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Eco Animal Health Gp - Half-year Report

RNS Number : 3250Y
Eco Animal Health Group PLC
31 December 2019
 

ECO Animal Health Group plc (''ECO")

(AIM: EAH)

 

Results for the six months ended 30 September 2019

 

ECO REPORTS A CHALLENGING FIRST HALF BUT INDICATIONS FOR H2 ARE POSITIVE

 

HIGHLIGHTS

 

Financials

·    Sales at £28.7m (2018 restated*: £30.0m)

·    EBITDA at £2.7m (2018 restated*: £6.4m)

·    Profit before taxation of £1.0m (2018 restated profit*: £5.3m)

·    Profit after taxation of £1.1m (2018 restated profit*: £4.6m)

·    Earnings per share of 1.51p (2018: restated Earnings per share*: 5.61p)

·    Cash generated by operations of £0.7m (2018 restated cash generated*: £5.8m)

·    Net cash at 30 September 2019 of £13.4m (2018 restated*: £23.8m)

*  Prior periods have been restated to correct errors

Operations

·    African Swine Fever has materially impacted the volume of business in China

·    Geopolitical trade relations between China and the USA has impacted the gross margins in the USA

·    Strong revenue growth of 45% to £19.4m (2018 restated: £13.4m) outside of China and North America, notably coming from Brazil and Mexico with continued expansion in South Asia and South-East Asia

·    New marketing authorisation from the European Medicines Agency for the use of Aivlosin® 625 mg/g Water Soluble Granules in breeding chickens

·    Two worldwide exclusive novel poultry vaccine licensing deals with The Pirbright Institute in the UK

·    Improving market conditions at the beginning of the second half of the year 

 

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

"We have had a challenging start to the first half of the year, but we now see signs that point to improved performance in the second half due to encouraging signs of early recovery in China as key producers build sow numbers and pork export and prices in North America improve.  Our investments in R&D to generate future products and growth continue to progress as planned.  The Board has made significant progress in reviewing its accounting policies; we believe that we have identified all material prior period errors and we have corrected them in this Interim Report.  This review and the audit thereof, will conclude with the publication of the March 2020 Annual Report.  The Directors remain confident and excited about the improving market conditions and future 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 6906

 

IFC Advisory

Graham Herring

Zach Cohen

 

020 3934 6630

 

N+1 Singer (Nominated Adviser & Joint Broker)

Mark Taylor

Peter Steel

Alex Bond

 

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 considerable challenges in its two largest markets, China and the USA, ECO has demonstrated considerable resilience on several fronts during the past six months. The market reversals in China, triggered by the African Swine Fever ("ASF") pandemic, and the ongoing trade war between the USA and China have had a significant impact on our results in these two markets. However, the rest of the business outside of China and North America has performed well and in line with expectations the revenue grew by 45%.  Our investments in R&D are progressing according to plan.  The Board has made significant progress in reviewing its accounting policies and, as a result, has identified and quantified certain errors in prior periods which have been restated in this Interim Report.  This review and the audit thereof, will conclude with the publication of the March 2020 Annual Report.  The Board considers that it has identified all material prior period errors.  

 

Restatement of prior periods

The Group released a trading update on 11 November 2019 in which the Board signalled the intention to restate certain aspects of our prior financial reports to correct errors.  These related to Revenue accounting, R&D cost capitalisation and accounting for the Group's interest in its joint ventures in the USA and Canada.  The financial report included in this Interim Statement reflects these and other prior period restatements, identified and quantified to date, together with notes 3 and 4 to explain the impact of the adjustments.  The audit of the restatements including any impact that the adjustments might have on distributable reserves will conclude with the publication of the March 2020 Annual Report.  The Board considers that all material prior period errors have been identified and corrected in this Interim Statement.

 

Financial Performance

Revenue for the six months ended 30 September 2019 was 4% lower than in the equivalent prior period at £28.7 million (2018 restated: £30.0 million).  The Group has historically reported a second half weighting to its revenue, representing between 55% and 60% of the full year revenue.  The gross margin has declined from 49% (restated) in the equivalent period last year to 43% this year.  This decline was largely due to a reduction in average gross margin in the USA where discounted pricing was required in the face of low pork prices. 

Administrative expenses of £7.2 million (2018 restated: £6.1 million) were 17% greater than the prior period reflecting further investments in sales and marketing expertise, operations and governance infrastructure.  Research and development expenditure is now explicitly shown on the income statement and together with the amount capitalised represented a cash investment of 17% of revenue in the six months ended 30 September 2019 (13% in the six month period ended 30 September 2018 restated). 

Earnings before interest, tax, depreciation, amortisation and share based payments ("EBITDA") were £2.7 million (2018 restated: £6.4 million).  This reduction in profitability was a result of the effects of ASF in China, decreased USA gross margins, increased administrative costs and research and development expenditure.

Cash generated from operations was £0.7 million (2018 restated: £5.8 million).  This reduction was due, in the main, to lower trading profits in the period.  Additionally, whilst receivables at 30 September 2019 were £3.5 million less than the (restated) position at 31 March 2019 (as a result of the recovery of year end debtors) the debtor position was £4.9m greater than that at 30 September 2018 (restated); this reflects the continuing need to support customers by providing extended credit in China in the face of ASF.  Net cash at 30 September 2019 was £13.4 million (31 March 2019 restated: £16.9 million).

Business Performance

The geographical analysis of the Group's revenue in the six months ended 30 September 2019 compared to the prior period in 2018 and the full year ended 31 March 2019 was as follows:

 

Revenue Summary

 

6 months ended 30 September

 

Year ended

 

 

 

 

2019

2018

 

31-Mar-19

% change

 

 

 

(£'m)

(£'m)

 

(£'m)

2018 to 2019

 

 

 

 

Restated

 

Restated

 

Asia and Japan, excluding China

8.7

5.7

 

13.5

53%

China

 

 

5.6

11.9

 

24.3

(53%)

North America (USA and Canada)

 

3.7

4.7

 

10.6

(21%)

Latin America

 

5.2

4.6

 

10.8

13%

Rest of World

 

5.5

3.1

 

8.0

77%

 

 

 

28.7

30.0

 

67.2

(4%)

 

Group revenue declined by 4% to £28.7 million during a period which continued to be dominated by the unprecedented impact of ASF in China, the trade war between the USA and China and the consequent disruption of the pork commodity cycle.

The ASF outbreak in China has been well publicised.  First detected in August 2018, the deadly African Swine Fever (ASF) virus has spread to every province in mainland China, devastating its pig population. Rabobank estimates the disease will claim 55% of the country's pig herd in 2019.  Before the outbreak of ASF, China used to account for around half of the global total number of pigs. The consequence of this decimation of the Chinese pig population is that the Group's revenue in China declined by 53% in the six months reported.

There is evidence that the Chinese national pig herd numbers are being rebuilt in response to the pork shortage and record pork prices but ASF is expected to impact on Chinese pork production and pork importation for an estimated two to three years.  Our Chinese subsidiary is particularly focused on replacement breeding sows whose numbers at the major producers are now increasing rapidly.  Additionally, we are looking for additional opportunities in the poultry sector in China.

North American revenue declined by 21% reflecting both a highly competitive domestic market in the face of increased pork production numbers and the loss of the Chinese export market leading to an excess of pork supply. Meaningful discounts were offered to major pork producers to retain existing business and these discounts have resulted in a significant reduction in average gross margins in 2019.

Excluding China and North America, revenue increased by a robust 45% from £13.4 million in the prior period to £19.4 million in the six months ended 30 September 2019.  The main countries contributing to this strong performance were Mexico and Brazil.  This increase is a continuation of the market share gains reported in the last annual report and is clear evidence of the effectiveness of key account management. India contributed well where the establishment of a subsidiary and a new distributor has opened up this important poultry market.  Gains in Thailand, which is a mixed swine and poultry market, further underline the effectiveness of introducing new sales resource and also emphasises that Aivlosin® is a product which is gaining market share in two distinct commercial animal health markets.

 

Research and Development

In our core product area, a licence was obtained from the European Medicines Agency for the use of Aivlosin® 625 mg/g Water Soluble Granules in breeding chickens and this approval is in the process of being rolled out beyond the EU into the multi-million dollar international poultry markets.  This furthers the strength and depth of our cornerstone product family.

The Group will continue to invest in building a product pipeline targeting both viral and bacterial diseases of economic importance in pigs and poultry, with the intention of developing a range of vaccines and new products to complement our existing antimicrobial business. The product pipeline contains a mix of well-established concepts as well as novel, potentially disruptive technologies and approaches.  These are in various stages of development thereby ensuring that the Group has several mid and late stage projects able to deliver revenues from 2022/23.

The Group has recently announced the following collaborations:

·    establishment of a joint venture, ECO-Pharm Limited, to progress the registration and commercialisation of several swine vaccine products already licensed in the USA and Canada for use in the UK, the EU, the Commonwealth of Independent States, Brazil and Japan with solid progress being made;

·    four University licensing deals with worldwide exclusive rights;

·    two worldwide exclusive novel poultry vaccine licensing deals with The Pirbright Institute in the UK.

 

Brexit

The Group has successfully transferred all EU marketing authorisations to a new European subsidiary, ECO Animal Health Europe Limited with a registered address in Dublin, Republic of Ireland. All contingency planning is in place and the financial and operational impact of Brexit is expected to be minimal, irrespective of the outcome and the timing of its implementation.

 

Dividend

The directors recognise the importance of the dividend to shareholders.  However, having due regard to the Group's operating cash flow, the investment in the new product pipeline and the trading conditions described above, the directors consider it prudent to defer the declaration of a dividend at this time.

 

Outlook

The impact of ASF in China will be felt for some time to come but it is clear that the economic and social imperative to increase pork production in China is already being seen by specific actions taken by both government and the larger producers.  Early indications in buying behaviour for the Group's products support a stronger second half in China.

The recent announcements regarding easing in the trade tensions between China and the USA, together with the sharply rising exports of pork from the USA suggests an improvement in pig production industry margins in the USAWe believe the improved industry margins will enable the Group to reduce discount programmes and improve margins in 2020 compared with 2019.

Notwithstanding the on-going uncertainties around the market recovery in China and margin improvements in the USA, other territories are expected to continue to perform in line with the Board's expectations. 

There are expected to be some important milestones in the R&D programme in the coming months and the Board looks forward to providing updates on these in due course.  The Board is committed to continuing the improvement in corporate governance and whilst this report describes some significant accounting changes, other improvements including internal audit, monitoring of risks, board composition and other internal control measures are all advancing at good pace.

The Board looks forward with confidence; it is not possible to declare that the past six months' poor trading conditions are behind us but it is correct to indicate that the rest of this financial year will be significantly stronger than the first half. 

 

A Jones

Non-Executive Chairman

30 December 2019

 

 

 

CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS TO 30 SEPTEMBER 2019

 

 

 

 

 

 

 

Six months

Six months

Year ended

 

 

to 30.09.19

to 30.09.18

31.03.19

 

Notes

(unaudited)

(unaudited)

(audited)

 

 

 £000's

 £000's

 £000's

 

 

 

 Restated*

 Restated*

Revenue

5

           28,741

           29,954

           67,166

Cost of sales

 

         (16,390)

         (15,313)

         (35,278)

Gross Profit

 

           12,351

           14,641

           31,888

Other income

 

                    8

                  30

                  35

Administrative expenses

 

           (7,154)

           (6,130)

         (14,139)

R&D expense

 

           (3,293)

           (2,633)

           (5,487)

Currency profits/(losses)

 

                311

                105

              (138)

Amortisation of intangible assets

 

           (1,206)

              (1,008)

           (2,112)

Share based payments

 

              (208)

              (375)

              (631)

Profit from operating activities:

 

                809

             4,630

             9,416

Net finance income

 

                167

                644

                543

Share of profit of associate

 

                  42

                  27

                  14

Profit before income tax

 

                1,018

             5,301

           9,973

Income tax benefit/(charge)

 

                130

              (664)

              (888)

Profit for the period

 

             1,148

             4,637

             9,085

 

 

 

 

 

Attributable to:

 

 

 

 

Owner of parent company

 

                1,018

             3,724

             7,479

Non-controlling interest

 

                130

                913

             1,606

 

 

             1,148

             4,637

             9,085

 

 

 

 

 

Earnings per share (pence)

7

               1.51

               5.61

             11.20

 

 

 

 

 

Diluted earnings per share (pence)

7

               1.50

               5.50

             11.04

 

 

 

 

 

Earnings before interest, taxation, depreciation,

 

 

 

 

amortisation and share based payments (EBITDA)

 

2,678

6,420

12,959

Exclude foreign exchange differences

 

              (311)

              (105)

                138

Adjusted EBITDA excluding foreign exchange differences

 

             2,367

             6,315

           13,097

 

 

 

 

 

*Details of the restatements, which are unaudited, are presented in Notes 3 and 4.

 

 

 

 

 

 

                                           CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

 

 

Six months

 Six months

Year ended

 

to 30.09.19

  to 30.09.18

31.03.19

 

(unaudited)

 (unaudited)

(audited)

 

 £000's

 £000's

 £000's

 

 

 Restated*

 Restated*

 

 

 

 

Profit for the period

              1,148

              4,637

              9,085

 

 

 

 

Other Comprehensive income/(losses) (net of related tax effects):

 

 

 

 

 

 

 

Items that will or may be reclassified to profit/(loss) in future periods:

 

 

 

Foreign currency translation differences

               47

           (283)

                 (8)

 

 

 

 

Items that will not be reclassified:

 

 

 

Defined benefit plan - actuarial losses

                   -

                   -

               (36)

 

 

 

 

Other comprehensive income/(losses) for the period

                   47

               (283)

                 (44)

 

 

 

 

Total comprehensive income for the period

              1,195

              4,354

              9,041

 

 

 

 

Attributable to:

 

 

 

Owners of the parent Company

           1,091

              3,546

              7,426

Non-controlling interest

                 104

                 808

              1,615

 

              1,195

              4,354

              9,041

 

 

 

 

*Details of the restatements, which are unaudited, are presented in Notes 3 and 4.

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 

 

 

 

 

 

 

 

Share

Share

Other

Revaluation

Retained

Total

Minority

Total

 

Capital

Premium

Reserves

Reserves

Earnings

 

Interest

Equity

 

Account

Account

 

 

 

 

 

 

 

£000's

£000's

£000's

£000's

£000's

£000's

£000's

£000's

FOR THE YEAR ENDED 31 MARCH 2019

 

 

 

 

 

 

 

Balance as at 1 April 2018 - as reported

    3,291

   58,847

      2,823

         664

   34,065

   99,690

   5,185

  104,875

Adjustment re revenue cut-off (Note 3.1)

            -

              -

              -

              -

       (632)

       (632)

         33

        (599)

Adjustment re intangible assets (Note 3.2)

            -

              -

              -

              -

  (17,756)

 (17,756)

            -

   (17,756)

Adjustment re bonuses (Note 3.4)

            -

              -

              -

              -

       (954)

       (954)

            -

        (954)

Balance as at 1 April 2018 - restated

    3,291

   58,847

      2,823

         664

   14,723

   80,348

   5,218

    85,566

Adjustment on implementation of IFRS16

            -

              -

              -

              -

         (17)

         (17)

           1

          (16)

Further IFRS16 adjustment (Note 4)

            -

              -

              -

              -

         (20)

         (20)

            -

          (20)

IFRS 16 adjusted balance as at 1 April 2018 - restated

    3,291

   58,847

      2,823

         664

   14,686

   80,311

   5,219

    85,530

Profit for the year - restated

 -

 -

 -

 -

     7,479

     7,479

   1,606

      9,085

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency differences

 -

 -

 -

 -

         (17)

         (17)

           9

             (8)

Actuarial (losses) on pension scheme assets

 -

 -

 -

 -

         (36)

         (36)

            -

          (36)

Total comprehensive income for the year

            -

              -

              -

              -

     7,426

     7,426

   1,615

      9,041

Transactions with owners recorded directly in equity:

 

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

 

Issue of shares in the year

         81

     3,803

 -

 -

 -

     3,884

            -

      3,884

Share-based payments

 -

 -

         631

 -

 -

        631

            -

          631

Transfers on expiry of options

 -

 -

       (112)

 -

         112

              -

            -

               -

Dividends (Note 8)

 -

 -

 -

 -

    (8,485)

   (8,485)

  (1,643)

   (10,128)

Transactions with owners

         81

     3,803

         519

              -

    (8,373)

   (3,970)

  (1,643)

     (5,613)

Balance as at 31 March 2019 - restated

    3,372

   62,650

      3,342

         664

   13,739

   83,767

   5,191

    88,958

 

 

 

 

 

 

 

 

 

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2019

 

 

 

 

 

 

 

Profit for the period

            -

              -

              -

              -

         1,018

        1,018

      130

      1,148

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency differences

            -

              -

              -

              -

           73

          73

       (26)

            47

Total comprehensive income for the period

            -

              -

              -

              -

     1,091

     1,091

      104

      1,195

Transactions with owners recorded directly in equity:

 

 

 

 

 

 

 

 

Issue of shares in the period

           5

        232

 -

 -

 -

        237

            -

          237

Share-based payments

 -

 -

         208

 -

 -

        208

            -

          208

Transfers on expiry of options

 -

 -

       (164)

 -

         164

              -

            -

               -

Dividends (Note 8)

 -

 -

 -

 -

    (7,453)

   (7,453)

            -

     (7,453)

Total transactions with owners

           5

        232

           44

              -

    (7,289)

   (7,008)

            -

     (7,008)

Balance as at 30 September 2019

    3,377

   62,882

      3,386

         664

     7,541

   77,850

   5,295

    83,145

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 

 

 

 

 

 

 

 

Share

Share

Other

Revaluation

Retained

Total

Minority

Total

 

Capital

Premium

Reserves

Reserves

Earnings

 

Interest

Equity

 

Account

Account

 

 

 

 

 

 

 

£000's

£000's

£000's

£000's

£000's

£000's

£000's

£000's

 

 

 

 

 

 

 

 

 

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

 

 

 

 

 

 

 

Balance as at 1 April 2018 - as reported

    3,291

   58,847

      2,823

         664

   34,065

   99,690

   5,185

  104,875

Adjustment re revenue cut-off (Note 3.1)

            -

              -

              -

              -

       (632)

       (632)

         33

        (599)

Adjustment re intangible assets (Note 3.2)

            -

              -

              -

              -

  (17,756)

 (17,756)

            -

   (17,756)

Adjustment re bonuses (Note 3.4)

            -

              -

              -

              -

       (954)

       (954)

            -

        (954)

Balance as at 1 April 2018 - restated

    3,291

   58,847

      2,823

         664

   14,723

   80,348

   5,218

    85,566

Adjustment on implementation of IFRS16

            -

              -

              -

              -

         (17)

         (17)

           1

          (16)

Further IFRS16 adjustment (Note 4)

            -

              -

              -

              -

         (20)

         (20)

            -

          (20)

IFRS 16 adjusted balance as at 1 April 2018 - restated

    3,291

   58,847

      2,823

         664

   14,686

   80,311

   5,219

    85,530

Profit for the period - restated

            -

              -

              -

              -

     3,724

     3,724

      913

      4,637

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency differences

            -

              -

              -

              -

       (178)

       (178)

     (105)

        (283)

Total comprehensive income for the period

            -

              -

              -

              -

     3,546

     3,546

      808

      4,354

Transactions with owners recorded directly in equity:

 

 

 

 

 

 

 

 

Issue of shares in the period

         67

     3,058

 -

 -

              -

     3,125

            -

      3,125

Share-based payments

 -

 -

         375

 -

              -

        375

            -

          375

Dividends (Note 8)

 -

 -

 -

 -

    (2,106)

   (2,106)

  (1,643)

     (3,749)

Total transactions with owners

         67

     3,058

         375

              -

    (2,106)

     1,394

  (1,643)

        (249)

Balance as at 30 September 2018 - restated

    3,358

   61,905

      3,198

         664

   16,126

   85,251

   4,384

    89,635

 

 

 

 

  

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

 

 

 

 

As at

As at

As at

 

 

30.09.19

30.09.18

31.03.19

 

 

(unaudited)

(unaudited)

(audited)

 

Notes

£000's

£000's

£000's

 

 

 

Restated*

Restated*

Non current assets

 

 

 

 

Intangible assets

9

                 40,351

                 39,029

                 40,005

Property, plant and equipment

10

                   2,044

                   2,127

                   2,144

Investment property

 

                      200

                      200

                      200

Right of use assets

 

                   2,043

                   2,512

                   2,315

Investments

 

                      166

                      125

                      116

 

 

                 44,804

                 43,993

                 44,780

Current assets

 

 

 

 

Inventories

 

                 20,647

                 19,854

                 19,645

Trade and other receivables

 

                 19,896

                 15,023

                 23,358

Income tax recoverable

 

                   1,585

                   1,062

                   1,449

Other taxes and social security

 

                      420

                   1,004

                      462

Cash and cash equivalents

 

                 13,411

                 23,824

                 16,863

 

 

                 55,959

                 60,767

                 61,777

Total assets

 

                 100,763

               104,760

               106,557

Current liabilities

 

 

 

 

Trade and other payables

 

                  (9,653)

                (10,383)

                (13,493)

Income tax

 

                       (55)

                     (371)

                     (795)

Other taxes and social security

 

                     (690)

                  (1,405)

                     (533)

Amounts due under leases

 

                     (431)

                     (587)

                     (555)

Dividends

 

                  (4,803)

                       (50)

                       (49)

 

 

                (15,632)

                (12,796)

                (15,425)

 

 

 

 

 

Total assets less current liabilities

 

                 85,131

                 91,964

                 91,132

 

 

 

 

 

Non current liabilities

 

 

 

 

Deferred tax

 

                     (309)

                     (327)

                     (333)

Amounts due under leases

 

                  (1,677)

                  (2,002)

                  (1,841)

Total assets less total liabilities

 

                 83,145

                 89,635

                 88,958

 

 

 

 

 

Equity

 

 

 

 

Capital and reserves

 

 

 

 

Issued share capital

 

                   3,377

                   3,358

                   3,372

Share premium account

 

                 62,882

                 61,905

                 62,650

Revaluation reserve

 

                      664

                      664

                      664

Other reserves

 

                   3,386

                   3,198

                   3,342

Retained earnings

 

                   7,541

                 16,126

                 13,739

Shareholders' funds

 

                 77,850

                 85,251

                 83,767

Non-controlling interests

 

                   5,295

                   4,384

                   5,191

Total equity

 

                 83,145

                 89,635

                 88,958

 

 

 

 

 

*Details of the restatements, which are unaudited, are presented in Notes 3 and 4.

 

 

 

 

 

 

 

 

 

 

 

NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2019

1.   Basis of preparation

The financial information for the period to 30 September 2019 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 2019, except as noted in 3, below.

 

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 2019.  These policies have been consistently applied in all prior years except where corrections have been described in this note 3.  The 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 correct application of the Group's accounting policies in accordance with IFRS continued into the six months ended 30 September 2019.

 

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 recognized 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 recognized.

 

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.

 

3.1A              Revenue recognition

 

Historical Treatment

Revised treatment and impact

Revenue has been recognised when goods have been despatched from the Group's warehouses and factories (third party owned facilities)

Having reference to the contractual trading terms with customers, the shipping and transportation methods, Incoterms guidance and other GAAP guidance the moment when control is judged to have passed to the customer was in 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 customers comprising volume rebates, discounts and commissions have historically been incorrectly accounted for as a cost of sale

These allowances have been set off against revenue in the relevant period and cost of sale appropriately adjusted.  There is no impact on gross profit or net profit.

 

3.2   IAS 38 - 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.

 

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.

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.

 

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 - optimization 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) has to 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.

 

In practice, work that is undertaken to build towards regulatory approval for a new treatment claim using Aivlosin or an approval for marketing Aivlosin in a new geographical market can be viewed as development work and are likely to meet the capitalization criteria whereas some of the Group's more recently announced projects (for example the vaccine collaboration projects with The Pirbright Institute) would be considered to not meet the criteria for capitalisation and should therefore be expensed.

 

Historical Treatment

All costs relating to the Research and Development team including regulatory affairs were incorrectly capitalised and amortised over a period of 10 or 20 years.  The capitalised costs of projects

that did not proceed because of technical

or other reasons were impaired. Amortisation commenced immediately from the date the costs were capitalized.

Historical costs have been considered in the light of

the Eco Animal Health R&D model.  IAS 38 (and IAS 36 in respect of amortization) have been applied to each year and where expenses meet the criteria for capitalization such costs have remained as capitalized intangible assets subject to annual impairment reviews and amortised over their useful economic lives starting from the year in which economic benefit flowed to the Group.

 

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 amortization)

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 ventures.

 

In assessing the relationship between the Group and its commercial collaborator in the USA management has considered the nature of the commercial arrangements, the legal agreement between the parties and other contractual arrangements.

 

Historical Treatment

The joint arrangements with Pharmgate in the USA and Canada have historically been correctly classified as joint operations.  Accordingly, the Group has correctly consolidated into its income statement the revenue and cost of sale, together with any sales incentives provided to customers, for sales of Aivlosin in those territories.  The Group has correctly brought 50% of all administrative costs into its income statement.  However, the Group has incorrectly consolidated 50% of each amount held in the Statement of financial position of the joint operation's legal entities into the Group's own Statement of financial position totals, being 50% of tangible fixed assets, 50% of trade and other receivables, 50% of cash and 50% of trade and other payables

The Group has rights and obligations over the individual assets and liabilities in the Statement of financial position.  Management considers that the nature of the commercial arrangements and the control that the Group has over the trade receivables and trade payables indicates that the joint arrangement should be also treated as a joint operation in the statement of financial position.  The historical Income statement treatment correctly reflects that of a joint operation but on the Statement of financial position the Group should consolidate those assets and liabilities over which it has rights and obligations.  Accordingly, the Group has restated past Statements of financial position to include the Group's own trade debtors (for Aivlosin sales) and intercompany 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 consolidation is cash.  Accordingly, together with several of the ss balances, the cash balance in the Group's Consolidated Statement of Financial Position has changed.

 

 

 

 

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

Bonuses paid to Directors and Employees in the Group are discretionary.  As a result the Historical treatment of Bonuses has been to account for them as an expense in the period in which they are paid - normally in October of each year.

Bonuses have been paid in each financial period.  Notwithstanding that the bonuses are subject to management and Remuneration Committee discretion, they are customarily paid and the amount paid is considered by reference to individual performance and Group performance in the preceding financial period.  Accordingly, it is considered that in accordance with IAS 19 the correct accounting treatment is to accrue for these bonuses in the corresponding year end Financial Statements.  

 

 

 

 

3.5 Impact of restatements of the financial statements

The following tables summarise the impact of adopting the changes, as described above in notes 3.1, 3.2, 3.3 and 3.4 on the Group's financial statements. References to the specific changes to which those adjustments relate are presented in the table headings as required.

 

Impact on the Group statement of comprehensive income for six months to 30 September 2018 

 

SIX MONTHS TO 30 SEPTEMBER 2018

 

 

 

 

 

 

 

 

 

As reported

Adjustment

Adjustment

Adjustment

Adjustment

Adjustment

Restated

Explanation of adjustment

(unaudited)

Note 3.1A

Note 3.1B

Note 3.2

Note 3.4

Note 4

(unaudited)

 

 £000's

 £000's

 £000's

 £000's

 £000's

 £000's

 £000's

 

 

 

 

 

 

 

 

Revenue

       31,745

       (1,041)

          (750)

 

 

 

       29,954

Cost of sales

     (16,659)

            561

            750

 

 

              35

      (15,313)

Gross Profit

       15,086

          (480)

                 -

                 -

                 -

              35

       14,641

 

 

 

 

 

 

 

 

Other income

              30

 

 

 

 

 

              30

Administrative expenses

       (6,801)

 

 

 

            693

            (22)

        (6,130)

R&D expense

                 -

 

 

       (2,633)

 

                 -

        (2,633)

Currency profits/(losses)

            105

 

 

 

 

 

            105

Amortisation of intangible assets

       (1,999)

 

 

         991

 

 

           (1,008)

Share based payments

          (375)

 

 

 

 

 

           (375)

Profit from operating activities:

         6,046

          (480)

                 -

       (1,642)

            693

              13

         4,630

 

 

 

 

 

 

 

 

Net finance income/(costs)

            697

 

 

 

 

            (53)

            644

Share of profit of associate

              27

 

 

 

 

 

              27

Profit before income tax

         6,770

          (480)

                 -

       (1,642)

            693

            (40)

         5,301

 

 

 

 

 

 

 

 

Income tax charge

          (765)

              30

 

            126

            (55)

 

           (664)

Profit for the period

         6,005

          (450)

                 -

       (1,516)

            638

            (40)

         4,637

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Owner of parent company

         5,052

          (427)

 

       (1,516)

            638

            (23)

         3,724

Non-controlling interest

            953

            (23)

 

 

 

            (17)

            913

 

         6,005

          (450)

                 -

       (1,516)

            638

            (40)

         4,637

 

 

 

 

 

 

 

 

Earnings per share (pence)

           7.62

         (0.64)

                 -

         (2.29)

           0.96

         (0.03)

           5.61

 

 

 

 

 

 

 

 

Diluted earnings per share (pence)

           7.46

         (0.63)

                 -

         (2.24)

           0.94

         (0.03)

           5.50

 

 

 

 

 

 

 

Earnings before interest,

 

 

 

 

 

 

taxation, depreciation, amortisation

 

 

 

 

 

 

and share based payments (EBITDA)

         8,569

         (480)

                -

      (2,633)

            693

            271

         6,420

 

 

 

 

 

 

 

 

Exclude foreign exchange differences

          (105)

                 -

                 -

                 -

                 -

                 -

           (105)

Adjusted EBITDA excluding foreign exchange differences

         8,464

          (480)

                 -

       (2,633)

            693

            271

         6,315

 

Impact on the Group statement of comprehensive income for the year to 31 March 2019

 

 

YEAR TO 31 MARCH 2019

 

 

 

 

 

 

 

 

 

As reported

Adjustment

Adjustment

Adjustment

Adjustment

Adjustment

Restated

Explanation of adjustment

(audited)

Note 3.1A

Note 3.1B

Note 3.2

Note 3.4

Note 4

(unaudited)

 

 £000's

 £000's

 £000's

 £000's

 £000's

 £000's

 £000's

 

 

 

 

 

 

 

 

Revenue

       74,578

       (4,512)

       (2,900)

 

 

 

       67,166

Cost of sales

     (40,725)

         2,547

         2,900

 

 

                -

      (35,278)

Gross Profit

       33,853

      (1,965)

                 -

                 -

                 -

  -

 31,888

 

 

 

 

 

 

 

 

Other income

              35

 

 

 

 

 

              35

Administrative expenses

     (14,466)

 

 

 

            311

              16

      (14,139)

R&D expense

                 -

 

 

       (5,487)

 

                -

        (5,487)

Currency profits/(losses)

          (138)

 

 

 

 

 

           (138)

Amortisation of intangible assets

       (3,982)

 

 

         1,870

 

 

        (2,112)

Share based payments

          (631)

 

 

 

 

 

           (631)

Profit from operating activities:

       14,671

      (1,965)

                 -

       (3,617)

            311

              16

         9,416

Net finance income/(costs)

            562

 

 

 

 

            (19)

            543

Share of profit of associate

              14

 

 

 

 

 

              14

Profit before income tax

       15,247

   (1,965)

                 -

       (3,617)

            311

             (3)

       9,973

 

 

 

 

 

 

 

 

Income tax charge

       (1,680)

            290

 

            532

            (30)

 

           (888)

Profit for the period

       13,567

    (1,675)

                 -

       (3,085)

            281

             (3)

         9,085

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Owner of parent company

       11,755

       (1,469)

 

       (3,085)

            281

              (3)

         7,479

Non-controlling interest

         1,812

          (206)

 

 

 

                 -

         1,606

 

       13,567

       (1,675)

                 -

       (3,085)

            281

              (3)

         9,085

 

 

 

 

 

 

 

 

Earnings per share (pence)

         17.60

         (2.20)

                 -

         (4.62)

           0.42

         (0.00)

         11.20

 

 

 

 

 

 

 

 

Diluted earnings per share (pence)

         17.35

         (2.17)

                 -

         (4.55)

           0.41

         (0.00)

         11.04

 

 

 

 

 

 

 

Earnings before interest,

 

 

 

 

 

 

taxation, depreciation, amortisation

 

 

 

 

 

 

 

and share based payments (EBITDA)

    19,949

      (1,965)

    -

     (5,487)

            311

            151

       12,959

 

 

 

 

 

 

 

 

Exclude foreign exchange differences

            138

                 -

                 -

                 -

                 -

                 -

            138

Adjusted EBITDA excluding foreign exchange differences

       20,087

       (1,965)

                 -

       (5,487)

            311

            151

       13,097

 

 

 

Impact on Group Statements of financial position

 

 

AS AT 1 APRIL 2018

 

 

 

 

 

 

 

 

As reported

Adjustment

Adjustment

Adjustment

Adjustment

Restated

Explanation of adjustment

(audited)

Note 3.1A

Note 3.2

Note 3.3

Note 3.4

(unaudited)

 

£000's

£000's

£000's

£000's

£000's

£000's

 

 

 

 

 

 

 

Non current assets

 

 

 

 

 

 

Intangible assets

   57,631

 

    (19,226)

 

          232

     38,637

Property, plant and equipment

     1,866

 

 

 

 

       1,866

Investment property

        200

 

 

 

 

          200

Right of use assets

             -

 

 

 

 

               -

Investments

          98

 

 

 

 

            98

 

     59,795

               -

    (19,226)

               -

          232

     40,801

Current assets

 

 

 

 

 

 

Inventories

     17,663

          991

 

 

 

     18,654

Trade and other receivables

     17,193

      (1,678)

 

         (296)

 

     15,219

Income tax recoverable

        113

            64

          397

 

          121

          695

Other taxes and social security

     1,160

 

 

 

 

       1,160

Cash and cash equivalents

     21,261

 

 

         (918)

 

     20,343

 

     57,390

         (623)

          397

      (1,214)

          121

     56,071

Total assets

   117,185

         (623)

    (18,829)

      (1,214)

          353

     96,872

Current liabilities

 

 

 

 

 

 

Trade and other payables

 (10,715)

 

 

       1,214

      (1,307)

    (10,808)

Income tax

      (152)

            24

 

 

 

         (128)

Other taxes and social security

      (108)

 

 

 

 

         (108)

Amounts due under leases

             -

 

 

 

 

               -

Dividends

        (42)

 

 

 

 

           (42)

 

 (11,017)

            24

               -

       1,214

      (1,307)

    (11,086)

 

 

 

 

 

 

 

Total assets less current liabilities

 106,168

         (599)

    (18,829)

               -

         (954)

     85,786

 

 

 

 

 

 

 

Non current liabilities

 

 

 

 

 

 

Deferred tax

   (1,293)

 

       1,073

 

 

         (220)

Amounts due under leases

               -

 

 

 

 

               -

Total assets less total liabilities

 104,875

         (599)

    (17,756)

               -

         (954)

     85,566

 

 

 

 

 

 

 

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

 

 

 

 

       2,823

Retained earnings

   34,065

         (632)

    (17,756)

 

         (954)

     14,723

Shareholders' funds

   99,690

         (632)

    (17,756)

               -

         (954)

     80,348

Non-controlling interests

     5,185

            33

 

 

 

       5,218

Total equity

 104,875

         (599)

    (17,756)

               -

         (954)

     85,566

 

 

 

 

 

 

AS AT 30 SEPTEMBER 2018

 

 

 

 

 

 

 

 

 

As reported

Adjustment

Adjustment

Adjustment

Adjustment

Adjustment

Restated

Explanation of adjustment

(unaudited)

Note 3.1A

Note 3.2

Note 3.3

Note 3.4

Note 4

(unaudited)

 

£000's

£000's

£000's

£000's

£000's

£000's

£000's

 

 

 

 

 

 

 

 

Non current assets

 

 

 

 

 

 

 

Intangible assets

     59,840

 

    (20,868)

 

            57

 

     39,029

Property, plant and equipment

       2,127

 

 

 

 

 

       2,127

Investment property

          200

 

 

 

 

 

          200

Right of use assets

               -

 

 

 

 

       2,512

       2,512

Investments

          125

 

 

 

 

 

          125

 

     62,292

               -

    (20,868)

               -

            57

       2,512

     43,993

Current assets

 

 

 

 

 

 

 

Inventories

     18,302

       1,552

 

 

 

 

     19,854

Trade and other receivables

     18,528

      (2,719)

 

         (786)

 

 

     15,023

Income tax recoverable

          362

          111

          523

 

            66

 

       1,062

Other taxes and social security

       1,004

 

 

 

 

 

       1,004

Cash and cash equivalents

     24,729

 

 

         (905)

 

 

     23,824

 

     62,925

      (1,056)

          523

      (1,691)

            66

               -

     60,767

Total assets

   125,217

      (1,056)

    (20,345)

      (1,691)

          123

       2,512

   104,760

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

    (11,635)

 

 

       1,691

         (439)

 

    (10,383)

Income tax

         (378)

              7

 

 

 

 

         (371)

Other taxes and social security

      (1,405)

 

 

 

 

 

      (1,405)

Amounts due under leases

               -

 

 

 

 

         (587)

         (587)

Dividends

           (50)

 

 

 

 

 

           (50)

 

    (13,468)

              7

               -

       1,691

         (439)

         (587)

    (12,796)

 

 

 

 

 

 

 

 

Total assets less current liabilities

   111,749

      (1,049)

    (20,345)

               -

         (316)

       1,925

     91,964

 

 

 

 

 

 

 

 

Non current liabilities

 

 

 

 

 

 

 

Deferred tax

      (1,400)

 

       1,073

 

 

 

         (327)

Amounts due under leases

               -

 

 

 

 

      (2,002)

      (2,002)

Total assets less total liabilities

   110,349

      (1,049)

    (19,272)

               -

         (316)

           (77)

     89,635

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Capital and reserves

 

 

 

 

 

 

 

Issued share capital

       3,358

 

 

 

 

 

       3,358

Share premium account

     61,905

 

 

 

 

 

     61,905

Revaluation reserve

          664

 

 

 

 

 

          664

Other reserves

       3,198

 

 

 

 

 

       3,198

Retained earnings

     36,832

      (1,059)

    (19,272)

 

         (316)

           (59)

     16,126

Shareholders' funds

   105,957

      (1,059)

    (19,272)

               -

         (316)

           (59)

     85,251

Non-controlling interests

       4,392

            10

 

 

 

           (18)

       4,384

Total equity

   110,349

      (1,049)

    (19,272)

               -

         (316)

           (77)

     89,635

 

 

 

 

 

 

 

AS AT 31 MARCH 2019

 

 

 

 

 

 

 

 

 

As reported

Adjustment

Adjustment

Adjustment

Adjustment

Adjustment

Restated

Explanation of adjustment

(audited)

Note 3.1A

Note 3.2

Note 3.3

Note 3.4

Note 4

(unaudited)

 

£000's

£000's

£000's

£000's

£000's

£000's

£000's

 

 

 

 

 

 

 

 

Non current assets

 

 

 

 

 

 

 

Intangible assets

     62,734

 

    (22,843)

 

          114

 

     40,005

Property, plant and equipment

       2,144

 

 

 

 

 

       2,144

Investment property

          200

 

 

 

 

 

          200

Right of use assets

       1,930

 

 

 

 

          385

       2,315

Investments

          116

 

 

 

 

 

          116

 

     67,124

               -

    (22,843)

               -

          114

          385

     44,780

Current assets

 

 

 

 

 

 

 

Inventories

     16,107

       3,538

 

 

 

 

     19,645

Trade and other receivables

     29,537

      (6,190)

 

            11

 

 

     23,358

Income tax recoverable

          466

          173

          719

 

            91

 

       1,449

Other taxes and social security

          462

 

 

 

 

 

          462

Cash and cash equivalents

     18,068

 

 

      (1,205)

 

 

     16,863

 

     64,640

      (2,479)

          719

      (1,194)

            91

               -

     61,777

Total assets

   131,764

      (2,479)

    (22,124)

      (1,194)

          205

          385

   106,557

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

    (13,809)

 

 

       1,194

         (878)

 

    (13,493)

Income tax

      (1,000)

          205

 

 

 

 

         (795)

Other taxes and social security

         (533)

 

 

 

 

 

         (533)

Amounts due under leases

         (415)

 

 

 

 

         (140)

         (555)

Dividends

           (49)

 

 

 

 

 

           (49)

 

    (15,806)

          205

               -

       1,194

         (878)

         (140)

    (15,425)

 

 

 

 

 

 

 

 

Total assets less current liabilities

   115,958

      (2,274)

    (22,124)

               -

         (673)

          245

     91,132

 

 

 

 

 

 

 

 

Non current liabilities

 

 

 

 

 

 

 

Deferred tax

      (1,616)

 

       1,283

 

 

 

         (333)

Amounts due under leases

      (1,573)

 

 

 

 

         (268)

      (1,841)

Total assets less total liabilities

   112,769

      (2,274)

    (20,841)

               -

         (673)

           (23)

     88,958

 

 

 

 

 

 

 

 

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

 

 

 

 

 

       3,342

Retained earnings

     37,377

      (2,101)

    (20,841)

 

         (673)

           (23)

     13,739

Shareholders' funds

   107,405

      (2,101)

    (20,841)

               -

         (673)

           (23)

     83,767

Non-controlling interests

       5,364

         (173)

 

 

 

               -

       5,191

Total equity

   112,769

      (2,274)

    (20,841)

               -

         (673)

           (23)

     88,958

                   

 

 

Impact on the Group statement of cash flows

 

 

SIX MONTHS TO 30 SEPTEMBER 2018

 

 

 

 

 

 

 

 

 

As reported

Adjustment

Adjustment

Adjustment

Adjustment

Adjustment

Restated

Explanation of adjustment

(unaudited)

Note 3.1A

Note 3.2

Note 3.3

Note 3.4

Note 4

(unaudited)

 

£000's

£000's

£000's

£000's

£000's

£000's

£000's

Cashflows from operating activities

 

 

 

 

 

 

 

Profit before income tax

       6,770

         (480)

      (1,642)

 

          693

           (40)

       5,301

 

 

 

 

 

 

 

 

Adjustment for:

 

 

 

 

 

 

 

Net finance (income)/costs

         (697)

 

 

 

 

            53

         (644)

Depreciation

          149

 

 

 

 

          258

          407

Revaluation of freehold property

               -

 

 

 

 

 

               -

Amortisation of intangible assets

       1,999

 

      (991)

 

 

 

          1,008

Pension payments

           (29)

 

 

 

 

 

           (29)

Share of associate's results

           (27)

 

 

 

 

 

           (27)

Impairment of investments

 

 

 

 

 

 

               -

Share based payments

          375

 

 

 

 

 

          375

 

 

 

 

 

 

 

 

Operating cash flow before movement in working capital

       8,540

         (480)

      (2,633)

               -

          693

          271

       6,391

 

 

 

 

 

 

 

 

Change in inventories

         (639)

         (561)

 

 

 

 

      (1,200)

Change in receivables

      (1,179)

       1,041

 

          490

 

 

          352

Change in payables

       2,246

 

 

         (477)

         (868)

 

          901

Cash generated from operations

       8,968

               -

      (2,633)

            13

         (175)

          271

       6,444

Finance costs

               -

 

 

 

 

 

               -

Income tax

         (681)

 

 

 

 

 

         (681)

Net cash from operating activities

       8,287

               -

      (2,633)

            13

         (175)

          271

       5,763

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Acquisition of property plant and equipment

         (431)

 

 

 

 

 

         (431)

Disposal of property plant and equipment

               -

 

 

 

 

 

               -

Purchase of intangibles

      (4,208)

 

       2,633

 

          175

 

      (1,400)

Finance income

            70

 

 

 

 

 

            70

Net cash (used in) investing activities

      (4,569)

               -

       2,633

               -

          175

               -

      (1,761)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from issue of share capital

       3,125

 

 

 

 

 

       3,125

Finance lease borrowings

               -

 

 

 

 

 

               -

Finance lease repayments

               -

 

 

 

 

         (271)

         (271)

Dividends paid

      (3,741)

 

 

 

 

 

      (3,741)

Net cash (used in) financing activities

         (616)

               -

               -

               -

               -

         (271)

         (887)

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

       3,102

               -

               -

            13

               -

               -

       3,115

Foreign exchange movements

          366

 

 

 

 

 

          366

Balance at the beginning of the period

     21,261

 

 

         (918)

 

 

     20,343

 

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

     24,729

               -

               -

         (905)

               -

               -

     23,824

Free cash flow

       3,648

               -

               -

            13

               -

          271

       3,932

 

 

 

 

YEAR ENDED 31 MARCH 2019

 

 

 

 

 

 

 

 

 

As reported

Adjustment

Adjustment

Adjustment

Adjustment

Adjustment

Restated

Explanation of adjustment

(audited)

Note 3.1A

Note 3.2

Note 3.3

Note 3.4

Note 4

(unaudited)

 

£000's

£000's

£000's

£000's

£000's

£000's

£000's

Cashflows from operating activities

 

 

 

 

 

 

 

Profit before income tax

   15,247

     (1,965)

     (3,617)

 

          311

            (3)

     9,973

 

 

 

 

 

 

 

 

Adjustment for:

 

 

 

 

 

 

 

Net finance (income)/costs

     (562)

 

 

 

 

            19

        (543)

Depreciation

        720

 

 

 

 

          135

          855

Revaluation of freehold property

       (55)

 

 

 

 

 

          (55)

Amortisation of intangible assets

     3,982

 

     (1,870)

 

 

 

       2,112

Pension payments

       (59)

 

 

 

 

 

          (59)

Share of associate's results

       (14)

 

 

 

 

 

          (14)

Impairment of investments

 

 

 

 

 

 

               -

Share based payments

        631

 

 

 

 

 

          631

 

 

 

 

 

 

 

 

Operating cash flow before movement in working capital

    19,890

     (1,965)

     (5,487)

               -

          311

          151

     12,900

 

 

 

 

 

 

 

 

Change in inventories

     1,556

     (2,547)

 

 

 

 

        (991)

Change in receivables

(11,646)

       4,512

 

        (307)

 

 

     (7,441)

Change in payables

     3,540

 

 

            20

        (429)

 

       3,131

Cash generated from operations

   13,340

               -

     (5,487)

        (287)

        (118)

          151

       7,599

Finance costs

       (69)

 

 

 

 

 

          (69)

Income tax

     (862)

 

 

 

 

 

        (862)

Net cash from operating activities

   12,409

               -

     (5,487)

        (287)

        (118)

          151

       6,668

 

 

 

 

 

 

 

 

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)

 

       5,487

 

          118

 

     (3,480)

Finance income

        127

 

 

 

 

 

          127

Net cash (used in) investing activities

     (9,519)

               -

       5,487

               -

          118

               -

     (3,914)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from issue of share capital

     3,884

 

 

 

 

 

       3,884

Finance lease borrowings

          67

 

 

 

 

 

            67

Finance lease repayments

     (406)

 

 

 

 

        (151)

        (557)

Dividends paid

(10,121)

 

 

 

 

 

   (10,121)

Net cash (used in) financing activities

     (6,576)

               -

               -

               -

               -

        (151)

     (6,727)

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

     (3,686)

               -

               -

        (287)

               -

               -

     (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

               -

               -

     (1,205)

               -

               -

     16,863

Free cash flow

     2,827

               -

               -

        (287)

               -

          151

       2,691

 

 

 

Impact on Group intangible assets

 

 

As Reported

Adjustment

Restated

 

 £000's

 £000's

 £000's

Cost

 

 

 

At 1 April 2018

   74,819

     (34,929)

   39,890

Additions

     4,208

       (2,808)

     1,400

At 30 September 2018

   79,027

     (37,737)

   41,290

Additions

     4,877

       (2,797)

     2,080

At 31 March 2019

   83,904

     (40,534)

   43,370

 

 

 

 

Amortisation  

 

 

 

At 1 April 2018

   35,729

     (15,935)

   19,794

Charge for the period

     1,960

       (991)

        969

At 30 September 2018

   37,689

     (16,926)

   20,763

Charge for the period

     1,950

          (879)

     1,071

At 31 March 2019

   39,639

     (17,805)

   21,834

 

 

 

 

Net Book Value

 

 

 

At 31 March 2019

   44,265

     (22,729)

   21,536

 

 

 

 

At 30 September 2018

   41,338

     (20,811)

   20,527

 

 

 

 

At 1 April 2018

   39,090

     (18,994)

   20,096

 

The Group is also looking into the impact that the adjustments referred to in this note might have had on the distributable reserves of Group subsidiaries and the consequential impact that could have with regard to certain historical dividends paid by them.

 

4.   IFRS 16 - Leases

 

This new leasing standard removed the distinction between finance and operating leases for lessees. For lessees, all leases are recorded on the Statement of financial position as liabilities, at the present value of the future lease payments, along with an asset reflecting the right to use the asset over the lease term.

 

The Group applied the new standard in the year ended 31 March 2019 and presented the effects of the adoption of IFRS in the consolidated financial statements of the Group for the year ended 31 March 2019. 

 

The Interim statement for the six months ended 30 September 2018 did not reflect the adoption of this standard and accordingly to provide comparison with the six months ended 30 September 2019, these interim statements show the six months ended 30 September 2018 restated on this basis.

 

As described in the impact tables in Note 3 there was an additional prior period restatement to correct an error to bring 100% of the costs of the lease of the Group's office in Southgate onto the Statement of financial position per IFRS16 rather than the previous treatment of only bringing half of the costs in.

 

 

5.   Revenue is derived from the Group's animal pharmaceutical businesses.

 

 

6.   Principal risks and uncertainties

These were set out on pages 24-27 of the notes to the consolidated financial statements for the year ended 31 March 2019. 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.

 

7.   Earnings per share

  

 

Six months

Six months

Year ended

 

to 30.09.19

to 30.09.18

31.03.19

 

(unaudited)

(unaudited)

(audited)

 

 

Restated

Restated

Weighted average number of shares in issue (000's)

         67,493

         66,326

        66,794

Fully diluted weighted average number of shares in issue (000's)

         68,092

         67,757

        67,737

Profit attributable to equity holders of the company (£000's)

              1,018

           3,724

          7,479

Basic earnings per share (pence)

             1.51

             5.61

          11.20

Fully diluted earnings per share (pence)

             1.50

             5.50

          11.04

 

8.   Dividends

 

Six months

Six months

Year ended

 

to 30.09.19

to 30.09.18

31.03.19

 

(unaudited)

(unaudited)

(audited)

 

 

 

 

 

£000's

£000's

£000's

Dividend in respect of the year ended 31 March 2018 at 3.2p/6.0p per ordinary share

 -

         2,106

         2,106

 

 

 

 

Further Interim Dividend in respect of the year ended 31 March 2018 at 6.0p per ordinary share

                -

                -

         4,029

 

 

 

 

Special dividend in respect of the year ended 31 March 2019 at 3.5p per ordinary share

 

                -

         2,350

 

 

 

 

Dividend in respect of the year ended 31 March 2019 at 4.0p per ordinary share

         2,698

                -

 -

 

 

 

 

Final dividend in respect of the year ended 31 March 2019 at 7.04p per ordinary share

         4,755

                -

 -

 

 

 

 

 

         7,453

         2,106

         8,485

 

Under IAS 10, dividends are recorded in the accounts when they become a legal obligation of the payer. For final dividends, this will be when they are approved by the shareholders in general meeting. For interim dividends, this will be when they have been paid.

 

In summary, what this means in practice is that:

·      Dividends need to be paid (if interim dividends) or approved by shareholders (if final dividends) before they are recognised in the accounts.

·      In the Annual General Meeting held during September 2019 a shareholder resolution was passed to approve the final dividend paid in October 2019.  Accordingly, a liability is recorded in the Statement of financial position on 30 September 2019

·      No such shareholder resolution was proposed or passed in the prior period AGM's.  Following the application of IAS 10 no liability was recorded at 31 March 2018, 31 March 2019 or 30 September 2018 for dividends declared but not paid before each of those reporting dates.

 

9.   Intangible non-current assets

 

 

Goodwill

 Distribution rights

Development Costs

Total

 

 £000's

 £000's

 £000's

 £000's

Cost

 

 

 

 

At 1 April 2018 - restated

        17,930

          1,442

        39,890

        59,262

Additions - restated

                 -

                 -

          1,400

          1,400

At 30 September 2018 - restated

        17,930

          1,442

        41,290

        60,662

Additions - restated

                 -

                 -

          2,080

          2,080

At 31 March 2019 - restated

        17,930

          1,442

        43,370

        62,742

Additions

                 -

                 -

          1,552

          1,552

At 30 September 2019

        17,930

          1,442

        44,922

        64,294

 

 

 

 

 

Amortisation  

 

 

 

 

At 1 April 2018 - restated

                 -

             831

        19,794

        20,625

Charge for the period - restated

                 -

               39

             969

             1,008

At 30 September 2018 - restated

                 -

             870

        20,763

        21,633

Charge for the period - restated

                 -

               33

          1,071

          1,104

At 31 March 2019 - restated

                 -

             903

        20,834

        22,737

Charge for the period

                 -

               36

          1,170

          1,206

At 30 September 2019

                 -

             939

        23,004

        23,943

 

 

 

 

 

Net Book Value

 

 

 

 

At 30 September 2019

        17,930

             503

        21,918

        40,351

 

 

 

 

 

At 31 March 2019 - restated

        17,930

             539

        21,536

        40,005

 

 

 

 

 

At 30 September 2018 - restated

        17,930

             572

        20,527

        39,029

 

 

 

 

 

At 1 April 2018 - restated

        17,930

             611

        20,096

        38,637

 

10.  Property, plant and equipment

  

 

Land & Buildings (freehold)

Plant and Machinery

Fixtures, fittings & equipment

Motor vehicles

Total

 

£000's

£000's

£000's

£000's

£000's

Cost or valuation

 

 

 

 

 

At 1 April 2018

           730

      1,602

     1,083

            61

        3,476

Additions

                -

          261

          150

           21

           432

Disposals

                -

         (19)

               -

              -

            (19)

Foreign exchange movements

                -

       (27)

               -

           (8)

            (35)

At 30 September 2018

           730

   1,817

   1,233

            74

        3,854

Additions

                -

         80

         48

             6

           134

Revaluation in the year

             30

             -

               -

           -

             30

Disposals

                -

     (49)

         -

             -

            (49)

Foreign exchange movements

                -

       38

         1

             2

             41

At 31 March 2019

           760

       1,886

   1,282

       82

        4,010

Additions

                -

       40

       45

             -

             85

Foreign exchange movements

                -

        (8)

          -

             -

              (8)

At 30 September 2019

           760

    1,918

   1,327

           82

        4,087

 

 

 

 

 

 

Depreciation

 

 

 

 

 

At 1 April 2018

             26

        864

     706

      14

        1,610

Charge for the period

               5

       81

       57

            6

           149

Disposals

                -

      (18)

          -

             -

            (18)

Foreign exchange movements

                -

      (14)

          -

            -

            (14)

At 30 September 2018

             31

     913

    763

           20

        1,727

Charge for the period

            (5)

      90

    97

     9

           191

Revaluation in the year

     (26)

          -

          -

            -

            (26)

Disposals

                -

     (45)

          -

            -

            (45)

Foreign exchange movements

                -

       20

          -

          (1)

             19

At 31 March 2019

                -

     978

     860

           28

        1,866

Charge for the period

               6

       83

       84

            9

           182

Foreign exchange movements

                -

          (5)

           -

             -

              (5)

At 30 September 2019

               6

   1,056

      944

           37

        2,043

 

 

 

 

 

 

Net book value

 

 

 

 

 

At 30 September 2019

           754

           862

           383

             45

        2,044

 

 

 

 

 

 

At 31 March 2019

           760

           908

           422

             54

        2,144

 

 

 

 

 

 

At 30 September 2018

           699

           904

           470

             54

        2,127

 

 

 

 

 

 

At 1 April 2018

           704

           738

           377

             47

        1,866

 

 

 

 

 

This financial information was approved by the board on 30 December 2019.

Copies of this interim report are being sent to all the Company's shareholders. Further copies can be obtained from the Company's registered office at 78 Coombe Road, New Malden, Surrey, KT3 4QS.

 

DIRECTORS AND OFFICERS

Andrew Jones

(Non-Executive Chairman)

 

Marc Loomes

(Chief Executive)

 

Chris Wilks

(Chief Financial Officer)

 

Anthony Rawlinson

(Non-Executive Director)

 

Julia Trouse

(Company Secretary)

 

 

 

REGISTERED OFFICE

78 Coombe Road, New Malden, Surrey. KT3 4QS

 

Tel: 020-8336-2900

Fax: 020-8336-0909

 

 

 

COMPANY NUMBER

01818170

 

 

INFORMATION AT

www.ecoanimalhealthgroupplc.com

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
IR DGBDDRXXBGCG

Quick facts: Eco Animal Health Group Plc

Price: 215

Market: AIM
Market Cap: £145.23 m
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