Eco Animal Regulatory News (EAH)

6 Dec 2017 07:00

6 December 2017

ECO Animal Health Group plc (‘’ECO”) (AIM: EAH)

Results for the six months ended 30 September 2017

ECO ANIMAL HEALTH REPORTS ANOTHER STRONG PERFORMANCE

HIGHLIGHTS

Financials

35% increase in adjusted EBITDA to £8.5m (2016: £6.3m). 10% increase in pre-tax profit to £5.9m (2016: £5.3m) 8% increase in sales to £29.2m (2016: £26.9) 11% increase in gross profit to £14.2m (2016: £12.8m) on improved margin 13% increase in earnings per share to 6.39p (2016: 5.68p) 28% increase interim dividend to 3.2p (2016: 2.5p) 36% increase in cash generation from operations to £7.2m (2016: £5.4m) leaving net cash of over £20 million at the period end.

Operations

Demand for Aivlosin® continues to grow strongly Strong performances in all major geographic areas, bar Latin America excluding Mexico New marketing authorisations gained in America and Malaysia – further authorisations are expected in Canada and South East Asia. Continued investment in new routes to market, product development and people to support future growth.

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

“The second half of the year has started well with a strong and growing order book. ECO has a sound balance sheet with good and reliable cash generation. The Company continues to invest in research and product development programmes to obtain further marketing authorisations and efficiencies in production. I look forward with confidence to reporting another set of impressive results in 2018”.

Contacts:
ECO Animal Health Group plc
Peter Lawrence		020 8336 6190
Marc Loomes		020 8447 6906
Spiro Financial
Anthony Spiro		020 8336 6196
Peel Hunt LLP (Nominated Adviser)
Dan Webster, Adrian Trimmings, George Sellar		020 7418 8900
N+1 Singer (Joint broker)
Mark Taylor		020 7496 3069

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.

Chairman’s statement

I am pleased to report that ECO Animal Health Group has delivered another set of record results for the six months to 30 September 2017. ECO provides essential medications to the ever growing global animal protein production industry. The success of the Company reflects its investment over many years in obtaining marketing authorisations, which are a legal requirement in all of the countries it serves. Currently it holds several hundred marketing authorisations and its products are prescribed and sold in more than sixty countries.

The Company’s consistent strategic focus is to concentrate on offering its medications into the key global food production markets. The standards imposed by the regulatory bodies that licence the use of pharmaceuticals for veterinary use are becoming ever more stringent. Consequently, the regulatory authorities require more in depth evaluation of drugs than ever before. ECO already satisfies these enhanced requirements, which means that it has a competitive advantage and is well placed to capitalise on further commercial opportunities.

Financial performance

Profit before tax in the period under review increased by over 10 per cent to almost £5.9m (2016: £5.3m) while sales advanced by over 8 per cent to £29.2m (2016: £26.9m). Earnings before interest, tax, depreciation, amortisation, share based payments, non-controlling (minority) interest and foreign exchange movements were almost £8.5m (2017: £6.3m) an increase of over 35 per cent. Gross profit advanced by 11 per cent to £14.2m (2016: £12.8m) and earnings per share rose 12.5 per cent to 6.39 pence per share (2016: 5.68 pence). Cash generated from operations remained robust advancing to £7.2m (2016: £5.4m).

Margins continued to improve compared to the same period last year, reflecting the success of our strategy to concentrate our sales effort on high value products, which offer the best long term returns for the Company.

Over recent months sterling has strengthened a little against major currencies. ECO continues to invoice more than 97 per cent of its sales in foreign currencies but the effect of the slightly stronger pound since our March 2017 year end has meant that the currency gains the Company benefitted from last year have not been repeated. Nevertheless, control of overheads meant that profit from operating activities was up over 30 per cent at £5.9m.

The board is pleased to declare an interim dividend of 3.2 pence per share (2016: 2.5 pence) to be paid on 12 April 2018 to shareholders on the register on 23 March 2018. This increase of 28 per cent reflects the board’s continued confidence in the sustainable growth of our international business and the consequent implementation of a progressive dividend policy.

Operations:

Sales of Aivlosin®, our patented molecule for the treatment of economically important diseases in pigs and poultry, increased by almost 18 per cent in sterling during the period under review. Aivlosin® is prescribed under strict veterinary control at low, yet efficacious, dose rates for short duration treatments of specified diseases. It meets all current guidelines for the responsible use of antimicrobials, which when used appropriately, help to promote animal welfare and food safety.

Sales in the USA rose 33 per cent in sterling, compared with the same period last year, reflecting strong growth of the Aivlosin® water soluble granule formulation for use in swine suffering from enteric (gut) diseases. In late July, the Center for Veterinary Medicine (CVM) of the US Food and Drug Administration (FDA) approved this formulation for a new label indication. The approval applied to the control of swine respiratory disease (SRD) associated with Bordetella bronchiseptica, Haemophilus parasuis, Pasteurella multocida, and Streptococcus suis, which are important bacterial respiratory pathogens. Early sales of the Aivlosin® medicated feed additive formulation, which was approved at the end of March 2016, also contributed to revenue in the period. In Canada, sales were also significantly ahead. The SRD application is still under review by the Veterinary Drugs Directorate of Health Canada, which when approved, will add to sales in North America.

Revenue growth in South East Asia was buoyant. The regulatory files supporting the marketing authorisation granted by the European Medicines Agency in June 2016 for the use of Aivlosin® water soluble granules in chickens laying eggs for human consumption, with a zero day drug withdrawal period for eggs, were submitted to a number of countries in the region. Approvals were obtained in Thailand, prior to this period, and in Malaysia during the period; further approvals are expected. The granting of a zero withdrawal period is a significant advantage to egg producers, who as a result are not required to destroy eggs laid while birds are being treated. These new licenses underpin our development of closer relationships with major poultry producers, particularly those in the key egg producing markets of South East Asia.

Both Europe and Japan posted strong sales growth across the portfolio, reflecting our development of closer ties with key customers in these more mature markets.

Last year in China our subsidiary, Zhejiang ECO Biok Animal Health Products, delivered exceptional sales growth. The current year’s sales reflect the organisation’s consolidation of its strong position during a period of softer pork prices and in advance of strategic initiatives to target poultry producers. Sales of Aivlosin® continued to grow and the net profit in China increased by more than 20 per cent over the same period last year, once again reflecting the effectiveness of our overall strategy.

The excellent performance of Aivlosin® across the majority of geographies was tempered by continuing weakness in some Latin American markets including Brazil, mainly due to slow regulatory responses and a generally weak economic environment. Sales in Mexico, on the other hand, were very strong. This performance was boosted by our first Aivlosin® approval for the medication of drinking water for the treatment of infections caused by Mycoplasma in poultry laying eggs for human consumption with a zero day drug withdrawal period for eggs in Latin America, received in January 2017.

People

David Danson, who completed nine years as a non executive director, will retire on 1 December from the board in accordance with corporate governance guidelines. I would like to thank David for his wise counsel, which has been invaluable and reflects his extensive business experience and Council membership of the Royal College of Veterinary Surgeons. Andrew Jones joined us as a non executive director on 1 December. Andrew brings a wealth of board experience gained across large listed, private equity backed and small to medium sized enterprises. Andrew’s particular focus is on the life sciences sector and importantly, the animal health industry.

While I have been executive chairman of the Company since its formation, the time is right for my role to become non executive. This change will take effect from 1 January 2018 and conforms to best practice corporate governance.

Outlook:

The second half of the year has started well with a strong and growing order book. ECO has a sound balance sheet with good and reliable cash generation. The Company continues to invest in research and product development programmes to obtain further marketing authorisations and efficiencies in production. I look forward with confidence to reporting another set of impressive results in 2018.

Peter A Lawrence

05 December 2017

CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS TO 30 SEPTEMBER 2017

				Six months		Six months		Year
				to		to		ended
				30.09.17		30.09.16		31.03.17
		Notes		(unaudited)		(unaudited)		(audited)
				£000		£000		£000
Revenue		3		29,204		26,939		61,422
Cost of sales				(14,970)		(14,153)		(31,103)
Gross Profit				14,234		12,786		30,319
Other operating income				138		98		379
Administrative expenses				(6,050)		(6,774)		(14,232)
Currency (losses)/profits				(300)		277		(55)
Amortisation of intangible assets				(1,700)		(1,593)		(3,088)
Share based payments				(380)		(240)		(678)
Profit from operating activities:				5,942		4,554		12,645
Net finance (costs)/income				(102)		724		784
Share of profit of associate				24		31		23
Profit before income tax				5,864		5,309		13,452
Income tax charge				(641)		(806)		(1,453)
Profit for the period from continuing operations				5,223		4,503		11,999
Attributable to:
Owners				4,188		3,632		10,565
Minority interest				1,035		871		1,434
				5,223		4,503		11,999
BASIC EARNINGS PER SHARE		5		6.39p		5.68p		16.35p
FULLY DILUTED EARNINGS PER SHARE		5		6.37p		5.65p		16.17p
Earnings from continuing activities before
interest, taxation, depreciation, amortisation
and share based payments				8,185		6,552		17,009
Exclude foreign exchange differences				300		(277)		55
EBITDA				8,485		6,275		17,064

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS TO 30 SEPTEMBER 2017
		Six months		Six months		Year
		to		to		ended
		30.09.17		30.09.16		31.03.17
		(unaudited)		(unaudited)		(audited)
		£000		£000		£000
Profit for the period		5,223		4,503		11,999
Foreign currency translation differences		(482)		998		1,030
Defined benefit pension plan - actuarial losses		-		-		(483)
Deferred tax on revaluations		-		-		10
Other comprehensive income for the period		(482)		998		557
Total comprehensive income for the period		4,741		5,501		12,556
Attributable to:
Owners		3,858		4,341		10,829
Minority interest		883		1,160		1,727
		4,741		5,501		12,556

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS TO 30 SEPTEMBER 2017
		Share		Share		Other		Revaluation		Treasury		Retained		Total		Minority		Total
		Capital		Premium		Reserves		Reserves		Reserve		Earnings				Interest		Equity
		Account		Account
		£000		£000		£000		£000		£000		£000		£000		£000		£000
At 1 April 2016		3,205		55,590		2,028		654		(1,144)		21,824		82,157		3,202		85,359
Profit for the year		-		-		-		-		-		10,565		10,565		1,434		11,999
Other comprehensive income:
Foreign currencydifferences		-		-		-		-		-		737		737		293		1,030
Actuarial (losses) onpension scheme assets		-		-		-		-		-		(483)		(483)		-		(483)
Deferred taxation change inrate		-		-		-		10		-		-		10		-		10
Total comprehensive income for the year		-		-		-		10		-		10,819		10,829		1,727		12,556
Transactions with ownersrecorded directly in equity
Contributions by and distributions to owners
Movement in TreasuryReserve arising fromdisposal of jointly ownedshares		-		-		-		-		1,144		-		1,144		-		1,144
Issue of shares in the year		66		2,517		-		-		-		-		2,583		-		2,583
Sale of treasury shares		-		47		-		-		-		60		107		-		107
Share-based payments		-		-		678		-		-		-		678		-		678
Transfers on expiry of options		-		-		(257)		-		-		257		-		-		-
Dividends relating to 2016		-		-		-		-		-		(3,667)		(3,667)		(587)		(4,254)
Transactions with owners		66		2,564		421		-		1,144		(3,350)		845		(587)		258
Balance as at 31 March 2017		3,271		58,154		2,449		664		-		29,293		93,831		4,342		98,173
Total comprehensive income for the period:
Profit for the period		-		-		-		-		-		4,188		4,188		1,035		5,223
Other comprehensive income
Foreign currency translationdifferences		-		-		-		-		-		(330)		(330)		(152)		(482)
Total comprehensive income for the period		-		-		-		-		-		3,858		3,858		883		4,741
Transactions with owners
Issue of shares in the year		17		568		-		-		-		-		585		-		585
Share based payments		-		-		380		-		-		-		380		-		380
Transfer to retained earnings on option expiry		-		-		(294)		-		-		294		-		-		-
Dividends		-		-		-		-		-		(1,635)		(1,635)		(1,389)		(3,024)
Total transactions with owners		17		568		86		-		-		(1,341)		(670)		(1,389)		(2,059)
At 30 September 2017		3,288		58,722		2,535		664		-		31,810		97,019		3,836		100,855
Prior interim period
At 1 April 2016		3,205		55,590		2,028		654		(1,144)		21,824		82,157		3,202		85,359
Total comprehensive income for the period:
Profit for the period		-		-		-		-		-		3,632		3,632		871		4,503
Other comprehensive income
Foreign currency translationdifferences		-		-		-		-		-		709		709		289		998
Total comprehensive income for the period		-		-		-		-		-		4,341		4,341		1,160		5,501
Transactions with owners
Issue of shares in the year		30		1,165		-		-		-		-		1,195		-		1,195
Movement in TreasuryReserve arising fromdisposal of jointly ownedshares		-		-		-		-		1,134		-		1,134		-		1,134
Disposal of treasury shares		-		47		-		-		-		59		106		-		106
Share based payments		-		-		240		-		-		-		240		-		240
Transfer to retainedearnings on option expiry		-		-		(244)		-		-		244		-		-		-
Dividends		-		-		-		-		-		(1,209)		(1,209)		(586)		(1,795)
Total transactions with owners		30		1,212		(4)		-		1,134		(906)		1,466		(586)		880
At 30 September 2016		3,235		56,802		2,024		654		(10)		25,259		87,964		3,776		91,740

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
				As at		As at		As at
				30.09.17		30.09.16		31.03.17
				(unaudited)		(unaudited)		(audited)
		Notes		£000		£000		£000
ASSETS
Non current assets
Goodwill and other intangibles		7		55,956		51,975		53,883
Property,plant and equipment		8		1,888		1,851		1,865
Investment property		9		185		185		185
Investments				113		98		97
				58,142		54,109		56,030
Current assets
Inventories				18,830		16,636		19,675
Trade and other receivables				14,583		15,393		16,158
Income tax recoverable				470		163		395
Other taxes and social security				961		565		897
Cash and cash equivalents				20,304		18,525		20,602
				55,148		51,282		57,727
Total assets				113,290		105,391		113,757
Current liabilities
Trade and other payables				(10,260)		(11,617)		(13,733)
Income tax				(244)		(377)		(238)
Other taxes and social security				(702)		(770)		(447)
Dividends				(40)		(37)		(39)
				(11,246)		(12,801)		(14,457)
Total assets less current liabilities				102,044		92,590		99,300
Non current liabilities
Deferred tax				(1,189)		(750)		(1,027)
Dilapidations on property leases				-		(100)		(100)
				100,855		91,740		98,173
Equity
Capital and reserves
Called up share capital				3,288		3,235		3,271
Share premium				58,722		56,802		58,154
Treasury Reserve				-		(10)		-
Revaluation reserve				664		654		664
Other reserves				2,535		2,024		2,449
Retained earnings				31,810		25,259		29,293
				97,019		87,964		93,831
Minority interest				3,836		3,776		4,342
Total equity				100,855		91,740		98,173

CONSOLIDATED STATEMENT OF CASH FLOWS
		Six months to		Six months to		Year ended
		30.09.17		30.09.16		31.03.17
		(unaudited)		(unaudited)		(audited)
		£000		£000		£000
Cashflows from operating activities
Profit before tax		5864		5309		13452
Adjustment for:
Net finance costs		102		(724)		(784)
Depreciation of property plant and equipment		139		134		264
Losses/(gains) on disposal of non-current assets		-		1		37
Amortisation of intangible assets		1,700		1,593		3,088
Impairment of intangible assets		-		-		297
Pension payments		-		-		(76)
Share of associate's results		(24)		(31)		(23)
Share based payments		380		240		678
Operating cash flow before movement in working capital		8,161		6,522		16,933
Change in inventories		845		(1,043)		(4,082)
Change in receivables		1,511		(1,812)		(3,195)
Change in payables		(3,318)		1,774		3,445
Cash generated from operations		7,199		5,441		13,101
Income tax (paid)		(548)		(555)		(1,286)
Net cash inflow from operating activities		6,651		4,886		11,815
Cash flows from investing activities
Purchase of property plant and equipment		(194)		(86)		(265)
Costs of acquiring drug registrations		(3,773)		(4,231)		(7,931)
Finance income		61		84		103
Net cash (used in) investing activities		(3,906)		(4,233)		(8,093)
Cash flows from financing activities
Proceeds from issue of share capital and sale ofjointly owned and treasury shares		585		2,435		3,834
Dividends paid		(3,024)		(1,795)		(4,252)
Net cash from financing activities		(2,439)		640		(418)
Net increase in cash and cash equivalents		306		1,293		3,304
Foreign exchange movements		(604)		1,567		1,633
Cash and cash equivalents at the beginning of theperiod		20,602		15,665		15,665
Cash and cash equivalents at the end of theperiod		20,304		18,525		20,602

NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2017

1. Basis of preparation The financial information for the period to 30 September 2017 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 2017.

The Group applies revised IAS 1 “Presentation of Financial Statements (2007)”. As a result, the Group presents all non-owner changes in equity in consolidated statements of comprehensive income and all owner changes in equity in consolidated statements of changes in equity.

2. Statement of compliance The interim financial statements do not include all of the information required for full annual financial statements and do not comply with all of the disclosure requirements in IAS 34 “Interim Financial Reporting”. Accordingly, whilst the interim statements have been prepared in accordance with IFRS, they cannot be construed as being in full compliance with IFRS and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2017.

3. Revenue is derived from the Group’s animal pharmaceutical businesses.

4. Principal risks and uncertainties These were set out on pages 63-66 of the notes to the consolidated financial statements for the year ended 31 March 2017. The key exposures are to foreign currency exchange rates, potential delays in obtaining marketing authorisations and single sources of supply for some raw materials and have remained unchanged since the year end.

5. Earnings per share

		Six months to		Six months to		Year ended
		30.09.17		30.09.16		31.03.17
		(unaudited)		(unaudited)		(audited)
Weighted average number of shares in issue (000's)		65,517		63,992		64,638
Fully diluted weighted average number of shares in issue(000's)		65,787		64,301		65,356
Profit attributable to equity holders of the company (£'s)		4,188		3,632		10,565
Basic earnings per share (pence)		6.39		5.68		16.35
Fully diluted earnings per share (pence)		6.37		5.65		16.17

6. Dividends

		Six months to		Six months to		Year ended
		30.09.17		30.09.16		31.03.17
		(unaudited)		(unaudited)		(audited)
		£000		£000		£000
Dividend in respect of the year ended 31 March 2016
at 1.9p/5.7p per ordinary share		-		1,209		3,675
Dividend in respect of the year ended 31 March 2017
at 2.5p per ordinary share		1,635		-		-
Dividend waived by employee benefit trust		-		-		(8)
		1,635		1,209		3,667
Dividend paid by subsidiary to non-controlling interests
(minorities)		1,389		586		-
		3,024		1,795		3,667

The company paid a further dividend of 4.6p per share on 6 October 2017, after the period end. The total paid was £3.02 million.

7. Intangible non-current assets

				Distribution		Development
		Goodwill		Rights		Costs		Total
Cost		£000		£000		£000		£000
Cost at 1 April 2016		17,930		1,442		59,712		79,084
Additions		-		-		4,231		4,231
Cost at 30 September 2016		17,930		1,442		63,943		83,315
Additions		-		-		4,007		4,007
Contributions from third parties		-		-		(307)		(307)
Cost at 31 March 2017		17,930		1,442		67,643		87,015
Additions		-		-		3,773		3,773
Cost at 30 September 2017		17,930		1,442		71,416		90,788
Amortisation
Amortisation at 1 April 2016		-		687		29,060		29,747
Charge for the period		-		36		1,557		1,593
Amortisation at 30 September 2016		-		723		30,617		31,340
Charge for the period		-		36		1,459		1,495
Impairment charge		-		-		297		297
Amortisation at 31 March 2017		-		759		32,373		33,132
Charge for the period		-		39		1,661		1,700
Amortisation at 30 September 2017		-		798		34,034		34,832
Net book value at 30 September2017		17,930		644		37,382		55,956
Net book value at 1 April 2017		17,930		683		35,270		53,883
Net book value at 30 September2016		17,930		719		33,326		51,975
Net book value at 1 April 2016		17,930		755		30,652		49,337

8. Property, plant and equipment

						Fixtures,
		Freehold		Plant and		fittings &		Motor
		Property		Machinery		equipment		Vehicles		Total
Cost		£000		£000		£000		£000		£000
Cost at 1 April 2016		730		1,658		710		53		3,151
Additions		-		30		24		32		86
Disposals		-		(13)		-		-		(13)
Foreign exchange movements		-		84		1		8		93
Cost at 30 September 2016		730		1,759		735		93		3,317
Additions		-		17		131		31		179
Disposals		-		(267)		-		(47)		(314)
Foreign exchange movements		-		32		(1)		(2)		29
Cost at 1 April 2017		730		1,541		865		75		3,211
Additions		-		51		143		-		194
Foreign exchange movements		-		(30)		-		(5)		(35)
Cost at 30 September 2017		730		1,562		1,008		70		3,370
Depreciation
Depreciation at 1 April 2016		-		772		507		39		1,318
Charge for the period		5		84		43		2		134
Disposals		-		(12)		-		-		(12)
Foreign exchange movements		-		24		-		2		26
Depreciation at 30 September 2016		5		868		550		43		1,466
Charge for the period		8		82		35		5		130
Disposals		-		(240)		-		(37)		(277)
Foreign exchange movements		-		27		2		(2)		27
Depreciation at 1 April 2017		13		737		587		9		1,346
Charge for the period		6		76		52		5		139
Foreign exchange movements		-		(3)		-		-		(3)
Depreciation at 30 September 2017		19		810		639		14		1,482
Net book value
Net book value at 30 September 2017		711		752		369		56		1,888
Net book value at 1 April 2017		717		804		278		66		1,865
Net book value at 30 September 2016		725		891		185		50		1,851
Net book value at 1 April 2016		730		886		203		14		1,833

9. Investment property

		Freehold
		Property		Total
Valuation		£000		£000
Valuation at 1 April 2016, 30 September 2016, 31March 2017 and 30 September 2017		189		189
Depreciation
Depreciation at 1 April 2016, 30 September 2016,31 March 2017 and 30 September 2017		4		4
Net Book Value
Net Book Value at 1 April 2016, 30 September2016, 31 March 2017 and 30 September 2017		185		185

This financial information was approved by the board on 05 December 2017.

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.

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)
		Andrew Jones		(Non-Executive Director, appointed 1st December 2017)
		Anthony Rawlinson		(Non-Executive Director)
REGISTERED OFFICE		78 Coombe Road, New Malden, Surrey. KT3 4QS
		Tel: 020-8336-2900		Fax: 020-8336-0909
COMPANY NUMBER		01818170
INFORMATION AT		www.ecoanimalhealthgroupplc.com

LEI: 2138009XN9DJ3YP70B55

Classification: 1.2. Half yearly financial reports and audit reports/limited reviews

View source version on businesswire.com: http://www.businesswire.com/news/home/20171205006309/en/

Copyright Business Wire 2017