- Continued strong growth in sales and profit
- Inflation and post-Covid normalisation dents profit margin
- Shares fall as growth shares remain out of favour
Global veterinary pharmaceutical specialist Dechra Pharmaceuticals (DPH) said it continued to outperform major markets as it delivered full year revenue growth of 13.8%, including contributions from acquisitions.
However, underlying operating profit increased at a lower clip of 9.4% reflecting a 20% increase in SG&A (selling, general and administration) expenses as the cost base normalised from lower levels during the pandemic.
Around a third of the increase was the result of inflationary cost pressures.
The company’s largest division, CAP (companion animal products representing 74.6% of revenues) grew 16% to £508.4 million driven by increased market shares gains across key therapeutic areas.
Despite a resilient post Covid performance Dechra’s shares fell 9% to £31.79 on Monday, as investors continued to shun growth shares in the face of rising interest rates.
Dechra’s price to earnings ratio has fallen by a fifth since the start of 2022 to 29.6 times.
The company offered up a positive outlook statement saying: ‘We remain confident in our ability to outperform the markets in which we operate and in the prospects for the current financial year.’
MATERIAL POST YEAR END ACQUISITIONS
Dechra made two material acquisitions post the 30 June year end supplemented by several product acquisitions. In July the company purchased Piedmont Animal Health for $210 million (£175 million).
The business brings ‘several novel exciting products to our development pipeline and we continue to identify new opportunities as we successfully execute our strategy’ said Dechra.
In August, Dechra purchased Med-Pharmex, an established platform business with manufacturing, product development and regulatory capabilities in the US, for $260 million (£222 million).
The company believes the acquisition creates an opportunity to extract ‘material’ margin synergies by leveraging Dechra’s existing US sales and marketing channels.
Post year end Dechra raised £184 million through the issue of new shares.
