REG - Eco Animal Health Gp - Results for the six months ended 30 September 2022
23/11/2022 07:00
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RNS Number : 2733H Eco Animal Health Group PLC 23 November 2022
ECO Animal Health Group plc
(''ECO" or the "Group") (AIM: EAH)
Results for the six months ended 30 September 2022
"In line with full year expectations"
HIGHLIGHTS
Financials
· Group Sales at £34.9 million (H1 2021: £38.5 million)
- China and Japan sales declined to £8.5 million (H1 2021: £15.7 million)
- Excluding China and Japan, revenues in aggregate increased by 16% to
£26.4 million (H1 2021: £22.8 million)
· Gross margins at 45% remained consistent with the prior year period
· Adjusted EBITDA at £1.7 million (H1 2021 restated*: £3.4 million)
· Profit before taxation of £3.0 million including a £2.6 million
foreign exchange gain (H1 2021 restated profit*: £0.5 million, including
£0.3 million gain)
· Earnings per share of 1.96p (H1 2021: restated loss per share*:
(0.92)p)
· Cash generated by operations of £3.0m (H1 2021 restated*: £6.1m)
* Prior period figures have been restated to reflect adjustments arising
from the March 2022 audit
Operations
· Sales in Latin America increased by 25% to £7.9 million (H1 2021:
£6.3 million)
· Sales in South and Southeast Asia increased by 23% to £7.4 million
(H1 2021: £6.0 million)
· China revenue represented 24% of total Group revenues (H1 2021: 41%)
which declined significantly as a result of reduced sales from the Group's
largest customers in the region and continued impact of COVID restrictions
· New R&D collaborations with Imperial College for saRNA technology
and Moredun Research Institute for the development of a poultry red mite
vaccine
· Two Mycoplasma vaccines for poultry expected to be submitted for
regulatory approval in late 2023 and early 2024
Dr Andrew Jones, Non-Executive Chairman of ECO Animal Health Group plc,
commented:
"We are delighted with the continuing growth in all markets outside of China
and the increasing market penetration experienced by Aivlosin® in its
multiple formulations. The China swine industry has been slow during the first
half of this year; the socio-economic reasons for this are well publicised and
understood. Nevertheless, we are pleased to retain our strong market position
and we expect a return to healthy markets in China during the course of this
next year.
We are excited by the progress in our new product developments and it is
particularly pleasing that some ground breaking technologies are being
explored in new collaborations announced in the last few months. We are on
track for submission of our new Mycoplasma poultry vaccines at the end of 2023
and we expect marketing approval to be received shortly afterwards. The rest
of the portfolio is demonstrating good progression.
Our recent annual strategy review endorsed the vision, objectives and
direction for the Group and we look forward with cautious optimism to
reporting the full year numbers in line with market expectations."
Contacts:
ECO Animal Health Group plc 020 8447 8899
David Hallas (CEO)
Christopher Wilks (CFO)
IFC Advisory 020 3934 6630
Graham Herring
Zach Cohen
Singer Capital Markets (Nominated Adviser & Joint Broker) 020 7496 3000
Mark Taylor
George Tzimas
Investec (Joint Broker) 020 7597 5970
Gary Clarence
Daniel Adams
Carlo Spingardi
Equity Development 020 7065 2692
Hannah Crowe
Matt Evans
The information contained within this announcement is deemed by the Group to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a
Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.
About ECO Animal Health
ECO Animal Health Group plc researches, develops and commercialises products
for livestock. Our business strategy is to generate shareholder value by
achieving the maximum sales potential from the existing product portfolio
whilst investing in research and development ("R&D") for new products,
particularly vaccines, and seeking to in-license new products.
The information contained within this announcement is deemed by the Group to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a
Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.
About ECO Animal Health
ECO Animal Health Group plc researches, develops and commercialises products
for livestock. Our business strategy is to generate shareholder value by
achieving the maximum sales potential from the existing product portfolio
whilst investing in research and development ("R&D") for new products,
particularly vaccines, and seeking to in-license new products.
Chairman's statement
I am pleased to present the results for the Group for the six months ended 30
September 2022 ("H1 2022"). During the first half of our financial year, we
experienced positive sales momentum in all our major markets outside of China.
Furthermore, our very promising new product development pipeline is
progressing well towards product registration.
Financial Performance
Group revenue was 9% lower in H1 2022 at £34.9 million (H1 2021: £38.5
million), as a result of a decline in revenues from China. China and Japan
revenue of £8.5 million represented 24% of Group revenue (H1 2021: 41%).
Excluding China and Japan, revenue from other markets grew by 16%, in
aggregate, to £26.4 million (H1 2021: £22.8 million).
The gross margin in H1 2022 was 45% (H1 2021: 45%). Despite the significant
reduction in higher margin China revenues, gross margins were maintained as a
result of favourable exchange rates and cost control within the Group.
Administrative expenses at £11.9 million were 9% higher than the comparative
period last year (H1 2021: £10.9 million). This arose from further
investment in sales and marketing, a return to travel after the easing of
COVID restrictions and a reclassification of technical support costs
previously included as an R&D expense (in the H1 2021 results) but now
shown as administrative expenses.
Research and development ("R&D") expenses shown in the income statement
together with the amounts capitalised were in aggregate a cash investment of
£4.2 million (H1 2021: £4.0 million); for comparative purposes this
represented 12.0% of revenue generated in the period (H1 2021: 10.4%).
Earnings before interest, tax, depreciation, amortisation and impairment,
share based payments and foreign exchange movements ("Adjusted EBITDA") were
£1.7 million (H1 2021 restated: £3.4 million). This reduction was due to
the fall in revenues in China.
Cash generated from operations was £3.0 million (H1 2021 restated: £6.1
million). Improved receivables and management of payables partly offset the
reduced profitability in the period.
This cash generation after allowing for tax payments of £1.0 million,
resulted in cash balances at the period end of £12.9 million (31 March 2022:
£14.3 million), of which £4.0 million (31 March 2022: £6.1 million) was
held in the Group's 51% owned subsidiary in China. The Group repatriates
cash from China by dividend declaration, accordingly only 51% is received by
the Group and is subject to withholding taxes. Additionally, the Group has a
wholly owned subsidiary in China, the cash in this company is repatriated
annually by dividend. 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 is based upon the cash balances outside of the China JV,
which at 30 September 2022 was £8.9 million (31 March 2022: £8.2 million).
Subsequent to the period end, two dividends totalling £5.7 million were
received from China.
The Group's committed banking facilities remain at £15.0 million, being a
£5.0 million overdraft facility and a £10 million revolving credit
facility. These facilities expire on 30 June 2026 and were undrawn as at 30
September 2022.
Basic EPS in the six months ended 30 September 2022 was 1.96p (H1 2021
restated: loss per share 0.92p). EPS benefited from the exchange rate gain
reported in the period of £2.6 million (H1 2021: £0.3 million) and the prior
period loss per share was adversely affected by the impairment of intangible
assets recorded in the six months ended 30 September 2021. The dilutive
effect of unexercised share options has reduced earnings per share to 1.95p in
the six months ended 30 September 2022 (H1 2021 restated: no change).
Business Performance
The geographical analysis of the Group's revenue in the six months ended 30
September 2022 compared to the prior period in 2021 and the full year ended 31
March 2022 was as follows:
Revenue Summary 6 months ended 30 September Year ended
2022 2021 H1 2022 vs H1 2021 31 March
2022
(£'m) (£'m) % Change (£'m)
China and Japan 8.5 15.7 (46%) 28.4
North America (USA and Canada) 6.5 6.0 8% 16.4
South and Southeast Asia 7.4 6.0 23% 11.8
Latin America 7.9 6.3 25% 15.8
Europe 2.9 2.9 - 6.4
Rest of World and UK 1.7 1.6 6% 3.4
Total Group 34.9 38.5 (9%) 82.2
Group revenue reduced by 9% to £34.9 million (H1 2021: £38.5 million). The
overall reduction in Group revenue in the six months ended 30 September 2022
was caused by a 46% reduction in revenue from China and Japan; excluding China
and Japan revenues in aggregate increased by 16% to £26.4 million (H1 2021:
£22.8 million). Travel restrictions during H1 2022 were largely lifted in
most of the Group's markets, with the exception of China, enabling sales and
marketing efforts to return to the in-person support that has historically
characterised the Group's approach to its customers and market place.
As previously indicated, trading in China was subdued during the first quarter
of the current financial year and therefore the Board's outlook for the
Chinese market in 2022 was cautious. Many of the Group's larger customers
needed to repair their respective balance sheets which had been damaged by
extended periods of trading at a loss and reduced their purchases of
Aivlosin® in the period. However, the Group enjoyed good trading with its
mid-tier customers in China who, in the main, were less expansive during the
re-stocking phase in 2020/2021. We also noted in our Annual Report and
Accounts for the year ended 31 March 2022 that the pork to grain price ratio
had for the first time in over a year risen above 5 in August; the China
National Reform and Development Commission reported that the ratio on 16
November 2022 was 8.78. This provides the Board with some optimism for
improved trading conditions in China.
Revenue in North America, in particular the USA, has been broadly consistent;
farm hog prices in the USA and Canada have been generally stable throughout
2022 and this has resulted in continuing strong market conditions. Aivlosin®
continues to gain market share.
The growth seen in Southeast Asia during the last three or four years has
continued during 2022. The poor poultry market in India in recent years has
recovered with revenue increasing to £2.2 million (H1 2021: £0.4 million).
Thailand remained the largest single market for the Group's products in this
region with revenue increasing to £3.5 million (H1 2021: £4.0 million),
supported with good sales into Pakistan, Malaysia and Vietnam of £1.6 million
(H1 2021: £1.6 million).
Revenue in Latin America grew 25% to £7.9 million (H1 2021: £6.3 million),
with Brazil representing the largest market at £4.2 million (H1 2021: £3.0
million). Brazil's exports of pork to China continued strongly during the
period providing strong demand for Aivlosin®. Mexico revenue in H1 2022 was
£0.5 million higher than the equivalent period last year and the remaining
counties in Latin America were broadly consistent year on year.
Revenue derived from Europe was consistent at £2.9 million. Within the
continent, Spain remained the largest single market with revenues of £1.0
million in the six months ended 30 September 2022 (H1 2021: £1.1 million).
Research and development
Work on the Group's promising pipeline of new products has continued at pace
during the first half of this financial year with £4.2 million (H1 2021:
£4.0 million) spent during the period. This is in line with plan and the
first two Mycoplasma vaccines for poultry are expected to be submitted for
regulatory approval in late 2023 and early 2024, with marketing authorisation
expected to be gained shortly thereafter.
In June 2022 we announced a very exciting collaboration with Imperial College
to assess the veterinary application of self-amplifying RNA technology. This
technology represents the next generation of RNA delivered medicines and is
particularly interesting for veterinary medication because it implies fewer
doses, lower dose rates, a broader range of applications and cost savings for
the producer compared with conventional mRNA approaches. Work is underway on
key proof of concept studies.
In July 2022 the Group signed a partnership agreement with the Moredun
Research Institute to research and develop an effective first in class vaccine
solution for the sustainable control of poultry red mite ("PRM"). Red mite
infestation in poultry is one of the emerging and important causes of
production losses in laying hens and has a major impact on animal welfare.
Poultry red mites also serve as vectors for several disease-causing bacteria
and viruses in poultry. Their ubiquitous presence threatens the poultry
industry globally, as there are no effective non-chemical solutions available
for the prevention of PRM infestation in poultry. If this programme is
successful, ECO may take the option of developing, registering and
commercialising the vaccine under a worldwide exclusive license from the
Moredun Research Institute.
Management plans to hold another Capital Markets Day during the first quarter
of 2023 during which an update will be provided on the new product development
portfolio.
Strategy
During the Autumn, the leadership team and the Board undertook a refresh of
the Group's strategy. This involved an analysis of the vision for the Group,
and assessment of the key internal and external elements available to the
Group to achieve this vision, as well as an appraisal of the risks and threats
to the success of the strategy. The exercise endorsed the Group's direction:
to maximise the commercial opportunity in the Group's existing products, to
bring forward the exciting array of new vaccine and biologicals products
programmes, continuing to focus on swine and poultry. The Group is open to
and will pursue further collaboration including technical partnering,
licensing and M&A activity.
Dividend
The Board recognises the value of dividends to shareholders and balancing the
need for prudent management of cash resources as well as funding the exciting
pipeline of new products. It has however decided that the best use of the
Group's cash is in the new product development initiatives and accordingly no
dividend is recommended at the current time.
Auditors
The Company announced on 14 November 2022 that BDO resigned as auditors to the
Group and we are delighted to have appointed Haysmacintyre LLP to be the
Group's auditors. Transitionary arrangements are underway, and we look
forward to their first audit for the year ending 31 March 2023.
Change of advisers
The Group also announces that from 23 November 2022, Singer Capital Markets
and Investec, will be retained and will act as the Group's nominated adviser
and joint broker, and joint broker, respectively.
Outlook
The China pork price has improved from less than CNY13/kg in March 2022 to in
excess of CNY27/kg by the end of October 2022. This increase in pork price
prompted the Ministry of Agriculture to release frozen pork onto the market
ahead of the National Day on 1 October - the first time it has done so during
2022. The Group has experienced improving trading conditions in China with
October's revenue greater than any other month recorded during this financial
year. Whilst this is a promising start to the second half, we remain
cautious on China's revenue recovery until January 2023 and the period of
strong pork demand associated with Chinese New Year and national holidays.
The containment policy in relation to COVID also provides short term reason to
be cautious regarding pork demand.
We expect continuing growth in our markets outside of China. Seasonally
occurring disease is anticipated to drive demand in the second half of the
financial year. This seasonal effect, together with expected stronger
trading in China in our fourth quarter is expected to result in the customary
second half weighting to our revenue. In the event Sterling weakness
continues, this would provide further upside in revenue opportunity. Cost
control in relation to manufacturing costs has served us well during 2022 and
we are cautiously optimistic in relation to the 2023 contractual price
negotiations.
The Board is excited about the continuing results from our new product
development programme and we look forward to providing an update at a Capital
Markets Day in the first quarter next year.
We look forward with cautious optimism to reporting the full year numbers in
line with market expectations.
Dr Andrew Jones
Non-Executive Chairman
23 November 2022
CONSOLIDATED INCOME STATEMENT
Six months Six months Year ended
to 30.09.22 to 30.09.21 31.03.22
Notes (unaudited) (unaudited) (audited)
£000's £000's £000's
Restated*
Revenue 4 34,859 38,474 82,195
Cost of sales (19,063) (21,335) (47,059)
Gross Profit 15,796 17,139 35,136
Other income 242 16 65
Administrative expenses (11,884) (10,852) (22,421)
Research and development expenses (2,923) (3,309) (8,762)
Foreign exchange gains 2,573 274 989
Amortisation of intangible assets (546) (586) (1,140)
Share based payments (175) (83) (342)
Impairment of intangible assets 8 - (2,085) (2,085)
Profit from operating activities: 3,083 514 1,440
Net finance cost (95) (89) (94)
Share of profit of associate 51 47 43
Profit before income tax 3,039 472 1,389
Income tax charge 7 (929) (828) (2,094)
Profit/(loss) for the period 2,110 (356) (705)
Attributable to:
Owners of the parent company 1,325 (621) (686)
Non-controlling interest 785 265 (19)
2,110 (356) (705)
Basic earnings per share (pence) 6 1.96 (0.92) (1.01)
Diluted earnings per share (pence) 6 1.95 (0.92) (1.01)
Earnings before interest, taxation, depreciation,
amortisation and share based payments (EBITDA) 4,243 1,593 6,395
Exclude foreign exchange differences and impairment (2,573) 1,811 (989)
Adjusted EBITDA 1,670 3,404 5,406
*Details of the restatement, which is unaudited, are presented in note 3.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year ended
to 30.09.22 to 30.09.21 31.03.22
(unaudited) (unaudited) (audited)
£000's £000's £000's
Restated*
Profit/(loss) for the period 2,110 (356) (705)
Other Comprehensive income/(loss) (net of related tax effects):
Items that will or may be reclassified to profit/(loss):
Foreign currency translation differences 276 136 2,195
Items that will not be reclassified:
Deferred tax on property revaluations - 2 1
Defined benefit plan - actuarial losses - - 24
Other comprehensive income/(loss) for the period 276 138 2,220
Total comprehensive income for the period 2,386 (218) 1,515
Attributable to:
Owners of the parent Company 1,506 (560) 435
Non-controlling interest 880 342 1,080
*Details of the restatement, which is unaudited, are presented in note 3.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Capital Account Share Premium Account Revaluation Reserves Other Reserves Foreign Exchange Reserve Retained Earnings Total Minority Interest Total Equity
£000's £000's £000's £000's £000's £000's £000's £000's £000's
FOR THE YEAR ENDED 31 MARCH 2022
Balance as at 31 March 2021 (restated) 3,379 63,258 656 106 1,092 13,410 81,901 13,414 95,315
Loss for the year - - - - - (686) (686) (19) (705)
Other comprehensive income:
Foreign currency differences - - - - 1,096 - 1,096 1,099 2,195
Deferred tax on property revaluations - - 1 - - - 1 - 1
Actuarial gains on pension scheme assets - - - - - 24 24 - 24
Total comprehensive income/(loss) for the year - - 1 - 1,096 (662) 435 1,080 1,515
Transactions with owners recorded directly in equity:
Issue of shares in the year 2 61 - - - - 63 - 63
Share-based payments - - - - - 342 342 - 342
Dividends - - - - - (677) (677) (2,210) (2,887)
Transactions with owners 2 61 - - - (335) (272) (2,210) (2,482)
Balance as at 31 March 2022 3,381 63,319 657 106 2,188 12,413 82,064 12,284 94,348
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022
Profit for the period - - - - - 1,325 1,325 785 2,110
Other comprehensive income:
Foreign currency differences - - - - 181 - 181 95 276
Total comprehensive income for the period - - - - 181 1,325 1,506 880 2,386
Transactions with owners recorded directly in equity:
Issue of shares in the period - - - - - - - - -
Share-based payments - - - - - 175 175 - 175
Dividends - - - - - - - (1,810) (1,810)
Total transactions with owners - - - - - 175 175 (1,810) (1,635)
Balance as at 30 September 2022 3,381 63,319 657 106 2,369 13,913 83,745 11,354 95,099
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Capital Account Share Premium Account Revaluation Reserves Other Reserves Foreign Exchange Reserve Retained Earnings Total Minority Interest Total Equity
£000's £000's £000's £000's £000's £000's £000's £000's £000's
FOR THE YEAR ENDED 31 MARCH 2021
Balance as at 31 March 2020 (restated) 3,377 62,882 572 106 800 5,982 73,719 5,766 79,485
Profit for the year (restated) - - - - - 7,337 7,337 8,491 15,828
Other comprehensive income:
Foreign currency differences (restated) - - - - 292 - 292 (281) 11
Deferred tax on property revaluations - - 84 - - - 84 - 84
Actuarial losses on pension scheme assets - - - - - (32) (32) - (32)
Total comprehensive income for the year - - 84 - 292 7,305 7,681 8,210 15,891
Transactions with owners recorded directly in equity:
Issue of shares in the year 2 376 - - - - 378 - 378
Share-based payments - - - - - 123 123 - 123
Deferred tax on share-based payments - - - - - - - - -
Dividends - - - - - - - (562) (562)
Transactions with owners 2 376 - - - 123 501 (562) (61)
Balance as at 31 March 2021 (restated) 3,379 63,258 656 106 1,092 13,410 81,901 13,414 95,315
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021
(Loss)/profit for the period - *restated - - - - - (621) (621) 265 (356)
Other comprehensive income:
Foreign currency differences (restated) - - - - 59 - 59 77 136
Deferred tax on property revaluations - - 1 - - - 1 - 1
Total comprehensive income for the period - - 1 - 59 (621) (561) 342 (219)
Transactions with owners recorded directly in equity:
Issue of shares in the period 2 61 - - - - 63 - 63
Share-based payments - - - - - 83 83 - 83
Total transactions with owners 2 61 - - - 83 146 - 146
Balance as at 30 September 2021 - restated* 3,381 63,319 657 106 1,151 12,872 81,486 13,756 95,242
*Details of the restatement, which is unaudited, are presented in note 3.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
30.09.22 30.09.21 31.03.22
(unaudited) (unaudited) (audited)
Notes £000's £000's £000's
Restated*
Non-current assets
Intangible assets 8 35,058 34,126 34,304
Property, plant and equipment 4,835 2,220 3,465
Investment property 227 305 227
Right-of-use assets 1,635 1,275 1,773
Investments 264 229 212
Deferred tax assets 523 352 523
Total non-current assets 42,542 38,507 40,504
Current assets
Inventories 32,853 26,492 30,142
Trade and other receivables 24,832 27,252 25,969
Income tax recoverable 1,598 3,358 1,596
Other taxes and social security 801 748 1,075
Cash and cash equivalents 12,883 22,892 14,314
Total current assets 72,967 80,742 73,096
Total assets 115,509 119,249 113,600
Current liabilities
Trade and other payables (13,242) (18,466) (12,954)
Provisions (4,512) (2,333) (3,875)
Income tax (351) (1,683) (224)
Other taxes and social security (481) (47) (239)
Amounts due under leases (97) (874) (397)
Dividends (50) (50) (50)
Total current liabilities (18,733) (23,453) (17,739)
Net current assets 54,234 57,289 55,357
Total assets less current liabilities 96,776 95,796 95,861
Non-current liabilities
Amounts due under leases (1,677) (554) (1,513)
Total assets less total liabilities 95,099 95,242 94,348
Equity
Capital and reserves
Issued share capital 3,381 3,381 3,381
Share premium account 63,319 63,319 63,319
Revaluation reserve 657 657 657
Other reserves 106 106 106
Foreign exchange reserve 2,369 1,151 2,188
Retained earnings 13,913 12,872 12,413
Shareholders' funds 83,745 81,486 82,064
Non-controlling interests 11,354 13,756 12,284
Total equity 95,099 95,242 94,348
*Details of the restatement, which is unaudited, are presented in note 3.
CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Year ended
to 30.09.22 to 30.09.21 31.03.22
(unaudited) (unaudited) (audited)
£000's £000's £000's
Restated*
Cash flows from operating activities
Profit/(loss) before income tax 3,039 472 1,389
Adjustment for: - - -
Finance income (42) (83) (190)
Finance cost 137 172 284
Foreign exchange (gain)/loss (2,573) (654) (989)
Depreciation 162 215 455
Amortisation of right-of-use assets 196 198 398
Revaluation of investment property - - 78
Amortisation of intangible assets 546 586 1,140
Impairment of intangible assets - 2,085 2,085
Share of associate's results (51) (47) (43)
Share based payment charge 175 83 342
Operating cash flows before movements in working capital 1,589 3,027 4,949
Change in inventories (1,671) (5,660) (8,585)
Change in receivables 4,153 5,217 7,630
Change in payables (1,593) 3,091 (2,868)
Change in provisions 502 376 1,392
Cash generated from operations 2,980 6,051 2,518
Finance costs (71) (68) (106)
Income tax (1,039) (2,288) (2,960)
Net cash from/(used in) operating activities 1,870 3,695 (548)
Cash flows from investing activities
Acquisition of property, plant and equipment (1,255) (223) (1,624)
Disposal of property, plant and equipment - 1 3
Purchase of intangibles (1,300) (689) (1,263)
Finance income 40 83 190
Net cash (used in)/from investing activities (2,515) (828) (2,694)
Cash flows from financing activities
Proceeds from issue of share capital - 62 63
Interest paid on lease liabilities (67) (67) (111)
Principal paid on lease liabilities (202) (195) (371)
Dividends paid (1,810) - (2,886)
Net cash (used in)/from financing activities (2,079) (200) (3,305)
Net increase/(decrease) in cash and cash equivalents (2,724) 2,667 (6,547)
Foreign exchange movements 1,293 702 1,338
Balance at the beginning of the period 14,314 19,523 19,523
Balance at the end of the period 12,883 22,892 14,314
*Details of the restatement, which is unaudited, are presented in note 3.
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2022
1. Basis of preparation
The financial information for the period to 30 September 2022 does not
constitute statutory accounts as defined by Section 435 of the Companies Act
2006. It has been prepared in accordance with the accounting policies set out
in, and is consistent with, the audited financial statements for year ended 31
March 2022.
The Group applies revised IAS 1 "Presentation of Financial Statements (2007)".
As a result, the Group presents all non-owner changes in equity in
consolidated statements of comprehensive income and all owner changes in
equity in consolidated statements of changes in equity.
This Interim Statement has not been audited or reviewed by the Group's
auditors.
2. Statement of compliance
This Interim Statement is prepared in accordance with IAS 34 "Interim
Financial Reporting". Accordingly, whilst the Interim Statement has been
prepared in accordance with IFRS, and the primary statements follow the format
of the annual financial statements, only selected notes are included - those
that provide an explanation of events and transactions that are significant to
an understanding of the changes in financial position and performance of the
Group since the last annual reporting date. IAS 34 states a presumption that
anyone who reads the Group's Interim Statement will also have access to its
most recent annual report. Accordingly, annual disclosures are not repeated
in this Interim Statement.
3. Changes to significant accounting policies and other restatements
The principal accounting policies which are adopted by the Group in the
preparation of its financial statements are set out in in the consolidated
financial statements of the Group for the year ended 31 March 2022. These
policies have been consistently applied to all prior years. Where necessary,
and as detailed in the consolidated financial statements of the Group for the
year ended 31 March 2022, any corrections to the application of the Group's
accounting policies to comply with International Financial Reporting Standards
have been made as restatements of prior period financial statements for the
correction of errors in accordance with IAS8. The Group's accounting policies
have been consistently applied in accordance with IFRS continued into the six
months ended 30 September 2022.
For the March 2022 Annual Report and Accounts, the Group became aware of tax
liabilities in a foreign jurisdiction associated with the importation of goods
and which would have fallen due in previous periods. The Group had not
previously recognised a liability, nor had it recognised a cost, in the
financial records for the years ended 31 March 2021, 31 March 2020 or periods
prior. The Group estimated the total liabilities, the related foreign
corporation tax impact, and their effect on the prior periods' consolidated
financial statements. As the Group has only recently become aware of the
liability, it has yet to confirm the exact amounts payable and it is not clear
when a settlement of these obligations will occur, however precedent suggests
that this may be up to seven years. The tax is related to the importation of
goods and therefore charged to cost of sales. The associated corporation tax
impact is shown in the Group's corporation tax charge and deferred tax asset.
Full details are given in the Annual Report and Accounts for the year ended 31
March 2022, but the financial effect on the interim consolidated financial
statements is summarised below.
Impact on the Balance Sheet and Income Statement
Balance sheet As reported Adjustment to reserves Adjustment through Income Statement As restated
as at
as at
30.09.21
30.09.21
Net assets: £000's £000's £000's £000's
Deferred tax assets 134 287 (69) 352
Provisions - (1,921) (412) (2,333)
Reserves:
Foreign exchange reserve 726 425 - 1,151
Retained earnings 15,412 (2,059) (481) 12,872
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2022
(Continued)
3. Changes to significant accounting policies and other restatements
(continued)
Income Statement As reported Adjustment As restated
for 6 months ended 30.09.21
for 6 months ended 30.09.21
£000's £000's £000's
Cost of sales (20,959) (376) (21,335)
Net finance cost (53) (36) (89)
Income tax (759) (69) (828)
4. Revenue is derived from the Group's animal pharmaceutical businesses.
5. Principal risks and uncertainties
The principal risks and uncertainties relating to the Group were set out on
pages 20-22 of the Group's Annual Report and Accounts for the year ended 31
March 2022. The key exposures are to foreign currency exchange rates,
potential delays in obtaining marketing authorisations, single sources of
supply for some raw materials, disease impact on growth, and trade debtor
recovery and have remained unchanged since the year end.
6. Earnings per share
Six months Six months Year ended
to 30.09.22 to 30.09.21 31.03.22
(unaudited) (unaudited) (audited)
Restated
Weighted average number of shares in issue (000's) 67,722 67,712 67,717
Fully diluted weighted average number of shares in issue (000's) 68,071 67,712 67,717
Profit/(loss) attributable to equity holders of the company (£000's) 1,325 (621) (686)
Basic earnings/(loss) per share (pence) 1.96 (0.92) (1.01)
Diluted earnings/(loss) per share (pence) 1.95 (0.92) (1.01)
Diluted earnings per share takes into account the dilutive effect of share
options. As the Group's result for the six months ended 30 September 2021
and the year ended 31 March 2022 were losses, there was no dilutive effect on
the earnings per share in those periods.
7. Taxation
The effective rate of the tax charge in the six months to 30 September 2022 is
31%, which is lower than the effective rate in the six months to 30 September
2021 of 175%. This reflects non-deductible tax expenses during the prior
period, of which the impairment of intangibles was the most significant.
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2022
(Continued)
8. Intangible non-current assets
Group Goodwill Distribution rights Drug registrations, patents and licence costs Total
£000's £000's £000's £000's
Cost
At 1 April 2021 17,930 407 23,963 42,300
Additions - - 689 689
Impairment - - (2,092) (2,092)
At 30 September 2021 17,930 407 22,560 40,897
Additions - - 732 732
At 31 March 2022 17,930 407 23,292 41,629
Additions - - 1,300 1,300
At 30 September 2022 17,930 407 24,592 42,929
Amortisation
At 1 April 2021 - 139 6,053 6,192
Charge for the period - 9 577 586
Written back on impairment - - (7) (7)
At 30 September 2021 - 148 6,623 6,771
Charge for the period - 10 544 554
At 31 March 2022 - 158 7,167 7,325
Charge for the period - 10 536 546
At 30 September 2022 - 168 7,703 7,871
Net Book Value
At 30 September 2022 17,930 239 16,889 35,058
At 31 March 2022 17,930 249 16,125 34,304
At 30 September 2021 17,930 259 15,937 34,126
At 1 April 2021 17,930 268 17,910 36,108
The Group continuously reviews the status of its research and development
activity, paying close attention to the likelihood of technical success and
the commercial viability of development projects. In the period to September
2021 there were indications that certain development projects for which costs
have previously been capitalised were unlikely to achieve technical success or
commercial viability. The capitalised costs in respect of these projects were
impaired through the income statement during the period to 30 September 2021.
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2022
(Continued)
This financial information was approved by the board on 23 November 2022.
This interim statement is available on the Group's website.
DIRECTORS AND OFFICERS Andrew Jones (Non-Executive Chairman)
David Hallas (Chief Executive)
Chris Wilks (Chief Financial Officer)
Tracey James (Non-Executive Director)
Frank Armstrong (Non-Executive Director)
REGISTERED OFFICE 78 Coombe Road, New Malden, Surrey, KT3 4QS
Tel: 020 8447 8899
COMPANY NUMBER 01818170
INFORMATION AT www.ecoanimalhealthgroupplc.com
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