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ECO Animal Health   -  EAH   

Final Results

Released 07:00 19-Jun-2019

Final Results


ECO Animal Health Group plc (‘’ECO”)


Results for the year ended 31 March 2019





Marc Loomes, CEO of ECO Animal Health Group plc, commented: “These are credible results for a year that was adversely depressed by both ASF and a trade war between the USA and China, our two largest markets. We are confident that our accelerated development programmes in vaccines and other products will add long term growth. For the year ahead we expect to report continued growth and to perform in line with the Board’s expectations.”

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.


ECO Animal Health Group plc  
Richard Wood 023 8084 1818
Marc Loomes 020 8447 6906

IFC Advisory

Graham Herring

Miles Nolan



0203 934 6630

N+1 Singer (Nominated Adviser & Joint Broker)

Mark Taylor

James White

Brough Ransom

020 7496 3000
Peel Hunt LLP (Joint Broker)

James Steel

Dr Christopher Golden

020 7418 8900



I am delighted to have joined the Board in March 2019 as Chairman and look forward to leading the Board in the next exciting phase of the Group’s development. Although not involved with the business last year, I am pleased to be able to report that ECO had another successful year and the business is in good heart.

Sales were 11 per cent higher than in 2017/8. Profit after taxation rose by 16 per cent to £13.6m, and earnings per share increased by 24 per cent to 17.6p. Dividends paid in the year totalled 12.7p per share including the ‘one off’ distribution in January 2019. The Group cash balance remained strong at the year end at £18.1m.

Our strategy of concentrating on growth opportunities in the important and growing markets of the USA, Latin America, China and the Far East paid off but the outbreak of African Swine Fever (ASF) in China curtailed sales in China in the second half of the year. This constraint is likely to continue in 2019 and until the disease has been contained, at which point we would expect to see further market growth, as the herd is rebuilt. In the meantime, Chinese food shortages will probably be bridged by imports particularly from Latin America and the USA if trade restrictions are lifted, so opportunities in those markets should improve in tandem.

Mid-year, when the Board was reviewing the potential of the Company’s R & D investment, the science team brought forward a compelling list of opportunities that convinced the Board that R&D expenditure should be increased to drive both medium term growth and business diversity. From the opportunities presented, the Board selected a mix of medium and long-term projects that comprise an affordable balance of risk and opportunity.

For 2019/20, development expenditure will rise above £9 million (2019: £5.3 million) to accelerate the development of our new vaccine range. However, it should be noted that even with this new investment, the development and regulatory timelines are such that we do not expect to see sales before 2022/23.

Last year, the Board decided to recommend to shareholders that it should use some of the accumulated cash balances to pay a one-off exceptional dividend of 3.5 pence per share and that was paid to shareholders on 9 January 2019.

There is no intention to repeat last year’s special distribution. The Board is now proposing a dividend for the year of 11.04 pence per share, which subject to shareholder approval will be paid on 16 October 2019 to shareholders on the register on 27 September 2019. The ex-dividend date will be 26 September 2019. This dividend represents an increase of 20 per cent over the previous year after finalisation, in line with our progressive dividend policy.

We have completed the transfer of our Aivlosin® API manufacturing process to a new facility in China which has greater capacity and the latest environmental controls. The purpose-built plant was validated and approved by the EU & US regulators.

After many years as a successful Chairman and continued substantial shareholder in the Company, Peter Lawrence, the founder of ECO, decided to retire during the final quarter of the year. The Board and the staff of the Company would like to thank him for his excellent stewardship during his tenure.

Looking forward, I will be reviewing, with the Board, the three-year corporate strategy over the next six months and will report more to shareholders with the interim results.

In my short time with the Company, I can report that the documenting of our corporate governance processes is well in hand and further work will continue during the current year.

In this regard, we have already made some changes to our annual reporting and shareholders will see these changes in this report. Reporting will evolve further during 2019.

In closing, I would like to say how much I am looking forward to helping guide ECO through its next stage of business development and growth.


The beginning of the year will remain challenging because of the continued impact of African Swine Fever in China but we believe that there will be some compensating buoyancy elsewhere as other nations move to fill the food shortages in China.

We are excited by our accelerated development programmes in vaccines and other products which are expected to result in long term growth.

For the full year ahead, we expect to report continued growth and to perform in line with the Board’s expectations.

Richard Wood


18 June 2019



Global revenue grew by 11 per cent to £74.6 million in a year dominated by an outbreak of African Swine Fever (ASF) in China and an ongoing trade war between the USA and China, our two principal markets. This year’s result, once again, demonstrated both the value of our global footprint, with sales generated in more than seventy countries, and the commoditised nature of pork and poultry production.

Sales of Aivlosin®, our patented molecule for the treatment of economically important diseases in pigs and poultry, increased by 14 per cent, accounting for 78 per cent of total revenue. Sales of the smaller Ecomectin® anti-parasitic range, which were adversely affected by European manufacturing issues and altered distribution purchasing patterns, declined by 7 per cent. Sales of all other products rose by 6 per cent, principally driven by increased sales in Mexico.

The Chinese subsidiary’s revenue was held at last year’s level, despite the ASF outbreak which exploded in August 2018 and spread rapidly throughout China. The severe movement restrictions, imposed by both the authorities and producers whose herds had remained free of disease, curtailed on farm selling but our team found new and innovative ways to reach customers. Margins did soften and credit terms were adjusted to retain business, during this period, resulting in Group debtors increasing by over £12 million during the year under review.

Recent analysis by Rabobank indicates that China has lost up to 200 million pigs (30 per cent of Chinese swine production). This figure exceeds the total USA production of about 120 million pigs per year. The 30 per cent loss of the breeding herd equates to double the total number of sows in the USA.

To combat this downturn and continued uncertainty in the short term, our focus for Aivlosin® in China has now shifted from being almost exclusively directed at the pig sector, to include poultry. In this new area, we are making good progress and look forward to reporting on developments.

North American revenue increased by 20 per cent. In the USA, revenue was 17 per cent higher, driven by Aivlosin for use in Swine Respiratory Disease. Margins softened as market pig prices were low and swine producers were making trading losses, in what was a difficult year for farmers. However, by March 2019, the $20 loss per market pig being experienced at the end of 2018 had reversed to a $30 per pig profit, because of a combination of cheapening feed prices and global supply shortages brought about by ASF in China. Canadian revenue rose 27 per cent, buoyed by the introduction of new veterinary prescription regulations for in-feed medication and adjusted commercial terms.

In South and Southeast Asia, revenue was 4 per cent higher. Highlights from the region included strong growth in India, Thailand and Pakistan. The improvement in India was a consequence of the establishment of ECO India and an adjustment to our route to market. For Thailand the improvement was as a result of implementing key account management strategies for both pig and poultry producers with our local third-party distributor. In Pakistan a number of accounts were switched to Aivlosin® from a competing product. These results were tempered by challenging conditions in Indonesia, Vietnam and Malaysia. In Indonesia a ban on all in-feed antimicrobial medication in early 2018 suspended trading for 8 months until Aivlosin® was successfully re-registered. Weak pork prices and the shutting of exports to China from Vietnam reduced potential in that territory.

Latin America revenue rose strongly by 62 per cent, with buoyant trade through the subsidiaries in Mexico and in Brazil, up 34 per cent and 47 per cent respectively. In both cases the benefits of following key account management strategies were increasingly evident. New business was written in Chile, tenders were won in Cuba and Colombia also performed particularly strongly.

European revenue declined by 4 per cent. Although sales in the United Kingdom, which represent just under 2 per cent of global revenue, rose 24 per cent, across all products. Aivlosin® sales were strong in key markets such as Denmark, Poland and Germany but were offset by a change in stock holding policy by a regional distributor for a number of other key markets such as Spain and Italy. This reduced sales potential from ECO but not on sales in the market. The total value of product supplied to European distributors before the end of March to mitigate any potential Brexit related supply interruption risks, was negated by production issues. These resulted in some sales being postponed into the new financial year. Delays to the inspection of manufacturing facilities and laboratories, and delays in receiving licences in Russia, also impacted negatively on revenue. These issues are expected to be fully resolved within the coming year.

Sales in the Rest of the World rose 14 per cent, principally through increased sales of Aivlosin ® for use in the poultry sector in Egypt and Aivlosin ® sales for pigs in South Africa.

Revenue in Japan rose by 14 per cent, driven by growth in the swine business to large producers.

Product Pipeline

The Board made a strategic decision to increase annual investment in product research and development to ensure that the new product pipeline has a mix of well-established concepts as well as novel, potentially highly competitive technologies and approaches. Rather than carry the significant cost of an in-house R&D function, the Company’s early stage R&D activities are outsourced to leading research institutions. However, all on-farm development work is managed in-house. External development expenditure in the year rose by 43 per cent to £5.3 million (2018: £3.7 million) and will be increased by more than 70 per cent to over £9 million in 2019/20. This will ensure that we have several mid and late stage projects able to deliver revenues from 2022/23. The pipeline is focused on pigs and poultry, targeting both viral and bacterial diseases of economic importance in both species. However, there will be a shift in emphasis towards developing a range of vaccines and new products to complement our existing antimicrobial business.

During the year, two new international Aivlosin® marketing authorisations were secured, notably Aivlosin® 625 mg/g Water Soluble Granules (WSG) for chickens laying eggs for human consumption with a zero-day drug withdrawal period in India, and in Vietnam for the treatment of pigs and poultry. A further licence was obtained from the European Medicines Agency for the use of Aivlosin® WSG in breeding chickens just after the year end and this approval will now be rolled out beyond the EU into the multi-million dollar international poultry markets.

ECO established a joint venture called ECO-Pharm Limited, in the Republic of Ireland, with Pharmgate LLC of Wilmington, North Carolina, USA. The JV company will progress the registration and commercialisation of several swine vaccine products already licensed in the USA and Canada for use in the United Kingdom, the EU, the Commonwealth of Independent States, Brazil and Japan.

A further four licensing deals have been signed (including University of Georgia in the USA and the University of Ghent, for poultry vaccine development, and with Agrinnovation and Yissum Research Development Company of the Hebrew University of Jerusalem for a swine antimicrobial). All of these opportunities are currently being taken through rigorous proof-of-concept evaluations in well-designed studies before any commitment to further development funding is made.


The veterinary market is consolidating rapidly at all levels. The top 10 veterinary pharmaceutical companies accounted for 88 per cent of the global market and had an average growth rate of 7 per cent in 2018.

We believe that ECO’s key competition comes from the branded antimicrobial products for pig and poultry supplied by the major multinationals.

During 2018/9, we believe that the Aivlosin® global market share rose by 2 per cent to 10 per cent. This gain arose from displacing older branded products in this sector.


ECO has successfully transferred all EU marketing authorisations to a new European subsidiary, ECO Animal Health Europe Limited with registered address in Dublin, Republic of Ireland. All contingency planning is in place and the financial and operational impact of Brexit is expected to be minimal.


ECO’s achievements are a direct result of the hard work, dedication and professionalism of our staff, now numbering more than 200 globally. We would like to thank all our employees for their individual and team contributions to ECO’s continued success.

Marc Loomes

Chief Executive Officer



ECO has traded well in tough market conditions with revenues increasing 11 per cent to £74.6 million. Whilst some markets performed well, the trading challenges of ASF and the US trade war highlighted in the CEO’s report resulted in pressure on margins which fell 2.5 per cent to 45.4 per cent.

Management’s early intervention to control overheads minimised the impact on operating profit which rose by 4 per cent to £14.7 million (2018 £14.1 million). ASF reduced the Chinese subsidiary’s reported operating profit by over £1 million, to £5.2 million, (2018: £6.4 million). The Group’s global footprint enabled us to compensate for this as operating profit in the rest of the Group increased.

Adjusted EBITDA (the profits before tax adjusted for share based payments, foreign exchange, net finance income, depreciation, amortisation and impairment charges) increased by 3 per cent to £20.1 million (2018: £19.6 million). Excluding the Chinese subsidiary’s adjusted EBITDA decrease of £1.0 million, the remainder of the Group contributed £1.5 million to the increase in adjusted EBITDA. An explanation of how adjusted EBITDA is calculated, and the rationale for each adjustment can be found in the accounts.

Profit before taxation rose by 10 per cent to £15.2 million (2018: £13.9 million) supported by currency gains arising from the reversal of non-cash currency losses, particularly the US Dollar, from the previous year. As we purchase most of our raw materials in US Dollars, it is necessary to hold significant operational balances in that currency. These act as an economic hedge against movements in the exchange rate of Sterling against the Dollar.

The taxation charge for the year of £1.7 million was 24 per cent lower than in 2018. The UK trading company makes significant use of enhanced tax allowances for R&D expenditure and, more recently, has used the Patent Box regulations on profits deriving from Aivlosin®, with the result that it currently has over £10 million of accumulated tax losses in the UK. The lower margins in China that arose from the challenging market conditions have also contributed in a lower tax charge when compared to last year.

Profit after taxation rose 16 per cent to £13.6 million. The share of profit attributable to non-controlling interests (minorities) was £0.5 million lower so that profit attributable to the Group rose by the equivalent amount.

Retained profit rose to £11.8 million compared to £9.3 million for 2018, an increase of over 26 per cent. Basic earnings per share rose by 24 per cent due to a lower minority charge.

The Group invested just over £5 million in clinical trials for both existing and new projects. As we approach the end of the Aivlosin® development programme expenditure has started to shift away from Aivlosin® to other projects such as vaccines and other new products. As a result, amortisation will increase in future years, but this is necessary for the continued development and diversification of the business.

The Group adopted IFRS16 for the first time in the year. This brings most leased assets onto the balance sheet along with the corresponding lease liabilities. More details can be found in the notes to the financial statements. The effect on the Group’s reported profits and on net assets has not been significant.

Group capital expenditure was £0.5 million (2018: £0.3 million), spent on IT systems and barcoding equipment to meet new Chinese product regulations.

Inventory fell from £17.7 million at the end of financial year 2018 to £16.1 million as at 31 March 2019. As a Group, to act as a strategic buffer, we normally hold around 6 months’ sales of Aivlosin® in inventory but since March’s sales in the USA and in China were ahead of the levels achieved in March 2018, inventory levels at the year-end were reduced to under 5 months’ sales. Inventory has been restored to normal levels subsequent to the year end.

Trade receivables increased from £15.8 million to £27.8 million predominately due to extended credit terms in China. The high USA sales before year end also contributed to the increase. The yearend figure represented less than 3 months’ sales in respect of both 2018 and 2019.

The Group’s cash balance was held at above £18 million, net of the special dividend of £2.4 million paid in January. In addition, the normal dividends were 20 per cent higher than 2018, in line with the Group’s stated progressive dividend policy. Together with dividend payments to the joint owners of the Chinese subsidiary and an £8 million investment in product development, the cash balance demonstrates the strong cash generating capability of the Group.

Having substantial cash reserves, the Group does not have any bank borrowing facilities. The Group’s Treasury Management Function (TMF) therefore seeks to ensure that funds necessary for the implementation of approved activities are always available. It also aims to increase the net worth of the Company by managing funds in the most appropriate manner.

The main processes used for achieving this are:

1. Updating 12 months cash flow forecasts every 3 months so that potential shortages are addressed in a timely manner.

2. Working (with the sales function) to ensure that all amounts due to the Group are received in a timely manner.

3. Ensuring as far as possible that all funds are held centrally, thus minimising the amounts held by subsidiaries, while not impeding their operations.

4. Ensuring that all funds received are deposited with appropriate and financially stable institutions, while at the same time maximising returns on those deposits.

5. Ensuring that funds are held only in currencies to the extent that it is anticipated those currencies will be required for use in the future, thus minimising foreign exchange risk.

6. Ensuring that suppliers are paid promptly for goods and services rendered, which in turn ensures continuity of supply of those goods and services.

The board keeps these procedures under review but is satisfied that the TMF worked effectively in the year.

Post balance sheet event

The Company paid a dividend of £2,697,725 on 12 April 2019 to its shareholders.

Kevin Stockdale

Finance Director



    2019       2018
Notes £000's £000's
Revenue 3 74,578 67,201
Cost of sales (40,725) (34,986)
Gross profit 33,853 32,215
Other income 35 436
Administrative expenses (19,217) (18,539)
Profit from operating activities 4 14,671 14,112
Finance income 631 138
Finance costs (69) (385)
Net finance (cost)/income 562 (247)
Share of profit of associate 14 7
14 7
Profit before income tax 15,247 13,872
Income tax (charge) 6 (1,680) (2,225)
Profit for the year 13,567 11,647
Profit attributable to:
Owners of the parent Company 11,755 9,315
Non-controlling interest 1,812 2,332
Profit for the year 13,567 11,647
Earnings per share (pence) 7 17.60 14.19
Diluted earnings per share (pence) 7 17.35 14.06
Earnings before Interest, Tax, Depreciation, Amortisation, Share Based Payments and Foreign Exchange Differences 4 20,087 19,571



    2019   2018
Notes £000's £000's
Profit for the year 13,567 11,647
Other comprehensive (losses) (net of related tax effects):
Items that will or may be reclassified to profit/(loss) in future periods:
Foreign currency translation differences (8) (372)
Items that will not be reclassified:
Defined benefit plan actuarial (losses) (36) (15)
Other comprehensive (losses) for the year (44) (387)
Total comprehensive income for the year 13,523 11,260
Attributable to:
Owners of the parent Company 11,694 9,028
Non-controlling interest 1,829 2,232
13,523 11,260

All items listed in other comprehensive income have gone through reserves and are shown in the consolidated statement of changes in equity.



CONSOLIDATED   Attributable to the owners of the Parent          
Share   Share   Revaluation Other Retained Total Non-controlling Total
Capital Premium Reserve Reserves Earnings Interest Equity
£000's £000's £000's £000's £000's £000's £000's £000's
Balance as at 31 March 2017 3,271 58,154 664 2,449 29,293 93,831 4,342 98,173
Profit for the year
Other comprehensive income: - - - - 9,315 9,315 2,332 11,647
Foreign currency differences - - - - (272) (272) (100) (372)
Actuarial (losses) on pension scheme assets - - - - (15) (15) - (15)
Total comprehensive income for the year - - - - 9,028 9,028 2,232 11,260
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year 20 693 - - - 713 - 713
Share-based payments - - - 778 - 778 - 778
Transfers on expiry of options - - - (404) 404 - - -
Dividends relating to 2018 - - - - (4,660) (4,660) (1,389) (6,049)
Transactions with owners 20 693 - 374 (4,256) (3,169) (1,389) (4,558)
Balance as at 31 March 2018 3,291 58,847 664 2,823 34,065 99,690 5,185 104,875
Adjustment on implementation of IFRS16 - - - - (17) (17) 1 (16)
IFRS16 adjusted balance as at 1 April 2018 3,291 58,847 664 2,823 34,048 99,673 5,186 104,859
Profit for the year - - - - 11,755 11,755 1,812 13,567
Other comprehensive income:
Foreign currency differences - - - - (17) (17) 9 (8)
Actuarial (losses) on pension scheme assets - - - - (36) (36) - (36)
Total comprehensive income for the year - - - - 11,702 11,702 1,821 13,523
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year 81 3,803 - - - 3,884 - 3,884
Share-based payments - - - 631 - 631 - 631
Transfers on expiry of options - - - (112) 112 - - -
Dividends relating to 2019 - - - - (8,485) (8,485) (1,643) (10,128)
Transactions with owners 81 3,803 - 519 (8,373) (3,970) (1,643) (5,613)
Balance as at 31 March 2019 3,372 62,650 664 3,342 37,377 107,405 5,364 112,769



Share Share Revaluation Other Retained Total
Capital Premium Reserve Reserves Earnings
£000's £000's £000's £000's £000's £000's
Balance as at 31 March 2017 3,271 58,154 395 2,449 11,384 75,653
Profit for the year - - - - 76 76
Other comprehensive income:
Actuarial (losses) on pension scheme assets - - - - (15) (15)
Total comprehensive income for the year - - - - 61 61
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year 20 693 - - - 713
Share-based payments - - - 778 - 778
Transfers on expiry of options - - - (404) 404 -
Dividends relating to 2018 - - - - (4,660) (4,660)
Transactions with owners 20 693 - 374 (4,256) (3,169)
Balance as at 31 March 2018 3,291 58,847 395 2,823 7,189 72,545
Profit for the year - - - - 15,041 15,041
Other comprehensive income:
Actuarial (losses) on pension scheme assets - - - - (36) (36)
Total comprehensive income for the year - - - - 15,005 15,005
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year 81 3,803 - - - 3,884
Share-based payments - - - 631 - 631
Transfers on expiry of options - - - (112) 112 -
Dividends relating to 2019 - - - - (8,485) (8,485)
Transactions with owners 81 3,803 - 519 (8,373) (3,970)
Balance as at 31 March 2019 3,372 62,650 395 3,342 13,821 83,580


AS AT 31 MARCH 2019

    Group   Company
2019   2018 2019   2018
Notes £000's £000's £000's £000's
Non-current assets
Intangible assets 8 62,734 57,631 - -
Property, plant and equipment 2,144 1,866 769 716
Investment property 200 200 200 200
Right of use assets 1,930 - 30 -
Investments 116 98 20,077 20,077
Amounts due from subsidiary Company - - 58,510 46,326
67,124 59,795 79,586 67,319
Current assets
Inventories 9 16,107 17,663 - -
Trade and other receivables 10 29,537 17,193 46 213
Income tax recoverable 466 113 - -
Other taxes and social security 462 1,160 145 518
Cash and cash equivalents 18,068 21,261 4,236 4,959
Total current assets 64,640 57,390 4,427 5,690
Trade and other payables 11 (13,809) (10,715) (181) (234)
Income tax (1,000) (152) - -
Other taxes and social security (533) (108) (90) (98)
Amounts due under leases (415) - (16) -
Dividends (49) (42) (49) (42)
Current liabilities (15,806) (11,017) (336) (374)
Net current assets 48,834 46,373 4,091 5,316
Total assets less current liabilities 115,958 106,168 83,677 72,635
Non current liabilities
Deferred tax (1,616) (1,293) (85) (90)
Amounts due under leases (1,573) - (12) -
TOTAL ASSETS LESS TOTAL LIABILITIES 112,769 104,875 83,580 72,545
Issued share capital 12 3,372 3,291 3,372 3,291
Share premium account 62,650 58,847 62,650 58,847
Revaluation reserve 664 664 395 395
Other reserves 3,342 2,823 3,342 2,823
Retained earnings 37,377 34,065 13,821 7,189
Shareholders' funds 107,405 99,690 83,580 72,545
Non-controlling interests 5,364 5,185 - -
112,769 104,875 83,580 72,545



    Group   Group   Company   Company
2019 2018 2019 2018
Notes £000's £000's £000's £000's
Cashflows from operating activities
Profit before income tax 15,247 13,872 15,050 89
Adjustment for:
Net finance cost/(income) (562) 247 (937) (911)
Depreciation 720 297 19 17
Revaluation of freehold property (55) - (55) -
Revaluation of investment property - (15) - (15)
Amortisation of intangible assets 8 3,982 3,428 - -
Pension payments (59) (39) (59) (39)
Share of associate's results (14) (7) - -
Impairment of investments - - - 5
Share based payments 631 778 631 778
Operating cash flows before movements in working capital 19,890 18,561 14,649 (76)
Change in inventories 1,556 2,012 - -
Change in receivables (11,646) (1,298) (11,644) (231)
Change in payables 3,540 (3,432) (39) (373)
Cash generated from/(absorbed by) operations 13,340 15,843 2,966 (680)
Finance costs (69) (14) (2) (3)
Income tax (862) (1,763) (13) (11)
Net cash from/(absorbed by) operating activities 12,409 14,066 2,951 (694)
Cash flows from investing activities
Acquisition of property, plant and equipment (566) (324) (2) (2)
Disposal of property, plant and equipment 5 1 - -
Purchase of intangibles 8 (9,085) (7,176) - -
Finance income 127 138 938 914
Net cash (used in)/from investing activities (9,519) (7,361) 936 912
Cash flows from financing activities
Proceeds from issue of share capital 3,884 713 3,884 713
Finance lease borrowings 67 - 1 -
Finance lease repayments (406) - (17) -
Dividends paid (10,121) (6,046) (8,478) (4,656)
Net cash (used in) financing activities (6,576) (5,333) (4,610) (3,943)
Net(decrease)/increase in cash and cash equivalents (3,686) 1,372 (723) (3,725)
Foreign exchange movements 493 (713) - -
Balance at 1 April 2018 21,261 20,602 4,959 8,684
Balance at 31 March 2019 18,068 21,261 4,236 4,959



1. General information

ECO Animal Health Group plc (“the Company”) and its subsidiaries (together “the Group”) manufacture and supply animal health products globally.

The Company is traded on the AIM market of the London Stock Exchange and is incorporated and domiciled in the UK. The address of its registered office is 78 Coombe Road, New Malden, Surrey, KT3 4QS.

The financial information set out in the announcement does not constitute the Group's statutory accounts for the year ended 31 March 2019 or 31 March 2018. The auditors reported on those accounts; their report was (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for the year ended 31 March 2019 have not yet been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 March 2018 were delivered to the Registrar of Companies on 17 August 2018.

2. Adoption of new IFRS

The following new standard has been implemented in the current period:

IFRS 16 – Leases

Further details on the implementation of this standard and its effect on the reported results for the period can be found in note 2.15.

The following new standards, amendments and interpretations for existing standards have been published that are mandatory for accounting periods beginning after 1 January 2019 (unless otherwise stated) and have not been applied in preparing these consolidated financial statements.

IFRS 9 – Financial Instruments (amendments)

IFRS 17 – Insurance contracts (effective 1 January 2021)

IAS19 – Employee benefits

IAS 28 – Investments in associates and joint ventures

IFRIC 23 – Uncertainty over income tax

IFRS 3, IFRS 11, IAS 12 and IAS 23- Amendments under 2015-2017 Cycle of Annual Improvements

The directors do not expect that the adoption of the Standards and Interpretations listed above will have a material impact on the financial statements of the Group in future periods.

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

3. Segment information

Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions. The Board considers the business from a geographical perspective. Geographically, management considers the performance in the Corporate/UK and China and Japan, North America, South and South East Asia, Latin America, Europe and the Rest of the World.

Management considers Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”), adjusted for share-based payments.



  China & Japan   North America   S & SE Asia   Latin America   Europe   Rest of World   Total
£000's £000's £000's £000's £000's £000's £000's £000's
Year ended 31 March 2019
Total segment revenue 1,422 35,861 31,230 11,038 14,287 7,594 1,747 103,179
Inter-segment revenue - (7,613) (17,796) - (3,192) - - (28,601)
Revenue from external customers 1,422 28,248 13,434 11,038 11,095 7,594 1,747 74,578
Sale of goods 1,422 28,248 13,434 11,038 11,095 7,594 1,591 74,422
Royalties - - - - - - 156 156
1,422 28,248 13,434 11,038 11,095 7,594 1,747 74,578
Adjusted EBITDA (2,818) 9,298 3,589 4,278 2,152 2,750 700 19,949
Total Assets 22,272 33,621 18,197 18,910 19,550 14,907 4,307 131,764
Year ended 31 March 2018
Total segment revenue 1,147 36,798 26,203 10,623 10,924 8,246 1,536 95,477
Inter-segment revenue - (9,198) (14,990) - (4,088) - - (28,276)
Revenue from external customers 1,147 27,600 11,213 10,623 6,836 8,246 1,536 67,201
Sale of goods 1,147 27,600 11,213 10,623 6,836 8,246 1,329 66,994
Royalties - - - - - - 207 207
1,147 27,600 11,213 10,623 6,836 8,246 1,536 67,201
Adjusted EBITDA (2,614) 9,908 4,118 3,942 791 1,880 576 18,601
Total Assets 24,429 29,466 12,179 17,209 15,609 14,499 3,794 117,185

Goodwill and other intangible assets are initially allocated to the geographical segments on the basis of the proportion of sales achieved by each segment.

A reconciliation of adjusted EBITDA for reportable segments to profit before tax is provided as follows:

  2019   2018
£000's £000's
Adjusted EBITDA for reportable segments 19,949 18,601
Depreciation (720) (298)
Revaluation of freehold property 55 -
Revaluation of investment property - 15
Amortisation (3,982) (3,428)
Share-based payment charges (631) (778)
Finance income/(costs) 562 (247)
Share of associate's results 14 7
Profit before tax on continuing activities 15,247 13,872

4. Result from operating activities

  2019   2018
£000's £000's
Result from operating activities is stated after charging/(crediting)
Cost of inventories recognised as an expense 40,614 34,887
Employee benefits expenses 8,829 8,567
Amortisation of intangible assets (note 11) 3,982 3,428
Depreciation (notes 12 & 14) 720 298
Revaluation of freehold property (note 12) (55) -
Revaluation of investment property (note 13) - (15)
Loss on foreign exchange transactions 138 970
Research and development 49 81
Operating lease rentals expensed - 495
Fees payable to the Company's auditor for the audit of the parent Company and Group annual accounts 18 17
For the audit of the Company's subsidiaries 52 42
Fees payable for audit of the Company's subsidiaries pursuant to legislation 14 14
2019 2018
£000's £000's
Earnings before interest, tax, depreciation, amortisation and impairment, share-based payments and foreign exchange differences (adjusted EBITDA)
Profit from operating activities 14,671 14,112
Depreciation 720 298
Revaluation of freehold property (55) -
Revaluation of investment property - (15)
Amortisation 3,982 3,428
Share-based payments 631 778
19,949 18,601
Foreign exchange differences 138 970
20,087 19,571

Management believe that adjusted EBITDA is the most 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 cashflow 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 cashflows.
Gains and losses on Disposal of Fixed Assets and Impairment of Intangibles These items are viewed as adjustments to depreciation and amortisation and therefore the rationale for depreciation and amortisation applies.
Share Based Payments This item is subject to judgement and will never be reflected in the Group’s cashflows.
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 often reverse later, 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.

5. 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.

  2019   2018
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 tax 11,755 66,794 17.60 9,315 65,646 14.19
Dilutive effect of share options - 943 (0.25) - 605 (0.13)
Fully diluted earnings per share 11,755 67,737 17.35 9,315 66,251 14.06

Diluted earnings per share takes into account the dilutive effect of share options.

6. Taxation

  2019   2018
Current tax year £000's £000's
Foreign corporation tax on profits for the year 1,655 1,852
Withholding tax on intercompany dividend 92 78
Research and development tax credits claimed in the year (285) (40)
Research and development tax credits - adjustment for prior year (104) 69
Deferred tax
Origination and reversal of temporary differences 411 266
Due to change in effective rate (89) -
Income tax charge 1,680 2,225
2019 2018
£000's £000's
Factors affecting the tax charge for the year
Profit on ordinary activities before taxation 15,247 13,872
Profit on ordinary activities before taxation multiplied by the applicable rate of UK corporation tax of 19% (2018: 19%) 2,897 2,636
Effects of:
Non deductible expenses 470 305
Non chargeable credits (984) (397)
Withholding tax on inter-company dividends 92 78
Enhanced allowance on research and development expenditure (928) (736)
Different tax rate for foreign subsidiaries 348 451
Reduced effective deferred tax rate (89) -
Unused tax losses carried forward 141 90
Patent box claim (267) (202)
Income tax charge 1,680 2,225
2019 2018
% %
Applicable tax rate per UK legislation 19.00 19.00
Effects of:
Non deductible expenses 3.08 2.20
Non chargeable credits (6.45) (2.86)
Withholding tax on inter-company dividends 0.60 0.56
Enhanced allowance on research and development expenditure (6.09) (5.31)
Different tax rate for foreign subsidiaries 2.28 3.25
Reduced effective deferred tax rate (0.58) -
Unused tax losses carried forward 0.93 0.65
Patent box claim (1.75) (1.45)
Effective tax rate 11.02 16.04

6. Taxation

Future tax changes

Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2016 (on 6 September 2016). These include reductions to the main rate to reduce the rate to 17% from 1 April 2020. Deferred taxes at the balance sheet date have been measured at this rate (2018: hybrid tax rate of 18%).

7. Dividends

  2019   2018
£000's £000's
Non-recurring dividend for the year ended 31 March 2019 of 3.5p per ordinary share 2,350 -
Dividend for the year ended 31 March 2018 of 9.2p per ordinary share 6,135 -
Dividend for the period ended 31 March 2017 of 7.1p per ordinary share - 4,660
8,485 4,660

The Board is proposing a dividend of 7.04p per ordinary share in respect of the year ended 31 March 2019, which, when taken with the 4.0p per ordinary share paid in April 2019 will total 11.04p per ordinary share, not including the “one-off” dividend (of 3.5p per ordinary share) paid in January 2019.

8. Intangible fixed assets

Group   Goodwill   Distribution rights   Drug registrations, patents and license costs   Total
£000's £000's £000's £000's
At 1 April 2017 17,930 1,442 67,643 87,015
Additions - internally generated - - 7,176 7,176
At 1 April 2018 17,930 1,442 74,819 94,191
Additions - internally generated - - 9,085 9,085
At 31 March 2019 17,930 1,442 83,904 103,276
At 1 April 2017 - 759 32,373 33,132
Charge for the year - 72 3,356 3,428
At 1 April 2018 - 831 35,729 36,560
Charge for the year - 72 3,910 3,982
At 31 March 2019 - 903 39,639 40,542
Net Book Value
At 31 March 2019 17,930 539 44,265 62,734
At 31 March 2018 17,930 611 39,090 57,631
At 31 March 2017 17,930 683 35,270 53,883

The amortisation and impairment charges are included within administrative expenses on 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 5 to 15 years.

The carrying value of goodwill is attributable to the following cash generating units:

Entity   Date of acquisition  


ECO Animal Health Limited 1 October 2004 17,359
Zhejiang Eco Biok Animal Health Products Limited 1 April 2007 94
ECO Animal Health Japan Inc 24 December 2009 477

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGU’s) that are expected to benefit from the business combination.

The recoverable amounts of the CGU’s are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates, growth rates and the estimated remaining useful life of the asset which is maintained at 30 years through ongoing investment in the cash generating unit.

The Group prepares cashflow forecasts derived from the most recent financial budgets and projections that are approved by management for the year ahead and then extrapolates them assuming a 3% annual growth rate which is well below the current performance of the existing 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’s. In the current year management estimated the applicable rate to be 11%. Management considers that there is adequate headroom when comparing the net present value of the cashflows to the carrying value of goodwill to conclude that no impairment is necessary this year. On current assumptions the excess of recoverable amount over carrying value is over £136 million (2018: £106 million).

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 £98 million more than the carrying value and no impairment would be necessary.

The net book value of Drug registrations and licenses can be broken down as follows:

Aivlosin 39,082
Ecomectin 2,743
Others 2,440

Aivlosin is a highly effective antibiotic that treats a range of specific enteric (gut) and respiratory diseases in pigs and poultry, ensuring a rapid return to health. In addition to the welfare benefits, healthy animals gain weight faster, digest food more efficiently and get to market earlier which all bring economic benefit to the farmer. Substantial ongoing product development covering more formulations, species and diseases is expected to substantially further increase its revenue generating potential. The remaining useful life is from 4 to 20 years.

Ecomectin is an endectocide that controls worms, ticks, lice and mange in grazing stock and pigs. The remaining useful life is 0 to 10 years.

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. The directors have conducted an impairment review in the current year by preparing cashflow projections for the year ahead and extrapolating the results for the remaining life of the registrations assuming zero growth and an 11% discount rate to establish value in use. On the current assumptions, (which assume a remaining life of only 5 years) the excess of the value in use over carrying value is almost £32 million (2018: £23 million).

Fair value calculated as 10 times the annual current cash generated by the registrations gives an even higher value of £195 million and this higher figure determines the recoverable amount, so management has again concluded that no impairment is necessary.

9. Inventories

  Group   Company
2019   2018 2019   2018
£000's £000's £000's £000's
Raw materials and consumables 10,422 12,975 - -
Finished goods and goods for resale 5,561 4,380 - -
Work in progress 124 308 - -
16,107 17,663 - -

The cost of inventories recognised as an expense and included in cost of sales in the period amounted to £40,614,000 (2018: £34,887,000).

10. Trade and other receivables

  Group   Company
Non-current 2019   2018 2019   2018
£000's £000's £000's £000's
Amounts owed by Group undertakings - - 58,510 46,236
  Group   Company
Current 2019   2018 2019   2018
£000's £000's £000's £000's
Trade receivables 27,841 15,777 - -
Amounts owed by joint operations 888 361 - -
Other receivables 339 488 35 186
Prepayments and accrued income 469 567 11 27
29,537 17,193 46 213

The provisions of IFRS9 “Financial Instruments” have been adopted during the year, using the Expected Credit Loss Model. This has had no material impact on the results.

As at 31 March 2019, trade receivables of £2,592,000 (2018: £4,020,000) due to the Group and £nil (2018: £nil) due to the Company were past due but not impaired. These relate to long standing distributors with whom we have agreed settlement terms and with whom there is no history of default. The ageing analysis of these trade receivables is as follows:

  Group   Company
2019   2018 2019   2018
£000's £000's £000's £000's
Up to 3 months past due 1,547 3,469 - -
3 to 6 months past due 515 345 - -
Over 6 months past due 530 206 - -
2,592 4,020 - -

As at 31 March 2019, trade receivables of £280,000 (2018: £470,000) were impaired and provided for. The impaired receivables mainly relate to historic debt for which recovery is still being sought. The Group mitigates its exposure to credit risk by extensive use of commercial credit reference agencies, close management of its customers’ trading against terms offered and use of retention of title clauses wherever possible. The ageing analysis of the impaired balances is as follows:

  Group   Company
2019   2018 2019   2018
£000's £000's £000's £000's
Current debt 1 86 - -
Up to 3 months past due - 19 - -
3 to 6 months past due 68 19 - -
Over 6 months past due 211 346 - -
280 470 - -

Movement on the Group provision for impairment of trade receivables is as follows:

Group 2019 2018
£ £
Balance at 1 April 470 501
(Recovered) in the year (33) (5)
Written off in the year (157) (26)
Balance at 31 March 280 470

The carrying amounts of trade and other receivables are denominated in the following currencies:

  Group   Company
2019   2018 2019   2018
£000's £000's £000's £000's
Pounds Sterling 1,146 805 46 213
Euros 4,423 3,420 - -
U S Dollars 10,940 7,314 - -
Chinese RMB 8,923 3,210 - -
Brazilian Real 965 363 - -
Japanese Yen 696 153 - -
Canadian dollars 817 346 - -
Mexican Pesos 1,505 1,457 - -
Other currencies 122 125 - -
29,537 17,193 46 213

The carrying amounts of trade and other receivables are not significantly different to their fair values.

11. Trade and other payables

  Group   Company
2019   2018 2019   2018
£000's £000's £000's £000's
Trade payables 12,012 8,860 17 33
Other payables 1,303 1,374 132 178
Accruals and deferred income 494 481 32 23
13,809 10,715 181 234

12. Share capital

During the year 1,618,310 shares were issued at a premium of £3,803,000 as a result of the exercise of options by employees. (2018: 402,110 shares at a premium of £693,000).

13. Employees

Number of employees

The average number of employees (including directors) during the year was:

  2019   2018
Number Number
Directors 7 7
Production and development 70 73
Administration 47 45
Sales 93 82
217 207
Employment costs (including amounts capitalised)
2019 2018
£000's £000's
Wages and salaries 10,254 9,971
Share-based payments 631 778
Social security costs 963 786
Other pension costs 353 286
12,201 11,821

Financial instruments

The Group uses financial instruments comprising borrowings, cash and liquid resources and various items, such as trade receivables, trade payables etc. that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group’s operations. The directors are responsible for the overall risk management.

The main risks arising from the Group’s use of financial instruments are capital and liquidity risk, credit risk and foreign currency risks and they are summarised below. The policies have remained unchanged throughout the year.

Capital and liquidity risk

The Group manages its capital to ensure continuity as a going concern whilst maximising returns through the optimisation of debt and equity. As part of this, the Board considers the cost and risk associated with each class of capital. The capital structure of the Group consists of cash and cash equivalents in note 19 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.

At 31 March 2019 the Group was contractually obliged to make repayments as detailed below:

  2019   2018
Within one year or on demand £000's £000's
Trade payables 12,012 8,860
12,012 8,860

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 and derivatives 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.

Currency risk

The Group operates in overseas markets particularly through its subsidiaries in China, Brazil, Mexico, the USA and Japan and its joint operation in Canada and is 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 taken to 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:

Foreign currency of Group operations              
2019   US Dollar   Euros Rand Chinese RMB Japanese Yen Brazilian Real Canadian Dollar Mexican Peso Other
Sterling equivalent (£000's) 8,296 4,611 112 8,669 741 1,452 1,631 1,755 27
Sterling equivalent (£000's) 8,025 4,163 178 7,659 448 723 1,506 1,531 (15)

At 31 March 2019 the Group was mainly exposed to the Dollar, Euro, the Chinese RMB, the Japanese Yen, the Brazilian Real, the Canadian Dollar and the 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 2019. A positive number indicates the decrease in profit which would arise from a 10% weakening of the foreign currency concerned.

  2019   2018
£000's £000's

US Dollar

754 730
Euro 419 378
Chinese RMB 788 696
Japanese Yen 67 41
Brazilian Real 132 66
Canadian Dollar 148 137
Mexican Peso 160 139

Analysis of financial instruments by category


  Loans and receivables   Financial liabilities   Total
2019 £000's £000's £000's
Trade and other receivables (excluding prepayments) 29,068 - 29,068
Cash and cash equivalents 18,068 - 18,068
Amounts due under leases - (1,988) (1,988)
2018 Loans and receivables Financial liabilities Total
£000's £000's £000's
Trade and other receivables (excluding prepayments) 16,626 - 16,626
Cash and cash equivalents 21,261 - 21,261


  Loans and receivables   Financial liabilities   Total
2019 £000's £000's £000's
Trade and other receivables (excluding prepayments) 35 - 35
Cash and cash equivalents 4,236 - 4,236
Amounts due under leases - (29) (29)
2018 Loans and receivables Financial liabilities Total
£000's £000's £000's
Trade and other receivables (excluding prepayments) 186 - 186
Cash and cash equivalents 4,959 - 4,959

All financial 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.

“A copy of this preliminary statement will be available to download on the Group's website Copies of the Annual Report and Accounts, together with the notice convening the Annual General Meeting, will be posted to shareholders in due course at which time the Annual Report and Accounts will be made available to download on the Group's website, in accordance with AIM Rule 26.

Eco Animal Health Group Plc

Source: Eco Animal Health Group Plc


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Final Results - RNS