Report
Robin Davison

Trading update triggers share price fall

The statement also flagged up two financial issues which had recently emerged: that it will have to make a provision for a possible but unanticipated sales tax sales liability and treat certain previously capitalised development costs as an expense.

The impact of these two items will be largely offset by exchange rate gains and ECO expects to report sales in excess of £82.5m and EBITDA of £6.5m, both broadly in line with consensus.

Current trading has been weak in the key Chinese market and will probably impact consensus results for FY23. This latter aspect of the trading statement has had a predictable effect on the shares, which have fallen by c. 20% in response, and are around their lowest level for many years.

ECO should be able to give more colour on its assessment of overall trading in FY23 with its forthcoming results. With cash at the last balance sheet date of almost £23m, its EV currently stands at £45m. Thus, based on known FY22 figures, their EV/sales ratio is currently 0.54 and its EV/EBITDA at 6.9 – both very low by any standards and certainly the norms of the animal health sector.
Underlying
Eco Animal Health Group

Eco Animal Health Group is engaged in the manufacture and supply of animal health products. Co.'s activities were conducted through a network including both regional offices, (notably in Shanghai and Princeton) and overseas subsidiaries. Co.'s patented molecule, Aivlosin® is used for the treatment of pigs and poultry diseases and is prescribed under veterinary control for the short duration treatment of diagnosed diseases. Co.'s products also include Ecomectin, an endectocide that controls worms, ticks, lice and mange in grazing stock and pigs.

Provider
Equity Development
Equity Development

​Equity Development enables companies to become better understood and supported by investors. Since our launch in 1996 we have consistently focused on helping our clients improve their communication and relationships with both existing and potential shareholders. Our clients have come from a wide variety of sectors and domiciles, are both private and quoted and range in size from micro-cap to $multi-billions. We offer free access to company research notes written by experienced analysts. These notes include detailed forecasts, financial models and a fair value. We host regular Private Investor Forums at which investors have the opportunity to hear company directors present, and to ask questions. These are free to attend. We broadcast live Webinars with company management that include active Q&A. We also make the recordings available online. We arrange face to face meetings between private investors and company management. We are active users of Twitter, commenting daily on company news, share price moves, Directors’ Dealings, Equity Development Research Notes & Events.

Analysts
Robin Davison

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