1st Mar 2005 07:00
Dechra Pharmaceuticals PLC01 March 2005 Issued by Citigate Dewe Rogerson, BirminghamDate: Tuesday, 1 March 2005 Embargoed 7.00am Dechra Pharmaceuticals PLC Interim Results for the six months ended 31 December 2004 Manufacturers, distributors and marketers of pharmaceuticals, veterinary equipment and related goods and services 2004 2003 Turnover £103.3m £92.4m +12% Operating profit (pre-goodwill amortisation &exceptional items) £5.4m £4.4m +23% Operating margin (pre-goodwill amortisation &exceptional items) 5.3% 4.8% Pre-tax profit £4.4m £3.5m +24% Pre-tax profit (pre-goodwill amortisation &exceptional items) £4.6m £3.8m +22% Earnings per Share 5.78p 4.65p +24% Adjusted Earnings per Share (pre-goodwillamortisation & exceptional items) 6.34p 5.20p +22% Interim dividend 1.70p 1.55p +10% Pharmaceuticals Division Sales from own veterinary pharma portfolio increased 18% to £5.2 million Pharmaceutical manufacturing traded strongly - sales up 24% Services Division Strong first half performance in buoyant market conditions - revenues up 12% NVS market share improved to 42.5% Significant development within our pharma portfolio both in the UK and USA "Both our Pharmaceuticals and Services Divisions have shown good growth in thefirst half reflecting improved market conditions, increased market share andfurther penetration within the veterinary markets. "It is pleasing to report that we have achieved a number of strategic objectivesand have also identified additional opportunities that will positively benefitthe Group in the future." Ian Page, Chief Executive FULL STATEMENT ATTACHED Enquiries: Ian Page, Chief ExecutiveSimon Evans, Group Finance DirectorDechra Pharmaceuticals PLC Fiona Tooley/Katie DaleToday: 020 7797 3817 (8.00am to 12.30pm) Citigate Dewe Rogerson07775 642222 (IP) Today: 0207 797 3817 (8.00am to 12.30pm)07775 642220 (SE) Mobile: 07785 703523Thereafter: 01782 771100 Thereafter: 0121 455 8370www.dechra.com Meetings to be held at (morning only): The Media & Business Complex London Stock Exchange 10 Paternoster Square London EC4M 7LS 9.30am - Analysts Meeting 10.45am - Press Briefing -2- Dechra Pharmaceuticals PLC Interim Results for the six months ended 31 December 2004 IntroductionBoth our Pharmaceuticals and Services Divisions have shown good growth in thefirst half reflecting improved market conditions, increased market share andfurther penetration within the veterinary markets. You will be aware of the Group's focus to develop and extend its own brandedlicensed veterinary product portfolio within North America, Europe and Japan. Itis pleasing to report therefore that we have achieved a number of strategicobjectives and have also identified additional opportunities that willpositively benefit the Group in the future. Financial HighlightsOperating profit (pre-goodwill amortisation and exceptional items) rose 23% to£5.4 million (2003: £4.4 million), on turnover of £103.3 million, up 12% (2003:£92.4 million). Pre-tax profit (pre-goodwill amortisation and exceptional items)rose 22% to £4.6 million (2003: £3.8 million). Adjusted earnings per share onthe same basis also increased 22% to 6.34 pence (2003: 5.20 pence). Interest cover remains strong at 7.0 times operating profit (pre-goodwillamortisation and exceptional items). As we reported in our trading update in January, Group operating margins beforegoodwill amortisation have improved from 4.8% to 5.3% for the same period lastyear. Net debt at 31 December 2004 stood at £13.2 million compared to £17.3 million atthe same point last year. As expected, net debt has risen from the year endposition at 30 June 2004, reflecting the normal working capital cycle of theGroup. DividendThe Board considers that the Group will benefit from retaining cash to supportits accelerating product development programme, whilst at the same timerewarding shareholders. Therefore the Board is declaring an interim dividend of1.70 pence (2003: 1.55 pence), an increase of 10%. The interim dividend will bepaid on 7 April 2005 to shareholders on the Register as at 11 March 2005. Thisdividend is covered 3.7 times by earnings before goodwill amortisation andexceptional items. ReviewPharmaceutical DivisionThis division comprises Arnolds Veterinary Products ("Arnolds"), DechraVeterinary Products ("DVP"), and Dales Pharmaceuticals ("Dales"). Sales & MarketingTrading within the Arnolds business has been encouraging with overall turnoverup 11%. Sales from our own veterinary pharmaceutical portfolio increased 18% to£5.2 million, of which £1.7 million relates to our own developed productsFelimazole(R) and Vetoryl(R). The instruments & consumables business performed in-line with our expectationswith sales now recovering following the slowdown seen over the last two years.Although sales continue to be influenced by both competitive pressures and greyimports, the restructured management team (reported last year) have made apositive impact. Arnolds has been considerably strengthened with the recruitment of a newmarketing manager and a new sales manager who has several years' experiencewithin the veterinary market. We now have the right mix of experience and skillsto maximise the opportunities created by our development programme. continued... -3- We are continuing to research the US market as we develop the sales andmarketing logistics of our US operation, DVP. We will be making our second keyappointment imminently with the recruitment of a sales and marketing manager. Weare due to make our first product launch prior to the end of this financial year(see Belcher Pharmaceuticals agreement later in this statement). Pharmaceutical ManufacturingOur manufacturing company, Dales, traded very strongly in the first half withsales up 24% compared to 2003. This considerable improvement reflects an upwardtrend in productivity with sales to both Arnolds and to third party customersincreased. Operationally, we have added an additional 18,000 sq ft warehouse to ourfacility in Skipton. This has allowed us to further improve our overallefficiency through a number of initiatives including a reduction in off-sitestorage. In October 2004 we successfully introduced a new shift system whichtargeted increased production on high capacity lines. Services DivisionThis division comprises National Veterinary Services ("NVS"), Vetcom Systems("Vetcom"), NationWide Laboratories ("NWL") and Cambridge Specialist LaboratoryServices ("CSLS"). DistributionNVS had a strong first half performance in buoyant market conditions which wasreflected in the 12% increase in revenues over the same period last year. Although the market has remained price competitive the management team has beensuccessful in increasing NVS's margin. This has been achieved through acombination of better purchasing, an improved product mix, new services and thesuccess of the Group's own branded 'Valu' range introduced last year. NVS alsoimproved its market share to 42.5%. NVS Indices (which analyses key data to indicate the profitability of aveterinary practice), and Alternative Analysis tool (which analyses practicespend) continue to add-value to our services and assist in differentiating usfrom our competitors. Recently, we launched our own range of consumer pet care products branded 'VetRemedy' which will be retailed to pet owners through veterinary practices. Thisrange provides an opportunity to further penetrate the waiting room salesmarket. Towards the end of the last financial year, we divided our Swanley depot intotwo new locations. This has resulted in an improved service, with earlier moreregular deliveries to our customer base in the South East. Additionally weestablished a stronger presence in Scotland, by introducing a dedicated serviceteam located in offices within a new trunking depot in Hamilton which hasincreased our penetration of the Scottish market. We expect to see furtherpractice gains from this operation over the coming months. Vetcom SystemsThe Group remains focused on providing its customers with the latest technologyto ensure that our veterinary practice clients are able to operate aprogressive, efficient and cost-effective practice. To further strengthen our position, the Group has established a joint venturepartnership with Cam-Dal Computing. This will provide Vetcom Systems, Dechra'sI.T. division, with its next generation cost-effective, multi-user, on-lineveterinary practice management system, Vetcom Open. This "state-of-the-art" software system, which will be launched in April of thisyear, has significantly improved functionality over current veterinary practicemanagement systems. It will also allow NVS to offer additional services to itsveterinary customers. This next generation technology developed by Cam-Dal overseveral years is already established in a number of veterinary practicesnationwide, including major large animal sites, 24-hour emergency clinics andmulti-site small animal groups. Feedback from the end-users has beenexceptionally positive. We are confident that Vetcom Open can further increaseNVS's market penetration of veterinary practice management systems. continued... -4- Laboratory ServicesNWL has experienced a period of consolidation following the retirement of theprevious owners who were also part of the senior management team. A newmanagement team is now establishing itself and is in the process of improvingexisting services and providing new services to differentiate them from thecompetition. Additionally, two new agreements have been signed that will offerNWL new services to be launched prior to the financial year end. CSLS continues to increase its volume sales in specialist veterinary endocrinehormone assays. Product DevelopmentWithin the period the Group continued to expand its licensed veterinary productportfolio. The Group gained a full EU licence for Felimazole(R) through the mutualrecognition procedure. Felimazole(R) was launched in October 2004 by ourmarketing partner Janssen Animal Health, in the key European territories ofFrance and Germany. Other territories will be coming on stream during 2005. Weremain encouraged by the potential in the product. Towards the end of 2004, the Group received authorisation in the UK from theVeterinary Medicines Directorate ("VMD") for its Felimazole(R) and Vetoryl(R)range extensions. A 30mg Vetoryl(R) capsule, targeted specifically at small dogsand a 2.5mg Felimazole(R) tablet for cats have been added to our licensedveterinary portfolio. These significant line extensions offer an improved safetyprofile without compromising efficacy whilst also giving the veterinary surgeonmore flexible dosing options. The Group continues to make very satisfactory progress in the USA, with ourprojects to license Vetoryl(R) and Felimazole(R) both continuing to remain ontrack. In February we submitted the safety section of the Vetoryl(R) dossier andanticipate completing the efficacy section by the end of March. A meeting hasbeen organised tomorrow (2nd March) with the United States Food and DrugAdministration ("FDA") to review the suitability of the Felimazole(R) dossierfor the US Market. The progression of both these products will, as expected,lead to an increase in investment in product development in the second half ofthe current financial year. Post-period end developmentsIn line with our objectives to build our own pharmaceutical portfolio both inthe UK and internationally, it is very pleasing to report that, since January,we have achieved a number of major milestones with our veterinary productdevelopment programme. The Group has already released information via theRegulatory News Service ('RNS') of the London Stock Exchange. In summary: We are about to launch our first significant licensed branded generic productfor dogs which will be the first generic entrant to be launched in a UK marketworth approximately £1.9 million. Our Regulatory Team has been granted a UK marketing authorisation for Ovuplant(R) whose chemical entity is the intellectual property of the Australianbio-technology company, Peptech Animal Health. Ovuplant(R) is acontrolled-release, synthetic hormone that stimulates ovulation in brood maresand it is used widely by horse breeders in a number of worldwide markets. TheMutual Recognition process has also commenced to licence Ovuplant(R) in Europe(EU). The Group has also added two new marketing agreements: Firstly, with Vetoquinol, Canada. This partnership, which will run for aninitial period of 5 years, allows Vetoquinol the marketing and distributionrights to our own developed products Felimazole(R) and Vetoryl(R). The Groupwill retain all Intellectual Property Rights to both products which will bemanufactured for the Canadian market at Dales. continued... -5- Secondly, with Belcher Pharmaceuticals, Inc. ("Belcher"), a wholly ownedsubsidiary of GeoPharma, Inc., based in Largo, Florida, USA. This agreement, forwhich we have paid a license fee of US$0.5 million, gives Dechra exclusiveworldwide sales and marketing rights for Belcher's levothyroxine liquid andtablets, used to control hypothyroidism in dogs. This product range allows us toestablish Dechra Veterinary Products in the American veterinary endocrine marketahead of the registration of our own key products, Vetoryl(R) and Felimazole(R). ProspectsAll areas of the business are performing well. The Directors are confident thatwith the developments outlined in this statement good progress will continue tobe made. Michael Redmond Ian PageNon-Executive Chairman Chief Executive -6- Dechra Pharmaceuticals PLC Interim Results CONSOLIDATED PROFIT & LOSS ACCOUNT Note Six Months Ended Year Ended 31.12.2004 31.12.2003 30.6.2004 £'000 £'000 £'000 Turnover 103,263 92,412 186,843 Cost of sales (89,023) (80,080) (161,422) ----------------------------------Gross profit 14,240 12,332 25,421 Other operating expenses (9,097) (8,194) (16,928) ----------------------------------Operating profit 5,143 4,138 8,493--------------------------------------------------------------------------------Operating profit before exceptionalitems and 5,425 4,419 9,184goodwill amortisation Exceptional items 1 - - (130) Goodwill amortisation (282) (281) (561) ----------------------------------Operating profit 5,143 4,138 8,493--------------------------------------------------------------------------------Net interest payable (776) (611) (1,124) ----------------------------------Profit on ordinary activitiesbefore 4,367 3,527 7,369taxation--------------------------------------------------------------------------------Profit on ordinary activitiesbefore 4,649 3,808 8,060taxation,exceptional items and goodwillamortisation Exceptional items - - (130)Goodwill amortisation (282) (281) (561) ----------------------------------Profit on ordinary activitiesbefore 4,367 3,527 7,369taxation--------------------------------------------------------------------------------Tax on profit on ordinary 2 (1,418) (1,159) (2,288)activities ---------------------------------- Profit on ordinary activities aftertaxation 2,949 2,368 5,081 Dividend 3 (867) (790) (2,396) ----------------------------------Retained profit for the period 2,082 1,578 2,685 ==================================Earnings per ordinary share- Basic 4 5.78p 4.65p 9.97p ==================================- Adjusted 4 6.34p 5.20p 11.28p ==================================Diluted- Basic 4 5.69p 4.58p 9.83p ==================================- Adjusted 4 6.23p 5.12p 11.12p ================================== -7- Dechra Pharmaceuticals PLC Interim Results CONSOLIDATED BALANCE SHEET (Summary) Note As at As at 31.12.2004 31.12.2003 30.6.2004 £'000 £'000 £'000 Fixed assets Intangible fixed assets 4,892 5,454 5,174 Tangible fixed assets 5,276 5,382 5,224 ---------------------------------- 10,168 10,836 10,398Current assets Stocks 24,394 26,040 16,979 Debtors 31,466 28,970 32,889 Cash at bank and in hand 6,224 - - ---------------------------------- 62,084 55,010 49,868Creditors: amounts falling duewithin one year Bank loans and overdraft (1,400) (11,489) (5,278) Other creditors (40,492) (39,589) (39,894) ---------------------------------- (41,892) (51,078) (45,172) ----------------------------------Net current assets 20,192 3,932 4,696 ----------------------------------Total assets less current 30,360 14,768 15,094liabilities Creditors: amounts falling dueafter (17,903) (5,719) (4,763)more than one year Provisions for liabilities andcharges- deferred tax (174) - (174) ----------------------------------Net assets 12,283 9,049 10,157 ==================================Capital and reserves Called-up share capital 510 510 510 Share premium account 26,828 26,783 26,784 Merger reserve 1,720 1,720 1,720 Profit and loss account (16,775) (19,964) (18,857) ----------------------------------Equity shareholders' funds 5 12,283 9,049 10,157 ================================== -8- Dechra Pharmaceuticals PLC Interim Results CONSOLIDATED CASH FLOW STATEMENT (Summary) Note Six Months Ended Year Ended 31.12.2004 31.12.2003 30.6.2004 £'000 £'000 £'000 Net cash flow from operatingactivities 6 724 688 10,576 Returns on investments andservicing (940) (563) (1,012)of finance Taxation (909) (699) (1,864) Capital expenditure and financialinvestment (153) (304) (546) Equity dividends paid (1,606) (1,402) (2,192) -----------------------------------Cash (outflow)/inflow beforefinancing (2,884) (2,280) 4,962 Financing: Shares issued 40 - 1 Term loans raised 13,160 - - Term loans repaid (700) (977) (1,954) Loan stock repaid - (500) (500) Capital element of finance leasepayments (68) (80) (135) ----------------------------------- 12,432 (1,557) (2,588) -----------------------------------Increase/(decrease) in cash in theperiod 9,548 (3,837) 2,374 =================================== Reconciliation of net cash flow to movement in net debt Six Months Ended Year Ended 31.12.2004 31.12.2003 30.6.2004 £'000 £'000 £'000 Increase/(decrease) in cash in theperiod 9,548 (3,837) 2,374 Cash flow from change in debt andlease (12,392) 1,557 2,589financing ------------------------------------Change in net debt arising from cashflows (2,844) (2,280) 4,963 New finance leases (346) - (11) Other non-cash changes 115 (40) (74) ------------------------------------Movement in net debt in period (3,075) (2,320) 4,878 Net debt at start of period (10,110) (14,988) (14,988) ------------------------------------Net debt at end of period 7 (13,185) (17,308) (10,110) ==================================== -9- Dechra Pharmaceuticals PLC Interim Results NOTES 1. Exceptional ItemsReorganisation costs of £130,000 were incurred in the year ended 30 June 2004which related to restructuring the Group's trading operations into a singlestatutory entity. 2. TaxationThe tax charge reflects the full year's estimated effective rate on the Group'sprofit before tax of 32.5% (2003: 32.9%). 3. DividendAn interim dividend of 1.70p per share (2003: 1.55p) costing £867,000 (2003:£790,000) has been declared. It is payable on 7 April 2005 to shareholders whosenames are on the Register of Members at close of business on 11 March 2005. Theordinary shares will become ex-dividend on 9 March 2005. 4. Earnings Per ShareEarnings per ordinary share has been calculated by dividing the profit onordinary activities after taxation for each financial period by the weightedaverage number of ordinary shares in issue during the period. In order to exclude the effect of the exceptional items and goodwillamortisation on the results of the Group, adjusted earnings per ordinary sharehave been based on the profit on ordinary activities after taxation for eachfinancial period but excluding exceptional items and goodwill amortisation. continued... -10- Six months ended Year ended 31.12.2004 31.12.2003 30.06.2004 Pence Pence PenceBasic earnings per share afterexceptional items and 5.78 4.65 9.97goodwill amortisation Effect of exceptional items andgoodwill amortisation 0.56 0.55 1.31 ------------------------------------Adjusted earnings per share 6.34 5.20 11.28 ------------------------------------Diluted earnings per share afterexceptional items and 5.69 4.58 9.83goodwill amortisation Effect of exceptional items andgoodwill amortisation 0.54 0.54 1.29 ------------------------------------Adjusted diluted earnings per share 6.23 5.12 11.12 ------------------------------------The calculation of basic and dilutedearnings per share isbased upon: £'000 £'000 £'000Earnings for basic and diluted earningsper share 2,949 2,368 5,081calculations Exceptional items and goodwillamortisation (net of tax effect) 282 281 670 ------------------------------------Earnings for adjusted and adjusteddiluted earnings per 3,231 2,649 5,751share ------------------------------------ No. No. No.Weighted average number of ordinaryshares for basic and adjusted earningsper share 50,997,064 50,975,037 50,975,214 Impact of share options 832,674 781,140 725,830 ------------------------------------Weighted average number of ordinaryshares for diluted and adjusted dilutedearnings per share 51,829,738 51,756,177 51,701,044 ------------------------------------ 5. Reconciliation of movements in shareholders' funds: Six Months Ended Year Ended 31.12.2004 31.12.2003 30.6.2004 £'000 £'000 £'000 Profit for the financial period 2,949 2,368 5,081 Dividends (867) (790) (2,396) New shares issued 44 - 1 -------------------------------------Net addition to shareholders' funds 2,126 1,578 2,686 Opening shareholders' funds 10,157 7,471 7,471 -------------------------------------Closing shareholders' funds 12,283 9,049 10,157 ===================================== continued... -11- 6. Reconciliation of operating profit to operating cash flows: Six Months Ended Year Ended 31.12.2004 31.12.2003 30.6.2004 £'000 £'000 £'000 Operating profit 5,143 4,138 8,493 Depreciation and amortisation 771 773 1,549 (Profit)/loss on sale of tangible fixedassets (32) 8 4 (Increase)/decrease in stocks (7,415) (8,744) 317 Decrease/(increase) in debtors 1,427 (975) (4,901) Increase in creditors 830 5,488 5,114 -------------------------------------Net cash flow from operating activities 724 688 10,576 ===================================== 7. Analysis of net debt As at As at As at 31.12.2004 31.12.2003 30.06.2004 £'000 £'000 £'000 Bank loans and overdrafts 19,058 17,191 10,037 Finance leases and hire purchasecontracts 351 117 73 Cash at bank and in hand (6,224) - - ------------------------------------- 13,185 17,308 10,110 ------------------------------------- 8. Basis of preparationThe interim financial information has been prepared on the basis of theaccounting policies set out in the 2004 Annual Report and Accounts and wasapproved by the Board of Directors on 1 March 2005. The financial informationset out above does not constitute statutory accounts within the meaning of theCompanies Act 1985. Comparative figures for the year ended 30 June 2004 havebeen taken from the Group's audited statutory accounts, which have beendelivered to the Registrar of Companies and in which the Company's auditorsexpressed an unqualified opinion. The results for the six months to 31 December2004 are unaudited. They have been reviewed by the auditors KPMG Audit Plc. Thereview report is attached to these interim results. This statement of interim results will be sent to all shareholders. Copies willbe available for members of the public upon application to the Company Secretaryat Dechra House, Jamage Industrial Estate, Talke Pits, Stoke-on-Trent, ST7 1XW.Tel: 01782 771100. www.dechra.com -12- Independent review report by KPMG Audit Plc to Dechra Pharmaceuticals PLC IntroductionWe have been engaged by the company to review the financial information set outon pages 6 to 11 and we have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules which require that the accounting policies and presentation applied to theinterim figures should be consistent with those applied in preparing thepreceding annual accounts except where they are to be changed in the next annualaccounts in which case any changes, and the reasons for them, are to bedisclosed. Review work performedWe conducted our review in accordance with guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review is substantially lessin scope than an audit performed in accordance with Auditing Standards andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusionOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 December 2004. KPMG Audit PlcChartered AccountantsBirmingham1 March 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
DPH.L