TIDMDPH
RNS Number : 7570K
Dechra Pharmaceuticals PLC
06 September 2021
Monday, 6 September 2021
Dechra Pharmaceuticals PLC
(Dechra, Company or the Group)
Preliminary Results Announcement
Global veterinary pharmaceutical business, Dechra, issues
audited preliminary results for the year ended 30 June 2021
"Dechra has continued to outperform a robust market throughout the COVID-19
pandemic affected financial year. As we start the new financial year trading
remains strong with the momentum and market penetration seen in the second
half of the prior financial year continuing."
Ian Page, Chief Executive Officer
Highlights
Strategic progress made:
* All product categories delivering growth, CAP and
Equine performance exceptional.
* Strong organic growth in all key markets.
* Good progress continues to be made on product
pipeline.
* Acquisitions Mirataz(R) and Osurnia(R) both
performing well.
Strong financial performance:
* Revenue growth of 21.0% to GBP608.0 million.
* Underlying operating profit increased by 29.2% to
GBP162.2 million.
* Underlying EBIT margin increased by 170 bps to 26.7%.
* Underlying diluted EPS increased by 19.4% to 108.14
pence.
* Reported operating profit growth of 63.0%.
* Full year dividend increased by 18.1% to 40.50 pence.
All of the above measures are at constant exchange rate
(CER).
Financial Summary
2021 2020
GBPm GBPm Growth at AER Growth at CER
------------------------------- ------ ----- ------------- -------------
Revenue 608.0 515.1 18.0% 21.0%
------------------------------- ------ ----- ------------- -------------
Underlying
Underlying Operating
profit 162.2 128.3 26.4% 29.2%
Underlying EBIT % 26.7% 24.9% 180bps 170 bps
Underlying EBITDA 177.7 142.5 24.7% 27.4%
Underlying diluted EPS
(p) 108.14 92.19 17.3% 19.4%
------------------------------- ------ ----- ------------- -------------
Reported
Operating profit 84.0 52.2 60.9% 63.0%
Diluted EPS (p) 51.03 32.76 55.8% 56.1%
Cash generated from operations
before interest/taxation 141.2 127.5 10.7%
Dividend per Share 40.50 34.29 18.1%
------------------------------- ------ ----- ------------- -------------
Underlying results exclude items associated with amortisation of
acquired intangibles and notional intangibles in respect of Medical
Ethics, acquisition and integration costs including release of
acquisition tax provisions, rationalisation of manufacturing, loss
on extinguishment of debt, foreign exchange and discount unwind
relating to contingent consideration, the tax impact of these items
and the deferred tax impact of changes in tax rates. Further
details are provided in notes 5 and 20.
AER is defined as Actual Exchange Rate.
Results Briefing today:
A presentation of the Annual Results will be held today at 9.00 am (UK
time) via https://webcasting.brrmedia.co.uk/broadcast/60ec05bd7245c37cc124444c
This will also be available on the Dechra website later today.
Dial in ref: Dechra Pharmaceuticals PLC - 2021 Annual Results
United Kingdom:
Participant Local: +44 (0)330 336 9434
Confirmation Code: 2677534
For assistance please contact Fiona Tooley on +44 (0) 7785 703 523.
Enquiries:
Dechra Pharmaceuticals PLC
Ian Page, Chief Executive Office: +44 (0) 1606 814 730
Officer
Paul Sandland, Chief Financial Office: +44 (0) 1606 814 730
Officer
e-mail: corporate.enquiries@dechra.com
TooleyStreet Communications
Ltd
Fiona Tooley, Director Office: +44 (0) 121 309 0099
e-mail: fiona@tooleystreet.com Mobile: +44 (0) 7785 703 523
Notes:
Foreign Exchange Rates:
FY2021 Average: EUR 1.1287: GBP 1.0; USD 1.3466: GBP 1.0
FY2021 Closing: EUR 1.1654: GBP 1.0; USD 1.385: GBP 1.0
FY2020 Average: EUR 1.1396: GBP 1.0; USD 1.2601: GBP 1.0
FY2020 Closing: EUR 1.0960: GBP 1.0; USD 1.2273: GBP 1.0
About Dechra
Dechra is a global specialist veterinary pharmaceuticals and related products
business. Its expertise is in the development, manufacture, marketing
and sales of high quality products exclusively for veterinarians worldwide.
Dechra's business is unique as the majority of its products are used to
treat medical conditions for which there is no other effective solution
or have a clinical or dosing advantage over competitor products. For more
information, please visit: www.dechra.com
Stock Code: Full Listing (Pharmaceuticals): DPH
LEI: 213800J4UVB5OWG8VX82
Trademarks
Trademarks appear throughout this document in italics. Dechra and the
Dechra 'D' logo are registered trademarks of Dechra Pharmaceuticals PLC.
StrixNB(R) and DispersinB(R) are trademarks licensed from Kane Biotech
Inc.
Forward Looking Statement
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 involve a degree of uncertainty.
Therefore, nothing in this document should be construed as a profit forecast
by the Company.
Market Abuse Regulation (MAR)
The information contained within this announcement may contain inside
information stipulated under the Market Abuse (Amendment) (EU Exit) Regulations
2018. Upon the publication of this announcement via the Regulatory Information
Service, this inside information is now considered to be in the public
domain.
Dechra Pharmaceuticals PLC
Preliminary Results for the year ended 30 June 2021
Chief Executive Officer's Statement
Introduction
I am pleased to report that Dechra has continued to outperform a
robust market throughout the COVID-19 pandemic affected financial
year. All product groups; Companion Animal Products (CAP), Food
producing Animal Products (FAP), Equine and Nutrition have
delivered solid growth and the recent acquisitions of Osurnia(R)
and Mirataz(R) have delivered good additional growth.
COVID-19
We have benefited from above average market growth in the
majority of our key CAP markets. The reasons for this market growth
are not yet fully defined. In the UK there have been reports of an
increased number of dogs; however, recent information from the
United States indicates that veterinary practice visits by pet
owners have marginally declined. What is clear is that people have
been spending more time with their pets and have therefore been
more cognitive of their welfare, and with disposable income being
higher than normal due to lockdown, expenditure per pet has
increased.
Dechra has operated exceptionally well throughout the pandemic;
all manufacturing sites and laboratories have remained operational
and communication with customers through digital media by our
highly motivated commercial teams has been excellent.
Operational Review
EU Pharmaceuticals Segment
In the year our European (EU) Pharmaceuticals Segment reported
net revenues increased by 20.2% at CER (20.1% at AER). This Segment
includes our International business, which is detailed below. It
also includes non-core business, such as third party contract
manufacturing, which we continue to exit as strategically planned.
Existing revenues, excluding third party contract manufacturing and
including the like-for-like impact of recent acquisitions,
increased by 16.7% at CER (16.6% at AER).
This growth is due to improved supply combined with very
successful digital sales and marketing interaction with our
customers, supported by professional key account management. We
have delivered high double digit revenue growth in nearly all areas
of the business, and almost all countries in Europe delivered high
single or double digit growth.
International Pharmaceuticals
Our International team continues to perform strongly, especially
in the territories where we have our Dechra branded sales and
marketing organisations: Australia, New Zealand and Brazil. Our
geographical expansion in other territories through distribution
partners has also delivered growth which has been enhanced with
Osurnia which is now sold into 15 international markets with
exceptionally high sales in Japan. Most of our key brands are now
registered in Australia where we are now also able to market our
leading endocrine products in Dechra livery as the previous
distribution agreement with a third party has come to term. In
Brazil the growth from our core vaccines has been enhanced with the
successful registration of a number of our leading CAP
products.
NA Pharmaceuticals Segment
Our North America (NA) Pharmaceuticals Segment net revenues
increased by 22.2% at CER (14.6% at AER), driven primarily by
strong organic growth on existing products (16.7% at CER, 9.4% at
AER) and incremental sales performance on recently acquired
products, Mirataz and Osurnia. Strong growth from Canada and Mexico
also contributed to North America's success.
Organic growth can be attributed to an improved supply chain,
increased volumes from market growth as a result of higher pet
spend during the pandemic, and market share gains as we continue to
execute strategic marketing initiatives.
Due to the strong growth in the US, we have continued to expand
our commercial organisation. The CAP team has expanded to 88 field
sales representatives and 18 tele-sales representatives divided
amongst nine US regions.
Product Category Performance
CAP
Companion Animal Products (CAP), which represent 72.8% of Group
turnover, grew by 25.9% at CER (19.2% organically) in the Period.
Organic growth was driven by increased market shares in our key
therapy areas of Endocrinology, Anaesthesia/Analgesia, and Internal
Medicine in the EU and across all categories in the USA.
Additionally, we successfully launched our two key new products,
Mirataz and Osurnia, in several markets during the period.
Marboquin, launched in the USA, exceeded sales expectations.
FAP
The strong performance in Food Producing Animal Products (FAP)
during recent years, which represents 12.7% of Group turnover, has
slowed to 4.7% at CER (4.7% organically) this year due to a number
of factors. In certain key FAP markets we have seen a reduction in
meat consumption as restaurants closed as a result of COVID-19.
Additionally meat production in several markets has been negatively
impacted by outbreaks of African Swine Fever and Avian
Influenza.
Equine
Equine, which represents 7.3% of Group turnover, grew by 25.5%
at CER (25.5% organically). This growth was driven partly by the
life cycle improvement to a key product, Equipalazone(R) , where we
added an additional flavouring, and by the launch of a number of Le
Vet pipeline products, which have strengthened our overall Equine
portfolio.
Nutrition
Nutrition represents 5.2% of Group turnover and grew by 9.4% at
CER (9.4% organically). After several years of decline, it is very
pleasing to report that our Nutrition business has delivered strong
growth in the year. This can be attributed to the recently formed
Business Unit which has worked closely with key markets and key
customers, to rebuild confidence in the range and to attract new
customers to the Specific brand.
Product Development and Regulatory Affairs (PDRA)
Overview
Our Regulatory and Development teams have continued to be
effective throughout the COVID-19 pandemic as our clinical trials
group was able to work remotely with veterinarians and laboratories
that were participating in clinical and non-clinical studies.
In preparation for full implementation of new regulations for
the authorisation and supervision of veterinary medicinal products
(EU Reg 2019/6), which comes into effect in January 2022, an
internal working group has been formed to ensure Dechra remains in
compliance.
The pharmaceutical development laboratories in the UK, Croatia
and Netherlands remained operational during the pandemic by
adopting staggered schedules. The laboratories increased
formulation capacity with additional people and new equipment,
including a new chromatography modelling system.
The vaccine development laboratory in Zagreb received Good
Laboratory Practice (GLP) certification and has expanded their
capacity for studies.
Pipeline Progress
Good progress continues to be made on the pipeline; the final
sections of a dossier for a new canine sedative for the USA have
been submitted. It is also pleasing to report that we are still
delivering favourable results on the dog and cat proof of concept
studies for the diabetes drugs being developed in partnership with
Akston Biosciences. Following our right to evaluate the cat
product, we subsequently signed a licensing and supply agreement on
4 February 2021.
Product Approvals
Numerous marketing authorisations have been achieved throughout
the year. Although none is material in its own right, they all
strengthen the existing portfolio in Dechra territories and enhance
our International portfolio, an increasing area of strategic
importance. Major approvals in Dechra territories are:
-- in Europe and the UK they included Apovomin Injection,
Clindacutin Ointment, Lodipred Tablets, Metomotyl Flavoured
Tablets, and Rexxolide(R) Injection. Apovomin is a gastrointestinal
product for dogs; Clindacutin is a topical dermatological product;
Lodipred is a treatment for hypertension in cats; Methomotyl is a
gastrointestinal product for dogs; Rexxolide is an antimicrobial
for cattle, pigs and sheep;
-- the first approval in Europe for a product included in our
agreement with Medical Ethics was Equi-Solfen(R) , a topical
anaesthetic for horses. This is an equine version of Tri-Solfen(R)
which was approved in Portugal;
-- Carprofen Flavoured Tablets, an anti-inflammatory for dogs, were approved in the USA;
-- Mirataz Transdermal Gel was registered in Canada;
-- three new products and one line extension were registered in
Australia and New Zealand, two new approvals in Mexico and
four new approvals in Brazil;
-- a 5 mg strength for Vetoryl(R) Capsules was registered in
Europe, and a number of established products already registered in
the EU, have now received approval in new territories, including
Avishield (R) IB GI-13, Avishield IBD Plus, Comfortan (R) , Myodine
and Phenoleptil; and
-- Internationally we have received 38 approvals across our key
brands in countries including Albania, Bolivia, Costa Rica, Israel,
Jordan, Kenya, Puerto Rico, South Africa, Tanzania, Ukraine, United
Arab Emirates and Venezuela.
Acquisitions
The recent product acquisitions of Mirataz and Osurnia are both
performing strongly. Osurnia is performing above our
expectations
in the EU, despite the launch of a competitor product, and has
also exceeded our expectations in Japan and Australia. In the USA
we are gaining market share having reduced the price to compete
better with the market leading product. We continue to pursue
registrations in new territories.
Mirataz continues to perform exceptionally well within the USA
market following a successful marketing campaign for this
clinically necessary unique product. It has now also been launched
in all our major European territories and initial sales are strong.
We expect to receive approval to market the product in other
countries imminently.
We were pleased to announce on 8 February 2021 the acquisition
of the Australian and New Zealand marketing rights for
Tri-Solfen(R) from Animal Ethics Pty Ltd, a related party.
Tri-Solfen(R) has already been successfully introduced to the
Australian market for pain relief in lambs since 2008 and was
approved and launched for use in cattle in 2019, achieving
cumulative annualised sales of AUD9.1 million (GBP5.1 million).
This acquisition allows us to create a meaningful FAP presence in
the Australian and New Zealand markets as we build a new sales
infrastructure. Additionally, we have acquired a further 1.5% of
the issued share capital, taking our holding in Animal Ethics Pty
Ltd's parent company, Medical Ethics Pty Ltd, to 49.5%. We are in
the process of recruiting a FAP sales team and have commenced
marketing the product in Dechra livery post the end of the 2021
financial year.
Manufacturing and Supply
We have made huge progress with improvements to the supply
chain. Backorders have been materially reduced and quality systems
and processes enhanced. The upcoming implementation of a recently
approved new quality management system will further enhance our
manufacturing capabilities. We continue to make good progress on
the technical transfer of Dechra products, predominantly into our
Zagreb facility, where we have just been awarded Croatian Employer
of the Year for people with disabilities. Our Bladel, Netherlands,
facility continues to prepare for an FDA audit so that we can bring
in-house sterile injectable manufacturing for some of our US
products. In Skipton, UK, we have now ceased all the third party
human products manufacturing so it now purely produces Dechra's own
brands. Work has been completed in Australia to prepare ourselves
for TGA quality approval; we are now awaiting inspection. If
successful, we will be able to export products from this site to
outside of Australia. We have completed a capital investment
programme in a new water for injection system, a key component in
all production, in our Londrina vaccine facility in Brazil as we
continue to progress our site development and quality improvement
strategy. We have now closed our Mexican manufacturing facility and
have transferred the legacy products we wished to retain from the
original acquisition to local third party manufacturers.
Technology
I am pleased to report that an external research survey in the
UK has voted Dechra's online Academy for veterinarians and
veterinary nurses as the best in class in the industry. This is an
amazing achievement given the scale of Dechra compared to the
market leading companies in animal health.
Digital communication with our customers has been enhanced with
upgraded video conferencing systems, improved security of key
servers and additional support for home workers' queries.
We have relaunched both the Dechra Pharmaceuticals PLC and
Dechra Veterinary Products web sites on new, improved platforms and
have also developed and launched a new internal, advanced intranet
site branded OneDechra.
In the year we successfully launched a global payroll system,
partnering with ADP Celergo, which is live in 16 countries with the
roll out across the entire Group expected to be completed within
the 2022 financial year.
Our sales and marketing database on the Salesforce software
platform, which we have used successfully for a number of years in
the US, has now gone live across Europe. This will improve our
knowledge of, and relationship with, our customers and will allow
us to better measure sales team performance and activity.
We have recently approved the implementation of a new quality
and document management system which will operate across
Manufacturing, Product Development and Regulatory Affairs.
Implementation has commenced in this new financial year.
People
The main factor behind Dechra's success is its people. I would
like to thank all our employees for their hard work, dedication and
innovation throughout the year.
In a world affected by COVID-19 it is a great achievement for
the Group to be paying the minimum of a living wage in every
country in which we operate and we have now formally had
accreditation for this status in the UK. We conducted the Great
Place to Work survey in the year to which over 90% of all our
global employees responded. We achieved an excellent engagement and
trust rating of 77%, far higher than the vast majority of companies
of our scale and ten points higher than the previous time we ran
the survey three years ago. We have launched a Dechra Leadership
Development Programme, incorporating diversity and inclusion
modules and we have also updated the global talent review process.
We have invested in our first in-house recruitment team who are
proving a great success in bringing talent to the Group, delivering
us considerable savings on recruitment costs.
After five years of successfully chairing the Group, Tony Rice
has indicated that he has decided to step down to devote more time
to his family and his other business and charitable activities. We
will commence the search for his replacement; at this time no
specific date has been set for his departure. He will continue as
Chairman of the Group until a successor has been appointed.
The Board was strengthened with the appointment of Denise Goode
as a Non-Executive Director in April 2021. It is the intention that
Denise will be appointed as Chairman of the Audit Committee upon
Julian Heslop's retirement from the role following the 2021 Annual
General Meeting.
Following the appointment of Milton McCann as Group
Manufacturing and Supply Director, we have increased the strength
and depth of his management team, most notably in the Quality
function with a Group Quality Director, an Internal Manufacturing
Quality Director and a Third Party Quality Director to monitor and
manage the processes of our outsourced products.
Environmental, Social and Governance (ESG)
Last year we refined our ESG strategy which is based on four
pillars; Our People, Our Environment, Our Business and Our
Communities. The world is facing significant global challenges such
as climate change and inequality and we strongly believe that a
sustainable and purposeful business in line with these pillars will
drive superior long term performance.
During the year, we appointed Carina Kjellberg as our first
Group Sustainability Director. Subsequently we have executed a
'Making a Difference' plan which involves setting targets and the
launch of some major projects. In particular, we have delivered,
ahead of plan, on our ambition to be a living wage employer and
have committed to setting verifiable targets across the entire
value chain through the Science Based Target initiative (SBTi). We
have set out how we plan to use our available resources to benefit
the local communities in which we operate. This includes the
provision of 100,000 community hours by 30 June 2030, roughly
equivalent to one full day per year per employee. We have also
established Regional Giving Committees, which will allow our
employees to decide what matters most in their local communities
and which organisations will receive our annual charity
donations.
Dividend
The Board is proposing a final dividend of 29.39 pence per share
(2020: 24.00 pence per share). Added to the interim dividend of
11.11 pence per share (2020: 10.29 pence per share), this brings
the total dividend for the financial year ended 30 June 2021 to
40.50 pence per share (2020: 34.29 pence per share), representing
18.1% growth over the previous year.
Subject to shareholder approval at the Annual General Meeting to
be held on 21 October 2021, the final dividend will be paid on
19 November 2021 to shareholders on the Register at 29 October
2021. The shares will become ex-dividend on 28 October 2021.
Outlook
As we start the new financial year trading remains strong with
the momentum and market penetration seen in the second half of the
prior financial year continuing. We have made significant
operational improvements by strengthening our infrastructure and by
investment in our greatest resource, our people. Although COVID-19
related travel restrictions have limited acquisition activity, we
have still been able to identify and progress numerous strategic
opportunities to strengthen our product portfolio and development
pipeline. We therefore remain confident in our ability to
successfully execute our strategy and in our future prospects.
Ian Page
Chief Executive Officer
6 September 2021
Financial Review
Overview of Reported Financial Results
To assist with understanding our reported financial performance,
the consolidated results below are split between existing and
acquired businesses; acquisition includes the incremental effect of
those businesses acquired in the current and prior year, reported
on a 'like-for-like' basis. Additionally, the following table shows
the growth at both reported actual exchange rates (AER), and
constant exchange rates (CER) to identify the impact of foreign
exchange movements. The acquisition operating loss includes
underlying operating profit of GBP12.3 million and non-underlying
charges of GBP14.9 million. These non-underlying charges comprise
amortisation of acquired intangibles of GBP13.6 million and
acquisition costs of GBP1.3 million.
Including non-underlying items, the Group's consolidated
operating profit increased by 63.0% at CER (60.9% at AER) whilst
consolidated profit before tax increased by 81.4% at CER (80.9% at
AER), benefiting from a reduction in net finance costs. Diluted EPS
growth was restricted to 56.1% at CER (55.8% at AER) primarily
reflecting the impact of the increase in the Netherlands and UK tax
rates on deferred tax balances.
Growth Growth
at AER at CER
------------------------- --------- ------------ ------------- -----
2021 2021 2021
Existing Acquisition Consolidated 2020 Consolidated Consolidated
As Reported GBPm GBPm GBPm GBPm % %
------------------------- --------- ------------ ------------- ----- ------------- ------------
Revenue 584.0 24.0 608.0 515.1 18.0% 21.0%
Gross profit 331.6 14.3 345.9 291.6 18.6% 21.3%
Gross profit % 56.8% 59.6% 56.9% 56.6% 30bps 20bps
Operating profit/(loss) 86.6 (2.6) 84.0 52.2 60.9% 63.0%
EBIT % 14.8% (10.8%) 13.8% 10.1% 370bps 360bps
Profit/(loss) before tax 77.1 (3.1) 74.0 40.9 80.9% 81.4%
Diluted EPS (p) 51.03 32.76 55.8% 56.1%
------------------------- --------- ------------ ------------- ----- ------------- ------------
Overview of Underlying Financial Results
When presenting our financial results, we use a number of
adjusted measures which are considered by the Board and management
in reporting, planning and decision making. Underlying results
reflect the Group's trading performance excluding non-underlying
items. A reconciliation of underlying results to reported results
in the year to 30 June 2021 is provided in the table below. In the
commentary which follows, all references will be to CER movement
unless otherwise stated.
Non-underlying Items
------------------------------------
Amortisation
and related Acquisition, Tax rate
2021 costs of impairments changes
Underlying acquired and restructuring and finance 2021 Reported
Results intangibles costs expenses Results
GBPm GBPm GBPm GBPm GBPm
------------------------------------ ----------- ------------ ------------------ ------------ -------------
Revenue 608.0 - - - 608.0
Gross profit 345.9 - - - 345.9
Selling, general and administrative
expenses (151.3) (70.8) (3.0) - (225.1)
R&D expenses (32.4) (4.4) - - (36.8)
Operating profit 162.2 (75.2) (3.0) - 84.0
Net finance costs (11.7) - - 2.8 (8.9)
Share of associate profit (0.4) (0.7) - - (1.1)
Profit before tax 150.1 (75.9) (3.0) 2.8 74.0
Taxation (32.5) 16.5 2.7 (5.2) (18.5)
Profit after tax 117.6 (59.4) (0.3) (2.4) 55.5
Diluted EPS (p) 108.14 51.03
------------------------------------ ----------- ------------ ------------------ ------------ -------------
In the year, Dechra delivered consolidated revenue of GBP608.0
million, representing an increase of 21.0% on the prior year. This
included GBP584.0 million from its existing business, an increase
of 16.2%, and a GBP24.0 million contribution from acquired
businesses.
Consolidated underlying operating profit of GBP162.2 million
represents a 29.2% increase on the prior year. This included
GBP149.9 million from Dechra's existing business, an increase of
19.5% on a like-for-like basis, and a GBP12.3 million contribution
from acquired businesses.
Underlying EBIT margin increased by 170 bps to 26.7%,
principally due to leverage from the acquisitions and also a
reduction in Selling, General and Administrative expenses
(SG&A) spend as a percentage of revenue.
Underlying diluted EPS grew by 19.4% to 108.14 pence reflecting
the profit growth from the existing and acquired businesses offset
by higher net finance costs, tax charges and the full year impact
of the equity placing in June 2020.
A more detailed explanation of our non-underlying items is
detailed further in this Financial Review.
Growth at CER
---------------------------- --------- ------------ ------------- ----- ----------------------
2021 2021 2021
Existing Acquisition Consolidated 2020 Existing Consolidated
Underlying GBPm GBPm GBPm GBPm % %
---------------------------- --------- ------------ ------------- ----- -------- ------------
Revenue 584.0 24.0 608.0 515.1 16.2% 21.0%
Gross profit 331.6 14.3 345.9 291.6 16.3% 21.3%
Gross profit % 56.8% 59.6% 56.9% 56.6% 10bps 20bps
Underlying Operating profit 149.9 12.3 162.2 128.3 19.5% 29.2%
Underlying EBIT % 25.7% 51.3% 26.7% 24.9% 70bps 170bps
Underlying EBITDA 165.3 12.4 177.7 142.5 18.6% 27.4%
Underlying Diluted EPS
(p) 108.14 92.19 19.4%
Dividend per share (p) 40.50 34.29 18.1%
---------------------------- --------- ------------ ------------- ----- -------- ------------
Reported Segmental Performance
Reported segmental performance is presented in note 2. The
effect of acquisitions in the year was material; the reported
segmental performance is analysed between existing and acquired
businesses, and at AER and CER in the table below. The acquisition
elements capture the additional base business coming into the Group
up to the first anniversary of their acquisition, including the
growth Dechra generated in them during the year, and the synergies
that have already been realised by the Group since acquisition.
This analysis becomes less definitive the further in time from the
completion of the acquisition, as the acquired business is
progressively integrated with the existing business.
Growth at AER Growth at CER
------------------ ------------- ------------ ------------- ------ ---------------------- ----------------------
2021 2021
2021 Existing Acquisition Consolidated 2020 Existing Consolidated Existing Consolidated
Reported GBPm GBPm GBPm GBPm % % % %
------------------ ------------- ------------ ------------- ------ -------- ------------ -------- ------------
Revenue by segment
EU Pharmaceuticals 374.4 14.1 388.5 323.5 15.7% 20.1% 15.9% 20.2%
NA Pharmaceuticals 209.6 9.9 219.5 191.6 9.4% 14.6% 16.7% 22.2%
Total 584.0 24.0 608.0 515.1 13.4% 18.0% 16.2% 21.0%
Operating
profit/(loss)
by segment
EU Pharmaceuticals 120.2 7.6 127.8 100.0 20.2% 27.8% 19.4% 26.9%
NA Pharmaceuticals 71.2 4.7 75.9 63.7 11.8% 19.2% 19.6% 27.5%
Pharmaceuticals
Research and
Development (32.4) - (32.4) (28.4) (14.1%) (14.1%) (17.3%) (17.3%)
Segment operating
profit 159.0 12.3 171.3 135.3 17.5% 26.6% 20.0% 29.2%
Corporate and
unallocated costs (9.1) - (9.1) (7.0) (30.0%) (30.0%) (28.6%) (28.6%)
Underlying
operating
profit 149.9 12.3 162.2 128.3 16.8% 26.4% 19.5% 29.2%
Non-underlying
operating items (63.3) (14.9) (78.2) (76.1)
Reported operating
profit 86.6 (2.6) 84.0 52.2 65.9% 60.9% 67.6% 63.0%
------------------ ------------- ------------ ------------- ------ -------- ------------ -------- ------------
Underlying Segmental Performance
European Pharmaceuticals
Revenue in European (EU) Pharmaceuticals grew by 20.2%. The
existing business grew by 15.9%; excluding third party contract
manufacturing, which is being reduced in line with our strategy and
replaced with own product manufacturing, revenues increased by
16.7%. This growth was driven by a strong performance across all
established European markets and also in the key International
businesses in ANZ and Brazil. The acquisitions of Mirataz and
Osurnia contributed a combined GBP14.1 million to revenue for the
Period where there is no comparative.
Operating Profit from existing business increased by 19.4%, with
operating margin increasing to 32.1% and consolidated operating
margin increasing to 32.9%. This improvement was due to strong in
market delivery as the demand for CAP products increased, whilst
the rate of SG&A spend was lower as a result of COVID-19.
Growth at CER
------------------- --------- ------------ ------------- ----- ----------------------
2021 2021 2021
Existing Acquisition Consolidated 2020 Existing Consolidated
Underlying GBPm GBPm GBPm GBPm % %
------------------- --------- ------------ ------------- ----- -------- ------------
Revenue 374.4 14.1 388.5 323.5 15.9% 20.2%
Operating Profit 120.2 7.6 127.8 100.0 19.4% 26.9%
Operating Profit % 32.1% 53.9% 32.9% 30.9% 90bps 170bps
------------------- --------- ------------ ------------- ----- -------- ------------
North American Pharmaceuticals
Revenue from North American (NA) Pharmaceuticals grew by 22.2%
to GBP219.5 million. The existing business grew by 16.7% reflecting
strong demand for our CAP products in the US, Canada and Mexico.
The acquisitions of Osurnia and Mirataz added GBP9.9 million to
revenue for the period.
Operating Profit from existing business grew 19.6% with
operating margin increasing to 34.0% and consolidated operating
margin increasing to 34.6%.
Growth at CER
------------------- --------- ------------ ------------- ----- ----------------------
2021 2021 2021
Existing Acquisition Consolidated 2020 Existing Consolidated
Underlying GBPm GBPm GBPm GBPm % %
------------------- --------- ------------ ------------- ----- -------- ------------
Revenue 209.6 9.9 219.5 191.6 16.7% 22.2%
Operating Profit 71.2 4.7 75.9 63.7 19.6% 27.5%
Operating Profit % 34.0% 47.5% 34.6% 33.2% 90bps 150bps
------------------- --------- ------------ ------------- ----- -------- ------------
Pharmaceuticals Research and Development
Pharmaceuticals Research and Development (R&D) expenses
increased by 17.3% from GBP28.4 million to GBP32.4 million
representing 5.5% of existing revenue with some project spend being
delayed due to COVID-19. This spend included GBP3.9 million in
relation to Akston which remains on track for launch in 2026.
Growth at CER
------------- --------- ---------------- ----------------- ------ ----------------------
2021
Existing 2021 Acquisition 2021 Consolidated 2020 Existing Consolidated
GBPm GBPm GBPm GBPm % %
------------- --------- ---------------- ----------------- ------ -------- ------------
R&D expenses (32.4) - (32.4) (28.4) (17.3%) (17.3%)
% of Revenue 5.5% - 5.3% 5.5%
------------- --------- ---------------- ----------------- ------ -------- ------------
Revenue by Product Category
CAP revenue continues to be the largest proportion of Dechra's
business at 72.8%, up from 70.1% in the prior year. CAP grew 25.9%
in the year from market penetration, product launches and the
additions of Osurnia and Mirataz. Equine revenue grew by 25.5% in
the year with all key portfolio products performing well. FAP
revenue growth slowed to 4.7% with demand in some of our markets
impacted by COVID-19 restrictions, African Swine Fever and Avian
Influenza. Nutrition revenue improved by 9.4% on the prior year
reflecting the execution of our strategy with key customers in our
key markets.
Other revenue reduced by 8.1% to GBP11.9 million, now
representing only 2.0% of the business as we continue our planned
exit from third party contract manufacturing in line with our
manufacturing strategy, to improve the production efficiency of
Dechra's own products.
2021 2020 % Change % Change
GBPm GBPm at AER at CER
------------------------ ----- ----- -------- --------
CAP 442.6 361.6 22.4% 25.9%
Equine 44.8 36.4 23.1% 25.5%
FAP 77.0 74.8 2.9% 4.7%
------------------------ ----- ----- -------- --------
Subtotal Pharmaceutical 564.4 472.8 19.4% 22.5%
Nutrition 31.7 28.6 10.8% 9.4%
Other 11.9 13.7 (13.1%) (8.1%)
------------------------ ----- ----- -------- --------
Total 608.0 515.1 18.0% 21.0%
------------------------ ----- ----- -------- --------
Gross Profit
Gross Profit for the existing business increased by 10 bps to
56.8% and the consolidated Gross Profit increased by 20 bps to
56.9%, reflecting the greater proportion of CAP sales.
Underlying Selling, General and Administrative Expenses
(SG&A)
SG&A costs grew from GBP134.9 million in the prior year to
GBP151.3 million in the current year, an increase of 12.2% (at
AER). This growth principally represents investment in our people
costs following the review of compensation across the Group, higher
delivery of bonus targets and increased related bonus payments and
additional cost incurred as a result of improved vesting conditions
across the Group's employee share schemes. Despite these increases,
the Group did benefit from lower than expected SG&A costs as a
result of COVID-19, particularly in relation to sales and marketing
activities and travel and entertainment.
Non-underlying Items
Non-underlying items incurred in the year are fully described in
note 5. In summary, they relate to the following:
-- Amortisation of acquired intangibles of GBP75.2 million: the
amortisation of the acquired intangibles has increased from GBP69.6
million in 2020 principally due to new charges relating to the
Osurnia and Mirataz acquisitions and a reducing charge from the AST
Farma and Le Vet acquisition;
-- Expenses relating to acquisition and subsequent integration
activities of GBP1.4 million (2020: GBP4.3 million): this includes
the transaction and integration costs associated with the
acquisitions made in recent years and principally relates to
Osurnia acquisition costs;
-- Rationalisation of manufacturing organisation of GBP1.6
million (2020: GBP2.2 million): this comprises the final costs
associated with this strategic programme which has now been
concluded;
-- Finance credit of GBP2.8 million (2020: charge of GBP2.5
million): this represents the net credit arising on the unwind of
the discount relating to the contingent consideration liability and
associated foreign exchange gain; and
-- Taxation credit of GBP14.0 million (2020: GBP17.7 million):
this represents the tax impact of the above items (GBP16.6
million), as well as the revaluation of deferred tax balance sheet
items (GBP4.8 million charge) following changes in corporate tax
rates, including a further revision to the Netherlands rate (which
will now remain at 25%) and the UK rate which will increase to 25%
in 2023, offset by the release of certain fair value provisions
relating to previous acquisitions (GBP2.2 million).
Taxation
The reported effective tax rate (ETR) for the year is 25.0%
(2020: 17.1%) and includes the one-off impact of the substantively
enacted increase in corporate tax rates in the Netherlands (from
21.7% to 25%) and the UK (from 19% to 25% effective 1 April 2023)
on deferred tax balances. On an underlying basis the ETR is 21.7%
(2020: 20.6%); the main differences to the UK corporation tax rate
applicable of 19.0% (2020: 19.0%) relate to differences in overseas
tax rates and non-deductible expenses offset by patent box
allowances.
The underlying ETR is expected to increase to within a range of
22.5% to 23% in the current year, due to a reduction in the patent
box allowance following the expiry of certain patents.
We continue to monitor relevant tax legislation internationally
as it may affect our future ETR.
Reported Profit
Reported profit before tax increased by 80.9% at AER reflecting
the reported operating profit growth of 60.9% at AER and the
reduction in net finance costs which include a foreign exchange
gain on the remeasurement of the contingent consideration
liability.
Earnings per Share and Dividend
Underlying diluted EPS for the year was 108.14 pence, a 19.4%
growth on the prior year reflecting the underlying EBIT growth of
29.2% offset by higher net finance costs and the full year impact
of the equity placing in June 2020. The weighted average number of
shares for the year was 108.8 million (2020: 103.5 million).
The reported diluted EPS for the year was 51.03 pence (2020:
32.76 pence). This represents an increase of 55.8% (at AER) in
reported EPS which is lower than the reported EBIT growth of 60.9%
(at AER) and reflects an increase in the reported tax charge due to
the impact of the revaluation of deferred tax balances for the
Netherlands and the UK, as noted above.
The Board is proposing a final dividend of 29.39 pence per share
(2020: 24.00 pence), added to the interim dividend of 11.11 pence,
the total dividend per share for the year ended 30 June 2021 is
40.50 pence. This represents 18.1% growth over the prior year.
Dividend cover based on underlying diluted EPS is 2.7 times (2020:
2.7 times). The Board continues to operate a progressive dividend
policy, recognising investment opportunities as they arise.
Currency Exposure
The average rate for GBP/EUR decreased by 1.0%, and the GBP/$
rate increased by 6.9% during the financial year. The effect in the
Consolidated Income Statement and Statement of Financial Position
is analysed in the above paragraphs of this review between
performance at AER and CER. CER analysis compares the performance
of the business on a like-for-like basis applying constant exchange
rates.
Average rates
--------
2021 2020 % Change
-------- ------- ------ --------
GBP/EUR 1.1287 1.1396 (1.0%)
GBP/$ 1.3466 1.2601 6.9%
-------- ------- ------ --------
Currency Sensitivity
Euro EUR: a 1% variation in the GBP/EUR exchange rate affects
underlying diluted EPS by approximately +/- 0.4%.
US Dollar $: a 1% variation in the GBP/$ exchange rate affects
underlying diluted EPS by approximately +/- 0.4%.
Current exchange rates are GBP/EUR 1.1646 and GBP/$ 1.3763 as at
1 September 2021. If these rates had applied throughout the year,
the underlying diluted EPS would have been approximately 2.5%
lower.
Statement of Financial Position
The Statement of Financial Position is summarised in the table
below.
-- Non-current assets (excluding deferred tax) increased from
GBP786.0 million to GBP819.9 million and includes the intangible
assets recognised on the acquisitions of Osurnia and the marketing
rights for Tri-Solfen(R) in ANZ, partly offset by amortisation of
acquired intangibles.
-- Working capital has increased from GBP116.5 million to
GBP142.7 million (GBP26.2 million at AER, GBP36.0 million cash flow
impact) mainly due to an increase in inventory due to the growth of
the Group, including stockholdings for Osurnia and Mirataz, and
also to maintain service levels during a period of uncertainty.
-- Net debt has increased in the year by GBP72.6 million from
GBP127.6 million to GBP200.2 million; this includes cash generation
from operations at GBP141.2 million, an outflow of GBP106.5 million
relating to the acquisition of Osurnia, net capital expenditure of
GBP19.8 million, interest/tax outflows of GBP51.6 million and
GBP37.9 million in dividends. Exchange rate variations positively
impacted the net debt position by GBP15.5 million.
-- Current and deferred tax has reduced from GBP78.7 million to
GBP45.8 million principally due to the realisation of deferred
tax
liabilities relating to the amortisation of acquired
intangibles.
2021 2020
GBPm GBPm
--------------------- ------- -------
Non-current assets 819.9 786.0
Working capital 142.7 116.5
Net debt (200.2) (127.6)
Current and deferred
tax (45.8) (78.7)
Other liabilities (83.7) (58.7)
--------------------- ------- -------
Total net assets 632.9 637.5
--------------------- ------- -------
Cash Flow, Financing and Liquidity
The Group enjoyed good cash generation during the year, with a
strong Underlying EBITDA margin of 29.2% (2020: 27.7%). However, as
mentioned above, working capital has increased by GBP36.0 million,
mainly due to increases in inventory as a result of additional
stock cover due to growth of the Group's trading activities,
including the acquisitions of Mirataz and Osurnia. This resulted in
net cash generated from operations of GBP141.2 million,
representing cash conversion of 87.1% of underlying operating
profit.
2021 2020
GBPm GBPm
------------------------------ ------ -----
Underlying operating
profit 162.2 128.3
Depreciation and amortisation 15.5 14.2
Underlying EBITDA 177.7 142.5
Underlying EBITDA
% 29.2% 27.7%
Working capital movement (36.0) (8.7)
Other 2.5 1.0
Cash generated from
operations before
interest, taxation
and non-underlying
items 144.2 134.8
Non-underlying items (3.0) (7.3)
Cash generated from
operations before
interest and taxation 141.2 127.5
Cash conversion (%) 87.1% 99.4%
------------------------------ ------ -----
Net Debt Bridge
Notable cash items are listed below in the net debt
reconciliation table:
-- Net capital expenditure on tangible assets increased to
GBP19.8 million (2020: GBP14.2 million), representing 1.8 times
depreciation.
-- Acquisitions of subsidiaries, intangible assets and
investment in associates of GBP116.3 million includes the
acquisition of Osurnia (GBP106.5 million), the additional
investment in Medical Ethics (GBP0.8 million) and capitalised
development expenditure including milestones on licensing
arrangements.
-- The net debt/underlying EBITDA leverage ratio per the
borrowing facilities' leverage covenant, which includes the
proforma adjustment to full year EBITDA for the acquisitions, was
1.1 times (2020: 0.8 times) versus a covenant of 3 times.
GBPm
-------------------------- -------
Net Debt 30 June 2020 (127.6)
Net cash generated from
operations before
non-underlying items 144.2
Non-underlying items (3.0)
Net capital expenditure (19.8)
Acquisition of intangible
assets (114.6)
Investment in associates (0.8)
Acquisition of subsidiary (0.9)
New lease liabilities (5.8)
Interest and tax (51.6)
Dividend paid (37.9)
Other movements 2.3
Other non-cash movements (0.2)
Foreign exchange on net
debt 15.5
-------------------------- -------
Net Debt 30 June 2021 (200.2)
-------------------------- -------
Borrowing Facilities
As reported in preceding Annual Reports, the Group completed a
refinancing and entered into a multi-currency facilities agreement
in July 2017 (the Facility Agreement), with a group of banks
comprising Bank of Ireland (UK) plc, BNP Paribas, Fifth Third Bank,
HSBC Bank plc, Lloyds Bank plc (replaced by Credit Industriel et
Commercial, London branch (CIC) in August 2019), Raiffeisen Bank
International AG and Santander UK plc (the Banks). The Facility
agreement has a revolving credit facility (the RCF) of GBP340.0
million, which is committed until July 2024.
In January 2020 the Group undertook a Private Placement raising
EUR50.0 million and USD 100.0 million (under seven and ten year new
senior secured notes respectively), the proceeds of which were used
to repay existing debt. The placement achieved the Group's aims of
diversifying the sources of debt financing and extending the debt
maturity profile.
On 4 June 2020 the Group successfully completed a share placing
of 5,132,500 new ordinary shares, representing approximately 5% of
the existing issued share capital of the Company, at a price of
2600 pence per placing share, raising gross proceeds of GBP133.4
million which were largely deployed to fund the Osurnia acquisition
upon its completion on 27 July 2020.
Covenants
There are two covenants governing the RCF and the Private
Placement:
-- Leverage: Net Debt to underlying EBITDA not greater than 3:1
for the RCF and 3.5:1 for the Private Placement (30 June 2021:
1.1:1); and
-- Interest Cover: underlying EBITDA to Net Finance Charges not
less than 4:1 (30 June 2021: 22.8:1).
The above ratios are calculated excluding the impact of IFRS16
and having adjusted for the pro-forma impact of acquisitions in
accordance with the terms of the RCF and Private Placement
arrangements.
The current RCF is committed and has a non-utilisation fee of
35.0% of the applicable margin. The margin over LIBOR (or
equivalent) ranges from 1.3% for leverage below 1.0 times, up to
2.2% for leverage above 2.5 times.
The weighted average coupon of the Private Placement fixed rate
notes will equate to 2.8%.
Return on Capital Employed (ROCE)
ROCE increased to 18.8% in the year (2020: 15.4%) reflecting the
increased contribution from the Group's existing businesses.
Acquisitions
The Group has made several acquisitions in recent years. The
incremental performance during the first year of ownership of the
acquisitions made during the 2020 and 2021 financial years is
separately summarised compared to the existing business in the
sections above.
In July 2020, the Group completed the acquisition of the
worldwide product rights to Osurnia from Elanco for consideration
of
GBP106.5 million. The addition of Osurnia significantly enhances
the Dechra portfolio and complements the existing product offering
to veterinarians. The acquisition was financed from the equity
placing in June 2020.
In February 2021 the Group acquired the Australian and New
Zealand marketing rights for Tri-Solfen(R) from Animal Ethics Pty
Ltd, a related party, for a total consideration of GBP17.2 million
with an upfront payment of GBP2.8 million made on signing and the
balance paid on the first commercial sale by Dechra in July 2021.
This acquisition allows us to create a meaningful FAP presence in
these markets. The acquisition was financed from the Group's
existing working capital resources.
In February 2021, the Group also acquired an additional 1.5% of
the shares of Medical Ethics Pty Ltd for a consideration of GBP0.8
million. This takes the Dechra Group shareholding to 49.5%. The
acquisition was financed from the Group's existing working capital
resources.
Accounting Standards
The accounting policies adopted are outlined in note 1 to the
Accounts. There are no accounting policy changes which have
materially impacted the 2021 financial year.
Going Concern
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis of accounting in preparing these annual financial
statements.
In reaching this conclusion, the Directors have given due regard
to the following:
-- The Group's business activities together with factors likely
to impact the future growth and operating performance;
-- The financial position of the Group, its cash flows,
available debt facilities and compliance with the financial
covenants associated with the Group's borrowings, which are
described in the financial statements; and
-- The cash generated from operations, available cash resources
and committed bank facilities and their maturities, which taken
together, provide confidence that the Group will be able to meet
its obligations as they fall due.
As at 30 June 2021, the Group had net debt of GBP200.2 million
(2020: net debt of GBP127.6 million), and had available cash
balances and unutilised committed borrowing facilities of GBP281.9
million.
Summary
Our business has benefited from strong market fundamentals which
accelerated growth in our existing business. This excellent revenue
performance has been facilitated by a much improved supply chain
and supplemented by healthy incremental contributions from our
global product acquisitions of Mirataz and Osurnia.
We have again increased our R&D expenditure and invested
heavily in our people, although certain SG&A costs were lower
in the year as a result of COVID-19.
The Group's balance sheet is strong, enabling us to continue to
consider further relevant acquisition and investment opportunities
as they arise.
Paul Sandland
Chief Financial Officer
6 September 2021
Key Performance Indicators
1. Existing Revenue Growth
Year-on-year CER sales growth including new products and excluding revenue
from acquired businesses.
Commentary
Dechra's existing business grew by 16.7% in EU Pharmaceuticals
(excluding third party contract manufacturing which
declined), and by 16.7% in NA Pharmaceuticals.
Up 16.2% Relevance to Strategy
2021: GBP584.0m A key driver of our strategy is to deliver sustainable
2020: GBP515.1m sales growth through delivering our pipeline, maximising
2019: GBP481.8m our existing portfolio and expanding geographically.
2018: GBP407.1m
2017: GBP359.3m
----------------------- --------------------------------------------------------------
2. Underlying Diluted EPS Growth
Underlying profit after tax divided by the diluted average number of
shares, calculated on the same basis as note 9 to the Accounts.
Commentary
This includes a 29.2% increase in underlying operating
profit, offset by higher net finance costs, tax charges
and the full year impact of the equity placing in
June 2020.
Up 19.4% Relevance to Strategy
2021: 108.14p Underlying diluted EPS is a key indicator of our
2020: 92.19p performance and the return we generate for our stakeholders.
2019: 90.01p It is one of the performance conditions of the LTIP.
2018: 76.45p
2017: 64.33p
----------------------- -------------------------------------------------------------
3. Underlying Return on Capital Employed
Underlying operating profit expressed as a percentage of the average
of the opening and closing operating assets
(excluding cash/debt and net tax liabilities).
Commentary
There was an increase in ROCE during the year reflecting
the increased contribution from the Group's existing
business. The Group's target is 15%.
Up 340bps Relevance to Strategy
2021: 18.8% As we look to grow the business, it is important
2020: 15.4% that we use our capital efficiently to generate returns
2019: 15.6% superior to our cost of capital in the medium to
2018: 15.4% long term. It underpins the performance conditions
2017: 17.7% of the LTIP.
----------------------- --------------------------------------------------------
4. Cash Conversion
Cash generated from operations before tax and interest payments as a
percentage of underlying operating profit.
Commentary
Cash conversion decreased during the year as a result
of increased working capital. This was primarily
due to increases in inventory as a result of additional
stock cover due to the growth of the Group's trading
activities including the acquisition of Mirataz and
Osurnia.
Down 1230bps Relevance to Strategy
2021: 87.1% Our stated aim is to be a cash generative business.
2020: 99.4% Cash generation supports investment in the pipeline,
2019: 85.0% acquisitions and people.
2018: 81.9%
2017: 115.9%
----------------------- --------------------------------------------------------
5. New Product Revenue
Revenue from new products as a percentage of total Group revenue. A
new product is defined as any molecule launched in the
last five financial years.
Commentary
New product revenues reflect the strong market penetration
of products launched in the year to 30 June 2021
and the previous four years, including the acquisitions
of Osurnia and Mirataz.
Relevance to Strategy
Up 370bps This measure shows the delivery of revenue in each
2021: 20.4% year from new products launched in the prior five
2020: 16.7% years, on a rolling basis. It shows the performance
2019: 16.7% of our R&D and sales and marketing organisations
2018: 11.9% when launching newly developed or in-licensed or
2017: 7.9% acquired products.
----------------------- ----------------------------------------------------------
6. Lost Time Accident Frequency Rate (LTAFR)
All accidents resulting in the absence or inability of employees to
conduct the full range of their normal working activities for
a period of more than three working days after the day when the incident
occurred, normalised per 100,000 hours worked.
Commentary
The LTAFR decreased from 0.17 to 0.09. None of these
incidents resulted in a work-related fatality or
disability.
Down 47.1% Relevance to Strategy
2021: 0.09 The safety of our employees is core to everything
2020: 0.17 we do. We are committed to a strong culture of safety
2019: 0.21 in all our workplaces.
2018: 0
2017: 0.26
----------------------- ------------------------------------------------------
7. Employee Turnover
Number of leavers during the period as a percentage of the average total
number of employees in the period.
Commentary
We saw an increase in employee turnover in the period
due to the planned closure of the Mexican manufacturing
facility in October 2020.
Up 110bps Relevance to Strategy
2021: 13.5% Attracting and retaining the best employees is critical
2020: 12.4% to the successful execution of our strategy.
2019: 13.6%
2018: 15.9%
2017: 15.7%
----------------------- --------------------------------------------------------
How the Business Manages Risk
Effective risk management and control is key to the delivery of
our business strategy and objectives.
Our risk management and control processes are designed to
identify, assess, mitigate and monitor significant risks, and
provide
reasonable but not absolute assurance that the Group will be
successful in delivering its objectives.
Risk Management Process
Our strategy informs the setting of objectives across the
business and is widely communicated. Strategic risks and
opportunities are identified as an integral part of our strategy
setting process, whilst operational, financial, compliance and
emerging risks are identified as an integral part of our functional
planning and budget setting processes.
The Board oversees the risk management and internal control
framework and the Audit Committee reviews the effectiveness of the
risk management process and the internal control framework.
Our Senior Executive Team (SET) owns the risk management process
and is responsible for managing specific Group risks. The SET
members are also responsible for embedding sound risk management in
strategy, planning, budgeting, performance management, and
operational processes within their respective Operating Segments
and business units.
The Board and the SET together set the tone and decide the level
of risk and control to be taken in achieving the Group's
objectives.
SET members present their risks, controls and mitigation plans
to the Board for review on a rolling programme throughout the year,
whilst the Board undertake a full review of the risk management
process biannually. The SET is responsible for conducting
self-assessments of their risks and the effectiveness of their
control processes. Where control weaknesses are identified,
remedial action plans are developed, and these are included in the
risk reports presented to the Board.
Internal Audit coordinate the ongoing risk reporting process and
provide independent assurance on the internal control
framework.
Emerging Risks
Emerging risks are new risks that are unlikely to impact the
business in the next year but have the potential to evolve rapidly
over a longer term and could have a significant impact on our
ability to achieve our objectives. They may develop into key risks
or may not arise at all.
As part of our risk management process, both the Board and SET
are tasked with identifying and assessing our emerging risks. These
are then monitored on an ongoing basis and reviewed alongside
existing risks.
COVID-19
We have continued to operate our risk management and control
processes effectively throughout the COVID-19 pandemic, including a
formal assessment of emerging risks, climate risk and the potential
longer-term impact of COVID-19 on the business.
The operational impact of COVID-19 on the business during the
last financial year and the actions we have taken in response are
described in various parts of the Strategic and Governance Reports.
Whilst the virus has had an impact on how we conduct our
operational activities, we have continued to operate successfully
throughout the pandemic in all of our worldwide locations. We have
not needed to use any government support or job retention schemes,
and have maintained and in some cases increased our headcount
during the year.
Sales have continued to grow throughout the financial year
against the backdrop globally of COVID-19 limiting the impact on
business performance, whilst recognising that risks around our
people and travel restrictions still exist. Given the developing
global responses to COVID-19 we remain cautious and will continue
to monitor and respond to further changes where needed.
Dechra Culture
The Dechra Values are the foundation of our entire business
culture including our approach to risk management and control. The
Board expects that these Values should drive the behaviours and
actions of all employees. We encourage an open communication style
where it is normal practice to escalate issues promptly so that
appropriate action can be taken quickly to minimise any impact on
the business.
Internal Control Framework
Our internal control framework is designed to ensure:
-- proper financial records are maintained;
-- the Group's assets are safeguarded;
-- compliance with laws and regulations; and
-- effective and efficient operation of business processes.
The key elements of the control framework are described
below:
Management Structure
Our management structure has clearly defined reporting lines,
accountabilities and authority levels. The Group is organised into
business units. Each business unit is led by a SET member and has
its own management team.
Policies and Procedures
Our key financial, legal and compliance policies that apply
across the Group are:
-- Code of Business Conduct and How to Raise a Concern;
-- Delegation of Authorities;
-- Dechra Finance Manual, including Tax and Treasury policies;
-- Anti-Bribery and Anti-Corruption;
-- Data Protection;
-- Health and Safety;
-- Sanctions; and
-- Charitable Donations.
Strategy and Business Planning
We have a five-year strategic plan which is developed by the SET
and endorsed by the Board annually. Business objectives and
performance measures are defined annually, together with budgets
and forecasts. Monthly business performance reviews are conducted
at both Group and business unit levels.
Operational Controls
Our key operational control processes are as follows:
-- Product Pipeline Reviews: We review our pipeline regularly to
identify new product ideas and assess the fit to our product
portfolio, prioritise development projects, review whether products
in development are progressing according to schedule, and assess
the expected commercial return on new products.
-- Lifecycle Management: We manage and monitor lifecycle
management activities for our key products to meet evolving
customer needs.
-- Pricing Policies: We manage and monitor our national and
European pricing policies to deliver equitable pricing for each
customer group.
-- Product Supply: We continue to develop our demand forecasting
and supply planning processes, with monthly reviews of demand and
production forecasts, inventory controls, and remediation plans for
products that are out of supply.
-- Quality Assurance: Each of our manufacturing sites has an
established Quality Management System. These systems are designed
to ensure that our products are manufactured to a high standard and
in compliance with the relevant regulatory requirements.
-- Pharmacovigilance: Our regulatory team operates a robust
system with a view to ensuring that any adverse reactions and
product complaints related to the use of our products are reported
and dealt with promptly.
-- Financial Controls: Our controls are designed to prevent and
detect financial misstatement or fraud and operate at three
levels:
- Entity Level Controls performed by senior managers at Group and business unit level;
- Month end and year end procedures performed as part of our
regular financial reporting and management processes; and
- Transactional Level Controls operated on a day-to-day basis.
The key controls in place to manage our principal risks are
described in the Understanding Our Key Risks. Internal Audit
provides independent and objective assurance and advice on the
design and operation of the Group's internal control framework. The
internal audit plan seeks to provide balanced coverage of the
Group's material financial, operational and compliance control
processes.
Improvements in 2021
We have continued to strengthen and improve our governance and
control processes and the following changes have been
implemented:
-- New governance and oversight processes to provide
transparency of performance, decisions and actions across the
manufacturing and supply network.
-- Recruitment of a new Group Quality Director to review and
coordinate the Group approach to quality.
-- Recruitment of a new Internal Network Director to strengthen the management of our internal manufacturing sites.
-- We have continued to make improvements to our manufacturing,
quality and supply processes, with additional investments in people
and production facilities.
-- Refreshed and relaunched our Code of Business Conduct, with a
commitment to host our How to Report a Concern Procedure
externally.
-- Expansion of our financial control framework ahead of the
proposed government BEIS report on audit and corporate governance,
with a working group established to shape our preparation; and
-- Our Environmental, Social and Governance (ESG) strategy has
been enhanced with the appointment of a Group Sustainability
Director, with an assessment underway to assess our climate risks
further.
Plans for 2022
We will continue to refine and strengthen our internal control
framework where required in response to changes in our risk profile
and improvement opportunities identified by business management,
quality assurance and internal audit. Our Manufacturing and Supply
processes continue to be the primary focus area for 2022.
We also plan to make further improvements and enhancements to
our financial control framework and our Group policies.
Understanding Our Key Risks
Link to
Strategic
Growth Driver Control and Mitigating
and Enabler Risk Potential Impact Actions Trends
-------------- ---------------------------- ---------------------------- --------------------------- -------------
Portfolio 1. Market Risk: The growth of corporate We manage and monitor No change
Focus The growth of veterinary customers and buying our national and European
buying groups and groups represents pricing policies to deliver
corporate customers an opportunity equitable pricing for
impacts the distribution to increase sales each customer group.
landscape. volumes and revenue Our relationships with
We sell and promote but may result larger customers are
primarily to veterinary in reduced margins. managed by key account
practices and distribute managers.
our products through Our marketing strategy
wholesaler and distributor is designed to support
networks in most veterinarians in retaining
markets. customers by promoting
In a number of mature the benefits of our product
markets, veterinarians portfolio in our major
have established therapeutic areas.
buying groups to
consolidate their
purchasing, and
corporate customers
are continuing to
expand.
-------------- ---------------------------- ---------------------------- --------------------------- -------------
Pipeline 2. Competitor Risk: Revenues and margins We focus on lifecycle No change
Delivery Competitor products may be adversely management strategies
Portfolio launched against affected should for our key products
Focus one of our leading competitors launch such that they can fulfil
Geographical brands (e.g. generics a novel or generic evolving customer
Expansion or a superior product product that competes requirements.
profile). with one of our Product patents are
We depend on data unique products monitored,
exclusivity periods upon the expiry and defensive strategies
or patents to have or early loss of are developed towards
exclusive marketing patents. the end of the patent
rights Costs may increase life or the data
for some of our due to defensive exclusivity
products. marketing activity. period.
Although we maintain We monitor market activity
a broad portfolio prior to competitor
of products, our products
unique products being launched and develop
like Vetoryl and a marketing response
Felimazole have strategy to mitigate
built a market which competitor impact.
continue to be attractive
to competitors.
-------------- ---------------------------- ---------------------------- --------------------------- -------------
Pipeline 3. Product Development A succession of Potential new development No change
Delivery and Launch Risk: clinical trial opportunities are assessed
Failure to deliver failures could from a commercial,
major products either adversely affect financial
due to pipeline our ability to and scientific perspective
delays or newly deliver shareholder by a multi-functional
launched products expectations team to allow senior
not meeting revenue and could also management to make
expectations. damage our reputation decisions
The development and relationship on which ones to progress.
of pharmaceutical with veterinarians. The pipeline is discussed
products is a complex, Our market position regularly by senior
risky and lengthy in key therapeutic management,
process involving areas could be including the Chief
significant financial, affected, resulting Executive
R&D and other resources. in reduced revenues Officer and Chief Financial
Products that initially and profits. Officer. Regular updates
appear promising Where we are unable are also provided to
may be delayed or to recoup the costs the Board.
fail to meet expected incurred in developing Each development project
clinical and launching a is managed by project
or commercial expectations product this would leaders who chair project
or face delays in result in impairment team meetings.
regulatory approval. of any intangible Before costly pivotal
It can also be difficult assets recognised. studies are initiated,
to predict whether smaller proof of concept
newly launched products pilot studies are conducted
will meet commercial to assess the effects
expectations. of the drug on target
species and for the target
indication.
In respect of all new
product launches a detailed
marketing plan is
established
and progress against
that plan is regularly
monitored by a new product
launch team.
The Group has detailed
market knowledge and
retains close contact
with customers through
its management and sales
teams which are trained
to a high standard.
-------------- ---------------------------- ---------------------------- --------------------------- -------------
Pipeline 4. Supply Chain Raw material supply We monitor the performance Decreased
Delivery Risk: failures may cause: of our key suppliers risk
Portfolio Inability to maintain -- increased product and act promptly to source
Focus supply of key products costs due to from alternative suppliers
Manufacturing due to manufacturing, difficulties where potential issues
and Supply quality or product in obtaining scarce are identified.
Chain supply problems materials on The top ten Group products
in our own facilities commercially are regularly reviewed
or from third party acceptable in order to identify
suppliers. terms; -- product the key suppliers of
We rely on third shortages due to materials or finished
parties for the manufacturing delays; products.
supply of all raw or -- delays in A dedicated external
materials for products clinical trials network team exist who
that we manufacture due to shortage manage and support our
in-house. We also of trial products. CMOs to deliver quality
purchase many of Shortages in products to our regulatory
our finished products manufactured specifications.
from third party products and third Demand forecasting and
manufacturers. party supply failures supply planning processes,
on finished products with monthly reviews
may result in lost of demand and production
sales. forecasts, inventory
We have now addressed levels, and remediation
the majority of plans for products that
our in-house quality are out of supply.
and supply challenges We plan to increase our
which contributed working capital and carry
to an increased higher levels of safety
supply chain risk stock on critical raw
last year, and materials, and finished
our enhanced products.
Governance Processes are in place
and controls in to monitor and improve
this area have product robustness,
seen including
a reduction in Quality and Technical
the risk here. analyses of key products
and engagement with
internal
and external Regulatory
stakeholders.
A business continuity
plan is in place at
Skipton,
Zagreb and Uldum, and
similar plans are being
developed for other sites.
A project is in progress
to review and improve
our supply planning
processes.
-------------- ---------------------------- ---------------------------- --------------------------- -------------
Pipeline 5. Regulatory Risk: Delays in regulatory The Group strives to No change
Delivery Failure to meet reviews and approvals exceed regulatory
Portfolio regulatory requirements. could impact the requirements
Focus We conduct our business timing of a product and ensure that its
Geographical in a highly regulated launch and have employees
Expansion environment, which a material effect have detailed experience
is designed to ensure on sales and margins. and knowledge of the
the safety, efficacy, Any changes made regulations.
quality, and ethical to the manufacturing, Manufacturing and
promotion of pharmaceutical distribution, marketing Regulatory
products. and safety surveillance teams have established
Failure to adhere processes of our quality systems and
to regulatory standards products may require standard
or to implement additional regulatory operating procedures
changes in those approvals, resulting in place.
standards could in additional costs A dedicated External
affect our ability and/or delays. Network Quality Director
to register, manufacture Non-compliance supports our CMOs in
or promote our products. with regulatory complying with our
requirements may regulatory
result in delays specifications.
to production Regular contact is
or lost sales. maintained
with all relevant
regulatory
bodies in order to build
and strengthen
relationships
and facilitate good
communication
lines.
The Regulatory and Quality
teams update their
knowledge
of regulatory developments
and implement changes
in business procedures
to comply with new
requirements.
Where changes are
identified
which could affect our
ability to market and
sell any of our products,
a response team is created
in order to mitigate
the risk.
External consultants
are used to audit our
manufacturing quality
systems.
-------------- ---------------------------- ---------------------------- --------------------------- -------------
Acquisition 6. Acquisition Risk: Failure to identify We have defined criteria Decreased
Identification of or secure suitable for screening acquisition risk
acquisition opportunities targets could slow targets, and we conduct
and their potential the pace at which commercial, clinical,
integration. we can expand into financial, environmental
Identification of new markets or and legal due diligence.
suitable opportunities grow our portfolio. The Board reviews
and securing a successful Acquisitions could acquisition
approach involves deliver lower profits plans and progress
a high degree of than expected or regularly
uncertainty. result in intangible and approves all potential
Acquired products assets impairment. transactions.
or businesses may The SET manages post
fail to deliver acquisition integration
expected returns and monitors the delivery
due to over-valuation of benefits and returns
or integration challenges. through
a defined process. Whilst
acquisition activity
has reduced across the
year, our defined processes
and acquisition team
strength have seen a
reduced risk against
a backdrop of no global
travel.
-------------- ---------------------------- ---------------------------- --------------------------- -------------
Geographical 7. People Risk: Failure to recruit The Group HR Director No change
Expansion Failure to resource or develop quality reviews the organisational
Acquisition the business to people could result structure with the SET
People achieve our strategic in: and the Board twice a
ambitions, particularly -- capability gaps year to confirm that
on geographical in new markets. the organisation is fit
expansion and acquisition. -- challenges in for purpose and to assess
As Dechra expands integrating new the resourcing implications
into new markets acquisitions; or of planned changes or
and acquires new -- overstretched strategic imperatives.
businesses or science, resources. A development programme
we recognise that This could delay is in place to identify
we may need new implementation opportunities to recruit
people with different of our strategy new talent and develop
skills, experience and we may not existing potential. A
and cultural knowledge meet shareholders' new talent acquisition
to execute our strategy expectations. team and applicant tracking
successfully in software have been embedded
those markets and in the year.
business areas.
-------------- ---------------------------- ---------------------------- --------------------------- -------------
Portfolio 8. Antimicrobials Reduction in sales Regular contact is Increased
Focus Regulatory of our antimicrobial maintained risk
Geographical Risk: product range. with relevant veterinary
Expansion Continuing pressure Our reputation authorities to enable
on reducing antimicrobial could be adversely us to have a comprehensive
use. impacted if we understanding of regulatory
The issue of the do not respond changes.
potential transfer appropriately to We strive to develop
of antibacterial government regulations new products and minimise
resistance from and recommendations. antimicrobial resistance
animals to humans concerns.
is subject to regulatory We communicate appropriate
discussions globally. antimicrobial use in
In the EU new veterinary line with best practice.
regulations are
likely to come into
force in January
2022 to reduce the
use of antimicrobials
in animals.
-------------- ---------------------------- ---------------------------- --------------------------- -------------
Pipeline 9. Retention of Loss of key skills The Nomination Committee No change
Delivery People Risk: and experience oversees succession
Portfolio Failure to retain could erode our planning
Focus high calibre, talented competitive advantage for the Board and the
People senior managers and could have SET.
and other key roles an adverse impact Succession plans are
in the business. on results. in place for the SET
Our growth plans Inability to attract together with development
and future success and retain plans for key senior
are dependent on key personnel managers.
retaining knowledgeable may weaken succession Remuneration packages
and experienced planning. are reviewed on an annual
senior managers basis in order to help
and key staff. ensure that the Group
can continue to retain,
incentivise and motivate
its employees.
-------------- ---------------------------- ---------------------------- --------------------------- -------------
Pipeline 10. Climate: Damage to our facilities The Sustainability Director New
Delivery Severe weather patterns as a result of and Risk team are engaged
Portfolio caused by climate climate change identifying the current
Focus change or natural could impact our risk threats and
People disaster causes abilities to both opportunities
damage to manufacturing supply and manufacture across the Group sites.
or distribution product, which Whilst there has been
facilities impacting may weaken customer previous work in this
our ability to meet confidence and area, the Group has a
customer demand. impact performance, renewed focus and
both over a shorter commitment
and longer term. towards its ESG
Natural disaster responsibilities.
could impact on
local employability
and the communities
in which our sites
are based.
-------------- ---------------------------- ---------------------------- --------------------------- -------------
Consolidated Income Statement
For the year ended 30 June 2021
2021 2020
-------------------------------- ----
Non- Non-
underlying* underlying*
(notes (notes
3, 4 & 3, 4 &
Underlying 5) Total Underlying 5) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ---- ---------- ------------ ------- ---------- ------------ -------
Revenue 2 608.0 - 608.0 515.1 - 515.1
Cost of sales (262.1) - (262.1) (223.5) - (223.5)
-------------------------------- ---- ---------- ------------ ------- ---------- ------------ -------
Gross profit 345.9 - 345.9 291.6 - 291.6
Selling, general and administrative
expenses (151.3) (73.8) (225.1) (134.9) (70.4) (205.3)
Research and development
expenses (32.4) (4.4) (36.8) (28.4) (5.7) (34.1)
-------------------------------- ---- ---------- ------------ ------- ---------- ------------ -------
Operating profit 2 162.2 (78.2) 84.0 128.3 (76.1) 52.2
Finance income 3 - 3.8 3.8 3.0 - 3.0
Finance expense 4 (11.7) (1.0) (12.7) (11.5) (2.5) (14.0)
Share of (loss)/profit
of investments accounted
for using the equity
method 6 (0.4) (0.7) (1.1) 0.3 (0.6) (0.3)
-------------------------------- ---- ---------- ------------ ------- ---------- ------------ -------
Profit before taxation 150.1 (76.1) 74.0 120.1 (79.2) 40.9
Income taxes 7 (32.5) 14.0 (18.5) (24.7) 17.7 (7.0)
-------------------------------- ---- ---------- ------------ ------- ---------- ------------ -------
Profit for the year 117.6 (62.1) 55.5 95.4 (61.5) 33.9
-------------------------------------- ---------- ------------ ------- ---------- ------------ -------
Earnings per share
Basic 9 51.33p 32.87p
Diluted 9 51.03p 32.76p
-------------------------------- ---- ---------- ------------ ------- ---------- ------------ -------
Dividend per share
(interim paid and
final proposed for
the year) 8 40.50p 34.29p
-------------------------------- ---- ---------- ------------ ------- ---------- ------------ -------
* The Group presents a number of non-GAAP Alternative
Performance Measures (APMs). This allows investors to understand
better the underlying performance of the Group, by excluding
non-underlying items as set out in note 5.
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2021
2021 2020
Note GBPm GBPm
--------------------------------------------------------- ---- ------ -----
Profit for the year 55.5 33.9
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to
profit or loss:
Foreign currency cash flow hedges
- fair value movements (1.7) 0.1
Foreign currency translation differences for
foreign operations (28.0) (7.1)
Income tax relating to components of other comprehensive
(expense)/income 7 (0.2) 1.8
--------------------------------------------------------- ---- ------ -----
(29.9) (5.2)
--------------------------------------------------------- ---- ------ -----
Total comprehensive income for the period 25.6 28.7
--------------------------------------------------------- ---- ------ -----
Consolidated Statement of Financial Position
At 30 June 2021
2021 2020
Note GBPm GBPm
------------------------------------- ---- ------- -------
ASSETS
Non-current assets
Intangible assets 10 715.8 692.2
Property, plant and equipment 87.0 76.4
Investments 6 17.1 17.4
Deferred tax assets 11 2.0 2.7
------------------------------------- ---- ------- -------
Total non-current assets 821.9 788.7
------------------------------------- ---- ------- -------
Current assets
Inventories 149.5 120.8
Current tax receivables 17.6 6.8
Trade and other receivables 106.7 93.9
Cash and cash equivalents 118.4 227.4
------------------------------------- ---- ------- -------
Total current assets 392.2 448.9
------------------------------------- ---- ------- -------
Total assets 1,214.1 1,237.6
------------------------------------- ---- ------- -------
LIABILITIES
Current liabilities
Borrowings and lease liabilities 12 (3.1) (4.6)
Trade and other payables (113.5) (98.2)
Contingent consideration 15 (22.6) (8.9)
Current tax liabilities (16.6) (25.6)
------------------------------------- ---- ------- -------
Total current liabilities (155.8) (137.3)
------------------------------------- ---- ------- -------
Non-current liabilities
Borrowings and lease liabilities 12 (315.5) (350.4)
Contingent consideration 15 (57.6) (47.3)
Provisions 13 (3.5) (2.5)
Deferred tax liabilities 11 (48.8) (62.6)
------------------------------------- ---- ------- -------
Total non-current liabilities (425.4) (462.8)
------------------------------------- ---- ------- -------
Total liabilities (581.2) (600.1)
------------------------------------- ---- ------- -------
Net assets 632.9 637.5
------------------------------------- ---- ------- -------
EQUITY
Issued share capital 1.1 1.1
Share premium account 411.6 409.3
Hedging reserve - -
Foreign currency translation reserve (11.9) 16.3
Merger reserve 84.4 84.4
Retained earnings 147.7 126.4
------------------------------------- ---- ------- -------
Total equity 632.9 637.5
------------------------------------- ---- ------- -------
The financial statements were approved by the Board of Directors
on 6 September 2021 and are signed on its behalf by:
Ian Page
Chief Executive Officer
6 September 2021
Paul Sandland
Chief Financial Officer
6 September 2021
Company number: 3369634
Consolidated Statement of Changes in Shareholders' Equity
For the year ended 30 June 2021
Foreign
Issued Share currency
share premium Hedging translation Merger Retained Total
capital account reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- -------- -------- ------------ -------- --------- -------
Year ended 30 June 2020
At 1 July 2019 1.0 277.9 - 21.6 84.4 124.2 509.1
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Profit for the period - - - - - 33.9 33.9
Foreign currency cash flow
hedge
- fair value movements - - 0.1 - - - 0.1
Foreign currency translation
differences for foreign operations - - - (7.1) - - (7.1)
Income tax relating to components
of other comprehensive income/(expense) - - - 1.8 - - 1.8
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Total comprehensive income/(expense) - - 0.1 (5.3) - 33.9 28.7
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Reclassified to cost of acquired
intangibles - - (0.1) - - - (0.1)
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Transactions with owners:
Dividends paid - - - - - (33.3) (33.3)
Share-based payments - - - - - 1.6 1.6
Shares issued 0.1 131.4 - - - - 131.5
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Total contributions by and
distributions to owners 0.1 131.4 - - - (31.7) 99.8
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
At 30 June 2020 1.1 409.3 - 16.3 84.4 126.4 637.5
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Year ended 30 June 2021
At 1 July 2020 1.1 409.3 - 16.3 84.4 126.4 637.5
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Profit for the period - - - - - 55.5 55.5
Foreign currency cash flow
hedge
- fair value movements - - (1.7) - - - (1.7)
Foreign currency translation
differences for foreign operations - - - (28.0) - - (28.0)
Income tax relating to components
of other comprehensive expense - - - (0.2) - - (0.2)
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Total comprehensive (expense)/income - - (1.7) (28.2) - 55.5 25.6
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Reclassified to cost of acquired
intangibles - - 1.7 - - - 1.7
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Transactions with owners:
Dividends paid - - - - - (37.9) (37.9)
Share-based payments - - - - - 3.7 3.7
Shares issued - 2.3 - - - - 2.3
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Total contributions by and
distributions to owners - 2.3 - - - (34.2) (31.9)
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
At 30 June 2021 1.1 411.6 - (11.9) 84.4 147.7 632.9
------------------------------------------ -------- -------- -------- ------------ -------- --------- -------
Hedging Reserve
The hedging reserve represents the cumulative fair value gains
or losses on derivative financial instruments for which cash flow
hedge accounting has been applied, net of tax.
Foreign Currency Translation Reserve
The foreign currency translation reserve contains exchange
differences on the translation of subsidiaries with a functional
currency other than Sterling and exchange gains or losses on the
translation of liabilities that hedge the Company's net investment
in foreign subsidiaries.
Merger Reserve
The merger reserve represents the excess of fair value over
nominal value of shares issued in consideration for the acquisition
of subsidiaries where statutory merger relief has been applied in
the financial statements of the Parent Company.
Consolidated Statement of Cash Flows
For the year ended 30 June 2021
2021 2020
Note GBPm GBPm
------------------------------------------------------ ---- ------- -------
Cash flows from operating activities
Operating profit 84.0 52.2
Non-underlying items 5 78.2 76.1
------------------------------------------------------ ---- ------- -------
Underlying operating profit 162.2 128.3
Adjustments for:
Depreciation 2 11.0 9.9
Amortisation and impairment 2 4.5 4.3
Release of government grant (0.6) (0.5)
Loss on disposal of intangible assets 0.3 -
Equity settled share-based payment expense 2.8 1.5
------------------------------------------------------ ---- ------- -------
Underlying operating cash flow before changes
in working capital 180.2 143.5
Increase in inventories (36.6) (15.7)
(Increase)/decrease in trade and other receivables (19.7) 6.9
Increase in trade and other payables 20.3 0.1
------------------------------------------------------ ---- ------- -------
Cash generated from operating activities before interest,
taxation and non-underlying items 144.2 134.8
Cash outflows in respect of non-underlying items (3.0) (7.3)
------------------------------------------------------ ---- ------- -------
Cash generated from operating activities before
interest and taxation 141.2 127.5
Interest paid (7.7) (7.8)
Interest on lease liabilities (0.5) (0.4)
Income taxes paid (43.9) (12.9)
------------------------------------------------------ ---- ------- -------
Net cash inflow from operating activities 89.1 106.4
------------------------------------------------------ ---- ------- -------
Cash flows from investing activities
Proceeds from disposal of tangible assets 0.2 0.2
Proceeds from disposal of intangible assets 0.2 -
Interest received - 0.3
Acquisition of subsidiaries (net of cash acquired) (0.9) (25.2)
Acquisition of investment in associates 6 (0.8) (7.6)
Purchase of property, plant and equipment (18.9) (7.8)
Capitalised development expenditure (1.3) (1.3)
Purchase of other intangible non-current assets (114.6) (40.1)
------------------------------------------------------ ---- ------- -------
Net cash outflow from investing activities (136.1) (81.5)
------------------------------------------------------ ---- ------- -------
Cash flows from financing activities
Proceeds from the issue of share capital 2.3 131.5
New borrowings - 297.3
Expenses of raising borrowing facilities - (1.7)
Repayment of borrowings (15.9) (271.7)
Principal elements of lease payments (3.6) (3.2)
Dividends paid 8 (37.9) (33.3)
------------------------------------------------------ ---- ------- -------
Net cash (outflow)/inflow from financing activities (55.1) 118.9
------------------------------------------------------ ---- ------- -------
Net (decrease)/increase in cash and cash equivalents (102.1) 143.8
Cash and cash equivalents at start of period 227.4 80.3
Exchange differences on cash and cash equivalents (6.9) 3.3
------------------------------------------------------ ---- ------- -------
Cash and cash equivalents at end of period 118.4 227.4
------------------------------------------------------ ---- ------- -------
Reconciliation of net cash flow to movement in
net borrowings
Net (decrease)/increase in cash and cash equivalents (102.1) 143.8
New borrowings and lease liabilities (5.8) (302.8)
Repayment of borrowings and lease liabilities 20.0 275.3
Expenses of raising borrowing facilities - 1.7
Acquisition of subsidiary borrowings and lease
liabilities - (0.1)
Changes in accounting policy for leases - (12.7)
Exchange differences on cash and cash equivalents (6.9) 3.3
Retranslation of foreign borrowings 22.4 (6.3)
Other non-cash changes (0.2) (2.0)
------------------------------------------------------ ---- ------- -------
Movement in net borrowings in the period (72.6) 100.2
Net borrowings at start of period (127.6) (227.8)
------------------------------------------------------ ---- ------- -------
Net borrowings at end of period (200.2) (127.6)
------------------------------------------------------ ---- ------- -------
Cash conversion is defined as cash generated from operating
activities before interest and taxation as a percentage of
underlying operating profit.
Notes to the Consolidated Financial Statements
1. Status of Accounts
These summary financial statements have been prepared in
accordance with International accounting standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applied in the European Union.
The Board of Directors approved the preliminary announcement on
6 September 2021.
2. Operating Segments
The Group has three reportable segments, as discussed below,
which are based on information provided to the Board of Directors,
which is deemed to be the Group's chief operating decision maker.
Several operating segments which have similar economic
characteristics have been aggregated into the reporting segments.
In undertaking this aggregation, the assessment determined that the
aggregated segments have similar products, production processes,
customers and overall regulatory environments.
The European Pharmaceuticals Segment comprises Dechra Veterinary
Products EU, Dechra Veterinary Products International and Dechra
Pharmaceuticals Manufacturing. This Segment operates
internationally and manufactures and markets Companion Animal,
Equine, Food producing Animal Products and Nutrition. This Segment
also includes third party manufacturing and other revenues from
non-core activities.
The North American Pharmaceuticals Segment consists of Dechra
Veterinary Products US, Dechra Veterinary Products Canada, and
Dechra Produtas Veterinarios (Mexico), which sells Companion
Animal, Equine and Food producing Animal Products in those
territories. The Segment also includes our manufacturing units
based in Melbourne, Florida and Fort Worth, Texas. This Segment
also includes third party manufacturing and other revenues from
non-core activities.
The Pharmaceuticals Research and Development Segment includes
all of the Group's pharmaceutical research and development
activities. This Segment has no revenue. Reconciliation of
reportable segment revenues, profit or loss and liabilities and
other material items:
2021 2020
GBPm GBPm
------------------------------------------------------------- ------- -------
Revenue by segment
European Pharmaceuticals 388.5 323.5
NA Pharmaceuticals 219.5 191.6
------------------------------------------------------------- ------- -------
608.0 515.1
------------------------------------------------------------- ------- -------
Underlying operating profit/(loss) by segment
European Pharmaceuticals 127.8 100.0
NA Pharmaceuticals 75.9 63.7
Pharmaceuticals Research and Development (32.4) (28.4)
------------------------------------------------------------- ------- -------
Underlying segment operating profit 171.3 135.3
Corporate and other unallocated costs (9.1) (7.0)
------------------------------------------------------------- ------- -------
Underlying operating profit 162.2 128.3
Amortisation of acquired intangibles (75.2) (69.6)
Rationalisation of manufacturing organisation (1.6) (2.2)
Expenses relating to acquisitions and subsequent integration
activities (1.4) (4.3)
------------------------------------------------------------- ------- -------
Total operating profit 84.0 52.2
Finance income 3.8 3.0
Finance expense (12.7) (14.0)
Share of losses in investment accounted for using
the equity method (1.1) (0.3)
------------------------------------------------------------- ------- -------
Profit before taxation 74.0 40.9
------------------------------------------------------------- ------- -------
Total liabilities by segment
European Pharmaceuticals (137.5) (110.3)
NA Pharmaceuticals (60.5) (53.1)
Pharmaceuticals Research and Development (5.9) (5.1)
------------------------------------------------------------- ------- -------
Segment liabilities (203.9) (168.5)
Corporate loans and revolving credit facility (302.7) (340.0)
Corporate accruals and other payables (9.2) (3.4)
Current and deferred tax liabilities (65.4) (88.2)
------------------------------------------------------------- ------- -------
(581.2) (600.1)
------------------------------------------------------------- ------- -------
2021 2020
GBPm GBPm
------------------------------------------------------ ----- -----
Revenue by product category
CAP 442.6 361.6
Equine 44.8 36.4
FAP 77.0 74.8
Nutrition 31.7 28.6
Other 11.9 13.7
------------------------------------------------------ ----- -----
608.0 515.1
------------------------------------------------------ ----- -----
Additions to intangible non-current assets by segment
(including through business combinations)
European Pharmaceuticals 97.1 22.3
NA Pharmaceuticals 40.2 47.5
Pharmaceuticals Research and Development 0.1 0.4
Corporate and central costs 1.4 1.5
------------------------------------------------------ ----- -----
138.8 71.7
------------------------------------------------------ ----- -----
Additions to Property, Plant and Equipment by segment
(including through business combinations)
European Pharmaceuticals 19.8 12.1
NA Pharmaceuticals 5.9 4.3
Pharmaceuticals Research and Development 0.4 0.7
Corporate and central costs 0.3 0.2
------------------------------------------------------ ---- ----
26.4 17.3
------------------------------------------------------ ---- ----
Depreciation and amortisation by segment
European Pharmaceuticals 67.1 64.1
NA Pharmaceuticals 22.4 18.5
Pharmaceuticals Research and Development 0.5 0.5
Corporate and central costs 0.7 0.7
------------------------------------------------------ ---- ----
90.7 83.8
------------------------------------------------------ ---- ----
The total depreciation and amortisation charge is
made up of the following:
Non-underlying
Amortisation - selling, general and administrative
expenses 70.8 63.9
Amortisation - research and development expenditure 4.4 5.7
------------------------------------------------------ ---- ----
75.2 69.6
------------------------------------------------------ ---- ----
Underlying
Amortisation and impairment 4.5 4.3
Depreciation 11.0 9.9
------------------------------------------------------ ---- ----
15.5 14.2
------------------------------------------------------ ---- ----
Geographical Information
The following table shows revenue based on the geographical
location of customers and non-current assets based on the country
of domicile of the entity holding the asset:
2021 2020
Non- Non-
2021 current 2020 current
Revenue assets Revenue assets
GBPm GBPm GBPm GBPm
--------------- -------- -------- -------- --------
UK 56.9 30.8 45.0 30.4
Germany 64.8 3.1 53.9 2.8
Rest of Europe 204.8 406.3 173.8 419.8
USA 206.5 215.2 181.9 213.2
Rest of World 75.0 166.5 60.5 122.5
--------------- -------- -------- -------- --------
608.0 821.9 515.1 788.7
--------------- -------- -------- -------- --------
3. Finance Income
2021 2020
Underlying GBPm GBPm
----------------------------- ----- -----
Finance income arising from:
- Cash and cash equivalents - 0.1
- Foreign exchange gains - 2.9
----------------------------- ----- -----
Underlying finance income - 3.0
----------------------------- ----- -----
2021 2020
Non-underlying GBPm GBPm
----------------------------------------------------- ----- -----
Finance income arising from:
- Foreign exchange gains on contingent consideration 3.8 -
----------------------------------------------------- ----- -----
Non-underlying finance income 3.8 -
----------------------------------------------------- ----- -----
Total finance income 3.8 3.0
----------------------------------------------------- ----- -----
4. Finance Expense
2021 2020
Underlying GBPm GBPm
------------------------------------------ ----- -----
Finance expense arising from:
- Financial liabilities at amortised cost 8.3 11.1
- Lease liability interest 0.5 0.4
- Foreign exchange losses 2.9 -
------------------------------------------ ----- -----
Underlying finance expense 11.7 11.5
------------------------------------------ ----- -----
2021 2020
Non-underlying GBPm GBPm
-------------------------------------------------------------- ----- -----
Finance expense arising from:
- Loss on extinguishment of debt - 1.0
- Foreign exchange losses on contingent consideration - 0.9
- Unwind of discount associated with contingent consideration 1.0 0.6
-------------------------------------------------------------- ----- -----
Non-underlying finance expense 1.0 2.5
-------------------------------------------------------------- ----- -----
Total finance expense 12.7 14.0
-------------------------------------------------------------- ----- -----
5. Non-underlying Items
Non-underlying items charged/(credited) comprise:
2021 2020
GBPm GBPm
------------------------------------------------------------- ------ ------
Amortisation of acquired intangibles
- classified within selling, general and administrative
expenses 70.8 63.9
- classified within research and development expenses 4.4 5.7
Expenses relating to acquisitions and subsequent integration
activities 1.4 4.3
Rationalisation of manufacturing organisation 1.6 2.2
------------------------------------------------------------- ------ ------
Non-underlying operating loss items 78.2 76.1
------------------------------------------------------------- ------ ------
Amortisation in relation to Medical Ethics Pty Ltd
(net of tax) 0.7 0.6
Loss on extinguishment of debt - 1.0
Foreign exchange (gains)/losses on contingent consideration (3.8) 0.9
Unwind of discount associated with contingent consideration 1.0 0.6
------------------------------------------------------------- ------ ------
Non-underlying loss before tax items 76.1 79.2
Tax on non-underlying loss before tax items (16.6) (18.0)
Revaluation of deferred tax balances following the
change in the Dutch and UK tax rates 4.8 0.3
Release of fair value provision on acquisition (2.2) -
------------------------------------------------------------- ------ ------
Non-underlying loss after tax items 62.1 61.5
------------------------------------------------------------- ------ ------
Amortisation of acquired intangibles reflects the amortisation
of the fair values of future cash flows recognised on acquisition
in relation to the identifiable intangible assets acquired.
Expenses relating to acquisitions and subsequent integration
activities represents costs incurred during the acquisition and
integration of Osurnia (GBP1.3 million) and other product licensing
agreements (GBP0.1 million).
Rationalisation of manufacturing organisation relates to the
income statement cost associated with this strategic programme.
Costs since the inception of the programme have been GBP8.7 million
and the programme has now been completed in the current financial
year.
The loss on extinguishment of debt in the prior year related to
the acceleration of the amortisation of arrangement fees relating
to the
Term Loan on termination.
The revaluation of the deferred tax balances arises as a result
of an increase in the Dutch and UK corporation tax rates from that
previously enacted in the prior year. The GBP4.8 million charge in
the current year predominantly arises from the change in the Dutch
corporation tax rate which has been substantively enacted to remain
at 25.0% (previously this was to reduce to 21.7% over the period to
2022).
During the year fair value corporation tax provisions on the
acquisitions of Ampharmco LLC, Genera d.d. and AST Farma B.V./ Le
Vet B.V. have been released.
6. Interests in Associate
Interest in Associate
2021 2020
GBPm GBPm
----------------------------------------------------- ----- -----
1 July 17.4 10.1
Additions 0.8 7.6
Share of underlying (loss)/profit after tax (0.4) 0.3
Share of amortisation of intangible asset identified
on acquisition (net of tax) (0.7) (0.6)
----------------------------------------------------- ----- -----
30 June 17.1 17.4
----------------------------------------------------- ----- -----
On 5 February 2021 the Group acquired a further 1.5% of the
issued share capital of Medical Ethics Pty Ltd for a total
consideration of AUD1.5 million (GBP0.8 million). Following the
acquisition the Group holds 49.5% of the issued share capital of
Medical Ethics Pty Ltd, which is the holding company of Animal
Ethics Pty Ltd. The increased shareholding to 49.5% of the issued
share capital has not resulted in a change of control or accounting
treatment of the entity. The company is incorporated in Australia,
which is also the principal place of business. The registered
address is c/o Level 3, 649 Bridge Road, Richmond, Victoria 3121,
Australia. The company has share capital consisting solely of
ordinary shares, which are directly owned by the Group. Medical
Ethics Pty Ltd is a private company and there is no quoted market
price available for its shares. There are no contingent liabilities
relating to the Group's interest in the associate.
The Group's share of the loss arising from its investment in
Medical Ethics includes the effect of harmonising the accounting
policies and of amortising the fair value adjustments (net of tax),
which are treated as non-underlying.
7. Income Taxes
2021 2020
GBPm GBPm
--------------------------------------------------------------- ------ ------
Current tax - UK corporation tax 2.8 3.5
- overseas tax at prevailing local rates 26.8 18.2
- adjustment in respect of prior years (2.6) (0.8)
--------------------------------------------------------------- ------ ------
Total current tax expense 27.0 20.9
--------------------------------------------------------------- ------ ------
Deferred tax - origination and reversal of temporary
differences (14.5) (14.5)
- adjustment in respect of tax rates 4.8 1.4
- adjustment in respect of prior years 1.2 (0.8)
--------------------------------------------------------------- ------ ------
Total deferred tax credit (8.5) (13.9)
--------------------------------------------------------------- ------ ------
Total income tax charge in the Consolidated Income
Statement 18.5 7.0
--------------------------------------------------------------- ------ ------
The tax on the Group's profit before taxation differs from the
standard rate of UK corporation tax of 19.0% (2020: 19.0%). The
differences to this rate are explained below:
2021 2020
GBPm GBPm
------------------------------------------------------------- ----- -----
Profit before taxation 74.0 40.9
------------------------------------------------------------- ----- -----
Tax at 19.0% (2020: 19.0%) 14.1 7.8
Effect of:
- expenses not deductible 1.8 1.4
- acquisition expenses - 0.6
- research and development related tax credits (0.3) (0.4)
- patent box tax credits (3.1) (2.7)
- other incentives (0.3) (0.2)
- share of results in associates - (0.1)
- effects of overseas tax rates 2.9 (0.3)
- movement in unrecognised deferred tax - 1.1
- adjustment in respect of prior years (1.4) (1.6)
- change in tax rates 4.8 1.4
------------------------------------------------------------- ----- -----
Total income tax charge in the Consolidated Income Statement 18.5 7.0
------------------------------------------------------------- ----- -----
Recurring items in the tax reconciliation include: research and
development related tax credits and patent box incentives; expenses
not deductible; and the share of results in associates. The
effective tax rate is 25.0% (excluding non-underlying items the
effective tax rate is 21.7%).
Tax Credit/(Charge) Recognised Directly in Equity
2021 2020
GBPm GBPm
---------------------------------------------------------- ----- -----
Deferred tax on employee benefit obligations - -
Deferred tax on other equity movements (0.2) 1.8
---------------------------------------------------------- ----- -----
Tax recognised in Consolidated Statement of Comprehensive
Income (0.2) 1.8
---------------------------------------------------------- ----- -----
Corporation tax on equity settled transactions 0.2 0.4
Deferred tax on equity settled transactions 0.7 (0.3)
---------------------------------------------------------- ----- -----
Total tax recognised in Equity 0.9 0.1
---------------------------------------------------------- ----- -----
On 15 September 2020, the Dutch Government submitted the 2021
tax plan, which included the reversal of the previously enacted
rate reduction from 25% to 21.7%, which was due to be effective
from 1 January 2021. As a result, the Dutch corporate income tax
headline rate has remained at 25%, and Dutch deferred tax assets
and liabilities as at 30 June 2021 have been recalculated
accordingly.
UK Finance Bill 2021 was substantively enacted on 24 May 2021,
which included the increase in main rate of UK corporation tax from
19% to 25%, effective 1 April 2023. UK deferred tax assets and
liabilities as at 30 June 2021 have been recalculated accordingly,
based on the Group's best estimate of the timing of the unwind of
existing temporary differences.
At 30 June 2021, the Group held a current provision of GBP5.7
million (2020: GBP5.6 million) in respect of uncertain tax
positions. The resolution of these tax matters may take many years.
The range of reasonably possible outcomes within the next financial
year is GBP2.1 million to GBP7.4 million.
EU CFC Challenge
The Group continues to monitor developments in relation to EU
State Aid investigations. On 25 April 2019, the EU Commission's
final decision regarding its investigation into the UK's Controlled
Foreign Company (CFC) regime was published. It concluded that the
legislation up until December 2018 does partially represent State
Aid. The Group considers that the potential amount of additional
tax payable remains between GBPnil and GBP4.0 million depending on
the basis of calculation and the outcome of HMRC's appeal to the EU
Commission. Based on current advice, the Group does not consider
any provision is required in relation to this investigation. This
judgement is based on current interpretation of legislation and
professional advice.
During the period, the Group received charging notices from HMRC
under The Taxation (Post Transition Period) Bill for part of the
exposure (GBP2.75 million) and has paid this to HMRC. As the Group
considers that the appeal will be successful, the charging notices
have been settled in full and a current tax receivable has been
recorded in respect of the payment on the basis that the amount
will be repaid in due course.
Future Tax Charge
The Group's future tax charge, and its effective tax rate could
be affected by several factors including the impact of the
implementation of the OECD's Base Erosion and Profit Shifting
('BEPS') actions, and changes in applicable tax rates and
legislation in the territories in which it operates.
8. Dividends
2021 2020
GBPm GBPm
----------------------------------------------------- ----- -----
Final dividend paid in respect of prior year but not
recognised as a liability in that year:
24.00 pence per share (2020: 22.10 pence per share) 25.9 22.7
Interim dividend paid: 11.11 pence per share (2020:
10.29 pence per share) 12.0 10.6
----------------------------------------------------- ----- -----
Total dividend 35.11 pence per share (2020: 32.39
pence per share) recognised as distributions
to equity holders in the period 37.9 33.3
----------------------------------------------------- ----- -----
Proposed final dividend for the year ended 30 June
2021: 29.39 pence per share
(2020: 24.00 pence per share) 31.8 25.9
Total dividend paid and proposed for the year ended
30 June 2021: 40.50 pence per share
(2020: 34.29 pence per share) 43.8 36.5
----------------------------------------------------- ----- -----
In accordance with IAS 10 'Events After the Balance Sheet Date',
the proposed final dividend for the year ended 30 June 2021 has not
been accrued for in these financial statements. It will be shown as
a deduction from equity in the financial statements for the year
ending 30 June 2022. There are no income tax consequences. The
final dividend for the year ended 30 June 2020 is shown as a
deduction from equity in the year ended 30 June 2021.
9. Earnings per Share
Earnings per ordinary share have been calculated by dividing the
profit attributable to equity holders of the parent after taxation
for each financial period by the weighted average number of
ordinary shares in issue during the period.
2021 2020
Pence Pence
--------------------------- ------ ------
Basic earnings per share
- Underlying* 108.77 92.50
- Basic 51.33 32.87
--------------------------- ------ ------
Diluted earnings per share
- Underlying* 108.14 92.19
- Diluted 51.03 32.76
--------------------------- ------ ------
The calculations of basic and diluted earnings per share are
based upon:
2021 2020
GBPm GBPm
----------------------------------------------------- ----- -----
Earnings for underlying basic and underlying diluted
earnings per share 117.6 95.4
----------------------------------------------------- ----- -----
Earnings for basic and diluted earnings per share 55.5 33.9
----------------------------------------------------- ----- -----
Number Number
------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for basic
earnings per share 108,119,864 103,133,142
------------------------------------------------------- ----------- -----------
Impact of share options 630,725 348,393
------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for diluted
earnings per share 108,750,589 103,481,535
------------------------------------------------------- ----------- -----------
* Underlying measures exclude non-underlying items as defined in
note 5.
At 30 June 2021, there are 401,672 options (2020: 373,439) that
are excluded from the EPS calculations as they are not dilutive for
the period presented but may become dilutive in the future.
10. Intangible Assets
Development Patent Marketing Acquired
Goodwill Software costs rights authorisations intangibles Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -------- -------- ----------- ------- --------------- ------------ -------
Cost
At 1 July 2019 245.7 19.7 14.0 4.3 0.9 709.8 994.4
Additions - 1.8 1.8 0.3 - 46.2 50.1
Acquisitions through
business combinations 6.6 0.1 - - - 14.9 21.6
Remeasurement (note
15) - - - - - 10.9 10.9
Foreign exchange
adjustments 1.5 0.1 0.1 (0.1) - 9.6 11.2
------------------------- -------- -------- ----------- ------- --------------- ------------ -------
At 30 June 2020
and 1 July 2020 253.8 21.7 15.9 4.5 0.9 791.4 1,088.2
Additions - 2.8 1.5 - - 134.5 138.8
Disposals - (0.9) (0.6) - - - (1.5)
Transfers between
categories - - (1.2) - 1.2 - -
Remeasurement (note
15) - - - - - 4.9 4.9
Foreign exchange
adjustments (17.7) (0.5) (0.5) (0.1) - (49.5) (68.3)
------------------------- -------- -------- ----------- ------- --------------- ------------ -------
At 30 June 2021 236.1 23.1 15.1 4.4 2.1 881.3 1,162.1
------------------------- -------- -------- ----------- ------- --------------- ------------ -------
Accumulated Amortisation
At 1 July 2019 - 6.1 8.5 3.3 - 295.9 313.8
Charge for the
year - 2.9 1.2 0.2 - 69.6 73.9
Foreign exchange
adjustments - - 0.1 - - 8.2 8.3
------------------------- -------- -------- ----------- ------- --------------- ------------ -------
At 30 June 2020
and 1 July 2020 - 9.0 9.8 3.5 - 373.7 396.0
Charge for the
year - 3.2 0.6 0.2 0.3 75.2 79.5
Impairments - - 0.2 - - - 0.2
Disposals - (0.8) (0.2) - - - (1.0)
Transfers between
categories - - (0.8) - 0.8 - -
Foreign exchange
adjustments - (0.2) (0.1) (0.1) (0.1) (27.9) (28.4)
------------------------- -------- -------- ----------- ------- --------------- ------------ -------
At 30 June 2021 - 11.2 9.5 3.6 1.0 421.0 446.3
------------------------- -------- -------- ----------- ------- --------------- ------------ -------
Net book value
At 30 June 2021 236.1 11.9 5.6 0.8 1.1 460.3 715.8
------------------------- -------- -------- ----------- ------- --------------- ------------ -------
At 30 June 2020 253.8 12.7 6.1 1.0 0.9 417.7 692.2
------------------------- -------- -------- ----------- ------- --------------- ------------ -------
GBP0.8 million of the marketing authorisations relate to the
Vetivex(R) range of products. Ownership of the marketing
authorisations rests with the Group in perpetuity. There are not
believed to be any legal, regulatory or contractual provisions that
limit their useful lives. Vetivex is an established range of
products which are relatively simple in nature and there are a
limited number of players in the market. Accordingly, the Directors
believe that it is appropriate that the marketing authorisations
are treated as having indefinite lives for accounting purposes.
The software intangible asset includes GBP9.3 million relating
to the ERP system in the EU Pharmaceuticals Segment; this has a
remaining amortisation period of 4 years.
Goodwill is allocated across cash generating units that are
expected to benefit from that business combination.
In accordance with the disclosure requirements of IAS 38
'Intangible Assets', the components of acquired intangibles are
summarised below:
Capitalised
Commercial Pharmacological development Product
relationships process Brand costs rights Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- -------------- --------------- ----- ------------ ------- ------
Cost
At 1 July 2019 6.8 51.4 16.3 393.6 241.7 709.8
Additions - - - - 46.2 46.2
Acquisitions through
business combinations 1.9 - - 13.0 - 14.9
Remeasurement - - - - 10.9 10.9
Foreign exchange adjustments - 1.8 0.3 3.4 4.1 9.6
----------------------------- -------------- --------------- ----- ------------ ------- ------
At 30 June 2020 and
1 July 2020 8.7 53.2 16.6 410.0 302.9 791.4
Additions - - - - 134.5 134.5
Remeasurement - - - - 4.9 4.9
Foreign exchange adjustments (0.6) (6.1) (1.7) (27.6) (13.5) (49.5)
----------------------------- -------------- --------------- ----- ------------ ------- ------
At 30 June 2021 8.1 47.1 14.9 382.4 428.8 881.3
----------------------------- -------------- --------------- ----- ------------ ------- ------
Accumulated Amortisation
At 1 July 2019 3.7 27.9 6.1 104.3 153.9 295.9
Charge for the year 2.0 5.7 1.6 48.2 12.1 69.6
Foreign exchange adjustments 0.2 1.1 0.2 3.4 3.3 8.2
----------------------------- -------------- --------------- ----- ------------ ------- ------
At 30 June 2020 and
1 July 2020 5.9 34.7 7.9 155.9 169.3 373.7
Charge for the year 1.8 4.4 1.4 42.3 25.3 75.2
Foreign exchange adjustments (0.4) (4.1) (0.9) (11.5) (11.0) (27.9)
----------------------------- -------------- --------------- ----- ------------ ------- ------
At 30 June 2021 7.3 35.0 8.4 186.7 183.6 421.0
----------------------------- -------------- --------------- ----- ------------ ------- ------
Net book value
At 30 June 2021 0.8 12.1 6.5 195.7 245.2 460.3
----------------------------- -------------- --------------- ----- ------------ ------- ------
At 30 June 2020 2.8 18.5 8.7 254.1 133.6 417.7
----------------------------- -------------- --------------- ----- ------------ ------- ------
The table below provides further detail on the acquired
intangibles and their remaining amortisation period.
Acquired Remaining
Goodwill intangibles Sub-Total amortisation
carrying carrying carrying period on
Description of acquired value value value acquired
Significant assets intangibles GBPm GBPm GBPm intangibles
------------------------------ ----------------------------- --------- ------------ --------- -------------
Intangible assets arising
from the acquisition Product, marketing and
of Dermapet distribution rights 0.4 12.8 13.2 4 1/2 years
------------------------------ ----------------------------- --------- ------------ --------- -------------
Intangible assets arising Technology, product,
from the acquisition marketing and distribution
of Eurovet rights 37.7 7.9 45.6 1 year
------------------------------ ----------------------------- --------- ------------ --------- -------------
Goodwill arising from
the acquisition of
Vetxx 16.4 - 16.4 N/A
------------------------------------------------------------- --------- ------------ --------- -------------
Intangible assets arising Product, brand, technology, 0.3 1 1/2 years
from the acquisition marketing
of Genera and distribution rights
------------------------------ -----------------------------
0.2 4 1/2 years
------------------------------ ----------------------------
5.8 9 1/2 years
Genera -
5.3 11.6 total
----------------------------------------------------------- --------- ------------ --------- -------------
Intangible assets arising Product, brand, technology, 4.4 5 years
from the acquisition pharmacological process,
of Putney marketing
and distribution rights
------------------------------ -----------------------------
12.5 5 years
------------------------------ ----------------------------
33.1 7 years
Putney -
47.3 97.3 total
----------------------------------------------------------- --------- ------------ --------- -------------
Intangible asset arising Product and technology 11.3 12 years
from the acquisition
of Apex
------------------------------- ----------------------------
1.7 9 years
------------------------------ ----------------------------
8.7 21.7 Apex - total
----------------------------------------------------------- --------- ------------ --------- -------------
Intangible assets related
to the licensing and
distribution of Tri-Solfen(R) Marketing and distribution
(excluding ANZ territories) rights - 39.7 39.7 10 years
------------------------------- ---------------------------- --------- ------------ --------- -------------
Intangible asset related
to an injectable solution Marketing and distribution
licensing agreement rights - 5.8 5.8 10 years
------------------------------- ---------------------------- --------- ------------ --------- -------------
Intangible assets arising Product, brand, technology, 46.2 6 1/2 years
from the acquisition marketing and distribution
of AST Farma and Le rights
Vet
------------------------------- ----------------------------
61.4 5 1/2 years
------------------------------ ----------------------------
13.3 7 years
0.8 1 1/2 years
AST Farma
and
Le Vet -
98.7 220.4 total
----------------------------------------------------------- --------- ------------ --------- -------------
Intangible assets related
to an injectable solution Marketing and distribution
licensing agreement rights - 5.6 5.6 15 years
------------------------------- ---------------------------- --------- ------------ --------- -------------
Intangible assets arising Product, brand, technology,
from the acquisition marketing
of Caledonian and distribution rights 0.8 2.9 3.7 7 1/2 years
------------------------------- ---------------------------- --------- ------------ --------- -------------
Intangible assets arising
from the acquisition
of Dechra Brasil Produtas Product, brand, technology,
Veterinarios LTDA marketing 6.6 7 1/2 years
and distribution rights 0.3 2 1/2 years
0.3 5 1/2 years
Brazil -
8.3 15.5 total
------------------------------- ---------------------------- --------- ------------ --------- -------------
Intangible assets arising
from the acquisition Product and technology
of Ampharmco rights 0.6 1 1/2 years
5.0 16 1/2 years
0.5 13 1/2 years
5.3 13 years
Ampharmco
5.8 17.2 - total
------------------------------- ---------------------------- --------- ------------ --------- -------------
Intangible assets arising Product and technology 37.9 8 1/2 years
from the acquisition rights
of Mirataz
7.2 9 1/2 years
0.9 9 1/2 years
- 46.0 Mirataz -
total
------------------------------- ---------------------------- --------- ------------ --------- -------------
Intangible assets arising
from the acquisition Product, marketing and
of Osurnia distribution rights - 96.5 96.5 9 years
------------------------------- ---------------------------- --------- ------------ --------- -------------
Intangible assets related
to the licensing and
distribution of Tri-Solfen(R) Product, marketing and
(ANZ territories) distribution rights - 24.5 24.5 10 years
------------------------------- ---------------------------- --------- ------------ --------- -------------
Other individually immaterial
goodwill and acquired
intangibles 6.7 9.0 15.7
------------------------------- ---------------------------- --------- ------------ --------- -------------
236.1 460.3 696.4
------------------------------- ---------------------------- --------- ------------ --------- -------------
11. Deferred Taxes
Recognised Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are analysed in the
statement of financial position after offset, to the extent there
is a legally enforceable right, of balances within countries as
follows:
2021 2020
GBPm GBPm
------------------------- ------ ------
Deferred tax assets 2.0 2.7
Deferred tax liabilities (48.8) (62.6)
------------------------- ------ ------
(46.8) (59.9)
------------------------- ------ ------
Deferred tax assets and liabilities are attributable to the
following, prior to any allowable offset:
Assets Liabilities Net
-----------------------------
2021 2020 2021 2020 2021 2020
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- ----- ------ ------ ------ ------
Intangible assets - - (51.1) (62.4) (51.1) (62.4)
Property, plant and
equipment - - (3.7) (4.0) (3.7) (4.0)
Inventories 0.9 1.4 - - 0.9 1.4
Receivables/payables 4.1 3.2 - - 4.1 3.2
Share-based payments 1.7 0.7 - - 1.7 0.7
Losses 0.7 0.5 - - 0.7 0.5
R&D tax credits 0.5 0.3 - - 0.5 0.3
Employee benefit obligations 0.1 0.4 - - 0.1 0.4
----------------------------- ----- ----- ------ ------ ------ ------
8.0 6.5 (54.8) (66.4) (46.8) (59.9)
----------------------------- ----- ----- ------ ------ ------ ------
12. Borrowings and lease liabilities
2021 2020
GBPm GBPm
---------------------------- ----- -----
Current liabilities:
Lease liabilities 3.1 3.2
Bank loans - 1.4
---------------------------- ----- -----
3.1 4.6
---------------------------- ----- -----
Non-current liabilities:
Lease liabilities 12.8 11.8
Senior loan notes 115.1 127.1
Bank loans 189.7 214.2
Arrangement fees netted off (2.1) (2.7)
---------------------------- ----- -----
315.5 350.4
---------------------------- ----- -----
Total borrowings 318.6 355.0
---------------------------- ----- -----
At 30 June 2021, GBP189.7 million was drawn against the GBP340.0
million Revolving Credit Facility maturing 25 July 2024. The
facility is not secured on any specific assets of the Group but is
supported by a joint and several cross guarantee structure.
Interest is charged on this facility at a minimum of 1.30% over
LIBOR and a maximum of 2.20% over LIBOR, dependent upon the
Leverage (the ratio of Total Net Debt to Adjusted EBITDA) of the
Group. As at 30 June 2021, interest being charged on this facility
is 1.50% above LIBOR. All covenants were met during the year ended
30 June 2021.
In January 2020, the Group undertook a Private Placement raising
EUR50.0 million and USD100.0 million (under seven and ten year new
senior secured notes respectively) which remains fully drawn at 30
June 2021. The Private Placement amounts are not secured on any
specific assets of the Group, but are supported by a joint and
several cross guarantee structure. Interest is charged on the
EUR50.0 million amount at a fixed rate of 1.19% until maturity
(January 2027). Interest is charged on the USD100.0 million amount
at a fixed rate of 3.34% until maturity (January 2030).
No interest has been capitalised during the year (2020:
GBPnil).
The borrowing facility of Genera of GBP4.6 million, of which
GBP1.4 million was drawn at 30 June 2020, was fully repaid in March
2021 and the facility was closed.
The maturity of the bank loans and senior loan notes is as
follows:
2021 2020
GBPm GBPm
--------------------------- ----- -----
Payable:
Within one year - 1.4
Between one and two years - -
Between two and five years 189.7 214.2
Over five years 115.1 127.1
--------------------------- ----- -----
304.8 342.7
--------------------------- ----- -----
The maturity of the lease liabilities is as follows:
2021 2020
GBPm GBPm
--------------------------- ----- -----
Payable:
Within one year 3.1 3.2
Between one and two years 2.5 2.5
Between two and five years 3.7 4.0
Over five years 6.6 5.3
--------------------------- ----- -----
15.9 15.0
--------------------------- ----- -----
13. Provisions
Environmental,
Provision Health
Deferred for PPE & Safety
Rent grant Grant Dilapidations Total
GBPm GBPm GBPm GBPm GBPm
----------------------------- -------- --------- -------------- ------------- -----
At start of period (0.4) (1.4) (0.3) (0.4) (2.5)
Provision recognised - - - (1.9) (1.9)
Provision utilised 0.1 0.5 0.2 - 0.8
Foreign exchange differences - - 0.1 - 0.1
----------------------------- -------- --------- -------------- ------------- -----
At end of period (0.3) (0.9) - (2.3) (3.5)
----------------------------- -------- --------- -------------- ------------- -----
The Group has received advanced payment for rental income on its
facilities in Portland. This has been recognised at amortised cost
and is being utilised over the period of the rental contract
expiring in January 2025.
Genera has received advanced funding (PPE grant) for the
refurbishment of the manufacturing facility for a third party
manufacturing contract. The funding has been recognised at
amortised cost and is being utilised over the life of the property,
plant and equipment until 2025.
On the acquisition of Ampharmco, the Group established a fair
value provision for dilapidations of a warehouse property. The
provision will be utilised over the period to the expiry of the
lease on 31 December 2022.
The Group established a fair value provision of GBP1.9 million
for dilapidations of two warehouse properties in Skipton. In line
with IFRS 16, the element of the provision that relates to
reinstatement work as a result of alterations (GBP1.6 million) has
been capitalised and will be depreciated over the lease term. The
remaining amount (GBP0.3 million) has been expensed to the income
statement. The respective provisions for the two buildings will be
utilised over the period to the expiry of the lease in March 2025
and March 2030.
14. Foreign Exchange Rates
The following primary exchange rates have been used in the
translation of the results of foreign operations:
Closing Closing
Average rate Average rate
rate at 30 June rate at 30 June
for 2020 2020 for 2021 2021
------------------ --------- ----------- --------- -----------
Australian Dollar 1.8784 1.7913 1.8035 1.8476
Brazilian Real 5.6245 6.6986 7.2518 6.8819
Danish Krone 8.5080 8.1681 8.3981 8.6664
Euro 1.1396 1.0960 1.1287 1.1654
US Dollar 1.2601 1.2273 1.3466 1.3850
------------------ --------- ----------- --------- -----------
15. Contingent Consideration Liabilities
2021 2020
GBPm GBPm
---------------------------------------------- ----- -----
Contingent consideration - less than one year 22.6 8.9
Contingent consideration - more than one year 57.6 47.3
---------------------------------------------- ----- -----
80.2 56.2
---------------------------------------------- ----- -----
The consideration for certain acquisitions and licensing
agreements includes amounts contingent on future events such as
development milestones or sales performance. The Group has provided
for the fair value of this contingent consideration as follows:
StrixNB(R) Injectable Injectable
Tri-Solfen(R) & DispersinB(R) Solution Solution Mirataz Phycox(R) Other Total
GBPm GBPm 1 GBPm 2 GBPm GBPm GBPm GBPm GBPm
------------------------- ------------- ---------------- ---------- ---------- ------- --------- ----- -----
As at 1 July 2019 22.0 0.7 4.4 5.2 - 2.2 1.5 36.0
Additions - 0.2 - - 10.9 - 0.2 11.3
Remeasurement through
intangibles 9.9 - 0.2 - - 0.8 - 10.9
Cash payments: investing
activities - (0.1) (1.5) (0.9) - (0.8) (0.2) (3.5)
Finance expense 0.4 - 0.1 0.1 - - - 0.6
Foreign exchange
adjustments 0.7 - 0.1 - - 0.1 - 0.9
------------------------- ------------- ---------------- ---------- ---------- ------- --------- ----- -----
At 30 June 2020 33.0 0.8 3.3 4.4 10.9 2.3 1.5 56.2
------------------------- ------------- ---------------- ---------- ---------- ------- --------- ----- -----
Additions 24.7 - - - - - 3.2 27.9
Remeasurement through
intangibles 2.3 0.1 (0.6) (2.3) 5.4 (0.1) 0.1 4.9
Cash payments: investing
activities (2.8) (0.3) (0.8) (0.2) (0.6) (0.9) (0.4) (6.0)
Finance expense 0.6 - - - 0.1 0.1 0.2 1.0
Foreign exchange
adjustments (1.6) - (0.3) (0.1) (1.4) (0.2) (0.2) (3.8)
------------------------- ------------- ---------------- ---------- ---------- ------- --------- ----- -----
At 30 June 2021 56.2 0.6 1.6 1.8 14.4 1.2 4.4 80.2
------------------------- ------------- ---------------- ---------- ---------- ------- --------- ----- -----
The table below shows on an indicative basis the sensitivity to
reasonably possible changes in key inputs to the valuations of the
contingent consideration liabilities. There will be a corresponding
opposite impact on the intangible asset .
Injectable Injectable
StrixNB(R) Solution Solution
Tri-Solfen(R) & DispersinB(R) 1 2 Mirataz Phycox(R) Other
------------------------ ------------- ---------------- ---------- ---------- ----------- --------- ----------
Increase/(decrease) in financial liability
---------------------------------------------------------------------------------------------------------------------
10% increase in royalty
forecasts GBPm 3.5 0.1 N/A N/A 1.4 0.1 0.2
10% decrease in royalty
forecasts GBPm (3.5) (0.1) N/A N/A (1.4) (0.1) (0.2)
1% increase in discount
rates GBPm (3.7) - - - (0.7) - (0.1)
1% decrease in discount
rates GBPm 3.7 - - - 0.7 - 0.1
5% appreciation in
currency GBPm (2.7) - (0.1) (0.1) (0.7) (0.1) (0.2)
5% depreciation in
currency GBPm 2.7 - 0.1 0.1 0.7 0.1 0.2
------------------------ ------------- ---------------- ---------- ---------- ----------- --------- ----------
Discount rate range
in 2021
financial year 0.0%-19.7% 10.4%-11.7% 9.2% 9.2% 7.5%-9.9% 10.4% 8.6%-10.4%
Discount rate range
in 2020
financial year 2.5%-16.6% 10.1%-13.1% 9.2% 9.2% 6.8%-10.2% 10.1% 9.4%
------------------------ ------------- ---------------- ---------- ---------- ----------- --------- ----------
Aggregate cash outflow in relation to royalties (remaining term of royalty
agreement)
---------------------------------------------------------------------------------------------------------------------
2021 GBPm (years) 58.5 (10.0) 0.8 (6.0) N/A N/A 22.5 (9.5) 1.3 (2.5) 3.4 (10.0)
2020 GBPm (years) 50.6 (10.0) 1.1 (7.0) N/A N/A 17.6 (10.0) 2.8 (3.5) N/A
------------------------ ------------- ---------------- ---------- ---------- ----------- --------- ----------
The consideration payable for Tri-Solfen(R) is expected to be
payable over a number of years, and relates to development
milestones and sales performance. During the year, the development
milestones and sales performance royalties have been remeasured. On
5 February 2021, the Group entered into a licensing agreement with
Animal Ethics Pty Ltd for the marketing authorisations of
Tri-Solfen(R) in Australia and New Zealand for a total
consideration of AUD31.0 million (GBP17.2 million) and sales
performance royalties. At 30 June 2021, AUD26.0 million (GBP14.1
million) of the total consideration was not discounted given that
settlement took place in July 2021. The remaining liability was
discounted between 1.2% and 19.7%. The broad range of discount
rates in respect of this licensing agreement reflects the
commercial makeup of the arrangement, with discount rates for
milestone payments related to regulatory approvals being lower and
based on a cost of debt approach and those with more variability in
timing and quantum of future cash flows being higher and based on a
CAPM-based approach, also taking into account systematic risk
associated with elements of the future cash flows.
The consideration payable for Mirataz relates to sales
performance and is expected to be payable over a number of
years.
The consideration payable for StrixNB(R) and DispersinB(R) is
expected to be payable over a number of years, and relates to sales
performance. During the year the contingent consideration has been
remeasured based on management's best estimate of forecasted sales
performance. An Addendum to the contract was agreed during the year
for a development milestone and sales performance in the Brazilian
market.
The consideration for two separate licensing agreements for
injectable solutions both relate to development milestones. Phycox
relates
to sales performance and arose as part of the acquisition of the
trade and assets of PSPC Inc. in 2014.
Where a liability is expected to be payable over a number of
years the total estimated liability is discounted to its present
value. With the exception of Phycox, all contingent consideration
liabilities relate to licensing agreements.
16. Related Party Transactions
Subsidiaries
The Group's ultimate Parent Company is Dechra Pharmaceuticals
PLC. A listing of subsidiaries will be shown within the financial
statements of the Company's 2021 Annual Report.
Transactions with Key Management Personnel
The details of the remuneration, Long Term Incentive Plans,
shareholdings, share options and pension entitlements of individual
Directors are included in the Directors' Remuneration Report in the
2021 Annual Report.
Associates
On 5 February 2021, the Group entered into a licensing agreement
with Animal Ethics Pty Ltd for the marketing authorisations of
Tri-Solfen(R) in Australia and New Zealand for a total
consideration of AUD31.0 million (GBP17.2 million). An upfront
payment of AUD5.0 million (GBP2.8 million) was payable on signing,
with the balance of the payment made in July 2021 on the first
commercial sale by Dechra into the Australian market. A royalty
will also be paid on net sales. The Group also acquired a further
1.5% of the issued share capital of Medical Ethics Pty Ltd, the
parent company of Animal Ethics, for a total consideration of
AUD1.5 million (GBP0.8 million) from the current shareholders.
Following this acquisition the Group holds 49.5% of the issued
share capital of Medical Ethics Pty Ltd, and this has not resulted
in a change of control or accounting treatment of the entity. Refer
to note 6 for further information on the results of the associate
in the period.
In 2017 the Group entered into a licensing agreement with Animal
Ethics Pty Ltd for Tri-Solfen(R) for which the fair value of
associated contingent consideration is disclosed in note 15.
17. Off Balance Sheet Arrangements
The Group has no off balance sheet arrangements to disclose as
required by S410A of the Companies Act 2006.
18. Contingent Liabilities
The Group continues to monitor developments in relation to EU
State Aid investigations. On 25 April 2019, the EU Commission's
final decision regarding its investigation into the UK's Controlled
Foreign Company (CFC) regime was published. It concluded that the
legislation up until December 2018 does partially represent State
Aid. The Group considers that the potential amount of additional
tax payable remains between GBPnil and GBP4.0 million depending on
the basis of calculation and the outcome of HMRC's appeal to the EU
Commission. Based on current advice, the Group does not consider
any provision is required in relation to this investigation. This
judgement is based on current interpretation of legislation and
professional advice.
During the period, the Group received charging notices from HMRC
under The Taxation (Post Transition Period) Bill for part of the
exposure (GBP2.75 million) and has paid this to HMRC. As the Group
considers that the appeal will be successful, the charging notices
have been settled in full and a current asset has been recorded in
respect of the payment on the basis that the amount will be repaid
in due course.
At 30 June 2021, contingent liabilities arising in the normal
course of business amounted to GBP13.0 million (2020: GBP11.4
million) relating to licence and distribution agreements. The stage
of development of the projects underpinning the agreements dictates
that a commercially stable product is yet to be achieved, and
accordingly an intangible asset and a contingent consideration
liability have not been recognised.
19. Subsequent Events
On 2 July 2021 the Group acquired the marketing rights to two
anaesthesia products for an initial payment of USD1.25 million. A
final payment of USD10.75 million will be made on 30 December
2021.
20. Underlying Operating Profit, EBITDA and Profit Before
Taxation reconciliation
2021 2020
GBPm GBPm
------------------------------------------------------------ ----- -----
Operating profit
Underlying operating profit/EBIT is calculated as follows:
Operating profit 84.0 52.2
Non-underlying operating expenses (note 5) 78.2 76.1
------------------------------------------------------------ ----- -----
Underlying operating profit/EBIT 162.2 128.3
Depreciation 11.0 9.9
Amortisation and impairment 4.5 4.3
------------------------------------------------------------ ----- -----
Underlying earnings before interest, tax, depreciation
and amortisation (EBITDA) 177.7 142.5
------------------------------------------------------------ ----- -----
Profit before taxation
Underlying profit before taxation is calculated as follows:
Profit before taxation 74.0 40.9
Non-underlying operating expenses 78.2 76.1
Amortisation of fair value adjustments relating to Medical
Ethics (net of tax) 0.7 0.6
Fair value and other movements on contingent consideration (2.8) 1.5
Loss on extinguishment of debt - 1.0
------------------------------------------------------------ ----- -----
Underlying profit before taxation 150.1 120.1
------------------------------------------------------------ ----- -----
21. Other information
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 30 June 2021 or
2020 but is derived from the 2021 and 2020 accounts. Statutory
accounts for 2020 have been delivered to the Registrar of Companies
and those for 2021 will be delivered in due course. The external
auditor has reported on those accounts; the report was (i)
unqualified, (ii) did not include references to any matters to
which the external auditor drew attention by way of emphasis
without qualifying the reports and (iii) did not contain statements
under section 498(2) or (3) of the Companies Act 2006.
22. Preliminary Statement
This Preliminary statement is not being posted to Shareholders.
The Annual Report and Accounts for the year ended 30 June 2021 will
be sent to shareholders shortly. Further copies will be available
from the Company's Registered Office: 24 Cheshire Avenue, Cheshire
Business Park, Lostock Gralam, Northwich CW9 7UA. Email:
corporate.enquiries@dechra.com. Copies will also be available on
the Company website www.dechra.com.
23. Directors' Responsibility Statement Required under the
Disclosure and Transparency Rules
The responsibility statement below has been prepared in
connection with the Company's full Annual Report and Accounts for
the year ended 30 June 2021. Certain parts of that Report are not
included within this announcement.
We confirm to the best of our knowledge:
a) the Company Financial Statements, which have been prepared in accordance
with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 'Reduced Disclosure Framework',
and applicable law), give a true and fair view of the assets, liabilities,
financial position and profit of the Company;
b) the Group Financial Statements, prepared in accordance with International
accounting standards in conformity with the requirements of the Companies
Act 2006 and International Financial Reporting Standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applied in the European Union,
give a true and fair view of the assets, liabilities, financial position
and profit or loss of Group; and
c) the Strategic Report includes a fair review of the development and performance
of the business and the position of the Group and Company, together
with a description of the principal risks and uncertainties that they
face.
Signed by the order of the Board:
Ian Page
Chief Executive Officer
6 September 2021
Paul Sandland
Chief Financial Officer
6 September 2021
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September 06, 2021 02:00 ET (06:00 GMT)
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