REG-ECO Animal Health Group plc, Half-yearly report
Released: 27/11/2009
26 November 2009
ECO Animal Health Group plc
Interim Results for the six months ended 30 September 2009
Key features
* Turnover on continuing operations rises 11 per cent to £8.9 million
(2008: £8.0 million).
* EBITDA and before share based payments increases 32 per cent
to £1.94 million
(2008: £1.47 million)
* Aivlosin(R) sales 10 per cent ahead of same period last year
* Further Aivlosin(R) marketing authorisations granted in Europe
* Strong performances in China and Latin America
* Net cash at period end of £3.2 million
Peter Lawrence, Chairman of ECO Animal Health Group plc, commented:
'The progress made in the first half of the year should continue, helped by the
recent new marketing authorisations that we have gained. Our balance sheet
remains debt free and although market conditions will undoubtedly remain
challenging, we look forward with continued confidence and optimism to
delivering further value to our shareholders'
Contacts:
ECO Animal Health Group plc
Peter Lawrence 020 8336 6190
Spiro Financial
Anthony Spiro 020 8336 6196
Cenkos Securities plc (Nominated Adviser)
Stephen Keys 020 7397 8926
Elizabeth Bowman 020 7397 8928
ECO Animal Health Group plc is a leader in the development, registration and
marketing of pharmaceutical products for animals. Our products for these global
growth markets promote well-being. Our financial goals are achieved through the
careful and responsible application of science to generate value for our
shareholders.
Eco Animal Health Group plc
Chairman's statement
I am pleased to report that we have maintained the good progress reported in my
statement last July and delivered a strong performance for the six months to 30
September 2009.
Turnover on continuing operations increased close to 11 per cent reaching £ 8.9
million (2008: £8.0 million) and EBITDAS (earnings before interest, tax,
depreciation, amortisation and share based payments) rose some 31 per cent to
£1.93 million (2008: £1.47 million)
In July I referred to the impact of IAS 21 on our results. This accounting
standard requires companies to revalue all foreign currency trade receivables at
the appropriate year-end exchange rate. I pointed out at the time that should
the value of sterling strengthen against the dollar in the current year then the
profit generated last year would be eroded and that is what has happened. In
the period under review the IAS 21 adjustment has reduced the Company's profit
by almost £400,000. It should be noted that these movements occur on paper only
and do not affect the actual trading of the company since it purchases most of
its raw materials in US dollars. Should sterling weaken again before the year-
end, the currency difference may diminish, but since the end of September it has
actually strengthened further against the US dollar.
On 9 November, following shareholder approval at the Annual General Meeting in
September, the Company paid a final dividend for the year to 31 March 2009 of
5.45 pence. A scrip dividend alternative was again available and I am delighted
that around half the total dividend was taken in shares, which is very positive
for the Company as it allows management to use the cash saved in the business.
Since the scheme was introduced in 2008, well over £4 million of cash has been
conserved and invested in the business. As mentioned last July, the Board was
considering combining the Interim and Final dividends into a single payment. We
have now decided to do this and therefore will declare a single dividend next
July with the results for the year to 31 March 2010. The Board believes that in
view of the administration costs a single payment is appropriate for a company
of our size.
Operations
While the overall global business climate remains extremely challenging, it is
encouraging that ECO's sales to the international veterinary pharmaceutical
market were 11 per cent ahead of the level achieved during the first six months
of last year. Overall margins continue to improve reflecting both the higher
weighting of sales of Aivlosin(R), ECO's patented macrolide antibiotic, within the
product portfolio and the early benefits obtained from the aggressive supply
chain cost reduction programme.
Trading in our major markets, including China, Latin America and South Africa
continues to develop very positively with further advances in sales and margin.
ECO Brazil's sales, in local currency, were around 38 per cent above the level
of last year whilst in China, sales from our subsidiary, Zhejiang ECO Biok
Animal Health Products Limited, were up over 12 per cent in local currency.
China remains the largest market opportunity for our products and we are
currently examining the feasibility of another joint venture in that country.
In Japan, as previously reported, ECO holds a minority shareholding in ECOPHARMA
Inc., a profitable distribution company. ECO's negotiations with the majority
shareholders about the sale of their stake in the business are progressing
steadily.
The global sales value of Aivlosin(R) was up 10 per cent in sterling compared with
the same period last year. During the first half of the year we continued to
expand our Aivlosin(R) product range. A Europe wide marketing authorisation for a
water-soluble granule formulation for the treatment and prevention of ileitis
(porcine proliferative enteropathy), an enteric disease of pigs, was obtained.
This addition to our European Aivlosin(R) product range provides a simple solution
to the accurate and simultaneous treatment of large numbers of pigs.
In Europe, we have recently concluded the appointment of a number of Aivlosin(R)
distributors, selected for their local knowledge of the poultry and pig
industries. These new partners will focus on a number of EU national and
regional markets while ECO itself will be responsible for selling Aivlosin(R) for
both pigs and poultry in the UK . Since the summer, we have been training our
new distributors in readiness for the Autumn sales campaigns which are important
for the seasonal treatment of respiratory diseases.
These major improvements to the distribution channels in Europe, together with
the additional new marketing authorisations and regional product launch
activities, are expected to yield dividends during the latter half of this year.
In addition, we have recently received positive opinions from the Committee for
Medicinal Products for Veterinary Use of the European Medicines Agency for two
new Aivlosin(R) formulations.
The first is for a concentrated oral powder for pigs, which will help improve
our market penetration in key markets such as Germany and Denmark where oral
powders are used in preference to premix products.
The second positive opinion is for a new presentation of Aivlosin(R) water soluble
granules for pheasants. This will open up a new market sector for game birds in
which ECO will have the first licensed product for the treatment of the most
important respiratory disease of farmed pheasants, Mycolasma gallisepticum.
In the United States, the granting by the Food and Drug Administration of the
first marketing authorisations for Aivlosin(R) are expected in 2010. We have
already started work on launch and distribution plans for this very important
market.
The research being carried out in The Virology Division of the Department of
Pathology at the University of Cambridge is continuing, boosted by the award of
a grant of £500,000 by the UK Medical Research Council. The work is focussing on
investigating the inhibition of influenza viruses by macrolide antibiotics; ECO
and the University continue to explore the potential of Aivlosin(R) as an anti-
viral agent in various systems.
Despite the extremely difficult trading conditions in Europe during the period,
sales of the Ecomectin(R) range of antiparasitic products have been broadly in-
line with management expectations. Strong sales in Spain, up 7 per cent over the
same period as last year, were offset by weaker sales in the UK and Ireland. The
launch of new formulations in Europe has benefited margins. Sales of Ecomectin(R)
are traditionally stronger in the second half of the fiscal year, associated
with the increased prevalence of parasites in the spring. Together, sales of
Ecomectin(R) and our other treatments also increased by over 11 per cent. There
remains solid potential within this group of products with further launches
expected in the near future.
Board membership
On 11 November, we announced the appointment of Brett Clemo as an executive
director and Julia Henderson as a non-executive director of the Company. Brett
joined ECO in 2006 and is its Director of Global Operations. Prior to joining
the Company, Brett was with Syngenta Chemicals BV where he became Operations
Director and previously he held senior management roles for 15 years within
AstraZeneca.
Julia has spent the majority of her career in the City and in 1989 became a
founder shareholder and later a director of Beeson Gregory (now Evolution
Securities) where she was involved for many years with entrepreneurial growth
companies and has acquired a wealth of City experience. I warmly welcome them
both to our Board.
Outlook
The progress made in the first half of the year should continue, helped by the
recent new marketing authorisations that we have gained. Our balance sheet
remains debt free and although market conditions will undoubtedly remain
challenging, we look forward with continued confidence and optimism to
delivering further value to our shareholders.
Peter A Lawrence
Executive Chairman
26 November 2009
ECO ANIMAL HEALTH GROUP PLC
DIRECTORS AND OFFICERS Peter Lawrence (Chairman)
Marc Loomes (Chief Executive)
Kevin Stockdale (Finance Director)
Julia Trouse (Executive Director and Company Secretary)
Brett Clemo (Executive Director) (with effect from 1 December 2009)
David Danson (Non-executive Director)
Julia Henderson (Non-executive Director) (with effect from 1 December 2009)
REGISTERED OFFICE 78, Coombe Road, New Malden, Surrey, KT3 4QS
Tel: 020-8336 2900 Fax: 020-8336 0909
COMPANY NUMBER 01818170
ECO ANIMAL HEALTH GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS TO 30 SEPTEMBER 2009
Six months Six months Year
to to ended
30.09.09 30.09.08 31.03.09
Notes (unaudited) (unaudited) (audited)
£000 £000 £000
Revenue 3
Continuing operations 8,877 8,027 18,898
Discontinued operations - 395 447
__________ __________ __________
8,877 8,422 19,345
Cost of sales (5,233) (5,376) (11,571)
__________ __________ __________
Gross Profit 3,644 3,046 7,774
Other operating income 60 80 186
Administrative expenses (1,430) (2,005) (4,756)
Currency (losses)/gains (390) 73 595
Amortisation of intangible assets (1,352) (1,210) (2,526)
Share based payments (72) (59) (133)
Results from operating activities:
Continuing operations 460 159 1,421
Discontinued operations - (234) (281)
__________ __________ __________
460 (75) 1,140
Loss on sale of a division - (591) (676)
Net finance (costs)/income (47) 43 40
__________ __________ __________
Profit/(loss) before tax:
Continuing operations 413 202 1,461
Discontinued operations - (825) (957)
__________ __________ __________
413 (623) 504
Taxation (45) 190 181
__________ __________ __________
Profit/(loss) for the period:
Continuing operations 368 392 1,642
Discontinued operations - (825) (957)
__________ __________ __________
Profit/(loss) for the period 368 (433) 685
Other comprehensive income:
Foreign currency translation differences on foreign operations: (179) 28 562
Actuarial losses on pension scheme - - (99)
__________ __________ __________
Total comprehensive income 189 (405) 1,148
__________ __________ __________
__________ __________ __________
Profit/(loss) attributable to:
Owners 194 (564) 447
Minority interest 174 131 238
__________ __________ __________
368 (433) 685
__________ __________ __________
Total comprehensive income/(loss) for the period:
Attributable to:
Owners 104 (590) 696
Minority interest 85 185 452
__________ __________ __________
Total comprehensive income/(loss) for the period 189 (405) 1,148
__________ __________ __________
__________ __________ __________
BASIC EARNINGS PER SHARE 4
Continuing operations 0.42p 0.57p 3.06p
Discontinued operations (1.81)p (2.08)p -
__________ __________ __________
0.42p (1.24)p 0.98p
__________ __________ __________
__________ __________ __________
FULLY DILUTED EARNINGS PER SHARE 4 0.42p (1.24)p 0.98p
Earnings from continuing activities before
interest, taxation, depreciation, amortisation
and share based payments. 1,941 1,471 3,979
__________ __________ __________
__________ __________ __________
ECO ANIMAL HEALTH GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS TO 30 SEPTEMBER 2009
Share Share Other Revaluation Retained Total Minority Total
Capital Premium Reserves Reserves Earnings Interest Equity
Account Account
£000 £000 £000 £000 £000 £000 £000 £000
At 1 April 2008 2,256 37,095 806 253 8,686 49,096 647 49,743
Total comprehensive
income for the period:
Profit for the period - - - - 447 447 238 685
Other comprehensive income
Foreign currency
translation differences - - - - 348 348 214 562
Depreciation written back - - - (3) - (3) - (3)
Actuarial losses on
pension scheme - - - - (99) (99) - (99)
________ ________ ________ ________ ________ ________ ________ ________
Total comprehensive
income for the period - - - (3) 696 693 452 1,145
________ ________ ________ ________ ________ ________ ________ ________
Transactions with owners
Arising on issue of
shares in the period 64 1,192 - - - 1,256 - 1,256
Dividends - - - - (3,269) (3,269) - (3,269)
Share based payments - - 132 - - 132 - 132
________ ________ ________ ________ ________ ________ ________ ________
Total transactions
with owners 64 1,192 132 - (3,269) (1,881) - (1,881)
________ ________ ________ ________ ________ ________ ________ ________
At 31 March 2009 2,320 38,287 938 250 6,113 47,908 1,099 49,007
Total comprehensive
income for the period:
Profit for the period - - - - 194 194 174 368
Other comprehensive income
Foreign currency
translation differences - - - - (90) (90) (89) (179)
________ ________ ________ ________ ________ ________ ________ ________
Total comprehensive
income for the period - - - - 104 104 85 189
________ ________ ________ ________ ________ ________ ________ ________
Transactions with owners
Arising on issue of
shares in the period 12 358 - - - 370 - 370
Dividends - - - - (2,542) (2,542) - (2,542)
Share based payments - - 72 - - 72 - 72
________ ________ ________ ________ ________ ________ ________ ________
Total transactions
with owners 12 358 72 - (2,542) (2,100) - (2,100)
________ ________ ________ ________ ________ ________ ________ ________
At 30 September 2009 2,332 38,645 1,010 250 3,675 45,912 1,184 47,096
________ ________ ________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________ ________ ________
Prior interim period
At 1 April 2008 2,256 37,095 806 253 8,686 49,096 647 49,743
Total comprehensive
(losses) for the period:
(Loss) for the period - - - - (564) (564) 131 (433)
Other comprehensive
(losses)/income
Foreign currency
translation differences - - - - (26) (26) 54 28
________ ________ ________ ________ ________ ________ ________ ________
Total comprehensive
(losses) for the period - - - - (590) (590) 185 (405)
________ ________ ________ ________ ________ ________ ________ ________
Transactions with owners
Arising on issue of
shares in the period 19 362 - - - 381 - 381
Dividends - - - - (2,480) (2,480) - (2,480)
Share based payments - - 59 - - 59 - 59
________ ________ ________ ________ ________ ________ ________ ________
Total transactions
with owners 19 362 59 - (2,480) (2,040) - (2,040)
________ ________ ________ ________ ________ ________ ________ ________
At 30 September 2008 2,275 37,457 865 253 5,616 46,466 832 47,298
________ ________ ________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________ ________ ________
ECO ANIMAL HEALTH GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
30.09.09 30.09.08 31.03.09
(unaudited) (unaudited) (audited)
Notes £000 £000 £000
ASSETS Non current
assets
Property,plant & equipment 7 1,152 1,224 1,158
Goodwill & other intangibles 6 36,064 34,862 35,729
Investments 287 284 286
_________ _________ _________
37,503 36,370 37,173
Current assets
Inventories 5,388 3,893 4,921
Trade and other receivables 6,608 8,021 8,354
Deferred tax 213 228 228
Other taxes and social security 151 225 24
Cash and cash equivalents 3,952 4,640 3,718
_________ _________ _________
16,312 17,007 17,245
_________ _________ _________
Total assets 53,815 53,377 54,418
_________ _________ _________
Current liabilities
Trade and other payables (3,193) (2,522) (3,532)
Short term borrowings (776) (650) (909)
Current portion of long term borrowings - (201) -
Corporation tax (20) (33) (10)
Other taxes and social security (164) (179) (149)
Dividends (2,563) (2,494) (808)
_________ _________ _________
(6,716) (6,079) (5,408)
Total assets less current liabilities 47,099 47,298 49,010
Non current liabilities
Long term provisions (3) - (3)
_________ _________ _________
47,096 47,298 49,007
_________ _________ _________
_________ _________ _________
Equity
Capital and reserves
Called up share capital 2,332 2,275 2,320
Share premium 38,645 37,457 38,287
Revaluation reserve 250 253 250
Other reserves 1,010 865 938
Retained earnings 3,675 5,616 6,113
_________ _________ _________
45,912 46,466 47,908
Minority interest 1,184 832 1,099
_________ _________ _________
Total equity 47,096 47,298 49,007
_________ _________ _________
_________ _________ _________
ECO ANIMAL HEALTH GROUP PLC CONSOLIDATED
STATEMENT OF CASH FLOWS
Six Six Year
months months ended
to 30.09.09 to 30.09.08 31.03.09
(unaudited) (unaudited) (audited)
£000 £000 £000
Profit/(loss) from operations 460 (75) 1,140
Adjustment for:
Depreciation of plant and equipment 57 61 177
Amortisation of intangible assets 1,352 1,206 2,526
Actuarial pension losses - - (99)
Increase in pension provision - - 3
Share based payments 72 59 133
Foreign exchange differences (180) 28 604
__________ __________ __________
Operating cash flow before movement in working capital 1,761 1,279 4,484
(Increase) in inventories (466) (67) (1,650)
Decrease in receivables 1,618 234 330
(Decrease)/increase in payables (324) (880) 110
__________ __________ __________
Cash generated from operations 2,589 566 3,274
Interest paid (56) (76) (138)
Taxation (20) (134) (167)
__________ __________ __________
Net cash inflow from operating activities 2,513 356 2,969
Cash flows from investing activities
Proceeds from disposal of a division - - 291
Purchase of property plant and equipment (51) (25) (53)
Disposal of property plant and equipment - 85 -
Purchase of investments (1) - (5)
Purchase of goodwill - - (215)
Costs of acquiring drug registrations (1,686) (1,860) (3,872)
Interest received 9 119 178
__________ __________ __________
Net cash (used in) investing activities (1,729) (1,681) (3,676)
__________ __________ __________
Cash flows from financing activities
Issue of shares 369 380 1,256
(Repayment of) bank borrowings - (186) (186)
Dividends paid (786) (586) (3,060)
__________ __________ __________
Net cash (used in) financing activities (417) (392) (1,990)
__________ __________ __________
Net increase/(decrease) in cash and cash equivalents 367 (1,717) (2,697)
Cash and cash equivalents at the beginning of the period 2,809 5,506 5,506
__________ __________ __________
Cash and cash equivalents at the end of the period 3,176 3,789 2,809
__________ __________ __________
__________ __________ __________
NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2009
1. Basis of preparation
The financial information for the period to 30 September 2009 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 the twelve months to 31 March 2009.
The Group applies revised IAS 1 'Presentation of Financial Statements (2007), which became effective as of 1 January
2009. 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 the consolidated statements of changes in equity.
This presentation has been applied in these interim financial statements for the period ended 30 September 2009.
Comparative information has been re-presented to conform to the revised IAS 1. Since the change in accounting policy
only impacts presentation of the statements there is no impact on earnings per share.
2. Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim
Financial Reporting'. They do not contain all the information required for the full annual financial statements and
should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2009.
3. Revenue is derived from the Group's animal pharmaceutical businesses.
4. Earnings per share Six Six Year
months to months to ended
30.09.09 30.09.08 31.03.09
(unaudited) (unaudited) (audited)
Weighted average number of shares in issue (000)'s 46,571 45,424 45,818
Fully diluted weighted average number of shares in issue (000)'s 46,593 45,425 45,818
Profit attributable to equity holders of the company (£'s) 194,554 (563,556) 447,081
Basic earnings per share (pence) 0.42 (1.24) 0.98
Fully diluted earnings per share (pence) 0.42 (1.24) 0.98
ECO ANIMAL HEALTH GROUP PLC
NOTES TO THE PRELIMINARY RESULTS
5. Dividends Six Six
months months Year
to to ended
30.09.09 30.09.08 31.03.09
(unaudited) (unaudited) (audited)
Final dividend in respect of the year ended 31 March 2008 £000 £000 £000
45,502,772 shares at 5.45p per share - 2,480 2,480
Interim dividend in respect of the year ended 31 March 2009
46,402,407 shares at 1.70p per share - - 789
Final dividend in respect of the year ended 31 March 2009
46,633,189 shares at 5.45p per share 2,542 - -
(Approved 24 September 2009 in General Meeting) _________________________________________
2,542 2,480 3,269
_________________________________________
_________________________________________
6. Intangible non current assets Development
Goodwill Costs Total
£000 £000 £000
Cost at 1 April 2009 19,892 26,723 46,615
Additions - 1,686 1,686
_________________________________________
Cost at 30 September 2009 19,892 28,409 48,301
_________________________________________
_________________________________________
Amortisation at 1 April 2009 1,466 9,419 10,885
Charge for the period - 1,352 1,352
_________________________________________
Amortisation at 30 September 2009 1,466 10,771 12,237
_________________________________________
_________________________________________
Net book value at 30 September 2009 18,426 17,638 36,064
_________________________________________
_________________________________________
Net book value at 1 April 2009 18,426 17,304 35,730
_________________________________________
_________________________________________
7. Property, plant and equipment
Plant Fixtures,
Freehold and fittings &
Property Machinery equipment Total
£000 £000 £000 £000
Cost at 1 April 2009 650 703 520 1,873
Additions - 47 4 51
_______________________________________________________
Cost at 30 September 2009 650 750 524 1,924
_______________________________________________________
_______________________________________________________
Amortisation at 1 April 2009 39 278 398 715
Charge for the period 6 24 27 57
_______________________________________________________
Amortisation at 30 September 2009 45 302 425 772
_______________________________________________________
_______________________________________________________
Net book value at 30 September 2009 605 448 99 1,152
_______________________________________________________
_______________________________________________________
Net book value at 1 April 2009 611 425 122 1,158
_______________________________________________________
_______________________________________________________
8. Related party transactions
At the balance sheet date, Eco Animal Health Group plc owed P A Lawrence, a director of Eco Animal Health Group plc, and
members of his family a balance amounting to £402,489 (30 September 2008: £542,493). This amount represents dividends
reinvested into the Company.
During the period the Group provided management services to Kiotech International plc, a company in which P A Lawrence
is a director and holds share options.
Fees charged were £20,484 (Six months to 30 September 2008: £20,484).
During the period the Group made sales to Zhejiang Eco Biok Animal Health Products Limited on an arm's length basis to
the value of £562,834(Six months to 30 September 2008: £426,429). At the end of the period there was an inter company
balance owing from this company of £545,137 (30 September 2008: £426,429).
The Group also made sales on an arm's length basis to Eco Animal Health do Brasil Comercio de Productos Veterinarios
Ltda to the value of £542,834 (Six months to 30 September 2008: £624,218). At the end of the period there was an inter
company balance of £761,166 (30 September 2008: £563,664).
Since both companies are subsidiaries of Eco Animal Health Group plc these transactions and balances have been
eliminated on consolidation.
9. This financial information was approved by the board on 26 November, 2009.
10. Copies of this interim report are being sent to all of the Company's shareholders. Further copies can be obtained
from the Company's registered office at 78 Coombe Road, New Malden, Surrey KT3 4QS.