REG - Eco Animal Health Gp - Final Results
15/07/2024 07:00
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RNS Number : 3150W Eco Animal Health Group PLC 15 July 2024
15 July 2024
ECO Animal Health Group plc ("ECO", the "Company" or the "Group")
(AIM: EAH)
Results for the year ended 31 March 2024
HIGHLIGHTS
Financial
· Revenue in-line and adjusted EBITDA ahead of market expectations
· Group sales increased by 5% to £89.4m
o North America growth 22%
o Latin America growth 10%
· Constant currency revenue increased by 11% to £94.5m
· North America, Latin America contributing a growing share of Group
revenues
· Gross margin declined to 42% (2023: 45%) due to currency
volatility
· Adjusted EBITDA increased to £8.0m (2023: £7.2m)
· Adjusted EBITDA margin improved to 9.0% (2023: 8.5%)
· Research and development expenditure £8.3m (2023: £8.3m), as
planned
· Earnings per share 1.55p (2023: 1.49p)
· Net cash at the end of the period £22.4m (2023: £21.7m),
reinforcing the Group's strong balance sheet with 36% of cash held outside
China (2023: 19%)
· RCF facility (£10m) and overdraft (£5m) available and undrawn
Operational
· Aivlosin(®) demand continues to be robust in key markets, with
particular strength in the Americas
· The Group has continued to streamline its operating structure and
pipeline focus with the disposal of Ecomectin(®) Horsepaste to ACME Drugs
S.r.l in Italy for €1.3m
· Continuing positive progress towards regulatory filing for
poultry mycoplasma vaccine ECOVAXXIN(®), on track for first launch in 2025
· Broader progress across R&D pipeline, with 9 products
expected to reach US and EU approval in the next 5 - 6 years
Post year end highlights
· Targeted recruitment underway to support commercial growth
· Appointment of two distribution partners in South East Asia to
support commercial operation
· Continued progress in building regulatory approval/label
extension for Aivlosin(®)
David Hallas, Chief Executive Officer of ECO Animal Health Group plc,
commented: "These results show that ECO continues to maintain a robust market
leading position with Aivlosin(®) while at the same time positioning itself
well for future growth with a launch of its first product in the
ECOVAXXIN(®), poultry vaccine portfolio. ECOVAXXIN(®) launches are expected
to commence from 2025 with a broader portfolio of next-generation animal
health products being rolled out in future years. We are seeing robust growth
in a number of our key territories and despite continuing volatility in
currency, we have generated EBITDA above market forecasts at year end.
"Our focus is on supporting our core business while investing prudently in
R&D pipeline which is our growth engine, and these results show us
achieving these key objectives. We're cautiously encouraged by trading as we
move into the 2025 financial year, despite continuing volatility in currency,
with robust activity in key markets. We look forward to what we believe will
be another year of positive momentum in core markets as we start to
crystallise our R&D efforts."
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 Officer)
Christopher Wilks (Chief Financial Officer)
ICR Consilium (Financial PR) 020 3709 5700
Mary-Jane Elliott
Jessica Hodgson
Singer Capital Markets (Nominated Adviser and Joint Broker)
Philip Davies 020 7496 3000
Sam Butcher
Investec (Joint Broker)
Gary Clarence 020 7597 5970
Lydia Zychowska
Equity Development 020 7065 2692
Hannah Crowe
Matt Evans
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S COMBINED STATEMENT
FOR THE YEAR ENDED 31 MARCH 2024
Overview
ECO Animal Health Group plc strives to provide best in class, scientifically
validated, ethical solutions to optimise the health, productivity and
wellbeing of pigs and poultry. We are pleased to report on another positive
year for the Group, with growing revenues and profitability driven by
sustained demand for our products in key territories. This has been achieved
despite currency headwinds and volatility that have impacted our sector
globally throughout the period, influenced by several factors including
fluctuations in pork prices in Asia and inflationary pressure. We are
especially pleased to have maintained financial momentum and growth while
continuing to invest heavily in our promising R&D pipeline, which we
believe has significant potential to drive future growth and value for
shareholders.
Strong product sales and robust profitability
Total revenues for the period increased to £89.4m (2023: £85.3m), benefiting
from strong performance in the second half of the year. This was driven
primarily by the growth of sales of Aivlosin(®), the Group's patented
antimicrobial used under veterinary prescription for the treatment of
economically important respiratory and gastrointestinal diseases in pigs and
poultry. Aivlosin(®) saw sales of £82.4m, an increase of 9% compared to last
year (2023: £75.9m). Sales of our parasite solution range, Ecomectin(®) were
£3.3m (2023: £3.6m) with sales of all other products of £3.7m (2023:
£5.8m).
ECO generated particularly strong growth in North America +22% with the USA
performing robustly, Latin America +10% where Brazil and Mexico grew +13% and
+11% respectively. South and South East Asia delivered +4% growth. The
presence of ECO in all major swine and poultry producing countries globally
helps to mitigate the impact from individual market conditions.
Gross margin was at 42.1% (2023: 45.0%), impacted by currency movements.
EBITDA increased to £8.0m (2023: £7.2m).
Research and development pipeline and regulatory progress
The Board has dedicated significant efforts to the progression of the Group's
R&D pipeline, which we believe will be a critical driver of future
growth. We are pleased with the progress made across the portfolio, having
committed substantial investment into R&D throughout the year, with £8.3m
spent this year (2023: £8.3m), the increased spend reflecting the clinical
and regulatory costs of our maturing late-stage projects.
As part of our strategy of advancing our R&D pipeline, we received
trademark approval for the ECOVAXXIN(®) family in the EU, offering extensive
protection in key markets for animal health products including the first two
planned products, ECOVAXXIN(®) MS, a vaccine against Mycoplasma synoviae, and
ECOVAXXIN(®) MG, a vaccine against Mycoplasma gallisepticum. This supports
ECO's plan for multiple product launches and sales growth in key territories,
expected to commence in 2025 and continue over the next decade.
Over the period the Group reported key regulatory progress. We received
notification from the U.S. Department of Agriculture that we had successfully
completed key safety studies for our future ECOVAXXIN(®) MS poultry product.
We also received additional label claims for Aivlosin(®) in the key US and
Canadian markets, having received a new 'sow safety' indication from the US
Food & Drug Administration (FDA) with female swine intended for breeding,
opening another market segment.
In addition, having engaged and worked alongside an experienced Contract
Manufacturing Organisation (CMO) we have further advanced our new biological
products including ECOVAXXIN(®) MS and MG.
Collaborations and partnerships
With strong partnerships and collaborations with prestigious institutions, the
Group is well poised to further enhance its R&D programme and we look
forward to updating the market with our progress.
Disposal of non-core assets
During the period we disposed of freehold properties including our former
registered office in New Malden and another freehold property in Mitcham. This
has freed resources and given us additional capital to further advance the
Group's growth aspirations, including a share buyback programme, to cover
possible future vesting of employee share-based incentives.
Post period we successfully disposed of our non-core product line
Ecomectin(®) Horsepaste to ACME Drugs S.r.l. in Italy for a total
consideration of €1.3m (£1.1m). In addition, ACME Drugs S.r.l. has
purchased the stock on hand at cost and taken over fulfilment of the current
order book. This will allow ECO to continue to focus on its core product range
of treatment and prevention of disease in pigs and poultry, and further
advance the Group's R&D pipeline.
People
On behalf of the Board we would like to thank our team across the globe for
their hard work and commitment over the year. Our staff have shown great
professionalism and ingenuity in supporting our customers, partners and other
stakeholders during what has been another successful year.
The wellbeing of our staff is our highest priority. Our inaugural Group-wide
engagement survey undertaken last year was a great success and the feedback
received has enabled us to implement a number of initiatives to benefit our
staff, the working environment at ECO and the business as a whole. We are
pleased that the second survey, undertaken this year, has shown a improvement
in the overall satisfaction of our employees. We look forward to building on
this momentum over the coming years. We were also pleased to achieve the
highest possible ESG rating score with Integrum ESG.
In line with its ongoing strategy, the Group has continued to strengthen the
research and development and Commercial teams through strategic new hires
including strengthening our scientific, development and laboratory
capabilities and our geographic commercial reach.
Dividend
ECO's current investment strategy is to reinvest to support its exciting
R&D pipeline, which the Board believes will become the core driver of
revenue growth in the medium to long term and will create significant
shareholder value. As such, no dividend will be recommended in respect of the
year ended 31 March 2024. The Board keeps this under review as it recognises
the value of dividends to shareholders.
Outlook
Aivlosin(®) continues to perform robustly and to take market share in key
territories particularly North America, Latin America and India, which are
ahead of expectations and where we expect to continue to increase our market
share in the coming months. These fast-growing regions are contributing a
growing share of Group revenue. Meanwhile, there is evidence of an improvement
in the pork price in China. We maintain tight control on costs.
In line with our usual seasonal trading pattern, we currently expect financial
year 2025 to be second half weighted.
The Group continues to build a strong R&D pipeline from which we see the
potential to deliver medium and long-term growth. We expect the ECOVAXXIN(®)
pipeline to generate multiple product launches from 2025 and look forward to
updating the market as we advance towards launch.
Dr Andrew
Jones
David Hallas
Non-executive
Chairman
Chief Executive Officer
REPORT OF THE CHIEF FINANCIAL OFFICER
FOR THE YEAR ENDED 31 MARCH 2024
Introduction
I am pleased to report a further strong year of financial performance.
Operationally the business continues to deliver from a sound base of
increasing market share in robust markets, converting this operational
performance into strong cash flow, providing the required investment capital
to progress the research and development programme at pace and ushering in the
next phase of revenue and profit growth from new products.
I am proud of the support the finance team provided to the business; this is
very much an enabler of growth at the same time as undertaking the fundamental
custodianship which is inherent in the function.
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. This pattern of trading has continued in the year
ended 31 March 2024 with the second half accounting for 57% (2023: 59%) of the
annual revenue. The main contributors to the second half weight this year were
China/Japan with a 61% H2 weight and Latin America also with a 61% H2 weight.
The geographical analysis of revenue corresponding to the Group's operating
segments is as follows:
Revenue summary - actual exchange rates Year ended 31 March
2024 2023 % change
(£'m) (£'m)
China and Japan 24.7 26.4 (6%)
North America (USA and Canada) 18.5 15.2 22%
South and Southeast Asia 17.4 16.8 4%
Latin America 19.9 18.1 10%
Europe 6.5 6.1 7%
Rest of World and UK 2.4 2.7 (11%)
89.4 85.3 5%
All markets showed revenue growth year on year except for the China/Japan
segment and Rest of World. As noted in our interim report, the exchange
rates in the first half proved to be a headwind; in the second half of our
financial year the exchange rates were more consistent with the prior year.
The geographical analysis of revenue on a constant currency basis is as
follows:
Revenue summary - constant currency Year ended 31 March
2024 2023 % change
(£'m) (£'m)
China and Japan 26.8 26.4 2%
North America (USA and Canada) 19.4 15.2 28%
South and Southeast Asia 18.2 16.8 8%
Latin America 20.9 18.1 15%
Europe 6.7 6.1 10%
Rest of World and UK 2.5 2.7 (7%)
94.5 85.3 11%
China revenue on a constant currency basis declined by 3% (£0.7m) but this
decline was compensated by very strong trading in Japan (an increase of £1.2m
year on year). The China revenue performance was reasonable when set against
the backdrop of continued poor commodity prices - pork prices below cost of
production for 10 out of 12 months of the year. The strength in the Japanese
market arose from increased usage of Aivlosin® by the primary customer
complemented by business with other, new, customers.
At £18.5m (constant currency £19.4m), North America recorded its greatest
revenue in a single financial year. The previous highest revenue was £16.4m
in the year ended 31 March 2022. The strength in this market arose from
market share gains and was achieved despite depressed pork prices and producer
margins.
South and South East Asia revenue growth was 4% (15% on a constant currency
basis) compared with the average growth rate of 36% since March 2021. The
demand in India for Aivlosin® to support the poultry industry continues to
buoy this market, Thailand and Vietnam are demonstrating sustained strength
and Philippines and Indonesia remain as untapped opportunity.
Latin America, comprises Brazil and Mexico (where the Group operates through
wholly owned subsidiaries) and a group of other countries in South America
where trade is conducted through exclusive distribution arrangements. Brazil
has seen particularly strong trading in the year ended 31 March 2024 - 13% and
Mexico grew by 11% in the year. Argentina and Columbia made up the majority
of the balance of Latin America where the growth was a more modest 5%.
The European market segment is dominated by sales into Spain - £1.8m (2023:
£1.2m) and Poland - £1.3m (2023: £1.0m). Spain accepted the resumption of
sales of Aivlosin® Pre-Mix formulation in the period, reversing a hiatus in
sales of this product in the year ended 31 March 2023.
Sales into the UK at £1m (2023: £1.3m) declined due to the termination in
sales of Ecomectin(®) pour-on formulation. An increase in manufacturing
costs made this product no longer viable in the UK and Ireland markets.
Gross margins were 42.1% in the year ended 31 March 2024 (2023: 45.0%). This
decline in gross margins arose in the main from the foreign exchange impact of
Sterling compared with the US Dollar and the Chinese Yuan. As noted above, on
a constant currency basis the revenues for the year are £94.5m; recalculating
the gross margin based on constant currency revenue would provide a gross
margin of 45.3%. The foreign exchange effect on cost of sales (a
corresponding benefit) was offset by geographical mix effects and depreciation
of the Chinese manufacturing plant (now included within cost of sales - prior
year was part of administrative expenses). As anticipated in our interim
report for the six months ended 30 September 2023, there was a partial
recovery in the gross margins in the second half of the financial year from
40.8% to 42.1% for the full year.
During the financial year a programme of foreign exchange hedging was
implemented. This comprised a layering of four forward contracts covering the
four successive financial quarters and a portion of the anticipated US Dollar
generation. On a quarterly basis these forward contracts are supplemented by
additional layers, thus providing an averaging effect to the US Dollar-
Sterling exchange rate. The hedging policy provides protection to net
profit, earnings per share and cash but has no effect on gross profit or gross
margin because the gains and losses are accounted for in finance costs.
Administrative expenses, at £29.4m (2023: £27.9m), showing a 5% overall
increase, were controlled through the course of the year. Increases of 8% in
personnel costs and 17% in marketing were offset by savings in legal, audit
and professional costs.
All R&D programmes progressed well during the year and previously
capitalised R&D remained in good standing at the year end with no
indications of impairment. The two mycoplasma projects for vaccination of
poultry continued to be capitalised; all incurred costs continuing to meet the
tests for capital treatment in the accounts.
Total cash expenditure on R&D (inclusive of that amount capitalised) in
the year was £8.3m (2023: £8.3m). The total expenditure on R&D can be
analysed as follows:
Year ended 31 March
2024 2023
£000's £000's
Research and development expenses - expensed in period 4,169 5,920
Development expenditure - capitalised in intangible assets 4,122 2,419
Total expenditure 8,291 8,339
Whilst the overall R&D expenditure in the year was comparable to the prior
year the portion capitalised was 50% compared with 29% in the prior year.
This was due to the late-stage phase of development of the poultry mycoplasma
projects, the commencement of the capitalisation of the costs incurred on the
EcoFlor project (now in the final development phase) and the costs of running
the late-stage trials. Nevertheless, the Group continued to deploy 50% of
its R&D budget in the year on research and earlier stage discovery
programmes where there is considerable opportunity for groundbreaking new
approaches to the prevention of disease in pigs and poultry.
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 other non-cash charges to profit provides a good
indication of the underlying cash trading performance of the business. The
charge for amortisation of intangible assets in the year was £1.2m (2023:
£1.1m). The adjusted EBITDA (Operating profit excluding exceptional items,
share based payments, depreciation, amortisation and foreign exchange gains
and losses) at £8.0m (2023: £7.2m) reflected a strong revenue performance
offset by lower gross margins (arising in the main from foreign exchange
headwinds) and good overhead cost control, together with the evolution of the
R&D programme into later stage resulting in greater capitalisation of
expenditure. Furthermore, the adjusted EBITDA margin (excluding foreign
exchange movements and expressed as a percentage of revenue in the period) was
9.0% in the year ended 31 March 2024 compared with 8.5% in the year ended 31
March 2023.
Profit before income tax was lower in the year ended 31 March 2024 at £3.0m
(2023: £4.4m). This reduction (compared to an increase in adjusted EBITDA
described above) arose because the Group recorded an exceptional item of
£0.7m in the year (2023: £nil) and also recorded an exchange rate loss of
£0.6m compared with a profit of £0.5m in the year ended 31 March 2023.
The exceptional item of £0.7m (2023: £nil) related to a loss incurred on the
cessation of the distribution of a third party product (the impairment of
associated intangible asset, stock write off and customer goodwill payments)
offset by the gains made on the sale of two unoccupied freehold properties in
the year.
The Group's effective tax rate was 32% for the year ended 31 March 2024 (2023:
30%). Factors causing the effective tax rate to be greater than the headline
UK rate of 25% are non-deductible expenses, timing differences on the
recognition of intangible assets, partly offset by R&D allowances and
reduced income tax rates under patent box. The 2% increase in rate to 32%
(2023: 30%) is due to lower chargeable R&D credits under the new UK
R&D regime, timing differences on recognition of intangible assets, partly
offset by the reduced impact of different tax rates in foreign subsidiaries on
the group rate and an increased level of profit attracting a lower tax rate
under patent box.
Earnings per share (EPS) has improved from 1.49 pence in the year ended 31
March 2023 to 1.55 pence per share in the year ended 31 March 2024 and
diluted EPS has improved from 1.47 pence in the year ended 31 March 2023 to
1.52 pence per share in the year ended 31 March 2024, due to improved
profitability attributable to the owners of the parent Company and a reduction
in the profit attributable to the minority interest in the Chinese subsidiary.
Operating cash inflow before movements in working capital was £7.7m (2023:
£7.2m). Continuing close management of working capital - in particular
inventories and receivables - has resulted in operating cash flow of £10.5m
(2023: £18.4m). Cash balances at 31 March 2024 can be analysed as follows:
At 31 March
2024 2023
(£'m) (£'m)
Held in UK 6.2 2.9
Held in non-China subsidiaries 1.9 1.2
Held in China 100% owned subsidiary 2.4 2.7
Held in China 51% owned subsidiary 11.9 14.9
22.4 21.7
The Group repatriates cash from China by annual dividend declaration; this is
subject to withholding taxes of 5% and is paid according to the relevant
shareholdings. On a day‐to‐day basis, the Board considers the cash held
in the Group's joint venture subsidiary in China to be unavailable to the
Group outside of China; accordingly, cash management and funds available for
investment in R&D are based upon the cash balances outside of China.
During June 2024, two dividends totalling £2.8m (post withholding tax) were
received from China.
The Group's committed banking facilities remain at £15.0m, being a £5.0m
overdraft facility and a £10m revolving credit facility. These facilities
expire on 30 June 2026 and were undrawn as at 31 March 2024.
The Group's inventory balance reduced to £17.0m on 31 March 2024 from £22.4m
on 31 March 2023. This reduction was in finished goods and work in progress
- the proportion of which reduced from 59% to 47% of the total - and reflected
the phasing of revenue towards the end of the financial year. Overall
inventory days expressed as an average of the annual cost of sales reduced
from 174 days to 120 days.
Trade receivables increased from £26.9m at 31 March 2023 to £32.2m on 31
March 2024. As noted above, the timing of revenue recorded during the fourth
quarter caused a temporary increase in the level of receivables at the year
end and an increase in the average debtor days (expressed as an average of the
annual revenue) from 115 days to 132 days.
Post balance sheet event
As separately announced, the Group disposed of its non-core business
manufacturing and selling horsepaste for the treatment of equine parasites.
This transaction was completed on 3 April 2024 for a total consideration of
€1.3m. The consideration is payable in three tranches (€0.5m on
completion, €0.4m 18 months later and €0.4m 36 months after completion of
the transaction). In addition, the buyer has purchased the stock on hand at
cost and taken over fulfilment of the current order book. The revenue derived
from this product was £0.8m in the year ended 31 March 2024 (2023: £1.0m).
The horsepaste product was never treated as a separate segment and together
with the relative immateriality of the revenue has resulted in not treating
this as a discontinued operation.
Christopher Wilks
Chief Financial Officer
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2024
2024 2023
Notes £000's £000's
Revenue 3 89,422 85,311
Cost of sales (51,739) (46,935)
Gross profit 37,683 38,376
42.1% 45.0%
Administrative expenses (29,394) (27,866)
Research and development expenses (4,169) (5,920)
Other income 4 66 357
Exceptional items 5 (651) -
Operating profit 3,535 4,947
Share of profit of associate 15 53 45
Finance income 6 150 104
Profit before financing and income tax 3,738 5,096
Finance costs 6 (764) (656)
Profit before income tax 2,974 4,440
Income tax charge 8 (966) (1,349)
Profit for the year 2,008 3,091
Profit attributable to:
Owners of the parent Company 1,048 1,008
Non-controlling interest 26 960 2,083
Profit for the year 2,008 3,091
Earnings per share (pence) 7 1.55 1.49
Diluted earnings per share (pence) 7 1.52 1.47
Adjusted EBITDA (Non-GAAP measure) 5 8,046 7,235
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2024
2024 2023
Notes £000's £000's
Profit for the year 2,008 3,091
Other comprehensive loss:
Items that may be reclassified to profit or loss:
Foreign currency translation differences (1,828) (586)
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit pension schemes 23 43 100
Other comprehensive loss for the year (1,785) (486)
Total comprehensive income for the year 223 2,605
Attributable to:
Owners of the parent Company 1 798
Non-controlling interest 26 222 1,807
223 2,605
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2024
Share Capital Share Premium Revaluation Reserve Other Reserves Foreign Exchange Reserve Retained Earnings Total Non-controlling Interest Total Equity
£000's £000's £000's £000's £000's £000's £000's £000's £000's
Balance at 31 March 2022 3,381 63,319 657 106 2,188 12,413 82,064 12,284 94,348
Profit for the year - - - - - 1,008 1,008 2,083 3,091
Other comprehensive income:
Foreign currency differences - - - - (310) - (310) (276) (586)
Actuarial gains on pension - - - - - 100 100 - 100
scheme assets
Total comprehensive income for the year - - - - (310) 1,108 798 1,807 2,605
Transactions with owners:
Share-based payments - - - - - 408 408 - 408
Dividends - - - - - - - (1,810) (1,810)
Transactions with owners - - - - - 408 408 (1,810) (1,402)
Balance at 31 March 2023 3,381 63,319 657 106 1,878 13,929 83,270 12,281 95,551
Profit for the year - - - - - 1,048 1,048 960 2,008
Other comprehensive income:
Foreign currency differences - - - - (1,090) - (1,090) (738) (1,828)
Actuarial gains on pension - - - - - 43 43 - 43
scheme assets
Total comprehensive income for the year - - - - (1,090) 1,091 1 222 223
Transactions with owners:
Issue of shares in the year 6 - - - - - 6 - 6
Revaluation reserve - - (386) - - 386 - - -
Share-based payments - - - - - 413 413 - 413
Dividends - - - - - - - (2,813) (2,813)
Transactions with owners 6 - (386) - - 799 419 (2,813) (2,394)
Balance at 31 March 2024 3,387 63,319 271 106 788 15,819 83,690 9,690 93,380
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2024
Company
Share Capital Share Premium Revaluation Reserve Other Reserves Retained Earnings Total
£000's £000's £000's £000's £000's £000's
Balance at 31 March 2022 3,381 63,319 386 106 8,429 75,621
Loss for the year - - - - (1,701) (1,701)
Other comprehensive income:
Actuarial gains on pension - - - - 100 100
scheme assets
Total comprehensive income for - - - - (1,601) (1,601)
the year
Transactions with owners:
Share-based payments - - - - 408 408
Transactions with owners - - - - 408 408
Balance at 31 March 2023 3,381 63,319 386 106 7,236 74,428
Loss for the year - - - - (1,158) (1,158)
Other comprehensive income:
Actuarial gains on pension - - - - 43 43
scheme assets
Total comprehensive income for - - - - (1,115) (1,115)
the year
Transactions with owners:
Issue of shares in the year 6 - - - - 6
Revaluation reserve - - (386) - 386 -
Share-based payments - - - - 413 413
Transactions with owners 6 - (386) - 799 419
Balance at 31 March 2024 3,387 63,319 - 106 6,920 73,732
STATEMENTS OF FINANCIAL POSITION (CO. NUMBER: 01818170)
AS AT 31 MARCH 2024
Group Company
2024 2023 2024 2023
Notes £000's £000's £000's £000's
Non-current assets
Intangible assets 11 38,351 35,636 - -
Property, plant and equipment 12 4,802 6,097 - 565
Right-of-use assets 14 3,672 4,282 59 71
Investments 15 268 252 21,451 21,165
Amounts due from subsidiary company 17 - - 51,078 51,526
Deferred tax assets 18 1,437 559 - 12
Total non-current assets 48,530 46,826 72,588 73,339
Current assets
Inventories 16 16,955 22,409 - -
Trade and other receivables 17 32,175 26,850 1,698 1,073
Income tax recoverable 13 2,687 2,947 - -
Other taxes and social security 526 395 - 43
Cash and cash equivalents 19 22,374 21,658 363 388
Assets held for sale 18 230 - 230
Total current assets 74,735 74,489 2,061 1,734
TOTAL ASSETS 123,265 121,315 74,649 75,073
Current Liabilities
Trade and other payables 20 (17,353) (14,523) (804) (520)
Provisions 22 (5,859) (5,178) - -
Income tax payable 13 (687) (1,017) - -
Other taxes and social security payable (632) (516) - -
Lease liabilities 21 (646) (884) (50) (41)
Dividends (50) (50) (50) (50)
Total current liabilities (25,227) (22,168) (904) (611)
Net current assets 49,508 52,321 1,157 1,123
Total assets less current liabilities 98,038 99,147 73,745 74,462
Non-current liabilities
Deferred tax liabilities 18 (1,279) - - -
Lease liabilities 21 (3,379) (3,596) (13) (34)
TOTAL ASSETS LESS TOTAL LIABILITIES 93,380 95,551 73,732 74,428
EQUITY
Issued share capital 25 3,387 3,381 3,387 3,381
Share premium account 63,319 63,319 63,319 63,319
Revaluation reserve 27 271 657 - 386
Other reserves 27 106 106 106 106
Foreign exchange reserve 27 788 1,878 - -
Retained earnings 15,819 13,929 6,920 7,236
Shareholders' funds 83,690 83,270 73,732 74,428
Non-controlling interests 26 9,690 12,281 - -
TOTAL EQUITY 93,380 95,551 73,732 74,428
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2024
Group Company
2024 2023 2024 2023
Notes £000's £000's £000's £000's
Cash flows from operating activities
Profit/(loss) before income tax 2,974 4,440 (1,349) (1,793)
Adjustment for:
Finance income 6 (150) (104) (1,708) (1,225)
Finance cost 6 764 656 62 151
Foreign exchange loss/(gain) 5 572 (468) 204 5
Depreciation 12 958 812 19 183
Amortisation of right-of-use assets 14 683 452 33 22
Revaluation of investment property - (3) - (3)
Amortisation of intangible assets 11 1,154 1,087 - -
Impairment of right-of-use assets 5 80 - - -
Share of associate's results 15 (53) (45) - -
Share based payment charge 24 413 408 127 179
Exceptional items 5 306 - (282) -
Operating cash flows before movements in working capital 7,701 7,235 (2,894) (2,481)
Decrease in inventory 4,741 7,776 - -
(Increase)/decrease in receivables (4,961) (1,843) (133) 1,109
Increase in payables 2,456 3,802 284 202
Increase in provisions and pensions 554 1,439 43 100
Cash generated from/(used in) operations 10,491 18,409 (2,700) (1,070)
Finance costs 6 (473) (451) (51) (139)
Income tax (601) (2,052) (23) (14)
Net cash from/(used in) operations 9,417 15,906 (2,774) (1,223)
Cash flows from investing activities
Acquisition of property, plant and equipment 12 (502) (3,562) - -
Proceeds from sale of property, plant and equipment 1,058 - 1,058 -
Purchase of intangibles 11 (4,122) (2,419) - -
Finance income 6 150 104 1,708 1,225
Dividends received - - 225 144
Net cash (used in)/from investing activities (3,416) (5,877) 2,991 1,369
Cash flows from financing activities
Proceeds from issue of share capital 6 - 6 -
Interest paid on lease liabilities 21 (291) (205) (11) (12)
Principal paid on lease liabilities 21 (593) (387) (34) (21)
Dividends paid (2,813) (1,810) - -
Net cash used in financing activities (3,691) (2,402) (39) (33)
Net increase in cash and cash equivalents 2,310 7,627 178 113
Foreign exchange movements (1,594) (283) (203) (4)
Balance at the beginning of the period 21,658 14,314 388 279
Balance at the end of the period 19 22,374 21,658 363 388
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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
The Grange, 100 High Street, Southgate, N14 6BN.
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 and 2.31.
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 Group and Company 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. 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, having due regard to
the identified strategic risks. The Directors concluded that the likelihood of
such a reduction was remote, and therefore that no material uncertainty exists
in respect of going concern.
2.2 Adoption of new and revised standards
No new standards or amendments that became effective in the financial year had
a material impact in preparing these financial statements. There are a number
of standards and amendments to standards which have been issued by the IASB
that are effective in future accounting periods that have not been adopted
early.
The following standard is effective for annual reporting periods beginning on
or after 1 January 2024:
· IFRS 17 - Insurance Contracts.
The following amendments are effective for annual reporting periods beginning
on or after 1 January 2024:
· Classification of liabilities as current or non-current
(Amendments to IAS 1);
· Deferred tax related to assets and liabilities arising from a
single transaction (Amendments to IAS 12);
· Lease Liability in a Sale and Leaseback (Amendments to IFRS 16);
· Classification of Financial Instruments (Amendments to IFRS 9);
· Non-current liabilities with covenants (Amendments to IAS 1); and
· Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7).
The following amendments are effective for annual reporting periods beginning
on or after 1 January 2025:
· Guidance on the exchange rate to use when a currency is not
exchangeable (Amendments to IAS 21);
· Accounting treatment for the sale or contribution of assets
(Amendments to IFRS 10 and IAS 28).
The following standards are effective for annual reporting periods beginning
on or after 1 January 2027:
· IFRS 18 Presentation and Disclosure in Financial Statements;
· IFRS 19 Subsidiaries without Public Accountability: Disclosures.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
2.3 Basis of consolidation
The consolidated financial statements comprise the accounts of the Company and
its subsidiaries drawn up to 31 March 2024.
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.
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.
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated on consolidation.
The Group initially recognises 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
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 Group and
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.
(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 with reference to historical data adjusted by forward-looking
information. 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,
12-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.
The group uses forward foreign exchange contracts to manage its currency
exposure. Certain foreign currency inflows that would typically be translated
to sterling at spot to meet liabilities are sold forward to reduce the Group's
exposure to fluctuations in exchange rates. The group has not opted to use
hedge accounting for these instruments, and any changes in fair value are
recognised in the income statement.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
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.
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 2024
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®, vaccines or other technologies, or an
approval for marketing new technologies of 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.
The Group's R&D team prepare a technical profile for new products in
development, with timings for development activity reflecting the technical
challenges that must be overcome in order to obtain a marketing authorisation
for the relevant regulator. In turn the R&D team work with the Group's
marketing team to develop a business case for a new product by considering a
number of additional factors. These additional factors will include local
intelligence on the appetite for new products gathered through the Group's
global network of existing sales channels, third-party data on the size of
potential markets for new products, and suitable pricing strategies in the
context of potential competitor products.
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.
Where it is possible to allocate an individual capitalised cost to a single
identifiable project 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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
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 cash flows 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.
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.
Non-current assets, or disposal groups comprising assets and liabilities, are
classified as held-for-sale if it is highly probable that they will be
recovered primarily through sale rather than through continuing use.
Such assets, or disposal groups, are generally measured at the lower of their
carrying amount and fair value less costs to sell. Any impairment loss on a
disposal group is allocated first to goodwill, and then to the remaining
assets and liabilities on a pro rata basis, except that no loss is allocated
to inventories, financial assets, deferred tax assets, employee benefit
assets, investment property or biological assets, which continue to be
measured in accordance with the Group's other accounting policies. Impairment
losses on initial classification as held-for-sale or held-for-distribution and
subsequent gains and losses on remeasurement are recognised in profit or loss.
Once classified as held-for-sale, intangible assets and property, plant and
equipment are no longer amortised or depreciated, and any equity-accounted
investee is no longer equity accounted.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
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.
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; or
- 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 cash flows 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 equal or exceed 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
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 remeasurement 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.
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 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 remeasured 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.
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 12 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
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, and 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.
2.22 Provisions
Provisions are recognised when there is a present obligation as a result of a
past event and it is probable that 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. This point in time is determined with reference to INCO terms with
that customer, with control of goods deemed to have transferred as per the
relevant INCO terms. The most common terms used by the Group are Carriage,
Insurance and Freight (CIF), Free On Board (FOB), ExWorks (EXW) and Carriage
and Insurance Paid to (CIP).
· For transactions under CIF and FOB, the revenue is recognised at
the point the goods are loaded onto the vessel or aircraft and a bill of
lading or airway bill is issued.
· For transactions under EXW, the revenue is recognised at the
point the goods are collected from the Group's warehouses or factory.
· For transactions under CIP, the revenue is recognised at the
point the goods are loaded on to a truck at the designated point of departure
and a loading note is issued.
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 has 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 accrual basis.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
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.
In addition, the binomial 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 the binomial model can
be found in note 24 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
IFRIC 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
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.
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
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:
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 12);
· investment property;
· forward foreign exchange contracts;
· pension and other post-retirement benefit commitments (note 23);
· share-based payments (note 24); and
· initial recognition of financial instruments (note 31).
For more detailed information in relation to the fair value measure of the
items above, please refer to the applicable notes.
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 number of
options expected to vest and various other inputs to the Black-Scholes and the
binomial model, as disclosed in note 24. 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. Those options that contain market
conditions have been valued using the binomial model, and those without have
been calculated using the Black-Scholes model. Management assesses whether the
charge or vested portion should be amended based on an annual reassessment of
the likelihood of non-market based vesting conditions being met.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
2.30 Critical accounting estimates (continued)
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%.
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 a 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 following are the critical judgements that have been made in the process
of applying the Group's accounting policies and have the most significant
effects on the amounts recognised in financial statements.
Income taxes
The Group is subject to income taxes in the United Kingdom and also in other
jurisdictions.
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 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
2.31 Critical accounting judgements
Capitalisation of intangible assets
The Group assesses development costs incurred for capitalisation in accordance
with the requirements of IAS 38 and the Group's accounting policy described in
note 2.8. In carrying out its assessment the Group considers a range of
factors, each of which requires the use of judgement, in consultation with the
new product development team. Factors considered include: the stage of
development and assessment of technical and commercial feasibility of the
project; the size of the markets in which the Group currently sells products;
and the size of any additional markets in which the Group intends to sell the
product. For key development projects, where there is a higher degree of
estimation uncertainty over future product releases, independent external
consultants are engaged to validate both technical progress and the overall
market appetite for the new product in order to ensure that it remains
reasonable to capitalise associated project costs.
Impairment review of intangible assets
The Group tests annually whether goodwill or other 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 (CGUs) 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 assumption of an indefinite future life
for the assets giving rise to the cash flows. Where intangible assets relate
to future product releases the key assumptions also relate to forecasts for
market share and product pricing. 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 11 of
the financial statements.
Provisions
Certain aspects of a sales tax related to imported products in a Group
subsidiary might have been applicable. The subsidiary has been importing an
increasing volume of product in recent years but has recently implemented for
its largest customer a new system to avoid this possible dispute. This matter
has been reviewed by the groups local tax experts but is subject to further
review of the tax legislation and ongoing case law. No tax payment has yet
been determined. However, a substantial tax settlement may be required in due
course and a provision has been recognised due to IFRIC 23 Uncertainty over
Income Tax Treatments.
Accounting for ECO Biok as a subsidiary
The Group has determined that it has control over Zhejiang ECO Biok Animal
Health Products Limited ('ECO Biok') and its results are therefore
consolidated within the Group accounts. The Group owns a 51% interest in ECO
Biok, although decisions are made jointly, it is the entity through which the
Group has chosen to enter the Chinese market. ECO Biok depends on the Group
for the right to sell Aivlosin® products, which gives the Group power over
ECO Biok's activities. Therefore it is appropriate to treat ECO Biok as a
subsidiary.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
3. 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
Southeast 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. Adjusted EBITDA is a non-GAAP measure
used by the management to assess the underlying business performance. The
details of Adjusted EBITDA is given in note 5.
Corporate China & Japan North America S & SE Asia Latin America Europe Rest of World Total
/UK
£000's £000's £000's £000's £000's £000's £000's £000's
Year ended 31 March 2024
Sale of goods 925 24,656 18,480 17,440 19,891 6,452 1,529 89,373
Royalties - - - - - - 49 49
Revenue from external customers 925 24,656 18,480 17,440 19,891 6,452 1,578 89,422
Adjusted EBITDA** (17,281) 7,007 7,229 5,610 3,578 488 843 7,474
Year ended 31 March 2023
Sale of goods 1,303 26,374 15,172 16,759 18,107 6,073 1,338 85,126
Royalties - - - - - - 185 185
Revenue from external customers 1,303 26,374 15,172 16,759 18,107 6,073 1,523 85,311
Adjusted EBITDA** (19,101) 9,340 5,463 6,767 3,059 1,486 689 7,703
A reconciliation of Adjusted EBITDA for reportable segments to profit from
operating activities is provided as follows:
2024 2023
£000's £000's
Adjusted EBITDA for reportable segments 7,474 7,703
Depreciation (958) (812)
Amortisation of right-of-use assets (683) (452)
Revaluation of investment property - 3
Amortisation (1,154) (1,087)
Impairment of right-of-use assets (80) -
Exceptional items (651) -
Share-based payment charges (413) (408)
Profit from operating activities 3,535 4,947
Foreign exchange differences 572 (468)
Adjusted EBITDA for the Group 8,046 7,235
**Adjusted EBITDA reported for the segments includes foreign exchange gains
and losses. The Adjusted EBITDA for the Group is presented in note 5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
3. Segment information (continued)
Product revenues
2024 2023
£000's £000's
Aivlosin® 82,436 75,942
Ecomectin® 3,340 3,595
Others 3,646 5,774
Total 89,422 85,311
All product revenues are recognised at a point in time.
Contract balances
2024 2023
Within one year or on demand £000's £000's
At 1 April 1,079 203
Amounts included in contract liabilities that were recognised as revenue (1,079) (203)
during the period
Cash received in advance of performance and not recognised as revenue during 3 1,079
the period
At 31 March 3 1,079
The Group recognised contract liabilities of £3,000 at 31 March 2024 (2023:
£1,079,000). 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.
4. Other income
2024 2023
£000's £000's
Sundry income 66 357
66 357
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
5. Result from operating activities
2024 2023
Notes £000's £000's
Result from operating activities is stated after charging/(crediting):
Cost of inventories recognised as an expense 51,108 46,461
Employee benefits expenses 29 16,795 15,461
Amortisation of intangible assets 11 1,154 1,087
Depreciation 12 958 813
Amortisation of right-of-use assets 14 683 452
Revaluation of investment property 13 - (3)
(Loss)/gain on foreign exchange transactions (572) 468
Research and development 4,169 5,920
Impairment losses on trade receivables 17 603 533
Fees payable to the Company's auditor for the audit of the parent Company and 246 535
Group annual accounts
Subsidiary audit fees payable 66 70
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 2024, are
£311,750 (2023: £290,000), and fees payable to the Company's auditor and its
component auditor for the audit of the Company's subsidiaries are £24,222
(2023: £24,000).
Alternative performance measures
Earnings before interest, tax, depreciation, amortisation, revaluation,
impairment, share-based payments and foreign exchange differences (Adjusted
EBITDA)
2024 2023
£000's £000's
Profit from operating activities 3,535 4,947
Depreciation 958 812
Amortisation of right-of-use assets 683 452
Revaluation of investment property - (3)
Amortisation 1,154 1,087
Impairment of right-of-use assets 80 -
Exceptional items 651 -
Share-based payments 413 408
7,474 7,703
Foreign exchange differences 572 (468)
Adjusted EBITDA 8,046 7,235
Exceptional items
2024 2023
£000's £000's
Cessation of distribution business(1) (933) -
Profit on disposal of properties(2) 282 -
(651) -
1. These costs relate to the cessation of the distribution of a third
party product, which was not part of the group's core product portfolio. This
was a one-off cessation and the product generated no revenue in the year. The
exceptional cost includes impairment of intangible assets (£234,000), stock
write-off (£133,000), goodwill payments made to customers (£345,000) and
provision for future goodwill payments (£221,000).
2. This profit relates to the sale of the freehold of the former head
office of the Group (New Malden) and the sale of an investment property
(Mitcham).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
5. 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.
Impairment of right-of-use assets This item is 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.
Exceptional items These items are a result of one-off changes to cessation of distribution
business and property disposals and therefore, although they are correctly
recorded as income or cost of the business, they do not reflect current or
future cash outflows.
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 2024
6. Finance income/(expense)
2024 2023
£000's £000's
Finance income
Interest received on short-term bank deposits 150 104
Finance costs
Interest paid (473) (451)
Interest paid on lease liabilities (291) (205)
(764) (656)
Net finance costs (614) (552)
7. 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.
2024 2023
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 1,048 67,745 1.55 1,008 67,722 1.49
tax
Dilutive effect of share options - 1,335 - - 918 -
Diluted earnings per share 1,048 69,080 1.52 1,008 68,640 1.47
The diluted EPS figure reflects the impact of historic grants of share options
and is calculated by reference to the number of options granted for which the
average share price for the year was in excess of the option exercise price.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
8. Taxation
2024 2023
£000's £000's
Current tax charge / (credit)
Foreign corporation tax on profits for the year 1,745 2,405
Foreign withholding tax 180 325
Research and development tax credits claimed in the year (1,027) (1,391)
Research and development tax credits - adjustment for prior year (333) 46
Deferred tax
Origination and reversal of temporary differences 401 (36)
Income tax charge 966 1,349
2024 2023
£000's £000's
Factors affecting the tax charge for the year
Profit on ordinary activities before taxation 2,974 4,440
Profit on ordinary activities before taxation multiplied by the applicable 743 844
rate of UK corporation tax of 25% (2023: 19%)
Effects of:
Non-deductible expenses 1,403 1,207
Non-chargeable credits (10) (571)
Right-of-use assets depreciation (55) (37)
Withholding tax on inter-company dividends 180 325
Enhanced allowance on research and development expenditure (627) (573)
Adjustment in respect of prior years (169) 98
Different tax rate for foreign subsidiaries (57) 506
Intra-Group dividend 34 -
Origin and reversal of temporary differences 720 -
Unused tax losses carried forward (367) (363)
Tax effect of share-based payments (71) (14)
Patent Box claim (758) (73)
Income tax charge 966 1,349
Effective income tax rate 32% 30%
9. Loss for the financial year
2024 2023
£000's £000's
Parent Company's (loss) for the financial year (1,158) (1,701)
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 2024
10. Dividends
The Board of Directors does not propose that a dividend be paid for the year
ended 31 March 2024 (2023: Nil).
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.
11. Intangible assets
Group Goodwill Distribution rights Drug registrations, patents and licence costs Total
£000's £000's £000's £000's
Cost
At 31 March 2022 17,930 407 23,292 41,629
Additions - - 2,419 2,419
At 31 March 2023 17,930 407 25,711 44,048
Additions - - 4,122 4,122
Disposal - - (287) (287)
At 31 March 2024 17,930 407 29,546 47,883
Amortisation
At 31 March 2022 - (158) (7,167) (7,325)
Charge for the year - (20) (1,067) (1,087)
At 31 March 2023 - (178) (8,234) (8,412)
Charge for the year - (20) (1,134) (1,154)
Disposal - - 268 268
Impairment - - (234) (234)
At 31 March 2024 - (198) (9,334) (9,532)
Net book value
At 31 March 2024 17,930 209 20,212 38,351
At 31 March 2023 17,930 229 17,477 35,636
At 31 March 2022 17,930 249 16,125 34,304
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 3 to 20 years.
The acquisition of ECO Animal Health Limited in October 2004 gave the Group
ownership of the intellectual property and established distribution networks
in respect of Aivlosin® and Ecomectin®. The acquisitions of Zhejiang Eco
Biok Animal Health Products Limited in 2007 and ECO Animal Health Japan Inc in
2009 opened further distribution and sale opportunities for Aivlosin® and
Ecomectin®.
Goodwill acquired in a business combination is allocated at acquisition to the
cash-generating units (CGUs) that are expected to benefit from the business
combination.
The Group has recalculated the headroom as it would have been at March 2024
when comparing the net present value of cash flows to the carrying value of
goodwill. The goodwill impairment review uses cash flows from the Group's
global revenues in respect of Aivlosin® and Ecomectin®. Expected future
cash flows in respect of new vaccines - both the outflows on research and
development of these new products and the forecast revenues from sales - are
excluded. Intangible assets in respect of new vaccines are tested for
impairment separately. This approach is appropriate given that the
acquisitions which gave rise to the goodwill balance were made to enhance the
Group's global capacity to sell Aivlosin® and Ecomectin® products rather
than new products expected to be introduced following successful completion of
current R&D projects.
The recoverable amount of the CGU is 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
11. Intangible assets (continued)
The Group prepares cash flow 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. 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. In the current year management estimated the applicable rate to be
10% (2023: 7%). Management considers that there is adequate headroom when
comparing the net present value of the cash flows to the carrying value of
goodwill to conclude that no impairment is necessary this year. On assumptions
as at each period end the excess of recoverable amount over carrying value is
over £86m (2023: £162m).
Management believes that the most significant assumption in the calculation of
value in use is the estimated growth rate. However, even if the growth rate
were to be zero, the recoverable amount would still be over £74m (2023:
£141m) more than the carrying value and no impairment would be necessary.
The Group estimates that the discount rate applied when calculating the value
in use would have to increase to a rate in excess of 39% before there was an
indication that the goodwill balance would need to be impaired (2023:
recalculated as 45%).
The net book value of drug registrations, patents and licence costs can be
broken down as follows:
2024 2023
£000's £000's
Aivlosin® 12,655 13,353
Ecomectin® 500 637
Vaccines 7,001 3,386
Others 56 101
20,212 17,477
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 ranges between 7 and 20 years, where the shortest period relates
to assets on the balance sheet which received regulatory approval a number of
years ago and have been amortised over a number of years, and where the
remaining useful life of 20 years relates to capitalised assets which have not
yet received regulatory approval and whose amortisation has not yet commenced.
Ecomectin® is an endectocide that controls worms, ticks, lice and mange in
grazing stock and pigs. The remaining useful life is 2 years.
At 31 March 2024 intangible assets included £7,173,000 (2023: £5,453,000) of
assets capitalised that had not commenced their useful life, of which
approximately £75,000 (2023: £2,307,000) were Aivlosin® related products.
The impairment review for intangible assets relating to ongoing development
activity, for which regulatory approval is expected to be received at a future
date, is performed with reference to cash flow projections modelled in each
development project's business case. The cash flows in these business cases
reflect the expected economic life of the new product (a period of more than 5
years) and the variables captured include the costs to complete the
development activity, the future product sale price, expected future market
share, the rate of market penetration for new product releases and overall
market size. The market size comprises a number of factors, including the
total population of the target animal species, the replacement rate (which in
the case of poultry is the length of time during which they are productive
layers), the proportion of the species population prone to the diseases to
which ECO's product is directed and the proportion of the population which is
subject to vaccination. In determining these factors uses the expertise of
own teams, particularly members of the R&D, marketing, sales and finance
teams. Third-party data is reviewed to enhance the accuracy of the estimates
used. For key development projects, independent external consultants are
engaged to validate both technical progress and the overall market appetite
for the new product.
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 Corporate/UK 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. During the year to March
2024 the Group identified a diminution in the efficacy of one of its non-core
products sold in one geography in South America. The Group has discontinued
the sale of this product and has impaired to nil the value of the previously
capitalised value of the intangible assets associated with this product. The
expense in respect of the impairment was £234,000 (2023: no impairment).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
12. 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 2022 709 605 2,187 2,012 287 5,800
Additions 31 146 2,813 465 107 3,562
Disposals (18) - (355) (46) (16) (435)
Foreign exchange movements (2) - (41) (33) (6) (82)
At 31 March 2023 720 751 4,604 2,398 372 8,845
Additions - - 366 82 54 502
Disposals (615) - (90) (737) (35) (1,477)
Foreign exchange movements (7) - (144) (127) (18) (296)
At 31 March 2024 98 751 4,736 1,616 373 7,574
Depreciation
At 31 March 2022 (40) (215) (571) (1,263) (246) (2,335)
Charge for the year (32) (116) (194) (443) (27) (812)
Disposals 9 - 265 44 16 334
Foreign exchange movements - - 49 11 5 65
At 31 March 2023 (63) (331) (451) (1,651) (252) (2,748)
Charge for the year (26) (129) (453) (333) (17) (958)
Disposals 69 - 90 737 35 931
Foreign exchange movements 1 - 2 - - 3
At 31 March 2024 (19) (460) (812) (1,247) (234) (2,772)
Net book value
At 31 March 2024 79 291 3,924 369 139 4,802
At 31 March 2023 657 420 4,153 747 120 6,097
At 31 March 2022 669 390 1,616 749 41 3,465
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
12. Property, plant and equipment (continued)
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 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.
Depreciation has been included in the administrative expenses line in the
income statement, except for £260,000 (2023: £275,000) of depreciation of
production equipment in the Chinese subsidiary ECO Biok, which is included
within cost of sales.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
12. 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 2022 615 183 798
Additions - - -
At 31 March 2023 615 183 798
Additions - -
Disposals (615) (182) (797)
At 31 March 2024 - 1 1
Depreciation
At 31 March 2022 (24) (26) (50)
Charge for the year (26) (157) (183)
At 31 March 2023 (50) (183) (233)
Charge for the year (19) - (19)
Disposals 69 182 251
At 31 March 2024 - (1) (1)
Net book value
At 31 March 2024 - - -
At 31 March 2023 565 - 565
At 31 March 2022 591 157 748
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
13. Income tax recoverable and payable
Income tax recoverable 2024 2023
£000's £000's
UK repayable tax credit in respect of R&D expenditure 2,743 2,939
Other overseas tax (payable)/receivable (56) 8
2,687 2,947
Income tax payable 2024 2023
£000's £000's
Overseas tax payable (687) (1,017)
(687) (1,017)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
14. Right-of-use assets
Group Property Vehicles Other Total
£000's £000's £000's £000's
Cost or valuation
At 31 March 2022 2,555 195 7 2,757
Additions 3,022 100 2 3,124
Disposals (29) - - (29)
Foreign exchange movements (161) - - (161)
At 31 March 2023 5,387 295 9 5,691
Additions 412 52 - 464
Disposals (315) - (9) (324)
Foreign exchange movements (238) - - (238)
At 31 March 2024 5,246 347 - 5,593
Depreciation
At 31 March 2022 (888) (95) (1) (984)
Charge for the year (402) (50) - (452)
Disposals - - - -
Foreign exchange movements 27 - - 27
At 31 March 2023 (1,263) (145) (1) (1,409)
Charge for the year (620) (63) - (683)
Disposals 187 - 1 188
Impairment (52) - - (52)
Foreign exchange movements 35 - - 35
At 31 March 2024 (1,713) (208) - (1,921)
Net book value
At 31 March 2024 3,533 139 - 3,672
At 31 March 2023 4,124 150 8 4,282
At 31 March 2022 1,667 100 6 1,773
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
14. Right of use assets (continued)
Company Vehicles Total
£000's £000's
Cost or valuation
At 31 March 2022 106 106
Additions 34 34
At 31 March 2023 140 140
Additions 21 21
At 31 March 2024 161 161
Depreciation
At 31 March 2022 (47) (47)
Charge for the year (22) (22)
At 31 March 2023 (69) (69)
Charge for the year (33) (33)
At 31 March 2024 (102) (102)
Net book value
At 31 March 2024 59 59
At 31 March 2023 71 71
At 31 March 2022 59 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
15. Investments
Group Investment in associate Unlisted investments Total
£000's £000's £000's
At 31 March 2022 203 9 212
Share of associate's result for the year 45 - 45
Foreign exchange differences (5) - (5)
At 31 March 2023 243 9 252
Share of associate's result for the year 53 - 53
Foreign exchange differences (37) - (37)
At 31 March 2024 259 9 268
Company Unlisted investments (subsidiaries) Total
£000's £000's
Cost
At 31 March 2022 Restated 21,230 21,230
Disposed (65) (65)
At 31 March 2023 21,165 21,165
Additional investment 286 286
At 31 March 2024 21,451 21,451
Impairment
At 31 March 2022 (20) (20)
Impairment charge - -
Disposal 20 20
At 31 March 2023 - -
Impairment charge - -
Disposal - -
At 31 March 2024 - -
Net book value
At 31 March 2024 21,451 21,451
At 31 March 2023 21,165 21,165
At 31 March 2022 21,210 21,210
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
15. Investments (continued)
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 The Grange, 100 High Street, Southgate, N14 6BN England & Wales Ordinary 100
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 USA Ordinary 100
Interpet LLC. 3775 Columbia Pike, Ellicott City, Maryland, 21043 USA 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 2024
15. 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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
15. 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 2024.
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 at Zhejiang ECO Biok
level, before wider Group eliminations.
Summarised statement of comprehensive income 2024 2023
For the year ended 31 March £000's £000's
Revenue 21,599 24,122
Cost of sales (13,322) (13,504)
Gross profit 8,277 10,618
Administrative expenses (5,394) (4,927)
Operating profit/(loss) 2,883 5,691
Other income 32 345
Finance income (142) (94)
Profit before tax 2,773 5,942
Tax expense (814) (1,691)
Profit after tax 1,959 4,251
Profit allocated to NCI 960 2,083
Other comprehensive (loss)/income allocated to NCI (738) (276)
Summarised balance sheet 2024 2023
As at 31 March £000's £000's
Assets:
Property, plant and equipment 570 860
Right-of-use assets 3,002 3,445
Deferred tax assets 189 -
Inventories 3,963 5,047
Trade and other receivables 4,528 3,925
Cash and cash equivalents 11,948 14,877
24,200 28,154
Liabilities:
Trade and other payables 2,873 1,742
Contract liabilities 3 1,080
Lease liabilities - short term 255 585
Lease liabilities - long term 3,050 3,061
6,181 6,468
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
15. Investments (continued)
Summarised cash flows 2024 2023
For the year ended 31 March £000's £000's
Cash flows from operating activities 4,357 15,802
Cash flows from investing activities (75) (2,772)
Cash flows from financing activities (6,221) (3,924)
Foreign exchange movements (989) (376)
Net increase/(decrease) in cash and cash equivalents (2,928) 8,730
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 USA. Pharmgate Animal Health LLC distributes the Group's products in the
USA.
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 2024
15. 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
2024 2023 2024 2023
£000's £000's £000's £000's
Non-current assets - 2 - -
Current assets 2,012 1,175 473 614
Current liabilities (1,984) (1,149) (473) (613)
Sales 14,912 11,672 3,568 3,499
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.
2024 2023
£000's £000's
Investments (share of net assets)
At 1 April 243 203
Share of results for the year 53 45
Foreign exchange movement (37) (5)
At 31 March 259 243
2024 2023
Summarised financial information £000's £000's
At 31 March
Current assets 813 831
Non-current assets 71 37
Current liabilities (239) (224)
Non-current liabilities (101) (134)
Net assets (100%) 544 510
Group share of net assets (47.62%) 259 243
Year ended 31 March
Revenue 2,106 2,122
Net profit 110 95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
16. Inventories
Group Company
2024 2023 2024 2023
£000's £000's £000's £000's
Raw materials and consumables 9,039 9,252 - -
Finished goods and goods for resale 5,425 7,660 - -
Work in progress 2,491 5,497 - -
16,955 22,409 - -
The above total includes the provision of inventory amounting to £631,000
(2023: £384,000).
17. Trade and other receivables
Group Company
2024 2023 2024 2023
£000's £000's £000's £000's
Non-current:
Amounts owed by Group undertakings - - 51,078 51,526
The inter-company 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
2024 2023 2024 2023
£000's £000's £000's £000's
Current:
Trade receivables 29,835 24,813 - -
Other receivables 1,816 1,312 1,444 825
Prepayments and accrued income 524 725 254 248
32,175 26,850 1,698 1,073
The ageing analysis of these trade receivables is as follows:
Group 2024
Trade receivables ECL rate ECL allowance Net of impairment
£000's % £000's £000's
Current 24,458 0.66% 161 24,297
Up to 3 months past due 4,115 4.41% 181 3,934
3 to 6 months past due 1,137 9.11% 104 1,033
Over 6 months past due 1,564 63.49% 993 571
31,274 1,439 29,835
Group 2023
Trade receivables ECL rate ECL allowance Net of impairment
£000's % £000's £000's
Current 20,241 1.58% 319 19,922
Up to 3 months past due 4,097 4.02% 165 3,932
3 to 6 months past due 711 4.73% 34 677
Over 6 months past due 609 53.74% 327 282
25,658 845 24,813
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
17. Trade and other receivables (continued)
The Group measures its trade receivables at amortised cost and estimates the
allowance for expected credit loss ("ECL") using a provision matrix based on
the Group's historical credit loss experience. The loss rates are then
adjusted for factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as the forecast
conditions.
This approach enables the Group to determine unbiased and probability-weighted
estimates of credit losses for the lifetime of those trade receivables as
required by IFRS 9.
The allowance for ECL in FY24 makes up 4.3% of all trade receivable balances
while in FY23, the allowance made up 3.4% of total trade receivable balances.
The allowance for ECL in FY24 makes up 19.2% of all overdue balances.
The increase in the provision is driven by:
- Worsening age profiles of outstanding trade debtors;
- Worsening loss rates observed in the past 12 months; and
- A full provision provided for PharmChem International's balance
due to the economic circumstances surrounding Egypt.
Movement on the Group provision for impairment of trade receivables is as
follows:
Group 2024 2023
£000's £000's
Balance at 1 April 845 194
Additional provision made 837 646
(Recovered) in the year (175) (80)
Written off in the year (59) (33)
Other (9) 118
Balance at 31 March 1,439 845
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
18. Deferred tax
Group
Deferred tax assets and liabilities are attributable to the following:
Assets / (liabilities) Assets / (liabilities)
2024 2023
£000's £000's
Trade-related temporary differences (3,875) (2,830)
Property - 26
Plant and equipment (96) (96)
Pension scheme (58) (45)
Deferred tax on share options 128 56
Tax losses carried forward 2,622 3,448
Total deferred tax (liabilities) / assets (1,279) 559
Overseas deferred tax assets 1,437 -
Total deferred tax assets 1,437 -
Sum of assets minus liabilities 158 559
The movement on the deferred tax account can be summarised as follows:
Deferred tax Trade related temporary differences Tax losses carried forward Property Plant and machinery Pension scheme Shares Overseas temporary differences Overseas tax losses Total
£000's £000's £000's £000's £000's £000's £000's £000's £000's
At 31 March 2022 (2,830) 2,619 27 (109) - 43 250 523 523
(Charge) / credit for the year through income statement (255) 3 (1) 13 (45) 13 5 303 36
At 31 March 2023 (3,085) 2,622 26 (96) (45) 56 255 826 559
(Charge) / credit for the year through income statement (790) - (26) - (13) 72 141 215 (401)
At 31 March 2024 (3,875) 2,622 - (96) (58) 128 396 1,041 158
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.
Company Property Pension scheme Share options Total
£000's £000's £000's £000's
At 31 March 2022 27 - 23 50
Credit for the year through income statement (1) (45) 8 (38)
At 31 March 2023 26 (45) 31 12
(Charge)/credit for the year through OCI (26) (13) 27 (12)
At 31 March 2024 - (58) 58 -
At the year ended 31 March 2024 the Group has unused unrecognised overseas tax
losses amounting to £547,000 (2023: £1,319,000), and unused unrecognised UK
tax losses amounting to £6,311,000 (2023: £4,613,000). These tax losses are
not expected to expire.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
19. Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term deposits held by the
Group net of amounts outstanding on bank overdraft. The carrying amount of
these assets is not significantly different to their fair value.
Group Company
2024 2023 2024 2023
£000's £000's £000's £000's
Cash and cash equivalents 22,374 21,658 363 388
Cash and cash equivalents presented in the statement of cash flows 22,374 21,658 363 388
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.
Cash and short-term deposits held in China are subject to local exchange
control regulations. These regulations provide for restrictions on exporting
capital from those countries, other than through normal dividends. The
carrying amount of the assets included within the consolidated financial
statements to which these restrictions apply is £14.3m (2023: £17.6m).
Significant non-cash transactions from investing activities are as follows:
Group Company
2024 2023 2024 2023
£000's £000's £000's £000's
Acquisition of property, plant and equipment by means of leases or not yet 464 3,124 21 34
paid at year end
Acquisition of intangible assets not yet paid at year end 272 306 - -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
20. Trade and other payables
Group Company
2024 2023 2024 2023
£000's £000's £000's £000's
Trade payables 10,119 6,124 75 194
Contract liabilities 3 1,079 - -
Other payables 1,205 667 167 45
Accruals and deferred income 6,026 6,653 562 281
17,353 14,523 804 520
21. Borrowings
Group Company
2024 2023 2024 2023
£000's £000's £000's £000's
Cash and cash equivalents 22,374 21,658 363 388
Lease liabilities (4,025) (4,480) (62) (75)
Net cash 18,349 17,178 301 313
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 2024, the undrawn facility was £5,000,000 (2023: £5,000,000).
At 31 March 2024, the Group has an undrawn revolving credit facility
£10,000,000 (2023: £10,000,000) with Natwest. This facility is interest
bearing and can be drawn by the Group on demand, The facility expires on 30
June 2026.
Reconciliation of lease liabilities
Group Company
2024 2023 2024 2023
£000's £000's £000's £000's
Opening lease liabilities (4,480) (1,910) (75) (62)
New lease liabilities (416) (3,327) (22) (22)
Repayment 884 387 45 21
Lease liabilities interest (291) (205) (11) (12)
Disposal 92 - - -
Foreign exchange 186 575 - -
Closing lease liabilities (4,025) (4,480) (63) (75)
Current lease liabilities (646) (884) (50) (41)
Non-current lease liabilities (3,379) (3,596) (13) (34)
The Group leases a number of properties and motor vehicles in the
jurisdictions it operates in. At 31 March 2024 there were no termination or
extension options on leases.
The Group expensed £71,000 for the year ended 31 March 2024 (2023: £48,000)
for short-term leases.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
21. Borrowings (continued)
Group leases maturity
At 31 March 2024 the Group held the following number of leases in each of the
maturity categories below.
At 31 March 2024 Property Vehicle Other Total
Number Number Number Number
Up to 1 year 4 1 2 7
Between 1 - 5 years 8 9 3 20
Over 5 years 2 - - 2
Total number of leases 14 10 5 29
Average remaining lease term (in years) 2.5 1.8 1.5 2.1
At 31 March 2023 Property Vehicle Other Total
Number Number Number Number
Up to 1 year 1 1 - 2
Between 1 - 5 years 5 8 3 16
Over 5 years 4 - - 4
Total number of leases 10 9 3 22
Average remaining lease term (in years) 8.3 2.7 3.3 5.3
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 2024 2023
£000's £000's
Up to 1 year 1,135 896
Between 1 - 5 years 2,055 2,503
Over 5 years 1,085 1,983
Total 4,275 5,382
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
22. Provisions
Litigation Overseas tax Other Total
£000's £000's £000's £000's
At 31 March 2022 456 3,419 - 3,875
Charge for year through income statement - 1,214 124 1,338
Foreign exchange - (35) - (35)
At 31 March 2023 456 4,598 124 5,178
Charge for year through income statement - 507 208 715
Foreign exchange - (34) - (34)
At 31 March 2024 456 5,071 332 5,859
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 £5,071,000 in respect of overseas tax
liabilities. Certain aspects of a sales tax related to imported products in a
Group subsidiary might have been applicable. The subsidiary has been importing
an increasing volume of product into this country in recent years. This matter
remains uncertain and subject to further review of the tax legislation and
case law. No tax payment has yet been determined. However, a substantial tax
settlement may be required in due course and a provision has been recognised.
23. 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 £108,491 (2023: £90,845).
Defined benefit pension scheme
The Group operates a defined benefit pension 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 2022 and updated on 31 March 2024 for IAS 19 purposes
by a qualified independent actuary. The major assumptions used by the actuary
were:
31 March 2024 31 March 2023
Discount rate 4.75% 4.85%
RPI inflation 3.45% 3.30%
Deferred revaluation rate CPI max 5% p.a. 2.45% 2.30%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
23. Pension and other post-retirement benefit commitments
(continued)
Mortality rates
No pre-retirement mortality is assumed (2023: 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 2022 projections with a 1.00% long-term
trend rate (2023: 1.25%).
Under these mortality assumptions, the expected future lifetime for a member
retiring at age 65 at the year-end would be 21.0 years for males (2023: 22.2
years) and 23.2 years for females (2023: 24.4 years). For members retiring in
20 years' time, the expectation of life would be 22.0 years for males (2023:
23.6 years) and 24.4 years for females (2023: 25.8 years).
The weighted average term of the liabilities is 7 years (2023: 8 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
2024 2023
£000's £000's
Assets at start of year 1,135 1,648
Defined benefit obligation at start of year (954) (1,569)
Net asset/(liability) at 1 April 181 79
Return on assets 55 45
Interest cost (46) (43)
9 2
Gain/(loss) from asset return 40 17
Gain/(loss) from changes in assumptions (1) 43
Gain/(loss) from experience 4 40
Statement of other comprehensive income 43 100
Employer contributions (gross) - -
Net assets at 31 March 233 181
Actual assets at end of year 1,202 1,135
Actual defined benefit obligation at end of year (969) (954)
Gain/(loss) on changes in assumptions was £nil (2023: £nil) relating to
changes in demographic assumptions and a loss of £1,000 (2023: £43,000 gain)
relating to changes in financial assumptions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
23. 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 contribution
schedules - lies with trustees.
Reconciliation of changes in the asset value during the year 2024 2023
£000's £000's
Fair value of assets at 1 April 1,135 1,648
Return on assets 55 45
Gain/(loss) on asset return 40 17
Employer contributions (gross) - -
(Decrease)/increase in secured pensioners' value due to scheme experience (28) (575)
Benefits paid - -
Fair value of assets at 31 March 1,202 1,135
Reconciliation of changes in the liability value during the year
Defined benefit obligation at 1 April 954 1,569
Interest cost 46 43
Past service cost (4) (40)
(Gain)/loss on changes in assumptions 1 (43)
(Decrease)/increase in secured pensioners' value due to scheme experience (28) (575)
Benefits paid - -
Defined benefit obligation at 31 March 969 954
No annual contribution to be paid by the employer is expected (2023:
£58,000).
Year ended 31 March 2024 2023 2022 2021 2020
£000's £000's £000's £000's £000's
Fair value of plan assets 1,202 1,135 1,648 1,795 1,795
Present value of defined benefit obligation 969 954 1,569 1,799 1,814
(Deficit)/surplus in plan 233 181 79 (4) (27)
Experience (losses)/gains on plan liabilities 40 17 (5) - (2)
Plan assets 2024 2023
£000's £000's
Assets under management 345 291
Insured annuities 857 844
Total 1,202 1,135
Assets under management composition
2024 2023
Corporate bonds 42.6% 43.0%
Overseas equities 37.1% 29.2%
UK equities 12.5% 17.6%
Property 7.0% 7.8%
Cash 0.8% 2.4%
100.0% 100.0%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
23. 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
2024 2023
£000's £000's £000's £000's
Discount rate +/- 0.1% (56) 64 (62) 73
Members' life expectancy +/- 1 year (73) 73 62 (64)
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 2024
24. Share-based payments
The expense recognised for share-based payments made during the year is shown
in the following table:
Group Company
2024 2023 2024 2023
£000's £000's £000's £000's
Total expense arising from equity-settled share-based payments transactions 413 408 127 179
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
2024 2024 2023 2023
000's WAEP (£) 000's WAEP (£)
Outstanding at 1 April 2,777 2.84 3,866 3.47
Granted during the year - Employee scheme 485 0.95 - -
Granted during the year - LTIPs 418 0.05 551 0.05
Granted during the year - Deferred bonus 45 0.05 46 0.05
Cancelled during the period (142) 4.47 (1,686) 3.20
Exercised during the period (23) 0.05 - -
Outstanding at 31 March 3,560 2.18 2,777 2.84
Granted < 3 years ago and not vested (1,559) (1,239)
Exercisable at 31 March 2,001 3.62 1,538 4.47
2,001,493 options were exercisable at 31 March 2024 (2023: 1,537,850). The
WAEP of exercisable options at 31 March 2024 was 362.0p (2023: 447.0p).
The average share price during the year was 106.9p (2023: 111.2p).
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 2024 had a weighted average
exercise price of £2.18 (2023: £2.84) and a weighted average remaining
contractual life of 5.4 years (2023: 4.7 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 Group.
484,900 share options have been granted in the year under this scheme (2023:
none). In addition 417,704 options have been issued under the Group's Long
Term Incentive Plan (2023: 550,953) and 44,562 under the Group's deferred
bonus arrangements (2023: 45,606).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
24. 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 2024 is
given below:
Date of grant Unapproved Approved Exercise price Expiry date
21 August 2014 - 11,400 £ 1.615 21 August 2024
13 February 2015 - 18,850 £ 2.005 13 February 2025
26 August 2015 - 21,350 £ 2.650 26 August 2025
19 January 2016 - 10,200 £ 3.150 19 January 2026
17 February 2016 - 19,600 £ 3.125 17 February 2026
01 March 2016 - 9,600 £ 3.125 01 March 2026
12 September 2016 - 23,100 £ 4.325 12 September 2026
12 September 2016 306,900 - £ 4.325 12 September 2023
15 September 2016 - 2,000 £ 4.350 15 September 2026
15 September 2016 398,000 - £ 4.350 15 September 2023
21 September 2017 - 36,650 £ 6.200 21 September 2027
21 September 2017 234,350 - £ 6.200 21 September 2024
12 April 2018 - 3,900 £ 5.450 12 April 2028
23 October 2018 - 56,050 £ 3.800 23 October 2028
23 October 2018 233,950 - £ 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 14,782 - £ 0.050 24 September 2031
12 December 2022 45,606 - £ 0.050 12 December 2032
27 February 2023 * 550,953 - £ 0.050 27 February 2033
25 April 2023 - 269,800 £ 1.011 24 April 2033
22 December 2023 44,562 - £ 0.050 22 December 2033
22 March 2024 * 417,704 - £ 0.050 22 March 2034
22 March 2024 - 215,100 £ 0.880 22 March 2034
2,700,037 859,549
*These are the options where a TSR ("Total Shareholder Return") criterion
affects the number of options that will vest.
The market price of the shares at 31 March 2024 was 85.5p (2023: 96.5p) with a
range in the year of 84.0p to 122.5p (2023: 82.5p to 165.0p).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
24. 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.
2024 2023 2022 2021 2020
Vesting period (years) 3 - 4 3 - 4 3 - 4 n/a n/a
Option expiry (years) 10 10 7 - 10
Dividends expected on the shares 0.00% 0.00% 1.00%
Risk free rate (average) 3.74% - 4.13% 3.20% - 3.75% 0.18%
Volatility of share price 40% 40% 40%
Weighted average fair value (pence) 47.0 -106.2 84.0 -108.0 101.0 - 316.0
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. 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. The R&D targets comprise a range of
identifiable and quantifiable criteria relating to the introduction of new
R&D projects, the progress of existing R&D projects to later stages of
the development cycle, the submission of projects for approval to relevant
regulators and for the approval of projects by the relevant regulators.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
25. Share capital
2024 2023
£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
67,744,889 (2023: 67,721,916) ordinary shares of 5p each 3,387 3,381
During the year 22,973 shares were issued (2023: no shares were issued). The
options were issued following the exercise of share options. The exercise
price was 5 pence per option and consideration of £1,000 was received.
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.
26. Non-controlling (minority) interests
2024 2023
£000's £000's
Balance as at 1 April 12,281 12,284
Share of subsidiary's profit/(loss) for the year 960 2,083
Share of foreign exchange gain/(loss) on net investment (738) (276)
222 1,807
Share of dividend paid by subsidiary (2,813) (1,810)
Balance as at 31 March 9,690 12,281
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
27. Other reserves
The Group and Company held a revaluation reserve of £311,000 as at
31 March 2024 (2023: £311,000) relating to the freehold of the former head
office of the Group (New Malden). The revaluation reserve has been transferred
directly to retained earnings after the disposal of the property.
The Group and Company held a revaluation reserve of £75,000 as at
31 March 2024 (2023: £75,000) relating to the investment property
(Mitcham). The revaluation reserve has been transferred directly to retained
earnings after the disposal of the property.
The Group held a revaluation reserve of £271,000 as at 31 March 2024 (2023:
£271,000) relating to the acquisition of ECO Animal Health Japan Inc in 2009
and corresponding to the carrying value of its assets.
The Group and Company held a capital redemption reserve of £106,000 as at
31 March 2024 (2023: £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 31 March 2023 Movement in the year At 31 March 2024
£000's £000's £000's
In respect of:
Zhejiang ECO Biok Animal Health Products Limited 1,098 (767) 331
Zhejiang ECO Animal Health Limited 319 (204) 115
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda 220 (5) 215
ECO Animal Health Japan Inc. (20) (164) (184)
ECO Animal Health USA Corp. (35) 20 (15)
ECO Animal Health de Mexico, S. de R. L. de C. V. 340 30 370
ECO South Africa (49) - (49)
Pharmgate LLC 5 - 5
Foreign exchange reserve movements charged to consolidated statement of 1,878 (1,090) 788
comprehensive income
28. Directors' emoluments
2024 2023
£000's £000's
Emoluments for qualifying services 1,211 999
Company pension contributions to money purchase schemes 25 25
Share-based payments 108 70
Benefits in kind 13 13
1,357 1,107
During the year no Directors exercised share options (2023: none) realising a
gain of £nil (2023: £nil).
The highest paid Director received £619,000 (2023: £497,000) including
£33,000 (2023: £6,000) of share-based payments and £nil (2023: £nil) of
pension contributions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
29. Employees
Number of employees
The average number of employees (including Directors) during the year was:
2024 2023
Number Number
Directors 5 6
Production and development 91 89
Administration 48 47
Sales 83 92
227 234
Employment costs (including amounts capitalised)
2024 2023
£000's £000's
Wages and salaries 14,393 13,045
Share-based payments 413 408
Social security costs 1,558 1,600
Other pension costs 431 408
16,795 15,461
30. Related party transactions
Dividends paid to related parties
During the year Mr P Lawrence (a significant shareholder) and his family
received no dividends (2023: £nil).
The other Directors and their families received dividends to the value of
£nil (2023: £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 £603,786 (2023: £750,000) and
charged interest of £1,707,579 (2023: £1,224,705) 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 Animal Health Ltd paid dividends to ECO Animal
Health Ltd of £449,560 (RMB 3,916,015).
During the year Zhejiang ECO Biok Animal Health Products Limited paid
dividends of £255,029 (RMB 1,960,000) to ECO Animal Health Group plc (2023:
£144,828) and £2,702,641 (RMB 23,540,000) to ECO Animal Health Limited
(2023: £1,739,409).
During the year ECO Animal Health do Brasil Comercio de Produtos Veterinarios
Ltda paid dividends to ECO Animal Health Ltd of £1,398,471 (BRL 9,000,000)
(2023: £Nil).
Key management compensation
The Group regards the Board of Directors as its key management.
2024 2023
£000's £000's
Emoluments for qualifying services 1,211 999
Retirement benefits 25 25
Share-based payments 108 70
Benefits in kind 13 13
1,357 1,107
The number of Directors for which retirement benefits were accruing was 1
(2023: 2).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
31. 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 risk 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 19, borrowings in note 21 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.
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 2024, the Group was contractually obliged to make repayments as
detailed below:
2024 2023
Within one year or on demand £000's £000's
Trade payables 10,119 6,124
Other payables 1,205 565
Accruals 6,026 6,653
17,350 13,342
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.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
31. Financial instruments (continued)
Foreign 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
2024 £000's £000's £000's £000's £000's £000's £000's £000's
Trade and other receivables 30,924 2,961 6,753 134 677 759 2,699 125
Trade and other payables (13,115) (681) (7,312) (1,074) (656) (494) (3,387) (80)
Cash and cash equivalents 4,638 439 14,356 618 878 321 378 64
Total 22,447 2,719 13,797 (322) 899 586 (310) 109
US Dollar Euros Chinese RMB Japanese Yen Brazilian Real Canadian Dollar Mexican Peso Other
2023 £000's £000's £000's £000's £000's £000's £000's £000's
Trade and other receivables 34,969 2,013 3,880 303 3,251 752 335 153
Trade and other payables (25,436) (479) (5,258) (449) (49) (673) - (125)
Cash and cash equivalents 2,162 515 17,736 240 265 180 125 53
Total 11,695 2,049 16,358 94 3,467 259 460 81
At 31 March 2024 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 2024.
2024 2023
£000's £000's
U S Dollar 2,278 1,300
Euro 265 228
Chinese RMB 1,450 1,818
Japanese Yen (39) 10
Brazilian Real 100 385
Canadian Dollar 65 29
Mexican Peso (41) 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
31. Financial instruments (continued)
Analysis of financial instruments by category
Group Financial assets Financial liabilities Total
2024 £000's £000's £000's
Trade and other receivables(1) 32,175 - 32,175
Cash and cash equivalents 22,374 - 22,374
Trade and other payables(2) - (17,350) (17,350)
Amounts due under leases - (4,025) (4,025)
Borrowings - - -
(1.) This includes prepayments and accrued income £524,000.
(2.) This excludes contract liabilities but includes accruals and deferred
income (£6,026,000).
( )
2023 £000's £000's £000's
Trade and other receivables(1) 26,850 - 26,850
Cash and cash equivalents 21,658 - 21,658
Trade and other payables(2) - (13,339) (13,339)
Amounts due under leases - (4,480) (4,480)
Borrowings - - -
(1.) This includes prepayments and accrued income £725,000.
(2.) This excludes contract liabilities but includes accruals and deferred
income (£6,653,000).
Company Financial assets Financial liabilities Total
2024 £000's £000's £000's
Trade and other receivables(1) 1,698 - 1,698
Cash and cash equivalents 363 - 363
Trade and other payables(2) - (804) (804)
Amounts due under leases - (62) (62)
Borrowings - - -
Amounts due from Group undertakings 51,078 - 51,078
(1.) This includes prepayments and accrued income £254,000.
(2.) This excludes contract liabilities, but includes accruals and deferred
income (£562,000).
( )
2023 £000's £000's £000's
Trade and other receivables(1) 1,073 - 1,073
Cash and cash equivalents 388 - 388
Trade and other payables(2) - (520) (520)
Amounts due under leases - (76) (76)
Borrowings - - -
Amounts due from Group undertakings 51,526 - 51,526
(1.) This includes prepayments and accrued income £248,000.
(2.) This excludes contract liabilities, but includes accruals and deferred
income (£281,000).
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 MARCH 2024
32. Post balance sheet events
Disposal of Horsepaste Business
ACME Drugs S.r.l in Italy has acquired all the marketing authorisations held
by ECO for the Ecomectin® Horsepaste, together with the intellectual property
£18,000, manufacturing and distribution arrangements and existing inventory
£155,000.
This transaction was completed on 3 April 2024 for a total consideration of
€1,300,000 (£1,120,000 at 31 March 2024). €500,000 (£431,000 at 31 March
2024) was paid on signature of the sale and purchase agreement with an
undertaking to pay two further payments of €400,000 (£345,000 at 31 March
2024) each on the date which is 18 months after completion and 36 months after
completion. These two elements of deferred consideration are unconditional and
supported with a bank guarantee which will be put in place within 45 days.
The revenue derived from this business in the year ending 31 March 2024 was
£814,000 (2023 £988,000). The product was never treated as a separate
segment and together with the relative immateriality of the revenue has
resulted in not treating this as a discontinued operation. As at 31 March
2024, the £18,000 has been included in the balance sheet as assets held for
sale.
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