REG - Eco Animal Health Gp - Final Results for the Year Ended 31 March 2022
31/08/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220831:nRSe6708Xa&default-theme=true
RNS Number : 6708X Eco Animal Health Group PLC 31 August 2022
31 August 2022
ECO Animal Health Group plc ("ECO", the "Company" or the "Group")
(AIM: EAH)
Results for the year ended 31 March 2022
Solid performance in a very challenging market
HIGHLIGHTS
Financials
· Group sales down 22% at £82.2m (2021: £105.6m)
- China and Japan sales declined significantly to £28.4m (2021: £58.9m)
- ROW sales increased by 15% to £53.8m (2021: £46.7m)
· Gross margin at 43% (2021 restated: 50%)
· EBITDA decreased to £6.4m (2021 restated: £21.3m) which
includes an exchange rate gain of £1m (2021: loss £2.2m)
· Administrative expenses excluding foreign exchange and
exceptional items were constant at £23.4m
· New product development expenditure 12% higher at £10.2m (2021:
£9.1m) reflecting maturing pipeline
· Loss per share of 1.01p (2021 restated: profit per share of
10.86p)
· Net cash at the end of the period £14.3m (2021: £19.5m)
· New £10m Bank RCF facility agreed after the end of the period,
which remains undrawn
Operations
· Aivlosin® demand remains robust with increasing market share in
key markets
o Strong growth in USA and Canada from stable domestic demand
o Strong export driven growth in Latin America
o Strong growth in South and South East Asia, particularly Thailand
· Two new Aivlosin Regulatory approvals
o The first zero day drug withdrawal period anti-microbial for poultry in
China
o New swine respiratory disease marketing authorisation in China
· Two new poultry vaccine projects progressed to full development
in the year
o Addressing a disease which costs the poultry industry over £600m per
annum
o First marketing approvals expected end of 2023
· New ESG report provides baseline metrics
· Appointment of new Chief Executive, David Hallas, on 1 April 2022
and new Non-Executive Director, Tracey James, during the year
David Hallas, CEO of ECO Animal Health Group plc, commented: "I am delighted
to have joined ECO in April this year and I have seen so many promising signs
within the Company since I have arrived. Whilst the well documented China
revenue performance has disappointed due to the extensively depressed pork
prices, the underlying growth and continuing gains in other markets is
impressive. We expect that China will remain subdued for another quarter or
two but the recent improvement in pork to feed price ratio provides the
foundation for a stronger end to the financial year. I am particularly
excited about our new technologies and the innovative products which will add
to our expanding portfolio of products in the coming years. Our approach,
our current and future assets and above all our team provide the Company with
a solid base for sustainable, profitable growth in the years ahead."
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") as it forms part of United Kingdom domestic law by
virtue of the European Union (Withdrawal) Act 2018. Upon the publication of
this announcement via a Regulatory Information Service ("RIS"), this inside
information is now considered to be in the public domain.
Forward-Looking Statements
This announcement contains certain forward-looking statements. The
forward-looking statements reflect the knowledge and information available to
the Company and Group during preparation and up to the publication of this
announcement. By their very nature, these statements depend upon circumstances
and relate to events that may occur in the future and thereby involving a
degree of uncertainty. Therefore, nothing in this announcement should be
construed as a profit forecast by the Company or Group.
Contacts
020 8447 8899
ECO Animal Health Group plc
David Hallas (Chief Executive)
Christopher Wilks (Finance Director)
IFC Advisory 020 3934 6630
Graham Herring
Zach Cohen
Singer Capital Markets (Nominated Adviser & Joint Broker)
Mark Taylor 020 7496 3000
George Tzimas
Investec (Joint Broker)
Gary Clarence 020 7597 5970
Brough Ransom
Carlo Spingardi
Peel Hunt LLP (Joint Broker)
Dr Christopher Golden 020 7418 8900
James Steel
Equity Development 020 7065 2692
Hannah Crowe
Matt Evans
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 MARCH 2022
I am pleased to report that ECO continues to make strong progress on its
journey towards building a broader and long term sustainable business.
Sales of our core Aivlosin business delivered strong growth in North America,
South East Asia and Latin America. Sales in Europe were slightly down due to
supply chain and post Brexit importation difficulties. China, however, saw a
major reduction in sales due to a very rapid and steep down cycle in the
overall pig market. Market cycles are a feature of our market, and looking
through these, we believe there are opportunities for continued growth of our
core Aivlosin business in the coming years.
The combination of the impact of the China market decline and our continued
substantial investment in R&D has resulted in a significant reduction in
bottom line performance for the year. The Board believes that the
significant investment in R&D is the most effective use of our cash flow
and expects it to lead to a substantial and sustainable increase in
shareholder value.
Our substantial investment in R&D has created a broad portfolio of
vaccines and biologicals projects that offer competitive advantages over
existing solutions in the market. Some of these projects moved into advanced
stages of development during the year and, based on current plans, the first
projects are likely to receive regulatory approval before the end of calendar
year 2023. We made an initial presentation of the portfolio and its
potential future value at our Capital Markets Day in January 2022. The Board
is excited about the transformative potential of the portfolio to drive a
major increase in shareholder value. Further updates on R&D progress
will be provided at the appropriate time in the coming year.
As we committed last year, we have laid out further information on our
approach to ESG and will continue to develop and embed our strategy in this
important area in the coming year.
We announced in July 2021 that Marc Loomes, the former Chief Executive ("CEO")
of ECO, had informed the Board of his wish to retire by the end of 2022.
Marc joined ECO in 2004 and the contribution his leadership has made to the
growth and development of the business cannot be understated. We sincerely
thank him and wish him every success and happiness in the next phase of his
life.
We announced in January 2022 the appointment, effective 1 April 2022, of David
Hallas as the new CEO of ECO. David has more than 30 years of experience in
the animal health sector and we are delighted to have been able to attract
such a high calibre individual to lead ECO through the next phase of its
development.
We were delighted to welcome Tracey James to the Board; she has now taken over
as Chair of Audit Committee and will build on the foundations put in place by
Tony Rawlinson who resigned from the Board as a Non-Executive Director.
After nearly eight years' service to the Board of ECO, I would like to
personally thank him for his support and wisdom and wish him well for the
future. We will in due course seek to add a further Non-Executive Director
to the Board.
The Board recognises the value of dividends to shareholders and balancing the
need for prudent management of cash resources as well as funding the exciting
pipeline of new products. We have however decided that the best use of the
Group's cash at the current time is in the new product development initiatives
and accordingly no dividend will be recommended in respect of the year ended
31 March 2022.
COVID-19 has remained a challenge during the year. We are very appreciative
and recognise that our people have shown great commitment and flexibility to
keep ECO operating and progressing.
Finally, on behalf of the Board, I sincerely thank all our shareholders and
stakeholders for the continued support you give to ECO, it is much valued and
appreciated as we build out the next exciting phase for ECO.
Outlook
As anticipated, the first three months of the new financial year has seen
Chinese revenue at a subdued level when compared with the record sales of the
equivalent prior year period. This quarter coincided with a policy of extended
urban lock-down within China in an attempt to control the spread of
COVID-19. This reduced pork consumption, prolonging the period during which
major producers were trading at a loss and therefore dampened demand for
Aivlosin®. However, gross margins in China were stronger due to the
favourable customer mix and demand for Aivlosin® in this period was at a
similar level to that experienced before the ASF outbreak.
Recently the Chinese pork to feed price ratio has increased to greater than 5;
this is the first occasion in the last year and is a primary indicator of
improved profitability within the ECO customer base and an improved trading
environment. We believe that customers will remain cautious for the
remainder of the calendar year; as winter disease outbreaks occur and the
normal seasonal demand for pork increases, which is expected to lead to an
increase in the demand for Aivlosin® in during fourth quarter.
Outside of China, the first quarter of our financial year ending 31 March 2023
saw strong year-on-year growth. This growth is particularly strong in our
newer markets of South East Asia supported by the trends in USA and Brazil,
which we currently expect to continue.
Like many businesses we are monitoring costs closely as the impact of
increasing energy costs and general inflationary pressures will be felt by the
business throughout this year. We remain committed to a focused programme of
new product development and are excited with the progress we are making. We
continue to focus our R&D activities on initiatives which will provide the
greatest shareholder value whilst balancing the cost, return, risk and time to
market.
We look forward to the rest of this financial year with cautious optimism and
confidence.
Dr Andrew Jones
Non-Executive Chairman
CHIEF EXECUTIVE'S REPORT
FOR THE YEAR ENDED 31 MARCH 2022
This is my first report as Chief Executive, having succeeded Marc Loomes in
April 2022. I am grateful to Marc for his leadership and considerable
contributions to the growth and development of ECO.
The Group confronted a series of operational challenges during a year
dominated by pork price volatility in China, and the global COVID-19 related
disruption of work locations, international travel and supply chains. Despite
the significant reduction in revenue from China, business in most other major
markets advanced and the Group continued to invest in critical organisation
development and strategically important R&D projects.
Operational Review
The difficult trading conditions in China which were primarily caused by low
pork prices and subsequent negative profitability for swine producers,
significantly impacted the Group's performance as global revenue declined by
22% to £82.2m. Excluding China and Japan, revenue advanced by 15% to £53.8m
reflecting the value of ECO's global footprint (selling in more than seventy
countries) and was an excellent and noteworthy performance.
Sales of Aivlosin®, our patented antimicrobial which is used under veterinary
prescription for the treatment of economically important respiratory and
gastrointestinal diseases in pigs and poultry, reduced by 17% to £72.9m
(2021: £87.5m) due to reduced Chinese sales and accounting for 89% of total
revenue.
Sales of the smaller Ecomectin® anti-parasitic range increased by 31% to
£5.5m (2021: £4.2m) and represented 7% of the Group's revenue.
Sales of all other products were £3.7m (2021: £13.8m) and mainly comprised a
range of supportive antimicrobial products for pigs in China.
Exposure to Russia and Ukraine is minimal with remaining Russian orders being
fulfilled on a payment before collection basis.
Product Approvals
Two Aivlosin® marketing authorisations were obtained from the Ministry of
Agriculture and Rural Affairs ("MOA") of the People's Republic of China for
the use of Aivlosin® Water Soluble Granules. The first approval allows for
the treatment of respiratory disease caused by Mycoplasma and other sensitive
bacteria, in chickens laying eggs for human consumption and in breeding
chickens. Aivlosin® is the first antimicrobial to be licensed by the Chinese
MOA for laying birds with a zero day drug withdrawal period for eggs. China is
the world's largest producer of table eggs and accounts for more than a third
of the world's laying birds. The second approval was for swine respiratory
disease ("SRD") adding three important bacterial respiratory pathogens of
swine, Haemophilus parasuis, Pasteurella multocida, and Streptococcus suis to
the existing Mycoplasma hyopneumoniae registration. Aivlosin® is approved for
the treatment of SRD in other markets; it occurs worldwide and causes major
economic losses to the pig industry due to mortality, reduction in growth
rates and decreased feed efficiency.
Innovation through Research and Development
ECO started a programme of significant investment in vaccine R&D and in
building our capability and expertise around four years ago and has seen
encouraging progress within the portfolio of projects.
Two poultry vaccine projects progressed to full development during the year.
These vaccines protect against respiratory disease estimated to cost the
poultry industry over £600m and will enter a vaccine market segment currently
worth over £100m. First approvals are expected towards the end of calendar
2023.
The Company's early-stage research and proof of concept activities are managed
through collaborations with leading research institutions and universities
with later stage full development work managed by ECO's experienced project
leaders through contract research organisations. This model mitigates the
significant costs associated with in-house laboratories and Company owned
research facilities.
ECO has a formidable team of scientists and is building a significant product
portfolio pipeline with a mix of well-established concepts and novel, highly
competitive technologies and approaches with the emphasis on vaccines and
other new products to complement our existing antimicrobial business. The
pipeline is focused on providing solutions to respiratory and gastrointestinal
(gut) diseases of major economic importance in pigs and poultry and is
constantly refreshed as new opportunities are identified.
New product development expenditure in the year was £10.2m (2021: £9.1m)
ensuring the acceleration of key projects.
A successful Capital Markets Day in early 2022 provided details of the
significant commercial value that exists within ECO's pipeline of over 12
active projects with the first two late-stage development vaccines set to
achieve approvals by the end of 2023, and several programmes expected to
progress to clinical proof of concept and early development in 2022 and 2023.
Sustainable future and our ESG approach
We have made significant progress over the year on climate goals and on
equity, diversity and inclusion. We include for the first time an ESG report.
We have collected baseline metrics and will use these to track progress and to
develop credible performance targets as part of a measurable climate
transition plan.
By providing medicines and vaccines to pig and poultry producers, we improve
the lives of both animals and the people who rely on them. The healthy animals
that we help to produce assists the world with its sustainability goals of the
alleviation of poverty and hunger.
COVID-19 Impact
The COVID-19 related restrictions on free movement have limited access to
customers, most notably in China where travel remains severely curtailed, and
created considerable supply chain disruption and uncertainty. Despite these
constraints, the Company has successfully adopted a hybrid working model and
has mitigated most COVID-19 related challenges through innovative ways of
working.
People
Our people have demonstrated superb commitment and flexibility during a
particularly challenging period for the business. We remain exceedingly
grateful to our colleagues, customers, and suppliers in showing considerable
resilience and engagement during a time of rapid and considerable change.
David Hallas
Chief Executive
FINANCE DIRECTOR'S REPORT
FOR THE YEAR ENDED 31 MARCH 2022
Introduction
The year ended 31 March 2022 has seen ECO further develop its long term aim of
becoming a leader in the field of animal health, through the development of
new and effective products that meet the needs of veterinary professionals
caring for livestock. Targeted and effective research and development remains
essential to achieving these goals. A Capital Markets Day, held earlier this
year, presented more detail around the Group's R&D activity.
Supporting the commercial performance of our existing portfolio of businesses
whilst ensuring a robust controls environment is in place to safeguard and
maximise the return on assets is central to the ambition of the finance team,
as well as supporting the strategic growth ambitions of the Group.
Trading
Previous years have seen a pattern of stronger trading in the second half of
the year. This is associated with disease prevalence in pigs during the
Northern Hemisphere winter. We finished the last quarter of the year ended 31
March 2021 very strongly and the record pork prices in China continued into
the first quarter of this financial year resulting in a strong start to the
year ended 31 March 2022. Our outlook statement last year signalled a
slowdown in China in the latter part of the year and, as a result the second
half weighting was less evident with 53% of revenue in the second half (the
Group's second half revenue accounts for 60% of the total in the year ended 31
March 21).
A geographical analysis of revenue is as follows:
Revenue Summary Year ended 31 March
2022 2021 % change
(£'m) (£'m)
China and Japan 28.4 58.9 (52%)
North America (USA and Canada) 16.4 13.9 18%
South and South East Asia 11.8 9.1 30%
Latin America 15.8 14.3 10%
Europe 6.4 6.6 (3%)
Rest of World and UK 3.4 2.8 21%
82.2 105.6 (22%)
Revenue from China and Japan in the second half of the year was £12.7m
compared to the first six months ended 30 September 2021 of £15.7m. This
unusual pattern of trading in China (second half at 45% of full year)
underscores the extent of the slowdown in the China swine industry and the
economic difficulties that producers have faced. Japan represents less than 5%
of the combined revenues.
Aside from China and Japan, most other markets have demonstrated sustained
revenue growth, arising from improving market share and relatively stable
producer margins. The total revenue excluding China and Japan increased by 15%
to £53.8m in the year ended 31 March 2022 compared with £46.7m in the year
ended 31 March 2021.
Revenue in our key market of China (including Japan) was sharply down at
£28.4m (2021: £58.9m) largely due to the record pork prices in 2021
resulting in record ECO Group revenue in 2021 followed by a sharp decline in
pork prices and consequent difficult trading conditions for our customers.
Revenue in China and Japan in the last full year of trading before the
outbreak of African Swine Fever ("ASF") (the year ended 31 March 2018) was
£27.6m. The pork commodity price cycle in the last few years in China has
exhibited more extreme peaks and troughs over a compressed timeline and this
arose from the ASF outbreak in 2019. The restructuring of the Chinese pork
production industry over the period from 2019 resulted in over capacity and
over supply which exceeded the immediate consumer demand. This cycle had
started to correct itself during the final quarter of our financial year, but
a policy of COVID-19 lockdowns within major Chinese cities reduced demand for
pork, extending the period of low pork prices. Recently pork prices appear
to be increasing and we look forward with cautious optimismto stronger trading
in China.
North America and Latin America demonstrated continued strong growth of 14% in
the year; stable markets in the USA provided opportunity for market share
expansion and Brazil, in particular, benefitted from exports to China in the
early part of the year.
The sales performance in South and South East Asia has again been strong;
despite both ASF and COVID-19 impacting these markets. Notably strong revenues
were recorded in Thailand (an increase from £4.5m to £7.1m). In addition,
recovery in the Indian poultry market is signalled by some material orders
received in the last quarter of the financial year.
Gross margins were 43% in the year ended 31 March 2022 (2021 restated: 50%).
This decline arose due to the combined effects of less volume through our key
China market (certain elements of fixed cost within cost of sales) as well as
less revenue from a high margin market. China and Japan represented 35% of
the Group's revenue in the year ended 31 March 2022 (2021: 56%).
Administrative expenses, at £22.9m, were lower than the year ended 31 March
2021 (£25.5m). Wages and salaries declined to £12.3m (2021: £13.8m)
reflecting lower bonus accruals - specifically in China and in respect of the
Executive Directors. Foreign exchange gains of £1.0m were recorded in the
year (2021: foreign exchange loss of £2.2m). This arose in the main from
the weakening of sterling compared with the US Dollar and the Chinese RMB.
Excluding the foreign exchange effects from administrative expenses the costs
in the year were slightly higher than the prior year at £23.9m (2021:
£23.3m).
As described in the Group's Interim Report, two development projects, which
had previously been capitalised, were impaired in the year resulting in a
charge to the income statement of £2.1m. This impairment arose due to the
prioritisation of certain other more promising R&D programmes.
Total expenditure on research and development in the year was £10.2m (2021:
£9.1m). The total expenditure in R&D can be analysed as follows:
Year ended 31 March
2022 2021
£000's £000's
Research and development expenses - expensed in period 8,762 8,072
Development expenditure - capitalised in intangible assets 1,421 986
Total expenditure 10,183 9,058
Overall R&D expenditure in the year increased both in absolute terms (an
increase of 12%) and as a percentage of revenue - cash expenditure was 12.4%
of revenue in the year ended 31 March 2022 (2021: 8.6%). This increase in
expenditure reflects the Group's stated intention to invest in its promising
pipeline of new technologies and new products. It should also be noted that
the proportion of R&D expenditure capitalised in the year has increased
from 11% to 14% as more programmes have moved from the early research phase
into the later development phase. In particular, the Group's poultry
mycoplasma vaccines have entered the final development phase and expenditure
has begun to be capitalised.
EBITDA has historically represented a key performance measure for the Group;
the removal of amortisation (which is a significant annual non-cash charge to
profits), depreciation and exceptional items provides a good indication of the
underlying cash trading performance of the business. The charge for
amortisation of intangible assets in the year was £1.1m (2021: £0.9m). The
adjusted EBITDA margin (excluding foreign exchange movements and expressed as
a percentage of revenue in the period) was 6.6% in the year ended 31 March
2022 compared with 22.3% in the year ended 31 March 2021 (restated). This
decline in the adjusted EBITDA margin arises principally due to weaker sales
in China; the operational gearing from decreasing revenue with largely fixed
overheads.
Profit before income tax has decreased to £1.4m in the year ended 31 March
2022 (2021 restated: £19.3m), due principally to the same reasons - EBITDA is
weaker, as well as the one off impact of the R&D impairment (£2.1m).
The Group continues to benefit from a low effective tax rate in the UK due to
the significant expenditure in the R&D programme for which R&D tax
credits are claimed. Historic tax losses result in zero tax payable in the UK
in the year. For the Group overall, in the year ended 31 March 2022 the
effective tax rate was -151% (2021 restated: 18%), reflecting the impairment
charge for which no tax deduction is received, higher tax rates in overseas
jurisdictions as well as withholding tax on dividends and royalties set
against low overall profit before tax.
Loss after tax was £0.7m in the year ended 31 March 2022 (2021 restated
profit: £15.8m). Earnings per share ("EPS") has declined from 10.86 pence in
the year ended 31 March 2021 (restated) to a loss per share of 1.01 pence in
the year ended 31 March 2022; the decrease in EPS arises from the decline in
the Group portion of post-tax profits.
The consolidated cash position in the Group has decreased from £19.5m at 31
March 2021 to £14.3m at 31 March 2022. This consolidated cash position at 31
March 2022 includes £6.1m (2021: £13.7m) which is held in the Group's
subsidiary in China. A portion of this cash is repatriated from China once per
annum by dividend declaration; the Group's share of the China cash
distribution which is received in the UK is 51%. During the year the dividend
received from the Group's holding in the China subsidiary was £2.3m - related
to the China profitability in the year ended 31 December 2020 (2021: £0.6m -
related to year ended 31 December 2019).
The cash generated from operations was significantly lower in the year ended
31 March 2022 at £2.5m (2021: £15.8m) reflecting the decreased profitability
of the Group and an increase in Group inventories of £8.6m. The increase in
Group inventories arose from a slowdown in the efficiency of international
shipping during the year; this affected all businesses trading globally during
2021 and 2022, particularly those with procurement in China. Additionally,
the inventories in China started to increase before the year end in
preparation for production stoppage over the summer of 2022 when production is
switched to the new factory in China. This project will be complete by
November 2022 and the excess stock holding is planned to unwind during the
production stoppage period. Trade receivables declined by 24% reflecting the
reduction in Group revenues and an unwind of an exceptionally high closing
debtors position as at 31 March 2021. From operating cashflow, income tax of
£3.0m was paid, £1.6m of property, plant and equipment was purchased,
development expenditure of £1.3m was capitalised, dividends were paid to the
minority interest in China and ECO Animal Health Group plc shareholders
(£2.9m in total), the US Dollar and other foreign denominated cash balances
generated a foreign exchange gain of £1.3m and other sundry cash outflows of
£0.3m resulted in an overall net cash decline of £5.2m and a cash balance at
31 March 2022 of £14.3m. The Group's £5m overdraft facility (undrawn at the
year end) remains in place.
Prior Year Adjustment
It recently came to our attention that certain aspects of a sales tax related
to imported products in a foreign jurisdiction where we operate through a
subsidiary company, might have been applicable. ECO has been importing an
increasing volume of product into this country in recent years. This issue is
at an early stage and no tax payment has yet been determined. However, it is
likely that a substantial tax settlement could be required in due course and
an estimated sum of £2.5m has been provided for in the Statement of Financial
Position. The sum has been apportioned to appropriate years, disclosed in Note
3 and charged to cost of sales within the Consolidated Income Statement. The
impact of this item in the year ended 31 March 2022 was an increase in cost of
sales of £0.9m (2021 restated: £0.9m).
Exceptional items
In the Group's Interim Report, we described the impairment of previously
capitalised R&D expenditure in relation to two projects which were paused
during the year. This impairment is shown as exceptional. Additionally, we
have created a provision for probable settlement of personnel related
disputes. These disputes are not expected to settle for some time.
Audit
The tax issue leading to the prior year adjustment and the exceptional items
caused a delay to the finalisation of our audit this year.
The limitation in scope qualification in respect of non-attendance at stock
takes at 31 March 2020 remains in the audit report this year because 31 March
2020 reflected the opening position for the comparative year ended 31 March
2021. We expect this to be the last year in which this qualification arises.
Post balance sheet events
Marc Loomes, who joined ECO in 2004, became Managing Director in 2005 and CEO
in 2010, retired from the Board of Directors on 1 April 2022. David Hallas
joined ECO Animal Health Group plc as CEO on 1 April 2022. Tony Rawlinson,
Non-Executive Director, resigned from the Board on 9 August 2022 to pursue
other business opportunities.
The Group put in place a £10m revolving credit facility with NatWest Bank on
9 July 2022. This facility is committed, subject to half yearly covenant
compliance checks and bears interest at a fixed margin over SONIA base rate.
The facility expires on 30 June 2026.
Christopher Wilks
Finance Director
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2022
2022 2021 (restated)
Notes £000's £000's
Revenue 4 82,195 105,607
Cost of sales (47,059) (52,858)
Gross profit 35,136 52,749
Other income 5 65 319
Research and development expenses 6 (8,762) (8,072)
Administrative expenses (22,914) (25,547)
Impairment of intangible assets 12 (2,085) -
Profit from operating activities 6 1,440 19,449
Finance income 7 190 129
Finance costs 7 (284) (302)
Net finance expense (94) (173)
Share of profit of associate 16 43 38
43 38
Profit before income tax 1,389 19,314
Income tax charge 9 (2,094) (3,486)
(Loss)/Profit for the year (705) 15,828
(Loss)/Profit attributable to:
Owners of the parent Company (686) 7,337
Non-controlling interest 27 (19) 8,491
(Loss)/Profit for the year (705) 15,828
(Loss)/earnings per share (pence) 8 (1.01) 10.86
Diluted (loss)/earnings per share (pence) 8 (1.01) 10.85
Earnings before Interest, Tax, Depreciation, Amortisation, Revaluation, 6 5,406 23,532
Impairment, Legal provision, Share Based Payments and Foreign Exchange
Differences
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2022 2021 restated
Notes £000's £000's
(Loss)/Profit for the year (705) 15,828
Other comprehensive income/(losses):
Items that may be reclassified to profit or loss:
Foreign currency translation differences 2,195 11
Items that will not be reclassified to profit or loss:
Deferred tax on property revaluations 1 84
Remeasurement of defined benefit pension schemes 24 24 (32)
Other comprehensive income/(losses) for the year 2,220 63
Total comprehensive income for the year 1,515 15,891
Attributable to:
Owners of the parent Company 435 7,681
Non-controlling interest 27 1,080 8,210
1,515 15,891
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2022
Share Share Revaluation Other Foreign Retained Total Non- Total
Capital Premium Reserve Reserves Exchange Earnings controlling Equity
Account Reserve Interest
£000's £000's £000's £000's £000's £000's £000's £000's £000's
Balance as at 31 March 2020 (restated) 3,377 62,882 572 106 800 5,982 73,719 5,766 79,485
Profit for the year (restated) - - - - - 7,337 7,337 8,491 15,828
Other comprehensive income:
Foreign currency differences - - - - 292 - 292 (281) 11
Deferred tax on property revaluations - - 84 - - - 84 - 84
Actuarial gains on pension scheme assets - - - - - (32) (32) - (32)
Total comprehensive income for the year - - 84 - 292 7,305 7,681 8,210 15,891
Transactions with owners:
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 (restated) 3,379 63,258 656 106 1,092 13,410 81,901 13,414 95,315
Loss for the year - - - - - (686) (686) (19) (705)
Other comprehensive income:
Foreign currency differences - - - - 1,096 - 1,096 1,099 2,195
Deferred tax on property revaluations - - 1 - - - 1 - 1
Actuarial gains on pension scheme assets - - - - - 24 24 - 24
Total comprehensive income for the year - - 1 - 1,096 (662) 435 1,080 1,515
Transactions with owners:
Issue of shares in the year 2 61 - - - - 63 - 63
Share-based payments - - - - - 342 342 - 342
Dividends - - - - - (677) (677) (2,210) (2,887)
Transactions with owners 2 61 - - - (335) (272) (2,210) (2,482)
Balance as at 31 March 2022 3,381 63,319 657 106 2,188 12,413 82,064 12,284 94,348
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2022
Company
Share Share Revaluation Other Retained Total
Capital Premium Reserve Reserves Earnings
Account
£000's £000's £000's £000's £000's £000's
Balance as at 31 March 2020 3,377 62,882 302 106 11,138 77,805
Loss for the year - - - - (903) (903)
Other comprehensive income:
Deferred tax on property revaluations - - 83 - - 83
Actuarial loss on pension scheme assets - - - - (32) (32)
Total comprehensive loss for the year - - 83 - (935) (852)
Transactions with owners
Issue of shares in the year 2 376 - - - 378
Share-based payments - - - - 123 123
Dividends - - - - - -
Transactions with owners 2 376 - - 123 501
Balance as at 31 March 2021 3,379 63,258 385 106 10,326 77,454
Loss for the year - - - - (1,586) (1,586)
Other comprehensive income:
Deferred tax on property revaluations - - 1 - - 1
Actuarial loss on pension scheme assets - - - - 24 24
Total comprehensive loss for the year - - 1 - (1,562) (1,561)
Transactions with owners
Issue of shares in the year 2 61 - - - 63
Share-based payments - - - - 342 342
Dividends - - - - (677) (677)
Transactions with owners 2 61 - - (335) (272)
Balance as at 31 March 2022 3,381 63,319 386 106 8,429 75,621
STATEMENTS OF FINANCIAL POSITION (CO. NUMBER: 01818170)
AS AT 31 MARCH 2022
Group Company
2022 2021 2020 2022 2021
Notes £000's £000's £000's £000's £000's
Restated Restated
Non-current assets
Intangible assets 12 34,304 36,108 36,020 - -
Property, plant and equipment 13 3,465 2,181 2,426 748 651
Investment property 14 227 305 305 227 305
Right-of-use assets 15 1,773 1,399 1,658 59 37
Investments 16 212 180 166 20,032 20,032
Amounts due from subsidiary Company 18 - - - 53,940 55,909
Deferred tax assets 523 266 164 50 -
Total non-current assets 40,504 40,439 40,739 75,056 76,934
Current assets
Inventories 17 30,142 20,504 17,264 - -
Trade and other receivables 18 25,969 32,452 28,353 338 281
Income tax recoverable 1,596 3,475 1,265 - -
Other taxes and social security 1,075 496 652 386 27
Cash and cash equivalents 20 14,314 19,523 11,877 279 819
Total current assets 73,096 76,450 59,411 1,003 1,127
TOTAL ASSETS 113,600 116,889 100,150 76,059 78,061
Current Liabilities
Trade and other payables 21 (12,954) (14,521) (14,486) (326) (524)
Provisions (3,875) (1,782) (1,128) - -
Borrowings - - (2,032) - -
Income tax payable (224) (3,015) (940) - -
Other taxes and social security (239) (501) - - -
Lease liabilities 22 (397) (311) (342) (13) (7)
Dividends (50) (50) (50) (50) (50)
Current liabilities (17,739) (20,180) (18,978) (389) (581)
Net current assets 55,357 56,270 40,433 614 546
Total assets less current liabilities 95,861 96,709 81,172 75,670 77,480
Non-current liabilities
Deferred tax 19 - (183) (263) - 6
Lease liabilities 22 (1,513) (1,211) (1,424) (49) (32)
TOTAL ASSETS LESS TOTAL LIABILITIES 94,348 95,315 79,485 75,621 77,454
EQUITY
Issued share capital 26 3,381 3,379 3,377 3,381 3,379
Share premium account 63,319 63,258 62,882 63,319 63,258
Revaluation reserve 657 656 572 386 385
Other reserves 28 106 106 106 106 106
Foreign exchange reserve 28 2,188 1,092 800 - -
Retained earnings 12,413 13,410 5,982 8,429 10,326
Shareholders' funds 82,064 81,901 73,719 75,621 77,454
Non-controlling interests 27 12,284 13,414 5,766 - -
Total equity 94,348 95,315 79,485 75,621 77,454
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2022
Group Company
2022 2021 2022 2021
(restated) restated
Notes £000's £000's £000's £000's
Cash flows from operating activities
Profit/(loss) before income tax 1,389 19,314 (1,611) (916)
Adjustment for:
Finance income 7 (190) (129) (832) (875)
Finance cost 7 284 302 71 65
Foreign exchange (gain)/loss (989) 559 (2) (3)
Depreciation 13 455 430 28 15
Amortisation of right-of-use assets 15 398 403 16 24
Revaluation of investment property 14 78 - 78 -
Amortisation of intangible assets 12 1,140 898 - -
Impairment of intangible assets 12 2,085 - - -
Share of associate's results 16 (43) (38) - -
Share based payment charge 342 123 342 8
Dividends received - - (177) (46)
Operating cash flows before movements in working capital 4,949 21,862 (2,087) (1,728)
Change in inventories (8,585) (3,698) - -
Change in receivables 7,630 (3,959) 2,385 4,044
Change in payables (2,868) 753 (174) 33
Movement in provisions 23 1,392 868 - -
Cash generated from/(used in) operations 2,518 15,826 124 2,349
Interest paid (106) (79) (60) (54)
Income tax (2,960) (3,766) (17) (5)
Net cash (used in) /from operating activities (548) 11,981 47 2,290
Cash flows from investing activities
Acquisition of property, plant and equipment 13 (1,624) (212) (125) (37)
Disposal of property, plant and equipment 13 3 11 - -
Purchase of intangibles 12 (1,263) (861) - -
Finance income 7 190 129 - -
Dividends received - - 177 46
Net cash (used in)/from investing activities (2,694) (933) 52 9
Cash flows from financing activities
Proceeds from issue of share capital 63 378 63 378
Interest paid on lease liabilities 22 (111) (122) (11) (11)
Principal paid on lease liabilities 22 (371) (378) (14) (23)
Dividends paid (2,886) (562) (677) -
Net cash (used in)/from financing activities (3,305) (684) (639) 344
Net (decrease)/increase in cash and cash equivalents (6,547) 10,364 (540) 2,643
Foreign exchange movements 1,338 (686) - -
Balance at the beginning of the period 19,523 9,845 819 (1,824)
Balance at the end of the period 20 14,314 19,523 279 819
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2022
1. General information
ECO Animal Health Group plc ("the Company") and its subsidiaries (together
"the Group") manufacture and supply animal health products globally.
The Company is traded on the AIM market of the London Stock Exchange and is
incorporated and domiciled in the UK. The address of its registered office is
78 Coombe Road, New Malden, Surrey, KT3 4QS.
The financial information set out in the announcement does not constitute the
Group's statutory accounts for the year ended 31 March 2022 or 31 March 2021.
The auditors reported on those accounts and their report (i) was qualified at
both year ends by virtue of limitation in scope in respect of non-attendance
at certain physical inventory counts on 31 March 2020; (ii) did not include
references to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and (iii) did not contain statements
under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts
for the year ended 31 March 2022 have not yet been delivered to the Registrar
of Companies.
2. Summary of the Group and Company's significant accounting
policies
2.1 Basis of preparation
These financial statements have been prepared in accordance with UK adopted
International Financial Reporting Standards. There were no changes to
accounting policies on adoption of UK IFRSs.
The preparation of financial statements, in accordance with UK-adopted
international accounting standards, requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Although these estimates are based on
management's best knowledge of the amount, event or actions, actual results
ultimately may differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both current and
future periods. Further details of estimates and judgements are provided in
note 2.30.
The principal accounting policies are set out below and have been applied
consistently in dealing with items which are considered material in relation
to the financial statements. They are prepared under the historical cost
convention with the exception of certain items which are measured at fair
value as described in the accounting policies below.
Going Concern
After making appropriate enquiries, the Directors have, at the time of
approving the financial statements, formed a judgement that there is a
reasonable expectation that the Company and Group have adequate resources to
continue in operational existence for the foreseeable future. For this reason,
the Directors continue to adopt the going concern basis in preparing the
financial statements.
This conclusion is based on a review of the resources available to the Group,
taking account of the Group's financial projections together with available
cash and committed borrowing facilities, which include a £10m Revolving
Credit Facility effective from July 2022 to June 2026 on top of the existing
£5m overdraft facility The Directors have performed a reverse stress test on
the business, by considering what quantum of revenue and gross margin
reduction would be required to exhaust all available funds within 12 months of
the date of approving the accounts. The Directors concluded that the
likelihood of such a reduction was remote, and therefore that no material
uncertainty exists with respect of going concern.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.2 Adoption of new and revised standards
The following new standards, amendments and interpretations for existing
standards became effective in the financial year. These standards have been
applied in preparing these financial statements but did not have a material
effect.
§ Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
§ Property, Plant and Equipment: Proceeds before Intended Use (Amendments
to IAS 16);
§ Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1,
IFRS 9, IFRS 16 and IAS 41); and
§ References to Conceptual Framework (Amendments to IFRS 3).
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that have been adopted early.
The following standard is effective from 1 January 2023.
§ IFRS 17 - Insurance Contracts
The following amendments are effective for the period beginning 1 January
2023:
§ Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2;
§ Classification of Liabilities as Current or Non-current (Amendments to IAS
1);
§ Definition of Accounting Estimates (Amendments to IAS 8); and
§ Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12).
The Directors do not expect that the adoption of the Standards and
Interpretations listed above will have a material impact on the financial
statements in future periods.
Beyond the information above, it is not practicable to provide a reasonable
estimate of the effect of these standards until a detailed review has been
completed.
2.3 Basis of consolidation
The consolidated financial statements comprise the accounts of the Company and
its subsidiaries drawn up to 31 March 2022.
An entity is classed as a subsidiary of the Company when as a result of
contractual arrangements, the Company has the power to govern its financial
and operating policies so as to obtain benefits from its activities.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured, as the fair
value of the assets given, equity instruments issued and liabilities incurred
or assumed at the date of exchange. Identifiable assets acquired and
contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of the
extent of any non-controlling interest. The excess of the cost of acquisition
over the fair value of the Group's share of the identifiable net assets
acquired is recorded as goodwill. If the cost of acquisition is less than the
fair value, the difference is recognised directly in the income statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.3 Basis of consolidation (continued)
Accounting policies of subsidiaries have been changed where material to ensure
consistency with the policies adopted by the Group. Although the subsidiaries
in Brazil and China and the joint operations in the USA and Canada all have
December year ends, the Group uses management accounts to the end of March to
prepare the Group accounts.
Subsidiaries are wholly consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised gains on transactions
between Group companies are eliminated on consolidation.
The Group initially recognised any non-controlling interest in the acquiree at
the non-controlling interest's proportionate share of the acquiree's net
assets. For each business combination, the Group elects whether to measure the
non-controlling interests in the acquiree at fair value or at the
proportionate share of the acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred and included in
administrative expenses. The Group has not elected to take the option to use
fair value in acquisitions completed to date.
Profit or loss and each component of Other Comprehensive Income are attributed
to the equity holders of the parent of the Group and to the non-controlling
interests, even if this results in the non-controlling interests having a
deficit balance.
2.4 Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting to the chief operating decision-maker. The chief operating
decision-maker who is responsible for allocating resources and assessing
performance of the operating segments has been identified as the Board.
2.5 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("functional currency"). The consolidated and company
financial statements are presented in Pounds Sterling, which is the Company's
functional currency.
(b) Transactions and balances
Monetary assets and liabilities denominated in foreign currencies are
translated into Pounds Sterling at the rates of exchange ruling at the date of
the financial statements.
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the date of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at period end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the income
statement within administrative expenses.
Foreign exchange gains and losses that relate to borrowing and cash and cash
equivalents are presented in the income statement within administrative
expenses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.5 Foreign currency translation (continued)
(c) Group companies
The results and financial position of all Group entities that have a
functional currency different from the Group's functional and presentation
currency are translated into the Group's functional and presentation currency
as follows:
· assets and liabilities for each Statement of financial position
presented are translated at the closing exchange rate at the date of the
Statement of financial position;
· income and expenses for each income statement are translated at
average exchange rates unless this average is not a reasonable approximation
of the cumulative effect of the rates prevailing on the transaction dates, in
which case the income and expenses are translated at the rate on the dates of
the transaction; and
· all resulting exchange differences are recognised through other
comprehensive income as a separate component of equity.
When a foreign operation is partially disposed or sold, exchange differences
that were recognised in equity are recognised in the income statement as part
of the gain or loss on sale. Goodwill and fair value adjustments arising on
the acquisition of a foreign entity are treated as assets and liabilities of
the foreign entity and translated at the closing exchange rate.
2.6 Financial instruments
Financial assets
Financial assets comprise mainly trade and other receivables and cash and cash
equivalents in the consolidated statement of financial position. These
financial assets arise principally from the provision of goods to customers
and are measured at amortised cost.
Impairment provisions for current and non-current trade receivables are
recognised based on the simplified approach within IFRS 9 using a provision
matrix in the determination of the lifetime expected credit losses. During
this process, the probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the expected
loss arising from default to determine the lifetime expected credit loss for
the trade receivables. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the loss being
recognised within Administrative expenses in the consolidated income
statement. On confirmation that the trade receivable will not be collectable,
the gross carrying value of the asset is written off against the associated
provision.
Impairment provisions for receivables from related parties and loans to
related parties are recognised based on a forward looking expected credit loss
model. The methodology used to determine the amount of the provision is based
on whether there has been a significant increase in credit risk since initial
recognition of the financial asset. For those where the credit risk has not
increased significantly since initial recognition of the financial asset,
twelve month expected credit losses along with gross interest income are
recognised. For those for which credit risk has increased significantly,
lifetime expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired, lifetime
expected credit losses along with interest income on a net basis are
recognised.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.6 Financial instruments (continued)
Financial liabilities
Financial liabilities comprise mainly trade and other payables and bank
overdrafts in the consolidated statement of financial position. These
financial liabilities are initially recognised at fair value and subsequently
measured at amortised cost in accordance with IFRS 9.
2.7 Goodwill
Goodwill arising on the acquisition of an entity represents the excess of the
costs of acquisition over the Group's interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities of the entity
recognised at the date of acquisition.
Goodwill is initially recognised as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses. Goodwill is not
subject to amortisation but is tested for impairment annually.
Negative goodwill arising on an acquisition is recognised directly in the
income statement. On disposal of a subsidiary or a jointly controlled entity,
the attributable amount of goodwill is included in the determination of the
profit or loss recognised in the income statement on disposal. Goodwill
arising before the date of transition to IFRS, on 1 April 2004, has been
retained at the previous UK GAAP amounts, subject to being tested for
impairment at that date. Goodwill written off to reserves under UK GAAP prior
to 1998 has not been reinstated and is not included in determining any
subsequent profit or loss on disposal.
2.8 Other intangible assets
IAS 38 - Intangible Assets includes guidance on the accounting for Research
and Development expenditure. Such an intangible asset is a resource that is
controlled by the entity as a result of past events (for example, purchase or
self-creation) and from which future economic benefits (inflows of cash or
other assets) are expected. The three critical attributes of an intangible
asset are:
· Identifiability;
· control (power to obtain benefits from the asset); and
· future economic benefits (such as revenues or reduced future
costs).
Identifiability
An intangible asset is identifiable when it:
· is separable (capable of being separated and sold, transferred,
licensed, rented, or exchanged, either individually or together with a related
contract); or
· arises from contractual or other legal rights, regardless of
whether those rights are transferable or separable from the entity or from
other rights and obligations.
Development expenditure - whether purchased or self-created (internally
generated) is an example of an intangible asset, governed under IAS 38.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.8 Other intangible assets (continued)
Recognition criteria
IAS 38 requires an entity to recognise an intangible asset (at cost) if, and
only if:
· it is probable that the future economic benefits that are
attributable to the asset will flow to the entity; and
· the cost of the asset can be measured reliably.
IAS 38 includes additional recognition criteria for internally generated
intangible assets.
Expenditure on the research phase of an internal project is expensed as
incurred. Expenditure in the development phase of an internal project is
capitalised if the entity can demonstrate:
a) the technical feasibility of completing the intangible asset so that it
will be available for use or sale.
b) its intention to complete the intangible asset and use or sell it.
c) its ability to use or sell the intangible asset.
d) how the intangible asset will generate probable future economic
benefits. Among other things, the entity can demonstrate the existence of a
market for the output of the intangible asset or the intangible asset itself
or, if it is to be used internally, the usefulness of the intangible asset.
e) the availability of adequate technical, financial and other resources
to complete the development and to use or sell the intangible asset.
f) its ability to measure reliably the expenditure attributable to the
intangible asset during its development.
The probability of future economic benefits must be based on reasonable and
supportable assumptions about conditions that will exist over the life of the
asset.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.8 Other intangible assets (continued)
The Group context of IAS 38
Since the early start-up stages of the business, the Group has and continues
to invest significant expenditure in research and development into new animal
treatments and therapies. This has resulted in a significant family of
pharmaceutical treatments for pigs and poultry. Branded as Aivlosin, this
product has developed over 20 years into treatments for multiple respiratory
and intestinal infections - each of which have separate regulatory and
marketing approvals in each target market. The work to bring Aivlosin from the
laboratory to the commercial farm has moved through the classical phases of
pharmaceutical development and the ECO Animal Health R&D model can be
described by the following broad phases:
• The discovery phase - in vitro, in laboratory.
• The proof of concept phase - key efficacy trials in small groups
of animals.
• The exploratory development phase - optimisation of dose,
economic validation.
• The full development phase - building the data set for dossier
submission.
• Submission of an application for regulatory approval.
• Marketing and regulatory approval granted - commercial revenue
begins.
The application of the principles of IAS 38 to the above model is to treat
expenditure on Research and Development as an expense until the likely
commercial benefits that will flow from the project can be judged to be highly
probable. This means that the technical feasibility (judged by reference to
efficacy) must be certain, the economic feasibility (judged by reference to
manufacturing methodology, market intelligence, overall programme cost) has to
be highly probable and the likelihood of gaining regulatory approval must be
judged to be highly probable. The Directors consider that capitalisation will
generally commence once a project enters the full development phase.
In practice, work that is undertaken to build towards regulatory approval for
a new treatment claim using Aivlosin, existing approved vaccines or other
technologies, or an approval for marketing existing technologies or
applications in a new geographical market can be viewed as starting at the
full development phase and are likely to meet the capitalisation criteria
whereas costs in relation to some of the Group's recently announced projects,
on vaccine development, for example, are likely to meet the capitalisation
requirements once they are approved internally to commence the full
development phase, subject to careful consideration of residual technical
feasibility/risk.
Amortisation of capitalised expenditure is determined with reference to the
point at which regulatory approval is given to the product to which the
expenditure relates. For historic periods, the approach adopted has been
to amalgamate the expenditure incurred on all projects relating to the same
product, since the last regulatory approval and then identify the next nearest
regulatory approval given for that product in either the same or a subsequent
half-year. Amortisation begins in the half-year following the receipt of
regulatory approval. A full six months of amortisation is charged in the
first half-year for which costs are amortised.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.8 Other intangible assets (continued)
Where the Group has capitalised costs which relate to multiple products, a
proportional method is adopted to determined what ratio of costs capitalised
to date should be subject to amortisation. This method first looks at
capitalised costs that relate to specific products and identifies the
proportion of such costs that are subject to amortisation at the end of any
given half-year period. The ratio thus calculated is then applied to those
costs that relate to multiple products to determine the portion that should be
subject to amortisation.
These approaches have been modified where it is possible to allocate an
individual capitalised cost to a single identifiable project. In these cases
the start date for amortisation is the half-year following the half-year
period in which the project receives regulatory approval. Where regulatory
approval has not been received for a project, the amortisation has not
started.
Amortisation is provided at rates calculated to write off the cost less
estimated residual value of each asset over its expected useful life, as
follows:
Aivlosin
5% on cost
Ecomectin 10% on
cost
Vaccines
5% on cost
Trade marks and patents 10% on cost
2.9 Property, plant and equipment and depreciation
Plant and equipment are stated at cost less depreciation. Depreciation is
provided at rates calculated to write off the cost less estimated residual
value of each asset over its expected useful life, as follows:
Plant and machinery
10%-20% on cost
Fixtures, fittings and equipment 10%-20% on cost
Motor vehicles
25% on cost
Leasehold Improvement 18%-25%
on cost
Freehold land and buildings valuations are measured as a level 3 recurring
fair value measurement. The property is professionally valued by a qualified
surveyor at least once every three years. Surpluses (which are not reversals
of previous deficits) arising from the periodic valuations are taken to other
comprehensive income, and deficits (which are not reversals of previous
surpluses) are taken to the income statement within administrative expenses.
Depreciation is provided at a rate calculated to expense the valuation less
estimated residual value over the remaining useful life of the building at a
rate of 2% per annum on a straight line basis. Land is not depreciated.
2.10 Impairment of non-financial assets
The carrying amounts of assets are reviewed at each year end, to determine
whether there is any indication of impairment. If any such indication exists,
the asset's recoverable amount is estimated in order to determine the
impairment loss if any. The recoverable amount is the higher of its fair value
and its value in use. For intangible assets with an indefinite useful life or
not available for use, an impairment test is performed at each year end.
In assessing value in use, the expected future cashflows from the asset are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.10 Impairment of non-financial assets (continued)
An impairment loss is recognised in the income statement whenever the carrying
amount of an asset or its cash-generating unit exceeds its recoverable amount.
A previously recognised impairment loss for costs other than goodwill is
reversed if the recoverable amount increases as a result of a change in the
estimates used to determine the recoverable amount, but not to an amount
higher than the carrying amount that would have been determined (net of
depreciation) had no impairment loss been recognised in prior years and no
reversal of impairment losses recognised on goodwill.
2.11 Investment property
Investment property is held either to earn rental income or for capital
appreciation or for both, but not for sale in the ordinary course of business,
use in the production or supply of goods or services or for administrative
purposes. Investment property is measured at fair value as a level 3 recurring
fair value measurement.
The property is professionally valued by a qualified surveyor at least once
every three years. Surpluses and deficits arising from the periodic valuations
are taken to the income statement within administrative expenses.
2.12 Investments in subsidiaries
An investment in a subsidiary is where the Group own a controlling interest in
an entity. Investments in subsidiaries are stated at cost less impairment in
the Parent Company's statement of financial position.
Other non-current asset investments are stated at fair value. They are
recognised or derecognised on the date when the contract for acquisition or
disposal requires the delivery of that investment.
Investments are assessed for impairment at the end of each reporting period.
An impairment is recognised in profit or loss when the recoverable amount of
an asset is less than its carrying amount, with the value of any impairment
being the difference between the recoverable amount and carrying amount .
Impairments can be reversed in subsequent periods where there is any
indication that the impairment loss recognised in a prior period may no longer
exist or have decreased.
2.13 Joint Arrangements
A joint arrangement is a contractual arrangement whereby the Group and other
parties undertake an economic activity that is subject to joint control; that
is, when the strategic financial and operating policy decisions relating to
the activities require the unanimous consent of the parties sharing control.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.13 Joint Arrangements (continued)
The group classifies its interests in joint arrangements as either:
- Joint ventures: where the group has rights to only the net assets of
the joint arrangement.
- Joint operations: where the group has both the rights to assets and
obligations for the liabilities of the joint arrangement.
In assessing the classification of interests in joint arrangements, the Group
considers:
- The structure of the joint arrangement.
- The legal form of joint arrangements structured through a separate
vehicle.
- The contractual terms of the joint arrangement agreement.
- Any other facts and circumstances (including any other contractual
arrangements).
The Group has interests in joint operations. The Group recognises its share of
the assets, liabilities, income, expenses and cashflows of joint operations
combined with the equivalent items in the consolidated financial statements on
a line by line basis.
2.14 Investments in Associates
An associate is an entity in which an investor has significant influence but
not control or joint control. Significant influence is defined as "the power
to participate in the financial and operating policy decisions but not to
control them".
The Group reports its interests in associates using the equity method of
accounting. Under this method, an equity investment is initially recorded at
cost (subject to initial fair value adjustment if acquired as part of the
acquisition of a subsidiary) and is subsequently adjusted to reflect the
Group's share of the net profit or loss of the associate. If the Group's share
of losses of an associate equals or exceeds its "interest in the associate",
the Group discontinues recognising its share of further losses. If the
associate subsequently reports profits, the investor resumes recognising its
share of those profits only after its share of the profits equals the share of
losses not recognised.
2.15 Leasing
The Group assesses at contract inception whether a contract is, or contains, a
lease. That is, if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
The Group applies a single recognition and measurement approach for all leases
under IFRS 16, except for short-term leases and leases of low-value assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the
lease, which is the date the underlying asset is available for use.
Right-of-use assets are measured at cost, less any accumulated depreciation
and impairment losses, and adjusted for any re-measurement of lease
liabilities. The cost of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and lease payments made
at or before the commencement date, less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis over the lease
term.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.15 Leasing (continued)
If ownership of the leased asset transfers to the Group at the end of the
lease term or the cost reflects the exercise of a purchase option,
depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the
accounting policies in the section 2.10 for further details.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities
measured at the present value of the lease payments to be made over the lease
term. The lease liabilities include the present value of the following lease
payments:
• fixed payments (including in-substance fixed payments), less any
lease incentives receivable;
• variable lease payments that are based on an index or a rate,
initially measured using the index or rate as at the commencement date;
• amounts expected to be payable by the Group under residual value
guarantees;
• the exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, the lessee's incremental
borrowing rate is used, being the rate that the individual lessee would have
to pay to borrow the funds necessary to obtain an asset of similar value to
the right-of-use asset in a similar economic environment with similar terms,
security and conditions. In addition, the carrying amount of lease liabilities
is re-measured if there is a modification, a change in the lease term, a
change in the lease payments (for example, changes to future payments
resulting from a change in an index or rate used to determine such lease
payments) or a change in the assessment of an option to purchase the
underlying asset.
The Group is exposed to potential future increases in variable lease payments
based on an index or rate, which are not included in the lease liability until
they take effect. When adjustments to lease payments based on an index or rate
take effect, the lease liability is reassessed and adjusted against the
right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period to produce a constant
periodic rate of interest on the remaining balance of the liability for each
period.
Extension and termination options
Extension and termination options are included in a number of property and
equipment leases across the Group. These are used to maximise operational
flexibility in terms of managing the assets used in the Group's operations.
The majority of extension and termination options held are exercisable only by
the Group and not by the respective lessor.
The Group applies judgement in evaluating whether it is reasonably certain
whether or not to exercise the option to renew or terminate the lease. That
is, it considers all relevant factors that create an economic incentive for it
to exercise either the renewal or termination. After the commencement date,
the Group reassesses the lease term if there is a significant event or change
in circumstances that is within its control and affects its ability to
exercise or not to exercise the option to renew or to terminate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.15 Leasing (continued)
Recognition exemptions
The Group applies the short-term lease recognition exemption to its short-term
leases, being those leases that have a lease term of twelve months or less
from the commencement date and do not contain a purchase option.
The Group also applies the recognition exemption to leases of which the
underlying asset is of low value, comprising assets below the Group's
capitalisation threshold. Lease payments on short-term leases and leases of
low-value assets are recognised as an expense on a straight-line basis over
the lease term.
Practical expedients
The Group applies a single discount rate to a portfolio of leases with
reasonably similar characteristics.
2.16 Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is
determined using the historical batch price of the principal raw materials and
the weighted average cost for other ingredients and other product costs. The
cost of finished goods comprises raw materials, packaging costs and
sub-contracted manufacturing costs. Net realisable value is the estimated
selling price in the ordinary course of business, less any costs which would
be incurred in completing the goods ready for sale.
2.17 Trade receivables
Trade receivables are initially measured at fair value and are subsequently
measured at amortised cost using the effective interest rate method. Trade
receivables are presented net of discounts or other variable consideration
adjustments earned, where the expectation and intention is to settle the
balance net. Impairment provisions are recognised based on the simplified
approach in accordance with IFRS 9 using a provision matrix in the
determination of the lifetime expected credit losses. See impairment section
in section '2.6 Financial instruments' for more details.
2.18 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with
banks, other short‑term highly liquid investments with original maturities
of three months or less. For the purpose of the statement of cash flows, bank
overdrafts are included in the presentation of cash and cash equivalents.
2.19 Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in assets after deducting
all of its liabilities.
2.20 Bank borrowings and loans
Interest-bearing bank loans and overdrafts are recorded as the proceeds
received, net of direct issue costs (which equate to fair value). Finance
charges including premiums payable on settlement or redemption and direct
issue costs are accounted for on an amortised cost basis in profit or loss
using the effective interest rate method and are added to the carrying amount
of the instrument to the extent that they are not settled in the period in
which they arise.
2.21 Trade payables
Trade payables are initially measured at fair value and are subsequently
measured at amortised cost using the effective interest rate method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.22 Provisions
Provisions are recognised when there is a present obligation as a result of a
past event and it is probable that the an outflow of resources will be
required to settle the obligation. Provisions are measured at the Directors'
best estimate of the expenditure required to settle the obligation outstanding
at the year end and are discounted to present value where the effect is
material.
2.23 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable
for the sale of goods in the ordinary course of the Group's activities. The
Group's revenue is principally derived from selling goods with revenue
recognised at a point in time when control of the goods has transferred to the
customer.
Revenue is shown net of value added tax, returns, rebates and discounts and
after eliminating sales within the Group. Transaction price is determined by
the contract and variable consideration relating to discounts, free goods or
volume rebates have been constrained in estimating contract revenue that is
highly probable by using the most likely amount method.
The Group's contracts for delivery of goods are less than 12 months, there are
no warranties within its sales contracts.
Revenue is recognised when the performance obligation is fulfilled and the
amount can be measured reliably. The performance obligation is fulfilled
when control of the goods passes to the customer, which is normally in
accordance with Incoterms or receipt by customer. No goods are dispatched on a
sale or return basis. Distributors trade on their own account and not as
agents.
The Group also receives interest and royalty income, which are recognised on
an accruals basis.
2.24 Pensions
Defined Contribution Scheme
The pension costs charged against operating profits represent the amount of
the contributions payable to the schemes in respect of the accounting period.
Defined Benefit Scheme
The regular cost of providing retirement pensions and related benefits is
charged to the income statement over the employees' service lives on the basis
of a constant percentage of earnings. The present value of the defined benefit
obligation less the fair value of the plan assets is disclosed as an asset or
liability in the statement of financial position in accordance with IAS 19.
The disclosure of a net defined benefit asset is limited to the present value
of any economic benefit available in the form of refunds from the plan or
reductions in future contributions to the plan. Actuarial gains or losses are
recognised through other comprehensive income.
2.25 Share-based payments
The Group issues equity-settled share options to certain employees in exchange
for services from those employees. Equity-settled share options are measured
at fair value (excluding the effect of non -market based vesting conditions)
at the date of grant.
The fair value determined at the grant date of such equity-settled share
options is expensed on a straight-line basis over the vesting period, based on
the Group's estimate of shares that will eventually vest and adjusted for the
effect of non-market based vesting conditions (with a corresponding movement
in equity).
Fair value is measured by use of the Black-Scholes model for those options
granted with non-market performance conditions. The expected life used in the
model has been established based on management's best estimate of the effects
of non-transferability, exercise restrictions and behaviour
considerations.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.25 Share-based payments (continued)
In addition a Monte Carlo simulation model has been used to model future
market outcomes for those options granted with a market performance
condition.
Further details of the inputs to the Black-Scholes and Monte Carlo simulation
models can be found in note 25 to the accounts.
Share-based payment charges are credited to retained earnings.
2.26 Taxation
Tax expense for the period comprises current and deferred tax.
Current tax, including UK corporation tax and foreign tax is provided at
amounts expected to be paid (or recovered) using the tax rates and laws that
have been enacted or substantially enacted by the year end. Tax expenses are
recognised in profit or loss or other comprehensive income according to the
treatment of the transactions which give rise to them.
Deferred income tax is recognised, using the liability method, on temporary
differences arising between the tax basis of assets and liabilities and their
carrying amount in the financial statements.
Deferred income tax is determined using tax rates (and laws) that have been
enacted, or substantially enacted, by the date of the statement of financial
position and are expected to apply when the related deferred tax asset is
realised or deferred tax liability is settled.
Deferred tax assets are recognised only to the extent that it is probable that
future taxable profits will be available against which the temporary
differences can be utilised.
IFRIC 23 Uncertainty over Income Tax Treatments
IFIRC 23 provides guidance on the accounting for current and deferred tax
liabilities and assets in circumstances in which there is uncertainty over
income tax treatments. The interpretation requires:
§ the Group to determine whether uncertain tax treatments should be
considered separately, or together as a group, based on which approach
provides better predictions of the resolution;
§ the Group to determine if it is probable that the tax authorities will
accept the uncertain tax treatment; and
§ if it is not probable that the uncertain tax treatment will be accepted,
measure the tax uncertainty based on the most likely amount or expected value,
depending on whichever method better predicts the resolution of the
uncertainty. The measurement is required to be based on the assumption that
each of the tax authorities will examine amounts they have a right to examine
and have full knowledge of all related information when making those
examinations.
2.27 Equity
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Amounts arising on the restructuring of equity and reserves to protect
creditor interests are credited to the capital redemption reserve.
Amounts arising from share-based payment expenses are recorded within retained
earnings.
The cost of its own shares bought into treasury is debited to retained
earnings as required by the Companies Act 2006. A subsequent sale of these
shares would result in this entry being wholly or partly reversed with any
profit on the sale being credited to Share Premium.
Amounts arising from the revaluation of non-monetary assets and liabilities
held in foreign subsidiaries, and joint operations are held within the foreign
exchange revaluation reserve.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.28 Non-controlling interest
For each business combination, the Group elects to measure any non-controlling
interest in the acquiree either at fair value or at their proportionate share
of the acquiree's identifiable net assets. Changes in the Group's interest in
a subsidiary that do not result in a loss of control are accounted for as
transactions with owners in their capacity as owner. Adjustments to
non-controlling interests are based on a proportionate amount of the net
assets of the subsidiary. No adjustments are made to goodwill and no gain or
loss is recognised in the statement of profit or loss.
2.29 Dividend distribution
Dividends are recorded when they become a legal obligation of the Company. For
final dividends, this will be when they are approved by the shareholders at
the AGM. For interim dividends, this will be when they have been paid.
2.30 Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are as follows:
Capitalisation and impairment review of intangible assets
The Group assesses development costs incurred for capitalisation in accordance
with the requirements of IAS38 and the Group's accounting policy described in
note 2.8. The stage of development and assessment of technical and commercial
feasibility, in particular, require the use of judgements and estimates in
consultation with the new product development team.
The Group tests annually whether intangible assets with indefinite life, or
not yet available for use, have suffered any impairment. Other intangible
assets are reviewed for impairment when an indication of potential impairment
exists. Impairment provisions are recorded as applicable based on Directors'
estimates of recoverable values.
The recoverable amounts of the Cash Generating Units (CGU's) to which
intangible assets are allocated are determined from value in use calculations.
The key assumptions for the value in use calculations are those regarding
discount rates, growth rates and the estimated remaining useful life of the
asset. The Group also reviews and quantifies the tax implications related to
any recognised impairments and these are included within tax calculations as
appropriate.
Further details of the impairment reviews performed can be found in note 12 of
the financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.30 Critical accounting estimates and judgements (continued)
Income taxes
The Group is subject to income taxes in all jurisdictions in which it
operates.
Significant judgements are required in determining the provision for income
taxes including the use of tax losses and in estimating deferred tax assets
arising from unused tax losses or credits. There are some transactions and
calculations for which the ultimate tax determination is uncertain, including
tax credits for research and development expenditures, the treatment of some
specific overseas transactions, and tax impact of the price of goods traded
between group entities. Therefore the Group recognises assets and liabilities
based on estimates of the final agreed position.
Where the final tax outcome of these matters is different from the amounts
that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
Deferred tax assets on timing differences are recognised to the extent by
which the Directors estimate that future profits will be generated to utilise
the underlying costs or losses to which they relate.
Pension scheme
The Group maintains one defined benefit pension scheme which has been
accounted for according to the provisions of IAS 19. Although the assumptions
were determined by a qualified actuary, any change in those assumptions may
materially impact the financial position and results of the Group. Details of
the assumptions used can be found in note 23 of the financial statements.
Share-based payments
The charge to the Income Statement in respect of share-based payments has been
externally calculated using management's best estimates of the amount of
options expected to vest and various other inputs to the Black-Scholes and
Monte Carlo simulation valuation models, as disclosed in note 25. Variations
in those assumptions in the model may have a material impact on the Group's
results and financial position at the time of valuation.
Leases - estimating the incremental borrowing rate
Where the Group cannot readily determine the interest rate implicit in the
lease, it uses its incremental borrowing rate (IBR) to measure lease
liabilities. The IBR is the rate of interest that the Group would have to pay
to borrow over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use asset in a
similar economic environment. The IBR therefore reflects what the Group 'would
have to pay', which requires estimation when no observable rates are available
or when they need to be adjusted to reflect the terms and conditions of the
lease.
In practice, the Group considered the following aspects in the assessment of
IBR. Once decided, the IBR will remain unchanged unless there are
modifications in lease terms or changes in the assessment of an option to
purchase the underlying asset.
A base rate that reflects economic environment and the term of the lease. This
is mainly derived from the yield of a government bond issued by the country in
which the Group has in scope leases. Where the term of the lease does not
conform with the maturity period of the bond, the Group considered other
available information such as yields on the bonds with the nearest maturity
period, or the yield curve published by the country's treasury department.
Considering there is often a difference in the cash flow profile between a
lease and government bond, the Group has decided to reduce the base rate by
0.05% to 0.10%.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
2.30 Critical accounting estimates and judgements (continued)
Financing factors that reflect the lessee companies' risk premium on
borrowing. Management considered the financial strength and credit risk of the
lessee companies and has estimated the credit spread to be in the range of
1.50% to 5.00%.
Asset factors that reflect the quality of hypothetical security. Depending on
the location and type of underlying assets, the Group expects the quality of
security in this hypothetical borrowing transaction to vary. For example, the
right to use a warehouse in rural areas may provide less relevant security
compared to commercial office in a major city's central business district.
Based on the Group's assessment, the asset factor ranges between - 0.45% to
- 0.50%.
The weighted average of the discount rates applied by the Group is as follows:
2022 2021
Property 4.3% 5.9%
Vehicle 29.0% 29.0%
Other 4.0% 4.0%
Weighted average 5.7% 7.2%
Fair value measurement
A number of assets and liabilities included in the Group's financial
statements require measurement, and/or disclosure of, fair value.
The fair value measurement of the Group's financial and non-financial assets
and liabilities utilises market observable inputs and data as far as possible.
Inputs used in determining fair value measurements are categorised into
different levels based on how observable the inputs used in the valuation
technique utilised are (the 'fair value hierarchy'):
- Level 1 : Quoted prices in active markets for identical items
(unadjusted).
- Level 2 : Observable direct or indirect inputs other than Level
1 inputs.
- Level 3 : Unobservable inputs (i.e. not derived from market
data).
The classification of an item into the above levels is based on the lowest
level of inputs used that has a significant effect on the fair value
measurement of the item.
The Group measures a number of items at fair value, including:
§ land and buildings (note 13);
§ investment property (note 14);
§ Pension and other post-retirement benefit commitments (note 23)
§ share-based payments (note 25); and
§ initial recognition of financial instruments (note 32).
For more detailed information in relation to the fair value measurement of the
items above please refer to the applicable notes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
3. Prior Year Restatement
The Group has become aware of tax liabilities in a foreign jurisdiction
associated with the importation of goods and which would have fallen due in
previous periods. The Group had not previously recognised a liability, nor had
it recognised a cost, in the financial records for the years ended 31 March
2021, 31 March 2020 or periods prior.
The Group has estimated the total liabilities, the related foreign corporation
tax impact, and their effect on the prior periods' consolidated financial
statements. As the Group has only recently become aware of the liability, it
has yet to confirm the exact amounts payable and it is not clear when a
settlement of these obligations will occur, however precedent suggests that
this may be up to 7 years.
The tax is related to the importation of goods and therefore charged to cost
of sales. The associated corporation tax impact is shown in the Group's
corporation tax charge and deferred tax asset.
The prior years' restatement in respect of these tax liabilities did not have
an effect on the individual financial statements of the Company.
The impact of the prior years' restatement on the Group's financial statements
is detailed below.
Impact on the Group consolidated income statement for the year to 31 March
2021
As reported Adjustments 2021 (restated)
£000's £000's £000's
Revenue 105,607 - 105,607
Cost of sales (51,990) (868) (52,858)
Gross profit 53,617 (868) 52,749
Other income 319 - 319
Research and development expenses (8,072) - (8,072)
Administrative expenses (25,547) - (25,547)
Profit from operating activities 20,317 (868) 19,449
Finance income 129 - 129
Finance costs (200) (102) (302)
Net finance expense (71) (102) (173)
Share of profit of associate 38 - 38
38 - 38
Profit before income tax 20,284 (970) 19,314
Income tax charge (3,635) 149 (3,486)
Profit for the year 16,649 (821) 15,828
Profit attributable to:
Owners of the parent Company 8,158 (821) 7,337
Non-controlling interest 8,491 - 8,491
Profit for the year 16,649 (821) 15,828
Earnings per share (pence) 12.08 (1.22) 10.86
Diluted earnings per share (pence) 12.07 (1.22) 10.85
Earnings before Interest, Tax, Depreciation, Amortisation, Share Based 24,400 (868) 23,532
Payments and Foreign Exchange Differences
Impact on the Group statement of comprehensive income for the year to 31 March
2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME As reported Adjustments 2021 (restated)
£000's £000's £000's
Profit for the year 16,649 (821) 15,828
Other comprehensive income/(losses):
Items that may be reclassified to profit or loss:
Foreign currency translation differences (258) 269 11
Items that will not be reclassified to profit or loss:
Deferred tax on property revaluations 84 - 84
Remeasurement of defined benefit pension schemes (32) - (32)
Other comprehensive income/(losses) for the year (206) 269 63
Total comprehensive income for the year 16,443 (552) 15,891
Attributable to:
Owners of the parent Company 8,233 (552) 7,681
Non-controlling interest 8,210 - 8,210
16,443 (552) 15,891
Impact on consolidated statement of financial position
2021 Adjustments 2021 2020 Adjustments 2020
As reported As restated As reported As restated
£000's £000's £000's £000's £000's
Non-current assets
Intangible assets 36,108 - 36,108 36,020 - 36,020
Property, plant and equipment 2,181 - 2,181 2,426 - 2,426
Investment property 305 - 305 305 - 305
Right-of-use assets 1,399 - 1,399 1,658 - 1,658
Investments 180 - 180 166 - 166
Amounts due from subsidiary Company - - - - - -
Deferred tax assets - 266 266 - 164 164
Total non-current assets 40,173 266 40,439 40,575 164 40,739
Current assets
Inventories 20,504 - 20,504 17,264 - 17,264
Trade and other receivables 32,452 - 32,452 28,353 - 28,353
Income tax recoverable 3,475 - 3,475 1,265 - 1,265
Other taxes and social security 496 - 496 652 - 652
Cash and cash equivalents 19,523 - 19,523 11,877 - 11,877
Total current assets 76,450 - 76,450 59,411 - 59,411
TOTAL ASSETS 116,623 266 116,889 99,986 164 100,150
Current Liabilities
Trade and other payables (14,521) - (14,521) (14,486) - (14,486)
Provisions - (1,782) (1,782) - (1,128) (1,128)
Borrowings - - - (2,032) - (2,032)
Income tax payable (3,015) - (3,015) (940) - (940)
Other taxes and social security (501) - (501) - - -
Lease liabilities (311) - (311) (342) - (342)
Dividends (50) - (50) (50) - (50)
Current liabilities (18,398) (1,782) (20,180) (17,850) (1,128) (18,978)
Net current assets 58,052 (1,782) 56,270 41,561 (1,128) 40,433
Total assets less current liabilities 98,225 (1,516) 96,709 82,136 (964) 81,172
Non-current liabilities
Deferred tax (183) - (183) (263) - (263)
Lease liabilities (1,211) - (1,211) (1,424) - (1,424)
TOTAL ASSETS LESS TOTAL LIABILITIES 96,831 (1,516) 95,315 80,449 (964) 79,485
EQUITY
Issued share capital 3,379 - 3,379 3,377 - 3,377
Share premium account 63,258 - 63,258 62,882 - 62,882
Revaluation reserve 656 - 656 572 - 572
Other reserves 106 - 106 106 - 106
Foreign exchange reserve 549 543 1,092 526 274 800
Retained earnings 15,469 (2,059) 13,410 7,220 (1,238) 5,982
Shareholders' funds 83,417 (1,516) 81,901 74,683 (964) 73,719
Non-controlling interests 13,414 - 13,414 5,766 - 5,766
Total equity 96,831 (1,516) 95,315 80,449 (964) 79,485
Impact on consolidated statement of cashflows
2021 Adjustments 2021
As reported restated
£000's £000's £000's
Cash flows from operating activities
Profit/(loss) before income tax 20,284 (970) 19,314
Adjustment for:
Finance income (129) - (129)
Finance cost 200 102 302
Foreign exchange (gain)/loss 559 - 559
Depreciation 430 - 430
Amortisation of right-of-use assets 403 - 403
Revaluation of investment property - - -
Amortisation of intangible assets 898 - 898
Impairment of intangible assets - - -
Share of associate's results (38) - (38)
Share based payment charge 123 - 123
Dividends received - - -
Operating cash flows before movements in working capital 22,730 (868) 21,862
Change in inventories (3,698) - (3,698)
Change in receivables (3,959) - (3,959)
Change in payables 753 - 753
Movement in provisions - 868 868
Cash generated from/(used in) operations 15,826 - 15,826
Interest paid (79) - (79)
Income tax (3,766) - (3,766)
Net cash from operating activities 11,981 - 11,981
Cash flows from investing activities
Acquisition of property, plant and equipment (212) - (212)
Disposal of property, plant and equipment 11 - 11
Purchase of intangibles (861) - (861)
Finance income 129 - 129
Dividends received - - -
Net cash (used in)/from investing activities (933) - (933)
Cash flows from financing activities
Proceeds from issue of share capital 378 - 378
Interest paid on lease liabilities (122) - (122)
Principal paid on lease liabilities (378) - (378)
Dividends paid (562) - (562)
Net cash (used in)/from financing activities (684) - (684)
Net (decrease)/increase in cash and cash equivalents 10,364 - 10,364
Foreign exchange movements (686) - (686)
Balance at the beginning of the period 9,845 - 9,845
Balance at the end of the period 19,523 - 19,523
Impact on consolidated statement of changes in equity
Share Share Revaluation Other Foreign Retained Total Non- Total
Capital Premium Reserve Reserves Exchange Earnings controlling Equity
Account Reserve Interest
£000's £000's £000's £000's £000's £000's £000's £000's £000's
Balance as at 31 March 2020 (restated) 3,377 62,882 572 106 800 5,982 73,719 5,766 79,485
Profit for the year - - - - - 8,158 8,158 8,491 16,649
Adjustment for overseas sales taxes - - - - (821) (821) - (821)
Profit for the year (restated) - - - - - 7,337 7,337 8,491 15,828
Other comprehensive income:
Foreign currency differences (restated) - - - - 292 - 292 (281) 11
Deferred tax on property revaluations - - 84 - - - 84 - 84
Actuarial gains on pension scheme assets - - - - - (32) (32) - (32)
Total comprehensive income for the year - - 84 - 292 7,305 7,681 8,210 15,891
Transactions with owners:
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 1,092 13,410 81,901 13,414 95,315
Management have identified a misclassification in the cash flow statement of
the Company for finance income that was accrued rather than received as cash.
There was no impact on the Company profit or statement of financial position.
The impact on the Company statement of cashflows
2021 Adjustments 2021
As reported restated
£000's £000's £000's
Cash flows from operating activities
Profit/(loss) before income tax (916) - (916)
Adjustment for:
Finance income (875) - (875)
Finance cost 65 - 65
Foreign exchange (gain)/loss (3) - (3)
Depreciation 15 - 15
Amortisation of right-of-use assets 24 - 24
Revaluation of investment property - - -
Amortisation of intangible assets - - -
Impairment of intangible assets - -
Movement in provisions - - -
Share of associate's results - - -
Share based payment charge 8 - 8
Dividends received (46) - (46)
Operating cash flows before movements in working capital (1,728) - (1,728)
Change in inventories - - -
Change in receivables 3,169 875 4,044
Change in payables 33 - 33
Cash generated from/(used in) operations 1,474 875 2,349
Interest paid (54) - (54)
Income tax (5) - (5)
Net cash from operating activities 1,415 875 2,290
Cash flows from investing activities
Acquisition of property, plant and equipment (37) - (37)
Disposal of property, plant and equipment - - -
Purchase of intangibles - - -
Finance income 875 (875) -
Dividends received 46 - 46
Net cash (used in)/from investing activities 884 (875) 9
Cash flows from financing activities
Proceeds from issue of share capital 378 - 378
Interest paid on lease liabilities (11) - (11)
Principal paid on lease liabilities (23) - (23)
Dividends paid - - -
Net cash (used in)/from financing activities 344 - 344
Net (decrease)/increase in cash and cash equivalents 2,643 - 2,643
Foreign exchange movements - - -
Balance at the beginning of the period (1,824) - (1,824)
Balance at the end of the period 819 - 819
4. Segment information
Management has determined the operating segments based on the reports reviewed
by the Board to make strategic decisions. The Board considers the business
from a geographical perspective. Geographically, management considers the
performance in the Corporate/UK, China and Japan, North America, South and
South East Asia, Latin America, Europe and the Rest of the World.
Revenues are geographically allocated by the destination of customer.
The performance of these geographical segments is measured using Earnings
before Interest, Tax, Depreciation and Amortisation ("Adjusted EBITDA*"),
adjusted to exclude share based payments, revaluation, impairment and
personnel related litigation matters.
Corporate China & Japan North America S & SE Asia Latin America Europe Rest of World Total
/U.K.
£000's £000's £000's £000's £000's £000's £000's £000's
Year ended 31 March 2022
Revenue from external customers 1,525 28,385 16,402 11,816 15,775 6,430 1,862 82,195
Sale of goods 1,525 28,385 16,402 11,816 15,775 6,430 1,623 81,956
Royalties - - - - - - 239 239
1,525 28,385 16,402 11,816 15,775 6,430 1,862 82,195
Adjusted EBITDA** (18,623) 10,260 5,546 4,632 3,035 841 704 6,395
Total Assets 30,040 50,526 11,958 4,978 13,653 2,684 (239) 113,600
Year ended 31 March 2021
Revenue from external customers 1,471 58,906 13,887 9,118 14,265 6,580 1,380 105,607
Sale of goods 1,471 58,906 13,887 9,118 14,265 6,580 1,204 105,431
Royalties - - - - - - 176 176
1,471 58,906 13,887 9,118 14,265 6,580 1,380 105,607
Adjusted EBITDA** (restated) (17,644) 26,080 4,973 3,390 2,392 1,597 515 21,303
Total Assets 33,136 59,568 8,109 3,165 9,641 2,250 754 116,623
During the year ended 31 March 2021 the revenue from sales to one particular
customer in the 'China & Japan' segment was £15,692,000, which was
greater than 10 percent of the revenue of the Group. There have been no
similar cases in the Group in the current financial year.
Goodwill and other intangible assets are initially allocated to the
geographical segments on the basis of the proportion of sales achieved by each
segment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
4. Segment information (continued)
A reconciliation of adjusted EBITDA for reportable segments to profit from
operating activities is provided as follows:
2022 2021
(restated)
£000's £000's
Adjusted EBITDA for reportable segments 6,395 21,303
Depreciation (455) (430)
Amortisation of right-of-use assets (398) (403)
Revaluation of investment property (78) -
Personnel related litigation matters (457) -
Amortisation (1,140) (898)
Impairment (2,085) -
Share-based payment charges (342) (123)
Profit from operating activities 1,440 19,449
**Adjusted EBITDA reported for the segments includes foreign exchange gains
and losses. The Adjusted EBITDA for the Group is presented in note 6.
Product Revenues
2022 2021
£000's £000's
Aivlosin 72,939 87,549
Ecomectin 5,543 4,234
Others 3,713 13,824
Total 82,195 105,607
Contract Balances
2022 2021
Within one year or on demand £000's £000's
At 1 April 2,155 594
Amounts included in contract liabilities that was recognised as revenue during (2,155) (594)
the period
Cash received in advance of performance and not recognised as revenue during 203 2,155
the period
At 31 March 203 2,155
The Group recognised contract liabilities of £203,000 at 31 March 2022 (2021:
£2,155,000). The Group does not hold any long term sales contracts and any
rebates, discounts or free goods incentives are settled and recognised as
revenue within the next accounting period. Contract balances are reported
within trade and other payables on the Statement of Financial Position.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
5. Other income
2022 2021
£000's £000's
Sundry income 65 319
65 319
6. Result from operating activities
2022 2021
Notes £000's £000's
Result from operating activities is stated after charging/(crediting):
Cost of inventories recognised as an expense 46,482 51,864
Employee benefits expenses 30 14,054 14,867
Amortisation of intangible assets 11 1,140 898
Depreciation 12 455 430
Amortisation of right-of-use assets 14 398 403
Revaluation of investment property 13 78 -
Gain/(Loss) on foreign exchange transactions 989 (2,229)
Research and development 8,762 8,072
Impairment losses on trade receivables 17 (167) (65)
Fees payable to the Company's auditor for the audit of the parent Company and 452 442
Group annual accounts
Fees payable to the Company's auditor and its associates for the audit of the 41 475
Company's subsidiaries
Total fees payable to the Company's auditor for the audit of the parent
Company and Group annual accounts, for the year ended 31 March 2022, were
£581,000 (2021: £350,000), and total fees payable to the Company's auditor
and its associates for the audit of the Company's subsidiaries were £26,000
(2021: £48,000).
2022 2021
(Restated)
£000's £000's
Earnings before interest, tax, depreciation, amortisation, revaluation,
impairment, Personnel related litigation matters, share-based payments and
foreign exchange differences (adjusted EBITDA)
Profit from operating activities 1,440 19,449
Depreciation 455 430
Amortisation of right-of-use assets 398 403
Revaluation of investment property 78 -
Amortisation 1,140 898
Impairment 2,085 -
Personnel related litigation matters 457 -
Share-based payments 342 123
6,395 21,303
Foreign exchange differences (989) 2,229
Adjusted EBITDA 5,406 23,532
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
6. Result from operating activities (continued)
Management believe that adjusted EBITDA is an appropriate measure of the
Group's performance as it is the initial source for all re-investment and for
all returns to shareholders. Investors, bankers and analysts all focus on this
important measure of underlying performance because it enables them to make
judgements about the Group's ability to generate sufficient cash to meet all
the re-investment needs of the business while still providing adequate returns
to shareholders. Therefore, adjusted EBITDA has a direct relationship with the
value of the Group and is seen by our investors as a Key Performance Indicator
for management.
The following items are adjusted for in the calculation of adjusted EBITDA as
defined by the Group.
Item Rationale for Adjustment
Depreciation and Amortisation These items are a result of past investments and therefore, although they are
correctly recorded as a cost of the business, they do not reflect current or
future cash outflows.
Additionally, Depreciation and Amortisation calculations are subject to
judgement regarding useful lives and residual values of particular assets and
the adjustment removes the element of judgement.
Revaluation of Investment Property These are subject to judgement and do not reflect cash flows.
Gains and Losses on Disposal of Fixed Assets and Impairment of Intangibles These items are a result of past investments and therefore, although they are
correctly recorded as income or cost of the business, they do not reflect
current or future cash outflows.
Personnel related litigation matters Amount in respect of a probable settlement of personnel related litigation
matters
Share Based Payments This item is subject to judgement and will never be reflected in the Group's
cash flows.
Foreign Exchange differences Since the key driver of this figure is the revaluation of monetary assets
denominated in foreign currency at the period end, which may reverse prior to
settlement, taking this figure out of the EBITDA figure removes volatility
from the performance measure. Foreign exchange movements are largely outside
of the Group's control, so this gives a better measure of the Group's progress
than statutory profit measures which include them.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
7. Finance income/(expense)
2022 2021
£000's £000's
Finance income
Interest received on short term bank deposits 190 129
Finance costs
Interest paid (173) (181)
Interest paid on lease liabilities (111) (121)
(284) (302)
Net finance costs (94) (173)
8. Earnings per share
The calculation of basic earnings per share is based on the post-tax profit
for the year divided by the weighted average number of shares in issue during
the year.
2022 2021
Earnings Weighted average number of shares Per share amount Earnings Weighted average number of shares Per share amount
£000's 000's pence £000's 000's pence
Earnings attributable to ordinary shareholders on continuing operations after (686) 67,717 (1.01) 7,337 67,559 10.86
tax
Dilutive effect of share options - - - - 44 (0.01)
Diluted earnings per share (686) 67,717 (1.01) 7,337 67,603 10.85
Diluted earnings per share takes into account the dilutive effect of share
options. As the Group's result for the year ending 31 March 2022 was a loss
there is no dilutive effect on the earnings per share.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
9. Taxation
2022 2021
£000's £000's
Current tax
Foreign corporation tax on profits for the year 3,284 5,772
Foreign withholding tax 406 31
Research and development tax credits claimed in the year (1,594) (1,569)
Research and development tax credits - adjustment for prior year 437 (752)
Deferred tax
Origination and reversal of temporary differences (439) 4
Income tax charge 2,094 3,486
2022 2021
£000's £000's
Factors affecting the tax charge for the year
Profit on ordinary activities before taxation 1,389 19,314
Profit on ordinary activities before taxation multiplied by the applicable 264 3,669
rate of UK corporation tax of 19% (2021: 19%)
Effects of:
Non-deductible expenses 1,345 374
Non-chargeable credits (69) (141)
Right-of-use assets depreciation (37) (40)
Withholding tax on inter-company dividends 406 31
Enhanced allowance on research and development expenditure (1,208) (1,741)
Adjustment in respect of prior years 456 -
Different tax rate for foreign subsidiaries 844 1,261
Origination and reversal of temporary differences 114 (116)
Unused tax losses carried forward (109) 189
Tax effect of share based payments 88 -
Income tax charge 2,094 3,486
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
9. Taxation (continued)
2022 2021
% %
Applicable tax rate per UK legislation 19.00 19.00
Effects of:
Non-deductible expenses 96.84 1.93
Non-chargeable credits (4.97) (0.73)
Right-of-use assets depreciation (2.66) (0.21)
Withholding tax on inter-company dividends 29.23 0.16
Enhanced allowance on research and development expenditure (86.97) (9.01)
Adjustment in respect of prior years 32.83 -
Different tax rate for foreign subsidiaries 60.76 6.53
Origination and reversal of temporary differences 8.21 (0.60)
Unused tax losses carried forward (7.85) 0.98
Tax effect of share based payment arrangements 6.34 -
Income tax charge 150.76 18.05
Future tax changes
On 5 March 2021 it was announced that the rate of UK corporation tax would be
increased to 25% from 1 April 2023. This change was substantively enacted in
April 2021 and as the UK deferred tax assets and liabilities have been
calculated based on the enacted rate of 25% (2021: 19%).
At the year ended 31 March 2022 the Group had unused overseas tax losses
amounting to £1,003,000 (2021: £nil) for which no deferred tax asset has
been recognised.
10. Loss for the financial year
2022 2021
£000's £000's
Parent Company's (loss) for the financial year (1,586) (903)
The Company has elected to take the exemption under Section 408 of the
Companies Act 2006 not to present the Parent Company income statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
11. Dividends
2022 2021
£000's £000's
Cash dividends on ordinary shares declared and paid:
Final dividend for the year end 31 March 2021 at 1.0p per ordinary share 677 -
(settled 22 October 2021)
The Board of Directors does not propose that a dividend be paid for the year
ended 31 March 2022 (2021: £0.01).
Proposed dividends on ordinary shares are subject to approval at the annual
general meeting and are not recognised as a liability as at the date of the
Statement of Financial Position.
12. Intangible fixed assets
Group Goodwill Distribution rights Drug registrations, patents and licence costs Total
£000's £000's £000's £000's
Cost
At 31 March 2020 17,930 407 22,977 41,314
Additions - - 986 986
At 31 March 2021 17,930 407 23,963 42,300
Additions - - 1,421 1,421
Impairment - - (2,092) (2,092)
At 31 March 2022 17,930 407 23,292 41,629
Amortisation
At 31 March 2020 - (120) (5,174) (5,294)
Charge for the year - (19) (879) (898)
At 31 March 2021 - (139) (6,053) (6,192)
Charge for the year - (19) (1,121) (1,140)
Written back on impairment - - 7 7
At 31 March 2022 - (158) (7,167) (7,325)
Net Book Value
At 31 March 2022 17,930 249 16,125 34,304
At 31 March 2021 17,930 268 17,910 36,108
At 31 March 2020 17,930 287 17,803 36,020
The amortisation and impairment charges are included within administrative
expenses in the income statement.
Distribution rights are amortised over their estimated useful life of 20 years
and reviewed for impairment when any indication of potential impairment
exists. The remaining amortisation period at the date of the financial
statements ranged from 4 to 20 years.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
12. Intangible fixed assets (continued)
The carrying value of goodwill is attributable to the following cash
generating units:
Entity Date of acquisition 2022 & 2021
£000's
ECO Animal Health Limited 1 October 2004 17,359
Zhejiang Eco Biok Animal Health Products Limited 1 April 2007 94
ECO Animal Health Japan Inc 24 December 2009 477
17,930
Goodwill acquired in a business combination is allocated at acquisition to the
cash generating units (CGU's) that are expected to benefit from the business
combination.
The recoverable amounts of the CGU's are determined from value in use
calculations. The key assumptions for the value in use calculations are those
regarding discount rates, growth rates and the estimated remaining useful life
of the asset.
The Group prepares cashflow forecasts that cover the two year period after the
Statement of Financial Position date and then extrapolates them assuming a 3%
annual growth rate which is well below the past performance of the business.
Forecasts for new products under development have been included based on board
approved plans for the next five years. The Directors believe that the
long-term growth rate assumed does not exceed the average long-term growth
rate for the relevant markets.
Management estimates discount rates using the pre-tax rates that reflect
current market assessments of the time value of money and the risks specific
to the CGU's. In the current year management estimated the applicable rate to
be 7% (2021: 8%) due to changes in the relative weighting of elements of the
Group's capital structure. Management considers that there is adequate
headroom when comparing the net present value of the cashflows to the carrying
value of goodwill to conclude that no impairment is necessary this year. The
Directors consider that no reasonably possible change in assumptions,
requiring disclosure, would result in impairment.
The net book value of Drug registrations, patents and licence costs can be
broken down as follows:
2022 2021
£000's £000's
Aivlosin 13,945 15,161
Ecomectin 754 2,466
Vaccines 1,296 267
Others 130 16
16,125 17,910
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
12. Intangible fixed assets (continued)
Aivlosin is a highly effective antibiotic that treats a range of specific
enteric (gut) and respiratory diseases in pigs and poultry, ensuring a rapid
return to health. In addition to the welfare benefits, healthy animals gain
weight faster, digest food more efficiently and get to market earlier which
all bring economic benefit to the farmer. Substantial ongoing product
development covering more formulations, species and diseases is expected to
substantially further increase its revenue generating potential. The remaining
useful life is from 4 to 20 years.
Ecomectin is an endectocide that controls worms, ticks, lice and mange in
grazing stock and pigs. The remaining useful life is 0 to 10 years.
At 31 March 2022 Intangible assets included £3,355,000 (2021: £5,791,000) of
assets capitalised that had not commenced their useful life, of which
approximately £2,044,000 (2021: £4,909,000) were Aivlosin related products.
Drug registrations and licences are amortised over their estimated useful
lives of 10 to 20 years, which is the Directors' estimate of the time it would
take to develop a new product allowing for the Group's patent protection and
the exclusivity period which comes with certain registrations. All such costs
are recorded in the UK/Corporate reporting segment.
The 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 year to March 2022
there were indications that certain development projects for which costs have
previously been capitalised were unlikely to achieve technical success or
commercial viability. Net capitalised costs of £2,085,000 in respect of
these projects have been impaired through the income statement during the
period reducing the carrying value of the impaired assets to nil. The
capitalised costs had previously been recognised within the Group's
UK/Corporate segment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
13. Property, plant and equipment
Group Freehold Land and Buildings Leasehold improvements Plant and Machinery Fixtures, Fittings and Equipment Motor Vehicles Total
£000's £000's £000's £000's £000's £000's
Cost or valuation
At 31 March 2020 668 555 986 1,650 311 4,170
Additions - - 64 153 2 219
Disposals - - (247) (34) (29) (310)
Foreign exchange movements (1) - (16) (21) (15) (53)
At 31 March 2021 667 555 787 1,748 269 4,026
Additions 36 50 1,305 233 - 1,624
Disposals - - (19) (26) - (45)
Foreign exchange movements 6 - 114 57 18 195
At 31 March 2022 709 605 2,187 2,012 287 5,800
Depreciation
At 31 March 2020 (9) - (710) (812) (213) (1,744)
Charge for the year (14) (103) (47) (238) (28) (430)
Disposals - - 244 29 26 299
Foreign exchange movements - - 10 10 10 30
At 31 March 2021 (23) (103) (503) (1,011) (205) (1,845)
Charge for the year (16) (112) (54) (250) (24) (456)
Disposals - - 17 24 - 41
Foreign exchange movements (1) - (31) (26) (17) (75)
At 31 March 2021 (40) (215) (571) (1,263) (246) (2,335)
Net Book Value
At 31 March 2022 669 390 1,616 749 41 3,465
At 31 March 2021 644 452 284 737 64 2,181
At 31 March 2020 659 555 276 838 98 2,426
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
13. Property, plant and equipment (continued)
The freehold land and buildings at Coombe Road, New Malden was valued at
£615,000 at 31 March 2020 by Colliers International Valuation UK LLP
(external independent qualified valuers). The fair value of the freehold
property was determined by applying a 7.5% discount rate to the annual rental
value of the property as determined by local market conditions. The Group
considers the fair value of the property determined. This property will
continue to be valued on a regular basis.
Valuation Technique used Significant unobservable inputs Inter-relationship between key unobservable inputs and fair value
RICS Valuation - Global Standards ('Red Book Global Standards') § Estimated market rent Reduced marketability and hence rent achievable by the property.
§ Capital Value
§ Price per square foot in local market.
§ Yield in local market
§ General condition
§ Statutory searches
§ Environmental matters
In determining the fair value of freehold land and buildings level-3 fair
value inputs are used. The significant unobservable inputs used in
establishing the fair value of freehold land and buildings are the estimated
market rent and capital value. The Directors believe that the fair value of
freehold land and buildings reflects the carrying value and a significant
change in unobservable inputs would not significantly increase or reduce the
fair value of the freehold land and buildings.
The freehold property of 78 Coombe Road, New Malden is subject to a legal
charge held by the Company's bankers dated 20 March 1987.
The value of the freehold property would have been recorded at £229,000
(2021: £239,000) on a historical cost basis.
Depreciation has been included in the administrative expenses line in the
income statement, except for £158,000 (2021: £118,000) of depreciation of
production equipment in the Chinese subsidiary ECO Biok and for £7,000 (2021:
£6,000) of depreciation in Pharmgate Animal Health USA LLC, which are
included within cost of sales.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
13. Property, plant and equipment (continued)
Company Freehold Land and Buildings Fixtures, Fittings and Equipment Total
£000's £000's £000's
Cost or valuation
At 31 March 2020 615 14 629
Additions - 44 44
At 31 March 2021 615 58 673
Additions - 125 125
At 31 March 2022 615 183 798
Depreciation
At 31 March 2020 - (7) (7)
Charge for the year (12) (3) (15)
At 31 March 2021 (12) (10) (22)
Charge for the year (12) (16) (28)
At 31 March 2022 (24) (26) (50)
Net Book Value
At 31 March 2022 591 157 748
At 31 March 2021 603 48 651
At 31 March 2020 615 7 622
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
14. Investment property
Group and Company Freehold Land and Buildings
£000's
At 31 March 2020 305
Revaluation in 2021 -
At 31 March 2021 305
Revaluation in 2022 (78)
At 31 March 2022 227
The property in Western Road, Mitcham was valued at £305,000 as at 31 March
2020 by Colliers International Valuation UK LLP (external independent
qualified valuer). The fair value of the investment property was determined by
applying a 7.75% discount rate to the annual rental value of the property as
determined by local market conditions.
The value of the investment property would have been recorded at £130,000 on
a historical cost basis.
Valuation Technique used Significant unobservable inputs Inter-relationship between key unobservable inputs and fair value
RICS Valuation - Global Standards ('Red Book Global Standards') § Estimated market rent Reduced marketability and hence rent achievable by the property.
§ Capital value
§ Price per square foot in local market.
§ Yield in local market
§ General condition
§ Statutory searches
§ Environmental matters
In determining the fair value of investment property level-3 fair value inputs
are used. The significant unobservable inputs used in establishing the fair
value of investment property are the estimated market rent and capital value.
The Directors believe that the fair value of investment property reflects the
carrying value and a significant change in unobservable inputs would not
significantly increase or reduce the fair value of the investment property.
Following the year end, the Group decided to dispose of the property and
agreed to sell the property for consideration of £227,000. This value is
lower than the carrying value at the balance sheet date and as such indicated
that the property should be revalued. This revaluation is noted as a post
balance sheet event in Note 32 to these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
15. Right-of-use assets
Group Property Vehicles Other Total
£000's £000's £000's £000's
Cost or valuation
At 31 March 2020 2,113 198 23 2,334
Additions 129 58 - 187
Disposals - (109) - (109)
Foreign exchange movements (41) - (1) (42)
At 31 March 2021 2,201 147 22 2,370
Additions 615 66 7 688
Disposals (366) (18) (22) (406)
Foreign exchange movements 105 - - 105
At 31 March 2022 2,555 195 7 2,757
Depreciation
At 31 March 2020 (542) (119) (15) (676)
Charge for the year (347) (52) (4) (403)
Disposals - 96 - 96
Foreign exchange movements 11 - 1 12
At 31 March 2021 (878) (75) (18) (971)
Charge for the year (355) (38) (5) (398)
Disposals 366 18 22 406
Foreign exchange movements (21) - - (21)
At 31 March 2022 (888) (95) (1) (984)
Net Book Value
At 31 March 2022 1,667 100 6 1,773
At 31 March 2021 1,323 72 4 1,399
At 31 March 2020 1,571 79 8 1,658
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
15. Right of use assets (continued)
Company Vehicles Other Total
£000's £000's £000's
Cost or valuation
At 31 March 2020 95 7 102
Additions 40 - 40
Disposals (67) - (67)
Foreign exchange movements - - -
At 31 March 2021 68 7 75
Additions 38 - 38
Disposals - (7) (7)
Foreign exchange movements - - -
At 31 March 2022 106 - 106
Depreciation
At 31 March 2020 (72) (5) (77)
Charge for the year (23) (1) (24)
Disposals 63 - 63
Foreign exchange movements - - -
At 31 March 2021 (32) (6) (38)
Charge for the year (16) - (16)
Disposals - 7 7
Foreign exchange movements - - -
At 31 March 2022 (48) 1 (47)
Net Book Value
At 31 March 2022 58 1 59
At 31 March 2021 36 1 37
At 31 March 2020 23 2 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
16. Fixed asset investments
Group Investment in Associate Unlisted investments Total
£000's £000's £000's
At 31 March 2020 157 9 166
Share of associate's result for the year 38 - 38
Foreign exchange differences (24) - (24)
At 31 March 2021 171 9 180
Share of associate's result for the year 43 - 43
Foreign exchange differences (11) - (11)
At 31 March 2022 203 9 212
Company Unlisted investments (subsidiaries) Total
£000's £000's
Cost
At 31 March 2020 20,077 20,077
Disposed (25) (25)
At 31 March 2021 20,052 20,052
Disposed - -
At 31 March 2022 20,052 20,052
Impairment
At 31 March 2020 (45) (45)
Impairment charge - -
Disposal 25 25
At 31 March 2021 (20) (20)
Impairment charge - -
Disposal - -
At 31 March 2022 (20) (20)
Net Book Value
At 31 March 2022 20,032 20,032
At 31 March 2021 20,032 20,032
At 31 March 2020 20,032 20,032
The Company holds more than 20% of the share capital of the following
companies:
Subsidiary undertakings held by the Company
Company Registered office address Country of registration or incorporation Class Shares held %
Zhejiang ECO Biok Animal Health Products Limited Zhongguan Industrial Area, Deqing, Zhejiang Province P. R. China Ordinary 3*
ECO Animal Health Limited 78 Coombe Road, New Malden, Surrey, KT3 4QS Great Britain Ordinary 100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
16. Fixed asset investments (continued)
Subsidiary undertakings held by the Group
Company Registered office address Country of registration or incorporation Class Shares held %
ECO Animal Health Southern Africa (Pty) Limited. 228 Athol Road, Highlands North, Johannesburg 2192 South Africa Ordinary 100
Zhejiang ECO Biok Animal Health Products Limited. Zhongguan Industrial Area, Deqing, Zhejiang Province P. R. China Ordinary 51*
Shanghai ECO Biok Veterinary Drug Sale Company Ltd. (via Zhejiang ECO Biok Room 1502-3, Imago Plaza, No. 99 Wuning Road, Ptro District, Shanghai 200063 P. R. China Ordinary 51
Animal Products Ltd.)
Zhejiang ECO Animal Health Limited Zhongguan Industrial Area, Deqing, Zhejiang Province P. R. China Ordinary 100
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda. Av. Dr. Cardoso de Melo, 1470, Cl311, Villa Olimpia, CEP 04548-005, Sao Paulo Brazil Ordinary 100
ECO Animal Health Japan Inc. 1-2-1, Hamamatsu-cho, Minato-Ku, Tokyo Japan Ordinary 100
ECO Animal Health USA Corp. 344 Nassau Street, Princeton, New Jersey, 08540 U.S.A. Ordinary 100
Interpet LLC. 3775 Columbia Pike, Ellicott City, Maryland, 21043 U.S.A. Ordinary 100
ECO Animal Health de Mexico, S de R.L. de C.V. Av Techologico Sur 134-4, Unidad Habitacional Moderna, Queretaro, 76030 Mexico Ordinary 100
ECO Animal Health de Argentina S.A. Calle 4 E 43/44 N: 581 P.6 D:B La Plata, Buenos Aires Argentina Ordinary 100
ECO Animal Health Malaysia Sdn. Bhd. 10(th) Floor, Menara Hap Seng, No 1 & 3, Jalan P Ramlee, 50250 Kuala Malaysia Ordinary 100
Lumpur
ECO Animal Health India (Private) Ltd No 33/5, Second Floor, Mount Kailash Building, Meanee Avenue Road, Ulsoor India Ordinary 100
Bangalore, Karnataka, 560042
ECO Animal Health Europe Ltd 6 Northbrook Road, Dublin 6, Eire Republic of Ireland Ordinary 100
*The Group's control over its China based subsidiary Zhejiang ECO Biok Animal
Health Products Limited is achieved via a joint holding of 51% of the entity's
Ordinary share capital between the Company (3%) and its UK based trading
subsidiary ECO Animal Health Limited (48%).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
16. Fixed asset investments (continued)
Subsidiary undertakings held by the Group (continued)
The principal activity of these undertakings for the last relevant financial
year was as follows:
Company Name Principal activity
ECO Animal Health Limited Distribution of animal drugs
ECO Animal Health Southern Africa (Pty) Limited Non-trading
Zhejiang ECO Biok Animal Health Products Limited Manufacture of animal drugs
Shanghai ECO Biok Veterinary Drug Sale Company Ltd. Distribution of animal drugs
Zhejiang ECO Animal Health Limited Procurement of raw materials
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda Distribution of animal drugs
ECO Animal Health Japan Inc. Distribution of animal drugs
ECO Animal Health USA Corp. Distribution of animal drugs
Interpret LLC Non-trading
ECO Animal Health de Mexico, S. de R. L. de C. V. Distribution of animal drugs
ECO Animal Health de Argentina S.A. Non-trading
ECO Animal Health Malaysia Sdn. Bhd Non-trading
ECO Animal Health India (Private) Ltd Non-trading
ECO Animal Health Europe Ltd Non-trading
The aggregate amount of capital and reserves and the results of these
undertakings for the last relevant financial year were:
2022 2021 (restated)
Equity Profit/(loss) Equity Profit/(loss)
for the year
for the year
£000's £000's £000's £000's
ECO Animal Health Limited (5,461) (373) (5,088) (1,816)
ECO Animal Health Southern Africa (Pty) Limited 315 35 280 4
Zhejiang ECO Biok Animal Health Products Ltd 25,069 (37) 27,384 17,340
Zhejiang ECO Animal Health Limited 6,196 4,886 - -
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda. (691) 473 (963) (26)
ECO Animal Health Japan Inc. 1,300 (103) 1,398 (16)
ECO Animal Health de Mexico, S. de R. L. de C. V. 729 124 578 151
ECO Animal Health USA Corp. (1,029) 411 (1,382) 111
ECO Animal Health India (Private) Ltd (13) (12) (1) (2)
ECO Animal Health Europe Ltd - - - -
The equity and results of Shanghai ECO Biok Veterinary Drug Sale Company Ltd
are included within those disclosed for Zhejiang ECO Biok Animal Health
Products Limited.
All of the subsidiaries listed above were included in the consolidation for
the year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
16. Fixed asset investments (continued)
Zhejiang ECO Biok Animal Health Products Limited, Zhejiang ECO Animal Health
Limited and ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda
all have 31 December year ends. The Group receives management accounts for the
three months to 31 March for these subsidiaries for use in preparing the
consolidated financial statements.
Interpet LLC has been excluded from consolidation as it holds no assets or
liabilities and has ceased trading.
The following trading subsidiaries have no requirement for audit under local
legislation:
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda.
ECO Animal Health Japan Inc.
ECO Animal Health USA Corp.
ECO Animal Health de Mexico, S. de R. L. de C. V.
ECO Animal Health Group PLC has given statutory guarantees against all the
outstanding liabilities of ECO Animal Health Ltd, thereby allowing its
subsidiary to be exempt from the annual audit requirement under Section 479A
of the Companies Act, for the year ended 31 March 2022.
Non-controlling interests
Zhejiang ECO Biok Animal Health Products Limited (Zhejiang ECO Biok) and
Shanghai ECO Biok Veterinary Drug Sale Company Limited (Shanghai ECO Biok),
both 51% owned subsidiaries of the Group, have material non-controlling
interests (NCI). Summarised financial information in relation to these two
subsidiaries is presented below together with amounts attributable to NCI.
Please note that as Shanghai ECO Biok is a 100% owned subsidiary of Zhejiang
ECO Biok, the summarised results below are consolidated on Zhejiang ECO Biok
level, before wider group eliminations.
Summarised statement of comprehensive income 2022 2021
For the year ended 31 March £000's £000's
Revenue 26,803 56,179
Cost of sales (17,192) (25,527)
Gross Profit 9,611 30,652
Administrative expenses (8,875) (7,619)
Operating (loss)/profit 736 23,033
Other income 34 6
Finance income 84 31
(Loss)/profit before tax 854 23,070
Tax expense (891) (5,730)
(Loss)/profit after tax (37) 17,340
(Loss)/profit allocated to NCI (19) 8,491
Other comprehensive income/(loss) allocated to NCI 1,099 (281)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
16. Fixed asset investments (continued)
Summarised balance sheet 2022 2021
As at 31 March £000's £000's
Assets:
Property, plant and equipment 1,960 626
Right-of-use assets 1,080 755
Deferred tax assets 3 -
Inventories 14,081 4,967
Trade and other receivables 6,300 18,161
Cash and cash equivalents 6,148 13,651
29,572 38,160
Liabilities:
Trade and other payables 4,489 7,785
Contract liabilities 11 2,155
Lease liabilities - short term 144 82
Lease liabilities - long term 1,040 753
5,684 10,775
Summarised cash flows 2022 2021
For the year ended 31 March £000's £000's
Cash flows from operating activities (2,818) 10,359
Cash flows from investing activities (810) 20
Cash flows from financing activities (4,565) (1,310)
Foreign exchange movements 690 (757)
Net (decrease)/increase in cash and cash equivalents (7,503) 8,312
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
16. Fixed asset investments (continued)
Joint Operations
The Group also holds (by means of its ownership of ECO Animal Health USA
Corp.), a 50% interest in Pharmgate Animal Health LLC, which is resident in
the U.S.A. Pharmgate Animal Health LLC distributes the Group's products in the
U.S.A.
The Group also holds (by means of its ownership of ECO Animal Health Ltd) a
50% interest in Pharmgate Animal Health Canada Inc, which distributes its
products into Canada.
The Group also holds (by means of its ownership of ECO Animal Health Europe
Ltd) a 50% interest in ECO-Pharm Limited, based in the Republic of Ireland.
ECO-Pharm Limited has not yet commenced trading.
Both Pharmgate Animal Health LLC and Pharmgate Animal Health Canada Inc. have
accounting years which end on 31 December.
The Group's holdings in each of the joint operations' share capital is given
in the table below:
Pharmgate Animal Health Canada Inc Holding Shares Holding
(shares) in issue %
Common Shares 100 200 50
Class A Shares 100 100 100
Class B Shares - 100 -
Pharmgate Animal Health USA LLC Holding Shares Holding
(shares) in issue %
Common Shares 100 200 50
Class A Shares 100 100 100
Class B Shares - 100 -
ECO-Pharm Limited Holding Shares Holding
(shares) in issue %
Common Shares 25,000 50,000 50
Class A Shares 1 1 100
Class B Shares - 1 -
In the case of Pharmgate Animal Health Canada Inc and Pharmgate Animal Health
USA LLC, A shares carry the rights to dividends payable out of profits
attributable to the Group. These are made up of profits made by products
supplied by the ECO Group plus 50% of any profit relating to new products
developed jointly by the partners to the joint operation.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
16. Fixed asset investments (continued)
In the case of ECO-Pharm Limited, profits attributable to the Group are made
up of profits made by products supplied by the ECO Group plus 33% of any
profit relating to new products developed jointly by the partners to the joint
operation.
The following amounts included in the Group's financial statements are related
to its interest in these joint operations.
Pharmgate Animal Health LLC Pharmgate Animal Health Canada Inc
2022 2021 2022 2021
£000's £000's £000's £000's
Non-current assets 11 18 - -
Current assets 1,871 1,055 631 545
Current liabilities (1,855) (1,047) (630) (544)
Sales 12,640 10,745 3,756 3,300
Profit after tax - - - -
Associated Company
The Group also holds (by means of its ownership of ECO Animal Health Japan
Inc.) a 47.62% interest in EcoPharma.com which is resident in Japan. This
Company distributes Animal Health products and other general merchandise
within Japan.
ECO Animal Health Japan Inc's holding in EcoPharma.com is 10,000,000 shares
out of a total of 21,000,000 shares.
The following amounts included in the Group's financial statements are related
to its interests in this associated Company.
2022 2021
£000's £000's
Investments (share of net assets)
At 1 April 171 157
Share of results for the year 43 38
Foreign exchange movement (10) (24)
At 31 March 204 171
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
16. Fixed asset investments (continued)
2022 2021
Summarised financial information £000's £000's
At 31 March
Current assets 744 938
Non-current assets 27 44
Current liabilities (222) (208)
Non-current liabilities (120) (415)
Net assets (100%) 429 359
Group share of net assets (47.62%) 204 171
Year ended 31 March
Revenue 1,897 1,704
Net profit 90 80
17. Inventories
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
Raw materials and consumables 9,772 11,488 - -
Finished goods and goods for resale 13,277 5,433 - -
Work in progress 7,093 3,583 - -
30,142 20,504 - -
The cost of inventories recognised as an expense and included in cost of sales
in the financial year amounted to £46,782,000 (2021: £51,864,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
18. Trade and other receivables
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
Non-current:
Amounts owed by group undertakings - - 53,940 55,909
The intercompany debt is due on demand, however the company has classified the
receivable as a non-current asset as it does not expect to realise the asset
within 12 months after the reporting period.
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
Current:
Trade receivables 23,388 29,838 - -
Other receivables 660 1,688 80 69
Amounts owed by group undertakings - - 48 -
Prepayments and accrued income 1,921 926 210 212
25,969 32,452 338 281
As at 31 March 2022, trade receivables of £2,733,000 (2021: £3,170,000) due
to the Group and £nil (2021: £nil) due to the Company were past due but not
impaired. These relate to long standing distributors with whom we have agreed
settlement terms and with whom there is no history of default. The ageing
analysis of these trade receivables is as follows:
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
Up to 3 months past due 1,772 2,098 - -
3 to 6 months past due 346 468 - -
Over 6 months past due 615 604 - -
2,733 3,170 - -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
18. Trade and other receivables (continued)
As at 31 March 2022, impairment provisions of £194,000 on gross receivables
of £889,000 (2021: £351,000 on gross receivables of £729,000) were
recognised. The impaired receivables mainly relate to debt for which recovery
is still being sought. The Group mitigates its exposure to credit risk by
extensive use of commercial credit reference agencies, close management of its
customers' trading against terms offered and use of retention of title clauses
wherever possible.
The Group has experienced minimal bad debt history and considered this in
arriving at the impairment provision recognised. This consideration includes
the potential risks arising from COVID on its customers. Its experience with
customers since 31 March 2022, is consistent with those considerations that
credit risk has not increased. No collateral is held against customer
receivable balances.
The ageing analysis of the impaired balances is as follows:
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
Current debt - 6
Up to 3 months past due 21 97 - -
3 to 6 months past due - 1 - -
Over 6 months past due 173 247 - -
194 351 - -
Movement on the Group provision for impairment of trade receivables is as
follows:
Group 2022 2021
£000's £000's
Balance at 1 April 351 419
Additional provision made 13 71
Recovered in the year (59) (136)
Written off during the year (121) -
Foreign exchange movements 10 (3)
Balance at 31 March 194 351
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
18. Trade and other receivables (continued)
The carrying amounts of trade and other receivables are denominated in the
following currencies:
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
British Pounds Sterling 1,776 1,192 288 281
U S Dollars 9,743 8,067 - -
Euros 2,072 1,749 - -
Chinese RMB 6,300 18,161 - -
Japanese Yen 622 175 - -
Brazilian Real 1,970 363 - -
Canadian dollars 630 545 - -
Mexican Pesos 2,701 1,997 - -
Other currencies 155 203 - -
25,969 32,452 288 281
The carrying amounts of trade and other receivables are not significantly
different to their fair values.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
19. Deferred tax
Group
Deferred tax assets and liabilities are attributable to the following:
Net
2022 2021
restated
£000's £000's
Trade related temporary differences (2,586) (2,294)
Overseas trade related temporary differences 3 3
Freehold property 9 8
Investment property 18 (1)
Plant and equipment (109) (12)
Deferred tax on share options 43 120
Tax losses carried forward 3,145 2,259
Amount receivable/(payable) after more than one year 523 83
The movement on the deferred tax account can be summarised as follows:
Trade-related temporary differences Tax losses carried forward Freehold property Investment property Plant and machinery Share options Total
£000's £000's £000's £000's £000's £000's £000's
At 31 March 2021 - as restated (2,291) 2,259 8 (1) (12) 120 83
(Charge) for the year through income statement - - - (97) (77) (466)
(292)
Credit for the year through income statement 886 - 19 - - 905
Credit for the year through reserves - 1 - - - 1
At 31 March 2022 (2,583) 3,145 9 18 (109) 43 523
Trade related temporary differences relate predominantly to research and
development tax deductions claimed in advance of expense recognition in the
income statement, carried forward trading losses and a provision for
unrealised profit arising on consolidation. The tax losses carried forward are
not expected to expire under current legislation.
Any future dividend received from the Chinese subsidiary Zhejiang ECO Biok
Animal Health Products Limited will be subject to a 5% withholding tax. The
deferred tax liability in respect of this has not been recognised.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
19. Deferred tax (continued)
Company Freehold property Investment property Share options Total
£000's £000's £000's £000's
At 31 March 2020 (76) (19) - (95)
Credit for the year through income statement - 17 - 17
Credit for the year through reserves 84 - - 84
At 31 March 2021 8 (2) - 6
Credit for the year through income statement - 20 23 43
Credit for the year through reserves 1 - - 1
At 31 March 2022 9 18 23 50
At the year ended 31 March 2022 the Group has an unrecognised deferred tax
asset in relation to unused overseas tax losses amounting to £1,003,000
(2021: £nil), and unused UK tax losses amounting to £2,725,000 (2021:
£1,082,000). These tax losses are not expected to expire.
20. Cash and cash equivalents
Cash and cash equivalents comprise cash, short-term deposits held by the Group
net of amounts outstanding on bank overdraft. The carrying amount of these
assets are not significantly different to their fair value.
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
Cash and cash equivalents 14,314 19,523 279 819
Cash and cash equivalents presented in the statement of cash flows 14,314 19,523 279 819
Balances drawn on the bank overdraft facility are repayable on demand and form
an integral part of the cash management of the Group and Company. In the
statement of cash flows, the Group and the Company have presented cash and
cash equivalents net of balances outstanding on bank overdrafts. Amounts
drawn and repaid on the overdraft facility are therefore considered as part of
changes in cash and cash equivalents and are not presented as financing cash
flows.
As at 31 March 2022, none of the Group's facilities were drawn.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
20. Cash and cash equivalents (continued)
Significant non-cash transactions from investing activities are as follows:
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
Acquisition of property, plant and equipment by means of leases or not yet 688 187 38 40
paid at year end
Acquisition of intangible assets not yet paid at year end 158 125 - -
21. Trade and other payables
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
Trade payables 9,415 7,918 50 58
Contract liabilities 203 2,155 - -
Other payables 926 683 70 147
Accruals and deferred income 2,410 3,765 206 319
12,954 14,521 326 524
22. Borrowings
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
Cash and cash equivalents 14,314 19,523 279 819
Lease liabilities (1,910) (1,522) (62) (39)
Net Cash 12,404 18,001 217 780
The Group has an overdraft facility in certain currencies in respect of a pool
of bank accounts held with NatWest Bank plc.
The interest rate for all currency overdrafts is 1.8% over the relevant
currency base rate and the borrowings are secured by two debentures held over
the assets of the Group. Any drawdown of this facility is repayable on demand.
The Company and ECO Animal Health Limited have each given a guarantee to the
Group's bankers for the overdraft facility. The facility has a gross and net
limit of £5,000,000, which may be borrowed and repaid at will.
At 31 March 2022, the undrawn facility was £5,000,000 (2021: £5,000,000).
The Group put in place a £10m revolving credit facility with Natwest bank on
9 July 2022. This facility is interest bearing and can be drawn by the Group
on demand, The facility expires on 30 June 2026. This has been disclosed in
Note 33, Post Balance Sheet Events.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
22. Borrowings (continued)
Reconciliation of Lease Liabilities
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
Opening lease liabilities (1,522) (1,766) (39) (29)
New lease liabilities (672) (188) (37) (43)
Repayment 482 500 25 35
Lease liabilities interest (111) (122) (11) (11)
Disposal - 18 - 6
Foreign exchange (87) 36 - 3
Closing lease Liabilities (1,910) (1,522) (62) (39)
Current lease liabilities (397) (311) (13) (7)
Non-current lease liabilities (1,513) (1,211) (49) (32)
The Group leases a number of properties and motor vehicles in the
jurisdictions it operates in. At 31 March 2022 there were no termination or
extension options on leases.
The Group expensed £64,000 for the year ended 31 March 2022 (2021: £55,000)
for short term leases.
Group Leases Maturity
At 31 March 2022 the Group held the following number of leases in each of the
maturity categories below.
At 31 March 2022 Property Vehicle Other Total
Number Number Number Number
Up to 1 year 1 3 - 4
Between 1 - 5 years 9 2 1 12
Over 5 years 2 - - 2
Total number of leases 12 5 1 18
Average remaining lease term (in years) 6.5 1.6 4.7 4.9
At 31 March 2021 Property Vehicle Other Total
Number Number Number Number
Up to 1 year 5 5 3 13
Between 1 - 5 years 2 5 - 7
Over 5 years 2 - - 2
Total number of leases 9 10 3 22
Average remaining lease term (in years) 7.1 1.3 0.7 3.6
The weighted average incremental borrowing rate applied to lease liabilities
recognised in the statement of financial position was 7.49% at 31 March 2022
(2021: 7.20%).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
Borrowings (continued)
Weighted average incremental borrowing rate:
Group 2022 2021
Property 6.25% 5.9%
Vehicle 29.0% 29.0%
Other 4.0% 4.0%
Weighted average 7.49% 7.2%
Amounts payable under lease arrangements for the Group
The undiscounted contractual cash flows payable under the existing lease
arrangements at 31 March are analysed into the following maturity categories.
Group 2022 2021
£000's £000's
Up to 1 year 523 415
Between 1 - 5 years 1,104 768
Over 5 years 1,391 768
Total 3,018 1,951
23. Provisions
Group Personnel related litigation matters Overseas tax liabilities Total
£000's £000's £000's
At 31 March 2020 - 1,128 1,128
Charge for the year through income statement - 970 970
Foreign exchange - (316) (316)
At 31 March 2021 - 1,782 1,782
Charge for the year through income statement 456 1,003 1,459
Foreign exchange - 634 634
At 31 March 2022 456 3,419 3,875
Provisions include an amount of £456,000 in respect of personnel related
litigation matters. Management has assessed the range of possible outcomes to
these claims and the provision made represents a best estimate and is
mid-range of the possible outcomes, having taken legal advice. ECO
management is vigorously defending the claims and the timing of any settlement
is uncertain due to the varying nature of the claims and the availability of
the relevant courts if required.
Provisions also include an amount of £3,419,000. in respect of overseas tax
liabilities. The Group has estimated the total liabilities that may be due. As
the Group has only recently become aware of the liability, it has yet to
confirm the exact amounts that may be payable and it is not clear when a
settlement of these obligations will occur, however precedent suggests that
this may be up to 7 years.
24. Pension and other post-retirement benefit commitments
Defined Contribution Pension Scheme
The Group operates defined contribution pension schemes. The assets of the
schemes are held separately from the Group and independently administered by
insurance companies. The pension cost charge represents contributions payable
to the funds in the year and amounted to £96,850
(2021: £105,000).
Defined Benefit Pension Scheme
The Group operates a defined benefit scheme in the UK for a number of
ex-employees which is closed to new members. A full actuarial valuation was
carried out at 6 April 2021 and updated to 31 March 2022 for IAS 19 purposes
by a qualified independent actuary. The major assumptions used by the actuary
were:
31-Mar 31-Mar
2022 2021
Discount rate 2.75% 1.90%
Pension revaluation 3.95% 3.40%
Inflation assumption with a maximum of 5% p.a. 3.95% 3.40%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
24. Pension and other post-retirement benefit commitments
(continued)
Mortality rates
No pre-retirement mortality is assumed (2021: none). Post retirement mortality
is based on 100% of the SAPS "S2" normal tables, based on the members' year of
birth, improving in line with CMI 2021 projections with a 1.25% long term
trend rate (2021: 1.25%).
Under these mortality assumptions, the expected future lifetime for a member
retiring at age 65 at the year-end would be 22.2 years for males (2021: 22.1
years) and 24.3 years for females (2021: 24.2 years). For members retiring in
20 years' time, the expectation of life would be 23.5 years for males (2021:
23.4 years) and 25.8 years for females (2021: 25.7 years).
The weighted average term of the liabilities is 11 years (2021: 10 years).
The scheme is exposed to a number of risks including:
§ Interest rate risk: Movements in the discount rate used could affect the
present value of the defined benefit pension obligations.
§ Longevity risk: Changes in the estimated mortality rates of former
employees could affect the present value of the defined benefit pension
obligations.
§ Investment risk: Variations in the actual return from the scheme's
investments could affect the scheme's ability to meet its future pension
obligations
2022 2021
£000's £000's
Assets at start of year 1,795 1,787
Defined benefit obligation at start of year (1,799) (1,814)
Net (liability) at 1 April (4) (27)
Return on assets 33 42
Interest cost (33) (42)
Past service cost - (4)
- (4)
Gain/(loss) on asset return (5) (4)
(Loss)/gain on changes in assumptions 29 (28)
Statement of other comprehensive income 24 (32)
Employer contributions (gross) 59 59
Net asset/(liability) at 31 March 79 (4)
Actual assets at end of year 1,648 1,795
Actual defined benefit obligation at end of year (1,569) (1,799)
Gain/(loss) on changes in assumptions was nil (2021: £3,000 gain) relating to
changes in demographic assumptions and a gain of £29,000 (2021: £31,000
loss) relating to changes in financial assumptions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
24. Pension and other post-retirement benefit commitments
(continued)
The pension fund assets (principally made up of annuities for the benefit of
active pensioners) are all held within a policy managed by an insurance
company regulated by the Financial Conduct Authority of the United Kingdom and
the United Kingdom Pensions Regulator. By law, the trustees are required to
act in the best interests of participants to the schemes. Responsibility for
governance of the plans - including investment decisions and contributions
schedules lies with trustees.
Reconciliation of changes in the asset value during the year
2022 2021
£000's £000's
Fair value of assets at 1 April 1,795 1,787
Return on assets 33 42
Gain/(loss) on asset return (5) (4)
Employer contributions (gross) 59 59
(Decrease)/increase in secured pensioners' value due to scheme experience (234) (89)
Benefits paid - -
Fair value of assets at 31 March 1,648 1,795
Reconciliation of changes in the liability value during the year
Defined benefit obligation at 1 April 1,799 1,814
Interest cost 33 42
Past service cost - 4
(Gain)/loss on changes in assumptions (29) 28
(Decrease)/increase in secured pensioners' value due to scheme experience (234) (89)
Benefits paid - -
Defined benefit obligation at 31 March 1,569 1,799
The amount of annual contribution to be paid by the employer of £59,000
(2021: £59,000) is expected to continue until December 2022.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
24. Pension and other post-retirement benefit commitments
(continued)
Year ended 31 March 2022 2021 2020 2019 2018
£000's £000's £000's £000's £000's
Fair value of plan assets 1,648 1,795 1,787 1,802 2,503
Present value of defined benefit obligation 1,569 1,799 1,814 1,899 2,603
(Deficit)/Surplus in plan 79 (4) (27) (97) (100)
Experience (losses)/gains on plan liabilities - - (2) (38) (7)
Plan Assets
2022 2021
£000's £000's
Assets under management 259 205
Annuities 1,389 1,590
Total 1,648 1,795
Assets under management composition
2022 2021
Corporate Bonds 42.6% 43.4%
Overseas Equities 27.7% 28.4%
UK Equities 17.8% 17.8%
Property 10.5% 8.9%
Cash 1.4% 1.2%
Derivatives - 0.3%
Gilts - -
100.0% 100.0%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
24. Pension and other post-retirement benefit commitments
(continued)
Defined benefit obligation - sensitivity analysis
The following amounts are the effect (on the defined benefit obligation) of
reasonably possible changes to the key actuarial assumptions, as required by
IAS 19.
Actuarial assumptions - Reasonably Possible Change (Decrease)/Increase in Defined Benefit Obligation
2022 2021
£000's £000's £000's £000's
Discount rate: +/- 0.1% (15) 15 (20) 20
Members' life expectancy: +/- 1 year (81) 84 (100) 100
The above sensitivity analyses are based on a change in an assumption while
holding all other assumptions constant. In practice, this is unlikely to
occur, and changes in some of the assumptions may be correlated. When
calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions the same method (present value of the defined benefit
obligation calculated with the projected unit credit method at the end of the
reporting period) has been applied as when calculating the defined benefit
liability recognised in the Statement of financial position.
The methods and types of assumptions used in preparing the sensitivity
analysis did not change compared to the prior period.
The Company has given a floating charge dated 1 December 2006 over all of its
assets to the trustees of the pension fund to secure all present and future
obligations and liabilities to the pension fund.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
25. Share-based payments
The expense recognised for share-based payments made during the year is shown
in the following table:
Group Company
2022 2021 2022 2021
£000's £000's £000's £000's
Total expense arising from equity settled share-based payments transactions 342 123 120 8
The share-based payment plans are described below:
Movements in issued share options during the year
The following table illustrates the number and weighted average exercise
prices (WAEP) of, and movements in, share options during the period:
Options Options
2022 2022 2021 2021
000's WAEP (£) 000's WAEP (£)
Outstanding at 1 April 3,370 3.73 3,519 3.68
Granted during the year - Employee scheme 327 3.50 - -
Granted during the year - LTIPs 279 0.05 - -
Granted during the year - Deferred bonus 38 0.05 - -
Cancelled during the period (122) 2.01 - -
Exercised during the period (26) 2.42 (149) 2.54
Outstanding at 31 March 3,866 3.47 3,370 3.73
3,223,400 options were exercisable at 31 March 2022 (2021: 3,004,500). The
WAEP of exercisable options at 31 March 2022 was 381.0p (2021: 372.0p).
The average share price during the year was 272.4p (2021: 253.1p).
The maximum aggregate number of shares over which options may currently be
granted cannot exceed 10% of the nominal share capital of the Company on the
grant date. The options outstanding at 31 March 2022 had a weighted average
exercise price of £3.47 (2021: £3.73) and a weighted average remaining
contractual life of 2.8 years (2021: 2.6 years).
ECO Animal Health Group plc Executive Share Option Scheme
In accordance with the Executive Share Option Scheme, approved and unapproved
share options are granted to Directors and employees who devote at least 25
hours per week to the performance of duties or employment with the Company.
326,679 share options have been granted in the year under this scheme (2021:
none). In addition 278,500 options have been issued under the group's Long
Term Incentive Plan (2021: none) and 37,755 under the group's deferred bonus
arrangements (2021: none).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
25. Share-based payments (continued)
The exercise price of the options is equal to the market price of the shares
at the date of grant. The options vest three years from the date of grant and
if the option holder ceases to be a Director or employee of the Company due to
injury, disability, redundancy or retirement on reaching pensionable age or
any other age at which they are bound to retire at in accordance with the
terms of their contract of employment, the option may be exercised within a
period of six months after the option holders so ceasing, although the Board
may, at its discretion, extend this period by up to 36 months after the date
of cessation.
If the option holder ceases employment for any other reason, the option may
not be exercised unless the Board permits. The approved and unapproved options
will be forfeited where they remain unexercised at the end of their respective
contractual lives of ten and seven years respectively.
An analysis of the expiry dates of the outstanding options at 31 March 2022 is
given below:
Date of grant Unapproved Approved Exercise price Expiry date
09 October 2013 11,100 £ 1.960 09 October 2023
21 August 2014 14,400 £ 1.615 21 August 2024
13 February 2015 34,500 £ 2.005 13 February 2025
26 August 2015 24,850 £ 2.650 26 August 2025
26 August 2015 511,650 £ 2.650 26 August 2022
18 December 2015 600,000 £ 3.125 18 December 2022
19 January 2016 10,200 £ 3.150 19 January 2026
19 January 2016 240,800 £ 3.150 19 January 2023
17 February 2016 19,600 £ 3.125 17 February 2026
17 February 2016 400 £ 3.125 17 February 2023
01 March 2016 9,600 £ 3.125 01 March 2026
01 March 2016 40,400 £ 3.125 01 March 2023
12 September 2016 25,100 £ 4.325 12 September 2026
12 September 2016 423,900 £ 4.325 12 September 2023
15 September 2016 5,900 £ 4.350 15 September 2026
15 September 2016 544,100 £ 4.350 15 September 2023
21 September 2017 53,475 £ 6.200 21 September 2027
21 September 2017 287,525 £ 6.200 21 September 2024
12 April 2018 3,900 £ 5.450 12 April 2028
23 October 2018 75,200 £ 3.800 23 October 2028
23 October 2018 276,800 £ 3.800 23 October 2025
19 December 2018 7,800 £ 3.800 19 December 2028
19 December 2018 2,200 £ 3.800 19 December 2025
28 April 2021 326,679 £ 0.050 28 April 2031
28 April 2021 154,149 £ 3.495 28 April 2031
28 April 2021 124,351 £ 3.495 28 April 2028
24 September 2021 37,755 £ 0.050 24 September 2031
3,416,560 449,774
The market price of the shares at 31 March 2022 was 165.0p (2021: 322.5p) with
a range in the year of 127.5p to 395.0p (2021: 198.0p to 371.0p).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
25. Share-based payments (continued)
The Company uses a Black-Scholes model to value share-based payments for
options with service conditions and/or non-market performance conditions and
the following table lists the inputs to this model for the last five years.
2022 2021 2020 2019 2018
Vesting period (years) 3 - 4 n/a n/a 3 3
Option expiry (years) 7 - 10 7 - 10 7 - 10
Dividends expected on the shares 1.00% 1.90% 1.10%
Risk free rate (average) 0.18% 1.00% 1.00%
Volatility of share price 40% 20.00% 20.00%
Weighted average fair value (pence) 101.0 - 316.0 51.0 98.6
The risk-free rate has been based on the yield from UK Government Treasury
coupons. The volatility of the share price was estimated based on standard
deviation calculations on the historic share price.
Long term incentive plan
Under this plan share options may be granted to certain Executive Directors
and members of the Company's Executive Leadership Team. The share options
awarded under the LTIP are subject to an exercise price of £0.05 per share
and performance conditions being achieved that have been set by the
Remuneration Committee and relate to total shareholder return (TSR) and
research and development targets.
Subject to the performance conditions being met, the share Options will vest
after the end of a three year vesting period from 1 April 2021 to 31 March
2024. The proportion of share options relating to each performance condition
is: (i) 75% in relation to the TSR conditions; and (ii) 25% in relation to the
R&D targets.
The TSR conditions mean that the share options subject to these conditions
will vest subject to the following: (i) 25% of the share options will vest if
the annual compound TSR over the performance period equals 7.5% ; (ii) 50% of
the share options will vest if the annual compound TSR over the performance
period equals 10% ; and (iii) 100% of the share options will vest if the
annual compound TSR over the performance period equals 20% .
The R&D targets mean that the share options subject to these targets will
vest subject to the following: (i) 25% of the shares options will vest if
specified R&D targets agreed between Executive Management and the
Remuneration Committee during the performance period are achieved; and (ii)
100% of the shares options will vest if specified R&D targets agreed
between Executive Management and the Remuneration Committee during the
performance period are achieved.
A Monte Carlo simulation model has been used to value these share options.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
26. Share capital
2022 2021
£000's £000's
Authorised
68,100,000 ordinary shares of 5p each 3,405 3,405
10,790 deferred ordinary shares of 10p each 1 1
32,334 convertible preference shares of £1 each 32 32
3,438 3,438
Allotted, called up and fully paid
67,721,916 (2021: 67,696,416) ordinary shares of 5p each 3,381 3,379
During the year 25,500 shares were issued at a premium of £61,000 as a result
of the exercise of options by employees. (2021: 148,790 shares at a premium of
£367,000).
All share issued are non-redeemable and rank equally in terms of voting rights
(one vote per share); rights to participate in all approved dividend
distribution for that class of shares; and right to participate in any capital
distribution on winding up.
The shares in the original or any increased capital of the Company may be
issued with such preferred, deferred or other special rights or restrictions,
whether in regard to dividend, voting, return of capital as the Company may
from time to time determine.
27. Non-controlling (minority) interests
Group
2022 2021
£000's £000's
Balance as at 1 April 13,414 5,766
Share of subsidiary's (loss)/profit for the year (19) 8,491
Share of foreign exchange gain/(loss) on net investment 1,099 (281)
1,080 8,210
Share of dividend paid by subsidiary (2,210) (562)
Balance as at 31 March 12,284 13,414
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
28. Other reserves
The Group and Company held a Capital redemption reserve of £106,000 as at
31 March 2022 (2021: £106,000).
Included in the Group's foreign exchange reserve are the following exchange
movements on consolidation of the subsidiaries and joint operations listed
below:
At Movement in the year At
31 March 2021
31 March 2022
£000's £000's £000's
In respect of:
Zhejiang ECO Biok Animal Health Products Limited 635 750 1,385
Zhejiang ECO Animal Health Limited - 186 186
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda 131 180 311
ECO Animal Health Japan Inc. 4 10 14
ECO Animal Health USA Corp. 88 (37) 51
ECO Animal Health de Mexico, S. de R. L. de C. V. 226 11 237
Pharmgate LLC 8 (4) 4
Foreign exchange reserve movements charged to Consolidated Statement of 1,092 1,096 2,188
Comprehensive Income
29. Directors' emoluments
2022 2021
£000's £000's
Emoluments for qualifying services 793 1,086
Company pension contributions to money purchase schemes 32 34
Share-based payments 112 1
Benefits in kind 4 5
941 1,126
During the year no directors exercised share options (2021: none) realising a
gain of £nil (2021: £nil).
The highest paid director received £430,000 (2021: £541,000) including
£65,000 (2021: £1,000) of share-based payments and £9,000
(2021: £10,000) of pension contributions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
30. Employees
Number of employees
The average number of employees (including Directors) during the year was:
2022 2021
Number Number
Directors 5 5
Production and development 72 66
Administration 49 48
Sales 95 88
221 207
Employment costs (including amounts capitalised)
2022 2021
£000's £000's
Wages and salaries 12,251 13,776
Share-based payments 341 123
Social security costs 1,185 863
Other pension costs 277 105
14,054 14,867
31. Related party transactions
In the year ended 31 March 2021, former director Julia Trouse repaid £322,109
to the group following an internal audit investigation on unauthorised cash
withdraws. This was recognised as other income in the group's consolidated
income statement of the same period.
During the year Mr P Lawrence (a significant shareholder) and his family
received dividends to the value of £2,926 (2021: £nil).
The other Directors and their families received dividends to the value of
£nil (2021: £nil).
Interest and management charges from Parent to the other Group companies
During the year the Company made management charges on an arm's length basis
to ECO Animal Health Limited amounting to £687,267 (2021: £775,000) and
charged interest of £832,000 (2021: £875,000) to the subsidiary company.
Both of these transactions were made through the inter-company account and
were eliminated on consolidation.
During the year Zhejiang ECO Biok Animal Health Products Limited paid
dividends of £176,717 (RMB 1,489,600) to ECO Animal Health Group plc (2021:
£45,000) and £2,122,406 (RMB 17,890,400) to ECO Animal Health Limited (2021:
£540,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
Related party transactions (continued)
Key management compensation
The Group regards the Board of Directors as its key management.
2022 2021
£000's £000's
Salaries and short-term benefits 797 1,091
Retirement benefits 32 34
Share-based payments 112 1
941 1,126
The number of Directors for which retirement benefits were accruing was 2
(2021: 2).
32. Financial instruments
The Group uses financial instruments comprising borrowings, cash and cash
equivalents and various items, such as trade receivables, trade payables etc.
that arise directly from its operations. The main purpose of these financial
instruments is to raise finance for the Group's operations. The Directors are
responsible for the overall risk management.
The main risks arising from the Group's use of financial instruments are
capital and liquidity risk, credit risk and foreign currency risks and they
are summarised below. The policies have remained unchanged throughout the
year.
Capital and liquidity risk
The Group manages its capital to ensure continuity as a going concern whilst
maximising returns through the optimisation of debt and equity. As part of
this, the Board considers the cost and risk associated with each class of
capital. The capital structure of the Group consists of cash and cash
equivalents in note 20, borrowings in note 22 and equity attributable to
equity holders of the parent comprising issued capital, reserves and retained
earnings as disclosed in the Group's statement of changes in equity.
Liquidity risk is managed by maintaining adequate reserves and banking
facilities with continuous monitoring of the latest developments by
management.
The Group's objectives when maintaining capital are:
- to safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for shareholders and
benefits for other stakeholders; and
- to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
32. Financial instruments (continued)
The Group sets the amount of capital it requires in proportion to risk. The
group manages its capital structure and makes adjustments to it in the light
of changes in economic conditions and the risk characteristics of the
underlying assets. In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares, or sell assets to reduce debt.
As an AIM quoted company, our governance framework is underpinned by the AIM
Rules and the Quoted Companies Alliance (QCA) Corporate Governance Code 2018
(the 'QCA Code'). In addition to the QCA Code, we monitor developments and
guidance in the UK Corporate Governance Code, applicable to main market listed
companies, to keep abreast of matters which we feel could also be embedded as
best practice as part of a progressive approach. We also review the Investment
Association guidelines and seek to comply with these where applicable.
At 31 March 2022, the Group was contractually obliged to make repayments as
detailed below:
2022 2021
Within one year or on demand £000's £000's
Trade payables 9,415 7,918
Other payables 926 683
Accruals 2, 3,765
12,751 12,366
Credit Risk
Credit risk is that of financial loss as a result of default by a counterparty
on its contractual obligations. The Group's exposure to credit risk arises
principally in relation to trade receivables from customers and on short term
bank deposits. Customers' creditworthiness is wherever possible checked
against independent rating databases and filing authorities, or otherwise
assessed on the basis of trade knowledge and experience. Exposure and customer
credit limits are continually monitored both on specific debts and overall.
The credit risk in relation to short term bank deposits is limited because the
counterparties are banks with good credit ratings.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
32. Financial instruments (continued)
The Group operates in certain geographical areas which are from time to time
subject to restrictions in the free movement of funds. The Board seeks to
minimise the Group's exposure to these markets but the nature of our business
makes it impossible to eliminate this exposure completely.
None of those receivables has been subject to a significant increase in credit
risk since initial recognition and, consequently, 12-month expected credit
losses have been recognised, and there are no non-current receivable balances
lifetime expected credit losses.
Currency risk
The Group operates in overseas markets particularly through its subsidiaries
in China, Brazil, Mexico, the USA and Japan as well as its joint operation in
Canada and is therefore subject to currency exposure on transactions
undertaken during the year. The Group does some simple economic hedging of
receivables when the Board feels it is appropriate to do so and foreign
exchange differences on retranslation of foreign monetary items are recorded
in administrative expenses in the income statement.
The table below shows the extent to which the Group companies have monetary
assets and liabilities in currencies other than in Sterling
US Dollar Euros Chinese RMB Japanese Yen Brazilian Real Canadian Dollar Mexican Peso Other
2022 £000's £000's £000's £000's £000's £000's £000's £000's
Trade and other receivables 9,027 2,068 6,789 123 1,964 806 2,648 108
Trade and other payables (3,912) (425) (4,701) (158) (97) (426) (350) (67)
Cash and cash equivalents 4,752 366 8,261 120 145 208 311 92
Total 9,867 2,009 10,349 85 2,012 588 2,609 133
US Dollar Euros Chinese RMB Japanese Yen Brazilian Real Canadian Dollar Mexican Peso Other
2021 £000's £000's £000's £000's £000's £000's £000's £000's
Trade and other receivables 8,063 1,749 17,783 160 359 533 1,849 175
Trade and other payables (3,773) (757) (5,273) (64) (74) (498) (87) (134)
Cash and cash equivalents 2,331 248 14,140 271 1,165 305 217 58
Total 6,621 1,240 26,650 367 1,450 340 1,979 99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
32. Financial instruments (continued)
At 31 March 2022 the Group was mainly exposed to the US Dollar, Euro, Chinese
RMB, Japanese Yen, Brazilian Real, Canadian Dollar and Mexican Peso. The
following table details the effect of a 10% movement in the exchange rate of
these currencies against sterling when applied to outstanding monetary items
denominated in foreign currency as at 31 March 2022.
2022 2021
£000's £000's
U S Dollar 1,096 736
Euro 223 138
Chinese RMB 1,150 2,961
Japanese Yen 9 41
Brazilian Real 224 161
Canadian Dollar 65 38
Mexican Peso 290 220
Analysis of financial instruments by category
Group Financial assets Financial liabilities Total
2022 £000's £000's £000's
Trade and other receivables 24,048 - 24,048
Cash and cash equivalents 14,314 - 14,314
Trade and other payables - (12,801) (12,801)
Amounts due under leases - (1,910) (1,910)
2021 £000's £000's £000's
Trade and other receivables 31,526 - 31,526
Cash and cash equivalents 19,523 - 19,523
Trade and other payables - (12,416) (12,416)
Amounts due under leases - (1,522) (1,522)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2022
32. Financial instruments (Continued)
Analysis of financial instruments by category (continued)
Company
Financial assets Financial liabilities Total
2022 £000's £000's £000's
Trade and other receivables 128 - 128
Cash and cash equivalents 279 - 279
Trade and other payables - (376) (377)
Amounts due under leases - (62) (62)
Amounts due from group undertakings 53,940 - 53,940
2021 £000's £000's £000's
Trade and other receivables 69 - 69
Cash and cash equivalents 819 - 819
Trade and other payables - (574) (574)
Amounts due under leases - (39) (39)
Amounts due from group undertakings 55,909 - 55,909
All financial assets and liabilities in the Group's and Company's statements
of financial position are classified as held at amortised cost for both the
current and previous year.
33. Post balance sheet events
Valuation of investment property in Mitcham
The Group agreed in principle to sell the investment property located at
Western road, Mitcham for around £227,000. As at 31 March 2022 the carrying
value of the property has been reduced from £305,000 to £227,000 with a
corresponding expense in the Group's income statement.
Retirement of the Chief Executive Officer and appointment of a new Chief
Executive Officer
Marc Loomes, who joined ECO Animal Health Group plc in 2004, became Managing
Director in 2005 and CEO in 2010, stepped down on 1 April 2022. David Hallas
joined ECO Animal Health Group plc as CEO on 1 April 2022.
Establishment of Revolving Credit Facility
The Group put in place a £10m revolving credit facility with Natwest bank on
9 July 2022. This facility is interest bearing and can be drawn by the Group
on demand, The facility expires on 30 June 2026.
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
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR DBGDIUSXDGDGRecent news on ECO Animal Health
See all newsREG - Eco Animal Health Gp Schroders PLC - Holding(s) in Company
AnnouncementREG - Eco Animal Health Gp - Director/PDMR Shareholding
AnnouncementREG - Eco Animal Health Gp - Trading Update
AnnouncementREG - Eco Animal Health Gp - R&D Day
AnnouncementREG - Eco Animal Health Gp - Submission of Marketing Authorisation Application
Announcement