Shares in ECO Animal Health Group PLC were down on Monday, as the company said it expects to pay a £2.5 million tax settlement.

Shares in the Surrey-based pet and livestock pharmaceuticals company were down 20% to 102.00 pence each in London on Monday mid-morning.

ECO expects to report revenue in the year ended March 31 of £82 million and earnings before interest, tax, depreciation and amortisation of around £6.5 million. In financial 2021, it recorded revenue of £105.6 million and adjusted Ebitda of £24.4 million.

However, this ignores the impact of a potential tax settlement of around £2.5 million, from an import tax in a foreign jurisdiction where ECO operates through a subsidiary company.

ECO said this issue is at an early stage and no tax payment has yet been determined, but it will be apportioned to appropriate years and charged to cost of sales. The impact of this item for financial year 2022 will be a £1.0 million reduction in Ebitda.

Further, ECO said that in the first quarter of its current financial year revenue in China fell ‘significantly’, compared to a ‘record’ quarter the year prior. This was due to low profitability and poor cashflow within major producers, it explained.

Elsewhere, revenue grew ‘strongly’ year-on-year, the company added.

‘A recent improvement in pork pricing in China provides us with some optimism for the rest of the year and the board continues to review overheads and capital expenditure levels in relation to trading trends,’ ECO said.

It is expected that the results for the financial year 2022 will be released on or around August 18.

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