5.5m (2019 restated: GBP7.1m)
-- New product development expenditure 17% higher at GBP10.9m (2019 GBP9.3m)
-- Net cash lower at GBP9.8m (2019 restated: GBP16.9m)
Operations
-- Demand for Aivlosin(R) continued to grow strongly, with two
new marketing authorisations gained in Europe and Indonesia for
breeding chickens and laying chickens, respectively.
-- Strong revenue in China in second half as market recovers
from worst effects of African Swine Fever (ASF).
-- Sales growth and margin recovery in the USA as trade tensions
between the USA and China recede.
-- Two new poultry vaccine collaborations signed during the year with the Pirbright Institute.
-- Transition to remote working and COVID-19 safe working seamless and uninterrupted
-- Continued corporate governance improvements.
Marc Loomes, CEO of ECO Animal Health Group plc, commented:
"These results reflect a solid recovery in our key markets,
particularly in the second half of the year and we have continued
our investment at record levels in new product development. We are
proud of the Group's ability to seamlessly adapt to safe working
during the Coronavirus pandemic. We are confident that our
development programmes will deliver exciting new products which
will augment the natural growth from current products and sustain
long term growth. For the year ahead we expect to report profitable
growth and to perform in line with the market expectations."
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.
This announcement is the entire text of the Annual report and
Accounts for Eco Animal Health Group plc, except for the Corporate
Governance Report, Directors Report and Strategic Report. The
Annual Report is published today in its entirety on the Company's
website at https://www.ecoanimalhealthgroupplc.com
Contacts:
ECO Animal Health Group plc
Marc Loomes (CEO)
Christopher Wilks (CFO)
Andrew Jones (Chairman) 020 8447 8899
IFC Advisory
Graham Herring
Zach Cohen 020 3934 6630
N+1 Singer (Nominated Adviser & Joint Broker)
Mark Taylor
Iqra Amin 020 7496 3000
Peel Hunt LLP (Joint Broker)
James Steel
Dr Christopher Golden 020 7418 8900
ECO Animal Health Group plc ("ECO" or "the Group") 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
FOR THE YEARED 31 MARCH 2020
This has been a challenging year for our business. The
combination of the ASF outbreak in Asia and the USA trade war with
China particularly impacted our business in the first half of the
year, although this was partly offset by very strong performance in
other parts of the world. Performance in the second half of the
year saw substantial recovery in revenues from the USA and China.
The net result was revenue ahead of the prior year but below our
internal budget.
The ECO Board is confident that our R&D portfolio has the
potential to deliver major value to our shareholders and so despite
the lower than budget top line revenue, we decided to maintain the
budgeted increased investment in R&D to keep our portfolio
progressing towards commercialisation.
This has resulted in a reduction in our immediate profits in the
2019-20 year, but we are confident this will be more than offset by
the growth in long term value of the company through progression of
our R&D portfolio.
We have decided not to pay a dividend for the financial year
2019-20 in order to maintain cash reserves at a prudent level,
particularly in the light of the economic uncertainty arising from
the COVID-19 pandemic, and to build value by continued investment
in key R&D programs.
The Board places the highest priority on good corporate
governance. We have taken several actions in this important area
during the year:
-- We appointed new auditors and undertook a major revision of
the application of accounting standards across our business and we
are now confident that our approach is fully compliant and reflects
best practice.
-- We recruited a new, highly experienced CFO and have
significantly expanded and strengthened the finance team. We have
also established an internal audit capability.
We have worked with a major city advisor to thoroughly review
our key codes and policies and procedures and to institute training
programs where needed.
We made significant changes at Board level during the year
including the addition, shortly after the year end, of a new and
highly experienced Non-Executive Director. The board now has a good
base of experience and skills to lead the Company from the current
period of challenge and change through its next stage of
development and value-based growth.
We are disappointed that the release of our annual results was
delayed due to the scale of work needed for the audit combined with
the restrictions in working associated with COVID-19, but believe
it was essential to enable completion of an extensive and thorough
review of our accounting policies and statements with our new
auditors.
This is my first statement as Chairman, having succeeded Richard
Wood in August 2019; I am grateful for his leadership and
implementing various change initiatives.
I started my report by noting that is has been a challenging
year for the Company. I am hugely grateful for how the Board,
Executive and wider ECO team have risen to the challenges,
delivered a strong performance considering the conditions and have
kept motivation and energy to keep ECO moving and developing value.
Finally, I sincerely thank our shareholders for their patience and
much valued strong support through this period.
Current trading and prospects
Performance in the current financial year ending 31 March 2021
has been strong with the strength seen in both our Chinese and US
markets towards the end of the last financial year continuing into
the current financial year. In October 2020, we announced that the
revenue performance in the first six months of the current
financial year was "significantly ahead of management expectations
and the prior year". We also advised that notwithstanding the
historical second half weighting to the Group's revenue, if these
revenue trends continued through the second half of the financial
year the Board expected that the Group's full year revenue for the
year ending 31 March 2021 would exceed market expectations. This
resulted in an upgraded market expectation both for revenue and
profitability
On 24 November 2020 we confirmed that strong trading had
continued during November and, being mindful of the continuing
global uncertainties and four months remaining until the end of the
financial year, we were confident of meeting the upgraded market
expectations.
On 21 January 2021 we issued a positive trading update,
confirming Group revenues and EBITDA were expected to be
significantly ahead of market expectations for the year ending 31
March 2021. We noted that the strength in the Chinese market,
supported by the rebuilding of pig herds and the high price for
pork, continued through the third quarter and the outlook for the
final quarter sales continued these strong trading trends.
We look forward to the rest of this financial year and our
reporting prospects for 2021 with continuing optimism.
Dr Andrew Jones
Chairman
3 February 2021
CHIEF EXECUTIVE'S REPORT
FOR THE YEARED 31 MARCH 2020
I am pleased to report that ECO demonstrated considerable
fortitude during a particularly challenging year for the Company.
The impact of African Swine Fever (ASF) in China which then spread
into neighbouring territories, the ongoing tensions between
Washington and Beijing and the onset of the COVID-19 pandemic
presented significant challenges to the business. The
determination, dedication and resilience of our employees combined
with the value of our product offering delivered a strong second
half performance during the year ended 31 March 2020 with results
for the full year being in line with the adjusted market
expectations.
Operational Review
Global revenue grew by 7% to GBP72.1 million illustrating the
value of ECO's global footprint, with sales generated in more than
seventy countries, in the face of significant headwinds, and the
commoditised nature of pork and poultry production.
Sales of Aivlosin(R), our patented antimicrobial which is used
under veterinary prescription for the treatment of economically
important diseases in pigs and poultry, increased by 16%,
accounting for 84% of total revenue.
Sales of the smaller Ecomectin(R) anti-parasitic range at GBP4
million, increased by 7% and represented 6% of the Group
revenue.
Sales of all other products were GBP7.5 million (2019 - GBP11.4
million) and mainly comprised a range of supportive antimicrobial
products for pigs in China.
The China revenue from external customers declined by 17%
reflecting a year of two remarkably different periods. In December
2019, we reported for the six month period ended 30 September 2019
("Interims") that the well-publicised effects of the ASF outbreak
in China provided significant headwinds in our largest market whist
noting encouraging signs for the second half of the financial year
with a reported reduction in the rate of new ASF outbreaks in China
and an indication of some restocking of pig herds by certain high
value producers, including some of our customers. These early
encouraging signs were supported by rapidly rising pork prices
resulting in a strong second half ("H2") with revenue ahead of the
prior year. Our Chinese subsidiary has focused on the respiratory
health of replacement breeding sows whose numbers at the major
producers have increased rapidly in response to the pork shortage
and very high pork prices. The high value of these sows and their
offspring has enabled the subsidiary to secure the business of an
increasing number of key accounts.
Revenue in Japan rose by 16%, driven again by growth in the
swine business to large producers.
North American revenue from external customers increased by 10%
reflecting the growing importance of Aivlosin(R)'s low yet
effective dose rate and short treatment duration in medication
protocols as veterinarians and producers adhere to responsible use
of antimicrobial guidelines.
In the USA, revenue was 22% higher, reflecting a strong H2
performance. The first half had been marred by China-USA trade
tensions which had left US pig producers with limited ability to
capitalise on the anticipated export market created by the pork
shortage in China which led to overproduction of pigs with
depressed prices and margins. The strong H2 was marked by better
pork prices linked to global supply shortages brought about by ASF
in China, an increase in commercial activities by a strengthened
sales and technical team during the autumn and winter months armed
with adjusted customer incentive programmes for the year 2020.
Canadian revenue fell by 11% largely as a result of restrictions
imposed by China on Canadian pork imports. These restrictions were
lifted but the poor first half performance was not fully recovered
in the second half of the financial period.
Latin America revenue rose strongly by 17%, with the Brazilian
and the Mexican subsidiaries up 80% and 23% respectively,
reflecting the benefits of ECO's key account management approach
and the development of strong partnerships with local third party
distributors in these two key markets. Argentina delivered a record
result and important tenders were again won in Cuba although these
results were tempered by challenging market conditions in Central
America and other Latin American countries such as Columbia and
Peru.
In South and Southeast Asia, revenue was 75% higher. Thailand
was the best performing market with Aivlosin(R) on all major
account approved product lists resulting in both swine and poultry
revenue growth. New business was won in Malaysia resulting in
almost a doubling of sales over the prior year. These two
outstanding performances were moderated by extremely challenging
conditions in India, where the poultry market contracted
significantly amidst a transition to a more consolidated integrated
market with higher quality standards and away from an informal
market characterised by small producers, and in Vietnam and The
Philippines, both affected by ASF.
European revenue declined by 4%. Aivlosin(R) sales were strong
in key markets such as Spain and Poland although overall revenue
into continental markets fell slightly.
Sales in the United Kingdom, which represent just over 2% of
global revenue, rose 25%, across all products, led by strong
Aivlosin(R) sales during an outbreak of swine dysentery.
In Russia, an increasingly active exporter of meat, revenue was
affected by disease outbreaks in swine and in poultry although
market share gains were made with the most important customers. The
previously reported delays to the inspection of manufacturing
facilities and laboratories by the Russian authorities have been
resolved.
Sales in the Rest of the World declined by half a million pounds
to GBP1.2million reflecting in equal parts a declining presence in
South Africa and softer demand in Middle East and North Africa.
Product Research and Development
The Company's early stage research and proof of concept
development activities are outsourced to leading research
institutions and universities with later stage full development
work managed in-house. This model mitigates the significant costs
associated with in-house laboratories and owned research
functions.
Product Approvals
Two Aivlosin(R) for poultry marketing authorisations were
received. The first, from the European Medicines Agency (EMA),
allowed ECO to market Aivlosin(R) 625 mg/g Water Soluble Granules
in Europe for the treatment and metaphylaxis (control) of
respiratory infections caused by Mycoplasma gallisepticum in
breeding chickens, whilst the second allows the use of the same
Aivlosin(R) formulation in chickens laying eggs for human
consumption, with a zero day drug withdrawal period for eggs in
Indonesia the most important market in Southeast Asia for laying
birds. The Aivlosin(R) approval for high value breeding chickens
will, like the commercial layer indication, be rolled out to the
multi-million dollar international poultry markets.
Pipeline
ECO 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. Two worldwide exclusive research
partnerships with The Pirbright Institute, United Kingdom were
signed in September 2019 to develop novel poultry vaccines against
respiratory and systemic viral diseases in commercial chicken
flocks globally. Several additional new proprietary concepts and
third-party opportunities entered ECO's product development
screening programme during the year. New product development
expenditure in the year rose by 17% to GBP10.9 million (2019:
GBP9.3 million) and is being continued at a significant level in
2020/21. This will ensure that we have several mid and late stage
projects able to deliver early revenues from 2022/23.
Covid-19 Impact
ECO transitioned smoothly to home working during the final weeks
of the year building on the new ways of communicating with
customers developed during the ASF outbreak and without losses of
efficiency. Outsourced manufacturing and the Group's supply chain
operated smoothly through the year end.
Brexit
ECO's EU marketing authorisations have been transferred to the
European subsidiary, ECO Animal Health Europe Limited registered in
Dublin, Republic of Ireland and all our Brexit contingency plans
are in place. The financial and operational impact of Brexit is
expected to be minimal, particularly given the recently announced
trade deal between the UK and the EU. ECO's sales to the EU
(excluding the UK) represented 8% of total revenue for the
year.
People
I would like to thank all our employees for their extraordinary
levels of energy, engagement, and professionalism in addressing the
challenges of the year. Individually and collectively their ability
to innovate and to adapt combined with sheer hard work underpins
these results and ECO's prospects.
Marc Loomes
Chief Executive Officer
3 February 2021
FINANCE DIRECTOR'S REPORT
FOR THE YEARED 31 MARCH 2020
Introduction
I was delighted to join ECO in September 2019 as Group Finance
Director.
It has been a significant year of change for the Group. In
addition to the many commercial challenges faced by the Group
during the year such as African Swine Fever in China, USA-China
trade tensions and, in the latter part of the financial period, the
advent of the COVID-19 pandemic, we have continued our journey of
improvements in governance. These improvements have been previously
signalled and were introduced in last year's Annual Report. During
the year ended 31 March 2020 we appointed new external auditors
(this is their first audit report on ECO), we established a new
internal audit function, overhauled much of the control environment
around the group - in particular around financial controls and
processes and, with the assistance of external professional
advisors, moved the governance agenda forward, particularly in
relation to the group leadership and the Board. The financial
control environment has been significantly strengthened -
specifically in relation to custodianship of assets, banking and
cash. These actions protect the business and individuals working
within the business with customary segregation of duties and
multiple authorisations. From a finance and governance point of
view we are now well positioned to support the strong growth the
Group is experiencing and driving.
Prior Year Restatements
One of the results of the changes described in my introductory
comments was to consider the accounting policies adopted by the
Group previously and to review the implementation of IFRS across
the Group. In a number of areas, technical non - conformance with
IFRS was identified and in other areas, interpretation of the
relevant standard was considered to have been incorrect. As a
result, in our interim report, released in December 2019, we
published extensive prior year restatements, describing the nature
of the adjustments and their financial effect. Those restatements
form part of these Financial Statements and have been audited for
the first time. The principles of the prior year restatements are
as previously described and fall into the following categories:
-- Accounting for revenue in accordance with IFRS15 - revenue
recognition and accounting for sales discounts (note 3.1)
-- Accounting for expenditure on research and development - in
particular the portion of expenditure which should be capitalised
under IAS38 (note 3.2)
-- Accounting for our Joint Arrangements in the USA and Canada under IFRS11 (note 3.3)
-- Accounting for bonus payments on an accruals basis (note 3.4)
-- Accounting for leases under IFRS16 (note 3.5)
-- Accounting for foreign exchange (note 3.6)
-- Accounting for Free Goods Incentive (note 3.7)
-- Accounting for share based payments (note 3.8 and 3.9(Company only))
The notes to these accounts describe these changes in
detail.
Audit
As stated earlier this was the first audit of the group
performed by BDO. This also coincided with a period of remote
working and lock-down amidst COVID-19 affecting the world. This
added some distinct challenges to the audit task.
The first and most obvious challenge was that, except in China
where COVID-19 was ahead of the initial European and US impact, the
auditors were unable to physically attend our year end stock takes.
Attendance at stock takes is a fundamental audit test. The
Institute of Chartered Accountants in England and Wales suggests
that auditors seek alternative means of satisfying themselves in
the event of being unable to attend stock takes. Notwithstanding
that the Group's stock is held at third party warehouses (and third
party certification of quantities on hand was provided by these
warehouses) and there was no indication that the valuation of
inventory was incorrect, the audit opinion is limited in scope
regarding inventory. The stock take was attended in China and
therefore this limitation in scope qualification is in respect of
stock held elsewhere in the group and amounted to 82% of the stock
value (GBP14 million).
The effect of the prior year restatements, described above, was
to reduce profitability in the year ended 31 March 2019.
Accordingly, our new auditors considered that the materiality
threshold to which our previous auditors worked (GBP757,000) was no
longer appropriate and took a decision to reduce it. As a result,
BDO have performed a re-audit of the statement of financial
position at 31 March 2019. A significant balance within this
statement of financial position is the net book value of Intangible
Assets representing the accumulated capitalised and amortised costs
historically incurred by the Group. These costs are in the main
related to the development and commercialisation of Aivlosin(R) and
Ecomectin(R), the Group's main families of marketing
authorisations. The capitalised net book value of these intangible
assets at 31 March 2020 was GBP22.9 million and the revenue during
the year ended 31 March 2020 derived from Aivlosin(R) and
Ecomectin(R) was GBP64.6 million; the net book value of these
assets was therefore only about one third of the annual revenue
derived from their usage. However, in order to verify the original
costs within the net book value of these assets our auditors
required evidence of costs dating back to 2004. The Group retains
invoices and records from third parties for seven years in line
with statutory practice but, unfortunately, we were unable to
provide some support for the audit sampling requests prior to this.
In addition, for expediency, it was decided that provision of
evidence to support the audit would be confined to the trading
periods being audited. As a result, BDO has further limited the
scope of their audit opinion in respect of Intangible assets. The
net book value at 31 March 2020 relating to costs capitalised more
than seven years previously (and therefore the element of audit
sampling not able to be supported by physical invoices) was GBP8.4
million.
Trading
During the year ended 31 March 2020, ECO recorded its highest
second half revenue weighting to date being 60% of the full year
revenue. This compares to an equivalent second half weighting in
the year ended 31 March 2019 of 55%. Year on year the second half
of this financial year was 18% greater than the prior year
reversing a shortfall at the half year and resulting in an overall
revenue improvement for the year ended 31 March 2020 of 7% compared
with the year ended 31 March 2019. The primary driver of this
strong second half performance was a recovery in China (from the
effects of African Swine Fever, described in our Chief Executive's
report) and strong performance in the USA. A geographical analysis
of revenue is as follows:
Year ended 31
Revenue Summary March
2020 2019 % change
2019 to
(GBP'm) (GBP'm) 2020
Restated
China and Japan 23.1 26.8 (14%)
North America (USA and
Canada) 11.6 10.5 10%
South and South East Asia 14.2 8.1 75%
Latin America 12.6 10.8 17%
Europe 7.6 7.9 (4%)
Rest of World and UK 3.0 3.2 (6%)
-------- --------- ---------
72.1 67.3 7%
--------------------------- -------- --------- ---------
Revenue from China in the second half of the year was GBP14.4
million compared to the equivalent six months ended 31 March 2019
of GBP12.4 million underlining the recovery in that market. Trade
with India (included within Asia in the above analysis) softened
towards the end of the financial year, however the rest of the
region including Indonesia, Malaysia, Thailand and the Philippines
continued the trend set in the first half of the year resulting a
year on year increase in Asia of 75% becoming the Group's second
largest segment this year. The thawing in trade tensions between
the USA and China resulting in strengthening swine market
conditions in the second half of the year is also evident in the
second half revenue from the USA of GBP5.8 million (2019 - GBP3.6
million). Latin America, and in particular Brazil, continued to
benefit from pig exports to China, resulting in buoyant commodity
prices and a consequent strong market for the Group's products.
Europe benefitted from pork exports to China, in particular from
Spain.
Gross margins at 46% in the year ended 31 March 2020 (2019: 47%)
were reasonably consistent and represented a strong recovery from
poor first half margins (43%) - this being associated in the main
with improvements in the USA.
Overheads, at GBP28.3million were significantly greater in the
year ended 31 March 2020 compared with the year ended 31 March 2019
(GBP21.8million). The greatest contributors to this increase were
expenditure on Research and Development, employment costs and
foreign exchange movements. Expensed research and development
expenditure increased from GBP5.8 million in the year ended 31
March 2019 to GBP8.8 million in the year ended 31 March 2020. This
increase of GBP3.0 million reflects the nature of the earlier stage
projects being undertaken (and therefore expensed to the income
statement) particularly in respect of vaccine development as well
as an overall increase of 18% in the cash expenditure in R&D.
Expensed employment costs increased from GBP9 million in the year
ended 31 March 2019 to GBP10 million in the year ended 31 March
2020. Whilst the staff numbers reduced from an average of 217 in
2019 to 204 in 2020, the amount of capitalised in house labour in
research and development also fell resulting in the greater charge
to the income statement. The foreign exchange loss in 2020 amounted
to GBP0.5 million whereas a gain of GBP0.7 million was recorded in
2019.
Total cash expenditure on research and development in the year
was GBP10.9 million (2019: GBP9.3 million). This expenditure was
expensed to the extent that it related to projects at the research
phase and capitalised in accordance with IAS38 to the extent that
it related to projects in the later stage (development phase) of
the project life-cycle. The total cash expenditure in R&D can
be analysed as follows:
Year ended 31 March
2020 2019
GBP000's GBP000's
(Restated)
Research expenditure - included in administrative
expenses 8,775 5,868
Development expenditure - capitalised in intangible
assets 2,115 3,477
Total cash expenditure (excluding employment
costs) 10,890 9,345
EBITDA is considered by the Board and the Group leadership team
to represent a key performance measure; the removal of amortisation
(which is a significant annual non-cash charge to profits) and
depreciation provides a good indication of the underlying trading
performance of the business. The EBITDA margin (EBITDA expressed as
a percentage of revenue in the period) was 11.6% in the year ended
31 March 2020 compared with 18.5% in the year ended 31 March 2019.
This reduction arises in part from the small reduction in gross
margin (1%) as well as the increased investment in R&D,
referred to previously.
The Group continues to benefit from a low effective tax rate. In
the year ended 31 March 2020 the effective tax rate for the Group
was 19.8% (2019 - 12.3%). The historical low effective tax rate is
largely a result of the significant R&D investment on which the
Group receives tax credits. These tax credits continue but in 2020
a prudent assessment has been taken of the likely taxes due in
foreign jurisdictions carrying a higher tax rate than the UK and no
account has been taken of the likely benefit that will accrue from
"patent box claims". Historic tax losses result in zero tax payable
in the year. Discussions with HMRC will commence concerning the tax
treatment of the prior year restatements; the accounting treatment
to expense previously capitalised R&D investment may result in
a reduction in prior year taxable profits. No benefit of this tax
re-computation has been recognised in this Annual Report.
The consolidated cash position in the Group has declined from
GBP16.9 million at 31 March 2019 to GBP11.9 million at 31 March
2020. This consolidated cash position at 31 March 2020 includes
GBP5.3 million (2019 - GBP4.0 million) 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
which is received in the UK is 51%.
The cash generated from operations was 23% lower in the year
ended 31 March 2020 at GBP5.5 million (2019 - GBP7.1 million) which
fell less than the lower profitability due to better working
capital management. From operating cash, dividends of GBP8.4
million were paid in September 2019 and investment of GBP2.1
million in capitalised development costs, together with income tax
paid of GBP1.1 million, acquisitions of tangible fixed assets
(GBP0.8 million) and other sundry cash movements (GBP0.2 million)
resulted in an overall net cash draw down of GBP7.1 million and the
lower cash balance at 31 March 2020.
Post balance sheet event
There have been no material post balance sheet events to
note.
Christopher Wilks
Finance Director
3 February 2021
INDEPENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC
FOR THE YEARED 31 MARCH 2020
Independent auditor's report to the members of ECO Animal Health
Group Plc
Qualified opinion
We have audited the financial statements of ECO Animal Health
Group Plc (the 'Parent Company') and its subsidiaries (the 'Group')
for the year ended 31 March 2020, which comprise the consolidated
statement of comprehensive income, the consolidated and company
statements of financial position, the consolidated and company
statements of changes in equity, the consolidated and company
statements of cashflow and notes to the financial statements,
including a summary of significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and
international accounting standards in conformity with the
requirements of the Companies Act 2006 and, as regards the Parent
Company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
In our opinion, except for the possible effects of the matters
described in the basis for qualified opinion section of our
report:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 31
March 2020 and of the Group's profit for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006;
-- the Parent Company financial statements have been properly
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and as
applied in accordance with the provisions of the Companies Act
2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
INDEPENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC
FOR THE YEARED 31 MARCH 2020
Basis for qualified opinion
a) Physical inventory observations (Group)
We were not able to observe the counting of physical inventories
around the Group, except for the China locations, ("non-China Group
inventories") held at 31 March 2020 due to restrictions and control
measures arising as a result of the COVID 19 pandemic. We were
unable to satisfy ourselves by alternative means concerning the
non-China Group inventories quantities held at 31 March 2020, which
are included in the consolidated statement of financial position at
a value of GBP14,003,000 (representing 82% of total inventory) by
using other audit procedures. Consequently, we were unable to
determine whether any adjustment to this amount was necessary.
If any adjustment to the non-China Group inventories quantities
and derived values were to be required, there would be an impact on
recorded cost of sales, recorded tax amounts, results recorded in
the statement of comprehensive income, inventory values and total
assets less total liabilities values recorded in the statement of
financial position.
b) Verification of capitalised distribution rights, drug
registrations, patents and license costs (together referred to as
"capitalised development costs") (Group)
Given the issues connected to the recording of capitalised
development costs that resulted in a prior year adjustment (as
described in note 3.2 to the financial statements), we requested
access to supporting information for all development costs
originally capitalised in the statement of financial position.
Historic accounting records for periods prior to 2013 were not
required to be retained by the Group; certain sample accounting
records and explanations for periods between 2013 and 1 April 2018,
were not made available due to the impracticable time estimated to
be required by the Directors, after commencing and carefully
assessing the scope of the exercise. As a result, we were unable to
obtain sufficient appropriate audit evidence concerning the net
carrying value of capitalised development costs, as restated,
totalling GBP21,726,000 at 1 April 2018.
Consequently, we were unable to determine whether any adjustment
to this amount, related amortisation and deferred tax liabilities
thereon, were necessary, either in respect of the current year to
31 March 2020, or the opening balances at 31 March 2019.
For the same reasons described above, we were unable to audit
the prior year adjustment described in note 3.2 to the financial
statements. We were not able to audit the adjustment to the net
carrying value of historically capitalised costs, totalling
GBP18,207,000, recorded as a prior year adjustment, as of 1 April
2018.
If any adjustment to the capitalised development costs were to
be required, there would be an impact on recorded amortisation
recognised in administrative expenses, related deferred tax
charges/credits, results recorded in the statement of comprehensive
income, intangible asset carrying values, deferred tax on related
timing differences and total assets less total liabilities values
recorded in the statement of financial position.
INDEPENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC
FOR THE YEARED 31 MARCH 2020
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Group
and the Parent Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the
UK, including the FRC's Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our qualified opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the Directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the Directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Group's or the Parent Company's ability to continue
to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
In addition to the matters described in the basis for qualified
opinion section of our report, we have determined the matters
described below to be the key audit matters to be communicated in
our report.
INDEPENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC
FOR THE YEARED 31 MARCH 2020
Revenue recognition and discount accounting
Key Audit Matter How We Addressed the Key Audit
Matter in the Audit
The Group's revenue recognition We reviewed the revenue recognition
policy is included within policy applied by the Group
the accounting policies in and considered its compliance
note 2 and the components with IFRS 15 'Revenue from
of revenue are set out in Contracts with Customers'.
note 4. Our work included review of
management's identification
The Group's revenue is a key of performance obligations
performance indicator for and assessment of contractual
the market upon which the terms to determine when these
results of the Group will performance obligations were
be assessed. met, both throughout the year
and around year-end.
The Group has one main source
of revenue representing direct We tested a sample of the
sales of animal pharmaceutical Group's revenue transactions
products into UK, European to verify that revenue was
and global markets. The Group accurately recorded in the
recognises revenue at the correct accounting period.
point its performance obligation This testing was performed
is met, which is generally through review of contracts,
on delivery of product to invoices and delivery notes
the customer, but may occur and agreement to the recognition
at different points in the of revenue in the accounting
revenue cycle dependent on system.
contractual terms.
Certain revenue arrangements
Prior period errors were identified include the offering of volume
in the Group's original revenue and other discounts to customers.
recognition policies, and We reviewed management's assessment
application thereof, as explained of the value of these discounts
in note 3. at year end, reviewed contractual
terms and re-performed calculations
Given the potential for misstatement for a sample of accrued balances.
of revenue whether due to
fraud or error, the inherent Where the Directors identified
judgements and estimates involved errors in prior periods, we
in revenue recognition and reviewed the underlying support
cut-off assessments, as well for adjustments proposed,
as the identified misstatements testing to supporting documents
in the prior period, we considered such as delivery and shipment
revenue recognition a significant details and agreed the correct
risk of material misstatement application of IFRS 15 in
in the financial statements. respect of these adjustments.
Key Observations
Based on the work performed,
and following the restatements
explained in note 3, we consider
that revenue has been recognised
in accordance with the Group's
revenue recognition accounting
policy and the requirements
of IFRS 15.
--------------------------------------- --------------------------------------
Intangible assets - Capitalised development expenditure
Key Audit Matter How We Addressed the Key Audit
Matter in the Audit
The Group's accounting policy We reviewed the Directors'
for intangible assets is included narrative re-assessment of
within the accounting policies the appropriateness of intangible
in note 2 and the components assets capitalised in the
of intangible assets are set past, against the Group's
out in note 12. revised accounting policy
included in note 2.8.
The Group's policy is to capitalise
development expenditure in Where management concluded
accordance with IAS 38. During that past costs were appropriately
the period, the Directors capitalised, for all periods
reviewed past capitalised up to 31 March 2019, we sampled
development expenditure and those costs and planned to
identified misstatements in agree the cost to underlying
prior periods as a result supporting documentation and
of the Group capitalising to management's assessment
items which did not meet the of whether the cost met the
criteria of IAS 38. criteria of IAS 38 at the
point of capitalisation. We
As a result of the errors performed the same procedures
identified, there was a significant on capitalised costs for the
audit risk that past capitalised year ended 31 March 2020.
expenditure was not appropriately
capitalised and capitalised We also sampled amortisation
costs, in respect of projects entries during the period
not yet available for use, 1 April 2018 to 31 March 2020,
are impaired. to ensure amortisation commenced
in the correct period and
Given the potential for misstatement over the useful life in accordance
of capitalised development with Group policy. We reviewed
expenditure, as well as the the useful lives applied,
identified misstatements in for appropriateness, by corroborating
the prior period, we considered the historical periods during
development expenditure capitalisation which the Group's products
a key audit matter. have been sold and the periods
over which competitor's products
have been marketed.
Our work was limited for the
periods prior to 1 April 2018,
where certain information
was not available for review,
as set out in the Basis for
qualified opinion section
of our report.
Our work was not limited for
movements in capitalised development
costs for the period from
1 April 2018 to 31 March 2020.
We reviewed management's impairment
assessment at 31 March 2020,
for capitalised development
costs not yet available for
use. We challenged the future
estimated forecast cashflows
and whether or not technical
feasibility continued to be
highly probable.
Key Observations
We consider the Group's revised
accounting policy to be appropriate,
Our audit scope was limited
in respect of the capitalised
development expenditure assets'
carrying value brought forward
as of 1 April 2018. We did
not identify anything to suggest
that the judgements applied
by management, in respect
of capitalisation and amortisation
from 1 April 2018, and their
impairment assessment as of
31 March 2020, were inappropriate.
----------------------------------------- ----------------------------------------
Unauthorised related party transactions and subsequent
investigation
Key Audit Matter How We Addressed the Key Audit
Matter in the Audit
As reported in note 31, during In response to the Directors'
the year ended 31 March 2020 findings, we included internal
a longstanding former Director forensic specialists as part
and Company Secretary of the of the audit team.
Group withdrew cash from the
Company totalling GBP25,748
(2019 - GBP46,920) which was
recorded in the Parent Company The audit team's work included
and Group's financial statements review of the subsequent reports
as administrative costs in produced, both those of internal
each year. Further cash was audit and the external law
withdrawn over an extended firm, and assessment of the
period starting in 2014, the completeness of their procedures
cumulative amount identified and enquiries.
was GBP322,109 as at 31 March
2020. Following our review of the
initially produced findings
These withdrawals were not reports, we recommended a
approved, were outside the subsequent extended scope
normal course of the Group's of work, and procedures were
business and were in excess performed by the external
of contractual remuneration law firm and internal audit
levels. department, supported by senior
management. These extended
The Group's internal audit procedures covered further
department identified the electronic record investigation,
payments and reported their examination of bank payments
findings to the Board in April over a period of 7 years and
2020. The Internal Audit department an investigation into the
and an external law firm performed appropriateness of supplier
further work to assess the and payroll payments. These
full extent of the withdrawals. reports were subsequently
reviewed by the audit team,
Repayment of GBP307,113 was including forensic audit specialists,
made to the Group in August which included re-performance
2020. of certain procedures.
A significant risk had been Our overall audit approach
identified, that further unauthorised included testing designed
transactions remain undetected. to identify and detect material
We considered this to be a misstatements in order to
key audit matter. obtain reasonable assurance
about whether the financial
statements as a whole are
free from material misstatement
due to fraud.
Key Observations
The results of the extended
scope of work, and our enquiries
thereon, did not identify
further material undetected
unauthorised transactions.
We consider the accounting
for, and disclosure of, the
transactions identified to
be appropriate.
---------------------------------------- ----------------------------------------
Prior period errors and opening balance sheet propriety
Key Audit Matter How We Addressed the Key Audit
Matter in the Audit
As disclosed in note 3, prior Given the extent of prior
period errors were identified period errors identified by
in respect of the following the Directors and the audit
areas: process, we have re-audited
the opening statement of financial
* IFRS15 Revenue from contracts with customers position at 31 March 2019.
To the extent that our scope
* IAS38 Intangible Assets was not limited in respect
of capitalised development
costs, procedures included
* IFRS11 Joint Arrangements the audit of the opening statement
of financial position to current
period materiality and, where
* Bonuses prior period errors were corrected,
audit of those adjustments.
This included a review of
* IFRS 16 - Leases management's revised assessment,
calculations and disclosures
in note 3, by agreement to
* Foreign exchange supporting documentation and
inspection of underlying evidence
on a sample basis.
* Accruals accounting
Our audit procedures were
designed to provide reasonable
* Share-based payments assurance that the restated
opening statement of financial
position is materially correct.
* Related party transaction disclosures This was required to ensure
that the starting point for
the movement between the opening
* Taxation and closing statements of
financial position, reflected
by the income statement and
statement of cashflows for
Given the extent of the errors the year ended 31 March 2020,
identified in the prior periods, are also materially correct.
our audit of the opening balance
sheet at 31 March 2019, formed
a key part of the audit.
Key Observations
A significant risk of material
misstatement was identified Based on the work performed,
relating to whether: and except for the capitalised
* the assets recorded in the opening balance sheet development cost limitation
exist; described in the Basis for
Qualified Opinion section
of our report, we have obtained
* the liabilities in the opening balance sheet were sufficient assurance on the
complete; opening statement of financial
position in order to form
our opinion for the year ended
* both assets and liabilities were accurately recorded; 31 March 2020.
and
* all disclosures required were made
------------------------------------------------------------------- --------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect or
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements. In order to reduce to an appropriately low
level the probability that any misstatements exceed materiality, we
use a lower level, "performance materiality", to determine the
extent of testing needed. Importantly, misstatements below these
levels will not necessarily be evaluated as immaterial, as we also
take account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
The materiality for the Group financial statements as a whole
was set at GBP250,000. This was determined by reference to the
Group's profit before tax and was set at 5%. Profit before tax is
considered the most appropriate measure in assessing the
performance of the Group given it is an AIM listed PLC and
therefore the number of users and level of interest in the
financial statements is expected to be higher. Performance
materiality was set at 50% of the Group materiality level, being
GBP125,000. Performance materiality was set at this level based on
the risks identified in respect of prior period errors and that
this was the first year we conducted an audit of the Group.
Where financial information from components was audited
separately, component materiality was set for this purpose at lower
levels, varying between GBP45,000 and GBP180,000. Component
performance materiality levels varied between GBP22,500 and
GBP90,000.
The materiality for auditing the Parent Company financial
statements, on a standalone basis, was determined with reference to
1.9% of the Parent Company's net assets. Materiality for assessing
the parent company financial statements was therefore set at
GBP1,450,000 and performance materiality was set at GBP725,000.
Materiality applied for group opinion purposes (component
materiality) was limited to an appropriate proportion of Group
materiality, and set at GBP45,000 for this purpose; performance
materiality was set at 50% of component materiality, GBP22,500.
We agreed with the Audit Committee that we would report to the
committee all individual audit differences in excess of GBP5,000.
We also agreed to report differences below this threshold that, in
our view, warranted reporting on qualitative grounds.
INDEPENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC
FOR THE YEARED 31 MARCH 2020
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements at the Group level.
We obtained an understanding of the internal control environment
related to the financial reporting process and assessed the
appropriateness, completeness and accuracy of Group journals and
other adjustments performed on consolidation.
At 31 March 2020, the Group comprised the Parent Company; one UK
trading company, ECO Animal Health Limited, a two entity sub-Group
in China headed by Zhejang Eco Biok Animal Health Products Limited;
a US joint operation in Pharmgate Animal Health LLC and 16 other
entities.
The Parent, the UK trading entity, the sub-Group in China and
the US joint operation were deemed to be the significant components
of the Group. Full scope audits were carried out, for the Parent
Company and ECO Animal Health Limited, by the Group audit team. The
audit of the Pharmgate Animal Health LLC component was carried out
by the Group audit team. The audit of the sub-Group, headed by
Zhejang ECO Biok Animal Health Products Limited, was conducted by
BDO China under instruction from and reporting to BDO LLP as the
Group auditor. We received reporting documents from the component
auditor relating to the period under audit as well as opening
balance sheet procedures; we conducted file reviews of the
underlying audit evidence.
Significant components for the year ended 31 March 2020 comprise
77% of consolidated Group revenue, 128% of consolidated Group
profit before tax (due to losses in non-significant components) and
100% of consolidated Group net assets (due to a combination of net
assets and net liabilities in non-significant components).
The remaining entities were deemed insignificant to the Group
due to the size of operations and balances within each entity.
Audit work on these components has been limited to analytical
review and sample revenue cut-off procedures carried out by the
Group audit team.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
INDEPENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC
FOR THE YEARED 31 MARCH 2020
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
As described in the basis for qualified opinion section of our
report, we were unable to satisfy ourselves concerning the
inventory quantities held at 31 March 2020 and the intangible
assets carrying value at 31 March 2019 and 31 March 2020. We have
concluded that where the other information refers to these balances
or related balances, it may be materially misstated for the same
reason.
Opinions on other matters prescribed by the Companies Act
2006
Except for the possible effects of the matters described in the
basis for qualified opinion section of our report, in our opinion,
based on the work undertaken in the course of the audit:
-- the information given in the strategic report and the
Directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the Directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
Except for the possible effect of the matters described in the
basis for qualified opinion section of our report, in the light of
the knowledge and understanding of the Group and the Parent Company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or
the Directors' report.
Arising solely from the limitations on the scope of our work
relating to inventory and intangible assets referred to above:
-- we have not obtained all the information and explanations
that we considered necessary for the purpose of our audit; and
-- we were unable to determine whether adequate accounting
records have been kept by the Parent Company.
INDEPENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC
FOR THE YEARED 31 MARCH 2020
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- returns adequate for our audit have not been received from branches not visited by us; or
-- the Parent Company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of Directors' remuneration specified by law are not made.
Responsibilities of Directors
As explained more fully in the Directors' responsibilities
statement the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website : www.frc.org.uk/auditorsresponsibilities . This
description forms part of our auditor's report.
INDEPENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC
FOR THE YEARED 31 MARCH 2020
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Ian Oliver (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Reading
United Kingdom
3 February 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 MARCH 2020
20 20 2019
Notes GBP000's GBP000's
Restated
*
Revenue 4 72,106 67,253
( 35,448
Cost of sales (38,742) )
--------- ---------
Gross profit 33,364 31,805
Other income 5 105 35
Administrative expenses (28,274) (21,772)
Profit from operating activities 6 5,195 10,068
Finance income 7 112 127
Finance costs 7 (142) (124)
--------- ---------
Net finance (cost)/income (30) 3
--------- ---------
Share of profit of associate 16 42 14
42 14
--------- ---------
Profit before income tax 5,207 10,085
Income tax charge 9 (1,032) (1,239)
--------- ---------
Profit for the year 4,175 8,846
========= =========
Profit attributable to:
Owners of the parent Company 2,582 7,253
Non-controlling interest 26 1,593 1,593
--------- ---------
Profit for the year 4,175 8,846
========= =========
Earnings per share (pence) 8 3.82 10.86
========= =========
Diluted earnings per share
(pence) 8 3.67 10.71
========= =========
Earnings before Interest,
Tax, Depreciation, Amortisation,
Share Based Payments and Foreign
Exchange Differences 6 8,362 12,452
========= =========
*Please refer to Note 3 for further details on prior year
restatements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2020
2020 2019
Notes GBP000's GBP000's
Restated
*
Profit for the year 4,175 8,846
Other comprehensive income (losses)
(net of related tax effects):
Revaluation of freehold property 13 ( 92) -
Foreign currency translation differences 98 (8)
Remeasurement of defined benefit
pension schemes 23 12 (36)
Other comprehensive income (losses)
for the year 18 (44)
--------- ---------
Total comprehensive income for
the year 4,193 8,802
Attributable to:
Owners of the parent Company 2,561 7,200
Non-controlling interest 26 1,632 1,602
--------- ---------
4,193 8,802
========= =========
All items listed in other comprehensive income have been
recorded directly through reserves and are shown in the
consolidated statement of changes in equity.
*Please refer to Note 3 for further details on prior year
restatements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2019
Share Share Revaluation Other Foreign Retained Total Non-controlling Total
Capital Premium Reserves Reserves Exchange Earnings Interest Equity
Account Reserves
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Balance as
at 31 March
2018 3,291 58,847 664 2,823 - 34,065 99,690 5,185 104,875
Adjustment
re revenue
cut-off (Note
3.1A) - - - - - (632) (632) 33 (599)
Adjustment
re intangible
assets (Note
3.2) - - - - - (17,153) (17,153) - (17,153)
Adjustment
re bonuses
(Note 3.4) - - - - - (954) (954) - (954)
Adjustment
re foreign
exchange (Note
3.6) - - - - 484 (484) - - -
Adjustment
re discounts
(Note3.7A) - - - - - (109) (109) (105) (214)
Adjustment
re provisions
(Note 3.7C) - - - - - 43 43 41 84
Adjustment
re Share based
payments (Note
3.8) - - - (2,717) - 2,956 239 - 239
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Balance as
at 1 April
2018 -
restated 3,291 58,847 664 106 484 17,732 81,124 5,154 86,278
Adjustment
on
implementation
of IFRS16 - - - - - (17) (17) 1 (16)
Further IFRS16
adjustment
(Note 3.5) - - - - - (37) (37) (12) (49)
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
IFRS 16
adjusted
balance as
at 1 April
2018 -
restated 3,291 58,847 664 106 484 17,678 81,070 5,143 86,213
Profit for
the year -
restated* - - - - - 7,253 7,253 1,593 8,846
Other
comprehensive
income
Foreign
currency
differences - - - - (17) - (17) 9 (8)
Actuarial
gains/
(losses) on
pension scheme
assets - - - - - (36) (36) - (36)
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Total
comprehensive
income for
the year - - - - (17) 7,217 7,200 1,602 8,802
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Transactions
with owners
recorded
directly
in equity
Issue of shares
in the year 81 3,803 - - - - 3,884 - 3,884
Share-based
payments - - - - - 631 631 - 631
Deferred tax
on share-based
payments - - - - - 173 173 - 173
Dividends - - - - - (8,485) (8,485) (1,643) (10,128)
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Transactions
with owners 81 3,803 - - - (7,681) (3,797) (1,643) (5,440)
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Balance as
at 31 March
2019 -
restated 3,372 62,650 664 106 467 17,214 84,473 5,102 89,575
========= ========= ============ ========= ========= ========= ========= ================ =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2020
Share Share Revaluation Other Foreign Retained Total Non-controlling Total
Capital Premium Reserves Reserves Exchange Earnings Interest Equity
Account Reserves
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Balance
as at
31 March
2019 -
restated* 3,372 62,650 664 106 467 17,214 84,473 5,102 89,575
Profit
for the
year - - - - - 2,582 2,582 1,593 4,175
Other
comprehensive
income:
Foreign
currency
differences - - - - 59 - 59 39 98
Revaluation
of freehold
property - - (92) - - - (92) - (92)
Actuarial
gains
on pension
scheme
assets - - - - - 12 12 - 12
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Total
comprehensive
income
for the
year - - (92) - 59 2,594 2,561 1,632 4,193
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Transactions
with owners
recorded
directly
in equity
Issue
of shares
in the
year 5 232 - - - - 237 - 237
Share-based
payments - - - - - 284 284 - 284
Deferred
tax on
share-based
payments - - - - - (373) (373) - (373)
Dividends - - - - - (7,453) (7,453) (968) (8,421)
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Transactions
with owners 5 232 - - - (7,542) (7,305) (968) (8,273)
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Balance
as at
31 March
2020 3,377 62,882 572 106 526 12,266 79,729 5,766 85,495
========= ========= ============ ========= ========= ========= ========= ================ =========
*Please refer to Note 3 for further details on prior year
restatements
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2019
Company
Share Share Other Revaluation Retained Total
Capital Premium Reserves Reserves Earnings
Account
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Balance as at
31 March 2018 3,291 58,847 2,823 395 7,189 72,545
Prior year adjustments:
Adjustment re
bonuses (Note
3.4) - - - - (172) (172)
Adjustment re
Share based
payments (Note
3.8) - - (2,717) - 2,807 90
Adjustment re
share-based
payments (Note
3.9) - - - - 1,324 1,324
--------- --------- --------- ------------ --------- ---------
Balance as at
31 March 2018
- restated 3,291 58,847 106 395 11,148 73,787
Adjustment on
implementation
of IFRS16 (Note
3.5) - - - - (7) (7)
IFRS 16 adjusted
balance as at
1 April 2018
- restated 3,291 58,847 106 395 11,141 73,780
--------- --------- --------- ------------ --------- ---------
Profit for the
year - as reported - - - - 15,041 15,041
Prior year adjustments:
Adjustment re
bonuses (Note
3.4) - - - - 71 71
Adjustment re
IFRS16 (Note
3.5) - - - - (3) (3)
Adjustment re
share payments
(Note 3.9) - - - - 154 154
--------- --------- --------- ------------ --------- ---------
Profit for the
year - restated - - - - 15,263 15,263
Other comprehensive
income:
Actuarial gains/(losses)
on pension scheme
assets - - - - (36) (36)
--------- --------- --------- ------------ --------- ---------
Total comprehensive
income for the
year - - - - 15,227 15,227
--------- --------- --------- ------------ --------- ---------
Transactions
with owners
recorded directly
in equity
Issue of shares
in the year 81 3,803 - - - 3,884
Share-based
payments - - - - 631 631
Adjustment re
share-based
payments (Note
3.8) - - - - (5) (5)
Dividends - - - - (8,485) (8,485)
Transactions
with owners 81 3,803 - - (7,859) (3,975)
--------- --------- --------- ------------ --------- ---------
Balance as at
31 March 2019
- restated 3,372 62,650 106 395 18,509 85,032
========= ========= ========= ============ ========= =========
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2020
Company
Share Share Other Revaluation Retained Total
Capital Premium Reserves Reserves Earnings
Account
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Balance as
at 31 March
2019 - restated 3,372 62,650 106 395 18,509 85,032
Loss for the
year - - - - (151) (151)
Other comprehensive
income:
Revaluation
of freehold
property - - - (92) - (92)
Actuarial
gains on pension
scheme assets - - - - 12 12
Total comprehensive
loss for the
year - - - (92) (139) (231)
--------- --------- --------- ------------ --------- ---------
Transactions
with owners
Issue of shares
in the year 5 232 - - - 237
Share-based
payments - - - - 284 284
Deferred tax
on share-based
payments - - - - (63) (63)
Deferred tax
on property
revaluations - - - (1) - (1)
Dividends - - - - (7,453) (7,453)
--------- --------- --------- ------------ --------- ---------
Transactions
with owners 5 232 - (1) (7,232) (6,996)
--------- --------- --------- ------------ --------- ---------
Balance as
at 31 March
2020 3,377 62,882 106 302 11,138 77,805
========= ========= ========= ============ ========= =========
*Please refer to Note 3 for further details on prior year
restatements.
STATEMENTS OF FINANCIAL POSITION (CO. NUMBER: 01818170)
AS AT 31 MARCH 2020
Group Company
2020 2019 2018 2020 2019 2018
Notes GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Restated* Restated* Restated* Restated*
Non-current assets
Intangible assets 12 41,439 41,009 39,656 - - -
Property, plant and
equipment 13 2,426 2,144 1,866 622 769 716
Investment property 14 305 200 200 305 200 200
Right of use assets 15 1,658 1,675 - 25 57 -
Investments 16 166 116 98 20,032 20,077 20,077
Amounts due from subsidiary
Company 18 - - - 59,295 59,988 47,650
--------- ---------- ---------- --------- ---------- ----------
Total non-current assets 45,994 45,144 41,820 80,279 81,091 68,643
Current assets
Inventories 17 17,264 19,477 18,654 - - -
Trade and other receivables 18 28,353 23,333 15,219 55 46 213
Income tax recoverable 1,265 827 343 - 14 22
Other taxes and social
security 652 462 1,160 36 145 518
Cash and cash equivalents 20 11,877 16,863 20,343 177 4,236 4,959
--------- ---------- ---------- --------- ---------- ----------
Total current assets 59,411 60,962 55,719 268 4,441 5,712
--------- ---------- ---------- --------- ---------- ----------
TOTAL ASSETS 105,405 106,106 97,539 80,547 85,532 74,355
Current Liabilities
Trade and other payables 21 (14,486) (13,363) (10,983) (567) (296) (428)
Borrowings 22 (2,032) - - (2,001) - -
Income tax payable (940) (816) (128) - - -
Other taxes and social
security - (533) (108) - (90) (98)
Lease liabilities 22 (342) (330) - (24) (36) -
Dividends (50) (49) (42) (50) (49) (42)
--------- ---------- ---------- --------- ---------- ----------
Current liabilities (17,850) (15,091) (11,261) (2,642) (471) (568)
--------- ---------- ---------- --------- ---------- ----------
Net current assets
/ (liabilities) 41,561 45,871 44,458 (2,374) 3,970 5,144
--------- ---------- ---------- --------- ---------- ----------
Total assets less current
liabilities 87,555 91,015 86,278 77,905 85,061 73,787
Non-current liabilities
Deferred tax 19 (636) - - (95) - -
Lease liabilities 22 (1,424) (1,440) - (5) (29) -
TOTAL ASSETS LESS TOTAL
LIABILITIES 85,495 89,575 86,278 77,805 85,032 73,787
========= ========== ========== ========= ========== ==========
EQUITY
Issued share capital 25 3,377 3,372 3,291 3,377 3,372 3,291
Share premium account 62,882 62,650 58,847 62,882 62,650 58,847
Revaluation reserve 572 664 664 302 395 395
Other reserves 27 106 106 106 106 106 106
Foreign exchange revaluation
reserve 27 526 467 484 - - -
Retained earnings 12,266 17,214 17,732 11,138 18,509 11,148
--------- ---------- ---------- --------- ---------- ----------
Shareholders' funds 79,729 84,473 81,124 77,805 85,032 73,787
Non-controlling interests 26 5,766 5,102 5,154 - - -
--------- ---------- ---------- --------- ---------- ----------
Total equity 85,495 89,575 86,278 77,805 85,032 73,787
========= ========== ========== ========= ========== ==========
Dr Andrew Jones, Chairman.
*Please refer to Note 3 for further details on prior year
restatements. The notes on pages 63 to 149 form part of these
financial statements.
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 MARCH 2020
Group Group Company Company
2020 2019 2020 2019
Restated* Restated*
Notes GBP000's GBP000's GBP000's GBP000's
Cash flows from operating
activities
Profit/(loss) before income
tax 5,207 10,085 (151) 15,272
Adjustment for:
Finance income 7 (112) (127) (895) (917)
Finance cost 7 142 124 30 -
Foreign exchange gain/(loss) 62 (504) - -
Depreciation 13 334 340 17 17
Amortisation of right-of-use
assets 15 389 380 32 15
Revaluation of investment
property (64) (55) (64) (55)
Amortisation of intangible
assets 12 1,685 1,745 - -
Pension payments 23 (59) (59) - (59)
Share of associate's results 16 (42) (14) - -
Impairment of investments 16 - - 45 -
Share based charge 24 284 631 114 305
Dividends received - - (77) -
--------- ---------- --------- ----------
Operating cash flows before
movements in working capital 7,826 12,546 (949) 14,578
Change in inventories 2,212 (1,814) - -
Change in receivables (5,209) (5,738) 962 (11,472)
Change in payables 662 2,141 253 (103)
--------- ---------- --------- ----------
Cash generated from operations 5,491 7,135 266 3,003
Finance costs (17) - (30) (2)
Income tax (1,076) (862) - (13)
--------- ---------- --------- ----------
Net cash from operating
activities 4,398 6,273 236 2,988
--------- ---------- --------- ----------
Cash flows from investing
activities
Acquisition of property,
plant and equipment 13 (767) (566) (1) (2)
Disposal of property, plant
and equipment 13 - 5 - -
Purchase of intangibles 12 (2,115) (3,098) - -
Finance income 7 112 127 895 938
Dividends received - - 77 -
--------- ---------- --------- ----------
Net cash (used in)/from
investing activities (2,770) (3,532) 971 936
--------- ---------- --------- ----------
Cash flows from financing
activities
Change in borrowings 22 2,032 - 2,001 -
Proceeds from issue of share
capital 237 3,884 237 3,884
Interest paid on lease liabilities (125) (139) (13) (22)
Principal paid on lease
liabilities (364) (338) (38) (31)
Dividends paid (8,421) (10,121) (7,453) (8,478)
Net cash (used in)/from
financing activities (6,641) (6,714) (5,266) (4,647)
--------- ---------- --------- ----------
Net (decrease) in cash and
cash equivalents (5,013) (3,973) (4,059) (723)
Foreign exchange movements 27 493 - -
Balance at the beginning
of the period 16,863 20,343 4,236 4,959
--------- ---------- --------- ----------
Balance at the end of the
period 20 11,877 16,863 177 4,236
========= ========== ========= ==========
A net cash reconciliation has been provided in note 22.
*Please refer to Note 3 for further details on prior year
restatements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 MARCH 2020
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.
2. Summary of significant accounting policies
2.1 Basis of preparation
The Group has presented its annual report and accounts in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006, IFRIC
interpretations and the Companies Act 2006 applicable to companies
reporting under IFRS.
The preparation of financial statements, in conformity with
international accounting standards in conformity with the
requirements of the Companies Act 2006, 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 of the Group are set out below
and have been applied consistently in dealing with items which are
considered material in relation to the Group's financial
statements.
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.
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 2020
2.2 Adoption of new and revised standards
The following new standards, amendments and interpretations for
existing standards have been published and are mandatory for
accounting periods beginning after 1 January 2019 (unless otherwise
stated) and have been applied in preparing these consolidated
financial statements. These did not result in any material
changes.
-- IFRS 9- Financial Instruments (amendments)
-- IFRIC 23 - Uncertainty over income tax
-- IAS 28 - Investments in associates and joint ventures
-- IAS 19 - Employee benefits
The following amendments to existing standards and
interpretations will be effective and adopted for period ended 31
March 2021 and the adoption of these amendments to existing
standards and interpretations are not expected to have a material
impact on the financial statements of the Group:
-- IFRS 3 Business combinations - Definition of a business
-- IAS 1 Presentation of financial statements, and IAS 8
Accounting policies, changes in accounting estimates and errors -
Definition of material
-- IFRS 11 - Joint Arrangements
-- IAS 12 - Income Taxes
-- IAS 23 - Amendments under 2015-2017 Cycle of Annual Improvements
The following new standards, amendments and interpretations for
existing standards have been published that are mandatory for
accounting periods beginning after 1 January 2020 (unless otherwise
stated) and have not been applied in preparing these consolidated
financial statements.
-- IFRS 9, IAS 39 and IFRS 17 - Interest rate benchmark reform
The Directors do not expect that the adoption of the Standards
and Interpretations listed above will have a material impact on the
financial statements of the Group 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 2020.
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
2.3 Basis of consolidation (continued)
initially at their fair values at the acquisition date,
irrespective of the extent of any minority 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.
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.
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 financial statements are presented in
Pounds Sterling, which is the Company's functional and the Group's
presentation 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 2020
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
The Group's 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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
2.7 Financial instruments (continued)
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.
Financial liabilities
The Group's 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)
-- 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 2020
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.
Initial recognition: research and development costs
-- Charge all research cost to expense.
-- Development costs are capitalised only after technical and
commercial feasibility of the asset for sale or use have been
established. This means that the entity must intend and be able to
complete the intangible asset and either use it or sell it and be
able to demonstrate how the asset will generate future economic
benefits.
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.
If recognition criteria are not met.
If an intangible item does not meet both the definition of and
the criteria for recognition as an intangible asset, IAS 38
requires the expenditure on this item to be recognised as an
expense when it is incurred.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
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 (or other
product) or an approval for marketing Aivlosin 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 more
recently announced projects (for example the vaccine collaboration
projects with The Pirbright Institute) would be considered to have
not yet met the criteria for capitalisation and should have
therefore been expensed. Such projects' costs 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 2020
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
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
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 the Group's 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 2020
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 property 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. 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 in subsidiaries are stated at cost less impairment
in the Parent Company's statement of financial position.
An impairment is recognised in profit or loss when there is
objective evidence that the asset is impaired and is measured as
the difference between the investment's carrying amount and the
present value of estimated future cashflows discounted at the
effective interest rate adjusted for a risk premium. Impairment
losses are reversed in subsequent periods when an increase in the
investment's recoverable amount can be related objectively to an
event occurring after the impairment was recognised, subject to the
restriction that the carrying amount of the investment at the date
the impairment is reversed shall not exceed what the amortised
costs would have been had the impairment not been recognised.
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 2020
2.13 Joint Operations (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, as applied from the transition date
of 1 April 2018, 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 2020
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.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
2.15 Leasing (continued)
Short-term leases and leases of low-value assets
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 used a number of practical expedients when applying
IFRS 16 to leases previously classified as operating leases under
IAS 17.
In particular, the Group applied:
-- not to reassess whether a contract is, or contains, a lease
at the date of initial application;
-- application of a single discount rate to a portfolio of
leases with reasonably similar characteristics;
-- exclusion of initial direct costs from the measurement of the
right-of-use asset at the date of initial application;
-- hindsight to determine the lease term;
-- exclusion of low-value leases - leases for which the
underlying assets are below the Group's capitalisation threshold;
and
-- exclusion of short-term leases - leases with lease term
ending within twelve months of the date of initial application.
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 historical 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020 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. Bank overdrafts are
shown within borrowings in current liabilities in the statement of
financial position.
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 the assets of the Group 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.
2.22 Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event and it is probable that the
Group 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. 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, royalty income. The amounts
are small and are recognised on an accruals basis.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
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. 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.
Further details of the inputs to the Black-Scholes model can be
found in note 24 to the accumulating share based payment charges in
reserves. Share-based payment charges are credited to retained
earnings only; subsequent to the prior year adjustment explained in
note 3, the share-based payment reserve account balance is subsumed
within 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
2.26 Taxation (continued)
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 recorded in
the Group's results are recorded within retained earnings.
The cost of its own shares bought into treasury by the Company
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.
Amounts arising from revaluations of assets not taken through
the income statement or other comprehensive income are held within
the Revaluation reserve.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
2.28 Non-controlling (minority) 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:
-- 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 2020
2.30 Critical accounting estimates and judgements (continued)
-- Income taxes
The Group is subject to income taxes predominantly in the United
Kingdom but also in other jurisdictions.
Significant estimates are required in determining the provision
for income taxes. There are some transactions and calculations for
which the ultimate tax determination is uncertain. 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 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 valuation model, as disclosed in
note 24. 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
2.30 Critical accounting estimates and judgements (continued)
- 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%.
- Financing factors that reflect the lessee companies' risk
premium on borrowing. Management considered the financial strength
and credit risk of lessee companies and 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%.
At 31 March 2020, the Group used a weighted average discount
rate of 7.10% (2019 restated: 7.84%).
Transition
2019 date 1
2020 Restated* April 2018
Property 5.9% 5.8% 5.9%
Vehicle 29.0% 29.0% 29.0%
Other 4.0% 4.0% 4.0%
------- ----------- ------------
Weighted average 7.10% 7.84% 7.03%
------- ----------- ------------
*Please refer to Note 3 for further details on prior year
restatements.
-- 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
non0financial 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
2.30 Critical accounting estimates and judgements (continued)
The Group measures a number of items at fair value.
- Revalued land and buildings (note 13)
- Investment property (note 14)
- Pension and other post-retirement benefit commitments (note 23)
- Share-based payments (note 24)
- Initial recognition of Financial instruments (note 32)
For more detailed information in relation to the fair value
measure of the items above please refer to the applicable
notes.
3. Prior year restatements
The following 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 IAS 8.
3.1 IFRS 15 Revenue from Contracts with Customers
The Group adopted IFRS 15 - Revenue from Contracts with
Customers with effect from 1 April 2018. It was noted in the
consolidated financial statements of the Group for the year ended
31 March 2019 that the effect of adoption of this standard was
immaterial to the Group.
IFRS 15 provides a single, principles-based five step model to
be applied to all sales contracts, based on the transfer of control
of goods and services to customers. It replaced the separate
guidance in IAS 11 for Construction Contracts and IAS 18 for
Revenue. Under IAS 18, the guiding principle for determining when
revenue should be recognised was to establish when the transfer of
risk and reward of ownership in the goods had passed to customers.
IFRS 15 requires a determination of when transfer of control has
passed to customers in order to establish when revenue can be
recognised.
IFRS 15 (and IAS 18) also requires that sales discounts,
commissions, rebates and other sales incentives provided to
customers are accounted for as an offset to Revenue.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
3.1 IFRS 15 Revenue from Contracts with Customers (continued)
3.1A Revenue recognition
Historical Treatment Revised treatment and impact
Revenue has been recognised Having reference to the contractual
when goods have been dispatched trading terms with customers,
from the Group's warehouses the shipping and transportation
and factories (third party methods, Incoterms guidance and
owned facilities). Historically other GAAP guidance the moment
certain revenue recognition when control is judged to have
has occurred prior to satisfying passed to the customer was in
the performance obligation. most cases later than the date
that the goods left the warehouse.
Accordingly, some revenue previously
incorrectly recorded shortly
before the relevant period end
was moved to the subsequent month
and the subsequent accounting
period.
-----------------------------------------
The associated cost of sale was
similarly moved to the subsequent
accounting period.
-----------------------------------------
The carrying value of Trade Debtors
and Inventory at the relevant
Statement of financial position
date was consequently adjusted.
A retained earnings adjustment
reflects the cumulative value
of net profit so adjusted in
the financial period.
-----------------------------------------
3.1B Sales Discounts
Historical Treatment Revised treatment and impact
Sales incentives provided to These allowances have been set
customers comprising volume off against revenue in the relevant
rebates, discounts and commissions period and cost of sale appropriately
have historically been incorrectly adjusted.
accounted for as a cost of Trade receivables are presented
sale. net of discounts or other variable
consideration adjustments earned,
where the expectation and intention
is to settle the balance net.
There is no impact on gross profit
or net profit.
------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
3.2 IAS 38 - Intangible Assets
Historical Treatment Revised treatment and impact
Certain costs relating to the Historical costs have been considered
Research and Development team in the light of IAS 38 and the
including regulatory affairs ECO Animal Health R&D model.
were incorrectly capitalised IAS 38 (and IAS 36 in respect
and amortised over a period of amortisation) have been applied
of 10 or 20 years. Amortisation to each year and where expenses
commenced immediately from meet the criteria for capitalisation
the date the costs were capitalised. such costs have remained as capitalised
intangible assets, as explained
in more detail in note 2.8. Development
costs for projects not yet generating
sales are subject to annual impairment
reviews. Development costs are
amortised over their useful economic
lives starting from the half
year after regulatory approval
is obtained to commence product
sales, which is the best estimate
of when the asset is available
for use.
--------------------------------------------
All other expenses incurred in
research, development, technical
and regulatory affairs and technical
support to the organization have
been expensed.
--------------------------------------------
The impact has been to increase
the Research and Development
expense (and reduce the amortisation)
in the Income Statement in each
year and to reduce the value
of capitalised intangible assets
on the Statement of financial
position.
--------------------------------------------
3.3 IFRS 11 - Joint Arrangements
IFRS 11 - Joint Arrangements defines an arrangement of which two
or more parties have joint control. A joint arrangement has the
following characteristics:
-- The parties are bound by a contractual arrangement.
-- The contractual arrangement gives two or more of those
parties joint control of the arrangement.
A joint arrangement is either a joint operation or a joint
venture. The classification of a joint arrangement as a joint
operation or a joint venture depends upon the rights and
obligations of the parties to the arrangement. A joint operation is
a joint arrangement whereby the parties that have joint control of
the arrangement have rights to the assets, and obligations for the
liabilities, relating to the arrangement. Those parties are called
joint operators. A joint venture is a joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the net assets of the arrangement. Those parties are called joint
venturers.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
3.3 IFRS 11 - Joint Arrangements (continued)
In assessing the relationship between the Group and its
commercial collaborator in the USA and Canada management has
considered the nature of the commercial arrangements, the legal
agreement between the parties and other contractual
arrangements.
Historical Treatment Revised treatment and impact
The joint arrangements with The Group has rights and obligations
Pharmgate in the USA and Canada over the individual assets and
have historically been correctly liabilities in the Statement
classified as joint operations. of financial position. Management
Accordingly, the Group has considers that the nature of
correctly included in into the commercial arrangements and
its income statement the revenue the control that the Group has
and cost of sale, together over the trade receivables and
with any sales incentives provided trade payables indicates that
to customers, for sales of the joint arrangement should
Aivlosin in those territories. be also treated as a joint operation
The Group has correctly brought in the statement of financial
50% of all administrative costs position. The historical Income
into its income statement. statement treatment correctly
However, the Group has incorrectly reflects that of a joint operation
included 50% of each amount but on the Statement of financial
held in the Statement of financial position the Group should incorporate
position of the joint operation's those assets and liabilities
legal entities into the Group's over which it has rights and
own Statement of Financial obligations. Accordingly, the
Position totals, being 50% Group has restated past Statements
of tangible fixed assets, 50% of Financial Position to include
of trade and other receivables, the Group's own trade debtors
50% of cash and 50% of trade (for Aivlosin sales) and related
and other payables. payable balance, together with
50% of any assets and liabilities
pertaining to shared overheads
(for example prepayments and
accruals of administrative expenses).
------------------------------------------
There is no change to the net
assets position of the group
and the remaining balance of
the specific assets and liabilities
to be brought into the Group
statement of financial position
is either cash or a payable to
the joint operation. Accordingly,
together with trade receivables
and payables, the cash/payable
to the joint operation balance
in the Group's Consolidated Statement
of Financial Position has changed.
------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
3.4 Bonuses
An entity may have no legal obligation to pay a bonus.
Nevertheless, in some cases, an entity has a practice of paying
bonuses. In such cases, the entity has a constructive obligation
because the entity has no realistic alternative but to pay the
bonus.
Historical Treatment Revised treatment and impact
Bonuses paid to Directors Bonuses have been paid in each financial
and Employees in the Group period. Notwithstanding that the bonuses
are discretionary, however are subject to management and Remuneration
no assessment was previously Committee discretion, they are customarily
performed as to whether a paid and the amount paid is considered
constructive obligation to by reference to individual performance
pay bonuses was present at and Group performance in the preceding
each year end. As a result financial period. Accordingly, it is
the historical treatment of considered that in accordance with
Bonuses has been to account IAS 19 a constructive obligation to
for them as an expense in pay bonuses has been created at 31
the period in which they are March 2018 and 2019 and the correct
paid - normally in October accounting treatment is to accrue for
of each year. these bonuses in the year in which
the employment services were received
. All periods presented were adjusted.
-----------------------------------------------
3.5 IFRS 16 - Leases
Management reviewed the Group's existing list of identified
leases under IFRS 16 and reassessed the reasonableness of key
inputs used in calculating the lease liabilities and right-of-use
assets. Comparing the results, material differences have been
identified in the following four areas:
-- Leases for two properties and three vehicles have been
identified where the Group has only capitalised 50% of the actual
lease payments in its original IFRS 16 calculation when 100% is
required to be capitalised.
-- Leases for one property, one vehicle and two pieces of
equipment have not been captured by the original assessment.
-- Two contracts have been incorrectly identified as leases as
they do not meet the definition of lease under IFRS 16.
-- The IBR for all identified leases was originally estimated at
4%. The Group re-estimated its incremental borrowing rate for each
class of leases based on consideration over the economic, financing
and asset factors. Please see Note 2.30 Critical accounting
estimates and judgements for more details. The weighted average IBR
based on the Directors' reassessment is 7.03% on transition at 1
April 2018, and 7.84% as at 31 March 2019.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
3.5 IFRS 16 - Leases (continued)
Transition date
2019 1 April 2018
Property 5.8% 5.9%
Vehicle 29.0% 29.0%
Other 4.0% 4.0%
------ ----------------
Weighted average 7.84% 7.03%
------ ----------------
Because of the findings above, the Directors consider it
necessary to provide a corrected reconciliation between the lease
commitment under IAS 17 and the Group's opening lease liabilities
on transition date.
GBP000's
Operating lease commitments at 31 Mar 2018
under IAS 17 - restated 2,910
Recognition exemption for short-term leases (36)
Extension and termination options reasonably
certain to be exercised 549
---------
Adjusted lease commitments at 31 Mar 2018
before discount 3,423
Discount on lease commitment (945)
---------
Lease liabilities recognised at 1 Apr 2018 2,478
of which are:
Current lease liabilities 782
Non-current lease liabilities 1,696
The following table gives details of the amounts introduced into
the Group Statement of financial position at 1 April 2018, the
IFRS16 transition date, split by category of asset.
Property Vehicles Other Total
GBP000's GBP000's GBP000's GBP000's
Restated Restated Restated Restated
Right-of-use assets introduced
Cost 2,224 144 22 2,390
Accumulated Depreciation (395) (44) (6) (445)
Net book value 1,829 100 16 1,945
--------- --------- --------- ---------
Lease liabilities introduced (1,885) (110) (17) (2,012)
--------- --------- --------- ---------
Adjustment to opening reserves (56) (10) (1) (67)
========= ========= ========= =========
The effect of IFRS 16 "Leases" on net profit for the year ended
31 March 2019 was a reduction in reported profit of GBP90,000 and
the effect on net assets as at 31 March 2019 was a reduction of
GBP157,000.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
3.6 Foreign exchange
IAS 21 - The Effects of Changes in Foreign Exchange Rates
requires the accumulated foreign exchange gains or losses from the
translation of foreign operations on consolidation to be presented
as a separate component of equity. Previously this foreign exchange
reserve was included in and presented as part of the Group's
retained earnings. It was separately disclosed in the notes.
Additionally, the Group has corrected how the foreign exchange
gains and losses on its consolidated income statement are
presented. Previously they were spread across multiple captions,
such as revenue, cost of sales and finance expenses. With this
change the overall foreign exchange impact on translation in the
income statement are only presented as part of administrative
expenses.
3.7A Free Goods Incentive
Zhejiang ECO Biok Animal Health Products Limited (hereafter "ECO
BIOK") offers to its customers goods with nominal price (hereafter
"free goods") in December each year, based on a percentage of the
year-to-date sales to the customer. To qualify for the free goods
incentive, the customer will need to meet their annual sales
target, which is set upfront in an annual contract at the beginning
of each calendar year.
Historically, ECO BIOK assess whether each of the in-scope
customers meet their annual target in December each year and ship
out the free goods before the end of that month. The cost to ECO
BIOK, as a result of this incentive, was recorded in the entity's
cost of sales, at the value of the inventory that are shipped out
as free goods.
Under IFRS 15, this free goods incentive is viewed as a material
right given to customers for future purchases at a discounted
price. Therefore, an element of the consideration received on
normal sales throughout the year should be allocated to this future
performance obligation to provide free goods, which should be in
turn recognised as revenue only when the free goods are
delivered.
Based on historical data and contractual terms management was
able to establish which customers were expected to meet their
annual sales targets, the actual percentage against reported sales
to be used in the calculation of free goods and confirm the correct
amount of contract liabilities to be recognised at the previous
year ends. The year-on-year movements of the contract liabilities
are reflected in the relevant year's revenue line.
3.7B Bonus accrual
Historically, ECO BIOK has accrued for its staff bonus in
December, in respect of the calendar year then ended, with payment
in January or February, prior to the Chinese New Year. At the
Group's March year-end no bonus accrual was calculated on a pro
rata basis, for the anticipated next December bonus. This was
incorrect as, in accordance with IAS 19 the correct accounting
treatment is to accrue for these bonuses in the corresponding
year-end. The restatement has recalculated the year-end accrual to
the correct level, which is calculated based on a proportion of the
actual paid amount for the year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
3.7C Other prior year adjustments
ECO BIOK incorrectly recognised, at 31 March 2018 and 31 March
2019, accruals for its national promotion conference planned for
December each year. The restatement has released the overstated
accrual.
3.7D Related party transactions disclosure
Certain related party transactions disclosures were not made in
31 March 2019 financial statements. The required disclosures,
including 31 March 2019 comparative amounts, have been made in note
31.
3.8 Share-based payments
The Company and Group has adopted a change in policy to combine
the previously reported reserve for share-based payment into
retained earnings. The updated accounting policy is included in
note 2.24.
Historically the Group has not recognised a deferred tax asset
on the expected future tax deduction in respect of share options
held at the statement of financial position sheet date. The prior
year results have been restated to recognise a tax asset on share
options, capped at a level for which there is a right of offset
against the deferred tax liability arising on other temporary
differences.
3.9 Share-based payments expense - Company only
Historically no separate accounting has been recorded for share
based payment charges that related to options issued to employees
of subsidiaries of ECO Animal Health Group PLC - the company. The
share based payment charge has historically been incorrectly
recognised in full in the company income statement.
Intercompany agreements exist which give the company the ability
to recharge share-based payment charges to its subsidiary
companies. Accordingly when the Directors have reassessed the
company accounting for share based payments, they have determined
that the expense should be recharged and a related intercompany
receivable asset recognised.
Whilst not impacting the consolidated results, the company share
based payment charge in the company income statement has decreased
and the amounts due from subsidiary companies in the company
statement of financial position have increased.
3.10 Impact of restatements of the financial statements
The following tables summarise the impact of adopting the
changes, as described above in notes 3.1 to 3.9 on the Group's
consolidated financial statements. Prior year adjustments impacting
the Company only profit/loss for the year ended 31 March 2019 are
presented in the Company Statement of Changes in Equity. References
to the specific changes to which those adjustments relate are
presented in the table headings as required.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Group statement of comprehensive income for the
year to 31 March 2019
As reported Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Note Note Note Note Note Note Note Note Note Note
3.1A 3.1B 3.2 3.4 3.5 3.6 3.7A 3.7B 3.7C 3.8
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Revenue 74,578 (4,223) (2,900) - - - (290) 88 - - - 67,253
Cost of sales (40,725) 2,379 2,900 - - - (2) - - - - (35,448)
----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------- ----------
Gross Profit 33,853 (1,844) - - - - (292) 88 - - - 31,805
Other income 35 - - - - - - - - - - 35
Administrative
expenses (14,466) - - - 311 68 - - (451) 354 - (14,184)
R&D expense - - - (5,868) - - - - - - - (5,868)
Currency
profits/(losses) (138) - - - - (1) 796 - - - - 657
Amortisation of
intangible
assets (3,982) - - 2,236 - - - - - - - (1,746)
Share based
payments (631) - - - - - - - - - - (631)
----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------- ----------
Profit from
operating
activities: 14,671 (1,844) - (3,632) 311 67 504 88 (451) 354 - 10,068
Net finance
income/(costs) 562 - - - - (55) (504) - - - - 3
Share of profit
of associate 14 - - - - - - - - - - 14
----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------- ----------
Profit before
income
tax 15,247 (1,844) - (3,632) 311 12 - 88 (451) 354 - 10,085
Income tax charge (1,680) 348 - 59 (59) - - (23) 117 (92) 91 (1,239)
----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------- ----------
Profit for the
period 13,567 (1,496) - (3,573) 252 12 - 65 (334) 262 91 8,846
----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------- ----------
Attributable to:
Owner of parent
company 11,755 (1,273) - (3,573) 252 4 - 33 (170) 134 91 7,253
Non-controlling
interest 1,812 (223) - - - 8 - 32 (164) 128 - 1,593
----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------- ----------
13,567 (1,496) - (3,573) 252 12 - 65 (334) 262 91 8,846
================= ================= ================= ================= ================= ================= ================= ================= ================= ================= =========== ==========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Group statement of comprehensive income for the
year to 31 March 2019 (continued)
As reported Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Note Note Note Note Note Note Note Note Note
3.1A 3.1B 3.2 3.4 3.5 3.6 3.7A 3.7B 3.7C Note 3.8
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Earnings per
share
(pence) 17.60 (1.91) - (5.35) 0.38 0.01 - 0.05 (0.25) 0.20 0.13 10.86
Diluted
earnings
per share
(pence) 17.35 (1.88) - (5.27) 0.37 0.01 - 0.05 (0.25) 0.20 0.13 10.71
Earnings
before
interest,
taxation,
depreciation,
amortisation
and share
based
payments
(EBITDA) 19,949 (1,844) - (5,868) 311 66 504 88 (451) 354 - 13,109
Exclude
foreign
exchange
differences 138 - - - - 1 (796) - - - - (657)
Adjusted
EBITDA
excluding
foreign
exchange
differences 20,087 (1,844) - (5,868) 311 67 (292) 88 (451) 354 - 12,452
============== =========== =========== =========== =========== =========== =========== =========== =========== =========== =========== ============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Group statement of financial position as at 31
March 2019
As
reported Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Note Note Note Note Note Note Note Note Note
3.1A Note 3.1B Note 3.2 3.3 3.4 3.5 3.6 3.7A 3.7B 3.7C 3.8
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Non-current
assets
Intangible
assets 62,734 - - (21,839) - 114 - - - - - - 41,009
Property,
plant
and
equipment 2,144 - - - - - - - - - - - 2,144
Investment
property 200 - - - - - - - - - - - 200
Right of use
assets 1,930 - - - - - (255) - - - - - 1,675
Investments 116 - - - - - - - - - - - 116
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
67,124 - - (21,839) - 114 (255) - - - - - 45,144
Current
assets
Inventories 16,107 3,370 - - - - - - - - - - 19,477
Trade and
other
receivables 29,537 (5,901) (570) - 11 - - - - - 256 - 23,333
Income tax
recoverable 466 252 - - - 62 - - 52 117 (122) - 827
Other taxes
and
social
security 462 - - - - - - - - - - - 462
Cash and
cash
equivalents 18,068 - - - (1,205) - - - - - - - 16,863
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
64,640 (2,279) (570) - (1,194) 62 - - 52 117 134 - 60,962
Total assets 131,764 (2,279) (570) (21,839) (1,194) 176 (255) - 52 117 134 - 106,106
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Group statement of financial position as at 31
March 2019 (continued)
As
reported Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Note Note Note Note Note Note Note Note Note Note
Note 3.1A 3.1A 3.2 3.3 3.4 3.5 3.6 3.7A 3.7B 3.7C 3.8
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Current
liabilities
Trade and other
payables (13,809) - 570 - 1,194 (878) - - (201) (451) 212 - (13,363)
Borrowings - - - - - - - - - - - - -
Income tax (1,000) 184 - - - - - - - - - - (816)
Other taxes
and social
security (533) - - - - - - - - - - - (533)
Amounts due
under leases (415) - - - - - 85 - - - - - (330)
Dividends (49) - - - - - - - - - - - (49)
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
(15,806) 184 570 - 1,194 (878) 85 - (201) (451) 212 - (15,091)
Total assets
less current
liabilities 115,958 (2,095) - (21,839) - (702) (170) - (149) (334) 346 - 91,015
Non-current
liabilities
Deferred tax (1,616) - - 1,113 - - - - - - - 503 -
Amounts due
under leases (1,573) - - - - - 133 - - - - - (1,440)
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Total assets
less total
liabilities 112,769 (2,095) - (20,726) - (702) (37) - (149) (334) 346 503 89,575
========= =========== =========== =========== =========== =========== =========== =========== =========== =========== =========== =========== =========
Equity
Capital and
reserves
Issued share
capital 3,372 - - - - - - - - - - - 3,372
Share premium
account 62,650 - - - - - - - - - - - 62,650
Revaluation
reserve 664 - - - - - - - - - - - 664
Other reserves 3,342 - - - - - - - - - - (3,236) 106
Foreign exchange
reserve - - - - - - - 467 - - - - 467
Retained
earnings 37,377 (1,905) - (20,726) - (702) (33) (467) (76) (170) 177 3,739 17,214
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Shareholders'
funds 107,405 (1,905) - (20,726) - (702) (33) - (76) (170) 177 503 84,473
Non-controlling
interests 5,364 (190) - - - - (4) - (73) (164) 169 - 5,102
Total equity 112,769 (2,095) - (20,726) - (702) (37) - (149) (334) 346 503 89,575
========= =========== =========== =========== =========== =========== =========== =========== =========== =========== =========== =========== =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Group statement of financial position as at 31
March 2018
As
reported Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Note
Note 3.1A Note 3.2 Note 3.3 Note 3.4 Note 3.6 Note 3.7A Note 3.7C 3.8
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Non-current
assets
Intangible
assets 57,631 - (18,207) - 232 - - - - 39,656
Property,
plant
and
equipment 1,866 - - - - - - - - 1,866
Investment
property 200 - - - - - - - - 200
Right of use - - - - - - - - - -
assets
Investments 98 - - - - - - - - 98
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
59,795 - (18,207) - 232 - - - - 41,820
Current
assets
Inventories 17,663 991 - - - - - - - 18,654
Trade and
other
receivables 17,193 (1,678) - (296) - - - - - 15,219
Income tax
recoverable 113 64 - - 121 - 75 (30) - 343
Other taxes
and
social
security 1,160 - - - - - - - - 1,160
Cash and
cash
equivalents 21,261 - - (918) - - - - - 20,343
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
57,390 (623) - (1,214) 121 - 75 (30) - 55,719
Total assets 117,185 (623) (18,207) (1,214) 353 - 75 (30) - 97,539
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Group statement of financial position as at 31
March 2018 (continued)
As
reported Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Note Note Note Note Note Note
3.1A Note 3.2 Note 3.3 3.4 3.6 3.7A 3.7C 3.8
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Current
liabilities
Trade and other
payables (10,715) - - 1,214 (1,307) - (289) 114 - (10,983)
Borrowings - - - - - - - - - -
Income tax
payable (152) 24 - - - - - - - (128)
Other taxes and
social security (108) - - - - - - - - (108)
Lease - - - - - - - - - -
liabilities
Dividends (42) - - - - - - - - (42)
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
(11,017) 24 - 1,214 (1,307) - (289) 114 - (11,261)
Total assets
less
current
liabilities 106,168 (599) (18,207) - (954) - (214) 84 - 86,278
Non-current
liabilities
Deferred tax (1,293) - 1,054 - - - - - 239 -
Lease - - - - - - - - - -
liabilities
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Total assets
less
total
liabilities 104,875 (599) (17,153) - (954) - (214) 84 239 86,278
========= =========== =========== =========== =========== =========== =========== =========== =========== =========
Equity
Capital and
reserves
Issued share
capital 3,291 - - - - - - - - 3,291
Share premium
account 58,847 - - - - - - - - 58,847
Revaluation
reserve 664 - - - - - - - - 664
Other reserves 2,823 - - - - - - - (2,717) 106
Foreign exchange
revaluation
reserve - - - - - 484 - - - 484
Retained
earnings 34,065 (632) (17,153) - (954) (484) (109) 43 2,956 17,732
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Shareholders'
funds 99,690 (632) (17,153) - (954) - (109) 43 239 81,124
Non-controlling
interests 5,185 33 - - - - (105) 41 - 5,154
Total equity 104,875 (599) (17,153) - (954) - (214) 84 239 86,278
========= =========== =========== =========== =========== =========== =========== =========== =========== =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Group statement of cash flows for the year ended
31 March 2019
As
reported Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Note Note Note Note Note Note Note Note
Note 3.1A 3.1B Note 3.2 3.3 3.4 3.5 3.7A 3.7B 3.7C 3.8
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Cashflows from
operating
activities
Profit before income
tax 15,247 (1,844) - (3,632) - 311 12 88 (451) 354 - 10,085
Adjustment for:
Finance income (127) - - - - - - - - - - (127)
Finance cost 69 - - - - - 55 - - - - 124
Foreign exchange
gain/(loss) (504) - - - - - - - - - - (504)
Depreciation 340 - - - - - - - - - - 340
Amortisation of
right-of-use
assets 380 - - - - - - - - - - 380
Revaluation of
freehold
property (55) - - - - - - - - - - (55)
Amortisation of
intangible
assets 3,982 - - (2,237) - - - - - - - 1,745
Pension payments (59) - - - - - - - - - - (59)
Share of post-tax
profits
of equity accounted
joint operations (14) - - - - - - - - - - (14)
Impairment of - - - - - - - - - - - -
investments
Share based charge 631 - - - - - - - - - - 631
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Operating cash flow
before movement in
working capital 19,890 (1,844) - (5,869) - 311 67 88 (451) 354 - 12,546
(Increase)/decrease
in inventories 1,556 (2,379) - - - - - - - - - (823)
(Increase)/decrease
in trade and other
receivables (11,646) 4,223 570 - (307) - - - - (256) - (7,416)
Increase/(decrease)
in trade and other
payables 3,540 92 (542) 42 (1,654) 801 88 828 27 (682) (742) 2,828
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Cash generated from
operations 13,340 92 1,112 (5,827) (1,961) 1,112 155 916 (478) (584) (742) 7,135
Finance costs (69) - - - - - 69 - - - - -
Income tax (862) - - - - - - - - - - (862)
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Net cash from
operating
activities 12,409 92 1,112 (5,827) (1,961) 1,112 224 916 (478) (584) (742) 6,273
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Group statement of cash flows for the year ended
31 March 2019 (continued)
As
reported Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Note Note Note Note Note
Note 3.1A 3.1B Note 3.2 Note 3.3 Note 3.4 Note 3.5 3.7A 3.7B 3.7C 3.8
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Cash flows
from
investing
activities
Acquisition
of property
plant and
equipment (566) - - - - - - - - - - (566)
Disposal
of property
plant and
equipment 5 - - - - - - - - - - 5
Purchase
of
intangibles (9,085) - - 5,873 - 114 - - - - - (3,098)
Finance
income 127 - - - - - - - - - - 127
Net cash
from
investing
activities (9,519) - - 5,873 - 114 - - - - - (3,532)
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Cash flows
from
financing
activities
Proceeds
from issue
of share
capital 3,884 - - - - - - - - - - 3,884
Interest
paid on
lease
liabilities 67 - - - - - (206) - - - - (139)
Principal
paid on
lease
liabilities (406) - - - - - 68 - - - - (338)
Dividends
paid (10,121) - - - - - - - - - - (10,121)
--------- ----------- ----------- ----------- ----------- ----------- -----------
Net cash
from
financing
activities (6,576) - - - - - (138) - - - - (6,714)
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Net decrease
in cash and
cash
equivalents (3,686) 92 1,112 46 (1,961) 1,226 86 916 (478) (584) (742) (3,973)
Foreign
exchange
movements 493 - - - - - - - - - - 493
Balance at
the
beginning
of the
period 21,261 - - - (918) - - - - - - 20,343
Cash and
cash
equivalents
at the end
of the
period 18,068 92 1,112 46 (2,879) 1,226 86 916 (478) (584) (742) 16,863
--------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Company statement of financial position as at 31
March 2019
As reported Adjustment Adjustment Adjustment Adjustment Restated
Note Note
Note 3.4 Note 3.5 3.8 3.9
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Non-current assets
Intangible assets - - - - - -
Property, plant
and equipment 769 - - - - 769
Investment property 200 - - - - 200
Right of use assets 30 - 27 - - 57
Investments 20,077 - - - - 20,077
Amounts due from
subsidiary Company 58,510 - - - 1,478 59,988
------------ ----------- ----------- ----------- ----------- ---------
79,586 - 27 - 1,478 81,091
Current assets
Inventories - - - - - -
Trade and other
receivables 46 - - - - 46
Income tax recoverable - 14 - - - 14
Other taxes and
social security 145 - - - - 145
Cash and cash equivalents 4,236 - - - - 4,236
------------ ----------- ----------- ----------- ----------- ---------
4,427 14 - - - 4,441
Total assets 84,013 14 27 - 1,478 85,532
------------ ----------- ----------- ----------- ----------- ---------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Company statement of financial position as at 31
March 2019 (continued)
As reported Adjustment Adjustment Adjustment Adjustment Restated
Note 3.4 Note 3.5 Note 3.8 Note 3.9
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Current liabilities
Trade and other
payables (181) (115) - - - (296)
Borrowings - - - - - -
Income tax - - - - - -
Other taxes and
social security (90) - - - - (90)
Amounts due under
leases (16) - (20) - - (36)
Dividends (49) - - - - (49)
------------ ----------- ----------- ----------- ----------- ---------
(336) (115) (20) - - (471)
Total assets less
current liabilities 83,677 (101) 7 - 1,478 85,061
Non-current liabilities
Deferred tax (85) - - 85 - -
Amounts due under
leases (12) - (17) - - (29)
------------ ----------- ----------- ----------- ----------- ---------
Total assets less
total liabilities 83,580 (101) (10) 85 1,478 85,032
============ =========== =========== =========== =========== =========
Equity
Capital and reserves
Issued share capital 3,372 - - - - 3,372
Share premium account 62,650 - - - - 62,650
Revaluation reserve 395 - - - - 395
Other reserves 3,342 - - (3,236) - 106
Foreign exchange - - - - - -
revaluation reserve
Retained earnings 13,821 (101) (10) 3,321 1,478 18,509
------------ ----------- ----------- ----------- ----------- ---------
Shareholders' funds 83,580 (101) (10) 85 1,478 85,032
Non-controlling - - - - - -
interests
Total equity 83,580 (101) (10) 85 1,478 85,032
============ =========== =========== =========== =========== =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Company statement of financial position as at 31
March 2018 (continued)
As reported Adjustment Adjustment Adjustment Restated
Note Note
Note 3.4 3.8 3.9
GBP000's GBP000's GBP000's GBP000's GBP000's
Non-current assets
Intangible assets - - - - -
Property, plant
and equipment 716 - - - 716
Investment property 200 - - - 200
Right of use assets - - - - -
Investments 20,077 - - - 20,077
Amounts due from
subsidiary Company 46,326 - - 1,324 47,650
------------ ----------- ----------- ----------- ---------
67,319 - - 1,324 68,643
Current assets
Inventories - - - - -
Trade and other
receivables 213 - - - 213
Income tax recoverable - 22 - - 22
Other taxes and
social security 518 - - - 518
Cash and cash equivalents 4,959 - - - 4,959
------------ ----------- ----------- ----------- ---------
5,690 22 - - 5,712
Total assets 73,009 22 - 1,324 74,355
------------ ----------- ----------- ----------- ---------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Company statement of financial position as at 31
March 2018 (continued)
As reported Adjustment Adjustment Adjustment Restated
Note Note
3.4 3.8 Note 3.9
GBP000's GBP000's GBP000's GBP000's GBP000's
Current liabilities
Trade and other
payables (234) (194) - - (428)
Borrowings - - - - -
Income tax - - - - -
Other taxes and
social security (98) - - - (98)
Amounts due under - - - - -
leases
Dividends (42) - - - (42)
------------ ----------- ----------- ----------- ---------
(374) (194) - - (568)
Total assets less
current liabilities 72,635 (172) - 1,324 73,787
Non-current liabilities
Deferred tax (90) - 90 - -
Amounts due under - - - - -
leases
------------ ----------- ----------- ----------- ---------
Total assets less
total liabilities 72,545 (172) 90 1,324 73,787
============ =========== =========== =========== =========
Equity
Capital and reserves
Issued share capital 3,291 - - - 3,291
Share premium account 58,847 - - - 58,847
Revaluation reserve 395 - - - 395
Other reserves 2,823 - (2,717) - 106
Foreign exchange - - - - -
revaluation reserve
Retained earnings 7,189 (172) 2,807 1,324 11,148
------------ ----------- ----------- ----------- ---------
Shareholders' funds 72,545 (172) 90 1,324 73,787
Non-controlling - - - -
interests -
Total equity 72,545 (172) 90 1,324 73,787
============ =========== =========== =========== =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
3. Prior year restatements (continued)
Impact on the Company statement of cash flows for the year ended
31 March 2019
As reported Adjustment Adjustment Adjustment Restated
Note Note Note
3.4 3.5 3.9
GBP000's GBP000's GBP000's GBP000's GBP000's
Profit before income
tax 15,050 71 (3) 154 15,272
Adjustment for:
Finance income (937) - 20 - (917)
Finance cost - - - - -
Depreciation 19 - (2) - 17
Amortisation of right-of-use
assets - - 15 - 15
Revaluation of freehold
property (55) - - - (55)
Pension payments (59) - - - (59)
Share based charge 631 - - (326) 305
------------ ----------- ----------- ----------- ---------
Operating cash flow
before movement in working
capital 14,649 71 30 (172) 14,578
Change in inventories - - - - -
Change in receivables (11,644) - - 172 (11,472)
Change in payables (39) (79) 15 - (103)
------------ ----------- ----------- ----------- ---------
Cash generated from
operations 2,966 (8) 45 - 3,003
Finance costs (2) - - - (2)
Income tax (13) - - - (13)
------------ ----------- ----------- ----------- ---------
Net cash from operating
activities 2,951 (8) 45 - 2,988
------------ ----------- ----------- ----------- ---------
Cash flows from investing
activities
Acquisition of property
plant and equipment (2) - - - (2)
Disposal of property - - - - -
plant and equipment
Purchase of intangibles - - - - -
Finance income 938 - - - 938
------------ ----------- ----------- ----------- ---------
Net cash from investing
activities 936 - - - 936
------------ ----------- ----------- ----------- ---------
Cash flows from financing
activities
Proceeds from issue
of share capital 3,884 - - - 3,884
Interest paid on lease
liabilities 1 - (23) - (22)
Principal paid on lease
liabilities (17) - (14) - (31)
Dividends paid (8,478) - - - (8,478)
------------ ----------- ----------- ----------- ---------
Net cash (used in)/from
financing activities (4,610) - (37) - (4,647)
------------ ----------- ----------- ----------- ---------
Net decrease in cash
and cash equivalents (723) (8) 8 - (723)
Foreign exchange movements - - - - -
Balance at the beginning
of the period 4,959 - - - 4,959
-
------------ ----------- ----------- ----------- ---------
Cash and cash equivalents
at the end of the period 4,236 (8) 8 - 4,236
============ =========== =========== =========== =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
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
("EBITDA"), adjusted to exclude share based payments expenses.
China North S & SE Latin Rest
Corporate/U.K. & Japan America Asia America Europe of World Total
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Year ended 31
March 2020
Total segment
revenue 3,507 27,085 22,297 25,303 19,540 14,549 2,378 114,659
Inter-segment
revenue (1,739) (3,937) (10,662) (11,128) (6,939) (6,959) (1,189) (42,553)
--------------- --------- --------- --------- --------- --------- ---------- ---------
Revenue from
external customers 1,768 23,148 11,635 14,175 12,601 7,590 1,189 72,106
--------------- --------- --------- --------- --------- --------- ---------- ---------
Sale of goods 1,768 23,148 11,635 14,175 12,601 7,590 1,032 71,949
Royalties - - - - - - 157 157
--------------- --------- --------- --------- --------- --------- ---------- ---------
1,768 23,148 11,635 14,175 12,601 7,590 1,189 72,106
--------------- --------- --------- --------- --------- --------- ---------- ---------
Adjusted EBITDA (15,011) 6,499 4,196 6,266 2,286 2,951 636 7,823
Total Assets 30,923 31,417 17,212 7,968 12,355 4,585 945 105,405
=============== ========= ========= ========= ========= ========= ========== =========
Year ended 31
March 2019
All 2019 figures
have been restated
Total segment
revenue 2,835 34,400 18,678 19,034 13,972 15,519 3,466 107,904
Inter-segment
revenue (1,418) (7,613) (8,135) (10,943) (3,193) (7,616) (1,733) (40,651)
--------------- --------- --------- --------- --------- --------- ---------- ---------
Revenue from
external customers 1,417 26,787 10,543 8,091 10,779 7,903 1,733 67,253
--------------- --------- --------- --------- --------- --------- ---------- ---------
Sale of goods
restated 1,417 26,787 10,543 8,091 10,779 7,903 1,576 67,096
Royalties - - - - - - 157 157
--------------- --------- --------- --------- --------- --------- ---------- ---------
1,417 26,787 10,543 8,091 10,779 7,903 1,733 67,253
--------------- --------- --------- --------- --------- --------- ---------- ---------
Adjusted EBITDA (1,771) 6,443 2,242 2,293 1,133 2,234 535 13,109
Total Assets 21,630 24,982 12,492 14,757 15,978 12,523 3,744 106,106
=============== ========= ========= ========= ========= ========= ========== =========
Goodwill and other intangible assets are initially allocated to
the geographical segments on the basis of the proportion of sales
achieved by each segment.
Adjusted EBITDA includes (Gain)/Loss on foreign exchange
transactions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
4. Segment information (continued)
A reconciliation of adjusted EBITDA for reportable segments to
profit before tax is provided as follows:
2020 2019
GBP000's GBP000's
Restated
Adjusted EBITDA for reportable segments 7,823 13,109
Depreciation (334) (340)
Amortisation of right of use assets (389) (380)
Revaluation of investment property 64 55
Amortisation (1,685) (1,745)
Share-based payment charges (284) (631)
Profit before tax on continuing activities 5,195 10,068
--------- ---------
Product Revenues
2020 2019
GBP000's GBP000's
Restated*
Aivlosin 60,686 52,212
Ecomectin 3,951 3,686
Others 7,469 11,355
--------- ----------
Total 72,106 67,253
Contract Balances
2020 2019
Within one year or on demand GBP000's GBP000's
Restated*
--------- ----------
At 1 April 847 289
--------- ----------
Amounts included in contract liabilities
that was recognised as revenue
during the period (847) (289)
Cash received in advance of performance
and not recognised as revenue
during the period 594 847
--------- ----------
At 31 March 594 847
--------- ----------
*Please refer to Note 3 for further details on prior year
adjustments
The Group recognised contract liabilities of GBP594,000 at 31
March 2020 (2019 restated: GBP847,000). 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 2020
5. Other income
2020 2019
GBP000's GBP000's
Management charges 7 30
Sundry income 98 5
105 35
--------- ---------
6. Result from operating activities
2020 2019
GBP000's GBP000's
Restated
Result from operating activities is stated
after charging/(crediting)
Cost of inventories recognised as an expense 38,381 35,337
Employee benefits expenses 9,968 8,969
Amortisation of intangible assets (note
12 ) 1,685 1,745
Depreciation (note 13) 334 340
Amortisation of right of use assets (note
15) 389 380
Revaluation of investment property (note
14) (64) (55)
Loss/(Gain) on foreign exchange transactions 539 (657)
Research and development 8,775 5,868
Impairment losses on trade receivables 139 64
Fees payable to the Company's auditor for
the audit of the parent Company and Group
annual accounts 54 18
Fees payable to the Company's auditor and
its associates for the audit of the Company's
subsidiaries 47 66
Fees payable to the Company's auditor for the audit of the
parent Company and Group annual accounts, for the year ended
31March 2020, were GBP414,000 (2019: GBP18,000), and fees
payable to the Company's auditor and its associates for the
audit of the Company's subsidiaries were GBP460,000 (2019:
GBP66,000).
2020 2019
GBP000's GBP000's
Restated
Earnings before interest, tax, depreciation,
amortisation and impairment, share-based
payments and foreign exchange differences
(adjusted EBITDA)
Profit from operating activities 5,195 10,068
Depreciation 334 340
Amortisation of right of use assets 389 380
Revaluation of investment property (64) (55)
Amortisation 1,685 1,745
Share-based payments 284 631
--------- ---------
7,823 13,109
Foreign exchange differences 539 (657)
--------- ---------
8,362 12,452
--------- ---------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
6. Result from operating activities (continued)
Management believe that adjusted EBITDA is the most 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.
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.
*Please refer to Note 3 for further details on prior year
restatements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
7. Finance income/ (costs)
2020 2019
GBP000's GBP000's
Finance income Restated
Interest received on short term bank deposits 112 127
Finance costs
Interest paid (18) (1)
Interest paid on lease liabilities (124) (123)
(142) (124)
--------- ---------
(30) 3
========= =========
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.
2020 2019
Earnings Weighted Per share Earnings Weighted Per share
average amount average amount
number number
of shares of shares
2020 2020 2020 2019 2019 2019
GBP000's 000's (pence) GBP000's 000's (pence)
Restated Restated
Earnings
attributable
to ordinary
shareholders
on continuing
operations
after tax 2,582 67,530 3.82 7,253 66,794 10.86
Dilutive
effect of
share options - 2,783 (0.15) - 943 (0.15)
Fully diluted
earnings
per share 2,582 70,313 3.67 7,253 67,737 10.71
--------- ----------- ---------- --------- ----------- ----------
Diluted earnings per share takes into account the dilutive
effect of share options.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
9. Taxation
2020 2019
Current tax year GBP000's GBP000's
Restated
Foreign corporation tax on profits for the year 1,520 1,493
Withholding tax on intercompany dividend 54 92
Research and development tax credits claimed
in the year (1,000) (414)
Research and development tax credits - adjustment
for prior year 196 (104)
Deferred tax
Origination and reversal of temporary differences 187 261
Due to change in effective rate 75 (89)
--------- ---------
Income tax charge 1,032 1,239
========= =========
Deferred tax recognised through reserves
Origination and reversal of temporary differences 373 (173)
Due to change in effective rate 1 -
--------- ---------
374 (173)
========= =========
2020 2019
GBP000's GBP000's
Factors affecting the tax charge for the year Restated
Profit on ordinary activities before taxation 5,207 10,085
========= =========
Profit on ordinary activities before taxation
multiplied by the applicable rate of UK corporation
tax of 19% (2019: 19%) 989 1,916
Effects of:
Non-deductible expenses 324 1,451
Non-chargeable credits (103) (984)
Withholding tax on inter-company dividends 54 92
Enhanced allowance on research and development
expenditure (756) (1,116)
Different tax rate for foreign subsidiaries 165 186
Reduced effective deferred tax rate 76 (89)
Origination and reversal of temporary differences 47 (91)
Unused tax losses carried forward 236 141
Patent box claim - (267)
Income tax charge 1,032 1,239
========= =========
2019
2020 Restated*
% %
Applicable tax rate per UK legislation 19.00 19.00
Effects of:
Non-deductible expenses 6.22 14.39
Non-chargeable credits (1.98) (9.76)
Withholding tax on inter-company dividends 1.04 0.91
Enhanced allowance on research and development
expenditure (14.52) (11.07)
Different tax rate for foreign subsidiaries 3.17 1.85
Reduced effective deferred tax rate 1.46 (0.88)
Origination and reversal of temporary differences 0.90 (0.90)
Unused tax losses carried forward 4.53 1.40
Patent box claim - (2.65)
Effective tax rate 19.82 12.29
======== ===========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
9. Taxation (continued)
Future tax changes
Changes to the UK corporation tax rates were substantively
enacted as part of the Finance Bill 2016 (on 6 September 2016).
These include reductions to the main rate to reduce the rate to 17%
from 1 April 2020. On 11 March 2020 the government announced that
the reduction to 17% would not take effect and the prevailing rate
of corporation tax would remain at 19%. Deferred taxes at the
Statement of financial position date have been measured at 19%
(2019: hybrid tax rate of 18%). At the year ended 31 March 2020 the
Group had unused overseas tax losses amounting to GBP3.8 million
(2019: GBP2.0 million) for which no deferred tax asset has been
recognised. These tax losses are not expected to expire.
10. Profit for the financial year
2020 2019
GBP000's GBP000's
Restated
Parent Company's profit/(loss) for the financial
year (151) 15,263
========= =========
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 2020
11. Dividends
2020 2019
GBP000's GBP000's
Interim dividend for the year ended 31 March 2,698 -
2019 at 4.0p per ordinary share (settled
12 April 2019)
Final dividend for the year ended 31 March 4,755 -
2019 at 7.04p per ordinary share (settled
16 October 2019)
Special dividend for the year ended 31 March
2019 of 3.5p per ordinary share (settled
9 January 2019) - 2,350
Interim dividend for the year ended 31 March
2018 at 3.2p per ordinary share (settled
12 April 2018) - 2,106
Final dividend for the year ended 31 March
2018 at 6.0p per ordinary share (settled
17 October 2018) - 4,029
7,453 8,485
========= =========
In light of the economic situation caused by the coronavirus
pandemic, the Board of Directors proposes that no dividend will be
paid for the year ended 31 March 2020.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
12. Intangible fixed assets
Group Goodwill Distribution Drug registrations, Total
rights patents
and license
costs
GBP000's GBP000's GBP000's GBP000's
Cost
At 1 April 2018 - as reported 17,930 1,442 74,819 94,191
Prior year adjustment - - (38,447) (38,447)
--------- ------------- -------------------- ---------
At 1 April 2018 - restated 17,930 1,442 36,372 55,744
Additions - as reported - - 9,085 9,085
Prior year adjustment - - (5,987) (5,987)
At 31 March 2019 - restated 17,930 1,442 39,470 58,842
Additions - - 2,115 2,115
At 31 March 2020 17,930 1,442 41,585 60,957
========= ============= ==================== =========
Amortisation
At 1 April 2018 - as reported - (831) (35,729) (36,560)
Prior year adjustment - 167 20,305 20,472
--------- ------------- -------------------- ---------
At 1 April 2018 - restated - (664) (15,424) (16,088)
Charge for the year -
as reported - (72) (3,910) (3,982)
Prior year adjustment - 1 2,236 2,237
--------- ------------- -------------------- ---------
At 31 March 2019 - restated - (735) (17,098) (17,833)
========= ============= ==================== =========
Charge for the year - (70) (1,615) (1,685)
At 31 March 2020 - (805) (18,713) (19,518)
========= ============= ==================== =========
Net Book Value
At 31 March 2020 17,930 637 22,872 41,439
========= ============= ==================== =========
At 31 March 2019 - restated 17,930 707 22,372 41,009
========= ============= ==================== =========
At 31 March 2018 - restated 17,930 778 20,948 39,656
========= ============= ==================== =========
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 5 to 15 years.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
12. Intangible fixed assets (continued)
The carrying value of goodwill is attributable to the following
cash generating units:
Entity Date of acquisition 2019 and 2020
GBP000's
ECO Animal Health Limited 1 October 2004 17,359
Zhejiang Eco Biok Animal Health Products Limited 1 April 2007 94
ECO Animal Health Japan Inc 24 December 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. 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 8% (2019: 11%). 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. On assumptions
as at each period end the excess of recoverable amount over
carrying value is over GBP130 million (2019 restated: GBP114
million).
Management believes that the most significant assumption in the
calculation of value in use is the estimated growth rate. However,
even if the growth rate were to be zero, the recoverable amount
would still be over GBP119 million (2019 restated: GBP76 million)
more than the carrying value and no impairment would be
necessary.
The net book value of Drug registrations, patents and license
costs can be broken down as follows:
2020 2019
GBP000's GBP000's
Restated
Aivlosin 18,009 17,659
Ecomectin 4,310 3,993
Others 553 720
22,872 22,372
========= =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
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 2020 Intangible assets included GBP7,063,000 (2019
restated: GBP4,834,000) of assets capitalised that had not
commenced their useful life, of which approximately GBP4,663,000
(2019: GBP3,234,000) were Aivlosin related products. The directors
have conducted impairment reviews and no impairment is required.
Following restatement, no impairment indicators have been
identified in relation to intangible assets in commercial use.
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 Directors have assessed the restated carrying value of
intangible assets (as set out in note 3.2) for indicators of value
impairment for the years ended 31 March 2019 and 31 March 2020 and
have concluded that no impairment is necessary.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
13. Property, plant and equipment
Group Land and Leasehold Plant and Fixtures, fittings Motor Vehicles Total
Buildings improvements machinery and equipment
(freehold)
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Cost or valuation
At 1 April
2018 730 - 1,602 1,083 61 3,476
Additions - - 341 198 27 566
Disposals - - (68) - - (68)
Revaluation
in the year 30 - - - - 30
Foreign exchange
movements - - 11 1 (6) 6
------------ -------------- ----------- ------------------- --------------- ---------
At 31 March
2019 760 - 1,886 1,282 82 4,010
Additions - 555 40 157 15 767
Disposals - - - (432) (6) (438)
Revaluation
in the year (145) - - - - (145)
Reclassification 53 - (937) 648 236 -
Foreign exchange
movements - - (3) (5) (16) (24)
------------ -------------- ----------- ------------------- --------------- ---------
At 31 March
2020 668 555 986 1,650 311 4,170
Depreciation
At 1 April
2018 (26) - (864) (706) (14) (1,610)
Charge for
the year - - (171) (154) (15) (340)
Disposals - - 63 - - 63
Revaluation
in the year 26 - - - - 26
Foreign exchange
movements - - (6) - 1 (5)
------------ -------------- ----------- ------------------- --------------- ---------
At 31 March
2019 - - (978) (860) (28) (1,866)
Charge for
the year (15) - (44) (241) (34) (334)
Disposals - - - 426 4 430
Revaluation
in the year 13 - - - - 13
Reclassification (7) - 310 (137) (166) -
Foreign exchange
movements - - 2 - 11 13
At 31 March
2020 (9) - (710) (812) (213) (1,744)
------------ -------------- ----------- ------------------- --------------- ---------
Net Book Value
At 31 March
2020 659 555 276 838 98 2,426
============ ============== =========== =================== =============== =========
At 31 March
2019 760 - 908 422 54 2,144
============ ============== =========== =================== =============== =========
At 31 March
2018 704 - 738 377 47 1,866
============ ============== =========== =================== =============== =========
The freehold land and buildings at 78 Coombe Road, New Malden
was valued at GBP615,000 as 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 property
will continue to be valued on a regular basis.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
13. Property, plant and equipment (continued)
Plant and machinery held by Zhejiang ECO Biok Animal Health
Products Limited has been reclassified from Plant and machinery to
Land and buildings, and Furniture, fittings and equipment. FE.
These adjustments have been made retrospectively to 1 April
2018.
Valuation Technique Significant unobservable Inter-relationship
used inputs between key unobservable
inputs and fair value
RICS Valuation - Global Estimated market rent Reduced marketability
Standards ('Red Book Capital Value and hence rent achievable
Global Standards') Price per square foot by the property.
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.
Depreciation has been included in the administrative expenses
line in the income statement, except for GBP129,000 (2019:
GBP110,000) of depreciation of production equipment in the Chinese
subsidiary ECO Biok, which is included within cost of sales.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
13. Property, plant and equipment (continued)
The value of the freehold property would have been recorded at
GBP249,000 (2019: GBP259,000) on a historical cost basis.
Company Land and Fixtures, Total
Buildings fittings
(freehold) and equipment
Cost or valuation GBP000's GBP000's GBP000's
At 1 April 2018 730 165 895
Additions - 2 2
Revaluation in the year 30 - 30
------------ --------------- ---------
At 31 March 2019 760 167 927
Additions - 1 1
Disposals - (154) (154)
Revaluation in the year (145) - (145)
At 31 March 2020 615 14 629
------------ --------------- ---------
Depreciation
At 1 April 2018 (25) (154) (179)
Charge for the year restated (13) (4) (17)
Revaluation in the year restated 38 - 38
------------ --------------- ---------
At 31 March 2019 - (158) (158)
Charge for the year (13) (4) (17)
Disposals - 155 155
Revaluation in the year 13 - 13
At 31 March 2020 - (7) (7)
------------ --------------- ---------
Net Book Value
At 31 March 2020 615 7 622
============ =============== =========
At 31 March 2019 760 9 769
============ =============== =========
At 31 March 2018 705 11 716
============ =============== =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
14. Investment property
Group and Company
Land and Total
Buildings
(freehold)
GBP000's GBP000's
At 1 April 2018 and 31 March 2019 200 200
Revaluation in 2020 105 105
------------ ---------
At 31 March 2020 305 305
------------ ---------
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. This property was previously the Head
Office of Lawrence plc (now ECO Animal Health Group plc) and is
occupied by a charity at zero cost. The Directors believe that the
open market value of this property is not significantly different
to the carrying value.
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 Estimated market rent Reduced marketability
Standards ('Red Book Capital value and hence rent achievable
Global Standards') Price per square foot by the property.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
15. Right of use assets
Group Property Vehicles Other Total
GBP000's GBP000's GBP000's GBP000's
Cost
Introduction on inception
of IFRS 16 2,297 203 7 2,507
Additions 118 85 - 203
Prior year adjustments* (192) (37) 15 (214)
Disposals - (19) - (19)
Foreign exchange movements 16 (3) - 13
--------- --------- ---------
At 31 March 2019 - restated 2,239 229 22 2,490
Additions 370 - - 370
Disposals (494) (33) - (527)
Foreign exchange movements (2) 2 1 1
--------- --------- --------- ---------
At 31 March 2020 2,113 198 23 2,334
--------- --------- --------- ---------
Depreciation
Introduction on inception
of IFRS 16 (328) (70) (2) (400)
Charge for the year (318) (60) (2) (380)
Prior year adjustments* (62) 18 (6) (50)
Disposals - 19 - 19
Foreign exchange movements (6) 2 - (4)
--------- --------- ---------
At 31 March 2019 - restated (714) (91) (10) (815)
Charge for the year (323) (61) (5) (389)
Disposals 494 33 - 527
Foreign exchange movements 1 - - 1
--------- --------- --------- ---------
At 31 March 2020 (542) (119) (15) (676)
--------- --------- --------- ---------
Net Book Value
At 31 March 2020 1,571 79 8 1,658
========= ========= ========= =========
At 31 March 2019 - restated* 1,525 138 12 1,675
========= ========= ========= =========
*Please refer to Note 3 for further details on prior year
adjustments.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
15. Right of use assets (continued)
Company Vehicles Other Total
GBP000's GBP000's GBP000's
Cost
Introduction on inception
of IFRS 16 21 7 28
Additions 26 - 26
Prior year adjustments 70 - 70
Disposals - - -
Foreign exchange movements (2) - (2)
At 31 March 2019 115 7 122
Additions - - -
Disposals (19) - (19)
Foreign exchange movements (1) - (1)
At 31 March 2020 95 7 102
--------- --------- ---------
Depreciation
Introduction on inception
of IFRS 16 (7) (2) (9)
Charge for the year (13) (2) (15)
Prior year adjustments (42) - (42)
Foreign exchange movements 1 - 1
--------- --------- ---------
At 31 March 2019 (61) (4) (65)
Charge for the year (31) (1) (32)
Disposals 19 - 19
Foreign exchange movements 1 - 1
--------- --------- ---------
At 31 March 2020 (72) (5) (77)
--------- --------- ---------
Net Book Value
At 31 March 2020 23 2 25
========= ========= =========
At 31 March 2019 54 3 57
========= ========= =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
16. Fixed asset investments
Group
Investment Unlisted Total
in Associate investments
(Equity) (Cost)
GBP000's GBP000's GBP000's
At 31 March 2018 89 9 98
Share of associate's result for the
year 14 - 14
Foreign exchange differences 4 - 4
At 31 March 2019 107 9 116
Share of associate's result for the
year 42 - 42
Foreign exchange differences 8 - 8
At 31 March 2020 157 9 166
=========
Company
Unlisted Total
investments
(subsidiaries)
Cost GBP000's GBP000's
At 31 March 2018, 2019 and 2020 20,077 20,077
Impairment
At 31 March 2018, 2019 - -
Impairment charge (45) (45)
At 31 March 2020 (45) (45)
Net Book Value
At 31 March 2020 20,032 20,032
At 31 March 2018, 2019 20,077 20,077
The Company's subsidiary Petlove Limited became dormant during
the financial year ended 31 March 2020 therefore was fully impaired
at the year end.
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 of Class Shares
registration held
or incorporation %
Zhejiang ECO Biok
Animal Health Products Zhongguan Industrial Area,
Limited Deqing, Zhejiang Province P. R. China Ordinary 3*
78 Coombe Road, New Malden,
Petlove Limited Surrey, KT3 4QS Great Britain Ordinary 91
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 2020
16. Fixed asset investments (continued)
Subsidiary undertakings held by the Group
Company Registered office address Country of Class Shares
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 48*
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 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 2020
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
Petlove Limited Non-trading
Zhejiang ECO Biok Animal Health Products Manufacture of animal
Limited drugs
Shanghai ECO Biok Veterinary Drug Sale Company Distribution of animal
Ltd. drugs
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
nterpret 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:
Equity Profit/(loss) Equity Profit/(loss)
for the for the
year year
2020 2020 2019 2019
GBP000's GBP000's GBP000's GBP000's
Restated Restated
ECO Animal Health Limited 1,021 1,834 (1,146) 5,737
ECO Animal Health Southern Africa
(Pty) Limited 276 19 276 19
Zhejiang ECO Biok Animal Health
Products Ltd 11,965 3,473 10,794 3,363
ECO Animal Health do Brasil Comercio
de Produtos Veterinarios Ltda. (227) (571) 307 (163)
ECO Animal Health Japan Inc. 1,505 152 1,253 175
ECO Animal Health de Mexico, S.
de R. L. de C. V. 141 99 118 53
ECO Animal Health USA Corp. (1,648) (997) (604) (725)
ECO Animal Health India (Private)
Ltd - - - -
ECO Animal Health Europe Ltd - - - -
ECO Animal Health Malaysia Sdn
Bhd (21) (7) (21) (7)
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 2020
16. Fixed asset investments (continued)
Zhejiang ECO Biok Animal Health Products Limited and ECO Animal
Health do Brasil Comercio de Produtos Veterinarios Ltda both 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.
Interpret 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 2020.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
16. Fixed asset investments (continued)
Please note 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.
2020 2019
For the year ended 31 March GBP000's GBP000's
Restated*
Revenue 20,169 24,300
Cost of sales (10,374) (14,311)
Gross Profit 9,795 9,989
Administrative expenses (5,275) (5,232)
Operating profit 4,520 4,757
Finance expense (67) (71)
Profit before tax 4,453 4,686
Tax expense (1,201) (1,435)
Profit after tax 3,252 3,251
Profit / (loss) allocated to NCI 1,593 1,593
Other comprehensive income allocated
to NCI 39 (2)
Dividend paid to NCI (968) (1,643)
2020 2019
As at 31 March GBP000's GBP000's
Assets:
Property, plant and equipment 704 799
Right-of-use assets 891 816
Deferred tax assets 30 30
Inventories 3,150 4,055
Trade and other receivables 6,457 7,530
Cash and cash equivalents 5,339 4,045
16,571 17,275
Liabilities:
Trade and other payables 3,306 5,261
Contract liabilities 605 848
Lease liabilities - short term 96 87
Lease liabilities - long term 857 775
4,864 6,971
Accumulated NCI 5,766 5,102
*Please refer to Note 3 for further details on prior year
restatements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
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 2020
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 Canada
Health LLC Inc
2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Restated Restated
Current assets 2,325 968 511 461
Current liabilities (2,310) (1,363) (510) (569)
Sales 7,612 9,161 3,358 3,764
Profit - - - -
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.
2020 2019
Investments (share of net assets) GBP000's GBP000's
At 1 April 107 89
Share of results for the year 42 14
Foreign exchange movement 8 4
At 31 March 157 107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
16. Fixed asset investments (continued)
2020 2019
Restated
Summarised financial information GBP000's GBP000's
At 31 March
Current assets 541 386
Non-current assets 19 19
Current liabilities 221 181
Non-current liabilities 12 5
Net assets (100%) 327 219
Group share of net assets (47.62%) 156 104
Year ended 31 March
Revenue 1,634 1,514
Net profit 79 30
17. Inventories
Group Company
2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Restated
Raw materials and consumables 6,734 13,960 - -
Finished goods and goods
for resale 4,397 5,393 - -
Work in progress 6,133 124 - -
17,264 19,477 - -
The cost of inventories recognised as an expense and included in
cost of sales in the period amounted to GBP38,381,000 (2019
restated: GBP35,337,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020 18. Trade and other receivables
Group Company
2020 2019 2020 2019
Non-current Restated
GBP000's GBP000's GBP000's GBP000's
Amounts owed by group
undertakings - - 59,295 59,988
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
Current 2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Restated Restated
Trade receivables 25,974 22,525 - -
Other receivables 1,884 339 30 35
Prepayments and accrued
income 495 469 25 11
28,353 23,333 55 46
As at 31 March 2020, trade receivables of GBP11,402,000 (2019:
GBP2,592,000) due to the Group and GBPnil (2019: 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
2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Up to 3 months past
due 6,974 1,547 - -
3 to 6 months past
due 2,899 515 - -
Over 6 months past
due 1,529 530 - -
11,402 2,592 - -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020 18. Trade and other receivables (continued)
As at 31 March 2020, impairment provisions of GBP419,000 on
gross receivables of GBP705,000 (2019: GBP280,000 on gross
receivables of GBP280,000) 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 concluded
that a wholly immaterial expected credit loss provision would be
required. This consideration includes the potential risks arising
from COVID on its customers. Its experience with customers since 31
March 2020, 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
2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Current debt 152 1 - -
Up to 3 months past
due 4 - - -
3 to 6 months past
due 2 68 - -
Over 6 months past
due 261 211 - -
419 280 - -
Movement on the Group provision for impairment of trade
receivables is as follows:
Group 2020 2019
GBP GBP
Balance at 1 April 280 470
Additional provision made 140 -
(Recovered) in the year - (33)
Written off in the year (1) (157)
-----
Balance at 31 March 419 280
-----
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020 18. Trade and other receivables (continued)
The carrying amounts of trade and other receivables are
denominated in the following currencies:
Group Company
2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Restated Restated
Pounds Sterling 759 1,130 55 46
Euros 2,875 3,288 - -
U S Dollars 12,875 7,053 - -
Chinese RMB 6,757 7,805 - -
Brazilian Real 2,233 946 - -
Japanese Yen 841 695 - -
Canadian dollars 511 816 - -
Mexican Pesos 1,499 1,477 - -
Other currencies 3 123 - -
28, 353 23,333 55 46
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 2020
19. Deferred tax
Group
Deferred tax assets and liabilities are attributable to the
following:
Assets / (Liabilities) Net
2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Restated Restated
Trade related temporary differences (2,487) (2,152) (2,487) (2,152)
Overseas trade related temporary
differences 30 - 30 -
Freehold property (76) (75) (76) (75)
Investment property (19) (10) (19) (10)
Plant and equipment (77) (49) (77) (49)
Deferred tax on share options - 503 - 503
Tax losses carried forward 1,993 1,783 1,993 1,783
Amount (payable) after more
than one year (636) - (636) -
The movement on the deferred tax account can be summarised as
follows:
Trade related
temporary Freehold Investment Plant Share
differences property property and machinery options Total
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
At 31 March 2019 - Restated (369) (75) (10) (49) 503 -
(Charge) for the year
through income statement (398) - (9) (28) (130) (565)
Credit for the year through
income statement 303 - - - - 303
(Charge) for the year
through reserves - (1) - (373) (374)
At 31 March 2020 (464) (76) (19) (77) - (636)
Trade related temporary differences are predominantly related to
research and development tax deductions claimed in advance of
expense recognition in the income statement.
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 2020
19. Deferred tax (continued)
Freehold Investment Share Freehold Investment Share
Company property property options Total property property options Total
2020 2020 2020 2020 2019 2019 2019 2019
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
At 1 April (75) (10) 85 - (79) (11) 90 -
(Charge) for the
year through income
statement - (9) (22) (31) - - - -
Credit for the year
through income statement - - - - 4 1 34 39
(Charge) for the
year through reserves (1) - (63) (64) - - (39) (39)
At 31 March (76) (19) - (95) (75) (10) 85 -
At the year ended 31 March 2020 the Group had a deferred tax
asset of GBPnil on share options. (2019 restated: A deferred tax
asset on share options of GBP139k was unrecognised).
At the year ended 31 March 2020 the Group has an unrecognised
deferred tax asset in relation to unused overseas tax losses
amounting to GBP700,000 (2019: GBP350,000). These tax losses are
not expected to expire.
20. Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term deposits
held by the Group. The carrying amount of these assets are not
significantly different to their fair value.
Group Company
2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Restated
Cash and cash equivalents 11,877 16,863 177 4,236
Net funds per cash flow 11,877 16,863 177 4,236
========= ========= =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
21. Trade and other payables
Group Company
2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Restated Restated
Trade payables 7.608 9,520 189 17
Contract liabilities 594 847 - -
Other payables 2,093 1,641 197 132
Accruals and deferred income 4,191 1,355 181 147
14,486 13,363 567 296
========= =========
22. Borrowings
Reconciliation of movement in borrowings
Group Group Company Company
2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Restated
Opening Borrowings - - - -
Overdraft drawn 2,032 - 2,001 -
Overdraft paid - - - -
Closing borrowings 2,032 - 2,001 -
Overdraft facility
The Group has the facility (up to GBP5,000,000) to overdraw in
specific currencies but no net facility. 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 all
assets of the Company. 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 foreign currency overdraft
facility.
The undrawn facility is GBP2,968,000 (2019: no facility).
Group Group Company Company
2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Restated
Cash and cash equivalents 11,877 16,863 177 4,236
Overdraft (2,032) - (2,001) -
Lease Liabilities (1,766) (1,770) (27) (67)
Net Cash 8,079 15,093 (1,851) (4,169)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
22. Borrowings (continued)
Reconciliation of Lease Liabilities
Group Group Company Company
2020 2019 2020 2019
GBP000's GBP000's GBP000's GBP000's
Restated Restated
Opening lease liabilities (1,770) - (65) -
Recognition of Lease liabilities on
adoption of IFRS 16 - (2,012) - (67)
New lease liabilities (359) (88) - (30)
Repayment of lease liabilities principal 364 338 38 31
Lease liabilities interest (125) (139) (13) (22)
Lease liabilities interest repayment 125 139 13 22
Foreign exchange (1) (8) (2) 1
Closing lease Liabilities (1,766) (1,770) (29) (65)
Current lease liabilities (342) (330) (24) (36)
Non-current lease liabilities (1,424) (1,440) (5) (29)
The Group leases a number of properties and motor vehicles in
the jurisdictions it operates in. At 31 March 2020 there were no
termination or extension options on leases.
The Group expensed GBP47,000 for the year ended 31 March 2020
(2019 restated: GBP91,000) for short term and low value leases.
Group Leases Maturity
At 31 March 2020 the Group held the following number of leases
in each of the maturity categories below.
Property Vehicle Other Total
Up to 1 year - 3 - 3
Between 2 - 5 years 5 8 3 16
Over 5 years 3 - - 3
Total number of leases 8 11 3 22
Average lease term (in
years) 10 4 5
The weighted average incremental borrowing rate applied to lease
liabilities recognised in the statement of financial position was
7.10% at 31 March 2020 (2019 restated: 7.84%, initial application
date: 7.03%).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
22. Borrowings (continued)
Weighted average incremental borrowing rate:
Group Group Group Transition
2020 2019 2018
Restated
Property 5.9% 5.8% 5.9%
Vehicle 29.0% 29.0% 29.0%
Other 4.0% 4.0% 4.0%
----------
Weighted average 7.10% 7.84% 7.03%
----------
Amounts payable under lease arrangements for the Group
The undiscounted contractual cash flows payable under the
existing lease arrangements at 31 March 2020 are analysed into the
following maturity categories.
Between Total
Up to 2 - 5 Over 5
1 year years years
GBP000's GBP000's GBP000's GBP000's
Amounts payable under lease
arrangements 502 1,025 1,621 3,148
23. 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 GBP262,000 (2019: GBP321,000).
Defined Benefit Pension Scheme
The Group operates a defined benefit scheme in the UK for
ex-employees only. A full actuarial valuation was carried out at 6
April 2018 and updated to 31 March 2020 for IAS 19 purposes by a
qualified independent actuary. The major assumptions used by the
actuary were:
31 March 31 March
2020 2019
Discount rate 2.40% 2.15%
Pension revaluation 2.70% 2.25%
Inflation assumption with a maximum of 5% p.a. 2.70% 2.25%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
23. Pension and other post-retirement benefit commitments (continued)
Mortality rates
No pre-retirement mortality is assumed (2019: 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 2019 projections with a 1.25 % long term trend rate
(2019: CMI 2018 ).
U nder these mortality assumptions, the expected future lifetime
for a member retiring at age 65 at the year-end would be 22.4 years
for males (2019: 21.7 years) and 24.4 years for females
(2019: 23.7 years). For members retiring in 20 years' time, the
expectation of life would be 23.7 years for males (2019: 23.0
years) and 25.9 years for females (2019: 25.2 years).
The weighted average term of the liabilities is 10 years (2019:
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
Results 2020 2019
GBP000's GBP000's GBP000's GBP000's
Assets at start of year 1,802 2,503
Defined benefit obligation at
start of year (1,899) (2,603)
Net (liability) at 1 April (97) (100)
Return on assets 38 61
Interest cost (39) (62)
Past service cost - (19)
(1) (20)
(Loss) on asset return (2) (38)
Gain/(loss) on changes in assumptions 14 2
Statement of other comprehensive
income 12 (36)
Employer contributions (gross) 59 59
Net (liability) at 31 March (27) (97)
Actual assets at end of year 1,787 1,802
Actual defined benefit obligation
at end of year (1,814) (1,899)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
23. 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
2020 2019
GBP000's GBP000's GBP000's GBP000's
Fair value of assets at 1 April 1,802 2,503
Return on assets 38 61
(Loss) on asset return (2) (38)
Employer contributions (gross) 59 59
(Decrease)/increase in secured
pensioners' value due to scheme
experience (110) (783)
Benefits paid - -
Fair value of assets at 31 March 1,787 1,802
Reconciliation of changes in the liability
value during the year
Defined benefit obligation at
1 April 1,899 2,603
Interest cost 39 62
Past service cost - 19
(Gain)/loss on changes in assumptions (14) (2)
(Decrease)/increase in secured
pensioners' value due to scheme
experience (110) (783)
Benefits paid - -
Defined benefit obligation at
31 March 1,814 1,899
The expected contribution to be paid by the employer during the
next accounting year is GBP59,000 (2019: GBP59,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
23. Pension and other post-retirement benefit commitments (continued)
2019
Year ended 31 March 2020 Restated 2018 2017 2016
GBP000's GBP000's GBP000's GBP000's GBP000's
Fair value of plan assets 1,787 1,802 2,503 2,314 2,715
Present value of defined
benefit obligation 1,814 1,899 2,603 2,435 2,431
(Deficit)/Surplus in plan (27) (97) (100) (121) 284
Experience (losses)/gains
on plan liabilities (2) (38) (7) (300) 13
Plan Assets
2020 2019
GBP000s GBP000s
Assets under management 145 102
Annuities 1,642 1,700
Total 1,787 1,802
Assets under management composition
2020 2019
GBP000s GBP000s
Gilts 9.80% 9.40%
Corporate Bonds 37.00% 35.50%
UK Equities 15.60% 17.30%
Overseas Equities 26.10% 26.60%
Property 10.10% 9.90%
Cash 1.40% 1.30%
100.00% 100.00%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
23. 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.
Reasonably (Decrease)/Increase in Defined
Actuarial assumption Possible Change Benefit Obligation
2020 2019
GBP000's GBP000's GBP000's GBP000's
Restated*
Discount rate (+/- 0.25%) (42) 44 (50) 50
Members' life expectancy (+/- 1year) (97) 101 (100) 110
* 2019 figures have been recalculated in order to be
comparable.
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 2020
24. Share-based payments
The expense recognised for share-based payments made during the
year is shown in the following table:
2020 2019
GBP000's GBP000's
Total expense arising from equity settled
share-based payments transactions 284 631
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
2020 2020 2019 2019
000's WAEP 000's WAEP
GBP GBP
Outstanding at 1 April 4,292 3.62 5,556 3.26
Granted during the period - - 387 3.82
Cancelled during the period (668) 3.55 (33) 3.54
Exercised during the period (105) 2.27 (1,618) 2.40
Outstanding at 31 March 3,519 3.68 4,292 3.62
Exercisable at 31 March 2,812 3.36 2,279 2.78
The average share price during the year was 319.10p (2019:
481.41p).
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 2020 had a weighted average share price of GBP3.68 (2019:
GBP3.62) and a weighted average remaining contractual life of 3.1
years (2019: 4.4 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.
Details of options granted to Directors can be found in the
Directors Report and notes 29 (Directors' Emoluments) and 31
(Related Party Transactions).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
24. 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 2020 is given below:
Exercise
Date of grant Unapproved Approved price (pence) Expiry date
11 October 2011 11,000 186.50 11 October 2021
09 October 2013 23,340 196.00 09 October 2023
09 October 2013 3,050 196.00 09 October 2020
21 August 2014 14,400 161.50 07 August 2024
21 August 2014 14,000 161.50 07 August 2021
13 February
2015 34,500 200.50 13 February 2025
13 February
2015 138,500 200.50 13 February 2022
26 August 2015 35,400 265.00 26 August 2025
26 August 2015 572,100 265.00 26 August 2022
18 December
2015 600,000 312.50 18 December 2022
18 January 2016 10,200 315.00 18 January 2026
18 January 2016 286,800 315.00 18 January 2023
17 February
2016 19,600 312.50 17 February 2026
17 February
2016 400 312.50 17 February 2023
01 March 2016 9,600 312.50 01 March 2026
01 March 2016 40,400 312.50 01 March 2023
12 September 12 September
2016 25,100 432.50 2026
12 September 12 September
2016 423,900 432.50 2023
15 September 15 September
2016 5,900 435.00 2026
15 September 15 September
2016 544,100 435.00 2023
21 September 21 September
2017 53,475 620.00 2027
21 September 21 September
2017 287,525 620.00 2024
12 April 2018 3,900 545.00 12 April 2028
23 October 2018 75,200 380.00 23 October 2028
23 October 2018 276,800 380.00 23 October 2025
19 December
2018 7,800 380.00 19 December 2028
19 December
2018 2,200 380.00 19 December 2025
3,189,775 329,415
The market price of the shares at 31 March 2020 was 220.0p
(2019: 440.0p) with a range in the year of 135.0p to 445.0p (2019:
367.0p to 581.0p).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
24. Share-based payments (continued)
The Company uses a Black-Scholes model to value share-based
payments and the following table lists the inputs to this model for
the last five years. No new options were issued in the year ended
31 March 2020.
2020 2019 2018 2017 2016
Vesting period (years) n/a 3 3 3 3
7-10 7-10 7-10 7-10
Option expiry (years) yrs yrs yrs yrs
Dividends expected
on the shares 1.90% 1.10% 1.50% 1.50%
Risk free rate (average) 1.00% 1.00% 1.00% 1.00%
Volatility of share
price 20% 20% 20% 20%
Weighted average fair
value (pence) 51.0 98.6 61.4 43.0
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.
The Company recognised GBP284,000 share-based payment expense in
the income statement in the year ended 31 March 2020.
25. Share capital
2020 2019
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
67,547,626 (2019: 67,443,126) ordinary
shares of 5p each 3,377 3,372
--------- ---------
During the year 104,500 shares were issued at a premium of
GBP232,000 as a result of the exercise of options by employees.
(2019: 1,618,310 shares at a premium of GBP3,803,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
26. Non-controlling (minority) interests
2020 2020 2019 2019
GBP000's GBP000's GBP000's GBP000's
Restated Restated
Balance at 1 April 2019 5,102 5,154
Share of adjustment to reserves
on implementation of IFRS
16 - 1
Prior year adjustment on IFRS
16 opening - (12)
---------
Balance at 1 April 2019 -
restated 5,102 5,143
Share of subsidiary's profit
for the year 1,593 1,593
Share of foreign exchange
gain/(loss) on net investment 39 9
1,632 1,602
Share of dividend paid by
subsidiary (968) (1,643)
Balance at 31 March 5,766 5,102
27. Other reserves
The Group and Company held a Capital redemption reserve of
GBP106,000 as at 31 March 2020 (2019 restated: GBP106,000, 2018
restated: GBP106,000).
Included in the Group's foreign currency revaluation reserve are
the following exchange movements on consolidation of the
subsidiaries and joint operations listed below:
At 1 April Movement At 31 March
2019 in the year 2020
GBP000's GBP000's GBP000's
In respect of: Restated
Zhejiang ECO Biok Animal Health Products
Limited 854 40 894
ECO Animal Health do Brasil Comercio
de Produtos Veterinarios Ltda (381) 35 (346)
ECO Animal Health Japan Inc. (5) 99 94
ECO Animal Health USA Corp. (21) (46) (67)
ECO Animal Health de Mexico, S. de
R. L. de C. V. 15 (75) (60)
Pharmgate LLC 5 6 11
Foreign currency differences attributable
to owner credited directly to reserves. 467 59 526
28. Capital commitments
The Group had no authorised capital commitments as at 31 March
2020 (2019: Nil).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
29. Directors' emoluments
2020 2019
GBP000's GBP000's
Restated*
Emoluments for qualifying services 847 943
Company pension contributions to money purchase
schemes 26 16
Share-based payments 70 404
Benefits in kind 11 16
954 1,379
=========
During the year the Directors exercised nil (2019: 15,000) share
options realising a gain of GBPnil (2019: GBP1,861,800).
The highest paid Director received GBP385,000 (2019 restated:
GBP638,000) including GBP38,000 (2019: GBP191,000) of share-based
payments and GBP10,000 (2019: GBP10,000) of pension
contributions.
The bonus values have been restated to include the amount
accrued for the financial year and not the amount related to
performance of the previous financial year, as previously
reported.
*Please refer to Note 3 for further details on prior year
adjustments.
30. Employees
Number of employees
The average number of employees (including Directors) during the
year was:
2020 2019
Number Number
Directors 5 7
Production and development 66 70
Administration 45 47
Sales 88 93
204 217
Employment costs (including amounts capitalised)
2020 2019
GBP000's GBP000's
Restated*
Wages and salaries 9,584 9,878
Share-based payments 284 631
Social security costs 764 914
Other pension costs 269 353
10,901 11,776
*The bonuses have been restated in accordance with note 3.4.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
31. Related party transactions
During the year ended 31 March 2020 Julia Trouse, a longstanding
former Director and Company Secretary of the Group, withdrew cash
from the Company totalling GBP25,748 (2019 - GBP46,920) which was
recorded in the Company and Group's financial statements as
administrative costs in each period.
Mrs Trouse withdrew further cash over an extended period
starting in 2014, the cumulative amount of which was GBP322,109 as
at 31 March 2020 (GBP296,361 as at 31 March 2019; and GBP249,441 as
at 31 March 2018). These withdrawals were not approved, were
outside the normal course of the Group's business and were in
excess of Mrs Trouse's contractual remuneration levels. The highest
total value of withdrawals in any year was GBP87,187. No
reimbursement of these withdrawals was assured at any of the
reporting dates to 31 March 2020, therefore all amounts remain
expensed in the periods in which each payment was made and no asset
for reimbursement has been included in the financial statements as
at 31 March 2020. Mrs Trouse resigned as a director of the Company
on 19 August 2019 and ceased employment with the Company on 31
January 2020.
The Group's Internal Audit department identified the payments
and reported their findings to the Board in April 2020. Further
work was performed to help assess the full extent of the
withdrawals. Mrs Trouse agreed to repay these amounts to the
Company and Group and repayment of GBP307,113 was made in August
2020. No interest was received. The reimbursement will be recorded
as Other Income in the financial statements for the year ending 31
March 2021. Discussions are on-going with regard to repayment of
the remaining GBP14,996.
During the year Clemo Consultancy Ltd, a company in which B
Clemo is a director, shareholder and person with significant
control received consultancy fees of GBP14,500 (2019: GBPnil).
During the year P Lawrence and his family received dividends to
the value of GBP489,000 (2019: GBP882,000).
The other Directors and their families received dividends to the
value of GBP1,000 (2019: GBP2,000).
During the year ended 31 March 2019, the Group provided
management services to Anpario plc, a Company in which P A Lawrence
is a Director and holds share options. Fees of GBP7,000 were
charged (2020: GBPNil).
During the year ended 31 March 2019, the Group provided
management services to Amati Aim VCT plc, a Company in which P A
Lawrence is a Director. Fees of GBP14,579 were charged (2020:
GBPNil)
During the year ended 31 March 2019, the Group employed two
adult children of P A Lawrence and provided their services to
Emmelle Construction Limited, a Company in which P A Lawrence is
both a Director and shareholder. All employment costs of the two
adult children, for five months of the year until August 2018 when
the arrangement was terminated, of GBP18,000 (2020: nil) were fully
recharged to Emmelle Construction Limited.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
31. Related party transactions (continued)
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 GBP475,000
(2019: GBP473,000) and charged interest of GBP890,000 (2019:
GBP910,000) to the Company. Both of these charges 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 GBP77,000 to ECO Animal Health Group plc (2019:
GBP131,000) and GBP930,000 to ECO Animal Health Limited (2019:
GBP1,578,000).
During the year ECO Animal Health Group plc received no dividend
from ECO Animal Health Limited (2019: GBP15,000,000).
Key management compensation
The Group regards the Board of Directors as its key
management.
2020 2019
GBP000's GBP000's
Restated*
Salaries and short-term benefits 858 959
Retirement benefits 26 16
Share-based payments 70 404
954 1,379
* The bonus values have been restated to include the amount
accrued for the financial year and not the amount related to
performance of the previous financial year, as previously
reported.
The number of Directors for which retirement benefits were
accruing was 4 (2019: 3).
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.
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 2020, the Group was contractually obliged to make
repayments as detailed below:
2020 2019
Within one year or on demand GBP000's GBP000's
Restated
Trade payables 7,608 9,520
Other payables 2,093 1,641
Accruals 4,191 1,355
Borrowings 2,032 -
15,924 12,516
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 2020 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:
Foreign currency of Group operations:
Chinese Japanese Brazilian Canadian Mexican
2020 US Dollar Euros RMB Yen Real Dollar Peso Other
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000')
Trade
and other
receivables 12,850 2,875 6,650 837 2,230 511 1,472 3
Trade
and other
payables (1,183) (12) (3,375) (233) (131) (129) (329) (1)
Cash and
cash equivalents 4,527 525 5,609 80 360 452 200 123
Total 16,194 3,388 8,884 684 2,459 834 1,343 125
2019 Chinese Japanese Brazilian Canadian Mexican
Restated US Dollar Euros RMB Yen Real Dollar Peso Other
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Trade
and other
receivables 7,016 3,288 7,757 689 944 817 1,397 123
Trade
and other
payables (644) (7) (2,680) (107) (51) - (13) (114)
Cash and
cash equivalents 5,239 906 4,340 256 433 1,104 175 34
Total 11,611 4,187 9,417 838 1,326 1,921 1,559 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020 32. Financial instruments (continued)
At 31 March 2020 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 2020.
2020 2019
Restated*
GBP000's GBP000's
U S Dollar 1,799 1,290
Euro 376 465
Chinese RMB 987 1,046
Japanese Yen 76 93
Brazilian Real 273 147
Canadian Dollar 93 213
Mexican Peso 149 173
Analysis of financial instruments by category
Group
Financial Financial
assets liabilities Total
2020 GBP000's GBP000's GBP000's
Trade and other receivables (excluding
prepayments) 27,858 - 27,858
Cash and cash equivalents 11,877 - 11,877
Trade and other payables - (13,892) (13,892)
Amounts due under leases - (1,766) (1,766)
Borrowings - (2,032) (2,032)
2019 GBP000's GBP000's GBP000's
Restated* Restated* Restated*
Trade and other receivables (excluding
prepayments) 22,864 - 22,864
Cash and cash equivalents 16,863 - 16,863
Trade and other payables - (12,516) (12,516)
Amounts due under leases - (1,770) (1,770)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARED 31 MARCH 2020
32. Financial instruments (Continued)
Analysis of financial instruments by category (continued)
Company
Financial Financial
assets liabilities Total
2020 GBP000's GBP000's GBP000's
Trade and other receivables (excluding
prepayments) 30 - 30
Cash and cash equivalents 177 - 177
Trade and other payables - (567) (567)
Amounts due under leases - (29) (29)
Borrowings - (2,001) (2,001)
2019 GBP000's GBP000's GBP000's
Restated* Restated* Restated*
Trade and other receivables (excluding
prepayments) 35 - 35
Cash and cash equivalents 4,236 - 4,236
Trade and other payables - (296) (296)
Amounts due under leases - (65) (65)
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.
*Please refer to Note 3 for further details on prior year
adjustments.
33. Post balance sheet events
Covid-19 Impact
The Group transitioned smoothly to home working during the final
weeks of the year building on the new ways of communicating with
customers developed during the African swine flu outbreak and
without losses of efficiency. Outsourced manufacturing and the
Group's supply chain operated smoothly through the year end.
Brexit
The Group's EU marketing authorisations have been transferred to
the European subsidiary, ECO Animal Health Europe Ltd registered in
Dublin, Republic of Ireland and all our Brexit contingency plans
are in place. The financial and operational impact of Brexit is
expected to be minimal, particularly given the recently announced
trade deal between the UK and the EU. The Group's sales to the EU
(excluding the UK) represented 8% of total revenue for the
year.
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END
FR DKQBBABKKNBK
(END) Dow Jones Newswires
February 04, 2021 02:00 ET (07:00 GMT)
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