Veterinary Group Dechra - 2018 Interim Results
LONDON, February 26, 2018 /PRNewswire/ --
Dechra Pharmaceuticals PLC, LSE: Main Market: symbol DPH) today releases its Half-Yearly Financial Report 2018 for the six months ended 31 December 2017 (the Period).
Ian Page, Chief Executive Officer at Dechra commented:
"Dechra has performed well in the Period with solid revenue growth in EU pharmaceuticals and strong revenue growth in NA Pharmaceuticals from the existing business. This has been delivered through the consistent application of our successful strategy, converting pipeline opportunities, leveraging our strong portfolio, and expanding our geographic presence. The acquisitions of AST Farma, Le Vet and RxVet will supplement our opportunities further.
Current trading continues in line with management expectations and the initial phase of integration of the AST Farma/Le Vet acquisition is progressing well. The Board remains confident that we can continue to implement our strategy and meet our expectations for the current financial year and deliver further growth in the future."
"The Board remains confident that we can continue to implement our strategy and meet our expectations for the current financial year and deliver further growth in the future."
Half-Year Highlights
- Trading in the Period was strong and in line with management expectations.
- Reported Group revenue for the Period increased by 11.2% at Constant Exchange Rate (CER) (12.5% at Actual Exchange Rate (AER)).
- European Pharmaceuticals revenue growth was 5.8% at CER (9.2% at AER).
- North American Pharmaceuticals revenue growth was 20.7% at CER (18.3% at AER).
- Underlying operating profit growth of 22.3% at CER (22.6% at AER) with operating margin expansion of 220 bps to 24.6%.
- Strong cash conversion of 96.2% includes pre product launch stock builds.
- Small bolt on acquisition of RxVet Limited, New Zealand, was completed.
- Major acquisition of AST Farma and Le Vet announced post Period end.
- Underlying diluted EPS growth of 19.8% to 37.58 pence. Interim dividend increase by 20.0% to 7.33 pence.
Half-Year Financial Report - key extracts
The Group has delivered a strong performance throughout the Period, driven by solid revenue growth in our European Pharmaceuticals Segment and by excellent revenue growth in our North American Pharmaceuticals Segment. All product categories delivered growth at CER: Companion Animal Products (CAP) 18.4%, Equine 19.3%, Food producing Animal Products (FAP) 3.2% and Nutrition (Pet Diets) 2.9%. The operating profit performance was enhanced by operational leverage, prudent cost control and efficiency gains within the Manufacturing and Supply Chain. A small acquisition was completed in the Period providing us with access to the New Zealand market, but more significantly a major acquisition was completed post the Period end on 13 February 2018 which will materially enhance our EU product portfolio and pipeline.
Operational Review
European Pharmaceuticals
In the Period our European Pharmaceuticals Segment reported revenues increased by 5.8% at CER (9.2% at AER). Excluding third party contract manufacturing and treating Apex on a like-for-like* basis, revenues increased by 4.2% at CER (7.6% at AER). Apex, an Australian business acquired in October 2016, which is part of Dechra Veterinary Products International, is included with the European Pharmaceuticals Segment. CAP continues to be the main growth driver, with sales increasing in all of our focus therapy areas. We have delivered FAP revenue growth at 3.7%, a solid performance in a market still experiencing pressure to reduce antibiotic usage. Nutrition is recovering with growth of 2.9% following the resolution of historic supply and palatability problems and is in the process of being relaunched with new packaging design and improved palatability. Despite increasing market penetration of Osphos®, our Equine sales declined by 4.3% due to continued generic competition to Equipalazone®, our largest and oldest product for horses.
*As Apex was acquired on 14 October 2016, the amounts represented by EU Pharmaceuticals - Acquisitions represent the Apex results for the period 1 July 2017 to 14 October 2017. In the current period and prior period, the results from 14 October to 31 December are included within EU Pharmaceuticals - Existing, which is referred to as a like-for-like basis.
North American Pharmaceuticals
In the Period our North American Pharmaceuticals Segment reported revenues increased by 20.7% at CER (18.3% at AER). This was a very pleasing performance as it was achieved in an environment where distributors were selling white label goods to compete with Carprovet (one of our major products), and in a period when two natural disasters disrupted trading in Florida and Texas. We delivered excellent growth from both CAP, across all therapeutic areas of focus, and Equine, which was predominantly from Osphos. CAP and Equine are currently the only two categories we operate in within the North American market. Investment continues to be made in the US sales team where we have increased the reporting regions from four to six adding two regional managers, 20 field based sales managers and two new internal sales personnel.
Acquisition
Within the Period we completed one small acquisition and have subsequently announced, post the Period end, a major acquisition of two associated Dutch companies.
In December 2017 we completed the acquisition of RxVet Limited, a small CAP business in New Zealand. RxVet have been Dechra's distributor since 2010, with revenue in the year to March 2017 of NZ$1.4 million; sales of Dechra products account for approximately half of this.
On 13 February 2018 we completed the acquisition of AST Farma and Le Vet for €340.0 million on a debt-free cash-free basis, paid for 75.0% in cash and 25.0% in Dechra shares which are subject to a two year lock-in. Part of the cash consideration was funded by £105.0 million (net of discounts) placing and the balance from new debt facilities. AST Farma strengthens our position within the Dutch market and provides us with a direct to veterinarian relationship with the potential to increase sales of our existing brands. Le Vet strengthens our product portfolio across Europe with 60 generic plus registrations which can be sold through our existing sales and marketing networks. The initial phase of integration is underway and proceeding to plan; further details will be provided on our progress at the announcement of our year end results in September 2018.
Pipeline Delivery
Several new product registrations were achieved, and numerous new products launched within the Period.
A number of new FAP registrations were achieved in Europe:
Solacyl® Water Soluble Powder, a line extension of an existing product for turkeys;
Diatrim®, an antibiotic for cattle mastitis; and
Avishield® IBH120, our second EU registered poultry vaccine developed in our Croatian facility.
Numerous international registrations were also achieved, including products for New Zealand, Thailand, Kazakhstan and Australia.
In North America we have extended the range of our Vetivex® critical care fluids and have launched all dosage sizes of AmoxiClav Tablets. The final low dose strength of AmoxiClav was made available after working closely with our manufacturing partner who implemented a new production line specifically for this tablet size. In Mexico we have launched Osphos, Vetoryl®, Cyclospray® and several products from our dermatology range.
In addition, to our own pipeline, we have also acquired new products from licensing deals:
Redonyl Ultra, a dermatological supplement from Premune, has been launched in the EU and we are currently developing it into a soft chew for the US market;
Vetradent, a water additive to combat biofilms from Kane Biotech Inc., extending our dental range, has been launched in the US; and
Bioequine, our first vaccine from Bioveta, for equine herpes virus, has been launched in Germany.
We continue to work with Animal Ethics Pty Ltd to accelerate the global registration of Tri-Solfen. Pressure from consumers to improve farm animal welfare continues to increase, strengthening anticipated demand for this unique product.
People
We have created a new Senior Executive Team role and subsequently employed Andrea Dodds as Global Marketing Director. Andrea joins us having held numerous international senior roles with Colgate Palmolive. An experienced Supply Chain Director has been appointed to manage our increasingly complex network of suppliers and we have strengthened the HR team with new appointments within our Manufacturing Group and in Mexico.
Half-Year Financial Summary
Restated
Six months Six months Growth at Growth at
ended ended actual constant
31.12.17 31.12.16 exchange exchange
GBPm GBPm rate rate
Revenue 194.1 172.6 12.5% 11.2%
Underlying
Operating profit 47.4 38.6 22.6% 22.3%
Operating profit % 24.4% 22.4%
EBITDA 51.0 41.6 22.5% 22.0%
Diluted EPS 37.58p 31.25p 20.3% 19.8%
Reported
Operating profit 26.3 14.0 87.1%
Diluted EPS 28.69p 10.66p 169.1%
The Group presents a number of non-GAAP Alternative Performance Measures (APM's). This allows investors to understand better the underlying performance of the Group, by excluding amortisation of acquired intangibles and impairment (if any) of acquired intangibles, acquisition expenses, fair value of uplift of inventory acquired through business combinations, rationalisation costs, loss on extinguishment of debt, and fair value and other movements on deferred and contingent consideration, and the taxation effects thereon. EBITDA is defined as underlying earnings before interest, tax, depreciation and amortisation.
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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.
The majority of Dechra's products are focused on key therapeutic categories where we have leading market positions, and many of our products are used to treat medical conditions for which there is no other effective solution or have a clinical or dosing advantage over competitive products.
For more information please visit: http://www.dechra.com or corporate.enquiries@dechra.com .
Stock Code: Full Listing (Pharmaceuticals): DPH.
LEI: 213800J4UVB5OWG8VX82
Trademarks
Dechra and the Dechra "D" logo are registered trademarks of Dechra Pharmaceuticals PLC.
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