TIDMEAH

RNS Number : 5234T

Eco Animal Health Group PLC

25 November 2021

ECO Animal Health Group plc ("ECO")

(AIM: EAH)

Results for the six months ended 30 September 2021

HIGHLIGHTS

Financials

   --    Sales at GBP38.5m (H1 2020: GBP42.5m) 
   --    EBITDA before exceptional impairment at GBP3.8m (H1 2020 restated*: GBP6.7m) 
   --    Profit before taxation of GBP0.9m (H1 2020 restated profit*: GBP4.8m) 
   --    Loss per share of 0.21p (H1 2020: restated Earnings per share*: 3.63p) 
   --    Cash generated by operations of GBP6.1m (H1 2020 restated*: GBP3.5m) 

* Prior period figures have been restated to reflect adjustments arising from the March 2021 audit

Operations

   --    Growth in Southeast Asia markets (representing 16% of sales) with revenues up 50% 

-- Encouraging vaccine trial results increased focus in the R&D programme and resulted in the impairment of one non-core R&D project

-- Significant decline in revenues from China (representing 41% of total revenues; H1 2020: 49%) arising from sharp fall in pig prices

   --    Excluding China and Japan revenues overall increased by 5% 
   --    Expectation for China pork industry recovery in H2 

Dr Andrew Jones, Non-executive Chairman of ECO Animal Health Group plc, commented:

"This set of results has clearly been impacted by the dramatic fall in the pig price in China which had a significant impact on the industry and losses of up to US$200 per head. This resulted in a significant decline in the demand for Aivlosin(R). However, we are pleased to note that China revenues are at pre-ASF levels and that there is continuing revenue growth in aggregate elsewhere. In addition, we are excited to see the positive results of key technical trials in some of our vaccine developments providing us with confidence to continue our investment in these key projects. We look forward to providing more detail on some of our new product development initiatives in the coming months as well as anticipated approvals. The Directors regard the situation in China as cyclical and one which is expected to reverse and as a result, we are confident and excited about the medium and longer term prospects for the business"

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.

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 
 Singer Capital Markets (Nominated Adviser 
  & Joint Broker) 
  Mark Taylor 
  George Tzimas                               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

I am pleased to report that despite the continuing challenges of travel restrictions presented by Covid-19, the Group outside of China continues to grow in most of our major markets compared to pre-pandemic levels. Unfortunately, the six months ended 30 September 2021 represented a period of much lower pork prices in China and this has had a consequent and significant impact on the Group's revenues and profitability.

Financial Performance

Revenue was 9% lower in the first six months to 30 September 2021 at GBP38.5 million (30 September 2020: GBP42.5 million), driven by a sharp decline in revenues from China. China and Japan represented 41% of Group revenue in the period (H1 2020: 49%). Excluding China and Japan revenues, other markets grew by 5% in aggregate. The strong performance in the six months ended 30 September 2020 was driven by an extraordinary year in China (a recovery from the African Swine Fever ("ASF") outbreak); for comparison the revenue performance for the Group before the ASF outbreak in China (the six months ended 30 September 2018) was GBP30 million.

The gross margin in the first half has been an average of 46% (H1 2020: 48%) reflecting the revenue reduction in China, given it is a higher margin territory.

Administrative expenses at GBP10.9 million were consistent with the comparative period last year (H1 2020: GBP10.5 million).

Research and development expenditure shown in the income statement together with the amounts capitalised represented a cash investment of GBP4.0 million (H1 2020: GBP4.1 million), representing 10.4% of revenue in the period (H1 2020: 9.6%).

A one-off impairment charge of GBP2.1 million was incurred in the period on previously capitalised costs on a particular development programme due to prioritisation given to other R&D projects and the cessation of activity on a long running horse paste project.

Earnings before interest, tax, depreciation, amortisation and impairment, share based payments and foreign exchange movements ("Adjusted EBITDA") were GBP3.8 million (H1 2020: GBP6.7 million). This decrease in profitability was directly a result of the lower revenue in China.

Cash generated from operations (on a fully consolidated basis) was GBP6.0 million (H1 2020: GBP3.5 million). This was a particularly strong performance; improved receivables and judicious management of payables helped to offset the reduced profits generated in the period.

This cash generation after allowing for tax payments of GBP2.3m (primarily tax paid in China) resulted in cash balances at the period end of GBP22.9 million (31 March 2021: GBP19.5 million), of which GBP22.7 million (31 March 2021: GBP13.7 million) was held in the Group's 51% owned subsidiary in China. The Group continues to work with our partner in China to establish the most efficient mechanism for repatriating cash from China bearing in mind that the Group's share of cash repatriated by dividend declaration is 51% and subject to withholding taxes. On a day to day basis, the Board considers the cash held in the Group's subsidiary in China to be unavailable to the Group outside of China; accordingly cash management and funds available for investment in R&D is based upon the cash balances outside of China, which at 30 September 2021 was GBP0.2 million (31 March 2021 - GBP5.8 million). The Group's committed overdraft facility remains at GBP5 million. The annual dividend due from the Group's subsidiary in China is expected to be received prior to the end of the current accounting period.

The EPS loss in the six months ended 30 September 2021 arises after netting off our China JV partner's 49% share of profit (Eco's 51% group share of which forms part of the EPS calculation).

Business Performance

The geographical analysis of the Group's revenue in the six months ended 30th September 2021 compared to the prior period in 2020 and the full year ended 31st March 2021 was as follows:

 
                                      6 months ended 30 
 Revenue Summary                          September        Year ended 
                                                             31 March 
                                         2021       2020         2021       % change 
                                      (GBP'm)    (GBP'm)      (GBP'm)   2020 to 2021 
 China and Japan                         15.7       20.8         58.9          (25%) 
 North America (USA and Canada)           6.0        6.4         13.9           (6%) 
 South and Southeast Asia                 6.0        4.0          9.1            50% 
 Latin America                            6.3        6.4         14.3           (2%) 
 Europe                                   2.9        3.4          6.6          (15%) 
 Rest of World and UK                     1.6        1.5          2.8             7% 
                                         38.5       42.5        105.6           (9%) 
  --------------------------------  ---------  ---------  -----------  ------------- 
 

Group revenue reduced by 9% to GBP38.5 million compared to the prior period in 2020 - a period during which global travel continued to be restricted, supply chain interruption had economic impact in many industries and trading with Europe in the post transitionary phase of Brexit was challenging. The overall reduction in Group revenue in the six months ended 30 September 2021 was primarily caused by a 25% reduction in revenue in China and Japan; excluding this segment Group revenues overall increased by 5%.

The Group reported record revenues in China in the year ended 31 March 2021 but as anticipated in our 2021 annual report, the strength of the Chinese market was likely to ease significantly in the current period. This was a year in which the Chinese pork industry enjoyed unprecedented pricing for its product. The shortage of pigs in the period after the African Swine Fever ("ASF") outbreak resulted in record value per farmed animal and a consequent rapid investment to expand herd numbers. Individual producers sought to increase market share funding this expansion through equity raises and debt.

The Group's outlook statement in the 31 March 2021 Annual Report together with the trading update statement released at the time of the AGM in September 2021 signalled ongoing regional outbreaks of ASF in China. A significant liquidation of swine stocks occurred during the trading period ended 30 September 2021 which was in part to avoid disease infection and partly to provide cashflow to service debt. As a result, this has caused a sharp fall in the wholesale market price for pork. The fall was exacerbated by producers continuing to fatten pigs for longer than would normally be the case, increasing the weight of animals sent to market. The commodity price fell to such an extent that for most producers, pigs were being produced at a loss. With this trading backdrop the Group experienced a consequential fall in demand for our flagship product Aivlosin(R).

Revenue in North America, in particular the USA, has been broadly consistent and the return to pre-2019 levels of business experienced last year has been maintained during this period. Pork prices in the USA and Canada have been generally stable and this has resulted in continuing strong revenues. The North American continent has seen some significant PRRS (Porcine reproductive and respiratory syndrome) virus infection during the Autumn months and this has resulted in continuing strong demand for Aivlosin(R) in this market.

Southeast Asia has experienced a particularly strong period of trading compared to last year. Revenue from Thailand has doubled from GBP2m to GBP4m in the six months ended 30 September 2021 underpinned by new staff and strong technical marketing. A further emerging opportunity in this segment is in Indonesia where the Group is investing in sales resource to support this opportunity.

Revenue in Latin America, as a group of markets, was consistent despite supply chain issues relating to product quarantine requirements in certain countries. Brazil continues to dominate this segment, representing 48% of the total Latin America revenue (42% in H1 2020). A slightly lower revenue in Mexico was offset by stronger revenue in other markets such as Columbia, Bolivia and Peru.

Revenue into Europe was adversely affected by transport shortages and Brexit related challenges. The post Brexit transitional arrangements expired and many customers within the EU had differing views regarding documentation and supply chain logistics for importation of our products. These issues have been largely overcome and we look forward to fulfilling European demand going forward.

Research and Development

During the last six months we have maintained our commitment to our exciting R&D programme investing a further GBP4.0 million, with a similar level of expenditure planned in H2. Some very encouraging results have been achieved in our new product development programmes. Novel vaccine technology was initially focussed on Mycoplasma in poultry with two licensed-in vaccines now in late-stage development. This has resulted in great efficacy in key proof of concept studies and we are proceeding with pace into dose optimisation work. Mycoplasmosis in both pigs and poultry are diseases of significant economic importance. We look forward to providing more detail on the new product development portfolio at our upcoming Capital Markets Day which is expected to be held early in the new year. An announcement on timing will be made in due course.

Work continues to gain further marketing authorisations for Aivlosin(R) - in particular in China and Brazil where gaps remain in the approved use claims. It is expected that updates on these programmes will be provided during the remainder of this financial year.

The significant potential in the vaccine developments and the promise shown by the trial work has resulted in a de-emphasis of certain other projects. A long running development of a combined horse paste (Ivermectin-Praziquantel) which has good potential as a combined (one-shot) parasite treatment required further work on the formulation. This was to be complementary to the long running and low-level revenue from horse paste which the Group has always enjoyed. It was decided that this project had become marginal; the return profile was less attractive compared with other programmes and work was ceased. Additionally, work was ceased on a pair of Aivlosin based projects where the returns were deemed to be not as attractive as other projects within the portfolio. Accordingly, a one-off impairment charge of GBP2.08 million was taken on the previously capitalised development costs. These are shown separately on the face of the Income statement.

Dividend

The directors recognise the importance of the dividend to shareholders. For the year ended 31 March 2021 a dividend of 1p per share was declared and paid during October 2021. The Directors will again assess the dividend at the year-end having due regard to the Group's significant investment in new product development, operating cash flow, and accessible cash balances.

Board composition

Earlier in July this year, we announced that Marc Loomes intends to retire by 31 December 2022. The search to find a replacement for Marc has been underway for some time and we are pleased with the calibre and quality of candidates that have been identified. We expect to be able to complete the selection process in the coming months.

The board intends to add further independent non-executive expertise. An announcement on this is likely to be made shortly.

Covid-19

Covid-19 remains an on-going business challenge. We adapted very well to remote working and have now also embraced "hybrid" working. We have re-opened the office in Southgate but limited the number of single day attendees. The teams have organised themselves to work within these constraints in a safe and effective manner. We continue to access customers using remote and electronic communication, exploring novel ways of marketing and providing technical support. Unfortunately travelling to China has not been possible since the beginning of the pandemic but we continue to monitor and explore ways in which we might be able to have some physical interaction with our China based colleagues in the coming months.

We remain exceedingly grateful to our staff members, customers and suppliers in showing considerable fortitude during this time of change.

Outlook

The China market remains of great importance to the Group. There has been continued volatility in the Chinese porcine market during October and November with the live pig price falling from around 20 RMB/kg to a low of 10 RMB/kg and recovering to the current levels at about 17 RMB/kg. Whilst commodity prices have seen a rise in recent weeks supported by government sponsored purchasing of pork for frozen reserves, they are still trading at a level which is below break-even for most producers. However, the late Autumn and Winter period normally gives rise to an increase in demand for Aivlosin(R), caused by increased disease prevalence in colder months and greater pork consumption associated with Chinese national holidays and festivals. We expect this seasonal effect to feed through in improving revenue opportunities during the fourth quarter of our financial year.

Furthermore, we expect stronger revenue in the Group's other worldwide markets in the second half; this has traditionally been the case and has contributed to the historically observed overall second half weighting to the revenues and profits. We expect that pattern of trading to recur during the remainder of this financial year.

The Board considers the situation in China as cyclical and one which will in due course reverse. This, together with positive vaccine trial results, support the Board's confidence and excitement about the medium and longer term prospects for the Group.

Dr Andrew Jones

Non-Executive Chairman

25 November 2021

 
 CONSOLIDATED INCOME STATEMENT 
                                                   Six months    Six months   Year ended 
                                                  to 30.09.21   to 30.09.20     31.03.21 
                                          Notes   (unaudited)   (unaudited)    (audited) 
                                                     GBP000's      GBP000's     GBP000's 
                                                                  Restated* 
 Revenue                                    5          38,474        42,530      105,607 
 Cost of sales                                       (20,959)      (22,098)     (51,990) 
                                                 ------------  ------------  ----------- 
 Gross Profit                                          17,515        20,432       53,617 
 Other income                                              16           397          319 
 Administrative expenses                             (10,852)      (10,524)     (22,296) 
 R&D expense                                          (3,309)       (4,093)      (8,072) 
 Currency profits/(losses)                                274         (843)      (2,230) 
 Amortisation of intangible assets                      (586)         (424)        (898) 
 Share based payments                                    (83)          (85)        (123) 
 Impairment of intangible assets            7         (2,085)             -            - 
 Profit from operating activities:                        890         4,860       20,317 
 Net finance cost                                        (53)          (39)         (71) 
 Share of profit of associate                              47             -           38 
 Profit before income tax                                 884         4,821       20,284 
 Income tax benefit/(charge)                            (759)         (623)      (3,635) 
                                                 ------------ 
 Profit for the period                                    125         4,198       16,649 
                                                 ============  ============  =========== 
 
 Attributable to: 
 Owner of parent company                                (140)         2,453        8,158 
 Non-controlling interest                                 265         1,745        8,491 
                                                          125         4,198       16,649 
                                                 ============  ============  =========== 
 
 Earnings per share (pence)                 6          (0.21)          3.63        12.08 
 
 Diluted earnings per share (pence)         6          (0.21)          3.49        12.07 
 
 Earnings before interest, taxation, 
  depreciation, 
 amortisation and share based payments 
  (EBITDA)                                              1,969         5,838       22,170 
 Exclude foreign exchange differences 
  and impairment                                        1,812           843        2,230 
 Adjusted EBITDA                                        3,781         6,681       24,400 
                                                 ============  ============  =========== 
 

*Details of the restatement, which is unaudited, is presented in note 3.

 
 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 
                                               Six months    Six months   Year ended 
                                              to 30.09.21   to 30.09.20     31.03.21 
                                              (unaudited)   (unaudited)    (audited) 
                                                 GBP000's      GBP000's     GBP000's 
                                                              Restated* 
 
 Profit for the period                                125         4,198       16,649 
 
 Other Comprehensive income/(losses) (net 
  of related tax effects): 
 
 Items that will or may be reclassified 
  to profit/(loss): 
 Foreign currency translation differences             254           507        (258) 
 
 Items that will not be reclassified: 
 Deferred tax on property revaluations                  -             -           84 
 Defined benefit plan - actuarial losses                -             -         (32) 
 Other comprehensive income/(losses) 
  for the period                                      254           507        (206) 
 
 Total comprehensive income for the 
  period                                              379         4,705       16,443 
 
 Attributable to: 
 Owners of the parent Company                          37         2,991        8,233 
 Non-controlling interest                             342         1,714        8,210 
 

*Details of the restatement, which is unaudited, is presented in note 3.

 
 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 
 
                      Share      Share                             Foreign 
                    Capital    Premium   Revaluation      Other   Exchange    Retained              Minority      Total 
                    Account    Account      Reserves   Reserves    Reserve    Earnings      Total   Interest     Equity 
                   GBP000's   GBP000's      GBP000's   GBP000's   GBP000's    GBP000's   GBP000's   GBP000's   GBP000's 
 FOR THE YEARED 
 31 MARCH 2021 
 Balance as at 
  31 March 
  2020                3,377     62,882           572        106        526       7,220     74,683      5,766     80,449 
 Profit for the 
  year                    -          -             -          -          -       8,158      8,158      8,491     16,649 
 Other 
 comprehensive 
 income: 
 Foreign 
  currency 
  differences             -          -             -          -         23           -         23      (281)      (258) 
 Deferred tax on 
  property 
  revaluations            -          -            84          -          -           -         84          -         84 
 Actuarial 
  gains/(losses) 
  on pension 
  scheme 
  assets                  -          -             -          -          -        (32)       (32)          -       (32) 
 Total 
  comprehensive 
  income for the 
  year                    -          -            84          -         23       8,126      8,233      8,210     16,443 
                  ---------  ---------  ------------  ---------  ---------  ----------  ---------  ---------  --------- 
 Transactions 
 with 
 owners recorded 
 directly 
 in equity: 
 Issue of shares 
  in 
  the year                2        376             -          -          -           -        378          -        378 
 Share-based 
  payments                -          -             -          -          -         123        123          -        123 
 Dividends                -          -             -          -          -           -          -      (562)      (562) 
 Transactions 
  with 
  owners                  2        376             -          -          -         123        501      (562)       (61) 
                  ---------  ---------  ------------  ---------  ---------  ----------  ---------  ---------  --------- 
 Balance as at 
  31 March 
  2021                3,379     63,258           656        106        549      15,469     83,417     13,414     96,831 
                  =========  =========  ============  =========  =========  ==========  =========  =========  ========= 
 
 FOR THE SIX 
 MONTHSED 30 
 SEPTEMBER 
 2021 
 Profit for the 
  period                  -          -             -          -          -       (140)      (140)        265        125 
 Other 
 comprehensive 
 income: 
 Foreign 
  currency 
  differences             -          -             -          -        177           -        177         77        254 
 Deferred tax on 
  property 
  revaluations            -          -             2          -          -           -          2          -          2 
                  ---------  ---------  ------------  ---------  ---------  ----------  ---------  ---------  --------- 
 Total 
  comprehensive 
  income for the 
  period                  -          -             2          -        177       (140)         39        342        381 
 Transactions 
 with 
 owners recorded 
 directly 
 in equity: 
 Issue of shares 
  in 
  the period              1         61             -          -          -           -         62          -         62 
 Share-based 
  payments                -          -             -          -          -          83         83          -         83 
 Deferred tax on 
 share-based 
 payments                 -          -             -          -          -           -          -          -          - 
                  ---------  ---------  ------------  ---------  ---------  ----------  ---------  ---------  --------- 
 Total 
  transactions 
  with owners             1         61             -          -          -          83        145          -        145 
                  =========  =========  ============  =========  =========  ==========  =========  =========  ========= 
 Balance as at 
  30 September 
  2021                3,380     63,319           658        106        726      15,412     83,601     13,756     97,357 
                  =========  =========  ============  =========  =========  ==========  =========  =========  ========= 
 
 
 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 
 
                      Share      Share                             Foreign 
                    Capital    Premium   Revaluation      Other   Exchange    Retained              Minority      Total 
                    Account    Account      Reserves   Reserves    Reserve    Earnings      Total   Interest     Equity 
                   GBP000's   GBP000's      GBP000's   GBP000's   GBP000's    GBP000's   GBP000's   GBP000's   GBP000's 
 FOR THE YEARED 
 31 MARCH 2020 
 Balance as at 
  31 March 
  2019                3,372     62,650           664        106        467      10,855     78,114      5,102     83,216 
 Profit for the 
  year                    -          -             -          -          -       3,895      3,895      1,593      5,488 
 Other 
 comprehensive 
 income: 
 Foreign 
  currency 
  differences             -          -             -          -         59           -         59         39         98 
 Deferred tax on 
  property 
  revaluations            -          -          (92)          -          -           -       (92)          -       (92) 
 Actuarial 
  gains/(losses) 
  on pension 
  scheme 
  assets                  -          -             -          -          -          12         12          -         12 
 Total 
  comprehensive 
  income for the 
  year                    -          -          (92)          -         59       3,907      3,874      1,632      5,506 
                  ---------  ---------  ------------  ---------  ---------  ----------  ---------  ---------  --------- 
 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       7,220     74,683      5,766     80,449 
                  =========  =========  ============  =========  =========  ==========  =========  =========  ========= 
 
 FOR THE SIX 
 MONTHSED 30 
 SEPTEMBER 
 2020 
 Profit for the 
  period 
  - *restated             -          -             -          -          -       2,453      2,453      1,745      4,198 
 Other 
 comprehensive 
 income: 
 Foreign 
  currency 
  differences             -          -             -          -        538           -        538       (31)        507 
 Total 
  comprehensive 
  income for the 
  period                  -          -             -          -        538       2,453      2,991      1,714      4,705 
                  ---------  ---------  ------------  ---------  ---------  ----------  ---------  ---------  --------- 
 Transactions 
 with 
 owners recorded 
 directly 
 in equity: 
 Issue of shares 
  in 
  the period              -          6             -          -          -           -          6          -          6 
 Share-based 
  payments                -          -             -          -          -          85         85          -         85 
 Total 
  transactions 
  with owners             -          6             -          -          -          85         91          -         91 
                  ---------  ---------  ------------  ---------  ---------  ----------  ---------  ---------  --------- 
 Balance as at 
  30 September 
  2020 - 
  restated*           3,377     62,888           572        106      1,064       9,758     77,765      7,480     85,245 
                  =========  =========  ============  =========  =========  ==========  =========  =========  ========= 
 

*Details of the restatement, which is unaudited, is presented in note 3.

 
 CONSOLIDATED STATEMENT OF FINANCIAL 
  POSITION 
                                                        As at         As at       As at 
                                                     30.09.21      30.09.20    31.03.21 
                                                  (unaudited)   (unaudited)   (audited) 
                                          Notes      GBP000's      GBP000's    GBP000's 
                                                                  Restated* 
 Non-current assets 
 Intangible assets                          7          34,126        35,613      36,108 
 Property, plant and equipment                          2,220         2,323       2,181 
 Investment property                                      305           305         305 
 Right-of-use assets                                    1,275         1,525       1,399 
 Investments                                              229           150         180 
                                                       38,155        39,916      40,173 
 Current assets 
 Inventories                                           26,492        20,282      20,504 
 Trade and other receivables                           27,252        28,083      32,452 
 Income tax recoverable                                 3,358         1,964       3,475 
 Other taxes and social security                          748           359         496 
 Cash and cash equivalents                             22,892        12,941      19,523 
 Total current assets                                  80,742        63,629      76,450 
 Total assets                                         118,897       103,545     116,623 
 
 Current liabilities 
 Trade and other payables                            (18,466)      (16,304)    (14,521) 
 Income tax                                           (1,683)          (25)     (3,015) 
 Other taxes and social security                         (47)             -       (501) 
 Amounts due under leases                               (874)         (375)       (311) 
 Dividends                                               (50)          (50)        (50) 
 Total current liabilities                           (21,120)      (16,754)    (18,398) 
 Net current assets/(liabilities)                      59,622        46,875      58,052 
                                                 ------------  ------------  ---------- 
 Total assets less current liabilities                 97,777        86,791      98,225 
 
 Non-current liabilities 
 Deferred tax assets/(liabilities)                        134         (338)       (183) 
 Amounts due under leases                               (554)       (1,208)     (1,211) 
 Total assets less total liabilities                   97,357        85,245      96,831 
                                                 ============  ============  ========== 
 
 Equity 
 Capital and reserves 
 Issued share capital                                   3,380         3,377       3,379 
 Share premium account                                 63,319        62,888      63,258 
 Revaluation reserve                                      658           572         656 
 Other reserves                                           106           106         106 
 Foreign exchange reserve                                 726         1,064         549 
 Retained earnings                                     15,412         9,758      15,469 
 Shareholders' funds                                   83,601        77,765      83,417 
 Non-controlling interests                             13,756         7,480      13,414 
 Total equity                                          97,357        85,245      96,831 
                                                 ============  ============  ========== 
 

*Details of the restatement, which is unaudited, is presented in note 3.

 
 CONSOLIDATED STATEMENT OF CASH FLOWS 
                                                         Six months           Year ended 
                                                  to 30.09.21   to 30.09.20     31.03.21 
                                                  (unaudited)   (unaudited)    (audited) 
                                                     GBP000's      GBP000's     GBP000's 
                                                                  Restated* 
 Cash flows from operating activities 
 Profit/(loss) before income tax                          884         4,456       20,284 
 Adjustment for:                                                                       - 
 Finance income                                          (83)          (64)        (129) 
 Finance cost                                             135           103          200 
 Foreign exchange (gain)/loss                           (654)         (688)          559 
 Depreciation                                             215           155          430 
 Amortisation of right-of-use assets                      198           187          403 
 Amortisation of intangible assets                        586           789          898 
 Impairment of intangible assets                        2,085             -            - 
 Share of associate's results                            (47)             -         (38) 
 Share based payment charge                                83            85          123 
 Operating cash flows before movements 
  in working capital                                    3,402         5,023       22,730 
 
 Change in inventories                                (5,660)       (3,018)      (3,698) 
 Change in receivables                                  5,217           563      (3,959) 
 Change in payables                                     3,091           952          753 
                                                 ------------  ------------  ----------- 
 Cash generated from operations                         6,051         3,520       15,826 
 
 Finance costs                                           (68)          (40)         (79) 
 Income tax                                           (2,288)         (116)      (3,766) 
                                                 ------------  ------------  ----------- 
 Net cash from operating activities                     3,695         3,364       11,981 
                                                 ------------  ------------  ----------- 
 
 Cash flows from investing activities 
 Acquisition of property, plant and equipment           (223)         (231)        (212) 
 Disposal of property, plant and equipment                  1             -           11 
 Purchase of intangibles                                (689)          (17)        (861) 
 Finance income                                            83            64          129 
 Dividends received                                         -             -            - 
                                                 ------------  ------------  ----------- 
 Net cash (used in)/from investing activities           (828)         (184)        (933) 
                                                 ------------  ------------  ----------- 
 
 Cash flows from financing activities 
 Proceeds from issue of share capital                      62             6          378 
 Interest paid on lease liabilities                      (67)          (63)        (122) 
 Principal paid on lease liabilities                    (195)         (182)        (378) 
 Dividends paid                                             -             -        (562) 
                                                 ------------  ------------  ----------- 
 Net cash (used in)/from financing activities           (200)         (239)        (684) 
                                                 ------------  ------------  ----------- 
 Net increase/(decrease) in cash and cash 
  equivalents                                           2,667         2,941       10,364 
 Foreign exchange movements                               702           155        (686) 
 Balance at the beginning of the period                19,523         9,845        9,845 
 Balance at the end of the period                      22,892        12,941       19,523 
                                                 ============  ============  =========== 
 
 

*Details of the restatement, which is unaudited, is presented in note 3.

NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2021

   1.   Basis of preparation 

The financial information for the period to 30 September 2021 does not constitute statutory accounts as defined by Section 435 of the Companies Act 2006. It has been prepared in accordance with the accounting policies set out in, and is consistent with, the audited financial statements for year ended 31 March 2021.

The Group applies revised IAS 1 "Presentation of Financial Statements (2007)". As a result, the Group presents all non-owner changes in equity in consolidated statements of comprehensive income and all owner changes in equity in consolidated statements of changes in equity.

These Interim Statements have not been audited or reviewed by the Group's auditors.

   2.   Statement of compliance 

This interim financial statement is prepared in accordance with IAS 34 "Interim Financial Reporting". Accordingly, whilst the interim statements have been prepared in accordance with IFRS, and the primary statements follow the format of the annual financial statements, only selected notes are included - those that provide an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual reporting date. IAS 34 states a presumption that anyone who reads the Group's interim report will also have access to its most recent annual report. Accordingly, annual disclosures are not repeated in these interim condensed reports.

   3.    Changes to significant accounting policies and other restatements 

The principal accounting policies which are adopted by the Group in the preparation of its financial statements are set out in in the consolidated financial statements of the Group for the year ended 31 March 2021. These policies have been consistently applied to all prior years. Where necessary, and as detailed in the consolidated financial statements of the Group for the year ended 31 March 2021, any corrections to the application of the Group's accounting policies to comply with International Financial Reporting Standards have been made as restatements of prior period financial statements for the correction of errors in accordance with IAS8 . The Group's accounting policies have been consistently applied in accordance with IFRS continued into the six months ended 30 September 2021.

For the March 2021 annual report and accounts the group revisited costs capitalised in periods prior to March 2018 to assess whether there are adequate records to support the capitalisation of costs. This review identified that some costs arising in periods prior to March 2013 had been incorrectly capitalised. Given the impracticality of obtaining the full records that would have been needed to review all costs capitalised in that period, a decision was taken to derecognise all costs relating to periods prior to March 2011 and to de-recognise staff costs capitalised in the period between March 2011 and March 2013. This approach is equivalent to these assets not having been recognised originally. The effect of the restatement is to decrease the net book value of intangible assets held at September 2020 and to decrease the deferred tax liability arising at that date in respect of those assets.

Full details are given in the annual report and accounts for the year ended 31 March 2021, but the financial effect is summarised below.

Development costs adjustment: Impact on the Balance Sheet and Income Statement

 
 Balance sheet               As reported     Adjustment          Adjustment   As restated 
                                   as at    to retained             through         as at 
                                30.09.20       earnings    Income Statement      30.09.20 
                                GBP000's       GBP000's            GBP000's      GBP000's 
 Intangible assets cost           60,974       (19,007)                   -        41,967 
 Accumulated amortisation       (20,307)         14,225                 365       (5,718) 
 Net Book Value                   40,667        (4,782)                 365        36,249 
                            ============  =============  ==================  ============ 
 
 Deferred tax liability            (686)            373                (25)         (338) 
 

NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2021 (Continued)

   3.    Changes to significant accounting policies and other restatements (continued) 
 
 Income Statement           As reported     Adjustment          Adjustment       As restated 
                           for 6 months    to retained             through      for 6 months 
                         ended 30.09.20       earnings    Income Statement    ended 30.09.20 
                               GBP000's       GBP000's            GBP000's          GBP000's 
 Amortisation charge                789              -               (365)               424 
 Deferred tax charge                598              -                  25               623 
 

Cash and cash equivalents

Balances drawn on the bank overdraft facility are repayable on demand and form an integral part of the cash management of the Group. In the Statement of Cash Flows, the Group has presented cash and cash equivalents net of balances outstanding on bank overdrafts. This is an updated presentation in the Statement of Cash Flows presented for the six months ended 30 September 2020, where balances outstanding on bank overdraft (totalling GBP4,117 thousands) were presented within creditors.

   4.   Revenue is derived from the Group's animal pharmaceutical businesses. 
   5.   Principal risks and uncertainties 

These were set out on pages 20-22 of the Group's Annual Report and Accounts for the year ended 31 March 2021. The key exposures are to foreign currency exchange rates, potential delays in obtaining marketing authorisations, single sources of supply for some raw materials and trade debtor recovery and have remained unchanged since the year end. In addition, the Annual Report and Accounts highlighted disease impact to growth in emerging markets as a key risk and this, in the form of ASF, is a principal uncertainty.

   6.   Earnings per share 
 
                                                Six months    Six months   Year ended 
                                               to 30.09.21   to 30.09.20     31.03.21 
                                               (unaudited)   (unaudited)    (audited) 
                                                                Restated 
 Weighted average number of shares in issue 
  (000's)                                           67,712        67,530       67,559 
 Fully diluted weighted average number of 
  shares in issue (000's)                           67,712        70,313       67,603 
 Profit attributable to equity holders of 
  the company (GBP000's)                             (140)         2,453        8,158 
 Basic earnings per share (pence)                   (0.21)          3.63        12.08 
 Fully diluted earnings per share (pence)           (0.21)          3.49        12.07 
 

NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2021 (Continued)

   7.   Intangible non-current assets 
 
                                                Distribution   Development 
                                     Goodwill         rights         Costs       Total 
                                     GBP000's       GBP000's      GBP000's    GBP000's 
 Cost 
 At 31 March 2020 - restated           17,930            407        22,977      41,314 
 Additions                                  -              -            17          17 
 At 30 September 2020 - restated       17,930            407        22,994      41,331 
 Additions                                  -              -           969         969 
 At 31 March 2021                      17,930            407        23,963      42,300 
 Additions                                  -              -           689         689 
 Impairment                                 -              -       (2,092)     (2,092) 
 At 30 September 2021                  17,930            407        22,560      40,897 
                                   ==========  =============  ============  ========== 
 
 Amortisation 
 At 31 March 2020 - restated                -            120         5,174       5,294 
 Charge for the period -restated            -             10           414         424 
 At 30 September 2020 - restated            -            130         5,588       5,718 
 Charge for the period                      -              9           465         474 
 At 31 March 2021                           -            139         6,053       6,192 
 Charge for the period                      -              9           577         586 
 Written back on impairment                 -              -           (7)         (7) 
 At 30 September 2021                       -            148         6,623       6,771 
                                   ==========  =============  ============  ========== 
 
 Net Book Value 
 At 30 September 2021                  17,930            259        15,937      34,126 
 At 31 March 2021                      17,930            268        17,910      36,108 
 

The group continuously reviews the status of its research and development activity, paying close attention to the likelihood of technical success and the commercial viability of development projects. In the period to September 2021 there were indications that certain development projects for which costs have previously been capitalised were unlikely to achieve technical success or commercial viability. The capitalised costs in respect of these projects have been impaired through the income statement during the period.

This financial information was approved by the board on 24 November 2021.

Copies of this interim report are being sent to all the Company's shareholders.

 
 DIRECTORS AND OFFICERS    Andrew Jones                      (Non-Executive Chairman) 
                           Marc Loomes                       (Chief Executive) 
                           Chris Wilks                       (Chief Financial Officer) 
                           Anthony Rawlinson                 (Non-Executive Director) 
                            Frank Armstrong                   (Non-Executive Director) 
 
 REGISTERED OFFICE         78 Coombe Road, New Malden, Surrey. KT3 4QS 
                           Tel: 020 8447 8899 
 
 COMPANY NUMBER            01818170 
 INFORMATION AT            www.ecoanimalhealthgroupplc.com 
 

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(END) Dow Jones Newswires

November 25, 2021 02:00 ET (07:00 GMT)

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