Final Results

Final Results

ECO Animal Health Group plc

ECO Animal Health Group plc

(AIM:EAH)

Results for the year ended 31 March 2010

HIGHLIGHTS

  • Profit attributable to shareholders before interest, tax, depreciation, amortisation, share based payments, impairment and minorities increased by over 33 per cent to £5.31 million (2009: £3.98 million)
  • Pre-tax earnings per share from continuing operations advanced 36 per cent to 3.49 pence (2009: 2.55 pence)
  • Turnover on continuing activities up 15.2 per cent at £21.8 million (2009: £18.9 million)
  • Dividend declared of 2.30 pence per share
  • £3.3 million of cash generated from operating activities during year (2009: £2.3 million)
  • Purchase of Eco Pharma Inc. in Japan to enhance distribution in the territory
  • Further important drug registrations granted for Aivlosin® and Ecomectin® with more expected in the current year
  • Formation after year end of joint venture with Chinese partner to distribute both parties products in USA

Peter Lawrence, Executive Chairman of ECO Animal Health Group plc, commented:

“ECO Animal Health Group has delivered a good set of results for the year ended 31 March 2010 and has started the current year strongly. We are excited at the prospect of commencing trading in the USA through our new joint venture and are confident that in due course this will be boosted by the granting of further licences for Aivlosin® and generic companion animal therapeutic drugs. We remain encouraged about future prospects for the Company and management’s ability to optimise value for shareholders by continuing to generate attractive returns.”

Contacts:

ECO Animal Health Group plc  
Peter Lawrence 020 8336 6190
Spiro Financial
Anthony Spiro 020 8336 6196
Cenkos Securities plc (Nominated Adviser)
Stephen Keys 020 7397 8926
Elizabeth Bowman 020 7397 8928

ECO Animal Health Group plc is a leader in the development, registration and marketing of pharmaceutical products for animals. Our products for these global growth markets promote well-being. Our financial goals are achieved through the careful and responsible application of science to generate value for our shareholders.

 
ECO ANIMAL HEALTH GROUP PLC
 
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 MARCH 2010
 
I am pleased to report that ECO Animal Health Group has delivered a good set of results for the year ended 31 March 2010. This is an excellent achievement considering the continuing harsh international trading environment. The deep recession resulting from the 2008 global banking crisis, coupled with the ensuing depressed levels of consumer and corporate confidence, created a very difficult business climate. Twelve months ago, I expressed confidence in the likely trading outcome for the year and these results justify that optimism.
 
Animal health is a global growth industry currently worth some $18 billion and demand for ECO's range of patented high performance and enhanced generic therapeutic drugs continues to grow. ECO is now a firmly established international animal pharmaceutical business delivering year on year sales growth in its key geographical markets.
 
CORPORATE ACTIVITY
In December 2009 the Company raised £6 million, before expenses, through placing 4,258,314 ordinary shares at 140 pence per share. The proceeds of the placing were used in part to finance the acquisition of the 80 per cent of Eco Pharma Inc. of Japan, which we did not already own, for a cash consideration of £1.2 million. The balance of the placing proceeds will be applied against the planned launch and marketing costs in the USA for Aivlosin®, ECO's patented macrolide antibiotic, and also to permit the Company to enter into important strategic alliances with Chinese suppliers.
 
This acquisition strengthens ECO's position in the important Japanese market where Tokyo based Eco Pharma is a major distributor of pharmaceutical products for animals including Aivlosin®. Eco Pharma has distributed ECO products in Japan for six years and is a solid business with strong commercial relations with its distributors and customers.
 
In March 2010 ECO Animal Health Ltd, our principal trading subsidiary and Pharmgate LLC, a subsidiary of Jinhe Biotechnology Ltd of China, formed Pharmgate Animal Health LLC. This jointly owned company, which is based in the USA, will distribute its owners' veterinary products in the North American livestock and poultry markets.
 
FINANCIAL
Group turnover on continuing activities in the year to 31 March 2010 increased by 15.2 per cent to £21.8 million (2009: £18.9 million). Profit before interest, tax, depreciation, amortisation, share-based payments, impairment and minorities rose by more than 33 per cent to £5.31 million (2009: £3.98 million). Pre-tax earnings per share from continuing operations advanced 36 per cent to 3.49 pence per share while the return on shareholders' funds before tax, amortisation of drug registrations and share based payments, of which none of the latter are cash payments, improved to 9.5 per cent, an increase of one percentage point over last year.
 
ECO trades in international markets; over 33 per cent of sales are in US dollars and 25 per cent in Euros; currency fluctuations are a normal part of our business. We hedge our currency risk as effectively as we can without taking speculative positions; our exposure is strictly limited to the extent of forecast cash flows and protection of local assets. As a UK based company our main administrative costs are in sterling, although an increasing presence in China and the US does give us the opportunity to meet administration costs in local currencies, thereby reducing exchange risk.
 
The Board has reviewed the Company's short term cash requirements for the expansion of the business. The Group generated cash of over £3.3 million from operations, an increase of close to £1 million, compared with twelve months earlier, but re-invested all of this and more to expand the business and create a significantly larger group and enhance value for shareholders. It is important that the Company manages its cash to ensure the successful and rapid launch of Aivlosin® into the US market, as soon as the anticipated and long awaited regulatory approvals are received. The USA is a huge market and represents about one third of the global demand for animal health drugs.
 
The Board has declared a dividend of 2.30 pence per share so that it can immediately apply more funds to continue the Group's development, enter new markets and increase its share of existing markets. The Board believes this will enhance shareholder value. The dividend will be paid on 24 September 2010 to shareholders on the register on 20 August 2010. We continue to offer shareholders a scrip alternative to the cash dividend and are grateful to those who have supported us in this way. Since introducing the scrip alternative in 2008, the company has conserved over £3 million of cash, which has been reinvested in the business.
 
At the annual General Meeting on 28 September 2010 shareholder approval will be sought to amend the Articles of Association to allow the Board to declare future dividends in cash, scrip only, scrip and cash alternative, or by way of an enhanced scrip dividend and cash combination scheme.
 
The Board regularly reviews strategy and is focussed on maximising returns to shareholders, including declaring interim dividends, although this will depend on the timing of the USA regulatory approvals. The cash generation that should be achieved over time, coupled with continuing organic growth from existing markets, especially in Europe and China, should enable the Board to offer shareholders growing dividends.
 
INVESTORS
The market for AIM traded stocks remains fragile and lacking in commitment from the market makers. During the year we saw once again volatile movements in our share price on very little volume as market makers continued to avoid holding stock in case they might be caught out by unexpected price movements. On the other hand, it is encouraging that our brokers were able to satisfy institutional demand for our stock. Until real confidence returns to the stockmarket, we shall continue to be frustrated by these conditions.
 
It has always been the case that the business model of ECO Animal Health is one that creates medium term shareholder value primarily from its intellectual property of over 600 licences and registrations including marketing authorisations that have been granted worldwide formulations, patents and trademarks. Almost all global sales are made through third party distributors who enjoy up to 50 per cent margins. The true value of the company lies in its portfolio of licences and registrations, which, if strategically sold, should generate a far higher return to shareholders than is reflected by the current share price.
 
Our website www.ecoanimalhealthgroupplc.com now offers commentary from Proactive Investors, an independent information site giving all investors access to selected broker analysis and comment usually restricted to institutional investors. I hope that this service will be of value to our many loyal retail followers.
 
The International Accounting Standards Board has introduced further reporting and disclosure requirements to provide investors with greater transparency. One of the changes, reflected in this set of results, has introduced a new statement of financial position which replaces the balance sheet.
 
OPERATIONS
Management has implemented an aggressive and on-going cost of goods reduction and supply chain optimisation programme, which is delivering significant financial benefits. The acquisition of Eco Pharma and the appointment of new management at that company will allow us to manage the cost base aggressively and grow sales of the Ecomectin® range and Aivlosin® in Japan, the country where the drug was first discovered and launched. Eco Pharma's new managing director has settled in well and, with the financial control of the business now based in England, we look forward to faster growth and deeper market penetration than had previously been achieved.
 
In the US, Pharmgate will benefit from the extensive manufacturing and product development experience of its owners to bring to market their ranges of medicated feed additives and innovative new therapeutic drugs. Pharmgate's low-cost structure will optimize the supply chain for a range of the most broadly utilized drugs and will be backed by a specialist sales and technical team. Two experienced managers, each with considerable knowledge of the animal health industry, have already been appointed in sales and marketing and finance; further key positions will be filled in due course.
 
Trading in major markets where we have established a direct presence through a local subsidiary, as in Brazil, or a production, sales and marketing joint venture, as in China, continues to develop positively with further advances in sales and margin. In China, sales and net profit in local currency from our subsidiary, Zhejiang ECO Biok Animal Health Products Limited, were over 11 per cent and 27 per cent respectively ahead of last year. China remains the market with the greatest potential for our products and we continue to seek futher opportunities in that country to expand our already significant presence.
 
ECO Brazil's sales, in local currency, were 52 per cent above the level of last year; whilst sales in South Africa were also well ahead. ECO is currently evaluating the establishment of further subsidiaries in key selected markets.
 
AIVLOSIN®
Sales of Aivlosin®, ECO's patented macrolide antibiotic, increased by 25 per cent reflecting deeper market penetration and now account for more than 59 per cent of ECO's global sales. During the year under review, ECO was granted two new marketing authorisations from the European Commission.
 
Aivlosin® granules for oral solution for medicated drinking water, was approved for the treatment of respiratory disease caused by Mycoplasma gallisepticum, one of the most economically important diseases of farmed pheasants throughout Europe. As the first authorised product for the treatment of this condition, Aivlosin® fulfils an unmet need in the market by providing a safe and effective solution for the treatment of reared pheasants and breeding stock. The UK and France account for the vast majority of intensively reared pheasants in the EU, with over 30 million birds being reared in these two countries annually. For the UK market, ECO has decided to market Aivlosin® for pheasants directly to specialist poultry veterinarians.
 
The second authorisation was for the new concentrated form of Aivlosin® oral powder for pigs. This product, with its compact packaging and lower transportation costs, provides a convenient method for the treatment and prevention of the respiratory disease Swine Enzootic Pneumonia, the enteric disease Swine Dysentery and the treatment of the enteric disease, Porcine Proliferative Enteropathy for pig farms of all sizes. In addition, this new concentrated form offers cost advantages at the manufacturing and distribution levels. This development will help market penetration in major pig markets such as Germany and Denmark where oral powders are used in preference to premixes.
 
We expect that the granting of approvals for Aivlosin® in the USA will start in the current financial year; national marketing and distribution will be through Pharmgate.
 
Last year, ECO appointed a number of new national distributors for selected EU territories, following the restructuring of distribution arrangements. The new structure is working well and sales to pig and poultry producers in these markets are ahead of our expectations.
 
ANTIPARASITICS, INCLUDING THE ECOMECTIN® RANGE
In Europe, sales of Ecomectin®, our branded range of endectocide antiparasitic formulations, were hampered by the unusual length and severity of the winter weather and the late turnout of winter housed cattle. Sales of our new Ecomectin® pig premix formulation, which is generally used in housed pigs, increased by 10 per cent in volume terms.
 
In Mexico, ECO has now received marketing authorisations for the entire Ecomectin® range, including Ecoheart, which is a palatable Ecomectin® chewable tablet for the treatment and prevention of heartworm and the treatment and control of roundworms and hookworms in dogs. Canine heartworm infection, a potentially fatal condition, is transmitted by mosquitoes and requires a monthly preventative treatment. Launches are planned for later this year.
 
In Japan, Ecoheart, launched two years ago, has increased its market share in a competitive market. In Asia, Latin America and South Africa total sales of our other important anti parasitic treatments, particularly those for treating bites from ticks and flies, increased more than 20 per cent.
 
DEVELOPMENTS
Project work on the formulation and development of selected, differentiated generic pet medications of potential major importance to ECO is progressing well. We believe that these new products will generate significant profits once marketing authorisations in Europe, the US and international markets have been achieved. The first approvals are expected in 2011. We currently hold some 630 marketing authorisations worldwide of which one third relate to Aivlosin® and about 100 are for Ecomectins. It is anticipated that during the next two years, a further 50 new licenses will be granted of which 17 will be for Aivlosin®. This reduced level of drug registrations and associated costs is entirely consistent with our long term plans which have been highlighted in previous annual reports.
 
Further work investigating the inhibition of influenza viruses by Aivlosin® in various laboratory systems was carried out by the Virology Division of the Department of Pathology at the University of Cambridge. It is envisaged ECO will continue to explore these effects with the University and also sponsor additional research on the effect of Aivlosin® on a specific pig viral disease.
 
PEOPLE
We currently employ some 137 staff in our 13 offices worldwide including our joint venture factory; over half our employees work in China. The majority of our people are specialists; their areas of expertise include veterinary science, pharmaceutical development, regulatory affairs, sales, marketing and finance. We are grateful to all the team for their dedication, commitment and hard work which continues to reinforce our company's reputation in the global animal health industry.
 
In November 2009 we enlarged the Board through the appointment of Brett Clemo as an executive director and Julia Henderson as a non executive director of the Company.
 
 
OUTLOOK
ECO has started the current year strongly and we are excited at the prospect of commencing trading in the USA through our new joint venture. We are confident that in due course this will be boosted by the granting of further licences for Aivlosin® and generic companion animal therapeutic drugs. The Company is investing heavily to ensure a successful launch of Aivlosin® to the American market, which accounts for about one third of the world's animal health drug sales. We are also increasing our investment in China, the world's largest producer of pigs and second largest producer of poultry. These substantial investments have been made to accelerate the group's growth and we expect to see the benefits from 2012. We remain encouraged about future prospects for the Company and management's ability to grow ECO Animal Health as a worldwide leading supplier of specialised animal health products and also to optimise value for shareholders by continuing to generate attractive returns.
 
 
Peter Lawrence

Executive Chairman

9 August 2010
 
 
 
CONSOLIDATED INCOME STATEMENT
 
FOR THE YEAR ENDED 31 MARCH 2010
 
2010       2009
  As restated
Continuing operations £ £
 
Revenue 21,768,164 18,897,645
Cost of sales (12,743,194) (11,206,606)
─────── ───────
Gross profit 9,024,970 7,691,039
 
Other income 185,074 185,108
Administrative expenses (7,117,125) (6,510,493)
─────── ───────
Profit from operating activities 2,092,919 1,365,654
 
Finance income 16,108 178,187
Finance costs (104,495) (138,504)
─────── ───────
Net finance (expense)/income (88,387) 39,683
─────── ───────
Profit before income tax 2,004,532 1,405,337
Income tax (charge)/credit (336,527) 181,148
─────── ───────
Profit for the year from continuing operations 1,668,005 1,586,485
 
Discontinued operation
(Loss) for the year from discontinued operation (net of income tax) (100,885) (956,688)
─────── ───────
Profit for the year 1,567,120 629,797
═══════ ═══════
Profit attributable to:
Owners of the parent company 1,239,068 391,763
Minority interest 328,052 238,034
─────── ───────
Profit for the year 1,567,120 629,797
═══════ ═══════
Basic and diluted earnings per share (pence) 2010 2009
 
-Continuing operations 2.79 2.94
-Discontinued operations (0.21) (2.08)
═══════ ═══════
Post tax earnings per share 2.58 0.86
═══════ ═══════
 
ECO ANIMAL HEALTH GROUP PLC
 
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2010
 
 
 
2010 2009
As restated
£ £
 
Profit for the year 1,567,120 629,797
 
Other comprehensive income:
Foreign currency translation differences (40,758) 561,754
Defined benefit plan actuarial losses (25,000) (112,000)
Deferred tax liability in respect of pension surplus written back - 12,900
Revaluation of investment in Eco Pharma Inc. prior to acquisition 268,862 -
─────── ───────
Other comprehensive income for the year 203,104 462,654
─────── ───────
Total comprehensive income for the year 1,770,224 1,092,451
 
Attributable to:
Owners of the parent company 1,468,204 640,813
Minority interest 302,020 451,638
─────── ───────
1,770,224 1,092,451
═══════ ═══════
 
All items listed in other comprehensive income have gone through reserves and are shown in the consolidated statement of changes in equity.
 

 

 
ECO ANIMAL HEALTH GROUP PLC
 
STATEMENT OF CHANGES IN EQUITY
 
FOR THE YEAR ENDED 31 MARCH 2010
 
  CONSOLIDATED   Attributable to the owners of the Parent
           
Share Capital Share Premium Account Revaluation Reserve Other Reserves Retained earnings Total Minority Interest Total Equity
£ £ £ £ £ £ £ £
Balance as at 1 April 2008 2,256,252 37,095,354 253,347 805,621 8,685,865 49,096,439 646,638 49,743,077
Prior year adjustment (note 11) -   -   -   -   444,706   444,706   -   444,706

 

 

 

 

 

 

 

 

Balance at 1 April 2008 as restated 2,256,252 37,095,354 253,347 805,621 9,130,571 49,541,145 646,638 50,187,783
Profit for the year - - - - 391,763 391,763 238,034 629,797
Other comprehensive income
Foreign currency translation differences - - - - 348,150 348,150 213,604 561,754
Actuarial losses on pension scheme assets - - - - (112,000) (112,000) - (112,000)
Deferred tax write back on actuarial losses - - - - 12,900 12,900 - 12,900
Transfer of depreciation -   -   (2,890)   -   -   (2,890)   -   (2,890)

 

 

 

 

 

 

 

 

Total comprehensive income for the year -   -   (2,890)   -   640,813   637,923   451,638   1,089,561

 

 

 

 

 

 

 

 

Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Dividends relating to 2008 - - - - (3,068,080) (3,068,080) - (3,068,080)
Issue of shares in the year 63,868 1,191,850 - - - 1,255,718 - 1,255,718
Share-based payments -   -   -   132,685   -   132,685   -   132,685

 

 

 

 

 

 

 

 

Transactions with owners 63,868   1,191,850   -   132,685   (3,068,080)   (1,679,677)   -   (1,679,677)

 

 

 

 

 

 

 

 

Balance as at 31 March 2009 2,320,120 38,287,204 250,457 938,306 6,703,304 48,499,391 1,098,276 49,597,667
 
Profit for the year - - - - 1,239,068 1,239,068 328,052 1,567,120
Other comprehensive income
Foreign currency translation differences - - - - (14,726) (14,726) (26,032) (40,758)
Actuarial losses on pension scheme assets - - - - (25,000) (25,000) - (25,000)
Revaluation of investment -   -   268,862   -   -   268,862   -   268,862

 

 

 

 

 

 

 

 

Total comprehensive income for the year -   -   268,862   -   1,199,342   1,468,204   302,020   1,770,224

 

 

 

 

 

 

 

 

Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year 260,517 7,200,693 - - - 7,461,210 - 7,461,210
Share-based payments - - - 203,285 - 203,285 - 203,285
Dividends relating to 2009 -   -   -   -   (3,332,802)   (3,332,802)   -   (3,332,802)

 

 

 

 

 

 

 

 

Transactions with owners 260,517   7,200,693   -   203,285   (3,332,802)   4,331,693   -   4,331,693

 

 

 

 

 

 

 

 

Balance as at 31 March 2010 2,580,637   45,487,897   519,319   1,141,591   4,569,844   54,299,288   1,400,296   55,699,584

 

 

 

 

 

 

 

 

 
ECO ANIMAL HEALTH GROUP PLC
 
STATEMENT OF CHANGES IN EQUITY
 
FOR THE YEAR ENDED 31 MARCH 2010
 
COMPANY
             
Share Capital Share Premium Account Revaluation Reserve Other Reserves Retained Earnings Total Equity
 
£ £ £ £ £ £
Balance as at 1 April 2008 2,256,252 37,095,354 253,347 805,621 4,916,860 45,327,434
Prior year adjustment (note 11) -   -   -   -   588,179   588,179

 

 

 

 

 

 

Balance as at 1 April 2008 (as restated) 2,256,252 37,095,354 253,347 805,621 5,505,039 45,915,613
 
Loss for the year - - - - (1,029,548) (1,029,548)
Other comprehensive income
Foreign currency translation differences - - - - (15,404) (15,404)
Actuarial losses on pension scheme assets - - - - (112,000) (112,000)
Deferred tax write back on actuarial losses - - - - 12,900 12,900
Transfer of depreciation -   -   (2,890)   -   -   (2,890)

 

 

 

 

 

 

Total comprehensive income for the year -   -   (2,890)   -   (1,144,052)   (1,146,942)

 

 

 

 

 

 

Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Dividends relating to 2008 - - - - (3,068,080) (3,068,080)
Issue of shares in the year 63,868 1,191,850 - - - 1,255,718
Share-based payments -   -   -   132,685   -   132,685

 

 

 

 

 

 

Transactions with owners 63,868   1,191,850   -   132,685   (3,068,080)   (1,679,677)

 

 

 

 

 

 

Balance as at 31 March 2009 2,320,120 38,287,204 250,457 938,306 1,292,907 43,088,994
 
Profit for the year - - - - 6,967,288 6,967,288
____
Actuarial losses on pension scheme assets -   -   -   -   (25,000)   (25,000)

 

 

 

 

 

 

Total comprehensive income for the year -   -   -   -   6,942,288   6,942,288

 

 

 

 

 

 

Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year 260,517 7,200,693 - - - 7,461,210
Share-based payments - - - 203,285 - 203,285
Dividends relating to 2009 -   -   -   -   (3,332,802)   (3,332,802)

 

 

 

 

 

 

Transactions with owners 260,517   7,200,693   -   203,285   (3,332,802)   4,331,693

 

 

 

 

 

 

Balance as at 31 March 2010 2,580,637   45,487,897   250,457   1,141,591   4,902,393   54,362,975

 

 

 

 

 

 

 
ECO ANIMAL HEALTH GROUP PLC
 
STATEMENTS OF FINANCIAL POSITION
 
AS AT 31 MARCH 2010
 
    Group   Company
2010   2009 2010   2009
£ £ £ £
Non-current assets As restated As restated
Intangible assets 37,543,567 35,530,716 - -
Property, plant and equipment 1,088,134 1,157,977 620,704 641,257
Investments 289,294 285,926 20,332,240 20,332,240
Deferred tax asset

-

  228,127   -   -

 

 

 

 

38,920,995   37,202,746   20,952,944   20,973,497

 

 

 

 

Current assets
Inventories 5,697,309 4,921,413 - -
Trade and other receivables 8,984,287 8,353,700 29,253,380 20,285,979
Income tax recoverable 339,817 - 213,622 -
Other taxes and social security 261,165 24,059 76,670 -
Cash and cash equivalents 9,881,722   3,717,430   7,917,774   2,243,997

 

 

 

 

Total current assets 25,164,300 17,016,602 37,461,446 22,529,976
 
Liablilities
Trade and other payables (3,611,666) (3,531,798) (79,641) (140,744)
Short -term borrowings (3,978,873) (908,500) (3,884,184) (194,160)
Income tax (42,495) (9,837) - -
Other taxes and social security (101,804) (149,118) (55,168) (57,147)
Dividends (29,154)   (19,428)   (29,154)   (19,428)

 

 

 

 

Current liabilities (7,763,992)   (4,618,681)   (4,048,147)   (411,479)

 

 

 

 

Net current assets 17,400,308   12,397,921   33,413,299   22,118,497

 

 

 

 

Total assets less current liabilities 56,321,303 49,600,667 54,366,243 43,091,994
Non current liabilities
Deferred tax (621,719) - (3,268) -
Provision for pension deficit -   (3,000)   -   (3,000)

 

 

 

 

TOTAL ASSETS LESS TOTAL LIABILITIES 55,699,584   49,597,667   54,362,975   43,088,994

 

 

 

 

EQUITY
Issued share capital 2,580,637 2,320,120 2,580,637 2,320,120
Share premium account 45,487,897 38,287,204 45,487,897 38,287,204
Revaluation reserve 519,319 250,457 250,457 250,457
Other reserves 1,141,591 938,306 1,141,591 938,306
Retained earnings 4,569,844   6,703,304   4,902,393   1,292,907

 

 

 

 

54,299,288 48,499,391 54,362,975 43,088,994
Minority interests 1,400,296   1,098,276   -   -

 

 

 

 

TOTAL EQUITY 55,699,584   49,597,667   54,362,975   43,088,994

 

 

 

 

Approved by the Board and authorised for issue on 9th August 2010

 
Mr Peter Lawrence
Director
 
ECO ANIMAL HEALTH GROUP PLC
 
RESTATED COMPARATIVE
 
STATEMENTS OF FINANCIAL POSITION
 
             
CONSOLIDATED 2009 2009 2008 2008
As restated Original As restated Original
£ £ £ £
Non-current assets
Intangible assets 35,530,716 35,729,507 34,654,890 34,798,363
Property, plant and equipment 1,157,977 1,157,977 1,348,663 1,348,663
Investments 285,926 285,926 280,550 280,550
Deferred tax asset 228,127   -   228,127   -

 

 

 

 

37,202,746   37,173,410   36,512,230   36,427,576

 

 

 

 

Current assets
Inventories 4,921,413 4,921,413 3,825,724 3,825,724
Trade and other receivables 8,353,700 8,353,700 8,354,376 8,354,376
Deferred tax asset - 228,127 - 228,127
Other taxes and social security 24,059 24,059 150,703 150,703
Cash and cash equivalents 3,717,430   3,717,430   6,143,189   6,143,189

 

 

 

 

Total current assets 17,016,602 17,244,729 18,473,992 18,702,119
 
Liablilities
Trade and other payables (3,531,798) (3,531,798) (3,523,613) (3,523,613)
Short -term borrowings (908,500) (908,500) (79,043) (79,043)
Current portion of long-term borrowings - - (557,862) (557,862)
Income tax (9,837) (9,837) (357,755) (357,755)
Other taxes and social security (149,118) (149,118) (82,783) (82,783)
Dividends (19,428)   (808,269)   (11,429)   (599,608)

 

 

 

 

Current liabilities (4,618,681)   (5,407,522)   (4,612,485)   (5,200,664)

 

 

 

 

Net current assets 12,397,921   11,837,207   13,861,507   13,501,455

 

 

 

 

Total assets less current liabilities 49,600,667 49,010,617 50,373,737 49,929,031
Non current liabilities
Long term borrowings - - (185,954) (185,954)
Provision for pension deficit (3,000)   (3,000)   -   -

 

 

 

 

TOTAL ASSETS LESS TOTAL LIABILITIES 49,597,667   49,007,617   50,187,783   49,743,077

 

 

 

 

EQUITY
Issued share capital 2,320,120 2,320,120 2,256,252 2,256,252
Share premium account 38,287,204 38,287,204 37,095,354 37,095,354
Revaluation reserve 250,457 250,457 253,347 253,347
Other reserves 938,306 938,306 805,621 805,621
Retained earnings 6,703,304   6,113,254   9,130,571   8,685,865

 

 

 

 

48,499,391 47,909,341 49,541,145 49,096,439
Minority interests 1,098,276   1,098,276   646,638   646,638

 

 

 

 

TOTAL EQUITY 49,597,667   49,007,617   50,187,783   49,743,077

 

 

 

 

 
ECO ANIMAL HEALTH GROUP PLC
 
RESTATED COMPARATIVE
 
STATEMENTS OF FINANCIAL POSITION (CONTINUED)
 
             
 
COMPANY 2009 2009 2008 2008
As restated Original As restated Original
£ £ £ £
Non-current assets
Property, plant and equipment 641,257 641,257 656,460 656,460
Investments 20,332,240   20,332,240   20,986,556   20,986,556

 

 

 

 

20,973,497   20,973,497   21,643,016   21,643,016

 

 

 

 

Current assets
Trade and other receivables 20,285,979 20,285,979 20,432,139 20,432,139
Other taxes and social security - - 143,665 143,665
Cash and cash equivalents

2,243,997

  2,243,997   5,122,408   5,122,408

 

 

 

 

Total current assets 22,529,976 22,529,976 25,698,212 25,698,212
 
Liablilities
Trade and other payables (140,744) (140,744) (237,332) (237,332)
Short -term borrowings (194,160) (194,160) (79,043) (79,043)
Current portion of long-term borrowings - - (557,862) (557,862)
Income tax - - (294,858) (294,858)
Other taxes and social security (57,147) (57,147) (59,137) (59,137)
Dividends (19,428)   (808,269)   (11,429)   (599,608)

 

 

 

 

Current liabilities (411,479)   (1,200,320)   (1,239,661)   (1,827,840)

 

 

 

 

Net current assets 22,118,497   21,329,656   24,458,551   23,870,372

 

 

 

 

Total assets less current liabilities 43,091,994 42,303,153 46,101,567 45,513,388
Non current liabilities
Long term borrowings - - (185,954) (185,954)
Provision for pension deficit (3,000)   (3,000)   -   -

 

 

 

 

TOTAL ASSETS LESS TOTAL LIABILITIES 43,088,994   42,300,153   45,915,613   45,327,434

 

 

 

 

EQUITY
Issued share capital 2,320,120 2,320,120 2,256,252 2,256,252
Share premium account 38,287,204 38,287,204 37,095,354 37,095,354
Revaluation reserve 250,457 250,457 253,347 253,347
Other reserves 938,306 938,306 805,621 805,621
Retained earnings 1,292,907   504,066   5,505,039   4,916,860

 

 

 

 

TOTAL EQUITY 43,088,994   42,300,153   45,915,613   45,327,434

 

 

 

 

 
ECO ANIMAL HEALTH GROUP PLC
 
STATEMENT OF CASHFLOWS
 
FOR THE YEAR ENDED 31 MARCH 2010
 
  Group   Group   Company   Company
2010 2009 2010 2009
£ £ £ £
Cashflows from operating activities As restated As restated
Profit/(loss) before income tax 1,903,647 448,649 6,740,466 (526,378)
Adjustment for:
Net finance costs/(income) 88,387 (39,683) (241,651) (723,399)
Loss on sale of division - 606,783 - -
Impairment of plant and machinery on disposal of subsidiary - 69,241 - -
Depreciation 144,553 107,554 22,177 18,988
Amortisation of intangible assets 2,869,270 2,581,378 - -
Pension payments (54,000) (64,000) (54,000) (64,000)
Pension operating costs 5,000 - 5,000 -
Share based payments 203,285   132,685   203,285   132,685

 

 

 

 

Operating cash flows before movements in working capital 5,160,142 3,842,607 6,675,277 (1,162,104)
Change in inventories (264,532) (1,650,016) - -
Change in receivables (566,751) 330,271 (9,027,071) 259,725
Change in payables (831,340)   109,387   (63,082)   (98,578)

 

 

 

 

Cash generated from operations 3,497,519 2,632,249 (2,414,876) (1,000,957)
Finance costs (100,495) (138,504) (5,836) (86,852)
Income tax (61,641)   (166,770)   16,468   (143,712)

 

 

 

 

Net cash from operating activities 3,335,383 2,326,975 (2,404,244) (1,231,521)
 
Cash flows from investing activities
Acquisition of undertaking, net of cash included (800,932) - - -
Disposal of discontinued operation - 291,109 - -
Acquisition of property, plant and equipment (72,133) (53,275) (1,624) (6,675)
Acquisition of other investments (3,368) (5,376) - -
Purchase of distribution rights - (214,482) - -
Purchase of drug registrations (3,478,515) (3,871,984) - -
Finance income 16,108   178,187   251,487   808,251

 

 

 

 

Net cash used in investing activities (4,338,840)   (3,675,821)   249,863   801,576

 

 

 

 

Cash flows from financing activities
Proceeds from issue of share capital 5,715,792 - 5,715,792 -
Repayment of borrowings - (185,954) - (185,954)
Dividends paid (1,577,658)   (1,804,363)   (1,577,658)   (1,804,363)

 

 

 

 

Net cash from/(used in) financing activities 4,138,134   (1,990,317)   4,138,134   (1,990,317)

 

 

 

 

Net increase/(decrease) in cash and cash equivalents 3,134,677 (3,339,163) 1,983,753 (2,420,262)
Foreign exchange movements (40,758) 641,809 - (15,404)
Balance at 1 April 2009 2,808,930   5,506,284   2,049,837   4,485,503

 

 

 

 

Balance at 31 March 2010 5,902,849   2,808,930   4,033,590   2,049,837

 

 

 

 

The cash flow from operating activities includes an outflow of £nil (2009: £120,513) in respect of the discontinued activity of Interpet LLC.
 
ECO ANIMAL HEALTH GROUP PLC
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
FOR THE YEAR ENDED 31 MARCH 2010
 
General information
Eco Animal Health Group plc ("the company") and its subsidiaries (together "the group") manufacture and supply animal health products globally. During the year, on 24 December 2009, the Company acquired the outstanding 80% of Eco Pharma Inc, Japan of which it already owned 20%.
 
The Company is traded on the AIM market of the London Stock Exchange and is incorporated and domiciled in the UK. The address of its registered office is 78 Coombe Road, New Malden, Surrey, KT3 4QS.
 
Summary of significant accounting policies
In preparing these accounts the directors have taken the opportunity to review accounting estimates and the classification of assets and liabilities. As a result certain adjustments have been made to the comparative figures. These adjustments are described in note 11.
 
Basis of preparation
The Group has presented its annual report and accounts in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

 

The preparation of financial statements, in conformity with IFRS as adopted by the European Union, 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.

 

The principal accounting policies of the group are set out below, and have been applied consistently in dealing with items which are considered material in relation to the Group's financial statements.

 
 
 
Adoption of new and revised standards
The group has adopted the following new and amended IFRSs as of 1 April 2009:
 
IAS1(revised), "Presentation of financial statements". The revised standard prohibits the presentation of items of income and expenses (that is "non-owner changes in equity") in the statement of changes in equity, requiring "non-owner changes in equity" to be presented separately from owner changes in equity. All "non-owner changes in equity" are required to be shown in a performance statement. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and the statement of comprehensive income).
 
The group has elected to present two statements: an income statement and a statement of comprehensive income.
 
IFRS8, "Operating segments", IFRS8 replaces IAS14, "Segment reporting". It requires a "management approach" under which segment information is presented on the same basis as that used for internal reporting purposes.

 
 
IFRS2 (amendment) "Share-based payment" deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact on the number of awards expected to vest or valuation thereof subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The amendment does not have a material impact on the Group's financial statements.
 
The following standards and interpretations had also become effective during the year ended 31 March 2010 but had no significant impact on the Group's financial statements:
 
IFRIC9 and IAS39 - Embedded derivatives (amendment)
IFRS1 and IAS27 - Cost of Investment in a Subsidiary, Jointly Controlled Entity or Associate (amended)
IAS23 - Borrowing Costs (revised)
IAS32 - Puttable Instruments and Obligations Arising on Liquidation
IFRIC15 - Agreements for the Construction of Real Estate
 
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
 
IFRS1 -First time adoption of International Financial Reporting Standards (revised)
IFRS3 - Business Combinations (revised)
IAS27 - Consolidated and Separate Financial Statements (revised)
IAS39 - Eligible Hedged Items (amendment)
IFRIC17 - Distributions of Non-cash Assets to Owners
IFRIC18 - Transfers of Assets from Customers
IFRS1 - Additional exemptions for First Time Adopters (amended)
IFRS2 - Group Cash - settled Share-Based Payment Transactions (amended)
IAS32 - Classification of Rights Issues (amended)
IAS24 - Related Party Transactions (revised)
IFRIC14 - Prepayments of Minimum Funding Requirement
 
The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.
 
 
 
Basis of consolidation
The consolidated financial statements comprise the accounts of the Company and its subsidiaries drawn up to 31 March 2010.
 
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, plus costs directly attributable to the acquisition. 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 minority 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 have been changed where material to ensure consistency with the policies adopted by the Group. Although the subsidiaries in Brazil, China and Japan 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.
 
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.
 
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 enviroment in which the entity operates ("functional currency"). The consolidated financial statements are presented in Pounds Sterling, which is the Company's functional and the Group's presentational 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 statement.
 
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.
 
Foreign exchange gains and losses that relate to borrowing and cash and cash equivalents are presented in the income statement within finance income or finance costs.
 
 
(c) Group companies
 
The results and financial position of all Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows;
 
-assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of the balance sheet;
 
-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 as a separate component of equity.
 
When a foreign operation is partially disposed of 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.
 
 
Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
 
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
 
Financial assets and liabilties are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends to settle on a net basis or to realise the asset and settle the liability simultaneously.
 
The Group has the following non-derivative financial assets: loans and receivables and available-for-sale assets.
 
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.
 
Loans and receivables comprise trade and other receivables and cash and cash equivalents.
 
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
 
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any other categories. The Group's investments in equity securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein are recognised in other comprehensive income and presented within equity. When an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.
 
Non-derivative financial liabilities
All financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the date at which the Group becomes a party to the contractual provisions of the instrument.
 
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
 
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to release the asset and settle the liability simultaneously.
 
The Group has the following non-derivative financial liabilities: bank overdrafts and trade and other payables.
 
Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs.Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.
 
Goodwill
Goodwill arising on consolidation represents the excess of the cost of the acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary 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 which is recognised as an asset is reviewed for impairment annually. Goodwill is allocated to cash generating units for the purposes of impairment testing. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.
 
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of profit or loss on disposal.
 
 
Other intangible assets
Drug registrations, patents and licenses
The Group recognises internally generated or externally acquired intangible assets at cost and subsequently recognises them at cost less accumulated amortisation and impairment losses. Intangible assets acquired as part of a business combination are recognised at fair value.
 
Expenditure on drug registrations and licenses is recognised as an internally generated or externally acquired intangible asset only if all the following conditions are met:
- an asset is created that can be identified.
- it is probable that the asset created will generate future economic benefits: and
- the development cost of the asset can be measured reliably.
 
All drug registrations and licenses are amortised on a straight-line basis over their useful economic life of 10 years.
 
Distribution rights
Distribution rights are recognised at cost and amortised on a straight line basis over their estimated useful economic life of 20 years. They are reviewed for impairment when any indication of potential impairment exists.
 
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 20% on cost
 
Fixtures, fittings & equipment 20% on cost
 
 
 
 
Freehold land and buildings are stated at valuation less depreciation. 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 revaluation reserve in the statement of financial position and are recognised in the statement of comprehensive income for the year. Depreciation is provided at a rate calculated to write off the valuation less estimated residual value over the remaining useful life of the building at a rate of 2 per cent per annum. Land is not depreciated.
 
Impairment of non-financial assets
The carrying amounts of the Group's 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, an impairment test is performed at each year end.
 
In assessing value in use, the expected future cash flows from the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised in the income statement whenever the carrying amount of an asset or it's cash-generating unit exceeds its recoverable amount.
 
A previously recognised impairment loss 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.
 
Leasing
The Group leases certain property, plant and equipment.

 

Assets obtained under finance leases, where the Group has substantially all the risks and rewards of ownership are capitalised as property, plant and equipment and depreciated over the shorter of the lease term and their useful lives. Obligations under such agreements are included in borrowings net of the financial charge allocated to future periods. The financial element of the rental payment is charged to the income statement so as to produce constant periodic rates of charge on the net obligations outstanding in each period.

 
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.
 
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. The cost of finished goods comprises raw materials, direct labour and other direct costs. Net realisable value is the estimated selling price in the ordinary course of business.
 
Trade receivables
Trade receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowance for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
 
Investments
Non-current asset investments are stated at fair value, including transaction costs, less impairment. They are recognised or derecognised on the date when the contract for acquisition or disposal requires the delivery of that investment.
 
Investments in subsidiaries are stated at cost less impairment in the Parent Company's statement of financial position.
 
An impairment is recognised in profit or loss when there is objective evidence that the asset is impaired and is measured on the difference between the investment's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate adjusted for a risk premium. Impairment losses are reversed in subsequent periods when an increase in the investment's recoverable amount can be related objectively to an event occuring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.
 
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 and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.
 
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 the assets of the Group after deducting all of its liabilities.
 
Bank borrowings and loans
Interest-bearing bank loans and overdrafts are recorded as the proceeds received, net of direct issue costs (which equates to fair value). Finance charges including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals 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.
 
Trade payables
Trade payables are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method.
 
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle that 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.
 
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. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the Group.
 
The Group recognises revenue on despatch of the goods (which the directors believe transfers substantially all the risks and rewards of ownership to the buyer). No goods are despatched on a sale or return basis. Distributors trade on their own account and not as agents.
 
The Group also receives interest, royalty income and management charges in respect of accounting services supplied to certain ex-subsidiaries. The amounts are small and are recognised on an accruals basis.
 
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. Any difference between the charge to the income statement and the contributions paid to the scheme are disclosed as an asset or liability in the statement of financial position in accordance with IAS 19. Actuarial gains or losses are taken directly to equity in the statement of comprehensive income.
 
Share-based payments
The Group has applied the requirements of IFRS2 Share-based payments. In accordance with the transitional provisions, IFRS2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005.
 
The Group issues equity-settled share-based payments to certain employees in exchange for services from those employees. Equity-settled share-based payments 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 of such equity-settled share-based payments 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. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
 
Further details of the inputs to the Black-Scholes model can be found in note 24 to the accounts.
 
Taxation
Tax expense for the period comprises current and deferred tax
Current tax, including UK corporation tax and foreign tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the year end . Tax expenses are recognised in the income statement or statement of comprehensive income according to the treatment of the transactions which give rise to them.
 
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax basis of assets and liabilities and their carrying amount in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the date of the 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.
 
Share Capital
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.
 
Dividend distributions
Final dividend distributions to the Company's shareholders are recognised as liabilities in the financial statements in the period in which they are approved by the Company's shareholders. Interim dividends are recognised when they are paid.
 
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:
 
(a) Estimated impairment value of intangible assets
The Group tests annually whether intangible assets with indefinite life 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 the directors' estimates of recoverable values. Details of the impairment reviews performed can be found in note 12 of the financial statements.
 
(b) Income taxes
The Group is subject to income taxes predominantly in the United Kingdom but also in other jurisdictions.
 
Significant estimates are required in detemining the provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain. 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.
 
c) Pension scheme
The Group maintains one defined benefit pension scheme which has been accounted for according to the provisions of IAS19. Although the assumptions were determined by a qualified actuary, any change in those assumptions may materially impact the financial position and results of the Group. Details of the assumptions used can be found in note 23 of the financial statements.
 
d) Share-based payments
The charge to the Income Statement in respect of share based payments has been externally calculated using management's best estimates of the amount of options expected to vest and various other inputs to the Black-Scholes model, as disclosed in note 24. Any variation in those assumptions may have a material impact on the Group's future results and financial position.
 
Segment information
Management has determined the operating segments based on the reports reviewed by the Board that are used to make

strategic decisions. The Board considers the business from a geographic perspective. Geographically, management considers

the performance in the UK and Europe, China, Japan and the Indian subcontinent, Latin America and the rest of the world.

The segment information provided to the Board for the year ended 31 March 2010 is as follows:

 
 
Management considers Earnings before Interest, Tax, Depreciation and Amortisation ("EBITDA"), adjusted for share-based

payments.

 
U.K. Europe

China, Japan and the Indian subcontinent

Latin America Rest of the World Total
 
£ £ £ £ £ £
Year ended 31 March 2010
Total segmental revenue 397,676 4,468,518 9,077,571 8,194,429 3,748,145 25,886,339
Inter-segment revenue - - (1,999,006) (2,119,169) - (4,118,175)

 

 

 

 

 

 

Revenue from external customers 397,676 4,468,518 7,078,565 6,075,260 3,748,145 21,768,164

 

 

 

 

 

 

 
Sale of goods 397,676 4,468,518 7,078,565 6,075,260 3,474,793 21,494,812
Royalties - - - - 273,352 273,352

 

 

 

 

 

 

397,676 4,468,518 7,078,565 6,075,260 3,748,145 21,768,164

 

 

 

 

 

 

 
Adjusted EBITDA (847,766) 1,579,389 1,634,099 1,799,571 1,144,734 5,310,027
Total assets 14,123,532 9,634,533 17,787,404 13,972,000 8,567,826 64,085,295

 

 

 

 

 

 

 
Year ended 31 March 2009
Total segmental revenue 578,684 4,287,563 6,459,877 5,288,415 4,854,476 21,469,015
Inter-segment revenue - - (1,095,153) (1,028,948) - (2,124,101)

 

 

 

 

 

 

Revenue from external customers 578,684 4,287,563 5,364,724 4,259,467 4,854,476 19,344,914

 

 

 

 

 

 

 
Sale of goods 578,684 4,287,563 5,364,724 4,259,467 4,675,077 19,165,515
Royalties - - - - 179,399 179,399

 

 

 

 

 

 

578,684 4,287,563 5,364,724 4,259,467 4,854,476 19,344,914

 

 

 

 

 

 

 
 
Adjusted EBITDA 69,899 1,454,076 940,726 925,620 541,075 3,931,396
Total assets 11,932,724 9,706,688 13,583,398 11,170,676 7,825,862 54,219,348

 

 

 

 

 

 

 
Goodwill and other intangible assets are allocated to the geographical segments on the basis of proportion of sales achieved

by each segment.

 
 
A reconciliation of adjusted EBITDA to profit before tax is provided as follows:
 
2010 2009
£ £
Adjusted EBITDA for reportable segments 5,310,027 3,931,396
Depreciation (144,553) (179,685)
Amortisation (2,869,270) (2,581,378)
Impairment provisions (100,885) (628,682)
Share-based payment charges (203,285) (132,685)
Finance (expense)/income (88,387) 39,683

─

 

Profit before tax after discontinued activities 1,903,647 448,649
Continued and discontinued operations and acquisitions
 
 
Revenue Expenses Other operating income Profit before tax Tax Profit for the year
2010 £ £ £ £ £ £
 
Continuing operations 20,334,255 (18,583,979) 184,963 1,935,239 (309,039) 1,626,200
Acquisitions 1,433,909 (1,364,727) 111 69,293 (27,488) 41,805

 

 

 

 

 

 

21,768,164 (19,948,706) 185,074 2,004,532 (336,527) 1,668,005
Discontinued activities - (100,885) - (100,885) - (100,885)

 

 

 

 

 

 

21,768,164 (20,049,591) 185,074 1,903,647 (336,527) 1,567,120

 

 

 

 

 

 

2009
 
Continuing operations 18,897,645 (17,677,416) 185,108 1,405,337 181,148 1,586,485
Discontinued activities 447,269 (1,405,026) 1,069 (956,688) - (956,688)

 

 

 

 

 

 

19,344,914 (19,082,442) 186,177 448,649 181,148 629,797

 

 

 

 

 

 

Analysis of sales by type:
Continuing Acquisitions Total Continuing Discontinued Total
£ £ £ £ £ £
 
Sale of goods 20,060,903 1,433,909 21,494,812 18,718,246 447,269 19,165,515
Royalties 273,352 - 273,352 179,399 - 179,399

 

 

 

 

 

 

20,334,255 1,433,909 21,768,164 18,897,645 447,269 19,344,914

 

 

 

 

 

 

 
Included in the comparative figure of £956,688 for loss on discontinued activities is an amount of £676,024 which relates to the loss on disposal of the Group's American pet products business, Interpet LLC.
 
The profit for the year includes a charge of £100,885 regarding the discontinued activities of Interpet LLC, which was disposed of during the previous accounting period. The proceeds of that disposal included an earnout based on sales over the five years from the date of disposal. The earnout was discounted to its net present value. The directors have reduced their estimate of average annual sales from $2million to $1.2 million in the current period and have therefore recognised the appropriate impairment in the present value of the amount receivable.
Result from operating activities 2010 2009
£ £
Result from operating activities is stated after charging:
Cost of inventories recognised as an expense 12,743,194 11,206,606
Employee benefits expenses 2,494,271 2,060,519
Amortisation of intangible assets 2,869,270 2,581,378
Depreciation 144,553 179,685
Loss/(gain) on foreign exchange transactions 161,657 (595,249)
Research and development 780 3,238
Operating lease rentals 136,548 110,127
 
 
Fees payable to the Company's auditor for the audit of the Parent Company and Group annual accounts 22,500 19,250
Fees payable for taxation services 1,514 4,746
Fees payable for audit of the Company's subsidiaries pursuant to legislation 22,500 19,250

 

 

2010 2009
Earnings due to shareholders before interest, tax, depreciation, amortisation, share-based payments and losses on disposal of discontinued activities £ £
Profit from operating activities - continuing activities 2,092,919 1,365,654
Operating losses from discontinued activities - (280,664)
Depreciation 144,553 179,685
Amortisation 2,869,270 2,581,378
Share-based payments 203,285 132,685

 

 

5,310,027 3,978,738
Minorities (328,052) (238,034)

 

 

4,981,975 3,740,704

 

 

 
Finance cost/income 2010 2009
£ £
Finance costs
On bank loans and overdrafts (104,495) (138,504)
 
Finance income
On short term bank deposits 16,108 178,187

 

 

Net finance (expense)/income (88,387) 39,683

 

 

 
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.
 
2010 2009
Earnings Weighted average number of shares Per share amount Earnings Weighted average number of shares Per share amount
£'000 '000 (pence) £'000 '000 (pence)
 
Earnings attributable to ordinary shareholders on continuing operations
after tax 1,340 48,025 2.79 1,348 45,818 2.94
Losses on discontinued activities (101) 48,025 (0.21) (957) 45,818 (2.08)

 

 

 

 

1,239

  2.58 391   0.86

 

 

 

 

 

 

 
Earnings attributable to ordinary shareholders on continuing operations before tax 1,676 48,025 3.49 1,167 45,818 2.55
 
 
Dilutive earnings per share takes into account the dilutive effect of share options. For this year and the previous year, fully diluted earnings per share were equal to basic earnings per share.
 

 
 
 
Profit/(loss) for the financial year
 
As permitted by section 408 Companies Act 2006, the Parent company's income statement has not been included in these financial statements. The profit/(loss) for the financial year is made up as follows:
 
2010 2009
£ £
 
Parent company's profit/(loss) for the financial year 6,967,288 (1,029,548)
 
 
 
Dividends 2010 2009
£ £
As restated
Interim dividend for the period ended 31 March 2008 of 1.7p per ordinary share 588,179
Final dividend paid for the period ended 31 March 2008 of 5.45p per ordinary share - 2,479,901
Interim dividend for the period ended 31 March 2009 of 1.7p per ordinary share 788,841 -
Final dividend paid for the period ended 31 March 2009 of 5.45p per ordinary share 2,543,961 -
 

 

 

3,332,802 3,068,080

 

 

 
The Board is declaring a dividend of £1,190,889 being 2.30 pence per share in respect of the year ended 31 March 2010. A scrip option will be offered.
 
At 31 March 2009 the Parent company had insufficient distributable reserves to pay the proposed final dividend in respect of that year. Although an inter-company dividend had been paid prior to this distribution so that sufficient reserves were available for the dividend to be paid, the Company omitted to file interim accounts with the Registrar of Companies as required by section 383(6) of the Companies Act 2006, which rendered the dividend technically unlawful. To rectify this situation, the board propose to have this dividend ratified by shareholders at the next General Meeting of the Company on the 28 September 2010.
 
Prior year adjustments
The prior year adjustment arises as a result of management's decision that an amount of £973,243 which had previously been included in the goodwill balance would more properly be classified as distribution rights with a 20 year useful life. The prior year adjustment therefore recognises the amortisation which would have been charged on this asset from the date of its acquisition to 31 March 2008. The comparative figures have also been restated in respect of this adjustment.
 
The effect of this change in accounting policy is to reduce both the current and the comparative retained profit by £55,318 and to reduce the intangible assets and total equity by £198,791 as at 31 March 2009 and £254,109 as at 31 March 2010.
 
The comparative income statement has also been restated to comply with the requirement that results from discontinued activities be shown as a single line on the income statement. This has had no effect on the total reported income or net assets for that period.
 
The comparative statements of financial position and changes in equity have also been restated to exclude dividends which were not approved by shareholders at the previous year end. The effect of this has been to increase net assets at 31 March 2009 by £788,841 and to reduce retained earnings for the year ended 31 March 2010 by the same amount.
 
The notes relating to pension costs, directors remuneration, related parties and employment costs have had comparative figures restated to include the relevant charges for share-based payments and for total defined benefit pension charges. These restatements have no effect on earnings or net assets for any period.
 
Effect on retained earnings of prior year adjustments.
 
Group Company
At 1 April 2008 £ £
Accumulated amortisation of distribution rights (143,473) -
Reversal of dividend payable 588,179 588,179

 

 

Restatement of reserves per statement of changes in equity 444,706 588,179

 

 

 
Restated statements of financial position for the years ending 31 March 2008 and 2009 are to be found on pages 18 and 19 of the accounts.
 
 
Intangible fixed assets
Group
Goodwill Distribution rights Drug registrations, patents and license costs Total
Cost £ £ £ £
At 1 April 2008 18,797,987 - 23,616,613 42,414,600
Prior year adjustment (758,761) 820,378 - 61,617

 

 

 

 

At 1 April 2008 (restated) 18,039,226 820,378 23,616,613 42,476,217
Additions - 214,482 3,871,984 4,086,466
Disposals (586,348) - (765,850) (1,352,198)

 

 

 

 

At 1 April 2009 17,452,878 1,034,860 26,722,747 45,210,485
Additions 477,617 - 3,478,515 3,956,132
Acquired with subsidiary - - 925,989 925,989

 

 

 

 

At 31 March 2010 17,930,495 1,034,860 31,127,251 50,092,606

 

 

 

 

 
 
Amortisation
At 1 April 2008 - - 7,616,237 7,616,237
Prior year adjustment - 205,090 - 205,090

 

 

 

 

At 1 April 2008 (restated) - 205,090 7,616,237 7,821,327
Amortisation on disposals - - (722,936) (722,936)
Charge for the year - 55,318 2,526,060 2,581,378

 

 

 

 

At 1 April 2009 - 260,408 9,419,361 9,679,769
Charge for the year - 55,318 2,813,952 2,869,270

 

 

 

 

At 31 March 2010 - 315,726 12,233,313 12,549,039

 

 

 

 

Net book value
At 31 March 2010 17,930,495 719,134 18,893,938 37,543,567

 

 

 

 

At 31 March 2009 17,452,878 774,452 17,303,386 35,530,716

 

 

 

 

At 1 April 2008 18,039,226 615,288 16,000,376 34,654,890

 

 

 

 

 
The amortisation charge is included within administrative expenses on the income statement.
 
Distribution rights are amortised over their estimated useful life of 20 years and reviewed for impairment when any indication of potential impairment exists.
The carrying value of goodwill is attributable to the following cash generating units:
 
Entity Date of acquisition £
Eco Animal Health Limited (outstanding 50%) 1 October 2004 17,358,621
Zhejiang Eco Biok Animal Health Products Limited 1 April 2007 94,257
Eco Pharma Inc. (outstanding 80%) 24 December 2009 477,617

 

17,930,495

 

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGU's) that are expected to benefit from the business combination. The addition in the current year has been allocated to the Group's ongoing Japanese trading entity, Eco Pharma Inc. which is included in the "China, Japan and Indian subcontinent" operating segment. The Group tests goodwill annually for impairment.
 
The recoverable amounts of the CGU's are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates, growth rates and the estimated remaining useful life of the asset which is maintained at 30 years through ongoing investment in the cash generating unit.
 
The Group prepares cash flow forecasts derived from the most recent financial budgets and projections approved by management for the year ahead and then extrapolates them assuming a 3% annual growth rate which is well below the current performance of the existing business. The directors believe that the long term growth rate assumed does not exceed the average long term growth rate for the relevant markets. The exception to this rule is Eco Pharma Inc. In this case the directors believe that a 5 per cent growth rate in sales and margin for the second to fifth years, followed by a 3 per cent growth rate thereafter is appropriate.
 
Management estimates discount rates using the pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU's. In the current year management estimated the applicable rate to be 11%. Despite general economic conditions, management considers that there is adequate headroom when comparing the net present value of the cash flows to the carrying value of goodwill to conclude that no impairment is necessary this year.
 
Management believes that the most significant assumption in the calculation of value in use is the estimated growth rate. If the growth rate were to be zero, then the recoverable amount would be determined by fair value rather than value in use and in this case, a maximum impairment of approximately £2.2 million would be indicated. This assumes an earnings multiple of 10 on the current budgeted results in estimating fair value which has been derived from historical data.
 
Drug registrations and licenses are amortised over their estimated useful lives of 10 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. Given the economic climate the directors have conducted an impairment review in the current year by preparing cash flow projections for the year ahead and extrapolating the results for the 10 year life of the registrations assuming zero growth and an 11% discount rate to establish value in use. These calculations have shown that a 6 year life is more than enough to justify the current carrying value of these registrations. Moreover, fair value calculated as 10 times the current cash generated by the registrations gives an even higher result, so management has again concluded that no impairment is necessary.
 

Property, plant and equipment
Group
Land and buildings (freehold) Plant and machinery Fixtures, fittings and equipment Total
£ £ £ £
Cost or valuation
At 1 April 2008 650,000 989,193 570,570 2,209,763
Additions - 18,393 34,882 53,275
Disposals - (304,324) (85,717) (390,041)

 

 

 

 

At 1 April 2009 650,000 703,262 519,735 1,872,997
Additions - 59,149 12,984 72,133
Acquired with subsidiary - - 2,577 2,577

 

 

 

 

At 31 March 2010 650,000 762,411 535,296 1,947,707

 

 

 

 

Depreciation
At 1 April 2008 26,000 426,072 409,028 861,100
Charge for the year 13,000 109,835 56,850 179,685
Disposals - (258,067) (67,698) (325,765)

 

 

 

 

At 1 April 2009 39,000 277,840 398,180 715,020
Charge for the year 13,000 81,299 50,254 144,553

 

 

 

 

At 31 March 2010 52,000 359,139 448,434 859,573

 

 

 

 

Net book value
At 31 March 2010

598,000

403,272 86,862 1,088,134

 

 

 

 

At 31 March 2009 611,000 425,422 121,555 1,157,977

 

 

 

 

At 1 April 2008 624,000 563,121 161,542 1,348,663

 

 

 

 

 
The freehold property was valued on 28 April 2010 by Mr R L Sworn of Kelion Sworn Chartered Surveyors and Valuers, London, W1. The fair value of the freehold property was determined at £650,000 and the property will continue to be valued on a regular basis. The directors feel this is not significantly different to its carrying value and therefore no adjustment has been made.
 
The value of non depreciable land included within Land and Buildings is £180,000. The directors believe that the depreciation charge relating to the land element of the property is immaterial.
 
The value of the freehold property would have been recorded at £350,251 (2009: £360,453) on a historical cost basis giving rise to the current revaluation surplus of £250,457.
 
Depreciation has been included in the administrative expenses line on the income statement.
 
 
 
 
 
Company
Land and buildings (freehold) Fixtures, fittings & equipment Total
£ £ £
Cost or valuation
At 1 April 2008 650,000 131,452 781,452
Additions - 6,675 6,675

 

 

 

At 1 April 2009

650,000

138,127 788,127
Additions - 1,624 1,624

 

 

 

At 31 March 2010 650,000 139,751 789,751

 

 

 

Depreciation
At 1 April 2008 26,000 98,992 124,992
Charge for the year 13,000 8,878 21,878

 

 

 

At 1 April 2009 39,000 107,870 146,870
Charge for the year 13,000 9,177 22,177

 

 

 

At 31 March 2010 52,000 117,047 169,047

 

 

 

Net book value
At 31 March 2010 598,000 22,704 620,704

 

 

 

At 31 March 2009 611,000 30,257 641,257

 

 

 

At 1 April 2008 624,000 32,460 656,460

 

 

 

 
The freehold property was valued on 28 April 2010 by Mr R L Sworn of Kelion Sworn Chartered Surveyors and Valuers, London, W1. The fair value of the freehold property was determined at £650,000 and the property will continue to be valued on a regular basis. The directors feel this is not significantly different to its carrying value and therefore no adjustment has been made.
 
The value of non depreciable land included within Land and Buildings is £180,000. The directors believe that the depreciation charge relating to the land element of the property is immaterial.
 
The value of the freehold property would have been recorded at £350,251 (2009: £360,453) on a historical cost basis giving rise to the current revaluation surplus of £250,457.
 
Depreciation has been charged to the administrative expenses line on the income statement.
 
Fixed asset investments
Group
Available for sale quoted assets at fair

 

value

Unlisted investments Total
 
£ £ £
 
Cost or fair value
At 1 April 2008 250,000 30,550 280,550
Additions - 5,376 5,376

 

 

 

At 1 April 2009 250,000 35,926 285,926
Additions - 3,368 3,368

 

 

 

At 31 March 2010 250,000 39,284 289,284

 

 

 

Net book value
At 31 March 2010 250,000 39,284 289,284

 

 

 

At 31 March 2009 250,000 35,926 285,926

 

 

 

At 1 April 2008 250,000 30,550 280,550

 

 

 

 
 
Company
Available for sale quoted assets at fair value Investments in subsidiary undertakings at cost Total
£ £ £
Cost or fair value
At 1 April 2008, 1 April 2009 and 31 March 2010 250,000 21,273,502 21,523,502

 

 

 

Impairment
At 1 April 2008 - 536,946 536,946
Charge for the year to 31 March 2009 - 654,316 654,316
Charge for the year to 31 March 2010 - - -

 

 

 

At 1 April 2009 and 31 March 2010 - 1,191,262 1,191,262

 

 

 

Net book values
At 31 March 2010 250,000 20,082,240 20,332,240

 

 

 

At 31 March 2009 250,000 20,082,240 20,332,240

 

 

 

At 1 April 2008 250,000 20,736,556 20,986,556

 

 

 

The available for sale quoted asset value of £250,000 relates to our holding in Kiotech International plc which is quoted on the AIM market of the London Stock Exchange.
 
Holdings of more than 20%
The company holds more than 20% of the share capital of the following companies:
 
Company Country of registration or incorporation Shares held
Class %
Subsidiary undertakings held by Company
Eco Group Limited B.V.I. Ordinary 100
Zhejiang Eco Biok Animal Health Products Limited P. R. of China Ordinary 3
Petlove Limited Great Britain Ordinary 91
 
Subsidiary undertakings held by Group
Eco Animal Health Limited Great Britain Ordinary 100
Eco Animal Health (Europe) Limited B.V.I. Ordinary 100
Eco Animal Health Southern Africa (Pty) Limited South Africa Ordinary 100
Zhejiang Eco Biok Animal Health Products Limited P. R. of China Ordinary 48
Shanghai Eco Biok Veterinary Drug Sale Company Ltd.(via Zhejiang Eco Biok Animal Health Products Ltd.) P. R. of China Ordinary 48
 
Eco Animal Health do Brasil Comercio de Produtos Veterinarios Ltda Brazil Ordinary 100
Eco Pharma Inc Japan Ordinary 100
Eco Animal Health USA Corp. U.S.A. Ordinary 100
 
The principal activity of these undertakings for the last relevant financial year was as follows:
 
Principal activity
Eco Animal Health Limited Distribution of animal drugs
Eco Animal Health (Europe) Limited Holding Company of Eco Animal Health Limited
Eco Group Limited Holding Company of Eco Animal (Europe) Limited
Eco Animal Health Southern Africa (Pty) Limited Non-trading
Petlove Limited Non-trading
Zhejiang Eco Biok Animal Health Products Limited Manufacture of animal drugs
Shanghai Eco Biok Veterinary Drug Sale Company Ltd. Distribution of animal drugs
Eco Animal Health do Brasil Comercio de Produtos Veterinarios Ltda Distribution of animal drugs
Eco Pharma Inc Distribution of animal drugs
Eco Animal Health USA Corp. Non-trading
 
The directors are in the course of taking the two non trading BVI companies out of the group structure and having

them dissolved.

 
All of the subsidiaries listed above were included in the consolidation for the year.
 
Zhejiang Eco Biok Animal Health Products Limited, Eco Pharma Inc 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 each subsidiary for use in preparing the consolidated financial statements.

 
Business Combinations
 
On 24 December 2009, the Group acquired the final 80% of the outstanding ordinary share capital of Eco Pharma Inc. of which it already owned 20 per cent for £1,330,825.
 
At that date the fair value of the net assets and liabilities acquired of Eco Pharma Inc was £1,122,070 and the transaction consequently gave rise to goodwill on the transaction of £477,617.
 
The acquired business contributed revenues of £1,433,909 and net profit after tax of £41,805 to the Group for the period 24 December 2009 to 31 March 2010. It is impractical to disclose the revenue and profit for the Group as though the acquisition date was 1 April 2009, since figures for Eco Pharma Inc as at that date are not available.
 
The goodwill arising on acquisition is attributable to the synergies expected from combining corporate overheads of Eco Pharma Inc with Eco Animal Health Group plc, in particular parts of the management structure.
 
Details of net assets acquired and goodwill are as follows;
£
Purchase consideration
Cash paid 1,234,640
Direct costs relating to the acquisition 96,185

 

Total purchase consideration 1,330,825

 

 
Net assets acquired Fair Value Acquiree's
Carrying Value
£ £
Cash and cash equivalents 529,893 529,893
Property, plant and equipment 2,577 2,577
Investments in associates - 68,592
Drug registrations 925,989 -
Inventories 511,364 538,109
Trade and other receivables 283,942 318,442
Trade and other payables (863,895) (855,218)
Corporation tax (liabilities)/assets (45,564) 25,399
Other net assets - 16,988
Deferred taxation (222,237) -

 

 

Fair value of assets 1,122,070 644,782
Fair value of previous interest in the acquiree (268,862)
Goodwill 477,617

 

Purchase consideration 1,330,825
Less: cash acquired (529,893)

 

Cash outflows on acquisition of subsidiary 800,932

 

 
For all current assets, fair value was ascertained by the amount actually recovered or expected to be recovered post-acquisition. Drug registrations were valued on the basis of the amount recoverable using an earnings multiple of 10 which is consistent with the average of the last 3 acquisitions within the industry on which figures were available.
 
Historic exchange movements
Included in the Group's retained earnings are the following exchange movements which have historically been taken directly to reserves:
 
2010 2009
£ £
In respect of: Gain/(loss) Gain
Zhejiang Eco Biok Animal Health Products Ltd. 242,299 269,394
Eco Animal Health do Brasil Comercio de Produtos Veterinarios Ltda (8,972) 652
Eco Pharma Inc. 22,341 -
 
Inventories
Group Company
2010 2009 2010 2009
£ £ £ £
 
Raw materials and consumables 2,956,737 2,985,385 - -
Finished goods and goods for resale 2,740,572 1,936,028 - -

 

 

 

 

5,697,309 4,921,413 - -

 

 

 

 

 
The cost of inventories recognised as an expense and included in cost of sales in the period amounted to £12,743,194 (2009: £11,206,606).
 
 
Trade and other receivables
Group Company
 
2010 2009 2010 2009
£ £ £ £
 
Trade receivables 8,555,993 7,839,283 - 67,542
Amounts owed by group undertakings - - 28,993,559 19,931,139
Other receivables 304,837 347,276 210,589 274,902
Prepayments and accrued income 123,457 167,141 49,232 12,396

 

 

 

 

8,984,287 8,353,700 29,253,380 20,285,979

 

 

 

 

 
Non current - - 28,993,559 19,931,139
Current 8,984,287 8,353,700 259,821 354,840

 

 

 

 

8,984,287 8,353,700 29,253,380 20,285,979

 

 

 

 

 
 
As at 31 March 2010, trade receivables of £2,111,185 (2009: £2,695,358) due to the Group and £nil (2009: £ nil) due to the Company were past due but not impaired. These relate to long standing distributors with whom we have agreed settlement terms and for whom there is no history of default. The ageing analysis of these trade receivables is as follows:
 
Group Company
2010 2009 2010 2009
£ £ £ £
 
Up to 3 months past due 1,987,280 1,411,104 - -
3 to 6 months past due 73,856 459,409 - -
Over 6 months past due 50,049 824,845 - -

 

 

 

 

2,111,185 2,695,358 - -

 

 

 

 

 
As at 31 March 2010, trade receivables of £444,944 were impaired and provided for. The impaired receivables mainly relate to historic debt for which recovery is still being sought. The Group mitigates its exposure to credit risk by extensive use of commercial credit reference agencies, close management of its customers' trading against terms offered and use of retention of title clauses wherever possible. The ageing analysis of the impaired balances is as follows:
 
Group Company
2010 2009 2010 2009
£ £ £ £
 
Current 260,627 427,003 - -
Up to 3 months past due 47,786 150,650 - -
3 to 6 months past due - 28,068 - -
Over 6 months past due 136,531 170,690 - -

 

 

 

 

444,944 776,411 - -

 

 

 

 

 
For the year ended March 2009, the directors took the view that the unprecedented global economic conditions coupled with difficulties in collecting debt within terms merited a provision in respect of bad debts across the whole of the Latin American region. The directors are pleased to note that due to active management and recovery of the overdue accounts, the actual losses experienced were much lower than had been anticipated and therefore the provision could be reduced in the current year.
 
The carrying amounts of trade and other receivables are denominated in the following currencies:
 
Group Company
2010 2009 2010 2009
£ £ £ £
 
Pounds Sterling 415,285 389,813 29,099,526 20,026,032
Euros 2,264,126 1,880,163 - -
U S Dollars 4,079,667 5,037,914 153,854 259,947
Chinese RMB 570,497 472,953 - -
Brazilian Real 609,300 183,516 - -
Japanese Yen 885,922 102,661 - -
Other currencies 159,490 286,680 - -

 

 

 

 

8,984,287 8,353,700 29,253,380 20,285,979

 

 

 

 

 
The carrying amounts of trade and other receivables are not significantly different to their fair values.
 
 
Deferred tax
 
Group
Deferred tax assets and liabilities are attributable to the following:
 
Assets Liabilities Net
2010 2009 2010 2009 2010 2009
£ £ £ £ £ £
 
Drug registration expenditure - 228,127 (1,930,695) - (1,930,695) 228,127
Property, plant and equipment - - (4,612) - (4,612) -
Tax losses carried forward - - 1,313,588 - 1,313,588 -

 

 

 

 

 

 

Amount recoverable/(payable) after more than one year - 228,127 (621,719) - (621,719) 228,127

 

 

 

 

 

 

 
The movement on the deferred tax account can be summarised as follows:
Drug Property,
Registration Plant &
Expenditure Equipment Total
£ £ £
At 1 April 2008 and 31 March 2009 228,127 - 228,127
Charge for the year through income statement (622,997) (4,612) (627,609)
Liability acquired with subsidiary (222,237) - (222,237)

 

 

 

At 31 March 2010 (617,107) (4,612) (621,719)

 

 

 

 
During the year it became apparent that the enhanced allowances on Drug Registration expenditure could be claimed more quickly than had previously been anticipated. This should generate substantial tax refunds in the short term, but has given rise to a deferred tax liability.
 
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 10 per cent withholding tax. The deferred tax liability in respect of this has not been recognised since it is expected that relief will be obtained against UK tax by that time.
 
Company Liabilities
2010 2009
£ £
Property, plant and equipment (3,268) -

 

 

(3,268) -

 

 

The charge for the year of £3,268 was all recognised in the Company's income statement for the year.
 
 
 
Cash and cash equivalents
Cash and cash equivalents comprise cash and short term deposits held by the Group. The carrying amount of these assets are not significantly different to their fair value.
Group Company
2010 2009 2010 2009
£ £ £ £
 
Cash and cash equivalents 9,881,722 3,717,430 7,917,774 2,243,997
Overdrafts (3,978,873) (908,500) (3,884,184) 194,160

 

 

 

 

Net funds per cash flow 5,902,849 2,808,930 4,033,590 2,049,837

 

 

 

 

 
Trade and other payables
Group Company
 
2010 2009 2010 2009
£ £ £ £
 
Trade payables 2,976,221 2,641,150 37,412 28,862
Other payables 350,415 508,109 3,722 24,233
Accruals and deferred income 285,030 382,539 38,507 87,649

 

 

 

 

3,611,666 3,531,798 79,641 140,744

 

 

 

 

 
 
 
Borrowings
Included within payables on the Statement of Financial Position are the following amounts at fair value secured by a debenture on the assets of the group:
 
Group Company
2010 2009 2010 2009
£ £ £ £
Short term borrowings 3,978,873 908,500 3,884,184 194,160

 

 

 

 

 
Currency analysis of short term borrowings
Group Company
2010 2009 2010 2009
£ £ £ £
 
U S Dollars 3,301,140 194,160 3,301,140 194,160
Euros 583,044 - 583,044 -
South African Rand 94,689 714,340 - -

 

 

 

 

3,978,873 908,500 3,884,184 194,160

 

 

 

 

 
 
 
The committed undrawn net facilities of the Group were £1,000,000 (2009: £1,000,000) as the Group actually had a positive net cash balance at 31 March 2010. The facilities are due for renewal on 22 July 2011 and include provision for a temporary increase to £2,000,000 between 1st November 2010 and 30 April 2011 inclusive. The interest rate for all overdrafts is 2.75 per cent over the relevant currency base rate.
 
 
Long term provisions
Group Company
Pension fund deficit: 2010 2009 2010 2009
£ £ £ £
(Asset)/provision at 1 April 3,000 (30,100) 3,000 (30,100)
Operating cost 5,000 - 5,000 -
Interest cost/(credit) 1,000 (4,000) 1,000 (4,000)
Actuarial losses 25,000 99,100 25,000 99,100
Contributions (net of expenses) (51,000) (62,000) (51,000) (62,000)

 

 

 

 

(Assets)/provision at 31 March (17,000) 3,000 (17,000) 3,000

 

 

 

 

 
 
Pension and other post-retirement benefit commitments
 
Defined Contribution Pension Scheme
The Group operates defined contribution pension schemes for the benefit of certain directors and senior employees. 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 £85,872 (2009: £36,485).
 
Defined Benefit Pension Scheme
The Group operates a defined benefit scheme in the UK for ex-employees only. A full actuarial valuation was carried out at 6 April 2009 and updated to 31 March 2010 by a qualified independent actuary. The major assumptions used by the actuary were:
31 March 2010 1 April 2009
Discount rate 5.5% 6.6%
Rate of increase in pension payment 3.6% 2.7%
Inflation assumption with a maximum of 5% p.a. 3.6% 2.7%
 
Mortality Rates
PMA00/PFA00 with 100% for males and 70% for females of medium cohort improvements with minimum of 1.4% p.a. for males and 1.1% for females 70% of AMC00/AFC00
 
Expectation of life at normal retirement age is 25.0 years for males and 28.9 years for females. For members retiring in 20 years' time, the expectation of life at normal retirement age would be 27.9 years for males and 31.1 years for females.
 
Results 2010 2009
£ £
Assets at start of year 2,224,000 2,368,000
Defined benefit obligation at start of year (2,227,000) (2,325,000)

 

 

(Liability)/net asset at 1 April (3,000) 43,000
 
Current service cost, including risk benefits (5,000) (5,000)
Gain on curtailments - 5,000

 

 

Operating cost (5,000) -

 

 

 
Expected return on assets 142,000 144,000
Interest cost (143,000) (140,000)

 

 

(1,000) 4,000

 

 

 
Gain/(loss) on asset return 89,000 (164,000)
Experience gain 9,000 3,000
(Loss)/gain on changes in assumptions (123,000) 49,000

 

 

Statement of other comprehensive income (25,000) (112,000)

 

 

2010 2009
£ £
Employer contributions gross 54,000 64,000
Expenses paid by trustees (3,000) (2,000)

 

 

Net asset/(liability) at 31 March 2010 17,000 (3,000)

 

 

Actual assets at end of year 2,592,000 2,224,000
Actual defined benefit obligation at end of year 2,575,000 2,227,000

 

 

Reconciliation of changes in the asset value during the year
2010 2009
£ £
Fair value of assets at 1 April 2,224,000 2,368,000
Expected return on assets 142,000 144,000
Gain/(loss) on asset return 89,000 (164,000)
Employer contributions (gross) 54,000 64,000
Death in service insurance premiums paid (5,000) (5,000)
Expenses paid by trustees (3,000) (2,000)
Increase/(decrease) in secured pensioners value due to scheme experience 91,000 (178,000)
Benefits paid - (3,000)

 

 

Fair value of assets at 31 March 2010 2,592,000 2,224,000

 

 

Reconciliation of changes in the liability value during the year
2010 2009
£ £
Defined benefit obligation at 1 April 2009 2,227,000 2,325,000
Interest cost 143,000 140,000
Experience (gain) on liabilities (9,000) (3,000)
Loss/(gain) on changes in assumptions 123,000 (49,000)
Loss/(gain) on curtailments - (5,000)
Increase/(decrease) in secured pensioners value due to scheme experience 91,000 (178,000)
Benefits paid - (3,000)

 

 

Defined benefit obligation at 31 March 2010 2,575,000 2,227,000

 

 

The expected contribution to be paid by the employer during the next accounting year is £59,000.
This includes a provision of £5,000 for death in service risk premium being the same as last year.
 
Year ended March 31 2010 2009 2008 2007 2006
 
Present value of defined benefit obligation 2,575,000 2,227,000 2,325,000 2,625,000 2,850,000
Fair value of plan assets 2,592,000 2,224,000 2,368,000 2,467,000 2,367,000
Surplus/(deficit) in plan 17,000 (3,000) 43,000 (158,000) (483,000)
Experience gains on plan liabilities 9,000 3,000 8,000 12,000 13,000
Share capital 2010 2009

£

£
Authorised
68,100,000 Ordinary shares of 5p each 3,405,000 3,405,000
10,790 Deferred ordinary shares of 10p each 1,079 1,079
32,334 Convertible preference shares of £1 each 32,334 32,334

 

 

3,438,413 3,438,413

 

 

 
Allotted, called up and fully paid
51,612,768 (2009:46,402,400) Ordinary shares of 5p each 2,580,637 2,320,120

 

 

 
On 24 December 2009 the Company undertook a share placement to fund the acquisition of Eco Pharma Inc. and the future launch costs of Aivlosin into the USA market, once approval has been granted there. In total, 4,258,314 shares were issued at a price of £1.40. This resulted in £5,446,626 (net of expenses) being credited to the Share Premium account.
 
During the year a further 907,027 shares were issued at a premium of £1,700,067 as a result of the take up of the scrip dividend option and 45,000 more shares were issued at a premium of £54,000 as a result of the exercise of options by a former employee.
 
After the year end a further 165,000 shares were issued at a premium of £170,775 as a result of the exercise of options by a retiring employee.
 
Minority interests 2010 2009
£ £
 
Balance at 1 April 2009 1,098,276 646,638
Share of subsidiary's profit for the year 328,052 238,034
Share of foreign exchange (loss)/gain on net investment (26,032) 213,604

 

 

Balance at 31 March 2010 1,400,296 1,098,276

 

 

 
Other reserves
 
Group and Company Capital Reserve for Total
redemption share-based
reserve payment
£ £ £
At 1 April 2008 105,829 699,792 805,621
Share-based payments - 132,685 132,685

 

 

 

At 1 April 2009 105,829 832,477 938,306
Share based payments - 203,285 203,825

 

 

 

At 31 March 2010 105,829 1,035,762 1,141,591

 

 

 

Financial commitments
 
At 31 March 2010 the group had minimum commitments under non-cancellable operating leases as follows:
 
Land and Buildings Motor vehicles
2010 2009 2010 2009
£ £ £ £
 
Expiry date:
Within one year 85,116 3,947 7,943 8,735
Between two and five years 113,124 245,222 40,141 30,549
In over five years 2,488,472 2,747,233 - -

 

 

 

 

2,686,712 2,996,402 48,084 39,284

 

 

 

 

 
These figures have been restated to include all payments due under non-cancellable leases rather than only those falling due within the next year.
 
Capital commitments
 
The group had no authorised capital commitments as at 31 March 2010 (2009: nil).
 
Directors' emoluments 2010 2009
£ £
 
Emoluments for qualifying services 404,076 299,532
Company pension contributions to money purchase schemes 3,518 3,434
Share-based payments 94,621 54,749
Benefits in kind 10,535 10,042

 

 

512,750 367,757

 

 

 
The number of directors for whom retirement benefits are accruing under money purchase pension schemes amounted to 1 (2009: 1).
 
The highest paid director received £208,780 (2009: £179,577) including share-based payments.
 
Related party transactions
During the year, the Group provided management services to Kiotech International plc, a company in which P A Lawrence is a director and holds share options. Fees of £35,505 were charged (2009: £39,992).
 
During the year, the Group provided the services of a representative to C-Corp Limited, a company in which P A Lawrence is a director and shareholder. No fees were charged during the year (2009: nil).
 
During the year, the Group made sales on an at arms length basis to the following group companies. The sales and year end balances are given in the table below. Since all of these companies are wholly owned by the Group, these transactions and balances have all been eliminated on consolidation.
 
Sales Year end

receivables

Sales Year end
Subsidiary companies receivables
2010 2010 2009 2009
£ £ £ £
Zhejiang Eco Biok Animal Health Products Limited 1,202,172 689,515 1,095,193 668,276
Eco Animal Health do Brasil Comercio de Productos Veterinarios Ltda. 2,119,169 1,569,551 1,028,948 683,963
Eco Pharma Inc. 796,834 829,854 - -
 
Interest and management charges from Parent to the other Group companies
During the year the Company made management charges on an arms length basis to ECO Animal Health Limited amounting to £181,540 (2009: nil) and charged interest of £245,721 (2009: £638,752) to that Company. Both of these charges were made through the inter-company account and were eliminated on consolidation.
 
ECO Animal Health Limited also made management charges on an arms length basis to Eco Pharma Inc. amounting to £46,000 (2009: nil). This amount was still outstanding at the year end and the whole transaction was eliminated on consolidation.
 
During the year ECO Animal Health Limited paid a dividend of £7,000,000 (2009: nil) to Eco Animal Health Group plc. This dividend was also eliminated on consolidation.
 
Key management compensation
The group regards the directors as its key management.
2010 2009
£ £
Salaries and short term benefits 464,399 349,241
Retirement benefits 3,518 3,434
Share-based payments 94,621 54,749

 

 

562,538 407,424

 

 

 
During the year P Lawrence and his family received dividends in the form of cash and shares to the value of £757,231 (2009: £715,774.), and the other directors and their families received dividends in the form of cash and shares to the value of £2,358 (2009: £950).

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ECO Animal Health Group (EAH)
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