· Group revenue at the half year ahead of management expectations and prior year
· Strength in the Chinese and US markets continues
· Limited impact of COVID-19 on the Group to date
· Financial Year 2019/20 results expected to be released around the end of November, as previously announced
The Board of ECO Animal Health Group plc is pleased to issue a positive trading update following the conclusion of its first six months ended 30 September 2020.
In June, we provided a trading update and indicated that the new financial period had started well with strength seen in the Chinese and US markets at the end of the year ended 31 March 2020 continuing into the first two months of the current financial year. This was also reflected in order books which provided good support for first half revenues.
We are pleased to confirm that the strength in the Chinese market, supported by the rebuilding of pig herds and the high price for pork, continued through the first six months resulting in a revenue outperformance in that market when compared with management expectations.
Revenue outperformance in certain other markets such as the USA offset weakness in India (and Southeast Asia) such that revenue for the rest of the Group (excluding China) is in line with management expectations for the six months ended 30 September 2020.
Overall, the outperformance in China, combined with the in-line performance in the rest of the Group, has resulted in revenue for the six months ended 30 September 2020 being significantly ahead of management expectations and the prior year.
Product pricing and manufacturing costs have remained broadly stable through the first half of the financial period although higher volumes have resulted in some additional customer discounts.
Investment in R&D and the pipeline of new product development during the first half has resulted in positive outcomes. These include two porcine respiratory and reproductive syndrome virus ("PRRSV") vaccine development authorisations and licensing deals as evidenced by the recent announcements. The Group R&D budget has been restricted in this financial period as a prudent cash conservation measure. The level of R&D expenditure remains under review by the Board which bears in mind the significant new product opportunity identified by the Group, particularly in the field of vaccines.
Notwithstanding the historical second half weighting to the Group's revenue, if these revenue trends continue through the second half of the financial year the Board expects that the Group's full year revenue for the year ending 31 March 2021 will exceed market expectations.
All staff and management in the UK continue to work from home. Planning had been completed for a limited return to the offices in the UK during September but following the resurgence in infection rates the current remote working arrangements have been extended. These remote working arrangements continue to be effective and the information technology requirements to support this way of working is proving to be robust. The planning remains in place to support a phased return to the offices when that becomes possible.
As previously announced, the additional difficulties arising from auditing the Group's international operations during the COVID-19 pandemic restrictions and against the backdrop of new auditors and new accounting policies adopted at the time of the most recent interim report resulted in an extension to the reporting deadlines. Progress has been steady and we are still targeting release of the full year results for the year ended 31 March 2020 on or around the end of November 2020.
Marc Loomes, CEO said:
"We are delighted with the continuing recovery from African Swine Fever in China and the improved revenue performance of the Group and we look forward with cautious optimism to this trend continuing during the second half of this financial year. If this business performance is sustained, we look forward to reporting full year revenue in excess of current market expectations. Furthermore, we are grateful to our staff and our customers for their continuing forbearance and adaptability to cope with the new ways of working in this most challenging of times."