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UPDATE - ECO Animal Health doubles first half profit as momentum continues

Last updated: 21:00 03 Dec 2014 AEDT, First published: 22:00 03 Dec 2014 AEDT

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--ADDS SHARE PRICE AND BROKER COMMENT--

ECO Animal Health (LON:EAH) doubled its pre- tax profit to £2mln in its latest half year as it continues to expand sales of its veterinary products.

Momentum is continuing in the business with the second half also starting well, it said.

Worldwide sales of its antibiotic for pigs and poultry - Aivlosin - continue to grow and increased by 14% in the six months to end September compared with the same period last year.

Sales of the product in the USA and Canada, which account for more than one third of its potential world market, continue to build.

Overall, the group saw strong sales growth in North America, China and Europe.

In China, where the group's subsidiary recently celebrated its 10th anniversary, sales rose 9% in sterling, or 18% in local currency, compared to 2013. In Europe, sales were up by over 66%.

In July, the firm purchased the business of its long standing Southeast Asian distributor in Kuala Lumpur and this operation saw sales up almost 60% in US dollars or 45% in sterling compared to 2013, it said.

Meanwhile, in Japan, the ongoing weakness of the yen continued to affect the numbers. In Latin America, the uncertain economic and political situation, particularly in Argentina and Venezuela, had a similar effect.

However, Eco said there was a significant upturn in business in Mexico and a key tender was won in Brazil, which will have a positive impact during the year.

Pre-tax profit was up to £2mln compared to £1mln, while there was an 11%  increase in revenue to £17mln (2013: £15.3mln).

Cash generated from operations grew 20% to £1.8 million (2013: £1.5 million).

The group's executive chairman, Peter Lawrence, said: "The second half of the year has started well and is maintaining the momentum of the first six months.

"While the company continues to apply for further marketing authorisations, it is rewarding to see the results of our change of focus from gaining intellectual property to delivering profitable and growing sales of our licensed products.

"As we expand sales into existing and newly licensed territories and grow market shares for our exciting range of veterinary pharmaceutical products, I look forward with confidence to ECO delivering an impressive performance when results for the full year are announced next summer."

Broker Peel Hunt rates the shares a 'buy' and noted the group was "continuing to deliver good growth from its existing approvals as the merits of Aivlosin are recognised in a growing number of regions".

The broker expects profits to grow by 16% in the current year, despite further investment to deliver long term performance.

Analyst Charles Hall notes that Aivlosin is taking market share because it acts quickly and is highly potent, which ensures that dosage is low and treatment duration is short.

"Given that ECO has only just entered North America and has limited approvals in a number of countries, we believe there is potential for sales of Aivlosin to double to £45m over the next three to five years without any new approvals.

"The opportunity from new approvals could add in excess of £25m in time." he said.

"ECO looks very well positioned to deliver strong growth and the recent share price weakness provides an attractive entry point," he added.

Peel Hunt targets a price of 220p on the shares, representing a 35% increase on where they are now at 162p.

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