Eco Animal Health's profits rise due to weak pound

Full year profits at animal pharmaceutical company ECO Animal Health jumped as the company benefitted from a weak pound caused by Brexit.

Pre-tax profit increased by 51% to £7.7m and gross profit increased 21% to £21m for the year ending 31 March 2016.

There was a 27% increase in second interim dividend to 3.80p making total dividend for the year up 20% to 5.7p.

The company said for the second successive year ECO achieved sales growth excess of 20%, sales rose by 21% to £47.1m. It said the growth was reflected in the rising market capitalisation of the company that recently exceeded £260m, which placed it among the 60 largest companies traded on AIM.

The US dollar and the Chinese RMB account for approximately 30% of sales followed by the euro at 15% and less than 3% of sales are invoiced in sterling.

The company said that it may have benefited from the weak pound. Following the UK’s decision to leave the European Union on the 24 June, the pound plummeted to record 31 year lows.

Executive chairman Peter Lawrence said: "The new financial year has started well with sales maintaining momentum. The recent weakness in the value of sterling may benefit ECO as virtually all our sales and majority of costs arise locally in dollars, RMB or the euro."

ECO said it exports its products to almost 60 countries and is exposed to movements in currency and it does not convert currencies which are used for purchasing raw materials and services in those currencies and which acts as an extensive hedge against currency fluctuations.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 29% to £11.1m which ECO said is a new record for the company. It also said that EBITDA is its main performance indicator because it is required to amortise its drug registration costs.

Lawrence added: "Our balance sheet remains robust with good cash generation, allowing us to invest in the business to ensure it is able to maximise efficiency and capitalise on market opportunities. Demand for Aivlosin, our flagship patented treatment, is building rapidly and gives us great confidence in the future potential and long term growth of the business."

Sales of the ECO’s antibiotic Aivlosin increased by 22% compared to the same period last year. In North America, which accounts for more than a third of Aivlosin’s potential market, grew by 11% during a year of unusually mild weather and consequently low disease pressure.

The company is awaiting an approval of Aivlosin Type A Medicated Article, or Premix, formulation in the US which would enable it to build its growth in the market.

Sales in the Far East were up 34%. Following the acquisition in 2014 of its southeast Asian distributor, revenue rose by 40%, which was also boosted by an investment in additional staff.

In Latin America revenue grew by 16% and in Europe sales grew to about 9%.

Shares in ECO Animal Health rose 10.13% to 418.50p at 1030 BST.