Interim Results

Dechra Pharmaceuticals PLC
28 February 2001


Dechra Pharmaceuticals PLC 
 
Interim Results for the six months ended 31 December 2000 
 
Analysts' Presentation today: 
 
9.30am 
 
@ 
 
Citigate Dewe Rogerson 
26 Finsbury Square 
London 
EC2M 5SY 
Tel: [phone] 
 
 
Dechra Pharmaceuticals PLC 
Manufacturers, distributors and marketers of pharmaceuticals, 
veterinary equipment and related goods and services 
 
Maiden Interim Results reflect a solid performance across the Group 
 
 
* Turnover                                 £78.54m     up 8% 
 
* Operating profit - pre-flotation costs     £4.0m     up 10% 
 
* Pro-forma profit before tax               £3.24m     up 11% 
 
* Earnings per share
  Basic adjusted to exclude flotation costs   4.03p    up 67% 
  Pro-forma                                   4.54p    up 11% 
  Fully diluted                               3.99p    up 72% 
 
 
* Interim dividend                            1.25p 
 
* Group margins continue to improve 

'Our strategy of continuing to improve performance through providing
consistently high levels of service and understanding our customers' needs in
the markets in which we operate has enabled us to produce a first-half
performance in line with management expectations. 
 
'At the time of flotation we committed to further investment in our
manufacturing capability. This process has now started and will continue.
Coupled with our focus on high levels of service and quality to our
customers, strong market position, and consistent provision of added-value
services, the Board is confident that the successful development of the Group
will continue.' 
  

FULL STATEMENT BELOW

 
Enquiries: 
Gary Evans, Chief Executive 
Simon Evans, Group Finance Director     Fiona Tooley 
Dechra(R) Pharmaceuticals PLC           Citigate Dewe Rogerson 
Tel: Today: 020 7282 8000 (8am-12noon)  Tel: Today: 020 7282 8000 
            020 7767 1000.(12.30pm-2.30pm)   Mobile:    [phone] 
     Mobile: [phone] (Gary Evans)       Thereafter: 0121 631 2299 
Thereafter:  01782 771100             e-mail: [e-mail]

www.dechra.com 

 
Dechra Pharmaceuticals PLC 

Interim Results for the six months ended 31 December 2000

 
Joint Statement by the Chairman, Peter Redfern & Chief Executive, Gary Evans 
 
Introduction 
These interim results are the first reported since the Company's successful
flotation on the London Stock Exchange in September 2000. 
 
The issue of 23,333,333 ordinary shares, representing 46.9% of the Enlarged
Share Capital in the Company was placed with institutional and private
investors and raised £26.4m, net of expenses. The proceeds were used to
reduce net debt, in particular £21.2m of unsecured loan stock, including
accrued interest issued at the time of the MBO. The balance of funds raised
reduced our borrowings from £20.1m to £15.0m and new bank facilities have
been agreed, leaving the Group well positioned to further develop the
business both organically and by acquisition. 
 
Our strategy of continuing to improve performance through providing
consistently high levels of service and understanding our customers' needs in
the markets in which we operate has enabled us to produce a first-half
performance in line with management expectations. 
 
Results 
Turnover in the six months ended 31 December 2000 increased by 8.34% to
£78.5m (1999: £72.5m) - all of which was organic growth. 
 
Good performances were achieved by all three trading subsidiaries. Group
operating margin was improved from 4.99% to 5.09%. This is despite an
increase in operating costs as the Group has increased its IT and marketing
expenditure. 
 
Operating profits in the period, excluding one-off flotation costs, were up
10.5% from £3.6m to £4.0m. Pro-forma profit before tax, excluding the
flotation costs, increased 11% to £3.2m from £2.9m. 
 
Excluding the flotation costs, Earnings per Share increased 67.2% from 2.41p
to 4.03p. On a pro-forma basis, the EPS were 4.54p (1999: 4.09p), an increase
of 11%. 
 
Net debt at the end of the period stood at £9.98m, reflecting the pattern of
stockholding in the business in the second quarter which is consistent with
previous years. The pro-forma net interest payment of £0.76m was covered 5.27
times. 
 
The Group continues to invest for the future. Capital expenditure in the
first half amounted to £1.25m compared to a depreciation charge of £0.55m.
During the second half, further investment will be made, principally at Dales
where additional capacity is required to meet the growing demand in
pharmaceutical manufacture. 
 
 
Dividend 
In line with the Board's progressive dividend policy, an interim dividend of
1.25p will be paid on 4 April 2001 to shareholders on the Register as at 9
March 2001. 
 
Review 

National Veterinary Services

NVS(R), currently the largest operating company within the Group, produced a
further solid performance during the period. Market share increased to over
43% of the ethical veterinary sector. 
 
We continue to enhance our efficiency and improve our service offering by
investing in our facility at Stoke-on-Trent. We have installed a mezzanine
floor in our existing warehouse, which has increased capacity by 40%.
Further, as part of this development we have also installed and recently
commissioned a new 'smart-pick system' which went live in December 2000. 
 
Exploitation of information technology is a core competence of NVS, and
further development of our Vetcom(R) ordering and practice management systems
has continued in the first half. Pioneered a decade ago, Vetcom is now
installed in some 1,200 practices and over 80% of all NVS orders are received
through this medium. Vetcom is being further developed using a 'Windows'
platform, which will offer our customers a familiar operating system and
greater flexibility. 
 
NVS continues to support the development of retail pet products sales via the
veterinary profession through our web based service Vet2Pet
(www.vet2pet.co.uk), and waiting-room catalogues. Subsequent orders are
either delivered directly to the consumers' address or to the practice,
whichever is more convenient to the client. 
 

Arnolds(R) Veterinary Products and Dales(R) Pharmaceuticals

Based in Shrewsbury, Arnolds is a long established and well recognised
leading player in the instrument, equipment and disposable sector of the UK
veterinary market. It has exclusive agreements and relationships with a
number of companies including Sims-Portex(R), B.Braun and 3M(R) for the
marketing of their products in the UK and some international markets. 
 
During the period three further agreements have been signed with B.Braun
(extension of product offering), Biopure(R) Corporation (substitute
haemoglobin for canine anaemia) and Humphrey ADE (anaesthetic circuit). 
 
Arnolds also holds a leading position in several niche veterinary
pharmaceutical sectors of the UK market, such as local anaesthesia and equine
anti-inflammatory, with strong positions in several other companion animal
sectors. 
 
During the period, along with a further two licences to complement an
existing range of metabolic products, the licensing and successful launch of
Hypercard(R), a unique feline cardiac product, was achieved. Hypercard, is
one of several new products which are the result of Arnolds' pharmaceutical
product development programme. A further two products are in the latter
stages of registration with a number of other products in development.
Product development is focussed on the companion animal sector, which
includes feline, canine and equine. 
  
Dales, based in Skipton, was originally the in-house manufacturing arm of
Arnolds. Today over 40% of Dales revenues are from the manufacture of branded
licensed pharmaceuticals for a growing number of human pharmaceutical
companies. This business complements the development and manufacture of
products from our own product development programme. Investment continues to
increase the manufacturing capacity at Dales. 
 
Prospects 
The second half has started well with trading in line with our expectations. 
 
Improvements continue to be made in operational and information technology
systems, allowing NVS to exploit its leading market position and increase its
profile amongst the veterinary profession. This, together with continuing
growth in the companion animal sector, bodes well for the future of this
service-led business. 
 
Dales and Arnolds will continue to develop their own branded products whilst
building their portfolio of products manufactured under licence. We have a
number of interesting and exciting dialogues underway with third parties
where we have identified clear opportunities to widen our pharmaceutical
manufacturing capability both in animal and human healthcare products. 
 
At the time of flotation we committed to further investment in our
manufacturing capability. This process has now started and will continue.
Coupled with our focus on high levels of service and quality to our
customers, strong market position, and consistent provision of added-value
services, the Board is confident that the successful development of the Group
will continue. 
 
     Peter Redfern     Gary Evans 
     Chairman          Chief Executive 
 
27 February 2001 

 
Dechra Pharmaceuticals PLC 
Interim Results 
CONSOLIDATED PROFIT & LOSS ACCOUNT 
 
 
                 Note       Six Months Ended        Year Ended 
                        31.12.2000     31.12.1999   30.6.2000 
                         £'000          £'000       £'000 
 
Turnover                 78,537        72,494       145,487 
Cost of sales           (69,177)      (64,300)     (128,550) 
Gross profit              9,360         8,194        16,937 
 
Other operating 
expenses                 (5,359)       (4,574)       (9,432) 
 
Operating profit 
before 
exceptional item          4,001         3,620         7,505 
 
Exceptional item: 
Flotation costs     1    (1,080)           -            - 
Operating profit          2,921         3,620         7,505 
 
Net interest payable     (1,753)       (2,726)       (5,417) 
 
Profit on ordinary      
activities before 
taxation                  1,168           894         2,088 
 
Tax on profit on 
ordinary 
activities          3      (681)         (279)         (652) 
 
Profit on ordinary 
activities 
after taxation              487           615         1,436 
 
Dividend           4       (622)            -            - 
Retained (deficit)
/profit 
for the period             (135)          615         1,436 
 
Earnings per 
ordinary share 
- Basic            5       1.25p         2.41p        5.62p 
- Adjusted to 
exclude      
exceptional item   5       4.03p         2.41p        5.62p 
 
Fully diluted 
excluding      
exceptional item   5       3.99p         2.32p        5.43p 

 
Dechra Pharmaceuticals PLC 
Interim Results 
CONSOLIDATED BALANCE SHEET (Summary) 
 
 
               Note          As at               As at 
                    31.12.2000   31.12.1999    30.6.2000 
                    £'000        £'000         £'000 
 
Fixed assets 
Tangible fixed 
assets                  3,296     2,480        2,595 
 
Current assets 
Stocks                 16,669    18,046       16,207 
Debtors                22,218    19,934       22,422 
Cash at bank 
and in hand             4,174      -          9,226 
                       43,061    37,980       47,855 
 
Creditors: 
amounts falling 
due within one 
year 
Bank loans 
and overdraft           (3,000)  (2,992)      (3,000) 
Other creditors        (33,173)  27,069)     (37,437) 
                       (36,173) (30,061)     (40,437) 
 
Net current 
assets                   6,888    7,919        7,418 
 
Total assets 
less current 
liabilities             10,184   10,399       10,013 
 
Creditors: amounts 
falling due after 
more than one year     (10,587) (39,150)     (37,943) 
Net liabilities           (403) (28,751)     (27,930) 
 
Capital and 
reserves 
Called-up share 
capital                    498        6            6 
Share premium 
account                  26,783      632          632 
Profit and loss 
account                 (27,684)(29,389)     (28,568) 
Shareholders' 
funds             6        (403)(28,751)     (27,930) 

 
Dechra Pharmaceuticals PLC 
Interim Results 
CONSOLIDATED CASH FLOW STATEMENT (Summary) 
 
 
                    Note   Six Months Ended     Year Ended 
                        31.12.2000     31.12.1999  30.6.2000 
                         £'000         £'000        £'000 
 
Net cash flow from 
operating activities  7  (1,395)      (2,098)     12,036 
Returns on investments 
and servicing of finance (7,090)      (1,631)     (3,662) 
Taxation                   (252)         -          (252) 
Capital expenditure and 
financial investment       (647)        (342)       (859) 
Acquisitions and disposals (100)        (180)       (260) 
Equity dividends paid        -            -           - 
Cash (outflow)/inflow before 
financing                (9,484)      (4,251)      7,003 
Financing: 
Shares issued less 
expenses                 27,662          -           - 
New bank loans           15,000          -           - 
Term loans repaid       (37,962)       (800)      (2,000) 
Capital element of 
finance lease 
payments                   (268)       (237)        (473) 
                          4,432      (1,037)      (2,473) 
 
(Decrease)/increase in cash 
in the period            (5,052)     (5,288)       4,530 
 
Reconciliation of net cash flow to movement in net debt: 
 
                         Six Months Ended        Year Ended             
                      31.12.2000     31.12.1999  30.6.2000 
                       £'000         £'000       £'000 
 
(Decrease)/increase in 
cash in the period          (5,052)     (5,288)     4530 
Cash outflow from  
change in debt and lease 
financing                   23,230       1,037     2,473 
Change in net debt arising 
from cash flows             18,178      (4,251)    7,003 
New finance leases            (625)        (57)      (76) 
Movement in net debt in period 17,553   (4,308)    6,927 
Net debt at start of period (27,535)   (34,462)  (34,462) 
Net debt at end of period   (9,982)    (38,770)  (27,535) 

 
 
Dechra Pharmaceuticals PLC 
Interim Results 
NOTES 
 
 
1.     Exceptional Item 
The element of the costs of the flotation charged to the profit and loss
account in the six months ended 31 December 2000 amounted to £1,080,000 and
has been classified as exceptional costs. In addition to the flotation costs
charged to the profit and loss account, £338,000 of costs were charged to the
share premium account. 
 
2.     Pro-Forma Results 
The key financial results are re-stated below on a pro-forma basis to reflect
the fundamental change in funding structure of the Group as a result of being
listed on the London Stock Exchange and to exclude the effect of the
flotation costs:  
 
                              Six Months Ended      Year Ended 
                         31.12.2000     31.12.1999  30.6.2000 
                         £'000          £'000       £'000 
     Operating profit        4,001     3,620        7,505 
 
     Profit on ordinary
     activities 
     before taxation          3,242    2,922        6,138 
     Profit on ordinary 
     activities 
     after taxation           2,263    2,035        4,271 
 
     Basic pro-forma earnings 
     per share                 4.54p    4.09p        8.58p 
 
     The pro-forma profit on ordinary activities after taxation may be
reconciled as follows: 
 
                              Six Months Ended     Year Ended 
                         31.12.2000     31.12.1999  30.6.2000 
                              £'000        £'000     £'000 
Profit on ordinary activities 
after taxation                  487          615     1,436 
 
Exceptional flotation costs   1,080           -        - 
 
Profit after taxation  
excluding exceptional costs   1,567          615     1,436 
Pro-forma interest adjustment 
after taxation                  696        1,420     2,835 
Pro-forma profit after taxation 2,263      2,035     4,271 
 
The pro-forma interest adjustment reflects the effect on interest payable and
other charges on bank and other loans (and the related tax effect) of
replacing the funding in place prior to 22 September 2000 with that in place
from 22 September 2000 onwards as if this financing had been in place since 1
July 1999. 
 
The calculation of earnings attributable to ordinary shareholders for the
calculation of fully diluted earnings per share includes an amount of £32,000
(1999: £nil) of notional interest on the proceeds of issuing the share options. 
 
3.     Taxation 
The tax charge reflects the full year's estimated effective rate on the
group's profit before exceptional items of 30.3% (1999: 31.2%). 
 
4.     Dividends 
An interim dividend of 1.25p per share costing £622,000 has been declared. It
is payable on 4 April 2001 to shareholders whose names are on the Register of
Members at close of business on 9 March 2001. The ordinary shares will become
ex-dividend on 7 March 2001. 
 
 
     Earnings Per Share

Earnings per ordinary share have been calculated by dividing the profit on
ordinary activities after taxation for each financial period by the weighted
average number of ordinary shares in issue during the period. 
 
In order to exclude the effect of the flotation costs on the results of the
group, adjusted earnings per ordinary share have been based on the profit on
ordinary activities after taxation for each financial period but excluding
flotation costs. 
 
The number of shares used to calculate earnings per share is given below: 
                         Six Months Ended     Year Ended 
                    31.12.2000     31.12.1999 30.6.2000 
                         No.            No.       No. 
     Number of ordinary 
     shares for basic 
     earnings per share   38,848,199  25,531,921  25,531,921 
 
     Impact of share options 
     and warrants          1,220,000     926,024     926,024 
 
     Number of ordinary shares 
     used for fully diluted earnings 
     per share            40,068,199   26,457,945  26,457,945 
 
Pro-forma earnings per share have been calculated assuming that the number of
shares in issue on listing of 49,791,278 were in issue during the whole of
each financial period. 
 
The calculation of earnings attributable to ordinary shareholders is shown in
note 2. 
 
6.     Reconciliation of movements in shareholders' funds: 
                              Six Months Ended     Year Ended 
                         31.12.2000     31.12.1999 30.6.2000 
                            £'000          £'000     £'000 
     Retained (deficit)/
     profit 
     for the period          (135)         615       1,436 
     New shares issued     28,000           -          - 
     Costs of share issue    (338)          -          - 
     Net addition to 
     shareholders' 
     funds                 27,527          615       1,436 
 
     Opening shareholders' 
     funds                (27,930)     (29,366)    (29,366) 
     Closing shareholders' 
     funds                   (403)     (28,751)    (27,930) 

 
 
7.     Reconciliation of operating profit to operating cash flows: 
                              Six Months Ended     Year Ended 
                         31.12.2000     31.12.1999 30.6.2000 
                         £'000          £'000       £'000 
 
     Operating profit    2,921         3,620     7,505 
     Depreciation          554           453       946 
     Profit on sale of 
     tangible 
     fixed assets          (27)          (17)      (17) 
     Increase in stocks   (462)       (6,344)   (4,505) 
     Increase in debtors   (62)         (336)   (2,558) 
     (Decrease)/increase in 
     creditors          (4,319)          526    10,665 
     Net cash flow from 
     operating activities(1,395)      (2,098)   12,036 
 
8.     Basis of preparation 
The interim financial information has been prepared on the basis of the
accounting policies set out in the 2000 Annual Report and Accounts and was
approved by the Board of Directors on 27 February 2001. The financial
information set out above does not constitute statutory accounts within the
meaning of the Companies Act 1985. Comparative figures for the year ended 30
June 2000 have been taken from the Group's audited statutory accounts, which
have been delivered to the Registrar of Companies and in which the company's
auditors expressed an unqualified opinion. The results for the six months to
31 December 2000 are unaudited. They have been reviewed by the auditors KPMG.
The review opinion is attached to these interim results. 
 
This statement of interim results will be sent to all shareholders. Copies
will be available for members of the public upon application to the Company
Secretary at Dechra House, Jamage Industrial Estate, Talke Pits,
Stoke-on-Trent. ST7 1XW. 


Independent Review Report to Dechra Pharmaceuticals PLC

 
 

Introduction

We have been instructed by the Company to review the financial information
set out on pages 5 to 10 and we have read the other information contained in
the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information. 
 

Directors' Responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. 
 

Review Work Performed

A review consists principally of making enquiries of Group management and
applying analytical procedures to the financial information and underlying
financial data and based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification
of assets, liabilities and transactions. It is substantially less in scope
than an audit performed in accordance with Auditing Standards applicable in
the United Kingdom and therefore provides a lower level of assurance than an
audit. Accordingly we do not express an audit opinion on the financial
information. 
 

Review Conclusion

On the basis of our review we are not aware of any material modifications
that should be made to the financial information as presented for the six
months ended 31 December 2000. 
 
 
KPMG 
Birmingham 
27 February 2001 
 
 

Financial Calendar

Financial year end                30 June 2001 
Announcement of final results     September 2001 
Annual General Meeting            October 2001 
Full and final dividend payment   November 2001