Dechra purring at strong growth in the US

The group, which owns the Dales manufacturing plant in Skipton, said group revenues rose by four per cent in the six months to December 31, boosted by exchange rate movements. It added that operating profit will be in line with management expectations.

After completing the sale of its services business last August, the group is focused on its pharmaceuticals business.

The European pharmaceuticals business reported a five per cent rise in revenues, but in constant currency revenues were flat.

Dechra’s chief executive Ian Page said that despite the challenging market conditions in Europe, the business delivered a resilient performance, with the exception of the Netherlands where sales were hit by increased competitive pressure.

Export revenues were lower than last year due to the phasing of the order book.

Mr Page said that the Companion Animal Products (CAP) business showed growth in the majority of its markets. As a result, gross margins have benefited.

In the US, revenues fell two per cent and were down three per cent on a constant currency basis.

Dechra said its key dermatology and endocrinology products performed strongly in the first half with revenues growing by 12 per cent or 11 per cent on a constant currency basis.

“We remain in a strong financial position to continue to deliver our strategy of building an international specialist veterinary pharmaceuticals and related products business,” said Mr Page.

Analyst Savvas Neophytou, at Panmure Gordon, said: “We had been anticipating a tough start to the year, with the base setting a high bar. To that end, it is with relief we see the company’s trading update pointing to some four per cent growth, versus our forecast of 0 per cent, albeit aided by exchange rate volatility.

“The base Companion Animal Products business performed strongly, boosting gross margin, although the US Animax situation is still providing headwinds resulting in minus two per cent growth in the period. The second half provides a much easier base and given our overall stance in this space, we re-iterate our ‘buy’ recommendation.”

Analyst Brian White said: “The update is a bit mixed with the European farm animals business resilient but impacted by a continued decline in antimicrobial use, particularly in the Netherlands. While this had been one of the reasons for the sale of the Eurovet business in the first place, the continuing impact appears to have been more sustained than initially envisaged.

“Increased competition has also been cited as a factor. The companion animal business on the other hand has continued to deliver growth in most markets and it is worth noting in this regard we anticipate much of the future growth of the overall business to come from the companion animal pipeline.”

He added that the US business performed well.

“On a more reassuring note the alteration in mix has resulted in an improved gross margin and the company has announced that operating profit in the period is estimated to be in line with management’s expectations. Given that the third quarter offers an easier comparator for Dechra, compared to the first half, we expect a more robust second half performance,” said Mr White.

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