ECO Animal Health Group plc (LON:EAH), a leader in the development, registration and marketing of pharmaceutical products for global animal health markets, has provided an update to its expected results for the year ended 31 March 2022.
The audit for the year ended 31 March 2022 is proceeding to its conclusion and it is expected that the results will be released on or around the 18th August 2022.
Overall, the Group expects to report revenue for the year ended 31 March 2022 in excess of £82m and EBITDA of approximately £6.5m, which includes an exchange rate gain of £1m and the effect of the items referred to below.
It has recently come to our attention that certain aspects of a sales tax related to imported products in a foreign jurisdiction where we operate through a subsidiary company, might have been applicable. ECO has been importing an increasing volume of product into this country in recent years. This issue is at an early stage and no tax payment has yet been determined. However, it is likely that a substantial tax settlement could be required in due course and an estimated sum of £2.5million has been provided for in our results for the year ended 31 March 2022. The sum has been apportioned to appropriate years and charged to Cost of Sales within the Income statement. The impact of this item in the year ended 31 March 2022 was a reduction in EBITDA of £1m.
In addition, certain development costs amounting to £0.3m which were initially capitalised but which on subsequent review were judged to not now meet the required specific criteria for capitalisation have resulted in a higher than expected charge for R&D in the consolidated income statement.
The first quarter of financial year 2021/22 saw ECO deliver record China revenue due to a favourable combination of industry structural changes and restocking of the pig herd after the ASF epidemic together with changes in regulations for use of antibiotics in feed created exceptional levels of demand and sales opportunity for Aivlosin®. China revenue in the first quarter of financial year 2022/23 was significantly below that of the record levels recorded in the prior year. This is a direct consequence of continuing low profitability and poor cashflow within major producers. However, gross margins in China were strong in the first quarter, reflecting the particular mix of customers. Elsewhere, Rest of World revenue grew strongly compared with the first quarter ended 30 June 2021.
A recent Improvement in pork pricing in China provides us with some optimism for the rest of the year and the Board continues to review overheads and capital expenditure levels in relation to trading trends.