Final Results
Dechra Pharmaceuticals PLC
03 September 2002
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Date: Tuesday, 3 September 2002 Embargoed: 7.00am
Dechra Pharmaceuticals PLC
Preliminary Results for the year ended 30 June 2002
• Turnover up 9% to £170 million
• Pre-tax profit up 30% to £7.6 million*
• 14% increase in earnings per share to 10.59p* +
• Dividend up 10%
• Significant achievements include:
• Introduction of two new veterinary licensed products
• completion of two acquisitions
• £2.8 million capital investment programme at Dales completed
* pre-exceptional and goodwill amortisation
+ after FRS19 re-statement
'Our core veterinary and third party contract manufacturing markets continue to
grow and offer opportunities that we can exploit. We will further expand our
licensed veterinary product portfolio through our own in-house development
capabilities whilst, at the same time, continuing to look for product
acquisition opportunities.
'The merger between Dales and Anglian is progressing well and the strengthened
management team is already starting to realise the exciting potential for this
business.
'North Western Laboratories ('NWL') and Cambridge Specialist Laboratory Services
('CSLS') have made encouraging progress since acquisition with results to date
in line with our pre-acquisition expectations
'Trading in the first two months of the new financial year is in line with our
expectations and we remain confident in the prospects for growth being realised
from our strategic development plans.'
Michael Redmond, Non-Executive Chairman
FULL STATEMENT ATTACHED
Enquiries: Fiona Tooley/Katie Dale
Ian Page, Chief Executive Citigate Dewe Rogerson
Simon Evans, Group Finance Director Tel: Today: 020 7282 8000
Dechra(R) Pharmaceuticals PLC Mobile: 07785 703523
Tel: Today: 020 7282 8000 (8am-12noon) Thereafter: 0121 455 8370
Mobile: 07775 642222 (IP) e-mail: fiona.tooley@citigatedr-bham.co.uk
Mobile: 07775 642220 (SE)
Thereafter: 01782 771100
www.dechra.com
-2-
Dechra Pharmaceuticals PLC
Preliminary Results
year ended 30 June 2002
STATEMENT BY THE NON-EXECUTIVE CHAIRMAN, MICHAEL REDMOND
Introduction
The Group has produced a good performance especially when considering the
outside influences which have clearly impacted on our business, in particular
the foot and mouth outbreak and the on-going decline in Agriculture.
Significant achievements include the introduction of two new veterinary licensed
products to our pharmaceutical portfolio and the completion of two acquisitions,
the first since our Stock Market Listing. We have also completed a £2.8 million
capital investment programme at Dales.
The two acquisitions were largely funded from the Group's own cash resources;
their contribution to this year's results is negligible as we completed these
transactions towards the end of the financial year. We expect both to be
earnings enhancing in the year ending 30 June 2003. Further details are provided
within the Chief Executive's Review.
Financial Highlights
Group turnover increased by 8.8% from £156 million to £170 million whilst
operating profit (pre-goodwill and exceptional items) improved from £8.23
million to £8.77 million. Pre-tax profit (pre-goodwill and exceptional items)
was £7.6 million (2001: £5.85 million), an increase of 29.9%. Earnings per
share, on the same basis, was 10.59 pence compared to 9.29 pence last year, an
increase of 14.0%.
Net debt at the year-end increased to £14.94 million and reflects the cash
consideration for the acquisitions and the costs of upgrading our pharmaceutical
manufacturing facilities.
Dividend
In light of these results and in line with the Group's progressive dividend
policy, the Board is recommending a final dividend of 2.75 pence (2001: 2.5p),
an increase of 10%. This, together with the interim dividend of 1.37 pence paid
in April 2002 gives a total for the year of 4.12 pence (2001:3.75 pence). The
total dividend is covered 2.4 times by profit after tax. If approved at the
Annual General Meeting on 16 October 2002, the final dividend will be paid to
shareholders on the Register as at 1 November 2002, on 27 November 2002.
People
In November 2001, Ian Page was appointed Chief Executive following the
resignation of Gary Evans. Prior to this he was Managing Director of NVS and
played a major role in establishing this division's leading position within its
marketplace. Martin Roach replaced Ian as Managing Director at NVS in January
this year. He has extensive experience within the distribution and veterinary
pharmaceuticals industries both in Europe and North America.
In January we also announced, with great sadness, the sudden death of Peter
Redfern who from 1997, as Chairman, guided the Group through the MBO to
flotation. Although he is missed, he has left with us a strong legacy upon which
we shall build further.
On behalf of the Board and shareholders I would like to welcome all the staff
who have joined the Group over the last 12 months. I also wish to place on
record our thanks to all our employees throughout our subsidiaries for their
hard work and dedication in delivering a good result in a challenging year which
has seen many achievements.
continued...
-3-
Prospects
Our core veterinary and third party contract manufacturing markets continue to
grow and offer opportunities that we can exploit. We will further expand our
licensed veterinary product portfolio through our own in-house development
capabilities whilst, at the same time, continuing to look for product
acquisition opportunities.
The merger between Dales and Anglian is progressing well and the strengthened
management team is already starting to realise the exciting potential for this
business.
North Western Laboratories ('NWL') and Cambridge Specialist Laboratory Services
('CSLS') have made encouraging progress since acquisition with results to date
in line with our pre-acquisition expectations.
Trading in the first two months of the new financial year is in line with our
expectations and we remain confident in the prospects for growth being realised
from our strategic development plans.
3 September 2002
-4-
Dechra Pharmaceuticals PLC
Preliminary Results
year ended 30 June 2002
REVIEW BY THE CHIEF EXECUTIVE, IAN PAGE
Introduction
In my first year as Chief Executive, I am delighted to report that Dechra has
made significant developments in taking forward and delivering our strategy for
growth.
The Competition Commission Inquiry
The Competition Commission's Review relating to the supply and dispensing of
Prescription-Only Veterinary Medicines ('POMs') continues.
On April 16, following an initial consultation period, an interim 'issues'
statement was released by the Commission which appeared on the Regulatory News
Service.
A 'Proposed Remedies' paper is anticipated to be released shortly which is
expected to be followed up by a further Consultation period, with the resultant
findings being published in early 2003.
The Company continues to co-operate fully with the inquiry and we will update
shareholders when any new relevant information is available.
Strategy development
Returning to our strategy, I would like to outline the progress achieved during
the year.
• The development of our veterinary pharmaceutical portfolio
We have successfully licensed and marketed two new veterinary prescription-only
medicines - Vetoryl(R) and Felimazole(R), both of which are projected to make a
significant contribution to revenues during the new financial year.
Product opportunities remain key to the Group's strategy as they offer
significantly higher margin returns across the Group.
Whilst our current pipeline will deliver satisfactory returns in the short and
medium term, we are now accelerating its development to drive longer-term growth
prospects.
We are continuing to identify niche opportunities and additionally are
developing high-value branded generics. We also have alliances with UK and
international pharmaceutical companies to develop products for the veterinary
markets worldwide.
• Increased Export Opportunities
Sales of our licensed pharmaceuticals will be significantly increased by
licensing products in overseas markets. Mainland Europe offers short to medium
term opportunities and we currently have a number of licensing dossiers under
preparation for submission through the 'mutual recognition' system.
Dales, our manufacturing division, has started the procedure to gain Federal
Drug Administration ('FDA') approval as we recognise the marketing opportunities
for niche products in North America. Whilst there will be no short-term revenue
benefits, this is an important step to achieve our long-term growth potential.
continued...
-5-
• Exploitation of Contract Manufacturing
The acquisition of Anglian Pharma Plc ('Anglian') has more than doubled our
contract manufacturing revenues and substantially enhanced our management
capabilities with the retention of senior Anglian personnel in all areas of the
business. The rationalisation of Anglian is proceeding to plan with the transfer
of business to Dales' site at Skipton expected to be completed by the end of
January 2003.
The 30% organic sales growth achieved this year provides a good base from which
to develop this business further in particular through Anglian's sales team who
already have a proven track record in securing new contracts and developing long
term relationships.
• Further Penetration of Existing Markets
Our principal trading subsidiary, National Veterinary Services ('NVS'), again
out-performed market growth in the year being reported by approximately three
percentage points.
NVS has launched Vetcom(R) windows our in-house developed practice management
software which not only generates regular rental income but considerably
improves veterinary practices marketing and business management capabilities.
The NVS Central operation in Stoke-on-Trent, Staffordshire, has been
considerably expanded by the acquisition of a lease for an adjacent warehouse.
The site has been refurbished and provides an additional 6,000 pallet spaces to
support growth across the Group. The new facility will further improve
operational efficiencies at NVS as well as providing increased security and
improved staff facilities.
More significantly, the acquisition of North Western Laboratories ('NWL') and
Cambridge Specialist Laboratory Services ('CSLS') has enabled us to extend our
service offering to the veterinary profession.
NWL and CSLS are well regarded within the industry for their high quality
service levels and clinical research methodologies. NWL, based in
Poulton-le-Flyde, is a multi-disciplined veterinary laboratory with UKAS
accreditation and provides diagnostic and clinical pathology services to
veterinary surgeons throughout the UK. Around 80% of its work is focussed around
the companion animal sector.
NWL's services are being promoted by NVS's sales team and we are already
beginning to see new business as a result. In addition we have launched a
national 'sample' collection service utilising the NVS network. This new service
offering to our customers gives us a competitive edge in this exciting and
developing market.
CSLS, based in Sawston, South Cambridgeshire is the UK's leading veterinary
endocrine laboratory specialist. For a number of years, Arnolds has utilised the
skills of CSLS in its product development programme - in particular they played
a key role in the newly launched licensed products Vetoryl(R) and Felimazole(R).
Summary
Despite the negative influence of factors outside of our control, our strong and
capable team have delivered a good result and a number of significant
achievements, as I have just outlined.
We welcome the additional skills and expertise our recent acquisitions have
brought to the Group and, with the continued support of the Board, management
and staff, I look forward to the future with enthusiasm and confidence.
3 September 2002
-6-
Dechra Pharmaceuticals PLC
Preliminary Results
year ended 30 June 2002
REVIEW BY THE FINANCE DIRECTOR, SIMON EVANS
Operating Results
The Group profit and loss account is shown on page 8 and discloses a profit
before tax, exceptional item and goodwill amortisation of £7.6 million, an
increase of 29.9% on last year calculated on the same basis. A significant
contributor to this increase was a lower interest charge, reflecting both lower
base rates this year and the full year effect of reduced gearing following our
listing on the London Stock Exchange in September 2000.
Group turnover increased by 8.8% (8.3% excluding acquisitions) compared to 7.5%
last year. This reflects a slow recovery in the market following the foot and
mouth outbreak last year, the benefit of new product introductions at Arnolds
and a 30.0% increase in third party contract manufacturing turnover at Dales.
Gross margin showed a slight decline during the year from 12.3% to 12.1%,
reflecting an increased competitive environment faced particularly by NVS
together with fewer opportunities for strategic stock purchases. Dales was also
impacted by the costs of the expansion.
However, I am pleased to say that the increase in operating costs was restricted
to 5.4% (before exceptional items and goodwill amortisation and excluding
acquisitions) compared to the increase in turnover of 8.3%. This was achieved
despite increased expenditure on new product development.
Overall, Group operating margin (before exceptional items and goodwill
amortisation) reduced slightly to 5.15% from 5.26%.
During the year, the Group made its first two acquisitions since flotation.
These were both made towards the end of our financial year and their impact on
the results for this year was therefore negligible. We expect both acquisitions
to be earnings enhancing in the year ending 30 June 2003.
The operations of Anglian Pharma Manufacturing Ltd are in the process of being
integrated into Dales. Rationalisation costs associated with the integration
will be shown as an exceptional operating item in the year ending 30 June 2003.
Net Interest Charge
The net interest charge of £1.2 million was covered 7.5 times by operating
profit before goodwill and exceptional item. This compares to 3.5 times for the
same period last year.
Exceptional Item
The exceptional item represents compensation for loss of office paid to Gary
Evans the former Chief Executive together with associated legal fees. This
represented his contractual entitlement.
Taxation
The tax charge of 30.8% is slightly higher than the standard UK corporation tax
rate of 30.0%. The difference is principally due to certain expenses that are
not allowable for tax, such as goodwill amortisation.
continued...
-7-
Earnings per Share and Dividend
Adjusted earnings per share (before exceptional items and goodwill amortisation)
was 10.59p (2001: 9.29p; 2001 pro-forma 9.66p), an increase of 14.0% (pro-forma:
9.6%).
Proforma earnings in 2001 were calculated before exceptional items and before a
proforma interest adjustment which reflected the effect on interest payable and
similar charges on bank and other loans (and the related tax effect) of
replacing the funding in place prior to the group's flotation on the London
Stock Exchange on 22 September 2000 with that in place from 22 September 2000
onwards as if this financing had been in place since 1 July 2000.
The proposed final dividend is 2.75p per share (2001: 2.5p) making a total of
4.12p for the year (2001: 3.75p). Dividends were covered 2.4 times by profit
after taxation.
Capital Expenditure
Total fixed asset additions (excluding acquisitions) were £2.8 million of which
£2.0 million related to the Dales expansion. The depreciation charge for the
year was £1.3 million compared to £1.2 million last year, the increase
reflecting the continued investment in the Group.
Cash Flow and Net Debt
During the year, significant investment of nearly £7.0 million was made both in
our existing businesses and acquisitions. This caused net debt to rise from £8.7
million to £14.9 million. Interest cover, however, remains healthy.
Balance Sheet and Shareholders' Funds
Shareholders' funds increased to £5.75 million during the year, reflecting the
retained profit for the year of £3.0 million and the issue of £1.0 million of
ordinary shares to partly fund the acquisition of North Western Laboratories
Limited and Anglian Pharma Plc. In addition, £0.75 million of shares are still
to be issued in respect of the Anglian Pharma Plc acquisition.
Working capital increased from £5.4 million to £9.1 million, of which £0.5
million related to new acquisitions. The remainder of the increase principally
reflected an investment in stocks at NVS to further improve service levels.
Prior Year Adjustment
The Group has adopted FRS19 'Deferred Tax' for the first time. This has resulted
in a net deferred tax asset not previously provided being included in the
balance sheet. All comparative figures have been amended accordingly.
3 September 2002
-8-
Dechra Pharmaceuticals PLC
Preliminary Results
Consolidated Profit and Loss Account
Year ended 30 June 2002
2002 2001
Notes Before Exceptional re-stated* Exceptional re-stated*
Exceptional Item Before Item
Item (note 1) Total Exceptional (note 1) Total
£'000 £'000 £'000 Item £'000 £'000
£'000
Turnover - continuing operations 169,346 - 169,346 156,400 - 156,400
- acquisitions 856 - 856 - - -
170,202 - 170,202 156,400 - 156,400
Cost of sales (149,664) - (149,664) (137,208) - (137,208)
Gross profit 20,538 - 20,538 19,192 - 19,192
Distribution costs (6,166) - (6,166) (5,882) - (5,882)
Administrative expenses
- before goodwill (5,599) (194) (5,793) (5,076) (1,080) (6,156)
amortisation
- goodwill amortisation (101) - (101) - - -
Total administrative expenses (5,700) (194) (5,894) (5,076) (1,080) (6,156)
Operating profit - continuing 8,689 (194) 8,495 8,234 (1,080) 7,154
operations
- acquisitions (17) - (17) - - -
Total operating profit 8,672 (194) 8,478 8,234 (1,080) 7,154
Net interest payable and similar 2 (1,170) - (1,170) (2,382) - (2,382)
charges
Profit on ordinary activities before 7,502 (194) 7,308 5,852 (1,080) 4,772
taxation
Tax on profit on ordinary activities 3 (2,308) 58 (2,250) (1,738) - (1,738)
Profit on ordinary activities after 5,194 (136) 5,058 4,114 (1,080) 3,034
taxation
Dividends 4 (2,069) (1,867)
Retained profit for the financial 2,989 1,167
year
Earnings per ordinary share
Basic 5 10.39p (0.27p) 10.12p 9.29p (2.44p) 6.85p
Diluted 5 10.36p (0.27p) 10.09p 9.26p (2.43p) 6.83p
* re-stated on adoption of FRS19, see Finance Director's Review.
All amounts relate to continuing operations.
-9-
Dechra Pharmaceuticals PLC
Preliminary Results
Consolidated Balance Sheet
as at 30 June 2002
2002 2001
£'000 re-stated*
£'000
Fixed assets
Intangible assets 5,284 -
Tangible assets 6,324 4,317
11,608 4,317
Current assets
Stocks 19,302 16,460
Debtors 25,822 24,237
Cash at bank and in hand - 3,993
45,124 44,690
Creditors: amounts falling due within one year (42,445) (38,950)
Net current assets 2,679 5,740
Total assets less current liabilities 14,287 10,057
Creditors: amounts falling due after more than one year (8,538) (9,047)
5,749 1,010
Capital and reserves
Called up share capital 504 498
Shares to be issued 750 -
Share premium account 26,783 26,783
Merger reserve 994 -
Profit and loss account (23,282) (26,271)
Total equity shareholders' funds 5,749 1,010
Reconciliation of Movements in Shareholders' Funds
2002 2001
£'000 re-stated*
£'000
At 1 July 2001 (re-stated - see below) 1,010 (27,819)
Profit after tax for the financial year 5,058 3,034
Dividends (2,069) (1,867)
New shares issued 1,000 28,002
Shares to be issued 750 -
Costs of share issue - (340)
At 30 June 2002 5,749 1,010
The Group's reserves at 1 July 2001 were originally £901,000 before adding a
prior year adjustment of £109,000
Consolidated Statement of Total Recognised Gains and Losses
2002 2001
£'000 re-stated*
£'000
Profit for the financial year being total gains and losses relating to the year 5,058 3,034
Prior year adjustment 109
Total gains and losses since the last annual report 5,167
* re-stated on adoption of FRS19, see Finance Director's Review.
-10-
Dechra Pharmaceuticals PLC
Preliminary Results
Consolidated Cash Flow Statement
Year ended 30 June 2002
Note 2002 2001
£'000 £'000
Net cash inflow from operating activities 6 6,397 3,453
Returns on investment and servicing of finance
Interest received 16 4
Interest paid (1,103) (7,673)
Interest element of finance lease rentals (39) (43)
Net cash outflow for returns on investment and servicing of finance (1,126) (7,712)
Taxation
Corporation tax paid (2,155) (1,195)
Capital expenditure
Purchase of tangible fixed assets (2,845) (1,882)
Sale of tangible fixed assets 141 111
Net cash outflow for capital expenditure and financial investment (2,704) (1,771)
Acquisitions and disposals
Acquisitions of subsidiary undertakings (3,214) -
Borrowings of acquired businesses (429) -
Purchase of business (180) (100)
Net cash outflow for acquisitions and disposals (3,823) (100)
Equity dividends paid (1,927) (622)
Cash outflow before financing (5,338) (7,947)
Financing
Shares issued less expenses - 27,662
New bank loans 3,000 15,000
Term loans repaid (3,364) (39,462)
Capital element of finance lease payments (401) (486)
Net cash (outflow)/inflow from financing (765) 2,714
Decrease in cash in the period (6,103) (5,233)
Cash at 30 June 2001 3,993 9,226
Cash at 30 June 2002 (2,110) 3,993
Reconciliation of Net Cash Flow to Movement in Net Debt
2002 2001
£'000 £'000
Decrease in cash during the period (6,103) (5,233)
Cash inflow from new loans (3,000) (15,000)
Debt repayments 3,364 39,462
Repayment of finance leases 401 486
Change in net debt resulting from cash flows (5,338) 19,715
New finance leases (418) (860)
Loan stock issued (500) -
Movement in net debt in the period (6,256) 18,855
Net debt at 1 July 2001 (8,680) (27,535)
Net debt at 30 June 2002 (14,936) (8,680)
-11-
Dechra Pharmaceuticals PLC
Preliminary Results
Notes to the Financial Statements
Year ended 30 June 2002
1. Exceptional Items
2002 2001
£'000 £'000
Flotation costs - 1,080
Compensation for loss of office 194 -
194 1,080
The compensation for loss of office relates to the termination of the
contract of Gary Evans, the former Chief Executive and associated legal
fees.
2. Net Interest Payable and Similar Charges
2002 2001
£'000 £'000
Bank loans and overdrafts 1,070 1,704
Amortisation of arrangement fees 74 37
Other loans 3 595
Other interest - 7
Finance charges payable on finance leases and hire purchase contracts 39 43
Total interest payable 1,186 2,386
Bank deposit and other interest receivable (16) (4)
Net interest payable and similar charges 1,170 2,382
3. Tax on Profit on Ordinary Activities
The tax charge based on the profit on ordinary activities for the year
comprises:
2002 2001
£'000 re-stated*
Current taxation £'000
UK Corporation tax charge 2,281 1,537
Adjustments in respect of prior periods (35) (67)
Total current tax charge for the year 2,246 1,470
Deferred taxation
Origination and reversal of timing differences (24) 263
Adjustments in respect of prior periods 28 5
Total deferred tax charge for the year 4 268
Tax on profit on ordinary activities 2,250 1,738
Tax credit included above attributable to 58 -
exceptional operating items
4. Dividends
2002 2001
£'000 £'000
Interim paid 1.37p per share (2001: 1.25p) 682 622
Final proposed 2.75p per share (2001: 2.5p) 1,387 1,245
2,069 1,867
* re-stated on adoption of FRS19, see Finance Director's Review.
continued...
-12-
5. Earnings per Share
Earnings per ordinary share have been calculated by dividing the profit
on ordinary activities after taxation for each financial year by the
weighted average number of ordinary shares in issue during the year.
2002 2001
re-stated*
pence Pence
Basic earnings per share after exceptional items and goodwill amortisation 10.12 6.85
Effect of exceptional items 0.27 2.44
Basic earnings per share before exceptional items 10.39 9.29
Effect of goodwill amortisation 0.20 -
Adjusted earnings per share 10.59 9.29
Diluted earnings per share 10.09 6.83
Effect of exceptional items 0.27 2.43
Diluted earnings per share before exceptional items 10.36 9.26
Effect of goodwill amortisation 0.20 -
Adjusted diluted earnings per share 10.56 9.26
£'000 £'000
The calculation of basic and diluted earnings per share is based upon:
Earnings for basic and diluted earnings per share calculations 5,058 3,034
Exceptional items 136 1,080
Earnings for basic and diluted earnings per share calculations 5,194 4,114
before exceptional items
Goodwill amortisation 101 -
Earnings for adjusted and adjusted diluted earnings per share 5,295 4,114
2002 2001
No. No.
Weighted average number of ordinary shares for basic and adjusted earnings per 49,989,015 44,274,767
share
Impact of share options 151,049 132,093
Weighted average number of ordinary shares issued for diluted and adjusted 50,140,064 44,406,860
diluted earnings per share
* re-stated on adoption of FRS19, see Finance Director's Review.
continued...
-13-
6. Reconciliation of Operating Profit to Operating Cash Flow
2002 2001
£'000 £'000
Operating profit 8,478 7,154
Depreciation 1,289 1,185
Goodwill amortisation 101 -
Profit on disposal of tangible fixed assets (43) (78)
Increase in stocks (2,223) (253)
Increase in debtors (601) (1,972)
Decrease in creditors (604) (2,583)
Net cash inflow from operating activities 6,397 3,453
7. The financial information set out above does not constitute the
Company's statutory accounts for the years ended 30 June 2001 or 2002
but is derived from those accounts. Statutory accounts for 2001 have
been delivered to the Registrar of Companies, and those for 2002 will be
delivered following the Company's Annual General Meeting. The auditors
have reported on those accounts; their reports were unqualified and did
not contain statements under Section 237(2) or (3) of the Companies Act 1985.
8. This statement is not being posted to shareholders. The Report &
Accounts for the year ended 30 June 2002 will be posted to shareholders
shortly. Further copies will be available from the Company's Registered
Office: Dechra House, Jamage Industrial Estate, Talke Pits, Stoke on
Trent, ST7 1XW. Email: corporate.enquiries@nvs-ltd.co.uk.
9. The Annual General Meeting will be held on Wednesday, 16 October
2002, 10.00am at The Manor House Hotel, Audley Road, Alsager, Stoke on
Trent, Staffordshire, ST7 2QR.
This information is provided by RNS
The company news service from the London Stock Exchange
Wednesday, 15th May 2024
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