Results for the Six Months Ended 30 September 2024
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ECO Animal Health Group plc ("ECO", the "Company", or the "Group") (AIM: EAH), a rapidly growing global animal health company with a portfolio of marketed veterinary products and a maturing proprietary R&D pipeline, today announces its Half Year Report for the six months ended 30 September 2024 in line with the guidance provided in the 1 October 2024 Trading Update.
HIGHLIGHTS
Financial
- Group Revenue decreased 13% to £33.2 million (H1 2023: £38.0 million)
o Revenues on a constant currency basis decreased 9%
- Gross margins 40.3% (H1 2023: 40.8%)
- Adjusted EBITDA at £0.4 million (H1 2023: £0.7 million)
- Loss per share of 2.50p (H1 2023: loss per share: 1.93p)
- Cash generated by operations before working capital increased to £0.8 million (H1 2023: £0.7 million)
- Cash balances decreased to £18.3 million (30 September 2023 £20.6 million)
Operational
- Revenue in USA and Canada increased by 5% to £8.6 million (H1 2023: £8.2 million)
- Revenue in Latin America increased by 8% to £8.3 million (H1 2023: £7.7 million)
- Improving pork prices and better producer profitability improved revenues during August and September 2024
- Rigorous control of input costs has supported gross margins at about the same level as prior year
- New marketing approval for Aivlosin® in Paraguay
- Late-stage Mycoplasma vaccine projects for poultry continued to progress towards regulatory submission according to plan, with launches planned for 2025
- Disposal of non-core equine anti-parasitic product for £1.0 million
David Hallas, Chief Executive Officer of ECO Animal Health Group plc, commented: "We are encouraged to see an improving revenue performance as we head into the second half of our financial year. As outlined in our trading statement in October, a combination of low disease incidence particularly in China and Southeast Asia, combined with currency headwinds impacted our performance over the summer months. Since then, the Group has seen demand accelerate with 82% of the market consensus* revenue now covered by year-to-date revenue, order books and run rate from the Group's stocking locations. ECO's trading performance is typically second-half weighted and we have observed renewed strength in seasonal trading patterns. This, supported by rigorous cost control, provides confidence that full-year profitability will be in line with market consensus*.
"Meanwhile, ECO maintains its targeted focus on its dual future strategy of continuing to support the Aivlosin® franchise and targeted investment in the R&D pipeline, the engine of future growth. The Company believes that over time these investments will generate significant value for shareholders. ECO is on track and expected to deliver value from the R&D pipeline in the next 12 months and continue over the next decade."
* Market consensus for the year ending 31 March 2025 is understood to be revenue of £85 million and EBITDA of £7.2 million
Group revenue was 13% lower in H1 2024 at £33.2 million (H1 2023: £38.0 million). China and Japan revenue of £8.2 million represented 25% of Group revenue (H1 2023: 26%). On a constant currency basis, the Group's revenue in H1 2024 was £34.4 million; a decrease of 10% compared with H1 2023. The principal currency effects were from a weaker US Dollar and Chinese RMB compared with Sterling during the period.
The gross margin in H1 2024 was 40.3% (H1 2023: 40.8%). Gross margins were impacted by exchange rate losses but offset by savings in cost of sales. The Gross margin movement may be analysed as follows:
%
| Gross margin in the six months ended 30 September 2023 | 40.8 |
| F/x impact on revenue | (2.2) |
| F/x impact on cost of sales | 1.3 |
| Reduction in API costs | 1.9 |
| Mix, other | (1.5) |
| Gross margin in the six months ended 30 September 2024 | 40.3 |
Administrative expenses excluding foreign exchange gains at £13.4 million were 4.5% lower than the comparative period last year (H1 2023: £14.0 million). This arose in the main from decreased personnel costs (lower bonus accruals, vacancies and f/x savings in US Dollar paid employees). Legal, audit and professional costs were 34% lower than in the prior period due to better credit control leading to lower expected credit loss provisions.
Research and development ("R&D") expense and amounts capitalised were in aggregate a cash investment of £4.1 million (H1 2023: £3.6 million). This represented 12% of revenue generated in the period (H1 2023: 9%). R&D expensed to the P&L was £2.4 million (H1 2023: £2.1 million); this represented progress in the mid-stage and early pipeline with a number of key proof of concept trials showing good early results. The late-stage Mycoplasma vaccine projects for poultry continued to progress towards regulatory submission according to plan.
Earnings before interest, tax, depreciation, amortisation and impairment, share based payments and foreign exchange movements ("Adjusted EBITDA") were £0.4 million (H1 2023: £0.7 million). This reduction arose as a direct consequence of the lower revenue offset by lower administrative expenses.
As previously announced the Group sold its licences to market an anti-parasitic equine product to its manufacturing partner in Italy. This sale resulted in a gain of £1.0 million. This gain is treated as exceptional and not part of the Group's reported Adjusted EBITDA.
Cash generated from operations was £nil (H1 2023: £4.8 million). The underlying cash profits in the period (operating cash flows before movements in working capital) remained strong at £0.8 million (H1 2023: £0.7 million). The unwind of year end trade payables resulted in an adverse movement in working capital. Inventory remained in line with the year end level and trade receivable showed strong post year end recovery (generating £5.3m cash). Cash balances at 30 September 2024 can be analysed as follows:
At 30 September
| 2024 (£'m) | 2023 (£'m) | |
|---|---|---|
| Held in UK | 6.9 | 6.1 |
| Held in non-China subsidiaries | 1.2 | 2.9 |
| Held in China 100% owned subsidiary | 1.5 | 1.5 |
| Held in China 51% owned subsidiary | 8.7 | 10.1 |
| 18.3 | 20.6 |
The Group repatriates cash from China by annual dividend declarations; this is subject to withholding taxes of 5% and is paid according to the relevant shareholdings. On a day‐to‐day basis, the Board considers the cash held in the Group's joint venture subsidiary in China to be unavailable to the Group outside of China; accordingly, cash management and funds available for investment in R&D is based upon the cash balances outside of China.
During June 2024, two dividends totalling £3.0 million (H1 2023: £3.4 million) were received from China.
The Group's committed banking facilities remain at £15.0 million, being a £5.0 million overdraft facility and a £10.0 million revolving credit facility. These facilities expire on 30 June 2026 and were undrawn as at 30 September 2024.
Basic loss per share in the six months ended 30 September 2024 was 2.50p (H1 2023: loss 1.93p).
Business Performance
The geographical analysis of the Group's revenue in the six months ended 30 September 2024 compared to the prior period in 2023 and the full year ended 31 March 2024 was as follows:
| Revenue Summary | 6 months ended 30 September | Year ended | ||
|---|---|---|---|---|
| 2024 | 2023 | H1 24 vs H1 23 | 31 March 2024 | |
| (£'m) | (£'m) | % Change | (£'m) | |
| China and Japan | 8.2 | 9.7 | (15%) | 24.7 |
| North America (USA and Canada) | 8.6 | 8.2 | 5% | 18.5 |
| South and Southeast Asia | 5.1 | 7.8 | (35%) | 17.4 |
| Latin America | 8.3 | 7.7 | 8% | 19.9 |
| Europe | 2.1 | 3.4 | (38%) | 6.5 |
| Rest of World and UK | 0.9 | 1.2 | (25%) | 2.4 |
| Total Group | 33.2 | 38.0 | (13%) | 89.4 |
Group revenue decreased by 13% to £33.2 million (H1 2023: £38.0 million). On a constant currency basis the decrease in revenue was 9% in H1 2024 compared with H1 2023. The main components of this overall revenue reduction were China (a reduction of £2.3 million - 27%), Mexico (a reduction of £1.3 million - 44%), Europe (a reduction of £1.3 million - 38%) and South and Southeast Asia (a reduction of £2.7 million - 35%). Offsetting these falls were gains in Japan (£0.8 million), USA and Canada (£0.4 million), Brazil and other Latin America countries (£1.9 million).
The lower revenue performance in China was due in the main to low disease incidence during the early summer months of 2024 compared with the equivalent period in 2023 but stronger pork prices and better producer profitability improved revenues during August and September 2024. It is expected that these stronger performances will result in a significantly stronger H2 in China.
The comparative reduction in Mexico revenue in H1 2024 compared with H1 2023 was due to 2023 being particularly strong - inventory shortages in January to March 2023 resulted in strong distributor demand in the first few months of H1 2023.
The reduction in Europe revenue was mostly due to the withdrawal from Russia (£0.5 million) and the withdrawal from sale of a loss-making product sold in Ireland (£0.5 million). We continue to expect a new licensing approval for Aivlosin® (poultry) in the Kingdom of Saudi Arabia.
The reduction in Southeast Asia arose mainly due to the loss of a key Thailand customer and the change in the distributor in Vietnam resulting in a slow period until the new distributor is appointed. Furthermore, regulatory approval delays in Philippines and Bangladesh have also held this geographical sector back.
The USA, Canada and Japan have traded well due to market share gains, new customer wins and overall market growth.
The macro-economic outlook for the production animal health market remains strong. According to Stonehaven Consulting, pork and poultry consumption is corelated to population growth. Over the past 25 years, consumption of pork and poultry products increased by 70%, rising from 157kTon to 268kTon, compared to population growth of 34% over the same period. With nearly 2 billion more people expected to require more food over the next 25 years, demand for animal protein is set to grow.
Stonehaven Consulting also assessed the animal health product market, revealing a 5-year Compound Annual Growth Rate ("CAGR") of 5.8% in medicated feed additives, 0% for anti-infectives, and 6.4% for vaccines. Notably the disease prevention market, particularly vaccines, is predicted to continue expanding at a CAGR of 3.1% over the next seven years compared with relatively modest growth rate of 1.2% to 1.8% per annum in the disease treatment markets. This further underpins the Group's strategic expansion into vaccines and biologicals whilst recognising that the market remains robust for disease treatment.
Accelerated growth through R&D investment
The Board continues to believe that the R&D portfolio is extremely valuable and will create long-term value for shareholders. The products in our pipeline are highly complementary to our successful existing Aivlosin® based business, addressing the same markets, producers, distributors and diseases. As revenue and profits are generated from these new products the resulting cashflow will be applied in a progressive way to dividend distribution further enhancing shareholder value.
The Group's promising pipeline of new products has continued development according to plan with £4.1 million (H1 2023: £3.6 million) spent during the period. We plan to hold a Capital Markets Day ("CMD") during the final quarter of our financial year; this will follow up on the developments since our last CMD held in November 2023 and provide a status summary of the R&D portfolio.
Preparation for manufacture of the Group's pair of Mycoplasma vaccines for poultry involving technology transfer from the Group's own research lab to the appointed contract manufacturing organisation has been moving ahead and proof of concept trials have been initiated for the necrotic enteritis vaccine for poultry.
Strategy
The Group's strategy is to protect and expand the flagship branded anti-microbial Aivlosin® while making targeted investment in our R&D pipeline of targeted new product development. Our strategy review has endorsed this vision, objectives and pathway. The value in Aivlosin® will be reinforced through further investment in technical and marketing support, while we continue to invest in our valuable R&D pipeline to progress to commercialisation.
Specific priorities have been identified to bring our near to market projects to completion, preparations for their launch are well underway and business partners identified. Defence against generic competition within the Aivlosin® business arena is robust and reinforced with sound technical and marketing initiatives.
The Group is actively pursuing opportunities to collaborate through licencing in or buying new products and licencing out late and mid stage R&D programmes.
Our values
Our values, the "3 C's" of Curiosity, Commitment and Collaboration are, we believe, the critical success factors which will drive the Group towards achieving its vision.
People
Our people, selected from the best in the animal health industry ensures that the Group's ambitions are achievable. The alignment of personal values and the Group's values -are central to employee engagement. The Group is proud of its social and charitable initiatives, particularly as many of these are employee led. The Board wishes to thank our people for their continuing diligence, active engagement and effort throughout the period.
Outlook
The Group expects that the historically observed increased demand for Aivlosin® associated with the Northern Hemisphere winter will once again result in a stronger second half to our year. 82% of the market consensus revenue is covered by year-to-date revenue, order books and run rate from the Group's stocking locations. Additionally, the first half currency headwinds have normalised and the phasing and mix of revenues, inventory usage and costs all support the forward profitability. The Board will continue during the remainder of this financial year to invest in our exciting new product pipeline and pursue options to realise value.
The Board looks forward with cautious optimism to reporting the full year numbers in line with revised market expectations.
Dr Andrew Jones David Hallas
Chairman Chief Executive Officer
CONSOLIDATED INCOME STATEMENT
| Six months to 30.09.24 (unaudited) | Six months to 30.09.23 (unaudited) | Year ended 31.03.24 (audited) | ||
|---|---|---|---|---|
| Notes | £000's | £000's | £000's | |
| Revenue | 6 | 33,182 | 38,009 | 89,422 |
| Cost of sales | (19,818) | (22,508) | (51,739) | |
| Gross profit | 13,364 | 15,501 | 37,683 | |
| 40.3% | 40.8% | 42.1% | ||
| Administrative expenses | (13,388) | (14,016) | (29,394) | |
| Research and development expenses | (2,350) | (2,098) | (4,169) | |
| Other income | 148 | 29 | 66 | |
| Exceptional items | 7 | 1,046 | - | (651) |
| Operating (loss)/profit | (1,180) | (584) | 3,535 | |
| Share of profit of associate | 40 | 47 | 53 | |
| Finance income | 59 | 76 | 150 | |
| (Loss)/profit before financing and income tax | (1,081) | (461) | 3,738 | |
| Finance costs | (336) | (166) | (764) | |
| (Loss)/profit before income tax | (1,417) | (626) | 2,974 | |
| Income tax charge | 9 | (343) | (580) | (966) |
| (Loss)/profit for the year | (1,760) | (1,206) | 2,008 | |
| (Loss)/profit attributable to: | ||||
| Owners of the parent Company | (1,697) | (1,307) | 1,048 | |
| Non-controlling interest | (63) | 101 | 960 | |
| (Loss)/profit for the year | (1,760) | (1,206) | 2,008 | |
| (Loss)/earnings per share (pence) | 8 | (2.50) | (1.93) | 1.55 |
| Diluted (loss)/earnings per share (pence) | 8 | (2.50) | (1.93) | 1.52 |
| Adjusted EBITDA (Non-GAAP measure) | 6 | 445 | 705 | 8,046 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||
| Six months to 30.09.24 (unaudited) | Six months to 30.09.23 (unaudited) | Year ended 31.03.24 (audited) | ||
| £000's | £000's | £000's | ||
| (Loss)/profit for the year | (1,760) | (1,206) | 2,008 | |
| Other comprehensive loss: | ||||
| Items that may be reclassified to profit or loss: | ||||
| Foreign currency translation differences | (240) | (1,285) | (1,828) | |
Items that will not be reclassified to profit or loss:
| Six months to 30.09.24 (unaudited) | Six months to 30.09.23 (unaudited) | Year ended 31.03.24 (audited) | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Notes | £000's | £000's | £000's | ||||||
| Remeasurement of defined benefit pension schemes | - | - | 43 | ||||||
| Other comprehensive loss for the year | (240) | (1,285) | (1,785) | ||||||
| Total comprehensive (loss)/income for the year | (2,000) | (2,491) | 223 | ||||||
| Attributable to: | |||||||||
| Owners of the parent Company | (1,684) | (2,070) | 1 | ||||||
| Non-controlling interest | (316) | (421) | 222 | ||||||
| (2,000) | (2,491) | 223 | |||||||
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | |||||||||
| Share Capital | Share Premium | Revaluation Reserve | Other Reserves | Foreign Exchange Reserve | Retained Earnings | Total | Non-controlling Interest | Total Equity | |
| £000's | £000's | £000's | £000's | £000's | £000's | £000's | £000's | £000's | |
| Balance at 31 March 2023 | 3,381 | 63,319 | 657 | 106 | 1,878 | 13,929 | 83,270 | 12,281 | 95,551 |
| Profit for the year | - | - | - | - | - | 1,048 | 1,048 | 960 | 2,008 |
| Other comprehensive income: | |||||||||
| Foreign currency differences | - | - | - | - | (1,090) | - | (1,090) | (738) | (1,828) |
| Actuarial gains on pension scheme assets | - | - | - | - | - | 43 | 43 | - | 43 |
| Total comprehensive income for the year | - | - | - | - | (1,090) | 1,091 | 1 | 222 | 223 |
| Transactions with owners: | |||||||||
| Issue of shares in the year | 6 | - | - | - | - | - | 6 | - | 6 |
| Revaluation reserve | - | - | (386) | - | - | 386 | - | - | 0 |
| Share-based payments | - | - | - | - | - | 413 | 413 | - | 413 |
| Dividends | - | - | - | - | - | - | - | (2,813) | (2,813) |
| Transactions with owners | 6 | - | (386) | - | - | 799 | 419 | (2,813) | (2,394) |
| Balance at 31 March 2024 | 3,387 | 63,319 | 271 | 106 | 788 | 15,819 | 83,690 | 9,690 | 93,380 |
| Loss for the period | - | - | - | - | - | (1,697) | (1,697) | (63) | (1,760) |
| Other comprehensive income: | |||||||||
| Foreign currency differences | - | - | - | - | 13 | - | 13 | (253) | (240) |
| Total comprehensive income for the period | - | - | - | - | 13 | (1,697) | (1,684) | (316) | (2,000) |
| Transactions with owners: | |||||||||
| Share-based payments | - | - | - | - | - | 186 | 186 | - | 186 |
| Dividends | - | - | - | - | - | - | - | (1,065) | (1,065) |
| Transactions with owners | - | - | - | - | - | 186 | 186 | (1,065) | (879) |
| Balance at 30 September 2024 | 3,387 | 63,319 | 271 | 106 | 801 | 14,308 | 82,192 | 8,309 | 90,501 |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | |||||||||
| Share Capital | Share Premium | Revaluation Reserve | Other Reserves | Foreign Exchange Reserve | Retained Earnings | Total | Non-controlling Interest | Total Equity | |
| £000's | £000's | £000's | £000's | £000's | £000's | £000's | £000's | £000's | |
| Balance as at 31 March 2022 | 3,381 | 63,319 | 657 | 106 | 2,188 | 12,413 | 82,064 | 12,284 | 94,348 |
| Profit for the year | - | - | - | - | - | 1,008 | 1,008 | 2,083 | 3,091 |
| Other comprehensive income: | |||||||||
| Foreign currency movement | - | - | - | - | (310) | - | (310) | (276) | (586) |
| Actuarial gains on pension scheme assets | - | - | - | - | - | 100 | 100 | - | 100 |
| Total comprehensive income for the year | - | - | - | - | (310) | 1,108 | 798 | 1,807 | 2,605 |
| Transactions with owners: | |||||||||
| Share-based payments | - | - | - | - | - | 408 | 408 | - | 408 |
| Dividends | - | - | - | - | - | - | - | (1,810) | (1,810) |
| Transactions with owners | - | - | - | - | - | 408 | 408 | (1,810) | (1,402) |
| Balance as at 31 March 2023 | 3,381 | 63,319 | 657 | 106 | 1,878 | 13,929 | 83,270 | 12,281 | 95,551 |
| Loss for the period | - | - | - | - | - | (1,307) | (1,307) | 101 | (1,206) |
| Other comprehensive income: | |||||||||
| Foreign currency movement | - | - | - | - | (763) | - | (763) | (522) | (1,285) |
| Total comprehensive loss for the period | - | - | - | - | (763) | (1,307) | (2,070) | (421) | (2,491) |
| Transactions with owners: | |||||||||
| Issue of shares in the year | 1 | - | - | - | - | - | 1 | - | 1 |
| Share-based payments | - | - | - | - | - | 320 | 320 | - | 320 |
| Dividends | - | - | - | - | - | - | - | (2,814) | (2,814) |
| Transactions with owners | 1 | - | - | - | - | 320 | 321 | (2,814) | (2,493) |
| Balance at 30 September 2023 | 3,382 | 63,319 | 657 | 106 | 1,115 | 12,942 | 81,521 | 9,046 | 90,567 |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||||||||
| Group | |||||||||
| As at 30.09.24 (unaudited) | As at 30.09.23 (unaudited) | As at 31.03.24 (audited) | |||||||
| Notes | £000's | £000's | £000's | ||||||
| Non-current assets | |||||||||
| Intangible assets | 10 | 39,561 | 36,639 | 38,351 | |||||
| Property, plant and equipment | 4,296 | 5,834 | 4,802 | ||||||
| Right-of-use assets | 3,274 | 3,857 | 3,672 | ||||||
| Investments | 310 | 274 | 268 | ||||||
| Deferred tax assets | 1,316 | 579 | 1,437 | ||||||
| Total non-current assets | 48,757 | 47,183 | 48,530 | ||||||
| Current assets | |||||||||
| Inventories | 16,745 | 19,497 | 16,955 | ||||||
| Trade and other receivables | 26,778 | 25,748 | 32,175 | ||||||
| Income tax recoverable | 991 | 1,647 | 2,687 | ||||||
| Other taxes and social security | 160 | 461 | 526 | ||||||
| Cash and cash equivalents | 18,298 | 20,577 | 22,374 | ||||||
| Assets held for sale | - | 230 | 18 | ||||||
| Total current assets | 62,972 | 68,160 | 74,735 | ||||||
| TOTAL ASSETS | 111,729 | 115,343 | 123,265 | ||||||
| Current Liabilities | |||||||||
| Trade and other payables | (10,826) | (15,020) | (17,353) | ||||||
| Provisions | (5,143) | (5,301) | (5,859) | ||||||
| Income tax payable | 30 | (116) | (687) | ||||||
| Other taxes and social security payable | (306) | (151) | (632) | ||||||
| Lease liabilities | (574) | (934) | (646) | ||||||
| Dividends | (50) | (50) | (50) | ||||||
| Total current liabilities | (16,869) | (21,572) | (25,227) | ||||||
| Net current assets | 46,103 | 46,588 | 49,508 | ||||||
| Total assets less current liabilities | 94,860 | 93,771 | 98,038 | ||||||
| Non-current liabilities | |||||||||
| Deferred tax liabilities | (1,279) | - | (1,279) | ||||||
| Lease liabilities | (3,080) | (3,204) | (3,379) | ||||||
| TOTAL ASSETS LESS TOTAL LIABILITIES | 90,501 | 90,567 | 93,380 | ||||||
| EQUITY | |||||||||
| Issued share capital | 3,387 | 3,382 | 3,387 | ||||||
| Share premium account | 63,319 | 63,319 | 63,319 | ||||||
| Revaluation reserve | 271 | 657 | 271 | ||||||
| Other reserves | 106 | 106 | 106 | ||||||
| Foreign exchange reserve | 801 | 1,115 | 788 | ||||||
| Retained earnings | 14,308 | 12,942 | 15,819 | ||||||
| Shareholders' funds | 82,192 | 81,521 | 83,690 | ||||||
| Non-controlling interests | 8,309 | 9,046 | 9,690 | ||||||
| TOTAL EQUITY | 90,501 | 90,567 | 93,380 | ||||||
| Consolidated Cash Flow Statement | |||||||||
| Group | |||||||||
| Six months to 30.09.24 (unaudited) | Six months to 30.09.23 (unaudited) | Year ended 31.03.24 (audited) | |||||||
| £000's | £000's | £000's | |||||||
| Cash flows from operating activities | |||||||||
| (Loss)/Profit before income tax | (1,417) | (627) | 2,974 | ||||||
| Adjustment for: | |||||||||
| Finance income | (59) | (76) | (150) | ||||||
| Finance cost | 336 | 166 | 764 | ||||||
| Foreign exchange (gain)/loss | 1,158 | (219) | 572 | ||||||
| Depreciation | 451 | 452 | 958 | ||||||
| Amortisation of right-of-use assets | 316 | 203 | 683 | ||||||
| Amortisation of intangible assets | 560 | 533 | 1,154 | ||||||
| Impairment of right-of-use assets | - | - | 80 | ||||||
| Share of associate's results | (40) | (47) | (53) | ||||||
| Share based payment charge | 186 | 320 | 413 | ||||||
| Exceptional items | (736) | - | 306 | ||||||
| Operating cash flows before movements in working capital | 755 | 705 | 7,701 | ||||||
| (Increase)/decrease in inventory | (153) | 2,535 | 4,741 | ||||||
| Decrease/(increase) in receivables | 5,298 | 2,349 | (4,961) | ||||||
| (Decrease)/increase in payables | (5,571) | (793) | 2,456 | ||||||
| (Decrease)/increase in provision and pensions | (333) | 16 | 554 | ||||||
| Cash (used in)/generated from operations | (4) | 4,812 | 10,491 | ||||||
| Finance costs | (130) | (6) | (473) | ||||||
| Income tax | 627 | (135) | (601) | ||||||
| Net cash from/(used in) operations | 493 | 4,671 | 9,417 | ||||||
| Cash flows from investing activities | |||||||||
| Acquisition of property, plant and equipment | (100) | (386) | (502) | ||||||
| Proceeds from sale of property, plant and equipment | - | - | 1,058 | ||||||
| Purchase of intangibles | (1,769) | (1,536) | (4,122) | ||||||
| Proceeds from sale of horse paste business | 380 | - | - | ||||||
| Finance income | 59 | 76 | 150 | ||||||
| Net cash (used in)/from investing activities | (1,430) | (1,846) | (3,416) | ||||||
| Cash flows from financing activities | |||||||||
| Proceeds from issue of share capital | - | 1 | 6 | ||||||
| Interest paid on lease liabilities | (206) | (160) | (291) | ||||||
| Principal paid on lease liabilities | (282) | (112) | (593) | ||||||
| Dividends paid | (1,065) | (2,813) | (2,813) | ||||||
| Net cash used in financing activities | (1,553) | (3,084) | (3,691) | ||||||
| Net (decrease)/increase in cash and cash equivalents | (2,490) | (259) | 2,310 | ||||||
| Foreign exchange movements | (1,586) | (822) | (1,594) | ||||||
| Balance at the beginning of the period | 22,374 | 21,658 | 21,658 | ||||||
| Balance at the end of the period | 18,298 | 20,577 | 22,374 | ||||||
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2024
General information
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 The Grange, 100 High Street, Southgate, London, N14 6BN.
Summary of the Group's significant accounting policies
2.1 Basis of preparation
The financial information for the period to 30 September 2024 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 2024.
This Interim Statement has not been audited or reviewed by the Group's auditors.
2.2 Statement of compliance
This Interim Statement is prepared in accordance with IAS 34 "Interim Financial Reporting". Accordingly, whilst the Interim Statement has 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 Statement will also have access to its most recent annual report. Accordingly, annual disclosures are not repeated in this Interim Statement.
- 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 2024. These policies have been consistently applied to all prior years. The Group's accounting policies have been consistently applied in accordance with IFRS continued into the six months ended 30 September 2024.
As set out in the consolidated financial statements of the Group for the year ended 31 March 2024, new standards and amendments came into effect during the financial year. These standards and amendments do not have a material impact.
Revenue
Revenue is derived from the Group's animal pharmaceutical businesses.
Principal risks and uncertainties
The principal risks and uncertainties relating to the Group were set out on pages 10-13 of the Group's Annual Report and Accounts for the year ended 31 March 2024. The key exposures identified at 31 March 2024 were: a high dependency on a single product, potential threat from generic producers, multiple new product launches in a single year, quality risk regarding new biologicals manufacturing, foreign currency exchange rates, disease impact on growth, the risk that tech transfer from R&D to manufacture fails or is delayed, and recession in major regions of the world leading to reduced demand for the Group's products. These risks have remained unchanged since the year end.
.
Segment information
Revenues are geographically allocated by the destination of customer.
The performance of these geographical segments is measured using Earnings before Interest, Tax, Depreciation, Amortisation and exceptional items adjusted to exclude share-based payments and impairment ("Adjusted EBITDA" and is referred to in the table below). Adjusted EBITDA is a non-GAAP measure used by the business to assess the underlying business performance.
| Corporate /UK | China & Japan | North America | S & SE Asia | Latin America | Europe | Rest of World | Total | ||
|---|---|---|---|---|---|---|---|---|---|
| £000's | £000's | £000's | £000's | £000's | £000's | £000's | £000's | ||
| Six months to 30.09.24 (unaudited) | |||||||||
| Sale of goods | 583 | 8,164 | 8,594 | 5,079 | 8,334 | 2,145 | 283 | 33,182 | |
| Royalties | - | - | - | - | - | - | - | - | |
| Revenue from external customers | 583 | 8,164 | 8,594 | 5,079 | 8,334 | 2,145 | 283 | 33,182 | |
| Adjusted EBITDA | (7,856) | 1,827 | 2,384 | 1,723 | 540 | 531 | 138 | (713) | |
| Six months to 30.09.23 (unaudited) | |||||||||
| Sale of goods | 503 | 9,705 | 8,193 | 7,746 | 7,722 | 3,481 | 562 | 37,912 | |
| Royalties | - | - | - | - | - | - | 97 | 97 | |
| Revenue from external customers | 503 | 9,705 | 8,193 | 7,746 | 7,722 | 3,481 | 659 | 38,009 | |
| Adjusted EBITDA | (8,363) | 1,948 | 3,267 | 2,591 | 763 | 364 | 354 | 925 | |
| Year ended 31 March 2024 | |||||||||
| Sale of goods | 925 | 24,656 | 18,480 | 17,440 | 19,891 | 6,452 | 1,529 | 89,373 | |
| Royalties | - | - | - | - | - | - | 49 | 49 | |
| Revenue from external customers | 925 | 24,656 | 18,480 | 17,440 | 19,891 | 6,452 | 1,578 | 89,422 | |
| Adjusted EBITDA | (17,281) | 7,007 | 7,229 | 5,612 | 3,578 | 488 | 842 | 7,474 | |
| Six months to 30.09.24 (unaudited) | Six months to 30.09.23 (unaudited) | Year ended 31.03.24 (audited) | |||||||
| £000's | £000's | £000's | |||||||
| Adjusted EBITDA for reportable segments | (713) | 925 | 7,474 | ||||||
| Depreciation | (451) | (452) | (958) | ||||||
| Amortisation of right-of-use assets | (316) | (204) | (683) | ||||||
| Amortisation | (560) | (533) | (1,154) | ||||||
| Impairment of right-of-use assets | - | - | (80) | ||||||
| Exceptional items | 1 , 046 | - | (651) | ||||||
| Share-based payment charges | (186) | (320) | (413) | ||||||
| Profit from operating activities | (1,180) | (584) | 3,535 | ||||||
| Foreign exchange differences | 1,158 | (220) | 572 | ||||||
| Adjusted EBITDA for the Group | 445 | 705 | 8,046 | ||||||
| 7. Exceptional items | |||||||||
| Six months to 30.09.24 (unaudited) | Six months to 30.09.23 (unaudited) | Year ended 31.03.24 (audited) | |||||||
| £000's | £000's | £000's | |||||||
| Cessation of distribution business | - | - | (933) | ||||||
| Profit on disposal of properties | - | - | 282 | ||||||
| Disposal of equine anti parasitic product line | 1,046 | - | - | ||||||
| 1,046 | - | (651) | |||||||
| 8. (Loss)/earnings per share | |||||||||
| Six months to 30.09.24 (unaudited) | Six months to 30.09.23 (unaudited) | Year ended 31.03.24 (audited) | |||||||
| Earnings | Weighted average number of shares | Per share amount | Earnings | Weighted average number of shares | Per share amount | Earnings | Weighted average number of shares | Per share amount | |
| £000's | 000's | pence | £000's | 000's | pence | £000's | 000's | pence | |
| Earnings attributable to ordinary shareholders on continuing operations after tax | (1,697) | 67,745 | (2.50) | (1,307) | 67,722 | (1.93) | 1,048 | 67,745 | 1.55 |
| Dilutive effect of share options | - | - | - | - | - | - | - | 1,335 | - |
| Diluted earnings per share | (1,697) | 67,745 | (2.50) | (1,307) | 67,722 | (1.93) | 1,048 | 69,080 | 1.52 |
The diluted EPS figure reflects the impact of historic grants of share options and is calculated by reference to the number of options granted for which the average share price for the year was in excess of the option exercise price. As the Group's result for the six months ended 30 September 2024 was loss, there was no dilutive effect on the earnings per share in this period.
Taxation
The effective rate of the tax charge in the six months to 30 September 2024 is minus 22% which is lower than the effective rate in the six months to 30 September 2023 of 93%. The effective rate reflects the impact of tax losses incurred without recognising a corresponding deferred tax asset and of withholding taxes suffered on dividends received during the period.
Intangible assets
| Group | Goodwill | Distribution rights | Drug registrations, patents and licence costs | Total |
|---|---|---|---|---|
| £000's | £000's | £000's | £000's | |
| Cost | ||||
| At 31 March 2023 | 17,930 | 407 | 25,711 | 44,048 |
| Additions | - | - | 1,536 | 1,536 |
| At 30 September 2023 | 17,930 | 407 | 27,247 | 45,584 |
| At 31 March 2023 | - | - | 2,567 | 2,567 |
| Disposal | - | - | (268) | (268) |
| At 31 March 2024 | 17,930 | 407 | 29,546 | 47,883 |
| Additions | - | - | 1,770 | 1,770 |
| At 30 September 2024 | 17,930 | 407 | 31,316 | 49,653 |
| Amortisation | ||||
| At 31 March 2023 | - | (178) | (8,234) | (8,412) |
| Charge for the period | - | (10) | (523) | (533) |
| At 30 September 2023 | - | (188) | (8,757) | (8,945) |
| Charge for the period | - | (10) | (577) | (587) |
| At 31 March 2024 | - | (198) | (9,334) | (9,532) |
| Charge for the period | - | (10) | (550) | (560) |
| At 30 September 2024 | - | (208) | (9,884) | (10,092) |
| Net book value | ||||
| At 30 September 2024 | 17,930 | 199 | 21,432 | 39,561 |
| At 31 March 2024 | 17,930 | 209 | 20,212 | 38,351 |
| At 30 September 2023 | 17,930 | 219 | 18,490 | 36,639 |
| At 31 March 2023 | 17,930 | 229 | 17,477 | 35,636 |
The Group continuously reviews the status of its research and development activity, paying close attention to the likelihood of technical success and the commercial viability of development projects. In the period to September 2024 there were no indications that any development projects for which costs have previously been capitalised were unlikely to achieve technical success or commercial viability.
Related party transactions
Interest and management charges from Parent to the other Group companies
During the period Zhejiang ECO Animal Health Ltd paid dividends of £1,860,759 (RMB 17,118,983) to ECO Animal Health Ltd (H1 2023: £449,600).
During the period Zhejiang ECO Biok Animal Health Products Limited paid dividends of £85,217 (RMB 784,000) to ECO Animal Health Group plc (H1 2023: £225,029) and £1,023,478 (RMB 9,416,000) to ECO Animal Health Limited (H1 2023: £2,702,641).
This financial information was approved by the Board on 27 November 2024.
This interim statement is available on the Group's website.
| DIRECTORS AND OFFICERS | Dr Andrew Jones David Hallas Chris Wilks Tracey James Dr Frank Armstrong Joachim Hasenmaier | (Non-Executive Chairman) (Chief Executive Officer) (Chief Financial Officer) (Non-Executive Director) (Non-Executive Director) (Non-Executive Director) |
|---|---|---|
| REGISTERED OFFICE | The Grange, 100 High Street, Southgate, Lond on, N14 6BN Tel: 020 8447 8899 | |
| COMPANY NUMBER | 01818170 | |
| INFORMATION AT | www.ecoanimalhealth.com |
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