Vet products group raises £133m through share placing to strengthen balance sheet

Northwich vet products group, Dechra Pharmaceuticals, has raised £133.4m through a share placing to strengthen its balance sheet.

The group, which has its manufacturing base in Skipton, North Yorkshire, announced the fundraise at 5pm last night (June 3), as well as a trading update.

It issued 5,132,500 new ordinary shares of nominal value of one pence each via an accelerated bookbuilding process launched yesterday evening, conducted by Investec, which represents approximately five per cent of the company’s current issued share capital.

Dechra said proceeds from the placing will be used to strengthen its balance sheet following a period of acquisitions, and to ensure its financial stability during the current turbulent conditions caused by the coronavirus pandemic.

The current financial year has been busy for Dechra operationally and in terms of acquisition activity.

The company said it expects to have spent around £180m by the end of the financial year, or shortly after, on the acquisitions of Mirataz, Ampharmco and Osurnia, and the increased investment in Medical Ethics.

On April 20, the UK Competition and Markets Authority announced it was reviewing Dechra’s proposed acquisition of Osurnia.

The board also issued a trading update last night covering the reporting period from July 1, 2019 to April 30, 2020, and the outlook for the financial years ending June 30, 2020, and 2021, together with an assessment of how the challenge of COVID-19 is being addressed by the group.

It said the outlook for the full year 2020 is broadly in line with management expectations, despite the disruption that has been caused by COVID-19.

Group revenue for the period increased by around 10.5% at constant exchange rates (CER). European Pharmaceuticals revenue growth was approximately 11.8% at CER. North American Pharmaceuticals revenue increased by about 8.3% at CER.

Net debt for the year ending June 30, 2020, prior to receipt of the net proceeds from the share placing, and assuming the completion of the Osurnia acquisition, is expected to be £386m.

Although trading has softened, and will most likely remain challenging until the year end, it has been offset by a record March as veterinarians stocked up on essential medicines.

Looking ahead, the Dechra board expects demand for the group’s products to remain relatively robust.

However, the impact of COVID-19 on revenues is difficult to predict with the expectation that there will be some level of stock unwind at wholesalers and some inevitable weakness in demand.

Balanced against this the group will benefit from a full year contribution from Mirataz in the US and Osurnia, on the assumption that the acquisition is completed shortly with the approval of the regulator.

The launch of Mirataz in Europe and the relaunch of the US ophthalmic range during the financial year, together with other new product launches, are expected. As a result of the timing of these, the board expects fiscal year 2021 to be second half-weighted.

Ian Page said: “Over the last three months we have all had to adapt and work together differently to protect our businesses, customers and, most importantly, protecting our strongest asset, our employees.

“I would like to thank all the Dechra team for their hard work and dedication and for the innovation and commitment they have shown throughout this challenging time.

“Despite uncertainties arising from COVID-19, the business has continued to perform robustly.

“Dechra is confident in its business model, and looks forward to continuing to outperform its markets and deliver solid growth.”