Results for the six months ended 30 September 2021

RNS Number : 5234T

Eco Animal Health Group PLC

25 November 2021

 

ECO Animal Health Group plc (''ECO")

(AIM: EAH)

Results for the six months ended 30 September 2021

HIGHLIGHTS

Financials

· Sales at £38.5m (H1 2020: £42.5m)

· EBITDA before exceptional impairment at £3.8m (H1 2020 restated*: £6.7m)

· Profit before taxation of £0.9m (H1 2020 restated profit*: £4.8m)

· Loss per share of 0.21p (H1 2020: restated Earnings per share*: 3.63p)

· Cash generated by operations of £6.1m (H1 2020 restated*: £3.5m)

*  Prior period figures have been restated to reflect adjustments arising from the March 2021 audit

Operations

· Growth in Southeast Asia markets (representing 16% of sales) with revenues up 50%

· Encouraging vaccine trial results increased focus in the R&D programme and resulted in the impairment of one non-core R&D project 

· Significant decline in revenues from China (representing 41% of total revenues; H1 2020: 49%) arising from sharp fall in pig prices

· Excluding China and Japan revenues overall increased by 5%

· Expectation for China pork industry recovery in H2

Dr Andrew Jones, Non-executive Chairman of ECO Animal Health Group plc, commented:

"This set of results has clearly been impacted by the dramatic fall in the pig price in China which had a significant impact on the industry and losses of up to US$200 per head. This resulted in a significant decline in the demand for Aivlosin®.  However, we are pleased to note that China revenues are at pre-ASF levels and that there is continuing revenue growth in aggregate elsewhere. In addition, we are excited to see the positive results of key technical trials in some of our vaccine developments providing us with confidence to continue our investment in these key projects.  We look forward to providing more detail on some of our new product development initiatives in the coming months as well as anticipated approvals.  The Directors regard the situation in China as cyclical and one which is expected to reverse and as a result, we are confident and excited about the medium and longer term prospects for the business"

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

Contacts:

ECO Animal Health Group plc Marc Loomes (CEO) Christopher Wilks (CFO) Andrew Jones (Chairman)	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
Peel Hunt LLP (Joint Broker) James Steel Dr Christopher Golden	020 7418 8900

ECO Animal Health Group plc ("ECO" or "the Group") researches, develops and commercialises products for livestock. Our business strategy is to generate shareholder value by achieving the maximum sales potential from the existing product portfolio whilst investing in Research and Development ("R&D") for new products, particularly vaccines, and seeking to in-license new products.

Chairman's statement

I am pleased to report that despite the continuing challenges of travel restrictions presented by Covid-19, the Group outside of China continues to grow in most of our major markets compared to pre-pandemic levels.  Unfortunately, the six months ended 30 September 2021 represented a period of much lower pork prices in China and this has had a consequent and significant impact on the Group's revenues and profitability.

Financial Performance

Revenue was 9% lower in the first six months to 30 September 2021 at £38.5 million (30 September 2020: £42.5 million), driven by a sharp decline in revenues from China. China and Japan represented 41% of Group revenue in the period (H1 2020: 49%). Excluding China and Japan revenues, other markets grew by 5% in aggregate. The strong performance in the six months ended 30 September 2020 was driven by an extraordinary year in China (a recovery from the African Swine Fever ("ASF") outbreak); for comparison the revenue performance for the Group before the ASF outbreak in China (the six months ended 30 September 2018) was £30 million.

The gross margin in the first half has been an average of 46% (H1 2020: 48%) reflecting the revenue reduction in China, given it is a higher margin territory.

Administrative expenses at £10.9 million were consistent with the comparative period last year (H1 2020: £10.5 million).

Research and development expenditure shown in the income statement together with the amounts capitalised represented a cash investment of £4.0 million (H1 2020: £4.1 million), representing 10.4% of revenue in the period (H1 2020: 9.6%). 

A one-off impairment charge of £2.1 million was incurred in the period on previously capitalised costs on a particular development programme due to prioritisation given to other R&D projects and the cessation of activity on a long running horse paste project.

Earnings before interest, tax, depreciation, amortisation and impairment, share based payments and foreign exchange movements ("Adjusted EBITDA") were £3.8 million (H1 2020: £6.7 million).  This decrease in profitability was directly a result of the lower revenue in China.

Cash generated from operations (on a fully consolidated basis) was £6.0 million (H1 2020: £3.5 million).  This was a particularly strong performance; improved receivables and judicious management of payables helped to offset the reduced profits generated in the period.

This cash generation after allowing for tax payments of £2.3m (primarily tax paid in China) resulted in cash balances at the period end of £22.9 million (31 March 2021: £19.5 million), of which £22.7 million (31 March 2021: £13.7 million) was held in the Group's 51% owned subsidiary in China.  The Group continues to work with our partner in China to establish the most efficient mechanism for repatriating cash from China bearing in mind that the Group's share of cash repatriated by dividend declaration is 51% and subject to withholding taxes.  On a day to day basis, the Board considers the cash held in the Group's subsidiary in China to be unavailable to the Group outside of China; accordingly cash management and funds available for investment in R&D is based upon the cash balances outside of China, which at 30 September 2021 was £0.2 million (31 March 2021 - £5.8 million).  The Group's committed overdraft facility remains at £5 million.  The annual dividend due from the Group's subsidiary in China is expected to be received prior to the end of the current accounting period.

The EPS loss in the six months ended 30 September 2021 arises after netting off our China JV partner's 49% share of profit (Eco's 51% group share of which forms part of the EPS calculation).

Business Performance

The geographical analysis of the Group's revenue in the six months ended 30th September 2021 compared to the prior period in 2020 and the full year ended 31st March 2021 was as follows:

Revenue Summary			6 months ended 30 September			Year ended
			2021	2020		31 March  2021	% change
			(£'m)	(£'m)		(£'m)	2020 to 2021
China and Japan			15.7	20.8		58.9	(25%)
North America (USA and Canada)			6.0	6.4		13.9	(6%)
South and Southeast Asia			6.0	4.0		9.1	50%
Latin America			6.3	6.4		14.3	(2%)
Europe			2.9	3.4		6.6	(15%)
Rest of World and UK			1.6	1.5		2.8	7%
			38.5	42.5		105.6	(9%)

Group revenue reduced by 9% to £38.5 million compared to the prior period in 2020 - a period during which global travel continued to be restricted, supply chain interruption had economic impact in many industries and trading with Europe in the post transitionary phase of Brexit was challenging.  The overall reduction in Group revenue in the six months ended 30 September 2021 was primarily caused by a 25% reduction in revenue in China and Japan; excluding this segment Group revenues overall increased by 5%.

The Group reported record revenues in China in the year ended 31 March 2021 but as anticipated in our 2021 annual report, the strength of the Chinese market was likely to ease significantly in the current period. This was a year in which the Chinese pork industry enjoyed unprecedented pricing for its product. The shortage of pigs in the period after the African Swine Fever ("ASF") outbreak resulted in record value per farmed animal and a consequent rapid investment to expand herd numbers. Individual producers sought to increase market share funding this expansion through equity raises and debt.

The Group's outlook statement in the 31 March 2021 Annual Report together with the trading update statement released at the time of the AGM in September 2021 signalled ongoing regional outbreaks of ASF in China. A significant liquidation of swine stocks occurred during the trading period ended 30 September 2021 which was in part to avoid disease infection and partly to provide cashflow to service debt. As a result, this has caused a sharp fall in the wholesale market price for pork. The fall was exacerbated by producers continuing to fatten pigs for longer than would normally be the case, increasing the weight of animals sent to market. The commodity price fell to such an extent that for most producers, pigs were being produced at a loss.  With this trading backdrop the Group experienced a consequential fall in demand for our flagship product Aivlosin®.   

Revenue in North America, in particular the USA, has been broadly consistent and the return to pre-2019 levels of business experienced last year has been maintained during this period. Pork prices in the USA and Canada have been generally stable and this has resulted in continuing strong revenues. The North American continent has seen some significant PRRS (Porcine reproductive and respiratory syndrome) virus infection during the Autumn months and this has resulted in continuing strong demand for Aivlosin® in this market.

Southeast Asia has experienced a particularly strong period of trading compared to last year.  Revenue from Thailand has doubled from £2m to £4m in the six months ended 30 September 2021 underpinned by new staff and strong technical marketing.  A further emerging opportunity in this segment is in Indonesia where the Group is investing in sales resource to support this opportunity.

Revenue in Latin America, as a group of markets, was consistent despite supply chain issues relating to product quarantine requirements in certain countries.  Brazil continues to dominate this segment, representing 48% of the total Latin America revenue (42% in H1 2020). A slightly lower revenue in Mexico was offset by stronger revenue in other markets such as Columbia, Bolivia and Peru.

Revenue into Europe was adversely affected by transport shortages and Brexit related challenges. The post Brexit transitional arrangements expired and many customers within the EU had differing views regarding documentation and supply chain logistics for importation of our products. These issues have been largely overcome and we look forward to fulfilling European demand going forward.

Research and Development

During the last six months we have maintained our commitment to our exciting R&D programme investing a further £4.0 million, with a similar level of expenditure planned in H2. Some very encouraging results have been achieved in our new product development programmes. Novel vaccine technology was initially focussed on Mycoplasma in poultry with two licensed-in vaccines now in late-stage development. This has resulted in great efficacy in key proof of concept studies and we are proceeding with pace into dose optimisation work. Mycoplasmosis in both pigs and poultry are diseases of significant economic importance. We look forward to providing more detail on the new product development portfolio at our upcoming Capital Markets Day which is expected to be held early in the new year. An announcement on timing will be made in due course.

Work continues to gain further marketing authorisations for Aivlosin® - in particular in China and Brazil where gaps remain in the approved use claims. It is expected that updates on these programmes will be provided during the remainder of this financial year.

The significant potential in the vaccine developments and the promise shown by the trial work has resulted in a de-emphasis of certain other projects.  A long running development of a combined horse paste (Ivermectin-Praziquantel) which has good potential as a combined (one-shot) parasite treatment required further work on the formulation.  This was to be complementary to the long running and low-level revenue from horse paste which the Group has always enjoyed.  It was decided that this project had become marginal; the return profile was less attractive compared with other programmes and work was ceased.  Additionally, work was ceased on a pair of Aivlosin based projects where the returns were deemed to be not as attractive as other projects within the portfolio.  Accordingly, a one-off impairment charge of £2.08 million was taken on the previously capitalised development costs.  These are shown separately on the face of the Income statement.

Dividend

The directors recognise the importance of the dividend to shareholders. For the year ended 31 March 2021 a dividend of 1p per share was declared and paid during October 2021. The Directors will again assess the dividend at the year-end having due regard to the Group's significant investment in new product development, operating cash flow, and accessible cash balances.

Board composition

Earlier in July this year, we announced that Marc Loomes intends to retire by 31 December 2022.  The search to find a replacement for Marc has been underway for some time and we are pleased with the calibre and quality of candidates that have been identified.  We expect to be able to complete the selection process in the coming months.

The board intends to add further independent non-executive expertise.  An announcement on this is likely to be made shortly.

Covid-19

Covid-19 remains an on-going business challenge.  We adapted very well to remote working and have now also embraced "hybrid" working.  We have re-opened the office in Southgate but limited the number of single day attendees.  The teams have organised themselves to work within these constraints in a safe and effective manner.  We continue to access customers using remote and electronic communication, exploring novel ways of marketing and providing technical support.  Unfortunately travelling to China has not been possible since the beginning of the pandemic but we continue to monitor and explore ways in which we might be able to have some physical interaction with our China based colleagues in the coming months. 

We remain exceedingly grateful to our staff members, customers and suppliers in showing considerable fortitude during this time of change.

Outlook

The China market remains of great importance to the Group. There has been continued volatility in the Chinese porcine market during October and November with the live pig price falling from around 20 RMB/kg to a low of 10 RMB/kg and recovering to the current levels at about 17 RMB/kg.  Whilst commodity prices have seen a rise in recent weeks supported by government sponsored purchasing of pork for frozen reserves, they are still trading at a level which is below break-even for most producers. However, the late Autumn and Winter period normally gives rise to an increase in demand for Aivlosin®, caused by increased disease prevalence in colder months and greater pork consumption associated with Chinese national holidays and festivals.  We expect this seasonal effect to feed through in improving revenue opportunities during the fourth quarter of our financial year.

Furthermore, we expect stronger revenue in the Group's other worldwide markets in the second half; this has traditionally been the case and has contributed to the historically observed overall second half weighting to the revenues and profits.  We expect that pattern of trading to recur during the remainder of this financial year.

The Board considers the situation in China as cyclical and one which will in due course reverse.  This, together with positive vaccine trial results, support the Board's confidence and excitement about the medium and longer term prospects for the Group.

Dr Andrew Jones

Non-Executive Chairman

25 November 2021

CONSOLIDATED INCOME STATEMENT
		Six months	Six months	Year ended
		to 30.09.21	to 30.09.20	31.03.21
	Notes	(unaudited)	(unaudited)	(audited)
		000's	000's	000's
			Restated*
Revenue	5	38,474	42,530	105,607
Cost of sales		(20,959)	(22,098)	(51,990)
Gross Profit		17,515	20,432	53,617
Other income		16	397	319
Administrative expenses		(10,852)	(10,524)	(22,296)
R&D expense		(3,309)	(4,093)	(8,072)
Currency profits/(losses)		274	(843)	(2,230)
Amortisation of intangible assets		(586)	(424)	(898)
Share based payments		(83)	(85)	(123)
Impairment of intangible assets	7	(2,085)	-	-
Profit from operating activities:		890	4,860	20,317
Net finance cost		(53)	(39)	(71)
Share of profit of associate		47	-	38
Profit before income tax		884	4,821	20,284
Income tax benefit/(charge)		(759)	(623)	(3,635)
Profit for the period		125	4,198	16,649
Attributable to:
Owner of parent company		(140)	2,453	8,158
Non-controlling interest		265	1,745	8,491
		125	4,198	16,649
Earnings per share (pence)	6	(0.21)	3.63	12.08
Diluted earnings per share (pence)	6	(0.21)	3.49	12.07
Earnings before interest, taxation, depreciation,
amortisation and share based payments (EBITDA)		1,969	5,838	22,170
Exclude foreign exchange differences and impairment		1,812	843	2,230
Adjusted EBITDA		3,781	6,681	24,400

*Details of the restatement, which is unaudited, is presented in note 3.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
		Six months	Six months	Year ended
		to 30.09.21	to 30.09.20	31.03.21
		(unaudited)	(unaudited)	(audited)
		000's	000's	000's
			Restated*
Profit for the period		125	4,198	16,649
Other Comprehensive income/(losses) (net of related tax effects):
Items that will or may be reclassified to profit/(loss):
Foreign currency translation differences		254	507	(258)
Items that will not be reclassified:
Deferred tax on property revaluations		-	-	84
Defined benefit plan - actuarial losses		-	-	(32)
Other comprehensive income/(losses) for the period		254	507	(206)
Total comprehensive income for the period		379	4,705	16,443
Attributable to:
Owners of the parent Company		37	2,991	8,233
Non-controlling interest		342	1,714	8,210

*Details of the restatement, which is unaudited, is presented in note 3.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
	Share Capital Account	Share Premium Account	Revaluation Reserves	Other Reserves	Foreign Exchange Reserve	Retained Earnings	Total	Minority Interest	Total Equity
	£000's	£000's	£000's	£000's	£000's	£000's	£000's	£000's	£000's
FOR THE YEAR ENDED 31 MARCH 2021
Balance as at 31 March 2020	3,377	62,882	572	106	526	7,220	74,683	5,766	80,449
Profit for the year	-	-	-	-	-	8,158	8,158	8,491	16,649
Other comprehensive income:
Foreign currency differences	-	-	-	-	23	-	23	(281)	(258)
Deferred tax on property revaluations	-	-	84	-	-	-	84	-	84
Actuarial gains/(losses) on pension scheme assets	-	-	-	-	-	(32)	(32)	-	(32)
Total comprehensive income for the year	-	-	84	-	23	8,126	8,233	8,210	16,443
Transactions with owners recorded directly in equity:
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	549	15,469	83,417	13,414	96,831
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021
Profit for the period	-	-	-	-	-	(140)	(140)	265	125
Other comprehensive income:
Foreign currency differences	-	-	-	-	177	-	177	77	254
Deferred tax on property revaluations	-	-	2	-	-	-	2	-	2
Total comprehensive income for the period	-	-	2	-	177	(140)	39	342	381
Transactions with owners recorded directly in equity:
Issue of shares in the period	1	61	-	-	-	-	62	-	62
Share-based payments	-	-	-	-	-	83	83	-	83
Deferred tax on share-based payments	-	-	-	-	-	-	-	-	-
Total transactions with owners	1	61	-	-	-	83	145	-	145
Balance as at 30 September 2021	3,380	63,319	658	106	726	15,412	83,601	13,756	97,357

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
	Share Capital Account	Share Premium Account	Revaluation Reserves	Other Reserves	Foreign Exchange Reserve	Retained Earnings	Total	Minority Interest	Total Equity
	£000's	£000's	£000's	£000's	£000's	£000's	£000's	£000's	£000's
FOR THE YEAR ENDED 31 MARCH 2020
Balance as at 31 March 2019	3,372	62,650	664	106	467	10,855	78,114	5,102	83,216
Profit for the year	-	-	-	-	-	3,895	3,895	1,593	5,488
Other comprehensive income:
Foreign currency differences	-	-	-	-	59	-	59	39	98
Deferred tax on property revaluations	-	-	(92)	-	-	-	(92)	-	(92)
Actuarial gains/(losses) on pension scheme assets	-	-	-	-	-	12	12	-	12
Total comprehensive income for the year	-	-	(92)	-	59	3,907	3,874	1,632	5,506
Transactions with owners recorded directly in equity:
Issue of shares in the year	5	232	-	-	-	-	237	-	237
Share-based payments	-	-	-	-	-	284	284	-	284
Deferred tax on share-based payments	-	-	-	-	-	(373)	( 373)	-	( 373)
Dividends	-	-	-	-	-	(7,453)	(7,453)	(968)	(8,421)
Transactions with owners	5	232	-	-	-	(7,542)	(7,305)	(968)	(8,273)
Balance as at 31 March 2020	3,377	62,882	572	106	526	7,220	74,683	5,766	80,449
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2020
Profit for the period - *restated	-	-	-	-	-	2,453	2,453	1,745	4,198
Other comprehensive income:
Foreign currency differences	-	-	-	-	538	-	538	(31)	507
Total comprehensive income for the period	-	-	-	-	538	2,453	2,991	1,714	4,705
Transactions with owners recorded directly in equity:
Issue of shares in the period	-	6	-	-	-	-	6	-	6
Share-based payments	-	-	-	-	-	85	85	-	85
Total transactions with owners	-	6	-	-	-	85	91	-	91
Balance as at 30 September 2020 - restated*	3,377	62,888	572	106	1,064	9,758	77,765	7,480	85,245

*Details of the restatement, which is unaudited, is presented in note 3.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
		As at	As at	As at
		30.09.21	30.09.20	31.03.21
		(unaudited)	(unaudited)	(audited)
	Notes	£000's	£000's	£000's
			Restated*
Non-current assets
Intangible assets	7	34,126	35,613	36,108
Property, plant and equipment		2,220	2,323	2,181
Investment property		305	305	305
Right-of-use assets		1,275	1,525	1,399
Investments		229	150	180
		38,155	39,916	40,173
Current assets
Inventories		26,492	20,282	20,504
Trade and other receivables		27,252	28,083	32,452
Income tax recoverable		3,358	1,964	3,475
Other taxes and social security		748	359	496
Cash and cash equivalents		22,892	12,941	19,523
Total current assets		80,742	63,629	76,450
Total assets		118,897	103,545	116,623
Current liabilities
Trade and other payables		(18,466)	(16,304)	(14,521)
Income tax		(1,683)	(25)	(3,015)
Other taxes and social security		(47)	-	(501)
Amounts due under leases		(874)	(375)	(311)
Dividends		(50)	(50)	(50)
Total current liabilities		(21,120)	(16,754)	(18,398)
Net current assets/(liabilities)		59,622	46,875	58,052
Total assets less current liabilities		97,777	86,791	98,225
Non-current liabilities
Deferred tax assets/(liabilities)		134	(338)	(183)
Amounts due under leases		(554)	(1,208)	(1,211)
Total assets less total liabilities		97,357	85,245	96,831
Equity
Capital and reserves
Issued share capital		3,380	3,377	3,379
Share premium account		63,319	62,888	63,258
Revaluation reserve		658	572	656
Other reserves		106	106	106
Foreign exchange reserve		726	1,064	549
Retained earnings		15,412	9,758	15,469
Shareholders' funds		83,601	77,765	83,417
Non-controlling interests		13,756	7,480	13,414
Total equity		97,357	85,245	96,831

*Details of the restatement, which is unaudited, is presented in note 3.

CONSOLIDATED STATEMENT OF CASH FLOWS
		Six months		Year ended
		to 30.09.21	to 30.09.20	31.03.21
		(unaudited)	(unaudited)	(audited)
		000's	000's	000's
			Restated*
Cash flows from operating activities
Profit/(loss) before income tax		884	4,456	20,284
Adjustment for:				-
Finance income		(83)	(64)	(129)
Finance cost		135	103	200
Foreign exchange (gain)/loss		(654)	(688)	559
Depreciation		215	155	430
Amortisation of right-of-use assets		198	187	403
Amortisation of intangible assets		586	789	898
Impairment of intangible assets		2,085	-	-
Share of associate's results		(47)	-	(38)
Share based payment charge		83	85	123
Operating cash flows before movements in working capital		3,402	5,023	22,730
Change in inventories		(5,660)	(3,018)	(3,698)
Change in receivables		5,217	563	(3,959)
Change in payables		3,091	952	753
Cash generated from operations		6,051	3,520	15,826
Finance costs		(68)	(40)	(79)
Income tax		(2,288)	(116)	(3,766)
Net cash from operating activities		3,695	3,364	11,981
Cash flows from investing activities
Acquisition of property, plant and equipment		(223)	(231)	(212)
Disposal of property, plant and equipment		1	-	11
Purchase of intangibles		(689)	(17)	(861)
Finance income		83	64	129
Dividends received		-	-	-
Net cash (used in)/from investing activities		(828)	(184)	(933)
Cash flows from financing activities
Proceeds from issue of share capital		62	6	378
Interest paid on lease liabilities		(67)	(63)	(122)
Principal paid on lease liabilities		(195)	(182)	(378)
Dividends paid		-	-	(562)
Net cash (used in)/from financing activities		(200)	(239)	(684)
Net increase/(decrease) in cash and cash equivalents		2,667	2,941	10,364
Foreign exchange movements		702	155	(686)
Balance at the beginning of the period		19,523	9,845	9,845
Balance at the end of the period		22,892	12,941	19,523

*Details of the restatement, which is unaudited, is presented in note 3.

NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2021

1.  Basis of preparation

The financial information for the period to 30 September 2021 does not constitute statutory accounts as defined by Section 435 of the Companies Act 2006. It has been prepared in accordance with the accounting policies set out in, and is consistent with, the audited financial statements for year ended 31 March 2021.

The Group applies revised IAS 1 "Presentation of Financial Statements (2007)". As a result, the Group presents all non-owner changes in equity in consolidated statements of comprehensive income and all owner changes in equity in consolidated statements of changes in equity.

These Interim Statements have not been audited or reviewed by the Group's auditors.

2.  Statement of compliance

This interim financial statement is prepared in accordance with IAS 34 "Interim Financial Reporting".  Accordingly, whilst the interim statements have been prepared in accordance with IFRS, and the primary statements follow the format of the annual financial statements, only selected notes are included - those that provide an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual reporting date. IAS 34 states a presumption that anyone who reads the Group's interim report will also have access to its most recent annual report.  Accordingly, annual disclosures are not repeated in these interim condensed reports.

3.  Changes to significant accounting policies and other restatements

The principal accounting policies which are adopted by the Group in the preparation of its financial statements are set out in in the consolidated financial statements of the Group for the year ended 31 March 2021. These policies have been consistently applied to all prior years. Where necessary, and as detailed in the consolidated financial statements of the Group for the year ended 31 March 2021, any corrections to the application of the Group's accounting policies to comply with International Financial Reporting Standards have been made as restatements of prior period financial statements for the correction of errors in accordance with IAS8 . The Group's accounting policies have been consistently applied in accordance with IFRS continued into the six months ended 30 September 2021.

For the March 2021 annual report and accounts the group revisited costs capitalised in periods prior to March 2018 to assess whether there are adequate records to support the capitalisation of costs. This review identified that some costs arising in periods prior to March 2013 had been incorrectly capitalised. Given the impracticality of obtaining the full records that would have been needed to review all costs capitalised in that period, a decision was taken to derecognise all costs relating to periods prior to March 2011 and to de-recognise staff costs capitalised in the period between March 2011 and March 2013.  This approach is equivalent to these assets not having been recognised originally. The effect of the restatement is to decrease the net book value of intangible assets held at September 2020 and to decrease the deferred tax liability arising at that date in respect of those assets.

Full details are given in the annual report and accounts for the year ended 31 March 2021, but the financial effect is summarised below.

Development costs adjustment: Impact on the Balance Sheet and Income Statement

Balance sheet	As reported as at 30.09.20	Adjustment to retained earnings	Adjustment through Income Statement	As restated as at 30.09.20
	000's	£000's	£000's	000's
Intangible assets cost	60,974	(19,007)	-	41,967
Accumulated amortisation	(20,307)	14,225	365	(5,718)
Net Book Value	40,667	(4,782)	365	36,249
Deferred tax liability	(686)	373	(25)	(338)

NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2021 (Continued)

3.  Changes to significant accounting policies and other restatements (continued)

Income Statement	As reported for 6 months ended 30.09.20	Adjustment to retained earnings	Adjustment through Income Statement	As restated for 6 months ended 30.09.20
	000's	£000's	£000's	000's
Amortisation charge	789	-	(365)	424
Deferred tax charge	598	-	25	623

Cash and cash equivalents

Balances drawn on the bank overdraft facility are repayable on demand and form an integral part of the cash management of the Group. In the Statement of Cash Flows, the Group has presented cash and cash equivalents net of balances outstanding on bank overdrafts. This is an updated presentation in the Statement of Cash Flows presented for the six months ended 30 September 2020, where balances outstanding on bank overdraft (totalling £4,117 thousands) were presented within creditors.

4.  Revenue is derived from the Group's animal pharmaceutical businesses.

5.  Principal risks and uncertainties

These were set out on pages 20-22 of the Group's Annual Report and Accounts for the year ended 31 March 2021. The key exposures are to foreign currency exchange rates, potential delays in obtaining marketing authorisations, single sources of supply for some raw materials and trade debtor recovery and have remained unchanged since the year end.  In addition, the Annual Report and Accounts highlighted disease impact to growth in emerging markets as a key risk and this, in the form of ASF, is a principal uncertainty.

6.  Earnings per share  

	Six months	Six months	Year ended
	to 30.09.21	to 30.09.20	31.03.21
	(unaudited)	(unaudited)	(audited)
		Restated
Weighted average number of shares in issue (000's)	67,712	67,530	67,559
Fully diluted weighted average number of shares in issue (000's)	67,712	70,313	67,603
Profit attributable to equity holders of the company (£000's)	(140)	2,453	8,158
Basic earnings per share (pence)	(0.21)	3.63	12.08
Fully diluted earnings per share (pence)	(0.21)	3.49	12.07

NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2021 (Continued)

7.  Intangible non-current assets

	Goodwill	Distribution rights	Development Costs	Total
	000's	000's	000's	000's
Cost
At 31 March 2020 - restated	17,930	407	22,977	41,314
Additions	-	-	17	17
At 30 September 2020 - restated	17,930	407	22,994	41,331
Additions	-	-	969	969
At 31 March 2021	17,930	407	23,963	42,300
Additions	-	-	689	689
Impairment	-	-	(2,092)	(2,092)
At 30 September 2021	17,930	407	22,560	40,897
Amortisation
At 31 March 2020 - restated	-	120	5,174	5,294
Charge for the period -restated	-	10	414	424
At 30 September 2020 - restated	-	130	5,588	5,718
Charge for the period	-	9	465	474
At 31 March 2021	-	139	6,053	6,192
Charge for the period	-	9	577	586
Written back on impairment	-	-	(7)	(7)
At 30 September 2021	-	148	6,623	6,771
Net Book Value
At 30 September 2021	17,930	259	15,937	34,126
At 31 March 2021	17,930	268	17,910	36,108

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 period to September 2021 there were indications that certain development projects for which costs have previously been capitalised were unlikely to achieve technical success or commercial viability. The capitalised costs in respect of these projects have been impaired through the income statement during the period.

 This financial information was approved by the board on 24 November 2021.

Copies of this interim report are being sent to all the Company's shareholders.

DIRECTORS AND OFFICERS	Andrew Jones	(Non-Executive Chairman)
	Marc Loomes	(Chief Executive)
	Chris Wilks	(Chief Financial Officer)
	Anthony Rawlinson Frank Armstrong	(Non-Executive Director) (Non-Executive Director)
REGISTERED OFFICE	78 Coombe Road, New Malden, Surrey. KT3 4QS
	Tel: [phone]
COMPANY NUMBER	01818170
INFORMATION AT	www.ecoanimalhealthgroupplc.com

 

END

 

 

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