Dechra Pharmaceuticals PLC: Half-Yearly Financial Report 2016
LONDON, February 22, 2016 /PRNewswire/ --
Dechra Pharmaceuticals PLC (LSE: Symbol: DPH Sector: Pharmaceuticals)
For more information or to download the full news release, please visit: http://www.dechra.com
"Strong first half performance reported by veterinary pharma specialists, Dechra"
"All our business units are performing well, we are in the process of launching several new products, our international expansion plans are progressing as expected and we have made two strategic acquisitions. We remain in a strong position to continue to grow the business and deliver returns to our shareholders."
Ian Page, Chief Executive Officer
Highlights
- Trading in our first half was strong with Group revenue growth, including Genera, of 14.9% at Constant Exchange Rate (CER) (9.7% at Actual Exchange Rate (AER)) and underlying operating profit growth of 24.2% at CER (13.9% at AER).
- Excluding Genera, revenue growth was 11.1% at CER (6.4% at AER).
- Revenue growth in EU Pharmaceuticals, including Genera, was encouraging at 8.1% (CER), however it continues to be adversely impacted by exchange rate headwinds (0.9% growth at AER).
- North America's excellent momentum continues with revenue growth of 51.9% at CER (59.1% at AER).
- Zycortal®, a novel canine endocrine product for the treatment of Addison's disease, has received regulatory approvals. Two Food producing Animal Products (FAP) antibiotics, Phenocillin and Solamocta®, have also been approved in the EU.
- The integration of Genera, acquired in October 2015, is on track.
- The underlying diluted EPS increased by 17.6% at CER (7.2% at AER) to 21.99 pence per share.
- Following the Genera acquisition and the investment in the US expansion, our reported net debt is £17.8 million as at 31 December 2015 (2014: net cash £3.0 million).
- Interim dividend increased to 5.55 pence, an increase of 8.4% compared to the prior year.
Financial Summary
Growth at Growth at
actual constant
2016 2015 exchange exchange
GBPm GBPm rate rate
Revenue 110.7 100.9 9.7% 14.9%
Gross profit 63.5 56.9 11.6% 18.8%
Gross profit % 57.4% 56.4%
Underlying operating profit 26.3 23.1 13.9% 24.2%
Underlying EBITDA 28.7 24.8 15.7% 24.6%
Underlying diluted EPS 21.99p 20.51p 7.2% 17.6%
Reported operating profit 15.9 13.9 14.4% 24.5%
Diluted EPS 12.74p 11.78p 8.1% 19.4%
The Group presents a number of non-GAAP measures. This is to allow investors to understand the underlying performance of the Group, excluding items associated with areas such as acquisition and disposal related expenses, debt refinancing, discontinued operations and rationalisation.
Introduction
The Group has continued to deliver significant progress on its strategic objectives resulting in solid growth in both revenue and profit at CER in the first six months of this financial year. Notable achievements in our key areas of focus are:
- Portfolio Focus: significant growth was achieved in all our key therapeutic sectors, including FAP;
- Pipeline Delivery: new novel and generic products were approved across several species and geographies;
- Acquisition: one acquisition, Genera, was completed in the period and a second, Brovel, announced after the close of the reporting period. Both enhance our product portfolio and geographical reach; and
- Geographical Expansion: our rest of the world presence has been extended through the creation of new subsidiaries, acquisitions and product registrations in the last 12 months.
Operational Review
European Pharmaceuticals
During the first half of the year our European Pharmaceuticals revenue, including two months of Genera sales, increased by 8.1% at CER to £86.3 million compared to the same period last year and by 0.9% AER.
The growth was predominantly driven by a strong performance in CAP with excellent performances in both our anaesthetic/analgesic and endocrine therapeutic sectors. The introduction of Osphos® into the UK, together with a repositioning of Equipalazone®, contributed to the increase in Equine sales. Osphos was also launched in Germany, France and the Netherlands towards the end of the period being reported and will be launched into other European territories throughout the second half of the financial year.
Although there has been a continued decline of antibiotic sales in Germany, we have delivered growth in FAP in the period of 19.0% at CER. This growth has been achieved through an increased penetration of target markets, a good performance in Poland which commenced trading in May 2015, and the Genera acquisition, which added 11.0% to the growth. Two new FAP antibiotics have been prepared for imminent launch in Europe. These new products, together with a continued focus on increasing market share in countries where we currently have a low base and gaining new registrations in the rest of the world, enhance our future prospects in FAP.
Diet sales declined by 2.3% at CER over the half year period. This follows a difficult six months during which we conducted the technical transfer of the products to a new supplier and the loss of a portion of our business with a large corporate account in Scandinavia. We have, however, seen signs of recovery in the second quarter of this financial year and several countries, including our largest market France, are now showing growth.
North American Pharmaceuticals
North American revenue increased by 51.9% at CER to £24.5 million (59.1% at AER) on the same period last year as our dermatology, endocrinology and ophthalmic ranges started the year strongly. Canada, which only commenced trading in the second half of our 2015 financial year, also contributed to the period-on-period growth.
Osphos has received good support from key opinion leaders within the US and, towards the end of the period, sales were strong and market penetration increased.
Sales of our DermaPet® range, a significant part of our dermatology therapeutic sector, reached the US$20.0 million moving annual total threshold in August 2015, which triggered the final milestone payment of US$5.0 million committed to in the 2010 acquisition agreement.
The excellent growth in our endocrinology sector was again driven by Vetoryl® which was enhanced by the launch of a new 5mg formulation which increases veterinarians dosing flexibility.
Pipeline Delivery
The first half of the financial year saw some notable new product approvals. In September 2015, Zycortal, a novel canine endocrine product for the treatment of Addison's disease, received approval through the centralised process in 29 EU Member States. We are awaiting a New Animal Drug Application in the US as all parts of the dossier were approved post half year end.
Following the successful registration of Osphos last year in the US and UK, approval was received in 19 EU countries in September 2015. Osphos is a unique product which treats Navicular Syndrome in horses.
We have also had several successes in our FAP portfolio in Europe with two new water soluble antibiotics, Solamocta and Phenocillin, approved in 17 member states and our existing antibiotic aerosol, Cyclospray®, extended into 12 new territories.
Furthermore, we have had several international approvals to enhance our geographical expansion including two canine products, Urilin® in Australia and Cardisure® in Korea; and a FAP antibiotic Soludox® in Egypt.
Although within the period we terminated an early stage project for canine ophthalmology, we continue to refill the pipeline. We have started several new projects in both FAP and CAP. Further detail on our pipeline will be provided as usual in our Annual Report and Accounts.
Acquisition
On 3 August 2015, Dechra announced that it had conditionally agreed with the majority shareholder to acquire 69% of the voting rights in Genera, a Croatian stock market listed business. We have subsequently taken formal control of Genera and, with effect from 21 October 2015, Dechra owns 92.26% of the voting rights (83.99% of the share capital). The equity acquisition cost of €36.6 million (£26.8 million) was funded from our existing cash and revolving debt facilities. This strategic acquisition gives the Group an entry point into the fast growing poultry vaccines market; broadens our EU FAP business; provides us with a variety of dose form manufacturing and technical know how in a low cost environment and extends our geographical reach into the Balkans.
Subsequent to the reported period, on 13 January 2016, Dechra acquired 100% of the share capital of Laboratorios Brovel S.A. de C.V. (Brovel), a veterinary pharmaceuticals company based in Mexico City. The Group paid US$5.0 million (£3.5 million) consideration in cash on completion and a further US$1.0 million (£0.7 million) is contingent upon Brovel reaching successful registration milestones for Dechra's products in Mexico. Brovel is a family-owned business with more than 52 years' experience in the production and distribution of pharmaceutical veterinary products. It has a diverse product portfolio with a turnover of MxP$ 66.2million (£2.6 million). The Board believes this acquisition will help open the significant Mexican animal health market to Dechra as well as offer the potential to access other Latin American markets in the future. The initial focus will be to achieve registration of several existing Dechra products in Mexico.
Geographical Expansion
Geographical expansion is progressing well. In addition to the acquisition of Brovel which creates a foothold and an opportunity to develop a presence in the significant Mexican market, the acquisition of Genera provides access to the smaller markets of Croatia, Slovenia and Bosnia Herzegovina. Furthermore, a new greenfield start up subsidiary has been established in Austria which commenced trading in January 2016. Our subsidiaries in Canada and Poland, established in the prior financial year, are performing well with the latter being a major contributor to the reversal in trend in our FAP business which returned to growth in the period.
Outlook
As a result of our focus on the execution of our strategy, we have delivered a strong first half performance. Our core portfolio demonstrates growth, the product pipeline is delivering results and geographical expansion through acquisitions and the creation of new subsidiaries is progressing. Although the macro-economic conditions in Europe are uncertain and currencies could be volatile, trading for the second half has started well and is in line with management expectations for the 2016 financial year. We remain confident in our future prospects.
Forward-Looking Statements
This document contains certain forward-looking statements which reflect the knowledge and information available to the Company during the preparation and up to the publication of this document. By their very nature, these statements depend upon circumstances and relate to events that may occur in the future thereby involving a degree of uncertainty. Therefore, nothing in this document should be construed as a profit forecast by the Company.
About Dechra
Dechra is an international specialist veterinary pharmaceuticals and related products business. Our expertise is in the development, manufacture, and sales and marketing of high quality products exclusively for veterinarians worldwide. Dechra's business is unique as the majority of its products are used to treat medical conditions for which there is no other effective solution or have a clinical or dosing advantage over competitor products.
Trademarks
Dechra and the Dechra "D" logo are registered trademarks of Dechra Pharmaceuticals PLC. The Malaseb trademark is used under licence from Dermacare-Vet Pty. Ltd.
Enquiries
Dechra Pharmaceuticals PLC
Office: +44-(0)1606-814730
Email: corporate.enquiries@dechra.com
TooleyStreet Communications Ltd
Fiona Tooley, Director
Mobile: +44-(0)7785-703-523
Email: fiona@tooleystreet.com
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