Half Yearly Report

RNS Number : 7544N

Dechra Pharmaceuticals PLC

24 February 2009

 



Issued by Citigate Dewe Rogerson Ltd, Birmingham

Date: Tuesday, 24 February 2009

Dechra® Pharmaceuticals PLC

Half-Yearly Financial Report

for the six months ended 31 December 2008

	2008	2007
Revenue	£173.2m	£141.1m	+23%
Adjusted operating profit*	£12.6m	£8.1m	+55%
Operating profit	£9.4m	£8.0m
Adjusted profit before taxation*	£10.5m	£7.5m	+40%
Profit before taxation	£7.3m	£7.4m
Adjusted earnings per share*	11.68p	9.97p	+17%
Earnings per share	7.93p	9.83p
Interim dividend	3.00p	2.75p	+9%
* before VetXX® rationalisation costs and amortisation of acquired intangibles.
Strong growth in revenue and operating profit
VetXX fully integrated and rebranded to Dechra Veterinary Products
Full approval received for Vetoryl® in the USA
New product launches imminent in Europe
Strong balance sheet and committed facilities
Additional novel development opportunities identified
Key pharmaceuticals continue to increase market penetration
Diets have now gained forward momentum
NVS® and Dales continue to show good growth

FULL STATEMENT ATTACHED

Enquiries:
Ian Page, Chief Executive		Fiona Tooley, Director
Simon Evans, Group Finance Director		Keith Gabriel, Senior Account Manager
Dechra Pharmaceuticals PLC		Citigate Dewe Rogerson
Today:	[phone] (until 12.30pm)	Today:	[phone]
Mobile:	[phone] (IP) or	Mobile:	[phone] (FMT) or
	[phone] (SE)		[phone] (KG)
Thereafter:	[phone]	Thereafter:	[phone]

  -2-

Dechra Pharmaceuticals PLC

Half-Yearly Financial Report

Six months ended 31 December 2008

Introduction

The Group is making good progress with both divisions increasing revenue and profitability. Our manufacturing and distribution businesses continue to improve efficiencies, our core pharmaceutical products continue to increase market penetration and our strategic pharmaceutical product development programme is delivering excellent results.

Financials

In the six months ended 31 December 2008, Group revenue increased by 23% to £173.2 million (2007: £141.1 million). Adjusted operating profit increased by 55% to £12.6 million (2007: £8.1 million) whilst adjusted profit before taxation rose 40% to £10.5 million (2007: £7.5 million). Operating profit after deducting amortisation of acquired intangibles was £9.4 million (2007: £8.0 million). Profit before taxation on the same basis was £7.3 million (2007: £7.4 million).

Adjusted basic earnings per share increased from 9.97 pence to 11.68 pence, up by 17%. Earnings per share after deducting amortisation of acquired intangibles was 7.93 pence (2007: 9.83 pence).

Adjusted Group operating margin increased from 5.8% to 7.3% reflecting a greater contribution from our Pharmaceuticals Division.

Research and development expenditure charged to the income statement was £1.3 million, a 92% increase over the corresponding period last year.

Cash flow from operating activities was £6.0 million, significantly higher than the £1.0 million in 2007. Cash flow in the first half of the financial year is always impacted by the seasonal increase in working capital although the effect was less marked than in previous years.

Net borrowings at 31 December 2008 were £31.9 million compared to £27.0 million at 30 June 2008. The increase was due to the retranslation of borrowings denominated in foreign currencies. Net borrowings on a consistent currency basis at 31 December 2008 were £27.0 million.

Total available bank facilities are currently £55 million, of which only £10 million is renewable within the next 12 months.

Interest cover on adjusted operating profit stands at 6.0 times (2007: 12.9 times). The reduced level of interest cover reflects the acquisition of VetXX which completed in January 2008.

Continued…

  -3-

Dividend

The Board is pleased to declare an interim dividend of 3.0 pence per share (2007: 2.75 pence), an increase of 9%. The interim dividend is covered 3.9 times by adjusted profit after taxation (2007: 3.0 times).

The dividend is payable on 9 April 2009 to Shareholders whose names are on the Register of Members at close of business on 13 March 2009.

Review

Product Development

In December 2008 full FDA approval was received to market Vetoryl in the USA. The product was successfully launched in January 2009 at the North American Veterinary Conference. Additionally, it is pleasing to report that we have now received full approval to market Vetoryl in Canada. The product will be marketed by our territory partner, Vetoquinol, at the beginning of our next financial year. All technical sections for the US Felimazole® Tablets, with the exception of labelling, have been accepted by the FDA, and we anticipate launching the product to schedule in summer 2009.

There have been a number of achievements in Europe and as a result four new products will be launched imminently. A low dose 2.5mg Felimazole Tablet has received approval, via the mutual recognition procedure, in all European territories. The contract with our current marketing partner for the original 5mg Felimazole Tablets expires at the end of the 2009 calendar year; we will co-market the product until this time.  Malaseb®, our licensed dermatological product which is currently marketed within the UK and achieves annual sales of approximately £2.0 million, has received approval for Scandinavia, Netherlands and Ireland. The dossier is due to be submitted for approval for all other major European countries. We have also achieved approval for a generic canine and feline analgesic injection and licensed-in a generic canine non-steroidal anti-inflammatory injection, both of which will be the first or second market entrant in all key territories.

We have also been very successful in identifying a number of additional novel development opportunities. Two of these projects have commenced with a further four at an advanced stage of internal approval. All projects complement our existing areas of competence and are in line with our worldwide development strategy. If all four additional projects move into the development phase it is anticipated that there will be a significant increase in expensed development spend. Given our proven track record the Directors consider this investment to be an important step in increasing the Group's future growth potential.

Pharmaceuticals Division

The Pharmaceuticals Division has benefited from the growth of our existing pharmaceutical range, the introduction of new products and the integration of the VetXX acquisition. Overall revenues from this division have increased by 146.1% and adjusted operating profit is 112.7% ahead of the same period in 2007.  Within these figures, VetXX achieved revenue of £21.1 million and an adjusted operating profit of £3.4 million.

Continued…

  -4-

Dechra Veterinary Products EU ('DVP EU')

VetXX has been integrated and rebranded 'Dechra Veterinary Products'. All aspects of our original integration plan have been successfully completed. The pet diets business, branded 'Specific®', which was in decline prior to our acquisition, has now gained forward momentum and we are seeing growth in both volume sales and profitability. The imminent launch of a number of new pharmaceuticals, as outlined in the Product Development Review, will continue to consolidate and strengthen our European business.

Dechra Veterinary Products US ('DVP US')

We have continued to make appointments as we strengthen our sales & marketing and technical support teams. The marketing campaign for Vetoryl is proving very successful with excellent distributor support and very substantial interest from our veterinary customers. Initial sales of the products are meeting our expectations.

Dales Pharmaceuticals ('Dales')

Our manufacturing business has had another strong first half with productivity and efficiency continuing to improve. Further investment continues to be made in infrastructure; lean manufacturing processes are being introduced, a new purified water system installed and skilled personnel employed as we prepare to apply for US FDA manufacturing approval.

Services Division

The Services Division continues to make good progress with revenue for the six months ended 31 December 2008 increasing by 7.7%, adjusted operating profit being 8.3% ahead and adjusted operating margin improving slightly to 4.14%.

National Veterinary Services ('NVS')

NVS continues to increase revenue in line with market growth of 7.4%. Although this growth was at a slower rate in the latter part of the trading period, overall the UK veterinary market continues to perform well. For the first time in its history, NVS consistently achieved a service level of over 99% throughout the period giving us an advantage over our competitors. Investment has been made in new tractor units for our overnight haulage of orders into our regional depots. This has provided efficiencies in fuel utilisation.

Laboratories

We have restructured the sales function at our laboratories with the appointment of a new experienced Sales Director and two new representatives.

Principal Risks and Uncertainties

As we have stated in previous reports, the Group, like every business, faces risks and uncertainties in both its day-to-day operations and in achieving its long-term strategic objectives.

The Board has ultimate responsibility for risk management within the Group. The Group has in place an ongoing and embedded process of assessing, monitoring, managing and reporting risks faced by both divisions and by the Group as a whole.

Continued…

  -5-

The main potential risk areas identified by the Board which could impact the next six months are:

Risks	Controls
Further effects of the economic slowdown across one or more of our markets or territories.	The Group has a number of new products that have not yet achieved their full market potential; there are also a number of imminent launches of new products and existing products into new markets.
The failure of a major customer or supplier.	The divisions closely monitor the financial status of both key customers and suppliers.
Failing to meet regulatory requirements under which we operate thereby disrupting our operations and our product manufacture pipeline.	The Group always strives to exceed regulatory requirements and ensures that its employees have detailed experience and knowledge of the regulations. All businesses have established quality systems and have monitoring procedures in place.
Revenue from recently launched new products failing to meet expectations.	The Group ensures that it has detailed market knowledge. It constantly develops close contact with customers through its international sales teams which are trained to a high standard.
Loss of key personnel at both Board and Operational levels.	The Group has training and key personnel succession plans in place, which are regularly reviewed. Further, the Group ensures that it rewards strong performance via its remuneration packages.

Outlook

Although it remains unclear as to the effects of the recession on the major companion animal markets in which we trade, overall most markets continue to demonstrate growth and the Group's current trading remains in line with the Board's expectations.

We remain confident that our strategy and development pipeline have positioned the Group to respond resolutely to challenging times. We remain focused and committed to achieving this strategy. Our growth in North America, increasing presence within the European markets, strong position within the UK distribution market and impending product launches strengthen our optimism for the Group's future prospects.

24 February 2009

Michael Redmond	Ian Page
Non-Executive Chairman	Chief Executive

  -6-

Dechra Pharmaceuticals PLC

Half-Yearly Financial Report for the six months ended 31 December 2008

Responsibility Statement of the Directors in Respect of the Half-Yearly Financial Report

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

• the interim management report includes a fair review of the information required by:

(a)  DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)  DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

By Order of the Board:

Ian Page, Chief Executive

Simon Evans, Group Finance Director

24 February 2009

-7-

Consolidated Income Statement

for the six months ended 31 December 2008

		Six months ended		Year ended
		31.12.08	31.12.07	30.06.08
	Note	£'000	£'000	£'000
Revenue	2	173,208	141,073	304,371
Cost of sales		(137,498)	(120,619)	(250,771)
Gross profit		35,710	20,454	53,600
Operating expenses		(26,345)	(12,426)	(39,529)
Operating profit		9,365	8,028	14,071
Adjusted operating profit	2,8	12,633	8,130	19,142
Amortisation of acquired intangibles		(3,268)	(102)	(2,975)
VetXX rationalisation costs		-	-	(2,096)
Operating profit		9,365	8,028	14,071
Finance income	3	2,255	721	1,973
Finance expense	4	(4,370)	(1,352)	(4,339)
Profit before taxation		7,250	7,397	11,705
Adjusted profit before taxation	8	10,518	7,499	16,853
Amortisation of acquired intangibles		(3,268)	(102)	(2,975)
VetXX rationalisation costs		-	-	(2,096)
Write-off of unamortised arrangement fees		-	-	(77)
Profit before taxation		7,250	7,397	11,705
Income tax expense	5	(2,066)	(2,204)	(3,387)
Profit for the period attributable to equity holders of  the parent		5,184	5,193	8,318
Earnings per share (pence)
Basic	7	7.93p	9.83p	14.20p
Diluted	7	7.90p	9.72p	14.09p
Dividend per share (declared/paid and proposed)	6	3.00p	2.75p	8.25p

  -8-

Consolidated Balance Sheet

at 31 December 2008

	As at 31.12.08 £'000	As at 31.12.07 £'000	As at 30.06.08 £'000
ASSETS
Non-current assets
Intangible assets	104,186	13,557	90,375
Property, plant & equipment	8,646	5,547	8,224
Deferred tax assets	346	-	1,053
Total non-current assets	113,178	19,104	99,652
Current assets
Inventories	32,558	30,189	32,435
Trade and other receivables	45,510	36,295	47,445
Cash and cash equivalents	20,416	10,758	22,219
Total current assets	98,484	77,242	102,099
Total assets	211,662	96,346	201,751
LIABILITIES
Current liabilities
Borrowings	(26,670)	(5,019)	(21,218)
Trade and other payables	(53,069)	(45,187)	(62,596)
Current tax liabilities	(3,883)	(3,355)	(2,824)
Total current liabilities	(83,622)	(53,561)	(86,638)
Non-current liabilities
Borrowings	(25,640)	(9,002)	(27,998)
Deferred tax liabilities	(17,670)	(87)	(15,316)
Total non-current liabilities	(43,310)	(9,089)	(43,314)
Total liabilities	(126,932)	(62,650)	(129,952)
Net assets	84,730	33,696	71,799
EQUITY
Issued share capital	655	530	652
Share premium account	62,249	28,121	62,166
Hedging reserve	(669)	(40)	281
Foreign currency translation reserve	13,758	-	1,608
Merger reserve	1,770	1,770	1,770
Retained earnings	6,967	3,315	5,322
Total equity attributable to equity holders of  the parent	84,730	33,696	71,799

  -9-

Consolidated Statement of Changes in Shareholders' Equity

for the six months ended 31 December 2008

	Issued share capital £'000	Share premium account £'000	Hedging reserve £'000	Foreign currency translation reserve £'000	Merger reserve £'000	Retained earnings £'000	Total £'000
Six months ended 31 December 2007
At 1 July 2007	528	28,041	(71)	-	1,770	240	30,508
Profit for the period being total recognised  income and expense for the period	-	-	-	-	-	5,193	5,193
Dividends paid	-	-	-	-	-	(2,640)	(2,640)
Share-based payments including current and  deferred tax taken directly to equity	-	-	-	-	-	522	522
Change in fair value of cash flow hedges  transferred to profit or loss	-	-	31	-	-	-	31
Shares issued	2	80	-	-	-	-	82
At 31 December 2007	530	28,121	(40)	-	1,770	3,315	33,696
Year ended 30 June 2008
At 1 July 2007	528	28,041	(71)	-	1,770	240	30,508
Profit for the period	-	-	-	-	-	8,318	8,318
Fair value gains on derivative financial  instruments	-	-	352	-	-	-	352
Exchange differences on translation of foreign  operations	-	-	-	1,608	-	-	1,608
Total recognised income and expense for the  period	-	-	352	1,608	-	8,318	10,278
Dividends paid	-	-	-	-	-	(4,420)	(4,420)
Share-based payments including current and  deferred tax taken directly to equity	-	-	-	-	-	1,184	1,184
Shares issued	124	35,636	-	-	-	-	35,760
Share issue expenses	-	(1,511)	-	-	-	-	(1,511)
At 30 June 2008	652	62,166	281	1,608	1,770	5,322	71,799
Six months ended 31 December 2008
At 1 July 2008	652	62,166	281	1,608	1,770	5,322	71,799
Profit for the period	-	-	-	-	-	5,184	5,184
Fair value losses on derivative financial  instruments	-	-	(950)	-	-	-	(950)
Exchange differences on translation of foreign  operations	-	-	-	12,150	-	-	12,150
Total recognised income and expense for the  period	-	-	(950)	12,150	-	5,184	16,384
Dividends paid	-	-	-	-	-	(3,600)	(3,600)
Share-based payments including current and  deferred tax taken directly to equity	-	-	-	-	-	61	61
Shares issued	3	83	-	-	-	-	86
At 31 December 2008	655	62,249	(669)	13,758	1,770	6,967	84,730

  -10-

Consolidated Statement of Cash Flows

for the six months ended 31 December 2008

		Six months ended		Year ended
	Note	31.12.08 £'000	31.12.07 £'000	30.06.08 £'000
Cash flows from operating activities
Profit for the period		5,184	5,193	8,318
Adjustments for:
Depreciation		720	565	1,291
Amortisation		3,437	190	3,230
Gain on sale of property, plant and equipment		(18)	(4)	15
Finance income		(2,255)	(721)	(1,973)
Finance expense		4,370	1,352	4,339
Equity-settled share-based payment expenses		275	298	603
Income tax expense		2,066	2,204	3,387
		13,779	9,077	19,210
Decrease/(increase) in inventories		1,011	(4,457)	(3,912)
Decrease/(increase) in trade and other receivables		3,899	(259)	(3,070)
(Decrease)/increase in trade and other payables		(12,705)	(3,375)	3,825
Cash flow from operating activities before interest and taxation		5,984	986	16,053
Interest paid		(1,939)	(1,307)	(4,450)
Income taxes paid		(944)	(1,162)	(3,041)
Net cash from operating activities		3,101	(1,483)	8,562
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		18	4	5
Interest received		1,782	721	1,648
Acquisition of subsidiaries		-	-	(65,151)
Purchase of property, plant and equipment		(531)	(313)	(694)
Capitalised development expenditure		(474)	(585)	(1,331)
Purchase of other intangible non-current assets		(474)	(7)	(92)
Net cash from investing activities		321	(180)	(65,615)
Cash flows from financing activities
Proceeds from the issue of share capital		99	82	35,747
Share issue expenses		-	-	(1,511)
New borrowings		-	-	50,200
Expenses of raising new borrowings		-	-	(751)
Repayment of borrowings		(888)	(2,243)	(17,185)
Dividends paid		(3,600)	(2,640)	(4,420)
Net cash from financing activities		(4,389)	(4,801)	62,080
Net (decrease)/increase in cash and cash equivalents		(967)	(6,464)	5,027
Cash and cash equivalents at start of period		22,219	17,222	17,222
Exchange differences on cash and cash equivalents		(836)	-	(30)
Cash and cash equivalents at end of period		20,416	10,758	22,219
Reconciliation of net cash flow to movement in net borrowings
Net (decrease)/increase in cash and cash equivalents		(967)	(6,464)	5,027
Repayment of borrowings		888	2,243	17,185
New borrowings		-	-	(50,200)
Borrowings assumed on acquisition of subsidiaries		-	-	-
New finance leases		-	(70)	(319)
Exchange differences on cash and cash equivalents		(836)	-	(30)
Retranslation of foreign borrowings		(3,799)	-	(616)
Other non-cash changes		(183)	1	929
Movement in net (borrowings)/cash in the period		(4,897)	(4,290)	(28,024)
Net (borrowings)/cash at start of period		(26,997)	1,027	1,027
Net borrowings at end of period	9	(31,894)	(3,263)	(26,997)

-11-

Notes to the Financial Statements

for the six months ended 31 December 2008

1.    Basis of Preparation and Principal Accounting Policies

Dechra Pharmaceuticals PLC (the 'Company') is a company domiciled in the UK. The condensed set of financial statements as at, and for, the six months ended 31 December 2008 comprises the Company and its subsidiaries (together referred to as the 'Group').

The Group financial statements as at, and for, the year ended 30 June 2008 prepared in accordance with IFRSs as adopted by the EU and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, are available upon request from the Company's registered office at Dechra House, Jamage Industrial Estate, Talke Pits, Stoke-on-Trent, ST7 1XW.

The prior year comparatives are derived from audited financial information for Dechra Pharmaceuticals PLC as set out in the Annual Report for the year ended 30 June 2008 and the unaudited financial information in the half-yearly financial report for the six months ended 31 December 2007.  The comparative figures for the financial year ended 30 June 2008 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors (i) was unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

The condensed set of financial statements for the six months ended 31 December 2008 are unaudited but have been reviewed by the auditors. The independent review report is set out on page 16.

STATEMENT OF COMPLIANCE

The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. The condensed set of financial statements does not include all of the information required for full annual financial statements, and should be read in conjunction with the Group financial statements as at, and for, the year ended 30 June 2008.

This condensed set of financial statements was approved by the Board of Directors on 24 February 2009.

SIGNIFICANT ACCOUNTING POLICIES

As required by the Disclosure and Transparency Rules of the Financial Services Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's consolidated financial statements for the year ended 30 June 2008.

ESTIMATES AND JUDGEMENTS

The preparation of a condensed set of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and the key sources of uncertainty were the same as those applied to the Group financial statements as at 30 June 2008.

Continued…

  -12-

2.    Segmental Analysis

The Group's primary reporting segment is business divisions which correspond with the way the operating businesses are organised and managed within the Group.

The following table analyses revenue and operating profit accordingly:

	Six months ended		Year ended
	31.12.08 £'000	31.12.07 £'000	30.06.08 £'000
Business Segment
Revenue
Pharmaceuticals	41,466	16,849	54,302
Services	137,809	127,900	259,363
Inter division	(6,067)	(3,676)	(9,294)
	173,208	141,073	304,371
Adjusted Operating Profit
Pharmaceuticals	8,215	3,862	10,765
Services	5,701	5,263	10,693
Central costs	(1,283)	(995)	(2,316)
	12,633	8,130	19,142

3.    Finance Income

	Six months ended		Year ended
	31.12.08 £'000	31.12.07 £'000	30.06.08 £'000
Recognised in profit or loss
Finance income arising from:
- cash and cash equivalents	1,576	705	1,631
- foreign exchange forward contracts	473	-	325
- loans and receivables	206	16	17
	2,255	721	1,973
Recognised directly in equity
- foreign currency translation differences for  foreign operations	16,882	-	2,415
- net loss on hedge of net investment in foreign  operations	(4,732)	-	(807)
Recognised in foreign currency translation  reserve	12,150	-	1,608
- fair value (losses)/gains on interest rate floor  and ceiling	(1,319)	-	446
- income tax credit/(expense) on above	369	-	(125)
- amount recycled to income statement	-	31	31
Recognised in hedging reserve	(950)	31	352
Total recognised in equity	11,200	31	1,960

Continued…

  -13-

4.    Finance Expense

	Six months ended		Year ended
	31.12.08 £'000	31.12.07 £'000	30.06.08 £'000
Recognised in profit or loss
Finance expense arising from:
- financial liabilities at amortised cost	3,101	1,310	4,281
- foreign exchange losses	1,269	-	-
- derivatives at fair value through profit or loss	-	42	58
	4,370	1,352	4,339

5.    Income Tax Expense

The tax charge for the six months ended 31 December 2008 has been based on the estimated effective rate for the year ending 30 June 2009 of 28.5% (six months ended 31 December 2007: 29.8%, year ended 30 June 2008: 28.9%).

6.    Dividends

The Directors have declared an interim dividend of 3.00p per share (2007: 2.75p) costing £1,965,000 (2007: £1,779,000). It is payable on 9 April 2009 to Shareholders whose names are on the Register of Members at close of business on 13 March 2009. The ordinary shares will become ex dividend on 11 March 2009.

As the dividend was declared after the end of the period being reported and in accordance with IAS10 'Events After the Balance Sheet Date', the interim dividend 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 2009.

Continued…

  -14-

7.    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.

	Six months ended		Year ended
	31.12.08 Pence	31.12.07 Pence	30.06.08 Pence
Basic earnings per share
- adjusted basic	11.68	9.97	20.81
- basic	7.93	9.83	14.20
Diluted earnings per share
- adjusted diluted	11.63	9.85	20.64
- diluted	7.90	9.72	14.09
The calculations of basic and diluted earnings per  share are based upon:
	£'000	£'000	£'000
Earnings for adjusted basic and adjusted diluted  earnings per share calculations	7,632	5,266	12,185
Earnings for basic and diluted earnings per share	5,184	5,193	8,318
	No.	No.	No.
Weighted average number of ordinary shares for  basic earnings per share	65,336,853	52,825,367	58,560,097
Impact of share options	267,641	614,917	464,486
Weighted average number of ordinary shares for  diluted earnings per share	65,604,494	53,440,284	59,024,583

Continued…

  -15-

8.    Adjusted Operating Profit and Profit Before Taxation

	Six months ended		Year ended
	31.12.08 £'000	31.12.07 £'000	30.06.08 £'000
Operating profit
Adjusted operating profit is calculated as follows:
Operating profit	9,365	8,028	14,071
Amortisation of intangible assets acquired as a result of  business combinations	3,268	102	2,975
Rationalisation costs arising following the acquisition of  VetXX Holdings A/S	-	-	2,096
	12,633	8,130	19,142
Profit before taxation
Adjusted profit before taxation is calculated as follows:
Profit before taxation	7,250	7,397	11,705
Amortisation of intangible assets acquired as a result of  business combinations	3,268	102	2,975
Rationalisation costs arising following the acquisition of  VetXX Holdings A/S	-	-	2,096
Write-off of unamortised arrangement fees on  borrowings refinanced as a result of the acquisition of  VetXX Holdings A/S	-	-	77
Adjusted profit before taxation	10,518	7,499	16,853

9.    Analysis of Net Borrowings

	As at 31.12.08 £'000	As at 31.12.07 £'000	As at 30.06.08 £'000
Bank loans and overdraft	(50,208)	(12,119)	(47,107)
Finance leases and hire purchase contracts	(2,102)	(1,902)	(2,109)
Cash and cash equivalents	20,416	10,758	22,219
	(31,894)	(3,263)	(26,997)

10.    Foreign Exchange Rates

The following exchange rates have been used in the translation of the results of foreign operations:

	Average rate for the six months ended		Closing rate
	31.12.08	31.12.07	at 31.12.08
Danish krone	9.1549	n/a	7.6438
US dollar	1.7364	2.0331	1.4479

11.    Trademarks

Trademarks appear throughout this document in italics.  Dechra and the Dechra 'D' logo are registered Trademarks of Dechra Pharmaceuticals PLC.

  -16-

Independent Review Report to Dechra Pharmaceuticals PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2008 which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Shareholders' Equity, the Consolidated Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA'). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2008 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

KPMG Audit Plc Chartered Accountants 24 February 2009

2 Cornwall Street Birmingham B3 2DL

 

END

 

 

IR ILFLDFFIVFIA