FY23 results ahead of expectations

ECO Animal Health Group reported revenue for the year to 31 March 2023 of £85.3m (+4%YoY) and adjusted EBITDA of £7.2m (+34%YoY), ahead of market expectations. Revenue growth was led by S&SE Asia (+42%YoY) and LatAm (+15%YoY). Gross profitability improved from a 42.7% margin in FY22 to 45.0%, whilst the (adj.) EBITDA margin was also up from 6.6% in FY22 to 8.5%. The year closed with net cash of £21.7m, with cash from operations of £15.9m (FY22: £(0.5)m), in addition to which the Group retained £10m in undrawn £10m RCF.

ECO allocated the equivalent of 9.8% of revenue in R&D spend in FY23 (£8.34m). They reported that two late-stage development projects are to be submitted in FY24; we note the collaboration (from 2022) with Imperial College London, and Moredun Research Institute in Scotland. Our medium-term cashflow outlook indicates ample resources to maintain the level of investment for over a dozen major projects underway or planned, alongside a healthy c£22m cash balance. A well-planned and well-resourced R&D and product development programme – the fruits of which are not factored into near-term estimates – form the basis for additional revenue streams which we estimate could add >£70m by FY28. We expect the group to update on R&D progress and spend before the end of this financial year.