Vet products group delivers improved results and increased dividend
Dechra Pharmaceuticals, the Northwich-based vet products group, announced improved annual results today, including a 10.8% increase in its dividend payout to shareholders.
The group last week completed the £221.5m acquisition of Med-Pharmex, Inc, in Pomona, California, following on from the £175m cash deal for US-based Piedmont Animal Health in July, after raising £184m in a share placing.
Today’s results revealed a 13.8% increase in revenues, to £681.8m, for the year to June 30, 2022, while pre-tax profits of £77.6m were up from £74m the previous year. A total dividend of 44.89 per share, which compares with 40.50p per share a year ago, has been recommended.
The group achieved strong cash generation of £163.3m, representing cash conversion of 93.7%.
Dechra said it made strong organic progress in all its key markets and across all therapeutic segments.
Its pipeline was strengthened through own innovation and acquisition, the international portfolio was strengthened through numerous product approvals, it successfully completed two material company acquisitions post year-end, in Piedmont and Med-Pharmex, and it executed numerous bolt-on product acquisitions to complement existing equine and CAP (companion animal products) portfolios.
Chief executive, Ian Page, said: “We have continued to progress on all aspects of our strategy; the product development pipeline was strengthened, material acquisitions were completed post year-end and a new subsidiary was established in South Korea as we continue our geographical expansion.”
Looking forwards, he said: “As the market returns to normal levels of trading post the impact of COVID-19 and as current macroeconomic uncertainties are expected to continue, the veterinary pharmaceutical market, particularly in the CAP sector, is resilient and in growth.
“The acquisition, post year end, of Med-Pharmex strategically strengthens our position in the US market. The acquisition of Piedmont adds several novel exciting products to our development pipeline and we continue to identify new opportunities as we successfully execute our strategy.
“We remain confident in our ability to outperform the markets in which we operate and in the prospects for the current financial year.”
Dr Mike Mitchell and Dr Julie Simmonds, analysts with broker Panmure Gordon, maintained their ‘hold’ advice for investors following today’s results.
They said: “Dechra’s full year results further emphasise the operational commentary from the company’s mid-July trading update, with the central message affirming the resilience of the veterinary pharmaceutical market and Dechra’s strength of positioning to maintain above market growth even with the ongoing normalisation towards historic growth rates.
“The strength of Dechra’s positioning is also reflected in the post-period acquisitions of Piedmont and Med-Pharmex which add, respectively, to Dechra’s innovation pipeline and scaling within the US.
“We update our forecasts to reflect the impact of acquisitions which see some netting of the respective incremental pipeline investment/commercial opportunity within the P&L – we also extend our forecast period to FY2025 – and also in light of today’s results, having already refined our view on the business pre-acquisitions in July.
“We maintain our Hold recommendation on valuation grounds, moving our target price from 3750p to 3790p (20.8x FY2 EV/EBITDA), maintaining a significant premium against our reference peer group.”