(EAH) Eco Animal Health Grp

Holding(s) in Company

Eco Animal Health Group Plc

Holding(s) in Company

Eco Animal Health Group Plc

Issue of Equity

Eco Animal Health Group Plc

Issue of Equity

Eco Animal Health Group plc

("Eco" or the "Company")

ISSUE OF EQUITY

Application has been made to the London Stock Exchange for 38,750 Ordinary shares in the Company to be admitted to trading on AIM as a result of the exercise of options. It is anticipated that these shares will be admitted to trading on 20 January 2012.

The total number of voting Ordinary shares in issue following this exercise of options will be 55,069,201.

Enquires:

Eco Animal Health Group plc

Peter Lawrence, Executive Chairman 020 8336 6190

Cenkos Securities plc

Lynn Taylor 0207 397 8924

(Nominated Adviser)

ECO Animal Health Group plc is a leader in the development, registration and marketing of pharmaceutical products. Our products for these global growth markets promote well-being in animals. Our financial goals are achieved through the careful and responsible application of science to generate value for our shareholders.

Half-yearly Report

Eco Animal Health Group Plc

ECO Animal Health Group plc

Interim Results for the six months ended 30 September 2011

Key features

• Profit for the period from continuing operations rose to £0.44 million (2010: £0.42 million)
• EBITDA and before share based payments was unchanged at £2.2 million (2010: £2.2 million)
• Basic earnings per share increased over 50 per cent to 0.53 pence (2010: 0.35 pence)
• Aivlosin® approval in Canada will have significant impact in next financial year
• Preparations for launch of Aivlosin® in USA continue
• Strong performances in major markets – Latin America, Asia and Middle East
• Net cash at period end of £8 million after spending £2 million on further drug registration work and the annual dividend

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

“The second half has started well. Based on orders booked for delivery in the third quarter, total sales after nine months should be comfortably ahead of last year. The approval for Aivlosin® in Canada is another important step in the Company’s global marketing plans; sales will commence after the end of the current financial year. ECO’s recent additional investment in people and new offices, ahead of imminent further marketing approvals, reflects management’s confidence, despite continuing worldwide troubled economies, in the future of the business and its ability to drive growth.â€�

Contacts:

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.

Chairman’s statement

I am pleased to report that ECO Animal Health Group has again delivered a good set of results for the six months ended 30 September 2011. Sales and operating profit were comfortably ahead of our budget although below last year’s outturn. As expected, some major customers adjusted their delivery schedules to give a stronger second half bias and this was built into our phased budget. The change in the timing of orders is not expected to affect the full year’s result, but has distorted the first half performance. The second half of the year is traditionally stronger as the incidence of respiratory disease increases and parasite numbers also rise during the southern hemisphere spring. This trend is already reflected in our results for the first two months of the second half, which are ahead of last year and show that ECO Group’s sales are cumulatively ahead of the comparable period in the previous year.

In November, ECO was pleased to report that the Veterinary Drugs Directorate of Health Canada has granted a marketing authorisation for Aivlosin^® for pigs. The Health Canada approval is the first in North America for Aivlosin^®, ECO’s patented macrolide antibiotic, and marks a very important step in the Company’s development of its global veterinary product. It further extends the marketing reach of Aivlosin^®, which is used for the treatment of respiratory and enteric diseases in pigs and poultry. We anticipate that we will shortly receive a long awaited registration from the Federal Drug Administration, which will allow us to commence sales in the large markets of the USA.

Financial

ECO’s earnings before interest, tax, depreciation, amortisation and share based payments (EBITDAS) were £2.2 million (2010: £2.2 million) and together with sales, were well ahead of our phased budget and confirm the underlying revenue growth trend. Profit from continuing operations rose to £0.44 million (2010: £0.42 million). Basic earnings per share were 0.53 pence (2010: 0.35 pence), which is an increase of over 50 per cent. Our balance sheet remains strong with almost £1.5 million cash generated in the period from our worldwide operations. Net cash remained high at near £8 million after investing around £2 million in our ongoing drug registration programme and having paid the annual dividend of £1 million. Shareholders representing some 22 per cent of holders chose to take the scrip alternative. This enables the Company to conserve cash, which can be redirected to finance our research, development and regulatory affairs which are so important for the future of the business.

The company has recently established a currency hedge position with regard to its exposure to the US dollar and the euro. This action will help to mitigate any real foreign exchange losses, as opposed to accounting regulatory ones, which reflected an uncrystallised currency ‘loss’ during the period and which can still be reversed if sterling weakens again.

Operations and markets

ECO’s sales in US dollars grew by nearly 5 per cent in the period. The relative strength of sterling against the dollar resulted in sterling sales at the Group level being broadly unchanged. Worldwide demand for animal health products for farmed animals is influenced by many factors ranging from levels of economic activity to the influence of outbreaks of disease. This was demonstrated again by the varying level of demand for our products across different territories. Strong double digit growth in US dollars in Latin America, South East Asia, the Middle East and South Africa was offset by a softening in China, although strong orders after the period end have reversed that situation. Japan remains a difficult market and is still affected by local issues resulting from its triple disasters in March. Although trading in Europe has reflected the ongoing economic difficulties, we have appointed additional sales staff in the region to drive sales of both Aivlosin^® and Ecomectin^®, ECO’s range of differentiated generic antiparasitic drugs. The additional (unbudgeted) costs associated with recruitment will, once the economic situation improves, enable the Company to increase its penetration in these high value markets.

After the period end the Veterinary Drugs Directorate (VDD) of Health Canada granted a marketing authorisation for Aivlosin^® 625 mg/g water soluble granules for pigs. This formulation of Aivlosin^® will be marketed for the treatment of ileitis (porcine proliferative enteropathy (PPE)), an enteric disease of pigs. Aivlosin^® water soluble granules dissolve readily in water providing a simple solution for the accurate and simultaneous treatment of large numbers of animals. Following several years of declining pig numbers in Canada the trend has reversed with producers now looking to consolidate their operations.

Canada and the USA represent more than one third of the world market for ECO’s products. We reported in July 2011 that the Aivlosin^® regulatory timeline in the USA had been extended by the Federal Drug Administration (FDA), owing to its excessive workload. The FDA was unable to commit to the original review timeline for the final component of the development programme relating to laboratory tests. Although the timeline is not under ECO’s control, the Company is making every effort to encourage the FDA to complete the approval of this final component as soon as possible. The joint venture with Pharmgate LLC in the USA, initiated in April 2010, has now been extended by the establishment of a legal entity in Canada. Inevitably, there is an investment cost of set up and administration in the period before sales can commence. This investment, together with expenditure to date, in order to obtain regulatory approval for Aivlosin^®, should be rewarded by significant sales and increased Group profits from markets into which so far, we have not been authorised to sell.

In line with our strategic intent of moving closer to the end users in key markets, ECO has established a subsidiary in Mexico which will allow us to benefit from favourable NAFTA free trade agreements and appointed an experienced commercial director to manage the operation.

The development of selected, differentiated generic pet medications of potential major importance to ECO’s future continues to progress and remain within our expected timeframes.

Building on the basic research conducted by the Virology Division of the Department of Pathology at the University of Cambridge, funded by the UK Medical Research Council, into the inhibition of viruses by Aivlosin®, ECO has commissioned further research with other institutions and the results will be reported in due course.

Outlook

The second half has started well, boosted by the receipt of orders deferred from the first half. Based on orders booked for delivery in the third quarter, total sales after nine months should be comfortably ahead of last year. The approval for Aivlosin® in Canada is another important step in the Company’s global marketing plans; sales will commence after the end of the current financial year. ECO’s recent additional investment in people and new offices, ahead of imminent further marketing approvals, reflects management’s confidence, despite continuing worldwide troubled economies, in the future of the business and its ability to drive growth.

NOTES TO THE PRELIMINARY RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2010

1. Basis of preparation

The financial information for the period to 30 September 2011 does not constitute statutory accounts as defined by Section 435 of the Companies Act 2006. It has been prepared in accordance with the accounting policies set out in, and is consistent with, the audited financial statements for the twelve months to 31 March 2011.

The Group applies revised IAS 1 “Presentation of Financial Statements (2007)�, which became effective as of 1 January 2009. As a result, the Group presents all non owner changes in equity in consolidated statements of comprehensive income and all owner changes in equity in consolidated changes in equity.

2. Statement of compliance

The interim financial statements do not include all of the information required for full annual financial statements and do not comply with all of the disclosure requirements in IAS 34 “Interim Financial Reporting�. Accordingly, whilst the interim statements have been prepared in accordance with IFRS, they cannot be construed as being in full compliance with IFRS and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2011.

3. Revenue is derived from the Group’s animal pharmaceutical businesses.

4. Principal risks and uncertainties were set out on pages 55-57 of the notes to the consolidated financial statements for the year ended 31 March 2011. The key exposures are to foreign currency exchange rates, potential delays in obtaining market authorisations and single sources of supply for some raw materials and have remained unchanged since the year end.

5. Earnings per share

6. Dividends

7. Related party transactions

At the balance sheet date, 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 £478,199 (30 September 2010: £4,864). During the period the Group provided management services to Kiotech International plc and C-Corp Limited, companies in which P A Lawrence is a director and holds equity interests. Fees charged were: Kiotech International plc £13,000 (2010: £13,000) and C-Corp Limited £25,287 (2010: £22,450). During the period, the Group also acquired a freehold property from C-Corp Limited at an arm’s basis for total consideration of £155,000.

During the period the Group made sales to Zhejiang ECO Biok Animal Health Products Limited at an arm’s length basis to the value of £1,096,382 (Six months to 30 September 2010: £577,551). At the end of this period there was an intercompany balance owing from this company of £778,226 (30 September 2010: £563,339).

The Group also made sales on an arm’s length basis to ECO Animal Health do Brasil Comercio de Productos Veterinarios Ltda to the value of £1,095,032 (Six months to 30 September 2010: £1,329,221). At the end of the period there was an intercompany balance of £1,515,949 (30 September 2010: £1,762,146).

The Group also made sales on an arm’s length basis to ECOpharma Inc to the value of £85,220 (30 September 2010: £621,279). At the end of the period there was an intercompany balance of £486,361 (30 September 2010: £420,296).

Since the last three of these companies are subsidiaries of ECO Animal Health Group plc, these transactions and balances have been eliminated on consolidation.

During the period ECO Animal Health Limited and ECO Animal Health Group plc received dividends of £404,442 (2010: £nil) from Zhejiang ECO Animal Health Products Limited. This amount has also been eliminated on consolidation.

8. Intangible non current assets

9. Property, plant and equipment

10. Share Premium Cancellation

On 5^th October 2011, just after the period end, ECO Animal Health Group plc obtained an order to confirm the cancellation of £10 million of its Share Premium Account and the transfer of this sum to its Distributable Reserves in accordance with the resolution passed by shareholders at the Annual General Meeting held on 2^nd September 2011. The order was registered at Companies house on 7^th October 2011. This will permit the Board much greater flexibility to determine its future distribution policy.

11. Cashflow

The cash generated from operations was £4.7m less than in the same period last year. This was because the inventory figure at September 2010 was unusually very low and the Company has since been building inventory to cover the expected increase in sales. The Company also reduced its trade payables by £1.4m in the period which is largely a function of the timing of payments to suppliers between one period and the next.

Group cash flow was also affected by an increase in dividends paid in the period compared to last year and was the result of the increase in the dividend declared as well as a decline in the take up of the scrip alternative. Finally, the minority interest’s share of our Chinese subsidiary’s dividend paid in the period resulted in a further £389,000 of cash outflow to the Group.

12. This financial information was approved by the board on 9 December 2011.

Copies of this interim report are being sent to all of the Company’s shareholders. Further copies can be obtained from the Company’s registered office at 78 Coombe Road, New Malden, Surrey KT3 4QS.