®
Half-Yearly Review 2011
Six months ended 31 December 2010
Overview
Group revenue increased by 4.0%
Underlying operating profit up 13.0%
Underlying earnings per share 15.60p
Strong performance from Dechra Veterinary Products EU and US
Resilient performance from Services in difficult economic
conditions
Two earnings enhancing acquisitions completed
£0.4 million increase in product development spend as the
pipeline continues to deliver results
Strong increase in dividend in line with underlying earnings
Balance sheet remains strong
3
Half-Yearly Results
Six months ended 31 December
2010
2009
Revenue
£192.2m
£184.8m
+4.0%
Underlying operating profit*
£14.5m
£12.8m
+13.0%
Operating profit
£10.0m
£8.8m
Underlying profit before taxation*
£13.9m
£13.7m
£9.0m
£9.7m
Underlying basic earnings per share*
15.60p
15.37p
Basic earnings per share
10.10p
10.85p
3.70p
3.30p
£49.6m
£18.5m
4.2 times
4.6 times
Profit before taxation
Interim dividend
Net borrowings
Dividend cover*
+1.5%
+1.5%
+12.1%
* before amortisation of acquired intangibles, acquisition expenses, rationalisation costs, payments to
acquire technology for the research and development programme, impairment charges and loss on
extinguishment of debt
4
Growth in Revenue and Underlying
Operating Profit
Growth
%
Revenue growth
Organic at constant currency
Acquisitions
Currency
Underlying operating profit growth
Organic at constant currency
Acquisitions
Currency
5
3.6
0.9
(0.5)
------4.0
====
9.1
5.3
(1.4)
------13.0
====
Financials
European Pharmaceuticals
Revenue
- core
- acquisitions
Underlying operating profit
- core
- acquisitions
2010
£’000
2009
£’000
43,381
296
--------43,677
=====
41,313
--------41,313
=====
+5.0%
10,392
44
--------10,436
=====
9,621
--------9,621
=====
+8.0%
Pharmaceuticals revenue grew by 11.1% (excluding acquisitions)
Diets revenue increased by 5.6%
Reduction in contract manufacturing revenue due to expected lower than
production from largest contract
6
+5.7%
+8.5%
Financials
US Pharmaceuticals
Revenue
- core
- acquisitions
Underlying operating profit
- core
- acquisitions
2010
£’000
2009
£’000
5,136
1,340
------6,476
====
5,350
------5,350
====
1,208
638
------1,846
====
309 +290.9%
------309 +497.4%
====
+21.0%
Strong increase in profitability due to increased sales of own-developed products
and benefit of DermaPet® acquisition
Core revenue impacted by ophthalmic and otic products supply issues
7
Financials
Services
Revenue
2010
2009
£’000
£’000
148,592
144,331
+3.0%
6,349
6,473
-1.9%
Underlying operating profit
NVS® profit level held despite increasingly competitive market place and disrupted
December trading
Laboratories profit reduced due to very poor December trading
8
Financials
Group Statement of Financial Position
Balance Sheet
Non-current assets - intangible assets
- property, plant and equipment
Net working capital
Contingent and deferred consideration
Current and deferred tax liabilities
Net borrowings
Net assets
2010
£’000
2009
£’000
125,873
7,714
--------133,587
39,224
(14,800)
(16,652)
(49,648)
--------91,711
---------
90,574
8,108
--------98,682
24,701
(19,129)
(18,459)
--------85,795
---------
Borrowings increased due to £33.0 million cost of acquisitions
9
Financials
Group Cash Flow
Cash Flow
Cash flow from operations
before interest and taxation
Capital expenditure
- Intangible assets
- Property, plant and equipment
Inventory days
Receivable days
Payable days
2010
£’000
2009
£’000
842
7,397
983
619
--------1,602
=====
397
675
--------1,072
=====
55
42
52
49
38
53
Increase in inventory levels ahead of bringing marketing of certain products back
in-house and change of diets manufacturer
Extended payment terms offered to certain customers to meet competitive
pressure
10
Acquisition - DermaPet
Total potential consideration US$64.0 million
Funded by refinancing debt facility
Accelerates presence and scale of our US operation
Further strengthens the Group’s dermatological portfolio
Cost synergies identified and being delivered in H2
Opportunity to increase EU sales
Will be materially earnings enhancing in first full year
11
Acquisition - Genitrix®
Total potential consideration £6.4 million
Funded from existing cash resources
Increases UK portfolio of veterinary products
Significant cost synergies identified and being delivered in H2
Recently approved UK product Libromide® being taken through
Mutual Recognition
Will be earnings enhancing in first full year
12
Product Development
Vetoryl® approved in Japan
Equidone® approved in USA
Two generics approved in the UK
Progress made on pipeline
New opportunities being explored
Organic ‘Specific®’ range launch imminent
13
European Pharmaceuticals
Review
Dechra Veterinary Products EU
Overall veterinary product growth of 8.0%
Both pharma and diets outperforming markets
New EU market opportunities; Belgium and Germany
Contracts completed for Specific to be marketed in USA and South Korea
Dales® Manufacturing
Application to achieve FDA compliance at ‘Dales’ ongoing
Fuciderm® Gel and Canaural® now manufactured at Dales
14
US Pharmaceuticals
Review
Dechra Veterinary Products US
Equidone launched
Sales and marketing teams strengthened
Vetoryl not yet fulfilling its potential
Supply issues on otic and ophthalmic products detract from strong
performance
15
Services
Review
NVS
Operating efficiencies gained
Integrated ERP system go live planned for April 2011
Laboratories
Result affected by poor December performance
Largest client retained following tender
16
Outlook
International pharmaceutical and diets businesses delivering good
growth
Strong growth in own products underpins Group strategy
General economic weakness resulting in competitive markets
New products and in-house marketing of our own products will
enhance growth
Cost synergies will be delivered from recent acquisitions
Strong product development pipeline
Our strategy will continue to deliver shareholder value
17
Segmental Summary
Revenue
European pharmaceuticals
US pharmaceuticals
Services
Inter-segment
Underlying operating profit
European pharmaceuticals
US pharmaceuticals
Services
Research & development
Corporate and other unallocated costs
18
2010
£’000
2009
£’000
43,677
6,476
148,592
(6,537)
--------192,208
---------
41,313
5,350
144,331
(6,220)
--------184,774
---------
10,436
1,846
6,349
(2,456)
(1,700)
--------14,475
---------
9,621
309
6,473
(2,064)
(1,534)
--------12,805
---------
Trademarks
Trademarks of the Dechra Group of companies appear throughout this document in italics.
Dechra and the Dechra ‘D’ logo are registered Trademarks of Dechra Pharmaceuticals PLC.
The Malaseb Trademark is used under licence from Dermcare-Vet Pty. Ltd.
Forward-Looking Statements
This document contains certain forward-looking statements. The forward-looking
statements 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.
19
20