Interim Results
Eco Animal Health Group PLC
17 December 2007
17 December 2007
ECO Animal Health Group plc
Interim Results for the six months ended 30 September 2007 and placing
Key features
• 700,000 new shares placed with an institution at a premium to share price
• Aivlosin sales (in US dollars) 34 per cent ahead of same period last year
• Strong growth from new Chinese subsidiary
• Scrip dividend alternative to be offered to all shareholders; a number of
major shareholders have already indicated their intention to take new
shares in lieu of the dividend
• Aivlosin European approval process for poultry in final stages
• Very encouraging results at reduced dose rate for ileitis in pigs with
Aivlosin, leading to submission for label change in the EU next year
• Group focused on veterinary pharmaceutical products
• Further important drug registrations granted during period
Peter Lawrence, Chairman of Eco Animal Health Group plc, commented:
'Much has happened to strengthen our animal health business so far this year
and following the granting of the new drug registrations, since the period end,
current indications are that sales are likely to show a good increase in the
second half of the year. I am particularly pleased with the projected low dose
submission to the EU on Aivlosin as it, when granted, should lead to our
existing sales success being replicated in the major European markets'
Contacts:
ECO Animal Health Group plc Peter Lawrence 020 8336 6190
Spiro Financial Anthony Spiro 020 8336 6196
Charles Stanley Securities Philip Davies 020 7149 6224
(Nominated Adviser)
ECO Animal Health Group is a leader in the development, registration and
marketing of pharmaceutical products. Our products for these global growth
markets promote well being in animals. Our financial goals are achieved through
the careful and responsible application of science to generate value for our
shareholders.
ECO Animal Health Group plc
CHAIRMAN'S STATEMENT
At the Annual General Meeting of Lawrence plc in August 2007 shareholders passed
a resolution to change the Company's name to ECO Animal Health Group plc from
Lawrence plc. As a result of the strategic disposals, which were implemented
over recent years, well over 90 per cent of sales are now attributable to our
ECO Animal Health operations; the name change reflects this focus. Our web site
address is now www.ecoanimalhealthgroupplc.com
The continuing weakness of the US dollar, which fell by a further seven per cent
against sterling over the six months under review, has once again masked the
underlying performance of the Company as the majority of its sales are invoiced
in that currency. Despite this dollar weakness, total sales in sterling were
close to last year's level. EBITDA (earnings before interest, tax, depreciation,
amortisation and share based payments) on continuing operations for the six
months to 30 September 2007 was £674,000.
Our strategy to become a focussed animal health company has been completed
successfully, although in terms of trading performance the full benefits have
yet to come through. I commented in the 2007 Annual Report that the Company is
determined to maximise the long-term value of its drug development and
registration programmes. Selling our mature, slow growth businesses has
inevitably had a short-term impact on cash generation. Our animal health
operations are still in the cash-consuming phase as we invest in drug
development and registrations.
In August 2007 the Company raised close to £5.3 million (after expenses) through
a share placing to accelerate its registration timetable, which would allow ECO
to achieve more authorisations in a shorter time. Furthermore the Board also
identified investment opportunities within the pet medication market. Work has
begun on these new development projects. The Board believes that these
programmes are of high priority and their early completion is an essential
component of the Company's strategy to build long-term value through targeted
investment.
The Board is declaring an unchanged Interim dividend of 1.7 pence (net) per
share, which will be paid on 12 May 2008 to shareholders on the register on 18
April 2008. In addition, the Board has decided to offer a scrip dividend
alternative and a circular will be sent to shareholders shortly convening an
Extraordinary General Meeting. We are confident that shareholders will benefit
from this proposal, as it will allow us to target a greater proportion of our
cash resources on the generation of profit from our product registration
programmes. A number of major shareholders have already indicated their
intention to take new shares in lieu of the dividend.
Operations
I am pleased to report that the Company made steady progress during the period
under review. Sales of Aivlosin(R), our patented macrolide antibiotic, advanced
34 per cent in US dollars from last year's level in generally challenging market
conditions. The principal growth area was in the rest of the world where the
level of sales was 54 per cent ahead of last year.
Sales of Aivlosin(R) in Europe to pig producers, which are principally handled
by our distributor Schering Plough, continue to disappoint and were 14 per cent
below last year's level. The reason is two fold; firstly farmers are facing
economic difficulties as a result of global grain shortages and secondly ECO has
been affected by the unexpected imposition of a higher than expected dose rate
by the European licensing authority, for the control of ileitis. ECO has
responded rapidly by commencing a reduced dose rate trial programme for ileitis
in pigs, which has produced very encouraging results. We will submit an
application for this lower treatment regimen to the EMEA (European Medicines
Evaluation Agency) next year: approval will have a significant positive impact
on our EU sales and market penetration.
We are in the final stages of the EMEA approval process for Aivlosin(R) for
poultry. A recent decision by the EMEA now allows us to continue the development
work to extend its use to egg laying birds. A European marketing authorisation
will open up new markets for Aivlosin(R) in the Middle East and North Africa
where the local regulatory authorities seek the reassurance of a European
approval. We have recently received approval for the use of Aivlosin(R) with
poultry in Turkey and our submission to the licensing authorities in India is
also progressing well.
We have been granted several new approvals around the world for Aivlosin(R),
including the very large markets for pigs and poultry in Brazil and a further
approval in Japan for pigs is imminent. At the important Latin American Poultry
Conference, held recently in Brazil and attended by leading veterinary
specialists from Central and Latin America, ECO reinforced its presence with a
trade stand manned by its Latin American sales team. ECO was also invited to
give a keynote lecture on mycoplasma control, a key benefit of Aivlosin(R),
during the parallel scientific programme.
The collaborative research programme with Cambridge University's Department of
Pathology is progressing well as is the related work on pigs at the University
of Iowa. Some of the early results from this research on the effect of Aivlosin
(R) on certain viral respiratory infections were presented to pig veterinarians
in China and were particularly well received. In April 2007 we increased our
shareholding in Zhejiang ECO-BIOK Animal Health Products Company Ltd and now
have control of this company and therefore consolidated its results for the
first time. This new Chinese subsidiary delivered a strong performance, with
sales exceeding £0.6 million, which represents a very significant increase over
the equivalent period last year. This business represents a large potential
profit centre for the Company. ECO also exhibited at the World Veterinary
Poultry Association Conference in Beijing.
Work on our Ecomectin(R) marketing authorisations is almost complete. Approval
for Ecomectin(R) horse paste in a further 16 EU countries was recently granted
and sales in Ireland, which began earlier in the year, are very encouraging.
Once labelling has been agreed with each member state, sales will commence.
European marketing authorisation for Ecomectin(R) pig premix is also imminent.
The US market for Ecomectin(R) cattle pour-on shows little sign of recovering
from the sharp drop in pricing levels that we reported two years ago. Customers
in Japan have placed opening orders for Ecoheart(R), a combination heartworm and
roundworm tablet for dogs, thus opening a substantial and very important market
segment.
Board
Kevin Stockdale, who is a chartered accountant, rejoined the Company on 3 August
2007 as Finance Director. Previously he had been responsible for the group
accounts of Lawrence plc and was also Finance Director of Lawrence's Interpet
operation. Kevin remained with Interpet following its disposal in 2004. Julia
Rosu also joined the Board on 3 August as an executive director. Julia has been
with the Company since 1993 and fulfilled a number of senior finance roles,
initially with our Pet Superstores division. She has been Company Secretary
since 2004 and was Group Financial Controller.
Gavin Casey, who joined as a non-executive director five years ago in 2002, will
retire from the Board at the end of the year. Gavin has been a most helpful and
constructive colleague; we will miss his wisdom and experience. We hope to
appoint his replacement in the coming months.
Outlook
Much has happened to strengthen our animal health business so far this year and
following the granting of the new drug registrations, since the period end,
current indications are that sales are likely to show a good increase in the
second half of the year.
Peter Lawrence
Executive Chairman
17 December 2007
CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS TO 30
SEPTEMBER 2007
Six months Six months Year
ended ended ended
30.09.07 30.09.06 31.03.07
(unaudited) (unaudited) (audited)
(as restated) (as restated)
£000 £000 £000
REVENUE
Continuing operations 6,292 6,891 14,703
Acquisitions 618 - -
Discontinued activities - 2,807 3,593
6,910 9,698 18,296
Cost of sales (4,786) (6,535) (12,367)
GROSS PROFIT 2,124 3,163 5,929
Administrative expenses (1,643) (1,555) (3,602)
Currency losses (87) - -
Amortisation of intangible assets (1,014) (741) (1,613)
Share based payments (131) (87) (224)
Other operating income 210 - 432
OPERATING (LOSS)/PROFIT:
Continuing operations (576) 338 427
Discontinued activities - 442 495
Acquisitions 35 - -
Profit on sale of a division - - 2,896
Amounts written off investments - - (40)
(LOSS)/PROFIT ON ORDINARY
ACTIVITIES BEFORE INTEREST (541) 780 3,778
Net interest payable (195) (206) (387)
(LOSS)/PROFIT ON ORDINARY
ACTIVITIES BEFORE TAXATION (736) 574 3,391
Taxation - - (571)
(LOSS)/PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION (736) 574 2,820
ATTRIBUTABLE TO:
Equity holders of the parent (753) 574 2,820
Minority interest 17 - -
(736) 574 2,820
BASIC (LOSS)/EARNINGS PER SHARE (2.363)p 1.844p 9.056p
FULLY DILUTED (LOSS)/EARNINGS
PER SHARE (2.360)p 1.832p 9.012p
EARNINGS BEFORE INTEREST,
TAXATION,DEPRECIATION,AND
SHARE BASED PAYMENTS 674 1,667 5,732
BASIC EARNINGS
PER SHARE BEFORE
DEPRECIATION AND SHARE
BASED PAYMENTS 2.062p 5.388p 18.408p
CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER
2007
As at As at As at
30.09.07 30.09.06 31.03.07
(unaudited) (unaudited) (audited)
(as restated) (as
restated)
£000 £000 £000
ASSETS
Non Current Assets
Property,Plant & Equipment 1,367 1,354 943
Goodwill & Other Intangibles 33,783 30,210 32,140
Investments 342 569 779
35,492 32,133 33,862
CURRENT ASSETS
Inventories 4,782 4,337 3,357
Trade and other receivables 8,337 9,999 9,257
Corporation tax - 58 -
Deferred tax 185 18 185
Other taxes and social security 320 103 -
Cash and cash equivalents 1,360 1,483 936
14,984 15,998 13,735
Total Assets 50,476 48,131 47,597
Equity
Capital and reserves
Called up share capital 1,695 1,558 1,559
Share premium 26,504 21,331 21,367
Revaluation reserve 256 429
256
Other reserves 679 411
548
Retained earnings 9,255 10,105 12,474
38,389 33,834 36,204
Minority interest 502 2 2
Total Equity 38,891 33,836 36,206
Liabilities
Non Current Liabilities
Long term borrowings 630 2,061 630
Long term provisions 111 338 111
Current Liabilities
Trade and other payables 4,880 4,218 5,321
Short term borrowings 3,155 5,555 3,864
Current portion of long term borrowings 210 210
210
Corporation tax 630
- 630
Other taxes and social security 119 215
92
Dividends payable 1,850 1,698
533
Total Equity and Liabilities 50,476 48,131 47,597
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS'
FUNDS FOR THE PERIOD TO 30 SEPTEMBER
Share Share Other Revaluation Retained Total Minority Total
Capital Premium Reserves Reserves Earnings Interest Equity
Account Account
£000 £000 £000 £000 £000 £000 £000 £000
At 1 April 2006 1,556 21,272 106 429 11,486 34,849 2 34,851
Changes in accounting policy - - 218 - (218) - - -
At 1 April 2006 restated 1,556 21,272 324 429 11,268 34,849 2 34,851
Profit for the year - - - - 2,820 2,820 - 2,820
Transfer from revaluation - - - (170) 170 - - -
reserve to retained earnings
Foreign currency translation - - - - 271 271 - 271
differences
Arising on issue of shares 3 95 - - - 98 - 98
in the year
Dividends - - - - (2,228) (2,228) - (2,228)
Depreciation written back - - - (3) - (3) - (3)
Share based payments - - 224 - - 224 - 224
Actuarial gains on pension - - - - 173 173 - 173
scheme assets
At 31 March 2007 1,559 21,367 548 256 12,474 36,204 2 36,206
Loss for the period - - - - (753) (753) 17 (736)
Foreign currency translation - - - - (619) (619) - (619)
differences
Arising on issue of shares
in the period 136 5,137 - - - 5,273 - 5,273
Arising on consolidation - - - - - - 483 483
of ECO Biok
Dividends payable - - - - (1,847) (1,847) - (1,847)
Share based payments - - 131 - - 131 - 131
At 30 September 2007 1,695 26,504 679 256 9,255 38,389 502 38,891
Prior interim period
At 1 April 2006 1,556 21,272 106 429 11,486 34,849 2 34,851
Changes in accounting policy - - 218 - (218) - - -
At 1 April 2006 restated 1,556 21,272 324 429 11,268 34,849 2 34,851
Profit for period 574 574 574
Foreign currency translation - - - - (39) (39) - (39)
differences
Arising on issue of 2 59 - - - 61 - 61
shares in the period
Dividends payable - - - - (1,698) (1,698) - (1,698)
Share based payments - - 87 - - 87 - 87
At 30 September 2006 1,558 21,331 411 429 10,105 33,834 2 33,836
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS TO 30SEPTEMBER 2007
Six months Six months Year ended
ended ended
30.09.07 30.09.06 31.03.07
(unaudited) (unaudited) (audited)
(as restated) (as restated)
£000 £000 £000
(Loss)/(Profit) from operations (541) 780 922
Adjustment for:
Depreciation of plant and equipment 70 59 117
Amortisation of intangible assets 1,014 741 1,613
Actuarial pension losses - - (54)
(Decrease)/increase in pension provision - - (227)
Share based payments 131 87 224
Foreign exchange differences (618) (39) 271
Operating cash flow before movement in working capital 56 1,628 2,866
(Increase)/decrease in inventories (985) (711) 270
Decrease in receivables 688 449 1,295
(Decrease)/Increase in payables (898) 13 1,219
Cash (absorbed by)/generated from operations (1,139) 1,379 5,650
Interest paid (197) (226) (477)
Taxation - - (51)
Net cash (outflow)/inflow from operating activities (1,336) 1,153 5,122
Cash flows from investing activities
Acquisition of ECO Biok (61) - -
(Less cash acquired with ECO Biok) 276 - -
Investment in Brazilian Office (62)
Proceeds from sale of a division - - 3,032
Purchase of property plant and
equipment (10) (37) (57)
Costs of acquiring drug registrations (2,419) (2,151) (4,970)
Interest received 2 20 90
Net cash (used in) investing
activities (2,274) (2,168) (1,905)
Cash flows from financing activities
Issue of shares 5,273 61 98
(Repayment of)/Increase in bank borrowings (709) 1,620 (1,501)
Dividends paid (530) (482) (2,177)
Net cash received from/(used in) financing
activities 4,034 1,199 (3,580)
Net increase/(decrease) in cash and cash equivalents 424 184 (363)
Cash and cash equivalents at the beginning of the
period 936 1,299 1,299
Cash and cash equivalents at the end of the period 1,360 1,483 936
ECO ANIMAL HEALTH GROUP PLC (FORMERLY LAWRENCE PLC)
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007
1. Basis of preparation
The group has historically prepared its audited annual accounts and unaudited
interim results in accordance with UK generally accepted accounting practice (UK
GAAP).Following new accounting standards the group is now required to present
its annual report and accounts in accordance with International Accounting and
Financial Reporting Standards (IFRS).
The IFRS information in this report for the year ended 31 March 2007 is a
restatement of information extracted from the statutory financial statements
prepared under UK GAAP on a historical cost basis. Those statutory accounts were
filed with the Registrar of Companies. The auditors report on those accounts was
unqualified and did not contain a statement under section 237 (2) or section 237
(3) of the Companies Act 1985.The restated IFRS information provided for the
year ended 31 March 2007 does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. However these are anticipated
to form the comparative period in the statutory accounts for the year ending 31
March 2008, the Group's first report to be prepared in accordance with IFRS.
The unaudited interim results for the six months ended 30 September 2006 and 30
September 2007 have been prepared by the Group in accordance with IFRS and
accounting policies that will be applied when the Group prepares its first IFRS
financial statements for the year ending 31 March 2008.The financial information
for the six months ended 30 September 2007 does not constitute statutory
accounts as defined by Section 240 of the Companies Act 1985.
2. The implementation of IFRS and IAS resulted in the following restatements
of previously reported figures:
For the six months ended 30th September 2006:
In respect of IFRS 2 'Share-based Payment' - a reduction of reported profit
through increased overheads of £87,000, a reduction in retained earnings brought
forward of £218,000, and an increase in Share Option Reserve of £305,000.
In respect of IAS 36 -'Impairment of Assets' - an increase in reported profit
through decreased amortisation of goodwill of £511,000 and a corresponding
increase in the value of Intangible
Assets in the Balance Sheet as at 30th September 2006.
For the year ended 31st March 2007:
In respect of IAS 36 -'Impairment of Assets' - an increase in reported profit
through decreased amortisation of goodwill of £1,021,112, and a corresponding
increase in the value of Intangible
Assets in the Balance Sheet as at 31st March 2007.
The effect of implementation of IAS 36 on the Financial Statements for the six
months ended 30th September 2007 is as follows:
In respect of IAS 36 -'Impairment of Assets' - an increase in reported profit
through decreased amortisation of goodwill of £511,000, an increase in retained
earnings brought forward of £1,021,112 and an increase in the value of
Intangible Assets in the Balance Sheet as at 31st March 2007 of £1,532,112.
3. Revenue is derived from the Group's animal pharmaceutical business.
4. Earnings per share
September 2007 September March
Unaudited 2006 2007
Unaudited Audited
(as restated) (as restated)
Weighted average number of share in issue 31,864 31,122 31,139
(000's)
Fully diluted weighted average number of shares
in issue (000's) 31,901 31,338 31,290
Profit/(loss) attributable to equity holders of
the company (£000's) (753) 574 2,820
Basic (loss)/earnings per share (pence) (2.363) 1.844 9.056
Fully diluted (loss)/ earnings per share (pence) (2.360) 1.832 9.012
5. This financial information was approved by the Board on
6. Copies of this interim report are being sent to all of the Company's
shareholders. Further copies can be obtained from the Company's registered
office at 78 Coombe Road, New Malden, Surrey, KT3 4QS.
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