Overview

Ian Page

Chief Executive Officer

The sale of the Services business is a significant step forward in achieving our clearly defined strategic objective.

Introduction

Strategically it has been a momentous year with the successful integration of Eurovet, acquired in May 2012, and with the transformational effect of the divestment of the Services businesses. Dechra is now entirely focused on developing, manufacturing and marketing high margin, cash generative veterinary pharmaceuticals and related products across global markets. From a trading perspective, a strong first half performance was partially offset by a poor third quarter, impacted by adverse weather and ongoing third party supply problems within the US. However, trading remained robust, with our key branded in-house manufactured products performing strongly.

The acquisition of Eurovet has fulfilled our expectations. It has expanded our geographical coverage, especially in Germany; enhanced our manufacturing capabilities; added complementary products to our companion animal portfolio and provided an entrance into food producing animal pharmaceuticals. The food producing animal sector is particularly important as we look at opportunities to expand internationally. The companion animal market is not sufficient in scale in many countries outside of the EU and North America to merit our own presence solely with our current specialist product portfolio. Furthermore, the ever increasing demand for high quality meat protein from emerging markets is creating a strong global livestock market. Further details of the Eurovet integration are provided within the EU Pharmaceuticals Segment review.

The sale of the Services businesses, National Veterinary Services ("NVS"®) and the Laboratories, is a significant step forward in our clearly defined strategic objective of developing an international specialist veterinary pharmaceuticals business. Historically, the strong cash generation of NVS has helped to fund the growth of the Pharmaceuticals Segments. However, as the years have progressed, the Pharmaceuticals Segments have gained sufficient critical mass to fund their own development and the Services businesses became strategically less and less relevant year on year. The businesses have been sold to Patterson Companies, Inc. for £87.5 million on a debt free, cash free basis.

The Board believes this is a fair valuation for businesses that have experienced increasing margin pressure over recent years as the customer base consolidates with the growth of corporate veterinary practice groups. We also recognise that Patterson is an ideal company to secure the future of the staff and take the businesses forward.

Calf running

"Eurovet has fulfilled our expectations and provided an entrance into food producing animal pharmaceuticals."