All RNS Press Releases

RNS Release - Half-yearly Report

12th Dec 2011, 7:00 am

Half-yearly Report

Eco Animal Health Group Plc

ECO Animal Health Group plc

Interim Results for the six months ended 30 September 2011

Key features

• Profit for the period from continuing operations rose to £0.44 million (2010: £0.42 million)
• EBITDA and before share based payments was unchanged at £2.2 million (2010: £2.2 million)
• Basic earnings per share increased over 50 per cent to 0.53 pence (2010: 0.35 pence)
• Aivlosin® approval in Canada will have significant impact in next financial year
• Preparations for launch of Aivlosin® in USA continue
• Strong performances in major markets �?? Latin America, Asia and Middle East
• Net cash at period end of £8 million after spending £2 million on further drug registration work and the annual dividend

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

�??The second half has started well. Based on orders booked for delivery in the third quarter, total sales after nine months should be comfortably ahead of last year. The approval for Aivlosin® in Canada is another important step in the Company�??s global marketing plans; sales will commence after the end of the current financial year. ECO�??s recent additional investment in people and new offices, ahead of imminent further marketing approvals, reflects management�??s confidence, despite continuing worldwide troubled economies, in the future of the business and its ability to drive growth.�?�

Contacts:

ECO Animal Health Group plc
Peter Lawrence		020 8336 6190
Spiro Financial
Anthony Spiro		020 8336 6196
Cenkos Securities plc (Nominated adviser)
Stephen Keys		020 7397 8926
Elizabeth Bowman		020 7397 8928

ECO Animal Health Group plc is a leader in the development, registration and marketing of pharmaceutical products for animals. Our products for these global growth markets promote well-being. Our financial goals are achieved through the careful and responsible application of science to generate value for our shareholders.

Chairman�??s statement

I am pleased to report that ECO Animal Health Group has again delivered a good set of results for the six months ended 30 September 2011. Sales and operating profit were comfortably ahead of our budget although below last year�??s outturn. As expected, some major customers adjusted their delivery schedules to give a stronger second half bias and this was built into our phased budget. The change in the timing of orders is not expected to affect the full year�??s result, but has distorted the first half performance. The second half of the year is traditionally stronger as the incidence of respiratory disease increases and parasite numbers also rise during the southern hemisphere spring. This trend is already reflected in our results for the first two months of the second half, which are ahead of last year and show that ECO Group�??s sales are cumulatively ahead of the comparable period in the previous year.

In November, ECO was pleased to report that the Veterinary Drugs Directorate of Health Canada has granted a marketing authorisation for Aivlosin^® for pigs. The Health Canada approval is the first in North America for Aivlosin^®, ECO�??s patented macrolide antibiotic, and marks a very important step in the Company�??s development of its global veterinary product. It further extends the marketing reach of Aivlosin^®, which is used for the treatment of respiratory and enteric diseases in pigs and poultry. We anticipate that we will shortly receive a long awaited registration from the Federal Drug Administration, which will allow us to commence sales in the large markets of the USA.

Financial

ECO�??s earnings before interest, tax, depreciation, amortisation and share based payments (EBITDAS) were £2.2 million (2010: £2.2 million) and together with sales, were well ahead of our phased budget and confirm the underlying revenue growth trend. Profit from continuing operations rose to £0.44 million (2010: £0.42 million). Basic earnings per share were 0.53 pence (2010: 0.35 pence), which is an increase of over 50 per cent. Our balance sheet remains strong with almost £1.5 million cash generated in the period from our worldwide operations. Net cash remained high at near £8 million after investing around £2 million in our ongoing drug registration programme and having paid the annual dividend of £1 million. Shareholders representing some 22 per cent of holders chose to take the scrip alternative. This enables the Company to conserve cash, which can be redirected to finance our research, development and regulatory affairs which are so important for the future of the business.

The company has recently established a currency hedge position with regard to its exposure to the US dollar and the euro. This action will help to mitigate any real foreign exchange losses, as opposed to accounting regulatory ones, which reflected an uncrystallised currency �??loss�?? during the period and which can still be reversed if sterling weakens again.

Operations and markets

ECO�??s sales in US dollars grew by nearly 5 per cent in the period. The relative strength of sterling against the dollar resulted in sterling sales at the Group level being broadly unchanged. Worldwide demand for animal health products for farmed animals is influenced by many factors ranging from levels of economic activity to the influence of outbreaks of disease. This was demonstrated again by the varying level of demand for our products across different territories. Strong double digit growth in US dollars in Latin America, South East Asia, the Middle East and South Africa was offset by a softening in China, although strong orders after the period end have reversed that situation. Japan remains a difficult market and is still affected by local issues resulting from its triple disasters in March. Although trading in Europe has reflected the ongoing economic difficulties, we have appointed additional sales staff in the region to drive sales of both Aivlosin^® and Ecomectin^®, ECO�??s range of differentiated generic antiparasitic drugs. The additional (unbudgeted) costs associated with recruitment will, once the economic situation improves, enable the Company to increase its penetration in these high value markets.

After the period end the Veterinary Drugs Directorate (VDD) of Health Canada granted a marketing authorisation for Aivlosin^® 625 mg/g water soluble granules for pigs. This formulation of Aivlosin^® will be marketed for the treatment of ileitis (porcine proliferative enteropathy (PPE)), an enteric disease of pigs. Aivlosin^® water soluble granules dissolve readily in water providing a simple solution for the accurate and simultaneous treatment of large numbers of animals. Following several years of declining pig numbers in Canada the trend has reversed with producers now looking to consolidate their operations.

Canada and the USA represent more than one third of the world market for ECO�??s products. We reported in July 2011 that the Aivlosin^® regulatory timeline in the USA had been extended by the Federal Drug Administration (FDA), owing to its excessive workload. The FDA was unable to commit to the original review timeline for the final component of the development programme relating to laboratory tests. Although the timeline is not under ECO�??s control, the Company is making every effort to encourage the FDA to complete the approval of this final component as soon as possible. The joint venture with Pharmgate LLC in the USA, initiated in April 2010, has now been extended by the establishment of a legal entity in Canada. Inevitably, there is an investment cost of set up and administration in the period before sales can commence. This investment, together with expenditure to date, in order to obtain regulatory approval for Aivlosin^®, should be rewarded by significant sales and increased Group profits from markets into which so far, we have not been authorised to sell.

In line with our strategic intent of moving closer to the end users in key markets, ECO has established a subsidiary in Mexico which will allow us to benefit from favourable NAFTA free trade agreements and appointed an experienced commercial director to manage the operation.

The development of selected, differentiated generic pet medications of potential major importance to ECO�??s future continues to progress and remain within our expected timeframes.

Building on the basic research conducted by the Virology Division of the Department of Pathology at the University of Cambridge, funded by the UK Medical Research Council, into the inhibition of viruses by Aivlosin®, ECO has commissioned further research with other institutions and the results will be reported in due course.

Outlook

The second half has started well, boosted by the receipt of orders deferred from the first half. Based on orders booked for delivery in the third quarter, total sales after nine months should be comfortably ahead of last year. The approval for Aivlosin® in Canada is another important step in the Company�??s global marketing plans; sales will commence after the end of the current financial year. ECO�??s recent additional investment in people and new offices, ahead of imminent further marketing approvals, reflects management�??s confidence, despite continuing worldwide troubled economies, in the future of the business and its ability to drive growth.

Peter Lawrence
Executive Chairman		9th December 2011

CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS TO 30 SEPTEMBER 2011
				Six months		Six months		Year ended
				to		to
				30.09.11		30.09.10		31.03.11
		Notes		(unaudited)		(unaudited)		(audited)
				£000		£000		£000
Revenue		3		11,880		12,313		27,078
Cost of sales				(7,473)		(7,435)		(16,365)
Gross Profit				4,407		4,878		10,713
Other operating income				154		87		179
Administrative expenses				(2,324)		(2,300)		(4,610)
Currency (losses)				(81)		(501)		(269)
Amortisation of intangible assets				(1,756)		(1,562)		(3,240)
Share based payments				(103)		(103)		(304)
Results from operating activities:				297		499		2,469
Net finance income/(expense)				17		1		(177)
Profit before income tax				314		500		2,292
Income tax				131		(81)		(298)
Profit for the period from continuing operations				445		419		1,994
Attributable to:
Owners				278		183		1,591
Minority interest				167		236		403
				445		419		1,994
BASIC EARNINGS PER SHARE		5		0.53p		0.35p		3.07p
FULLY DILUTED EARNINGS PER SHARE		5		0.52p		0.35p		2.96p
PRE TAX BASIC EARNINGS PER SHARE		4		0.35p		0.46p		3.64p
Earnings from continuing activities before interest, taxation, depreciation, amortisation, and share based payments.				2,224		2,241		6,101

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS TO 30 SEPTEMBER 2011
		Six months		Six months		Year ended
		to		to
		30.09.11		30.09.10		31.03.11
		(unaudited)		(unaudited)		(audited)
		£000		£000		£000
Profit for the period		445		419		1,994
Foreign currency translation differences		301		(29)		203
Defined benefit pension plan �?? actuarial losses		-		-		14
Revaluation of investment in Kiotech International plc		(51)		79		62
Deferred tax on revaluation of investment in Kiotech		12		(19)		(16)
Revaluation of freehold property		-		52		52
Deferred tax on revaluation of freehold property		-		(72)		(72)
Other comprehensive income for the period		262		11		243
Total comprehensive income for the period		707		430		2,237
Attributable to:
Owners		441		232		1,754
Minority interest		266		198		483
		707		430		2,237

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS TO 30 SEPTEMBER 2011
		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 2010 Total comprehensive income for the period		2,581		45,488		1,142		519		4,569		54,299		1,400		55,699
Profit for the period		-		-		-		-		1,591		1,591		403		1,994
Other comprehensive income
Revaluation of freehold property		-		-		-		52		-		52		-		52
Revaluation of investment		-		-		-		61		-		61		-		61
Tax effect of revaluations		-		-		-		(87)		-		(87)		-		(87)
Foreign currency translation differences		-		-		-		-		123		123		80		203
Actuarial gains on pension scheme assets		-		-		-		-		14		14		-		14
Total comprehensive income for the period		-		-		-		26		1,728		1,754		483		2,237
No investment advice The Company is a publisher and is not registered with or authorised by the Financial Services Authority (FSA). You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon. Home Newsletter Forums Events Traders Focus Companies Archives Columns Search My Account Terms & Conditions· Privacy Policy· Copyright Notice Copyright © Proactiveinvestors.co.uk, 2012. All Rights Reserved Design & Development: Tehnicom Computers