ECO Animal Health Group plc

(AIM: EAH)

Results for the year ended 31 March 2012

HIGHLIGHTS

• First Aivlosin^® marketing authorisation for US received after year end, further approvals expected
• 31.8 per cent increase in profit after tax to £2.6 million (2011: £2.0 million)
• 41.6 per cent uplift in diluted earnings per share to 4.19 pence (2011: 2.96 pence)
• Rise to £6.5 million (2011: £6.4 million) in profit attributable to shareholders before interest, tax, depreciation, amortisation, share based payments, impairment, foreign exchange and minorities.
• 25 per cent increase in dividend to 3.75 pence per share (2011: 3.0 pence)
• Net cash of £9.5 million at year end
• Continuing strong Aivlosin^® sales in key markets
• New subsidiary formed in Mexico

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

"ECO Animal Health Group has delivered another strong set of results for the year ended 31 March 2012 and the current year has started well. We are confident that the long awaited marketing authorisations in the US and Canada will have a major positive effect on the development of ECO, although it will be some months before the product launches gain momentum. We do not expect a noticeable impact on our financial performance until next year.

ECO is very well placed to further broaden its product ranges and its global reach will ensure that it capitalises on opportunities as they arise in all the Company's major markets. The Company is set for an exciting future and looks forward to maximising value for shareholders"

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

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.

CHAIRMANS STATEMENT

FOR THE YEAR ENDED 31 MARCH 2012

I am pleased to report that ECO Animal Health Group has delivered another sound set of results for the year ended 31 March 2012. In the Interim Report issued in December 2011, I advised that the second half had started well with a significant increase in sales; I am pleased to report that this performance was maintained for the balance of the year. The results for the year have been achieved in a marketplace under considerable pressure from the ongoing global economic difficulties and it is particularly encouraging that the overall consumption of meat protein continues to grow and the animal health industry along with it.

The most important event affecting the future performance of the Group occurred after the year end when, in July 2012, the Center for Veterinary Medicine (CVM) of the US Food and Drug Administration (FDA) granted ECO a marketing authorisation in the United States for Aivlosin^® 625 mg/g water soluble granules for swine. This long awaited decision follows an enormous amount of product development and regulatory work by our staff for the US authorities and represents the culmination of a huge investment by the Group over the past decade. The significance of this initial approval cannot be over stated as it allows ECO to enter a market that is one third of the global market for its products, which until now was closed to the Group.

FINANCIAL

Group turnover increased by close to 5 per cent to £28.3 million (2011: £27.1 million) while in US dollar terms the increase was 7 per cent. The US dollar exchange rate against other major currencies has a significant influence on ECO's performance as a large portion of the Group's sales and purchases are in US dollars and the value of that currency influences the translation of our results into sterling. As a global business, it is inevitable that we are impacted by currency movements and we take steps, where appropriate, to hedge that risk. In the year under review, the US dollar weakened against sterling and the Group hedged its exposure about half way through the period, albeit at some initial expense, but this has subsequently proved to have been the correct course of action.

Profit after tax for the year increased by 31.8 per cent to over £2.6 million (2011: £2.0 million) and profit before interest and non cash charges of tax, depreciation and amortisation, share based payments, impairment, foreign exchange and minorities rose to £6.5 million (2011: £6.4 million). I believe that this measure is a truer reflection of the state of the business than profit before tax, because we are required to amortise or depreciate drug registration costs, rather than to assess them by the increase in their fair value. The depreciation figure alone in our financial statements leads to an understatement of the actual value of our marketing authorisations worldwide and therefore of the total return to shareholders. Further, the figure for share based payments (which we are required to recognise in the income statement as a measure of the non cash remuneration received by our employees in return for their efforts during the year) has a significant impact on our reported profit. The method of calculating the amount charged to the income statement is an inexact science and will vary from award to award, as market conditions change. This is because the value of any award can be based on a variety of complex assumptions, variables and models, which inevitably, are subject to review and will change as further data becomes available over time.

Diluted earnings per share advanced 41.6 per cent reaching 4.19 pence (2011: 2.96 pence) The Group continues to benefit from enhanced tax allowances associated with the costs of developing its drugs. As a result of this and the favourable resolution of tax enquiries relating to previous years, the Group continues to accumulate tax losses, which have served to reduce the necessary level of deferred tax provision when compared to prior years. As a result, the Group does not expect to have a liability in respect of UK Corporation Tax for some years. Cash generated from operations during the year exceeded £6 million and the Group was able to deliver net cash balance at the year end of £9.5 million, a slight increase on the previous year.

The Board is pleased to declare a dividend of 3.75 pence per share (2011: 3.00 pence) which is an increase of 25 per cent and reflects our continued confidence in the business and the anticipated further profit contribution from its product portfolio. This will be paid on 5 October 2012 to shareholders on the register on 28 August 2012. Once again, we are offering shareholders a scrip alternative to the cash dividend and remain grateful to the many shareholders who support us in this way and help to conserve cash within the Company.

OPERATIONS

Overall ECO sales were ahead by nearly 5 per cent in the year to 31 March 2012 and the increase in the second half of the year, over the equivalent period in 2011, was in excess of 11 per cent. This accelerating trend is encouraging and was achieved in tough global markets, where pricing pressures intensified during the year, reflecting the generally difficult environment. ECO responded rapidly to the changing market dynamics by introducing pricing strategies to retain and, where possible grow, market shares.

We were particularly pleased to see a rise of 23 per cent in our turnover in Latin America, which delivered an increase in earnings of over 40 per cent from this important and fast growing region. The growth was driven principally by advances in Aivlosin^® sales to Argentina and Venezuela, underpinned by continuing substantial sales in Brazil. ECO set up a new subsidiary in Mexico which should generate increased sales of Aivlosin^® and other ECO products to the large and growing Mexican and Central American markets.

Further growth was driven by strong sales of Aivlosin^® in China, India and Malaysia. Sales from our Chinese subsidiary, Zhejiang ECO Biok Animal Health Products Limited, also continued to grow, rising a further 7 per cent during the year. As this important business is currently focused on pigs, the next significant strategic step is to broaden its product offering by entering the poultry sector in China for which the company already holds a number of marketing authorisations.. Aivlosin®'s excellent product performance in India, Malaysia and Turkey and its growing reputation, is leading to increased penetration in these rapidly developing markets for poultry.

The difficulties within the Eurozone, coupled with the decline in the value of the Euro against sterling and the US dollar, meant that the sterling value of turnover and earnings arising from within that area dropped back slightly. Substantial investment and progress has since been made that will support future Aivlosin® growth, including an adjustment in strategy with increased focus on key markets, employment of additional sales support staff, the appointment of a new distributor in France and obtaining an important new approval for Aivlosin^® Water Soluble Granules for use in poultry in Turkey. The European markets remain important to ECO, although their potential is not as significant as those territories with faster growing animal production where in general our presence is strong.

We were also particularly encouraged by the growth in UK sales of over 30 per cent, reflecting the continued success of our direct- to- market strategy with Aivlosin^®.

Although the initial signs of recovery in Japan were promising, following the natural disasters of March 2011, it is now apparent that the full impact of these cataclysmic events is taking longer to overcome than previously thought. Many farmers were put out of business either through flooding, nuclear contamination or logistical problems and the cumulative effect has caused our business there to suffer for much of the year. Confidence in the economy and particularly in local agriculture was badly damaged, but following a series of initiatives undertaken by our Ecopharma subsidiary, its sales have been showing signs of a firm recovery since the year end.

Aivlosin^®- North America

The last few months have been transformational in ECO's development of Aivlosin^®. North America is an extremely important market for this product and access is dependent on obtaining the necessary regulatory approvals, which is a very lengthy, costly and exacting process. In November 2011 the Veterinary Drugs Directorate (VDD) of Health Canada granted a marketing authorisation for Aivlosin^® 625 mg/g water soluble granules for pigs for the treatment of ileitis, an enteric (gut) disease in pigs. The Health Canada approval was the first in North America for Aivlosin^®. Initial sales in Canada, which started in March 2012, have been very encouraging and the feedback from veterinarians is positive.

In July 2012, after years of trials and preparatory work by ECO's product development and regulatory specialists in the UK and North America, the US Food and Drug Administration (FDA) also granted ECO a marketing authorisation in the United States for Aivlosin^® 625 mg/g water soluble granules for pigs for the treatment of ileitis. The FDA's approval is ECO's first in the United States and marks a very important step in the Group's continuing development of Aivlosin^® as a global veterinary product. ECO established a joint venture sales and marketing company, Pharmgate Animal Health LLC, in the US in 2010 to prepare for the launch of Aivlosin^®.

These approvals will, in due course, be followed by further authorisations for other formulations and indications.

PEOPLE

We now employ over 150 people in our 14 offices around the world and we are, as always, grateful to our dedicated, hard working team of highly qualified specialists who are making our Group a leading force in the global animal health markets.

OUTLOOK

We are confident that the long awaited marketing authorisations in the US and Canada will have a major positive effect on the development of ECO, although it will be some months before the product launches gain momentum. We do not expect a noticeable impact on our financial performance until next year. ECO is very well placed to further broaden its product ranges and its global spread will ensure that it capitalises on opportunities as they arise in all the Group's major markets. The Group is set for an exciting future and looks forward to maximising value for shareholders.

Peter Lawrence

Executive Chairman

19 July 2012

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2012

				2012				2011
		Notes		£				£
Revenue		2,3		28,322,177				27,078,262
Cost of sales				(17,504,226)				(16,365,337)
Gross profit				10,817,951				10,712,925
Other income		4		760,062				178,961
Administrative expenses				(9,373,175)				(8,422,529)
Profit from operating activities		5		2,204,838				2,469,357
Finance income		6		130,931				73,116
Finance costs		6		(15,427)				(250,857)
Net finance income/(expense)				115,504				(177,741)
Profit before income tax				2,320,342				2,291,616
Income tax credit/(charge)		8		306,584				(297,813)
Profit for the year				2,626,926				1,993,803
Profit attributable to:
Owners of the parent company				2,217,627				1,590,781
Minority interest		24		409,299				403,022
Profit for the year				2,626,926				1,993,803
Basic and diluted earnings per share (pence)		7		2012				2011
Post tax earnings per share				4.24				3.07
Diluted earnings per share (pence)				4.19				2.96

The consolidated income statement has been prepared on the basis that all operations are continuing operations.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2012

				2012				2011
		Notes		£				£
Profit for the year				2,626,926				1,993,803
Other comprehensive income:
Foreign currency translation differences				200,872				203,229
Defined benefit plan actuarial (losses)/gains		21		(151,000)				14,000
Revaluation of investments				(2,828)				61,594
Transfer on disposal of investment				(58,766)				-
Revaluation of freehold property				-				52,000
Deferred tax on revaluations				14,782				(87,373)
Other comprehensive income for the year				3,060				243,450
Total comprehensive income for the year				2,629,986				2,237,253
Attributable to:
Owners of the parent company				2,140,405				1,754,161
Minority interest		24		489,581				483,092
				2,629,986				2,237,253

All items listed in other comprehensive income have gone through reserves and are shown in the consolidated statement of changes in equity.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2012

CONSOLIDATED		Attributable to the owners of the Parent
		Share		Share		Treasury		Revaluation		Other		Retained		Total		Minority		Total
		Capital		premium		Reserve		Reserve		Reserves		Earnings				Interest		Equity
				Account
		£		£		£		£		£		£		£		£		£
Balance as at 31 March 2010		2,580,637		45,487,897		-		519,319		1,141,591		4,569,844		54,299,288		1,400,296		55,699,584
Profit for the year		-		-		-		-		-		1,590,781		1,590,781		403,022		1,993,803
Other comprehensive income:
Foreign currency differences		-		-		-		-		-		123,159		123,159		80,070		203,229
Actuarial losses on pension scheme assets		-		-		-		-		-		14,000		14,000		-		14,000
Revaluation of investment		-		-		-		61,594		-		-		61,594		-		61,594
Revaluation of freehold property		-		-		-		52,000		-		-		52,000		-		52,000
Deferred taxation		-		-		-		(87,373)		-		-		(87,373)		-		(87,373)
Total comprehensive income for the year		-		-		-		26,221		-		1,727,940		1,754,161		483,092		2,237,253
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year		29,121		781,203		-		-		-		-		810,324		-		810,324
Share-based payments		-		-		-		-		303,504		-		303,504		-		303,504
Transfers on expiry of options		-		-		-		-		(114,865)		114,865		-		-		-
Dividends relating to 2010		-		-		-		-		-		(1,190,888)		(1,190,888)		(92,801)		(1,283,689)
Transactions with owners		29,121		781,203		-		-		188,639		(1,076,023)		(77,060)		(92,801)		(169,861)
Balance as at 31 March 2011		2,609,758		46,269,100		-		545,540		1,330,230		5,221,761		55,976,389		1,790,587		57,766,976
Profit for the year		-		-		-		-		-		2,217,627		2,217,627		409,299		2,626,926
Other comprehensive income:
Foreign currency differences		-		-		-		-		-		120,590		120,590		80,282		200,872
Actuarial losses on pension scheme assets		-		-		-		-		-		(151,000)		(151,000)		-		(151,000)
Revaluation of investment		-		-		-		(2,828)		-		-		(2,828)		-		(2,828)
Transfer on disposal of investment		-		-		-		(58,766)		-		-		(58,766)		-		(58,766)
Deferred taxation		-		-		-		14,782		-				14,782		-		14,782
Total comprehensive income for the year		-		-		-		(46,812)		-		2,187,217		2,140,405		489,581		2,629,986
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year		146,202		4,587,817		-		-		-		-		4,734,019		-		4,734,019
Share-based payments		-		-		-		-		290,890		-		290,890		-		290,890
Transfers on expiry of options		-		-		-		-		(96,989)		96,989		-		-		-
Dividends relating to 2011		-		-		-		-		-		(1,567,595)		(1,567,595)		(388,581)		(1,956,176)
Cancellation of share premium account		-		(13,250,000)		-		-		3,250,000		10,000,000		-		-		-
Treasury reserve arising from issue of jointly owned shares		-		-		(5,217,580)		-		-		-		(5,217,580)		-		(5,217,580)
Transactions with owners		146,202		(8,662,183)		(5,217,580)		-		3,443,901		8,529,394		(1,760,266)		(388,581)		(2,148,847)
Balance as at 31 March 2012		2,755,960		37,606,917		(5,217,580)		498,728		4,774,131		15,938,372		56,356,528		1,891,587		58,248,115

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2012

COMPANY		Attributable to the owners of the Parent
		Share		Share		Treasury		Revaluation		Other		Retained		Total
		Capital		premium		Reserve		Reserve		Reserves		Earnings
				Account
		£		£		£		£		£		£		£
Balance as at 31 March 2010		2,580,637		45,487,897		-		250,457		1,141,591		4,902,393		54,362,975
Profit for the year		-		-		-		-		-		1,353,391		1,353,391
Other comprehensive income:
Actuarial losses on pension scheme assets		-		-		-		-		-		14,000		14,000
Revaluation of investment		-		-		-		61,594		-		-		61,594
Revaluation of freehold property		-		-		-		52,000		-		-		52,000
Deferred taxation		-		-		-		(87,372)		-		-		(87,372)
Total comprehensive income for the year		-		-		-		26,222		-		1,367,391		1,393,613
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year		29,121		781,203		-		-		-		-		810,324
Share-based payments		-		-		-		-		303,504		-		303,504
Transfer to retained earnings re expired options		-		-		-		-		(114,865)		114,865		-
Dividends relating to 2010		-		-		-		-		-		(1,190,888)		(1,190,888)
Transactions with owners		29,121		781,203		-		-		188,639		(1,076,023)		(77,060)
Balance as at 31 March 2011		2,609,758		46,269,100		-		276,679		1,330,230		5,193,761		55,679,528
Profit for the year		-		-		-		-		-		739,303		739,303
Other comprehensive income:		-		-		-		-		-		-		-
Actuarial losses on pension scheme assets		-		-		-		-		-		(151,000)		(151,000)
Revaluation of investment		-		-		-		(2,828)		-		-		(2,828)
Transfer on disposal of investment		-		-		-		(58,766)		-		-		(58,766)
Deferred taxation		-		-		-		14,782		-		-		14,782
Total comprehensive income for the year		-		-		-		(46,812)		-		588,303		541,491
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares in the year		146,202		4,587,817		-		-		-		-		4,734,019
Share-based payments		-		-		-		-		290,890		-		290,890
Transfers on expiry of options		-		-		-		-		(96,989)		96,989
Dividends relating to 2011		-		-		-		-		-		(1,567,595)		(1,567,595)
Cancellation of share premium account		-		(13,250,000)		-		-		3,250,000		10,000,000		-
Treasury reserve arising from issue of jointly owned shares		-		-		(5,217,580)		-		-		-		(5,217,580)
Transactions with owners		146,202		(8,662,183)		(5,217,580)		-		3,443,901		8,529,394		(1,760,266)
Balance as at 31 March 2012		2,755,960		37,606,917		(5,217,580)		229,867		4,774,131		14,311,458		54,460,753

STATEMENTS OF FINANCIAL POSITION (CO. NUMBER: 01818170)

AS AT 31 MARCH 2012

				Group				Company
				2012		2011		2012		2011
		Notes		£		£		£		£
Non-current assets
Intangible assets		11		39,109,147		38,636,816		-		-
Property, plant and equipment		12		1,268,063		1,277,586		662,599		655,611
Investment property		13		154,773		-		154,773		-
Investments		14		8,738		350,888		20,082,240		20,393,834
				40,540,721		40,265,290		20,899,612		21,049,445
Current assets
Inventories		15		4,417,317		4,803,929		-		-
Trade and other receivables		16		10,755,390		9,642,817		28,912,983		28,625,161
Income tax recoverable				15,921		355,667		-		213,622
Other taxes and social security				292,182		94,712		229,630		3,588
Cash and cash equivalents		18		14,002,422		9,471,537		9,793,239		6,243,597
Total current assets				29,483,232		24,368,662		38,935,852		35,085,968
Liabilities
Trade and other payables		19		(6,705,991)		(5,795,322)		(734,166)		(226,588)
Short -term borrowings		20		(4,492,690)		(53,196)		(4,492,690)		(53,196)
Income tax				(58,084)		(77,529)		-		-
Other taxes and social security				(157,572)		(76,699)		(44,143)		(54,628)
Dividends				(31,122)		(32,369)		(31,122)		(32,369)
Current liabilities				(11,445,459)		(6,035,115)		(5,302,121)		(366,781)
Net current assets				18,037,773		18,333,547		33,633,731		34,719,187
Total assets less current liabilities				58,578,494		58,598,837		54,533,343		55,768,632
Non current liabilities
Deferred tax		17		(330,379)		(831,861)		(72,590)		(89,104)
TOTAL ASSETS LESS TOTAL LIABILTIES				58,248,115		57,766,976		54,460,753		55,679,528
EQUITY
Issued share capital		23		2,755,960		2,609,758		2,755,960		2,609,758
Share premium account				37,606,917		46,269,100		37,606,917		46,269,100
Treasury reserve		25		(5,217,580)		-		(5,217,580)		-
Revaluation reserve				498,728		545,540		229,867		276,679
Other reserves		26		4,774,131		1,330,230		4,774,131		1,330,230
Retained earnings				15,938,372		5,221,761		14,311,458		5,193,761
				56,356,528		55,976,389		54,460,753		55,679,528
Minority interests		24		1,891,587		1,790,587		-		-
TOTAL EQUITY				58,248,115		57,766,976		54,460,753		55,679,528

Approved by the Board and authorised for issue on 19 July 2012

Peter Lawrence Director

The notes on pages 18 to 62 form part of these financial statements.

STATEMENT OF CASHFLOWS

FOR THE YEAR ENDED 31 MARCH 2012

				Group		Group		Company		Company
				2012		2011		2012		2011
		Notes		£		£		£		£
Cashflows from operating activities
Profit before income tax				2,320,342		2,291,616		732,074		1,352,597
Adjustment for:
Net finance costs/(income)				(115,504)		177,741		(398,154)		(406,817)
Depreciation		12 & 13		98,219		88,543		21,932		20,859
Amortisation of intangible assets		11		3,593,365		3,239,948		-		-
Pension payments		21		(64,000)		(59,000)		(64,000)		(59,000)
Pension operating costs		21		3,000		2,000		3,000		2,000
Share based payments		22		290,890		303,504		290,890		303,504
Profit on disposal of investment				(28,210)		-		(58,766)		-
Operating cash flows before movements in working capital				6,098,102		6,044,352		526,976		1,213,143
Change in inventories				386,612		893,380		-		-
Change in receivables				(1,396,043)		(421,077)		(599,864)		772,301
Change in payables				991,542		2,158,550		497,093		146,407
Cash generated from operations				6,080,213		8,675,205		424,205		2,131,851
Finance costs				(90,356)		(54,169)		(89,831)		(52,866)
Income tax				140,185		(155,860)		219,119		(742)
Net cash from operating activities				6,130,042		8,465,176		553,493		2,078,243
Cash flows from investing activities
Disposal of investment				308,766		-		308,766		-
Acquisition of property, plant and equipment		12		(140,457)		(151,257)		(27,143)		(3,766)
Acquisition of investment property		13		(156,550)		-		(156,550)		-
Purchase of drug registrations		11		(4,063,647)		(4,269,988)		-		-
Finance income				126,931		73,116		483,985		459,683
Net cash used in investing activities				(3,924,957)		(4,348,129)		609,058		455,917
Cash flows from financing activities
Proceeds from issue of share capital				4,390,913		305,995		4,390,913		305,995
Dividends paid				(1,614,317)		(776,145)		(1,225,736)		(683,344)
Purchase of own shares				(5,217,580)		-		(5,217,580)		-
Net cash used in financing activities				(2,440,984)		(470,150)		(2,052,403)		(377,349)
Net (decrease)/increase in cash and cash equivalents				(235,899)		3,646,897		(889,852)		2,156,811
Foreign exchange movements				327,290		(131,405)		-		-
Balance at 1 April 2011				9,418,341		5,902,849		6,190,401		4,033,590
Balance at 31 March 2012		18		9,509,732		9,418,341		5,300,549		6,190,401

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2012

1. General information

Eco Animal Health Group plc ("the company") and its subsidiaries (together "the group") manufacture and supply animal health products globally.

The Company is traded on the AIM market of the London Stock Exchange and is incorporated and domiciled in the UK. The address of its registered office is 78 Coombe Road, New Malden, Surrey, KT3 4QS.

2. Summary of significant accounting policies

2.1 Basis of preparation

The group has presented its annual report and accounts in accordance with International Financial reporting Standards (IFRS), as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

The preparation of financial statements, in conformity with IFRS as adopted by the European Union, requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The principal accounting policies of the group are set out below and have been applied consistently in dealing with items which are considered material in relation to the Group's financial statements.

2.2 Adoption of new and revised standards

At the date of authorisation of these financial statements, the following standards and interpretations to existing standards are mandatory for the first time for the accounting period ended 31 March 2012.

				Effective from
IFRIC 19 (issued 2009)		"Extinguishing Financial Liabilities with Equity Instruments"		01 July 2010
IFRS 1 (amended 2010)		"Limited Exemption from Comparative IFRS Disclosures for first time Adoptors"		01 July 2010
IFRS 3		"Measurement of non-controlling interests"		01 July 2010
IFRIC 14 (amended 2009)		"Prepayments of a Minimum Funding Requirement"		01 January 2011
IAS 24 (revised 2009)		"Related Party Disclosures"		01 January 2011
IAS 34		"Significant events and transactions"		01 January 2011
IFRIC 13		"Fair value of award credit"		01 January 2011

2.3 Adoption of new and revised standards (continued)

The adaption of these standards and interpretations has not had a significant impact on the Group. At the date of the authorisation of these financial statements, the following standards and interpretations were in issue but not yet effective.

				Effective from
IFRS 1 (amended 2010)		"Severe Hyperinflation and Removal of Fixed Dates for First-time Adoptors"		01 July 2011
IFRS 7 (amended 2010)		Financial Instruments: Disclosures"		01 July 2011
IAS12 (amended 2012)		"Deferred Tax: Recovery of Underlying Assets"		01 January 2012
IFRS 9 (issued 2009)		"Financial Instruments"		01 January 2013
IFRS 10 (issued 2011)		"Consolidated Financial Statements"		01 January 2013
IFRS 11 (issued 2011)		"Joint arrangements"		01 January 2013
IFRS 12 (issued 2011)		"Disclosure of Interests in Other Entities"		01 January 2013
IFRS 13 (issued 2011)		"Fair Value Measurement"		01 January 2013
IAS 1 (issued 2011)		"Presentation of other items of Comprehensive Income"		01 July 2012
IAS 19		"Employee Benefits (Revised)"		01 January 2013

A review of the impact of these standards, amendments and interpretations continues. At this stage the directors do not believe that they will give rise to any significant financial impact.

The Group did not adopt any new or amended standards early during the year and does not plan to early adopt any of the standards issued but not yet effective.

2.4 Basis of consolidation

The consolidated financial statements comprise the accounts of the Company and its subsidiaries drawn up to 31 March 2012.

An entity is classed as a subsidiary of the Company when as a result of contractual arrangements the Company has the power to govern its financial and operating policies so as to obtain benefits from its activities.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured, as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value the difference is recognised directly in the income statement.

Accounting policies have been changed where material to ensure consistency with the policies adopted by the Group. Although the subsidiaries in Brazil and China have December year ends, the Group uses management accounts to the end of March to prepare the Group accounts. Subsidiaries are wholly consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation.

2.5 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments has been identified as the Board.

2.6 Foreign currency translation

(a) Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("functional currency"). The consolidated financial statements are presented in Pounds Sterling, which is the Company's functional and the Group's presentational currency.

(b) Transactions and balances

Monetary assets and liabilities denominated in foreign currencies are translated into Pounds Sterling at the rates of exchange ruling at the date of the financial statements.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Foreign exchange gains and losses that relate to borrowing and cash and cash equivalents are presented in the income statement within finance income or finance costs.

(c) Group companies

The results and financial position of all Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows;

• assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of the balance sheet;
• income and expenses for each income statement are translated at average exchange rates unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case the income and expenses are translated at the rate on the dates of the transaction; and
• all resulting exchange differences are recognised as a separate component of equity.

When a foreign operation is partially disposed or sold, exchange differences that were recognised in equity are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rate.

2.7 Financial instruments

Non-derivative financial assets

The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows from the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group has the following non-derivative financial assets:

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables comprise trade and other receivables and cash and cash equivalents.

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Non-derivative financial liabilities

All financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

The Group has the following non-derivative financial liabilities: bank overdrafts and trade and other payables.

Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

2.8 Goodwill

Goodwill arising on the acquisition of an entity represents the excess of the costs of acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition.

Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not subject to amortisation but is tested for impairment.

Negative goodwill arising on an acquisition is recognised directly in the income statement. On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss recognised in the income statement on disposal. Goodwill arising before the date of transition to IFRS, on 1 April 2004, has been retained at the previous UK GAAP amounts, subject to being tested for impairment at that date. Goodwill written off to reserves

under UK GAAP prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal.

2.9 Other intangible assets

Drug registrations, patents and licences

The Group recognises internally generated or externally acquired intangible assets at cost and subsequently recognises them at cost less accumulated amortisation and impairment losses. Intangible assets acquired as part of a business combination are recognised at fair value.

Expenditure on drug registrations and licences is recognised as an internally generated or externally acquired intangible asset only if all the following conditions are met:

• an asset is created that can be identified
• it is probable that the asset created will generate future economic benefits: and
• the development cost of the asset can be measured reliably.

All drug registrations and licences are amortised on a straight-line basis over their useful economic life of 10 years.

Distribution rights

Distribution rights are recognised at cost and amortised on a straight line basis over their estimated useful economic life of 20 years. They are reviewed for impairment when any indication of potential impairment exists.

2.10 Property, plant and equipment and depreciation

Plant and equipment are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows;

Plant and machinery 20% on cost

Fixtures, fittings and equipment 20% on cost

Motor Vehicles 25% on cost

Freehold land and buildings are stated at valuation less depreciation. The property is professionally valued by a qualified surveyor at least once every three years. Surpluses and deficits arising from the periodic valuations are taken to the revaluation reserve in the statement of financial position and are recognised in the statement of comprehensive income for the year. Depreciation is provided at a rate calculated to write off the valuation less estimated residual value over the remaining useful life of the building at a rate of 2 per cent per annum. Land is not depreciated.

2.11 Impairment of non-financial assets

The carrying amounts of the Group's assets are reviewed at each year end, to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated in order to determine the impairment loss if any. The recoverable amount is the higher of its fair value and its value in use. For intangible assets with an indefinite useful life, an impairment test is performed at each year end.

In assessing value in use, the expected future cash flows from the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.

A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a change in the estimates used to determine the recoverable amount, but not to an amount higher

than the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior years.

2.12 Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently at its cost less any accumulated impairment and depreciation.

2.13 Leasing

The Group leases certain property, plant and equipment.

Assets obtained under finance leases, where the Group has substantially all the risks and rewards of ownership are capitalised as property, plant and equipment and depreciated over the shorter of the lease term and their useful lives. Obligations under such agreements are included in borrowings net of the financial charge allocated to future periods. The financial element of the rental payment is charged to the income statement so as to produce constant periodic rates of charge on the net obligations outstanding in each period.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

2.14 Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. The cost of finished goods comprises raw materials, direct labour and other direct costs. Net realisable value is the estimated selling price in the ordinary course of business.

2.15 Trade receivables

Trade receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowance for estimated, irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

2.16 Investments

Non-current asset investments are stated at fair value, including transaction costs, less impairment. They are recognised or derecognised on the date when the contract for acquisition or disposal requires the delivery of that investment.

Investments in subsidiaries are stated at cost less impairment in the Parent Company's statement of financial position.

An impairment is recognised in profit or loss when there is objective evidence that the asset is impaired and is measured on the difference between the investment's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate adjusted for a risk premium. Impairment losses are reversed in subsequent periods when an increase in the investment's recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised costs would have been had the impairment not been recognised.

Investments classified as available-for-sale are stated at fair value. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in net profit or loss for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity, determined using the weighted average cost method, is included in the net profit or loss for the period.

2.17 Interest in joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control; that is, when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.

The Group reports its interests in jointly controlled entities using proportionate consolidation. The group's share of the assets, liabilities, income, expenses and cash flows of jointly controlled entities are combined with the equivalent items in the results on a line-by-line basis.

2.18 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.

2.19 Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

2.20 Bank borrowings and loans

Interest-bearing bank loans and overdrafts are recorded as the proceeds received, net of direct issue costs (which equate to fair value). Finance charges including premiums payable on settlement or redemption and direct issue costs are accounted for on an accruals basis in profit or loss using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

2.21 Trade payables

Trade payables are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method.

2.22 Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle the obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation outstanding at the year end and are discounted to present value where the effect is material.

2.23 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Group's activities. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue on despatch of the goods (which the directors believe transfers substantially all the risks and rewards of ownership to the buyer). No goods are despatched on a sale or return basis. Distributors trade on their own account and not as agents.

The Group also receives interest, royalty income and management charges in respect of accounting services supplied to certain ex-subsidiaries. The amounts are small and are recognised on an accruals basis.

2.24 Pensions

Defined Contribution Scheme

The pension costs charged against operating profits represent the amount of the contributions payable to the schemes in respect of the accounting period.

Defined Benefit Scheme

The regular cost of providing retirement pensions and related benefits is charged to the income statement over the employees' service lives on the basis of a constant percentage of earnings. Any difference between the charge to the income statement and the contributions paid to the scheme are disclosed as an asset or liability in the statement of financial position in accordance with IAS 19. Actuarial gains or losses are taken directly to equity in the statement of comprehensive income.

2.25 Share-based payments

The Group has applied the requirements of IFRS2 Share-based payments. In accordance with the transitional provisions, IFRS2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005.

The Group issues equity-settled share-based payments to certain employees in exchange for services from those employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant of such equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions (with a corresponding movement in equity).

The Group's Employee Benefit Trust ("the Trust") was set up on 6 October 2011 to administer the Group's Joint Share Ownership Plan (JSOP). The trust was funded by loans from the Group, with its assets comprising shares in the Company. The Group recognised the assets and liabilities of the Trust in its own accounts and the carrying value of the Company's shares held by the Trust were recorded as a deduction in total equity until such a time as the shares vest unconditionally to employees.

Fair value, for both options and jointly owned shares is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behaviour considerations.

Further details of the inputs to the Black-Scholes model can be found in note 22 to the accounts.

2.26 Taxation

Tax expense for the period comprises current and deferred tax.

Current tax, including UK corporation tax and foreign tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the year end. Tax expenses are recognised in the income statement or statement of comprehensive income according to the treatment of the transactions which give rise to them.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax basis of assets and liabilities and their carrying amount in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the date of the statement of financial position and are expected to apply when the related deferred tax asset is realised or deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

2.27 Equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Amounts arising on the restructuring of equity and reserves to protect creditor interests are credited to the capital redemption reserve.

The Treasury reserve arises when the Company issues equity share capital under its Joint Share Ownership Plan, which is held in trust by ECO Animal Health Group plc Employee Benefit Trust. The interests of this trust are consolidated into the Group's financial statements and the relevant amount treated as a reduction in equity. The expenses of the trust are included in the consolidated income statement.

2.28 Dividend distribution

Final dividend distributions to the Company's shareholders are recognised as liabilities in the financial statements in the period in which they are approved by the Company's shareholders. Interim dividends are recognised when they are paid.

2.29 Critical accounting estimates and judgements

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are:

(a) Estimated impairment value of intangible assets

The Group tests annually whether intangible assets with indefinite life have suffered any impairment. Other intangible assets are reviewed for impairment when an indication of

potential impairment exists. Impairment provisions are recorded as applicable based on directors' estimates of recoverable values. Details of the impairment reviews performed can be found in note 11 of the financial statements.

(b) Income taxes

The Group is subject to income taxes predominantly in the United Kingdom but also in other jurisdictions.

Significant estimates are required in determining the provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises assets and liabilities based on estimates of the final agreed position. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(c) Pension scheme

The Group maintains one defined benefit pension scheme which has been accounted for according to the provisions of IAS19. Although the assumptions were determined by a qualified actuary, any change in those assumptions may materially impact the financial position and results of the Group. Details of the assumptions used can be found in note 21 of the financial statements.

(d) Share-based payments

The charge to the Income Statement in respect of share-based payments has been externally calculated using management's best estimates of the amount of options expected to vest and various other inputs to the Black-Scholes model, as disclosed in note 22. Any variation in those assumptions may have a material impact on the Group's future results and financial position.

3. Segment information

Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions. The Board considers the business from a geographical perspective. Geographically, management considers the performance in the UK and Europe, China, Japan and the Indian subcontinent, Latin America and the rest of the world. The segment information provided to the Board for the year ended 31 March 2012 is as follows;

Management considers Earnings before Interest, Tax, Depreciation and Amortisation ("EBITDA"), adjusted for share-based payments.

		U.K.		Europe		China, Japan and the Indian subcontinent		Latin America		Rest of the world		Total
		£		£		£		£		£		£
Year ended 31 March 2012
Total segmental revenue		760,235		4,201,343		11,546,943		11,791,871		4,644,930		32,945,322
Inter-segment revenue		-		-		(2,421,888)		(2,196,659)		(4,598)		(4,623,145)
Revenue from external customers		760,235		4,201,343		9,125,055		9,595,212		4,640,332		28,322,177
Sale of goods		760,235		4,201,343		9,125,055		9,595,212		4,325,068		28,006,913
Royalties		-		-		-		-		315,264		315,264
		760,235		4,201,343		9,125,055		9,595,212		4,640,332		28,322,177
Adjusted EBITDA		(846,287)		1,103,737		1,934,133		2,636,392		1,359,337		6,187,312
Total assets		15,285,976		9,464,789		20,078,286		16,556,570		8,638,332		70,023,953
Year ended 31 March 2011
Total segmental revenue		567,921		4,344,378		12,198,318		10,095,787		4,433,739		31,640,143
Inter-segment revenue		-		-		(2,218,332)		(2,343,549)		-		(4,561,881)
Revenue from external customers		567,921		4,344,378		9,979,986		7,752,238		4,433,739		27,078,262
Sale of goods		567,921		4,344,378		9,979,986		7,752,238		4,091,730		26,736,253
Royalties		-		-		-		-		342,009		342,009
		567,921		4,344,378		9,979,986		7,752,238		4,433,739		27,078,262
Adjusted EBITDA		(935,268)		1,416,463		2,481,290		1,849,331		1,289,536		6,101,352
Total assets		11,843,501		9,446,879		20,182,417		14,721,730		8,439,425		64,633,952

Goodwill and other intangible assets are initially allocated to the geographical segments on the basis of the proportion of sales achieved by each segment.

A reconciliation of adjusted EBITDA to profit before tax is provided as follows:

		2012		2011
		£		£
Adjusted EBITDA for reportable segments		6,187,312		6,101,352
Depreciation		(98,219)		(88,543)
Amortisation		(3,593,365)		(3,239,948)
Share-based payment charges		(290,890)		(303,504)
Finance income/(expense)		115,504		(177,741)
Profit before tax		2,320,342		2,291,616

4. Other income

This includes an amount of £550,000 received in compensation for a claim against a former adviser relating to tax losses not claimed within the statutory time limit.

5. Result from operating activities

		2012		2011
		£		£
Result from operating activities is stated after charging:
Cost of inventories recognised as an expense		17,504,226		16,365,337
Employee benefits expenses		2,967,640		2,879,736
Amortisation of intangible assets		3,593,365		3,239,948
Depreciation		98,219		88,543
Loss on foreign exchange transactions		332,411		268,757
Research and development		37,561		29,245
Operating lease rentals		178,625		146,221
Fees payable to the Company's auditor for the audit of the parent Company and Group annual accounts		18,000		18,000
Fees payable for audit of the Company's subsidiaries pursuant to legislation		27,000		27,000
		2012		2011
		£		£
Earnings due to shareholders before interest, tax, depreciation, amortisation, share-based payments and foreign exchange differences.
Profit from operating activities		2,204,838		2,469,357
Depreciation		98,219		88,543
Amortisation		3,593,365		3,239,948
Share-based payments		290,890		303,504
		6,187,312		6,101,352
Foreign exchange differences		332,411		268,757
		6,519,723		6,370,109
Minorities		(409,299)		(403,022)
		6,110,424		5,967,087

6. Finance cost/income

		2012		2011
		£		£
Finance costs
Interest paid		(90,356)		(54,169)
Foreign exchange differences on bank loans and overdrafts		74,929		(196,688)
Finance income
On short term bank deposits		130,931		73,116
Net finance income/(expense)		115,504		(177,741)

7. Earnings per share

The calculation of basic earnings per share is based on the post tax profit for the year divided by the weighted average number of shares in issue during the year.

		2012						2011
		Earnings		Weighted average number of shares		Per share amount		Earnings		Weighted average number of shares		Per share amount
		£'000		000		(pence)		£'000		000		(pence)
Earrnings attributable to ordinary shareholders on continuing operations after tax		2,218		52,333		4.24		1,590		51,873		3.07
Dilutive effect of share options		-		553		(0.05)		-		1,860		(0.11)
Fully diluted earnings per share		2,218		52,886		4.19		1,590		53,733		2.96

Dilutive earnings per share takes into account the dilutive effect of share options. For the purposes of calculating earnings per share, shares held by the Employee Benefit Trust as part of the Joint Share Ownership Plan are excluded from the calculation of the weighted average number of shares. The weighted average number of shares held by the Trust during the year was 1,233,950.

8. Taxation

		2012		2011
		£		£
Current tax year
Foreign corporation tax on profits for the year		189,527		189,248
Adjustment for prior years		(9,411)		(14,205)
Current tax		180,116		175,043
Deferred tax
Origination and reversal of temporary differences		(486,700)		122,770
Income tax(credit)/charge		(306,584)		297,813
Factors affecting the tax charge for the year
Profit on ordinary activities before taxation		2,320,342		2,291,616
		2012		2011
		£		£
Profit on ordinary activities before taxation multiplied by the applicable rate of UK corporation tax of 26% (2011: 28%)		603,289		641,652
Effects of:
Non deductible expenses		148,535		73,425
Non chargeable credits		(453,659)		(113,993)
Enhanced allowance on research and development expenditure		(742,797)		(153,062)
Lower tax rate for Chinese subsidiary		(116,428)		(153,561)
Unused tax losses carried forward		263,899		-
Other tax adjustments		(9,423)		3,352
Income tax charge		(306,584)		297,813
		2012		2011
		%		%
Applicable tax rate per UK legislation		26.00		28.00
Effects of:
Non deductible expenses		6.40		3.20
Non chargeable credits		(19.55)		(4.97)
Enhanced allowance on research and development expenditure		(32.01)		(6.68)
Lower tax rate for Chinese subsidiary		(5.02)		(6.70)
Unused tax losses carried forward		11.37		-
Other tax adjustments		(0.40)		0.15
Effective tax rate		(13.21)		13.00

9. Profit for the financial year

		2012		2011
		£		£
Parent Company's profit for the financial year		739,303		1,353,391

10. Dividends

		2012		2011
		£		£
Dividend for the period ended 31 March 2010 of 2.3p per ordinary share		-		1,190,888
Dividend for the period ended 31 March 2011 of 3.0p per ordinary share		1,567,595		-
		1,567,595		1,190,888

The Board is declaring a dividend of 3.75 pence per share in respect of the year ended 31 March 2012. A scrip dividend alternative will be offered.

11. Intangible fixed assets

Group		Goodwill		Distribution rights		Drug registrations, patents and licence costs		Total
Cost		£		£		£		£
At 1 April 2010		17,930,495		1,034,860		31,127,251		50,092,606
Additions		-		-		4,269,988		4,269,988
Foreign exchange movements		-		-		63,209		63,209
At 1 April 2011		17,930,495		1,034,860		35,460,448		54,425,803
Additions		-		-		4,063,647		4,063,647
At 31 March 2012		17,930,495		1,034,860		39,524,095		58,489,450
Amortisation
At 1 April 2010		-		315,726		12,233,313		12,549,039
Charge for the year		-		55,318		3,184,630		3,239,948
At 1 April 2011		-		371,044		15,417,943		15,788,987
Charge for the year		-		51,743		3,541,622		3,593,365
Foreign exchange movements		-		-		(2,049)		(2,049)
At 31 March 2012		-		422,787		18,957,516		19,380,303
Net Book Value
At 31 March 2012		17,930,495		612,073		20,566,579		39,109,147
At 31 March 2011		17,930,495		663,816		20,042,505		38,636,816
At 1 April 2010		17,930,495		719,134		18,893,938		37,543,567

The amortisation charge is included within administrative expenses on the income statement.

Distribution rights are amortised over their estimated useful life of 20 years and reviewed for impairment when any indication of potential impairment exists. The remaining amortisation period at the date of the financial statements was 11 years.

The carrying value of goodwill is attributable to the following cash generating units:

Entity		Date of acquisition		£
Eco Animal Health Limited (remaining 50%)		1 October 2004		17,358,621
Zhejiang Eco Biok Animal Health Products Limited		1 April 2007		94,257
ECOpharma Inc. (remaining 80%)		24 December 2009		477,617
				-------------------------------------------------
				17,930,495
				===================

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGU's) that are expected to benefit from the business combination.

The recoverable amounts of the CGU's are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates, growth rates and the estimated remaining useful life of the asset which is maintained at 30 years through ongoing investment in the cash generating unit.

The Group prepares cash flow forecasts derived from the most recent financial budgets and projections that are approved by management for the year ahead and then extrapolates them assuming a 3% annual growth rate which is well below the current performance of the existing business. The directors believe that the long term growth rate assumed does not exceed the average long term growth rate for the relevant markets. The exception to this rule is ECOpharma Inc. In this case the directors believe that a 5 percent growth rate in sales and margin for the second to fifth years, followed by a 3 per cent growth rate thereafter is appropriate.

Management estimates discount rates using the pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU's. In the current year management estimated the applicable rate to be 11%. Despite general economic conditions, management considers that there is adequate headroom when comparing the net present value of the cash flows to the carrying value of goodwill to conclude that no impairment is necessary this year. On current assumptions the excess of recoverable amount over carrying value is over £35 million.

Management believes that the most significant assumption in the calculation of value in use is the estimated growth rate. However, even if the growth rate were to be zero, the recoverable amount would still be over £16 million more than the carrying value and no impairment would be necessary. This assumes an earnings multiple of 10 on the current budgeted results in estimating fair value which has been derived from historical data.

Drug registrations and licences are amortised over their estimated useful lives of 10 years, which is the directors' estimate of the time it would take to develop a new product allowing for the Group's patent protection and the exclusivity period which comes with certain registrations. Given the economic climate the directors have conducted an impairment review in the current year by preparing cash flow projections for the year ahead and extrapolating the results for the remaining life of the registrations assuming zero growth and an 11% discount rate to establish value in use. On the current assumptions the excess of the recoverable amount over carrying value is more than £18 million. The calculations have also shown that on current budget figures a 5 year life is more than enough to justify the current carrying value of these registrations. Moreover, fair value calculated as 10 times the current cash generated by the registrations gives an even higher result, so management has again concluded that no impairment is necessary.

12. Property, plant and equipment

Group		Land and Buildings (freehold)		Plant and machinery		Fixtures, fittings and equipment		Motor Vehicles		Total
Cost or valuation		£		£		£		£		£
At 1 April 2010		650,000		762,411		535,296		-		1,947,707
Additions		-		93,456		15,590		42,211		151,257
Foreign exchange movements		-		280,133		-		-		280,133
At 1 April 2011		650,000		1,136,000		550,886		42,211		2,379,097
Additions		-		6,117		74,749		59,591		140,457
Foreign exchange movements		-		43,660		-		-		43,660
At 31 March 2012		650,000		1,185,777		625,635		101,802		2,563,214
Depreciation
At 1 April 2010		52,000		359,139		448,434		-		859,573
Charge for the year		9,400		29,058		42,125		7,960		88,543
Foreign exchange movements		-		203,463		(151)		2,083		205,395
Revaluation adjustment		(52,000)		-		-		-		(52,000)
At 1 April 2011		9,400		591,660		490,408		10,043		1,101,511
Charge for the year		9,400		33,433		37,597		16,012		96,442
Foreign exchange movements		-		97,190		8		-		97,198
At 31 March 2012		18,800		722,283		528,013		26,055		1,295,151
Net Book Value
At 31 March 2012		631,200		463,494		97,622		75,747		1,268,063
At 31 March 2011		640,600		544,340		60,478		32,168		1,277,586
At 1 April 2010		598,000		403,272		86,862		-		1,088,134

The freehold property at 78 Coombe Road, New Malden was valued on 28 April 2010 by Mr R Sworn of Kelion Sworn Chartered Surveyors and Valuers, London, W1. The fair value in use of the freehold property was determined at £650,000 by means of applying a 7.5% discount rate to the annual rental value of the property as determined by local market conditions. The property will continue to be valued on a regular basis

The value of non depreciable land included within Land and Buildings is £180,000.

The value of the freehold property would have been recorded at £328,743 (2011: £340,049) on a historical cost basis giving rise to the current revaluation surplus of £229,867.This balance is not distributable to shareholders.

Depreciation has been included in the administrative expenses line on the income statement.

13. Investment property

Group and Company		Land and Buildings (freehold)		Total
		£		£
Cost
Additions		156,550		156,550
At 31 March 2012		156,550		156,550
Depreciation
Charge for the year		1,777		1,777
At 31 March 2012		1,777		1,777
Net Book Value
At 31 March 2012		154,773		154,773
At 31 March 2011		-		-

The investment property was purchased at open market value during the year.

Depreciation has been included in the administrative expenses line on the income statement.

14. Fixed asset investment

Group
		Available for sale quoted assets at fair value		Unlisted investments		Total
Cost or fair value		£		£		£
At 1 April 2010		250,000		39,294		289,294
Revaluation in the year		61,594		-		61,594
At 31 March 2011		311,594		39,294		350,888
Revaluation in the year		(2,828)		(30,556)		(33,384)
Disposals		(308,766)		-		(308,766)
At 31 March 2012		-		8,738		8,738
Net Book Value
At 31 March 2012		-		8,738		8,738
At 31 March 2011		311,594		39,294		350,888
At 1 April 2010		250,000		39,294		289,294

The available for sale asset (the holding in Anpario plc (formerly Kiotech International plc)) was sold during the year.

The Company holds more than 20% of the share capital of the following companies:

Company		Country of registration or incorporation		Class		Shares held %
Subsidiary undertakings held by Company
Zhejiang ECO Biok Animal Health Products Limited		P. R. China		Ordinary		3
Petlove Limited		Great Britain		Ordinary		91
Eco Animal Health Limited		Great Britain		Ordinary		100
Subsidiary undertakings held by Group
ECO Animal Health Southern Africa (Pty) Limited		South Africa		Ordinary		100
Zhejiang ECO Biok Animal Health Products Limited		P. R. China		Ordinary		48
Shanghai ECO Biok Veterinary Drug Sale Company Ltd. (via Zhejiang ECO Biok Animal Products Ltd.)		P. R. China		Ordinary		48
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda.		Brazil		Ordinary		100
ECOpharma Inc.		Japan		Ordinary		100
ECO Animal Health USA Corp.		U.S.A.		Ordinary		100
Interpet LLC		U.S.A.		Ordinary		100
ECO Animal Health de Mexico		Mexico		Ordinary		100
ECO Argentina S.A.		Argentina		Ordinary		100

The principal activity of these undertakings for the last relevant financial year was as follows:

		Principal activity
ECO Animal Health Limited		Distribution of animal drugs
ECO Animal Health Southern Africa (Pty) Limited		Non-trading
Petlove Limited		Non-trading
Zhejiang ECO Biok Animal Health Products Limited		Manufacture of animal drugs
Shanghai ECO Biok Veterinary Drug Sale Company Ltd.		Distribution of animal drugs
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda		Distribution of animal drugs
ECOpharma Inc.		Distribution of animal drugs
ECO Animal Health USA Corp.		Non-trading
Interpet LLC		Non-trading
ECO Animal Health de Mexico		Distribution of animal drugs
ECO Argentina S.A.		Non-trading

The aggregate amount of capital and reserves and the results of these undertakings for the last relevant financial year were:

		Equity		Profit/loss for the year		Equity		Profit/loss for the year
		2012		2012		2011		2011
		£		£		£		£
ECO Animal Health Limited		3,345,471		2,068,100		1,277,371		1,237,171
Zhejiang ECO Biok Animal Health Products Ltd		3,855,323		835,305		3,649,202		822,493
ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda		(129,901)		(197,683)		41,893		(45,195)
ECOpharma Inc		671,451		(98,253)		758,461		224,171
ECO Animal Health de Mexico		9,233		9,093		-		-

The equity and results of Shanghai ECO Biok Veterinary Drug Sale Company Ltd are included within those disclosed for Zhejiang ECO Biok Animal Health Products Limited.

During the year ECO Animal Health (Europe) Limited was taken out of the group structure and dissolved.

All of the subsidiaries listed above were included in the consolidation for the year.

Zhejiang ECO Animal Health Products Limited and ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda both have 31 December year ends. The Group receives management accounts for the three months to 31 March for these subsidiaries for use in preparing the consolidated financial statements. ECOpharma Inc has changed its year end to March with effect from 31 March 2012.

ECO Argentina S.A. which holds neither assets nor liabilities and which has not traded since its formation has been excluded from consolidation.

The Group also holds (by means of its ownership of ECO Animal Health USA Corp.), a 50% joint venture interest in Pharmgate LLC, which is resident in U.S.A. Pharmgate LLC will distribute the group's products in the U.S.A. once marketing authorisations are granted.

The Group has also entered into a new 50% joint venture, Pharmgate Animal Health Canada Inc, to

The following amounts included in the group's financial statements are related to its interest in these joint ventures.

		Pharmgate LLC				Pharmgate Animal Health Canada Inc
		2012		2011		2012		2011
		£		£		£		£
Current assets		31,803		20,439		16,377		-
Current liabilities		(9,851)		(4,751)		(14,705)		-
Sales		-		-		5,644		-
Margins		-		-		4,599		-
Expenses		(100,153)		100,153		-		-

15. Inventories

		Group				Company
		2012		2011		2012		2011
		£		£		£		£
Raw materials and consumables		2,279,354		2,935,528		-		-
Finished goods and goods for resale		2,137,963		1,868,401		-		-
At 31 March 2012		4,417,317		4,803,929		-		-

The cost of inventories recognised as an expense and included in cost of sales in the period amounted to £17,504,226 (2011: £16,635,337).

16. Trade and other receivables

		Group				Company
		2012		2011		2012		2011
		£		£		£		£
Trade receivables		9,616,990		9,015,511		-		-
Amounts owed by group undertakings		-		-		28,418,185		28,184,995
Other receivables		768,301		391,384		226,630		281,542
Prepayments and accrued income		370,099		235,922		268,168		158,624
		10,755,390		9,642,817		28,912,983		28,625,161
Non current		100,225		128,224		28,373,610		28,313,219
Current		10,655,165		9,514,593		539,373		311,942
		10,755,390		9,642,817		28,912,983		28,625,161

As at 31 March 2012, trade receivables of £2,102,528 (2011: £1,324,362) due to the Group and £nil (2011: £nil) due to the Company were past due but not impaired. These relate to long standing distributors with whom we have agreed settlement terms and with whom there is no history of default. The ageing analysis of these trade receivables is as follows:

		Group				Company
		2012		2011		2012		2011
		£		£		£		£
Up to 3 months past due		1,731,377		1,238,808		-		-
3 to 6 months past due		286,649		33,021		-		-
Over 6 months past due		84,502		52,533		-		-
		2,102,528		1,324,362		-		-

As at 31 March 2012, trade receivables of £32,379 were impaired and provided for. The impaired receivables mainly relate to historic debt for which recovery is still being sought. The Group mitigates its exposure to credit risk by extensive use of commercial credit reference agencies, close management of its customers' trading against terms offered and use of retention of title clauses wherever possible. The ageing analysis of the impaired balances is as follows:

		Group				Company
		2012		2011		2012		2011
		£		£		£		£
Current		-		1,379		-		-
Up to 3 months past due		-		27,622		-		-
3 to 6 months past due		-		26,478		-		-
Over 6 months past due		32,379		68,869		-		-
		32,379		124,348		-		-

Movement on the Group provision for impairment of trade receivables is as follows:

		Group
Group		2012
		£
Balance at 1 April		124,348
Recovered in the year		(75,605)
Written off in the year		(16,364)
Balance at 31 March		32,379

The directors are pleased to note that the active management of the Latin American accounts provided for in 2009 as a result of the economic conditions at that time, has resulted in a positive outcome in almost all cases and that the remaining general provision in respect of this region could be released during the year.

The carrying amounts of trade and other receivables are denominated in the following currencies:

		Group				Company
		2012		2011		2012		2011
		£		£		£		£
Pounds Sterling		776,993		633,540		28,780,350		28,478,774
Euros		2,857,514		2,806,327		-		-
U S Dollars		5,513,412		4,070,628		132,633		146,387
Chinese RMB		411,957		544,793		-		-
Brazilian Real		357,576		606,322		-		-
Japanese Yen		492,684		757,984		-		-
Other currencies		345,254		223,223		-		-
		10,755,390		9,642,817		28,912,983		28,625,161

The carrying amounts of trade and other receivables are not significantly different to their fair values.

17. Deferred tax

Group

Deferred tax assets and liabilities are attributable to the following:

		Liabilities				Net
		2012		2011		2012		2011
		£		£		£		£
Drug registration expenditure		(2,139,050)		(2,281,894)		(2,139,050)		(2,281,894)
Freehold property		(72,590)		(72,590)		(72,590)		(72,590)
Plant and equipment		(12,094)		(2,050)		(12,094)		(2,050)
Investments		-		(14,782)		-		(14,782)
Tax losses carried forward		1,893,355		1,539,455		1,893,355		1,539,455
Amount (payable) after more than one year		(330,379)		(831,861)		(330,379)		(831,861)

The movement on the deferred tax account can be summarised as follows:

		Drug registration expenditure		Freehold property		Property, plant and equipment		Investments		Total
		£		£		£		£		£
At 31 March 2011		(742,439)		(72,590)		(2,050)		(14,782)		(831,861)
Credit/(charge) for the year through income statement		496,744		-		(10,044)		-		486,700
Movement through the year through revaluation reserve		-		-		-		14,782		14,782
At 31 March 2012		(245,695)		(72,590)		(12,094)		-		(330,379)

The tax losses carried forward are not expected to expire under current legislation.

Any future dividend received from the Chinese subsidiary Zhejiang ECO Biok Animal Health Products Limited will be subject to a 10 per cent withholding tax. The deferred tax liability in respect of this has not been recognised.

18. Cash and cash equivalents

Cash and cash equivalents comprise cash and short term deposits held by the Group. The carrying amount of these assets are not significantly different to their fair value.

		Note		Group				Company
				2012		2011		2012		2011
				£		£		£		£
Cash and cash equivalents				14,002,422		9,471,537		9,793,239		6,243,597
Overdrafts		20		(4,492,690)		(53,196)		(4,492,690)		(53,196)
Net funds per cash flow				9,509,732		9,418,341		5,300,549		6,190,401

19. Trade and other payables

		Group				Company
		2012		2011		2012		2011
		£		£		£		£
Trade payables		5,410,817		4,904,967		124,057		135,904
Other payables		887,400		514,654		565,651		69,025
Accruals and deferred income		407,774		375,701		44,458		21,659
		6,705,991		5,795,322		734,166		226,588

20. Borrowings

Included within payables on the statement of financial position are the following amounts at fair value secured by a debenture on the assets of the group:

		Group				Company
		2012		2011		2012		2011
		£		£		£		£
Short term borrowings		4,492,690		53,196		4,492,690		53,196

Currency analysis of short term borrowings

		Group				Company
		2012		2011		2012		2011
		£		£		£		£
U S Dollars		4,072,226		-		4,072,226		-
Euros		420,464		53,196		420,464		53,196
		4,492,690		53,196		4,492,690		53,196

The Group has no net overdraft facilities in place at the year end, although it has the facility to overdraw in specific currencies within a positive total cash balance. The interest rate for all currency overdrafts is 2.75 per cent over the relevant currency base rate.

21. Pension and other post-retirement benefit commitments

Defined Contribution pension Scheme

The Group operates defined contribution pension schemes for the benefit of certain directors and senior employees. The assets of the schemes are held separately from the Group and independently administered by insurance companies. The pension cost charge represents contributions payable to the funds in the year and amounted to £316,853 (2011: £201,994).

Defined Benefit Pension Scheme

The Group operates a defined benefit scheme in the UK for ex-employees only. A full actuarial valuation was carried out at 6 April 2009 and updated 31 March 2012 by a qualified independent actuary. The major assumptions used by the actuary were:

		31 March		1 April
		2012		2011
Discount rate		4.6%		5.5%
Rate of increase in pension payment		2.9%		3.4%
Inflation assumption with a maximum of 5% p.a.		2.9%		3.4%

Mortality rates

Pre retirement mortality is based on the mortality table known as AMCOO for males and AFCOO for females and 70% of the mortality indicated by this table has been taken, as in the previous year.

Post retirement mortality is based on the mortality table known as PCMAOO for males and PCFAOO for females. Allowance has been made for the improvement in mortality experienced recently and expected in the future by using 100% for males and 70% for females of the "Medium Cohort" improvement table, subject to a minimum improvement rate of 1.4% p.a. for males and 1.1% p.a. for females. To allow for the expected additional cost of purchasing annuities on retirement, only 60% of the mortality indicated by these projections has been taken into the calculations.

Expectation of life at retirement age of 65 is 25.2 (2011: 25.1) years for males and 29.1 (2011: 29.0) years for females. For members retiring in 20 years time, the expectation of life at age 65 would be 28.1 (2011: 28.0) years for males and 31.3 (2011: 31.2) years for females.

Results		2012				2011
		£		£		£		£
Assets at start of year		2,684,000				2,592,000
Defined benefit obligation at start of year		(2,596,000)				(2,575,000)
Net asset at 1 April				88,000				17,000
Current service cost, including risk benefits		(3,000)				(2,000)
				(3,000)				(2,000)
Expected return on assets		150,000				144,000
Interest cost		(139,000)				(138,000)
				11,000				6,000
(Loss)/gain on asset return		(26,000)				10,000
Experience (loss)/gain		(5,000)				1,000
(Loss)/gain on changes in assumptions		(120,000)				3,000
Statement of other comprehensive income				(151,000)				14,000
Employer contributions gross		64,000				59,000
Expenses paid by trustees		(7,000)				(6,000)
				57,000				53,000
Net asset at 31 March 2012				2,000				88,000
Actual assets at end of year				2,959,000				2,684,000
Actual defined benefit obligation at end of year				2,957,000				2,596,000

The pension fund assets are all held within a policy managed by an insurance company.

Reconciliation of changes in the asset value during the year

		2012				2011
		£		£		£		£
Fair value of assets at 1 April		2,684,000				2,592,000
Expected return on assets		150,000				144,000
(Loss)/gain on asset return		(26,000)				10,000
Employer contributions (gross)		64,000				59,000
Death in service insurance premiums paid		(3,000)				(2,000)
Expenses paid by trustees		(7,000)				(6,000)
Increase/(decrease) in secured pensioners value due to scheme experience		97,000				(113,000)
Fair value of assets at 31 March 2012				2,959,000				2,684,000
Reconciliation of changes in the liability value during the year
Defined benefit obligation at 1 April		2,596,000				2,575,000
Interest cost		139,000				138,000
Experience loss/(gain) on liabilities		5,000				(1,000)
Loss/(gain) on changes in assumptions		120,000				(3,000)
Increase/(decrease) in secured pensioners value due to scheme experience		97,000				(113,000)
Defined benefit obligation at 31 March 2012				2,957,000				2,596,000

The expected contribution to be paid by the employer during the next accounting year is £59,000. This includes a provision of £3,000 for death in service risk premium, (2011: £5,000).

Year ended 31 March		2012		2011		2010		2009		2008
Present value of defined benefit obligation		2,959,000		2,596,000		2,575,000		2,227,000		2,325,000
Fair value of plan assets		2,957,000		2,684,000		2,592,000		2,224,000		2,368,000
Surplus/(deficit) in plan		2,000		88,000		17,000		(3,000)		43,000
Experience (loss)/gains on plan liabilities		(5,000)		1,000		9,000		3,000		8,000

22. Share-based payments

The measurement requirements of IFRS2 have been implemented in respect of share options that were granted after 7 November 2002. The expense recognised for share based payments made during the year is shown in the following table:

		2012		2011
		£		£
Total expense arising from equity settled share-based transactions		290,890		303,504

The share based payment plans are described below:

Movements in issued share options and jointly owned shares during the year

The following table illustrates the number and weighted average exercise prices (WAEP) of and movements in, share options and jointly owned shares during the period:

		Options				Jointly owned shares				Options
		2012		2012		2012		2012		2011		2011
				WAEP				WAEP				WAEP
				£				£				£
Outstanding at 1 April		4,007,390		1.23		-		-		3,307,390		1.14
Granted during the period		456,500		1.87		2,603,290		2.00		985,000		1.48
Expired/cancelled during the period		-		-		-		-		(30,000)		1.39
Exercised during the period		(1,206,040)		1.03		-		-		(255,000)		1.09
Outstanding at 31 March		3,257,850		1.39		2,603,290		2.00		4,007,390		1.23
Exercisable at 31 March		1,129,350		1.11		-		-		1,905,390		1.12

The maximum aggregate number of shares over which options may currently be granted cannot exceed 10 per cent of the nominal share capital of the Company on the grant date. The options outstanding at 31 March 2012 had a weighted average share price of £1.39 and a weighted average contractual life of 5.2 years.

Eco Animal Health Group plc Executive Share Option Scheme

In accordance with the Executive Share Option Scheme, approved and unapproved share options are granted to full time directors and employees who devote at least 25 hours per week to the performance of duties or employment with the Company.

Details of options granted to directors can be found in the Directors Report and notes 29 (Directors Emoluments) and 31 (Related Party Transactions).

The exercise price of the options is equal to the market price of the shares at the date of grant. The options vest three years from the date of grant and if the option holder ceases to be a director or employee of the Company due to injury, disability, redundancy or retirement on reaching pensionable age or any other age at which they are bound to retire at in accordance with the terms of their contract of employment, the option may be exercised within a period of six months after the option holders so ceasing, although the Board may, at its discretion, extend this period by up to 36 months after the date of cessation.

If the option holder ceases employment for any other reason, the option may not be exercised unless the Board permits. The approved and unapproved options will be forfeited where they remain unexercised at the end of their respective contractual lives of ten and seven years.

An analysis of the expiry dates of the outstanding options is given below:

Date of grant		Unapproved		Approved		Exercise price (pence)		Expiry date
06 August 2003				10,000		202.50		06 August 2013
25 October 2005		10,000				340.00		25 October 2012
20 February 2006				11,880		252.50		20 February 2016
10 August 2006				12,600		238.00		10 August 2016
03 March 2008				490,900		108.50		03 March 2018
03 March 2008		443,970				108.50		03 March 2015
18 September 2008				35,000		85.00		18 September 2018
18 September 2008		115,000				85.00		18 September 2015
30 April 2009				55,550		147.00		30 April 2019
30 April 2009		481,450				147.00		30 April 2016
06 August 2009				22,000		135.00		06 August 2019
06 August 2009		103,000				135.00		06 August 2016
24 December 2009				29,350		155.00		24 December 2019
24 December 2009		10,650				155.00		24 December 2016
12 April 2010		375,000				150.00		12 April 2017
20 May 2010				115,100		140.00		20 May 2020
20 May 2010		389,900				140.00		20 May 2017
13 September 2010		90,000				161.00		13 September 2017
11 October 2011				154,100		186.50		11 October 2021
11 October 2011		302,400				186.50		11 October 2018
		2,321,370		936,480

ECO Animal Health Group plc Joint Share Ownership Plan

In accordance with the newly established Joint Share Ownership Plan (JSOP), jointly owned shares may be awarded to directors and employees of the company.

The shares are awarded at the market price on the day of the award and are held jointly by the employee concerned and the ECO Animal Health Group plc Employee Benefit Trust. After a three year vesting period, the shares may be sold at the option of the employee. The proceeds of sale are split between the trust and the employee so that the Trust receives the original market value of the shares sold plus a 5.9% per annum carry charge, with the employee receiving any excess over this amount.

Because these are actual issued shares in the company rather than options there is no expiry date associated with jointly owned shares. However, they will normally be forfeit if the employee ceases to be an employee of the company for any reason other than death, injury, redundancy, retirement on or after normal retirement age or disposal by the Group of the employing business entity.

The market price of the shares at 31 March 2012 was 207.5p with a range in the year of 185p to

Inputs to the Valuation Model (for options and jointly owned shares)

The fair value of share options granted prior to 31 March 2007 were estimated at the time of grant using trinomial pricing model, taking into account all the terms and conditions upon which the options were granted. For options issued after 1 April 2007, the directors took the decision that a Black-Scholes model would be more appropriate.

The following table lists the inputs to the Black-Scholes model which applies to both options and jointly owned shares.

		2012		2011		2010		2009		2008
Vesting period (years)		3		3		3		3		3
Option expiry (years)		7-10 yrs		7-10 yrs		7-10 yrs		7-10 yrs		7-10 yrs
Dividends expected on the shares		1.00%		4.50%		5.00%		4.50%		5.00%
Risk free rate		2.00%		2.00%		2.40%		4.19%		4.66%
Volatility of share price		27%		45%		40%		30%		25%
Weighted average fair value of options		41.0p		37.78p		32.6p		16.8p		18.7p

The risk free rate has been based on the yield from UK Government treasury coupons. The volatility of the share price was estimated based on standard deviation calculations on the historic share price.

Under the terms of the Group's Joint Share Ownership Plan (JSOP) on 6 October 2011, the Group issued a part interest in 1,819,290 Ordinary shares of 5p each to the Executive Directors at a price of 194p per share as an effective modification to existing benefits under the Group's Unapproved Share Option Scheme.

As part of this transaction the Directors exercised 1,039,290 of vested options and agreed that a further 780,000 of unvested options would be effectively capped at the 6 October 2011 market price of 194p by means of a partial waiver of these options. The jointly owned shares and the capped options are therefore treated as one instrument when looking at the overall limit on outstanding share options and jointly owned shares.

On 21 October 2011, the Group issued a part interest in a further 784,000 Ordinary shares of 5p each to the Executive Directors and certain other senior employees below board level as an alternative to unapproved options. These shares were issued at a price of 214p per share and have a vesting period of three years.

The fair value of the part interest in the jointly owned shares was calculated using a Black-Scholes model with the same assumptions as those used for the options issued during the year. The weighted average fair value of each jointly owned share issued during the year was 26.15 pence.

23. Share capital

		2012		2011
		£		£
Authorised
68,100,000 Ordinary shares of 5p each		3,405,000		3,405,000
10,790 Deferred ordinary shares of 10p each		1,079		1,079
32,334 Convertible preference shares of £1 each		32,334		32,334
		3,438,413		3,438,413
Allotted, called up and fully paid
55,119,201 ( 2011: 52,195,172) Ordinary shares of 5p each		2,755,960		2,609,758

During the year a further 173,989 shares were issued at a premium of £334,406 as a result of the take up of the scrip dividend option and 1,206,040 more shares were issued at a premium of £1,182,451 as a result of the exercise of options by employees. In addition, 1,544,000 shares were issued as a result of the Group's new share ownership scheme at a premium of £3,070,960.

During the year the Company obtained a court order authorising the cancellation of £10,000,000 of the total share premium. This amount was transferred to the credit of the Company's retained earnings in accordance with the resolution approved by the shareholders at the Annual General Meeting on 2 September 2011. At the same time an amount of £3,250,000 was transferred from the Share Premium Account to a non-distributable Special Reserve for the protection of creditors. This transfer will be reversed when all creditors outstanding as at the date of the court order have been paid or alternatively, when a further £3,250,000 has been credited to the Share Premium Account as a result of the issue of equity.

24. Minority interests

		2012		2012		2011		2011
		£		£		£		£
Balance at 1 April				1,790,587				1,400,296
Share of subsidiary's profit for the year		409,299				403,022
Share of foreign exchange gain on net investment		80,282				80,070
				489,581				483,092
Share of dividend paid by subsidiary				(388,581)				(92,801)
Balance at 31 March				1,891,587				1,790,587

25. Treasury share reserve

		2012		2011
		£		£
Balance at 1 April		-		-
Arising in the year		5,217,580		-
Balance at 31 March		5,217,580		-

Treasury share reserve includes £5,217,580 (2011: £nil), being the cost of 2,603,290 shares in the Company held by the Group's JSOP.

26. Other reserves

Group and Company		Capital redemption reserve		Special reserve		Reserve for share-based payment		Total
		£		£		£		£
At 1 April 2010		105,829		-		1,035,762		1,141,591
Share-based payments		-		-		303,504		303,504
Transfer to retained earnings on expiry of options		-		-		(114,865)		(114,865)
At 31 March 2011		105,829		-		1,224,401		1,330,230
Share-based payments		-		-		290,890		290,890
Transfer to retained earnings on expiry of options		-		-		(96,989)		(96,989)
Transfer on reduction of share premium for protection of creditors		-		3,250,000		-		3,250,000
At 31 March 2012		105,829		3,250,000		1,418,302		4,774,131

Included in the Group's retained earnings are the following exchange movements which have been taken directly to reserves on consolidation of the subsidiaries listed below:

		At 1 April 2011		Movement in the year		At 31 March 2012
		£		£		£
In respect of:
Zhejiang Eco Biok Animal Health Products Limited		325,638		83,555		409,193
Eco Animal Health do Brasil Comercio de Produtos Veterinarios Ltda		2,281		25,891		28,172
ECOpharma Inc.		49,254		11,243		60,497
ECO Animal Health Southern Africa (pty) Ltd		38		(131)		(93)
Interpet LLC		2,245		84		2,329
Pharmgate LLC		(629)		(52)		(681)
Foreign currency differences attributable to owner credited directly to reserves.				120,590

27. Financial commitments

At 31 March 2012 the Group had minimum commitments under non-cancellable operating leases as follows:

		Land and Buildings				Motor vehicles
		2012		2011		2012		2011
		£		£		£		£
Expiry date:
Within one year		10,377		-		4,988		3,168
Between two and five years		536,971		713,846		62,136		67,244
In over five years		2,197,631		2,293,625		-		-
		2,744,979		3,007,471		67,124		70,412

28. Capital commitments

The group had no authorised capital commitments as at 31 March 2012 (2011: Nil).

29. Directors' emoluments

		2012		2011
		£		£
Emoluments for qualifying services		386,008		439,520
Company pension contributions to money purchase schemes		183,024		94,074
Share-based payments		174,979		157,288
Benefits in kind		22,317		19,577
		766,328		710,459

During the year the directors exercised 1,059,290 (2011: nil) share options realising a gain of £968,243 (2011: £nil).

The number of directors for whom retirement benefits are accruing under money purchase pension schemes amounted to 3 (2011: 3). No directors accrued benefits under defined benefit schemes for this or the previous year.

The highest paid director received £304,766 (2011: £266,565) including share-based payments and £120,854 (2011: £79,220) of pension contributions.

30. Employees

Number of employees

The average number of employees (including directors) during the year was:

		2012		2011
		Number		Number
Directors		7		7
Production and development		49		47
Administration		34		39
Sales		55		51
		145		144
Employment costs (including amounts capitalised)
		2012		2011
		£		£
Wages and salaries		3,628,585		3,512,002
Share-based payments		290,890		303,504
Social security costs		329,837		277,724
Other pension costs		319,853		203,994
		4,569,165		4,297,224

31. Related party transactions

At the year end ECO Animal Health Group plc owed P A Lawrence, a director of ECO Animal health Group plc and members of his family a balance amounting to £512,337 (2011: £62,886).

During the year, the Group provided management services to Anpario plc (formerly Kiotech International plc), a company in which P A Lawrence is a Director and holds share options. Fees of £26,000 (2011: £26,000) were charged.

During the year, the Group provided the services of two employees to C-Corp Limited, a company in which P A Lawrence is a Director and shareholder. Fees of £48,970 (2011: £44,279) were charged.

During the year ECO Animal Health Limited made sales on an at arm's length basis to the following other companies. The sales and year end balances are given in the table below. Since all of these companies are wholly owned by the Group, these transactions and balances have all been eliminated on consolidation.

Subsidiary companies		Sales		Year end receivables		Sales		Year end receivables
		2012				2011
		£		£		£		£
Zhejiang Eco Biok Animal Health Products Limited		1,854,311		558,361		1,119,737		541,705
Eco Animal Health do Brasil Comercio de Produtos Veterinarios Ltda.		2,196,659		1,250,962		2,343,549		1,371,550
Ecopharma Inc.		567,577		344,499		1,098,594		337,958
ECO Animal Health de Mexico		-		175,411		-		-
ECO Animal Health USA Corp.		-		22,633		-		-

Interest and management charges from Parent to the other Group companies

During the year the Company made management charges on an arm's length basis to ECO Animal Health Limited amounting to £195,598 (2011: £187,222) and charged interest of £397,298 (2011: £304,705) to the Company. Both of these charges were made through the inter-company account and were eliminated on consolidation.

ECO Animal Health Limited also made management charges on an arm's length basis to ECOpharma Inc. amounting to £32,316 (2011: £85,828). The whole transaction was eliminated on consolidation.

ECO Animal Health Limited also paid £109,011 (2011: £100,153) of management charges to ECO Animal Health USA Corp. which were that company's share of the expenses incurred by Pharmgate LLC prior to commencement of sales in the USA. This transaction was eliminated on consolidation.

During the year ECO Animal Health Limited paid no dividend (2011: £1,500,000) to ECO Animal Health Group plc.

During the year Zhejiang ECO Biok Animal Health Products Limited paid dividends of £31,085 (2011: £7,425) to ECO Animal Health Group plc and £373,356 (2011: £89,164) to ECO Animal Health Limited. Both amounts were eliminated on consolidation.

During the year P Lawrence and his family received dividends in the form of cash and shares to the value of £333,185 (2011: £252,934), and the other directors and their families received dividends in the form of cash and shares to the value of £895 (2011: £662).

During the year the Company acquired at open market value a freehold property from C-Corp Limited of which P A Lawrence is a Director and Shareholder, for a total cost of £156,550 including 1% stamp duty.

Joint Ventures

During the year ECO Animal Health Limited made sales on an arm's length basis of £4,515 to ECO Animal Health Canada LLC. This balance remained outstanding at the year end.

Key management compensation

The group regards the directors as its key management.

		2012		2011
		£		£
Salaries and short term benefits		461,639		507,343
Retirement benefits		183,024		94,074
Share-based payments		174,979		157,288
		819,642		758,705

32. Financial instruments

The Group uses financial instruments comprising borrowings, cash and liquid resources and various items, such as trade receivables, trade payables etc. that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group's operations. The directors are responsible for the overall risk management.

The main risks arising from the Group's use of financial instruments are interest rate risk, capital and liquidity risk, credit risk and foreign currency risks and they are summarised below. The policies have remained unchanged throughout the year.

Interest rate risk

The Group finances its operations through a mixture of retained earnings and bank borrowings. At the year end the interest rate exposure of the Group arose on currency overdraft facilities of £4,492,690 (2011: £53,196), details of which are shown in the note below on capital and liquidity risk. IFRS7 requires the disclosure of a sensitivity analysis that details the effects on the Group's profit or loss and other equity of reasonably possible fluctuations in market rates. This sensitivity analysis has been determined based on exposure at the year end date. If interest rates had been 1 per cent higher or lower and all other variables were held constant the Group's profit would have decreased/increased

Capital and liquidity risk

The Group manages its capital to ensure continuity as a going concern whilst maximising returns through the optimisation of debt and equity. As part of this, the Board considers the cost and risk associated with each class of capital. The capital structure of the Group consists of debt which includes the borrowings disclosed in note 20, cash and cash equivalents in note 18 and equity attributable to equity holders of the parent comprising issued capital, reserves and retained earnings as disclosed in the Group's statement of changes in equity.

Liquidity risk is managed by maintaining adequate reserves and banking facilities with continuous monitoring of the latest developments by management.

At 31 March 2012 the Group was contractually obliged to make repayments as detailed below:

		2012		2011
WITHIN ONE YEAR OR ON DEMAND		£		£
Bank overdrafts		4,492,690		53,196
Trade payables		5,410,817		4,904,967
		9,903,507		4,958,163

Credit risk

Credit risk is that of financial loss as a result of default by a counterparty on its contractual obligations. The Group's exposure to credit risk arises principally in relation to trade receivables from customers and on short term bank deposits. Customers' creditworthiness is wherever possible checked against independent rating databases and filing authorities or otherwise assessed on the basis of trade knowledge and experience. Exposure and customer credit limits are continually monitored both on specific debts and overall.

The credit risk in relation to short term bank deposits and derivatives is limited because the counterparties are banks with good credit ratings.

Currency risk

The Group operates in overseas markets particularly through its subsidiaries in China, Brazil and Japan and is subject to currency exposure on transactions undertaken during the year. The Group does some hedging of receivables when the Board feels it is appropriate to do so and foreign exchange differences on retranslation of foreign monetary items are taken to the income statement.

The table below shows the extent to which the Group companies have monetary assets and liabilities in currencies other than in Sterling:

Foreign currency of Group operations
2012		US Dollar		Euros		Rand		Chinese RMB		Japanese Yen		Brazilian Real		Other
Sterling equivalent (000's)		(1,930)		2,141		266		2,790		438		794		192
2011
Sterling equivalent (000's)		4,508		2,410		204		2,867		165		835		52

At 31 March 2012 the Group was mainly exposed to the U S Dollar, the Euro, the Chinese RMB and the Brazilian Real. The following table details the effect of a 10 per cent movement in the exchange

rate of these currencies against sterling when applied to outstanding monetary items denominated in foreign currency as at 31 March 2012. A positive number indicates the decrease in profit which would arise from a 10 per cent weakening of the foreign currency concerned.

	2012		2011
	£'000		£'000
U S Dollar	(175)		410
Euro	195		219
Chinese RMB	254		261
Brazilian Real	72		76

Analysis of financial instruments by category

Group

		Loans and receivables		Available for sale		Total
2012		£		£		£
Investments		8,738		-		8,738
Trade and other receivables (excluding prepayments)		10,385,291		-		10,385,291
Cash and cash equivalents		14,002,422		-		14,002,422
2011		Loans and receivables		Available for sale		Total
		£		£		£
Investments		43,461		311,594		355,055
Trade and other receivables (excluding prepayments)		9,406,895		-		9,406,895
Cash and cash equivalents		9,594,403		-		9,594,403

Company

		Loans and receivables		Available for sale		Total
2012		£		£		£
Trade and other receivables (excluding prepayments)		28,644,815		-		28,644,815
Cash and cash equivalents		9,793,239		-		9,793,239
2011		Loans and receivables		Available for sale		Total
		£		£		£
Investments		-		311,594		311,594
Trade and other receivables (excluding prepayments)		28,466,537		-		28,466,537
Cash and cash equivalents		6,243,597		-		6,243,597

All financial liabilities in the Group's and Company's statements of financial position are classified as held at amortised cost for both the current and previous year.

Copyright Business Wire 2012