Eco Animal Regulatory News (EAH)

17 Dec 2007 07:00

Eco Animal Health Group PLC17 December 2007 17 December 2007 ECO Animal Health Group plc Interim Results for the six months ended 30 September 2007 and placing Key features • 700,000 new shares placed with an institution at a premium to share price • Aivlosin sales (in US dollars) 34 per cent ahead of same period last year • Strong growth from new Chinese subsidiary • Scrip dividend alternative to be offered to all shareholders; a number of major shareholders have already indicated their intention to take new shares in lieu of the dividend • Aivlosin European approval process for poultry in final stages • Very encouraging results at reduced dose rate for ileitis in pigs with Aivlosin, leading to submission for label change in the EU next year • Group focused on veterinary pharmaceutical products • Further important drug registrations granted during period Peter Lawrence, Chairman of Eco Animal Health Group plc, commented: "Much has happened to strengthen our animal health business so far this yearand following the granting of the new drug registrations, since the period end,current indications are that sales are likely to show a good increase in thesecond half of the year. I am particularly pleased with the projected low dosesubmission to the EU on Aivlosin as it, when granted, should lead to ourexisting sales success being replicated in the major European markets" Contacts: ECO Animal Health Group plc Peter Lawrence 020 8336 6190 Spiro Financial Anthony Spiro 020 8336 6196 Charles Stanley Securities Philip Davies 020 7149 6224(Nominated Adviser) ECO Animal Health Group is a leader in the development, registration andmarketing of pharmaceutical products. Our products for these global growthmarkets promote well being in animals. Our financial goals are achieved throughthe careful and responsible application of science to generate value for ourshareholders. ECO Animal Health Group plc CHAIRMAN'S STATEMENT At the Annual General Meeting of Lawrence plc in August 2007 shareholders passeda resolution to change the Company's name to ECO Animal Health Group plc fromLawrence plc. As a result of the strategic disposals, which were implementedover recent years, well over 90 per cent of sales are now attributable to ourECO Animal Health operations; the name change reflects this focus. Our web siteaddress is now www.ecoanimalhealthgroupplc.com The continuing weakness of the US dollar, which fell by a further seven per centagainst sterling over the six months under review, has once again masked theunderlying performance of the Company as the majority of its sales are invoicedin that currency. Despite this dollar weakness, total sales in sterling wereclose to last year's level. EBITDA (earnings before interest, tax, depreciation,amortisation and share based payments) on continuing operations for the sixmonths to 30 September 2007 was £674,000. Our strategy to become a focussed animal health company has been completedsuccessfully, although in terms of trading performance the full benefits haveyet to come through. I commented in the 2007 Annual Report that the Company isdetermined to maximise the long-term value of its drug development andregistration programmes. Selling our mature, slow growth businesses hasinevitably had a short-term impact on cash generation. Our animal healthoperations are still in the cash-consuming phase as we invest in drugdevelopment and registrations. In August 2007 the Company raised close to £5.3 million (after expenses) througha share placing to accelerate its registration timetable, which would allow ECOto achieve more authorisations in a shorter time. Furthermore the Board alsoidentified investment opportunities within the pet medication market. Work hasbegun on these new development projects. The Board believes that theseprogrammes are of high priority and their early completion is an essentialcomponent of the Company's strategy to build long-term value through targetedinvestment. The Board is declaring an unchanged Interim dividend of 1.7 pence (net) pershare, which will be paid on 12 May 2008 to shareholders on the register on 18April 2008. In addition, the Board has decided to offer a scrip dividendalternative and a circular will be sent to shareholders shortly convening anExtraordinary General Meeting. We are confident that shareholders will benefitfrom this proposal, as it will allow us to target a greater proportion of ourcash resources on the generation of profit from our product registrationprogrammes. A number of major shareholders have already indicated theirintention to take new shares in lieu of the dividend. Operations I am pleased to report that the Company made steady progress during the periodunder review. Sales of Aivlosin(R), our patented macrolide antibiotic, advanced34 per cent in US dollars from last year's level in generally challenging marketconditions. The principal growth area was in the rest of the world where thelevel of sales was 54 per cent ahead of last year. Sales of Aivlosin(R) in Europe to pig producers, which are principally handledby our distributor Schering Plough, continue to disappoint and were 14 per centbelow last year's level. The reason is two fold; firstly farmers are facingeconomic difficulties as a result of global grain shortages and secondly ECO hasbeen affected by the unexpected imposition of a higher than expected dose rateby the European licensing authority, for the control of ileitis. ECO hasresponded rapidly by commencing a reduced dose rate trial programme for ileitisin pigs, which has produced very encouraging results. We will submit anapplication for this lower treatment regimen to the EMEA (European MedicinesEvaluation Agency) next year: approval will have a significant positive impacton our EU sales and market penetration. We are in the final stages of the EMEA approval process for Aivlosin(R) forpoultry. A recent decision by the EMEA now allows us to continue the developmentwork to extend its use to egg laying birds. A European marketing authorisationwill open up new markets for Aivlosin(R) in the Middle East and North Africawhere the local regulatory authorities seek the reassurance of a Europeanapproval. We have recently received approval for the use of Aivlosin(R) withpoultry in Turkey and our submission to the licensing authorities in India isalso progressing well. We have been granted several new approvals around the world for Aivlosin(R),including the very large markets for pigs and poultry in Brazil and a furtherapproval in Japan for pigs is imminent. At the important Latin American PoultryConference, held recently in Brazil and attended by leading veterinaryspecialists from Central and Latin America, ECO reinforced its presence with atrade stand manned by its Latin American sales team. ECO was also invited togive a keynote lecture on mycoplasma control, a key benefit of Aivlosin(R),during the parallel scientific programme. The collaborative research programme with Cambridge University's Department ofPathology is progressing well as is the related work on pigs at the Universityof Iowa. Some of the early results from this research on the effect of Aivlosin(R) on certain viral respiratory infections were presented to pig veterinariansin China and were particularly well received. In April 2007 we increased ourshareholding in Zhejiang ECO-BIOK Animal Health Products Company Ltd and nowhave control of this company and therefore consolidated its results for thefirst time. This new Chinese subsidiary delivered a strong performance, withsales exceeding £0.6 million, which represents a very significant increase overthe equivalent period last year. This business represents a large potentialprofit centre for the Company. ECO also exhibited at the World VeterinaryPoultry Association Conference in Beijing. Work on our Ecomectin(R) marketing authorisations is almost complete. Approvalfor Ecomectin(R) horse paste in a further 16 EU countries was recently grantedand sales in Ireland, which began earlier in the year, are very encouraging.Once labelling has been agreed with each member state, sales will commence.European marketing authorisation for Ecomectin(R) pig premix is also imminent.The US market for Ecomectin(R) cattle pour-on shows little sign of recoveringfrom the sharp drop in pricing levels that we reported two years ago. Customersin Japan have placed opening orders for Ecoheart(R), a combination heartworm androundworm tablet for dogs, thus opening a substantial and very important marketsegment. Board Kevin Stockdale, who is a chartered accountant, rejoined the Company on 3 August2007 as Finance Director. Previously he had been responsible for the groupaccounts of Lawrence plc and was also Finance Director of Lawrence's Interpetoperation. Kevin remained with Interpet following its disposal in 2004. JuliaRosu also joined the Board on 3 August as an executive director. Julia has beenwith the Company since 1993 and fulfilled a number of senior finance roles,initially with our Pet Superstores division. She has been Company Secretarysince 2004 and was Group Financial Controller. Gavin Casey, who joined as a non-executive director five years ago in 2002, willretire from the Board at the end of the year. Gavin has been a most helpful andconstructive colleague; we will miss his wisdom and experience. We hope toappoint his replacement in the coming months. Outlook Much has happened to strengthen our animal health business so far this year andfollowing the granting of the new drug registrations, since the period end,current indications are that sales are likely to show a good increase in thesecond half of the year. Peter LawrenceExecutive Chairman 17 December 2007 CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS TO 30 SEPTEMBER 2007 Six months Six months Year ended ended ended 30.09.07 30.09.06 31.03.07 (unaudited) (unaudited) (audited) (as restated) (as restated) £000 £000 £000REVENUE Continuing operations 6,292 6,891 14,703 Acquisitions 618 - - Discontinued activities - 2,807 3,593 6,910 9,698 18,296 Cost of sales (4,786) (6,535) (12,367) GROSS PROFIT 2,124 3,163 5,929 Administrative expenses (1,643) (1,555) (3,602) Currency losses (87) - - Amortisation of intangible assets (1,014) (741) (1,613) Share based payments (131) (87) (224) Other operating income 210 - 432 OPERATING (LOSS)/PROFIT:Continuing operations (576) 338 427 Discontinued activities - 442 495 Acquisitions 35 - - Profit on sale of a division - - 2,896 Amounts written off investments - - (40) (LOSS)/PROFIT ON ORDINARYACTIVITIES BEFORE INTEREST (541) 780 3,778 Net interest payable (195) (206) (387) (LOSS)/PROFIT ON ORDINARYACTIVITIES BEFORE TAXATION (736) 574 3,391 Taxation - - (571) (LOSS)/PROFIT ON ORDINARYACTIVITIES AFTER TAXATION (736) 574 2,820 ATTRIBUTABLE TO:Equity holders of the parent (753) 574 2,820 Minority interest 17 - - (736) 574 2,820 BASIC (LOSS)/EARNINGS PER SHARE (2.363)p 1.844p 9.056p FULLY DILUTED (LOSS)/EARNINGSPER SHARE (2.360)p 1.832p 9.012p EARNINGS BEFORE INTEREST,TAXATION,DEPRECIATION,ANDSHARE BASED PAYMENTS 674 1,667 5,732 BASIC EARNINGSPER SHARE BEFOREDEPRECIATION AND SHAREBASED PAYMENTS 2.062p 5.388p 18.408p CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER2007 As at As at As at 30.09.07 30.09.06 31.03.07 (unaudited) (unaudited) (audited) (as restated) (as restated) £000 £000 £000 ASSETSNon Current AssetsProperty,Plant & Equipment 1,367 1,354 943Goodwill & Other Intangibles 33,783 30,210 32,140Investments 342 569 779 35,492 32,133 33,862 CURRENT ASSETSInventories 4,782 4,337 3,357Trade and other receivables 8,337 9,999 9,257Corporation tax - 58 -Deferred tax 185 18 185 Other taxes and social security 320 103 -Cash and cash equivalents 1,360 1,483 936 14,984 15,998 13,735 Total Assets 50,476 48,131 47,597 EquityCapital and reserves Called up share capital 1,695 1,558 1,559Share premium 26,504 21,331 21,367Revaluation reserve 256 429 256Other reserves 679 411 548Retained earnings 9,255 10,105 12,474 38,389 33,834 36,204Minority interest 502 2 2 Total Equity 38,891 33,836 36,206 Liabilities Non Current Liabilities Long term borrowings 630 2,061 630Long term provisions 111 338 111 Current LiabilitiesTrade and other payables 4,880 4,218 5,321Short term borrowings 3,155 5,555 3,864Current portion of long term borrowings 210 210 210Corporation tax 630 - 630Other taxes and social security 119 215 92Dividends payable 1,850 1,698 533 Total Equity and Liabilities 50,476 48,131 47,597 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS FOR THE PERIOD TO 30 SEPTEMBER Share Share Other Revaluation Retained Total Minority Total Capital Premium Reserves Reserves Earnings Interest Equity Account Account £000 £000 £000 £000 £000 £000 £000 £000 At 1 April 2006 1,556 21,272 106 429 11,486 34,849 2 34,851 Changes in accounting policy - - 218 - (218) - - - At 1 April 2006 restated 1,556 21,272 324 429 11,268 34,849 2 34,851 Profit for the year - - - - 2,820 2,820 - 2,820Transfer from revaluation - - - (170) 170 - - -reserve to retained earnings Foreign currency translation - - - - 271 271 - 271 differences Arising on issue of shares 3 95 - - - 98 - 98in the year Dividends - - - - (2,228) (2,228) - (2,228) Depreciation written back - - - (3) - (3) - (3) Share based payments - - 224 - - 224 - 224 Actuarial gains on pension - - - - 173 173 - 173scheme assets At 31 March 2007 1,559 21,367 548 256 12,474 36,204 2 36,206 Loss for the period - - - - (753) (753) 17 (736)Foreign currency translation - - - - (619) (619) - (619)differences Arising on issue of shares in the period 136 5,137 - - - 5,273 - 5,273 Arising on consolidation - - - - - - 483 483of ECO Biok Dividends payable - - - - (1,847) (1,847) - (1,847) Share based payments - - 131 - - 131 - 131 At 30 September 2007 1,695 26,504 679 256 9,255 38,389 502 38,891 Prior interim periodAt 1 April 2006 1,556 21,272 106 429 11,486 34,849 2 34,851 Changes in accounting policy - - 218 - (218) - - -At 1 April 2006 restated 1,556 21,272 324 429 11,268 34,849 2 34,851Profit for period 574 574 574 Foreign currency translation - - - - (39) (39) - (39) differences Arising on issue of 2 59 - - - 61 - 61shares in the period Dividends payable - - - - (1,698) (1,698) - (1,698) Share based payments - - 87 - - 87 - 87 At 30 September 2006 1,558 21,331 411 429 10,105 33,834 2 33,836 CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS TO 30SEPTEMBER 2007 Six months Six months Year ended ended ended 30.09.07 30.09.06 31.03.07 (unaudited) (unaudited) (audited) (as restated) (as restated) £000 £000 £000 (Loss)/(Profit) from operations (541) 780 922 Adjustment for: Depreciation of plant and equipment 70 59 117 Amortisation of intangible assets 1,014 741 1,613 Actuarial pension losses - - (54) (Decrease)/increase in pension provision - - (227) Share based payments 131 87 224 Foreign exchange differences (618) (39) 271 Operating cash flow before movement in working capital 56 1,628 2,866 (Increase)/decrease in inventories (985) (711) 270 Decrease in receivables 688 449 1,295 (Decrease)/Increase in payables (898) 13 1,219 Cash (absorbed by)/generated from operations (1,139) 1,379 5,650 Interest paid (197) (226) (477) Taxation - - (51) Net cash (outflow)/inflow from operating activities (1,336) 1,153 5,122 Cash flows from investing activities Acquisition of ECO Biok (61) - - (Less cash acquired with ECO Biok) 276 - - Investment in Brazilian Office (62) Proceeds from sale of a division - - 3,032 Purchase of property plant andequipment (10) (37) (57) Costs of acquiring drug registrations (2,419) (2,151) (4,970) Interest received 2 20 90 Net cash (used in) investing activities (2,274) (2,168) (1,905) Cash flows from financing activities Issue of shares 5,273 61 98 (Repayment of)/Increase in bank borrowings (709) 1,620 (1,501) Dividends paid (530) (482) (2,177) Net cash received from/(used in) financingactivities 4,034 1,199 (3,580) Net increase/(decrease) in cash and cash equivalents 424 184 (363) Cash and cash equivalents at the beginning of theperiod 936 1,299 1,299 Cash and cash equivalents at the end of the period 1,360 1,483 936 ECO ANIMAL HEALTH GROUP PLC (FORMERLY LAWRENCE PLC) NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 1. Basis of preparation The group has historically prepared its audited annual accounts and unauditedinterim results in accordance with UK generally accepted accounting practice (UKGAAP).Following new accounting standards the group is now required to presentits annual report and accounts in accordance with International Accounting andFinancial Reporting Standards (IFRS). The IFRS information in this report for the year ended 31 March 2007 is arestatement of information extracted from the statutory financial statementsprepared under UK GAAP on a historical cost basis. Those statutory accounts werefiled with the Registrar of Companies. The auditors report on those accounts wasunqualified and did not contain a statement under section 237 (2) or section 237(3) of the Companies Act 1985.The restated IFRS information provided for theyear ended 31 March 2007 does not constitute statutory accounts within themeaning of Section 240 of the Companies Act 1985. However these are anticipatedto form the comparative period in the statutory accounts for the year ending 31March 2008, the Group's first report to be prepared in accordance with IFRS. The unaudited interim results for the six months ended 30 September 2006 and 30September 2007 have been prepared by the Group in accordance with IFRS andaccounting policies that will be applied when the Group prepares its first IFRSfinancial statements for the year ending 31 March 2008.The financial informationfor the six months ended 30 September 2007 does not constitute statutoryaccounts as defined by Section 240 of the Companies Act 1985. 2. The implementation of IFRS and IAS resulted in the following restatements of previously reported figures: For the six months ended 30th September 2006: In respect of IFRS 2 'Share-based Payment' - a reduction of reported profitthrough increased overheads of £87,000, a reduction in retained earnings broughtforward of £218,000, and an increase in Share Option Reserve of £305,000. In respect of IAS 36 -'Impairment of Assets' - an increase in reported profitthrough decreased amortisation of goodwill of £511,000 and a correspondingincrease in the value of Intangible Assets in the Balance Sheet as at 30th September 2006. For the year ended 31st March 2007: In respect of IAS 36 -'Impairment of Assets' - an increase in reported profitthrough decreased amortisation of goodwill of £1,021,112, and a correspondingincrease in the value of Intangible Assets in the Balance Sheet as at 31st March 2007. The effect of implementation of IAS 36 on the Financial Statements for the sixmonths ended 30th September 2007 is as follows: In respect of IAS 36 -'Impairment of Assets' - an increase in reported profitthrough decreased amortisation of goodwill of £511,000, an increase in retainedearnings brought forward of £1,021,112 and an increase in the value ofIntangible Assets in the Balance Sheet as at 31st March 2007 of £1,532,112. 3. Revenue is derived from the Group's animal pharmaceutical business. 4. Earnings per share September 2007 September March Unaudited 2006 2007 Unaudited Audited (as restated) (as restated) Weighted average number of share in issue 31,864 31,122 31,139(000's) Fully diluted weighted average number of sharesin issue (000's) 31,901 31,338 31,290 Profit/(loss) attributable to equity holders ofthe company (£000's) (753) 574 2,820 Basic (loss)/earnings per share (pence) (2.363) 1.844 9.056 Fully diluted (loss)/ earnings per share (pence) (2.360) 1.832 9.012 5. This financial information was approved by the Board on 6. 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. This information is provided by RNS The company news service from the London Stock Exchange