Eco Animal Regulatory News (EAH)

28 Jul 2014 07:00

ECO ANIMALHEALTH GROUP PLC

28 July 2014

ECO Animal Health Group plc

(AIM: EAH)

Results for the year ended 31 March 2014

HIGHLIGHTS

Group sales increase by 10% to £31.9m (+13% at constant exchange rates) Gross profit up 8% at £14.1m Adjusted EBITDA rises 5% to £7.1m (+13% at constant exchange rates) Gross margins held at level of last year despite strength of sterling Net cash increased to £18.2m Cash generation strong at £6.2m, up 44% Full year dividend raised by 5% to 4.2 pence per share Sales in China continue to advance, rising by over a third Global Aivlosin sales up over 22% New marketing authorisations gained in Canada, EU, Russia and Republic of Korea Current financial year started strongly

Peter Lawrence, Executive Chairman of ECO Animal Health Group plc, commented:

“The current year has started well with our major markets maintaining their rate of growth, with particularly good demand from customers in the US and Canada. The strength of sterling may remain an issue, but it will not divert us from our objective of developing our global business. Aivlosin® sales are growing rapidly, boosted particularly by North American demand where our business is still in its early stages but showing very significant and exciting potential. We look forward with optimism and are confident of delivering another strong performance in the current year.”

Contacts:
ECO Animal Health Group plc
Peter Lawrence								020 8336 6190
Spiro Financial
Anthony Spiro								020 8336 6196
Peel Hunt LLP (Nominated Adviser )
Dan Webster, Dan Harris								020 7418 8869

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.

CHAIRMANS STATEMENT

FOR THE YEAR ENDED 31 MARCH 2014

I am pleased to report that ECO Animal Health Group (“ECO”) has delivered another strong set of results for the year ended 31 March 2014. It is particularly encouraging that this result has been achieved during a period where the strength of sterling has had a significant accounting impact on our figures. ECO sells its veterinary pharmaceutical products to customers in some 60 countries and invoices in local currency to the majority of them. Therefore, the financial results of companies like ECO that trade internationally, but report in sterling, are inevitably affected by currency movements.

The US dollar declined by over 9% against sterling during the year and the pound was also strong against the Brazilian Real, Japanese Yen and Chinese Yuan. While these movements adversely affected the stated value of our export sales, they have a beneficial effect on the price of imported raw materials, which are used in the manufacture of our products. However, while the Group benefits from the cushioning effect of these currency movements on its purchases, it could not entirely escape the overall impact of sterling’s strength.

Sales grew to almost £32m and EBITDA (Earnings before Interest, Tax, Depreciation, Amortisation, minority interests, share based payments and foreign exchange differences) to over £7m and cash generation advanced again, reaching £6.2m. Group cash at the year end was £18.2m following the successful placing last October, which raised £11.5m after expenses. The Company is grateful to all those who supported the placing so strongly. Following the latest reporting regulations, information on the full financial results is given in later sections of this report.

The Board is pleased to declare a dividend for the year of 4.2 pence per share, an increase of 5 per cent over the level last year. The dividend will be paid on 15th August to shareholders on the register on 8th August 2014. This increase reflects the Board’s confidence in the strength of ECO and its ability to continue to profitably expand its operations. Owing to the very low uptake of our scrip dividend alternative last year and our improving cash generation, a scrip alternative is not available for the above declaration.

Operations

Sales of Aivlosin® in the USA and Canada, territories which account for approximately one third of the potential world market for Aivlosin®, continue to build quickly. The price of pork has risen in North America as a result of tight supply caused by Porcine Endemic Diarrhoea virus (PEDv) and increased consumer demand. The increasing value of pigs bodes well for producers unaffected by the virus who have invested heavily in enhanced biosecurity and disease control programmes. A vaccine against PEDv has very recently received regulatory approval in the USA. This development is positive as it will allow us access onto pig farms which have previously been quarantined.

Our Chinese subsidiary, Zhejiang ECO Biok Animal Health Products, had another very successful year with sales up by over 33%. In Japan, the fact that sterling strengthened by almost 20% against the Yen during the period weighed heavily on results. The uncertain economic and political situation in Latin America, most notably in Argentina and Venezuela, but also in Mexico where there have been outbreaks of disease, has hampered sales in the region. The restricted availability of foreign currency to these distributors constrained our ability to ship significant orders, which were received in late 2013. By contrast, sales in Brazil exceeded our expectations despite the Real also weakening by 20% against sterling. Demand for Aivlosin® in Latin America remains high and strengthening local economies in the region would have a major positive impact on our business there. Sales in other markets of strategic importance to the Group, notably, Russia, Turkey and India, also continued to grow whilst overall performance in mainland Europe was up by 28%, despite the generally difficult economic climate.

We continue to invest in our product development pipeline, with the aim of obtaining additional marketing authorisations for further disease indications in both our traditional pig and poultry sectors, as well as for new species. As a result of these ongoing activities, we were granted several new Aivlosin® marketing authorisations during late 2013 and early 2014 which are important milestones in the development of the company. These include approvals for use for turkeys in the EU, for pigs in South Korea and the broadening of our existing licences in Russia and Canada. Sales arising from the launch of these products are beginning to build and will have a growing impact on results in the years ahead.

Work is progressing well on the implementation of our supply chain strategy and we now have the funds in place to support the ongoing expansion of our global business.

After the year end, ECO acquired the business of its longstanding Southeast Asian distributor, with headquarters in Kuala Lumpur and representation throughout the region. We are confident that this exciting development will allow ECO to accelerate its penetration of important pig and poultry markets in the region. Our distribution arrangements in Southeast Asia will now benefit from enhanced levels of technical and marketing support, which will boost the commercial impact of the Aivlosin® marketing authorisations we have already gained in these territories.

Employees

On behalf of all shareholders I would like to thank all our employees for their hard work and effort during another very successful year. Their dedication, teamwork and commitment underpin our company and give us considerable optimism for the future.

Outlook

The current year has started well with our major markets maintaining their rate of growth with particularly good demand from customers in the US and Canada. The strength of sterling may remain an issue, but it will not divert us from our objective of developing our global business. Aivlosin® sales are growing rapidly, boosted particularly by North American demand where our business is still in its early stages but showing very significant and exciting potential. We look forward with optimism and are confident of delivering another strong performance in the current year.

Peter Lawrence

Executive Chairman

25 July 2014

STRATEGIC REPORT

FOR THE YEAR ENDED 31 MARCH 2014

Financial

Group sales in the year to 31 March 2014 rose by 10% to £31.9m; this increase is 13% at constant exchange rates (CER) i.e.as if the 2013 sales are recalculated using the same average exchange rates as applied in 2014. Sales of Aivlosin®, our flagship, patented, therapeutic (disease treating) product, advanced by over 22% in sterling above the level of the previous year. This encouraging performance continues to reflect our strategic decision to focus primarily on our core high margin products and less on lower margin generics. The resulting more profitable product mix was becoming established last year and, despite the strength of sterling, the margins were broadly the same as achieved last year and still significantly higher than 2012.

EBITDA (Earnings before interest, tax, depreciation, amortisation, share based payments, foreign exchange movements and minorities) is our main key performance indicator because we are required to amortise our drug registration costs even though we believe they are increasing in value.

EBITDA advanced over 5% to £7.05m, a new record for the company and, on a like for like basis at CER the growth would have been 13%. Pre tax profit increased by 11% which continued to reflect the change in estimated useful life of Aivlosin® drug registrations effected last year, which accounts for approximately £0.5m increase over the prior year’s figure. Our key measurement of EBITDA is unaffected by this change.

Group cash at the year end was £18.2m following the successful placing last October, which raised £11.5m after expenses. The higher weighted average number of shares in issue following the placing and the higher tax charge in the year to 31 March 2014 reduced the earnings per share from 4.98p in 2013 to 4.35p.

Key Performance Indicators

The key performance indicators (‘KPIs’) for the Group are those that communicate the financial performance and strength of the group as a whole to shareholders.

A summary of the KPI’s is as follows:

Currency

Under IFRS rules, financial assets at the period end are translated from foreign currencies using the period end exchange rates. It has been our practice not to convert the majority of the currency balances into sterling, but to use them to pay overseas suppliers in local currency and invest in the business. It is therefore entirely possible that these currency losses on translation may reverse in the current period and if they do not, it will give us the opportunity to purchase raw materials and services in the current year at advantageous effective exchange rates.

Since the placing, we do not see any current need to add to our sterling balances by converting currencies. Much of the planned expansion in sales of Aivlosin® and the associated working capital can be financed from the funds raised last year.

Risks and Uncertainties

All businesses face a number of strategic and operational risks and uncertainties and the Board considers that the following could influence the Group’s performance:

Currency Movements

The Group exports its products to almost 60 counties and is exposed to movements in currency. It has not been the company’s practice to convert currencies which are used for purchasing raw materials and services in those currencies and this acts as an extensive hedge against currency fluctuations.

Commercial Risks

There is increasing pressure on veterinarians to prescribe antibiotics appropriately and in accordance with the product label. Aivlosin® meets all current guidelines for the judicious and prudent use of antimicrobials for food producing animals and is never used in human health. The Group spends considerable effort and resource liaising with regulatory authorities and leading consultants to ensure that it remains compliant with all prescribing guidelines.

Supply Risks

The Group is dependent on a small number of suppliers for some of its raw materials and maintains business interruption insurance in respect of each of these. In the longer term the Group continues to build strategic manufacturing partnerships internationally and to increase safety stock levels in order to protect its complex global supply chain.

Dependence on key customers

The Group is dependent on a number of customers and distributors in each of the territories into which it sells. The loss of one or more of its key customers could result in lower than expected sales and have a significant impact on the scale of its operations. The Group seeks to minimise reliance on key territories and individual customers and distributors.

Disease

Although outbreaks of diseases for which our products are indicated are generally beneficial to our sales, some disease outbreaks temporarily impact on production, disrupt the free movement of animals and affect trade. In the face of continued global demand for animal protein, however, any reduction in supply leads to increased prices and therefore benefits those who have taken effective measures to prevent or control the disease. In the medium term, most disease outbreaks are generally well controlled by appropriate intervention strategies.

Timing of approval of marketing authorisations

Aivlosin® has been licenced for use in pigs and/or in poultry by the European, USA, Canadian, Japanese, Chinese and many other regulatory bodies globally but the exact timing of new approvals of marketing authorisations is difficult to predict. Regulatory authorities may submit additional questions or require supplementary trial work to be performed prior to granting of a license and this can lead to some delay. Therefore, considerable resource is devoted to our licensing work in order to address any issues that may arise in as timely a manner as is possible.

Strategy

ECO Animal Health Group plc is a leader in the development, registration and marketing of pharmaceutical products for animals. The company has developed into a significant UK based business with subsidiaries, joint ventures and distributors in 60 countries. ECO has been granted over 600 drug registrations around the world for its pharmaceutical products, which are principally, but not exclusively, for the treatment of various conditions in pigs and poultry. The company uses advanced science in order to offer a wide and effective range of specialist treatments, underpinned by strong customer service.

The company will continue to pursue organic growth by developing its markets and expanding its customer base. It will also continue to research and develop additional applications for its established and proven ranges of active pharmaceutical ingredients. ECO will also consider acquisition opportunities as they arise, provided they meet its market, financial and strategic objectives.

Post Balance Sheet Event

The Group entered into an agreement to acquire the business of its Southeast Asian distributor in May 2014 for a consideration of $437,500.

Trading update and outlook

The current year has started well with major markets maintaining their rate of growth with particularly good demand from customers in the US and Canada. The strength of sterling may remain an issue, but it will not divert the company from its objective of developing a global business. Aivlosin® sales are growing rapidly, boosted particularly by North American demand where business is still in its early stages but showing very significant and exciting potential.

Peter Lawrence

Executive Chairman

25 July 2014

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2014

				2014				2013
		Notes		£				£
Revenue		2,3		31,864,593				28,985,954
Cost of sales				(17,725,507)				(15,882,933)
Gross profit				14,139,086				13,103,021
Other income		4		324,223				179,380
Administrative expenses				(10,495,114)				(9,752,606)
Profit from operating activities		5		3,968,195				3,529,795
Finance income		6		57,613				56,214
Finance costs		6		(342,744)				(269,919)
Net finance (expense)				(285,131)				(213,705)
Profit before income tax				3,683,064				3,316,090
Income tax charge		8		(602,064)				(192,487)
Profit for the year from continuing operations				3,081,000				3,123,603
Discontinued operations
(Loss) for the year from discontinued operations (net of income tax)				-				(70,000)
Profit for the year				3,081,000				3,053,603
Profit attributable to:
Owners of the parent company				2,431,143				2,616,892
Minority interest		24		649,857				436,711
Profit for the year				3,081,000				3,053,603
Earnings per share (pence)		7
Continuing operations				4.35				5.11
Discontinued operations				-				(0.13)
Post tax earnings per share (pence)				4.35				4.98
Diluted earnings per share (pence)
Continuing operations				4.30				5.03
Discontinued operations				-				(0.13)
Diluted earnings per share (pence)				4.30				4.90

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2014

				2014				2013
		Notes		£				£
Profit for the year				3,081,000				3,053,603
Other comprehensive income:
Foreign currency translation differences				(651,390)				247,348
Defined benefit plan actuarial gains		21		25,000				57,000
Revaluation of freehold property				-				28,200
Deferred tax on revaluations				9,920				(3,460)
Other comprehensive income for the year				(616,470)				329,088
Total comprehensive income for the year				2,464,530				3,382,691
Attributable to:
Owners of the parent company				1,955,227				2,816,028
Minority interest		24		509,303				566,663
				2,464,530				3,382,691

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

The notes on pages 13 to 40 form part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED		Attributable to the owners of the Parent
		Share		Share		Treasury		Revaluation		Other		Retained		Total		Minority		Total
		Capital		premium		Reserve		Reserve		Reserves		Earnings				Interest		Equity
				Account
		£		£		£		£		£		£		£		£		£
Balance as at 31 March 2012		2,755,960		37,606,917		(5,217,580)		498,728		4,774,131		15,938,372		56,356,528		1,891,587		58,248,115
Profit for the year		-		-		-		-		-		2,616,892		2,616,892		436,711		3,053,603
Other comprehensive income:
Foreign currency differences		-		-		-		-		-		117,396		117,396		129,952		247,348
Actuarial losses on pension scheme assets		-		-		-		-		-		57,000		57,000		-		57,000
Revaluation of freehold property		-		-		-		28,200		-		-		28,200		-		28,200
Deferred taxation		-		-		-		(3,460)		-		-		(3,460)		-		(3,460)
Total comprehensive income for the year		-		-		-		24,740		-		2,791,288		2,816,028		566,663		3,382,691
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year		11,291		274,079		-		-		-		-		285,370		-		285,370
Share-based payments		-		-		-		-		358,260		-		358,260		-		358,260
Transfers on expiry of options		-		-		-		-		(82,062)		82,062		-		-		-
Dividends relating to 2012		-		-		-		-		-		(1,982,700)		(1,982,700)		-		(1,982,700)
Transactions with owners		11,291		274,079		-		-		276,198		(1,900,638)		(1,339,070)		-		(1,339,070)
Balance as at 31 March 2013		2,767,251		37,880,996		(5,217,580)		523,468		5,050,329		16,829,022		57,833,486		2,458,250		60,291,736
Transactions with owners
Profit for the year		-		-		-		-		-		2,431,143		2,431,143		649,857		3,081,000
Other comprehensive income:
Foreign currency differences		-		-		-		-		-		(510,836)		(510,836)		(140,554)		(651,390)
Actuarial gains on pension scheme assets		-		-		-		-		-		25,000		25,000		-		25,000
Deferred taxation		-		-		-		9,920		-		-		9,920		-		9,920
Total comprehensive income for the year		-		-		-		9,920		-		1,945,307		1,955,227		509,303		2,464,530
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year		356,461		12,298,339		-		-		-		-		12,654,800		-		12,654,800
Share-based payments		-		-		-		-		306,562		-		306,562		-		306,562
Transfer from special reserve to share premium		-		3,250,000		-		-		(3,250,000)		-		-		-		-
Transfers on expiry of options		-		-		-		-		(290,949)		290,949		-		-		-
Dividends relating to 2013		-		-		-		-		-		(2,110,183)		(2,110,183)		(799,146)		(2,909,329)
Transactions with owners		356,461		15,548,339		-		-		(3,234,387)		(1,819,234)		10,851,179		(799,146)		10,052,033
Balance as at 31 March 2014		3,123,712		53,429,335		(5,217,580)		533,388		1,815,942		16,955,095		70,639,892		2,168,407		72,808,299

FOR THE YEAR ENDED 31 MARCH 2014

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2014

COMPANY		Attributable to the owners of the Parent
		Share		Share				Treasury		Revaluation		Other		Retained		Total
		Capital		premium				Reserve		Reserve		Reserves		Earnings
				Account
		£		£				£		£		£		£		£
Balance as at 31 March 2012		2,755,960		37,606,917				(5,217,580)		229,867		4,774,131		14,311,458		54,460,753
Loss for the year		-		-				-		-		-		(232,332)		(232,332)
Actuarial gains on pension scheme assets		-		-				-		-		-		57,000		57,000
Revaluation of freehold property		-		-				-		28,200		-		-		28,200
Deferred taxation		-		-				-		(3,461)		-		-		(3,461)
Total comprehensive income for the year		-		-				-		24,739		-		(175,332)		(150,593)
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year		11,291		274,079				-		-		-		-		285,370
Share-based payments		-		-				-		-		358,260		-		358,260
Transfers on expiry of options		-		-				-		-		(82,062)		82,062		-
Dividends relating to 2012		-		-				-		-		-		(1,982,700)		(1,982,700)
Transactions with owners		11,291		274,079				-		-		276,198		(1,900,638)		(1,339,070)
Balance as at 31 March 2013		2,767,251		37,880,996				(5,217,580)		254,606		5,050,329		12,235,488		52,971,090
Loss for the year		-		-				-		-		-		(42,370)		(42,370)
Actuarial gains on pension scheme assets		-		-				-		-		-		25,000		25,000
Deferred taxation		-		-				-		9,920		-		-		9,920
Total comprehensive income for the year		-		-				-		9,920		-		(17,370)		(7,450)
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year		356,461				12,298,339		-		-		-		-		12,654,800
Share-based payments		-				-		-		-		306,562		-		306,562
Transfer from special reserve to share premium		-				3,250,000		-		-		(3,250,000)		-		-
Transfers on expiry of options		-				-		-		-		(290,949)		290,949		-
Dividends relating to 2013		-				-		-		-		-		(2,110,183)		(2,110,183)
Transactions with owners		356,461				15,548,339		-		-		(3,234,387)		(1,819,234)		10,851,179
Balance as at 31 March 2014		3,123,712				53,429,335		(5,217,580)		264,526		1,815,942		10,398,884		63,814,819

STATEMENTS OF FINANCIAL POSITION (CO. NUMBER: 01818170)

AS AT 31 MARCH 2014

				Group				Company
				2014		2013		2014		2013
		Notes		£		£		£		£
Non-current assets
Intangible assets		11		43,172,124		41,169,357		-		-
Property, plant and equipment		12		1,002,264		1,176,213		654,483		671,391
Investment property		13		148,511		151,642		148,511		151,642
Investments		14		8,738		8,738		20,082,240		20,082,240
				44,331,637		42,505,950		20,885,234		20,905,273
Current assets
Inventories		15		6,972,078		6,425,937		-		-
Trade and other receivables		16		9,868,673		11,248,516		33,908,457		30,348,663
Income tax recoverable				27,064		23,395		-		-
Other taxes and social security				304,174		170,615		101,963		157,612
Cash and cash equivalents		18		18,239,830		9,664,443		9,229,578		4,130,622
Total current assets				35,411,819		27,532,906		43,239,998		34,636,897
Liabilities
Trade and other payables		19		(6,343,255)		(6,915,983)		(150,957)		(278,332)
Short -term borrowings		20		-		(2,134,765)		-		(2,134,765)
Income tax				(205,626)		(174,467)		-		-
Other taxes and social security				(178,414)		(258,454)		(62,711)		(50,097)
Dividends				(30,614)		(31,835)		(30,614)		(31,835)
Current liabilities				(6,757,909)		(9,515,504)		(244,282)		(2,495,029)
Net current assets				28,653,910		18,017,402		42,995,716		32,141,868
Total assets less current liabilities				72,985,547		60,523,352		63,880,950		53,047,141
Non current liabilities
Deferred tax		17		(177,248)		(231,616)		(66,131)		(76,051)
TOTAL ASSETS LESS TOTAL LIABILTIES				72,808,299		60,291,736		63,814,819		52,971,090
EQUITY
Issued share capital		23		3,123,712		2,767,251		3,123,712		2,767,251
Share premium account				53,429,335		37,880,996		53,429,335		37,880,996
Treasury reserve		25		(5,217,580)		(5,217,580)		(5,217,580)		(5,217,580)
Revaluation reserve				533,388		523,468		264,526		254,606
Other reserves		26		1,815,942		5,050,329		1,815,942		5,050,329
Retained earnings				16,955,095		16,829,022		10,398,884		12,235,488
				70,639,892		57,833,486		63,814,819		52,971,090
Minority interests		24		2,168,407		2,458,250		-		-
TOTAL EQUITY				72,808,299		60,291,736		63,814,819		52,971,090

Approved by the Board and authorised for issue on 25 July 2014

Peter Lawrence Director

STATEMENT OF CASHFLOWS

FOR THE YEAR ENDED 31 MARCH 2014

				Group				Company
				2014		2013		2014		2013
		Notes		£		£		£		£
Cash flows from operating activities
Profit/(loss) before income tax				3,683,064		3,246,090		(35,978)		(232,332)
Adjustment for:
Net finance costs/(income)		6		285,131		213,705		(446,174)		(398,422)
Depreciation		12 & 13		172,776		190,224		20,829		22,933
Amortisation of intangible assets		11		2,336,424		2,562,217		-		-
Pension payments		21		(54,000)		(60,000)		(54,000)		(60,000)
Pension operating costs		21		4,000		4,000		4,000		4,000
Share based payments		22		306,562		358,260		306,562		358,260
Operating cash flows before movements in working capital				6,733,957		6,514,496		(204,761)		(305,561)
Change in inventories				(546,141)		(2,008,620)		-		-
Change in receivables				1,321,284		(258,559)		(3,429,145)		(1,250,662)
Change in payables				(652,768)		310,874		(114,761)		(449,880)
Cash generated from/(used in) operations				6,856,332		4,558,191		(3,748,667)		(2,006,103)
Finance costs				(33,723)		(39,184)		(31,979)		(38,995)
Income tax				(619,022)		(185,802)		(6,392)		-
Net cash from/(absorbed by) operating activities				6,203,587		4,333,205		(3,787,038)		(2,045,098)
Cash flows from investing activities
Acquisition of property, plant and equipment		12		(31,517)		(38,642)		(790)		(394)
Disposal of property plant and equipment				14,688		-		-		-
Purchase of intangibles		11		(4,339,731)		(4,619,566)		-		-
Finance income		6		57,613		56,214		478,153		437,417
Net cash (used in)/from investing activities				(4,298,947)		(4,601,994)		477,363		437,023
Cash flows from financing activities
Proceeds from issue of share capital				12,629,412		244,927		12,629,412		244,927
Dividends paid				(2,885,162)		(1,941,544)		(2,086,016)		(1,941,544)
Net cash (used in) financing activities				9,744,250		(1,696,617)		10,543,396		(1,696,617)
Net increase/(decrease) in cash and cash equivalents				11,648,890		(1,965,406)		7,233,721		(3,304,692)
Foreign exchange movements				(938,738)		(14,648)		-		-
Balance at 1 April 2013				7,529,678		9,509,732		1,995,857		5,300,549
Balance at 31 March 2014		18		18,239,830		7,529,678		9,229,578		1,995,857

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2014

1. General information

Eco Animal Health Group plc (“the company”) and its subsidiaries (together “the group”) manufacture and supply animal health products globally.

The Company is traded on the AIM market of the London Stock Exchange and is incorporated and domiciled in the UK. The address of its registered office is 78 Coombe Road, New Malden, Surrey, KT3 4QS.

2. Basis of preparation

The group has presented its annual report and accounts in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

The preparation of financial statements, in conformity with IFRS as adopted by the European Union, requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The principal accounting policies of the group are set out below and have been applied consistently in dealing with items which are considered material in relation to the Group’s financial statements.

3. Segment information

Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions. The Board considers the business from a geographical perspective. Geographically, management considers the performance in the UK and Europe, China, Japan and the Indian subcontinent, Latin America and the rest of the world. The segment information provided to the Board for the year ended 31 March 2014 is as follows;

Management considers Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”), adjusted for share-based payments.

		U.K.		Europe		China, Japan and the Indian subcontinent		Latin America		North America		Rest of the world		Total
		£		£		£		£		£		£		£
Year ended 31 March 2014
Total segmental revenue		784,102		5,534,264		17,347,649		8,486,794		5,033,518		3,111,228		40,297,555
Inter-segment revenue		-		-		(3,654,716)		(1,879,170)		(2,899,076)		-		(8,432,962)
Revenue from external customers		784,102		5,534,264		13,692,933		6,607,624		2,134,442		3,111,228		31,864,593
Sale of goods		784,102		5,534,264		13,692,933		6,607,624		2,134,442		2,902,185		31,655,550
Royalties		-		-		-		-		-		209,043		209,043
		784,102		5,534,264		13,692,933		6,607,624		2,134,442		3,111,228		31,864,593
Adjusted EBITDA		(1,209,358)		1,378,115		4,033,029		1,248,432		427,619		906,120		6,783,957
Total assets		21,359,252		12,837,414		19,968,441		14,151,503		2,900,998		8,222,756		79,440,364
Year ended 31 March 2013
Total segmental revenue		1,202,118		4,323,022		13,738,407		9,403,628		3,276,743		4,427,208		36,371,126
Inter-segment revenue		-		-		(2,854,106)		(2,453,163)		(2,077,903)		-		(7,385,172)
Revenue from external customers		1,202,118		4,323,022		10,884,301		6,950,465		1,198,840		4,427,208		28,985,954
Sale of goods		1,202,118		4,323,022		10,884,301		6,950,465		1,198,840		4,192,591		28,751,337
Royalties		-		-		-		-		-		234,617		234,617
		1,202,118		4,323,022		10,884,301		6,950,465		1,198,840		4,427,208		28,985,954
Adjusted EBITDA		(915,195)		1,004,225		2,959,981		1,771,244		32,650		1,787,591		6,640,496
Total assets		9,355,833		12,118,870		18,700,691		17,243,942		2,448,145		10,171,375		70,038,856

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

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

		2014		2013
		£		£
Adjusted EBITDA for reportable segments		6,783,957		6,640,496
Depreciation		(172,776)		(190,224)
Amortisation		(2,336,424)		(2,562,217)
Share-based payment charges		(306,562)		(358,260)
Finance (expense)		(285,131)		(213,705)
Profit before tax on continuing activities		3,683,064		3,316,090

4. Other income

		2014		2013
		£		£
Management charges		141,595		141,511
Rental income		126,600		6,600
Sundry Income		56,028		31,269
		324,223		179,380

5. Result from operating activities

		2014		2013
		£		£
Result from operating activities is stated after charging:
Cost of inventories recognised as an expense		17,635,170		15,795,333
Employee benefits expenses		3,819,200		3,432,339
Amortisation of intangible assets		2,336,424		2,562,217
Depreciation		172,776		190,224
Loss on foreign exchange transactions		264,138		29,507
Research and development		10,860		7,131
Operating lease rentals		410,195		297,569
Fees payable to the Company's auditor for the audit of the parent Company and Group annual accounts		18,225		19,000
For the audit of the Company's subsidiaries		30,525		28,500
Fees payable to other auditors for audit of the Company's subsidiaries pursuant to legislation		4,346		4,635
		2014		2013
		£		£
Earnings due to shareholders before interest, tax, depreciation, amortisation, share-based payments, foreign exchange differences and losses on disposal of discontinued activities
Profit from operating activities		3,968,195		3,529,795
Depreciation		172,776		190,224
Amortisation		2,336,424		2,562,217
Share-based payments		306,562		358,260
		6,783,957		6,640,496
Foreign exchange differences		264,138		29,507
		7,048,095		6,670,003

6. Finance (expense)

		2014		2013
		£		£
Finance costs
Interest paid		(33,723)		(39,184)
Foreign exchange differences on bank loans and overdrafts		(309,021)		(230,735)
Finance income
On short term bank deposits		57,613		56,214
Net finance (expense)		(285,131)		(213,705)

7. Earnings per share

The calculation of basic earnings per share is based on the post tax profit for the year divided by the weighted average number of shares in issue during the year.

		2014						2013
		Earnings		Weighted average number of shares		Per share amount		Earnings		Weighted average number of shares		Per share amount
		£'000		000’s		(pence)		£'000		000’s		(pence)
Earnings attributable to ordinary shareholders on continuing operations after tax		2,431		55,871		4.35		2,687		52,599		5.11
Dilutive effect of share options		-		691		(0.05)		-		789		(0.08)
Fully diluted earnings per share on continuing operations		2,431		56,562		4.30		2,687		53,388		5.03
Loss on discontinued activities		-		-		-		(70)		-		(0.13)
Fully diluted earnings per share		2,431		56,562		4.30		2,617		53,388		4.90

Diluted earnings per share takes into account the dilutive effect of share options. For the purposes of calculating earnings per share, shares held by the Employee Benefit Trust as part of the Joint Share Ownership Plan are excluded from the calculation of the weighted average number of shares. The weighted average number of shares held by the Trust during the year was 2,603,290 (2013: 2,603,290).

8. Taxation

		2014		2013
		£		£
Current tax:
Foreign corporation tax on profits for the year		646,512		294,395
Deferred tax
Due to change in effective rate		(23,150)		-
Origination and reversal of temporary differences		(21,298)		(101,908)
Income tax charge		602,064		192,487
Factors affecting the tax charge for the year
Profit on ordinary activities before taxation		3,683,064		3,316,090
		2014		2013
		£		£
Profit on ordinary activities before taxation multiplied by the applicable rate of UK corporation tax of 23% (2013: 24%)		847,105		795,862
Effects of:
Non deductible expenses		95,258		170,266
Non chargeable credits		(151,483)		(79,599)
Withholding tax on inter-company dividends		83,176		-
Enhanced allowance on research and development expenditure		(657,812)		(894,569)
Different tax rate for foreign subsidiaries		83,677		(34,725)
Reduced effective deferred tax rate		(23,150)		-
Unused tax losses carried forward		325,293		229,226
Other tax adjustments		-		6,026
Income tax charge		602,064		192,487
		2014		2013
		%		%
Applicable tax rate per UK legislation		23.00		24.00
Effects of:
Non deductible expenses		2.59		5.13
Non chargeable credits		(4.11)		(2.40)
Withholding tax on inter-company dividends		2.26		-
Enhanced allowance on research and development expenditure		(17.86)		(26.97)
Different tax rate for foreign subsidiaries		2.27		(1.05)
Reduced effective deferred tax rate		(0.63)		-
Unused tax losses carried forward		8.83		6.91
Other tax adjustments		-		0.18
Effective tax rate		16.35		5.80

The UK corporation tax rate reduced from 24% to 23% with effect from 1 April 2013. Deferred tax balances at the year end have been measured at 20%. Further reductions in the UK corporation tax rate to 21% from 1 April 2014 and 20% from 1 April 2015 have not been recognised in these financial statements and are not expected to have a material impact on the tax position of the Group.

9. Profit for the financial year

		2014		2013
		£		£
Parent Company's (loss) for the financial year		(42,370)		(232,332)

10. Dividends

		2014		2013
		£		£
Dividend for the period ended 31 March 2012 of 3.75p per ordinary share		-		2,066,984
Dividend for the period ended 31 March 2013 of 4.00p per ordinary share		2,212,773		-
Dividend waived by Employee Benefit Trust		(102,590)		(84,284)
		2,110,183		1,982,700

The Board is declaring a dividend of 4.20 pence per share in respect of the year ended 31 March 2014.

11. Intangible fixed assets

Group		Goodwill		Distribution rights		Drug registrations, patents and licence costs		Total
Cost		£		£		£		£
At 1 April 2012		17,930,495		1,034,860		39,524,095		58,489,450
Additions - internally generated		-		-		4,083,884		4,083,884
Additions - acquired separately		-		231,256		304,426		535,682
At 1 April 2013		17,930,495		1,266,116		43,912,405		63,109,016
Additions - internally generated		-		-		4,068,589		4,068,589
Additions - acquired separately		-		-		271,142		271,142
At 31 March 2014		17,930,495		1,266,116		48,252,136		67,448,747
Amortisation
At 1 April 2012		-		422,787		18,957,516		19,380,303
Charge for the year		-		58,050		2,504,167		2,562,217
Foreign exchange movements		-		-		(2,861)		(2,861)
At 1 April 2013		-		480,837		21,458,822		21,939,659
Charge for the year		-		63,447		2,272,977		2,336,424
Foreign exchange movements		-		-		540		540
At 31 March 2014		-		544,284		23,732,339		24,276,623
Net Book Value
At 31 March 2014		17,930,495		721,832		24,519,797		43,172,124
At 31 March 2013		17,930,495		785,279		22,453,583		41,169,357
At 1 April 2012		17,930,495		612,073		20,566,579		39,109,147

The amortisation charge is included within administrative expenses on the income statement.

Distribution rights are amortised over their estimated useful life of 20 years and reviewed for impairment when any indication of potential impairment exists. The remaining amortisation period at the date of the financial statements ranged from 9 to 18 years.

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

Entity		Date of acquisition		£
Eco Animal Health Limited (remaining 50%)		1 October 2004		17,358,621
Zhejiang Eco Biok Animal Health Products Limited		1 April 2007		94,257
ECOpharma Inc. (remaining 80%)		24 December 2009		477,617
				17,930,495
				====================

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGU’s) that are expected to benefit from the business combination.

The recoverable amounts of the CGU’s are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates, growth rates and the estimated remaining useful life of the asset which is maintained at 30 years through ongoing investment in the cash generating unit.

The Group prepares cash flow forecasts derived from the most recent financial budgets and projections that are approved by management for the year ahead and then extrapolates them assuming a 3% annual growth rate which is well below the current performance of the existing business. The directors believe that the long term growth rate assumed does not exceed the average long term growth rate for the relevant markets.

Management estimates discount rates using the pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU’s. In the current year management estimated the applicable rate to be 11%. Management considers that there is adequate headroom when comparing the net present value of the cash flows to the carrying value of goodwill to conclude that no impairment is necessary this year. On current assumptions the excess of recoverable amount over carrying value is over £34 million.

Management believes that the most significant assumption in the calculation of value in use is the estimated growth rate. However, even if the growth rate were to be zero, the recoverable amount would still be over £17 million more than the carrying value and no impairment would be necessary. This assumes an earnings multiple of 10 on the current budgeted results in estimating fair value which has been derived from historical data.

The value of Drug registrations and licenses can be broken down as follows:

		£
Aivlosin		21,249,573
Ecomectin		1,798,212
Others		1,472,012
		_____________
		24,519,797
		====================

Aivlosin is a highly effective antibiotic that treats a range of specific enteric (gut) and respiratory diseases in pigs and poultry, ensuring a rapid return to health. In addition to the welfare benefits, healthy animals gain weight faster, digest food more efficiently and get to market earlier which all bring economic benefit to the user. Substantial ongoing product development covering more formulations, species and diseases is expected to substantially further increase its revenue generating potential. The remaining amortisation period is from 9 to 20 years.

Ecomectin is an endectocide that controls worms, ticks, lice and mange in grazing stock and pigs. The remaining amortisation period is 0 to 10 years.

Drug registrations and licences are amortised over their estimated useful lives of 10 to 20 years, which is the directors’ estimate of the time it would take to develop a new product allowing for the Group’s patent protection and the exclusivity period which comes with certain registrations. Given the economic climate the directors have conducted an impairment review in the current year by preparing cash flow projections for the year ahead and extrapolating the results for the remaining life of the registrations assuming zero growth and an 11% discount rate to establish value in use. On the current assumptions the excess of the recoverable amount over carrying value is almost £11 million.

The calculations have also shown that on current budget figures a 5 year life is more than enough to justify the current carrying value of these registrations. Moreover, fair value calculated as 10 times the current cash generated by the registrations gives an even higher result, so management has again concluded that no impairment is necessary.

12. Property, plant and equipment

Group		Land and Buildings (freehold)		Plant and machinery		Fixtures, fittings and equipment		Motor Vehicles		Total
Cost or valuation		£		£		£		£		£
At 1 April 2012		650,000		1,185,777		625,635		101,802		2,563,214
Additions		-		15,701		22,941		-		38,642
Foreign exchange movements		-		64,852		-		-		64,852
At 1 April 2013		650,000		1,266,330		648,576		101,802		2,666,708
Additions		-		19,803		11,714		-		31,517
Foreign exchange movements		-		(80,780)		-		-		(80,780)
Disposals		-		-		(188,313)		(27,115)		(215,428)
At 31 March 2014		650,000		1,205,353		471,977		74,687		2,402,017
Depreciation
At 1 April 2012		18,800		722,283		528,013		26,055		1,295,151
Charge for the year		9,400		118,563		33,121		26,009		187,093
Foreign exchange movements		-		41,376		(4,562)		(363)		36,451
Revaluation adjustment		(28,200)		-		-		-		(28,200)
At 1 April 2013		-		882,222		556,572		51,701		1,490,495
Charge for the year		9,400		112,649		31,638		15,958		169,645
Foreign exchange movements		-		(61,072)		890		535		(59,647)
Disposals		-		-		(188,313)		(12,427)		(200,740)
At 31 March 2014		9,400		933,799		400,787		55,767		1,399,753
Net Book Value
At 31 March 2014		640,600		271,554		71,190		18,920		1,002,264
At 31 March 2013		650,000		384,108		92,004		50,101		1,176,213
At 1 April 2012		631,200		463,494		97,622		75,747		1,268,063

The freehold property at 78 Coombe Road, New Malden was valued on 10 May 2013 by Mr R Sworn of Kelion Sworn Chartered Surveyors and Valuers, London, W1. The fair value in use of the freehold property was determined at £650,000 by means of applying a 7.75% discount rate to the annual rental value of the property as determined by local market conditions. The property will continue to be valued on a regular basis.

The value of non depreciable land included within Land and Buildings is £180,000.

The freehold property of 78 Coombe Road, New Malden is subject to a legal charge held by the company’s bankers dated 20 March 1987.

The value of the freehold property would have been recorded at £306,131 (2013: £317,437) on a historical cost basis giving rise to the current revaluation surplus of £264,526 net of deferred tax provision.This balance is not distributable to shareholders.

Depreciation has been included in the administrative expenses line on the income statement, except for £90,337 (2013: £87,600) of depreciation of production equipment in our Chinese subsidiary ECO Biok, which is included within cost of sales.

Company		Land and Buildings (freehold)		Fixtures, fittings and equipment		Motor Vehicles		Total
Cost or valuation		£		£		£		£
At 1 April 2012		650,000		144,194		26,466		820,660
Additions		-		394		-		394
At 31 March 2013		650,000		144,588		26,466		821,054
Additions		-		790		-		790
At 31 March 2014		650,000		145,378		26,466		821,844
Depreciation
At 1 April 2012		18,800		137,590		1,671		158,061
Charge for the year		9,400		3,790		6,612		19,802
Revaluation adjustment		(28,200)		-		-		(28,200)
At 31 March 2013		-		141,380		8,283		149,663
Charge for the year		9,400		1,686		6,612		17,698
At 31 March 2014		9,400		143,066		14,895		167,361
Net Book Value
At 31 March 2014		640,600		2,312		11,571		654,483
At 31 March 2013		650,000		3,208		18,183		671,391
At 1 April 2012		631,200		6,604		24,795		662,599

13. Investment property

Group and Company		Land and		Total
		Buildings
		(freehold)
		£		£
Cost
At March 2012, 2013 and 2014		156,550		156,550
Depreciation
At March 2012		1,777		1,777
Charge for the year		3,131		3,131
At March 2013		4,908		4,908
Charge for the year		3,131		3,131
At March 2014		8,039		8,039
Net Book Value
At 31 March 2014		148,511		148,511
At March 2013		151,642		151,642
At 1 April 2012		154,773		154,773

Depreciation has been included in the administrative expenses line on the income statement.

14. Fixed asset investment

Group		Unlisted		Total
		investments
		£		£
Cost, fair value and net book value
At March 2012, 2013 and 2014		8,738		8,738
Company		Unlisted		Total
		investments
		£		£
Cost or fair value
At March 2012, 2013 and 2014		21,273,502		21,273,502
Impairment
At March 2012, 2013 and 2014		1,191,262		1,191,262
Net Book Value
At 31 March 2012, 2013 and 2014		20,082,240		20,082,240

The Company holds more than 20% of the share capital of the following companies:

Company		Country of registration or incorporation		Class		Shares held %
Subsidiary undertakings held by Company
Zhejiang ECO Biok Animal Health Products Limited		P. R. China		Ordinary		3
Shanghai ECO Biok Veterinary Drug Sale Company Ltd. (via Zhejiang ECO Biok Animal Products Ltd.)		P. R. China		Ordinary		3
Petlove Limited		Great Britain		Ordinary		91
Eco Animal Health Limited		Great Britain		Ordinary		100
Subsidiary undertakings held by Group
ECO Animal Health Southern Africa (Pty) Limited		South Africa		Ordinary		100
Zhejiang ECO Biok Animal Health Products Limited		P. R. China		Ordinary		48
Shanghai ECO Biok Veterinary Drug Sale Company Ltd. (via Zhejiang ECO Biok Animal Products Ltd.)		P. R. China		Ordinary		48
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda.		Brazil		Ordinary		100
ECO Animal Health Japan Inc.(formally ECOpharma Inc)		Japan		Ordinary		100
ECO Animal Health USA Corp.		U.S.A.		Ordinary		100
Interpet LLC		U.S.A.		Ordinary		100
ECO Animal Health de Mexico		Mexico		Ordinary		100
ECO Argentina S.A.		Argentina		Ordinary		100

The principal activity of these undertakings for the last relevant financial year was as follows:

		Principal activity
ECO Animal Health Limited		Distribution of animal drugs
ECO Animal Health Southern Africa (Pty) Limited		Non-trading
Petlove Limited		Non-trading
Zhejiang ECO Biok Animal Health Products Limited		Manufacture of animal drugs
Shanghai ECO Biok Veterinary Drug Sale Company Ltd.		Distribution of animal drugs
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda		Distribution of animal drugs
ECO Animal Health Japan Inc. (formerly ECOpharma Inc.)		Distribution of animal drugs
ECO Animal Health USA Corp.		Distribution of animal drugs
Interpet LLC		Non-trading
ECO Animal Health de Mexico		Distribution of animal drugs
ECO Argentina S.A.		Non-trading

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

		Equity		Profit/loss for the year		Equity		Profit/loss for the year
		2014		2014		2013		2013
		£		£		£		£
ECO Animal Health Limited		7,545,809		1,697,094		5,848,715		2,503,244
ECO Animal Health Southern Africa (Pty) Limited		323,500		(862)		324,362		(698)
Zhejiang ECO Biok Animal Health Products Ltd		4,420,263		1,326,238		5,011,779		891,248
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda		1,196,039		119,044		1,290,474		(172,581)
ECO Animal Health Japan Inc. (formerly ECOpharma Inc.)		703,759		76,863		755,807		151,070
ECO Animal Health de Mexico		(134,625)		(94,757)		(19,078)		(12,084)
ECO Animal Health USA Corp.		(38,820)		(38,820)		(475)		-

The equity and results of Shanghai ECO Biok Veterinary Drug Sale Company Ltd are included within those disclosed for Zhejiang ECO Biok Animal Health Products Limited.

All of the subsidiaries listed above were included in the consolidation for the year.

Zhejiang ECO Biok Animal Health Products Limited and ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda both have 31 December year ends. The Group receives management accounts for the three months to 31 March for these subsidiaries for use in preparing the consolidated financial statements.

ECO Argentina S.A. which holds neither assets nor liabilities and which has not traded since its formation has been excluded from consolidation. Interpet LLC has also been excluded from consolidation as it holds no assets or liabilities and has ceased trading.

The following trading subsidiaries have no requirement for audit under local legislation;

ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda.

ECO Animal Health Japan Inc. (formerly ECOpharma Inc.)

ECO Animal Health USA Corp.

ECO Animal Health de Mexico.

The Group also holds (by means of its ownership of ECO Animal Health USA Corp.), a 50% joint venture interest in Pharmgate Animal Health LLC, which is resident in U.S.A. Pharmgate Animal Health LLC distributes the group’s products in the U.S.A.

The Group also holds a 50% joint venture interest in Pharmgate Animal Health Canada Inc, which distributes its products into Canada.

Both Pharmgate Animal Health LLC and Pharmgate Animal Health Canada Inc. have accounting years which end on 31 December.

The group’s holdings in each of the joint venture companies share capital is given in the table below:

Pharmgate Animal Health Canada Inc		Holding (shares)		Shares in Issue		Holding %
Common shares		100		200		50
Class A shares		100		100		100
Class B shares		-		100		-
Pharmgate Animal Health USA LLC		Holding (shares)		Shares in Issue		Holding %
Common shares		100		200		50
Class A shares		100		100		100
Class B shares		-		100		-

In each case class A shares carry the rights to dividends payable out of profits attributable to the group. These are made up of profits made by products supplied by the ECO group plus 50% of any profit relating to new products developed jointly by the partners to the joint venture.

The following amounts included in the group’s financial statements are related to its interest in these joint ventures.

		Pharmgate LLC				Pharmgate Animal Health Canada Inc
		2014		2013		2014		2013
		£		£		£		£
Current assets		214,024		113,561		143,415		59,479
Current liabilities		(199,438)		(99,939)		(142,572)		(58,680)
Sales		1,400,385		841,644		771,281		357,198
Margins		748,372		424,600		404,495		210,962
Expenses		(527,331)		(457,804)		(150,681)		(145,108)

15. Inventories

		Group				Company
		2014		2013		2014		2013
		£		£		£		£
Raw materials and consumables		3,111,357		3,225,988		-		-
Finished goods and goods for resale		3,860,721		3,199,949		-		-
		6,972,078		6,425,937		-		-

The cost of inventories recognised as an expense and included in cost of sales in the period amounted to £17,635,170 (2013: £15,795,393).

16. Trade and other receivables

		Group				Company
		2014		2013		2014		2013
		£		£		£		£
Trade receivables		8,574,712		10,665,453		-		-
Amounts owed by group undertakings		-		-		33,579,573		30,098,438
Amounts owed by joint ventures		234,293		112,664		-		-
Other receivables		572,893		279,695		257,905		205,661
Prepayments and accrued income		486,775		190,704		70,979		44,564
		9,868,673		11,248,516		33,908,457		30,348,663

In the year ended 31 March 13, only within “Trade and other receivables” note to the financial statements, ”Amounts owed by group undertakings” were disclosed as a non current asset. As shown above, “Amounts owed by group undertakings” of £33,579,573 (2013: £30,098,438) are correctly disclosed as current assets due to the trading balance being payable on demand.

As at 31 March 2014, trade receivables of £2,336,116 (2013: £1,881,527) due to the Group and £nil (2013: £nil) due to the Company were past due but not impaired. These relate to long standing distributors with whom we have agreed settlement terms and with whom there is no history of default. The ageing analysis of these trade receivables is as follows:

		Group				Company
		2014		2013		2014		2013
		£		£		£		£
Up to 3 months past due		1,585,215		1,575,637		-		-
3 to 6 months past due		352,306		220,108		-		-
Over 6 months past due		398,595		85,782		-		-
		2,336,116		1,881,527		-		-

As at 31 March 2014, trade receivables of £105,142 (2013: £60,269) were impaired and provided for. The impaired receivables mainly relate to historic debt for which recovery is still being sought. The Group mitigates its exposure to credit risk by extensive use of commercial credit reference agencies, close management of its customers’ trading against terms offered and use of retention of title clauses wherever possible. The ageing analysis of the impaired balances is as follows:

		Group				Company
		2014		2013		2014		2013
		£		£		£		£
Up to 3 months past due		15,894		6,102		-		-
3 to 6 months past due		4,935		-		-		-
Over 6 months past due		84,313		54,167		-		-
		105,142		60,269		-		-

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

		Group
		2014		2013
		£		£
Balance at 1 April		60,269		32,379
Provided in the year		50,141		27,890
Written off in the year		(5,268)		-
Balance at 31 March		105,142		60,269

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

		Group				Company
		2014		2013		2014		2013
		£		£		£		£
Pounds Sterling		771,264		851,016		33,908,457		30,317,630
Euros		2,711,339		2,459,140		-		-
U S Dollars		3,488,701		4,496,919		-		31,033
Chinese RMB		682,162		684,529		-		-
Brazilian Real		698,507		915,847		-		-
Japanese Yen		510,702		625,170		-		-
Other currencies		1,005,998		1,215,895		-		-
		9,868,673		11,248,516		33,908,457		30,348,663

The carrying amounts of trade and other receivables are not significantly different to their fair values.

17. Deferred tax

Group

Deferred tax assets and liabilities are attributable to the following:

		Liabilities				Net
		2014		2013		2014		2013
		£		£		£		£
Drug registration expenditure		(2,022,881)		(2,193,897)		(2,022,881)		(2,193,897)
Freehold property		(66,131)		(76,051)		(66,131)		(76,051)
Plant and equipment		(4,169)		(8,682)		(4,169)		(8,682)
Tax losses carried forward		1,915,933		2,047,014		1,915,933		2,047,014
Amount (payable) after more than one year		(177,248)		(231,616)		(177,248)		(231,616)

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

		Drug registration expenditure		Freehold property		Total
		£		£		£
At 31 March 2013		(155,565)		(76,051)		(231,616)
Credit for the year through income statement		44,448		-		44,448
Movement through the year through revaluation reserve		-		9,920		9,920
At 31 March 2014		(111,117)		(66,131)		(177,248)

The tax losses carried forward are not expected to expire under current legislation.

Any future dividend received from the Chinese subsidiary Zhejiang ECO Biok Animal Health Products Limited will be subject to a 10 per cent withholding tax. The deferred tax liability in respect of this has not been recognised.

Company		2014				2013
		Freehold property		Total		Freehold property		Total
		£		£		£		£
At 1 April		(76,051)		(76,051)		(72,590)		(72,590)
Movement in the year through revaluation reserve		9,920		9,920		(3,461)		(3,461)
At 31 March 2014		(66,131)		(66,131)		(76,051)		(76,051)

No charge or credit (2013: credit of £1,732) was recognised in the Company’s income statement for the year. A credit of £9,920 (2013: charge of £3,461) was recognised in the Company’s Revaluation Reserve.

18. Cash and cash equivalents

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

		Note		Group				Company
				2014		2013		2014		2013
				£		£		£		£
Cash and cash equivalents				18,239,830		9,664,443		9,229,578		4,130,622
Overdrafts		20		-		(2,134,765)		-		(2,134,765)
Net funds per cash flow				18,239,830		7,529,678		9,229,578		1,995,857

19. Trade and other payables

		Group				Company
		2014		2013		2014		2013
		£		£		£		£
Trade payables		4,972,605		6,099,247		53,165		57,953
Amounts due to joint venture		-		34,966		-		-
Other payables		305,566		424,791		55,532		187,850
Accruals and deferred income		1,065,084		356,979		42,260		32,529
		6,343,255		6,915,983		150,957		278,332

20. Borrowings

Included within payables on the statement of financial position are the following amounts at fair value secured by a debenture on the assets of the group:

		Group				Company
		2014		2013		2014		2013
		£		£		£		£
Short term borrowings		-		2,134,765		-		2,134,765

Currency analysis of short term borrowings

		Group				Company
		2014		2013		2014		2013
		£		£		£		£
U S Dollars		-		835,527		-		835,527
Euros		-		1,299,238		-		1,299,238
		-		2,134,765		-		2,134,765

The Group has the facility to overdraw in specific currencies but no net facility. The interest rate for all currency overdrafts is 2.75 per cent over the relevant currency base rate and the borrowings are secured by two debentures held over all assets of the company dated 28 January 1995 and 28 November 2006.

21. Pension and other post-retirement benefit commitments

Defined Contribution pension Scheme

The Group operates defined contribution pension schemes for the benefit of certain directors and senior employees. The assets of the schemes are held separately from the Group and independently administered by insurance companies. The pension cost charge represents contributions payable to the funds in the year and amounted to £387,850 (2013: £340,268).

Defined Benefit Pension Scheme

The Group operates a defined benefit scheme in the UK for ex-employees only. A full actuarial valuation was carried out at 6 April 2012 and updated 31 March 2014 by a qualified independent actuary. The major assumptions used by the actuary were:

		31 March		1 April
		2014		2013
Discount rate		4.30%		4.1%
Rate of increase in pension payment		2.45%		2.1%
Inflation assumption with a maximum of 5% p.a.		3.15%		2.8%

Mortality rates

Pre retirement mortality is based on the mortality table known as AMCOO for males and AFCOO for females and 70% of the mortality indicated by this table has been taken, as in the previous year.

Post retirement mortality is based on the mortality table known as PCMAOO for males and PCFAOO for females. Allowance has been made for the improvement in mortality experienced recently and expected in the future by using 100% of the “Medium Cohort” improvement table, subject to a minimum improvement rate of 1% for males and 0.7% for females as in the previous year.

Under these mortality assumptions, the expected future lifetime for a member retiring at age 65 at the year end would be 22.7 years for males (2013: 22.6 years) and 24.6 years for females (2013: 24.5 years). For members retiring in 20 years time, the expectation of life would be 24.6 years for males (2013: 24.5 years) and 26.0 years for females (2013: 25.9 years).

Results		2014				2013
		£		£		£		£
Assets at start of year		2,760,000				2,959,000
Defined benefit obligation at start of year		(2,631,000)				(2,957,000)
Net asset at 1 April				129,000				2,000
Current service cost, including risk benefits		(4,000)				(4,000)
Past service credit		-				20,000
				(4,000)				16,000
Expected return on assets		113,000				132,000
Interest cost		(108,000)				(131,000)
				5,000				1,000
Gain on asset return		2,000				34,000
Experience gain/(loss)		4,000				(31,000)
Gain on changes in assumptions		19,000				54,000
Statement of other comprehensive income				25,000				57,000
Employer contributions gross		54,000				60,000
Expenses paid by trustees		(7,000)				(7,000)
				47,000				53,000
Net asset at 31 March 2014				202,000				129,000
Actual assets at end of year				2,680,000				2,760,000
Actual defined benefit obligation at end of year				(2,478,000)				(2,631,000)

The pension fund assets are all held within a policy managed by an insurance company.

Reconciliation of changes in the asset value during the year

		2014				2013
		£		£		£		£
Fair value of assets at 1 April		2,760,000				2,959,000
Expected return on assets		113,000				132,000
Gain on asset return		2,000				34,000
Employer contributions (gross)		54,000				60,000
Death in service insurance premiums paid		(4,000)				(4,000)
Expenses paid by trustees		(7,000)				(7,000)
(Decrease) in secured pensioners value due to scheme experience		(238,000)				(413,000)
Benefits paid		-				(1,000)
Fair value of assets at 31 March 2014				2,680,000				2,760,000
Reconciliation of changes in the liability value during the year
Defined benefit obligation at 1 April		2,631,000				2,957,000
Interest cost		108,000				131,000
Past service credit		-				(20,000)
Experience (gain)/loss on liabilities		(4,000)				31,000
(Gain) on changes in assumptions		(19,000)				(54,000)
(Decrease) in secured pensioners value due to scheme experience		(238,000)				(413,000)
Benefits paid		-				(1,000)
Defined benefit obligation at 31 March 2014				2,478,000				2,631,000

The expected contribution to be paid by the employer during the next accounting year is £59,000. This includes a provision of £4,000 for death in service risk premium (2013: £4,000).

Year ended 31 March		2014		2013		2012		2011		2010
Fair value of plan assets		2,680,000		2,760,000		2,959,000		2,596,000		2,575,000
Present value of defined benefit obligation		2,478,000		2,631,000		2,957,000		2,684,000		2,592,000
Surplus in plan		202,000		129,000		2,000		88,000		17,000
Experience (loss)/gains on plan liabilities		4,000		(31,000)		(5,000)		1,000		9,000

22. Share-based payments

The measurement requirements of IFRS2 have been implemented in respect of share options that were granted after 7 November 2002. The expense recognised for share based payments made during the year is shown in the following table:

		2014		2013
		£		£
Total expense arising from equity settled share-based transactions		306,562		358,260

The share based payment plans are described below:

Movements in issued share options and jointly owned shares during the year

The following table illustrates the number and weighted average exercise prices (WAEP) of and movements in, share options and jointly owned shares during the period:

		Options				Jointly owned shares				Options				Jointly owned shares
		2014		2014		2014		2014		2013		2013		2013		2013
				WAEP				WAEP				WAEP				WAEP
				£				£				£				£
Outstanding at 1 April		3,448,610		1.50		2,603,290		2.00		3,257,850		1.39		2,603,290		2.00
Granted during the period		979,560		2.07		-		-		410,000		2.23		-		-
Expired/cancelled during the period		(185,100)		1.54		-		-		(10,000)		3.40		-		-
Exercised during the period		(801,885)		1.42		-		-		(209,240)		1.17		-		-
Outstanding at 31 March		3,441,185		1.94		2,603,290		2.00		3,448,610		1.50		2,603,290		2.00
Exercisable at 31 March		1,665,125		1.28		315,000		2.00		1,612,110		1.24		315,000		2.00

The average share price during the year was 217.9p.

The maximum aggregate number of shares over which options may currently be granted cannot exceed 10 per cent of the nominal share capital of the Company on the grant date. The options outstanding at 31 March 2014 had a weighted average share price of £1.94 and a weighted average contractual life of 4.6 years.

Eco Animal Health Group plc Executive Share Option Scheme

In accordance with the Executive Share Option Scheme, approved and unapproved share options are granted to full time directors and employees who devote at least 25 hours per week to the performance of duties or employment with the Company.

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

The exercise price of the options is equal to the market price of the shares at the date of grant. The options vest three years from the date of grant and if the option holder ceases to be a director or employee of the Company due to injury, disability, redundancy or retirement on reaching pensionable age or any other age at which they are bound to retire at in accordance with the terms of their contract of employment, the option may be exercised within a period of six months after the option holders so ceasing, although the Board may, at its discretion, extend this period by up to 36 months after the date of cessation.

If the option holder ceases employment for any other reason, the option may not be exercised unless the Board permits. The approved and unapproved options will be forfeited where they remain unexercised at the end of their respective contractual lives of ten and seven years.

An analysis of the expiry dates of the outstanding options is given below:

Date of grant		Unapproved		Approved		Exercise price (pence)		Expiry date
20 February 2006				11,880		252.50		20 February 2016
10 August 2006				12,600		238.00		10 August 2016
03 March 2008				193,635		108.50		03 March 2018
03 March 2008		420,010				108.50		03 March 2015
18 September 2008				35,000		85.00		18 September 2018
18 September 2008		85,000				85.00		18 September 2015
30 April 2009				32,550		147.00		30 April 2019
30 April 2009		184,450				147.00		30 April 2016
06 August 2009				22,000		135.00		06 August 2019
06 August 2009		68,000				135.00		06 August 2016
24 December 2009				19,350		155.00		24 December 2019
24 December 2009		10,650				155.00		24 December 2016
12 April 2010		30,000				150.00		12 April 2017
20 May 2010				115,100		140.00		20 May 2020
20 May 2010		359,900				140.00		20 May 2017
13 September 2010		65,000				161.00		13 September 2017
11 October 2013				133,100		186.50		11 October 2021
11 October 2013		278,400				186.50		11 October 2018
9 July 2013		375,000				222.50		9 July 2018
30 July 2013		10,000				254.00		30 July 2018
24 April 2013				26,060		215.00		24 April 2020
20 August 2013				13,200		226.00		20 August 2023
20 August 2013		306,800				226.00		20 August 2020
9 October 2013				90,440		196.00		9 October 2023
9 October 2013		478,060				196.00		9 October 2020
22 January 2014				14,450		207.50		22 January 2024
22 January 2014		50,550				207.50		22 January 2021
		2,721,820		719,365

ECO Animal Health Group plc Joint Share Ownership Plan

In accordance with the Group’s Joint Share Ownership Plan (JSOP), jointly owned shares may be awarded to directors and employees of the company.

The shares are awarded at the market price on the day of the award and are held jointly by the employee concerned and the ECO Animal Health Group plc Employee Benefit Trust. After a three year vesting period, the shares may be sold at the option of the employee. The proceeds of sale are split between the trust and the employee so that the Trust receives the original market value of the shares sold plus a 5.9% per annum carry charge, with the employee receiving any excess over this amount.

Because these are actual issued shares in the company rather than options there is no expiry date associated with jointly owned shares. However, they will normally be forfeit if the employee ceases to be an employee of the company for any reason other than death, injury, redundancy, retirement on or after normal retirement age or disposal by the Group of the employing business entity.

The market price of the shares at 31 March 2014 was 169.0p with a range in the year of 163.5p to 265.0p.

Inputs to the Valuation Model (for options and jointly owned shares)

The fair value of share options granted prior to 31 March 2007 were estimated at the time of grant using trinomial pricing model, taking into account all the terms and conditions upon which the options were granted. For options issued after 1 April 2007, the directors took the decision that a Black-Scholes model would be more appropriate.

The following table lists the inputs to the Black-Scholes model which applies to both options and jointly owned shares.

		2014		2013		2012		2011		2010
Vesting period (years)		3		3		3		3		3
Option expiry (years)		7-10 yrs		7-10 yrs		7-10 yrs		7-10 yrs		7-10 yrs
Dividends expected on the shares		1.4 - 1.9%		1.40%		1.00%		4.50%		5.00%
Risk free rate		0.5 - 1.2%		0.50%		2.00%		2.00%		2.40%
Volatility of share price		20%		25%		27%		45%		40%
Weighted average fair value of options		29.1p		38.7p		41.0p		37.8p		32.6p

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

No shares were issued under the Joint Share Ownership Plan during the year or the previous year.

The fair value of the part interest in the jointly owned shares was calculated using a Black-Scholes model with the same assumptions as those used for the options issued during the same year.

The weighted average fair value of the Jointly owned shares issued during the year ended 31 March 2012 was 26.1p.

23. Share capital

		2014		2013
		£		£
Authorised
68,100,000 Ordinary shares of 5p each		3,405,000		3,405,000
10,790 Deferred ordinary shares of 10p each		1,079		1,079
32,334 Convertible preference shares of £1 each		32,334		32,334
		3,438,413		3,438,413
Allotted, called up and fully paid
62,474,231 (2013: 55,345,016) Ordinary shares of 5p each		3,123,712		2,767,251

During the year the Company issued 6,315,790 shares as a result of a placing with institutional investors at a price of 190p resulting in an increase in share premium of £11.2 million after expenses.

During the year a further 11,540 shares were issued at a premium of £24,926 as a result of the take up of the scrip dividend option and 801,885 more shares were issued at a premium of £1,096,276 as a result of the exercise of options by employees.

24. Minority interests

		2014		2014		2013		2013
		£		£		£		£
Balance at 1 April				2,458,250				1,891,587
Share of subsidiary's profit for the year		649,857				436,711
Share of foreign exchange (loss)/gain on net investment		(140,554)				129,952
				509,303				566,663
Share of dividend paid by subsidiary				(799,146)				-
Balance at 31 March				2,168,407				2,458,250

25. Treasury share reserve

		2014		2013
		£		£
Balance at 1 April 2013 and 31 March 2014		5,217,580		5,217,580

Treasury share reserve consists of £5,217,580 (2013: £5,217,580), being the cost of 2,603,290 shares in the Company held by the Group’s JSOP.

26. Other reserves

Group and Company		Capital redemption reserve		Special reserve		Reserve for share-based payment		Total
		£		£		£		£
At 31 March 2012		105,829		3,250,000		1,418,302		4,774,131
Share-based payments		-		-		358,260		358,260
Transfer to retained earnings on expiry of options		-		-		(82,062)		(82,062)
At 31 March 2013		105,829		3,250,000		1,694,500		5,050,329
Share-based payments		-		-		306,562		306,562
Transfer to retained earnings on expiry of options		-		-		(290,949)		(290,949)
Transfer to share premium on issue of equity in the year		-		(3,250,000)		-		(3,250,000)
		105,829		-		1,710,113		1,815,942

The only material reserve remaining at the year end is the reserve for share based payments which records the total amount which has been charged to the Group’s results in respect of unexpired share based payment arrangements.

Included in the Group’s retained earnings are the following exchange movements which have been taken directly to reserves on consolidation of the subsidiaries and joint ventures listed below:

		At 1 April 2013		Movement in the year		At 31 March 2014
		£		£		£
In respect of:
Zhejiang Eco Biok Animal Health Products Limited		544,448		(146,290)		398,158
Eco Animal Health do Brasil Comercio de Produtos Veterinarios Ltda		91,971		(213,479)		(121,508)
ECO Animal Health Japan Inc. (formerly ECOpharma Inc.)		(6,217)		(128,911)		(135,128)
ECO Animal Health USA Corp.		(475)		-		(475)
ECO Animal Health de Mexico		(16,227)		(20,790)		(37,017)
ECO Animal Health Southern Africa (pty) Ltd		493		-		493
Pharmgate LLC		475		(1,410)		(935)
Pharmgate Canada LLC		16		44		60
Foreign currency differences attributable to owner (debited) directly to reserves.				(510,836)

27. Financial commitments

At 31 March 2014 the Group had minimum commitments under non-cancellable operating leases as follows:

		Land and Buildings				Other
		2014		2013		2014		2013
		£		£		£		£
Expiry date:
Within one year		376,502		62,137		55,000		-
Between two and five years		628,475		855,766		93,654		42,482
In over five years		1,249,416		1,621,230		-		-
		2,254,393		2,539,133		148,654		42,482
Minimum expected sublease rental receipts:
Within one year		120,000		-		-		-
Between two and five years.		285,370		525,370		-		-
		405,370		525,370		-		-

28. Capital commitments

The group had no authorised capital commitments as at 31 March 2014 (2013: Nil).

29. Directors’ emoluments

		2014		2013
		£		£
Emoluments for qualifying services		544,744		541,126
Company pension contributions to money purchase schemes		147,260		117,874
Share-based payments		188,329		213,479
Benefits in kind		21,320		21,421
		901,653		893,900

During the year the directors exercised 698,370 (2013: 31,640) share options realising a gain of £295,797 (2013: £41,607).

The number of directors for whom retirement benefits are accruing under money purchase pension schemes amounted to 3 (2013: 3). No directors accrued benefits under defined benefit schemes for this or the previous year.

The highest paid director received £377,060 (2013: £390,678) including share-based payments and £50,000 (2013: £50,000) of pension contributions.

30. Employees

Number of employees

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

		2014		2013
		Number		Number
Directors		7		7
Production and development		52		48
Administration		39		36
Sales		67		63
		165		154
Employment costs (including amounts capitalised)
		2014		2013
		£		£
Wages and salaries		4,817,985		4,322,201
Share-based payments		306,562		358,260
Social security costs		370,512		376,514
Other pension costs		391,850		324,268
		5,886,909		5,381,243

31. Related party transactions

During the year P Lawrence and his family received dividends in the form of cash and shares to the value of £450,727 (2013: £420,320). The Company also paid net expenses of £596,076 on behalf of P Lawrence and his family. At the year end ECO Animal Health Group plc owed P A Lawrence and members of his family a total of £508 (2013: £146,502). The maximum amount briefly outstanding from P Lawrence and connected parties during the year was £372,293.

The other directors and their families received dividends to the value of £2,637 (2013: £13,916).

During the year, the Group provided management services to Anpario plc, a company in which P A Lawrence is a Director and holds share options. Fees of £32,500 (2013: £29,250) were charged.

During the year, the Group provided the services of two employees to C-Corp Limited, a company in which P A Lawrence is a Director and shareholder. Fees of £43,398 (2013: £43,451) were charged.

During the year ECO Animal Health Limited made sales on an arm’s length basis to the following other companies. The sales and year end balances are given in the table below. Since all of these companies are wholly owned by the Group, these transactions and balances have all been eliminated on consolidation.

Subsidiary companies		Sales		Year end (payables) receivables (net)				Sales		Year end receivables
		2014				2013
		£		£		£				£
Zhejiang Eco Biok Animal Health Products Limited		2,562,788		-		1,707,566				601,240
Eco Animal Health do Brasil Comercio de Produtos Veterinarios Ltda.		1,590,138		(1,044)		2,273,712				1,116,150
ECO Animal Health Japan Inc		1,091,928		176,909		1,146,540				101,880
ECO Animal Health de Mexico		289,032		827,234		179,451				550,489
ECO Animal Health USA Corp.		977,414		550,723		997,534				437,755

Interest and management charges from Parent to the other Group companies

During the year the Company made management charges on an arm’s length basis to ECO Animal Health Limited amounting to £208,328 (2013: £217,259) and charged interest of £454,782 (2013: £425,598) to the Company. Both of these charges were made through the inter-company account and were eliminated on consolidation.

ECO Animal Health Limited also made management charges on an arm’s length basis to ECO Japan Inc. amounting to £66,133 (2013: £113,426). The whole transaction was eliminated on consolidation.

ECO Animal Health Limited also paid £302,465 (2013: £346,682) of service charges to ECO Animal Health USA Corp. during the year. This transaction was eliminated on consolidation.

During the year Zhejiang ECO Biok Animal Health Products Limited paid a dividend of £63,925 to ECO Animal Health Group plc (2013: £nil) and a dividend of £767,839 to ECO Animal Health Limited (2013: £nil).

Inter Company Guarantee

ECO Animal Health Group plc and ECO Animal Health Limited have each given a guarantee dated 28 January 1995 to the company’s bankers in respect of the £1,000,000 facility which has been extended to them jointly.

Joint Ventures

During the year ECO Animal Health Limited made sales on an arm’s length basis of £519,779 (2013: £240,590) to ECO Animal Health Canada LLC. The balance outstanding at the year end was £197,115 (2013: £74,443).

Key management compensation

The group regards the board of directors as its key management.

		2014		*2013
		£		£
Salaries and short term benefits		566,065		562,547
Retirement benefits		147,260		117,874
Share-based payments		188,329		213,479
		901,654		893,900

\* The comparative figures have been restated to include non executive Directors and exclude Employers National Insurance.

The number of directors for which retirement benefits are accruing is 3 (2013: 3).

32. Financial instruments

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

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

Interest rate risk

The Group finances its operations through a mixture of retained earnings and bank borrowings. At the year end the Group had no exposure to overdraft interest (2013: the Group was exposed to interest rates on currency overdraft facilities of £2,134,765.)

Capital and liquidity risk

The Group manages its capital to ensure continuity as a going concern whilst maximising returns through the optimisation of debt and equity. As part of this, the Board considers the cost and risk associated with each class of capital. The capital structure of the Group consists of debt which includes the borrowings disclosed in note 20, cash and cash equivalents in note 18 and equity attributable to equity holders of the parent comprising issued capital, reserves and retained earnings as disclosed in the Group’s statement of changes in equity.

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

At 31 March 2014 the Group was contractually obliged to make repayments as detailed below:

		2014		2013
WITHIN ONE YEAR OR ON DEMAND		£		£
Bank overdrafts		-		2,134,765
Trade payables		4,972,605		6,099,247
		4,972,605		8,234,012

Credit risk

Credit risk is that of financial loss as a result of default by a counterparty on its contractual obligations. The Group’s exposure to credit risk arises principally in relation to trade receivables from customers and on short term bank deposits. Customers’ creditworthiness is wherever possible checked against independent rating databases and filing authorities or otherwise assessed on the basis of trade knowledge and experience. Exposure and customer credit limits are continually monitored both on specific debts and overall.

The credit risk in relation to short term bank deposits and derivatives is limited because the counterparties are banks with good credit ratings.

The Group operates in certain geographical areas (for example Venezuela) which are from time to time subject to restrictions in the free movement of funds. The Board seeks to minimise the group’s exposure to these markets but the nature of our business makes it impossible to eliminate this exposure completely.

Currency risk

The Group operates in overseas markets particularly through its subsidiaries in China, Brazil, the USA and Japan and is subject to currency exposure on transactions undertaken during the year. The Group does some hedging of receivables when the Board feels it is appropriate to do so and foreign

The table below shows the extent to which the Group companies have monetary assets and liabilities in currencies other than in Sterling:

Foreign currency of Group operations
2014		US Dollar		Euros		Rand		Chinese RMB		Japanese Yen		Brazilian Real		Other
Sterling equivalent (000's)		2,951		4,206		537		3,274		2,091		1,191		1,002
2013
Sterling equivalent (000's)		73		670		617		3,841		1,265		921		480

At 31 March 2014 the Group was mainly exposed to the Dollar, Euro, the Chinese RMB, the Japanese Yen and the Brazilian Real. The following table details the effect of a 10 per cent movement in the exchange rate of these currencies against sterling when applied to outstanding monetary items denominated in foreign currency as at 31 March 2014. A positive number indicates the decrease in profit which would arise from a 10 per cent weakening of the foreign currency concerned.

		2014				2013
		£'000				£'000
U S Dollar		268				7
Euro		382				61
Chinese RMB		298				349
Japanese Yen		190				115
Brazilian Real		108				84

Analysis of financial instruments by category

Group

		Loans and receivables		Total
2014		£		£
Investments		8,738		8,738
Trade and other receivables (excluding prepayments)		9,381,898		9,381,898
Cash and cash equivalents		18,239,830		18,239,830
2013		Loans and receivables		Total
		£		£
Investments		8,738		8,738
Trade and other receivables (excluding prepayments)		11,057,812		11,057,812
Cash and cash equivalents		9,664,443		9,664,443

Company

		Loans and receivables		Total
2014		£		£
Trade and other receivables (excluding prepayments)		33,837,478		33,837,478
Cash and cash equivalents		9,229,578		9,229,578
2013		Loans and receivables		Total
		£		£
Trade and other receivables (excluding prepayments)		30,304,099		30,304,099
Cash and cash equivalents		4,130,622		4,130,622

All financial liabilities in the Group’s and Company’s statements of financial position are classified as held at amortised cost for both the current and previous year.

33. Post Balance Sheet event

ECO Animal Health Limited signed an agreement in May 2014 which resulted in the acquisition of the business of its agent in South East Asia for a consideration of $437,500.

Copyright Business Wire 2014