Dechra Pharmaceuticals PLC — Earnings Release 2015

Sep 7, 2015

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RNS Number : 2029Y

Dechra Pharmaceuticals PLC

07 September 2015

7 September 2015

Dechra Pharmaceuticals PLC

(Dechra or the Group)

Preliminary Results Announcement / Press Release

International veterinary pharmaceutical business, Dechra issues its audited preliminary results.

"Delivering our global growth strategy"

"During the financial year, we focused on the execution of our strategic priorities. As a result we consolidated our position within the market, invested in the launch of new products and expanded geographically, delivering underlying operating profit growth of 11.6% at constant exchange rates. Our strong balance sheet gives us the flexibility to pursue strategic opportunities as they arise in the future."
Ian Page, Chief Executive Officer

Highlights

·      Strong financial performance with double digit revenue and underlying profit growth (at CER).

·      Good progress made on delivering our global growth strategy.

·      EU Pharmaceuticals revenue grew by 3.9% (at CER) with a strong performance in Companion Animal Products (CAP) partly offset by a decline in Food producing Animal Products (FAP).

·      Excellent performance in North America Pharmaceuticals with a revenue increase of 59.9% (at CER), driven by the growth of our core brands, new product launches and the acquired product, Phycox®.

·      Continued geographical expansion with trading commencing in two new subsidiaries in Canada and Poland.

·      Advances in the short term pipeline with approval of TAF Spray® and Osphos® in EU, and filing of Zycortal®.

·      Investment made in sales resources, infrastructure and manufacturing to support our future growth.

·      Conditional offer of €51.4 million made for Genera d.d. announced on 3 August 2015 to enable us to enter the poultry vaccines market.

·      Cash conversion of 107.1% and a net cash position of £13.4 million.

Financial Summary

	2015	2014	Actual exchange rate	Constant exchange rate
£m	£m	%	%
Revenue	203.5	193.6	5.1	10.0
Gross profit	116.1	107.7	7.8	13.6
Gross profit %	57.1%	55.6%
Underlying operating profit	44.4	42.2	5.2	11.6
Underlying EBIT %	21.8%	21.8%
Underlying EBITDA	48.0	46.2	3.9	10.2
Underlying diluted EPS (p)	39.90	36.32	9.9	16.9
Dividend per share (p)	16.94	15.40	10.0	10.0

Outlook

Michael Redmond, Chairman said:

"The Board believes that our focus on our key therapy areas, the continued rate of adoption of Osphos and sales in our new territories will drive progress in the short term. Current trading is in line with management expectations; however, the business continues to be exposed to exchange rate volatility. In the long term the delivery of further new products and the integration of potential acquisitions give the Board confidence in the Group's future prospects."

Enquiries:
Dechra Pharmaceuticals PLC
Ian Page, Chief Executive Officer	Mobile: +44 (0) 7775 642 222
Anne-Francoise Nesmes, Chief Financial Officer e-mail: corporate.enquiries@dechra.com	Mobile: +44 (0) 7841 764 864 Office: +44 (0) 1606 814 730
TooleyStreet Communications Ltd
Fiona Tooley, Director e-mail: fiona@tooleystreet.com	Office: +44 (0) 121 309 0099 Mobile: +44 (0) 7785 703 523

Results Briefing today: A presentation of the Annual Result's will be held today at 10.30 am at the office of Investec Bank plc, 2 Gresham Street, London EC2V 7QP.

Dial in: Ref: Dechra - Standard International Access London +44 (0)20 3003 2666.

For assistance please contact Fiona Tooley on +44 (0) 7785 703 523 or at Investec on + 44 (0) 20 7597 5970.

About Dechra

Dechra is an international specialist veterinary pharmaceuticals and related products business.  Its expertise is in the development, manufacture and sales and marketing of high quality products exclusively for veterinarians worldwide.  Dechra's business is unique as the majority of its products are used to treat medical conditions for which there is no other effective solution or have a clinical or dosing advantage over competitor products.  For more information please visit: www.dechra.com.

Stock Code: Full Listing (Pharmaceuticals): DPH

Trademarks

Trademarks appear throughout this document in italics.  Dechra and the Dechra 'D' logo are registered Trademarks of Dechra Pharmaceuticals PLC.  The Malaseb Trademark is used under licence from Dermcare-Vet Pty. Ltd.

Forward Looking Statement

This document contains certain forward-looking statements. The forward-looking statements reflect the knowledge and information available to the Company during the preparation and up to the publication of this document. By their very nature, these statements depend upon circumstances and relate to events that may occur in the future thereby involve a degree of uncertainty.  Therefore, nothing in this document should be construed as a profit forecast by the Company.

Dechra Pharmaceuticals PLC

Preliminary Results for the year ended 30 June 2015

Chairman's and Chief Executive Officer's Statement

We are pleased to report that the Group has delivered a strong performance in the year, with good revenue growth in the majority of our EU markets and excellent growth within North America. This performance has been realised through new product launches, the resolution of a number of supply issues, improved penetration of our core products into our major markets and new territory launches. Overall it has been a successful year which clearly demonstrates that we are delivering our global growth strategy.

Portfolio Focus

Dechra Veterinary Products (DVP EU)

Our EU business has delivered solid growth of 3.9% at CER, driven by a strong performance across our Companion Animal Products (CAP) portfolio offsetting a decline in Food producing Animal Products (FAP). Most markets grew in the year but the most significant double digit sales increases were seen in the UK, France, Spain and Belgium. Our key therapeutic focus areas of endocrinology, dermatology and anaesthetics and analgesics all performed strongly. Additionally, we have strengthened two of our therapeutic areas:

·      our dermatology portfolio was expanded with the successful launch of an in-licensed product, Sporimune® in seven European markets.

·      the launch of Osphos in the UK improves our position in the equine market. Preparations are now being made for the launch of the product across the rest of Europe in the new financial year.

FAP continues to decline as we have a strong presence in the antibiotics market in Western Europe where there is continued focus on prudent prescribing due to concerns over antibiotic resistance. This remains an ongoing headwind against our overall performance, especially in Germany and also in Denmark, where there has been competitive pressure. However, it is pleasing to note that the rate of decline has slowed in the Netherlands, a market in which antibiotic use has reduced sharply over the last four years.

Our therapeutic and life stage pet diets, branded SpecificTM, have now fully recovered from the stock-outs created by the complex transfer of the products to a new manufacturer. The supply issues were well managed given the logistical challenges involved in the transfer process. Overall sales declined slightly compared to the previous year. The range has now been repositioned and a new marketing campaign is being rolled out across Europe focusing on three key drivers:

·      the high inclusion of fish protein and the associated benefits of Omega 3;

·      the ethos of deriving the nutrients of the products from sustainable sources; and

·      the Specific brand being dedicated to the veterinary market.

Dechra Veterinary Products North America (DVP NA)

We have seen an excellent performance in North America with sales growth of 59.9% at CER. All our major therapeutic areas grew, in particular endocrinology and dermatology sales increased by 24.0%. The sales increase in endocrinology was driven by Vetoryl®, our lead product in this category, which continued to deliver double digit growth and by the new product launch of Levocrine® Chewable Tablets, which has outperformed our expectations.

Our performance in North America benefited from the full year trading of Phycox, the re-launch of ophthalmics, the launch of Osphos and the opening of our Canadian subsidiary. Phycox, which came into the Group through the acquisition of the assets of PSPC Inc. in May 2014, has performed well throughout the year and we have increased the number of customers purchasing the product by over 50%. The ophthalmics products, which were re-launched following long term supply issues, achieved expected sales targets despite strong competition from human generic equivalents. We have successfully launched Osphos, our unique product for equine lameness and, whilst the uptake has been a little slower than expected, we have to date penetrated approximately one-third of the equine and mixed animal practices. Adjusting for these items, sales of our existing core products grew by 21.7% at CER.

Our agility enables us to respond rapidly to market changes or opportunities. Following a serious shortage of critical care intravenous fluids in the US market, we obtained FDA approval for the emergency importation of our European critical care intravenous fluid Vetivex® 11 (Hartmans solution) to supply the equine market. We are currently working with the FDA to achieve long term approval for a US labelled version of this product to add to our equine portfolio.

To support our growth in the US, we have continued our investment in the infrastructure with 16 new appointments, predominantly across sales and technical support.

Pipeline Delivery

Team Restructuring

Given the varied range of projects in development and the increasing demands of regulatory authorities, the Product Development and Regulatory Department has been restructured. Dr Joseph Rosentel has been appointed to lead the Product Development Project Teams and Dr Susan Longhofer will now head up Regulatory Affairs and will dedicate more time to business development, a critical function as we assess numerous in-licensing opportunities.

This restructuring has been implemented to provide the necessary expertise and focus with a view to ensuring we deliver the increasingly complex product portfolio in a timely and efficient manner.

Successful Approvals

Following the launch of Osphos in the UK and US in the first half of our financial year, we have subsequently received approval in 17 additional EU territories and have also received marketing approval in Canada. EU approvals were achieved following the completion of mandatory studies demonstrating food safety as the horse is classed as a food producing animal in the majority of EU territories.

TAF Spray was also approved in 14 European countries in the year. This is a differentiated generic antibiotic aerosol containing thiamphenicol which is used to treat superficial wound infections in several species.

A new low dose 5mg Vetoryl has been approved for the US. This enhances the range of dosing options available to veterinarians and provides a new marketing message as we continue to deliver growth from the Group's leading product.

To support our geographic expansion goals, minor approvals were received for Octacillin® and Soludox® in the Philippines and Sedaxylan® in South Africa.

Development Update

Complete dossiers have been filed in both the EU and US for a canine endocrine product, to be branded Zycortal. Initial questions have been received and it is hoped that the first approval will be received during our new financial year.

We have three FAP project dossiers for poultry and swine under review in Europe and are preparing a further dossier for a decentralised application which will be submitted before the end of the 2015 calendar year.

Owing to the nature of the development process, some projects in the Feasibility phase have taken longer than projected before reaching the Development phase. However, we are mitigating the potential impact of delays by increasing the overall number of projects in development.

Refilling the Pipeline

We continue to identify new opportunities internally and externally to improve and expand our product portfolio. We have reached a preliminary agreement with Jaguar Animal Health Inc. to secure marketing and joint development rights for their leading companion animal product. We have also acquired a partially completed dossier for an additional canine endocrinology product; further development work will be required to gain full approval, which will be conducted at our manufacturing facility in Skipton, UK.

Geographical Expansion

In the first half of our financial year we opened our Canadian subsidiary and successfully recruited a team of eight, the majority of whom focus on sales. We commenced trading in January 2015 and have begun to establish a strong presence in this territory. The Canadian subsidiary achieved sales targets for Vetoryl, Felimazole® and the dermatology range. However, other products sales were impacted by surplus stock in the market from our previous distributor which had washed through the system by the end of the financial year. The new team is highly focused to deliver results in our new financial year.

We have also established a trading subsidiary in Poland. This came about as the distributor of our range of predominantly FAP products was acquired, thereby allowing us to take advantage of a change of ownership clause in the contract. We have appointed ten people, including the Country Manager and an experienced sales team, the majority of whom previously worked for our distributor, together with three contracted sales representatives. Trading commenced ahead of our expectations in May 2015.

We are currently at an advanced stage of planning the start-up in an additional new territory, Austria, which we anticipate will be trading prior to the end of the new financial year.

We also continue to invest in our Regulatory function to gain new licences in other countries identified as target markets. Whilst there are few locations where we have the relevant critical mass for a new start-up at this time, the registration process is important as we look to expand beyond our core markets.

The principal benefits of trading through our own subsidiaries are that we can capture the full margin from our own products and we can provide the relevant sales and marketing focus which is more difficult to achieve through marketing partners.

Acquisition

Throughout the year we have continued to identify and screen potential businesses and products for acquisition that could increase Dechra's value and improve returns to shareholders.

We were pleased to announce, post the year end, that we have made a conditional offer to acquire a 63.3% shareholding (equivalent to 69% of voting rights) in a Croatian based business, Genera d.d., which triggered a mandatory takeover for the remaining shares which would value the business at the equivalent of €51.4 million on a debt free, cash free basis. The sale and purchase agreement to acquire this stake is conditional on total aggregate shareholder acceptances reaching 75% of the voting share capital. The mandatory offer is expected to be completed by November 2015 and is subject to approval by the Croatian Financial Services Agency (HANFA). The principal reason for the acquisition of this shareholding in Genera is that it represents a unique opportunity for Dechra to enter the poultry vaccines market, thereby expanding our FAP portfolio. This broader product offering will support our FAP sales in Western Europe and will enhance our ability to increase our presence in emerging markets. Additionally, the acquisition will bring three new sales territories in Croatia, Slovenia and Bosnia and Herzegovina and will enhance our manufacturing capabilities through access to a lower cost manufacturing base.

Although the veterinary market has undergone considerable consolidation over the past decade, we are still able to identify potential acquisition candidates due to our market knowledge and increasing international presence.

Strategic Enablers

Manufacturing

The key objective of Dechra Pharmaceuticals Manufacturing (DPM) is to produce Dechra's own pharmaceutical range in the most efficient and effective manner. In addition to manufacturing the Group's products, we also utilise spare capacity to provide a third party manufacturing service. Within the year these external sales, reported under our EU segment, have increased by 11.7%.

A number of projects were implemented across our sites throughout the year to increase capacity, improve yields and drive efficiencies to reduce the cost of goods. These include investments in:

·      the Premix Department in Bladel to increase batch sizes for FAP products;

·      a new faster encapsulating machine in Skipton which increases yield and doubles capacity;

·      a blister packing line to increase capacity and flexibility through automation; and

·      a larger creams and ointments vessel to facilitate a major third party contract and production of in-house creams, liquids and ointments in Skipton.

There have been a number of other developments within Manufacturing, the most significant of which is the successful pre-approval inspection of the Skipton facility by the FDA in preparation for the approval of our new canine endocrine product, Zycortal, to be manufactured at the site.

Our US site in Melbourne, Florida, which was acquired from PSPC Inc. in May 2014, has been fully integrated into Group Manufacturing. This year, we have focused on increasing quality systems and production capacity following the launch of a new product, Levocrine, which is manufactured at this site. A new Manufacturing Manager has been appointed to drive quality systems improvements and the necessary increase in production to meet the demand we have created for both Levocrine and Phycox.

Information Technology

The roll out of the Oracle Programme remains one of the primary objectives for the Group. Detailed plans are in place for the implementation to be completed by the end of 2017. Progress has been made in the year with the appointment of a new dedicated Project Manager to coordinate this complex project and ensure adherence to plan. Additionally, the implementation of the Group Finance Consolidation solution went live in June 2015.

We have continued to refresh our IT infrastructure and update our digital technologies with the following initiatives:

·      a Group high-speed network has been implemented across all major Dechra locations;

·      a web-based portal for staff training has been designed;

·      a new DVP website has been launched in multiple languages and a new PLC website is at an advanced stage of development; and

·      new hybrid PC tablets are being introduced for all sales staff to improve mobile working and presentation capabilities.

People

As reported last year, our focus has been on talent management and development. We have introduced a Talent Mapping programme to identify staff with high potential and we are implementing a professional development programme to strengthen and support individuals as required. Succession planning is also in place for all key managerial and technical roles across the Group and a rolling review programme has been established. Additionally, a Dechra careers website has been developed to provide up-to-date information on opportunities for all employees and to attract new talent to the Group.

The Senior Executive Team (SET) has been strengthened within the year with the appointment to the team of Dr Joseph Rosentel, Director of Product Development, and Giles Coley, Marketing Director DVP EU. Work has commenced on a Leadership Development programme for the team.

There has been significant recruitment throughout the year to support the Group's growth. In total, we have added over 100 employees, in new territories, in sales and technical support teams within DVP US and in recruitment to fill vacancies in DVP EU and DPM.

As we grow, internal communication to drive Group-wide alignment is increasingly important. With this in mind, a Dechra-wide newsletter has been introduced to improve internal communication across all our locations and all our employees.

Dividend

The Board is proposing a final dividend of 11.82 pence per share (2014: 10.65 pence per share). Added to the interim dividend of 5.12 pence per share, this brings the total dividend for the financial year ended 30 June 2015 to 16.94 pence per share, representing 10.0% growth over the previous year.

Subject to shareholder approval at the Annual General Meeting to be held on 23 October 2015, the final dividend will be paid on 20 November 2015 to shareholders on the Register at 30 October 2015. The shares will be become ex-dividend on 29 October 2015.

Outlook

The Board believes that our focus on our key therapy areas, the continued rate of adoption of Osphos and sales in our new territories will drive progress in the short term. Current trading is in line with management expectations; however, the business continues to be exposed to exchange rate volatility.

In the long term the delivery of further new products and the integration of potential acquisitions give the Board confidence in the Group's future prospects.

Financial Review by the Chief Financial Officer

During the 2015 financial year the Group focused on the execution of our four strategic pillars. As a result, we consolidated our position within the market, invested in the launch of new products and expanded geographically delivering underlying profit growth of 11.6% at constant exchange rates (CER). Our performance offsets strong currency headwinds, notably due to the volatility of the Euro, resulting in a growth of 5.2% at actual exchange rates (AER).

When presenting our financial results, we use a number of adjusted measures which are considered by the Board and management in reporting, planning and decision-making. These measures are reconciled to the financial results reported under IFRS further in this report.

·       Underlying results reflect the Group's trading performance excluding amortisation of acquired intangibles, non-underlying charges and one-off events such as restructuring and acquisition costs.

·       All growth rates for both underlying and reported financial results included in this review are at constant exchange rates (CER) unless otherwise stated. This shows the year-on-year growth as if exchange rates had remained the same as in the previous year.

·       All numbers are presented on a continuing operations basis. The divested Services Segment (in August 2013) is shown as discontinued operations in accordance with IFRS.

Overview of Underlying Financial Results

	2015 £m	2014 £m	Actual exchange rate	Constant exchange rate
Revenue	203.5	193.6	5.1%	10.0%
Gross profit	116.1	107.7	7.8%	13.6%
Gross profit %	57.1%	55.6%
Underlying operating profit	44.4	42.2	5.2%	11.6%
Underlying EBIT %	21.8%	21.8%
Underlying EBITDA	48.0	46.2	3.9%	10.2%
Underlying diluted EPS (p)	39.90	36.32	9.9%	16.9%
Dividend per share (p)	16.94	15.40	10.0%	10.0%

We delivered underlying operating profit of £44.4 million, representing a growth of 11.6% compared to the previous year. This was achieved through a combination of revenue growth and improvement in margins whilst we invested in key areas to support our growth.

A reconciliation to reported results is provided further in this report.

Revenue

Total revenue grew by 10.0% to £203.5 million. We delivered good growth in our CAP portfolio, and revenues increased due to product launches and the start of trading in new subsidiaries.

Revenue by Segment

European Pharmaceuticals Segment revenue grew by 3.9% to £168.6 million with a strong performance in the UK offsetting lower revenue in Germany due to the reduced use of antibiotics and in Denmark due to competitive pressure. It is pleasing to report that Vetoryl bounced back following last year's slower performance and grew by 22% due to trading in Italy as well as the roll out of our new marketing campaign.

Revenue in our North American Pharmaceuticals Segment grew by 59.9% to £34.9 million with the full year effect of the PSPC Inc. acquisition contributing to the growth. Our key products also performed well with an increase of 20.0% for Vetoryl and 24.0% for DermaPet®. Osphos, launched in August 2015, is also gaining momentum.

New territories, Italy, Canada and Poland, performed well and contributed 16.0% of the total revenue growth.

Revenue by Categories

Overall, the strong performance in CAP and Equine is offset by a decline in FAP sales.

CAP sales grew by 20.8% fuelled by Vetoryl's momentum in the EU and US, the launch of Phycox and the success of our dermatology range, DermaPet, in the US.

On a restated basis, Equine revenue has grown by 17.0% following the launch of Osphos.

FAP declined by 13.6%, mostly due to the impact of the reduction in the prescription of antibiotics and increased competition in Germany and Denmark. However, as reported in the Chairman's and Chief Executive Officer's statement, we are pleased to report that the rate of decline has currently slowed in the Netherlands.

Unfortunately we experienced some supply disruption as we transferred the manufacturing of our dry diets to a new third party manufacturer. This affected our sales which declined by 4.2% in this financial year. However, all supply issues were resolved in the latter part of the year and we expect to regain momentum in the 2016 financial year with the launch of a new marketing campaign.

Finally, third party manufacturing sales increased by 11.7% as we realise the value from new contracts signed in 2014.

	2015 £m	2014 As restated £m	Actual exchange rate	Constant exchange rate
CAP	113.9	98.2	16.0%	20.8%
Equine*	17.0	15.3	11.1%	17.0%
FAP*	27.3	33.7	(19.0%)	(13.6%)
Subtotal Pharma	158.2	147.2	7.5%	12.6%
Diets	25.6	28.4	(9.9%)	(4.2%)
Third Party Manufacturing	19.7	18.0	9.4%	11.7%
Total	203.5	193.6	5.1%	10.0%

* As we continue to focus on our Equine portfolio, we reviewed our product allocation to ensure that multi-species products were appropriately allocated to the relevant categories. As a result we have reclassified £2.2 million of 2014 product sales from FAP to Equine and £0.5 million from CAP to Equine.

Gross Profit

Our gross margins have improved from 55.6% to 57.1% (at AER) reflecting the higher margins within our CAP portfolio compared to the lower margin FAP business.

This favourable product mix is the main reason for the improvement in margins. However, we also benefited from a reduction in cost of goods as we transferred the pet diets to a new third party manufacturer and from the higher margins retained through establishing our own subsidiaries in Italy and Canada.

Selling, General and Administrative Expenses (SG&A)

SG&A expenses grew by 15.4% to £63.1 million as we continued to invest to support the future growth of the Group.

During 2014, SG&A growth was driven by a mixture of one-off items and investment in resources to progress the strategic pillars. This prior year investment has had a full year effect in 2015. Additionally, we have invested in the sales organisation in DVP EU and DVP US, strengthened our manufacturing resources and built necessary infrastructure functions to support the operations going forward. By ensuring that we are right-sized to achieve our ambitions and by funding our geographical expansion, we are building a platform for future growth.

Research and Development Expenses (R&D)

Our R&D spend in the 2015 financial year was £8.7 million. This is slightly above last year (2014: £8.2 million), commensurate with our pipeline progress and an increase in our in-licensing activities to create additional value and breadth within the pipeline. In addition to R&D spend, in-licensing activities sometimes lead to capital investments, such as the share investment of US$1.0 million in Jaguar Animal Health Inc.

Segmental Profit

Operating leverage continues to improve in our European and North American Pharmaceuticals Segments with underlying profit as a percentage of sales at 28.5% and 30.4% respectively (at AER), as summarised in the table below.

Operating Segment (Pharmaceuticals)

	2015 £m	2014 £m	Actual exchange rate	Constant exchange rate
Revenue	203.5	193.6	5.1%	10.0%
- EU	168.6	172.4	(2.2%)	3.9%
- North America	34.9	21.2	64.6%	59.9%
Operating Profit
- EU	48.0	49.0	(2.0%)	4.1%
- North America	10.6	6.0	76.7%	73.3%
EBIT %
- EU	28.5%	28.4%
- North America	30.4%	28.3%

The full segmental analysis can be found in note 2.

During 2015, consequent to the commencement of trading in Canada, the Board reviewed our reporting Segments and concluded that the US Pharmaceutical Segment should be expanded to include Canada and named the North American Pharmaceuticals Segment, reflecting the way we manage the Group and meeting the criteria defined under IFRS 8.

Overview of Reported Financial Results

Including non-underlying items, the Group's profit after tax of £19.5 million decreased by 65.1% at CER (66.9% at AER), due to the one-off profit on disposal of the Services Segment of £38.6 million in the prior year.

	2015 £m	2014 £m	Actual exchange rate	Constant exchange rate
Revenue	203.5	193.6	5.1%	10.0%
Gross profit	116.1	107.7	7.8%	13.6%
Gross profit %	57.1%	55.6%
Operating profit	26.0	25.0	4.0%	9.6%
EBIT %	12.8%	12.9%
Profit after tax	19.5	19.4	0.5%	6.2%
Profit after tax including discontinued
operations	19.5	59.0	(66.9%)	(65.1%)
Diluted EPS (p)	21.99	67.33	(67.3%)	(65.4%)

A reconciliation of underlying results to reported results as at 30 June 2015 is shown in the table below:

	2015 Underlying results £m	Non-underlying items			2015 Total Reported results £m
Amortisation of  intangibles £m	Acquisition costs £m	Finance expenses £m
Revenue	203.5				203.5
Gross profit	116.1				116.1
Selling, General and Administrative Expenses	(63.0)	(17.9)	(0.5)		(81.4)
R&D expenses	(8.7)				(8.7)
Operating profit	44.4	(17.9)	(0.5)		26.0
Net finance costs	0.7			(0.9)	(0.2)
Profit before tax	45.1	(17.9)	(0.5)	(0.9)	25.8
Taxation	(9.8)	3.4		0.1	(6.3)
Profit after tax	35.3	(14.5)	(0.5)	(0.8)	19.5
Diluted EPS (p)	39.90				21.99

Non-underlying items of £19.3 million before taxation, excluding the discontinued operations, are £0.9 million above the previous year due to higher acquired intangible amortisation with the full year effect of the PSPC Inc. acquired intangibles taking effect. Full details are shown in notes 4 and 5.

Earnings per Share and Dividends

Underlying diluted EPS from continuing operations for the year was 39.90 pence, 16.9% growth versus last year.

The reduction in interest payments following the repayment of our debt and the positive impact of transactional exchange gains, contributed to our EPS increase. The transactional currency effect of the Euro and other currency movements impacted profit after tax by £1.8 million and contributed 2.12 pence to the EPS.

The reported diluted EPS for the year was 21.99 pence (2014: 67.33 pence).

The Board is proposing a final dividend of 11.82 pence per share (2014: 10.65 pence). Added to the interim dividend of 5.12 pence, it brings the total dividend per share for the year to 16.94 pence, representing 10.0% growth over the previous year. Dividend cover based on underlying EPS is 2.4 times.

Net Cash Position

Our net cash position continues to improve with strong cash generation being reflected in the increase from £5.0 million net borrowings in the prior year to £13.4 million net cash as at 30 June 2015.

Covenants on all loan facilities were met during the year.

Whilst no new acquisitions were completed during the financial year, the Group announced on 3 August 2015 that it had signed a conditional agreement to purchase a majority shareholding in Genera d.d., a Croatian pharmaceutical company. This triggers a mandatory takeover obligation for the remaining shares of Genera, this takeover is subject to approval by the Croatian Financial Services Agency (HANFA). More information pertaining to this acquisition can be seen in note 15.

Balance Sheet

Net assets at 30 June 2015 were £194.5 million, a £10.3 million decrease compared to 2014. This decrease is reflective of a significant amount of the Group assets being held in Eurozone countries.

	2015 £m	2014 £m
Total non-current assets	183.5	214.4
Working capital	31.7	32.2
Net cash/(debt)	13.4	(5.0)
Corporate and deferred tax	(25.0)	(28.0)
Other liabilities	(9.1)	(8.8)
Total net assets	194.5	204.8
Cash conversion	107.1%	90.6%

Total non-current assets include intangibles which amounted to £166.7 million (2014: £196.2 million) as at 30 June 2015.

Additionally, it is worth noting that total working capital decreased during the year from £32.2 million to £31.7 million. Whilst the expected increase of working capital in geographical expansion areas such as North America did occur, it was offset by translational exchange impacts on Euro and other currency based working capital.

Finance Strategy

Taxation and Treasury

We reported last year that we had undertaken a review of our tax and treasury strategies to make our operations more efficient, robust and scalable. During 2015, we continued to implement the tax strategy approved by the Board.

In September 2014, the Group refinanced its existing bank facility. This refinancing resulted in a loss on extinguishment of debt of £0.4 million in the year ended 30 June 2015, which is included in our non-underlying financial expenses.

Currency Risk

During 2015, we have been exposed to significant transactional and translational currency risk. This has resulted in one-off transactional gains of £2.2 million being recognised in the Consolidated Income Statement and £18.5 million foreign exchange translational impact being recognised in the Consolidated Statement of Comprehensive Income in 2015. We have been reviewing a number of mechanisms to manage the currency risk inherent within our business given our primarily UK based manufacturing facilities and Euro/Dollar based sales organisations. Whilst we are committed to determining a hedging strategy which reflects our risk from a transactional perspective, we do not, at present, see benefit in translational hedging.

Summary

During the 2015 financial year we made good progress towards our strategic ambitions as we focused on executing our strategy:

·      our revenue and earnings grew through our portfolio focus, pipeline delivery and geographic expansion;

·      we invested in our selling and administration infrastructure to promote growth, while maintaining our operating profit margin; and

·      our strong balance sheet continues to give us the flexibility to pursue strategic investment opportunities as and when they arise.

Consolidated Income Statement

For the year ended 30 June 2015

	Note	2015			2014
Underlying £000	Non- underlying items* (notes 4 & 5) £000	Total £000	Underlying £000	Non- underlying items* (notes 4 & 5) £000	Total £000
Revenue	2	203,480	-	203,480	193,571	-	193,571
Cost of sales		(87,338)	-	(87,338)	(85,863)	-	(85,863)
Gross profit		116,142	-	116,142	107,708	-	107,708
Selling, general and administrative expenses		(63,120)	(18,371)	(81,491)	(57,292)	(17,172)	(74,464)
Research and development expenses		(8,671)	-	(8,671)	(8,248)	-	(8,248)
Operating profit	2	44,351	(18,371)	25,980	42,168	(17,172)	24,996
Finance income	3	2,242	-	2,242	302	-	302
Finance expense	4	(1,496)	(920)	(2,416)	(2,609)	(1,247)	(3,856)
Profit before taxation - continuing operations		45,097	(19,291)	25,806	39,861	(18,419)	21,442
Income tax expense	6	(9,790)	3,443	(6,347)	(8,012)	5,986	(2,026)
Profit for the year - continuing operations		35,307	(15,848)	19,459	31,849	(12,433)	19,416
Profit for the year - discontinued operations	14	-	-	-	1,020	38,611	39,631
Profit for the year attributable to owners of the parent		35,307	(15,848)	19,459	32,869	26,178	59,047
Earnings per share
Basic	8			22.14p			67.57p
- continuing operations				22.14p			22.22p
- discontinued operations				-			45.35p
Diluted	8			21.99p			67.33p
- continuing operations				21.99p			22.14p
- discontinued operations				-			45.19p
Dividend per share (interim paid and final proposed for the year)	7			16.94p			15.40p

* Non-underlying items comprise amortisation and impairment (if any) of acquired intangibles, acquisition expenses, rationalisation costs, loss on extinguishment of debt, fair value and other movements on deferred and contingent consideration, and profit and related expenses on the disposal of discontinued operations.

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2015

	2015 £000	2014 £000
Profit for the year	19,459	59,047
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension scheme	(111)	(136)
Income tax relating to components of other comprehensive income	97	-
	(14)	(136)
Items that may be reclassified subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges	(136)	(341)
Cash flow hedges recycled to income statement	178	180
Losses arising on available for sale financial assets	(37)	-
Foreign currency translation differences for foreign operations	(18,525)	(18,128)
Income tax relating to components of other comprehensive income	(4)	29
	(18,524)	(18,260)
Total comprehensive income for the period attributable to owners of the parent	921	40,651

Consolidated Statement of Financial Position

At 30 June 2015

	Note	2015 £000	2014 £000
ASSETS
Non-current assets
Intangible assets	9	166,684	196,182
Property, plant and equipment		16,822	18,258
Total non-current assets		183,506	214,440
Current assets
Inventories		31,744	29,673
Trade and other receivables		30,932	29,888
Cash and cash equivalents		45,948	26,773
Total current assets		108,624	86,334
Total assets		292,130	300,774
LIABILITIES
Current liabilities
Borrowings	11	(8)	(103)
Trade and other payables		(31,025)	(27,365)
Deferred and contingent consideration		(4,417)	(1,784)
Current tax liabilities		(8,659)	(6,463)
Total current liabilities		(44,109)	(35,715)
Non-current liabilities
Borrowings	11	(32,519)	(31,660)
Deferred and contingent consideration		(3,412)	(6,025)
Employee benefit obligations		(1,311)	(1,070)
Deferred tax liabilities	10	(16,291)	(21,498)
Total non-current liabilities		(53,533)	(60,253)
Total liabilities		(97,642)	(95,968)
Net assets		194,488	204,806
EQUITY
Issued share capital		880	877
Share premium account		124,801	124,429
Own shares		(303)	(606)
Hedging reserve		(94)	(132)
Foreign currency translation reserve		(27,547)	(9,022)
Merger reserve		1,770	1,770
Retained earnings		94,981	87,490
Total equity attributable to equity holders of the parent		194,488	204,806

Consolidated Statement of Changes in Shareholders' Equity

For the year ended 30 June 2015

Year ended 30 June 2014	Attributable to owners of the parent
Issued share capital £000	Share premium account £000	Own shares £000	Hedging reserve £000	Foreign currency translation reserve £000	Merger reserve £000	Retained earnings £000	Total £000
At 1 July 2013	872	123,485	-	-	9,106	1,770	39,383	174,616
Profit for the period	-	-	-	-	-	-	59,047	59,047
Effective portion of changes in fair value of cash flow hedges, net of tax	-	-	-	(312)	-	-	-	(312)
Foreign currency translation differences for foreign operations	-	-	-	-	(18,128)	-	-	(18,128)
Remeasurement of defined benefit pension scheme	-	-	-	-	-	-	(136)	(136)
Cash flow hedges recycled to income statement, net of tax	-	-	-	180	-	-	-	180
Total comprehensive income	-	-	-	(132)	(18,128)	-	58,911	40,651
Transactions with owners
Dividends paid	-	-	-	-	-	-	(12,579)	(12,579)
Share-based payments	-	-	-	-	-	-	1,775	1,775
Shares issued	5	944	-	-	-	-	-	949
Own shares purchased	-	-	(606)	-	-	-	-	(606)
Total contributions by and distributions to owners	5	944	(606)	-	-	-	(10,804)	(10,461)
At 30 June 2014	877	124,429	(606)	(132)	(9,022)	1,770	87,490	204,806
Year ended 30 June 2015
At 1 July 2014	877	124,429	(606)	(132)	(9,022)	1,770	87,490	204,806
Profit for the period	-	-	-	-	-	-	19,459	19,459
Effective portion of changes in fair value of cash flow hedges, net of tax	-	-	-	(140)	-	-	-	(140)
Losses arising on held for trading financial assets	-	-	-	-	-	-	(37)	(37)
Foreign currency translation differences for foreign operations	-	-	-	-	(18,525)	-	-	(18,525)
Remeasurement of defined benefit pension scheme, net of tax	-	-	-	-	-	-	(14)	(14)
Cash flow hedges recycled to income statement, net of tax	-	-	-	178	-	-	-	178
Total comprehensive income	-	-	-	38	(18,525)	-	19,408	921
Transactions with owners
Dividends paid	-	-	-	-	-	-	(13,857)	(13,857)
Share-based payments	-	-	-	-	-	-	2,243	2,243
Shares issued	3	372	-	-	-	-	-	375
Own shares recycled to retained earnings	-	-	303	-	-	-	(303)	-
Total contributions by and distributions to owners	3	372	303	-	-	-	(11,917)	(11,239)
At 30 June 2015	880	124,801	(303)	(94)	(27,547)	1,770	94,981	194,488

Hedging Reserve

The hedging reserve represents the cumulative fair value gains or losses on derivative financial instruments for which cash flow hedge accounting has been applied, net of tax.

Foreign Currency Translation Reserve

The foreign currency translation reserve contains exchange differences on the translation of subsidiaries with a functional currency other than Sterling and exchange gains or losses on the translation of liabilities that hedge the Company's net investment in foreign subsidiaries.

Merger Reserve

The merger reserve represents the excess of fair value over nominal value of shares issued in consideration for the acquisition of subsidiaries where statutory merger relief has been applied in the financial statements of the Parent Company.

Consolidated Statement of Cash Flows

For the year ended 30 June 2015

	Note	2015 £000	2014 £000
Cash flows from operating activities
Profit for the period		19,459	59,047
Adjustments for:
Depreciation		2,412	2,197
Amortisation and impairment	9	19,126	18,340
Loss on disposal of intangible assets		45	-
Profit expenses on disposal of discontinued operations, net of tax	14	-	(38,611)
Finance income	3	(2,242)	(302)
Finance expense	4	2,416	3,856
Equity settled share-based payment expense		1,767	1,616
Income tax expense		6,347	2,322
Operating cash flow before changes in working capital		49,330	48,465
Increase in inventories		(4,527)	(2,811)
Increase in trade and other receivables		(2,553)	(21,100)
Increase/(decrease) in trade and other payables		4,738	(1,159)
Cash generated from operating activities before interest and taxation		46,988	23,395
Interest paid		(1,338)	(2,444)
Income taxes paid		(4,667)	(9,479)
Net cash inflow from operating activities		40,983	11,472
Cash flows from investing activities
Interest received		16	260
Acquisition of subsidiaries		(908)	(5,938)
Proceeds from disposal of discontinued operations		-	91,202
Expenses related to the disposal of discontinued operations		-	(1,576)
Purchase of property, plant and equipment		(2,081)	(4,927)
Capitalised development expenditure	9	(1,035)	(1,065)
Purchase of other intangible non-current assets	9	(643)	(1,381)
Net cash (outflow)/inflow from investing activities		(4,651)	76,575
Cash flows from financing activities
Proceeds from the issue of share capital		375	949
Own shares purchased		-	(606)
Repayment of borrowings		(102)	(81,470)
Expenses of refinancing borrowing facilities		(1,235)	-
Resetting of foreign currency borrowings	11	-	1,558
Dividends paid	7	(13,857)	(12,579)
Net cash outflow from financing activities		(14,819)	(92,148)
Net increase/(decrease) in cash and cash equivalents		21,513	(4,101)
Cash and cash equivalents at start of period		26,773	32,791
Exchange differences on cash and cash equivalents		(2,338)	(1,917)
Cash and cash equivalents at end of period		45,948	26,773
Reconciliation of net cash flow to movement in net cash/(borrowings)
Net increase/(decrease) in cash and cash equivalents		21,513	(4,101)
Repayment of borrowings		102	81,470
Expenses of refinancing borrowing facilities		1,235	-
Exchange differences on cash and cash equivalents		(2,338)	(1,917)
Retranslation of foreign borrowings		(1,442)	1,935
Other non-cash changes		(659)	(1,578)
Movement in net cash/(borrowings) in the period		18,411	75,809
Net borrowings at start of period		(4,990)	(80,799)
Net cash/(borrowings) at end of period		13,421	(4,990)

Notes to the Preliminary Results

for the year ended 30 June 2015

1.         Status of Accounts

These summary financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (adopted IFRS).  These summary financial statements have also been prepared in accordance with the Companies Act 2006.

The Board of Directors approved the preliminary announcement on 7 September 2015.

2. Operating Segments

The Group has three reportable segments, as discussed below, which are based on information provided to the Board of Directors, which is deemed to be the Group's chief operating decision maker. Several operating segments which have similar economic characteristics have been aggregated into the reporting segments.

The European Pharmaceuticals Segment comprises Dechra Veterinary Products EU and Dechra Pharmaceuticals Manufacturing. This Segment operates internationally and manufactures and markets Companion Animal, Equine and Food producing Animal Products. This Segment also includes third party manufacturing sales.

The North American (NA) Pharmaceuticals Segment consists of Dechra Veterinary Products US and Dechra Veterinary Products Canada, which sell Companion Animal and Equine Products into those territories. The Segment expanded during the prior year with the acquisition of PSPC Inc.'s manufacturing unit based in Melbourne, Florida, and during the current year with the opening of the Canadian subsidiary.

The Pharmaceuticals Research and Development Segment includes all of the Group's pharmaceutical research and development activities. From a Board perspective, this Segment has no revenue income.

Reconciliations of reportable segment revenues, profit or loss and liabilities and other material items:

	2015 £000	2014 £000
Revenue by segment
European Pharmaceuticals          - total	168,665	172,449
- inter segment	(32)	(35)
NA Pharmaceuticals                    - total	34,870	21,215
- inter segment	(23)	(58)
	203,480	193,571
Operating profit/(loss) by segment
European Pharmaceuticals	48,030	49,016
NA Pharmaceuticals	10,637	5,980
Pharmaceuticals Research and Development	(8,671)	(8,248)
Segment operating profit	49,996	46,748
Corporate and other unallocated costs	(5,645)	(4,580)
Underlying operating profit	44,351	42,168
Amortisation of acquired intangibles	(17,871)	(16,543)
Rationalisation costs	(9)	(479)
Acquisition costs	(491)	(150)
Total operating profit	25,980	24,996
Finance income	2,242	302
Finance expense	(2,416)	(3,856)
Profit before taxation - continuing operations	25,806	21,442
Total liabilities by segment
European Pharmaceuticals	(24,567)	(23,615)
NA Pharmaceuticals	(11,486)	(8,884)
Pharmaceuticals Research and Development	(710)	(633)
Segment liabilities	(36,763)	(33,132)
Corporate loans and revolving credit facility	(32,519)	(31,653)
Corporate accruals and other payables	(3,410)	(3,222)
Current and deferred tax liabilities	(24,950)	(27,961)
	(97,642)	(95,968)
Revenue by product category		Restated*
CAP	113,888	98,155
Equine	17,040	15,251
FAP	27,278	33,791
Diets	25,575	28,372
Third party manufacturing	19,699	18,002
	203,480	193,571
Additions to intangible non-current assets by segment (including through business combinations)
European Pharmaceuticals	802	1,356
NA Pharmaceuticals	-	7,567
Pharmaceuticals Research and Development	422	1,065
Corporate and central costs	454	25
	1,678	10,013

	2015 £000	2014 £000
Additions to Property, Plant and Equipment by segment (including through business combinations)
European Pharmaceuticals	1,688	2,979
NA Pharmaceuticals	214	2,185
Pharmaceuticals Research and Development	102	55
Corporate and central costs	77	26
	2,081	5,245
Depreciation and amortisation by segment
European Pharmaceuticals	17,156	17,684
NA Pharmaceuticals	3,828	1,987
Pharmaceuticals Research and Development	497	816
Corporate and central costs	57	50
	21,538	20,537

* The prior year categorisation has been restated to reflect the current portfolio, following a product allocation review in the period.

Geographical Information

The following table shows revenue based on the geographical location of customers and non-current assets based on the country of domicile of the entity holding the asset:

	2015 Revenue £000	2015 Non- current assets £000	2014 Revenue £000	2014 Non- current assets £000
UK	59,673	17,368	49,412	17,752
Germany	34,052	1,983	38,599	2,260
Rest of Europe	65,796	123,803	71,918	152,158
USA	32,848	40,352	21,242	42,270
Rest of World	11,111	-	12,400	-
	203,480	183,506	193,571	214,440

3. Finance Income

	2015 £000	2014 £000
Finance income arising from:
- Cash and cash equivalents	23	80
- Loans and receivables	3	61
- Foreign exchange gains	2,216	161
	2,242	302

4. Finance Expense

Underlying	2015 £000	2014 £000
Finance expense arising from:
- Financial liabilities at amortised cost	1,460	2,561
- Net interest on net defined benefit obligations	36	48
Underlying finance expense	1,496	2,609

Non-underlying	2015 £000	2014 £000
Loss on extinguishment of debt (notes 20 and 22)	392	1,213
Fair value and other movements on deferred and contingent consideration	528	34
Non-underlying finance expense	920	1,247
Total finance expense	2,416	3,856

5. Non-underlying Items

Non-underlying items comprise:

	2015 £000	2014 £000
Amortisation of intangible assets acquired as a result of acquisitions	17,871	16,543
Rationalisation costs	9	479
Expenses relating to acquisition activities	491	150
	18,371	17,172

Rationalisation costs relate to the integration of Eurovet Animal Health B.V. and the ensuing senior management team restructure.

6. Income Tax Expense

	2015 £000	2014 £000
Current tax        - UK corporation tax	2,146	646
- overseas tax at prevailing local rates	6,185	6,097
- adjustment in respect of prior years	257	(910)
Total current tax expense	8,588	5,833
Deferred tax      - origination and reversal of temporary differences	(3,123)	(2,428)
- adjustment in respect of prior years	882	(1,379)
Total deferred tax expense	(2,241)	(3,807)
Total income tax expense in the Consolidated Income Statement - continuing operations	6,347	2,026
Tax on discontinued operations	-	396
Total income tax expense in the Consolidated Income Statement	6,347	2,422

The tax on the Group's profit before tax differs from the standard rate of UK corporation tax of 20.75% (2014: 22.50%). The differences are explained below:

	2015 £000	2014 £000
Profit before taxation - continuing operations	25,806	21,442
Tax at 20.75% (2014: 22.50%)	5,355	4,824
Effect of:
- disallowable expenses	434	98
- income not taxable	(387)	-
- innovation related tax credits	(923)	(832)
- differences on overseas tax rates	587	331
- adjustments in respect of prior years	1,139	(2,289)
- difference between current and deferred tax rates	150	-
- change in tax rates	(8)	(106)
Total income tax expense - continuing operations	6,347	2,026
Tax on discontinued operations	-	396
Total income tax expense in the Consolidated Income Statement	6,347	2,422

Tax Credit Recognised Directly in Equity

	2015 £000	2014 £000
Deferred tax on effective portion of changes in fair value of cash flow hedges	(4)	29
Deferred tax on employee benefit obligations	97	-
Tax recognised in Consolidated Statement of Comprehensive Income	93	29
Corporation tax on equity settled transactions	157	250
Deferred tax on equity settled transactions	319	(91)
Total tax recognised in equity	569	188

The Budget on 8 July 2015 announced that the UK corporation tax rate will reduce to 19% by 2017. The change in rates was not substantively enacted at the balance sheet date and therefore has not been reflected in the tax rates used for deferred tax purposes. The future rate reductions will affect the Group's future current tax charges.

	2015 £000	2014 £000
Final dividend paid in respect of prior year but not recognised as a liability in that year: 10.65 pence per share (2014: 9.66 pence per share)	9,355	8,420
Interim dividend paid: 5.12 pence per share (2014: 4.75 pence per share)	4,502	4,159
Total dividend 15.77 pence per share (2014: 14.41 pence per share) recognised as distributions to equity holders in the period	13,857	12,579
Proposed final dividend for the year ended 30 June 2015: 11.82 pence per share (2014: 10.65 pence per share)	10,398	9,341
Total dividend paid and proposed for the year ended 30 June 2015: 16.94 pence per share (2014: 15.40 pence per share)	14,900	13,500

7. Dividends

In accordance with IAS 10 'Events After the Balance Sheet Date', the proposed final dividend for the year ended 30 June 2015 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 2016. There are no income tax consequences. The final dividend for the year ended 30 June 2014 is shown as a deduction from equity in the year ended 30 June 2015.

8. Earnings per Share

Earnings per ordinary share has 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.

	2015 Pence	2014 Pence
Basic earnings per share
- Underlying*	40.17	37.61
- continuing operations	40.17	36.45
- discontinued operations	-	1.16
- Basic	22.14	67.57
- continuing operations	22.14	22.22
- discontinued operations	-	45.35
Diluted earnings per share
- Underlying*	39.90	37.48
- continuing operations	39.90	36.32
- discontinued operations	-	1.16
- Diluted	21.99	67.33
- continuing operations	21.99	22.14
- discontinued operations	-	45.19

The calculations of basic and diluted earnings per share are based upon:

	2015 £000	2014 £000
Earnings for underlying basic and underlying diluted earnings per share	35,307	32,869
- continuing operations	35,307	31,849
- discontinued operations	-	1,020
Earnings for basic and diluted earnings per share	19,459	59,047
- continuing operations	19,459	19,416
- discontinued operations	-	39,631

	Number	Number
Weighted average number of ordinary shares for basic earnings per share	87,890,277	87,385,689
Impact of share options	604,887	312,771
Weighted average number of ordinary shares for diluted earnings per share	88,495,164	87,698,460

* Underlying measures exclude non-underlying items as defined in the Consolidated Income Statement.

At 30 June 2015, there are 351,332 options that are excluded from the EPS calculations as they are not dilutive for the period presented but may become dilutive in the future.

9. Intangible Assets

	Goodwill £000	Software £000	Development costs £000	Patent rights £000	Marketing authorisations £000	Acquired intangibles £000	Total £000
Cost
At 1 July 2013	58,355	3,412	9,071	3,680	853	204,830	280,201
Additions	-	1,381	1,065	-	-	-	2,446
Acquisitions through business combinations	84	-	-	-	-	7,483	7,567
Foreign exchange adjustments (restated)*	(3,461)	794	(359)	-	-	(14,165)	(17,191)
At 30 June 2014 and 1 July 2014	54,978	5,587	9,777	3,680	853	198,148	273,023
Additions	-	643	1,035	-	-	-	1,678
Disposals	-	(52)	(86)	-	-	-	(138)
Foreign exchange adjustments	(5,652)	(515)	(86)	-	-	(12,534)	(18,787)
At 30 June 2015	49,326	5,663	10,640	3,680	853	185,614	255,776
Amortisation
At 1 July 2013	-	947	3,963	1,468	-	54,227	60,605
Charge for the year	-	341	1,122	334	-	16,543	18,340
Foreign exchange adjustments (restated)*	-	981	(292)	-	-	(2,793)	(2,104)
At 30 June 2014 and 1 July 2014	-	2,269	4,793	1,802	-	67,977	76,841
Charge for the year	-	187	732	336	-	17,871	19,126
Disposals	-	(52)	(41)	-	-	-	(93)
Foreign exchange adjustments	-	(178)	(186)	-	-	(6,418)	(6,782)
At 30 June 2015	-	2,226	5,298	2,138	-	79,430	89,092
Net book value
At 30 June 2015	49,326	3,437	5,342	1,542	853	106,184	166,684
At 30 June 2014 and 1 July 2014	54,978	3,318	4,984	1,878	853	130,171	196,182
At 30 June 2013	58,355	2,465	5,108	2,212	853	150,603	219,596

	2015 £000	2014 £000
Contracted capital commitments	-	-
Software assets in the course of construction included above	1,121	2,856

* The opening cost and accumulated amortisation balances have been restated to reflect the foreign exchange separately on each element. This has no impact on the opening net book value.

Goodwill is allocated across cash generating units that are expected to benefit from that business combination.

10. Deferred Taxes

Recognised Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities are attributable to the following:

	Assets		Liabilities		Net
2015 £000	2014 £000	2015 £000	2014 £000	2015 £000	2014 £000
Intangible assets	-	-	(17,235)	(21,738)	(17,235)	(21,738)
Property, plant and equipment	-	-	(1,806)	(1,641)	(1,806)	(1,641)
Inventories	165	477	-	-	165	477
Payables	480	303	-	-	480	303
Share-based payments	1,210	719	-	-	1,210	719
Losses	99	90	-	-	99	90
R&D tax credits	129	-	-	-	129	-
Employee benefit obligations	667	292	-	-	667	292
	2,750	1,881	(19,041)	(23,379)	(16,291)	(21,498)

Deferred tax assets and liabilities are offset to the extent that there is a legally enforceable right to offset current tax assets against current tax liabilities.

	2015 £000	2014 £000
Current liabilities:
Finance lease obligations	8	103
Bank loans	-	-
	8	103
Non-current liabilities:
Finance lease obligations	-	7
Bank loans	32,519	31,653
	32,519	31,660
Total borrowings	32,527	31,763

11. Borrowings

In September 2014, the Group refinanced its existing bank facility, which gave rise to a loss on extinguishment of debt of £0.4 million in the year ending 30 June 2015. The Group's revised borrowing facility comprises a £90.0 million revolving credit facility and a £30.0 million Accordion facility committed until September 2019 and various finance lease obligations.

Resetting of foreign currency borrowings within the prior year Consolidated Statement of Cash Flows relates to the cash adjustment required to ensure the movements in foreign exchange rates do not result in the committed revolving credit facility being exceeded.

At the year end, the Group had the following unutilised borrowing facilities:

	2015 £000	2014 £000
Bank overdraft facility	-	-

The revised borrowing facility is not secured on any specific assets of the Group but is supported by a joint and several cross-guarantee structure. Interest will be charged at 1.30% over LIBOR. All covenants were met during the year ended 30 June 2015.

The maturity of the bank loans and overdrafts is as follows:

	2015 £000	2014 £000
Payable:
Within one year	-	-
Between one and two years	-	31,653
Between two and five years	32,519	-
	32,519	31,653

The minimum lease payments and the present value of minimum lease payments payable under finance lease obligations are:

	Minimum lease      payments		Present value of    minimum lease       payments
2015 £000	2014 £000	2015 £000	2014 £000
Within one year	8	103	8	103
Between one and two years	-	7	-	7
Between two and five years	-	-	-	-
Total minimum lease payments	8	110	8	110
Future finance charges	-	-	-	-
Present value of lease obligations	8	110	8	110

12. Foreign Exchange Rates

	Average rate for 2014	Closing rate at 30 June 2014	Average rate for 2015	Closing rate at 30 June 2015
Danish Krone	8.9378	9.3051	9.7175	10.4869
Euro	1.1981	1.2480	1.3045	1.4057
US Dollar	1.6259	1.6938	1.5834	1.5728

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

13. Acquisitions

Acquisition of Phycox

On 20 May 2014, the Group acquired certain trade and assets of PSPC Inc. for a maximum total consideration of US$14.2 million. PSPC's principal product is Phycox, a patented nutraceutical which competes in the US veterinary joint health supplement market. Additionally, a new product was in the final phase of development and has been launched in the 2015 financial year under the trade name of Levocrine. The acquisition enhances our US product portfolio and adds further critical mass to our US business. US$8.5 million of the consideration was payable on completion, US$1.5 million was contingent upon the successful registration of the new product, which occurred in June 2014, and US$4.2 million is contingent on future sales. During the year ended 30 June 2015, US$0.5 million (£0.3 million) of the contingent consideration was paid.

	Book value £000	Fair value £000
Recognised amounts of identifiable assets acquired and liabilities assumed
Identifiable assets
Property, plant and equipment	701	319
Trade and other receivables	86	86
Inventory	617	436
Identifiable intangible assets	-	7,483
Net identifiable assets	1,404	8,324
Goodwill		84
Total consideration		8,408
Satisfied by:
Cash		5,047
Contingent consideration arrangement - paid on 20 June 2014		891
Contingent consideration		2,470
Total consideration transferred		8,408
Net cash outflow arising on acquisition
Cash consideration		5,047
Contingent consideration arrangement - paid on 20 June 2014		891
		5,938

The fair value adjustments mostly relate to harmonisation with the Group IFRS accounting policies, including the application of fair values on acquisition, principally the recognition of product rights in accordance with IFRS 3. No deferred tax has been recognised on the identifiable intangible assets as no temporary differences arise between the carrying amounts of the assets for financial purposes and the amounts used for taxation purposes (the tax base).

The book value of receivables in the table above represents the gross contractual amounts receivable.

The goodwill of £0.1 million arising from the acquisition consists of the assembled workforce and technical expertise. None of the goodwill is expected to be deductible for income tax purposes.

Acquisition related costs (included in operating expenses) amounted to £0.2 million. Phycox's results are reported within the NA Pharmaceuticals Segment.

Contingent consideration of US$1.5 million was paid on 20 June 2014 following the successful registration of Levocrine. The remaining contingent consideration of US$4.2 million (£2.5 million) is dependent on 10% of future global net sales (with a further 2.5% payable on sales over US$7.5 million, and a further 2.5% payable on sales over US$12.5 million). $0.5 million (£0.3 million) was paid during the year.

Acquisition of DermaPet Inc.

On 22 October 2010, the Group acquired 100% of the share capital of DermaPet Inc., a Florida based business which develops and markets a range of dermatological preparations, including shampoos, conditioners and ear products, for the US and overseas companion animal markets. These veterinary products are marketed and distributed through the same channels as Dechra's current US product portfolio.

During the period, the Group paid a further US$1.0 million (£0.6 million) in respect of the acquisition of DermaPet, Inc.; this related to deferred consideration which was paid on the fourth anniversary of the completion date.

The maximum further consideration payable is US$5.0 million, which is contingent upon revenue exceeding US$20.0 million in any rolling 12 month period ending on the sixth anniversary of the completion date. After the year end, in August 2015, this US$5.0 million has been paid, leaving no further consideration outstanding for this acquisition.

14. Discontinued Operations

The divestment of the Services Segment was completed on 16 August 2013 for sale proceeds of £91.2 million. The costs to sell were £1.6 million (of which £1.5 million was incurred in the prior year), with an associated tax deduction of £0.1 million.

The Services businesses constituted a reporting segment in accordance with IFRS 8.

The results of the discontinued operations included in the profit for the prior year are set out below. The Segment was classified as discontinued operations and as held for sale at 30 June 2013.

Profit for the Year from Discontinued Operations

	2015 £000	2014 £000
Revenue	-	48,259
Cost of sales	-	(44,519)
Gross profit	-	3,740
Distribution costs	-	(1,669)
Administrative expenses	-	(755)
Non-underlying expenses*	-	-
Operating profit	-	1,316
Net finance expense	-	-
Profit before taxation from operating activities	-	1,316
Income tax expenses	-	(296)
Profit for the year from operating activities	-	1,020
Profit on disposal and related expenses	-	38,711
Tax on profit on disposal and related expenses	-	(100)
Total profit for the year from discontinued operations attributable to owners of the parent	-	39,631

* Non-underlying items comprise amortisation of acquired intangibles and rationalisation costs.

See note 8 for the Earnings per Share split between continued and discontinued operations.

Cash Flows from Discontinued Operations

	2015 £000	2014 £000
Net cash outflow from operating activities	-	(14,210)
Net cash inflow from investing activities	-	89,626
Net cash outflow from financing activities (including repayment of inter company funding)	-	-

Effect of the Disposal on the Financial Position of the Group

	2014 £000
Goodwill	(2,621)
Intangible assets	(1,049)
Property, plant and equipment	(1,677)
Inventories	(29,274)
Trade and other receivables	(73,330)
Trade and other payables	55,569
Net assets sold	(52,382)
Consideration received	87,500
Working capital adjustment	3,702
Expenses related to disposal (including those accrued in the previous year)	(1,576)
Net cash inflow	89,626

15. Events after the Reporting Period

On 3 August 2015, Dechra announced that it had signed a conditional share purchase agreement (SPA) to acquire 63.3% of the authorised shares (equivalent to 69% voting rights) in Genera d.d. (Genera), a Croatian listed pharmaceutical business. Under the Croatian Takeover Rules, the conditional offer requires Dechra to make a mandatory offer for the remaining issued share capital of Genera. The SPA is conditional on total aggregate shareholder acceptances reaching 75% of the voting share capital.

Dechra has offered HRK179.60 per share, which was equivalent to €51.4 million, based on exchange rates in effect on the date of signing, for the entire share capital on a cash free, debt free basis. This will be wholly payable in cash and is to be funded from Dechra's existing debt facilities.

Genera is the oldest and largest manufacturer of animal health products in the Republic of Croatia with a strong market share in its local market and neighbouring countries. It operates three main divisions: Animal Health, which represents the majority of revenue; Agrochemicals; and Human Pharmaceuticals. It operates from one manufacturing location in Kalinovica, Croatia and during 2014 employed 287 people.

16. Other Information

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2015 or 2014 but is derived from the 2015 accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered in due course. The external auditor has reported on those accounts; the report was (i) unqualified, (ii) did not include references to any matters to which the external auditor drew attention by way of emphasis without qualifying the reports and (iii) did not contain statements under section 498(2) or (3) of the Companies Act  2006.

17. Preliminary Statement

This Preliminary statement is not being posted to Shareholders.  The Report and Accounts for the year ended 30 June 2015 will be sent to shareholders shortly.  Further copies will be available from the Company's Registered Office: 24 Cheshire Avenue, Cheshire Business Park, Lostock Gralam, Northwich CW9 7UA.  Email: corporate.enquiries@dechra.com.  Copies are also available on the Company website www.dechra.com.

18. Directors' Responsibility Statement Required under the Disclosure and Transparency Rules

The responsibility statement below has been prepared in connection with the Company's full Annual Report for the year ended 30 June 2015.  Certain parts of that Report are not included with this announcement.

We confirm to the best of our knowledge:

a)         the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

b)         the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a  description of the principal risks and uncertainties that they face; and

c)         the management report, which comprises the Directors' Report, includes a fair review of the development and performance of the Business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Approved by the Board and signed on its behalf by:

Ian Page	Anne-Francoise Nesmes
Chief Executive Officer	Chief Financial Officer
7 September 2015	7 September 2015

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR EADNKEDPSEFF