Results for the six months ended 30 September 2021

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 £38.5m (H1 2020: £42.5m)

· EBITDA before exceptional impairment at £3.8m (H1 2020 restated*: £6.7m)

· Profit before taxation of £0.9m (H1 2020 restated profit*: £4.8m)

· Loss per share of 0.21p (H1 2020: restated Earnings per share*: 3.63p)

· Cash generated by operations of £6.1m (H1 2020 restated*: £3.5m)

*  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®.  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 £38.5 million (30 September 2020: £42.5 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 £30 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 £10.9 million were consistent with the comparative period last year (H1 2020: £10.5 million).

Research and development expenditure shown in the income statement together with the amounts capitalised represented a cash investment of £4.0 million (H1 2020: £4.1 million), representing 10.4% of revenue in the period (H1 2020: 9.6%). 

A one-off impairment charge of £2.1 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 £3.8 million (H1 2020: £6.7 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 £6.0 million (H1 2020: £3.5 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 £2.3m (primarily tax paid in China) resulted in cash balances at the period end of £22.9 million (31 March 2021: £19.5 million), of which £22.7 million (31 March 2021: £13.7 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 £0.2 million (31 March 2021 - £5.8 million).  The Group's committed overdraft facility remains at £5 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:

Revenue Summary


6 months ended 30 September


Year ended





2021

2020


31 March

 2021

% change




(£'m)

(£'m)


(£'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 £38.5 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®.   

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® in this market.

Southeast Asia has experienced a particularly strong period of trading compared to last year.  Revenue from Thailand has doubled from £2m to £4m 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 £4.0 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® - 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 £2.08 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®, 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)



 000's

 000's

 000'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)



 000's

 000's

 000'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 Capital Account

Share Premium Account

Revaluation Reserves 

Other Reserves

Foreign Exchange Reserve

Retained Earnings

Total

Minority Interest

Total Equity


£000's

£000's

£000's

£000's

£000's

£000's

£000's

£000's

£000's

FOR THE YEAR ENDED 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 MONTHS ENDED 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 Capital Account

Share Premium Account

Revaluation Reserves 

Other Reserves

Foreign Exchange Reserve

Retained Earnings

Total

Minority Interest

Total Equity


£000's

£000's

£000's

£000's

£000's

£000's

£000's

£000's

£000's

FOR THE YEAR ENDED 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 MONTHS ENDED 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

£000's

£000's

£000'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)



 000's

 000's

 000'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
as at
30.09.20

Adjustment to retained earnings

Adjustment through Income Statement

As restated
as at
30.09.20


 000's

£000's

£000's

 000'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
for 6 months ended 30.09.20

Adjustment to retained earnings

Adjustment through Income Statement

As restated
for 6 months ended 30.09.20


 000's

£000's

£000's

 000'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 £4,117 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 (£000'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

 


Goodwill

Distribution rights

Development Costs

Total


 000's

 000's

 000's

 000'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

Frank Armstrong

(Non-Executive Director)

(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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