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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Dechra Pharmaceuticals Plc | LSE:DPH | London | Ordinary Share | GB0009633180 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 3,866.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMDPH
RNS Number : 8484P
Dechra Pharmaceuticals PLC
05 September 2017
5 September 2017
Dechra(R) Pharmaceuticals PLC
(Dechra or the Company)
Availability of 2017 Annual Report and Accounts
The 2017 Annual Report and Accounts is now available to view at www.dechra.com.
The following documents are scheduled to be mailed to registered shareholders of the Company on 18 September 2017:
-- 2017 Annual Report and Accounts -- Notice of the 2017 Annual General Meeting; and -- Proxy Form for the 2017 Annual General Meeting.
In accordance with Listing Rule 9.6.1 a copy of each of these documents will be submitted to the National Storage Mechanism and will be available for viewing shortly after posting.
The information below, which is extracted from the 2017 Annual Report and Accounts, is included solely for the purpose of complying with DTR 6.3.5. This information should be read in conjunction with the Company's 4 September 2017 announcement of its 2017 Preliminary Results (available at www.dechra.com). This material is not a substitute for reading the full 2017 Annual Report and Accounts. All page numbers and cross-references in the extracted information below refer to page numbers and notes to the financial statements, in the 2017 Annual Report and Accounts.
Key Performance Indicators
The Group utilises the following KPIs to assess our progress against our strategic, financial and operational objectives. Their relevance to our strategy and their definitions are explained below.
Some KPIs are also used as a measure in the long term incentive arrangements for the remuneration of the Executives.
These are identified with an asterisk.
Definition Relevance to Strategic KPI and Performance Commentary Strategy Link ------------ ---------------------- ---------------------- -------------------------- ------------------ Sales Year-on-year Dechra delivered A key driver Pipeline Growth sales growth GBP269.6 million of our strategy Delivery 6.5% including new from its existing is to deliver Portfolio products and business, sustainable Focus excluding revenue an increase sales growth Geographical from acquired of 6.5% from through delivering Expansion businesses. market penetration our pipeline, Acquisition 2017GBP269.6m and new product maximising 2016 GBP225.9m launches. our existing 2015 GBP203.5m portfolio and expanding geographically. ------------ ---------------------- ---------------------- -------------------------- ------------------ Underlying Underlying The increase Underlying Pipeline Diluted profit after reflects growth EPS is a key Delivery EPS Growth* tax divided from the existing indicator of Portfolio 35.1% by the diluted and acquired our performance Focus average number businesses, and the return Geographical of shares, increased we generate Expansion calculated finance charges for our shareholders. Acquisition on the same from the increased It is one of basis as note debt to fund the performance 11 to the Accounts. acquisitions, conditions 2017 64.33p and the change of the Long 2016 42.65p in mix to Term Incentive 2015 39.90p the applicable Plan (LTIP's). tax rates. ------------ ---------------------- ---------------------- -------------------------- ------------------ Return Underlying ROCE grew As we look Pipeline on Capital operating profit as the returns to grow the Delivery Employed* expressed as from the 2016 business, it Portfolio 160bps a percentage acquisitions is important Focus of the average (in particular that we use Geographical of the opening Putney, acquired our capital Expansion and closing in April 2016) efficiently Acquisition operating assets were manifest to generate (excluding in the Group's returns superior cash/debt and results. to our cost net tax liabilities). of capital in the medium 2017 17.7% to long term. 2016 16.1% It underpins 2015 20.0% the performance conditions of the LTIPs. ------------ ---------------------- ---------------------- -------------------------- ------------------ Underlying Cash generated The Group Our stated Pipeline Cash from operations enjoyed strong aim is to be Delivery Conversion before tax underlying a cash generative Portfolio 910 bps and interest cash conversion business. Focus payments as during the Geographical a percentage year. With Expansion of underlying the EBITDA operating profit. margin strengthening from 23.4% to 24.5%, 2017 115.9% and working 2016 106.8% capital shrinking 2015 105.9% by GBP6.9 million. ------------ ---------------------- ---------------------- -------------------------- ------------------ New Product Revenue from The decline This measure Pipeline Sales new products arose from shows the delivery Delivery (620 as a percentage the increase of sales in Portfolio bps) of total Group in new product each year from Focus revenue. A revenue from new products Acquisition new product acquisitions. launched in is defined We continue the prior five as any molecule to invest years, on a launched in in our pipeline rolling basis. the last five to develop It shows the financial years. new products performance 2017 8.2% and plan to of our R&D 2016 14.4% increase this and sales and 2015 13.8% investment. marketing organisations when launching newly developed or in-licensed products. ------------ ---------------------- ---------------------- -------------------------- ------------------ Lost All accidents The LTAFR The safety Manufacturing Time resulting in decreased of our employees and Supply Accident the absence from 0.35 is core to Chain Frequency or inability to 0.26. None everything Rate of employees of these incidents we do. We are (LTAFR) to conduct related in committed to the full range a work-related a strong culture of their normal fatality or of safety in working activities disability. all our workplaces. for a period of more than three working days after the day when the incident occurred, normalised per 100,000 hours worked.
(25.7%) People 2017 0.26 2016 0.35 2015 0.07 ------------ ---------------------- ---------------------- -------------------------- ------------------ Employee Number of leavers The figure Attracting People Turnover during the for the 2017 and retaining 260 bps period as a financial the best employees percentage year includes is critical of the average the employees to the successful total number from Genera, execution of of employees Brovel and our strategy. in the period. Putney, whereas the previous 2017 15.7% year excludes 2016 13.1%+/- them. The 2015 12.2%+/- increase relates +/- excludes to streamlining Apex, Brovel, of operations Genera and within the Putney acquired businesses and the restructuring of our manufacturing team. ------------ ---------------------- ---------------------- -------------------------- ------------------
How the Business Manages Risk
Effective risk management and control is key to the delivery of our business strategy and objectives. Our risk management and control processes are designed to identify, assess, mitigate and monitor significant risks, and can only provide reasonable and not absolute assurance that the Group will be successful in delivering its objectives.
The Board is responsible for overseeing how the Group's strategic, operational, financial and compliance risks are managed, and for assessing the effectiveness of the risk management and internal control framework.
Our Senior Executive Team (SET) owns the risk management process and is responsible for managing specific Group risks.
The SET is also responsible for embedding sound risk management in strategy, planning, budgeting, performance management, and operational processes within their respective Operating Segments and business units.
The Board and the SET together set the tone and decide the level of risk and control to be taken in achieving the Group's objectives.
Risk Management Process
Our strategy informs the setting of the objectives across the business and is widely communicated. Strategic risks and opportunities are identified as an integral part of the strategy setting process.
The SET is responsible for evaluating and managing risk from both a bottom up and top down level and acts as a link between the Board and the business units to ensure management of operational risks is embedded in the business.
Each SET member owns one or more Group risks and is responsible for identifying how the risks are currently controlled, what additional mitigating actions are required, what monitoring and assurance mechanisms are in place, assessing the effectiveness of key control processes, and addressing any weaknesses identified.
The Board conducts a review of the risk management and internal control framework and SET members present their risks, controls and mitigation plans to the Board for review on a rolling programme throughout the year. The Audit Committee reviews the effectiveness of internal financial controls annually.
Internal Control Framework
Our internal control framework is designed to ensure:
-- proper financial records are maintained; -- the Company's assets are safeguarded; -- compliance with laws and regulations; and -- effective and efficient operation of business processes.
The Dechra Values are the foundation of the control framework and it is the Board's aim that these values should drive the behaviours and actions of all employees. The key elements of the control framework are described below:
-- Management Structure
Our management structure has clearly defined reporting lines, accountabilities and authority levels.
The Group is organised as business units. Each business unit is led by a SET member and has its own management team.
-- Policies and Procedures
Our key financial, legal and compliance policies that apply across the Group are:
-- Code of Business Conduct; -- Delegation of Authorities; -- Anti-Bribery and Anti-Corruption; -- Whistleblowing; -- Sanctions; and -- Charitable Donations. -- Strategy and Business Planning
We have a five year strategic plan which is updated and reviewed by the Board annually. Business objectives and performance measures are defined annually together with budgets and forecasts. Monthly business performance reviews are conducted at both Group and business unit levels.
The product pipeline is reviewed regularly to:
-- assess whether products in development are progressing according to schedule; -- identify new product ideas and assess fit with our product portfolio; and -- assess the expected commercial return on new products. -- Operational Controls
Our key operational control processes are as follows:
-- Quality Assurance: All our manufacturing sites have an established Quality Management System. These systems are designed to ensure that our products are manufactured to a high standard and in compliance with the relevant regulatory requirements.
-- Pharmacovigilance: Our regulatory team operates a robust system with a view to ensuring that any adverse reactions related to the use of our products are reported and dealt with promptly.
-- Information Technology: Our business units currently use a number of different local financial, manufacturing and warehouse management systems to support their operations. We are in the process of implementing Oracle across the Group.
-- Financial Controls: Our financial controls are designed to prevent and detect financial misstatement or fraud and operate at three levels:
o Entity Level Controls performed by senior managers at Group and business unit level;
o Month-end and Year-end procedures performed as part of our regular financial reporting and management processes; and
o Transactional Level Controls operated on a day-to-day basis.
Internal Audit provides independent and objective assurance and advice on the design and operation of the Group's internal control framework. The internal audit plan seeks to provide balanced coverage of the Group's material financial, operational and compliance control processes
-- Improvements in 2017
We have continued to strengthen and improve a number of key control processes and the following changes have been implemented:
-- a number of portfolio and project management improvements have been implemented in our product development processes;
-- the manufacturing Quality Management Systems in all our recent acquisitions have been assessed and improvements implemented to ensure they meet relevant regulatory standards;
-- a risk assessment of the key contract manufacturing organisations (CMOs) that our supply chain is dependent upon has been completed and quality audits have also been conducted on the top 35 CMOs; and
-- our standard financial control framework has been updated and rolled out across the Group, including all recent acquisitions, in response to a number of improvement opportunities identified from internal audit reviews.
-- Plans for 2018
We will continue to refine and strengthen our internal control framework where required in response to changes in our risk profile and improvement opportunities identified by business management, quality assurance and internal audit.
We are planning to review our key corporate compliance processes and training activities including our Group Code of Conduct, key Group Policies and our Third Party Principles Policy in order to improve our ability to comply with existing and emerging legislation.
Understanding Our Key Risks
Dechra is one of only a handful of listed veterinary pharmaceuticals companies in the FTSE. We therefore believe it is important to summarise the key distinctions between the animal and human pharmaceutical industries in order to provide a better understanding of our risk profile.
The business of developing and marketing animal pharmaceuticals shares a number of characteristics with human pharmaceutical businesses. These similarities include the need to conduct clinical trials to prove product safety and efficacy, obtain regulatory approval for new products, complex and highly regulated product manufacturing, and to market products based on approved clinical claims. However, there are also significant differences between animal and human pharmaceutical businesses, including:
-- Product development is generally faster, cheaper and more predictable and sustainable: Development of animal medicines typically requires fewer clinical studies with fewer subjects and is conducted directly in the target species. Decisions on product safety, efficacy and likelihood of success can therefore be made more quickly.
-- Diversified product portfolios: Animal pharmaceuticals businesses are generally less reliant on a small number of 'blockbuster' products. Animal health products are sold across different regions which may have distinct product requirements. As a result, animal health products often have a smaller market size and the performance of any single product typically has less impact on overall business performance.
-- Stronger customer relationships and brand loyalty: Companion Animal Products are often directly prescribed and dispensed by veterinarians which contributes to brand loyalty, which often continues after the loss of patent protection or regulatory exclusivity.
-- Lower pricing pressure: Livestock producers and pet owners generally pay for animal healthcare themselves. Pricing decisions are not influenced by government payors that are involved in product and pricing decisions for human medicines.
-- Less price erosion by generic competition: Generic competition in animal healthcare, whilst playing an important role, has a lower impact on prices compared to human pharmaceuticals because of the smaller average market size of each product opportunity, stronger customer relationships and brand loyalty.
The SET has identified and agreed key risks with the Board. Of these, a number are deemed to be generic risks facing every business including failure to comply with financial reporting regulation, foreign exchange, IT systems failure and non-compliance with legislation. The table below therefore details the ten principal risks that are specific to our business and provides information on:
-- how they link to Group strategy; -- their potential impact on the business; and -- what controls are in place to mitigate them. Link to Risk Potential Impact Controls and Trend Strategic Mitigating Pillar Actions and Enabler ----------------- ----------------- ------------------------------------------------------------ ------------------ ------------- Pipeline Competitor Revenues and We focus on Increased Delivery Risk: margins may be lifecycle Risk Portfolio Competitor adversely affected management Competitor Focus products should competitors strategies product Geographical launched launch a novel for our key launches Expansion against one or generic product products against some of our leading that competes to ensure they of our key brands with one of our fulfil evolving products (e.g. generics unique products customer or upon the expiry requirements. a superior or early loss Product patents product of patents. are monitored profile). Costs may increase and defensive We depend on due to defensive strategies are data marketing activity. developed exclusivity towards periods the end of the or patents to patent life or have the data exclusive exclusivity marketing period. rights for some We monitor of market our products. activity prior Although we to competitor maintain products being a broad launched, and portfolio develop a of products, marketing our unique response products like strategy Vetoryl to mitigate and Felimazole competitor have impact. built a market which may be attractive to competitors. ----------------- ----------------- ------------------------------------------------------------ ------------------ ------------- Portfolio Market Risk: The emergence We manage and No Change Focus The emergence of corporate monitor our of veterinary customers and national buying groups buying groups and European and represents an pricing policies corporate opportunity to to ensure customers. increase sales equitable We sell and volumes and revenue pricing for each promote but may result customer group. primarily to in reduced margins. Our veterinary Our reputation relationships practices and and relationships with larger distribute with veterinary customers our products practices could are managed by through also be adversely key account wholesaler affected. managers. and Our marketing distributor strategy is networks in designed most markets. to support In a number veterinarians of mature in retaining markets, customers by veterinarians promoting the are benefits of our establishing product buying portfolio groups to in our major consolidate therapeutic their areas. purchasing, and corporate customers are also emerging. ----------------- ----------------- ------------------------------------------------------------ ------------------ ------------- Acquisition Acquisition Failure to identify We have defined Decreased
Risk: or secure suitable criteria for risk Identification targets could screening Successful of slow the pace acquisition integration acquisition at which we can targets and we of recent candidates expand into new conduct acquisition. and their markets or grow commercial, potential our portfolio. clinical, integration. Acquisitions financial Identification could deliver and legal due of lower profits diligence. suitable than expected The Board candidates or result in reviews and securing a intangible assets acquisition successful impairment. plans approach and progress involves regularly and a high degree approves all of uncertainty. potential Acquired transactions. products The SET manages or businesses post-acquisition may integration and fail to deliver monitors the expected delivery of returns due to benefits over-valuation and returns. or integration challenges. ----------------- ----------------- ------------------------------------------------------------ ------------------ ------------- Pipeline Product A succession Potential new No Change Delivery Development of clinical trial development Risk: failures could candidates Failure to adversely affect are assessed deliver our ability to from a major products deliver shareholder commercial, either expectations financial and due to pipeline and could also scientific delays damage our reputation perspective or newly and relationship by a launched with veterinarians. multi-functional products not Our market position team to allow meeting in key therapeutic senior revenue areas could be management expectations. affected, resulting to make The development in reduced revenues decisions of and profits. on which ones pharmaceutical Where we are to progress. products unable to recoup The pipeline is a complex, the costs incurred is discussed risky in developing regularly by and lengthy and launching senior process a product this management, involving would result including the significant in impairment Chief Executive financial, R&D of intangible Officer and and assets. Chief other resources. Financial Products that Officer. initially Regular updates appear promising are also may provided be delayed or to the Board. fail Each development to meet expected project is clinical managed or commercial by co-project expectations leaders who or face delays chair in project team regulatory meetings. approval. Before costly It can also be pivotal studies difficult are initiated, to predict smaller proof whether of concept pilot newly launched studies are products conducted will meet to assess the commercial effects of the expectations. drug on target species and for the target indication. In respect of all new product launches a detailed marketing plan
is established and progress against that plan is regularly monitored. The Group ensures that it has a detailed market knowledge and retains close contact with customers through its management and sales teams which are trained to a high standard. ----------------- ----------------- ------------------------------------------------------------ ------------------ ------------- Pipeline Regulatory Risk: Delays in regulatory The Group No Change Delivery Failure to meet reviews and approvals strives Portfolio regulatory could impact to exceed Focus requirements. the timing of regulatory Geographical We conduct our a product launch requirements Expansion business and have a material and ensures that in a highly effect on sales its employees regulated and margins. have detailed environment, Any changes made experience and which to the manufacturing, knowledge of is designed to distribution, the regulations. ensure marketing and Manufacturing the safety, safety surveillance and Regulatory efficacy processes of have established quality, and our products quality systems ethical may require additional and standard promotion of regulatory approvals, operating pharmaceutical resulting in procedures products. additional costs in place. Failure to and/or delays. Regular contact adhere Non-compliance is maintained to regulatory with regulatory with all standards requirements relevant or to implement may result in regulatory changes delays to production bodies in those or lost sales. in order to standards build could affect our and strengthen ability relationships to register, and ensure good manufacture communication or promote our lines. products. The regulatory and legal teams keep updated in respect of changes with a view to ensuring that the business is equipped to deal with, and adhere to, such changes. Where changes are identified which could affect our ability to market and sell any of our products, a response team is created in order to mitigate the risk. External consultants are used to audit our manufacturing quality systems. ----------------- ----------------- ------------------------------------------------------------ ------------------ -------------
Portfolio Regulatory Risk: Reduction in Regular contact Increased Focus Continuing sales of our is maintained Risk Geographical pressure antimicrobial with relevant Antibiotic Expansion on reducing product range. veterinary decline has antibiotic Our reputation authorities increased use. could be adversely to ensure that in the UK The issue of the impacted if we we have a and Denmark potential do not respond comprehensive transfer of appropriately understanding increased to government of regulatory antibacterial recommendations. changes. resistance We strive to from food develop new producing products animals to and minimise humans antimicrobial is subject to resistance regulatory concerns. discussions. In some countries this has led to government recommendations on reducing the use of antibiotics in food producing animals. ----------------- ----------------- ------------------------------------------------------------ ------------------ ------------- Pipeline Reliance on Raw material We monitor the No Change Delivery Third supply failures performance of Portfolio Parties Risk: may cause: our key Focus A supply failure * increased product costs due to difficulties in suppliers Manufacturing on obtaining scarce materials on commercially acceptable and act promptly and Supply a key product terms; to source from Chain may alternative affect our suppliers ability * product shortages due to manufacturing delays; where potential to develop, issues are make, identified. or sell our * delays in clinical trials due to shortage of trial The top ten products. products. Group We rely on third products are parties regularly for the supply Shortages in reviewed of manufactured in order to all raw products and identify materials third party supply the key for products failures on finished suppliers that products may of materials we manufacture result in lost or finished in-house. sales. products. We also purchase We maintain many buffer of our finished stocks and dual products sourcing from third party arrangements manufacturers. for key products. All contracts with suppliers are reviewed from both a commercial and legal perspective to try to ensure that assignment of the contract is allowed should there be a change of control of either of the contracting parties. ----------------- ----------------- ------------------------------------------------------------ ------------------ ------------- Portfolio Reliance on Loss of a key The DPM sales Decrease Focus Third customer can team maintains Risk Manufacturing Parties Risk: impact manufacturing relationships Strategy and Supply Loss of key revenues and with key to reduce Chain third lead to an increase customers. third party party in the cost of Robust supply manufacturing manufacturing goods of the agreements are contracts customers from remaining portfolio. in place with DPM. each of our key Other sales, customers and relating are regularly to third party reviewed. manufacturing Monthly customer and other service level
non-core monitoring and activities, reporting is represents in place. approximately 9.2% of Group revenues. ----------------- ----------------- ------------------------------------------------------------ ------------------ ------------- Portfolio People Risk: Loss of key skills The Nomination Decreased Focus Failure to and experience Committee Risk Pipeline retain could erode our oversees Board and Delivery high calibre, competitive advantage succession SET People talented and could have planning succession senior managers an adverse impact for the Board planning and on results. and the SET. managed other key roles Inability to Succession plans successfully in attract and retain are in place the business. key personnel for the SET Our growth plans may weaken succession together and planning. with development future success plans for key are senior managers. dependent on Key person retaining insurance knowledgeable is in place and where experienced appropriate. senior Remuneration managers and key packages are staff. reviewed on an annual basis in order to help ensure that the Group can continue to retain, incentivise and motivate its employees. ----------------- ----------------- ------------------------------------------------------------ ------------------ ------------- Geographical People Risk: Failure to recruit The Group HR Decreased Expansion Failure to or develop good Director reviews Risk Acquisition resource quality people the Successful People the business to could result organisational recruitment achieve in: structure with of DPM our strategic * capability gaps in new markets; the SET twice management ambitions, a year to aim team particularly on to ensure that geographical * challenges in integrating new acquisitions; or the organisation expansion and is fit for acquisition. purpose As Dechra * overstretched resources and to assess expands the resourcing into new markets implications and This could delay of planned acquires new implementation changes businesses of our strategy or strategic or science we and we may not imperatives. recognise meet shareholders' A development that we may need expectations. programme is new in place to people with identify different opportunities skills, to recruit new experience talent and and cultural develop knowledge existing to execute our potential. strategy successfully in those markets and business areas. ----------------- ----------------- ------------------------------------------------------------ ------------------ -------------
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 2017. Certain parts of that Report are not included with this announcement.
We confirm to the best of our knowledge:
a) the Company Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 'Reduced Disclosure Framework', and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company;
b) the Group Financial Statements, prepared in accordance with the IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of Group; and
c) the Strategic Report includes a fair review of the development and performance of the business and the position of the Group and Company, 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 Richard Cotton Chief Executive Officer Chief Financial Officer 4 September 2017 4 September 2017
For further information, please contact:
Melanie Hall, Company Secretary
Telephone number: 01606 814730
About Dechra
Dechra is an international specialist veterinary pharmaceuticals and related products business. Our 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
Trademarks
Trademarks appear throughout this document in italics. Dechra and the Dechra "D" logo are registered trademarks of Dechra Pharmaceuticals PLC.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
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September 05, 2017 05:09 ET (09:09 GMT)
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