Buy
Sell
Share Name Share Symbol Market Type Share ISIN Share Description
Eco Animal Health Group Plc LSE:EAH London Ordinary Share GB0032036807 ORD 5P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -2.50 -0.69% 360.00 360.00 370.00 365.00 365.00 365.00 63,390 16:35:10
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Pharmaceuticals & Biotechnology 72.1 5.2 3.8 94.2 243

Eco Animal Health Group PLC Final Results for Year Ended 31 March 2020

04/02/2021 7:00am

UK Regulatory (RNS & others)


Eco Animal Health (LSE:EAH)
Historical Stock Chart


From Jan 2021 to Apr 2021

Click Here for more Eco Animal Health Charts.

TIDMEAH

RNS Number : 9847N

Eco Animal Health Group PLC

04 February 2021

ECO Animal Health Group plc ("ECO")

(AIM: EAH)

Results for the year ended 31 March 2020

ECO REPORTS A RESILIENT PERFORMANCE

HIGHLIGHTS

Financials

   --      Sales 7% higher at GBP72.1m (2019 restated: GBP67.3m) 
   --      Gross margin consistent to within 1% (2020 46%, 2019 47%) 

-- Increased R&D investment results in adjusted EBITDA 33% lower at GBP8.4m (2019 restated: GBP12.5m)

   --      Earnings per share 65% lower at 3.82p (2019 restated: 10.86p) 
   --      Strong cash generation from operations of GBP5.5m (2019 restated: GBP7.1m) 
   --      New product development expenditure 17% higher at GBP10.9m (2019 GBP9.3m) 
   --      Net cash lower at GBP9.8m (2019 restated: GBP16.9m) 

Operations

-- Demand for Aivlosin(R) continued to grow strongly, with two new marketing authorisations gained in Europe and Indonesia for breeding chickens and laying chickens, respectively.

-- Strong revenue in China in second half as market recovers from worst effects of African Swine Fever (ASF).

-- Sales growth and margin recovery in the USA as trade tensions between the USA and China recede.

   --      Two new poultry vaccine collaborations signed during the year with the Pirbright Institute. 
   --      Transition to remote working and COVID-19 safe working seamless and uninterrupted 
   --      Continued corporate governance improvements. 

Marc Loomes, CEO of ECO Animal Health Group plc, commented: "These results reflect a solid recovery in our key markets, particularly in the second half of the year and we have continued our investment at record levels in new product development. We are proud of the Group's ability to seamlessly adapt to safe working during the Coronavirus pandemic. We are confident that our development programmes will deliver exciting new products which will augment the natural growth from current products and sustain long term growth. For the year ahead we expect to report profitable growth and to perform in line with the market expectations."

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.

This announcement is the entire text of the Annual report and Accounts for Eco Animal Health Group plc, except for the Corporate Governance Report, Directors Report and Strategic Report. The Annual Report is published today in its entirety on the Company's website at https://www.ecoanimalhealthgroupplc.com

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 
 N+1 Singer (Nominated Adviser & Joint Broker) 
  Mark Taylor 
  Iqra Amin                                       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

FOR THE YEARED 31 MARCH 2020

This has been a challenging year for our business. The combination of the ASF outbreak in Asia and the USA trade war with China particularly impacted our business in the first half of the year, although this was partly offset by very strong performance in other parts of the world. Performance in the second half of the year saw substantial recovery in revenues from the USA and China. The net result was revenue ahead of the prior year but below our internal budget.

The ECO Board is confident that our R&D portfolio has the potential to deliver major value to our shareholders and so despite the lower than budget top line revenue, we decided to maintain the budgeted increased investment in R&D to keep our portfolio progressing towards commercialisation.

This has resulted in a reduction in our immediate profits in the 2019-20 year, but we are confident this will be more than offset by the growth in long term value of the company through progression of our R&D portfolio.

We have decided not to pay a dividend for the financial year 2019-20 in order to maintain cash reserves at a prudent level, particularly in the light of the economic uncertainty arising from the COVID-19 pandemic, and to build value by continued investment in key R&D programs.

The Board places the highest priority on good corporate governance. We have taken several actions in this important area during the year:

-- We appointed new auditors and undertook a major revision of the application of accounting standards across our business and we are now confident that our approach is fully compliant and reflects best practice.

-- We recruited a new, highly experienced CFO and have significantly expanded and strengthened the finance team. We have also established an internal audit capability.

We have worked with a major city advisor to thoroughly review our key codes and policies and procedures and to institute training programs where needed.

We made significant changes at Board level during the year including the addition, shortly after the year end, of a new and highly experienced Non-Executive Director. The board now has a good base of experience and skills to lead the Company from the current period of challenge and change through its next stage of development and value-based growth.

We are disappointed that the release of our annual results was delayed due to the scale of work needed for the audit combined with the restrictions in working associated with COVID-19, but believe it was essential to enable completion of an extensive and thorough review of our accounting policies and statements with our new auditors.

This is my first statement as Chairman, having succeeded Richard Wood in August 2019; I am grateful for his leadership and implementing various change initiatives.

I started my report by noting that is has been a challenging year for the Company. I am hugely grateful for how the Board, Executive and wider ECO team have risen to the challenges, delivered a strong performance considering the conditions and have kept motivation and energy to keep ECO moving and developing value. Finally, I sincerely thank our shareholders for their patience and much valued strong support through this period.

Current trading and prospects

Performance in the current financial year ending 31 March 2021 has been strong with the strength seen in both our Chinese and US markets towards the end of the last financial year continuing into the current financial year. In October 2020, we announced that the revenue performance in the first six months of the current financial year was "significantly ahead of management expectations and the prior year". We also advised that notwithstanding the historical second half weighting to the Group's revenue, if these revenue trends continued through the second half of the financial year the Board expected that the Group's full year revenue for the year ending 31 March 2021 would exceed market expectations. This resulted in an upgraded market expectation both for revenue and profitability

On 24 November 2020 we confirmed that strong trading had continued during November and, being mindful of the continuing global uncertainties and four months remaining until the end of the financial year, we were confident of meeting the upgraded market expectations.

On 21 January 2021 we issued a positive trading update, confirming Group revenues and EBITDA were expected to be significantly ahead of market expectations for the year ending 31 March 2021. We noted that the strength in the Chinese market, supported by the rebuilding of pig herds and the high price for pork, continued through the third quarter and the outlook for the final quarter sales continued these strong trading trends.

We look forward to the rest of this financial year and our reporting prospects for 2021 with continuing optimism.

Dr Andrew Jones

Chairman

3 February 2021

CHIEF EXECUTIVE'S REPORT

FOR THE YEARED 31 MARCH 2020

I am pleased to report that ECO demonstrated considerable fortitude during a particularly challenging year for the Company. The impact of African Swine Fever (ASF) in China which then spread into neighbouring territories, the ongoing tensions between Washington and Beijing and the onset of the COVID-19 pandemic presented significant challenges to the business. The determination, dedication and resilience of our employees combined with the value of our product offering delivered a strong second half performance during the year ended 31 March 2020 with results for the full year being in line with the adjusted market expectations.

Operational Review

Global revenue grew by 7% to GBP72.1 million illustrating the value of ECO's global footprint, with sales generated in more than seventy countries, in the face of significant headwinds, and the commoditised nature of pork and poultry production.

Sales of Aivlosin(R), our patented antimicrobial which is used under veterinary prescription for the treatment of economically important diseases in pigs and poultry, increased by 16%, accounting for 84% of total revenue.

Sales of the smaller Ecomectin(R) anti-parasitic range at GBP4 million, increased by 7% and represented 6% of the Group revenue.

Sales of all other products were GBP7.5 million (2019 - GBP11.4 million) and mainly comprised a range of supportive antimicrobial products for pigs in China.

The China revenue from external customers declined by 17% reflecting a year of two remarkably different periods. In December 2019, we reported for the six month period ended 30 September 2019 ("Interims") that the well-publicised effects of the ASF outbreak in China provided significant headwinds in our largest market whist noting encouraging signs for the second half of the financial year with a reported reduction in the rate of new ASF outbreaks in China and an indication of some restocking of pig herds by certain high value producers, including some of our customers. These early encouraging signs were supported by rapidly rising pork prices resulting in a strong second half ("H2") with revenue ahead of the prior year. Our Chinese subsidiary has focused on the respiratory health of replacement breeding sows whose numbers at the major producers have increased rapidly in response to the pork shortage and very high pork prices. The high value of these sows and their offspring has enabled the subsidiary to secure the business of an increasing number of key accounts.

Revenue in Japan rose by 16%, driven again by growth in the swine business to large producers.

North American revenue from external customers increased by 10% reflecting the growing importance of Aivlosin(R)'s low yet effective dose rate and short treatment duration in medication protocols as veterinarians and producers adhere to responsible use of antimicrobial guidelines.

In the USA, revenue was 22% higher, reflecting a strong H2 performance. The first half had been marred by China-USA trade tensions which had left US pig producers with limited ability to capitalise on the anticipated export market created by the pork shortage in China which led to overproduction of pigs with depressed prices and margins. The strong H2 was marked by better pork prices linked to global supply shortages brought about by ASF in China, an increase in commercial activities by a strengthened sales and technical team during the autumn and winter months armed with adjusted customer incentive programmes for the year 2020. Canadian revenue fell by 11% largely as a result of restrictions imposed by China on Canadian pork imports. These restrictions were lifted but the poor first half performance was not fully recovered in the second half of the financial period.

Latin America revenue rose strongly by 17%, with the Brazilian and the Mexican subsidiaries up 80% and 23% respectively, reflecting the benefits of ECO's key account management approach and the development of strong partnerships with local third party distributors in these two key markets. Argentina delivered a record result and important tenders were again won in Cuba although these results were tempered by challenging market conditions in Central America and other Latin American countries such as Columbia and Peru.

In South and Southeast Asia, revenue was 75% higher. Thailand was the best performing market with Aivlosin(R) on all major account approved product lists resulting in both swine and poultry revenue growth. New business was won in Malaysia resulting in almost a doubling of sales over the prior year. These two outstanding performances were moderated by extremely challenging conditions in India, where the poultry market contracted significantly amidst a transition to a more consolidated integrated market with higher quality standards and away from an informal market characterised by small producers, and in Vietnam and The Philippines, both affected by ASF.

European revenue declined by 4%. Aivlosin(R) sales were strong in key markets such as Spain and Poland although overall revenue into continental markets fell slightly.

Sales in the United Kingdom, which represent just over 2% of global revenue, rose 25%, across all products, led by strong Aivlosin(R) sales during an outbreak of swine dysentery.

In Russia, an increasingly active exporter of meat, revenue was affected by disease outbreaks in swine and in poultry although market share gains were made with the most important customers. The previously reported delays to the inspection of manufacturing facilities and laboratories by the Russian authorities have been resolved.

Sales in the Rest of the World declined by half a million pounds to GBP1.2million reflecting in equal parts a declining presence in South Africa and softer demand in Middle East and North Africa.

Product Research and Development

The Company's early stage research and proof of concept development activities are outsourced to leading research institutions and universities with later stage full development work managed in-house. This model mitigates the significant costs associated with in-house laboratories and owned research functions.

Product Approvals

Two Aivlosin(R) for poultry marketing authorisations were received. The first, from the European Medicines Agency (EMA), allowed ECO to market Aivlosin(R) 625 mg/g Water Soluble Granules in Europe for the treatment and metaphylaxis (control) of respiratory infections caused by Mycoplasma gallisepticum in breeding chickens, whilst the second allows the use of the same Aivlosin(R) formulation in chickens laying eggs for human consumption, with a zero day drug withdrawal period for eggs in Indonesia the most important market in Southeast Asia for laying birds. The Aivlosin(R) approval for high value breeding chickens will, like the commercial layer indication, be rolled out to the multi-million dollar international poultry markets.

Pipeline

ECO 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. Two worldwide exclusive research partnerships with The Pirbright Institute, United Kingdom were signed in September 2019 to develop novel poultry vaccines against respiratory and systemic viral diseases in commercial chicken flocks globally. Several additional new proprietary concepts and third-party opportunities entered ECO's product development screening programme during the year. New product development expenditure in the year rose by 17% to GBP10.9 million (2019: GBP9.3 million) and is being continued at a significant level in 2020/21. This will ensure that we have several mid and late stage projects able to deliver early revenues from 2022/23.

Covid-19 Impact

ECO transitioned smoothly to home working during the final weeks of the year building on the new ways of communicating with customers developed during the ASF outbreak and without losses of efficiency. Outsourced manufacturing and the Group's supply chain operated smoothly through the year end.

Brexit

ECO's EU marketing authorisations have been transferred to the European subsidiary, ECO Animal Health Europe Limited registered in Dublin, Republic of Ireland and all our Brexit contingency plans are in place. The financial and operational impact of Brexit is expected to be minimal, particularly given the recently announced trade deal between the UK and the EU. ECO's sales to the EU (excluding the UK) represented 8% of total revenue for the year.

People

I would like to thank all our employees for their extraordinary levels of energy, engagement, and professionalism in addressing the challenges of the year. Individually and collectively their ability to innovate and to adapt combined with sheer hard work underpins these results and ECO's prospects.

Marc Loomes

Chief Executive Officer

3 February 2021

FINANCE DIRECTOR'S REPORT

FOR THE YEARED 31 MARCH 2020

Introduction

I was delighted to join ECO in September 2019 as Group Finance Director.

It has been a significant year of change for the Group. In addition to the many commercial challenges faced by the Group during the year such as African Swine Fever in China, USA-China trade tensions and, in the latter part of the financial period, the advent of the COVID-19 pandemic, we have continued our journey of improvements in governance. These improvements have been previously signalled and were introduced in last year's Annual Report. During the year ended 31 March 2020 we appointed new external auditors (this is their first audit report on ECO), we established a new internal audit function, overhauled much of the control environment around the group - in particular around financial controls and processes and, with the assistance of external professional advisors, moved the governance agenda forward, particularly in relation to the group leadership and the Board. The financial control environment has been significantly strengthened - specifically in relation to custodianship of assets, banking and cash. These actions protect the business and individuals working within the business with customary segregation of duties and multiple authorisations. From a finance and governance point of view we are now well positioned to support the strong growth the Group is experiencing and driving.

Prior Year Restatements

One of the results of the changes described in my introductory comments was to consider the accounting policies adopted by the Group previously and to review the implementation of IFRS across the Group. In a number of areas, technical non - conformance with IFRS was identified and in other areas, interpretation of the relevant standard was considered to have been incorrect. As a result, in our interim report, released in December 2019, we published extensive prior year restatements, describing the nature of the adjustments and their financial effect. Those restatements form part of these Financial Statements and have been audited for the first time. The principles of the prior year restatements are as previously described and fall into the following categories:

-- Accounting for revenue in accordance with IFRS15 - revenue recognition and accounting for sales discounts (note 3.1)

-- Accounting for expenditure on research and development - in particular the portion of expenditure which should be capitalised under IAS38 (note 3.2)

   --    Accounting for our Joint Arrangements in the USA and Canada under IFRS11 (note 3.3) 
   --    Accounting for bonus payments on an accruals basis (note 3.4) 
   --    Accounting for leases under IFRS16 (note 3.5) 
   --    Accounting for foreign exchange (note 3.6) 
   --    Accounting for Free Goods Incentive (note 3.7) 
   --    Accounting for share based payments (note 3.8 and 3.9(Company only)) 

The notes to these accounts describe these changes in detail.

Audit

As stated earlier this was the first audit of the group performed by BDO. This also coincided with a period of remote working and lock-down amidst COVID-19 affecting the world. This added some distinct challenges to the audit task.

The first and most obvious challenge was that, except in China where COVID-19 was ahead of the initial European and US impact, the auditors were unable to physically attend our year end stock takes. Attendance at stock takes is a fundamental audit test. The Institute of Chartered Accountants in England and Wales suggests that auditors seek alternative means of satisfying themselves in the event of being unable to attend stock takes. Notwithstanding that the Group's stock is held at third party warehouses (and third party certification of quantities on hand was provided by these warehouses) and there was no indication that the valuation of inventory was incorrect, the audit opinion is limited in scope regarding inventory. The stock take was attended in China and therefore this limitation in scope qualification is in respect of stock held elsewhere in the group and amounted to 82% of the stock value (GBP14 million).

The effect of the prior year restatements, described above, was to reduce profitability in the year ended 31 March 2019. Accordingly, our new auditors considered that the materiality threshold to which our previous auditors worked (GBP757,000) was no longer appropriate and took a decision to reduce it. As a result, BDO have performed a re-audit of the statement of financial position at 31 March 2019. A significant balance within this statement of financial position is the net book value of Intangible Assets representing the accumulated capitalised and amortised costs historically incurred by the Group. These costs are in the main related to the development and commercialisation of Aivlosin(R) and Ecomectin(R), the Group's main families of marketing authorisations. The capitalised net book value of these intangible assets at 31 March 2020 was GBP22.9 million and the revenue during the year ended 31 March 2020 derived from Aivlosin(R) and Ecomectin(R) was GBP64.6 million; the net book value of these assets was therefore only about one third of the annual revenue derived from their usage. However, in order to verify the original costs within the net book value of these assets our auditors required evidence of costs dating back to 2004. The Group retains invoices and records from third parties for seven years in line with statutory practice but, unfortunately, we were unable to provide some support for the audit sampling requests prior to this. In addition, for expediency, it was decided that provision of evidence to support the audit would be confined to the trading periods being audited. As a result, BDO has further limited the scope of their audit opinion in respect of Intangible assets. The net book value at 31 March 2020 relating to costs capitalised more than seven years previously (and therefore the element of audit sampling not able to be supported by physical invoices) was GBP8.4 million.

Trading

During the year ended 31 March 2020, ECO recorded its highest second half revenue weighting to date being 60% of the full year revenue. This compares to an equivalent second half weighting in the year ended 31 March 2019 of 55%. Year on year the second half of this financial year was 18% greater than the prior year reversing a shortfall at the half year and resulting in an overall revenue improvement for the year ended 31 March 2020 of 7% compared with the year ended 31 March 2019. The primary driver of this strong second half performance was a recovery in China (from the effects of African Swine Fever, described in our Chief Executive's report) and strong performance in the USA. A geographical analysis of revenue is as follows:

 
                                  Year ended 31 
 Revenue Summary                       March 
                                   2020       2019   % change 
                                                      2019 to 
                                (GBP'm)    (GBP'm)       2020 
                                          Restated 
 China and Japan                   23.1       26.8      (14%) 
 North America (USA and 
  Canada)                          11.6       10.5        10% 
 South and South East Asia         14.2        8.1        75% 
 Latin America                     12.6       10.8        17% 
 Europe                             7.6        7.9       (4%) 
 Rest of World and UK               3.0        3.2       (6%) 
                               --------  ---------  --------- 
                                   72.1       67.3         7% 
  ---------------------------  --------  ---------  --------- 
 
 

Revenue from China in the second half of the year was GBP14.4 million compared to the equivalent six months ended 31 March 2019 of GBP12.4 million underlining the recovery in that market. Trade with India (included within Asia in the above analysis) softened towards the end of the financial year, however the rest of the region including Indonesia, Malaysia, Thailand and the Philippines continued the trend set in the first half of the year resulting a year on year increase in Asia of 75% becoming the Group's second largest segment this year. The thawing in trade tensions between the USA and China resulting in strengthening swine market conditions in the second half of the year is also evident in the second half revenue from the USA of GBP5.8 million (2019 - GBP3.6 million). Latin America, and in particular Brazil, continued to benefit from pig exports to China, resulting in buoyant commodity prices and a consequent strong market for the Group's products. Europe benefitted from pork exports to China, in particular from Spain.

Gross margins at 46% in the year ended 31 March 2020 (2019: 47%) were reasonably consistent and represented a strong recovery from poor first half margins (43%) - this being associated in the main with improvements in the USA.

Overheads, at GBP28.3million were significantly greater in the year ended 31 March 2020 compared with the year ended 31 March 2019 (GBP21.8million). The greatest contributors to this increase were expenditure on Research and Development, employment costs and foreign exchange movements. Expensed research and development expenditure increased from GBP5.8 million in the year ended 31 March 2019 to GBP8.8 million in the year ended 31 March 2020. This increase of GBP3.0 million reflects the nature of the earlier stage projects being undertaken (and therefore expensed to the income statement) particularly in respect of vaccine development as well as an overall increase of 18% in the cash expenditure in R&D. Expensed employment costs increased from GBP9 million in the year ended 31 March 2019 to GBP10 million in the year ended 31 March 2020. Whilst the staff numbers reduced from an average of 217 in 2019 to 204 in 2020, the amount of capitalised in house labour in research and development also fell resulting in the greater charge to the income statement. The foreign exchange loss in 2020 amounted to GBP0.5 million whereas a gain of GBP0.7 million was recorded in 2019.

Total cash expenditure on research and development in the year was GBP10.9 million (2019: GBP9.3 million). This expenditure was expensed to the extent that it related to projects at the research phase and capitalised in accordance with IAS38 to the extent that it related to projects in the later stage (development phase) of the project life-cycle. The total cash expenditure in R&D can be analysed as follows:

 
                                                          Year ended 31 March 
                                                             2020          2019 
                                                         GBP000's      GBP000's 
                                                                     (Restated) 
 Research expenditure - included in administrative 
  expenses                                                  8,775         5,868 
 Development expenditure - capitalised in intangible 
  assets                                                    2,115         3,477 
 Total cash expenditure (excluding employment 
  costs)                                                   10,890         9,345 
 

EBITDA is considered by the Board and the Group leadership team to represent a key performance measure; the removal of amortisation (which is a significant annual non-cash charge to profits) and depreciation provides a good indication of the underlying trading performance of the business. The EBITDA margin (EBITDA expressed as a percentage of revenue in the period) was 11.6% in the year ended 31 March 2020 compared with 18.5% in the year ended 31 March 2019. This reduction arises in part from the small reduction in gross margin (1%) as well as the increased investment in R&D, referred to previously.

The Group continues to benefit from a low effective tax rate. In the year ended 31 March 2020 the effective tax rate for the Group was 19.8% (2019 - 12.3%). The historical low effective tax rate is largely a result of the significant R&D investment on which the Group receives tax credits. These tax credits continue but in 2020 a prudent assessment has been taken of the likely taxes due in foreign jurisdictions carrying a higher tax rate than the UK and no account has been taken of the likely benefit that will accrue from "patent box claims". Historic tax losses result in zero tax payable in the year. Discussions with HMRC will commence concerning the tax treatment of the prior year restatements; the accounting treatment to expense previously capitalised R&D investment may result in a reduction in prior year taxable profits. No benefit of this tax re-computation has been recognised in this Annual Report.

The consolidated cash position in the Group has declined from GBP16.9 million at 31 March 2019 to GBP11.9 million at 31 March 2020. This consolidated cash position at 31 March 2020 includes GBP5.3 million (2019 - GBP4.0 million) 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 which is received in the UK is 51%.

The cash generated from operations was 23% lower in the year ended 31 March 2020 at GBP5.5 million (2019 - GBP7.1 million) which fell less than the lower profitability due to better working capital management. From operating cash, dividends of GBP8.4 million were paid in September 2019 and investment of GBP2.1 million in capitalised development costs, together with income tax paid of GBP1.1 million, acquisitions of tangible fixed assets (GBP0.8 million) and other sundry cash movements (GBP0.2 million) resulted in an overall net cash draw down of GBP7.1 million and the lower cash balance at 31 March 2020.

Post balance sheet event

There have been no material post balance sheet events to note.

Christopher Wilks

Finance Director

3 February 2021

INDEPENT AUDITOR REPORT

TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC

FOR THE YEARED 31 MARCH 2020

Independent auditor's report to the members of ECO Animal Health Group Plc

Qualified opinion

We have audited the financial statements of ECO Animal Health Group Plc (the 'Parent Company') and its subsidiaries (the 'Group') for the year ended 31 March 2020, which comprise the consolidated statement of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statements of changes in equity, the consolidated and company statements of cashflow and notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006 and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

In our opinion, except for the possible effects of the matters described in the basis for qualified opinion section of our report:

-- the financial statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 March 2020 and of the Group's profit for the year then ended;

-- the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006;

-- the Parent Company financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and as applied in accordance with the provisions of the Companies Act 2006; and

-- the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

INDEPENT AUDITOR REPORT

TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC

FOR THE YEARED 31 MARCH 2020

Basis for qualified opinion

   a)   Physical inventory observations (Group) 

We were not able to observe the counting of physical inventories around the Group, except for the China locations, ("non-China Group inventories") held at 31 March 2020 due to restrictions and control measures arising as a result of the COVID 19 pandemic. We were unable to satisfy ourselves by alternative means concerning the non-China Group inventories quantities held at 31 March 2020, which are included in the consolidated statement of financial position at a value of GBP14,003,000 (representing 82% of total inventory) by using other audit procedures. Consequently, we were unable to determine whether any adjustment to this amount was necessary.

If any adjustment to the non-China Group inventories quantities and derived values were to be required, there would be an impact on recorded cost of sales, recorded tax amounts, results recorded in the statement of comprehensive income, inventory values and total assets less total liabilities values recorded in the statement of financial position.

b) Verification of capitalised distribution rights, drug registrations, patents and license costs (together referred to as "capitalised development costs") (Group)

Given the issues connected to the recording of capitalised development costs that resulted in a prior year adjustment (as described in note 3.2 to the financial statements), we requested access to supporting information for all development costs originally capitalised in the statement of financial position. Historic accounting records for periods prior to 2013 were not required to be retained by the Group; certain sample accounting records and explanations for periods between 2013 and 1 April 2018, were not made available due to the impracticable time estimated to be required by the Directors, after commencing and carefully assessing the scope of the exercise. As a result, we were unable to obtain sufficient appropriate audit evidence concerning the net carrying value of capitalised development costs, as restated, totalling GBP21,726,000 at 1 April 2018.

Consequently, we were unable to determine whether any adjustment to this amount, related amortisation and deferred tax liabilities thereon, were necessary, either in respect of the current year to 31 March 2020, or the opening balances at 31 March 2019.

For the same reasons described above, we were unable to audit the prior year adjustment described in note 3.2 to the financial statements. We were not able to audit the adjustment to the net carrying value of historically capitalised costs, totalling GBP18,207,000, recorded as a prior year adjustment, as of 1 April 2018.

If any adjustment to the capitalised development costs were to be required, there would be an impact on recorded amortisation recognised in administrative expenses, related deferred tax charges/credits, results recorded in the statement of comprehensive income, intangible asset carrying values, deferred tax on related timing differences and total assets less total liabilities values recorded in the statement of financial position.

INDEPENT AUDITOR REPORT

TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC

FOR THE YEARED 31 MARCH 2020

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

-- the Directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

-- the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group's or the Parent Company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matters described in the basis for qualified opinion section of our report, we have determined the matters described below to be the key audit matters to be communicated in our report.

INDEPENT AUDITOR REPORT

TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC

FOR THE YEARED 31 MARCH 2020

 
 Revenue recognition and discount accounting 
 
   Key Audit Matter                         How We Addressed the Key Audit 
                                            Matter in the Audit 
 
   The Group's revenue recognition          We reviewed the revenue recognition 
   policy is included within                policy applied by the Group 
   the accounting policies in               and considered its compliance 
   note 2 and the components                with IFRS 15 'Revenue from 
   of revenue are set out in                Contracts with Customers'. 
   note 4.                                  Our work included review of 
                                            management's identification 
   The Group's revenue is a key             of performance obligations 
   performance indicator for                and assessment of contractual 
   the market upon which the                terms to determine when these 
   results of the Group will                performance obligations were 
   be assessed.                             met, both throughout the year 
                                            and around year-end. 
   The Group has one main source 
   of revenue representing direct           We tested a sample of the 
   sales of animal pharmaceutical           Group's revenue transactions 
   products into UK, European               to verify that revenue was 
   and global markets. The Group            accurately recorded in the 
   recognises revenue at the                correct accounting period. 
   point its performance obligation         This testing was performed 
   is met, which is generally               through review of contracts, 
   on delivery of product to                invoices and delivery notes 
   the customer, but may occur              and agreement to the recognition 
   at different points in the               of revenue in the accounting 
   revenue cycle dependent on               system. 
   contractual terms. 
                                            Certain revenue arrangements 
   Prior period errors were identified      include the offering of volume 
   in the Group's original revenue          and other discounts to customers. 
   recognition policies, and                We reviewed management's assessment 
   application thereof, as explained        of the value of these discounts 
   in note 3.                               at year end, reviewed contractual 
                                            terms and re-performed calculations 
   Given the potential for misstatement     for a sample of accrued balances. 
   of revenue whether due to 
   fraud or error, the inherent             Where the Directors identified 
   judgements and estimates involved        errors in prior periods, we 
   in revenue recognition and               reviewed the underlying support 
   cut-off assessments, as well             for adjustments proposed, 
   as the identified misstatements          testing to supporting documents 
   in the prior period, we considered       such as delivery and shipment 
   revenue recognition a significant        details and agreed the correct 
   risk of material misstatement            application of IFRS 15 in 
   in the financial statements.             respect of these adjustments. 
 
                                            Key Observations 
 
                                            Based on the work performed, 
                                            and following the restatements 
                                            explained in note 3, we consider 
                                            that revenue has been recognised 
                                            in accordance with the Group's 
                                            revenue recognition accounting 
                                            policy and the requirements 
                                            of IFRS 15. 
---------------------------------------  -------------------------------------- 
 
 
 Intangible assets - Capitalised development expenditure 
 
   Key Audit Matter                           How We Addressed the Key Audit 
                                              Matter in the Audit 
 
   The Group's accounting policy              We reviewed the Directors' 
   for intangible assets is included          narrative re-assessment of 
   within the accounting policies             the appropriateness of intangible 
   in note 2 and the components               assets capitalised in the 
   of intangible assets are set               past, against the Group's 
   out in note 12.                            revised accounting policy 
                                              included in note 2.8. 
   The Group's policy is to capitalise 
   development expenditure in                 Where management concluded 
   accordance with IAS 38. During             that past costs were appropriately 
   the period, the Directors                  capitalised, for all periods 
   reviewed past capitalised                  up to 31 March 2019, we sampled 
   development expenditure and                those costs and planned to 
   identified misstatements in                agree the cost to underlying 
   prior periods as a result                  supporting documentation and 
   of the Group capitalising                  to management's assessment 
   items which did not meet the               of whether the cost met the 
   criteria of IAS 38.                        criteria of IAS 38 at the 
                                              point of capitalisation. We 
   As a result of the errors                  performed the same procedures 
   identified, there was a significant        on capitalised costs for the 
   audit risk that past capitalised           year ended 31 March 2020. 
   expenditure was not appropriately 
   capitalised and capitalised                We also sampled amortisation 
   costs, in respect of projects              entries during the period 
   not yet available for use,                 1 April 2018 to 31 March 2020, 
   are impaired.                              to ensure amortisation commenced 
                                              in the correct period and 
   Given the potential for misstatement       over the useful life in accordance 
   of capitalised development                 with Group policy. We reviewed 
   expenditure, as well as the                the useful lives applied, 
   identified misstatements in                for appropriateness, by corroborating 
   the prior period, we considered            the historical periods during 
   development expenditure capitalisation     which the Group's products 
   a key audit matter.                        have been sold and the periods 
                                              over which competitor's products 
                                              have been marketed. 
 
                                              Our work was limited for the 
                                              periods prior to 1 April 2018, 
                                              where certain information 
                                              was not available for review, 
                                              as set out in the Basis for 
                                              qualified opinion section 
                                              of our report. 
 
                                              Our work was not limited for 
                                              movements in capitalised development 
                                              costs for the period from 
                                              1 April 2018 to 31 March 2020. 
 
                                              We reviewed management's impairment 
                                              assessment at 31 March 2020, 
                                              for capitalised development 
                                              costs not yet available for 
                                              use. We challenged the future 
                                              estimated forecast cashflows 
                                              and whether or not technical 
                                              feasibility continued to be 
                                              highly probable. 
 
 
                                              Key Observations 
 
 
                                              We consider the Group's revised 
                                              accounting policy to be appropriate, 
                                              Our audit scope was limited 
                                              in respect of the capitalised 
                                              development expenditure assets' 
                                              carrying value brought forward 
                                              as of 1 April 2018. We did 
                                              not identify anything to suggest 
                                              that the judgements applied 
                                              by management, in respect 
                                              of capitalisation and amortisation 
                                              from 1 April 2018, and their 
                                              impairment assessment as of 
                                              31 March 2020, were inappropriate. 
-----------------------------------------  ---------------------------------------- 
 
 
 Unauthorised related party transactions and subsequent 
  investigation 
 
   Key Audit Matter                          How We Addressed the Key Audit 
                                             Matter in the Audit 
 
   As reported in note 31, during            In response to the Directors' 
   the year ended 31 March 2020              findings, we included internal 
   a longstanding former Director            forensic specialists as part 
   and Company Secretary of the              of the audit team. 
   Group withdrew cash from the 
   Company totalling GBP25,748 
   (2019 - GBP46,920) which was 
   recorded in the Parent Company            The audit team's work included 
   and Group's financial statements          review of the subsequent reports 
   as administrative costs in                produced, both those of internal 
   each year. Further cash was               audit and the external law 
   withdrawn over an extended                firm, and assessment of the 
   period starting in 2014, the              completeness of their procedures 
   cumulative amount identified              and enquiries. 
   was GBP322,109 as at 31 March 
   2020.                                     Following our review of the 
                                             initially produced findings 
   These withdrawals were not                reports, we recommended a 
   approved, were outside the                subsequent extended scope 
   normal course of the Group's              of work, and procedures were 
   business and were in excess               performed by the external 
   of contractual remuneration               law firm and internal audit 
   levels.                                   department, supported by senior 
                                             management. These extended 
   The Group's internal audit                procedures covered further 
   department identified the                 electronic record investigation, 
   payments and reported their               examination of bank payments 
   findings to the Board in April            over a period of 7 years and 
   2020. The Internal Audit department       an investigation into the 
   and an external law firm performed        appropriateness of supplier 
   further work to assess the                and payroll payments. These 
   full extent of the withdrawals.           reports were subsequently 
                                             reviewed by the audit team, 
   Repayment of GBP307,113 was               including forensic audit specialists, 
   made to the Group in August               which included re-performance 
   2020.                                     of certain procedures. 
 
   A significant risk had been               Our overall audit approach 
   identified, that further unauthorised     included testing designed 
   transactions remain undetected.           to identify and detect material 
   We considered this to be a                misstatements in order to 
   key audit matter.                         obtain reasonable assurance 
                                             about whether the financial 
                                             statements as a whole are 
                                             free from material misstatement 
                                             due to fraud. 
 
                                             Key Observations 
 
                                             The results of the extended 
                                             scope of work, and our enquiries 
                                             thereon, did not identify 
                                             further material undetected 
                                             unauthorised transactions. 
                                             We consider the accounting 
                                             for, and disclosure of, the 
                                             transactions identified to 
                                             be appropriate. 
----------------------------------------  ---------------------------------------- 
 
 
 Prior period errors and opening balance sheet propriety 
 
        Key Audit Matter                                                How We Addressed the Key Audit 
                                                                        Matter in the Audit 
 
        As disclosed in note 3, prior                                   Given the extent of prior 
        period errors were identified                                   period errors identified by 
        in respect of the following                                     the Directors and the audit 
        areas:                                                          process, we have re-audited 
                                                                        the opening statement of financial 
         *    IFRS15 Revenue from contracts with customers              position at 31 March 2019. 
 
                                                                        To the extent that our scope 
         *    IAS38 Intangible Assets                                   was not limited in respect 
                                                                        of capitalised development 
                                                                        costs, procedures included 
         *    IFRS11 Joint Arrangements                                 the audit of the opening statement 
                                                                        of financial position to current 
                                                                        period materiality and, where 
         *    Bonuses                                                   prior period errors were corrected, 
                                                                        audit of those adjustments. 
                                                                        This included a review of 
         *    IFRS 16 - Leases                                          management's revised assessment, 
                                                                        calculations and disclosures 
                                                                        in note 3, by agreement to 
         *    Foreign exchange                                          supporting documentation and 
                                                                        inspection of underlying evidence 
                                                                        on a sample basis. 
         *    Accruals accounting 
                                                                        Our audit procedures were 
                                                                        designed to provide reasonable 
         *    Share-based payments                                      assurance that the restated 
                                                                        opening statement of financial 
                                                                        position is materially correct. 
         *    Related party transaction disclosures                     This was required to ensure 
                                                                        that the starting point for 
                                                                        the movement between the opening 
         *    Taxation                                                  and closing statements of 
                                                                        financial position, reflected 
                                                                        by the income statement and 
                                                                        statement of cashflows for 
        Given the extent of the errors                                  the year ended 31 March 2020, 
        identified in the prior periods,                                are also materially correct. 
        our audit of the opening balance 
        sheet at 31 March 2019, formed 
        a key part of the audit. 
                                                                        Key Observations 
        A significant risk of material 
        misstatement was identified                                     Based on the work performed, 
        relating to whether:                                            and except for the capitalised 
         *    the assets recorded in the opening balance sheet          development cost limitation 
              exist;                                                    described in the Basis for 
                                                                        Qualified Opinion section 
                                                                        of our report, we have obtained 
         *    the liabilities in the opening balance sheet were         sufficient assurance on the 
              complete;                                                 opening statement of financial 
                                                                        position in order to form 
                                                                        our opinion for the year ended 
         *    both assets and liabilities were accurately recorded;     31 March 2020. 
              and 
 
 
         *    all disclosures required were made 
-------------------------------------------------------------------  -------------------------------------- 
 

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect or misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower level, "performance materiality", to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial, as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

The materiality for the Group financial statements as a whole was set at GBP250,000. This was determined by reference to the Group's profit before tax and was set at 5%. Profit before tax is considered the most appropriate measure in assessing the performance of the Group given it is an AIM listed PLC and therefore the number of users and level of interest in the financial statements is expected to be higher. Performance materiality was set at 50% of the Group materiality level, being GBP125,000. Performance materiality was set at this level based on the risks identified in respect of prior period errors and that this was the first year we conducted an audit of the Group.

Where financial information from components was audited separately, component materiality was set for this purpose at lower levels, varying between GBP45,000 and GBP180,000. Component performance materiality levels varied between GBP22,500 and GBP90,000.

The materiality for auditing the Parent Company financial statements, on a standalone basis, was determined with reference to 1.9% of the Parent Company's net assets. Materiality for assessing the parent company financial statements was therefore set at GBP1,450,000 and performance materiality was set at GBP725,000.

Materiality applied for group opinion purposes (component materiality) was limited to an appropriate proportion of Group materiality, and set at GBP45,000 for this purpose; performance materiality was set at 50% of component materiality, GBP22,500.

We agreed with the Audit Committee that we would report to the committee all individual audit differences in excess of GBP5,000. We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

INDEPENT AUDITOR REPORT

TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC

FOR THE YEARED 31 MARCH 2020

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control, and assessing the risks of material misstatement in the financial statements at the Group level.

We obtained an understanding of the internal control environment related to the financial reporting process and assessed the appropriateness, completeness and accuracy of Group journals and other adjustments performed on consolidation.

At 31 March 2020, the Group comprised the Parent Company; one UK trading company, ECO Animal Health Limited, a two entity sub-Group in China headed by Zhejang Eco Biok Animal Health Products Limited; a US joint operation in Pharmgate Animal Health LLC and 16 other entities.

The Parent, the UK trading entity, the sub-Group in China and the US joint operation were deemed to be the significant components of the Group. Full scope audits were carried out, for the Parent Company and ECO Animal Health Limited, by the Group audit team. The audit of the Pharmgate Animal Health LLC component was carried out by the Group audit team. The audit of the sub-Group, headed by Zhejang ECO Biok Animal Health Products Limited, was conducted by BDO China under instruction from and reporting to BDO LLP as the Group auditor. We received reporting documents from the component auditor relating to the period under audit as well as opening balance sheet procedures; we conducted file reviews of the underlying audit evidence.

Significant components for the year ended 31 March 2020 comprise 77% of consolidated Group revenue, 128% of consolidated Group profit before tax (due to losses in non-significant components) and 100% of consolidated Group net assets (due to a combination of net assets and net liabilities in non-significant components).

The remaining entities were deemed insignificant to the Group due to the size of operations and balances within each entity. Audit work on these components has been limited to analytical review and sample revenue cut-off procedures carried out by the Group audit team.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

INDEPENT AUDITOR REPORT

TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC

FOR THE YEARED 31 MARCH 2020

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

As described in the basis for qualified opinion section of our report, we were unable to satisfy ourselves concerning the inventory quantities held at 31 March 2020 and the intangible assets carrying value at 31 March 2019 and 31 March 2020. We have concluded that where the other information refers to these balances or related balances, it may be materially misstated for the same reason.

Opinions on other matters prescribed by the Companies Act 2006

Except for the possible effects of the matters described in the basis for qualified opinion section of our report, in our opinion, based on the work undertaken in the course of the audit:

-- the information given in the strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-- the strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

Except for the possible effect of the matters described in the basis for qualified opinion section of our report, in the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors' report.

Arising solely from the limitations on the scope of our work relating to inventory and intangible assets referred to above:

-- we have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and

-- we were unable to determine whether adequate accounting records have been kept by the Parent Company.

INDEPENT AUDITOR REPORT

TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC

FOR THE YEARED 31 MARCH 2020

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

   --     returns adequate for our audit have not been received from branches not visited by us; or 

-- the Parent Company financial statements are not in agreement with the accounting records and returns; or

   --     certain disclosures of Directors' remuneration specified by law are not made. 

Responsibilities of Directors

As explained more fully in the Directors' responsibilities statement the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group's and the Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website : www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditor's report.

INDEPENT AUDITOR REPORT

TO THE SHAREHOLDERS OF ECO ANIMAL HEALTH GROUP PLC

FOR THE YEARED 31 MARCH 2020

Use of our report

This report is made solely to the Parent Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Ian Oliver (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

Reading

United Kingdom

3 February 2021

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

CONSOLIDATED INCOME STATEMENT

FOR THE YEARED 31 MARCH 2020

 
                                                 20 20       2019 
                                      Notes   GBP000's   GBP000's 
                                                         Restated 
                                                                * 
 
 Revenue                                4       72,106     67,253 
                                                         ( 35,448 
 Cost of sales                                (38,742)          ) 
                                             ---------  --------- 
 
 Gross profit                                   33,364     31,805 
 
 Other income                           5          105         35 
 Administrative expenses                      (28,274)   (21,772) 
 
 Profit from operating activities       6        5,195     10,068 
 
 Finance income                         7          112        127 
 Finance costs                          7        (142)      (124) 
                                             ---------  --------- 
 Net finance (cost)/income                        (30)          3 
                                             ---------  --------- 
 
 Share of profit of associate          16           42         14 
                                                    42         14 
                                             ---------  --------- 
 
 
 Profit before income tax                        5,207     10,085 
 Income tax charge                      9      (1,032)    (1,239) 
                                             ---------  --------- 
 Profit for the year                             4,175      8,846 
                                             =========  ========= 
 
 
 Profit attributable to: 
 Owners of the parent Company                    2,582      7,253 
 Non-controlling interest              26        1,593      1,593 
                                             ---------  --------- 
 Profit for the year                             4,175      8,846 
                                             =========  ========= 
 
 
 Earnings per share (pence)             8         3.82      10.86 
                                             =========  ========= 
 
 Diluted earnings per share 
  (pence)                               8         3.67      10.71 
                                             =========  ========= 
 
 
 Earnings before Interest, 
  Tax, Depreciation, Amortisation, 
  Share Based Payments and Foreign 
  Exchange Differences                  6        8,362     12,452 
                                             =========  ========= 
 
 

*Please refer to Note 3 for further details on prior year restatements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARED 31 MARCH 2020

 
                                                         2020       2019 
                                             Notes   GBP000's   GBP000's 
                                                                Restated 
                                                                       * 
 
 Profit for the year                                    4,175      8,846 
 
 Other comprehensive income (losses) 
  (net of related tax effects): 
 Revaluation of freehold property             13        ( 92)          - 
 Foreign currency translation differences                  98        (8) 
 Remeasurement of defined benefit 
  pension schemes                             23           12       (36) 
 Other comprehensive income (losses) 
  for the year                                             18       (44) 
                                                    ---------  --------- 
 
 Total comprehensive income for 
  the year                                              4,193      8,802 
 
 Attributable to: 
 Owners of the parent Company                           2,561      7,200 
 Non-controlling interest                     26        1,632      1,602 
                                                    ---------  --------- 
                                                        4,193      8,802 
                                                    =========  ========= 
 
 

All items listed in other comprehensive income have been recorded directly through reserves and are shown in the consolidated statement of changes in equity.

*Please refer to Note 3 for further details on prior year restatements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 31 MARCH 2019

 
                      Share      Share   Revaluation      Other    Foreign   Retained      Total   Non-controlling      Total 
                    Capital    Premium      Reserves   Reserves   Exchange   Earnings                     Interest     Equity 
                               Account                            Reserves 
                   GBP000's   GBP000's      GBP000's   GBP000's   GBP000's   GBP000's   GBP000's          GBP000's   GBP000's 
 Balance as 
  at 31 March 
  2018                3,291     58,847           664      2,823          -     34,065     99,690             5,185    104,875 
 Adjustment 
  re revenue 
  cut-off (Note 
  3.1A)                   -          -             -          -          -      (632)      (632)                33      (599) 
 Adjustment 
  re intangible 
  assets (Note 
  3.2)                    -          -             -          -          -   (17,153)   (17,153)                 -   (17,153) 
 Adjustment 
  re bonuses 
  (Note 3.4)              -          -             -          -          -      (954)      (954)                 -      (954) 
 Adjustment 
  re foreign 
  exchange (Note 
  3.6)                    -          -             -          -        484      (484)          -                 -          - 
 Adjustment 
  re discounts 
  (Note3.7A)              -          -             -          -          -      (109)      (109)             (105)      (214) 
 Adjustment 
  re provisions 
  (Note 3.7C)             -          -             -          -          -         43         43                41         84 
 Adjustment 
  re Share based 
  payments (Note 
  3.8)                    -          -             -    (2,717)          -      2,956        239                 -        239 
                  ---------  ---------  ------------  ---------  ---------  ---------  ---------  ----------------  --------- 
 Balance as 
  at 1 April 
  2018 - 
  restated            3,291     58,847           664        106        484     17,732     81,124             5,154     86,278 
 Adjustment 
  on 
  implementation 
  of IFRS16               -          -             -          -          -       (17)       (17)                 1       (16) 
 Further IFRS16 
  adjustment 
  (Note 3.5)              -          -             -          -          -       (37)       (37)              (12)       (49) 
                  ---------  ---------  ------------  ---------  ---------  ---------  ---------  ----------------  --------- 
 IFRS 16 
  adjusted 
  balance as 
  at 1 April 
  2018 - 
  restated            3,291     58,847           664        106        484     17,678     81,070             5,143     86,213 
 Profit for 
  the year - 
  restated*               -          -             -          -          -      7,253      7,253             1,593      8,846 
 Other 
 comprehensive 
 income 
 Foreign 
  currency 
  differences             -          -             -          -       (17)          -       (17)                 9        (8) 
 Actuarial 
  gains/ 
  (losses) on 
  pension scheme 
  assets                  -          -             -          -          -       (36)       (36)                 -       (36) 
                  ---------  ---------  ------------  ---------  ---------  ---------  ---------  ----------------  --------- 
 Total 
  comprehensive 
  income for 
  the year                -          -             -          -       (17)      7,217      7,200             1,602      8,802 
                  ---------  ---------  ------------  ---------  ---------  ---------  ---------  ----------------  --------- 
 Transactions 
 with owners 
 recorded 
 directly 
 in equity 
 Issue of shares 
  in the year            81      3,803             -          -          -          -      3,884                 -      3,884 
 Share-based 
  payments                -          -             -          -          -        631        631                 -        631 
 Deferred tax 
  on share-based 
  payments                -          -             -          -          -        173        173                 -        173 
 Dividends                -          -             -          -          -    (8,485)    (8,485)           (1,643)   (10,128) 
                  ---------  ---------  ------------  ---------  ---------  ---------  ---------  ----------------  --------- 
 Transactions 
  with owners            81      3,803             -          -          -    (7,681)    (3,797)           (1,643)    (5,440) 
                  ---------  ---------  ------------  ---------  ---------  ---------  ---------  ----------------  --------- 
 Balance as 
  at 31 March 
  2019 - 
  restated            3,372     62,650           664        106        467     17,214     84,473             5,102     89,575 
                  =========  =========  ============  =========  =========  =========  =========  ================  ========= 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 31 MARCH 2020

 
                     Share      Share   Revaluation      Other    Foreign   Retained      Total   Non-controlling      Total 
                   Capital    Premium      Reserves   Reserves   Exchange   Earnings                     Interest     Equity 
                              Account                            Reserves 
                  GBP000's   GBP000's      GBP000's   GBP000's   GBP000's   GBP000's   GBP000's          GBP000's   GBP000's 
 Balance 
  as at 
  31 March 
  2019 - 
  restated*          3,372     62,650           664        106        467     17,214     84,473             5,102     89,575 
 Profit 
  for the 
  year                   -          -             -          -          -      2,582      2,582             1,593      4,175 
 Other 
  comprehensive 
  income: 
 Foreign 
  currency 
  differences            -          -             -          -         59          -         59                39         98 
 Revaluation 
  of freehold 
  property               -          -          (92)          -          -          -       (92)                 -       (92) 
 Actuarial 
  gains 
  on pension 
  scheme 
  assets                 -          -             -          -          -         12         12                 -         12 
                 ---------  ---------  ------------  ---------  ---------  ---------  ---------  ----------------  --------- 
 Total 
  comprehensive 
  income 
  for the 
  year                   -          -          (92)          -         59      2,594      2,561             1,632      4,193 
                 ---------  ---------  ------------  ---------  ---------  ---------  ---------  ----------------  --------- 
 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     12,266     79,729             5,766     85,495 
                 =========  =========  ============  =========  =========  =========  =========  ================  ========= 
 
 

*Please refer to Note 3 for further details on prior year restatements

STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 31 MARCH 2019

Company

 
                                Share      Share      Other   Revaluation   Retained      Total 
                              Capital    Premium   Reserves      Reserves   Earnings 
                                         Account 
                             GBP000's   GBP000's   GBP000's      GBP000's   GBP000's   GBP000's 
 
 Balance as at 
  31 March 2018                 3,291     58,847      2,823           395      7,189     72,545 
 Prior year adjustments: 
 Adjustment re 
  bonuses (Note 
  3.4)                              -          -          -             -      (172)      (172) 
 Adjustment re 
  Share based 
  payments (Note 
  3.8)                              -          -    (2,717)             -      2,807         90 
 Adjustment re 
  share-based 
  payments (Note 
  3.9)                              -          -          -             -      1,324      1,324 
                            ---------  ---------  ---------  ------------  ---------  --------- 
 Balance as at 
  31 March 2018 
  - restated                    3,291     58,847        106           395     11,148     73,787 
 Adjustment on 
  implementation 
  of IFRS16 (Note 
  3.5)                              -          -          -             -        (7)        (7) 
 IFRS 16 adjusted 
  balance as at 
  1 April 2018 
  - restated                    3,291     58,847        106           395     11,141     73,780 
                            ---------  ---------  ---------  ------------  ---------  --------- 
 Profit for the 
  year - as reported                -          -          -             -     15,041     15,041 
 Prior year adjustments: 
 Adjustment re 
  bonuses (Note 
  3.4)                              -          -          -             -         71         71 
 Adjustment re 
  IFRS16 (Note 
  3.5)                              -          -          -             -        (3)        (3) 
 Adjustment re 
  share payments 
  (Note 3.9)                        -          -          -             -        154        154 
                            ---------  ---------  ---------  ------------  ---------  --------- 
 Profit for the 
  year - restated                   -          -          -             -     15,263     15,263 
 Other comprehensive 
  income: 
 Actuarial gains/(losses) 
  on pension scheme 
  assets                            -          -          -             -       (36)       (36) 
                            ---------  ---------  ---------  ------------  ---------  --------- 
 Total comprehensive 
  income for the 
  year                              -          -          -             -     15,227     15,227 
                            ---------  ---------  ---------  ------------  ---------  --------- 
 Transactions 
  with owners 
  recorded directly 
  in equity 
 Issue of shares 
  in the year                      81      3,803          -             -          -      3,884 
 Share-based 
  payments                          -          -          -             -        631        631 
 Adjustment re 
  share-based 
  payments (Note 
  3.8)                              -          -          -             -        (5)        (5) 
 Dividends                          -          -          -             -    (8,485)    (8,485) 
 Transactions 
  with owners                      81      3,803          -             -    (7,859)    (3,975) 
                            ---------  ---------  ---------  ------------  ---------  --------- 
 Balance as at 
  31 March 2019 
  - restated                    3,372     62,650        106           395     18,509     85,032 
                            =========  =========  =========  ============  =========  ========= 
 

STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 31 MARCH 2020

Company

 
                           Share      Share      Other   Revaluation   Retained      Total 
                         Capital    Premium   Reserves      Reserves   Earnings 
                                    Account 
                        GBP000's   GBP000's   GBP000's      GBP000's   GBP000's   GBP000's 
 
 Balance as 
  at 31 March 
  2019 - restated          3,372     62,650        106           395     18,509     85,032 
 
 Loss for the 
  year                         -          -          -             -      (151)      (151) 
 Other comprehensive 
  income: 
 Revaluation 
  of freehold 
  property                     -          -          -          (92)          -       (92) 
 Actuarial 
  gains on pension 
  scheme assets                -          -          -             -         12         12 
 Total comprehensive 
  loss for the 
  year                         -          -          -          (92)      (139)      (231) 
                       ---------  ---------  ---------  ------------  ---------  --------- 
 Transactions 
  with owners 
 Issue of shares 
  in the year                  5        232          -             -          -        237 
 Share-based 
  payments                     -          -          -             -        284        284 
 Deferred tax 
  on share-based 
  payments                     -          -          -             -       (63)       (63) 
 Deferred tax 
  on property 
  revaluations                 -          -          -           (1)          -        (1) 
 Dividends                     -          -          -             -    (7,453)    (7,453) 
                       ---------  ---------  ---------  ------------  ---------  --------- 
 Transactions 
  with owners                  5        232          -           (1)    (7,232)    (6,996) 
                       ---------  ---------  ---------  ------------  ---------  --------- 
 Balance as 
  at 31 March 
  2020                     3,377     62,882        106           302     11,138     77,805 
                       =========  =========  =========  ============  =========  ========= 
 
 

*Please refer to Note 3 for further details on prior year restatements.

STATEMENTS OF FINANCIAL POSITION (CO. NUMBER: 01818170)

AS AT 31 MARCH 2020

 
                                                      Group                             Company 
                                             2020        2019        2018       2020        2019        2018 
                                 Notes   GBP000's    GBP000's    GBP000's   GBP000's    GBP000's    GBP000's 
                                                    Restated*   Restated*              Restated*   Restated* 
 Non-current assets 
 Intangible assets                12       41,439      41,009      39,656          -           -           - 
 Property, plant and 
  equipment                       13        2,426       2,144       1,866        622         769         716 
 Investment property              14          305         200         200        305         200         200 
 Right of use assets              15        1,658       1,675           -         25          57           - 
 Investments                      16          166         116          98     20,032      20,077      20,077 
 Amounts due from subsidiary 
  Company                         18            -           -           -     59,295      59,988      47,650 
                                        ---------  ----------  ----------  ---------  ----------  ---------- 
 Total non-current assets                  45,994      45,144      41,820     80,279      81,091      68,643 
 
 Current assets 
 Inventories                      17       17,264      19,477      18,654          -           -           - 
 Trade and other receivables      18       28,353      23,333      15,219         55          46         213 
 Income tax recoverable                     1,265         827         343          -          14          22 
 Other taxes and social 
  security                                    652         462       1,160         36         145         518 
 Cash and cash equivalents        20       11,877      16,863      20,343        177       4,236       4,959 
                                        ---------  ----------  ----------  ---------  ----------  ---------- 
 Total current assets                      59,411      60,962      55,719        268       4,441       5,712 
                                        ---------  ----------  ----------  ---------  ----------  ---------- 
 TOTAL ASSETS                             105,405     106,106      97,539     80,547      85,532      74,355 
 
 Current Liabilities 
 Trade and other payables         21     (14,486)    (13,363)    (10,983)      (567)       (296)       (428) 
 Borrowings                       22      (2,032)           -           -    (2,001)           -           - 
 Income tax payable                         (940)       (816)       (128)          -           -           - 
 Other taxes and social 
  security                                      -       (533)       (108)          -        (90)        (98) 
 Lease liabilities                22        (342)       (330)           -       (24)        (36)           - 
 Dividends                                   (50)        (49)        (42)       (50)        (49)        (42) 
                                        ---------  ----------  ----------  ---------  ----------  ---------- 
 Current liabilities                     (17,850)    (15,091)    (11,261)    (2,642)       (471)       (568) 
                                        ---------  ----------  ----------  ---------  ----------  ---------- 
 Net current assets 
  / (liabilities)                          41,561      45,871      44,458    (2,374)       3,970       5,144 
                                        ---------  ----------  ----------  ---------  ----------  ---------- 
 Total assets less current 
  liabilities                              87,555      91,015      86,278     77,905      85,061      73,787 
 
 Non-current liabilities 
 
 Deferred tax                     19        (636)           -           -       (95)           -           - 
 Lease liabilities                22      (1,424)     (1,440)           -        (5)        (29)           - 
 TOTAL ASSETS LESS TOTAL 
  LIABILITIES                              85,495      89,575      86,278     77,805      85,032      73,787 
                                        =========  ==========  ==========  =========  ==========  ========== 
 
 EQUITY 
 Issued share capital             25        3,377       3,372       3,291      3,377       3,372       3,291 
 Share premium account                     62,882      62,650      58,847     62,882      62,650      58,847 
 Revaluation reserve                          572         664         664        302         395         395 
 Other reserves                   27          106         106         106        106         106         106 
 Foreign exchange revaluation 
  reserve                         27          526         467         484          -           -           - 
 Retained earnings                         12,266      17,214      17,732     11,138      18,509      11,148 
                                        ---------  ----------  ----------  ---------  ----------  ---------- 
 Shareholders' funds                       79,729      84,473      81,124     77,805      85,032      73,787 
 Non-controlling interests        26        5,766       5,102       5,154          -           -           - 
                                        ---------  ----------  ----------  ---------  ----------  ---------- 
 Total equity                              85,495      89,575      86,278     77,805      85,032      73,787 
                                        =========  ==========  ==========  =========  ==========  ========== 
 

Dr Andrew Jones, Chairman.

*Please refer to Note 3 for further details on prior year restatements. The notes on pages 63 to 149 form part of these financial statements.

STATEMENT OF CASH FLOWS

FOR THE YEARED 31 MARCH 2020

 
                                                  Group       Group    Company     Company 
                                                   2020        2019       2020        2019 
                                                          Restated*              Restated* 
                                       Notes   GBP000's    GBP000's   GBP000's    GBP000's 
 Cash flows from operating 
  activities 
 Profit/(loss) before income 
  tax                                             5,207      10,085      (151)      15,272 
 Adjustment for: 
 Finance income                          7        (112)       (127)      (895)       (917) 
 Finance cost                            7          142         124         30           - 
 Foreign exchange gain/(loss)                        62       (504)          -           - 
 Depreciation                           13          334         340         17          17 
 Amortisation of right-of-use 
  assets                                15          389         380         32          15 
 Revaluation of investment 
  property                                         (64)        (55)       (64)        (55) 
 Amortisation of intangible 
  assets                                12        1,685       1,745          -           - 
 Pension payments                       23         (59)        (59)          -        (59) 
 Share of associate's results           16         (42)        (14)          -           - 
 Impairment of investments              16            -           -         45           - 
 Share based charge                     24          284         631        114         305 
 Dividends received                                   -           -       (77)           - 
                                              ---------  ----------  ---------  ---------- 
 Operating cash flows before 
  movements in working capital                    7,826      12,546      (949)      14,578 
 
 Change in inventories                            2,212     (1,814)          -           - 
 Change in receivables                          (5,209)     (5,738)        962    (11,472) 
 Change in payables                                 662       2,141        253       (103) 
                                              ---------  ----------  ---------  ---------- 
 Cash generated from operations                   5,491       7,135        266       3,003 
 Finance costs                                     (17)           -       (30)         (2) 
 Income tax                                     (1,076)       (862)          -        (13) 
                                              ---------  ----------  ---------  ---------- 
 Net cash from operating 
  activities                                      4,398       6,273        236       2,988 
                                              ---------  ----------  ---------  ---------- 
 
 Cash flows from investing 
  activities 
 Acquisition of property, 
  plant and equipment                   13        (767)       (566)        (1)         (2) 
 Disposal of property, plant 
  and equipment                         13            -           5          -           - 
 Purchase of intangibles                12      (2,115)     (3,098)          -           - 
 Finance income                          7          112         127        895         938 
 Dividends received                                   -           -         77           - 
                                              ---------  ----------  ---------  ---------- 
 Net cash (used in)/from 
  investing activities                          (2,770)     (3,532)        971         936 
                                              ---------  ----------  ---------  ---------- 
 
 Cash flows from financing 
  activities 
 Change in borrowings                   22        2,032           -      2,001           - 
 Proceeds from issue of share 
  capital                                           237       3,884        237       3,884 
 Interest paid on lease liabilities               (125)       (139)       (13)        (22) 
 Principal paid on lease 
  liabilities                                     (364)       (338)       (38)        (31) 
 Dividends paid                                 (8,421)    (10,121)    (7,453)     (8,478) 
 Net cash (used in)/from 
  financing activities                          (6,641)     (6,714)    (5,266)     (4,647) 
                                              ---------  ----------  ---------  ---------- 
 Net (decrease) in cash and 
  cash equivalents                              (5,013)     (3,973)    (4,059)       (723) 
 Foreign exchange movements                          27         493          -           - 
 Balance at the beginning 
  of the period                                  16,863      20,343      4,236       4,959 
                                              ---------  ----------  ---------  ---------- 
 
 Balance at the end of the 
  period                                20       11,877      16,863        177       4,236 
                                              =========  ==========  =========  ========== 
 
 

A net cash reconciliation has been provided in note 22.

*Please refer to Note 3 for further details on prior year restatements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARED 31 MARCH 2020

   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.

   2.         Summary of significant accounting policies 
   2.1       Basis of preparation 

The Group has presented its annual report and accounts in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

The preparation of financial statements, in conformity with international accounting standards in conformity with the requirements of the Companies Act 2006, 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 of the Group are set out below and have been applied consistently in dealing with items which are considered material in relation to the Group's financial statements.

Going Concern

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

This conclusion is based on a review of the resources available to the Group, taking account of the Group's financial projections together with available cash and committed borrowing facilities. The Directors have performed a reverse stress test on the business, by considering what quantum of revenue and gross margin reduction would be required to exhaust all available funds within 12 months of the date of approving the 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 YEARED 31 MARCH 2020

   2.2       Adoption of new and revised standards 

The following new standards, amendments and interpretations for existing standards have been published and are mandatory for accounting periods beginning after 1 January 2019 (unless otherwise stated) and have been applied in preparing these consolidated financial statements. These did not result in any material changes.

   --    IFRS 9- Financial Instruments (amendments) 
   --    IFRIC 23 - Uncertainty over income tax 
   --    IAS 28 - Investments in associates and joint ventures 
   --    IAS 19 - Employee benefits 

The following amendments to existing standards and interpretations will be effective and adopted for period ended 31 March 2021 and the adoption of these amendments to existing standards and interpretations are not expected to have a material impact on the financial statements of the Group:

   --    IFRS 3 Business combinations - Definition of a business 

-- IAS 1 Presentation of financial statements, and IAS 8 Accounting policies, changes in accounting estimates and errors - Definition of material

   --    IFRS 11 - Joint Arrangements 
   --    IAS 12 - Income Taxes 
   --      IAS 23 - Amendments under 2015-2017 Cycle of Annual Improvements 

The following new standards, amendments and interpretations for existing standards have been published that are mandatory for accounting periods beginning after 1 January 2020 (unless otherwise stated) and have not been applied in preparing these consolidated financial statements.

   --    IFRS 9, IAS 39 and IFRS 17 - Interest rate benchmark reform 

The Directors do not expect that the adoption of the Standards and Interpretations listed above will have a material impact on the financial statements of the Group 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 2020.

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   2.3       Basis of consolidation (continued) 

initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value, the difference is recognised directly in the income statement.

Accounting policies 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.

   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 financial statements are presented in Pounds Sterling, which is the Company's functional and the Group's presentation 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 YEARED 31 MARCH 2020

   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

The Group's 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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   2.7       Financial instruments (continued) 

with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

Financial liabilities

The Group's 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) 
   --    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 YEARED 31 MARCH 2020

   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.

Initial recognition: research and development costs

   --    Charge all research cost to expense. 

-- Development costs are capitalised only after technical and commercial feasibility of the asset for sale or use have been established. This means that the entity must intend and be able to complete the intangible asset and either use it or sell it and be able to demonstrate how the asset will generate future economic benefits.

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.

If recognition criteria are not met.

If an intangible item does not meet both the definition of and the criteria for recognition as an intangible asset, IAS 38 requires the expenditure on this item to be recognised as an expense when it is incurred.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   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 (or other product) or an approval for marketing Aivlosin 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 more recently announced projects (for example the vaccine collaboration projects with The Pirbright Institute) would be considered to have not yet met the criteria for capitalisation and should have therefore been expensed. Such projects' costs 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 YEARED 31 MARCH 2020

   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 
   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 

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 the Group's assets are reviewed at each year end, to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated in order to determine the impairment loss if any. The recoverable amount is the higher of its fair value and its value in use. For intangible assets with an indefinite useful life 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 YEARED 31 MARCH 2020

   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 property 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. 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 in subsidiaries are stated at cost less impairment in the Parent Company's statement of financial position.

An impairment is recognised in profit or loss when there is objective evidence that the asset is impaired and is measured as the difference between the investment's carrying amount and the present value of estimated future cashflows discounted at the effective interest rate adjusted for a risk premium. Impairment losses are reversed in subsequent periods when an increase in the investment's recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised costs would have been had the impairment not been recognised.

   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 YEARED 31 MARCH 2020

   2.13     Joint Operations (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, as applied from the transition date of 1 April 2018, 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 YEARED 31 MARCH 2020

   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.

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   2.15     Leasing (continued) 

Short-term leases and leases of low-value assets

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 used a number of practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17.

In particular, the Group applied:

-- not to reassess whether a contract is, or contains, a lease at the date of initial application;

-- application of a single discount rate to a portfolio of leases with reasonably similar characteristics;

-- exclusion of initial direct costs from the measurement of the right-of-use asset at the date of initial application;

-- hindsight to determine the lease term;

-- exclusion of low-value leases - leases for which the underlying assets are below the Group's capitalisation threshold; and

-- exclusion of short-term leases - leases with lease term ending within twelve months of the date of initial application.

   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 historical 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   FOR THE YEARED 31 MARCH 2020 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. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.

   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 the assets of the Group after deducting all of its liabilities.

   2.20     Bank borrowings and loans 

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

   2.21     Trade payables 

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

   2.22     Provisions 

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle 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. 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, royalty income. The amounts are small and are recognised on an accruals basis.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   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. 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.

Further details of the inputs to the Black-Scholes model can be found in note 24 to the accumulating share based payment charges in reserves. Share-based payment charges are credited to retained earnings only; subsequent to the prior year adjustment explained in note 3, the share-based payment reserve account balance is subsumed within 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   2.26     Taxation (continued) 

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 recorded in the Group's results are recorded within retained earnings.

The cost of its own shares bought into treasury by the Company 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.

Amounts arising from revaluations of assets not taken through the income statement or other comprehensive income are held within the Revaluation reserve.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   2.28     Non-controlling (minority) 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:

   --    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 YEARED 31 MARCH 2020

   2.30     Critical accounting estimates and judgements (continued) 
   --    Income taxes 

The Group is subject to income taxes predominantly in the United Kingdom but also in other jurisdictions.

Significant estimates are required in determining the provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises assets and liabilities based on estimates of the final agreed position.

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

Deferred tax assets on timing differences are recognised to the extent by which 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 valuation model, as disclosed in note 24. 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   2.30     Critical accounting estimates and judgements (continued) 

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

- Financing factors that reflect the lessee companies' risk premium on borrowing. Management considered the financial strength and credit risk of lessee companies and 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%.

At 31 March 2020, the Group used a weighted average discount rate of 7.10% (2019 restated: 7.84%).

 
                                            Transition 
                                    2019        date 1 
                       2020    Restated*    April 2018 
 
 Property              5.9%         5.8%          5.9% 
 Vehicle              29.0%        29.0%         29.0% 
 Other                 4.0%         4.0%          4.0% 
                    -------  -----------  ------------ 
 Weighted average     7.10%        7.84%         7.03% 
                    -------  -----------  ------------ 
 

*Please refer to Note 3 for further details on prior year restatements.

   --    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 non0financial 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   2.30     Critical accounting estimates and judgements (continued) 

The Group measures a number of items at fair value.

   -      Revalued land and buildings (note 13) 
   -      Investment property (note 14) 
   -      Pension and other post-retirement benefit commitments (note 23) 
   -      Share-based payments (note 24) 
   -      Initial recognition of Financial instruments (note 32) 

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

   3.         Prior year restatements 

The following 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 IAS 8.

   3.1       IFRS 15 Revenue from Contracts with Customers 

The Group adopted IFRS 15 - Revenue from Contracts with Customers with effect from 1 April 2018. It was noted in the consolidated financial statements of the Group for the year ended 31 March 2019 that the effect of adoption of this standard was immaterial to the Group.

IFRS 15 provides a single, principles-based five step model to be applied to all sales contracts, based on the transfer of control of goods and services to customers. It replaced the separate guidance in IAS 11 for Construction Contracts and IAS 18 for Revenue. Under IAS 18, the guiding principle for determining when revenue should be recognised was to establish when the transfer of risk and reward of ownership in the goods had passed to customers. IFRS 15 requires a determination of when transfer of control has passed to customers in order to establish when revenue can be recognised.

IFRS 15 (and IAS 18) also requires that sales discounts, commissions, rebates and other sales incentives provided to customers are accounted for as an offset to Revenue.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 
   3.1       IFRS 15 Revenue from Contracts with Customers (continued) 
   3.1A   Revenue recognition 
 
    Historical Treatment                   Revised treatment and impact 
    Revenue has been recognised            Having reference to the contractual 
     when goods have been dispatched        trading terms with customers, 
     from the Group's warehouses            the shipping and transportation 
     and factories (third party             methods, Incoterms guidance and 
     owned facilities). Historically        other GAAP guidance the moment 
     certain revenue recognition            when control is judged to have 
     has occurred prior to satisfying       passed to the customer was in 
     the performance obligation.            most cases later than the date 
                                            that the goods left the warehouse. 
                                            Accordingly, some revenue previously 
                                            incorrectly recorded shortly 
                                            before the relevant period end 
                                            was moved to the subsequent month 
                                            and the subsequent accounting 
                                            period. 
                                       ----------------------------------------- 
                                           The associated cost of sale was 
                                            similarly moved to the subsequent 
                                            accounting period. 
                                       ----------------------------------------- 
                                           The carrying value of Trade Debtors 
                                            and Inventory at the relevant 
                                            Statement of financial position 
                                            date was consequently adjusted. 
                                            A retained earnings adjustment 
                                            reflects the cumulative value 
                                            of net profit so adjusted in 
                                            the financial period. 
                                       ----------------------------------------- 
 
   3.1B   Sales Discounts 
 
    Historical Treatment                     Revised treatment and impact 
    Sales incentives provided to             These allowances have been set 
     customers comprising volume              off against revenue in the relevant 
     rebates, discounts and commissions       period and cost of sale appropriately 
     have historically been incorrectly       adjusted. 
     accounted for as a cost of               Trade receivables are presented 
     sale.                                    net of discounts or other variable 
                                              consideration adjustments earned, 
                                              where the expectation and intention 
                                              is to settle the balance net. 
                                              There is no impact on gross profit 
                                              or net profit. 
                                         ------------------------------------------ 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.         Prior year restatements (continued) 
   3.2        IAS 38 - Intangible Assets 
 
    Historical Treatment                       Revised treatment and impact 
    Certain costs relating to the              Historical costs have been considered 
     Research and Development team              in the light of IAS 38 and the 
     including regulatory affairs               ECO Animal Health R&D model. 
     were incorrectly capitalised               IAS 38 (and IAS 36 in respect 
     and amortised over a period                of amortisation) have been applied 
     of 10 or 20 years. Amortisation            to each year and where expenses 
     commenced immediately from                 meet the criteria for capitalisation 
     the date the costs were capitalised.       such costs have remained as capitalised 
                                                intangible assets, as explained 
                                                in more detail in note 2.8. Development 
                                                costs for projects not yet generating 
                                                sales are subject to annual impairment 
                                                reviews. Development costs are 
                                                amortised over their useful economic 
                                                lives starting from the half 
                                                year after regulatory approval 
                                                is obtained to commence product 
                                                sales, which is the best estimate 
                                                of when the asset is available 
                                                for use. 
                                           -------------------------------------------- 
                                               All other expenses incurred in 
                                                research, development, technical 
                                                and regulatory affairs and technical 
                                                support to the organization have 
                                                been expensed. 
                                           -------------------------------------------- 
                                               The impact has been to increase 
                                                the Research and Development 
                                                expense (and reduce the amortisation) 
                                                in the Income Statement in each 
                                                year and to reduce the value 
                                                of capitalised intangible assets 
                                                on the Statement of financial 
                                                position. 
                                           -------------------------------------------- 
 
   3.3        IFRS 11 - Joint Arrangements 

IFRS 11 - Joint Arrangements defines an arrangement of which two or more parties have joint control. A joint arrangement has the following characteristics:

   --      The parties are bound by a contractual arrangement. 

-- The contractual arrangement gives two or more of those parties joint control of the arrangement.

A joint arrangement is either a joint operation or a joint venture. The classification of a joint arrangement as a joint operation or a joint venture depends upon the rights and obligations of the parties to the arrangement. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Those parties are called joint venturers.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 
   3.3        IFRS 11 - Joint Arrangements (continued) 

In assessing the relationship between the Group and its commercial collaborator in the USA and Canada management has considered the nature of the commercial arrangements, the legal agreement between the parties and other contractual arrangements.

 
    Historical Treatment                     Revised treatment and impact 
    The joint arrangements with              The Group has rights and obligations 
     Pharmgate in the USA and Canada          over the individual assets and 
     have historically been correctly         liabilities in the Statement 
     classified as joint operations.          of financial position. Management 
     Accordingly, the Group has               considers that the nature of 
     correctly included in into               the commercial arrangements and 
     its income statement the revenue         the control that the Group has 
     and cost of sale, together               over the trade receivables and 
     with any sales incentives provided       trade payables indicates that 
     to customers, for sales of               the joint arrangement should 
     Aivlosin in those territories.           be also treated as a joint operation 
     The Group has correctly brought          in the statement of financial 
     50% of all administrative costs          position. The historical Income 
     into its income statement.               statement treatment correctly 
     However, the Group has incorrectly       reflects that of a joint operation 
     included 50% of each amount              but on the Statement of financial 
     held in the Statement of financial       position the Group should incorporate 
     position of the joint operation's        those assets and liabilities 
     legal entities into the Group's          over which it has rights and 
     own Statement of Financial               obligations. Accordingly, the 
     Position totals, being 50%               Group has restated past Statements 
     of tangible fixed assets, 50%            of Financial Position to include 
     of trade and other receivables,          the Group's own trade debtors 
     50% of cash and 50% of trade             (for Aivlosin sales) and related 
     and other payables.                      payable balance, together with 
                                              50% of any assets and liabilities 
                                              pertaining to shared overheads 
                                              (for example prepayments and 
                                              accruals of administrative expenses). 
                                         ------------------------------------------ 
                                             There is no change to the net 
                                              assets position of the group 
                                              and the remaining balance of 
                                              the specific assets and liabilities 
                                              to be brought into the Group 
                                              statement of financial position 
                                              is either cash or a payable to 
                                              the joint operation. Accordingly, 
                                              together with trade receivables 
                                              and payables, the cash/payable 
                                              to the joint operation balance 
                                              in the Group's Consolidated Statement 
                                              of Financial Position has changed. 
                                         ------------------------------------------ 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 
   3.4        Bonuses 

An entity may have no legal obligation to pay a bonus. Nevertheless, in some cases, an entity has a practice of paying bonuses. In such cases, the entity has a constructive obligation because the entity has no realistic alternative but to pay the bonus.

 
    Historical Treatment               Revised treatment and impact 
    Bonuses paid to Directors          Bonuses have been paid in each financial 
     and Employees in the Group         period. Notwithstanding that the bonuses 
     are discretionary, however         are subject to management and Remuneration 
     no assessment was previously       Committee discretion, they are customarily 
     performed as to whether a          paid and the amount paid is considered 
     constructive obligation to         by reference to individual performance 
     pay bonuses was present at         and Group performance in the preceding 
     each year end. As a result         financial period. Accordingly, it is 
     the historical treatment of        considered that in accordance with 
     Bonuses has been to account        IAS 19 a constructive obligation to 
     for them as an expense in          pay bonuses has been created at 31 
     the period in which they are       March 2018 and 2019 and the correct 
     paid - normally in October         accounting treatment is to accrue for 
     of each year.                      these bonuses in the year in which 
                                        the employment services were received 
                                        . All periods presented were adjusted. 
                                   ----------------------------------------------- 
 
   3.5        IFRS 16 - Leases 

Management reviewed the Group's existing list of identified leases under IFRS 16 and reassessed the reasonableness of key inputs used in calculating the lease liabilities and right-of-use assets. Comparing the results, material differences have been identified in the following four areas:

-- Leases for two properties and three vehicles have been identified where the Group has only capitalised 50% of the actual lease payments in its original IFRS 16 calculation when 100% is required to be capitalised.

-- Leases for one property, one vehicle and two pieces of equipment have not been captured by the original assessment.

-- Two contracts have been incorrectly identified as leases as they do not meet the definition of lease under IFRS 16.

-- The IBR for all identified leases was originally estimated at 4%. The Group re-estimated its incremental borrowing rate for each class of leases based on consideration over the economic, financing and asset factors. Please see Note 2.30 Critical accounting estimates and judgements for more details. The weighted average IBR based on the Directors' reassessment is 7.03% on transition at 1 April 2018, and 7.84% as at 31 March 2019.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 
   3.5        IFRS 16 - Leases (continued) 
 
                             Transition date 
                      2019      1 April 2018 
 
 Property             5.8%              5.9% 
 Vehicle             29.0%             29.0% 
 Other                4.0%              4.0% 
                    ------  ---------------- 
 Weighted average    7.84%             7.03% 
                    ------  ---------------- 
 

Because of the findings above, the Directors consider it necessary to provide a corrected reconciliation between the lease commitment under IAS 17 and the Group's opening lease liabilities on transition date.

 
                                                 GBP000's 
 
 Operating lease commitments at 31 Mar 2018 
  under IAS 17 - restated                           2,910 
 Recognition exemption for short-term leases         (36) 
 Extension and termination options reasonably 
  certain to be exercised                             549 
                                                --------- 
 Adjusted lease commitments at 31 Mar 2018 
  before discount                                   3,423 
 Discount on lease commitment                       (945) 
                                                --------- 
 Lease liabilities recognised at 1 Apr 2018         2,478 
 of which are: 
 Current lease liabilities                            782 
 Non-current lease liabilities                      1,696 
 

The following table gives details of the amounts introduced into the Group Statement of financial position at 1 April 2018, the IFRS16 transition date, split by category of asset.

 
                                   Property   Vehicles      Other      Total 
                                   GBP000's   GBP000's   GBP000's   GBP000's 
                                   Restated   Restated   Restated   Restated 
 Right-of-use assets introduced 
 Cost                                 2,224        144         22      2,390 
 Accumulated Depreciation             (395)       (44)        (6)      (445) 
 Net book value                       1,829        100         16      1,945 
                                  ---------  ---------  ---------  --------- 
 
 
 Lease liabilities introduced       (1,885)      (110)       (17)    (2,012) 
                                  ---------  ---------  ---------  --------- 
 
 Adjustment to opening reserves        (56)       (10)        (1)       (67) 
                                  =========  =========  =========  ========= 
 

The effect of IFRS 16 "Leases" on net profit for the year ended 31 March 2019 was a reduction in reported profit of GBP90,000 and the effect on net assets as at 31 March 2019 was a reduction of GBP157,000.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 
   3.6        Foreign exchange 

IAS 21 - The Effects of Changes in Foreign Exchange Rates requires the accumulated foreign exchange gains or losses from the translation of foreign operations on consolidation to be presented as a separate component of equity. Previously this foreign exchange reserve was included in and presented as part of the Group's retained earnings. It was separately disclosed in the notes.

Additionally, the Group has corrected how the foreign exchange gains and losses on its consolidated income statement are presented. Previously they were spread across multiple captions, such as revenue, cost of sales and finance expenses. With this change the overall foreign exchange impact on translation in the income statement are only presented as part of administrative expenses.

   3.7A     Free Goods Incentive 

Zhejiang ECO Biok Animal Health Products Limited (hereafter "ECO BIOK") offers to its customers goods with nominal price (hereafter "free goods") in December each year, based on a percentage of the year-to-date sales to the customer. To qualify for the free goods incentive, the customer will need to meet their annual sales target, which is set upfront in an annual contract at the beginning of each calendar year.

Historically, ECO BIOK assess whether each of the in-scope customers meet their annual target in December each year and ship out the free goods before the end of that month. The cost to ECO BIOK, as a result of this incentive, was recorded in the entity's cost of sales, at the value of the inventory that are shipped out as free goods.

Under IFRS 15, this free goods incentive is viewed as a material right given to customers for future purchases at a discounted price. Therefore, an element of the consideration received on normal sales throughout the year should be allocated to this future performance obligation to provide free goods, which should be in turn recognised as revenue only when the free goods are delivered.

Based on historical data and contractual terms management was able to establish which customers were expected to meet their annual sales targets, the actual percentage against reported sales to be used in the calculation of free goods and confirm the correct amount of contract liabilities to be recognised at the previous year ends. The year-on-year movements of the contract liabilities are reflected in the relevant year's revenue line.

   3.7B     Bonus accrual 

Historically, ECO BIOK has accrued for its staff bonus in December, in respect of the calendar year then ended, with payment in January or February, prior to the Chinese New Year. At the Group's March year-end no bonus accrual was calculated on a pro rata basis, for the anticipated next December bonus. This was incorrect as, in accordance with IAS 19 the correct accounting treatment is to accrue for these bonuses in the corresponding year-end. The restatement has recalculated the year-end accrual to the correct level, which is calculated based on a proportion of the actual paid amount for the year.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 
   3.7C     Other prior year adjustments 

ECO BIOK incorrectly recognised, at 31 March 2018 and 31 March 2019, accruals for its national promotion conference planned for December each year. The restatement has released the overstated accrual.

   3.7D     Related party transactions disclosure 

Certain related party transactions disclosures were not made in 31 March 2019 financial statements. The required disclosures, including 31 March 2019 comparative amounts, have been made in note 31.

   3.8        Share-based payments 

The Company and Group has adopted a change in policy to combine the previously reported reserve for share-based payment into retained earnings. The updated accounting policy is included in note 2.24.

Historically the Group has not recognised a deferred tax asset on the expected future tax deduction in respect of share options held at the statement of financial position sheet date. The prior year results have been restated to recognise a tax asset on share options, capped at a level for which there is a right of offset against the deferred tax liability arising on other temporary differences.

   3.9        Share-based payments expense - Company only 

Historically no separate accounting has been recorded for share based payment charges that related to options issued to employees of subsidiaries of ECO Animal Health Group PLC - the company. The share based payment charge has historically been incorrectly recognised in full in the company income statement.

Intercompany agreements exist which give the company the ability to recharge share-based payment charges to its subsidiary companies. Accordingly when the Directors have reassessed the company accounting for share based payments, they have determined that the expense should be recharged and a related intercompany receivable asset recognised.

Whilst not impacting the consolidated results, the company share based payment charge in the company income statement has decreased and the amounts due from subsidiary companies in the company statement of financial position have increased.

   3.10      Impact of restatements of the financial statements 

The following tables summarise the impact of adopting the changes, as described above in notes 3.1 to 3.9 on the Group's consolidated financial statements. Prior year adjustments impacting the Company only profit/loss for the year ended 31 March 2019 are presented in the Company Statement of Changes in Equity. References to the specific changes to which those adjustments relate are presented in the table headings as required.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.         Prior year restatements (continued) 

Impact on the Group statement of comprehensive income for the year to 31 March 2019

 
                          As reported         Adjustment         Adjustment         Adjustment         Adjustment         Adjustment         Adjustment         Adjustment         Adjustment         Adjustment   Adjustment    Restated 
                                                    Note               Note               Note               Note               Note               Note               Note               Note               Note         Note 
                                                    3.1A               3.1B                3.2                3.4                3.5                3.6               3.7A               3.7B               3.7C          3.8 
                             GBP000's           GBP000's           GBP000's           GBP000's           GBP000's           GBP000's           GBP000's           GBP000's           GBP000's           GBP000's     GBP000's    GBP000's 
 
 Revenue                       74,578            (4,223)            (2,900)                  -                  -                  -              (290)                 88                  -                  -            -      67,253 
 Cost of sales               (40,725)              2,379              2,900                  -                  -                  -                (2)                  -                  -                  -            -    (35,448) 
                    -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------  ---------- 
 Gross Profit                  33,853            (1,844)                  -                  -                  -                  -              (292)                 88                  -                  -            -      31,805 
 
 Other income                      35                  -                  -                  -                  -                  -                  -                  -                  -                  -            -          35 
 Administrative 
  expenses                   (14,466)                  -                  -                  -                311                 68                  -                  -              (451)                354            -    (14,184) 
 R&D expense                        -                  -                  -            (5,868)                  -                  -                  -                  -                  -                  -            -     (5,868) 
 Currency 
  profits/(losses)              (138)                  -                  -                  -                  -                (1)                796                  -                  -                  -            -         657 
 Amortisation of 
  intangible 
  assets                      (3,982)                  -                  -              2,236                  -                  -                  -                  -                  -                  -            -     (1,746) 
 Share based 
  payments                      (631)                  -                  -                  -                  -                  -                  -                  -                  -                  -            -       (631) 
                    -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------  ---------- 
 Profit from 
  operating 
  activities:                  14,671            (1,844)                  -            (3,632)                311                 67                504                 88              (451)                354            -      10,068 
 Net finance 
  income/(costs)                  562                  -                  -                  -                  -               (55)              (504)                  -                  -                  -            -           3 
 Share of profit 
  of associate                     14                  -                  -                  -                  -                  -                  -                  -                  -                  -            -          14 
                    -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------  ---------- 
 Profit before 
  income 
  tax                          15,247            (1,844)                  -            (3,632)                311                 12                  -                 88              (451)                354            -      10,085 
 
 Income tax charge            (1,680)                348                  -                 59               (59)                  -                  -               (23)                117               (92)           91     (1,239) 
                    -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------  ---------- 
 Profit for the 
  period                       13,567            (1,496)                  -            (3,573)                252                 12                  -                 65              (334)                262           91       8,846 
                    -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------  ---------- 
 
 Attributable to: 
 Owner of parent 
  company                      11,755            (1,273)                  -            (3,573)                252                  4                  -                 33              (170)                134           91       7,253 
 Non-controlling 
  interest                      1,812              (223)                  -                  -                  -                  8                  -                 32              (164)                128            -       1,593 
                    -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------------  -----------  ---------- 
                               13,567            (1,496)                  -            (3,573)                252                 12                  -                 65              (334)                262           91       8,846 
                    =================  =================  =================  =================  =================  =================  =================  =================  =================  =================  ===========  ========== 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.         Prior year restatements (continued) 

Impact on the Group statement of comprehensive income for the year to 31 March 2019 (continued)

 
                    As reported   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment    Restated 
                                        Note         Note         Note         Note         Note         Note         Note         Note         Note 
                                        3.1A         3.1B          3.2          3.4          3.5          3.6         3.7A         3.7B         3.7C     Note 3.8 
                       GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's      GBP000's 
 
 Earnings per 
  share 
  (pence)                 17.60       (1.91)            -       (5.35)         0.38         0.01            -         0.05       (0.25)         0.20         0.13         10.86 
 Diluted 
  earnings 
  per share 
  (pence)                 17.35       (1.88)            -       (5.27)         0.37         0.01            -         0.05       (0.25)         0.20         0.13         10.71 
 
 Earnings 
 before 
 interest, 
 taxation, 
 depreciation, 
 amortisation 
 and share 
  based 
  payments 
  (EBITDA)               19,949      (1,844)            -      (5,868)          311           66          504           88        (451)          354            -        13,109 
 
 Exclude 
  foreign 
  exchange 
  differences               138            -            -            -            -            1        (796)            -            -            -            -         (657) 
 Adjusted 
  EBITDA 
  excluding 
  foreign 
  exchange 
  differences            20,087      (1,844)            -      (5,868)          311           67        (292)           88        (451)          354            -        12,452 
                 ==============  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ============ 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 

Impact on the Group statement of financial position as at 31 March 2019

 
                      As 
                reported   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Restated 
                                 Note                                   Note         Note         Note         Note         Note         Note         Note         Note 
                                 3.1A    Note 3.1B     Note 3.2          3.3          3.4          3.5          3.6         3.7A         3.7B         3.7C          3.8 
                GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's   GBP000's 
 Non-current 
 assets 
 Intangible 
  assets          62,734            -            -     (21,839)            -          114            -            -            -            -            -            -     41,009 
 Property, 
  plant 
  and 
  equipment        2,144            -            -            -            -            -            -            -            -            -            -            -      2,144 
 Investment 
  property           200            -            -            -            -            -            -            -            -            -            -            -        200 
 Right of use 
  assets           1,930            -            -            -            -            -        (255)            -            -            -            -            -      1,675 
 Investments         116            -            -            -            -            -            -            -            -            -            -            -        116 
               ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
                  67,124            -            -     (21,839)            -          114        (255)            -            -            -            -            -     45,144 
 Current 
 assets 
 Inventories      16,107        3,370            -            -            -            -            -            -            -            -            -            -     19,477 
 Trade and 
  other 
  receivables     29,537      (5,901)        (570)            -           11            -            -            -            -            -          256            -     23,333 
 Income tax 
  recoverable        466          252            -            -            -           62            -            -           52          117        (122)            -        827 
 Other taxes 
  and 
  social 
  security           462            -            -            -            -            -            -            -            -            -            -            -        462 
 Cash and 
  cash 
  equivalents     18,068            -            -            -      (1,205)            -            -            -            -            -            -            -     16,863 
               ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
                  64,640      (2,279)        (570)            -      (1,194)           62            -            -           52          117          134            -     60,962 
 Total assets    131,764      (2,279)        (570)     (21,839)      (1,194)          176        (255)            -           52          117          134            -    106,106 
               ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 

Impact on the Group statement of financial position as at 31 March 2019 (continued)

 
                          As 
                    reported   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Restated 
                                            Note         Note         Note         Note         Note         Note         Note         Note         Note         Note 
                               Note 3.1A     3.1A         3.2          3.3          3.4          3.5          3.6          3.7A         3.7B         3.7C         3.8 
                    GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's   GBP000's 
 Current 
 liabilities 
 Trade and other 
  payables          (13,809)            -          570            -        1,194        (878)            -            -        (201)        (451)          212            -   (13,363) 
 Borrowings                -            -            -            -            -            -            -            -            -            -            -            -          - 
 Income tax          (1,000)          184            -            -            -            -            -            -            -            -            -            -      (816) 
 Other taxes 
  and social 
  security             (533)            -            -            -            -            -            -            -            -            -            -            -      (533) 
 Amounts due 
  under leases         (415)            -            -            -            -            -           85            -            -            -            -            -      (330) 
 Dividends              (49)            -            -            -            -            -            -            -            -            -            -            -       (49) 
                   ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
                    (15,806)          184          570            -        1,194        (878)           85            -        (201)        (451)          212            -   (15,091) 
 Total assets 
  less current 
  liabilities        115,958      (2,095)            -     (21,839)            -        (702)        (170)            -        (149)        (334)          346            -     91,015 
 Non-current 
  liabilities 
 Deferred tax        (1,616)            -            -        1,113            -            -            -            -            -            -            -          503          - 
 Amounts due 
  under leases       (1,573)            -            -            -            -            -          133            -            -            -            -            -    (1,440) 
                   ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 Total assets 
  less total 
  liabilities        112,769      (2,095)            -     (20,726)            -        (702)         (37)            -        (149)        (334)          346          503     89,575 
                   =========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ========= 
 Equity 
 Capital and 
  reserves 
 Issued share 
  capital              3,372            -            -            -            -            -            -            -            -            -            -            -      3,372 
 Share premium 
  account             62,650            -            -            -            -            -            -            -            -            -            -            -     62,650 
 Revaluation 
  reserve                664            -            -            -            -            -            -            -            -            -            -            -        664 
 Other reserves        3,342            -            -            -            -            -            -            -            -            -            -      (3,236)        106 
 Foreign exchange 
  reserve                  -            -            -            -            -            -            -          467            -            -            -            -        467 
 Retained 
  earnings            37,377      (1,905)            -     (20,726)            -        (702)         (33)        (467)         (76)        (170)          177        3,739     17,214 
                   ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 Shareholders' 
  funds              107,405      (1,905)            -     (20,726)            -        (702)         (33)            -         (76)        (170)          177          503     84,473 
 Non-controlling 
  interests            5,364        (190)            -            -            -            -          (4)            -         (73)        (164)          169            -      5,102 
 Total equity        112,769      (2,095)            -     (20,726)            -        (702)         (37)            -        (149)        (334)          346          503     89,575 
                   =========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ========= 
 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 

Impact on the Group statement of financial position as at 31 March 2018

 
                      As 
                reported   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Restated 
                                                                                                                            Note 
                            Note 3.1A     Note 3.2     Note 3.3     Note 3.4     Note 3.6    Note 3.7A    Note 3.7C          3.8 
                GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's   GBP000's 
 Non-current 
 assets 
 Intangible 
  assets          57,631            -     (18,207)            -          232            -            -            -            -     39,656 
 Property, 
  plant 
  and 
  equipment        1,866            -            -            -            -            -            -            -            -      1,866 
 Investment 
  property           200            -            -            -            -            -            -            -            -        200 
 Right of use          -            -            -            -            -            -            -            -            -          - 
 assets 
 Investments          98            -            -            -            -            -            -            -            -         98 
               ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
                  59,795            -     (18,207)            -          232            -            -            -            -     41,820 
 Current 
 assets 
 Inventories      17,663          991            -            -            -            -            -            -            -     18,654 
 Trade and 
  other 
  receivables     17,193      (1,678)            -        (296)            -            -            -            -            -     15,219 
 Income tax 
  recoverable        113           64            -            -          121            -           75         (30)            -        343 
 Other taxes 
  and 
  social 
  security         1,160            -            -            -            -            -            -            -            -      1,160 
 Cash and 
  cash 
  equivalents     21,261            -            -        (918)            -            -            -            -            -     20,343 
               ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
                  57,390        (623)            -      (1,214)          121            -           75         (30)            -     55,719 
 Total assets    117,185        (623)     (18,207)      (1,214)          353            -           75         (30)            -     97,539 
               ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 

Impact on the Group statement of financial position as at 31 March 2018 (continued)

 
                          As 
                    reported   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Restated 
                                     Note                                   Note         Note         Note         Note         Note 
                                     3.1A     Note 3.2     Note 3.3          3.4          3.6         3.7A         3.7C          3.8 
                    GBP000's   GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's                  GBP000's 
 Current 
 liabilities 
 Trade and other 
  payables          (10,715)            -            -        1,214      (1,307)            -        (289)          114            -   (10,983) 
 Borrowings                -            -            -            -            -            -            -            -            -          - 
 Income tax 
  payable              (152)           24            -            -            -            -            -            -            -      (128) 
 Other taxes and 
  social security      (108)            -            -            -            -            -            -            -            -      (108) 
 Lease                     -            -            -            -            -            -            -            -            -          - 
 liabilities 
 Dividends              (42)            -            -            -            -            -            -            -            -       (42) 
                   ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
                    (11,017)           24            -        1,214      (1,307)            -        (289)          114            -   (11,261) 
 Total assets 
  less 
  current 
  liabilities        106,168        (599)     (18,207)            -        (954)            -        (214)           84            -     86,278 
 Non-current 
 liabilities 
 Deferred tax        (1,293)            -        1,054            -            -            -            -            -          239          - 
 Lease                     -            -            -            -            -            -            -            -            -          - 
 liabilities 
                   ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 Total assets 
  less 
  total 
  liabilities        104,875        (599)     (17,153)            -        (954)            -        (214)           84          239     86,278 
                   =========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ========= 
 Equity 
 Capital and 
 reserves 
 Issued share 
  capital              3,291            -            -            -            -            -            -            -            -      3,291 
 Share premium 
  account             58,847            -            -            -            -            -            -            -            -     58,847 
 Revaluation 
  reserve                664            -            -            -            -            -            -            -            -        664 
 Other reserves        2,823            -            -            -            -            -            -            -      (2,717)        106 
 Foreign exchange 
  revaluation 
  reserve                  -            -            -            -            -          484            -            -            -        484 
 Retained 
  earnings            34,065        (632)     (17,153)            -        (954)        (484)        (109)           43        2,956     17,732 
                   ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 Shareholders' 
  funds               99,690        (632)     (17,153)            -        (954)            -        (109)           43          239     81,124 
 Non-controlling 
  interests            5,185           33            -            -            -            -        (105)           41            -      5,154 
 Total equity        104,875        (599)     (17,153)            -        (954)            -        (214)           84          239     86,278 
                   =========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ===========  ========= 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 

Impact on the Group statement of cash flows for the year ended 31 March 2019

 
                        As 
                        reported   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Restated 
                                                      Note                      Note         Note         Note         Note         Note         Note         Note 
                                    Note 3.1A         3.1B     Note 3.2          3.3          3.4          3.5         3.7A         3.7B         3.7C          3.8 
                        GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's   GBP000's 
 Cashflows from 
 operating 
 activities 
 Profit before income 
  tax                     15,247      (1,844)            -      (3,632)            -          311           12           88        (451)          354            -     10,085 
 
 Adjustment for: 
 Finance income            (127)            -            -            -            -            -            -            -            -            -            -      (127) 
 Finance cost                 69            -            -            -            -            -           55            -            -            -            -        124 
 Foreign exchange 
  gain/(loss)              (504)            -            -            -            -            -            -            -            -            -            -      (504) 
 Depreciation                340            -            -            -            -            -            -            -            -            -            -        340 
 Amortisation of 
  right-of-use 
  assets                     380            -            -            -            -            -            -            -            -            -            -        380 
 Revaluation of 
  freehold 
  property                  (55)            -            -            -            -            -            -            -            -            -            -       (55) 
 Amortisation of 
  intangible 
  assets                   3,982            -            -      (2,237)            -            -            -            -            -            -            -      1,745 
 Pension payments           (59)            -            -            -            -            -            -            -            -            -            -       (59) 
 Share of post-tax 
  profits 
  of equity accounted 
  joint operations          (14)            -            -            -            -            -            -            -            -            -            -       (14) 
 Impairment of                 -            -            -            -            -            -            -            -            -            -            -          - 
 investments 
 Share based charge          631            -            -            -            -            -            -            -            -            -            -        631 
                       ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 Operating cash flow 
  before movement in 
  working capital         19,890      (1,844)            -      (5,869)            -          311           67           88        (451)          354            -     12,546 
 (Increase)/decrease 
  in inventories           1,556      (2,379)            -            -            -            -            -            -            -            -            -      (823) 
 (Increase)/decrease 
  in trade and other 
  receivables           (11,646)        4,223          570            -        (307)            -            -            -            -        (256)            -    (7,416) 
 Increase/(decrease) 
  in trade and other 
  payables                 3,540           92        (542)           42      (1,654)          801           88          828           27        (682)        (742)      2,828 
                       ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 Cash generated from 
  operations              13,340           92        1,112      (5,827)      (1,961)        1,112          155          916        (478)        (584)        (742)      7,135 
 Finance costs              (69)            -            -            -            -            -           69            -            -            -            -          - 
 Income tax                (862)            -            -            -            -            -            -            -            -            -            -      (862) 
                       ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 Net cash from 
  operating 
  activities              12,409           92        1,112      (5,827)      (1,961)        1,112          224          916        (478)        (584)        (742)      6,273 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 

Impact on the Group statement of cash flows for the year ended 31 March 2019 (continued)

 
                      As 
                reported   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Adjustment   Restated 
                                              Note                                                             Note         Note         Note         Note 
                            Note 3.1A         3.1B     Note 3.2     Note 3.3     Note 3.4     Note 3.5         3.7A         3.7B         3.7C          3.8 
                GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's     GBP000's   GBP000's 
 Cash flows 
 from 
 investing 
 activities 
 Acquisition 
  of property 
  plant and 
  equipment        (566)            -            -            -            -            -            -            -            -            -            -      (566) 
 Disposal 
  of property 
  plant and 
  equipment            5            -            -            -            -            -            -            -            -            -            -          5 
 Purchase 
  of 
  intangibles    (9,085)            -            -        5,873            -          114            -            -            -            -            -    (3,098) 
 Finance 
  income             127            -            -            -            -            -            -            -            -            -            -        127 
 Net cash 
  from 
  investing 
  activities     (9,519)            -            -        5,873            -          114            -            -            -            -            -    (3,532) 
               ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 Cash flows 
 from 
 financing 
 activities 
 Proceeds 
  from issue 
  of share 
  capital          3,884            -            -            -            -            -            -            -            -            -            -      3,884 
 Interest 
  paid on 
  lease 
  liabilities         67            -            -            -            -            -        (206)            -            -            -            -      (139) 
 Principal 
  paid on 
  lease 
  liabilities      (406)            -            -            -            -            -           68            -            -            -            -      (338) 
 Dividends 
  paid          (10,121)            -            -            -            -            -            -            -            -            -            -   (10,121) 
               ---------  -----------  -----------  -----------  -----------  -----------  ----------- 
 Net cash 
  from 
  financing 
  activities     (6,576)            -            -            -            -            -        (138)            -            -            -            -    (6,714) 
               ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 Net decrease 
  in cash and 
  cash 
  equivalents    (3,686)           92        1,112           46      (1,961)        1,226           86          916        (478)        (584)        (742)    (3,973) 
 Foreign 
  exchange 
  movements          493            -            -            -            -            -            -            -            -            -            -        493 
 Balance at 
  the 
  beginning 
  of the 
  period          21,261            -            -            -        (918)            -            -            -            -            -            -     20,343 
 Cash and 
  cash 
  equivalents 
  at the end 
  of the 
  period          18,068           92        1,112           46      (2,879)        1,226           86          916        (478)        (584)        (742)     16,863 
               ---------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  -----------  --------- 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 

Impact on the Company statement of financial position as at 31 March 2019

 
                              As reported   Adjustment   Adjustment   Adjustment   Adjustment   Restated 
                                                                            Note         Note 
                                              Note 3.4     Note 3.5          3.8          3.9 
                                 GBP000's     GBP000's     GBP000's     GBP000's     GBP000's   GBP000's 
 Non-current assets 
 Intangible assets                      -            -            -            -            -          - 
 Property, plant 
  and equipment                       769            -            -            -            -        769 
 Investment property                  200            -            -            -            -        200 
 Right of use assets                   30            -           27            -            -         57 
 Investments                       20,077            -            -            -            -     20,077 
 Amounts due from 
  subsidiary Company               58,510            -            -            -        1,478     59,988 
                             ------------  -----------  -----------  -----------  -----------  --------- 
                                   79,586            -           27            -        1,478     81,091 
 Current assets 
 Inventories                            -            -            -            -            -          - 
 Trade and other 
  receivables                          46            -            -            -            -         46 
 Income tax recoverable                 -           14            -            -            -         14 
 Other taxes and 
  social security                     145            -            -            -            -        145 
 Cash and cash equivalents          4,236            -            -            -            -      4,236 
                             ------------  -----------  -----------  -----------  -----------  --------- 
                                    4,427           14            -            -            -      4,441 
 Total assets                      84,013           14           27            -        1,478     85,532 
                             ------------  -----------  -----------  -----------  -----------  --------- 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 

Impact on the Company statement of financial position as at 31 March 2019 (continued)

 
                            As reported   Adjustment   Adjustment   Adjustment   Adjustment   Restated 
                                            Note 3.4     Note 3.5     Note 3.8     Note 3.9 
                               GBP000's     GBP000's     GBP000's     GBP000's     GBP000's   GBP000's 
 Current liabilities 
 Trade and other 
  payables                        (181)        (115)            -            -            -      (296) 
 Borrowings                           -            -            -            -            -          - 
 Income tax                           -            -            -            -            -          - 
 Other taxes and 
  social security                  (90)            -            -            -            -       (90) 
 Amounts due under 
  leases                           (16)            -         (20)            -            -       (36) 
 Dividends                         (49)            -            -            -            -       (49) 
                           ------------  -----------  -----------  -----------  -----------  --------- 
                                  (336)        (115)         (20)            -            -      (471) 
 Total assets less 
  current liabilities            83,677        (101)            7            -        1,478     85,061 
 Non-current liabilities 
 Deferred tax                      (85)            -            -           85            -          - 
 Amounts due under 
  leases                           (12)            -         (17)            -            -       (29) 
                           ------------  -----------  -----------  -----------  -----------  --------- 
 Total assets less 
  total liabilities              83,580        (101)         (10)           85        1,478     85,032 
                           ============  ===========  ===========  ===========  ===========  ========= 
 Equity 
 Capital and reserves 
 Issued share capital             3,372            -            -            -            -      3,372 
 Share premium account           62,650            -            -            -            -     62,650 
 Revaluation reserve                395            -            -            -            -        395 
 Other reserves                   3,342            -            -      (3,236)            -        106 
 Foreign exchange                     -            -            -            -            -          - 
  revaluation reserve 
 Retained earnings               13,821        (101)         (10)        3,321        1,478     18,509 
                           ------------  -----------  -----------  -----------  -----------  --------- 
 Shareholders' funds             83,580        (101)         (10)           85        1,478     85,032 
 Non-controlling                      -            -            -            -            -          - 
  interests 
 Total equity                    83,580        (101)         (10)           85        1,478     85,032 
                           ============  ===========  ===========  ===========  ===========  ========= 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 

Impact on the Company statement of financial position as at 31 March 2018 (continued)

 
                              As reported   Adjustment   Adjustment   Adjustment   Restated 
                                                               Note         Note 
                                              Note 3.4          3.8          3.9 
                                 GBP000's     GBP000's     GBP000's     GBP000's   GBP000's 
 Non-current assets 
 Intangible assets                      -            -            -            -          - 
 Property, plant 
  and equipment                       716            -            -            -        716 
 Investment property                  200            -            -            -        200 
 Right of use assets                    -            -            -            -          - 
 Investments                       20,077            -            -            -     20,077 
 Amounts due from 
  subsidiary Company               46,326            -            -        1,324     47,650 
                             ------------  -----------  -----------  -----------  --------- 
                                   67,319            -            -        1,324     68,643 
 Current assets 
 Inventories                            -            -            -            -          - 
 Trade and other 
  receivables                         213            -            -            -        213 
 Income tax recoverable                 -           22            -            -         22 
 Other taxes and 
  social security                     518            -            -            -        518 
 Cash and cash equivalents          4,959            -            -            -      4,959 
                             ------------  -----------  -----------  -----------  --------- 
                                    5,690           22            -            -      5,712 
 Total assets                      73,009           22            -        1,324     74,355 
                             ------------  -----------  -----------  -----------  --------- 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 

Impact on the Company statement of financial position as at 31 March 2018 (continued)

 
                            As reported   Adjustment   Adjustment   Adjustment   Restated 
                                                Note         Note 
                                                 3.4          3.8     Note 3.9 
                               GBP000's     GBP000's     GBP000's     GBP000's   GBP000's 
 Current liabilities 
 Trade and other 
  payables                        (234)        (194)            -            -      (428) 
 Borrowings                           -            -            -            -          - 
 Income tax                           -            -            -            -          - 
 Other taxes and 
  social security                  (98)            -            -            -       (98) 
 Amounts due under                    -            -            -            -          - 
  leases 
 Dividends                         (42)            -            -            -       (42) 
                           ------------  -----------  -----------  -----------  --------- 
                                  (374)        (194)            -            -      (568) 
 Total assets less 
  current liabilities            72,635        (172)            -        1,324     73,787 
 Non-current liabilities 
 Deferred tax                      (90)            -           90            -          - 
 Amounts due under                    -            -            -            -          - 
  leases 
                           ------------  -----------  -----------  -----------  --------- 
 Total assets less 
  total liabilities              72,545        (172)           90        1,324     73,787 
                           ============  ===========  ===========  ===========  ========= 
 Equity 
 Capital and reserves 
 Issued share capital             3,291            -            -            -      3,291 
 Share premium account           58,847            -            -            -     58,847 
 Revaluation reserve                395            -            -            -        395 
 Other reserves                   2,823            -      (2,717)            -        106 
 Foreign exchange                     -            -            -            -          - 
  revaluation reserve 
 Retained earnings                7,189        (172)        2,807        1,324     11,148 
                           ------------  -----------  -----------  -----------  --------- 
 Shareholders' funds             72,545        (172)           90        1,324     73,787 
 Non-controlling                      -                         -            -          - 
  interests                                        - 
 Total equity                    72,545        (172)           90        1,324     73,787 
                           ============  ===========  ===========  ===========  ========= 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   3.   Prior year restatements (continued) 

Impact on the Company statement of cash flows for the year ended 31 March 2019

 
                                 As reported   Adjustment   Adjustment   Adjustment   Restated 
                                                     Note         Note         Note 
                                                      3.4          3.5          3.9 
                                    GBP000's     GBP000's     GBP000's     GBP000's   GBP000's 
 
 Profit before income 
  tax                                 15,050           71          (3)          154     15,272 
 Adjustment for: 
 Finance income                        (937)            -           20            -      (917) 
 Finance cost                              -            -            -            -          - 
 Depreciation                             19            -          (2)            -         17 
 Amortisation of right-of-use 
  assets                                   -            -           15            -         15 
 Revaluation of freehold 
  property                              (55)            -            -            -       (55) 
 Pension payments                       (59)            -            -            -       (59) 
 Share based charge                      631            -            -        (326)        305 
                                ------------  -----------  -----------  -----------  --------- 
 Operating cash flow 
  before movement in working 
  capital                             14,649           71           30        (172)     14,578 
 
 Change in inventories                     -            -            -            -          - 
 Change in receivables              (11,644)            -            -          172   (11,472) 
 Change in payables                     (39)         (79)           15            -      (103) 
                                ------------  -----------  -----------  -----------  --------- 
 Cash generated from 
  operations                           2,966          (8)           45            -      3,003 
 Finance costs                           (2)            -            -            -        (2) 
 Income tax                             (13)            -            -            -       (13) 
                                ------------  -----------  -----------  -----------  --------- 
 Net cash from operating 
  activities                           2,951          (8)           45            -      2,988 
                                ------------  -----------  -----------  -----------  --------- 
 Cash flows from investing 
  activities 
 Acquisition of property 
  plant and equipment                    (2)            -            -            -        (2) 
 Disposal of property                      -            -            -            -          - 
  plant and equipment 
 Purchase of intangibles                   -            -            -            -          - 
 Finance income                          938            -            -            -        938 
                                ------------  -----------  -----------  -----------  --------- 
 Net cash from investing 
  activities                             936            -            -            -        936 
                                ------------  -----------  -----------  -----------  --------- 
 
 Cash flows from financing 
  activities 
 Proceeds from issue 
  of share capital                     3,884            -            -            -      3,884 
 Interest paid on lease 
  liabilities                              1            -         (23)            -       (22) 
 Principal paid on lease 
  liabilities                           (17)            -         (14)            -       (31) 
 Dividends paid                      (8,478)            -            -            -    (8,478) 
                                ------------  -----------  -----------  -----------  --------- 
 Net cash (used in)/from 
  financing activities               (4,610)            -         (37)            -    (4,647) 
                                ------------  -----------  -----------  -----------  --------- 
 
 Net decrease in cash 
  and cash equivalents                 (723)          (8)            8            -      (723) 
 Foreign exchange movements                -            -            -            -          - 
 Balance at the beginning 
  of the period                        4,959            -            -            -      4,959 
                                                                                             - 
                                ------------  -----------  -----------  -----------  --------- 
 Cash and cash equivalents 
  at the end of the period             4,236          (8)            8            -      4,236 
                                ============  ===========  ===========  ===========  ========= 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   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 ("EBITDA"), adjusted to exclude share based payments expenses.

 
                                         China      North      S & SE     Latin                 Rest 
                        Corporate/U.K.    & Japan    America    Asia       America   Europe      of World   Total 
                        GBP000's         GBP000's   GBP000's   GBP000's   GBP000's   GBP000's   GBP000's    GBP000's 
  Year ended 31 
   March 2020 
  Total segment 
   revenue              3,507            27,085     22,297     25,303     19,540     14,549     2,378       114,659 
  Inter-segment 
   revenue              (1,739)          (3,937)    (10,662)   (11,128)   (6,939)    (6,959)    (1,189)     (42,553) 
                       ---------------  ---------  ---------  ---------  ---------  ---------  ----------  --------- 
 
  Revenue from 
   external customers   1,768            23,148     11,635     14,175     12,601     7,590      1,189       72,106 
                       ---------------  ---------  ---------  ---------  ---------  ---------  ----------  --------- 
 
  Sale of goods         1,768            23,148     11,635     14,175     12,601     7,590      1,032       71,949 
  Royalties             -                -          -          -          -          -          157         157 
                       ---------------  ---------  ---------  ---------  ---------  ---------  ----------  --------- 
 
                        1,768            23,148     11,635     14,175     12,601     7,590      1,189       72,106 
                       ---------------  ---------  ---------  ---------  ---------  ---------  ----------  --------- 
 
  Adjusted EBITDA       (15,011)         6,499      4,196      6,266      2,286      2,951      636         7,823 
  Total Assets          30,923           31,417     17,212     7,968      12,355     4,585      945         105,405 
                       ===============  =========  =========  =========  =========  =========  ==========  ========= 
 
  Year ended 31 
   March 2019 
   All 2019 figures 
   have been restated 
  Total segment 
   revenue              2,835            34,400     18,678     19,034     13,972     15,519     3,466       107,904 
  Inter-segment 
   revenue              (1,418)          (7,613)    (8,135)    (10,943)   (3,193)    (7,616)    (1,733)     (40,651) 
                       ---------------  ---------  ---------  ---------  ---------  ---------  ----------  --------- 
 
  Revenue from 
   external customers   1,417            26,787     10,543     8,091      10,779     7,903      1,733       67,253 
                       ---------------  ---------  ---------  ---------  ---------  ---------  ----------  --------- 
 
  Sale of goods 
   restated             1,417            26,787     10,543     8,091      10,779     7,903      1,576       67,096 
  Royalties             -                -          -          -          -          -          157         157 
                       ---------------  ---------  ---------  ---------  ---------  ---------  ----------  --------- 
 
                        1,417            26,787     10,543     8,091      10,779     7,903      1,733       67,253 
                       ---------------  ---------  ---------  ---------  ---------  ---------  ----------  --------- 
  Adjusted EBITDA       (1,771)          6,443      2,242      2,293      1,133      2,234      535         13,109 
  Total Assets          21,630           24,982     12,492     14,757     15,978     12,523     3,744       106,106 
                       ===============  =========  =========  =========  =========  =========  ==========  ========= 
 
 
 

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

Adjusted EBITDA includes (Gain)/Loss on foreign exchange transactions.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   4.         Segment information (continued) 

A reconciliation of adjusted EBITDA for reportable segments to profit before tax is provided as follows:

 
                                                   2020       2019 
                                               GBP000's   GBP000's 
                                                          Restated 
 Adjusted EBITDA for reportable segments          7,823     13,109 
 Depreciation                                     (334)      (340) 
 Amortisation of right of use assets              (389)      (380) 
 Revaluation of investment property                  64         55 
 Amortisation                                   (1,685)    (1,745) 
 Share-based payment charges                      (284)      (631) 
 Profit before tax on continuing activities       5,195     10,068 
                                              ---------  --------- 
 
 

Product Revenues

 
                  2020        2019 
              GBP000's    GBP000's 
                         Restated* 
 Aivlosin       60,686      52,212 
 Ecomectin       3,951       3,686 
 Others          7,469      11,355 
             ---------  ---------- 
 Total          72,106      67,253 
 

Contract Balances

 
                                                 2020        2019 
 Within one year or on demand                GBP000's    GBP000's 
                                                        Restated* 
                                            ---------  ---------- 
 At 1 April                                       847         289 
                                            ---------  ---------- 
 Amounts included in contract liabilities 
  that was recognised as revenue 
  during the period                             (847)       (289) 
 Cash received in advance of performance 
  and not recognised as revenue 
  during the period                               594         847 
                                            ---------  ---------- 
 At 31 March                                      594         847 
                                            ---------  ---------- 
 

*Please refer to Note 3 for further details on prior year adjustments

The Group recognised contract liabilities of GBP594,000 at 31 March 2020 (2019 restated: GBP847,000). 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 YEARED 31 MARCH 2020

   5.         Other income 
 
                           2020       2019 
                       GBP000's   GBP000's 
 
 Management charges           7         30 
 Sundry income               98          5 
                            105         35 
                      ---------  --------- 
 
 
   6.         Result from operating activities 
 
                                                       2020       2019 
                                                   GBP000's   GBP000's 
                                                              Restated 
 Result from operating activities is stated 
  after charging/(crediting) 
 Cost of inventories recognised as an expense        38,381     35,337 
 Employee benefits expenses                           9,968      8,969 
 Amortisation of intangible assets (note 
  12 )                                                1,685      1,745 
 Depreciation (note 13)                                 334        340 
 Amortisation of right of use assets (note 
  15)                                                   389        380 
 Revaluation of investment property (note 
  14)                                                  (64)       (55) 
 Loss/(Gain) on foreign exchange transactions           539      (657) 
 Research and development                             8,775      5,868 
 Impairment losses on trade receivables                 139         64 
 Fees payable to the Company's auditor for 
  the audit of the parent Company and Group 
  annual accounts                                        54         18 
 Fees payable to the Company's auditor and 
  its associates for the audit of the Company's 
  subsidiaries                                           47         66 
 
 Fees payable to the Company's auditor for the audit of the 
  parent Company and Group annual accounts, for the year ended 
  31March 2020, were GBP414,000 (2019: GBP18,000), and fees 
  payable to the Company's auditor and its associates for the 
  audit of the Company's subsidiaries were GBP460,000 (2019: 
  GBP66,000). 
                                                       2020       2019 
                                                   GBP000's   GBP000's 
                                                              Restated 
 Earnings before interest, tax, depreciation, 
  amortisation and impairment, share-based 
  payments and foreign exchange differences 
  (adjusted EBITDA) 
 Profit from operating activities                     5,195     10,068 
 Depreciation                                           334        340 
 Amortisation of right of use assets                    389        380 
 Revaluation of investment property                    (64)       (55) 
 Amortisation                                         1,685      1,745 
 Share-based payments                                   284        631 
                                                  ---------  --------- 
                                                      7,823     13,109 
 Foreign exchange differences                           539      (657) 
                                                  ---------  --------- 
                                                      8,362     12,452 
                                                  ---------  --------- 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   6.         Result from operating activities (continued) 

Management believe that adjusted EBITDA is the most 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         These items are a result of 
  of Fixed Assets and Impairment       past investments and therefore, 
  of Intangibles                       although they are correctly 
                                       recorded as income or cost of 
                                       the business, they do not reflect 
                                       current or future cash outflows. 
 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. 
 
 

*Please refer to Note 3 for further details on prior year restatements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   7.         Finance income/ (costs) 
 
                                                      2020       2019 
                                                  GBP000's   GBP000's 
 Finance income                                              Restated 
 Interest received on short term bank deposits         112        127 
 
 Finance costs 
 Interest paid                                        (18)        (1) 
 Interest paid on lease liabilities                  (124)      (123) 
                                                     (142)      (124) 
                                                 ---------  --------- 
                                                      (30)          3 
                                                 =========  ========= 
 
 
   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.

 
                                 2020                                2019 
                   Earnings     Weighted   Per share   Earnings     Weighted   Per share 
                                 average      amount                 average      amount 
                                  number                              number 
                               of shares                           of shares 
                       2020         2020        2020       2019         2019        2019 
                   GBP000's        000's     (pence)   GBP000's        000's     (pence) 
                                                       Restated                 Restated 
 Earnings 
  attributable 
  to ordinary 
  shareholders 
  on continuing 
  operations 
  after tax           2,582       67,530        3.82      7,253       66,794       10.86 
 Dilutive 
  effect of 
  share options           -        2,783      (0.15)          -          943      (0.15) 
 
 Fully diluted 
  earnings 
  per share           2,582       70,313        3.67      7,253       67,737       10.71 
                  ---------  -----------  ----------  ---------  -----------  ---------- 
 
 

Diluted earnings per share takes into account the dilutive effect of share options.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

    9.        Taxation 
 
                                                             2020       2019 
 Current tax year                                        GBP000's   GBP000's 
                                                                    Restated 
 Foreign corporation tax on profits for the year            1,520      1,493 
 Withholding tax on intercompany dividend                      54         92 
 Research and development tax credits claimed 
  in the year                                             (1,000)      (414) 
 Research and development tax credits - adjustment 
  for prior year                                              196      (104) 
 Deferred tax 
 Origination and reversal of temporary differences            187        261 
 Due to change in effective rate                               75       (89) 
                                                        ---------  --------- 
 Income tax charge                                          1,032      1,239 
                                                        =========  ========= 
 
 Deferred tax recognised through reserves 
 Origination and reversal of temporary differences            373      (173) 
 Due to change in effective rate                                1          - 
                                                        ---------  --------- 
                                                              374      (173) 
                                                        =========  ========= 
                                                             2020       2019 
                                                         GBP000's   GBP000's 
 Factors affecting the tax charge for the year                      Restated 
 Profit on ordinary activities before taxation              5,207     10,085 
                                                        =========  ========= 
 
 Profit on ordinary activities before taxation 
  multiplied by the applicable rate of UK corporation 
  tax of 19% (2019: 19%)                                      989      1,916 
 Effects of: 
 Non-deductible expenses                                      324      1,451 
 Non-chargeable credits                                     (103)      (984) 
 Withholding tax on inter-company dividends                    54         92 
 Enhanced allowance on research and development 
  expenditure                                               (756)    (1,116) 
 Different tax rate for foreign subsidiaries                  165        186 
 Reduced effective deferred tax rate                           76       (89) 
 Origination and reversal of temporary differences             47       (91) 
 Unused tax losses carried forward                            236        141 
 Patent box claim                                               -      (267) 
 Income tax charge                                          1,032      1,239 
                                                        =========  ========= 
 
 
 
                                                                      2019 
                                                         2020    Restated* 
                                                            %            % 
 Applicable tax rate per UK legislation                 19.00        19.00 
 Effects of: 
 Non-deductible expenses                                 6.22        14.39 
 Non-chargeable credits                                (1.98)       (9.76) 
 Withholding tax on inter-company dividends              1.04         0.91 
 Enhanced allowance on research and development 
  expenditure                                         (14.52)      (11.07) 
 Different tax rate for foreign subsidiaries             3.17         1.85 
 Reduced effective deferred tax rate                     1.46       (0.88) 
 Origination and reversal of temporary differences       0.90       (0.90) 
 Unused tax losses carried forward                       4.53         1.40 
 Patent box claim                                           -       (2.65) 
 Effective tax rate                                     19.82        12.29 
                                                     ========  =========== 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   9.         Taxation (continued) 

Future tax changes

Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2016 (on 6 September 2016). These include reductions to the main rate to reduce the rate to 17% from 1 April 2020. On 11 March 2020 the government announced that the reduction to 17% would not take effect and the prevailing rate of corporation tax would remain at 19%. Deferred taxes at the Statement of financial position date have been measured at 19% (2019: hybrid tax rate of 18%). At the year ended 31 March 2020 the Group had unused overseas tax losses amounting to GBP3.8 million (2019: GBP2.0 million) for which no deferred tax asset has been recognised. These tax losses are not expected to expire.

   10.       Profit for the financial year 
 
                                                         2020       2019 
                                                     GBP000's   GBP000's 
                                                                Restated 
 
 Parent Company's profit/(loss) for the financial 
  year                                                  (151)     15,263 
                                                    =========  ========= 
 
 

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 YEARED 31 MARCH 2020

   11.       Dividends 
 
                                                     2020       2019 
                                                 GBP000's   GBP000's 
 
 Interim dividend for the year ended 31 March       2,698          - 
  2019 at 4.0p per ordinary share (settled 
  12 April 2019) 
 Final dividend for the year ended 31 March         4,755          - 
  2019 at 7.04p per ordinary share (settled 
  16 October 2019) 
 Special dividend for the year ended 31 March 
  2019 of 3.5p per ordinary share (settled 
  9 January 2019)                                       -      2,350 
 Interim dividend for the year ended 31 March 
  2018 at 3.2p per ordinary share (settled 
  12 April 2018)                                        -      2,106 
 Final dividend for the year ended 31 March 
  2018 at 6.0p per ordinary share (settled 
  17 October 2018)                                      -      4,029 
 
                                                    7,453      8,485 
                                                =========  ========= 
 
 

In light of the economic situation caused by the coronavirus pandemic, the Board of Directors proposes that no dividend will be paid for the year ended 31 March 2020.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   12.       Intangible fixed assets 
 
 Group                            Goodwill   Distribution   Drug registrations,      Total 
                                                   rights               patents 
                                                                    and license 
                                                                          costs 
                                  GBP000's       GBP000's              GBP000's   GBP000's 
 Cost 
 At 1 April 2018 - as reported      17,930          1,442                74,819     94,191 
 Prior year adjustment                   -              -              (38,447)   (38,447) 
                                 ---------  -------------  --------------------  --------- 
 At 1 April 2018 - restated         17,930          1,442                36,372     55,744 
 Additions - as reported                 -              -                 9,085      9,085 
 Prior year adjustment                   -              -               (5,987)    (5,987) 
 At 31 March 2019 - restated        17,930          1,442                39,470     58,842 
 Additions                               -              -                 2,115      2,115 
 At 31 March 2020                   17,930          1,442                41,585     60,957 
                                 =========  =============  ====================  ========= 
 
 Amortisation 
 At 1 April 2018 - as reported           -          (831)              (35,729)   (36,560) 
 Prior year adjustment                   -            167                20,305     20,472 
                                 ---------  -------------  --------------------  --------- 
 At 1 April 2018 - restated              -          (664)              (15,424)   (16,088) 
 Charge for the year - 
  as reported                            -           (72)               (3,910)    (3,982) 
 Prior year adjustment                   -              1                 2,236      2,237 
                                 ---------  -------------  --------------------  --------- 
 At 31 March 2019 - restated             -          (735)              (17,098)   (17,833) 
                                 =========  =============  ====================  ========= 
 Charge for the year                     -           (70)               (1,615)    (1,685) 
 At 31 March 2020                        -          (805)              (18,713)   (19,518) 
                                 =========  =============  ====================  ========= 
 
 Net Book Value 
 At 31 March 2020                   17,930            637                22,872     41,439 
                                 =========  =============  ====================  ========= 
 At 31 March 2019 - restated        17,930            707                22,372     41,009 
                                 =========  =============  ====================  ========= 
 At 31 March 2018 - restated        17,930            778                20,948     39,656 
                                 =========  =============  ====================  ========= 
 
 
 

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 5 to 15 years.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   12.       Intangible fixed assets (continued) 

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

 
 Entity                                              Date of acquisition     2019 and 2020 
                                                                                  GBP000'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. 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 8% (2019: 11%). Management considers that there is adequate headroom when comparing the net present value of the cashflows to the carrying value of goodwill to conclude that no impairment is necessary this year. On assumptions as at each period end the excess of recoverable amount over carrying value is over GBP130 million (2019 restated: GBP114 million).

Management believes that the most significant assumption in the calculation of value in use is the estimated growth rate. However, even if the growth rate were to be zero, the recoverable amount would still be over GBP119 million (2019 restated: GBP76 million) more than the carrying value and no impairment would be necessary.

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

 
                  2020       2019 
              GBP000's   GBP000's 
                         Restated 
 Aivlosin       18,009     17,659 
 Ecomectin       4,310      3,993 
 Others            553        720 
                22,872     22,372 
             =========  ========= 
 
 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   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 2020 Intangible assets included GBP7,063,000 (2019 restated: GBP4,834,000) of assets capitalised that had not commenced their useful life, of which approximately GBP4,663,000 (2019: GBP3,234,000) were Aivlosin related products. The directors have conducted impairment reviews and no impairment is required. Following restatement, no impairment indicators have been identified in relation to intangible assets in commercial use.

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 Directors have assessed the restated carrying value of intangible assets (as set out in note 3.2) for indicators of value impairment for the years ended 31 March 2019 and 31 March 2020 and have concluded that no impairment is necessary.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   13.       Property, plant and equipment 
 
 Group                   Land and       Leasehold    Plant and   Fixtures, fittings   Motor Vehicles      Total 
                        Buildings    improvements    machinery        and equipment 
                       (freehold) 
                         GBP000's        GBP000's     GBP000's             GBP000's         GBP000's   GBP000's 
 Cost or valuation 
 At 1 April 
  2018                        730               -        1,602                1,083               61      3,476 
 Additions                      -               -          341                  198               27        566 
 Disposals                      -               -         (68)                    -                -       (68) 
 Revaluation 
  in the year                  30               -            -                    -                -         30 
 Foreign exchange 
  movements                     -               -           11                    1              (6)          6 
                     ------------  --------------  -----------  -------------------  ---------------  --------- 
 At 31 March 
  2019                        760               -        1,886                1,282               82      4,010 
 Additions                      -             555           40                  157               15        767 
 Disposals                      -               -            -                (432)              (6)      (438) 
 Revaluation 
  in the year               (145)               -            -                    -                -      (145) 
 Reclassification              53               -        (937)                  648              236          - 
 Foreign exchange 
  movements                     -               -          (3)                  (5)             (16)       (24) 
                     ------------  --------------  -----------  -------------------  ---------------  --------- 
 At 31 March 
  2020                        668             555          986                1,650              311      4,170 
 
 Depreciation 
 At 1 April 
  2018                       (26)               -        (864)                (706)             (14)    (1,610) 
 Charge for 
  the year                      -               -        (171)                (154)             (15)      (340) 
 Disposals                      -               -           63                    -                -         63 
 Revaluation 
  in the year                  26               -            -                    -                -         26 
 Foreign exchange 
  movements                     -               -          (6)                    -                1        (5) 
                     ------------  --------------  -----------  -------------------  ---------------  --------- 
 At 31 March 
  2019                          -               -        (978)                (860)             (28)    (1,866) 
 Charge for 
  the year                   (15)               -         (44)                (241)             (34)      (334) 
 Disposals                      -               -            -                  426                4        430 
 Revaluation 
  in the year                  13               -            -                    -                -         13 
 Reclassification             (7)               -          310                (137)            (166)          - 
 Foreign exchange 
  movements                     -               -            2                    -               11         13 
 At 31 March 
  2020                        (9)               -        (710)                (812)            (213)    (1,744) 
                     ------------  --------------  -----------  -------------------  ---------------  --------- 
 
 Net Book Value 
 At 31 March 
  2020                        659             555          276                  838               98      2,426 
                     ============  ==============  ===========  ===================  ===============  ========= 
 
 At 31 March 
  2019                        760               -          908                  422               54      2,144 
                     ============  ==============  ===========  ===================  ===============  ========= 
 
 At 31 March 
  2018                        704               -          738                  377               47      1,866 
                     ============  ==============  ===========  ===================  ===============  ========= 
 

The freehold land and buildings at 78 Coombe Road, New Malden was valued at GBP615,000 as 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 property will continue to be valued on a regular basis.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   13.       Property, plant and equipment (continued) 

Plant and machinery held by Zhejiang ECO Biok Animal Health Products Limited has been reclassified from Plant and machinery to Land and buildings, and Furniture, fittings and equipment. FE. These adjustments have been made retrospectively to 1 April 2018.

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

In determining the fair value of freehold land and buildings level-3 fair value inputs are used. The 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.

Depreciation has been included in the administrative expenses line in the income statement, except for GBP129,000 (2019: GBP110,000) of depreciation of production equipment in the Chinese subsidiary ECO Biok, which is included within cost of sales.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   13.       Property, plant and equipment (continued) 

The value of the freehold property would have been recorded at GBP249,000 (2019: GBP259,000) on a historical cost basis.

 
 Company                                Land and        Fixtures,      Total 
                                       Buildings         fittings 
                                      (freehold)    and equipment 
 Cost or valuation                      GBP000's         GBP000's   GBP000's 
 
 At 1 April 2018                             730              165        895 
 Additions                                     -                2          2 
 Revaluation in the year                      30                -         30 
                                    ------------  ---------------  --------- 
 At 31 March 2019                            760              167        927 
 Additions                                     -                1          1 
 Disposals                                     -            (154)      (154) 
 Revaluation in the year                   (145)                -      (145) 
 At 31 March 2020                            615               14        629 
                                    ------------  ---------------  --------- 
 
 Depreciation 
 At 1 April 2018                            (25)            (154)      (179) 
 Charge for the year restated               (13)              (4)       (17) 
 Revaluation in the year restated             38                -         38 
                                    ------------  ---------------  --------- 
 At 31 March 2019                              -            (158)      (158) 
 Charge for the year                        (13)              (4)       (17) 
 Disposals                                     -              155        155 
 Revaluation in the year                      13                -         13 
 At 31 March 2020                              -              (7)        (7) 
                                    ------------  ---------------  --------- 
 
 
 Net Book Value 
 At 31 March 2020                            615                7        622 
                                    ============  ===============  ========= 
 
 At 31 March 2019                            760                9        769 
                                    ============  ===============  ========= 
 
 At 31 March 2018                            705               11        716 
                                    ============  ===============  ========= 
 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   14.       Investment property 
 
 Group and Company 
                                         Land and      Total 
                                        Buildings 
                                       (freehold) 
                                         GBP000's   GBP000's 
 
 At 1 April 2018 and 31 March 2019            200        200 
 Revaluation in 2020                          105        105 
                                     ------------  --------- 
 At 31 March 2020                             305        305 
                                     ------------  --------- 
 
 

The property in Western Road, Mitcham was valued at GBP305,000 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. This property was previously the Head Office of Lawrence plc (now ECO Animal Health Group plc) and is occupied by a charity at zero cost. The Directors believe that the open market value of this property is not significantly different to the carrying value.

The value of the investment property would have been recorded at GBP130,000 on a historical cost basis.

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

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   15.       Right of use assets 
 
 Group                           Property   Vehicles      Other      Total 
                                 GBP000's   GBP000's   GBP000's   GBP000's 
 Cost 
 Introduction on inception 
  of IFRS 16                        2,297        203          7      2,507 
 Additions                            118         85          -        203 
 Prior year adjustments*            (192)       (37)         15      (214) 
 Disposals                              -       (19)          -       (19) 
 Foreign exchange movements            16        (3)          -         13 
                                ---------  ---------  --------- 
 At 31 March 2019 - restated        2,239        229         22      2,490 
 Additions                            370          -          -        370 
 Disposals                          (494)       (33)          -      (527) 
 Foreign exchange movements           (2)          2          1          1 
                                ---------  ---------  ---------  --------- 
 At 31 March 2020                   2,113        198         23      2,334 
                                ---------  ---------  ---------  --------- 
 
 Depreciation 
 Introduction on inception 
  of IFRS 16                        (328)       (70)        (2)      (400) 
 Charge for the year                (318)       (60)        (2)      (380) 
 Prior year adjustments*             (62)         18        (6)       (50) 
 Disposals                              -         19          -         19 
 Foreign exchange movements           (6)          2          -        (4) 
                                ---------  ---------  --------- 
 At 31 March 2019 - restated        (714)       (91)       (10)      (815) 
 Charge for the year                (323)       (61)        (5)      (389) 
 Disposals                            494         33          -        527 
 Foreign exchange movements             1          -          -          1 
                                ---------  ---------  ---------  --------- 
 At 31 March 2020                   (542)      (119)       (15)      (676) 
                                ---------  ---------  ---------  --------- 
 
 Net Book Value 
 At 31 March 2020                   1,571         79          8      1,658 
                                =========  =========  =========  ========= 
 At 31 March 2019 - restated*       1,525        138         12      1,675 
                                =========  =========  =========  ========= 
 

*Please refer to Note 3 for further details on prior year adjustments.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   15.       Right of use assets (continued) 
 
 Company                        Vehicles      Other      Total 
                                GBP000's   GBP000's   GBP000's 
 Cost 
 Introduction on inception 
  of IFRS 16                          21          7         28 
 Additions                            26          -         26 
 Prior year adjustments               70          -         70 
 Disposals                             -          -          - 
 Foreign exchange movements          (2)          -        (2) 
 At 31 March 2019                    115          7        122 
 Additions                             -          -          - 
 Disposals                          (19)          -       (19) 
 Foreign exchange movements          (1)          -        (1) 
 At 31 March 2020                     95          7        102 
                               ---------  ---------  --------- 
 
 Depreciation 
 Introduction on inception 
  of IFRS 16                         (7)        (2)        (9) 
 Charge for the year                (13)        (2)       (15) 
 Prior year adjustments             (42)          -       (42) 
 Foreign exchange movements            1          -          1 
                               ---------  ---------  --------- 
 At 31 March 2019                   (61)        (4)       (65) 
 Charge for the year                (31)        (1)       (32) 
 Disposals                            19          -         19 
 Foreign exchange movements            1          -          1 
                               ---------  ---------  --------- 
 At 31 March 2020                   (72)        (5)       (77) 
                               ---------  ---------  --------- 
 
 Net Book Value 
 At 31 March 2020                     23          2         25 
                               =========  =========  ========= 
 At 31 March 2019                     54          3         57 
                               =========  =========  ========= 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   16.       Fixed asset investments 
 
 Group 
                                           Investment      Unlisted      Total 
                                         in Associate   investments 
                                             (Equity)        (Cost) 
                                             GBP000's      GBP000's   GBP000's 
 At 31 March 2018                                  89             9         98 
 Share of associate's result for the 
  year                                             14             -         14 
 Foreign exchange differences                       4             -          4 
At 31 March 2019                                  107             9        116 
 Share of associate's result for the 
  year                                             42             -         42 
 Foreign exchange differences                       8             -          8 
At 31 March 2020                                  157             9        166 
                                                                     ========= 
 
 
 Company 
                                          Unlisted     Total 
                                       investments 
                                    (subsidiaries) 
 Cost                                     GBP000's  GBP000's 
At 31 March 2018, 2019 and 2020             20,077    20,077 
 
Impairment 
At 31 March 2018, 2019                           -         - 
Impairment charge                             (45)      (45) 
At 31 March 2020                              (45)      (45) 
 
Net Book Value 
At 31 March 2020                            20,032    20,032 
At 31 March 2018, 2019                      20,077    20,077 
 
 

The Company's subsidiary Petlove Limited became dormant during the financial year ended 31 March 2020 therefore was fully impaired at the year end.

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          Class      Shares 
                                                         registration                    held 
                                                         or incorporation                   % 
 
Zhejiang ECO Biok 
 Animal Health Products   Zhongguan Industrial Area, 
 Limited                   Deqing, Zhejiang Province    P. R. China         Ordinary       3* 
                          78 Coombe Road, New Malden, 
Petlove Limited            Surrey, KT3 4QS              Great Britain       Ordinary       91 
ECO Animal Health         78 Coombe Road, New Malden, 
 Limited                   Surrey, KT3 4QS              Great Britain       Ordinary      100 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   16.       Fixed asset investments (continued) 

Subsidiary undertakings held by the Group

 
Company                     Registered office address       Country of          Class      Shares 
                                                             registration                   held 
                                                             or incorporation               % 
ECO Animal Health 
 Southern Africa            228 Athol Road, Highlands 
 (Pty) Limited.              North, Johannesburg 2192       South Africa        Ordinary   100 
Zhejiang ECO Biok 
 Animal Health Products     Zhongguan Industrial Area, 
 Limited.                    Deqing, Zhejiang Province      P. R. China         Ordinary   48* 
Shanghai ECO Biok 
 Veterinary Drug 
 Sale Company Ltd. 
 (via Zhejiang ECO          Room 1502-3, Imago Plaza, 
 Biok Animal Products        No. 99 Wuning Road, Ptro 
 Ltd.)                       District, Shanghai 200063      P. R. China         Ordinary   100 
ECO Animal Health 
 do Brasil Comercio         Av. Dr. Cardoso de Melo, 
 de Produtos Veterinarios    1470, Cl311, Villa Olimpia, 
 Ltda.                       CEP 04548-005, Sao Paulo       Brazil              Ordinary   100 
ECO Animal Health           1-2-1, Hamamatsu-cho, 
 Japan Inc.                  Minato-Ku, Tokyo               Japan               Ordinary   100 
ECO Animal Health           344 Nassau Street, Princeton, 
 USA Corp.                   New Jersey, 08540              U.S.A.              Ordinary   100 
                            3775 Columbia Pike, Ellicott 
Interpet LLC.                City, Maryland, 21043          U.S.A.              Ordinary   100 
ECO Animal Health           Av Techologico Sur 134-4, 
 de Mexico, S de             Unidad Habitacional Moderna, 
 R.L. de C.V.                Queretaro, 76030               Mexico              Ordinary   100 
                            Calle 4 E 43/44 N: 581 
ECO Animal Health            P.6 D:B La Plata, Buenos 
 de Argentina S.A.           Aires                          Argentina           Ordinary   100 
                            10(th) Floor, Menara Hap 
                             Seng, No 1 & 3, Jalan 
ECO Animal Health            P Ramlee, 50250 Kuala 
 Malaysia Sdn. Bhd.          Lumpur                         Malaysia            Ordinary   100 
                            No 33/5, Second Floor, 
                             Mount Kailash Building, 
ECO Animal Health            Meanee Avenue Road, Ulsoor 
 India (Private)             Bangalore, Karnataka, 
 Ltd.                        560042                         India               Ordinary   100 
ECO Animal Health           6 Northbrook Road, Dublin       Republic 
 Europe Ltd.                 6, Eire                         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 YEARED 31 MARCH 2020

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

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

 
                                          Equity  Profit/(loss)     Equity  Profit/(loss) 
                                                        for the                   for the 
                                                           year                      year 
                                            2020           2020       2019           2019 
                                        GBP000's       GBP000's   GBP000's       GBP000's 
                                                                  Restated       Restated 
ECO Animal Health Limited                  1,021          1,834    (1,146)          5,737 
ECO Animal Health Southern Africa 
 (Pty) Limited                               276             19        276             19 
Zhejiang ECO Biok Animal Health 
 Products Ltd                             11,965          3,473     10,794          3,363 
ECO Animal Health do Brasil Comercio 
 de Produtos Veterinarios Ltda.            (227)          (571)        307          (163) 
ECO Animal Health Japan Inc.               1,505            152      1,253            175 
ECO Animal Health de Mexico, S. 
 de R. L. de C. V.                           141             99        118             53 
ECO Animal Health USA Corp.              (1,648)          (997)      (604)          (725) 
ECO Animal Health India (Private) 
 Ltd                                           -              -          -              - 
ECO Animal Health Europe Ltd                   -              -          -              - 
ECO Animal Health Malaysia Sdn 
 Bhd                                        (21)            (7)       (21)            (7) 
 

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 YEARED 31 MARCH 2020

   16.       Fixed asset investments (continued) 

Zhejiang ECO Biok Animal Health Products Limited and ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda both 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.

Interpret 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 2020.

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   16.       Fixed asset investments (continued) 

Please note 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.

 
                                            2020       2019 
For the year ended 31 March             GBP000's   GBP000's 
                                                  Restated* 
Revenue                                   20,169     24,300 
Cost of sales                           (10,374)   (14,311) 
Gross Profit                               9,795      9,989 
 
Administrative expenses                  (5,275)    (5,232) 
Operating profit                           4,520      4,757 
 
Finance expense                             (67)       (71) 
 
Profit before tax                          4,453      4,686 
Tax expense                              (1,201)    (1,435) 
Profit after tax                           3,252      3,251 
 
Profit / (loss) allocated to NCI           1,593      1,593 
 
Other comprehensive income allocated 
 to NCI                                       39        (2) 
 
Dividend paid to NCI                       (968)    (1,643) 
 
                                            2020       2019 
As at 31 March                          GBP000's   GBP000's 
 
  Assets: 
 Property, plant and equipment               704        799 
 Right-of-use assets                         891        816 
 Deferred tax assets                          30         30 
 Inventories                               3,150      4,055 
 Trade and other receivables               6,457      7,530 
 Cash and cash equivalents                 5,339      4,045 
                                          16,571     17,275 
Liabilities: 
 Trade and other payables                  3,306      5,261 
 Contract liabilities                        605        848 
 Lease liabilities - short term               96         87 
 Lease liabilities - long term               857        775 
                                           4,864      6,971 
Accumulated NCI                            5,766      5,102 
 
 

*Please refer to Note 3 for further details on prior year restatements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   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 YEARED 31 MARCH 2020

   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 
                       Pharmgate Animal      Health Canada 
                          Health LLC              Inc 
                          2020      2019      2020      2019 
                      GBP000's  GBP000's  GBP000's  GBP000's 
                                Restated            Restated 
Current assets           2,325       968       511       461 
Current liabilities    (2,310)   (1,363)     (510)     (569) 
Sales                    7,612     9,161     3,358     3,764 
Profit                       -         -         -         - 
 

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.

 
                                        2020      2019 
Investments (share of net assets)   GBP000's  GBP000's 
 
At 1 April                               107        89 
Share of results for the year             42        14 
Foreign exchange movement                  8         4 
At 31 March                              157       107 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   16.       Fixed asset investments (continued) 
 
                                         2020       2019 
                                                Restated 
Summarised financial information     GBP000's   GBP000's 
At 31 March 
Current assets                            541        386 
Non-current assets                         19         19 
Current liabilities                       221        181 
Non-current liabilities                    12          5 
Net assets (100%)                         327        219 
Group share of net assets (47.62%)        156        104 
Year ended 31 March 
Revenue                                 1,634      1,514 
Net profit                                 79         30 
 
 
   17.       Inventories 
 
                                      Group              Company 
                                    2020      2019      2020      2019 
                                GBP000's  GBP000's  GBP000's  GBP000's 
                                          Restated 
Raw materials and consumables      6,734    13,960         -         - 
Finished goods and goods 
 for resale                        4,397     5,393         -         - 
Work in progress                   6,133       124         -         - 
                                  17,264    19,477         -         - 
 
 
 

The cost of inventories recognised as an expense and included in cost of sales in the period amounted to GBP38,381,000 (2019 restated: GBP35,337,000).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   FOR THE YEARED 31 MARCH 2020 18.        Trade and other receivables 
 
                        Group               Company 
                            2020      2019      2020       2019 
Non-current                                            Restated 
                        GBP000's  GBP000's  GBP000's   GBP000's 
 
Amounts owed by group 
 undertakings                  -         -    59,295     59,988 
 
 

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 
Current                       2020      2019      2020      2019 
                          GBP000's  GBP000's  GBP000's  GBP000's 
                                    Restated            Restated 
Trade receivables           25,974    22,525         -         - 
Other receivables            1,884       339        30        35 
Prepayments and accrued 
 income                        495       469        25        11 
                            28,353    23,333        55        46 
 

As at 31 March 2020, trade receivables of GBP11,402,000 (2019: GBP2,592,000) due to the Group and GBPnil (2019: GBPnil) 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 
                          2020      2019      2020      2019 
                      GBP000's  GBP000's  GBP000's  GBP000's 
 
Up to 3 months past 
 due                     6,974     1,547         -         - 
3 to 6 months past 
 due                     2,899       515         -         - 
Over 6 months past 
 due                     1,529       530         -         - 
                        11,402     2,592         -         - 
 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   FOR THE YEARED 31 MARCH 2020 18.        Trade and other receivables (continued) 

As at 31 March 2020, impairment provisions of GBP419,000 on gross receivables of GBP705,000 (2019: GBP280,000 on gross receivables of GBP280,000) 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 concluded that a wholly immaterial expected credit loss provision would be required. This consideration includes the potential risks arising from COVID on its customers. Its experience with customers since 31 March 2020, 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 
                          2020      2019      2020      2019 
                      GBP000's  GBP000's  GBP000's  GBP000's 
Current debt               152         1         -         - 
Up to 3 months past 
 due                         4         -         -         - 
3 to 6 months past 
 due                         2        68         -         - 
Over 6 months past 
 due                       261       211         -         - 
                           419       280         -         - 
 
 

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

 
 
Group                        2020   2019 
                              GBP    GBP 
 
Balance at 1 April            280    470 
Additional provision made     140      - 
(Recovered) in the year         -   (33) 
Written off in the year       (1)  (157) 
                            ----- 
 
Balance at 31 March           419    280 
                            ----- 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   FOR THE YEARED 31 MARCH 2020 18.        Trade and other receivables (continued) 

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

 
                         Group              Company 
                       2020      2019      2020      2019 
                   GBP000's  GBP000's  GBP000's  GBP000's 
                             Restated            Restated 
 
Pounds Sterling         759     1,130        55        46 
Euros                 2,875     3,288         -         - 
U S Dollars          12,875     7,053         -         - 
Chinese RMB           6,757     7,805         -         - 
Brazilian Real        2,233       946         -         - 
Japanese Yen            841       695         -         - 
Canadian dollars        511       816         -         - 
Mexican Pesos         1,499     1,477         -         - 
Other currencies          3       123         -         - 
                    28, 353    23,333        55        46 
 
 

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 YEARED 31 MARCH 2020

   19.       Deferred tax 

Group

Deferred tax assets and liabilities are attributable to the following:

 
                                        Assets / (Liabilities)          Net 
                                              2020         2019      2020      2019 
                                          GBP000's     GBP000's  GBP000's  GBP000's 
                                                       Restated            Restated 
 Trade related temporary differences       (2,487)      (2,152)   (2,487)   (2,152) 
 Overseas trade related temporary 
  differences                                   30            -        30         - 
 Freehold property                            (76)         (75)      (76)      (75) 
 Investment property                          (19)         (10)      (19)      (10) 
 Plant and equipment                          (77)         (49)      (77)      (49) 
 Deferred tax on share options                   -          503         -       503 
 Tax losses carried forward                  1,993        1,783     1,993     1,783 
Amount (payable) after more 
 than one year                               (636)            -     (636)         - 
 

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

 
                          Trade related 
                              temporary   Freehold  Investment           Plant     Share 
                            differences   property    property   and machinery   options     Total 
 
                               GBP000's   GBP000's    GBP000's        GBP000's  GBP000's  GBP000's 
 
At 31 March 2019 - Restated       (369)       (75)        (10)            (49)       503         - 
 
(Charge) for the year 
 through income statement         (398)          -         (9)            (28)     (130)     (565) 
Credit for the year through 
income statement                    303          -           -               -         -       303 
(Charge) for the year 
 through reserves                     -        (1)           -                     (373)     (374) 
At 31 March 2020                  (464)       (76)        (19)            (77)         -     (636) 
 
 

Trade related temporary differences are predominantly related to research and development tax deductions claimed in advance of expense recognition in the income statement.

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 YEARED 31 MARCH 2020

   19.       Deferred tax (continued) 
 
                             Freehold  Investment     Share             Freehold  Investment     Share 
Company                      property    property   options     Total   property    property   options     Total 
                                 2020        2020      2020      2020       2019        2019      2019      2019 
                             GBP000's    GBP000's  GBP000's  GBP000's   GBP000's    GBP000's  GBP000's  GBP000's 
 
At 1 April                       (75)        (10)        85         -       (79)        (11)        90         - 
 
 
(Charge) for the 
 year through income 
 statement                          -         (9)      (22)      (31)          -           -         -         - 
 
 
 
Credit for the year 
 through income statement           -           -         -         -          4           1        34        39 
 
  (Charge) for the 
  year through reserves           (1)           -      (63)      (64)          -           -      (39)      (39) 
At 31 March                      (76)        (19)         -      (95)       (75)        (10)        85         - 
 
 

At the year ended 31 March 2020 the Group had a deferred tax asset of GBPnil on share options. (2019 restated: A deferred tax asset on share options of GBP139k was unrecognised).

At the year ended 31 March 2020 the Group has an unrecognised deferred tax asset in relation to unused overseas tax losses amounting to GBP700,000 (2019: GBP350,000). These tax losses are not expected to expire.

   20.       Cash and cash equivalents 

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

 
                                   Group               Company 
                                2020       2019       2020       2019 
                            GBP000's   GBP000's   GBP000's   GBP000's 
                                       Restated 
 
Cash and cash equivalents     11,877     16,863        177      4,236 
Net funds per cash flow       11,877     16,863        177      4,236 
                                      =========  =========  ========= 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   21.       Trade and other payables 
 
                                     Group               Company 
                                   2020      2019       2020       2019 
                               GBP000's  GBP000's   GBP000's   GBP000's 
                                         Restated              Restated 
 
Trade payables                    7.608     9,520        189         17 
Contract liabilities                594       847          -          - 
Other payables                    2,093     1,641        197        132 
Accruals and deferred income      4,191     1,355        181        147 
                                 14,486    13,363        567        296 
                                                   =========  ========= 
 
 
   22.       Borrowings 

Reconciliation of movement in borrowings

 
                        Group     Group   Company   Company 
                         2020      2019      2020      2019 
                     GBP000's  GBP000's  GBP000's  GBP000's 
                               Restated 
 
Opening Borrowings          -         -         -         - 
Overdraft drawn         2,032         -     2,001         - 
Overdraft paid              -         -         -         - 
Closing borrowings      2,032         -     2,001         - 
 
 

Overdraft facility

The Group has the facility (up to GBP5,000,000) to overdraw in specific currencies but no net facility. 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 all assets of the Company. 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 foreign currency overdraft facility.

The undrawn facility is GBP2,968,000 (2019: no facility).

 
                               Group     Group   Company   Company 
                                2020      2019      2020      2019 
                            GBP000's  GBP000's  GBP000's  GBP000's 
                                      Restated 
 
Cash and cash equivalents     11,877    16,863       177     4,236 
Overdraft                    (2,032)         -   (2,001)         - 
Lease Liabilities            (1,766)   (1,770)      (27)      (67) 
Net Cash                       8,079    15,093   (1,851)   (4,169) 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   22.       Borrowings (continued) 

Reconciliation of Lease Liabilities

 
                                              Group     Group   Company   Company 
                                               2020      2019      2020      2019 
                                           GBP000's  GBP000's  GBP000's  GBP000's 
                                                     Restated            Restated 
 
Opening lease liabilities                   (1,770)         -      (65)         - 
Recognition of Lease liabilities on 
 adoption of IFRS 16                              -   (2,012)         -      (67) 
New lease liabilities                         (359)      (88)         -      (30) 
Repayment of lease liabilities principal        364       338        38        31 
Lease liabilities interest                    (125)     (139)      (13)      (22) 
Lease liabilities interest repayment            125       139        13        22 
Foreign exchange                                (1)       (8)       (2)         1 
Closing lease Liabilities                   (1,766)   (1,770)      (29)      (65) 
Current lease liabilities                     (342)     (330)      (24)      (36) 
Non-current lease liabilities               (1,424)   (1,440)       (5)      (29) 
 

The Group leases a number of properties and motor vehicles in the jurisdictions it operates in. At 31 March 2020 there were no termination or extension options on leases.

The Group expensed GBP47,000 for the year ended 31 March 2020 (2019 restated: GBP91,000) for short term and low value leases.

Group Leases Maturity

At 31 March 2020 the Group held the following number of leases in each of the maturity categories below.

 
                         Property  Vehicle  Other  Total 
 
Up to 1 year                    -        3      -      3 
Between 2 - 5 years             5        8      3     16 
Over 5 years                    3        -      -      3 
Total number of leases          8       11      3     22 
 
Average lease term (in 
 years)                        10        4      5 
 

The weighted average incremental borrowing rate applied to lease liabilities recognised in the statement of financial position was 7.10% at 31 March 2020 (2019 restated: 7.84%, initial application date: 7.03%).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   22.       Borrowings (continued) 

Weighted average incremental borrowing rate:

 
                    Group       Group  Group Transition 
                     2020        2019              2018 
                             Restated 
 
 Property            5.9%        5.8%              5.9% 
 Vehicle            29.0%       29.0%             29.0% 
 Other               4.0%        4.0%              4.0% 
                           ---------- 
 Weighted average   7.10%       7.84%             7.03% 
                           ---------- 
 

Amounts payable under lease arrangements for the Group

The undiscounted contractual cash flows payable under the existing lease arrangements at 31 March 2020 are analysed into the following maturity categories.

 
                                         Between               Total 
                                 Up to     2 - 5    Over 5 
                                1 year     years     years 
                              GBP000's  GBP000's  GBP000's  GBP000's 
Amounts payable under lease 
 arrangements                      502     1,025     1,621     3,148 
 
   23.       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 GBP262,000 (2019: GBP321,000).

Defined Benefit Pension Scheme

The Group operates a defined benefit scheme in the UK for ex-employees only. A full actuarial valuation was carried out at 6 April 2018 and updated to 31 March 2020 for IAS 19 purposes by a qualified independent actuary. The major assumptions used by the actuary were:

 
                                                 31 March  31 March 
                                                     2020      2019 
Discount rate                                       2.40%     2.15% 
Pension revaluation                                 2.70%     2.25% 
Inflation assumption with a maximum of 5% p.a.      2.70%     2.25% 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

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

Mortality rates

No pre-retirement mortality is assumed (2019: 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 2019 projections with a 1.25 % long term trend rate (2019: CMI 2018 ).

U nder these mortality assumptions, the expected future lifetime for a member retiring at age 65 at the year-end would be 22.4 years for males (2019: 21.7 years) and 24.4 years for females

(2019: 23.7 years). For members retiring in 20 years' time, the expectation of life would be 23.7 years for males (2019: 23.0 years) and 25.9 years for females (2019: 25.2 years).

The weighted average term of the liabilities is 10 years (2019: 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

 
Results                                     2020                2019 
                                        GBP000's  GBP000's  GBP000's  GBP000's 
 
Assets at start of year                    1,802               2,503 
Defined benefit obligation at 
 start of year                           (1,899)             (2,603) 
Net (liability) at 1 April                            (97)               (100) 
 
Return on assets                              38                  61 
Interest cost                               (39)                (62) 
Past service cost                              -                (19) 
                                                       (1)                (20) 
 
(Loss) on asset return                       (2)                (38) 
Gain/(loss) on changes in assumptions         14                   2 
Statement of other comprehensive 
 income                                                 12                (36) 
 
Employer contributions (gross)                          59                  59 
 
Net (liability) at 31 March                           (27)                (97) 
 
Actual assets at end of year                         1,787               1,802 
Actual defined benefit obligation 
 at end of year                                    (1,814)             (1,899) 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   23.       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

 
                                               2020                2019 
                                        GBP000's  GBP000's  GBP000's  GBP000's 
 
Fair value of assets at 1 April            1,802               2,503 
Return on assets                              38                  61 
(Loss) on asset return                       (2)                (38) 
Employer contributions (gross)                59                  59 
(Decrease)/increase in secured 
 pensioners' value due to scheme 
 experience                                (110)               (783) 
Benefits paid                                  -                   - 
Fair value of assets at 31 March                     1,787               1,802 
 
Reconciliation of changes in the liability 
 value during the year 
 
Defined benefit obligation at 
 1 April                                   1,899               2,603 
Interest cost                                 39                  62 
Past service cost                              -                  19 
(Gain)/loss on changes in assumptions       (14)                 (2) 
(Decrease)/increase in secured 
 pensioners' value due to scheme 
 experience                                (110)               (783) 
Benefits paid                                  -                   - 
Defined benefit obligation at 
 31 March                                            1,814               1,899 
 
 

The expected contribution to be paid by the employer during the next accounting year is GBP59,000 (2019: GBP59,000).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   23.       Pension and other post-retirement benefit commitments (continued) 
 
                                       2019 
Year ended 31 March          2020       Restated  2018      2017      2016 
                             GBP000's  GBP000's   GBP000's  GBP000's  GBP000's 
 
Fair value of plan assets    1,787     1,802      2,503     2,314     2,715 
Present value of defined 
 benefit obligation          1,814     1,899      2,603     2,435     2,431 
(Deficit)/Surplus in plan    (27)      (97)       (100)     (121)     284 
Experience (losses)/gains 
 on plan liabilities         (2)       (38)       (7)       (300)     13 
 

Plan Assets

 
                                    2020             2019 
                                 GBP000s          GBP000s 
Assets under management              145              102 
Annuities                          1,642            1,700 
Total                              1,787            1,802 
 

Assets under management composition

 
                       2020     2019 
                    GBP000s  GBP000s 
Gilts                 9.80%    9.40% 
Corporate Bonds      37.00%   35.50% 
UK Equities          15.60%   17.30% 
Overseas Equities    26.10%   26.60% 
Property             10.10%    9.90% 
Cash                  1.40%    1.30% 
                    100.00%  100.00% 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   23.       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.

 
                              Reasonably         (Decrease)/Increase in Defined 
Actuarial assumption        Possible Change            Benefit Obligation 
                                                    2020                2019 
                                             GBP000's  GBP000's  GBP000's  GBP000's 
                                                                          Restated* 
Discount rate                (+/- 0.25%)         (42)        44      (50)        50 
Members' life expectancy     (+/- 1year)         (97)       101     (100)       110 
 
 

* 2019 figures have been recalculated in order to be comparable.

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 YEARED 31 MARCH 2020

   24.       Share-based payments 

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

 
                                                 2020       2019 
                                             GBP000's   GBP000's 
 
Total expense arising from equity settled 
 share-based payments transactions                284        631 
 
 

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 
                               2020  2020     2019  2019 
                              000's  WAEP    000's  WAEP 
                                      GBP            GBP 
Outstanding at 1 April        4,292  3.62    5,556  3.26 
Granted during the period         -     -      387  3.82 
Cancelled during the period   (668)  3.55     (33)  3.54 
Exercised during the period   (105)  2.27  (1,618)  2.40 
 
Outstanding at 31 March       3,519  3.68    4,292  3.62 
Exercisable at 31 March       2,812  3.36    2,279  2.78 
 
 

The average share price during the year was 319.10p (2019: 481.41p).

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 2020 had a weighted average share price of GBP3.68 (2019: GBP3.62) and a weighted average remaining contractual life of 3.1 years (2019: 4.4 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.

Details of options granted to Directors can be found in the Directors Report and notes 29 (Directors' Emoluments) and 31 (Related Party Transactions).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   24.       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 2020 is given below:

 
                                           Exercise 
 Date of grant    Unapproved  Approved   price (pence)    Expiry date 
11 October 2011                 11,000          186.50  11 October 2021 
09 October 2013                 23,340          196.00  09 October 2023 
09 October 2013        3,050                    196.00  09 October 2020 
21 August 2014                  14,400          161.50  07 August 2024 
21 August 2014        14,000                    161.50  07 August 2021 
13 February 
 2015                           34,500          200.50  13 February 2025 
13 February 
 2015                138,500                    200.50  13 February 2022 
26 August 2015                  35,400          265.00  26 August 2025 
26 August 2015       572,100                    265.00  26 August 2022 
18 December 
 2015                600,000                    312.50  18 December 2022 
18 January 2016                 10,200          315.00  18 January 2026 
18 January 2016      286,800                    315.00  18 January 2023 
17 February 
 2016                           19,600          312.50  17 February 2026 
17 February 
 2016                    400                    312.50  17 February 2023 
01 March 2016                    9,600          312.50  01 March 2026 
01 March 2016         40,400                    312.50  01 March 2023 
12 September                                            12 September 
 2016                           25,100          432.50   2026 
12 September                                            12 September 
 2016                423,900                    432.50   2023 
15 September                                            15 September 
 2016                            5,900          435.00   2026 
15 September                                            15 September 
 2016                544,100                    435.00   2023 
21 September                                            21 September 
 2017                           53,475          620.00   2027 
21 September                                            21 September 
 2017                287,525                    620.00   2024 
12 April 2018                    3,900          545.00  12 April 2028 
23 October 2018                 75,200          380.00  23 October 2028 
23 October 2018      276,800                    380.00  23 October 2025 
19 December 
 2018                            7,800          380.00  19 December 2028 
19 December 
 2018                  2,200                    380.00  19 December 2025 
 
                   3,189,775   329,415 
 
 

The market price of the shares at 31 March 2020 was 220.0p (2019: 440.0p) with a range in the year of 135.0p to 445.0p (2019: 367.0p to 581.0p).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   24.       Share-based payments (continued) 

The Company uses a Black-Scholes model to value share-based payments and the following table lists the inputs to this model for the last five years. No new options were issued in the year ended 31 March 2020.

 
                             2020   2019   2018   2017   2016 
 
Vesting period (years)        n/a      3      3      3      3 
                                    7-10   7-10   7-10   7-10 
Option expiry (years)                yrs    yrs    yrs    yrs 
Dividends expected 
 on the shares                     1.90%  1.10%  1.50%  1.50% 
Risk free rate (average)           1.00%  1.00%  1.00%  1.00% 
Volatility of share 
 price                               20%    20%    20%    20% 
Weighted average fair 
 value (pence)                      51.0   98.6   61.4   43.0 
 
 

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

The Company recognised GBP284,000 share-based payment expense in the income statement in the year ended 31 March 2020.

   25.       Share capital 
 
                                                2020       2019 
                                            GBP000's   GBP000's 
 
Authorised 
68,100,000 ordinary shares of 5p each          3,405      3,405 
10,790 deferred ordinary shares of 
 10p each                                          1          1 
32,334 convertible preference shares 
 of GBP1 each                                     32         32 
                                               3,438      3,438 
                                           =========  ========= 
 
Allotted, called up and fully paid 
67,547,626 (2019: 67,443,126) ordinary 
 shares of 5p each                             3,377      3,372 
                                           ---------  --------- 
 
 

During the year 104,500 shares were issued at a premium of GBP232,000 as a result of the exercise of options by employees. (2019: 1,618,310 shares at a premium of GBP3,803,000).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   26.       Non-controlling (minority) interests 
 
                                        2020       2020       2019      2019 
                                    GBP000's   GBP000's   GBP000's  GBP000's 
                                                          Restated  Restated 
Balance at 1 April 2019                           5,102                5,154 
Share of adjustment to reserves 
 on implementation of IFRS 
 16                                                   -                    1 
Prior year adjustment on IFRS 
 16 opening                                           -                 (12) 
                                              --------- 
Balance at 1 April 2019 - 
 restated                                         5,102                5,143 
Share of subsidiary's profit 
 for the year                                     1,593                1,593 
Share of foreign exchange 
 gain/(loss) on net investment                       39                    9 
                                                  1,632                1,602 
Share of dividend paid by 
 subsidiary                                       (968)              (1,643) 
Balance at 31 March                               5,766                5,102 
 
   27.       Other reserves 

The Group and Company held a Capital redemption reserve of GBP106,000 as at 31 March 2020 (2019 restated: GBP106,000, 2018 restated: GBP106,000).

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

 
                                            At 1 April     Movement  At 31 March 
                                                  2019  in the year         2020 
                                              GBP000's     GBP000's     GBP000's 
In respect of:                                Restated 
Zhejiang ECO Biok Animal Health Products 
 Limited                                           854           40          894 
ECO Animal Health do Brasil Comercio 
 de Produtos Veterinarios Ltda                   (381)           35        (346) 
ECO Animal Health Japan Inc.                       (5)           99           94 
ECO Animal Health USA Corp.                       (21)         (46)         (67) 
ECO Animal Health de Mexico, S. de 
 R. L. de C. V.                                     15         (75)         (60) 
Pharmgate LLC                                        5            6           11 
Foreign currency differences attributable 
 to owner credited directly to reserves.           467           59          526 
 
 
   28.       Capital commitments 

The Group had no authorised capital commitments as at 31 March 2020 (2019: Nil).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   29.       Directors' emoluments 
 
                                                       2020       2019 
                                                   GBP000's   GBP000's 
                                                             Restated* 
Emoluments for qualifying services                      847        943 
Company pension contributions to money purchase 
 schemes                                                 26         16 
Share-based payments                                     70        404 
Benefits in kind                                         11         16 
                                                        954      1,379 
                                                  ========= 
 
 

During the year the Directors exercised nil (2019: 15,000) share options realising a gain of GBPnil (2019: GBP1,861,800).

The highest paid Director received GBP385,000 (2019 restated: GBP638,000) including GBP38,000 (2019: GBP191,000) of share-based payments and GBP10,000 (2019: GBP10,000) of pension contributions.

The bonus values have been restated to include the amount accrued for the financial year and not the amount related to performance of the previous financial year, as previously reported.

*Please refer to Note 3 for further details on prior year adjustments.

   30.       Employees 

Number of employees

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

 
                                                       2020       2019 
                                                     Number     Number 
 
Directors                                                 5          7 
Production and development                               66         70 
Administration                                           45         47 
Sales                                                    88         93 
                                                        204        217 
 
Employment costs (including amounts capitalised) 
                                                       2020       2019 
                                                   GBP000's   GBP000's 
                                                             Restated* 
Wages and salaries                                    9,584      9,878 
Share-based payments                                    284        631 
Social security costs                                   764        914 
Other pension costs                                     269        353 
                                                     10,901     11,776 
 

*The bonuses have been restated in accordance with note 3.4.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   31.       Related party transactions 

During the year ended 31 March 2020 Julia Trouse, a longstanding former Director and Company Secretary of the Group, withdrew cash from the Company totalling GBP25,748 (2019 - GBP46,920) which was recorded in the Company and Group's financial statements as administrative costs in each period.

Mrs Trouse withdrew further cash over an extended period starting in 2014, the cumulative amount of which was GBP322,109 as at 31 March 2020 (GBP296,361 as at 31 March 2019; and GBP249,441 as at 31 March 2018). These withdrawals were not approved, were outside the normal course of the Group's business and were in excess of Mrs Trouse's contractual remuneration levels. The highest total value of withdrawals in any year was GBP87,187. No reimbursement of these withdrawals was assured at any of the reporting dates to 31 March 2020, therefore all amounts remain expensed in the periods in which each payment was made and no asset for reimbursement has been included in the financial statements as at 31 March 2020. Mrs Trouse resigned as a director of the Company on 19 August 2019 and ceased employment with the Company on 31 January 2020.

The Group's Internal Audit department identified the payments and reported their findings to the Board in April 2020. Further work was performed to help assess the full extent of the withdrawals. Mrs Trouse agreed to repay these amounts to the Company and Group and repayment of GBP307,113 was made in August 2020. No interest was received. The reimbursement will be recorded as Other Income in the financial statements for the year ending 31 March 2021. Discussions are on-going with regard to repayment of the remaining GBP14,996.

During the year Clemo Consultancy Ltd, a company in which B Clemo is a director, shareholder and person with significant control received consultancy fees of GBP14,500 (2019: GBPnil).

During the year P Lawrence and his family received dividends to the value of GBP489,000 (2019: GBP882,000).

The other Directors and their families received dividends to the value of GBP1,000 (2019: GBP2,000).

During the year ended 31 March 2019, the Group provided management services to Anpario plc, a Company in which P A Lawrence is a Director and holds share options. Fees of GBP7,000 were charged (2020: GBPNil).

During the year ended 31 March 2019, the Group provided management services to Amati Aim VCT plc, a Company in which P A Lawrence is a Director. Fees of GBP14,579 were charged (2020: GBPNil)

During the year ended 31 March 2019, the Group employed two adult children of P A Lawrence and provided their services to Emmelle Construction Limited, a Company in which P A Lawrence is both a Director and shareholder. All employment costs of the two adult children, for five months of the year until August 2018 when the arrangement was terminated, of GBP18,000 (2020: nil) were fully recharged to Emmelle Construction Limited.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   31.       Related party transactions (continued) 

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 GBP475,000 (2019: GBP473,000) and charged interest of GBP890,000 (2019: GBP910,000) to the Company. Both of these charges 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 GBP77,000 to ECO Animal Health Group plc (2019: GBP131,000) and GBP930,000 to ECO Animal Health Limited (2019: GBP1,578,000).

During the year ECO Animal Health Group plc received no dividend from ECO Animal Health Limited (2019: GBP15,000,000).

Key management compensation

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

 
                                    2020      2019 
                                    GBP000's  GBP000's 
                                              Restated* 
Salaries and short-term benefits    858       959 
Retirement benefits                 26        16 
Share-based payments               70         404 
                                   954        1,379 
 

* The bonus values have been restated to include the amount accrued for the financial year and not the amount related to performance of the previous financial year, as previously reported.

The number of Directors for which retirement benefits were accruing was 4 (2019: 3).

   32.       Financial instruments 

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

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

Capital and liquidity risk

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

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

The Group's objectives when maintaining capital are:

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

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

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

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

At 31 March 2020, the Group was contractually obliged to make repayments as detailed below:

 
                                    2020       2019 
Within one year or on demand    GBP000's   GBP000's 
                                           Restated 
Trade payables                     7,608      9,520 
Other payables                     2,093      1,641 
Accruals                           4,191      1,355 
Borrowings                         2,032          - 
 
                                  15,924     12,516 
 
 

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 YEARED 31 MARCH 2020 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:

Foreign currency of Group operations:

 
                                          Chinese  Japanese  Brazilian  Canadian   Mexican 
2020                US Dollar     Euros       RMB       Yen       Real    Dollar      Peso     Other 
                     GBP000's  GBP000's  GBP000's  GBP000's   GBP000's  GBP000's  GBP000's  GBP000') 
Trade 
 and other 
 receivables           12,850     2,875     6,650       837      2,230       511     1,472         3 
Trade 
 and other 
 payables             (1,183)      (12)   (3,375)     (233)      (131)     (129)     (329)       (1) 
Cash and 
 cash equivalents       4,527       525     5,609        80        360       452       200       123 
Total                  16,194     3,388     8,884       684      2,459       834     1,343       125 
 
2019                                      Chinese  Japanese  Brazilian  Canadian   Mexican 
 Restated           US Dollar     Euros       RMB       Yen       Real    Dollar      Peso     Other 
                     GBP000's  GBP000's  GBP000's  GBP000's   GBP000's  GBP000's  GBP000's  GBP000's 
Trade 
 and other 
 receivables            7,016     3,288     7,757       689        944       817     1,397       123 
Trade 
 and other 
 payables               (644)       (7)   (2,680)     (107)       (51)         -      (13)     (114) 
Cash and 
 cash equivalents       5,239       906     4,340       256        433     1,104       175        34 
Total                  11,611     4,187     9,417       838      1,326     1,921     1,559        43 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   FOR THE YEARED 31 MARCH 2020 32.        Financial instruments (continued) 

At 31 March 2020 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 2020.

 
                       2020        2019 
                              Restated* 
                   GBP000's    GBP000's 
 
U S Dollar            1,799       1,290 
Euro                    376         465 
Chinese RMB             987       1,046 
Japanese Yen             76          93 
Brazilian Real          273         147 
Canadian Dollar          93         213 
Mexican Peso            149         173 
 

Analysis of financial instruments by category

Group

 
                                         Financial     Financial 
                                            assets   liabilities      Total 
2020                                      GBP000's      GBP000's   GBP000's 
 
Trade and other receivables (excluding 
 prepayments)                               27,858             -     27,858 
Cash and cash equivalents                   11,877             -     11,877 
Trade and other payables                         -      (13,892)   (13,892) 
Amounts due under leases                         -       (1,766)    (1,766) 
Borrowings                                       -       (2,032)    (2,032) 
 
2019                                      GBP000's      GBP000's   GBP000's 
                                         Restated*     Restated*  Restated* 
Trade and other receivables (excluding 
 prepayments)                               22,864             -     22,864 
Cash and cash equivalents                   16,863             -     16,863 
Trade and other payables                         -      (12,516)   (12,516) 
Amounts due under leases                         -       (1,770)    (1,770) 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARED 31 MARCH 2020

   32.       Financial instruments (Continued) 

Analysis of financial instruments by category (continued)

Company

 
                                         Financial     Financial 
                                            assets   liabilities      Total 
2020                                      GBP000's      GBP000's   GBP000's 
 
Trade and other receivables (excluding 
 prepayments)                                   30             -         30 
Cash and cash equivalents                      177             -        177 
Trade and other payables                         -         (567)      (567) 
Amounts due under leases                         -          (29)       (29) 
Borrowings                                       -       (2,001)    (2,001) 
 
2019                                      GBP000's      GBP000's   GBP000's 
                                         Restated*     Restated*  Restated* 
Trade and other receivables (excluding 
 prepayments)                                   35             -         35 
Cash and cash equivalents                    4,236             -      4,236 
Trade and other payables                         -         (296)      (296) 
Amounts due under leases                         -          (65)       (65) 
 

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.

*Please refer to Note 3 for further details on prior year adjustments.

   33.       Post balance sheet events 

Covid-19 Impact

The Group transitioned smoothly to home working during the final weeks of the year building on the new ways of communicating with customers developed during the African swine flu outbreak and without losses of efficiency. Outsourced manufacturing and the Group's supply chain operated smoothly through the year end.

Brexit

The Group's EU marketing authorisations have been transferred to the European subsidiary, ECO Animal Health Europe Ltd registered in Dublin, Republic of Ireland and all our Brexit contingency plans are in place. The financial and operational impact of Brexit is expected to be minimal, particularly given the recently announced trade deal between the UK and the EU. The Group's sales to the EU (excluding the UK) represented 8% of total revenue for the year.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

FR DKQBBABKKNBK

(END) Dow Jones Newswires

February 04, 2021 02:00 ET (07:00 GMT)

1 Year Eco Animal Health Chart

1 Year Eco Animal Health Chart

1 Month Eco Animal Health Chart

1 Month Eco Animal Health Chart
ADVFN Advertorial
Your Recent History
LSE
EAH
Eco Animal..
Register now to watch these stocks streaming on the ADVFN Monitor.

Monitor lets you view up to 110 of your favourite stocks at once and is completely free to use.

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V:gb D:20210420 22:45:45