Final Results for the Year Ended 31 March 2022

RNS Number : 6708X

Eco Animal Health Group PLC

31 August 2022

 

31 August 2022

ECO Animal Health Group plc ("ECO", the "Company" or the "Group")
(AIM: EAH)

Results for the year ended 31 March 2022

Solid performance in a very challenging market

HIGHLIGHTS

Financials

· Group sales down 22% at £82.2m (2021: £105.6m)

- China and Japan sales declined significantly to £28.4m (2021: £58.9m)

- ROW sales increased by 15% to £53.8m (2021: £46.7m)

· Gross margin at 43% (2021 restated: 50%)

· EBITDA decreased to £6.4m (2021 restated: £21.3m) which includes an exchange rate gain of £1m (2021: loss £2.2m)

· Administrative expenses excluding foreign exchange and exceptional items were constant at £23.4m

· New product development expenditure 12% higher at £10.2m (2021: £9.1m) reflecting maturing pipeline

· Loss per share of 1.01p (2021 restated: profit per share of 10.86p)

· Net cash at the end of the period £14.3m (2021: £19.5m)

· New £10m Bank RCF facility agreed after the end of the period, which remains undrawn

Operations

· Aivlosin® demand remains robust with increasing market share in key markets

o  Strong growth in USA and Canada from stable domestic demand

o  Strong export driven growth in Latin America

o  Strong growth in South and South East Asia, particularly Thailand

· Two new Aivlosin Regulatory approvals

o  The first zero day drug withdrawal period anti-microbial for poultry in China

o  New swine respiratory disease marketing authorisation in China

· Two new poultry vaccine projects progressed to full development in the year

o  Addressing a disease which costs the poultry industry over £600m per annum

o  First marketing approvals expected end of 2023

· New ESG report provides baseline metrics

· Appointment of new Chief Executive, David Hallas, on 1 April 2022 and new Non-Executive Director, Tracey James, during the year

David Hallas, CEO of ECO Animal Health Group plc, commented: "I am delighted to have joined ECO in April this year and I have seen so many promising signs within the Company since I have arrived. Whilst the well documented China revenue performance has disappointed due to the extensively depressed pork prices, the underlying growth and continuing gains in other markets is impressive.  We expect that China will remain subdued for another quarter or two but the recent improvement in pork to feed price ratio provides the foundation for a stronger end to the financial year.  I am particularly excited about our new technologies and the innovative products which will add to our expanding portfolio of products in the coming years.  Our approach, our current and future assets and above all our team provide the Company with a solid base for sustainable, profitable growth in the years ahead."

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR") as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

Forward-Looking Statements

This announcement contains certain forward-looking statements. The forward-looking statements reflect the knowledge and information available to the Company and Group during preparation and up to the publication of this announcement. By their very nature, these statements depend upon circumstances and relate to events that may occur in the future and thereby involving a degree of uncertainty. Therefore, nothing in this announcement should be construed as a profit forecast by the Company or Group.

Contacts

ECO Animal Health Group plc David Hallas (Chief Executive) Christopher Wilks (Finance Director)	020 8447 8899
IFC Advisory Graham Herring Zach Cohen	020 3934 6630
Singer Capital Markets (Nominated Adviser & Joint Broker) Mark Taylor George Tzimas	020 7496 3000
Investec (Joint Broker) Gary Clarence Brough Ransom Carlo Spingardi Peel Hunt LLP (Joint Broker) Dr Christopher Golden James Steel	020 7597 5970 020 7418 8900

Equity Development Hannah Crowe Matt Evans

020 7065 2692

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 MARCH 2022

I am pleased to report that ECO continues to make strong progress on its journey towards building a broader and long term sustainable business.

Sales of our core Aivlosin business delivered strong growth in North America, South East Asia and Latin America.  Sales in Europe were slightly down due to supply chain and post Brexit importation difficulties. China, however, saw a major reduction in sales due to a very rapid and steep down cycle in the overall pig market.  Market cycles are a feature of our market, and looking through these, we believe there are opportunities for continued growth of our core Aivlosin business in the coming years.

The combination of the impact of the China market decline and our continued substantial investment in R&D has resulted in a significant reduction in bottom line performance for the year.  The Board believes that the significant investment in R&D is the most effective use of our cash flow and expects it to lead to a substantial and sustainable increase in shareholder value.

Our substantial investment in R&D has created a broad portfolio of vaccines and biologicals projects that offer competitive advantages over existing solutions in the market.  Some of these projects moved into advanced stages of development during the year and, based on current plans, the first projects are likely to receive regulatory approval before the end of calendar year 2023 .  We made an initial presentation of the portfolio and its potential future value at our Capital Markets Day in January 2022.  The Board is excited about the transformative potential of the portfolio to drive a major increase in shareholder value.  Further updates on R&D progress will be provided at the appropriate time in the coming year.

As we committed last year, we have laid out further information on our approach to ESG and will continue to develop and embed our strategy in this important area in the coming year.

We announced in July 2021 that Marc Loomes, the former Chief Executive ("CEO") of ECO, had informed the Board of his wish to retire by the end of 2022.  Marc joined ECO in 2004 and the contribution his leadership has made to the growth and development of the business cannot be understated.  We sincerely thank him and wish him every success and happiness in the next phase of his life.

We announced in January 2022 the appointment, effective 1 April 2022, of David Hallas as the new CEO of ECO.  David has more than 30 years of experience in the animal health sector and we are delighted to have been able to attract such a high calibre individual to lead ECO through the next phase of its development.

We were delighted to welcome Tracey James to the Board; she has now taken over as Chair of Audit Committee and will build on the foundations put in place by Tony Rawlinson who resigned from the Board as a Non-Executive Director.  After nearly eight years' service to the Board of ECO, I would like to personally thank him for his support and wisdom and wish him well for the future.  We will in due course seek to add a further Non-Executive Director to the Board.

The Board recognises the value of dividends to shareholders and balancing the need for prudent management of cash resources as well as funding the exciting pipeline of new products.  We have however decided that the best use of the Group's cash at the current time is in the new product development initiatives and accordingly no dividend will be recommended in respect of the year ended 31 March 2022. 

COVID-19 has remained a challenge during the year.  We are very appreciative and recognise that our people have shown great commitment and flexibility to keep ECO operating and progressing.

Finally, on behalf of the Board, I sincerely thank all our shareholders and stakeholders for the continued support you give to ECO, it is much valued and appreciated as we build out the next exciting phase for ECO.

Outlook

As anticipated, the first three months of the new financial year has seen Chinese revenue at a subdued level when compared with the record sales of the equivalent prior year period. This quarter coincided with a policy of extended urban lock-down within China in an attempt to control the spread of COVID-19.  This reduced pork consumption, prolonging the period during which major producers were trading at a loss and therefore dampened demand for Aivlosin ® .  However, gross margins in China were stronger due to the favourable customer mix and demand for Aivlosin ® in this period was at a similar level to that experienced before the ASF outbreak.

Recently the Chinese pork to feed price ratio has increased to greater than 5; this is the first occasion in the last year and is a primary indicator of improved profitability within the ECO customer base and an improved trading environment.  We believe that customers will remain cautious for the remainder of the calendar year; as winter disease outbreaks occur and the normal seasonal demand for pork increases, which is expected to lead to an increase in the demand for Aivlosin ® in during fourth quarter.

Outside of China, the first quarter of our financial year ending 31 March 2023 saw strong year-on-year growth.  This growth is particularly strong in our newer markets of South East Asia supported by the trends in USA and Brazil, which we currently expect to continue.

Like many businesses we are monitoring costs closely as the impact of increasing energy costs and general inflationary pressures will be felt by the business throughout this year.  We remain committed to a focused programme of new product development and are excited with the progress we are making.  We continue to focus our R&D activities on initiatives which will provide the greatest shareholder value whilst balancing the cost, return, risk and time to market.

We look forward to the rest of this financial year with cautious optimism and confidence.

Dr Andrew Jones

Non-Executive Chairman

CHIEF EXECUTIVE'S REPORT

FOR THE YEAR ENDED 31 MARCH 2022

This is my first report as Chief Executive, having succeeded Marc Loomes in April 2022. I am grateful to Marc for his leadership and considerable contributions to the growth and development of ECO.

The Group confronted a series of operational challenges during a year dominated by pork price volatility in China, and the global COVID-19 related disruption of work locations, international travel and supply chains. Despite the significant reduction in revenue from China, business in most other major markets advanced and the Group continued to invest in critical organisation development and strategically important R&D projects.

Operational Review

The difficult trading conditions in China which were primarily caused by low pork prices and subsequent negative profitability for swine producers, significantly impacted the Group's performance as global revenue declined by 22% to £82.2m. Excluding China and Japan, revenue advanced by 15% to £53.8m reflecting the value of ECO's global footprint (selling in more than seventy countries) and was an excellent and noteworthy performance.

Sales of Aivlosin®, our patented antimicrobial which is used under veterinary prescription for the treatment of economically important respiratory and gastrointestinal diseases in pigs and poultry, reduced by 17% to £72.9m (2021: £87.5m) due to reduced Chinese sales and accounting for 89% of total revenue.

Sales of the smaller Ecomectin® anti-parasitic range increased by 31% to £5.5m (2021: £4.2m) and represented 7% of the Group's revenue.

Sales of all other products were £3.7m (2021: £13.8m) and mainly comprised a range of supportive antimicrobial products for pigs in China.

Exposure to Russia and Ukraine is minimal with remaining Russian orders being fulfilled on a payment before collection basis.

Product Approvals

Two Aivlosin® marketing authorisations were obtained from the Ministry of Agriculture and Rural Affairs ("MOA") of the People's Republic of China for the use of Aivlosin® Water Soluble Granules. The first approval allows for the treatment of respiratory disease caused by Mycoplasma and other sensitive bacteria, in chickens laying eggs for human consumption and in breeding chickens. Aivlosin® is the first antimicrobial to be licensed by the Chinese MOA for laying birds with a zero day drug withdrawal period for eggs. China is the world's largest producer of table eggs and accounts for more than a third of the world's laying birds. The second approval was for swine respiratory disease ("SRD") adding three important bacterial respiratory pathogens of swine, Haemophilus parasuis, Pasteurella multocida, and Streptococcus suis to the existing Mycoplasma hyopneumoniae registration. Aivlosin® is approved for the treatment of SRD in other markets; it occurs worldwide and causes major economic losses to the pig industry due to mortality, reduction in growth rates and decreased feed efficiency.

Innovation through Research and Development

ECO started a programme of significant investment in vaccine R&D and in building our capability and expertise around four years ago and has seen encouraging progress within the portfolio of projects.

Two poultry vaccine projects progressed to full development during the year. These vaccines protect against respiratory disease estimated to cost the poultry industry over £600m and will enter a vaccine market segment currently worth over £100m. First approvals are expected towards the end of calendar 2023.

The Company's early-stage research and proof of concept activities are managed through collaborations with leading research institutions and universities with later stage full development work managed by ECO's experienced project leaders through contract research organisations. This model mitigates the significant costs associated with in-house laboratories and Company owned research facilities.

ECO has a formidable team of scientists and is building a significant product portfolio pipeline with a mix of well-established concepts and novel, highly competitive technologies and approaches with the emphasis on vaccines and other new products to complement our existing antimicrobial business. The pipeline is focused on providing solutions to respiratory and gastrointestinal (gut) diseases of major economic importance in pigs and poultry and is constantly refreshed as new opportunities are identified.

New product development expenditure in the year was £10.2m (2021: £9.1m) ensuring the acceleration of key projects.

A successful Capital Markets Day in early 2022 provided details of the significant commercial value that exists within ECO's pipeline of over 12 active projects with the first two late-stage development vaccines set to achieve approvals by the end of 2023, and several programmes expected to progress to clinical proof of concept and early development in 2022 and 2023.

Sustainable future and our ESG approach

We have made significant progress over the year on climate goals and on equity, diversity and inclusion. We include for the first time an ESG report. We have collected baseline metrics and will use these to track progress and to develop credible performance targets as part of a measurable climate transition plan.

By providing medicines and vaccines to pig and poultry producers, we improve the lives of both animals and the people who rely on them. The healthy animals that we help to produce assists the world with its sustainability goals of the alleviation of poverty and hunger.

COVID-19 Impact

The COVID-19 related restrictions on free movement have limited access to customers, most notably in China where travel remains severely curtailed, and created considerable supply chain disruption and uncertainty. Despite these constraints, the Company has successfully adopted a hybrid working model and has mitigated most COVID-19 related challenges through innovative ways of working.

People

Our people have demonstrated superb commitment and flexibility during a particularly challenging period for the business. We remain exceedingly grateful to our colleagues, customers, and suppliers in showing considerable resilience and engagement during a time of rapid and considerable change.

David Hallas

Chief Executive

FINANCE DIRECTOR'S REPORT

FOR THE YEAR ENDED 31 MARCH 2022

Introduction

The year ended 31 March 2022 has seen ECO further develop its long term aim of becoming a leader in the field of animal health, through the development of new and effective products that meet the needs of veterinary professionals caring for livestock. Targeted and effective research and development remains essential to achieving these goals. A Capital Markets Day, held earlier this year, presented more detail around the Group's R&D activity.

Supporting the commercial performance of our existing portfolio of businesses whilst ensuring a robust controls environment is in place to safeguard and maximise the return on assets is central to the ambition of the finance team, as well as supporting the strategic growth ambitions of the Group.

Trading

Previous years have seen a pattern of stronger trading in the second half of the year.  This is associated with disease prevalence in pigs during the Northern Hemisphere winter. We finished the last quarter of the year ended 31 March 2021 very strongly and the record pork prices in China continued into the first quarter of this financial year resulting in a strong start to the year ended 31 March 2022.  Our outlook statement last year signalled a slowdown in China in the latter part of the year and, as a result the second half weighting was less evident with 53% of revenue in the second half (the Group's second half revenue accounts for 60% of the total in the year ended 31 March 21).

A geographical analysis of revenue is as follows:

Revenue Summary	Year ended 31 March
	2022	2021	% change
	(£'m)	(£'m)
China and Japan	28.4	58.9	(52%)
North America (USA and Canada)	16.4	13.9	18%
South and South East Asia	11.8	9.1	30%
Latin America	15.8	14.3	10%
Europe	6.4	6.6	(3%)
Rest of World and UK	3.4	2.8	21%
	82.2	105.6	(22%)

Revenue from China and Japan in the second half of the year was £12.7m compared to the first six months ended 30 September 2021 of £15.7m. This unusual pattern of trading in China (second half at 45% of full year) underscores the extent of the slowdown in the China swine industry and the economic difficulties that producers have faced. Japan represents less than 5% of the combined revenues.

Aside from China and Japan, most other markets have demonstrated sustained revenue growth, arising from improving market share and relatively stable producer margins. The total revenue excluding China and Japan increased by 15% to £53.8m in the year ended 31 March 2022 compared with £46.7m in the year ended 31 March 2021.

Revenue in our key market of China (including Japan) was sharply down at £28.4m (2021: £58.9m) largely due to the record pork prices in 2021 resulting in record ECO Group revenue in 2021 followed by a sharp decline in pork prices and consequent difficult trading conditions for our customers.  Revenue in China and Japan in the last full year of trading before the outbreak of African Swine Fever ("ASF") (the year ended 31 March 2018) was £27.6m. The pork commodity price cycle in the last few years in China has exhibited more extreme peaks and troughs over a compressed timeline and this arose from the ASF outbreak in 2019.  The restructuring of the Chinese pork production industry over the period from 2019 resulted in over capacity and over supply which exceeded the immediate consumer demand.  This cycle had started to correct itself during the final quarter of our financial year, but a policy of COVID-19 lockdowns within major Chinese cities reduced demand for pork, extending the period of low pork prices.  Recently pork prices appear to be increasing and we look forward with cautious optimismto stronger trading in China. 

North America and Latin America demonstrated continued strong growth of 14% in the year; stable markets in the USA provided opportunity for market share expansion and Brazil, in particular, benefitted from exports to China in the early part of the year.

The sales performance in South and South East Asia has again been strong; despite both ASF and COVID-19 impacting these markets. Notably strong revenues were recorded in Thailand (an increase from £4.5m to £7.1m).  In addition, recovery in the Indian poultry market is signalled by some material orders received in the last quarter of the financial year.

Gross margins were 43% in the year ended 31 March 2022 (2021 restated: 50%).  This decline arose due to the combined effects of less volume through our key China market (certain elements of fixed cost within cost of sales) as well as less revenue from a high margin market.  China and Japan represented 35% of the Group's revenue in the year ended 31 March 2022 (2021: 56%).

Administrative expenses, at £22.9m, were lower than the year ended 31 March 2021 (£25.5m). Wages and salaries declined to £12.3m (2021: £13.8m) reflecting lower bonus accruals - specifically in China and in respect of the Executive Directors.  Foreign exchange gains of £1.0m were recorded in the year (2021: foreign exchange loss of £2.2m).  This arose in the main from the weakening of sterling compared with the US Dollar and the Chinese RMB.  Excluding the foreign exchange effects from administrative expenses the costs in the year were slightly higher than the prior year at £23.9m (2021: £23.3m).

As described in the Group's Interim Report, two development projects, which had previously been capitalised, were impaired in the year resulting in a charge to the income statement of £2.1m.  This impairment arose due to the prioritisation of certain other more promising R&D programmes.

Total expenditure on research and development in the year was £10.2m (2021: £9.1m). The total expenditure in R&D can be analysed as follows:

Year ended 31 March
	2022 £000's	2021 £000's
Research and development expenses - expensed in period	8,762	8,072
Development expenditure - capitalised in intangible assets	1,421	986
Total expenditure	10,183	9,058

Overall R&D expenditure in the year increased both in absolute terms (an increase of 12%) and as a percentage of revenue - cash expenditure was 12.4% of revenue in the year ended 31 March 2022 (2021: 8.6%).  This increase in expenditure reflects the Group's stated intention to invest in its promising pipeline of new technologies and new products.  It should also be noted that the proportion of R&D expenditure capitalised in the year has increased from 11% to 14% as more programmes have moved from the early research phase into the later development phase.  In particular, the Group's poultry mycoplasma vaccines have entered the final development phase and expenditure has begun to be capitalised.

EBITDA has historically represented a key performance measure for the Group; the removal of amortisation (which is a significant annual non-cash charge to profits), depreciation and exceptional items provides a good indication of the underlying cash trading performance of the business. The charge for amortisation of intangible assets in the year was £1.1m (2021: £0.9m). The adjusted EBITDA margin (excluding foreign exchange movements and expressed as a percentage of revenue in the period) was 6.6% in the year ended 31 March 2022 compared with 22.3% in the year ended 31 March 2021 (restated). This decline in the adjusted EBITDA margin arises principally due to weaker sales in China; the operational gearing from decreasing revenue with largely fixed overheads.

Profit before income tax has decreased to £1.4m in the year ended 31 March 2022 (2021 restated: £19.3m), due principally to the same reasons - EBITDA is weaker, as well as the one off impact of the R&D impairment (£2.1m).

The Group continues to benefit from a low effective tax rate in the UK due to the significant expenditure in the R&D programme for which R&D tax credits are claimed. Historic tax losses result in zero tax payable in the UK in the year. For the Group overall, in the year ended 31 March 2022 the effective tax rate was -151% (2021 restated: 18%), reflecting the impairment charge for which no tax deduction is received, higher tax rates in overseas jurisdictions as well as withholding tax on dividends and royalties set against low overall profit before tax.

Loss after tax was £0.7m in the year ended 31 March 2022 (2021 restated profit: £15.8m). Earnings per share ("EPS") has declined from 10.86 pence in the year ended 31 March 2021 (restated) to a loss per share of 1.01 pence in the year ended 31 March 2022; the decrease in EPS arises from the decline in the Group portion of post-tax profits.

The consolidated cash position in the Group has decreased from £19.5m at 31 March 2021 to £14.3m at 31 March 2022. This consolidated cash position at 31 March 2022 includes £6.1m (2021: £13.7m) which is held in the Group's subsidiary in China. A portion of this cash is repatriated from China once per annum by dividend declaration; the Group's share of the China cash distribution which is received in the UK is 51%. During the year the dividend received from the Group's holding in the China subsidiary was £2.3m - related to the China profitability in the year ended 31 December 2020 (2021: £0.6m - related to year ended 31 December 2019).

The cash generated from operations was significantly lower in the year ended 31 March 2022 at £2.5m (2021: £15.8m) reflecting the decreased profitability of the Group and an increase in Group inventories of £8.6m. The increase in Group inventories arose from a slowdown in the efficiency of international shipping during the year; this affected all businesses trading globally during 2021 and 2022, particularly those with procurement in China.  Additionally, the inventories in China started to increase before the year end in preparation for production stoppage over the summer of 2022 when production is switched to the new factory in China.  This project will be complete by November 2022 and the excess stock holding is planned to unwind during the production stoppage period. Trade receivables declined by 24% reflecting the reduction in Group revenues and an unwind of an exceptionally high closing debtors position as at 31 March 2021. From operating cashflow, income tax of £3.0m was paid, £1.6m of property, plant and equipment was purchased, development expenditure of £1.3m was capitalised, dividends were paid to the minority interest in China and ECO Animal Health Group plc shareholders (£2.9m in total), the US Dollar and other foreign denominated cash balances generated a foreign exchange gain of £1.3m and other sundry cash outflows of £0.3m resulted in an overall net cash decline of £5.2m and a cash balance at 31 March 2022 of £14.3m. The Group's £5m overdraft facility (undrawn at the year end) remains in place.

Prior Year Adjustment

It recently came to our attention that certain aspects of a sales tax related to imported products in a foreign jurisdiction where we operate through a subsidiary company, might have been applicable. ECO has been importing an increasing volume of product into this country in recent years. This issue is at an early stage and no tax payment has yet been determined. However, it is likely that a substantial tax settlement could be required in due course and an estimated sum of £2.5m has been provided for in the Statement of Financial Position. The sum has been apportioned to appropriate years, disclosed in Note 3 and charged to cost of sales within the Consolidated Income Statement.  The impact of this item in the year ended 31 March 2022 was an increase in cost of sales of £0.9m (2021 restated: £0.9m).

Exceptional items

In the Group's Interim Report, we described the impairment of previously capitalised R&D expenditure in relation to two projects which were paused during the year.  This impairment is shown as exceptional.  Additionally, we have created a provision for probable settlement of personnel related disputes.  These disputes are not expected to settle for some time.

Audit

The tax issue leading to the prior year adjustment and the exceptional items caused a delay to the finalisation of our audit this year.

The limitation in scope qualification in respect of non-attendance at stock takes at 31 March 2020 remains in the audit report this year because 31 March 2020 reflected the opening position for the comparative year ended 31 March 2021.  We expect this to be the last year in which this qualification arises.

Post balance sheet events

Marc Loomes, who joined ECO in 2004, became Managing Director in 2005 and CEO in 2010, retired from the Board of Directors on 1 April 2022. David Hallas joined ECO Animal Health Group plc as CEO on 1 April 2022. Tony Rawlinson, Non-Executive Director, resigned from the Board on 9 August 2022 to pursue other business opportunities.

The Group put in place a £10m revolving credit facility with NatWest Bank on 9 July 2022. This facility is committed, subject to half yearly covenant compliance checks and bears interest at a fixed margin over SONIA base rate.  The facility expires on 30 June 2026.

Christopher Wilks

Finance Director

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2022

		2022	2021 (restated)
	Notes	£000's	£000's
Revenue	4	82,195	105,607
Cost of sales		(47,059)	(52,858)
Gross profit		35,136	52,749
Other income	5	65	319
Research and development expenses	6	(8,762)	(8,072)
Administrative expenses		(22,914)	(25,547)
Impairment of intangible assets	12	(2,085)	-
Profit from operating activities	6	1,440	19,449
Finance income	7	190	129
Finance costs	7	(284)	(302)
Net finance expense		(94)	(173)
Share of profit of associate	16	43	38
		43	38
Profit before income tax		1,389	19,314
Income tax charge	9	(2,094)	(3,486)
(Loss)/Profit for the year		(705)	15,828
(Loss)/Profit attributable to:
Owners of the parent Company		(686)	7,337
Non-controlling interest	27	(19)	8,491
(Loss)/Profit for the year		(705)	15,828
(Loss)/earnings per share (pence)	8	(1.01)	10.86
Diluted (loss)/earnings per share (pence)	8	(1.01)	10.85
Earnings before Interest, Tax, Depreciation, Amortisation, Revaluation, Impairment, Legal provision, Share Based Payments and Foreign Exchange Differences	6	5,406	23,532

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2022

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
		2022	2021 restated
	Notes	£000's	£000's
(Loss)/Profit for the year		(705)	15,828
Other comprehensive income/(losses):
Items that may be reclassified to profit or loss:
Foreign currency translation differences		2,195	11
Items that will not be reclassified to profit or loss:
Deferred tax on property revaluations		1	84
Remeasurement of defined benefit pension schemes	24	24	(32)
Other comprehensive income/(losses) for the year		2,220	63
Total comprehensive income for the year		1,515	15,891
Attributable to:
Owners of the parent Company		435	7,681
Non-controlling interest	27	1,080	8,210
		1,515	15,891

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2022

	Share	Share	Revaluation	Other	Foreign	Retained	Total	Non-	Total
	Capital	Premium	Reserve	Reserves	Exchange	Earnings		controlling	Equity
		Account			Reserve			Interest
	£000's	£000's	£000's	£000's	£000's	£000's	£000's	£000's	£000's
Balance as at 31 March 2020 (restated)	3,377	62,882	572	106	800	5,982	73,719	5,766	79,485
Profit for the year (restated)	-	-	-	-	-	7,337	7,337	8,491	15,828
Other comprehensive income:
Foreign currency differences	-	-	-	-	292	-	292	(281)	11
Deferred tax on property revaluations	-	-	84	-	-	-	84	-	84
Actuarial gains on pension scheme assets	-	-	-	-	-	(32)	(32)	-	(32)
Total comprehensive income for the year	-	-	84	-	292	7,305	7,681	8,210	15,891
Transactions with owners:
Issue of shares in the year	2	376	-	-	-	-	378	-	378
Share-based payments	-	-	-	-	-	123	123	-	123
Dividends	-	-	-	-	-	-	-	(562)	(562)
Transactions with owners	2	376	-	-	-	123	501	(562)	(61)
Balance as at 31 March 2021 (restated)	3,379	63,258	656	106	1,092	13,410	81,901	13,414	95,315
Loss for the year	-	-	-	-	-	(686)	(686)	(19)	(705)
Other comprehensive income:
Foreign currency differences	-	-	-	-	1,096	-	1,096	1,099	2,195
Deferred tax on property revaluations	-	-	1	-	-	-	1	-	1
Actuarial gains on pension scheme assets	-	-	-	-	-	24	24	-	24
Total comprehensive income for the year	-	-	1	-	1,096	(662)	435	1,080	1,515
Transactions with owners:
Issue of shares in the year	2	61	-	-	-	-	63	-	63
Share-based payments	-	-	-	-	-	342	342	-	342
Dividends	-	-	-	-	-	(677)	(677)	(2,210)	(2,887)
Transactions with owners	2	61	-	-	-	(335)	(272)	(2,210)	(2,482)
Balance as at 31 March 2022	3,381	63,319	657	106	2,188	12,413	82,064	12,284	94,348

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2022

Company

	Share	Share	Revaluation	Other	Retained	Total
	Capital	Premium	Reserve	Reserves	Earnings
		Account
	£000's	£000's	£000's	£000's	£000's	£000's
Balance as at 31 March 2020	3,377	62,882	302	106	11,138	77,805
Loss for the year	-	-	-	-	(903)	(903)
Other comprehensive income:
Deferred tax on property revaluations	-	-	83	-	-	83
Actuarial loss on pension scheme assets	-	-	-	-	(32)	(32)
Total comprehensive loss for the year	-	-	83	-	(935)	(852)
Transactions with owners
Issue of shares in the year	2	376	-	-	-	378
Share-based payments	-	-	-	-	123	123
Dividends	-	-	-	-	-	-
Transactions with owners	2	376	-	-	123	501
Balance as at 31 March 2021	3,379	63,258	385	106	10,326	77,454
Loss for the year	-	-	-	-	(1,586)	(1,586)
Other comprehensive income:
Deferred tax on property revaluations	-	-	1	-	-	1
Actuarial loss on pension scheme assets	-	-	-	-	24	24
Total comprehensive loss for the year	-	-	1	-	(1,562)	(1,561)
Transactions with owners
Issue of shares in the year	2	61	-	-	-	63
Share-based payments	-	-	-	-	342	342
Dividends	-	-	-	-	(677)	(677)
Transactions with owners	2	61	-	-	(335)	(272)
Balance as at 31 March 2022	3,381	63,319	386	106	8,429	75,621

STATEMENTS OF FINANCIAL POSITION (CO. NUMBER: 01818170)

AS AT 31 MARCH 2022

		Group			Company
		2022	2021	2020	2022	2021
	Notes	£000's	£000's Restated	£000's Restated	£000's	£000's
Non-current assets

Intangible assets	12	34,304	36,108	36,020	-	-
Property, plant and equipment	13	3,465	2,181	2,426	748	651
Investment property	14	227	305	305	227	305
Right-of-use assets	15	1,773	1,399	1,658	59	37
Investments	16	212	180	166	20,032	20,032
Amounts due from subsidiary Company	18	-	-	-	53,940	55,909
Deferred tax assets		523	266	164	50	-
Total non-current assets		40,504	40,439	40,739	75,056	76,934
Current assets
Inventories	17	30,142	20,504	17,264	-	-
Trade and other receivables	18	25,969	32,452	28,353	338	281
Income tax recoverable		1,596	3,475	1,265	-	-
Other taxes and social security		1,075	496	652	386	27
Cash and cash equivalents	20	14,314	19,523	11,877	279	819
Total current assets		73,096	76,450	59,411	1,003	1,127
TOTAL ASSETS		113,600	116,889	100,150	76,059	78,061
Current Liabilities
Trade and other payables	21	(12,954)	(14,521)	(14,486)	(326)	(524)
Provisions		(3,875)	(1,782)	(1,128)	-	-
Borrowings		-	-	(2,032)	-	-
Income tax payable		(224)	(3,015)	(940)	-	-
Other taxes and social security		(239)	(501)	-	-	-
Lease liabilities	22	(397)	(311)	(342)	(13)	(7)
Dividends		(50)	(50)	(50)	(50)	(50)
Current liabilities		(17,739)	(20,180)	(18,978)	(389)	(581)
Net current assets		55,357	56,270	40,433	614	546
Total assets less current liabilities		95,861	96,709	81,172	75,670	77,480
Non-current liabilities
Deferred tax	19	-	(183)	(263)	-	6
Lease liabilities	22	(1,513)	(1,211)	(1,424)	(49)	(32)
TOTAL ASSETS LESS TOTAL LIABILITIES		94,348	95,315	79,485	75,621	77,454
EQUITY
Issued share capital	26	3,381	3,379	3,377	3,381	3,379
Share premium account		63,319	63,258	62,882	63,319	63,258
Revaluation reserve		657	656	572	386	385
Other reserves	28	106	106	106	106	106
Foreign exchange reserve	28	2,188	1,092	800	-	-
Retained earnings		12,413	13,410	5,982	8,429	10,326
Shareholders' funds		82,064	81,901	73,719	75,621	77,454
Non-controlling interests	27	12,284	13,414	5,766	-	-
Total equity		94,348	95,315	79,485	75,621	77,454

STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2022

		Group		Company
		2022	2021 (restated)	2022	2021 restated
	Notes	£000's	£000's	£000's	£000's
Cash flows from operating activities

Profit/(loss) before income tax		1,389	19,314	(1,611)	(916)
Adjustment for:
Finance income	7	(190)	(129)	(832)	(875)
Finance cost	7	284	302	71	65
Foreign exchange (gain)/loss		(989)	559	(2)	(3)
Depreciation	13	455	430	28	15
Amortisation of right-of-use assets	15	398	403	16	24
Revaluation of investment property	14	78	-	78	-
Amortisation of intangible assets	12	1,140	898	-	-
Impairment of intangible assets	12	2,085	-	-	-
Share of associate's results	16	(43)	(38)	-	-
Share based payment charge		342	123	342	8
Dividends received		-	-	(177)	(46)
Operating cash flows before movements in working capital		4,949	21,862	(2,087)	(1,728)
Change in inventories		(8,585)	(3,698)	-	-
Change in receivables		7,630	(3,959)	2,385	4,044
Change in payables		(2,868)	753	(174)	33
Movement in provisions	23	1,392	868	-	-
Cash generated from/(used in) operations		2,518	15,826	124	2,349
Interest paid		(106)	(79)	(60)	(54)
Income tax		(2,960)	(3,766)	(17)	(5)
Net cash (used in) /from operating activities		(548)	11,981	47	2,290
Cash flows from investing activities
Acquisition of property, plant and equipment	13	(1,624)	(212)	(125)	(37)
Disposal of property, plant and equipment	13	3	11	-	-
Purchase of intangibles	12	(1,263)	(861)	-	-
Finance income	7	190	129	-	-
Dividends received		-	-	177	46
Net cash (used in)/from investing activities		(2,694)	(933)	52	9
Cash flows from financing activities
Proceeds from issue of share capital		63	378	63	378
Interest paid on lease liabilities	22	(111)	(122)	(11)	(11)
Principal paid on lease liabilities	22	(371)	(378)	(14)	(23)
Dividends paid		(2,886)	(562)	(677)	-
Net cash (used in)/from financing activities		(3,305)	(684)	(639)	344
Net (decrease)/increase in cash and cash equivalents		(6,547)	10,364	(540)	2,643
Foreign exchange movements		1,338	(686)	-	-
Balance at the beginning of the period		19,523	9,845	819	(1,824)
Balance at the end of the period	20	14,314	19,523	279	819

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2022

1.  General information

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

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

The financial information set out in the announcement does not constitute the Group's statutory accounts for the year ended 31 March 2022 or 31 March 2021. The auditors reported on those accounts and their report (i) was qualified at both year ends by virtue of limitation in scope in respect of non-attendance at certain physical inventory counts on 31 March 2020; (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for the year ended 31 March 2022 have not yet been delivered to the Registrar of Companies.

2.  Summary of the Group and Company's significant accounting policies

2.1  Basis of preparation

These financial statements have been prepared in accordance with UK adopted International Financial Reporting Standards. There were no changes to accounting policies on adoption of UK IFRSs.

The preparation of financial statements, in accordance with UK-adopted international accounting standards, requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Further details of estimates and judgements are provided in note 2.30 .

The principal accounting policies are set out below and have been applied consistently in dealing with items which are considered material in relation to the financial statements. They are prepared under the historical cost convention with the exception of certain items which are measured at fair value as described in the accounting policies below.

Going Concern

After making appropriate enquiries, the Directors have, at the time of approving the financial statements, formed a judgement that there is a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.

This conclusion is based on a review of the resources available to the Group, taking account of the Group's financial projections together with available cash and committed borrowing facilities, which include a £10m Revolving Credit Facility effective from July 2022 to June 2026 on top of the existing £5m overdraft facility The Directors have performed a reverse stress test on the business, by considering what quantum of revenue and gross margin reduction would be required to exhaust all available funds within 12 months of the date of approving the accounts. The Directors concluded that the likelihood of such a reduction was remote, and therefore that no material uncertainty exists with respect of going concern.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.2  Adoption of new and revised standards

The following new standards, amendments and interpretations for existing standards became effective in the financial year. These standards have been applied in preparing these financial statements but did not have a material effect.

§ Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);

§ Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);

§ Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and

§ References to Conceptual Framework (Amendments to IFRS 3).

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that have been adopted early.

The following standard is effective from 1 January 2023.

§ IFRS 17 - Insurance Contracts

The following amendments are effective for the period beginning 1 January 2023:

§ Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2;

§ Classification of Liabilities as Current or Non-current (Amendments to IAS 1);

§ Definition of Accounting Estimates (Amendments to IAS 8); and

§ Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).

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

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

2.3  Basis of consolidation

The consolidated financial statements comprise the accounts of the Company and its subsidiaries drawn up to 31 March 2022.

An entity is classed as a subsidiary of the Company when as a result of contractual arrangements, the Company has the power to govern its financial and operating policies so as to obtain benefits from its activities.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured, as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value, the difference is recognised directly in the income statement.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.3   Basis of consolidation (continued)

Accounting policies of subsidiaries have been changed where material to ensure consistency with the policies adopted by the Group. Although the subsidiaries in Brazil and China and the joint operations in the USA and Canada all have December year ends, the Group uses management accounts to the end of March to prepare the Group accounts.

Subsidiaries are wholly consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation.

The Group initially recognised any non-controlling interest in the acquiree at the non-controlling interest's proportionate share of the acquiree's net assets. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. The Group has not elected to take the option to use fair value in acquisitions completed to date.

Profit or loss and each component of Other Comprehensive Income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

2.4  Segment reporting

Operating segments are reported in a manner consistent with the internal reporting to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments has been identified as the Board.

2.5  Foreign currency translation

(a)  Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("functional currency"). The consolidated and company financial statements are presented in Pounds Sterling, which is the Company's functional currency.

(b)  Transactions and balances

Monetary assets and liabilities denominated in foreign currencies are translated into Pounds Sterling at the rates of exchange ruling at the date of the financial statements.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement within administrative expenses.

Foreign exchange gains and losses that relate to borrowing and cash and cash equivalents are presented in the income statement within administrative expenses.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.5   Foreign currency translation (continued)

(c)  Group companies

The results and financial position of all Group entities that have a functional currency different from the Group's functional and presentation currency are translated into the Group's functional and presentation currency as follows:

· assets and liabilities for each Statement of financial position presented are translated at the closing exchange rate at the date of the Statement of financial position;

· income and expenses for each income statement are translated at average exchange rates unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case the income and expenses are translated at the rate on the dates of the transaction; and

· all resulting exchange differences are recognised through other comprehensive income as a separate component of equity.

When a foreign operation is partially disposed or sold, exchange differences that were recognised in equity are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rate.

2.6  Financial instruments

Financial assets

Financial assets comprise mainly trade and other receivables and cash and cash equivalents in the consolidated statement of financial position. These financial assets arise principally from the provision of goods to customers and are measured at amortised cost.

Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process, the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within Administrative expenses in the consolidated income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.6   Financial instruments (continued)

Financial liabilities

Financial liabilities comprise mainly trade and other payables and bank overdrafts in the consolidated statement of financial position. These financial liabilities are initially recognised at fair value and subsequently measured at amortised cost in accordance with IFRS 9.

2.7  Goodwill

Goodwill arising on the acquisition of an entity represents the excess of the costs of acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition.

Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not subject to amortisation but is tested for impairment annually.

Negative goodwill arising on an acquisition is recognised directly in the income statement. On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss recognised in the income statement on disposal. Goodwill arising before the date of transition to IFRS, on 1 April 2004, has been retained at the previous UK GAAP amounts, subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal.

2.8  Other intangible assets

IAS 38 - Intangible Assets includes guidance on the accounting for Research and Development expenditure. Such an intangible asset is a resource that is controlled by the entity as a result of past events (for example, purchase or self-creation) and from which future economic benefits (inflows of cash or other assets) are expected. The three critical attributes of an intangible asset are:

· Identifiability;

· control (power to obtain benefits from the asset); and

· future economic benefits (such as revenues or reduced future costs).

Identifiability

An intangible asset is identifiable when it:

· is separable (capable of being separated and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract); or

· arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

Development expenditure - whether purchased or self-created (internally generated) is an example of an intangible asset, governed under IAS 38.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.8   Other intangible assets (continued)

Recognition criteria

IAS 38 requires an entity to recognise an intangible asset (at cost) if, and only if:

· it is probable that the future economic benefits that are attributable to the asset will flow to the entity; and

· the cost of the asset can be measured reliably.

IAS 38 includes additional recognition criteria for internally generated intangible assets.

Expenditure on the research phase of an internal project is expensed as incurred. Expenditure in the development phase of an internal project is capitalised if the entity can demonstrate:

a)  the technical feasibility of completing the intangible asset so that it will be available for use or sale.

b)  its intention to complete the intangible asset and use or sell it.

c)  its ability to use or sell the intangible asset.

d)  how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.

e)  the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.

f)  its ability to measure reliably the expenditure attributable to the intangible asset during its development.

The probability of future economic benefits must be based on reasonable and supportable assumptions about conditions that will exist over the life of the asset.

If an entity cannot distinguish the research phase of an internal project to create an intangible asset from the development phase, the entity treats the expenditure for that project as if it were incurred in the research phase only.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.8   Other intangible assets (continued)

The Group context of IAS 38

Since the early start-up stages of the business, the Group has and continues to invest significant expenditure in research and development into new animal treatments and therapies. This has resulted in a significant family of pharmaceutical treatments for pigs and poultry. Branded as Aivlosin, this product has developed over 20 years into treatments for multiple respiratory and intestinal infections - each of which have separate regulatory and marketing approvals in each target market. The work to bring Aivlosin from the laboratory to the commercial farm has moved through the classical phases of pharmaceutical development and the ECO Animal Health R&D model can be described by the following broad phases:

• The discovery phase - in vitro, in laboratory.

• The proof of concept phase - key efficacy trials in small groups of animals.

• The exploratory development phase - optimisation of dose, economic validation.

• The full development phase - building the data set for dossier submission.

• Submission of an application for regulatory approval.

• Marketing and regulatory approval granted - commercial revenue begins.

The application of the principles of IAS 38 to the above model is to treat expenditure on Research and Development as an expense until the likely commercial benefits that will flow from the project can be judged to be highly probable. This means that the technical feasibility (judged by reference to efficacy) must be certain, the economic feasibility (judged by reference to manufacturing methodology, market intelligence, overall programme cost) has to be highly probable and the likelihood of gaining regulatory approval must be judged to be highly probable. The Directors consider that capitalisation will generally commence once a project enters the full development phase.

In practice, work that is undertaken to build towards regulatory approval for a new treatment claim using Aivlosin, existing approved vaccines or other technologies, or an approval for marketing existing technologies or applications in a new geographical market can be viewed as starting at the full development phase  and are likely to meet the capitalisation criteria whereas costs in relation to some of the Group's recently announced projects, on vaccine development, for example, are likely to meet the capitalisation requirements once they are approved internally to commence the full development phase, subject to careful consideration of residual technical feasibility/risk.

Amortisation of capitalised expenditure is determined with reference to the point at which regulatory approval is given to the product to which the expenditure relates.  For historic periods, the approach adopted has been to amalgamate the expenditure incurred on all projects relating to the same product, since the last regulatory approval and then identify the next nearest regulatory approval given for that product in either the same or a subsequent half-year.  Amortisation begins in the half-year following the receipt of regulatory approval.  A full six months of amortisation is charged in the first half-year for which costs are amortised.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.8 Other intangible assets (continued)

Where the Group has capitalised costs which relate to multiple products, a proportional method is adopted to determined what ratio of costs capitalised to date should be subject to amortisation.  This method first looks at capitalised costs that relate to specific products and identifies the proportion of such costs that are subject to amortisation at the end of any given half-year period.  The ratio thus calculated is then applied to those costs that relate to multiple products to determine the portion that should be subject to amortisation. 

These approaches have been modified where it is possible to allocate an individual capitalised cost to a single identifiable project.  In these cases the start date for amortisation is the half-year following the half-year period in which the project receives regulatory approval.  Where regulatory approval has not been received for a project, the amortisation has not started.

Amortisation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:

Aivlosin    5% on cost

Ecomectin  10% on cost

Vaccines  5% on cost

Trade marks and patents   10% on cost

2.9  Property, plant and equipment and depreciation

Plant and equipment are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:

Plant and machinery    10%-20 % on cost

Fixtures, fittings and equipment   10%-20 % on cost

Motor vehicles      25 % on cost

Leasehold Improvement  18%-25% on cost

Freehold land and buildings valuations are measured as a level 3 recurring fair value measurement. The property is professionally valued by a qualified surveyor at least once every three years. Surpluses (which are not reversals of previous deficits) arising from the periodic valuations are taken to other comprehensive income, and deficits (which are not reversals of previous surpluses) are taken to the income statement within administrative expenses. Depreciation is provided at a rate calculated to expense the valuation less estimated residual value over the remaining useful life of the building at a rate of 2% per annum on a straight line basis. Land is not depreciated.

2.10  Impairment of non-financial assets

The carrying amounts of assets are reviewed at each year end, to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated in order to determine the impairment loss if any. The recoverable amount is the higher of its fair value and its value in use. For intangible assets with an indefinite useful life or not available for use, an impairment test is performed at each year end.

In assessing value in use, the expected future cashflows from the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.10   Impairment of non-financial assets (continued)

An impairment loss is recognised in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.

A previously recognised impairment loss for costs other than goodwill is reversed if the recoverable amount increases as a result of a change in the estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior years and no reversal of impairment losses recognised on goodwill.

2.11  Investment property

Investment property is held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at fair value as a level 3 recurring fair value measurement.

The property is professionally valued by a qualified surveyor at least once every three years. Surpluses and deficits arising from the periodic valuations are taken to the income statement within administrative expenses.

2.12  Investments in subsidiaries

An investment in a subsidiary is where the Group own a controlling interest in an entity.  Investments in subsidiaries are stated at cost less impairment in the Parent Company's statement of financial position.

Other non-current asset investments are stated at fair value. They are recognised or derecognised on the date when the contract for acquisition or disposal requires the delivery of that investment.

Investments are assessed for impairment at the end of each reporting period. An impairment is recognised in profit or loss when the recoverable amount of an asset is less than its carrying amount, with the value of any impairment being the difference between the recoverable amount and carrying amount .

Impairments can be reversed in subsequent periods where there is any indication that the impairment loss recognised in a prior period may no longer exist or have decreased.

2.13  Joint Arrangements

A joint arrangement is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control; that is, when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.13   Joint Arrangements (continued)

The group classifies its interests in joint arrangements as either:

-  Joint ventures: where the group has rights to only the net assets of the joint arrangement.

-  Joint operations: where the group has both the rights to assets and obligations for the liabilities of the joint arrangement.

In assessing the classification of interests in joint arrangements, the Group considers:

-  The structure of the joint arrangement.

-  The legal form of joint arrangements structured through a separate vehicle.

-  The contractual terms of the joint arrangement agreement.

-  Any other facts and circumstances (including any other contractual arrangements).

The Group has interests in joint operations. The Group recognises its share of the assets, liabilities, income, expenses and cashflows of joint operations combined with the equivalent items in the consolidated financial statements on a line by line basis.

2.14  Investments in Associates

An associate is an entity in which an investor has significant influence but not control or joint control. Significant influence is defined as "the power to participate in the financial and operating policy decisions but not to control them".

The Group reports its interests in associates using the equity method of accounting. Under this method, an equity investment is initially recorded at cost (subject to initial fair value adjustment if acquired as part of the acquisition of a subsidiary) and is subsequently adjusted to reflect the Group's share of the net profit or loss of the associate. If the Group's share of losses of an associate equals or exceeds its "interest in the associate", the Group discontinues recognising its share of further losses. If the associate subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

2.15  Leasing

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Group applies a single recognition and measurement approach for all leases under IFRS 16, except for short-term leases and leases of low-value assets.

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease, which is the date the underlying asset is available for use. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date, less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.15   Leasing (continued)

If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

The right-of-use assets are also subject to impairment. Refer to the accounting policies in the section  2.10 for further details.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of the lease payments to be made over the lease term. The lease liabilities include the present value of the following lease payments:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable;

• variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date;

• amounts expected to be payable by the Group under residual value guarantees;

• the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and

• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term, a change in the lease payments (for example, changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.

The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Extension and termination options

Extension and termination options are included in a number of property and equipment leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group's operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor.

The Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.15   Leasing (continued)

Recognition exemptions

The Group applies the short-term lease recognition exemption to its short-term leases, being those leases that have a lease term of twelve months or less from the commencement date and do not contain a purchase option.

The Group also applies the recognition exemption to leases of which the underlying asset is of low value, comprising assets below the Group's capitalisation threshold. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

Practical expedients

The Group applies a single discount rate to a portfolio of leases with reasonably similar characteristics.

2.16  Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is determined using the historical batch price of the principal raw materials and the weighted average cost for other ingredients and other product costs. The cost of finished goods comprises raw materials, packaging costs and sub-contracted manufacturing costs. Net realisable value is the estimated selling price in the ordinary course of business, less any costs which would be incurred in completing the goods ready for sale.

2.17  Trade receivables

Trade receivables are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method. Trade receivables are presented net of discounts or other variable consideration adjustments earned, where the expectation and intention is to settle the balance net. Impairment provisions are recognised based on the simplified approach in accordance with IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. See impairment section in section '2.6 Financial instruments' for more details.

2.18  Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks, other short‑term highly liquid investments with original maturities of three months or less. For the purpose of the statement of cash flows, bank overdrafts are included in the presentation of cash and cash equivalents.

2.19  Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in assets after deducting all of its liabilities.

2.20  Bank borrowings and loans

Interest-bearing bank loans and overdrafts are recorded as the proceeds received, net of direct issue costs (which equate to fair value). Finance charges including premiums payable on settlement or redemption and direct issue costs are accounted for on an amortised cost basis in profit or loss using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

2.21  Trade payables

Trade payables are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.22  Provisions

Provisions are recognised when there is a present obligation as a result of a past event and it is probable that the an outflow of resources will be required to settle the obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation outstanding at the year end and are discounted to present value where the effect is material.

2.23  Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Group's activities. The Group's revenue is principally derived from selling goods with revenue recognised at a point in time when control of the goods has transferred to the customer.

Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the Group. Transaction price is determined by the contract and variable consideration relating to discounts, free goods or volume rebates have been constrained in estimating contract revenue that is highly probable by using the most likely amount method.

The Group's contracts for delivery of goods are less than 12 months, there are no warranties within its sales contracts.

Revenue is recognised when the performance obligation is fulfilled and the amount can be measured reliably.  The performance obligation is fulfilled when control of the goods passes to the customer, which is normally in accordance with Incoterms or receipt by customer. No goods are dispatched on a sale or return basis. Distributors trade on their own account and not as agents.

The Group also receives interest and royalty income, which are recognised on an accruals basis.

2.24  Pensions

Defined Contribution Scheme

The pension costs charged against operating profits represent the amount of the contributions payable to the schemes in respect of the accounting period.

Defined Benefit Scheme

The regular cost of providing retirement pensions and related benefits is charged to the income statement over the employees' service lives on the basis of a constant percentage of earnings. The present value of the defined benefit obligation less the fair value of the plan assets is disclosed as an asset or liability in the statement of financial position in accordance with IAS 19. The disclosure of a net defined benefit asset is limited to the present value of any economic benefit available in the form of refunds from the plan or reductions in future contributions to the plan. Actuarial gains or losses are recognised through other comprehensive income.

2.25  Share-based payments

The Group issues equity-settled share options to certain employees in exchange for services from those employees. Equity-settled share options are measured at fair value (excluding the effect of non -market based vesting conditions) at the date of grant.

The fair value determined at the grant date of such equity-settled share options is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions (with a corresponding movement in equity).

Fair value is measured by use of the Black-Scholes model for those options granted with non-market performance conditions. The expected life used in the model has been established based on management's best estimate of the effects of non-transferability, exercise restrictions and behaviour considerations. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.25   Share-based payments (continued)

In addition a Monte Carlo simulation model has been used to model future market outcomes for those options granted with a market performance condition. 

Further details of the inputs to the Black-Scholes and Monte Carlo simulation models can be found in note 25 to the accounts. 

Share-based payment charges are credited to retained earnings. 

2.26  Taxation

Tax expense for the period comprises current and deferred tax.

Current tax, including UK corporation tax and foreign tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the year end. Tax expenses are recognised in profit or loss or other comprehensive income according to the treatment of the transactions which give rise to them.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax basis of assets and liabilities and their carrying amount in the financial statements.

Deferred income tax is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the date of the statement of financial position and are expected to apply when the related deferred tax asset is realised or deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

IFRIC 23 Uncertainty over Income Tax Treatments

IFIRC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The interpretation requires:

§ the Group to determine whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution;

§ the Group to determine if it is probable that the tax authorities will accept the uncertain tax treatment; and

§ if it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. The measurement is required to be based on the assumption that each of the tax authorities will examine amounts they have a right to examine and have full knowledge of all related information when making those examinations.

2.27  Equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Amounts arising on the restructuring of equity and reserves to protect creditor interests are credited to the capital redemption reserve.

Amounts arising from share-based payment expenses are recorded within retained earnings.

The cost of its own shares bought into treasury is debited to retained earnings as required by the Companies Act 2006. A subsequent sale of these shares would result in this entry being wholly or partly reversed with any profit on the sale being credited to Share Premium.

Amounts arising from the revaluation of non-monetary assets and liabilities held in foreign subsidiaries, and joint operations are held within the foreign exchange revaluation reserve.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.28  Non-controlling interest

For each business combination, the Group elects to measure any non-controlling interest in the acquiree either at fair value or at their proportionate share of the acquiree's identifiable net assets. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owner. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in the statement of profit or loss.

2.29  Dividend distribution

Dividends are recorded when they become a legal obligation of the Company. For final dividends, this will be when they are approved by the shareholders at the AGM. For interim dividends, this will be when they have been paid. 

2.30  Critical accounting estimates and judgements

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:

Capitalisation and impairment review of intangible assets

The Group assesses development costs incurred for capitalisation in accordance with the requirements of IAS38 and the Group's accounting policy described in note 2.8. The stage of development and assessment of technical and commercial feasibility, in particular, require the use of judgements and estimates in consultation with the new product development team.

The Group tests annually whether intangible assets with indefinite life, or not yet available for use, have suffered any impairment. Other intangible assets are reviewed for impairment when an indication of potential impairment exists. Impairment provisions are recorded as applicable based on Directors' estimates of recoverable values.

The recoverable amounts of the Cash Generating Units (CGU's) to which intangible assets are allocated are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates, growth rates and the estimated remaining useful life of the asset. The Group also reviews and quantifies the tax implications related to any recognised impairments and these are included within tax calculations as appropriate.

Further details of the impairment reviews performed can be found in note 12 of the financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.30   Critical accounting estimates and judgements (continued)

Income taxes

The Group is subject to income taxes in all jurisdictions in which it operates.

Significant judgements are required in determining the provision for income taxes including the use of tax losses and in estimating deferred tax assets arising from unused tax losses or credits. There are some transactions and calculations for which the ultimate tax determination is uncertain, including tax credits for research and development expenditures, the treatment of some specific overseas transactions, and tax impact of the price of goods traded between group entities. Therefore the Group recognises assets and liabilities based on estimates of the final agreed position.

Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Deferred tax assets on timing differences are recognised to the extent by which the Directors estimate that future profits will be generated to utilise the underlying costs or losses to which they relate.

Pension scheme

The Group maintains one defined benefit pension scheme which has been accounted for according to the provisions of IAS 19. Although the assumptions were determined by a qualified actuary, any change in those assumptions may materially impact the financial position and results of the Group. Details of the assumptions used can be found in note 23 of the financial statements.

Share-based payments

The charge to the Income Statement in respect of share-based payments has been externally calculated using management's best estimates of the amount of options expected to vest and various other inputs to the Black-Scholes and Monte Carlo simulation valuation models, as disclosed in note 25 . Variations in those assumptions in the model may have a material impact on the Group's results and financial position at the time of valuation.

Leases - estimating the incremental borrowing rate

Where the Group cannot readily determine the interest rate implicit in the lease, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group 'would have to pay', which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease.

In practice, the Group considered the following aspects in the assessment of IBR. Once decided, the IBR will remain unchanged unless there are modifications in lease terms or changes in the assessment of an option to purchase the underlying asset.

A base rate that reflects economic environment and the term of the lease. This is mainly derived from the yield of a government bond issued by the country in which the Group has in scope leases. Where the term of the lease does not conform with the maturity period of the bond, the Group considered other available information such as yields on the bonds with the nearest maturity period, or the yield curve published by the country's treasury department. Considering there is often a difference in the cash flow profile between a lease and government bond, the Group has decided to reduce the base rate by 0.05% to 0.10%.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

2.30   Critical accounting estimates and judgements (continued)

Financing factors that reflect the lessee companies' risk premium on borrowing. Management considered the financial strength and credit risk of the lessee companies and has estimated the credit spread to be in the range of 1.50% to 5.00%.

Asset factors that reflect the quality of hypothetical security. Depending on the location and type of underlying assets, the Group expects the quality of security in this hypothetical borrowing transaction to vary. For example, the right to use a warehouse in rural areas may provide less relevant security compared to commercial office in a major city's central business district. Based on the Group's assessment, the asset factor ranges between - 0.45% to - 0.50%.  

The weighted average of the discount rates applied by the Group is as follows:

		2022	2021
Property		4.3%	5.9%
Vehicle		29.0%	29.0%
Other		4.0%	4.0%
Weighted average		5.7%	7.2%

Fair value measurement

A number of assets and liabilities included in the Group's financial statements require measurement, and/or disclosure of, fair value.

The fair value measurement of the Group's financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the 'fair value hierarchy'):

-  Level 1 : Quoted prices in active markets for identical items (unadjusted).

-  Level 2 : Observable direct or indirect inputs other than Level 1 inputs.

-  Level 3 : Unobservable inputs (i.e. not derived from market data).

The classification of an item into the above levels is based on the lowest level of inputs used that has a significant effect on the fair value measurement of the item.

The Group measures a number of items at fair value, including:

§ land and buildings (note 13 );

§ investment property (note 14 );

§ Pension and other post-retirement benefit commitments (note 23)

§ share-based payments (note 25 ); and

§ initial recognition of financial instruments (note 32 ).

For more detailed information in relation to the fair value measurement of the items above please refer to the applicable notes.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

3.  Prior Year Restatement

The Group has become aware of tax liabilities in a foreign jurisdiction associated with the importation of goods and which would have fallen due in previous periods. The Group had not previously recognised a liability, nor had it recognised a cost, in the financial records for the years ended 31 March 2021, 31 March 2020 or periods prior. 

The Group has estimated the total liabilities, the related foreign corporation tax impact, and their effect on the prior periods' consolidated financial statements. As the Group has only recently become aware of the liability, it has yet to confirm the exact amounts payable and it is not clear when a settlement of these obligations will occur, however precedent suggests that this may be up to 7 years.

The tax is related to the importation of goods and therefore charged to cost of sales. The associated corporation tax impact is shown in the Group's corporation tax charge and deferred tax asset.

The prior years' restatement in respect of these tax liabilities did not have an effect on the individual financial statements of the Company.

The impact of the prior years' restatement on the Group's financial statements is detailed below.

Impact on the Group consolidated income statement for the year to 31 March 2021

	As reported	Adjustments	2021 (restated)
	£000's	£000's	£000's
Revenue	105,607	-	105,607
Cost of sales	(51,990)	(868)	(52,858)
Gross profit	53,617	(868)	52,749
Other income	319	-	319
Research and development expenses	(8,072)	-	(8,072)
Administrative expenses	(25,547)	-	(25,547)
Profit from operating activities	20,317	(868)	19,449
Finance income	129	-	129
Finance costs	(200)	(102)	(302)
Net finance expense	(71)	(102)	(173)
Share of profit of associate	38	-	38
	38	-	38
Profit before income tax	20,284	(970)	19,314
Income tax charge	(3,635)	149	(3,486)
Profit for the year	16,649	(821)	15,828
Profit attributable to:
Owners of the parent Company	8,158	(821)	7,337
Non-controlling interest	8,491	-	8,491
Profit for the year	16,649	(821)	15,828
Earnings per share (pence)	12.08	(1.22)	10.86
Diluted earnings per share (pence)	12.07	(1.22)	10.85
Earnings before Interest, Tax, Depreciation, Amortisation, Share Based Payments and Foreign Exchange Differences	24,400	(868)	23,532

Impact on the Group statement of comprehensive income for the year to 31 March 2021

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	As reported	Adjustments	2021 (restated)
	£000's	£000's	£000's
Profit for the year	16,649	(821)	15,828
Other comprehensive income/(losses):
Items that may be reclassified to profit or loss:
Foreign currency translation differences	(258)	269	11
Items that will not be reclassified to profit or loss:
Deferred tax on property revaluations	84	-	84
Remeasurement of defined benefit pension schemes	(32)	-	(32)
Other comprehensive income/(losses) for the year	(206)	269	63
Total comprehensive income for the year	16,443	(552)	15,891
Attributable to:
Owners of the parent Company	8,233	(552)	7,681
Non-controlling interest	8,210	-	8,210
	16,443	(552)	15,891

Impact on consolidated statement of financial position

	2021 As reported	Adjustments	2021 As restated	2020 As reported	Adjustments	2020 As restated
	£000's	£000's	£000's	£000's		£000's
Non-current assets
Intangible assets	36,108	-	36,108	36,020	-	36,020
Property, plant and equipment	2,181	-	2,181	2,426	-	2,426
Investment property	305	-	305	305	-	305
Right-of-use assets	1,399	-	1,399	1,658	-	1,658
Investments	180	-	180	166	-	166
Amounts due from subsidiary Company	-	-	-	-	-	-
Deferred tax assets	-	266	266	-	164	164
Total non-current assets	40,173	266	40,439	40,575	164	40,739
Current assets
Inventories	20,504	-	20,504	17,264	-	17,264
Trade and other receivables	32,452	-	32,452	28,353	-	28,353
Income tax recoverable	3,475	-	3,475	1,265	-	1,265
Other taxes and social security	496	-	496	652	-	652
Cash and cash equivalents	19,523	-	19,523	11,877	-	11,877
Total current assets	76,450	-	76,450	59,411	-	59,411
TOTAL ASSETS	116,623	266	116,889	99,986	164	100,150
Current Liabilities
Trade and other payables	(14,521)	-	(14,521)	(14,486)	-	(14,486)
Provisions	-	(1,782)	(1,782)	-	(1,128)	(1,128)
Borrowings	-	-	-	(2,032)	-	(2,032)
Income tax payable	(3,015)	-	(3,015)	(940)	-	(940)
Other taxes and social security	(501)	-	(501)	-	-	-
Lease liabilities	(311)	-	(311)	(342)	-	(342)
Dividends	(50)	-	(50)	(50)	-	(50)
Current liabilities	(18,398)	(1,782)	(20,180)	(17,850)	(1,128)	(18,978)
Net current assets	58,052	(1,782)	56,270	41,561	(1,128)	40,433
Total assets less current liabilities	98,225	(1,516)	96,709	82,136	(964)	81,172
Non-current liabilities
Deferred tax	(183)	-	(183)	(263)	-	(263)
Lease liabilities	(1,211)	-	(1,211)	(1,424)	-	(1,424)
TOTAL ASSETS LESS TOTAL LIABILITIES	96,831	(1,516)	95,315	80,449	(964)	79,485
EQUITY
Issued share capital	3,379	-	3,379	3,377	-	3,377
Share premium account	63,258	-	63,258	62,882	-	62,882
Revaluation reserve	656	-	656	572	-	572
Other reserves	106	-	106	106	-	106
Foreign exchange reserve	549	543	1,092	526	274	800
Retained earnings	15,469	(2,059)	13,410	7,220	(1,238)	5,982
Shareholders' funds	83,417	(1,516)	81,901	74,683	(964)	73,719
Non-controlling interests	13,414	-	13,414	5,766	-	5,766
Total equity	96,831	(1,516)	95,315	80,449	(964)	79,485

Impact on consolidated statement of cashflows

	2021 As reported	Adjustments	2021 restated
	£000's	£000's	£000's
Cash flows from operating activities
Profit/(loss) before income tax	20,284	(970)	19,314
Adjustment for:
Finance income	(129)	-	(129)
Finance cost	200	102	302
Foreign exchange (gain)/loss	559	-	559
Depreciation	430	-	430
Amortisation of right-of-use assets	403	-	403
Revaluation of investment property	-	-	-
Amortisation of intangible assets	898	-	898
Impairment of intangible assets	-	-	-
Share of associate's results	(38)	-	(38)
Share based payment charge	123	-	123
Dividends received	-	-	-
Operating cash flows before movements in working capital	22,730	(868)	21,862
Change in inventories	(3,698)	-	(3,698)
Change in receivables	(3,959)	-	(3,959)
Change in payables	753	-	753
Movement in provisions	-	868	868
Cash generated from/(used in) operations	15,826	-	15,826
Interest paid	(79)	-	(79)
Income tax	(3,766)	-	(3,766)
Net cash from operating activities	11,981	-	11,981
Cash flows from investing activities
Acquisition of property, plant and equipment	(212)	-	(212)
Disposal of property, plant and equipment	11	-	11
Purchase of intangibles	(861)	-	(861)
Finance income	129	-	129
Dividends received	-	-	-
Net cash (used in)/from investing activities	(933)	-	(933)
Cash flows from financing activities
Proceeds from issue of share capital	378	-	378
Interest paid on lease liabilities	(122)	-	(122)
Principal paid on lease liabilities	(378)	-	(378)
Dividends paid	(562)	-	(562)
Net cash (used in)/from financing activities	(684)	-	(684)
Net (decrease)/increase in cash and cash equivalents	10,364	-	10,364
Foreign exchange movements	(686)	-	(686)
Balance at the beginning of the period	9,845	-	9,845
Balance at the end of the period	19,523	-	19,523

Impact on consolidated statement of changes in equity

	Share	Share	Revaluation	Other	Foreign	Retained	Total	Non-	Total
	Capital	Premium	Reserve	Reserves	Exchange	Earnings		controlling	Equity
		Account			Reserve			Interest
	£000's	£000's	£000's	£000's	£000's	£000's	£000's	£000's	£000's
Balance as at 31 March 2020 (restated)	3,377	62,882	572	106	800	5,982	73,719	5,766	79,485
Profit for the year	-	-	-	-	-	8,158	8,158	8,491	16,649
Adjustment for overseas sales taxes	-	-	-	-		(821)	(821)	-	(821)
Profit for the year (restated)	-	-	-	-	-	7,337	7,337	8,491	15,828
Other comprehensive income:
Foreign currency differences (restated)	-	-	-	-	292	-	292	(281)	11
Deferred tax on property revaluations	-	-	84	-	-	-	84	-	84
Actuarial gains on pension scheme assets	-	-	-	-	-	(32)	(32)	-	(32)
Total comprehensive income for the year	-	-	84	-	292	7,305	7,681	8,210	15,891
Transactions with owners:
Issue of shares in the year	2	376	-	-	-	-	378	-	378
Share-based payments	-	-	-	-	-	123	123	-	123
Dividends	-	-	-	-	-	-	-	(562)	(562)
Transactions with owners	2	376	-	-	-	123	501	(562)	(61)
Balance as at 31 March 2021	3,379	63,258	656	106	1,092	13,410	81,901	13,414	95,315

Management have identified a misclassification in the cash flow statement of the Company for finance income that was accrued rather than received as cash. There was no impact on the Company profit or statement of financial position.

The impact on the Company statement of cashflows

	2021 As reported	Adjustments	2021 restated
	£000's	£000's	£000's
Cash flows from operating activities
Profit/(loss) before income tax	(916)	-	(916)
Adjustment for:
Finance income	(875)	-	(875)
Finance cost	65	-	65
Foreign exchange (gain)/loss	(3)	-	(3)
Depreciation	15	-	15
Amortisation of right-of-use assets	24	-	24
Revaluation of investment property	-	-	-
Amortisation of intangible assets	-	-	-
Impairment of intangible assets	-	-
Movement in provisions	-	-	-
Share of associate's results	-	-	-
Share based payment charge	8	-	8
Dividends received	(46)	-	(46)
Operating cash flows before movements in working capital	(1,728)	-	(1,728)
Change in inventories	-	-	-
Change in receivables	3,169	875	4,044
Change in payables	33	-	33
Cash generated from/(used in) operations	1,474	875	2,349
Interest paid	(54)	-	(54)
Income tax	(5)	-	(5)
Net cash from operating activities	1,415	875	2,290
Cash flows from investing activities
Acquisition of property, plant and equipment	(37)	-	(37)
Disposal of property, plant and equipment	-	-	-
Purchase of intangibles	-	-	-
Finance income	875	(875)	-
Dividends received	46	-	46
Net cash (used in)/from investing activities	884	(875)	9
Cash flows from financing activities
Proceeds from issue of share capital	378	-	378
Interest paid on lease liabilities	(11)	-	(11)
Principal paid on lease liabilities	(23)	-	(23)
Dividends paid	-	-	-
Net cash (used in)/from financing activities	344	-	344
Net (decrease)/increase in cash and cash equivalents	2,643	-	2,643
Foreign exchange movements	-	-	-
Balance at the beginning of the period	(1,824)	-	(1,824)
Balance at the end of the period	819	-	819

4.  Segment information

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

Revenues are geographically allocated by the destination of customer.

The performance of these geographical segments is measured using Earnings before Interest, Tax, Depreciation and Amortisation ("Adjusted EBITDA*"), adjusted to exclude share based payments, revaluation, impairment and p ersonnel related litigation matters .

	Corporate /U.K.	China & Japan	North America	S & SE Asia	Latin America	Europe	Rest of World	Total
	£000's	£000's	£000's	£000's	£000's	£000's	£000's	£000's
Year ended 31 March 2022
Revenue from external customers	1,525	28,385	16,402	11,816	15,775	6,430	1,862	82,195
Sale of goods	1,525	28,385	16,402	11,816	15,775	6,430	1,623	81,956
Royalties	-	-	-	-	-	-	239	239
	1,525	28,385	16,402	11,816	15,775	6,430	1,862	82,195
Adjusted EBITDA**	(18,623)	10,260	5,546	4,632	3,035	841	704	6,395
Total Assets	30,040	50,526	11,958	4,978	13,653	2,684	(239)	113,600
Year ended 31 March 2021
Revenue from external customers	1,471	58,906	13,887	9,118	14,265	6,580	1,380	105,607
Sale of goods	1,471	58,906	13,887	9,118	14,265	6,580	1,204	105,431
Royalties	-	-	-	-	-	-	176	176
	1,471	58,906	13,887	9,118	14,265	6,580	1,380	105,607
Adjusted EBITDA** (restated)	(17,644)	26,080	4,973	3,390	2,392	1,597	515	21,303
Total Assets	33,136	59,568	8,109	3,165	9,641	2,250	754	116,623

During the year ended 31 March 2021 the revenue from sales to one particular customer in the 'China & Japan' segment was £15,692,000, which was greater than 10 percent of the revenue of the Group. There have been no similar cases in the Group in the current financial year.

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

4.   Segment information (continued)

A reconciliation of adjusted EBITDA for reportable segments to profit from operating activities is provided as follows:

				2022	2021 (restated)
				£000's	£000's

Adjusted EBITDA for reportable segments				6,395	21,303
Depreciation				(455)	(430)
Amortisation of right-of-use assets				(398)	(403)
Revaluation of investment property				(78)	-
Personnel related litigation matters				(457)	-
Amortisation				(1,140)	(898)
Impairment				(2,085)	-
Share-based payment charges				(342)	(123)
Profit from operating activities				1,440	19,449

**Adjusted EBITDA reported for the segments includes foreign exchange gains and losses. The Adjusted EBITDA for the Group is presented in note 6 .

Product Revenues

						2022	2021
						£000's	£000's
Aivlosin						72,939	87,549
Ecomectin						5,543	4,234
Others						3,713	13,824
Total						82,195	105,607

Contract Balances

			2022	2021
Within one year or on demand			£000's	£000's
At 1 April			2,155	594
Amounts included in contract liabilities that was recognised as revenue during the period			(2,155)	(594)
Cash received in advance of performance and not recognised as revenue during the period			203	2,155
At 31 March			203	2,155

The Group recognised contract liabilities of £203,000 at 31 March 2022 (2021: £2,155,000). The Group does not hold any long term sales contracts and any rebates, discounts or free goods incentives are settled and recognised as revenue within the next accounting period. Contract balances are reported within trade and other payables on the Statement of Financial Position.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

5.  Other income

		2022	2021
		£000's	£000's
Sundry income		65	319
		65	319

6.  Result from operating activities

		2022	2021
	Notes	£000's	£000's
Result from operating activities is stated after charging/(crediting):
Cost of inventories recognised as an expense		46,482	51,864
Employee benefits expenses	30	14,054	14,867
Amortisation of intangible assets	11	1,140	898
Depreciation	12	455	430
Amortisation of right-of-use assets	14	398	403
Revaluation of investment property	13	78	-
Gain/(Loss) on foreign exchange transactions		989	(2,229)
Research and development		8,762	8,072
Impairment losses on trade receivables	17	(167)	(65)
Fees payable to the Company's auditor for the audit of the parent Company and Group annual accounts		452	442
Fees payable to the Company's auditor and its associates for the audit of the Company's subsidiaries		41	475

Total fees payable to the Company's auditor for the audit of the parent Company and Group annual accounts, for the year ended 31 March 2022, were £581,000 (2021: £350,000), and total fees payable to the Company's auditor and its associates for the audit of the Company's subsidiaries were £26,000 (2021: £48,000).

		2022	2021 (Restated)
		£000's	£000's
Earnings before interest, tax, depreciation, amortisation, revaluation, impairment, Personnel related litigation matters, share-based payments and foreign exchange differences (adjusted EBITDA)
Profit from operating activities		1,440	19,449
Depreciation		455	430
Amortisation of right-of-use assets		398	403
Revaluation of investment property		78	-
Amortisation		1,140	898
Impairment		2,085	-
Personnel related litigation matters		457	-
Share-based payments		342	123
		6,395	21,303
Foreign exchange differences		(989)	2,229
Adjusted EBITDA		5,406	23,532

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

6 .  Result from operating activities (continued)

Management believe that adjusted EBITDA is an appropriate measure of the Group's performance as it is the initial source for all re-investment and for all returns to shareholders. Investors, bankers and analysts all focus on this important measure of underlying performance because it enables them to make judgements about the Group's ability to generate sufficient cash to meet all the re-investment needs of the business while still providing adequate returns to shareholders. Therefore, adjusted EBITDA has a direct relationship with the value of the Group and is seen by our investors as a Key Performance Indicator for management.

The following items are adjusted for in the calculation of adjusted EBITDA as defined by the Group.

Item	Rationale for Adjustment
Depreciation and Amortisation	These items are a result of past investments and therefore, although they are correctly recorded as a cost of the business, they do not reflect current or future cash outflows. Additionally, Depreciation and Amortisation calculations are subject to judgement regarding useful lives and residual values of particular assets and the adjustment removes the element of judgement.
Revaluation of Investment Property	These are subject to judgement and do not reflect cash flows.
Gains and Losses on Disposal of Fixed Assets and Impairment of Intangibles	These items are a result of past investments and therefore, although they are correctly recorded as income or cost of the business, they do not reflect current or future cash outflows.
Personnel related litigation matters	Amount in respect of a probable settlement of p ersonnel related litigation matters
Share Based Payments	This item is subject to judgement and will never be reflected in the Group's cash flows.
Foreign Exchange differences	Since the key driver of this figure is the revaluation of monetary assets denominated in foreign currency at the period end, which may reverse prior to settlement, taking this figure out of the EBITDA figure removes volatility from the performance measure. Foreign exchange movements are largely outside of the Group's control, so this gives a better measure of the Group's progress than statutory profit measures which include them.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

7.  Finance income/(expense)

		2022	2021
		£000's	£000's
Finance income
Interest received on short term bank deposits		190	129
Finance costs
Interest paid		(173)	(181)
Interest paid on lease liabilities		(111)	(121)
		(284)	(302)
Net finance costs		(94)	(173)

8.  Earnings per share

The calculation of basic earnings per share is based on the post-tax profit for the year divided by the weighted average number of shares in issue during the year.

	2022				2021
	Earnings	Weighted average number of shares	Per share amount		Earnings	Weighted average number of shares	Per share amount
	£000's	000's	pence		£000's	000's	pence
Earnings attributable to ordinary shareholders on continuing operations after tax	(686)	67,717	(1.01)		7,337	67,559	10.86
Dilutive effect of share options	-	-	-		-	44	(0.01)
Diluted earnings per share	(686)	67,717	(1.01)		7,337	67,603	10.85

Diluted earnings per share takes into account the dilutive effect of share options. As the Group's result for the year ending 31 March 2022 was a loss there is no dilutive effect on the earnings per share.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

9.  Taxation

		2022	2021
		£000's	£000's
Current tax
Foreign corporation tax on profits for the year		3,284	5,772
Foreign withholding tax		406	31
Research and development tax credits claimed in the year		(1,594)	(1,569)
Research and development tax credits - adjustment for prior year		437	(752)
Deferred tax
Origination and reversal of temporary differences		(439)	4
Income tax charge		2,094	3,486

		2022	2021
		£000's	£000's
Factors affecting the tax charge for the year
Profit on ordinary activities before taxation		1,389	19,314
Profit on ordinary activities before taxation multiplied by the applicable rate of UK corporation tax of 19% (2021: 19%)		264	3,669
Effects of:
Non-deductible expenses		1,345	374
Non-chargeable credits		(69)	(141)
Right-of-use assets depreciation		(37)	(40)
Withholding tax on inter-company dividends		406	31
Enhanced allowance on research and development expenditure		(1,208)	(1,741)
Adjustment in respect of prior years		456	-
Different tax rate for foreign subsidiaries		844	1,261
Origination and reversal of temporary differences		114	(116)
Unused tax losses carried forward		(109)	189
Tax effect of share based payments		88	-
Income tax charge		2,094	3,486

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

9 .  Taxation (continued)

		2022	2021
		%	%

Applicable tax rate per UK legislation		19.00	19.00
Effects of:
Non-deductible expenses		96.84	1.93
Non-chargeable credits		(4.97)	(0.73)
Right-of-use assets depreciation		(2.66)	(0.21)
Withholding tax on inter-company dividends		29.23	0.16
Enhanced allowance on research and development expenditure		(86.97)	(9.01)
Adjustment in respect of prior years		32.83	-
Different tax rate for foreign subsidiaries		60.76	6.53
Origination and reversal of temporary differences		8.21	(0.60)
Unused tax losses carried forward		(7.85)	0.98
Tax effect of share based payment arrangements		6.34	-
Income tax charge		150.76	18.05

Future tax changes

On 5 March 2021 it was announced that the rate of UK corporation tax would be increased to 25% from 1 April 2023. This change was substantively enacted in April 2021 and as the UK deferred tax assets and liabilities have been calculated based on the enacted rate of 25% (2021: 19%).

At the year ended 31 March 2022 the Group had unused overseas tax losses amounting to £1,003,000 (2021: nil) for which no deferred tax asset has been recognised.

10.  Loss for the financial year

		2022	2021
		£000's	£000's
Parent Company's (loss) for the financial year		(1,586)	(903)

The Company has elected to take the exemption under Section 408 of the Companies Act 2006 not to present the Parent Company income statement.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

11.  Dividends

		2022	2021
		£000's	£000's
Cash dividends on ordinary shares declared and paid:
Final dividend for the year end 31 March 2021 at 1.0p per ordinary share (settled 22 October 2021)		677	-

The Board of Directors does not propose that a dividend be paid for the year ended 31 March 2022 (2021: £0.01).

Proposed dividends on ordinary shares are subject to approval at the annual general meeting and are not recognised as a liability as at the date of the Statement of Financial Position.

12.  Intangible fixed assets

Group	Goodwill	Distribution rights	Drug registrations, patents and licence costs	Total
	£000's	£000's	£000's	£000's
Cost
At 31 March 2020	17,930	407	22,977	41,314
Additions	-	-	986	986
At 31 March 2021	17,930	407	23,963	42,300
Additions	-	-	1,421	1,421
Impairment	-	-	(2,092)	(2,092)
At 31 March 2022	17,930	407	23,292	41,629
Amortisation
At 31 March 2020	-	(120)	(5,174)	(5,294)
Charge for the year	-	(19)	(879)	(898)
At 31 March 2021	-	(139)	(6,053)	(6,192)
Charge for the year	-	(19)	(1,121)	(1,140)
Written back on impairment	-	-	7	7
At 31 March 2022	-	(158)	(7,167)	(7,325)
Net Book Value
At 31 March 2022	17,930	249	16,125	34,304
At 31 March 2021	17,930	268	17,910	36,108
At 31 March 2020	17,930	287	17,803	36,020

The amortisation and impairment charges are included within administrative expenses in the income statement.

Distribution rights are amortised over their estimated useful life of 20 years and reviewed for impairment when any indication of potential impairment exists. The remaining amortisation period at the date of the financial statements ranged from 4 to 20 years.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

12 .  Intangible fixed assets (continued)

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

Entity	Date of acquisition	2022 & 2021
		£000's
ECO Animal Health Limited	1 October 2004	17,359
Zhejiang Eco Biok Animal Health Products Limited	1 April 2007	94
ECO Animal Health Japan Inc	24 December 2009	477
		17,930

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

The recoverable amounts of the CGU's are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates, growth rates and the estimated remaining useful life of the asset.

The Group prepares cashflow forecasts that cover the two year period after the Statement of Financial Position date and then extrapolates them assuming a 3 % annual growth rate which is well below the past performance of the business. Forecasts for new products under development have been included based on board approved plans for the next five years. The Directors believe that the long-term growth rate assumed does not exceed the average long-term growth rate for the relevant markets.

Management estimates discount rates using the pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU's. In the current year management estimated the applicable rate to be 7 % (2021: 8%) due to changes in the relative weighting of elements of the Group's capital structure . Management considers that there is adequate headroom when comparing the net present value of the cashflows to the carrying value of goodwill to conclude that no impairment is necessary this year. The Directors consider that no reasonably possible change in assumptions, requiring disclosure, would result in impairment.

The net book value of Drug registrations, patents and licence costs can be broken down as follows:

		2022	2021
		£ 000's	£ 000's
Aivlosin		13,945	15,161
Ecomectin		754	2,466
Vaccines		1,296	267
Others		130	16
		16,125	17,910

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

12 .  Intangible fixed assets (continued)

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

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

At 31 March 2022 Intangible assets included £3,355,000 (2021: £5,791,000) of assets capitalised that had not commenced their useful life, of which approximately £2,044,000 (2021: 4,909,000) were Aivlosin related products.

Drug registrations and licences are amortised over their estimated useful lives of 10 to 20 years, which is the Directors' estimate of the time it would take to develop a new product allowing for the Group's patent protection and the exclusivity period which comes with certain registrations. All such costs are recorded in the UK/Corporate reporting segment.

The Group continuously reviews the status of its research and development activity, paying close attention to the likelihood of technical success and the commercial viability of development projects.  In the year to March 2022 there were indications that certain development projects for which costs have previously been capitalised were unlikely to achieve technical success or commercial viability.  Net capitalised costs of £2,085,000 in respect of these projects have been impaired through the income statement during the period reducing the carrying value of the impaired assets to nil.  The capitalised costs had previously been recognised within the Group's UK/Corporate segment.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

13.  Property, plant and equipment

Group	Freehold Land and Buildings	Leasehold improvements	Plant and Machinery	Fixtures, Fittings and Equipment	Motor Vehicles	Total
	£000's	£000's	£000's	£000's	£000's	£000's
Cost or valuation
At 31 March 2020	668	555	986	1,650	311	4,170
Additions	-	-	64	153	2	219
Disposals	-	-	(247)	(34)	(29)	(310)
Foreign exchange movements	(1)	-	(16)	(21)	(15)	(53)
At 31 March 2021	667	555	787	1,748	269	4,026
Additions	36	50	1,305	233	-	1,624
Disposals	-	-	(19)	(26)	-	(45)
Foreign exchange movements	6	-	114	57	18	195
At 31 March 2022	709	605	2,187	2,012	287	5,800
Depreciation
At 31 March 2020	(9)	-	(710)	(812)	(213)	(1,744)
Charge for the year	(14)	(103)	(47)	(238)	(28)	(430)
Disposals	-	-	244	29	26	299
Foreign exchange movements	-	-	10	10	10	30
At 31 March 2021	(23)	(103)	(503)	(1,011)	(205)	(1,845)
Charge for the year	(16)	(112)	(54)	(250)	(24)	(456)
Disposals	-	-	17	24	-	41
Foreign exchange movements	(1)	-	(31)	(26)	(17)	(75)
At 31 March 2021	(40)	(215)	(571)	(1,263)	(246)	(2,335)
Net Book Value
At 31 March 2022	669	390	1,616	749	41	3,465
At 31 March 2021	644	452	284	737	64	2,181
At 31 March 2020	659	555	276	838	98	2,426

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

13 .  Property, plant and equipment (continued)

The freehold land and buildings at Coombe Road, New Malden was valued at £615,000 at 31 March 2020 by Colliers International Valuation UK LLP (external independent qualified valuers). The fair value of the freehold property was determined by applying a 7.5 % discount rate to the annual rental value of the property as determined by local market conditions. The Group considers the fair value of the property determined. This property will continue to be valued on a regular basis.

Valuation Technique used	Significant unobservable inputs	Inter-relationship between key unobservable inputs and fair value
RICS Valuation - Global Standards ('Red Book Global Standards')	§ Estimated market rent § Capital Value § Price per square foot in local market. § Yield in local market § General condition § Statutory searches § Environmental matters	Reduced marketability and hence rent achievable by the property.

In determining the fair value of freehold land and buildings level-3 fair value inputs are used. The significant unobservable inputs used in establishing the fair value of freehold land and buildings are the estimated market rent and capital value. The Directors believe that the fair value of freehold land and buildings reflects the carrying value and a significant change in unobservable inputs would not significantly increase or reduce the fair value of the freehold land and buildings.

The freehold property of 78 Coombe Road, New Malden is subject to a legal charge held by the Company's bankers dated 20 March 1987.

The value of the freehold property would have been recorded at £229,000 (2021: £239,000) on a historical cost basis.

Depreciation has been included in the administrative expenses line in the income statement, except for £158,000 (2021: £118,000) of depreciation of production equipment in the Chinese subsidiary ECO Biok and for £7,000 (2021: £6,000) of depreciation in Pharmgate Animal Health USA LLC, which are included within cost of sales.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

13 .  Property, plant and equipment (continued)

Company		Freehold Land and Buildings	Fixtures, Fittings and Equipment	Total
		£000's	£000's	£000's
Cost or valuation
At 31 March 2020		615	14	629
Additions		-	44	44
At 31 March 2021		615	58	673
Additions		-	125	125
At 31 March 2022		615	183	798
Depreciation
At 31 March 2020		-	(7)	(7)
Charge for the year		(12)	(3)	(15)
At 31 March 2021		(12)	(10)	(22)
Charge for the year		(12)	(16)	(28)
At 31 March 2022		(24)	(26)	(50)
Net Book Value
At 31 March 2022		591	157	748
At 31 March 2021		603	48	651
At 31 March 2020		615	7	622

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

14.  Investment property

Group and Company		Freehold Land and Buildings
		£000's
At 31 March 2020		305
Revaluation in 2021		-
At 31 March 2021		305
Revaluation in 2022		(78)
At 31 March 2022		227

The property in Western Road, Mitcham was valued at £305,000 as at 31 March 2020 by Colliers International Valuation UK LLP (external independent qualified valuer). The fair value of the investment property was determined by applying a 7.75 % discount rate to the annual rental value of the property as determined by local market conditions.

The value of the investment property would have been recorded at £130,000 on a historical cost basis.

Valuation Technique used	Significant unobservable inputs	Inter-relationship between key unobservable inputs and fair value
RICS Valuation - Global Standards ('Red Book Global Standards')	§ Estimated market rent § Capital value § Price per square foot in local market. § Yield in local market § General condition § Statutory searches § Environmental matters	Reduced marketability and hence rent achievable by the property.

In determining the fair value of investment property level-3 fair value inputs are used. The significant unobservable inputs used in establishing the fair value of investment property are the estimated market rent and capital value. The Directors believe that the fair value of investment property reflects the carrying value and a significant change in unobservable inputs would not significantly increase or reduce the fair value of the investment property.

Following the year end, the Group decided to dispose of the property and agreed to sell the property for consideration of £227,000. This value is lower than the carrying value at the balance sheet date and as such indicated that the property should be revalued. This revaluation is noted as a post balance sheet event in Note 32 to these financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

15.  Right-of-use assets

Group		Property	Vehicles	Other	Total
		£000's	£000's	£000's	£000's
Cost or valuation
At 31 March 2020		2,113	198	23	2,334
Additions		129	58	-	187
Disposals		-	(109)	-	(109)
Foreign exchange movements		(41)	-	(1)	(42)
At 31 March 2021		2,201	147	22	2,370
Additions		615	66	7	688
Disposals		(366)	(18)	(22)	(406)
Foreign exchange movements		105	-	-	105
At 31 March 2022		2,555	195	7	2,757
Depreciation
At 31 March 2020		(542)	(119)	(15)	(676)
Charge for the year		(347)	(52)	(4)	(403)
Disposals		-	96	-	96
Foreign exchange movements		11	-	1	12
At 31 March 2021		(878)	(75)	(18)	(971)
Charge for the year		(355)	(38)	(5)	(398)
Disposals		366	18	22	406
Foreign exchange movements		(21)	-	-	(21)
At 31 March 2022		(888)	(95)	(1)	(984)
Net Book Value
At 31 March 2022		1,667	100	6	1,773
At 31 March 2021		1,323	72	4	1,399
At 31 March 2020		1,571	79	8	1,658

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

15 .  Right of use assets (continued)

Company			Vehicles	Other	Total
			£000's	£000's	£000's
Cost or valuation
At 31 March 2020			95	7	102
Additions			40	-	40
Disposals			(67)	-	(67)
Foreign exchange movements			-	-	-
At 31 March 2021			68	7	75
Additions			38	-	38
Disposals			-	(7)	(7)
Foreign exchange movements			-	-	-
At 31 March 2022			106	-	106
Depreciation
At 31 March 2020			(72)	(5)	(77)
Charge for the year			(23)	(1)	(24)
Disposals			63	-	63
Foreign exchange movements			-	-	-
At 31 March 2021			(32)	(6)	(38)
Charge for the year			(16)	-	(16)
Disposals			-	7	7
Foreign exchange movements			-	-	-
At 31 March 2022			(48)	1	(47)
Net Book Value
At 31 March 2022			58	1	59
At 31 March 2021			36	1	37
At 31 March 2020			23	2	25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

16.  Fixed asset investments

Group		Investment in Associate	Unlisted investments	Total
		£000's	£000's	£000's
At 31 March 2020		157	9	166
Share of associate's result for the year		38	-	38
Foreign exchange differences		(24)	-	(24)
At 31 March 2021		171	9	180
Share of associate's result for the year		43	-	43
Foreign exchange differences		(11)	-	(11)
At 31 March 2022		203	9	212
Company			Unlisted investments (subsidiaries)	Total
			£000's	£000's
Cost
At 31 March 2020			20,077	20,077
Disposed			(25)	(25)
At 31 March 2021			20,052	20,052
Disposed			-	-
At 31 March 2022			20,052	20,052
Impairment
At 31 March 2020			(45)	(45)
Impairment charge			-	-
Disposal			25	25
At 31 March 2021			(20)	(20)
Impairment charge			-	-
Disposal			-	-
At 31 March 2022			(20)	(20)
Net Book Value
At 31 March 2022			20,032	20,032
At 31 March 2021			20,032	20,032
At 31 March 2020			20,032	20,032

The Company holds more than 20 % of the share capital of the following companies:

Subsidiary undertakings held by the Company

Company	Registered office address	Country of registration or incorporation	Class	Shares held %
Zhejiang ECO Biok Animal Health Products Limited	Zhongguan Industrial Area, Deqing, Zhejiang Province	P. R. China	Ordinary	3*
ECO Animal Health Limited	78 Coombe Road, New Malden, Surrey, KT3 4QS	Great Britain	Ordinary	100

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

16 .  Fixed asset investments (continued)

Subsidiary undertakings held by the Group

Company	Registered office address	Country of registration or incorporation	Class	Shares held %
ECO Animal Health Southern Africa (Pty) Limited.	228 Athol Road, Highlands North, Johannesburg 2192	South Africa	Ordinary	100
Zhejiang ECO Biok Animal Health Products Limited.	Zhongguan Industrial Area, Deqing, Zhejiang Province	P. R. China	Ordinary	51*
Shanghai ECO Biok Veterinary Drug Sale Company Ltd. (via Zhejiang ECO Biok Animal Products Ltd.)	Room 1502-3, Imago Plaza, No. 99 Wuning Road, Ptro District, Shanghai 200063	P. R. China	Ordinary	51
Zhejiang ECO Animal Health Limited	Zhongguan Industrial Area, Deqing, Zhejiang Province	P. R. China	Ordinary	100
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda.	Av. Dr. Cardoso de Melo, 1470, Cl311, Villa Olimpia, CEP 04548-005, Sao Paulo	Brazil	Ordinary	100
ECO Animal Health Japan Inc.	1-2-1, Hamamatsu-cho, Minato-Ku, Tokyo	Japan	Ordinary	100
ECO Animal Health USA Corp.	344 Nassau Street, Princeton, New Jersey, 08540	U.S.A.	Ordinary	100
Interpet LLC.	3775 Columbia Pike, Ellicott City, Maryland, 21043	U.S.A.	Ordinary	100
ECO Animal Health de Mexico, S de R.L. de C.V.	Av Techologico Sur 134-4, Unidad Habitacional Moderna, Queretaro, 76030	Mexico	Ordinary	100
ECO Animal Health de Argentina S.A.	Calle 4 E 43/44 N: 581 P.6 D:B La Plata, Buenos Aires	Argentina	Ordinary	100
ECO Animal Health Malaysia Sdn. Bhd.	10th Floor, Menara Hap Seng, No 1 & 3, Jalan P Ramlee, 50250 Kuala Lumpur	Malaysia	Ordinary	100
ECO Animal Health India (Private) Ltd	No 33/5, Second Floor, Mount Kailash Building, Meanee Avenue Road, Ulsoor Bangalore, Karnataka, 560042	India	Ordinary	100
ECO Animal Health Europe Ltd	6 Northbrook Road, Dublin 6, Eire	Republic of Ireland	Ordinary	100

*The Group's control over its China based subsidiary Zhejiang ECO Biok Animal Health Products Limited is achieved via a joint holding of 51% of the entity's Ordinary share capital between the Company (3%) and its UK based trading subsidiary ECO Animal Health Limited (48%).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

16 .  Fixed asset investments (continued)

Subsidiary undertakings held by the Group (continued)

The principal activity of these undertakings for the last relevant financial year was as follows:

Company Name	Principal activity
ECO Animal Health Limited	Distribution of animal drugs
ECO Animal Health Southern Africa (Pty) Limited	Non-trading
Zhejiang ECO Biok Animal Health Products Limited	Manufacture of animal drugs
Shanghai ECO Biok Veterinary Drug Sale Company Ltd.	Distribution of animal drugs
Zhejiang ECO Animal Health Limited	Procurement of raw materials
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda	Distribution of animal drugs
ECO Animal Health Japan Inc.	Distribution of animal drugs
ECO Animal Health USA Corp.	Distribution of animal drugs
Interpret LLC	Non-trading
ECO Animal Health de Mexico , S. de R. L. de C. V.	Distribution of animal drugs
ECO Animal Health de Argentina S.A.	Non-trading
ECO Animal Health Malaysia Sdn. Bhd	Non-trading
ECO Animal Health India (Private) Ltd	Non-trading
ECO Animal Health Europe Ltd	Non-trading

The aggregate amount of capital and reserves and the results of these undertakings for the last relevant financial year were:

	2022		2021	(restated)
	Equity	Profit/ (loss) for the year	Equity	Profit/(loss ) for the year
	£ 000's	£ 000's	£ 000's	£ 000's
ECO Animal Health Limited	(5,461)	(373)	(5,088 )	(1,816)
ECO Animal Health Southern Africa (Pty) Limited	315	35	280	4
Zhejiang ECO Biok Animal Health Products Ltd	25,069	(37)	27,384	17,340
Zhejiang ECO Animal Health Limited	6,196	4,886	-	-
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda.	(691)	473	(963)	(26)
ECO Animal Health Japan Inc.	1,300	(103)	1,398	(16)
ECO Animal Health de Mexico, S. de R. L. de C. V.	729	124	578	151
ECO Animal Health USA Corp.	(1,029)	411	(1,382 )	111
ECO Animal Health India (Private ) Ltd	(13)	(12)	(1 )	(2 )
ECO Animal Health Europe Ltd	-	-	-	-

The equity and results of Shanghai ECO Biok Veterinary Drug Sale Company Ltd are included within those disclosed for Zhejiang ECO Biok Animal Health Products Limited.

All of the subsidiaries listed above were included in the consolidation for the year.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

16 .  Fixed asset investments (continued)

Zhejiang ECO Biok Animal Health Products Limited, Zhejiang ECO Animal Health Limited and ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda all have 31 December year ends. The Group receives management accounts for the three months to 31 March for these subsidiaries for use in preparing the consolidated financial statements.

Interpet LLC has been excluded from consolidation as it holds no assets or liabilities and has ceased trading.

The following trading subsidiaries have no requirement for audit under local legislation:

ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda.

ECO Animal Health Japan Inc.

ECO Animal Health USA Corp.

ECO Animal Health de Mexico, S. de R. L. de C. V.

ECO Animal Health Group PLC has given statutory guarantees against all the outstanding liabilities of ECO Animal Health Ltd, thereby allowing its subsidiary to be exempt from the annual audit requirement under Section 479A of the Companies Act, for the year ended 31 March 2022.

Non-controlling interests

Zhejiang ECO Biok Animal Health Products Limited (Zhejiang ECO Biok) and Shanghai ECO Biok Veterinary Drug Sale Company Limited (Shanghai ECO Biok), both 51% owned subsidiaries of the Group, have material non-controlling interests (NCI). Summarised financial information in relation to these two subsidiaries is presented below together with amounts attributable to NCI.

Please note that as Shanghai ECO Biok is a 100% owned subsidiary of Zhejiang ECO Biok, the summarised results below are consolidated on Zhejiang ECO Biok level, before wider group eliminations.

Summarised statement of comprehensive income		2022	2021
For the year ended 31 March		£000's	£000's
Revenue		26,803	56,179
Cost of sales		(17,192)	(25,527)
Gross Profit		9,611	30,652
Administrative expenses		(8,875)	(7,619)
Operating (loss)/profit		736	23,033
Other income		34	6
Finance income		84	31
(Loss)/profit before tax		854	23,070
Tax expense		(891)	(5,730)
(Loss)/profit after tax		(37)	17,340
(Loss)/profit allocated to NCI		(19)	8,491
Other comprehensive income/(loss) allocated to NCI		1,099	(281)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

16 .  Fixed asset investments (continued)

Summarised balance sheet		2022	2021
As at 31 March		£000's	£000's
Assets:
Property, plant and equipment		1,960	626
Right-of-use assets		1,080	755
Deferred tax assets		3	-
Inventories		14,081	4,967
Trade and other receivables		6,300	18,161
Cash and cash equivalents		6,148	13,651
		29,572	38,160
Liabilities:
Trade and other payables		4,489	7,785
Contract liabilities		11	2,155
Lease liabilities - short term		144	82
Lease liabilities - long term		1,040	753
		5,684	10,775

Summarised cash flows		2022	2021
For the year ended 31 March		£000's	£000's
Cash flows from operating activities		(2,818)	10,359
Cash flows from investing activities		(810)	20
Cash flows from financing activities		(4,565)	(1,310)
Foreign exchange movements		690	(757)
Net (decrease)/increase in cash and cash equivalents		(7,503)	8,312

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

16 .  Fixed asset investments (continued)

Joint Operations

The Group also holds (by means of its ownership of ECO Animal Health USA Corp.), a 50 % interest in Pharmgate Animal Health LLC, which is resident in the U.S.A. Pharmgate Animal Health LLC distributes the Group's products in the U.S.A.

The Group also holds (by means of its ownership of ECO Animal Health Ltd) a 50 % interest in Pharmgate Animal Health Canada Inc, which distributes its products into Canada.

The Group also holds (by means of its ownership of ECO Animal Health Europe Ltd) a 50 % interest in ECO-Pharm Limited, based in the Republic of Ireland. ECO-Pharm Limited has not yet commenced trading.

Both Pharmgate Animal Health LLC and Pharmgate Animal Health Canada Inc. have accounting years which end on 31 December.

The Group's holdings in each of the joint operations' share capital is given in the table below:

Pharmgate Animal Health Canada Inc	Holding	Shares	Holding
	(shares)	in issue	%
Common Shares	100	200	50
Class A Shares	100	100	100
Class B Shares	-	100	-
Pharmgate Animal Health USA LLC	Holding	Shares	Holding
	(shares)	in issue	%
Common Shares	100	200	50
Class A Shares	100	100	100
Class B Shares	-	100	-
ECO-Pharm Limited	Holding	Shares	Holding
	(shares)	in issue	%
Common Shares	25,000	50,000	50
Class A Shares	1	1	100
Class B Shares	-	1	-

In the case of Pharmgate Animal Health Canada Inc and Pharmgate Animal Health USA LLC, A shares carry the rights to dividends payable out of profits attributable to the Group. These are made up of profits made by products supplied by the ECO Group plus 50 % of any profit relating to new products developed jointly by the partners to the joint operation.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

16 .  Fixed asset investments (continued)

In the case of ECO-Pharm Limited, profits attributable to the Group are made up of profits made by products supplied by the ECO Group plus 33 % of any profit relating to new products developed jointly by the partners to the joint operation.

The following amounts included in the Group's financial statements are related to its interest in these joint operations.

	Pharmgate Animal Health LLC		Pharmgate Animal Health Canada Inc
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
Non-current assets	11	18	-	-
Current assets	1,871	1,055	631	545
Current liabilities	(1,855)	(1,047)	(630)	(544)
Sales	12,640	10,745	3,756	3,300
Profit after tax	-	-	-	-

Associated Company

The Group also holds (by means of its ownership of ECO Animal Health Japan Inc.) a 47.62 % interest in EcoPharma.com which is resident in Japan. This Company distributes Animal Health products and other general merchandise within Japan.

ECO Animal Health Japan Inc's holding in EcoPharma.com is 10,000,000 shares out of a total of 21,000,000 shares.

The following amounts included in the Group's financial statements are related to its interests in this associated Company.

		2022	2021
		£000's	£000's
Investments (share of net assets)
At 1 April		171	157
Share of results for the year		43	38
Foreign exchange movement		(10)	(24)
At 31 March		204	171

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

16 .  Fixed asset investments (continued)

		2022	2021
Summarised financial information		£ 000's	£ 000's
At 31 March
Current assets		744	938
Non-current assets		27	44
Current liabilities		( 222)	( 208)
Non-current liabilities		(120)	(415)
Net assets (100%)		429	359
Group share of net assets (47.62%)		204	171
Year ended 31 March
Revenue		1,897	1,704
Net profit		90	80

17.  Inventories

	Group		Company
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
Raw materials and consumables	9,772	11,488	-	-
Finished goods and goods for resale	13,277	5,433	-	-
Work in progress	7,093	3,583	-	-
	30,142	20,504	-	-

The cost of inventories recognised as an expense and included in cost of sales in the financial year amounted to £46,782,000 (2021: £51,864,000 ).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

18.  Trade and other receivables

	Group		Company
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
Non-current:
Amounts owed by group undertakings	-	-	53,940	55,909

The intercompany debt is due on demand, however the company has classified the receivable as a non-current asset as it does not expect to realise the asset within 12 months after the reporting period.

	Group		Company
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
Current:
Trade receivables	23,388	29,838	-	-
Other receivables	660	1,688	80	69
Amounts owed by group undertakings	-	-	48	-
Prepayments and accrued income	1,921	926	210	212
	25,969	32,452	338	281

As at 31 March 2022, trade receivables of £2,733,000 (2021: £3,170,000) due to the Group and £nil (2021: £nil) due to the Company were past due but not impaired. These relate to long standing distributors with whom we have agreed settlement terms and with whom there is no history of default. The ageing analysis of these trade receivables is as follows:

	Group		Company
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
Up to 3 months past due	1,772	2,098	-	-
3 to 6 months past due	346	468	-	-
Over 6 months past due	615	604	-	-
	2,733	3,170	-	-

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

18 .  Trade and other receivables (continued)

As at 31 March 2022, impairment provisions of £194,000 on gross receivables of £889,000 (2021: 351,000 on gross receivables of £729,000) were recognised. The impaired receivables mainly relate to 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 Group has experienced minimal bad debt history and considered this in arriving at the impairment provision recognised. This consideration includes the potential risks arising from COVID on its customers. Its experience with customers since 31 March 2022, is consistent with those considerations that credit risk has not increased. No collateral is held against customer receivable balances.

The ageing analysis of the impaired balances is as follows:

	Group		Company
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
Current debt	-	6
Up to 3 months past due	21	97	-	-
3 to 6 months past due	-	1	-	-
Over 6 months past due	173	247	-	-
	194	351	-	-

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

Group			2022	2021
			£000's	£000's
Balance at 1 April			351	419
Additional provision made			13	71
Recovered in the year			(59)	(136)
Written off during the year			(121)	-
Foreign exchange movements			10	(3)
Balance at 31 March			194	351

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

18 .  Trade and other receivables (continued)

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

	Group		Company
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
British Pounds Sterling	1,776	1,192	288	281
U S Dollars	9,743	8,067	-	-
Euros	2,072	1,749	-	-
Chinese RMB	6,300	18,161	-	-
Japanese Yen	622	175	-	-
Brazilian Real	1,970	363	-	-
Canadian dollars	630	545	-	-
Mexican Pesos	2,701	1,997	-	-
Other currencies	155	203	-	-
	25,969	32,452	288	281

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

19.  Deferred tax

Group

Deferred tax assets and liabilities are attributable to the following:

	Net
	2022	2021 restated
	£000's	£000's
Trade related temporary differences	(2,586)	(2,294)
Overseas trade related temporary differences	3	3
Freehold property	9	8
Investment property	18	(1)
Plant and equipment	(109)	(12)
Deferred tax on share options	43	120
Tax losses carried forward	3,145	2,259
Amount receivable/(payable) after more than one year	523	83

The movement on the deferred tax account can be summarised as follows:

	Trade-related temporary differences	Tax losses carried forward	Freehold property	Investment property	Plant and machinery	Share options	Total
	£000's	£000's	£000's	£000's	£000's	£000's	£000's
At 31 March 2021 - as restated	(2,291)	2,259	8	(1)	(12)	120	83
(Charge) for the year through income statement	(292)	-	-	-	(97)	(77)	(466)
Credit for the year through income statement		886	-	19	-	-	905
Credit for the year through reserves	-		1	-	-	-	1
At 31 March 2022	(2,583)	3,145	9	18	(109)	43	523

Trade related temporary differences relate predominantly to research and development tax deductions claimed in advance of expense recognition in the income statement, carried forward trading losses and a provision for unrealised profit arising on consolidation. The tax losses carried forward are not expected to expire under current legislation.

Any future dividend received from the Chinese subsidiary Zhejiang ECO Biok Animal Health Products Limited will be subject to a 5 % withholding tax. The deferred tax liability in respect of this has not been recognised.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

19 .  Deferred tax (continued)

Company	Freehold property	Investment property	Share options	Total
	£000's	£000's	£000's	£000's
At 31 March 2020	(76)	(19)	-	(95)
Credit for the year through income statement	-	17	-	17
Credit for the year through reserves	84	-	-	84
At 31 March 2021	8	(2)	-	6
Credit for the year through income statement	-	20	23	43
Credit for the year through reserves	1	-	-	1
At 31 March 2022	9	18	23	50

At the year ended 31 March 2022 the Group has an unrecognised deferred tax asset in relation to unused overseas tax losses amounting to £1,003,000 (2021: £nil), and unused UK tax losses amounting to £2,725,000 (2021: £1,082,000). These tax losses are not expected to expire.

20.  Cash and cash equivalents

Cash and cash equivalents comprise cash, short-term deposits held by the Group net of amounts outstanding on bank overdraft. The carrying amount of these assets are not significantly different to their fair value.

	Group		Company
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
Cash and cash equivalents	14,314	19,523	279	819
Cash and cash equivalents presented in the statement of cash flows	14,314	19,523	279	819

Balances drawn on the bank overdraft facility are repayable on demand and form an integral part of the cash management of the Group and Company. In the statement of cash flows, the Group and the Company have presented cash and cash equivalents net of balances outstanding on bank overdrafts.  Amounts drawn and repaid on the overdraft facility are therefore considered as part of changes in cash and cash equivalents and are not presented as financing cash flows.

As at 31 March 2022, none of the Group's facilities were drawn.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

20 .  Cash and cash equivalents (continued)

Significant non-cash transactions from investing activities are as follows:

	Group		Company
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
Acquisition of property, plant and equipment by means of leases or not yet paid at year end	688	187	38	40
Acquisition of intangible assets not yet paid at year end	158	125	-	-

21.  Trade and other payables

	Group		Company
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
Trade payables	9,415	7,918	50	58
Contract liabilities	203	2,155	-	-
Other payables	926	683	70	147
Accruals and deferred income	2,410	3,765	206	319
	12,954	14,521	326	524

22.  Borrowings

	Group		Company
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
Cash and cash equivalents	14,314	19,523	279	819
Lease liabilities	(1,910)	(1,522)	(62)	(39)
Net Cash	12,404	18,001	217	780

The Group has an overdraft facility in certain currencies in respect of a pool of bank accounts held with NatWest Bank plc.

The interest rate for all currency overdrafts is 1.8% over the relevant currency base rate and the borrowings are secured by two debentures held over the assets of the Group. Any drawdown of this facility is repayable on demand. The Company and ECO Animal Health Limited have each given a guarantee to the Group's bankers for the overdraft facility. The facility has a gross and net limit of £5,000,000, which may be borrowed and repaid at will.

At 31 March 2022, the undrawn facility was £5,000,000 (2021: £5,000,000).

The Group put in place a £10m revolving credit facility with Natwest bank on 9 July 2022. This facility is interest bearing and can be drawn by the Group on demand, The facility expires on 30 June 2026. This has been disclosed in Note 33, Post Balance Sheet Events.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

22. Borrowings (continued)

Reconciliation of Lease Liabilities

	Group		Company
	2022	2021	2022	2021
	£000's	£000's	£000's	£000's
Opening lease liabilities	(1,522)	(1,766)	(39)	(29)
New lease liabilities	( 672)	(188)	( 37)	(43 )
Repayment	482	500	25	35
Lease liabilities interest	( 111)	(122)	( 11)	(11)
Disposal	-	18	-	6
Foreign exchange	( 87)	36	-	3
Closing lease Liabilities	(1,910)	(1,522)	(62)	(39)
Current lease liabilities	(397)	(311)	(13)	(7)
Non-current lease liabilities	(1,513)	(1,211)	(49)	(32)

The Group leases a number of properties and motor vehicles in the jurisdictions it operates in. At 31 March 2022 there were no termination or extension options on leases.

The Group expensed £64,000 for the year ended 31 March 2022 (2021: £55,000) for short term leases.

Group Leases Maturity

At 31 March 2022 the Group held the following number of leases in each of the maturity categories below.

At 31 March 2022	Property	Vehicle	Other	Total
	Number	Number	Number	Number
Up to 1 year	1	3	-	4
Between 1 - 5 years	9	2	1	12
Over 5 years	2	-	-	2
Total number of leases	12	5	1	18
Average remaining lease term (in years)	6.5	1.6	4.7	4.9
At 31 March 2021	Property	Vehicle	Other	Total
	Number	Number	Number	Number
Up to 1 year	5	5	3	13
Between 1 - 5 years	2	5	-	7
Over 5 years	2	-	-	2
Total number of leases	9	10	3	22
Average remaining lease term (in years)	7.1	1.3	0.7	3.6

The weighted average incremental borrowing rate applied to lease liabilities recognised in the statement of financial position was 7.49% at 31 March 2022 (2021: 7.20%).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

Borrowings (continued)

Weighted average incremental borrowing rate :

Group	2022	2021
Property	6.25 %	5.9 %
Vehicle	29.0%	29.0%
Other	4.0%	4.0%
Weighted average	7.49%	7.2%

Amounts payable under lease arrangements for the Group

The undiscounted contractual cash flows payable under the existing lease arrangements at 31 March are analysed into the following maturity categories.

Group	2022	2021
	£000's	£000's
Up to 1 year	523	415
Between 1 - 5 years	1,104	768
Over 5 years	1,391	768
Total	3,018	1,951

23.  Provisions

Group	Personnel related litigation matters	Overseas tax liabilities	Total
	£000's	£000's	£000's
At 31 March 2020	-	1,128	1,128
Charge for the year through income statement	-	970	970
Foreign exchange	-	(316)	(316)
At 31 March 2021	-	1,782	1,782
Charge for the year through income statement	456	1,003	1,459
Foreign exchange	-	634	634
At 31 March 2022	456	3,419	3,875

Provisions include an amount of £456,000 in respect of personnel related litigation matters . Management has assessed the range of possible outcomes to these claims and the provision made represents a best estimate and is mid-range of the possible outcomes, having taken legal advice.  ECO management is vigorously defending the claims and the timing of any settlement is uncertain due to the varying nature of the claims and the availability of the relevant courts if required.

Provisions also include an amount of £3,419,000. in respect of overseas tax liabilities. The Group has estimated the total liabilities that may be due. As the Group has only recently become aware of the liability, it has yet to confirm the exact amounts that may be payable and it is not clear when a settlement of these obligations will occur, however precedent suggests that this may be up to 7 years.

24.  Pension and other post-retirement benefit commitments

Defined Contribution Pension Scheme

The Group operates defined contribution pension schemes. The assets of the schemes are held separately from the Group and independently administered by insurance companies. The pension cost charge represents contributions payable to the funds in the year and amounted to £96,850

(2021: £105,000).

Defined Benefit Pension Scheme

The Group operates a defined benefit scheme in the UK for a number of ex-employees which is closed to new members. A full actuarial valuation was carried out at 6 April 2021 and updated to 31 March 2022 for IAS 19 purposes by a qualified independent actuary. The major assumptions used by the actuary were:

	31-Mar	31-Mar
	2022	2021
Discount rate	2.75%	1.90%
Pension revaluation	3.95%	3.40%
Inflation assumption with a maximum of 5% p.a.	3.95%	3.40%

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

24.  Pension and other post-retirement benefit commitments (continued)

Mortality rates

No pre-retirement mortality is assumed (2021: none). Post retirement mortality is based on 100 % of the SAPS "S2" normal tables, based on the members' year of birth, improving in line with CMI 2021 projections with a 1.25 % long term trend rate (2021: 1.25% ).

U nder these mortality assumptions, the expected future lifetime for a member retiring at age 65 at the year-end would be 22.2 years for males (2021: 22.1 years) and 24.3 years for females (2021: 24.2 years). For members retiring in 20 years' time, the expectation of life would be 23.5 years for males (2021: 23.4 years) and 25.8 years for females (2021: 25.7 years).

The weighted average term of the liabilities is 11 years (2021: 10 years).

The scheme is exposed to a number of risks including:

§ Interest rate risk: Movements in the discount rate used could affect the present value of the defined benefit pension obligations.

§ Longevity risk: Changes in the estimated mortality rates of former employees could affect the present value of the defined benefit pension obligations.

§ Investment risk: Variations in the actual return from the scheme's investments could affect the scheme's ability to meet its future pension obligations

		2022	2021
		£000's	£000's
Assets at start of year		1,795	1,787
Defined benefit obligation at start of year		(1,799)	(1,814)
Net (liability) at 1 April		(4)	(27)
Return on assets		33	42
Interest cost		(33)	(42)
Past service cost		-	(4)
		-	(4)
Gain/(loss) on asset return		(5)	(4)
(Loss)/gain on changes in assumptions		29	(28)
Statement of other comprehensive income		24	(32)
Employer contributions (gross)		59	59
Net asset/(liability) at 31 March		79	(4)
Actual assets at end of year		1,648	1,795
Actual defined benefit obligation at end of year		(1,569)	(1,799)

Gain/(loss) on changes in assumptions was nil (2021: £3,000 gain) relating to changes in demographic assumptions and a gain of £29,000 (2021: £31,000 loss) relating to changes in financial assumptions.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

24.  Pension and other post-retirement benefit commitments (continued)

The pension fund assets (principally made up of annuities for the benefit of active pensioners) are all held within a policy managed by an insurance company regulated by the Financial Conduct Authority of the United Kingdom and the United Kingdom Pensions Regulator. By law, the trustees are required to act in the best interests of participants to the schemes. Responsibility for governance of the plans - including investment decisions and contributions schedules lies with trustees.

Reconciliation of changes in the asset value during the year

		2022	2021
		£000's	£000's
Fair value of assets at 1 April		1,795	1,787
Return on assets		33	42
Gain/(loss) on asset return		(5)	(4)
Employer contributions (gross)		59	59
(Decrease)/increase in secured pensioners' value due to scheme experience		(234)	(89)
Benefits paid		-	-
Fair value of assets at 31 March		1,648	1,795
Reconciliation of changes in the liability value during the year
Defined benefit obligation at 1 April		1,799	1,814
Interest cost		33	42
Past service cost		-	4
(Gain)/loss on changes in assumptions		(29)	28
(Decrease)/increase in secured pensioners' value due to scheme experience		(234)	(89)
Benefits paid		-	-
Defined benefit obligation at 31 March		1,569	1,799

The amount of annual contribution to be paid by the employer of £59,000 (2021: £59,000) is expected to continue until December 2022.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

24.  Pension and other post-retirement benefit commitments (continued)

Year ended 31 March	2022	2021	2020	2019	2018
	£000's	£000's	£000's	£000's	£000's
Fair value of plan assets	1,648	1,795	1,787	1,802	2,503
Present value of defined benefit obligation	1,569	1,799	1,814	1,899	2,603
(Deficit)/Surplus in plan	79	(4)	(27)	(97)	(100)
Experience (losses)/gains on plan liabilities	-	-	(2)	(38)	(7)

Plan Assets

		2022	2021
		£000's	£000's
Assets under management		259	205
Annuities		1,389	1,590
Total		1,648	1,795

Assets under management composition

		2022	2021
Corporate Bonds		42.6%	43.4%
Overseas Equities		27.7%	28.4%
UK Equities		17.8%	17.8%
Property		10.5%	8.9%
Cash		1.4%	1.2%
Derivatives		-	0.3%
Gilts		-	-
		100.0%	100.0%

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

24.  Pension and other post-retirement benefit commitments (continued)

Defined benefit obligation - sensitivity analysis

The following amounts are the effect (on the defined benefit obligation) of reasonably possible changes to the key actuarial assumptions, as required by IAS 19.

Actuarial assumptions - Reasonably Possible Change		(Decrease)/Increase in Defined Benefit Obligation
		2022		2021
		£000's	£000's	£000's	£000's
Discount rate: +/- 0.1%		(15)	15	(20)	20
Members' life expectancy: +/- 1 year		(81)	84	(100)	100

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the Statement of financial position.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period. 

The Company has given a floating charge dated 1 December 2006 over all of its assets to the trustees of the pension fund to secure all present and future obligations and liabilities to the pension fund.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

25.  Share-based payments

The expense recognised for share-based payments made during the year is shown in the following table:

			Group		Company
			2022	2021	2022	2021
			£000's	£000's	£000's	£000's
Total expense arising from equity settled share-based payments transactions			342	123	120	8

The share-based payment plans are described below:

Movements in issued share options during the year

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the period:

	Options		Options
	2022	2022	2021	2021
	000's	WAEP (£)	000's	WAEP (£)
Outstanding at 1 April	3,370	3.73	3,519	3.68
Granted during the year - Employee scheme	327	3.50	-	-
Granted during the year - LTIPs	279	0.05	-	-
Granted during the year - Deferred bonus	38	0.05	-	-
Cancelled during the period	( 122)	2.01	-	-
Exercised during the period	( 26)	2.42	(149)	2.54
Outstanding at 31 March	3,866	3.47	3,370	3.73

3,223,400 options were exercisable at 31 March 2022 (2021: 3,004,500). The WAEP of exercisable options at 31 March 2022 was 381.0p (2021: 372.0p).

The average share price during the year was 272.4p (2021: 253.1p).

The maximum aggregate number of shares over which options may currently be granted cannot exceed 10% of the nominal share capital of the Company on the grant date. The options outstanding at 31 March 2022 had a weighted average exercise price of £3.47 (2021: £3.73) and a weighted average remaining contractual life of 2.8 years (2021: 2.6 years).

ECO Animal Health Group plc Executive Share Option Scheme

In accordance with the Executive Share Option Scheme, approved and unapproved share options are granted to Directors and employees who devote at least 25 hours per week to the performance of duties or employment with the Company.

326,679 share options have been granted in the year under this scheme (2021: none).  In addition 278,500 options have been issued under the group's Long Term Incentive Plan (2021: none) and 37,755 under the group's deferred bonus arrangements (2021: none).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

25 .  Share-based payments (continued)

The exercise price of the options is equal to the market price of the shares at the date of grant. The options vest three years from the date of grant and if the option holder ceases to be a Director or employee of the Company due to injury, disability, redundancy or retirement on reaching pensionable age or any other age at which they are bound to retire at in accordance with the terms of their contract of employment, the option may be exercised within a period of six months after the option holders so ceasing, although the Board may, at its discretion, extend this period by up to 36 months after the date of cessation.

If the option holder ceases employment for any other reason, the option may not be exercised unless the Board permits. The approved and unapproved options will be forfeited where they remain unexercised at the end of their respective contractual lives of ten and seven years respectively.

An analysis of the expiry dates of the outstanding options at 31 March 2022 is given below:

Date of grant	Unapproved	Approved	Exercise price	Expiry date
09 October 2013		11,100	1.960	09 October 2023
21 August 2014		14,400	1.615	21 August 2024
13 February 2015		34,500	2.005	13 February 2025
26 August 2015		24,850	2.650	26 August 2025
26 August 2015	511,650		2.650	26 August 2022
18 December 2015	600,000		3.125	18 December 2022
19 January 2016		10,200	3.150	19 January 2026
19 January 2016	240,800		3.150	19 January 2023
17 February 2016		19,600	3.125	17 February 2026
17 February 2016	400		3.125	17 February 2023
01 March 2016		9,600	3.125	01 March 2026
01 March 2016	40,400		3.125	01 March 2023
12 September 2016		25,100	4.325	12 September 2026
12 September 2016	423,900		4.325	12 September 2023
15 September 2016		5,900	4.350	15 September 2026
15 September 2016	544,100		4.350	15 September 2023
21 September 2017		53,475	6.200	21 September 2027
21 September 2017	287,525		6.200	21 September 2024
12 April 2018		3,900	5.450	12 April 2028
23 October 2018		75,200	3.800	23 October 2028
23 October 2018	276,800		3.800	23 October 2025
19 December 2018		7,800	3.800	19 December 2028
19 December 2018	2,200		3.800	19 December 2025
28 April 2021	326,679		0.050	28 April 2031
28 April 2021		154,149	3.495	28 April 2031
28 April 2021	124,351		3.495	28 April 2028
24 September 2021	37,755		0.050	24 September 2031
	3,416,560	449,774

The market price of the shares at 31 March 2022 was 165.0p (2021: 322.5p) with a range in the year of 127.5p to 395.0p (2021: 198.0p to 371.0p).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

25.  Share-based payments (continued)

The Company uses a Black-Scholes model to value share-based payments for options with service conditions and/or non-market performance conditions and the following table lists the inputs to this model for the last five years.

	2022	2021	2020	2019	2018
Vesting period (years)	3 - 4	n /a	n /a	3	3
Option expiry (years)	7 - 10			7 - 10	7 - 10
Dividends expected on the shares	1.00 %			1.90 %	1.10 %
Risk free rate (average)	0.18 %			1.00%	1.00%
Volatility of share price	40 %			20.00%	20.00%
Weighted average fair value (pence)	101.0 - 316.0			51.0	98.6

The risk-free rate has been based on the yield from UK Government Treasury coupons. The volatility of the share price was estimated based on standard deviation calculations on the historic share price.

Long term incentive plan

Under this plan share options may be granted to certain Executive Directors and members of the Company's Executive Leadership Team. The share options awarded under the LTIP are subject to an exercise price of £0.05 per share and performance conditions being achieved that have been set by the Remuneration Committee and relate to total shareholder return (TSR) and research and development targets.

Subject to the performance conditions being met, the share Options will vest after the end of a three year vesting period from 1 April 2021 to 31 March 2024. The proportion of share options relating to each performance condition is: (i) 75% in relation to the TSR conditions; and (ii) 25% in relation to the R&D targets.

The TSR conditions mean that the share options subject to these conditions will vest subject to the following: (i) 25% of the share options will vest if the annual compound TSR over the performance period equals 7.5% ; (ii) 50% of the share options will vest if the annual compound TSR over the performance period equals 10% ; and (iii) 100% of the share options will vest if the annual compound TSR over the performance period equals 20% .

The R&D targets mean that the share options subject to these targets will vest subject to the following: (i) 25% of the shares options will vest if specified R&D targets agreed between Executive Management and the Remuneration Committee during the performance period are achieved; and (ii) 100% of the shares options will vest if specified R&D targets agreed between Executive Management and the Remuneration Committee during the performance period are achieved.

A Monte Carlo simulation model has been used to value these share options.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

26.  Share capital

			2022	2021
			£000's	£000's
Authorised
68,100,000 ordinary shares of 5p each			3,405	3,405
10,790 deferred ordinary shares of 10p each			1	1
32,334 convertible preference shares of £1 each			32	32
			3,438	3,438
Allotted, called up and fully paid
67,721,916 (2021: 67,696,416) ordinary shares of 5p each			3,381	3,379

During the year 25,500 shares were issued at a premium of £61,000 as a result of the exercise of options by employees. (2021: 148,790 shares at a premium of £367,000).

All share issued are non-redeemable and rank equally in terms of voting rights (one vote per share); rights to participate in all approved dividend distribution for that class of shares; and right to participate in any capital distribution on winding up.

The shares in the original or any increased capital of the Company may be issued with such preferred, deferred or other special rights or restrictions, whether in regard to dividend, voting, return of capital as the Company may from time to time determine.

27.  Non-controlling (minority) interests

		Group
		2022	2021
		£000's	£000's

Balance as at 1 April		13,414	5,766
Share of subsidiary's (loss)/profit for the year		(19)	8,491
Share of foreign exchange gain/(loss) on net investment		1,099	(281)
		1,080	8,210
Share of dividend paid by subsidiary		(2,210)	(562)
Balance as at 31 March		12,284	13,414

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

28.  Other reserves

The Group and Company held a Capital redemption reserve of £106,000 as at 31 March 2022 (2021: £106,000).

Included in the Group's foreign exchange reserve are the following exchange movements on consolidation of the subsidiaries and joint operations listed below:

	At 31 March 2021	Movement in the year	At 31 March 2022
	£000's	£000's	£000's
In respect of:

Zhejiang ECO Biok Animal Health Products Limited	635	750	1,385
Zhejiang ECO Animal Health Limited	-	186	186
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda	131	180	311
ECO Animal Health Japan Inc.	4	10	14
ECO Animal Health USA Corp.	88	(37)	51
ECO Animal Health de Mexico, S. de R. L. de C. V.	226	11	237
Pharmgate LLC	8	(4)	4
Foreign exchange reserve movements charged to Consolidated Statement of Comprehensive Income	1,092	1,096	2,188

29.  Directors' emoluments

	2022	2021
	£000's	£000's
Emoluments for qualifying services	793	1,086
Company pension contributions to money purchase schemes	32	34
Share-based payments	112	1
Benefits in kind	4	5
	941	1,126

During the year no directors exercised share options (2021: none) realising a gain of £nil (2021: £nil).

The highest paid director received £430,000 (2021: 541,000) including £65,000 (2021: 1,000) of share-based payments and £9,000 (2021: 10,000) of pension contributions.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

30.  Employees

Number of employees

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

	2022	2021
	Number	Number
Directors	5	5
Production and development	72	66
Administration	49	48
Sales	95	88
	221	207

Employment costs (including amounts capitalised)

	2022	2021
	£000's	£000's
Wages and salaries	12,251	13,776
Share-based payments	341	123
Social security costs	1,185	863
Other pension costs	277	105
	14,054	14,867

31.  Related party transactions

In the year ended 31 March 2021, former director Julia Trouse repaid £322,109 to the group following an internal audit investigation on unauthorised cash withdraws. This was recognised as other income in the group's consolidated income statement of the same period.

During the year Mr P Lawrence (a significant shareholder) and his family received dividends to the value of £2,926 (2021: £nil).

The other Directors and their families received dividends to the value of £nil (2021: £nil).

Interest and management charges from Parent to the other Group companies

During the year the Company made management charges on an arm's length basis to ECO Animal Health Limited amounting to £687,267 (2021: £775,000) and charged interest of £832,000 (2021: £875,000) to the subsidiary company. Both of these transactions were made through the inter-company account and were eliminated on consolidation.

During the year Zhejiang ECO Biok Animal Health Products Limited paid dividends of £176,717 (RMB 1,489,600) to ECO Animal Health Group plc (2021: £45,000) and £2,122,406 (RMB 17,890,400) to ECO Animal Health Limited (2021:  540,000).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

Related party transactions (continued)

Key management compensation

The Group regards the Board of Directors as its key management.

	2022	2021
	£000's	£000's
Salaries and short-term benefits	797	1,091
Retirement benefits	32	34
Share-based payments	112	1
	941	1,126

The number of Directors for which retirement benefits were accruing was 2 (2021: 2).

32.  Financial instruments

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

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

Capital and liquidity risk

The Group manages its capital to ensure continuity as a going concern whilst maximising returns through the optimisation of debt and equity. As part of this, the Board considers the cost and risk associated with each class of capital. The capital structure of the Group consists of cash and cash equivalents in note 20 , borrowings in note 22 and equity attributable to equity holders of the parent comprising issued capital, reserves and retained earnings as disclosed in the Group's statement of changes in equity.

Liquidity risk is managed by maintaining adequate reserves and banking facilities with continuous monitoring of the latest developments by management.

The Group's objectives when maintaining capital are:

-  to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

-  to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

32 .  Financial instruments (continued )

The Group sets the amount of capital it requires in proportion to risk. The group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

As an AIM quoted company, our governance framework is underpinned by the AIM Rules and the Quoted Companies Alliance (QCA) Corporate Governance Code 2018 (the 'QCA Code'). In addition to the QCA Code, we monitor developments and guidance in the UK Corporate Governance Code, applicable to main market listed companies, to keep abreast of matters which we feel could also be embedded as best practice as part of a progressive approach. We also review the Investment Association guidelines and seek to comply with these where applicable.

At 31 March 2022, the Group was contractually obliged to make repayments as detailed below:

				2022	2021
Within one year or on demand				£000's	£000's
Trade payables				9,415	7,918
Other payables				926	683
Accruals				2,	3,765
				12,751	12,366

Credit Risk

Credit risk is that of financial loss as a result of default by a counterparty on its contractual obligations. The Group's exposure to credit risk arises principally in relation to trade receivables from customers and on short term bank deposits. Customers' creditworthiness is wherever possible checked against independent rating databases and filing authorities, or otherwise assessed on the basis of trade knowledge and experience. Exposure and customer credit limits are continually monitored both on specific debts and overall.

The credit risk in relation to short term bank deposits is limited because the counterparties are banks with good credit ratings.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

32 .  Financial instruments (continued )

The Group operates in certain geographical areas which are from time to time subject to restrictions in the free movement of funds. The Board seeks to minimise the Group's exposure to these markets but the nature of our business makes it impossible to eliminate this exposure completely.

None of those receivables has been subject to a significant increase in credit risk since initial recognition and, consequently, 12-month expected credit losses have been recognised, and there are no non-current receivable balances lifetime expected credit losses.

Currency risk

The Group operates in overseas markets particularly through its subsidiaries in China, Brazil, Mexico, the USA and Japan as well as its joint operation in Canada and is therefore subject to currency exposure on transactions undertaken during the year. The Group does some simple economic hedging of receivables when the Board feels it is appropriate to do so and foreign exchange differences on retranslation of foreign monetary items are recorded in administrative expenses in the income statement.

The table below shows the extent to which the Group companies have monetary assets and liabilities in currencies other than in Sterling

	US Dollar	Euros	Chinese RMB	Japanese Yen	Brazilian Real	Canadian Dollar	Mexican Peso	Other
2022	£000's	£000's	£000's	£000's	£000's	£000's	£000's	£000's
Trade and other receivables	9,027	2,068	6,789	123	1,964	806	2,648	108
Trade and other payables	(3,912)	(425)	(4,701)	(158)	(97)	(426)	(350)	(67)
Cash and cash equivalents	4,752	366	8,261	120	145	208	311	92
Total	9,867	2,009	10,349	85	2,012	588	2,609	133
	US Dollar	Euros	Chinese RMB	Japanese Yen	Brazilian Real	Canadian Dollar	Mexican Peso	Other
2021	£000's	£000's	£000's	£000's	£000's	£000's	£000's	£000's
Trade and other receivables	8,063	1,749	17,783	160	359	533	1,849	175
Trade and other payables	(3,773)	(757)	(5,273)	(64)	(74)	(498)	(87)	(134)
Cash and cash equivalents	2,331	248	14,140	271	1,165	305	217	58
Total	6,621	1,240	26,650	367	1,450	340	1,979	99

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

32 .  Financial instruments (continued )

At 31 March 2022 the Group was mainly exposed to the US Dollar, Euro, Chinese RMB, Japanese Yen, Brazilian Real, Canadian Dollar and Mexican Peso. The following table details the effect of a 10% movement in the exchange rate of these currencies against sterling when applied to outstanding monetary items denominated in foreign currency as at 31 March 2022.

				2022	2021
				£000's	£000's

U S Dollar				1,096	736
Euro				223	138
Chinese RMB				1,150	2,961
Japanese Yen				9	41
Brazilian Real				224	161
Canadian Dollar				65	38
Mexican Peso				290	220

Analysis of financial instruments by category

Group				Financial assets	Financial liabilities	Total
2022				£000's	£000's	£000's
Trade and other receivables				24,048	-	24,048
Cash and cash equivalents				14,314	-	14,314
Trade and other payables				-	(12,801)	(12,801)
Amounts due under leases				-	(1,910)	(1,910)
2021				£000's	£000's	£000's
Trade and other receivables				31,526	-	31,526
Cash and cash equivalents				19,523	-	19,523
Trade and other payables				-	(12,416)	(12,416)
Amounts due under leases				-	(1,522)	(1,522)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEAR ENDED 31 MARCH 2022

32 .  Financial instruments (Continued)

Analysis of financial instruments by category (continued)

Company
				Financial assets	Financial liabilities	Total
2022				£000's	£000's	£000's
Trade and other receivables				128	-	128
Cash and cash equivalents				279	-	279
Trade and other payables				-	(376)	(377)
Amounts due under leases				-	(62)	(62)
Amounts due from group undertakings				53,940	-	53,940
2021				£000's	£000's	£000's
Trade and other receivables				69	-	69
Cash and cash equivalents				819	-	819
Trade and other payables				-	(574)	(574)
Amounts due under leases				-	(39)	(39)
Amounts due from group undertakings				55,909	-	55,909

All financial assets and liabilities in the Group's and Company's statements of financial position are classified as held at amortised cost for both the current and previous year.

33.  Post balance sheet events

Valuation of investment property in Mitcham

The Group agreed in principle to sell the investment property located at Western road, Mitcham for around £227,000. As at 31 March 2022 the carrying value of the property has been reduced from £305,000 to £227,000 with a corresponding expense in the Group's income statement.

Retirement of the Chief Executive Officer and appointment of a new Chief Executive Officer

Marc Loomes, who joined ECO Animal Health Group plc in 2004, became Managing Director in 2005 and CEO in 2010, stepped down on 1 April 2022. David Hallas joined ECO Animal Health Group plc as CEO on 1 April 2022.

Establishment of Revolving Credit Facility

The Group put in place a £10m revolving credit facility with Natwest bank on 9 July 2022. This facility is interest bearing and can be drawn by the Group on demand, The facility expires on 30 June 2026.

 

END

 

 

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