TIDMEAH
RNS Number : 4155F
Eco Animal Health Group PLC
10 July 2023
10 July 2023
ECO Animal Health Group pc ("ECO", the "Company" or the
"Group")
(AIM: EAH)
Results for the year ended 31 March 2023
HIGHLIGHTS
Financial
-- Revenue and adjusted EBITDA ahead of market expectations
-- Group sales increased by 4% to GBP85.3m, driven primarily by
growth in revenues from South & Southeast Asia (excl. China and
Japan) and Latin America
o China and Japan sales representing 31% of group sales (2022:
35%), declined by 7%
o Rest of world sales increased by 9%
-- Gross margin increased to 45% (2022: 43%)
-- Adjusted EBITDA increased to GBP7.2m (2022: GBP5.4m)
-- Adjusted EBITDA margin improved to 8.5% (2022: 6.6%)
-- New product development expenditure GBP8.3m (2022: GBP9.0m) as planned
-- Earnings per share 1.49p (2022: loss per share 1.01p)
-- Net cash at the end of the period GBP21.7m (2022: GBP14.3m),
reinforcing the Group's strong balance sheet
-- RCF facility (GBP10m) available and undrawn
Operational
-- Aivlosin(R) demand remained strong in key markets, with increasing market share
-- Unwinding of stock, as new China factory becomes operational
-- Continuing positive progress towards regulatory filing for poultry mycoplasma vaccines
-- New partnership with Imperial College London for
self-amplifying RNA technology to deliver swine vaccines and
biologics
-- New partnership with Moredun Research Institute to deliver a poultry red mite vaccine
David Hallas, Chief Executive Officer of ECO Animal Health Group
plc, commented: "I am pleased to present these results, which also
represent the first full financial year since I became CEO. I am
delighted that the Group has performed robustly, with encouraging
growth in revenues; and profitability whilst also significantly
improving our cash position. The strong performance in the second
half of the year has continued and we are delighted that this
momentum is evident in buoyant trade currently and, notwithstanding
challenges in certain markets, we look forward to the rest of the
current financial year with cautious optimism.
We have previously spoken of the strength and depth of our
R&D portfolio and I remain convinced that this is a primary
driver of future ECO success. I look forward to presenting our
results and meeting investors in person during our results meetings
or at our AGM in September".
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
ECO Animal Health Group plc
David Hallas (Chief Executive Officer)
Christopher Wilks (Chief Financial Officer) 020 8447 8899
IFC Advisory
Graham Herring
Zach Cohen 020 3934 6630
Singer Capital Markets (Nominated Adviser
& Joint Broker)
Philip Davies
George Tzimas
Sam Butcher 020 7496 3000
Investec (Joint Broker)
Gary Clarence
Carlo Spingardi
Lydia Zychowska 020 7597 5970
Equity Development
Hannah Crowe
Matt Evans 020 7065 2692
CHAIRMAN AND CHIEF EXECUTIVE'S COMBINED STATEMENT
FOR THE YEARED 31 MARCH 2023
Having successfully navigated amidst difficult market
conditions, we are pleased to report a robust performance of the
Group. Despite facing numerous obstacles and uncertainties, ECO has
emerged stronger and more determined than ever. Our people have
been the true driving force behind our resilience. Their unwavering
dedication, adaptability, and persistence have been instrumental in
overcoming the challenges.
Operational Review
Revenues for the period increased to GBP85.3m along with
increasing profitability driven by both customer and market mix:
gross margin was up at 45% (2022: 43%) and EBITDA increased to
GBP7.2m (2022: GBP5.4m). This healthy performance was delivered
primarily in the second half of the year and we are delighted to
report that this momentum has continued into the new financial
year.
ECO saw strong performance in all regions: the Group generated
particularly strong growth (+42%) in South & Southeast Asia
driven by an impressive performance in Thailand and greater poultry
sales in India. ECO is also pleased to report further development
in Latin America, which delivered double digit growth. The presence
of ECO in all major swine and poultry producing countries globally
helps to mitigate the impact from individual market downturns.
Sales of Aivlosin(R), our patented antimicrobial which is used
under veterinary prescription for the treatment of economically
important respiratory and gastrointestinal diseases in pigs and
poultry, reached GBP75.9m in FY2023 (2022: GBP72.9m). Demand was
stronger than expected in China and Asia.
Sales of the smaller Ecomectin(R) anti-parasitic range were
GBP3.6m (2022: GBP5.5m) with sales of all other products reaching
GBP5.8m (2022: GBP3.7m).
In China, the Group has completed on schedule a plant for
packaging and finishing final product which has provided greater
automation and adherence to the high regulatory compliance
requirements. During the construction process inventories were
built up to GBP30m of product. Since completion, we are pleased to
report that inventory levels have been reduced considerably to
approximately GBP22m and continue to reduce to more normalised
levels.
Product Approvals
Additional product approvals were obtained in the year for
Aivlosin including new label extensions for additional diseases and
one new country in Latin America. Furthermore, since the year end,
the Group has been informed by the FDA that a previous safety
warning can now be removed from the Aivlosin label in the USA
following trials which show that it is safe to use in pregnant and
lactating sows.
Innovation through Research and Development
The Group is pleased to see further progress within our
portfolio of projects and continues to invest into vaccine R&D
and in building our capability and expertise. The Board has
dedicated significant efforts on its R&D programme and the
amount of innovation in the pipeline is at its highest level.
We continue to invest in promising projects with substantial
value associated with major diseases in swine and poultry.
Two late-stage development projects are expected to be submitted
and approved by the end of next financial year (the year ending 31
March 2024).
We have engaged an experienced Contract Manufacturing
Organisation ("CMO") and secured production for USA, EU, LATAM and
Asia for our new biological products.
In June 2022, the Group announced a collaboration with Imperial
College London to assess the veterinary application of
self-amplifying RNA technology, representing the next generation of
RNA delivered medicines. 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"). Both of
these initiatives are progressing well and we look forward to
updating the market on these in due course.
The Board believes that investment in the exciting initiatives
outlined above should, over time, deliver significant shareholder
value and therefore these are being prioritised ahead of the
payment of dividends, balancing also the need for prudent
management of cash resources. Accordingly no dividend will be
recommended in respect of the year ended 31 March 2023 but the
Board does intend to keep this under review in the future as it
recognises the value of dividends to shareholders.
People
We extend our sincere gratitude to our people, customers,
partners, and shareholders who have stood by us during this
journey. Their unwavering support and trust have been instrumental
in our resilience. The Group remains committed to delivering
exceptional value, driving innovation, and forging a bright future.
ECO has now concluded its first Group-wide engagement survey,
providing guidance to improving activities and overall satisfaction
of all our people. We are pleased that this first survey reported
good engagement and actions are underway to build on these good
foundations.
The Group has continued to strengthen the Research &
Development and Commercial teams through strategic new hires. I
would like to extend a warm welcome to our new appointments in our
leadership team, which include new heads of our Quality and
Regulatory Team and HR Director.
Outlook
Trading momentum from the second half of FY2023 has continued
into the first half of the current financial year. In China, the
Group has seen improved trading and the Asian and Latin American
markets continue the trend of delivering strong growth. Production
and operational efficiencies are being driven by the leadership
team and this is expected to support margins going forward. The
R&D programme continues to provide considerable excitement and
game-changing future product flow is confidently expected. Despite
the challenges from continuing, sporadic African swine fever
outbreaks and commodity price pressures, the Board is cautiously
optimistic for the remainder of this financial year and views the
future with confidence.
Dr Andrew Jones David Hallas
Non-executive Chairman Chief Executive Officer
FINANCE DIRECTOR'S REPORT
FOR THE YEARED 31 MARCH 2023
Introduction
I am delighted to report a year of strong financial progress.
Building on the foundations established in the past three years and
working with new leadership we have delivered a year of robust
growth in revenue and profit terms whilst improving working capital
ratios and balance sheet strength. We have seen growth in all major
performance metrics.
Supporting the commercial performance of our existing portfolio
of businesses whilst ensuring a robust controls environment is in
place to safeguard and maximise the return on assets is central to
the role of the finance team, as well as supporting the strategic
growth ambitions of the Group.
Trading
Previous years have seen a pattern of stronger trading in the
second half of the year. This is associated with disease prevalence
in pigs during the Northern Hemisphere winter. This pattern of
trading has continued in the year ended 31 March 2023 with the
second half accounting for 59% of the annual revenue. The primary
contributing segment to this weighting was China and Japan, where
the second half represented 68% of the annual revenue. In our
interim report for the six months ended 30 September 2022 we stated
that China revenue had declined as a result of poor producer
margins and Covid impacts; in our second half of year the
zero-Covid policy in China was relaxed and pork consumption
improved, coinciding with the customary winter disease outbreaks
providing a strong end to our trading year in China.
A geographical analysis of revenue is as follows:
Revenue Summary Year ended 31 March
2023 2022 % change
(GBP'm) (GBP'm)
China and Japan 26.4 28.4 (7%)
North America (USA and Canada) 15.2 16.4 (7%)
South and Southeast Asia 16.8 11.8 42%
Latin America 18.1 15.8 15%
Europe 6.1 6.4 (5%)
Rest of World and UK 2.7 3.4 ( 21%)
85.3 82.2 4%
------------------------------- ------------------- ------- --------
Revenue from China and Japan in the last four successive
six-month trading periods was GBP15.7m, GBP12.7m, GBP8.5m and
GBP17.9m, respectively. This underscores the pork industry cycle in
China since the restocking of the herd in the year ended 31 March
2021. The recovery in the six months to 31 March 2023 represented a
significant improvement in trading conditions and producer margins.
Japan represents less than 5% of the segment's combined
revenues.
North America which comprises Canada and the USA showed a small
decline overall compared with the year ended 31 March 2022. Canada
is a mature market and Aivlosin(R) enjoys a high market share in
this market. The USA had a slower second half compared with prior
years where typically disease outbreaks have driven strong demand
for the Group's products in the final quarter of the year. This
disease driven demand was less pronounced in this financial
year.
South and Southeast Asia reported another strong period of
annual growth in revenue. Specific strong demand arose from the
poultry industry in India and Thailand, with other neighbouring
countries also performing well.
Latin America also experienced strong growth in this financial
year; principally from Brazil but also showing good revenue
performance in Mexico in both swine and poultry.
After some supply interruption in Spain which arose from a
regulatory change requiring macrolides to be delivered in water
soluble form and not as in-feed formulation, Europe recorded a
small 5% reduction in revenues.
Gross margins were 45% in the year ended 31 March 2023 (2022:
43%). This improvement in gross margins arose in the main from the
weakness of Sterling compared with the US Dollar and the Chinese
Yuan. At net margin, both of these effects were somewhat offset by
the currency effect on foreign denominated administrative
costs.
Administrative expenses, at GBP27.9m, were 16% higher than the
prior year (GBP24.1m). Sterling weakness, as mentioned above,
together with increased salary costs, travel costs and depreciation
drove the increase.
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.
Total expenditure on R&D in the year was GBP8.3m (2022:
GBP9.0m). The total expenditure on R&D can be analysed as
follows:
Year ended 31 March
2023 2022
GBP000's GBP000's
Research and development expenses - expensed
in period 5,920 7,621
Development expenditure - capitalised in intangible
assets 2,419 1 ,421
Total expenditure 8,339 9,042
Overall R&D expenditure in the year was 8% lower than the
prior year due largely to timing and phasing of trial work. The
portion of this expenditure capitalised in the year nearly doubled
as a consequence of the greater proportion of the expenditure in
the year ended 31 March 2023 being applied to the late-stage
poultry vaccine programmes for mycoplasma prevention in chickens.
These projects are in the final development stage and have met the
capitalisation requirements set out in IAS38 for the entire
financial year.
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 GBP1.1m (2022: GBP1.1m). The
adjusted EBITDA at GBP7.2m in the year ended 31 March 2023 was a
significant increase on the year ended 31 March 2022 (GBP5.4m).
Furthermore, the adjusted EBITDA margin (excluding foreign exchange
movements and expressed as a percentage of revenue in the period)
was 8.5% in the year ended 31 March 2023 compared with 6.6% in the
year ended 31 March 2022. This increase in the adjusted EBITDA
margin arose principally from improved gross margins and the effect
of operational gearing in the business.
Profit before income tax was significantly stronger in the year
ended 31 March 2023 at GBP4.4m (2022: GBP1.4m).
The Group's effective tax rate has reduced to 30% in the year
ended 31 March 2023 (2022: 151%) due to lower net non-deductible
expenses, lower profitability in high tax rate subsidiaries,
increased utilisation of past tax losses, offset by lower R&D
expenditure allowances. The UK corporation tax rate moves to 25%
with effect from 1 April 2023; this should not impact tax payable
in the near term due to the continuing availability of tax losses
in the UK.
Earnings per share ("EPS") has improved from a loss per share of
1.01 pence in the year ended 31 March 2022 to 1.49 pence profit per
share in the year ended 31 March 2023 and diluted EPS has improved
from a loss per share of 1.01 pence in the year ended 31 March 2022
to 1.47 pence profit per share in the year ended 31 March 2023.
The consolidated cash position in the Group has increased to
GBP21.7m at 31 March 2023 from GBP14.3m at 31 March 2022. The
consolidated cash position held outside of China decreased to
GBP4.1m at 31 March 2023 from GBP6.2m at 31 March 2022. A portion
of the China cash is repatriated once per annum by dividend
declaration; the Group's share of the cash distribution from ECO
Biok in China received in the UK is 51%. During the year the
dividend received from ECO Biok was GBP1.8m - related to the China
profitability in the year ended 31 December 2021 (2022: GBP2.2m -
related to year ended 31 December 2020). In addition, the Group
received a first dividend of GBP4.0m during the year from its
wholly owned entity in China.
The cash generated from operations was significantly greater in
the year ended 31 March 2023 at GBP18.4m (2022: GBP2.5m) reflecting
the increased profitability of the Group and, most significantly, a
release of working capital from reduction in inventories. Group
inventory levels fell from GBP30m at 31 March 2022 to GBP22.4m at
31 March 2023. The new factory in China was successfully
commissioned during the year and the required inventory build ahead
of the shutdown period unwound by the end of March 2023. Inventory
days, expressed as inventory level as a ratio of annual cost of
sales was 174 days at 31 March 2023 (2022: 234 days).
Trade receivables increased by 3% proportional to the increase
in revenues in the year; the debtor days ratio remaining consistent
at around 114 days. The Group's GBP5m overdraft facility (undrawn
at the year end) remains in place and the Group's committed GBP10m
Revolving Credit Facility ("RCF") has not been utilised to
date.
Prior Year Adjustment
The prior year adjustment disclosed in note 3 is a technical
item relating to the accounting for share options issued to
employees of subsidiary companies. The adjustment affects ECO
Animal Health Group plc's balance sheet only (not the consolidated
position) and moves the cost of the share-based payment out of the
intercompany account and into the investment in subsidiary
account.
Audit
We are pleased to have completed the first audit with
Haysmacintyre LLP. The audit has been a smooth process with good
and appropriate challenge and astute enquiry. I would like to
personally thank Haysmacintyre for their work and, subject to their
reappointment at this year's AGM, we look forward to working with
them again next year.
Christopher Wilks
Finance Director
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 MARCH 2023
2023 2022
Notes GBP000's GBP000's
Revenue 4 85,311 82,195
Cost of sales (46,935) (47,059)
--------- ---------
Gross profit 38,376 35,136
45.0% 42.7%
Other income 5 357 65
Research and development expenses (5,920) (7,621)
Administrative expenses (27,866) (24,055)
Impairment of intangible assets - (2,085)
Profit from operating activities 6 4,947 1,440
Finance income 7 104 190
Finance costs 7 (656) (284)
--------- ---------
Net finance cost (552) (94)
--------- ---------
Share of profit of associate 16 45 43
--------- ---------
45 43
--------- ---------
Profit before income tax 4,440 1,389
Income tax charge 9 (1,349) (2,094)
--------- ---------
Profit/(loss) for the year 3,091 (705)
--------- ---------
Profit/(loss) attributable to:
Owners of the parent Company 1,008 (686)
Non-controlling interest 27 2,083 (19)
--------- ---------
Profit/(loss) for the year 3,091 (705)
--------- ---------
Earnings per share (pence) 8 1.49 (1.01)
========= =========
Diluted earnings per share (pence) 8 1.47 (1.01)
========= =========
Adjusted EBITDA (Non-GAAP measure) 6 7,235 5,406
========= =========
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2023
2023 2022
Notes GBP000's GBP000's
Profit for the year 3,091 (705)
Other comprehensive income/(losses):
Items that may be reclassified to profit
or loss:
Foreign currency translation differences (586) 2,195
Items that will not be reclassified to
profit or loss:
Deferred tax on property revaluations - 1
Remeasurement of defined benefit pension
schemes 24 100 24
--------- ---------
Other comprehensive income/(losses) for
the year (486) 2,220
--------- ---------
Total comprehensive income for the year 2,605 1,515
Attributable to:
Owners of the parent Company 798 435
Non-controlling interest 27 1,807 1,080
--------- ---------
2,605 1,515
========= =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2023
Share Share Revaluation Other Foreign Retained Total Non-controlling Total
Capital Premium Reserve Reserves Exchange Earnings Interest Equity
Reserve
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Balance as at
31 March 2021 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
revaluation
of
freehold
property - - 1 - - - 1 - 1
Actuarial
gains
on pension
scheme assets - - - - - 24 24 - 24
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Total
comprehensive
income for
the
year - - 1 - 1,096 (662) 435 1,080 1,515
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Transactions
with
owners:
Issue of
shares
in the year 2 61 - - - - 63 - 63
Share-based
payments - - - - - 342 342 - 342
Dividends - - - - - (677) (677) (2,210) (2,887)
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Transactions
with owners 2 61 - - - (335) (272) (2,210) (2,482)
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Balance 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
scheme assets - - - - - 100 100 - 100
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Total
comprehensive
income for
the (310
year - - - - ) 1,108 798 1,807 2,605
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Transactions
with
owners:
Share-based
payments - - - - - 408 408 - 408
(1,810 (1,810
Dividends - - - - - - - ) )
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Transactions
with (1,810 (1,402
owners - - - - - 408 408 ) )
--------- --------- ------------ --------- --------- --------- --------- ---------------- ---------
Balance at 31
March 2023 3,381 63,319 657 106 1,878 13,929 83,270 12,281 95,551
========= ========= ============ ========= ========= ========= ========= ================ =========
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2023
Company
Share Capital Share Premium Revaluation Other Reserves Retained Earnings Total
Reserve
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Balance as at 31
March 2021 3,379 63,258 385 106 10,326 77,454
Loss for the year - - - - (1,586) (1,586)
Other
comprehensive
income:
Deferred tax on
revaluation of
freehold
property - - 1 - - 1
Actuarial gains
on pension
scheme assets - - - - 24 24
-------------- -------------- ------------------ --------------- ------------------ ---------
Total
comprehensive
income for
the year - - 1 - (1,562) (1,561)
-------------- -------------- ------------------ --------------- ------------------ ---------
Transactions with
owners:
Issue of shares
in the year 2 61 - - - 63
Share-based
payments - - - - 342 342
Dividends - - - - (677) (677)
-------------- -------------- ------------------ --------------- ------------------ ---------
Transactions with
owners 2 61 - - (335) (272)
-------------- -------------- ------------------ --------------- ------------------ ---------
Balance 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
scheme assets - - - - 100 100
-------------- -------------- ------------------ --------------- ------------------ ---------
Total
comprehensive
income for
the year - - - - (1,601) (1,601)
-------------- -------------- ------------------ --------------- ------------------ ---------
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
============== ============== ================== =============== ================== =========
STATEMENTS OF FINANCIAL POSITION (CO. NUMBER: 01818170)
AS AT 31 MARCH 2023
Group Company
2023 2022 2023 2022 2021
Notes GBP000's GBP000's GBP000's GBP000's GBP000's
Restated Restated
Non-current assets
Intangible assets 12 35,636 34,304 - - -
Property, plant and equipment 13 6,097 3,465 565 748 651
Investment property 14 - 227 - 227 305
Right-of-use assets 15 4,282 1,773 71 59 37
Investments 16 252 212 21,165 21,230 21,047
Amounts due from subsidiary
Company 18 - - 51,526 52,742 54,894
Deferred tax assets 19 559 523 12 50 -
--------- --------- --------- --------- ---------
Total non-current assets 46,826 40,504 73,339 75,056 76,934
Current assets
Inventories 17 22,409 30,142 - - -
Trade and other receivables 18 26,850 25,969 1,073 338 281
Income tax recoverable 2,947 1,596 - - -
Other taxes and social security 395 1,075 43 386 27
Cash and cash equivalents 20 21,658 14,314 388 279 819
Assets held for sale 14 230 - 230 - -
--------- --------- --------- --------- ---------
Total current assets 74,489 73,096 1,734 1,003 1,127
--------- --------- --------- --------- ---------
TOTAL ASSETS 121,315 113,600 75,073 76,059 78,061
Current Liabilities
Trade and other payables 21 (14,523) (12,954) (520) (326) (524)
Provisions 23 (5,178) (3,875) - - -
Income tax payable (1,017) (224) - - -
Other taxes and social security
payable (516) (239) - - -
Lease liabilities 22 (884) (397) (41) (13) (7)
Dividends (50) (50) (50) (50) (50)
--------- --------- --------- --------- ---------
Current liabilities (22,168) (17,739) (611) (389) (581)
--------- --------- --------- --------- ---------
Net current assets 52,321 55,357 1,123 614 546
--------- --------- --------- --------- ---------
Total assets less current
liabilities 99,147 95,861 74,462 75,670 77,480
Non-current liabilities
Deferred tax liabilities 19 - - - - 6
Lease liabilities 22 (3,596) (1,513) (34) (49) (32)
--------- --------- --------- --------- ---------
TOTAL ASSETS LESS TOTAL
LIABILITIES 95,551 94,348 74,428 75,621 77,454
========= ========= ========= ========= =========
EQUITY
Issued share capital 25 3,381 3,381 3,381 3,381 3,379
Share premium account 63,319 63,319 63,319 63,319 63,258
Revaluation reserve 657 657 386 386 385
Other reserves 28 106 106 106 106 106
Foreign exchange reserve 28 1,878 2,188 - - -
Retained earnings 13,929 12,413 7,236 8,429 10,326
--------- --------- --------- --------- ---------
Shareholders' funds 83,270 82,064 74,428 75,621 77,454
Non-controlling interests 27 12,281 12,284 - - -
--------- --------- --------- --------- ---------
TOTAL EQUITY 95,551 94,348 74,428 75,621 77,454
========= ========= ========= ========= =========
STATEMENTS OF CASH FLOWS
FOR THE YEARED 31 MARCH 2023
Group Company
2023 2022 2023 2022
Notes GBP000's GBP000's GBP000's GBP000's
Cash flows from operating activities
Profit/(loss) before income tax 4,440 1,389 (1,793) (1,611)
Adjustment for:
Finance income 7 (104) (190) (1,225) (832)
Finance cost 7 656 284 151 71
Foreign exchange (gain)/loss 6 (468) (989) 5 (2)
Depreciation 13 812 455 183 28
Amortisation of right-of-use assets 15 452 398 22 16
Revaluation of investment property 14 (3) 78 (3) 78
Amortisation of intangible assets 12 1,087 1,140 - -
Impairment of intangible assets 12 - 2,085 - -
Share of associate's results 16 (45) (43) - -
Share-based payment charge 25 408 342 179 342
Dividends received - - - (177)
--------- --------- --------- ---------
Operating cash flows before movements in working capital 7,235 4,949 (2,481) (2,087)
Change in inventories 7,776 (8,585) - -
Change in receivables (1,843) 7,630 1,109 2,385
Change in payables 3,802 (2,868) 202 (174)
Change in provisions and pensions 1,439 1,392 100 -
--------- --------- --------- ---------
Cash generated from operations 18,409 2,518 (1,070) 124
Finance costs 7 (451) (106) (139) (60)
Income tax (2,052) (2,960) (14) (17)
--------- --------- --------- ---------
Net cash from/(out) operating activities 15,906 (548) (1,223) 47
--------- --------- --------- ---------
Cash flows from investing activities
Acquisition of property, plant and equipment 13 (3,562) (1,624) - (125)
Disposal of property, plant and equipment 13 - 3 - -
Purchase of intangibles 12 (2,419) (1,263) - -
Finance income 7 104 190 1,225 -
Dividends received - - 144 177
--------- --------- --------- ---------
Net cash (used in)/from investing activities (5,877) (2,694) 1,369 52
--------- --------- --------- ---------
Cash flows from financing activities
Proceeds from issue of share capital - 63 - 63
Interest paid on lease liabilities 22 (205) (111) (12) (11)
Principal paid on lease liabilities 22 (387) (371) (21) (14)
Dividends paid (1,810) (2,886) - (677)
--------- --------- --------- ---------
Net cash (used in)/from financing activities (2,402) (3,305) (33) (639)
--------- --------- --------- ---------
Net increase/(decrease) in cash and cash equivalents 7,627 (6,547) 113 (540)
Foreign exchange movements (283) 1,338 (4) -
Balance at the beginning of the period 14,314 19,523 279 819
--------- --------- --------- ---------
Balance at the end of the period 20 21,658 14,314 388 279
========= ========= ========= =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 MARCH 2023
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,
Lond on, N14 6BN.
2. Summary of the Group and Company's significant accounting policies
2.1 Basis of preparation
These fi nancial statements have been prepared in accordance
with UK-adopted International Financial Reporting Standards. There
were no changes to accounting policies on adoption of UK IFRSs.
The preparation of financial statements, in accordance with
UK-adopted international accounting standards, requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting
period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results
ultimately may differ from those estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
Further details of estimates and judgements are provided in note
2.30.
The principal accounting policies are set out below and have
been applied consistently in dealing with items which are
considered material in relation to the financial statements. They
are prepared under the historical cost convention with the
exception of certain items which are measured at fair value as
described in the accounting policies below.
Going Concern
After making appropriate enquiries, the Directors have, at the
time of approving the financial statements, formed a judgement that
there is a reasonable expectation that the Company and Group have
adequate resources to continue in operational existence for the
foreseeable future. For this reason, the Directors continue to
adopt the going concern basis in preparing the financial
statements.
This conclusion is based on a review of the resources available
to the Group, taking account of the Group's financial projections
together with available cash and committed borrowing facilities.
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 financial statements, 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 with 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 2023:
-- IFRS 17 - Insurance Contracts
The following amendments are effective for annual reporting
periods beginning on or after 1 January 2023:
-- Amendments to IFRS 17
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
-- Definition of Accounting Estimates (Amendments to IAS 8);
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12); and
-- International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12).
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);
-- Lease Liability in a Sale and Leaseback (Amendments to IFRS 16);
-- Non-current liabilities with covenants (Amendments to IAS 1); and
-- Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7).
Beyond the information above, it is not practicable to provide a
reasonable estimate of the effect of these standards until a
detailed review has been completed.
2.3 Basis of consolidation
The consolidated financial statements comprise the accounts of
the Company and its subsidiaries drawn up to 31 March 2023.
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.
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated on
consolidation.
The Group initially recognised any non-controlling interest in
the acquiree at the non-controlling interest's proportionate share
of the acquiree's net assets. For each business combination, the
Group elects whether to measure the non-controlling interests in
the acquiree at fair value or at the proportionate share of the
acquiree's identifiable net assets. Acquisition-related costs are
expensed as incurred and included in administrative expenses. The
Group has not elected to take the option to use fair value in
acquisitions completed to date.
Profit or loss and each component of Other Comprehensive Income
are attributed to the equity holders of the parent of the Group and
to the non-controlling interests, even if this results in the
non-controlling interests having a deficit balance.
2.4 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting to the chief operating decision-maker. The chief
operating decision-maker who is responsible for allocating
resources and assessing performance of the operating segments has
been identified as the Board.
Assets and liabilities of the Group are not reviewed on a
segment basis by the chief operating decision-maker, accordingly
assets and liabilities on a segment basis are not presented in
these consolidated financial statements.
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, twelve month expected credit losses along with gross
interest income are recognised. For those for which credit risk has
increased significantly, lifetime expected credit losses along with
the gross interest income are recognised. For those that are
determined to be credit impaired, lifetime expected credit losses
along with interest income on a net basis are recognised.
Financial liabilities
Financial liabilities comprise mainly trade and other payables
and bank overdrafts in the consolidated statement of financial
position. These financial liabilities are initially recognised at
fair value and subsequently measured at amortised cost in
accordance with IFRS 9.
2.7 Goodwill
Goodwill arising on the acquisition of an entity represents the
excess of the costs of acquisition over the Group's interest in the
net fair value of the identifiable assets, liabilities and
contingent liabilities of the entity recognised at the date of
acquisition.
Goodwill is initially recognised as an asset at cost and is
subsequently measured at cost less any accumulated impairment
losses. Goodwill is not subject to amortisation but is tested for
impairment annually.
Negative goodwill arising on an acquisition is recognised
directly in the income statement. On disposal of a subsidiary or a
jointly controlled entity, the attributable amount of goodwill is
included in the determination of the profit or loss recognised in
the income statement on disposal. Goodwill arising before the date
of transition to IFRS, on 1 April 2004, has been retained at the
previous UK GAAP amounts, subject to being tested for impairment at
that date. Goodwill written off to reserves under UK GAAP prior to
1998 has not been reinstated and is not included in determining any
subsequent profit or loss on disposal.
2.8 Other intangible assets
IAS 38 - Intangible Assets includes guidance on the accounting
for Research and Development expenditure. Such an intangible asset
is a resource that is controlled by the entity as a result of past
events (for example, purchase or self-creation) and from which
future economic benefits (inflows of cash or other assets) are
expected. The three critical attributes of an intangible asset
are:
-- Identifiability;
-- control (power to obtain benefits from the asset); and
-- future economic benefits (such as revenues or reduced future costs).
Identifiability
An intangible asset is identifiable when it:
-- is separable (capable of being separated and sold,
transferred, licensed, rented, or exchanged, either individually or
together with a related contract); or
-- arises from contractual or other legal rights, regardless of
whether those rights are transferable or separable from the entity
or from other rights and obligations.
Development expenditure - whether purchased or self-created
(internally generated) is an example of an intangible asset,
governed under IAS 38.
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.
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.
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
2.9 Property, plant and equipment and depreciation
Plant and equipment are stated at cost less depreciation.
Depreciation is provided at rates calculated to write off the cost
less estimated residual value of each asset over its expected
useful life, as follows:
Plant and machinery 10%-20 % on cost
Fixtures, fittings and equipment 10%-20 % on cost
Motor vehicles 25 % on cost
Leasehold Improvement 18%-25% on cost
Freehold land and buildings valuations are measured as a level 3
recurring fair value measurement. The property is professionally
valued by a qualified surveyor at least once every three years.
Surpluses (which are not reversals of previous deficits) arising
from the periodic valuations are taken to other comprehensive
income, and deficits (which are not reversals of previous
surpluses) are taken to the income statement within administrative
expenses. Depreciation is provided at a rate calculated to expense
the valuation less estimated residual value over the remaining
useful life of the building at a rate of 2% per annum on a straight
line basis. Land is not depreciated.
2.10 Impairment of non-financial assets
The carrying amounts of assets are reviewed at each year end, to
determine whether there is any indication of impairment. If any
such indication exists, the asset's recoverable amount is estimated
in order to determine the impairment loss if any. The recoverable
amount is the higher of its fair value and its value in use. For
intangible assets with an indefinite useful life or not available
for use, an impairment test is performed at each year end.
In assessing value in use, the expected future cashflows from
the asset are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset.
An impairment loss is recognised in the income statement
whenever the carrying amount of an asset or its cash-generating
unit exceeds its recoverable amount.
A previously recognised impairment loss for costs other than
goodwill is reversed if the recoverable amount increases as a
result of a change in the estimates used to determine the
recoverable amount, but not to an amount higher than the carrying
amount that would have been determined (net of depreciation) had no
impairment loss been recognised in prior years and no reversal of
impairment losses recognised on goodwill.
2.11 Investment property
Investment property is held either to earn rental income or for
capital appreciation or for both, but not for sale in the ordinary
course of business, use in the production or supply of goods or
services or for administrative purposes. Investment property is
measured at fair value as a level 3 recurring fair value
measurement.
The property is professionally valued by a qualified surveyor at
least once every three years. Surpluses and deficits arising from
the periodic valuations are taken to the income statement within
administrative expenses.
2.12 Investments in subsidiaries
An investment in a subsidiary is where the Group own a
controlling interest in an entity. Investments in subsidiaries are
stated at cost less impairment in the Parent Company's statement of
financial position.
Other non-current asset investments are stated at fair value.
They are recognised or derecognised on the date when the contract
for acquisition or disposal requires the delivery of that
investment.
Investments are assessed for impairment at the end of each
reporting period. An impairment is recognised in profit or loss
when the recoverable amount of an asset is less than its carrying
amount, with the value of any impairment being the difference
between the recoverable amount and carrying amount.
Impairments can be reversed in subsequent periods where there is
any indication that the impairment loss recognised in a prior
period may no longer exist or have decreased.
2.13 Joint Arrangements
A joint arrangement is a contractual arrangement whereby the
Group and other parties undertake an economic activity that is
subject to joint control; that is, when the strategic financial and
operating policy decisions relating to the activities require the
unanimous consent of the parties sharing control.
The group classifies its interests in joint arrangements as
either:
- Joint ventures: where the group has rights to only the net assets of the joint arrangement.
- Joint operations: where the group has both the rights to
assets and obligations for the liabilities of the joint
arrangement.
In assessing the classification of interests in joint
arrangements, the Group considers:
- The structure of the joint arrangement.
- The legal form of joint arrangements structured through a separate vehicle.
- The contractual terms of the joint arrangement agreement.
- Any other facts and circumstances (including any other contractual arrangements).
The Group has interests in joint operations. The Group
recognises its share of the assets, liabilities, income, expenses
and cashflows of joint operations combined with the equivalent
items in the consolidated financial statements on a line-by-line
basis.
2.14 Investments in Associates
An associate is an entity in which an investor has significant
influence but not control or joint control. Significant influence
is defined as "the power to participate in the financial and
operating policy decisions but not to control them".
The Group reports its interests in associates using the equity
method of accounting. Under this method, an equity investment is
initially recorded at cost (subject to initial fair value
adjustment if acquired as part of the acquisition of a subsidiary)
and is subsequently adjusted to reflect the Group's share of the
net profit or loss of the associate. If the Group's share of losses
of an associate 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.
2.15 Leasing
The Group assesses at contract inception whether a contract is,
or contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration.
The Group applies a single recognition and measurement approach
for all leases under IFRS 16, except for short-term leases and
leases of low-value assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease, which is the date the underlying asset is
available for use. Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses, and adjusted
for any re-measurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made
at or before the commencement date, less any lease incentives
received. Right-of-use assets are depreciated on a straight-line
basis over the lease term.
If ownership of the leased asset transfers to the Group at the
end of the lease term or the cost reflects the exercise of a
purchase option, depreciation is calculated using the estimated
useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to
the accounting policies in the section 2.10 for further
details.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of the lease
payments to be made over the lease term. The lease liabilities
include the present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- variable lease payments that are based on an index or a rate,
initially measured using the index or rate as at the commencement
date;
-- amounts expected to be payable by the Group under residual value guarantees;
-- the exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
the lessee's incremental borrowing rate is used, being the rate
that the individual lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms,
security and conditions. In addition, the carrying amount of lease
liabilities is re-measured if there is a modification, a change in
the lease term, a change in the lease payments (for example,
changes to future payments resulting from a change in an index or
rate used to determine such lease payments) or a change in the
assessment of an option to purchase the underlying asset.
The Group is exposed to potential future increases in variable
lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to
lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the right-of-use
asset.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease period
to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Extension and termination options
Extension and termination options are included in a number of
property and equipment leases across the Group. These are used to
maximise operational flexibility in terms of managing the assets
used in the Group's operations. The majority of extension and
termination options held are exercisable only by the Group and not
by the respective lessor.
The Group applies judgement in evaluating whether it is
reasonably certain whether or not to exercise the option to renew
or terminate the lease. That is, it considers all relevant factors
that create an economic incentive for it to exercise either the
renewal or termination. After the commencement date, the Group
reassesses the lease term if there is a significant event or change
in circumstances that is within its control and affects its ability
to exercise or not to exercise the option to renew or to
terminate.
Recognition exemptions
The Group applies the short-term lease recognition exemption to
its short-term leases, being those leases that have a lease term of
twelve months or less from the commencement date and do not contain
a purchase option.
The Group also applies the recognition exemption to leases of
which the underlying asset is of low value, comprising assets below
the Group's capitalisation threshold. Lease payments on short-term
leases and leases of low-value assets are recognised as an expense
on a straight-line basis over the lease term.
Practical expedients
The Group applies a single discount rate to a portfolio of
leases with reasonably similar characteristics.
2.16 Inventories
Inventories are valued at the lower of cost and net realisable
value. Cost is determined using the historical batch price of the
principal raw materials and the weighted average cost for other
ingredients and other product costs. The cost of finished goods
comprises raw materials, packaging costs and sub-contracted
manufacturing costs. Net realisable value is the estimated selling
price in the ordinary course of business, less any costs which
would be incurred in completing the goods ready for sale.
2.17 Trade receivables
Trade receivables are initially measured at fair value and are
subsequently measured at amortised cost using the effective
interest rate method. Trade receivables are presented net of
discounts or other variable consideration adjustments earned, where
the expectation and intention is to settle the balance net.
Impairment provisions are recognised based on the simplified
approach in accordance with IFRS 9 using a provision matrix in the
determination of the lifetime expected credit losses. See
impairment section in section '2.6 Financial instruments' for more
details.
2.18 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on
call with banks, other short--term highly liquid investments with
original maturities of three months or less. For the purpose of the
statement of cash flows, bank overdrafts are included in the
presentation of cash and cash equivalents.
2.19 Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in assets after deducting all of its
liabilities.
2.20 Bank borrowings and loans
Interest-bearing bank loans and overdrafts are recorded as the
proceeds received, net of direct issue costs (which equate to fair
value). Finance charges including premiums payable on settlement or
redemption and direct issue costs are accounted for on an amortised
cost basis in profit or loss using the effective interest rate
method and are added to the carrying amount of the instrument to
the extent that they are not settled in the period in which they
arise.
2.21 Trade payables
Trade payables are initially measured at fair value and are
subsequently measured at amortised cost using the effective
interest rate method.
2.22 Provisions
Provisions are recognised when there is a present obligation as
a result of a past event and it is probable that the an outflow of
resources will be required to settle the obligation. Provisions are
measured at the Directors' best estimate of the expenditure
required to settle the obligation outstanding at the year end and
are discounted to present value where the effect is material.
2.23 Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the sale of goods in the ordinary course of the
Group's activities. The Group's revenue is principally derived from
selling goods with revenue recognised at a point in time when
control of the goods has transferred to the customer. 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 have been
constrained in estimating contract revenue that is highly probable
by using the most likely amount method.
The Group's contracts for delivery of goods are less than 12
months, there are no warranties within its sales contracts.
Revenue is recognised when the performance obligation is
fulfilled, and the amount can be measured reliably. The performance
obligation is fulfilled when control of the goods passes to the
customer, which is normally in accordance with INCO terms 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.
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 25 to the accounts.
Share-based payment charges are credited to retained
earnings.
2.26 Taxation
Tax expense for the period comprises current and deferred
tax.
Current tax, including UK corporation tax and foreign tax is
provided at amounts expected to be paid (or recovered) using the
tax rates and laws that have been enacted or substantively 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 substantively enacted, by the date of
the statement of financial position and are expected to apply when
the related deferred tax asset is realised or deferred tax
liability is settled.
Deferred tax assets are recognised only to the extent that it is
probable that future taxable profits will be available against
which the temporary differences can be utilised.
IFRIC 23 Uncertainty over Income Tax Treatments
IFIRC 23 provides guidance on the accounting for current and
deferred tax liabilities and assets in circumstances in which there
is uncertainty over income tax treatments. The interpretation
requires:
-- the Group to determine whether uncertain tax treatments
should be considered separately, or together as a group, based on
which approach provides better predictions of the resolution;
-- the Group to determine if it is probable that the tax
authorities will accept the uncertain tax treatment; and
-- if it is not probable that the uncertain tax treatment will
be accepted, measure the tax uncertainty based on the most likely
amount or expected value, depending on whichever method better
predicts the resolution of the uncertainty. The measurement is
required to be based on the assumption that each of the tax
authorities will examine amounts they have a right to examine and
have full knowledge of all related information when making those
examinations.
2.27 Equity
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Amounts arising on the restructuring of equity and reserves to
protect creditor interests are credited to the capital redemption
reserve.
Amounts arising from share-based payment expenses are recorded
within retained earnings.
The cost of its own shares bought into treasury is debited to
retained earnings as required by the Companies Act 2006. A
subsequent sale of these shares would result in this entry being
wholly or partly reversed with any profit on the sale being
credited to Share Premium.
Amounts arising from the revaluation of non-monetary assets and
liabilities held in foreign subsidiaries, and joint operations are
held within the foreign exchange revaluation reserve.
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 income statement.
2.29 Dividend distribution
Dividends are recorded when they become a legal obligation of
the Company. For final dividends, this will be when they are
approved by the shareholders at the AGM. For interim dividends,
this will be when they have been paid.
2.30 Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are as follows:
Impairment review of intangible assets
The Group tests annually whether intangible assets with
indefinite life, or not yet available for use, have suffered any
impairment. Other intangible assets are reviewed for impairment
when an indication of potential impairment exists. Impairment
provisions are recorded as applicable based on Directors' estimates
of recoverable values.
The recoverable amounts of the Cash Generating Units (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. These assumptions and other
commercial outlook conditions may change, which in turn might
result in material changes in the recoverable amount in the future.
The Group also reviews and quantifies the tax implications related
to any recognised impairments and these are included within tax
calculations as appropriate.
Further details of the impairment reviews performed can be found
in note 12 of the financial statements.
Fair value measurement
A number of assets and liabilities included in the Group's
financial statements require measurement, and/or disclosure of,
fair value.
The fair value measurement of the Group's financial and
non-financial assets and liabilities utilises market observable
inputs and data as far as possible. Inputs used in determining fair
value measurements are categorised into different levels based on
how observable the inputs used in the valuation technique utilised
are (the 'fair value hierarchy'):
- Level 1: Quoted prices in active markets for identical items (unadjusted).
- Level 2: Observable direct or indirect inputs other than Level 1 inputs.
- Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on
the lowest level of inputs used that has a significant effect on
the fair value measurement of the item.
The Group measures a number of items at fair value,
including:
-- land and buildings (note 13);
-- investment property (note 14);
-- Pension and other post-retirement benefit commitments (note 24);
-- share-based payments (note 25); and
-- initial recognition of financial instruments (note 32).
For more detailed information in relation to the fair value
measure of the items above please refer to the applicable
notes.
2.30 Critical accounting estimates and judgements (continued)
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.
This matter is at an early stage 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.
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 24 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 25. Variations in those assumptions in the model
may have a material impact on the Group's results and financial
position at the time of valuation. 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 assess 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.
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
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.
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 and 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.
Capitalisation of intangible assets
The Group assesses development costs incurred for capitalisation
in accordance with the requirements of IAS38 and the Group's
accounting policy described in note 2.8. The stage of development
and assessment of technical and commercial feasibility, in
particular, require the use of judgements and estimates in
consultation with the new product development team.
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.
3. Prior Year Restatement
The Group reviewed the accounting for share incentive awards
made to employees of subsidiary companies and concluded that the
previous approach to recording the transaction in the balance sheet
of the parent company should be by increasing the value of the
investment in subsidiary, rather than recording it as an
intercompany receivable. Accordingly, the prior year balance sheets
of the Parent company have been restated to show this presentation.
There is no impact or effect on the consolidated financial
statements.
2022 2022 2021 2021
as reported Adjustments as restated as reported Adjustments as restated
Notes GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Non-current assets
Property, plant and
equipment 13 748 - 748 651 - 651
Investment property 14 227 - 227 305 - 305
Right-of-use assets 15 59 - 59 37 - 37
Investments 16 20,032 1,198 21,230 20,032 1,015 21,047
Amounts due from
subsidiary Company 18 53,940 (1,198) 52,742 55,909 (1,015) 54,894
Deferred tax assets 19 50 - 50 - - -
------------ ------------ ------------ ------------ ------------ ------------
Total non-current assets 75,056 - 75,056 76,934 - 76,934
Current assets
Trade and other
receivables 18 338 - 338 281 - 281
Other taxes and social
security 386 - 386 27 - 27
Cash and cash equivalents 20 279 - 279 819 - 819
------------ ------------ ------------ ------------ ------------ ------------
Total current assets 1,003 - 1,003 1,127 - 1,127
------------ ------------ ------------ ------------ ------------ ------------
TOTAL ASSETS 76,059 - 76,059 78,061 - 78,061
Current Liabilities
Trade and other payables 21 (326) - (326) (524) - (524)
Lease liabilities 22 (13) - (13) (7) - (7)
Dividends (50) - (50) (50) - (50)
------------ ------------ ------------ ------------ ------------ ------------
Current liabilities (389) - (389) (581) - (581)
------------ ------------ ------------ ------------ ------------ ------------
Net current assets 614 - 614 546 - 546
------------ ------------ ------------ ------------ ------------ ------------
Total assets less current
liabilities 75,670 - 75,670 77,480 - 77,480
Non-current liabilities
Deferred tax liabilities 19 - - - 6 - 6
Lease liabilities 22 (49) - (49) (32) - (32)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL ASSETS LESS TOTAL
LIABILITIES 75,621 - 75,621 77,454 - 77,454
============ ============ ============ ============ ============ ============
EQUITY
Issued share capital 25 3,381 - 3,381 3,379 - 3,379
Share premium account 63,319 - 63,319 63,258 - 63,258
Revaluation reserve 386 - 386 385 - 385
Other reserves 28 106 - 106 106 - 106
Retained earnings 8,429 - 8,429 10,326 - 10,326
------------ ------------ ------------ ------------ ------------ ------------
Shareholders' funds 75,621 - 75,621 77,454 - 77,454
Non-controlling interests 27 - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Total equity 75,621 - 75,621 77,454 - 77,454
============ ============ ============ ============ ============ ============
4. Segment information
Management has determined the operating segments based on the
reports reviewed by the Board to make strategic decisions. The
Board considers the business from a geographical perspective.
Geographically, management considers the performance in the
Corporate/UK, China and Japan, North America, South and South East
Asia, Latin America, Europe and the Rest of the World.
Revenues are geographically allocated by the destination of
customer.
The performance of these geographical segments is measured using
Earnings before Interest, Tax, Depreciation and Amortisation
("Adjusted EBITDA**"), adjusted to exclude share-based payments,
revaluation, impairment and personnel related litigation matters.
Adjusted EBITDA is a non-GAAP measure used by the management to
assess the underlying business performance.
Corporate China North S & Latin Europe Rest Total
/U.K. & Japan America SE Asia America of World
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Year ended 31 March
2023
Sale of goods 1,304 26,374 15,172 16,759 18,107 6,073 1,338 85,126
Royalties - - - - - - 185 185
---------- --------- --------- --------- --------- --------- ---------- ---------
Revenue from external
customers 1,304 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
Year ended 31 March
2022
Sale of goods 1,525 28,385 16,402 11,816 15,775 6,430 1,623 81,956
Royalties - - - - - - 239 239
---------- --------- --------- --------- --------- --------- ---------- ---------
Revenue from external
customers 1,525 28,385 16,402 11,816 15,775 6,430 1,862 82,195
---------- --------- --------- --------- --------- --------- ---------- ---------
Adjusted EBITDA** (18,623) 10,260 5,546 4,632 3,035 841 704 6,395
A reconciliation of adjusted EBITDA for reportable segments to
profit from operating activities is provided as follows:
2023 2022
GBP000's GBP000's
Adjusted EBITDA for reportable
segments 7,703 6,395
Depreciation (812) (455)
Amortisation of right-of-use assets (452) (398)
Revaluation of investment property 3 (78)
Provision for ongoing employee
litigation - (457)
Amortisation (1,087) (1,140)
Impairment - (2,085)
Share-based payment charges (408) (342)
--------- ---------
Profit from operating activities 4,947 1,440
========= =========
Foreign exchange differences (468) (989)
--------- ---------
Adjusted EBITDA for the Group 7,235 5,406
========= =========
**Adjusted EBITDA reported for the segments includes foreign
exchange gains and losses. The Adjusted EBITDA for the Group is
presented in note 6.
2023 2022
GBP000's GBP000's
Aivlosin 75,942 72,939
Ecomectin 3,595 5,543
Others 5,774 3,713
--------- ---------
Total 85,311 82,195
========= =========
Product Revenue s
All product revenues are recognised at a point in time.
Contract Balances
2023 2022
Within one year or on demand GBP000's GBP000's
At 1 April 203 2155
Amounts included in contract liabilities that was recognised as revenue during the
period (203) (2,155)
Cash received in advance of performance and not recognised as revenue during the
period 1,079 203
--------- ---------
At 31 March 1,079 203
========= =========
The Group recognised contract liabilities of GBP1,079,000 at 31
March 2023 (2022: GBP203,000). 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.
5. Other income
2023 2022
GBP000's GBP000's
Sundry income 357 65
--------- ---------
357 65
========= =========
6. Result from operating activities
2023 2022
Notes GBP000's GBP000's
Result from operating activities is stated after charging/(crediting):
Cost of inventories recognised as an expense 46,461 46,482
Employee benefits expenses 30 15,461 14,054
Amortisation of intangible assets 12 1,087 1,140
Depreciation 13 812 455
Amortisation of right-of-use assets 15 452 398
Revaluation of investment property 14 (3) 78
Gain on foreign exchange transactions 468 989
Research and development 5,920 7,621
Impairment losses on trade receivables 18 533 (167)
Audit fees recognised in the financial period to the Company's auditors for the audit
of the
parent Company and Group annual accounts 535 452
Audit fees recognised in the financial period to the Company's auditors and its
associates
for the audit of the Company's subsidiaries 70 41
Total fees payable to the Company's auditor for the audit of
these parent Company and Group annual accounts, for the year ended
31 March 2023, are GBP290,000 (2022: GBP584,000), and fees payable
to the Company's auditor and its associates for the audit of the
Company's subsidiaries are GBP24,000 (2022: GBP83,000).
2023 2022
GBP000's GBP000's
Earnings before interest, Tax, Depreciation, Amortisation, Revaluation, Impairment, Personnel
related litigation matters, Share-based payments and Foreign exchange differences (adjusted
EBITDA ) - Non-GAAP measure
Profit from operating activities 4,947 1,440
Depreciation 812 455
Amortisation of right-of-use assets 452 398
Revaluation of investment property (3) 78
Amortisation 1,087 1,140
Impairment - 2,085
Personnel related litigation matters - 457
Share-based payments 408 342
--------- ---------
7,703 6,395
Foreign exchange differences (468) (989)
--------- ---------
Adjusted EBITDA 7,235 5,406
========= =========
Management believe that adjusted EBITDA is an appropriate
measure of the Group's performance as it is the initial source for
all re-investment and for all returns to shareholders. Investors,
bankers and analysts all focus on this important measure of
underlying performance because it enables them to make judgements
about the Group's ability to generate sufficient cash to meet all
the re-investment needs of the business while still providing
adequate returns to shareholders. Therefore, adjusted EBITDA has a
direct relationship with the value of the Group and is seen by our
investors as a Key Performance Indicator for management.
The following items are adjusted for in the calculation of
adjusted EBITDA as defined by the Group.
Item Rationale for Adjustment
Depreciation and Amortisation These items are a result of past investments and
therefore,
although they are correctly recorded as a cost of the
business,
they do not reflect current or future cash outflows.
Additionally, Depreciation and Amortisation calculations
are
subject to judgement regarding useful lives and residual
values of
particular assets and the adjustment removes the element
of
judgement.
Revaluation of Investment Property These are subject to judgement and do not reflect cash
flows.
Gains and Losses on Disposal of Fixed Assets and These items are a result of past investments and
Impairment of Intangibles therefore,
although they are correctly recorded as income or cost of
the
business, they do not reflect current or future cash
outflows.
Employment litigation Amount in respect of a probable settlement of an
employment
related matter in a foreign subsidiary of ECO Animal
Health Group plc.
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.
7. Finance income/(expense)
2023 2022
GBP000's GBP000's
Finance income
Interest received on short term bank deposits 104 190
Finance costs
Interest paid (451) (173)
Interest paid on lease liabilities (205) (111)
--------- ---------
(656) (284)
--------- ---------
Net finance costs (552) (94)
========= =========
8. Earnings per share
The calculation of basic earnings per share is based on the
post-tax profit for the year divided by the weighted average number
of shares in issue during the year.
2023 2022
Earnings Weighted average Per share amount Earnings Weighted average Per share amount
number of shares number of shares
GBP000's 000's pence GBP000's 000's pence
Earnings
attributable to
ordinary
shareholders on
continuing
operations after
tax 1,008 67,722 1.49 (686) 67,717 (1.01)
Dilutive effect - 918 - - - -
of share options
--------- ----------------- ----------------- --------- ----------------- -----------------
Diluted earnings
per share 1,008 68,640 1.47 (686) 67,717 (1.01)
========= ================= ================= ========= ================= =================
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.
9. Taxation
2023 2022
GBP000's GBP000's
Current tax
Foreign corporation tax on profits for the year 2,405 3,284
Foreign withholding tax 325 406
Research and development tax credits claimed in the year (1,391) (1,594)
Research and development tax credits - adjustment for prior year 46 437
Deferred tax
Origination and reversal of temporary differences (36) (439)
--------- ---------
Income tax charge 1,349 2,094
========= =========
Origination and reversal of temporary differences - (1)
--------- ---------
Deferred tax recognised through reserves - (1)
========= =========
2023 2022
GBP000's GBP000's
Factors affecting the tax charge for the year
Profit before income tax 4,440 1,389
========= =========
Profit on ordinary activities before taxation multiplied by the applicable rate of UK
corporation
tax of 19% (2021: 19%) 844 264
Effects of:
Non-deductible expenses 1,207 1,345
Non-chargeable credits (571) (69)
Right-of-use assets depreciation (37) (37)
Withholding tax on inter-company dividends 325 406
Enhanced allowance on research and development expenditure (573) (1,208)
Adjustment in respect of prior years 98 456
Different tax rate for foreign subsidiaries 506 844
Origination and reversal of temporary differences - 114
Unused tax losses carried forward (363) (109)
Tax effect of share-based payments (14) 88
Patent Box claim (73) -
--------- ---------
Income tax charge 1,349 2,094
========= =========
Effective income tax rate 30% 151%
Future tax changes
On 5 March 2021 it was announced that the rate of UK corporation
tax would be increased to 25% from 1 April 2023. This change was
substantively enacted in April 2021 and the UK deferred tax assets
and liabilities have been calculated based on the enacted rate of
25% (2022: 25%).
10. Loss for the financial year
2023 2022
GBP000's GBP000's
Parent Company's (loss) for the financial year (1,701) (1,586)
========= =========
The Company has elected to take the exemption under Section 408
of the Companies Act 2006 not to present the Parent Company income
statement.
11. Dividends
2023 2022
GBP000's GBP000's
Cash dividends on ordinary shares declared and paid:
Final dividend for the year end 31 March 2022 at 1.0p per ordinary share - 677
========= =========
The Board of Directors does not propose that a dividend be paid
for the year ended 31 March 2023 (2022: 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.
12. Intangible assets
Group Goodwill Distribution rights Drug registrations, patents and license Total
costs
GBP000's GBP000's GBP000's GBP000's
Cost
At 31 March 2021 17,930 407 23,963 42,300
Additions - - 1,421 1,421
Impairment - - (2,092) (2,092)
At 31 March 2022 17,930 407 23,292 41,629
Additions - - 2,419 2,419
Impairment - - - -
At 31 March 2023 17,930 407 25,711 44,048
--------- -------------------- -------------------------------------------- ---------
Amortisation
At 31 March 2021 - (139) (6,053) (6,192)
Charge for the year - (19) (1,121) (1,140)
Written back on impairment - - 7 7
At 31 March 2022 - (158) (7,167) (7,325)
Charge for the year - (20) (1,067) (1,087)
Written back on impairment - - - -
At 31 March 2023 - (178) (8,234) (8,412)
--------- -------------------- -------------------------------------------- ---------
Net Book Value
At 31 March 2023 17,930 229 17,477 35,636
========= ==================== ============================================ =========
At 31 March 2022 17,930 249 16,125 34,304
========= ==================== ============================================ =========
At 31 March 2021 17,930 268 17,910 36,108
========= ==================== ============================================ =========
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. During the year the Group
modified the cash flows used in the impairment review of the
goodwill balance such that the Group's global revenues in respect
of Aivlosin and Ecomectin products are now used, and the 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. 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.
The Group has recalculated the headroom as it would have been at
March 2022 when comparing the net present value of cash flows to
the carrying value of goodwill on this modified basis.
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.
The Group prepares cashflow forecasts that cover the two-year
period after the Statement of Financial Position date and then
extrapolates them assuming a 3% annual growth rate which is well
below the past performance of the business. 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 7% (2022: 7%). 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 assumptions
as at each period end the excess of recoverable amount over
carrying value is over GBP118 million (2022: reported as GBP44
million and recalculated as GBP162 million using the modified
basis).
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 GBP102 million (2022: reported as GBP39 million
and recalculated as GBP141 million) 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 45% before there was an indication that the goodwill
balance would need to be impaired (2022: recalculated as 57%).
The net book value of drug registrations, patents and license
costs can be broken down as follows:
2023 2022
GBP000's GBP000's
Aivlosin 13,353 13,945
Ecomectin 637 754
Vaccines 3,386 1,296
Others 101 130
--------- ---------
17,477 16,125
========= =========
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 3 to 20 years.
Ecomectin is an endectocide that controls worms, ticks, lice and
mange in grazing stock and pigs. The remaining useful life is 2 to
10 years.
At 31 March 2023 Intangible assets included GBP5,453,000 (2022:
GBP3,502,000) of assets capitalised that had not commenced their
useful life, of which approximately GBP2,307,000 (2022:
GBP2,044,000) were Aivlosin related products.
Drug registrations and licences are amortised over their
estimated useful lives of 10 to 20 years, which is the Directors'
estimate of the time it would take to develop a new product
allowing for the Group's patent protection and the exclusivity
period which comes with certain registrations. All such costs are
recorded in the UK/Corporate reporting segment.
The group continuously reviews the status of its research and
development activity, paying close attention to the likelihood of
technical success and the commercial viability of development
projects. In the year to March 2023 there were no indications that
an impairment was necessary (2022: impairment of GBP2,085,000).
13. Property, plant and equipment
Group Freehold Land Leasehold Plant and Fixtures, Motor Vehicles Total
and Buildings improvements Machinery Fittings and
Equipment
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Cost or
valuation
At 31 March 2021 667 555 787 1,748 269 4,026
Additions 36 50 1,305 233 - 1,624
Disposals - - (19) (26) - (45)
Foreign exchange
movements 6 - 114 57 18 195
---------------- ---------------- ----------------- ---------------- --------------- ---------
At 31 March 2022 709 605 2,187 2,012 287 5,800
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
---------------- ---------------- ----------------- ---------------- --------------- ---------
Depreciation
At 31 March 2021 (23) (103) (503) (1,011) (205) (1,845)
Charge for the
year (16) (112) (54) (250) (24) (456)
Disposals - - 17 24 - 41
Foreign exchange
movements (1) - (31) (26) (17) (75)
---------------- ---------------- ----------------- ---------------- --------------- ---------
At 31 March 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)
---------------- ---------------- ----------------- ---------------- --------------- ---------
Net Book Value
At 31 March 2023 657 420 4,153 747 120 6,097
================ ================ ================= ================ =============== =========
At 31 March 2022 669 390 1,616 749 41 3,465
================ ================ ================= ================ =============== =========
At 31 March 2021 644 452 284 737 64 2,181
================ ================ ================= ================ =============== =========
The freehold land and buildings at Coombe Road, New Malden was
valued at GBP565,000 at 31 March 2023 by Colliers International
Property Consultants Limited (external independent qualified
valuers). The fair value of the freehold property was determined by
applying a 7.5 % discount rate to the annual rental value of the
property as determined by local market conditions. The Group
considers the fair value of the property determined. This property
will continue to be valued on a regular basis.
Valuation Technique Significant unobservable Inter-relationship between
used inputs key unobservable inputs
and fair value
RICS Valuation - Global Reduced marketability
Standards ('Red Book * Estimated market rent and hence rent achievable
Global Standards') 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.
The freehold property of 78 Coombe Road, New Malden is subject
to a legal charge held by the Company's bankers dated 20 March
1987.
The value of the freehold property would have been recorded at
GBP219,000 (2022: GBP229,000) on a historical cost basis.
Depreciation has been included in the administrative expenses
line in the income statement, except for GBP275,000 (2022:
GBP158,000) of depreciation of production equipment in the Chinese
subsidiary ECO Biok and for GBP9,011 (2022: GBP7,000) of
depreciation in Pharmgate Animal Health USA LLC, which are included
within cost of sales.
Company Freehold Land and Buildings Fixtures, Fittings and Equipment Total
GBP000's GBP000's GBP000's
Cost or valuation
At 31 March 2021 615 58 673
Additions - 125 125
---------------------------- --------------------------------- ---------
At 31 March 2022 615 183 798
Additions - - -
---------------------------- --------------------------------- ---------
At 31 March 2023 615 183 798
---------------------------- --------------------------------- ---------
Depreciation
At 31 March 2021 (12) (10) (22)
Charge for the year (12) (16) (28)
---------------------------- --------------------------------- ---------
At 31 March 2022 (24) (26) (50)
Charge for the year (26) (157) (183)
---------------------------- --------------------------------- ---------
At 31 March 2023 (50) (183) (233)
---------------------------- --------------------------------- ---------
Net Book Value
At 31 March 2023 565 - 565
============================ ================================= =========
At 31 March 2022 591 157 748
============================ ================================= =========
At 31 March 2021 603 48 651
============================ ================================= =========
14. Investment property
Group and Company Freehold Land and Buildings
GBP000's
At 31 March 2021 305
Revaluation in 2022 (78)
----------------------------
At 31 March 2022 227
Revaluation in 2023 3
----------------------------
At 31 March 2023 230
============================
The property in Western Road, Mitcham was valued at GBP230,000
as at 31 March 2023 by Colliers International Property Consultants
Limited (external independent qualified valuer). The fair value of
the investment property was determined by applying an 8.36 %
discount rate to the annual rental value of the property as
determined by local market conditions.
The value of the investment property would have been recorded at
GBP130,000 on a historical cost basis.
Valuation Technique Significant unobservable Inter-relationship between
used inputs key unobservable inputs
and fair value
RICS Valuation - Global Reduced marketability
Standards ('Red Book * Estimated market rent and hence rent achievable
Global Standards') by the property.
* Capital value
* Price per square foot in local market
* Yield in local market
* General condition
* Statutory searches
* Environmental matters
--------------------------------------------- ---------------------------
In determining the fair value of investment property level-3
fair value inputs are used. The significant unobservable inputs
used in establishing the fair value of investment property are the
estimated market rent and capital value. The Directors believe that
the fair value of investment property reflects the carrying value
and a significant change in unobservable inputs would not
significantly increase or reduce the fair value of the investment
property.
During the financial period ended 31 Mar 2023, the Group agreed
to sell the property for consideration of GBP230,000 and has
classified this property as ass ets held for sale.
15. Right-of-use assets
Group Property Vehicles Other Total
GBP000's GBP000's GBP000's GBP000's
Cost or valuation
At 31 March 2021 2,201 147 22 2,370
Additions 615 66 7 688
Disposals (366) (18) (22) (406)
Foreign exchange movements 105 - - 105
--------- --------- --------- ---------
At 31 March 2022 2,555 195 7 2,757
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
--------- --------- --------- ---------
Depreciation
At 31 March 2021 (878) (75) (18) (971)
Charge for the year (355) (38) (5) (398)
Disposals 366 18 22 406
Foreign exchange movements (21) - - (21)
--------- --------- --------- ---------
At 31 March 2022 (888) (95) (1) (984)
Charge for the year (402) (50) - (452)
Disposals - - - -
Foreign exchange movements 27 - - 27
--------- --------- --------- ---------
At 31 March 2023 (1,263) (145) (1) (1,409)
--------- --------- --------- ---------
Net Book Value
At 31 March 2023 4,124 150 8 4,282
========= ========= ========= =========
At 31 March 2022 1,667 100 6 1,773
========= ========= ========= =========
At 31 March 2021 1,323 72 4 1,399
========= ========= ========= =========
Company Vehicles Other Total
GBP000's GBP000's GBP000's
Cost or valuation
At 31 March 2021 68 7 75
Additions 38 - 38
Disposals - (7) (7)
Foreign exchange movements - - -
--------- --------- ---------
At 31 March 2022 106 - 106
Additions - 34 34
Disposals - - -
Foreign exchange movements - - -
--------- --------- ---------
At 31 March 2023 106 34 140
--------- --------- ---------
Depreciation
At 31 March 2021 (32) (6) (38)
Charge for the year (16) - (16)
Disposals - 7 7
Foreign exchange movements - - -
--------- --------- ---------
At 31 March 2022 (48) 1 (47)
Charge for the year - (22) (22)
Disposals - - -
Foreign exchange movements - - -
--------- --------- ---------
At 31 March 2023 (48) (21) (69)
--------- --------- ---------
Net Book Value
At 31 March 2023 58 13 71
========= ========= =========
At 31 March 2022 58 1 59
========= ========= =========
At 31 March 2021 36 1 37
========= ========= =========
16. I nvestments
Group Investment in Associate Unlisted investments Total
GBP000's GBP000's GBP000's
At 31 March 2021 171 9 180
Share of associate's result for the year 43 - 43
Foreign exchange differences (11) - (11)
------------------------ --------------------- ---------
At 31 March 2022 203 9 212
Share of associate's result for the year 45 - 45
Foreign exchange differences (5) - (5)
------------------------ --------------------- ---------
At 31 March 2023 243 9 252
======================== ===================== =========
Company Unlisted investments (subsidiaries) Total
GBP000's GBP000's
Cost
At 31 March 2021 Restated 21,047 21,047
Additional investment 183 183
------------------------------------ ---------
At 31 March 2022 Restated 21,230 21,230
Disposal (65) (65)
------------------------------------ ---------
At 31 March 2023 21,165 21,165
==================================== =========
Impairment
At 31 March 2021 (20) (20)
Impairment charge - -
Disposal - -
------------------------------------ ---------
At 31 March 2022 (20) (20)
Impairment charge - -
Disposal 20 20
------------------------------------ ---------
At 31 March 2023 - -
==================================== =========
Net Book Value
At 31 March 2023 21,165 21,165
==================================== =========
At 31 March 2022 Restated 21,210 21,210
==================================== =========
At 31 March 2021 Restated 21,027 21,027
==================================== =========
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 Class Shares held %
incorporation
Zhejiang ECO Biok Animal Zhongguan Industrial Area,
Health Products Limited Deqing, Zhejiang Province P. R. China Ordinary 3*
78 Coombe Road, New Malden,
ECO Animal Health Limited Surrey, KT3 4QS Great Britain Ordinary 100
Subsidiary undertakings held by the Group
Country of registration or Class Shares held %
Company Registered office address incorporation
ECO Animal Health Southern 228 Athol Road, Highlands
Africa (Pty) Limited. North, Johannesburg 2192 South Africa Ordinary 100
Zhejiang ECO Biok Animal Zhongguan Industrial Area,
Health Products Limited. Deqing, Zhejiang Province P. R. China Ordinary 51*
Shanghai ECO Biok Veterinary
Drug Sale Company Ltd. (via
Zhejiang ECO Biok Animal Room 1502-3, Imago Plaza,
Products No. 99 Wuning Road, Ptro
Ltd.) District, Shanghai 200063 P. R. China Ordinary 51
Zhejiang ECO Animal Health Zhongguan Industrial Area,
Limited Deqing, Zhejiang Province P. R. China Ordinary 100
Av. Dr. Cardoso de Melo,
ECO Animal Health do Brasil 1470, Cl311, Villa
Comercio de Produtos Olimpia, CEP 04548-005,
Veterinarios Ltda. Sao Paulo Brazil Ordinary 100
1-2-1, Hamamatsu-cho,
ECO Animal Health Japan Inc. Minato-Ku, Tokyo Japan Ordinary 100
344 Nassau Street,
Princeton, New Jersey,
ECO Animal Health USA Corp. 08540 U.S.A. Ordinary 100
3775 Columbia Pike,
Ellicott City, Maryland,
Interpet LLC. 21043 U.S.A. Ordinary 100
Av Techologico Sur 134-4,
ECO Animal Health de Mexico, Unidad Habitacional
S de R.L. de C.V. Moderna, Queretaro, 76030 Mexico Ordinary 100
ECO Animal Health de Calle 4 E 43/44 N: 581 P.6
Argentina S.A. D:B La Plata, Buenos Aires Argentina Ordinary 100
10(th) Floor, Menara Hap
ECO Animal Health Malaysia Seng, No 1 & 3, Jalan P
Sdn. Bhd. Ramlee, 50250 Kuala Lumpur Malaysia Ordinary 100
No 33/5, Second Floor,
Mount Kailash Building,
Meanee Avenue Road, Ulsoor
ECO Animal Health India Bangalore, Karnataka,
(Private) Ltd 560042 India Ordinary 100
6 Northbrook Road, Dublin
ECO Animal Health Europe Ltd 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%).
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) Non-trading
Limited
Zhejiang ECO Biok Animal Health Products Manufacture of animal
Limited drugs
Shanghai ECO Biok Veterinary Drug Sale Company Distribution of animal
Ltd. drugs
Zhejiang ECO Animal Health Limited Procurement of raw
materials
ECO Animal Health do Brasil Comercio de Distribution of animal
Produtos Veterinarios Ltda 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. Distribution of animal
de C. V. 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
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 2023.
Non-controlling interests
Zhejiang ECO Biok Animal Health Products Limited (Zhejiang ECO
Biok) and Shanghai ECO Biok Veterinary Drug Sale Company Limited
(Shanghai ECO Biok), both 51% owned subsidiaries of the Group, have
material non-controlling interests (NCI). Summarised financial
information in relation to these two subsidiaries is presented
below together with amounts attributable to NCI.
Please note that as Shanghai ECO Biok is a 100% owned subsidiary
of Zhejiang ECO Biok, the summarised results below are consolidated
on Zhejiang ECO Biok level, before wider group eliminations.
Summarised statement of comprehensive income 2023 2022
For the year ended 31 March GBP000's GBP000's
Revenue 24,122 26,803
Cost of sales (13,504) (17,192)
--------- ---------
Gross Profit 10,618 9,611
Administrative expenses (4,927) (8,875)
--------- ---------
Operating profit/(loss) 5,691 736
Other income 345 34
Finance income (94) 84
--------- ---------
Profit before tax 5,942 854
Tax expense (1,691) (891)
--------- ---------
Profit after tax 4,251 (37)
Profit allocated to NCI 2,083 (19)
Other comprehensive (loss)/income allocated to NCI (276) 1,099
Summarised balance sheet 2023 2022
As at 31 March GBP000's GBP000's
Assets:
Property, plant and equipment 860 1,960
Right-of-use assets 3,445 1,080
Deferred tax assets - 3
Inventories 5,047 14,081
Trade and other receivables 3,925 6,300
Cash and cash equivalents 14,877 6,148
--------- ---------
28,154 29,572
Liabilities:
Trade and other payables 1,742 4,489
Contract liabilities 1,080 11
Lease liabilities - short term 585 144
Lease liabilities - long term 3,061 1,040
--------- ---------
6,468 5,684
Summarised cash flows 2023 2022
For the year ended 31 March GBP000's GBP000's
Cash flows from operating activities 15,802 (2,818)
Cash flows from investing activities (2,772) (810)
Cash flows from financing activities (3,924) (4,565)
Foreign exchange movements (376) 690
Net increase/(decrease) in cash and cash equivalents 8,730 (7,503)
Joint Operations
The Group also holds (by means of its ownership of ECO Animal
Health USA Corp.), a 50 % interest in Pharmgate Animal Health LLC,
which is resident in the U.S.A. Pharmgate Animal Health LLC
distributes the Group's products in the U.S.A.
The Group also holds (by means of its ownership of ECO Animal
Health Ltd) a 50 % interest in Pharmgate Animal Health Canada Inc,
which distributes its products into Canada.
The Group also holds (by means of its ownership of ECO Animal
Health Europe Ltd) a 50 % interest in ECO-Pharm Limited, based in
the Republic of Ireland. ECO-Pharm Limited has not yet commenced
trading.
Both Pharmgate Animal Health LLC and Pharmgate Animal Health
Canada Inc. have accounting years which end on 31 December.
The Group's holdings in each of the joint operations' share
capital is given in the table below:
Pharmgate Animal Health Canada Inc Holding Shares Holding
(shares) in issue %
Common Shares 100 200 50
Class A Shares 100 100 100
Class B Shares - 100 -
Pharmgate Animal Health USA LLC Holding Shares Holding
(shares) in issue %
Common Shares 100 200 50
Class A Shares 100 100 100
Class B Shares - 100 -
ECO-Pharm Limited Holding Shares Holding
(shares) in issue %
Common Shares 25,000 50,000 50
Class A Shares 1 1 100
Class B Shares - 1 -
In the case of Pharmgate Animal Health Canada Inc and Pharmgate
Animal Health USA LLC, A shares carry the rights to dividends
payable out of profits attributable to the Group. These are made up
of profits made by products supplied by the ECO Group plus 50 % of
any profit relating to new products developed jointly by the
partners to the joint operation.
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
2023 2022 2023 2022
GBP000's GBP000's GBP000's GBP000's
Non-current assets 2 11 - -
Current assets 1,175 1,871 614 631
Current liabilities (1,149) (1,855) (613) (630)
Sales 11,672 12,640 3,499 3,756
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.
2023 2022
GBP000's GBP000's
Investments (share of net assets)
At 1 April 203 171
Share of results for the year 45 43
Foreign exchange movement (5) (11)
At 31 March 243 203
2023 2022
Summarised financial information GBP000's GBP000's
At 31 March
Current assets 831 744
Non-current assets 37 27
Current liabilities (224) 222
Non-current liabilities (134) 120
Net assets (100%) 510 428
Group share of net assets (47.62%) 243 204
Year ended 31 March
Revenue 2,122 1,897
Net profit 95 90
17. Inventories
Group Company
2023 2022 2023 2022
GBP000's GBP000's GBP000's GBP000's
Raw materials and consumables 9,252 9,772 - -
Finished goods and goods for resale 7,660 13,277 - -
Work in progress 5,497 7,093 - -
22,409 30,142 - -
The above total includes the provision of inventory amounting to
GBP384,000 (2022: GBP146,000).
18. Trade and other receivables
Group Company
2023 2022 2023 2022
GBP000's GBP000's GBP000's GBP000's
Restated
Non-current:
Amounts owed by group undertakings - - 51,526 52,742
The intercompany debt is due on demand, however the company has
classified the receivable as a non-current asset as it does not
expect to realise the asset within 12 months after the reporting
period.
Group Company
2023 2022 2023 2022
GBP000's GBP000's GBP000's GBP000's
Current:
Trade receivables 24,813 23,388 - -
Other receivables 1,312 660 825 80
Amounts owed by group undertakings - - - 48
Prepayments and accrued income 725 1,921 248 210
--------- ---------
26,850 25,969 1,073 338
The ageing analysis of these trade receivables is as
follows:
Trade receivables Net of impairment
2023 2022 2023 2022
GBP000's GBP000's GBP000's GBP000's
Current 20,241 20,849 19,922 20,849
Up to 3 months past due 4,097 1,772 3,932 1,751
3 to 6 months past due 711 346 677 346
Over 6 months past due 609 615 282 442
25,658 23,582 24,813 23,388
Movement on the Group provision for impairment of trade
receivables is as follows:
Group 2023 2022
GBP000's GBP000's
Balance at 1 April 194 351
Additional provision made 646 13
(Recovered) in the year (80) (59)
Written off in the year (33) (121)
Other 118 10
Balance at 31 March 845 194
19. Deferred tax
Group
Deferred tax assets and liabilities are attributable to the
following:
Assets/ (Liabilities)
2023 2022
GBP000's GBP000's
Trade related temporary differences (2,830) (2,586)
Overseas trade related temporary differences - 3
Freehold property 9 9
Investment property and assets held for sale 17 18
Plant and equipment (96) (109)
Deferred tax on pension scheme (45)
Deferred tax on share options 56 43
Tax losses carried forward 3,448 3,145
Amount receivable/(payable) after more than one year 559 523
The movement on the deferred tax account can be summarised as
follows:
Investment
Trade-related property and
temporary Freehold assets held Plant and
differences property for sale machinery Pension scheme Share options Total
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
At 31 March 2022 562 9 18 (109) - 43 523
Credit/(Charge)
for the year
through income
statement 56 - (1) 13 (45) 13 36
At 31 March 2023 618 9 17 (96) (45) 56 559
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 Investment property and
Freehold property assets held for sale Pension scheme Share options Total
GBP000's GBP000's GBP000's GBP000's GBP000's
At 31 March 2021 8 (2) - - 6
Credit for the year through
income statement - 20 - 23 43
Credit for the year through
reserves 1 - - - 1
----------------------------
At 31 March 2022 9 18 - 23 50
----------------------------
Credit for the year through
income statement - (1) (45) 8 (38)
----------------------------
At 31 March 2023 9 17 (45) 31 12
At 31 March 2023 the Group has recognised a deferred tax asset
in respect of carried forward UK trading losses of GBP10,489,000
(2022: GBP10,489,000). At 31 March 2023 the Group has unrecognised
carried forward excess UK trading losses of GBP4,613,000 (2022:
GBP3,185,000) and unrecognised carried forward overseas trading
losses of GBP1,319,000 (2022: GBP1,508,000). These tax losses are
not expected to expire.
20. Cash and cash equivalents
Cash and cash equivalents comprise cash, short-term deposits
held by the Group net of amounts outstanding on bank overdraft. The
carrying amount of these assets are not significantly different to
their fair value.
Group Company
2023 2022 2023 2022
GBP000's GBP000's GBP000's GBP000's
Cash and cash equivalents 21,658 14,314 388 279
Cash and cash equivalents presented in the statement of cash flows 21,658 14,314 388 279
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 GBP17.6m (2022: GBP8.1m).
Significant non-cash transactions from investing activities are
as follows:
Group Company
2023 2022 2023 2022
GBP000's GBP000's GBP000's GBP000's
Acquisition of property, plant and equipment by means of leases or not yet
paid at year end 3,124 688 34 38
Acquisition of intangible assets not yet paid at year end 306 106 - -
21. Trade and other payables
Group Company
2023 2022 2023 2022
GBP000's GBP000's GBP000's GBP000's
Trade payables 6,124 9,415 194 50
Contract liabilities 1,079 203 - -
Other payables 667 926 45 70
Accruals and deferred income 6,653 2,410 281 206
14,523 12,954 520 326
22. Borrowings
Group Company
2023 2022 2023 2022
GBP000's GBP000's GBP000's GBP000's
Cash and cash equivalents 21,658 14,314 388 279
Lease liabilities (4,480) (1,910) (75) (62)
Net Cash 17,178 12,404 313 217
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
GBP5,000,000, which may be borrowed and repaid at will.
At 31 March 2023, the undrawn facility was GBP5,000,000 (2022:
GBP5,000,000).
The Group put in place a GBP10m revolving credit facility with
Natwest bank on 9 July 2022. This facility is interest bearing and
can be drawn by the Group on demand, The facility expires on 30
June 2026.
Reconciliation of Lease Liabilities
Group Company
2023 2022 2023 2022
GBP000's GBP000's GBP000's GBP000's
Opening lease liabilities (1,910) (1,522) (62) (39)
New lease liabilities (3,327) (672) (22) (37)
Repayment 387 483 21 25
Lease liabilities interest (205) (111) (12) (11)
Disposal - - - -
Foreign exchange 575 (88) - -
Closing lease Liabilities (4,480) (1,910) (75) (62)
Current lease liabilities (884) (397) (41) (13)
Non-current lease liabilities (3,596) (1,513) (34) (49)
The Group leases a number of properties and motor vehicles in
the jurisdictions it operates in. At 31 March 2023 there were no
termination or extension options on leases.
The Group expensed GBP48,000 for the year ended 31 March 2023
(2022: GBP64,000) for short term leases.
Group Leases Maturity
At 31 March 2023 the Group held the following number of leases
in each of the maturity categories below.
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
At 31 March 2022 Property Vehicle Other Total
Number Number Number Number
Up to 1 year 1 4 - 5
Between 1 - 5 years 9 1 1 11
Over 5 years 2 - - 2
Total number of leases 12 5 1 18
Average remaining lease term (in years) 6.5 1.2 4.7 4.9
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 2023 2022
GBP000's GBP000's
Up to 1 year 896 523
Between 1 - 5 years 2,503 1,104
Over 5 years 1,983 1,391
Total 5,382 3,018
23. Provisions
Litigation Overseas tax Other Total
GBP000's GBP000's GBP000's GBP000's
At March
2021 - 1,782 - 1,782
Charge for
year
through
income
statement 456 1,003 - 1,459
Foreign
Exchange 634 - 634
At 31 Mar
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
Provisions include an amount of GBP456,000 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 GBP4,598,000 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 is at an early stage
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.
24. Pension and other post-retirement benefit commitments
Defined Contribution Pension Scheme
The Group operates defined contribution pension schemes. The
assets of the schemes are held separately from the Group and
independently administered by insurance companies. The pension cost
charge represents contributions payable to the funds in the year
and amounted to GBP90,845 (2022: GBP96,850).
Defined Benefit Pension Scheme
The Group operates a defined benefit scheme in the UK for a
number of ex-employees which is closed to new members. A full
actuarial valuation was carried out at 6 April 2022 and updated to
31 March 2023 for IAS 19 purposes by a qualified independent
actuary. The major assumptions used by the actuary were:
31 March 2023 31 March 2022
Discount rate 4.85% 2.75%
Pension revaluation 3.30% 3.95%
Inflation assumption with a maximum of 5% p.a. 3.30% 3.95%
Mortality rates
No pre-retirement mortality is assumed (2022: none). Post
retirement mortality is based on 100 % of the SAPS "S2" normal
tables, based on the members' year of birth, improving in line with
CMI 2021 projections with a 1.25 % long term trend rate (2022:
1.25% ).
U nder these mortality assumptions, the expected future lifetime
for a member retiring at age 65 at the year-end would be 22.2 years
for males (2022: 22.2 years) and 24.4 years for females (2022: 24.3
years). For members retiring in 20 years' time, the expectation of
life would be 23.6 years for males (2022: 23.5 years) and 25.8
years for females (2022: 25.8 years).
The weighted average term of the liabilities is 8 years (2022:
10 years).
The scheme is exposed to a number of risks including:
-- Interest rate risk: Movements in the discount rate used could
affect the present value of the defined benefit pension
obligations.
-- Longevity risk: Changes in the estimated mortality rates of
former employees could affect the present value of the defined
benefit pension obligations.
-- Investment risk: Variations in the actual return from the
scheme's investments could affect the scheme's ability to meet its
future pension obligations
2023 2022
GBP000's GBP000's
Assets at start of year 1,648 1,795
Defined benefit obligation at start of year (1,569) (1,799)
Net asset/(liability) at 1 April 79 (4)
Return on assets 45 33
Interest cost (43) (33)
2 -
Gain/(loss) from asset return 17 (5)
Gain/(Loss) from changes in assumptions 43 29
Gain/(loss) from experience 40 -
Statement of other comprehensive income 100 24
Employer contributions (gross) - 59
Net asset at 31 March 181 79
Actual assets at end of year 1,135 1,648
Actual defined benefit obligation at end of year (954) (1,569)
Gain/(loss) on changes in assumptions was nil (2022: nil )
relating to changes in demographic assumptions and a gain of
GBP43,000 (2022: GBP29,000 gain) relating to changes in financial
assumptions.
The pension fund assets (principally made up of annuities for
the benefit of active pensioners) are all held within a policy
managed by an insurance company regulated by the Financial Conduct
Authority of the United Kingdom and the United Kingdom Pensions
Regulator. By law, the trustees are required to act in the best
interests of participants to the schemes. Responsibility for
governance of the plans - including investment decisions and
contributions schedules lies with trustees.
Reconciliation of changes in the asset value during the year 2023 2022
GBP000's GBP000's
Fair value of assets at 1 April 1,648 1,795
Return on assets 45 33
Gain/(loss) on asset return 17 (5)
Employer contributions (gross) - 59
(Decrease)/increase in secured pensioners' value due to scheme experience (575) (234)
Benefits paid - -
Fair value of assets at 31 March 1,135 1,648
Reconciliation of changes in the liability value during the year
Defined benefit obligation at 1 April 1,569 1,799
Interest cost 43 33
Past service cost (40) -
(Gain)/loss on changes in assumptions (43) (29)
(Decrease)/increase in secured pensioners' value due to scheme experience (575) (234)
Benefits paid - -
Defined benefit obligation at 31 March 954 1,569
The amount of annual contribution to be paid by the employer of
GBP58,000 (2022: GBP59,000) is expected to continue until December
2023.
Year ended 31 March 2023 2022 2021 2020 2019
GBP000's GBP000's GBP000's GBP000's GBP000's
Fair value of plan assets 1,135 1,648 1,795 1,795 1,802
Present value of defined benefit obligation 954 1,569 1,799 1,814 1,899
(Deficit)/Surplus in plan 181 79 (4) (27) (97)
Experience (losses)/gains on plan liabilities 17 (5) - (2) (38)
Plan Assets 2023 2022
GBP000's GBP000's
Assets under management 291 259
Annuities 844 1,389
Total 1,135 1,648
Assets under management composition
2023 2022
Corporate Bonds 43.0% 42.6%
Overseas Equities 29.2% 27.7%
UK Equities 17.6% 17.8%
Property 7.8% 10.5%
Cash 2.4% 1.4%
100.0% 100.0%
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
2023 2022
GBP000's GBP000's GBP000's GBP000's
Discount rate +/- 0.1% (62) 73 (15) 15
Members' life expectancy +/- 1 year 62 (64) 81 (84)
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.
25. Share-based payments
The expense recognised for share-based payments made during the
year is shown in the following table:
Group Company
2023 2022 2023 2022
GBP000's GBP000's GBP000's GBP000's
Total expense arising from equity settled share-based payments
transactions 408 342 179 120
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
2023 2023 2022 2022
000's WAEP (GBP) 000's WAEP (GBP)
Outstanding at 1 April 3,866 3.47 3,370 3.73
Granted during the year - Employee scheme - - 327 3.50
Granted during the year - LTIPs 551 0.05 279 0.05
Granted during the year - Deferred bonus 46 0.05 38 0.05
Cancelled during the period (1,686) 3.20 (122) 2.01
Exercised during the period - - (26) 2.42
Outstanding at 31 March 2,777 2.84 3,866 3.47
Granted < 3 years ago and not vested (1,239) (643)
Exercisable at 31 March 1,538 4.47 3,223 3.81
1,537,850 options were exercisable at 31 March 2023 (2022:
3,223,400). The WAEP of exercisable options at 31 March 2023 was
447.0p (2022: 381.0p).
The average share price during the year was 111.2p (2022:
272.4p).
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 2023 had a weighted average exercise price of GBP2.84 (2022:
GBP3.47) and a weighted average remaining contractual life of 4.7
years (2022: 2.8 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.
No share options have been granted in the year under this scheme
(2022: 326,679). In addition 550,953 options have been issued under
the group's Long Term Incentive Plan (2022: 278,500) and 45,606
under the group's deferred bonus arrangements (2022: 37,755).
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 2023 is given below:
Date of grant Unapproved Approved Exercise price Expiry date
09 October 2013 - 8,600 GBP 1.960 09 October 2023
21 August 2014 - 11,400 GBP 1.615 21 August 2024
13 February 2015 - 23,700 GBP 2.005 13 February 2025
26 August 2015 - 22,850 GBP 2.650 26 August 2025
19 January 2016 - 10,200 GBP 3.150 19 January 2026
17 February 2016 - 19,600 GBP 3.125 17 February 2023
01 March 2016 - 9,600 GBP 3.125 01 March 2026
12 September 2016 - 23,100 GBP 4.325 12 September 2026
12 September 2016 351,900 - GBP 4.325 12 September 2023
15 September 2016 - 2,000 GBP 4.350 15 September 2026
15 September 2016 398,000 - GBP 4.350 15 September 2023
21 September 2017 - 45,125 GBP 6.200 21 September 2027
21 September 2017 266,875 - GBP 6.200 21 September 2024
12 April 2018 - 3,900 GBP 5.450 12 April 2028
23 October 2018 - 65,200 GBP 3.800 23 October 2028
23 October 2018 265,800 - GBP 3.800 23 October 2025
19 December 2018 - 7,800 GBP 3.800 19 December 2028
19 December 2018 2,200 - GBP 3.800 19 December 2025
28 April 2021* 326,679 - GBP 0.050 28 April 2028
28 April 2021 - 154,149 GBP 3.495 29 April 2031
28 April 2021 124,351 - GBP 3.495 28 April 2028
24 September 2021 37,755 - GBP 0.050 24 September 2028
12 December 2022 45,606 - GBP 0.050 12 December 2029
27 February 2023* 550,953 - GBP 0.050 27 February 2030
2,370,119 407,224
*These are the options where a TSR criterion affects the
price.
The market price of the shares at 31 March 2023 was 96.5p (2022:
165.0p) with a range in the year of 82.5p to 165.0p (2022: 127.5p
to 395.0p).
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.
2023 2022 2021 2020 2019
Vesting period (years) 3 - 4 3 - 4 n/a n/a 3
Option expiry (years) 10 7 - 10 7 - 10
Dividends expected on the shares 0.00% 1.00% 1.90%
Risk free rate (average) 3.20% - 3.75% 0.18% 1.00%
Volatility of share price 40% 40% 20.00%
Weighted average fair value (pence) 84.0 -108.0 101.0 - 316.0 51.0
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 GBP0.05 per share and performance
conditions being achieved that have been set by the Remuneration
Committee and relate to total shareholder return (TSR) and research
and development targets.
Subject to the performance conditions being met, the share
Options will vest after the end of a three year vesting period from
1 April 2022 to 31 March 2025. 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 TSR conditions are
modelled using the Cox, Ross and Rubenstein binomial option pricing
model for which the key inputs are the starting equity value, a
time period of three years, an assumption that the equity value
changes once every three months, the volatility of the share price,
and the dividend yield.
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.
26. Share capital
2023 2022
GBP000's GBP000'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 GBP1 each 32 32
3,438 3,438
Allotted, called up and fully paid
67,721,916 (2022: 67,721,916) ordinary shares of 5p each 3,381 3,381
During the year no shares were issued. (2022: 25,500 shares at a
premium of GBP61,000 as a result of the exercise of options by
employees).
All share issued are non-redeemable and rank equally in terms of
voting rights (one vote per share); rights to participate in all
approved dividend distribution for that class of shares; and right
to participate in any capital distribution on winding up.
The shares in the original or any increased capital of the
Company may be issued with such preferred, deferred or other
special rights or restrictions, whether in regard to dividend,
voting, return of capital as the Company may from time to time
determine.
27. Non-controlling (minority) interests
2023 2022
GBP000's GBP000's
Balance as at 1 April 12,284 13,414
Share of subsidiary's (loss)/profit for the year 2,083 (19)
Share of foreign exchange gain/(loss) on net investment (276) 1,099
--------- ---------
1,807 1,080
Share of dividend paid by subsidiary (1,810) (2,210)
Balance as at 31 March 12,281 12,284
========= =========
28. Other reserves
The Group and Company held a Capital redemption reserve of
GBP106,000 as at 31 March 2023 (2022: GBP106,000).
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 2022 Movement in the year At 31 March 2023
GBP000's GBP000's GBP000's
In respect of:
Zhejiang ECO Biok Animal Health Products Limited 1,385 (287) 1,098
Zhejiang ECO Animal Health Limited 186 133 319
ECO Animal Health do Brasil Comercio de Produtos
Veterinarios Ltda 311 (91) 220
ECO Animal Health Japan Inc. 14 (34) (20)
ECO Animal Health USA Corp. 51 (86) (35)
ECO Animal Health de Mexico, S. de R. L. de C. V. 237 103 340
ECO South Africa - (49) (49)
Pharmgate LLC 4 2 6
Foreign exchange reserve movements charged to Consolidated
Statement of Comprehensive Income 2,188 (309) 1,878
29. Directors' emoluments
2023 2022
GBP000's GBP000's
Emoluments for qualifying services 1,009 793
Company pension contributions to money purchase schemes 25 32
Share-based payments 70 112
Benefits in kind 3 4
1,107 941
During the year no directors exercised share options (2022:
none) realising a gain of GBPnil (2022: GBPnil).
The highest paid director received GBP497,000 (2022: GBP430,000)
including GBP6,000 (2022: GBP65,000) of share-based payments and
nil (2022: GBP9,000) of pension contributions.
30. Employees
Number of employees
The average number of employees (including Directors) during the
year was:
2023 2022
Number Number
Directors 6 5
Production and development 89 72
Administration 47 49
Sales 92 95
234 221
Employment costs (including amounts capitalised)
2023 2022
GBP000's GBP000's
Wages and salaries 13,045 12,251
Share-based payments 408 341
Social security costs 1,600 1,185
Other pension costs 408 277
15,461 14,054
31. Related party transactions
Dividends paid to related parties
During the year Mr P Lawrence (a significant shareholder) and
his family received no dividends (2022: GBP66,960).
The other Directors and their families received dividends to the
value of GBPnil (2022: GBPnil).
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 GBP750,000
(2022: GBP687,267) and charged interest of GBP1,224,705 (2022:
GBP832,000) to the subsidiary company. Both of these transactions
were made through the inter-company account and were eliminated on
consolidation.
During the year Zhejiang ECO Animal Health Ltd paid dividends to
ECO Animal Health Ltd of GBP4,167,710 (RMB 33,300,000)
During the year Zhejiang ECO Biok Animal Health Products Limited
paid dividends of GBP144,828 (RMB 900,000) to ECO Animal Health
Group plc (2022: GBP176,717) and GBP1,739,409 (RMB 15,300,000) to
ECO Animal Health Limited (2022: GBP2,122,406).
Key management compensation
The Group regards the Board of Directors as its key
management.
2023 2022
GBP000's GBP000's
Emoluments for qualifying services 881 793
Company pension contributions to money purchase schemes 25 32
Share-based payments 70 112
Benefits in kind 3 4
979 941
The number of Directors for which retirement benefits were
accruing was 2 (2022: 2).
32. Financial instruments
The Group uses financial instruments comprising borrowings, cash
and cash equivalents and various items, such as trade receivables,
trade payables etc. that arise directly from its operations. The
main purpose of these financial instruments is to raise finance for
the Group's operations. The Directors are responsible for the
overall risk management.
The main risks arising from the Group's use of financial
instruments are capital and liquidity risk, credit risk and foreign
currency risks and they are summarised below. The policies have
remained unchanged throughout the year.
Capital and liquidity risk
The Group manages its capital to ensure continuity as a going
concern whilst maximising returns through the optimisation of debt
and equity. As part of this, the Board considers the cost and risk
associated with each class of capital. The capital structure of the
Group consists of cash and cash equivalents in note 20, borrowings
in note 22 and equity attributable to equity holders of the parent
comprising issued capital, reserves and retained earnings as
disclosed in the Group's statement of changes in equity.
Liquidity risk is managed by maintaining adequate reserves and
banking facilities with continuous monitoring of the latest
developments by management.
The Group's objectives when maintaining capital are:
- to safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
- to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
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 2023, the Group was contractually obliged to make
repayments as detailed below:
2023 2022
Within one year or on demand GBP000's GBP000's
Trade payables 6,124 9,415
Other payables 565 926
Accruals 6,653 2,410
13,342 12,751
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.
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 Canadian Mexican Peso Other
Real Dollar
2023 GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000'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
US Dollar Euros Chinese RMB Japanese Yen Brazilian Canadian Mexican Peso Other
Real Dollar
2022 GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Trade and
other
receivables 9,027 2,068 6,789 123 1,964 806 2,648 108
Trade and
other
payables (3,912) (425) (4,701) (158) (97) (426) (350) (67)
Cash and cash
equivalents 4,752 366 8,261 120 145 208 311 92
Total 9,867 2,009 10,349 85 2,012 588 2,609 133
At 31 March 2023 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 2023.
2023 2022
GBP000's GBP000's
U S Dollar 1,300 1,096
Euro 228 223
Chinese RMB 1,818 1,150
Japanese Yen 10 9
Brazilian Real 385 224
Canadian Dollar 29 65
Mexican Peso 51 290
Analysis of financial instruments by category
Group Financial assets Financial liabilities Total
2023 GBP000's GBP000's GBP000's
Trade and other receivables 26,865 - 26,865
Cash and cash equivalents 21,658 - 21,658
Trade and other payables - (13,339) (13,339)
Amounts due under leases - (4,480) (4,480)
2022 GBP 000's GBP 000's GBP 000's
Trade and other receivables 24,048 - 24,048
Cash and cash equivalents 14,314 - 14,314
Trade and other payables - (12,801) (12,801)
Amounts due under leases - (1,910) (1,910)
Company Financial assets Financial liabilities Total
2023 GBP000's GBP000's GBP000's
Trade and other receivables 723 - 723
Cash and cash equivalents 388 - 388
Trade and other payables - (418) (418)
Amounts due under leases - (76) (76)
Amounts due from group undertakings 51,526 - 51,526
2022 GBP000's GBP000's GBP000's
Trade and other receivables 128 - 128
Cash and cash equivalents 279 - 279
Trade and other payables - (376) (376)
Amounts due under leases - (62) (62)
Amounts due from group undertakings 53,940 - 53,940
All financial assets and liabilities in the Group's and
Company's statements of financial position are classified as held
at amortised cost for both the current and previous year.
33. Post balance sheet events
Disposal of property in New Malden
The Group accepted an offer of GBP795,000 for the property
located at Coombe Road, New Malden, and expect to complete in the
financial year ending 31 March 2024. The sale is subject to
contract. As at 31 March 2023, the carrying value of the property
was GBP565,000.
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END
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July 10, 2023 02:00 ET (06:00 GMT)
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