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| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 8.50 | 9.04% | 102.50 | 100.00 | 105.00 | 102.50 | 97.00 | 97.00 | 90,746 | 10:04:10 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Chem,fertlizer Minrl Mng,nec | 85.31M | 1.01M | 0.0149 | 68.79 | 69.44M |
From Apr 2019 to Apr 2024
TIDMEAH
RNS Number : 3250Y
Eco Animal Health Group PLC
31 December 2019
ECO Animal Health Group plc ("ECO")
(AIM: EAH)
Results for the six months ended 30 September 2019
ECO REPORTS A CHALLENGING FIRST HALF BUT INDICATIONS FOR H2 ARE POSITIVE
HIGHLIGHTS
Financials
-- Sales at GBP28.7m (2018 restated*: GBP30.0m) -- EBITDA at GBP2.7m (2018 restated*: GBP6.4m) -- Profit before taxation of GBP1.0m (2018 restated profit*: GBP5.3m) -- Profit after taxation of GBP1.1m (2018 restated profit*: GBP4.6m) -- Earnings per share of 1.51p (2018: restated Earnings per share*: 5.61p) -- Cash generated by operations of GBP0.7m (2018 restated cash generated*: GBP5.8m) -- Net cash at 30 September 2019 of GBP13.4m (2018 restated*: GBP23.8m)
* Prior periods have been restated to correct errors
Operations
-- African Swine Fever has materially impacted the volume of business in China
-- Geopolitical trade relations between China and the USA has impacted the gross margins in the USA
-- Strong revenue growth of 45% to GBP19.4m (2018 restated: GBP13.4m) outside of China and North America, notably coming from Brazil and Mexico with continued expansion in South Asia and South-East Asia
-- New marketing authorisation from the European Medicines Agency for the use of Aivlosin(R) 625 mg/g Water Soluble Granules in breeding chickens
-- Two worldwide exclusive novel poultry vaccine licensing deals with The Pirbright Institute in the UK
-- Improving market conditions at the beginning of the second half of the year
Andrew Jones, Non-executive Chairman of ECO Animal Health Group plc, commented:
"We have had a challenging start to the first half of the year, but we now see signs that point to improved performance in the second half due to encouraging signs of early recovery in China as key producers build sow numbers and pork export and prices in North America improve. Our investments in R&D to generate future products and growth continue to progress as planned. The Board has made significant progress in reviewing its accounting policies; we believe that we have identified all material prior period errors and we have corrected them in this Interim Report. This review and the audit thereof, will conclude with the publication of the March 2020 Annual Report. The Directors remain confident and excited about the improving market conditions and future prospects for the business."
The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
Contacts:
ECO Animal Health Group plc Marc Loomes (CEO) Christopher Wilks (CFO) Andrew Jones (Chairman) 020 8447 6906 IFC Advisory Graham Herring Zach Cohen 020 3934 6630 N+1 Singer (Nominated Adviser & Joint Broker) Mark Taylor Peter Steel Alex Bond 020 7496 3000 Peel Hunt LLP (Joint Broker) James Steel Dr Christopher Golden 020 7418 8900
ECO Animal Health Group plc ("ECO" or "the Group") researches, develops and commercialises products for livestock. Our business strategy is to generate shareholder value by achieving the maximum sales potential from the existing product portfolio whilst investing in Research and Development ("R&D") for new products, particularly vaccines, and seeking to in-license new products.
Chairman's statement
I am pleased to report that despite the considerable challenges in its two largest markets, China and the USA, ECO has demonstrated considerable resilience on several fronts during the past six months. The market reversals in China, triggered by the African Swine Fever ("ASF") pandemic, and the ongoing trade war between the USA and China have had a significant impact on our results in these two markets. However, the rest of the business outside of China and North America has performed well and in line with expectations the revenue grew by 45%. Our investments in R&D are progressing according to plan. The Board has made significant progress in reviewing its accounting policies and, as a result, has identified and quantified certain errors in prior periods which have been restated in this Interim Report. This review and the audit thereof, will conclude with the publication of the March 2020 Annual Report. The Board considers that it has identified all material prior period errors.
Restatement of prior periods
The Group released a trading update on 11 November 2019 in which the Board signalled the intention to restate certain aspects of our prior financial reports to correct errors. These related to Revenue accounting, R&D cost capitalisation and accounting for the Group's interest in its joint ventures in the USA and Canada. The financial report included in this Interim Statement reflects these and other prior period restatements, identified and quantified to date, together with notes 3 and 4 to explain the impact of the adjustments. The audit of the restatements including any impact that the adjustments might have on distributable reserves will conclude with the publication of the March 2020 Annual Report. The Board considers that all material prior period errors have been identified and corrected in this Interim Statement.
Financial Performance
Revenue for the six months ended 30 September 2019 was 4% lower than in the equivalent prior period at GBP28.7 million (2018 restated: GBP30.0 million). The Group has historically reported a second half weighting to its revenue, representing between 55% and 60% of the full year revenue. The gross margin has declined from 49% (restated) in the equivalent period last year to 43% this year. This decline was largely due to a reduction in average gross margin in the USA where discounted pricing was required in the face of low pork prices.
Administrative expenses of GBP7.2 million (2018 restated: GBP6.1 million) were 17% greater than the prior period reflecting further investments in sales and marketing expertise, operations and governance infrastructure. Research and development expenditure is now explicitly shown on the income statement and together with the amount capitalised represented a cash investment of 17% of revenue in the six months ended 30 September 2019 (13% in the six month period ended 30 September 2018 restated).
Earnings before interest, tax, depreciation, amortisation and share based payments ("EBITDA") were GBP2.7 million (2018 restated: GBP6.4 million). This reduction in profitability was a result of the effects of ASF in China, decreased USA gross margins, increased administrative costs and research and development expenditure.
Cash generated from operations was GBP0.7 million (2018 restated: GBP5.8 million). This reduction was due, in the main, to lower trading profits in the period. Additionally, whilst receivables at 30 September 2019 were GBP3.5 million less than the (restated) position at 31 March 2019 (as a result of the recovery of year end debtors) the debtor position was GBP4.9m greater than that at 30 September 2018 (restated); this reflects the continuing need to support customers by providing extended credit in China in the face of ASF. Net cash at 30 September 2019 was GBP13.4 million (31 March 2019 restated: GBP16.9 million).
Business Performance
The geographical analysis of the Group's revenue in the six months ended 30 September 2019 compared to the prior period in 2018 and the full year ended 31 March 2019 was as follows:
Hot Features
Premium
6 months ended 30
Revenue Summary September Year ended
2019 2018 31-Mar-19 % change
(GBP'm) (GBP'm) (GBP'm) 2018 to 2019
Restated Restated
Asia and Japan, excluding
China 8.7 5.7 13.5 53%
China 5.6 11.9 24.3 (53%)
North America (USA and Canada) 3.7 4.7 10.6 (21%)
Latin America 5.2 4.6 10.8 13%
Rest of World 5.5 3.1 8.0 77%
28.7 30.0 67.2 (4%)
-------------------------------- --------- --------- ----------- -------------
Group revenue declined by 4% to GBP28.7 million during a period which continued to be dominated by the unprecedented impact of ASF in China, the trade war between the USA and China and the consequent disruption of the pork commodity cycle.
The ASF outbreak in China has been well publicised. First detected in August 2018, the deadly African Swine Fever (ASF) virus has spread to every province in mainland China, devastating its pig population. Rabobank estimates the disease will claim 55% of the country's pig herd in 2019. Before the outbreak of ASF, China used to account for around half of the global total number of pigs. The consequence of this decimation of the Chinese pig population is that the Group's revenue in China declined by 53% in the six months reported.
There is evidence that the Chinese national pig herd numbers are being rebuilt in response to the pork shortage and record pork prices but ASF is expected to impact on Chinese pork production and pork importation for an estimated two to three years. Our Chinese subsidiary is particularly focused on replacement breeding sows whose numbers at the major producers are now increasing rapidly. Additionally, we are looking for additional opportunities in the poultry sector in China.
North American revenue declined by 21% reflecting both a highly competitive domestic market in the face of increased pork production numbers and the loss of the Chinese export market leading to an excess of pork supply. Meaningful discounts were offered to major pork producers to retain existing business and these discounts have resulted in a significant reduction in average gross margins in 2019.
Excluding China and North America, revenue increased by a robust 45% from GBP13.4 million in the prior period to GBP19.4 million in the six months ended 30 September 2019. The main countries contributing to this strong performance were Mexico and Brazil. This increase is a continuation of the market share gains reported in the last annual report and is clear evidence of the effectiveness of key account management. India contributed well where the establishment of a subsidiary and a new distributor has opened up this important poultry market. Gains in Thailand, which is a mixed swine and poultry market, further underline the effectiveness of introducing new sales resource and also emphasises that Aivlosin(R) is a product which is gaining market share in two distinct commercial animal health markets.
Research and Development
In our core product area, a licence was obtained from the European Medicines Agency for the use of Aivlosin(R) 625 mg/g Water Soluble Granules in breeding chickens and this approval is in the process of being rolled out beyond the EU into the multi-million dollar international poultry markets. This furthers the strength and depth of our cornerstone product family.
The Group will continue to invest in building a product pipeline targeting both viral and bacterial diseases of economic importance in pigs and poultry, with the intention of developing a range of vaccines and new products to complement our existing antimicrobial business. The product pipeline contains a mix of well-established concepts as well as novel, potentially disruptive technologies and approaches. These are in various stages of development thereby ensuring that the Group has several mid and late stage projects able to deliver revenues from 2022/23.
The Group has recently announced the following collaborations:
-- establishment of a joint venture, ECO-Pharm Limited, to progress the registration and commercialisation of several swine vaccine products already licensed in the USA and Canada for use in the UK, the EU, the Commonwealth of Independent States, Brazil and Japan with solid progress being made;
-- four University licensing deals with worldwide exclusive rights;
-- two worldwide exclusive novel poultry vaccine licensing deals with The Pirbright Institute in the UK.
Brexit
The Group has successfully transferred all EU marketing authorisations to a new European subsidiary, ECO Animal Health Europe Limited with a registered address in Dublin, Republic of Ireland. All contingency planning is in place and the financial and operational impact of Brexit is expected to be minimal, irrespective of the outcome and the timing of its implementation.
Dividend
The directors recognise the importance of the dividend to shareholders. However, having due regard to the Group's operating cash flow, the investment in the new product pipeline and the trading conditions described above, the directors consider it prudent to defer the declaration of a dividend at this time.
Outlook
The impact of ASF in China will be felt for some time to come but it is clear that the economic and social imperative to increase pork production in China is already being seen by specific actions taken by both government and the larger producers. Early indications in buying behaviour for the Group's products support a stronger second half in China.
The recent announcements regarding easing in the trade tensions between China and the USA, together with the sharply rising exports of pork from the USA suggests an improvement in pig production industry margins in the USA. We believe the improved industry margins will enable the Group to reduce discount programmes and improve margins in 2020 compared with 2019.
Notwithstanding the on-going uncertainties around the market recovery in China and margin improvements in the USA, other territories are expected to continue to perform in line with the Board's expectations.
There are expected to be some important milestones in the R&D programme in the coming months and the Board looks forward to providing updates on these in due course. The Board is committed to continuing the improvement in corporate governance and whilst this report describes some significant accounting changes, other improvements including internal audit, monitoring of risks, board composition and other internal control measures are all advancing at good pace.
The Board looks forward with confidence; it is not possible to declare that the past six months' poor trading conditions are behind us but it is correct to indicate that the rest of this financial year will be significantly stronger than the first half.
A Jones
Non-Executive Chairman
30 December 2019
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS TO 30 SEPTEMBER 2019
Six months Six months Year ended
to 30.09.19 to 30.09.18 31.03.19
Notes (unaudited) (unaudited) (audited)
GBP000's GBP000's GBP000's
Restated* Restated*
Revenue 5 28,741 29,954 67,166
Cost of sales (16,390) (15,313) (35,278)
--------------------- --------------------- --------------------
Gross Profit 12,351 14,641 31,888
Other income 8 30 35
Administrative expenses (7,154) (6,130) (14,139)
R&D expense (3,293) (2,633) (5,487)
Currency profits/(losses) 311 105 (138)
Amortisation of intangible assets (1,206) (1,008) (2,112)
Share based payments (208) (375) (631)
--------------------- --------------------- --------------------
Profit from operating activities: 809 4,630 9,416
Net finance income 167 644 543
Share of profit of associate 42 27 14
--------------------- --------------------- --------------------
Profit before income tax 1,018 5,301 9,973
Income tax benefit/(charge) 130 (664) (888)
--------------------- --------------------- --------------------
Profit for the period 1,148 4,637 9,085
--------------------- --------------------- --------------------
Attributable to:
Owner of parent company 1,018 3,724 7,479
Non-controlling interest 130 913 1,606
--------------------- --------------------- --------------------
1,148 4,637 9,085
===================== ===================== ====================
Earnings per share (pence) 7 1.51 5.61 11.20
Diluted earnings per share (pence) 7 1.50 5.50 11.04
Earnings before interest, taxation,
depreciation,
amortisation and share based payments
(EBITDA) 2,678 6,420 12,959
Exclude foreign exchange differences (311) (105) 138
Adjusted EBITDA excluding foreign
exchange differences 2,367 6,315 13,097
===================== ===================== ====================
*Details of the restatements, which are unaudited,
are presented in Notes 3 and 4.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year ended
to 30.09.19 to 30.09.18 31.03.19
(unaudited) (unaudited) (audited)
GBP000's GBP000's GBP000's
Restated* Restated*
Profit for the period 1,148 4,637 9,085
Other Comprehensive income/(losses) (net
of related tax effects):
Items that will or may be reclassified
to profit/(loss) in future periods:
Foreign currency translation differences 47 (283) (8)
Items that will not be reclassified:
Defined benefit plan - actuarial losses - - (36)
Other comprehensive income/(losses) for
the period 47 (283) (44)
--------------------- -------------------- ---------------------
Total comprehensive income for the period 1,195 4,354 9,041
Attributable to:
Owners of the parent Company 1,091 3,546 7,426
Non-controlling interest 104 808 1,615
1,195 4,354 9,041
===================== ==================== =====================
*Details of the restatements, which are unaudited,
are presented in Notes 3 and 4.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Other Revaluation Retained Total Minority Total
Capital Premium Reserves Reserves Earnings Interest Equity
Account Account
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
FOR THE YEARED 31 MARCH
2019
Balance as at 1
April
2018 - as
reported 3,291 58,847 2,823 664 34,065 99,690 5,185 104,875
Adjustment re
revenue
cut-off (Note
3.1) - - - - (632) (632) 33 (599)
Adjustment re
intangible
assets (Note
3.2) - - - - (17,756) (17,756) - (17,756)
Adjustment re
bonuses
(Note 3.4) - - - - (954) (954) - (954)
------------- --------------- --------------- --------------- -------------- --------------- ------------- ----------------
Balance as at 1
April
2018 -
restated 3,291 58,847 2,823 664 14,723 80,348 5,218 85,566
Adjustment on
implementation
of IFRS16 - - - - (17) (17) 1 (16)
Further IFRS16
adjustment
(Note 4) - - - - (20) (20) - (20)
IFRS 16
adjusted
balance as at
1 April
2018 -
restated 3,291 58,847 2,823 664 14,686 80,311 5,219 85,530
------------- --------------- --------------- --------------- -------------- --------------- ------------- ----------------
Profit for the
year
- restated - - - - 7,479 7,479 1,606 9,085
Other
comprehensive
income:
Foreign
currency
differences - - - - (17) (17) 9 (8)
Actuarial
(losses)
on pension
scheme
assets - - - - (36) (36) - (36)
Total
comprehensive
income for the
year - - - - 7,426 7,426 1,615 9,041
------------- --------------- --------------- --------------- -------------- --------------- ------------- ----------------
Transactions
with
owners recorded
directly
in equity:
Contributions
by
and
distributions
to owners
Issue of shares
in
the year 81 3,803 - - - 3,884 - 3,884
Share-based
payments - - 631 - - 631 - 631
Transfers on
expiry
of options - - (112) - 112 - - -
Dividends (Note
8) - - - - (8,485) (8,485) (1,643) (10,128)
Transactions
with
owners 81 3,803 519 - (8,373) (3,970) (1,643) (5,613)
------------- --------------- --------------- --------------- -------------- --------------- ------------- ----------------
Balance as at
31
March 2019 -
restated 3,372 62,650 3,342 664 13,739 83,767 5,191 88,958
============= =============== =============== =============== ============== =============== ============= ================
FOR THE SIX MONTHSED
30 SEPTEMBER 2019
Profit for the
period - - - - 1,018 1,018 130 1,148
Other
comprehensive
income:
Foreign
currency
differences - - - - 73 73 (26) 47
Total
comprehensive
income for the
period - - - - 1,091 1,091 104 1,195
------------- --------------- --------------- --------------- -------------- --------------- ------------- ----------------
Transactions
with
owners recorded
directly
in equity:
Issue of shares
in
the period 5 232 - - - 237 - 237
Share-based
payments - - 208 - - 208 - 208
Transfers on
expiry
of options - - (164) - 164 - - -
Dividends (Note
8) - - - - (7,453) (7,453) - (7,453)
Total
transactions
with owners 5 232 44 - (7,289) (7,008) - (7,008)
------------- --------------- --------------- --------------- -------------- --------------- ------------- ----------------
Balance as at
30
September 2019 3,377 62,882 3,386 664 7,541 77,850 5,295 83,145
============= =============== =============== =============== ============== =============== ============= ================
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Other Revaluation Retained Total Minority Total
Capital Premium Reserves Reserves Earnings Interest Equity
Account Account
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
FOR THE SIX MONTHSED
30 SEPTEMBER 2018
Balance as at 1
April
2018 - as
reported 3,291 58,847 2,823 664 34,065 99,690 5,185 104,875
Adjustment re
revenue
cut-off (Note
3.1) - - - - (632) (632) 33 (599)
Adjustment re
intangible
assets (Note
3.2) - - - - (17,756) (17,756) - (17,756)
Adjustment re
bonuses
(Note 3.4) - - - - (954) (954) - (954)
------------- --------------- --------------- --------------- --------------- ------------- ------------- --------------
Balance as at 1
April
2018 -
restated 3,291 58,847 2,823 664 14,723 80,348 5,218 85,566
Adjustment on
implementation
of IFRS16 - - - - (17) (17) 1 (16)
Further IFRS16
adjustment
(Note 4) - - - - (20) (20) - (20)
--------------
IFRS 16
adjusted
balance as at
1 April
2018 -
restated 3,291 58,847 2,823 664 14,686 80,311 5,219 85,530
------------- --------------- --------------- --------------- --------------- ------------- ------------- --------------
Profit for the
period
- restated - - - - 3,724 3,724 913 4,637
Other
comprehensive
income:
Foreign
currency
differences - - - - (178) (178) (105) (283)
Total
comprehensive
income for the
period - - - - 3,546 3,546 808 4,354
------------- --------------- --------------- --------------- --------------- ------------- ------------- --------------
Transactions
with
owners recorded
directly
in equity:
Issue of shares
in
the period 67 3,058 - - - 3,125 - 3,125
Share-based
payments - - 375 - - 375 - 375
Dividends (Note
8) - - - - (2,106) (2,106) (1,643) (3,749)
Total
transactions
with owners 67 3,058 375 - (2,106) 1,394 (1,643) (249)
------------- --------------- --------------- --------------- --------------- ------------- ------------- --------------
Balance as at
30
September 2018
-
restated 3,358 61,905 3,198 664 16,126 85,251 4,384 89,635
============= =============== =============== =============== =============== ============= ============= ==============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
30.09.19 30.09.18 31.03.19
(unaudited) (unaudited) (audited)
Notes GBP000's GBP000's GBP000's
Restated* Restated*
Non current assets
Intangible assets 9 40,351 39,029 40,005
Property, plant and
equipment 10 2,044 2,127 2,144
Investment property 200 200 200
Right of use assets 2,043 2,512 2,315
Investments 166 125 116
--------------------------- --------------------------- ---------------------------
44,804 43,993 44,780
Current assets
Inventories 20,647 19,854 19,645
Trade and other
receivables 19,896 15,023 23,358
Income tax recoverable 1,585 1,062 1,449
Other taxes and social
security 420 1,004 462
Cash and cash
equivalents 13,411 23,824 16,863
--------------------------- --------------------------- ---------------------------
55,959 60,767 61,777
Total assets 100,763 104,760 106,557
--------------------------- --------------------------- ---------------------------
Current liabilities
Trade and other
payables (9,653) (10,383) (13,493)
Income tax (55) (371) (795)
Other taxes and social
security (690) (1,405) (533)
Amounts due under
leases (431) (587) (555)
Dividends (4,803) (50) (49)
--------------------------- --------------------------- ---------------------------
(15,632) (12,796) (15,425)
Total assets less
current
liabilities 85,131 91,964 91,132
Non current
liabilities
Deferred tax (309) (327) (333)
Amounts due under
leases (1,677) (2,002) (1,841)
--------------------------- --------------------------- ---------------------------
Total assets less
total
liabilities 83,145 89,635 88,958
=========================== =========================== ===========================
Equity
Capital and reserves
Issued share capital 3,377 3,358 3,372
Share premium account 62,882 61,905 62,650
Revaluation reserve 664 664 664
Other reserves 3,386 3,198 3,342
Retained earnings 7,541 16,126 13,739
--------------------------- --------------------------- ---------------------------
Shareholders' funds 77,850 85,251 83,767
Non-controlling
interests 5,295 4,384 5,191
Total equity 83,145 89,635 88,958
=========================== =========================== ===========================
*Details of the restatements, which are unaudited, are presented
in Notes 3 and 4.
CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months
to to Year ended
30.09.19 30.09.18 31.03.19
(unaudited) (unaudited) (audited)
GBP000's GBP000's GBP000's
Restated* Restated*
Cashflows from operating
activities
Profit before income tax 1,018 5,301 9,973
Adjustment for:
Net finance (income) (167) (644) (543)
Depreciation 455 407 855
Revaluation of freehold
property - - (55)
Amortisation of intangible
assets 1,206 1,008 2,112
Pension payments (29) (29) (59)
Share of associate's results (42) (27) (14)
Share-based payments 208 375 631
--------------------------- ------------------------------ ------------------------
Operating cash flow before
movement
in working capital 2,649 6,391 12,900
Change in inventories (1,002) (1,200) (991)
Change in receivables 3,278 352 (7,441)
Change in payables (3,428) 901 3,131
--------------------------- ------------------------------ ------------------------
Cash generated from operations 1,497 6,444 7,599
Finance costs - - (69)
Income tax (770) (681) (862)
--------------------------- ------------------------------ ------------------------
Net cash from operating
activities 727 5,763 6,668
Cash flows from investing
activities
Acquisition of property, plant
and
equipment (85) (431) (566)
Disposal of property, plant
and
equipment - - 5
Purchase of intangibles (1,552) (1,400) (3,480)
Finance income 51 70 127
Net cash (used in) investing
activities (1,586) (1,761) (3,914)
--------------------------- ------------------------------ ------------------------
Cash flows from financing
activities
Proceeds from issue of share
capital 237 3,125 3,884
Finance lease borrowings - - 67
Finance lease repayments (343) (271) (557)
Dividends paid (2,699) (3,741) (10,121)
--------------------------- ------------------------------ ------------------------
Net cash (used in) financing
activities (2,805) (887) (6,727)
--------------------------- ------------------------------ ------------------------
Net (decrease)/increase in
cash
and cash equivalents (3,664) 3,115 (3,973)
Foreign exchange movements 212 366 493
Balance at the beginning of
the
period 16,863 20,343 20,343
Balance at the end of the
period 13,411 23,824 16,863
=========================== ============================== ========================
Free cash flow (910) 3,932 2,691
--------------------------- ------------------------------ ------------------------
*Details of the restatements, which are unaudited,
are presented in Notes 3 and 4.
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2019
1. Basis of preparation
The financial information for the period to 30 September 2019 does not constitute statutory accounts as defined by Section 435 of the Companies Act 2006. It has been prepared in accordance with the accounting policies set out in, and is consistent with, the audited financial statements for year ended 31 March 2019, except as noted in 3, below.
The Group applies revised IAS 1 "Presentation of Financial Statements (2007)". As a result, the Group presents all non-owner changes in equity in consolidated statements of comprehensive income and all owner changes in equity in consolidated statements of changes in equity.
These Interim Statements have not been audited or reviewed by the Group's auditors.
2. Statement of compliance
This interim financial statement is prepared in accordance with IAS 34 "Interim Financial Reporting". Accordingly, whilst the interim statements have been prepared in accordance with IFRS, and the primary statements follow the format of the annual financial statements, only selected notes are included - those that provide an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual reporting date. IAS 34 states a presumption that anyone who reads the Group's interim report will also have access to its most recent annual report. Accordingly, annual disclosures are not repeated in these interim condensed reports.
3. Changes to significant accounting policies and other restatements
The principal accounting policies which are adopted by the Group in the preparation of its financial statements are set out in in the consolidated financial statements of the Group for the year ended 31 March 2019. These policies have been consistently applied in all prior years except where corrections have been described in this note 3. The corrections to the application of the Group's accounting policies to comply with International Financial Reporting Standards have been made as restatements of prior period financial statements for the correction of errors in accordance with IAS8. The correct application of the Group's accounting policies in accordance with IFRS continued into the six months ended 30 September 2019.
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 recognized 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 recognized.
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.
3.1A Revenue recognition
Historical Treatment Revised treatment and impact
Revenue has been recognised Having reference to the contractual
when goods have been despatched trading terms with customers, the
from the Group's warehouses shipping and transportation methods,
and factories (third party Incoterms guidance and other GAAP
owned facilities) guidance the moment when control is
judged to have passed to the customer
was in 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 These allowances have been set off
to customers comprising volume against revenue in the relevant period
rebates, discounts and commissions and cost of sale appropriately adjusted.
have historically been incorrectly There is no impact on gross profit
accounted for as a cost of or net profit.
sale
---------------------------------------------
3.2 IAS 38 - 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.
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.
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.
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 - optimization 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) has to 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.
In practice, work that is undertaken to build towards regulatory approval for a new treatment claim using Aivlosin or an approval for marketing Aivlosin in a new geographical market can be viewed as development work and are likely to meet the capitalization criteria whereas some of the Group's more recently announced projects (for example the vaccine collaboration projects with The Pirbright Institute) would be considered to not meet the criteria for capitalisation and should therefore be expensed.
Historical Treatment Revised treatment and impact
All costs relating to the Historical costs have been considered
Research and Development team in the light of
including regulatory affairs the Eco Animal Health R&D model. IAS
were incorrectly capitalised 38 (and IAS 36 in respect of amortization)
and amortised over a period have been applied to each year and
of 10 or 20 years. The capitalised where expenses meet the criteria for
costs of projects capitalization such costs have remained
that did not proceed because as capitalized intangible assets subject
of technical to annual impairment reviews and amortised
or other reasons were impaired. over their useful economic lives starting
Amortisation commenced immediately from the year in which economic benefit
from the date the costs were flowed to the Group.
capitalized.
-----------------------------------------------
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 amortization)
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 ventures.
In assessing the relationship between the Group and its commercial collaborator in the USA 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 liabilities
have historically been correctly in the Statement of financial position.
classified as joint operations. Management considers that the nature
Accordingly, the Group has of the commercial arrangements and
correctly consolidated into the control that the Group has over
its income statement the revenue the trade receivables and trade payables
and cost of sale, together indicates that the joint arrangement
with any sales incentives should be also treated as a joint operation
provided to customers, for in the statement of financial position.
sales of Aivlosin in those The historical Income statement treatment
territories. The Group has correctly reflects that of a joint
correctly brought 50% of all operation but on the Statement of financial
administrative costs into position the Group should consolidate
its income statement. However, those assets and liabilities over which
the Group has incorrectly it has rights and obligations. Accordingly,
consolidated 50% of each amount the Group has restated past Statements
held in the Statement of financial of financial position to include the
position of the joint operation's Group's own trade debtors (for Aivlosin
legal entities into the Group's sales) and intercompany payable balance,
own Statement of financial together with 50% of any assets and
position totals, being 50% liabilities pertaining to shared overheads
of tangible fixed assets, (for example prepayments and accruals
50% of trade and other receivables, of administrative expenses)
50% of cash and 50% of trade
and other payables
-------------------------------------------------
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 consolidation is cash. Accordingly,
together with several of the ss balances,
the cash balance in the Group's Consolidated
Statement of Financial Position has
changed.
-------------------------------------------------
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. As a result are subject to management and Remuneration
the Historical treatment of Committee discretion, they are customarily
Bonuses has been to account paid and the amount paid is considered
for them as an expense in by reference to individual performance
the period in which they are and Group performance in the preceding
paid - normally in October financial period. Accordingly, it is
of each year. considered that in accordance with
IAS 19 the correct accounting treatment
is to accrue for these bonuses in the
corresponding year end Financial Statements.
-------------------------------------------------
3.5 Impact of restatements of the financial statements
The following tables summarise the impact of adopting the changes, as described above in notes 3.1, 3.2, 3.3 and 3.4 on the Group's financial statements. References to the specific changes to which those adjustments relate are presented in the table headings as required.
Impact on the Group statement of comprehensive income for six months to 30 September 2018
SIX MONTHS TO 30 SEPTEMBER 2018
As reported Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Explanation of
adjustment (unaudited) Note 3.1A Note 3.1B Note 3.2 Note 3.4 Note 4 (unaudited)
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Revenue 31,745 (1,041) (750) 29,954
Cost of sales (16,659) 561 750 35 (15,313)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Gross Profit 15,086 (480) - - - 35 14,641
Other income 30 30
Administrative
expenses (6,801) 693 (22) (6,130)
R&D expense - (2,633) - (2,633)
Currency
profits/(losses) 105 105
Amortisation of
intangible
assets (1,999) 991 (1,008)
Share based
payments (375) (375)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Profit from
operating
activities: 6,046 (480) - (1,642) 693 13 4,630
Net finance
income/(costs) 697 (53) 644
Share of profit
of
associate 27 27
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Profit before
income
tax 6,770 (480) - (1,642) 693 (40) 5,301
Income tax charge (765) 30 126 (55) (664)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Profit for the
period 6,005 (450) - (1,516) 638 (40) 4,637
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Attributable to:
Owner of parent
company 5,052 (427) (1,516) 638 (23) 3,724
Non-controlling
interest 953 (23) (17) 913
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
6,005 (450) - (1,516) 638 (40) 4,637
================== ================== ================== ================== ================== ================== ==================
Earnings per
share
(pence) 7.62 (0.64) - (2.29) 0.96 (0.03) 5.61
Diluted earnings
per
share (pence) 7.46 (0.63) - (2.24) 0.94 (0.03) 5.50
Earnings before interest,
taxation, depreciation, amortisation
and share based
payments
(EBITDA) 8,569 (480) - (2,633) 693 271 6,420
Exclude foreign
exchange
differences (105) - - - - - (105)
Adjusted EBITDA
excluding
foreign exchange
differences 8,464 (480) - (2,633) 693 271 6,315
================== ================== ================== ================== ================== ================== ==================
Impact on the Group statement of comprehensive income for the year to 31 March 2019
YEAR TO 31 MARCH 2019
As reported Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Explanation of Note Note
adjustment (audited) 3.1A Note 3.1B Note 3.2 Note 3.4 4 (unaudited)
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Revenue 74,578 (4,512) (2,900) 67,166
Cost of sales (40,725) 2,547 2,900 - (35,278)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ----------------
Gross Profit 33,853 (1,965) - - - - 31,888
Other income 35 35
Administrative
expenses (14,466) 311 16 (14,139)
R&D expense - (5,487) - (5,487)
Currency
profits/(losses) (138) (138)
Amortisation of
intangible
assets (3,982) 1,870 (2,112)
Share based
payments (631) (631)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ----------------
Profit from
operating
activities: 14,671 (1,965) - (3,617) 311 16 9,416
Net finance
income/(costs) 562 (19) 543
Share of profit
of
associate 14 14
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ----------------
Profit before
income
tax 15,247 (1,965) - (3,617) 311 (3) 9,973
Income tax charge (1,680) 290 532 (30) (888)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ----------------
Profit for the
period 13,567 (1,675) - (3,085) 281 (3) 9,085
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ----------------
Attributable to:
Owner of parent
company 11,755 (1,469) (3,085) 281 (3) 7,479
Non-controlling
interest 1,812 (206) - 1,606
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ----------------
13,567 (1,675) - (3,085) 281 (3) 9,085
================== ================== ================== ================== ================== ================== ================
Earnings per
share
(pence) 17.60 (2.20) - (4.62) 0.42 (0.00) 11.20
Diluted earnings
per
share (pence) 17.35 (2.17) - (4.55) 0.41 (0.00) 11.04
Earnings before interest,
taxation,
depreciation,
amortisation
and share based
payments
(EBITDA) 19,949 (1,965) - (5,487) 311 151 12,959
Exclude foreign
exchange
differences 138 - - - - - 138
Adjusted EBITDA
excluding
foreign exchange
differences 20,087 (1,965) - (5,487) 311 151 13,097
================== ================== ================== ================== ================== ================== ================
Impact on Group Statements of financial position
AS AT 1 APRIL 2018
As reported Adjustment Adjustment Adjustment Adjustment Restated
Explanation of Note
adjustment (audited) 3.1A Note 3.2 Note 3.3 Note 3.4 (unaudited)
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Non current
assets
Intangible
assets 57,631 (19,226) 232 38,637
Property, plant
and
equipment 1,866 1,866
Investment
property 200 200
Right of use
assets - -
Investments 98 98
---------------- ---------------- ---------------- ---------------- -------------- ----------------
59,795 - (19,226) - 232 40,801
Current assets
Inventories 17,663 991 18,654
Trade and other
receivables 17,193 (1,678) (296) 15,219
Income tax
recoverable 113 64 397 121 695
Other taxes and
social
security 1,160 1,160
Cash and cash
equivalents 21,261 (918) 20,343
---------------- ---------------- ---------------- ---------------- -------------- ----------------
57,390 (623) 397 (1,214) 121 56,071
Total assets 117,185 (623) (18,829) (1,214) 353 96,872
---------------- ---------------- ---------------- ---------------- -------------- ----------------
Current
liabilities
Trade and other
payables (10,715) 1,214 (1,307) (10,808)
Income tax (152) 24 (128)
Other taxes and
social
security (108) (108)
Amounts due
under leases - -
Dividends (42) (42)
---------------- ---------------- ---------------- ---------------- -------------- ----------------
(11,017) 24 - 1,214 (1,307) (11,086)
Total assets
less current
liabilities 106,168 (599) (18,829) - (954) 85,786
Non current
liabilities
Deferred tax (1,293) 1,073 (220)
Amounts due
under leases - -
---------------- ---------------- ---------------- ---------------- -------------- ----------------
Total assets
less total
liabilities 104,875 (599) (17,756) - (954) 85,566
================ ================ ================ ================ ============== ================
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 2,823
Retained
earnings 34,065 (632) (17,756) (954) 14,723
---------------- ---------------- ---------------- ---------------- -------------- ----------------
Shareholders'
funds 99,690 (632) (17,756) - (954) 80,348
Non-controlling
interests 5,185 33 5,218
Total equity 104,875 (599) (17,756) - (954) 85,566
================ ================ ================ ================ ============== ================
AS AT 30 SEPTEMBER 2018
As reported Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Explanation of Note
adjustment (unaudited) 3.1A Note 3.2 Note 3.3 Note 3.4 Note 4 (unaudited)
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Non current
assets
Intangible
assets 59,840 (20,868) 57 39,029
Property, plant
and equipment 2,127 2,127
Investment
property 200 200
Right of use
assets - 2,512 2,512
Investments 125 125
---------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
62,292 - (20,868) - 57 2,512 43,993
Current assets
Inventories 18,302 1,552 19,854
Trade and other
receivables 18,528 (2,719) (786) 15,023
Income tax
recoverable 362 111 523 66 1,062
Other taxes and
social security 1,004 1,004
Cash and cash
equivalents 24,729 (905) 23,824
---------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
62,925 (1,056) 523 (1,691) 66 - 60,767
Total assets 125,217 (1,056) (20,345) (1,691) 123 2,512 104,760
---------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
Current
liabilities
Trade and other
payables (11,635) 1,691 (439) (10,383)
Income tax (378) 7 (371)
Other taxes and
social security (1,405) (1,405)
Amounts due
under
leases - (587) (587)
Dividends (50) (50)
---------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
(13,468) 7 - 1,691 (439) (587) (12,796)
Total assets
less
current
liabilities 111,749 (1,049) (20,345) - (316) 1,925 91,964
Non current
liabilities
Deferred tax (1,400) 1,073 (327)
Amounts due
under
leases - (2,002) (2,002)
---------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
Total assets
less
total
liabilities 110,349 (1,049) (19,272) - (316) (77) 89,635
================ ================ ================ ================ ============== ================ ===============
Equity
Capital and
reserves
Issued share
capital 3,358 3,358
Share premium
account 61,905 61,905
Revaluation
reserve 664 664
Other reserves 3,198 3,198
Retained
earnings 36,832 (1,059) (19,272) (316) (59) 16,126
---------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
Shareholders'
funds 105,957 (1,059) (19,272) - (316) (59) 85,251
Non-controlling
interests 4,392 10 (18) 4,384
Total equity 110,349 (1,049) (19,272) - (316) (77) 89,635
================ ================ ================ ================ ============== ================ ===============
AS AT 31 MARCH 2019
As reported Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Explanation of
adjustment (audited) Note 3.1A Note 3.2 Note 3.3 Note 3.4 Note 4 (unaudited)
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Non current
assets
Intangible assets 62,734 (22,843) 114 40,005
Property, plant
and equipment 2,144 2,144
Investment
property 200 200
Right of use
assets 1,930 385 2,315
Investments 116 116
--------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
67,124 - (22,843) - 114 385 44,780
Current assets
Inventories 16,107 3,538 19,645
Trade and other
receivables 29,537 (6,190) 11 23,358
Income tax
recoverable 466 173 719 91 1,449
Other taxes and
social security 462 462
Cash and cash
equivalents 18,068 (1,205) 16,863
--------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
64,640 (2,479) 719 (1,194) 91 - 61,777
Total assets 131,764 (2,479) (22,124) (1,194) 205 385 106,557
--------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
Current
liabilities
Trade and other
payables (13,809) 1,194 (878) (13,493)
Income tax (1,000) 205 (795)
Other taxes and
social security (533) (533)
Amounts due under
leases (415) (140) (555)
Dividends (49) (49)
--------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
(15,806) 205 - 1,194 (878) (140) (15,425)
Total assets less
current
liabilities 115,958 (2,274) (22,124) - (673) 245 91,132
Non current
liabilities
Deferred tax (1,616) 1,283 (333)
Amounts due under
leases (1,573) (268) (1,841)
--------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
Total assets less
total
liabilities 112,769 (2,274) (20,841) - (673) (23) 88,958
=============== ================ ================ ================ ============== ================ ===============
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 3,342
Retained earnings 37,377 (2,101) (20,841) (673) (23) 13,739
--------------- ---------------- ---------------- ---------------- -------------- ---------------- ---------------
Shareholders'
funds 107,405 (2,101) (20,841) - (673) (23) 83,767
Non-controlling
interests 5,364 (173) - 5,191
Total equity 112,769 (2,274) (20,841) - (673) (23) 88,958
=============== ================ ================ ================ ============== ================ ===============
Impact on the Group statement of cash flows
SIX MONTHS TO 30 SEPTEMBER 2018
As reported Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Explanation of Note Note Note
adjustment (unaudited) Note 3.1A Note 3.2 3.3 3.4 4 (unaudited)
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Cashflows from
operating
activities
Profit before
income
tax 6,770 (480) (1,642) 693 (40) 5,301
Adjustment for:
Net finance
(income)/costs (697) 53 (644)
Depreciation 149 258 407
Revaluation of
freehold
property - -
Amortisation of
intangible
assets 1,999 (991) 1,008
Pension
payments (29) (29)
Share of
associate's
results (27) (27)
Impairment of
investments -
Share based
payments 375 375
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Operating cash
flow
before
movement in
working
capital 8,540 (480) (2,633) - 693 271 6,391
Change in
inventories (639) (561) (1,200)
Change in
receivables (1,179) 1,041 490 352
Change in
payables 2,246 (477) (868) 901
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Cash generated
from
operations 8,968 - (2,633) 13 (175) 271 6,444
Finance costs - -
Income tax (681) (681)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Net cash from
operating
activities 8,287 - (2,633) 13 (175) 271 5,763
Cash flows from
investing
activities
Acquisition of
property
plant and
equipment (431) (431)
Disposal of
property
plant and
equipment - -
Purchase of
intangibles (4,208) 2,633 175 (1,400)
Finance income 70 70
Net cash (used
in) investing
activities (4,569) - 2,633 - 175 - (1,761)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Cash flows from
financing
activities
Proceeds from
issue
of share
capital 3,125 3,125
Finance lease
borrowings - -
Finance lease
repayments - (271) (271)
Dividends paid (3,741) (3,741)
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Net cash (used
in) financing
activities (616) - - - - (271) (887)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Net increase in
cash
and cash
equivalents 3,102 - - 13 - - 3,115
Foreign
exchange
movements 366 366
Balance at the
beginning
of the period 21,261 (918) 20,343
Cash and cash
equivalents
at the end of
the period 24,729 - - (905) - - 23,824
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Free cash flow 3,648 - - 13 - 271 3,932
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
YEARED 31 MARCH 2019
As reported Adjustment Adjustment Adjustment Adjustment Adjustment Restated
Explanation of Note Note Note Note Note
adjustment (audited) 3.1A 3.2 3.3 3.4 4 (unaudited)
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Cashflows from
operating
activities
Profit before
income
tax 15,247 (1,965) (3,617) 311 (3) 9,973
Adjustment for:
Net finance
(income)/costs (562) 19 (543)
Depreciation 720 135 855
Revaluation of
freehold
property (55) (55)
Amortisation of
intangible
assets 3,982 (1,870) 2,112
Pension
payments (59) (59)
Share of
associate's
results (14) (14)
Impairment of
investments -
Share based
payments 631 631
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Operating cash
flow
before
movement in
working
capital 19,890 (1,965) (5,487) - 311 151 12,900
Change in
inventories 1,556 (2,547) (991)
Change in
receivables (11,646) 4,512 (307) (7,441)
Change in
payables 3,540 20 (429) 3,131
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Cash generated
from
operations 13,340 - (5,487) (287) (118) 151 7,599
Finance costs (69) (69)
Income tax (862) (862)
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Net cash from
operating
activities 12,409 - (5,487) (287) (118) 151 6,668
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) 5,487 118 (3,480)
Finance income 127 127
Net cash (used
in) investing
activities (9,519) - 5,487 - 118 - (3,914)
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Cash flows from
financing
activities
Proceeds from
issue
of share
capital 3,884 3,884
Finance lease
borrowings 67 67
Finance lease
repayments (406) (151) (557)
Dividends paid (10,121) (10,121)
------------- ---------------- ---------------- ---------------- ---------------- ----------------
Net cash (used
in) financing
activities (6,576) - - - - (151) (6,727)
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Net decrease in
cash
and cash
equivalents (3,686) - - (287) - - (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 - - (1,205) - - 16,863
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Free cash flow 2,827 - - (287) - 151 2,691
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Impact on Group intangible assets
As Reported Adjustment Restated
GBP000's GBP000's GBP000's
Cost
At 1 April 2018 74,819 (34,929) 39,890
Additions 4,208 (2,808) 1,400
------------ --------------- -----------
At 30 September 2018 79,027 (37,737) 41,290
Additions 4,877 (2,797) 2,080
------------ --------------- -----------
At 31 March 2019 83,904 (40,534) 43,370
============ =============== ===========
Amortisation
At 1 April 2018 35,729 (15,935) 19,794
Charge for the period 1,960 (991) 969
------------ --------------- -----------
At 30 September 2018 37,689 (16,926) 20,763
Charge for the period 1,950 (879) 1,071
------------ --------------- -----------
At 31 March 2019 39,639 (17,805) 21,834
============ =============== ===========
Net Book Value
At 31 March 2019 44,265 (22,729) 21,536
============ =============== ===========
At 30 September 2018 41,338 (20,811) 20,527
============ =============== ===========
At 1 April 2018 39,090 (18,994) 20,096
============ =============== ===========
The Group is also looking into the impact that the adjustments referred to in this note might have had on the distributable reserves of Group subsidiaries and the consequential impact that could have with regard to certain historical dividends paid by them.
4. IFRS 16 - Leases
This new leasing standard removed the distinction between finance and operating leases for lessees. For lessees, all leases are recorded on the Statement of financial position as liabilities, at the present value of the future lease payments, along with an asset reflecting the right to use the asset over the lease term.
The Group applied the new standard in the year ended 31 March 2019 and presented the effects of the adoption of IFRS in the consolidated financial statements of the Group for the year ended 31 March 2019.
The Interim statement for the six months ended 30 September 2018 did not reflect the adoption of this standard and accordingly to provide comparison with the six months ended 30 September 2019, these interim statements show the six months ended 30 September 2018 restated on this basis.
As described in the impact tables in Note 3 there was an additional prior period restatement to correct an error to bring 100% of the costs of the lease of the Group's office in Southgate onto the Statement of financial position per IFRS16 rather than the previous treatment of only bringing half of the costs in.
5. Revenue is derived from the Group's animal pharmaceutical businesses. 6. Principal risks and uncertainties
These were set out on pages 24-27 of the notes to the consolidated financial statements for the year ended 31 March 2019. The key exposures are to foreign currency exchange rates, potential delays in obtaining marketing authorisations, single sources of supply for some raw materials and trade debtor recovery and have remained unchanged since the year end. In addition, the Annual Report and Accounts highlighted disease impact to growth in emerging markets as a key risk and this, in the form of ASF, is a principal uncertainty.
7. Earnings per share
Six months Six months Year ended
to 30.09.19 to 30.09.18 31.03.19
(unaudited) (unaudited) (audited)
Restated Restated
Weighted average number of shares in issue
(000's) 67,493 66,326 66,794
Fully diluted weighted average number of
shares in issue (000's) 68,092 67,757 67,737
Profit attributable to equity holders of
the company (GBP000's) 1,018 3,724 7,479
Basic earnings per share (pence) 1.51 5.61 11.20
Fully diluted earnings per share (pence) 1.50 5.50 11.04
8. Dividends
Six months Six months Year ended
to 30.09.19 to 30.09.18 31.03.19
(unaudited) (unaudited) (audited)
GBP000's GBP000's GBP000's
Dividend in respect of the year ended 31 March 2018
at 3.2p/6.0p per ordinary share - 2,106 2,106
Further Interim Dividend in respect of the year ended
31 March 2018 at 6.0p per ordinary share - - 4,029
Special dividend in respect of the year ended 31 March
2019 at 3.5p per ordinary share - 2,350
Dividend in respect of the year ended 31 March 2019
at 4.0p per ordinary share 2,698 - -
Final dividend in respect of the year ended 31 March
2019 at 7.04p per ordinary share 4,755 - -
7,453 2,106 8,485
================= ================= ==============
Under IAS 10, dividends are recorded in the accounts when they become a legal obligation of the payer. For final dividends, this will be when they are approved by the shareholders in general meeting. For interim dividends, this will be when they have been paid.
In summary, what this means in practice is that:
-- Dividends need to be paid (if interim dividends) or approved by shareholders (if final dividends) before they are recognised in the accounts.
-- In the Annual General Meeting held during September 2019 a shareholder resolution was passed to approve the final dividend paid in October 2019. Accordingly, a liability is recorded in the Statement of financial position on 30 September 2019
-- No such shareholder resolution was proposed or passed in the prior period AGM's. Following the application of IAS 10 no liability was recorded at 31 March 2018, 31 March 2019 or 30 September 2018 for dividends declared but not paid before each of those reporting dates.
9. Intangible non-current assets
Distribution Development
Goodwill rights Costs Total
GBP000's GBP000's GBP000's GBP000's
Cost
At 1 April 2018 - restated 17,930 1,442 39,890 59,262
Additions - restated - - 1,400 1,400
------------------ ------------------ ---------------- ------------------
At 30 September 2018
- restated 17,930 1,442 41,290 60,662
Additions - restated - - 2,080 2,080
------------------ ------------------ ---------------- ------------------
At 31 March 2019 - restated 17,930 1,442 43,370 62,742
Additions - - 1,552 1,552
------------------ ------------------ ---------------- ------------------
At 30 September 2019 17,930 1,442 44,922 64,294
================== ================== ================ ==================
Amortisation
At 1 April 2018 - restated - 831 19,794 20,625
Charge for the period
- restated - 39 969 1,008
------------------ ------------------ ---------------- ------------------
At 30 September 2018
- restated - 870 20,763 21,633
Charge for the period
- restated - 33 1,071 1,104
------------------ ------------------ ---------------- ------------------
At 31 March 2019 - restated - 903 20,834 22,737
Charge for the period - 36 1,170 1,206
------------------ ------------------ ---------------- ------------------
At 30 September 2019 - 939 23,004 23,943
================== ================== ================ ==================
Net Book Value
At 30 September 2019 17,930 503 21,918 40,351
================== ================== ================ ==================
At 31 March 2019 - restated 17,930 539 21,536 40,005
================== ================== ================ ==================
At 30 September 2018
- restated 17,930 572 20,527 39,029
================== ================== ================ ==================
At 1 April 2018 - restated 17,930 611 20,096 38,637
================== ================== ================ ==================
10. Property, plant and equipment
Fixtures,
Land & Buildings Plant and fittings
(freehold) Machinery & equipment Motor vehicles Total
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 - 261 150 21 432
Disposals - (19) - - (19)
Foreign exchange movements - (27) - (8) (35)
----------------- -------------- ---------------- --------------- -----------------
At 30 September 2018 730 1,817 1,233 74 3,854
Additions - 80 48 6 134
Revaluation in the
year 30 - - - 30
Disposals - (49) - - (49)
Foreign exchange movements - 38 1 2 41
----------------- -------------- ---------------- --------------- -----------------
At 31 March 2019 760 1,886 1,282 82 4,010
Additions - 40 45 - 85
Foreign exchange movements - (8) - - (8)
---------------- ---------------
At 30 September 2019 760 1,918 1,327 82 4,087
================= ============== ================ =============== =================
Depreciation
At 1 April 2018 26 864 706 14 1,610
Charge for the period 5 81 57 6 149
Disposals - (18) - - (18)
Foreign exchange movements - (14) - - (14)
----------------- -------------- ---------------- --------------- -----------------
At 30 September 2018 31 913 763 20 1,727
Charge for the period (5) 90 97 9 191
Revaluation in the
year (26) - - - (26)
Disposals - (45) - - (45)
Foreign exchange movements - 20 - (1) 19
----------------- -------------- ---------------- --------------- -----------------
At 31 March 2019 - 978 860 28 1,866
Charge for the period 6 83 84 9 182
Foreign exchange movements - (5) - - (5)
----------------- -------------- ---------------- ---------------
At 30 September 2019 6 1,056 944 37 2,043
================= ============== ================ =============== =================
Net book value
At 30 September 2019 754 862 383 45 2,044
================= ============== ================ =============== =================
At 31 March 2019 760 908 422 54 2,144
================= ============== ================ =============== =================
At 30 September 2018 699 904 470 54 2,127
================= ============== ================ =============== =================
At 1 April 2018 704 738 377 47 1,866
================= ============== ================ =============== =================
This financial information was approved by the board on 30 December 2019.
Copies of this interim report are being sent to all the Company's shareholders. Further copies can be obtained from the Company's registered office at 78 Coombe Road, New Malden, Surrey, KT3 4QS.
DIRECTORS AND OFFICERS Andrew Jones (Non-Executive Chairman)
Marc Loomes (Chief Executive)
Chris Wilks (Chief Financial Officer)
Anthony Rawlinson (Non-Executive Director)
Julia Trouse (Company Secretary)
REGISTERED OFFICE 78 Coombe Road, New Malden, Surrey. KT3 4QS
Tel: 020-8336-2900 Fax: 020-8336-0909
COMPANY NUMBER 01818170
INFORMATION AT www.ecoanimalhealthgroupplc.com
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.
END
IR DGBDDRXXBGCG
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