27th Feb 2007 07:01
Dechra Pharmaceuticals PLC27 February 2007 Issued by Citigate Dewe Rogerson Ltd, BirminghamDate: Tuesday, 27 February 2007 Embargoed: 7.00am Dechra Pharmaceuticals PLC Interim Results for the six months ended 31 December 2006 2006 2005 Revenue £125.9m £116.1m +8.5% Operating profit £6.5m £5.8m +12.0% Profit before taxation £5.9m £5.2m +14.2% Earnings per share - basic 7.84p 6.99p +12.2% - diluted 7.76p 6.86p +13.1% Interim dividend 2.50p 1.91p +30.9% Net borrowings £5.4m £10.2m Strong organic growth in revenue and pre-tax profit EU revenues beginning to materialise Further strategic progress with the product development programme Significant increase in dividend Commenting, Ian Page, Chief Executive, said: "The Group continues to make substantial progress across all its businesses." "The strong organic growth during the period has been enhanced by increasedsales and new launches of two of our key products, Vetoryl(R) and Felimazole(R),into Europe. Our strategic pharmaceutical development programme continues togain momentum; new products have been identified and licensing projects for keyinternational markets are progressing to expectations." FULL STATEMENT ATTACHED Enquiries:Ian Page, Chief Executive Fiona Tooley, DirectorSimon Evans, Group Finance Director Katie Dale, Senior Account ManagerDechra(R) Pharmaceuticals PLC Citigate Dewe RogersonToday: +44 (0) 20 7638 9571 (until 12.30pm) Today: +44 (0) 207 638 9571Mobile: +44 (0) 7775 642222 (IP) or Mobile: +44 (0) 7785 703523 (FMT)or +44 (0) 7775 642220 (SE) +44 (0) 7770 788 624 (KD)Thereafter: 01782 771100 Thereafter: 0121 455 8370www.dechra.com -2- Dechra Pharmaceuticals PLC Interim Results for the six months ended 31 December 2006 Introduction The Group continues to make substantial progress across all its businesses. Thisis demonstrated by increases in the period of 8.5% in revenue and 14.2% inpre-tax profit compared to the same period in the prior year. The strong organic growth during the period has been enhanced by increased salesand new launches of two of our key products, Vetoryl(R) and Felimazole(R), intoEurope. Our strategic pharmaceutical development programme continues to gainmomentum; new products have been identified and licensing projects for keyinternational markets are progressing to expectations. Further details areprovided later in this report. Financials In the six months ended 31 December 2006, Group revenue increased by 8.5% to£125.9 million (2005: £116.1 million), whilst operating profit was up by 12.0%to £6.5 million (2005: £5.8 million) and profit before taxation rose by 14.2% to£5.9 million (2005: £5.2 million). Basic earnings per share increased by 12.2% from 6.99 pence to 7.84 pence. The increase in revenue was driven by above market growth by National VeterinaryServices ("NVS") and a strong performance from Dechra Veterinary Products("DVP"). Group operating margin increased from 5.0% to 5.2% as a result of increasedmargins at NVS and a higher proportion of Group revenue from our own brandedpharmaceuticals through Dechra Veterinary Products. Research and development expenditure charged to the income statement was similarto last year at £636,000 (2005: £680,000) as were the costs of our USA operationat £170,000 (2005: £157,000). A further £657,000 of development expenditure wascapitalised, principally relating to Vetoryl(R) US. As normal, inventory levels were at a seasonally high level at the end of theperiod being reported and this caused a swing from a net cash position at 30June 2006 of £1.1 million to net borrowings of £5.4 million at 31 December 2006.However, this was significantly less than the net borrowings of £10.2 million atthe same point last year. The relatively high inventory levels will unwind inthe second half of the financial year. This is reflected in operating profitproviding strong interest cover at 10.9 times (2005: 9.2 times). Dividend In line with the Group's progressive dividend policy and confidence in thebusiness going forward, the Board is pleased to declare an interim dividend of2.50 pence per share (2005: 1.91 pence), a significant increase of 30.9%. Atthis level, the interim dividend remains covered 3.1 times by profit aftertaxation (2005: 3.6 times). The dividend is payable on 10 April 2007 to shareholders whose names are on theRegister of Members at close of business on 9 March 2007. continued... -3- Review Pharmaceuticals DivisionOur own branded licensed products have performed well within Europe and havealso achieved good growth within the UK. DVP remains the fastest growing UKveterinary pharmaceutical company; the key brands, Vetoryl(R) and Felimazole(R)grew in the UK in excess of 30%, Vetivex(R) increased by 16% and Equipalazone(R), our long-established equine product, grew by 3% despite competing with anew entrant within the sector. Global revenue of Vetoryl(R) increased by 62% to£2.0 million (including £535,000 within the European Union) and Felimazole(R) by35% to £1.5 million (including £138,000 within the European Union). The focus at Dales, our manufacturing business, has continued to be onefficiency and implementation of new quality systems. Production for a new £1.0million contract announced at the end of our last financial year has beenvalidated and initial sales commenced in November. Full-scale production shouldensure a strong second half performance. Services DivisionOur wholesaling and distribution business, NVS, has produced a strong first halfperformance and retained its leading market position. To enhance support for thegrowth of this business, additional sales personnel have been employed toprovide improved regional coverage. An investment of over £700,000 was made towards the end of the last financialyear in additional automation and capacity within the centralised warehouse.This is now fully commissioned and has improved productivity and overalloperational efficiency. The Group's Laboratory businesses are continuing to increase market share. Toaccelerate this growth the Company has established a new satellite laboratory inSwanscombe. This presence in Southern England has increased opportunities forgrowth, which has been demonstrated by a number of new account wins securedprior to the period end. Product Development The benefits of the Group's product development programme are beginning to berealised with increased penetration of our products within the EU. We havecontinued to progress this important strategy in the following ways: •Intellectual Property Acquisition Prior to the half year end, we announced that we had acquired the intellectualproperty for Equidone(R), an equine product, which is at an advanced stage ofdevelopment for the US market. The use of the active ingredient, Domperidone, has been co-developed by Equi-Toxand Clemson University, based in South Carolina, USA for the prevention ofFescue Toxicity, a disease which is caused by eating a fungus which infects tallfescue grass. The most serious clinical signs are observed in the late stages ofpregnancy and the toxicity can result in foal death. Equidone(R) is already patented and under limited distribution in the US under aspecial license. The market for equine fescue toxicity is estimated to beapproximately US$2 million per annum. Other patents for Equidone use have alsobeen approved; exploration into these indications, which have substantiallylarger markets, will be undertaken shortly. •US Clinical Trials All the dogs required for efficacy trials for Vetoryl(R) have now beenrecruited. The manufacturing and safety dossiers have been submitted to the FDA.The Board remains confident that the product will be launched in line with ourplanned programme. continued... -4- Recruitment for the Felimazole(R) trial continues, approximately three quartersof the required cats are now enrolled. The safety section has been submitted andthe manufacturing dossier is close to completion. As with Vetoryl(R), weanticipate to complete the submission in 2007 to facilitate launch into the USmarket, to target, in 2008. •Generic Products The Group has secured the UK marketing rights for four new generic products forthe equine and small animal market sectors. Following submission and regulatoryapproval, the Board expects the first of these products to be launched withinthis financial year, with the others anticipated to be licensed by the end ofthe calendar year. •Pipeline We continue to identify opportunities to bring new products into our portfolioto add to the novel and generic products we currently have under development. Outlook All businesses across the Group continue to trade and progress in line withmanagement expectations. Growth is now also being realised from the historicalinvestment in product development; furthermore projects initiated over the lastfew years will ensure continued growth for many years. We therefore look forwardto the future with confidence. Michael Redmond Ian PageNon-Executive Chairman Chief Executive -5- Consolidated Income Statement for the six months ended 31 December 2006 Six months ended Year ended 31.12.06 31.12.05 30.06.06 Note £'000 £'000 £'000 Revenue 2 125,908 116,088 232,471 Cost of sales (108,279) (100,015) (199,205) --------------------------------Gross profit 17,629 16,073 33,266 Operating expenses (11,125) (10,264) (20,954) --------------------------------Operating profit 2 6,504 5,809 12,312 Finance income 3 437 378 725 Finance expense 4 (1,032) (1,012) (1,993) --------------------------------Profit before taxation 5,909 5,175 11,044 Income tax expense 5 (1,809) (1,595) (3,487) -------------------------------- Profit for the period attributable toequity holders of the parent 4,100 3,580 7,557 ================================Earnings per share (pence) Basic 7 7.84p 6.99p 14.71p ================================ Diluted 7 7.76p 6.86p 14.36p ================================ Dividend per share (declared/paid andproposed) 6 2.50p 1.91p 6.24p ================================ -6- Consolidated Balance Sheet At 31 December 2006 As at As at As at 31.12.06 31.12.05 30.06.06 £'000 £'000 £'000 ASSETSNon-Current AssetsIntangible assets- goodwill 4,385 4,385 4,385- software 1,015 226 626- development costs 1,281 536 645- other intangibles 1,868 1,880 1,871Property, plant & equipment 5,646 5,431 5,595Deferred tax assets - 540 445 ---------------------------------Total non-current assets 14,195 12,998 13,567 =================================Current AssetsInventories 27,777 27,616 21,957Trade and other receivables 33,097 32,656 35,347Cash and cash equivalents 12,176 7,893 19,738 ---------------------------------Total current assets 73,050 68,165 77,042 =================================Total assets 87,245 81,163 90,609 ================================= LIABILITIESCurrent LiabilitiesBorrowings (4,006) (2,315) (3,417)Trade and other payables (41,226) (40,367) (45,530)Current tax liabilities (2,096) (2,535) (2,505) ---------------------------------Total current liabilities (47,328) (45,217) (51,452) ================================= Non-Current LiabilitiesBorrowings (13,571) (15,819) (15,242)Deferred tax liabilities (86) - - ---------------------------------Total non-current liabilities (13,657) (15,819) (15,242) =================================Total liabilities (60,985) (61,036) (66,694) =================================Net assets 26,260 20,127 23,915 =================================EQUITYIssued share capital 526 515 519Share premium account 27,865 27,417 27,693Hedging reserve (71) (71) (71)Merger reserve 1,720 1,720 1,720Retained earnings (3,780) (9,454) (5,946) ---------------------------------Total equity attributable to equity holdersof the parent 26,260 20,127 23,915 ================================= -7- Consolidated Statement of Changes in Shareholders' Equity for the six months ended 31 December 2006 Issued Share Hedging Merger Retained Total Share Premium Reserve Reserve Earnings Capital Account £'000 £'000 £'000 £'000 £'000 £'000 Six months ended 31 December 2005 At 1 July 2005 aspreviously stated 511 26,953 - 1,720 (11,582) 17,602 Impact of adoptionof IAS32 and IAS39 on 1 July 2005 - - (71) - - (71) ------------------------------------------------------At 1 July 2005 -re-stated 511 26,953 (71) 1,720 (11,582) 17,531 Profit for theperiod being total recognised incomeand expense for theperiod - - - - 3,580 3,580 Dividends paid - - - - (1,794) (1,794) Share-based paymentsincluding currentand deferred taxtaken directly toequity - - - - 342 342 Shares issued 4 464 - - - 468 ---------------------------------------------------------At 31 December 2005 515 27,417 (71) 1,720 (9,454) 20,127 ========================================================= Year ended 30 June 2006 At 1 July 2005 aspreviously stated 511 26,953 - 1,720 (11,582) 17,602 Impact of adoptionof IAS32 and IAS39 on 1 July 2005 - - (71) - - (71) ----------------------------------------------------------At 1 July 2005 -re-stated 511 26,953 (71) 1,720 (11,582) 17,531 Profit for theperiod being total recognised incomeand expense for theperiod - - - - 7,557 7,557 Dividends paid - - - - (2,777) (2,777) Share-based paymentsincluding currentand deferred taxtaken directly toequity - - - - 856 856 Shares issued 8 740 - - - 748 ----------------------------------------------------------At 30 June 2006 519 27,693 (71) 1,720 (5,946) 23,915 ========================================================== Six months ended 31 December 2006 At 1 July 2006 519 27,693 (71) 1,720 (5,946) 23,915 Profit for theperiod being total recognised incomeand expense for theperiod - - - - 4,100 4,100 Dividends paid - - - - (2,278) (2,278) Share-based paymentsincluding currentand deferred taxtaken directly toequity - - - - 344 344 Shares issued 7 172 - - - 179 ----------------------------------------------------------At 31 December 2006 526 27,865 (71) 1,720 (3,780) 26,260 ========================================================== -8- Consolidated Statement of Cash Flows for the six months ended 31 December 2006 Six months ended Year ended Note 31.12.06 31.12.05 30.06.06 £'000 £'000 £'000 Cash flows from operating activities Profit for the period 4,100 3,580 7,557 Adjustments for:Depreciation 477 431 886 Amortisation 49 68 136 Gain on sale of property, plant andequipment (6) (10) (23) Finance income (437) (378) (725) Finance expense 1,032 1,012 1,993 Equity-settled share-based paymentexpenses 225 199 427 Income tax expense 1,809 1,595 3,487 ------------------------------ 7,249 6,497 13,738 Increase in inventories (5,820) (7,226) (1,567) Decrease/(increase) in trade and otherreceivables 2,522 970 (1,736) (Decrease)/increase in trade and otherpayables (4,510) (1,711) 3,562 ------------------------------Cash flow from operating activitiesbefore interest and taxation (559) (1,470) 13,997 Interest paid (1,037) (967) (1,890) Income taxes paid (1,568) (1,078) (2,618) ------------------------------ Net cash from operating activities (3,164) (3,515) 9,489 Cash flows from investing activities Proceeds from sale of property, plantand equipment 6 10 23 Interest received 444 334 672 Purchase of property, plant andequipment (293) (821) (1,320) Capitalised development expenditure (492) (56) (195) Purchase of other intangiblenon-current assets (258) - - ------------------------------ Net cash from investing activities (593) (533) (820) Cash flows from financing activities Proceeds from the issue of sharecapital 179 500 780 New borrowings 13 66 705 Repayment of borrowings (1,700) (755) (1,582) Dividends paid (2,278) (1,794) (2,777) ----------------------------- Net cash from financing activities (3,786) (1,983) (2,874) Net (decrease)/increase in cash andcash equivalents (7,543) (6,031) 5,795 Cash and cash equivalents at start ofperiod 19,719 13,924 13,924 ------------------------------Cash and cash equivalents at end ofperiod 12,176 7,893 19,719 ==============================Shown as: Cash and cash equivalents 12,176 7,893 19,738 Bank overdraft - - (19) ------------------------------ 12,176 7,893 19,719 ============================== Reconciliation of net cash to movementin net cash/(borrowings) Net (decrease)/increase in cash andcash equivalents (7,543) (6,031) 5,795 Repayment of borrowings 1,700 755 1,582 New borrowings (13) (66) (705) New finance leases (631) - (649) Other non-cash changes 7 (40) (85) ------------------------------Movement in net cash/(borrowings) inthe period (6,480) (5,382) 5,938 Net cash/(borrowings) at start ofperiod 1,079 (4,859) (4,859) ------------------------------ Net (borrowings)/cash at end of period 8 (5,401) (10,241) 1,079 ============================== -9- Notes to the Financial Statements For the six months ended 31 December 2006 1. Basis of PreparationThis interim financial information has been prepared applying the accountingpolicies and presentation that were applied in the preparation of the Company'spublished consolidated financial statements for the year ended 30 June 2006. Theprior-year comparatives are derived from audited financial information forDechra Pharmaceuticals PLC as set out in the Annual Report for the year ended 30June 2006 and the unaudited financial information in the interim financialstatements for the six months ended 31 December 2005. These consolidated interimfinancial statements have been prepared under the historical cost convention,except in respect to certain financial instruments. The consolidated accounts incorporate the accounts of the Company and of each ofits subsidiaries for the period to 31 December 2006. The consolidated interim financial statements for the six months ended 31December 2006 are unaudited but have been reviewed by the auditors. Theindependent review report is set out on page 12. The consolidated interimfinancial statements for the six months ended 31 December 2006 were approved bythe Directors on 27 February 2007. The comparative figures for the financial year ended 30 June 2006 are not theCompany's statutory accounts for that financial year. Those accounts have beenreported on by the Company's auditors and delivered to the Registrar ofCompanies. The report of the auditors was (i) unqualified, (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and (iii) did not contain a statementunder Section 237(2) or (3) of the Companies Act 1985. continued... -10- The Group's primary reporting segment is business divisions which correspondwith the way the operating businesses are organised and managed within theGroup. The following table analyses revenue and operating profit accordingly: Six months ended Year ended 31.12.06 31.12.05 30.06.06 £'000 £'000 £'000Business SegmentRevenuePharmaceuticals 11,983 11,179 23,252Services 117,436 108,101 215,556Inter division (3,511) (3,192) (6,337) ---------------------------------------------------- 125,908 116,088 232,471 ====================================================Operating ProfitPharmaceuticals 2,600 2,047 4,868Services 4,738 4,275 8,681Central costs (834) (513) (1,237) ---------------------------------------------------- 6,504 5,809 12,312 ==================================================== 3. Finance Income Six months ended Year ended 31.12.06 31.12.05 30.06.06 £'000 £'000 £'000 Bank interest receivable 432 318 627Other interest receivable 5 36 52Fair value gains on derivative financialinstruments - 24 46 ------------------------------------ 437 378 725 ==================================== 4. Finance Expense Six months ended Year ended 31.12.06 31.12.05 30.06.06 £'000 £'000 £'000 Bank loans and overdrafts 909 981 1,913Finance charges payable on finance leases and 92 19 64hire purchase contractsFair value losses on derivative financialinstruments 31 12 16 --------------------------------- 1,032 1,012 1,993 ================================= 5. Income Tax ExpenseThe tax charge for the six months ended 31 December 2006 has been based on theestimated effective rate for the year ending 30 June 2007 of 30.6% (six monthsended 31 December 2005: 30.8%). All taxation is in the United Kingdom. 6. DividendsThe Directors have declared an interim dividend of 2.50p per share (2005: 1.91p)costing £1,316,000 (2005: £983,000). It is payable on 10 April 2007 toshareholders whose names are on the Register of Members at close of business on9 March 2007. The ordinary shares will become ex-dividend on 7 March 2007. continued... -11- As the dividend was declared after the end of the period being reported and inaccordance with IAS10 'Events After the Balance Sheet Date', the interimdividend has not been accrued for in these financial statements. It will beshown as a deduction from equity in the financial statements for the year ending30 June 2007. 7. Earnings per ShareEarnings per ordinary share have been calculated by dividing the profitattributable to equity holders of the parent after taxation for each financialperiod by the weighted average number of ordinary shares in issue during theperiod. Six months ended Year ended 31.12.06 31.12.05 30.06.05 Pence Pence Pence Basic earnings per share 7.84 6.99 14.71 ===================================Diluted earnings per share 7.76 6.86 14.36 =================================== The calculation of basic and dilutedearnings per share is based upon: £'000 £'000 £'000Earnings for basic and diluted earningsper share calculations 4,100 3,580 7,557 =================================== No. No. No.Weighted average number of ordinaryshares for basic earnings 52,275,152 51,229,294 51,385,648per share Impact of share options 579,890 938,907 1,227,342 ----------------------------------- Weighted average number of ordinaryshares for diluted earnings 52,855,042 52,168,201 52,612,990per share =================================== 8. Analysis of Net (Borrowings)/Cash As at As at As at 31.12.06 31.12.05 30.06.06 £'000 £'000 £'000 Bank loans and overdraft (15,601) (17,750) (17,114)Finance leases and hire purchase contracts (1,976) (384) (1,545)Cash and cash equivalents 12,176 7,893 19,738 ----------------------------------- (5,401) (10,241) 1,079 =================================== -12- Independent review report to Dechra Pharmaceuticals PLC IntroductionWe have been instructed by the Company to review the financial information forthe six months ended 31 December 2006, which comprises the Consolidated IncomeStatement, the Consolidated Balance Sheet, the Consolidated Statement of Changesin Shareholders' Equity, the Consolidated Statement of Cash Flows and therelated notes. 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 that the Company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilities The 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 of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We 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 excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On 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 2006. KPMG Audit PlcChartered AccountantsBirmingham27 February 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
DPH.L