27th Feb 2023 11:16
(Alliance News) - Liberum said investors should be "mindful" about Dechra Pharmaceuticals PLC's outlook on Monday, as it offered more conservative full-year expectations compared to consensus.
Liberum retained its 'buy' rating, with an unchanged target price of GBP31.00.
Shares were down 15% at 2,654.00 pence each on Monday morning in London.
Dechra reported "unpredictable" trading patterns in 2023 so far.
The veterinary pharmaceutical company said revenue in the six months to December 31 rose 14% to GBP377.4 million from GBP332.4 million a year before.
"The global companion animal healthcare market has returned to more normalised levels of growth following the extraordinarily high rates seen during the Covid-19 pandemic, and against that context our performance has been robust," the firm said.
In European Pharmaceuticals, revenue growth was up 1.3%, total North American Pharmaceuticals revenue was up 35%, but revenue growth in International Pharmaceuticals was down 1.6%.
Liberum said that international growth was hindered as Dechra made changes to operations in South Korea and Japan.
Pretax profit fell sharply to GBP29.7 million from GBP53.4 million, as operating profit fell to GBP44.6 million from GBP57.4 million a year before.
Underlying diluted earnings per share dropped to 55.44 pence each, down 13% from 54.01 pence the year before.
Dechra declared an interim dividend of 12.50 pence each, up 4.2% from 12.0p a year prior.
Liberum said the interim results are within expectations, with Dechra showing a "robust performance." It explained that the results are also consistent with its expectations of a "modest" second half weighting.
Looking ahead, Dechra now expects full year underlying operating profit to be at the lower end of analyst expectations. However, Liberum said its forecasts are "more conservatively set than consensus", expecting 1% to 2% lower earnings before interest and tax compared to consensus.
Liberum expects full year revenue of GBP779.8 million, meaning GBP402.4 million should be generated in the second half of the year.
Liberum explained: "Altogether this implies a H1-H2 weighting of around 48%-52% for Dechra to hit our sales estimates for the full year, and thus drops through to around 48%-52% at the Ebit level.
It also expects full-year selling, general & administrative expenses of GBP192.2 million and research & development expenses of GBP58.5 million. In the first-half of financial 2023, SG&A expenses amounted to GBP102.5 million and R&D expenses amounted to GBP26.5 million.
"Investors should remain mindful of the anticipated H2 weighting to R&D and SG&A expenditure. This is broadly in line with pre-pandemic weightings," Liberum said.
It added: "The outlook reports from Dechra's Animal Health peers are mixed. We are seeing resilient performances in the companion animal market, particularly in the US and amongst innovative medicines, but softness in the food producing animal market."
By Sophie Rose, Alliance News reporter and Xindi Wei, Alliance News reporter
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