City round-up: N Brown Group; Very Group; Franchise Brands; K3 Business Technology Group; Dechra Pharmaceuticals
12th January 2023
Dechra Pharmaceuticals, the Northwich-based vet products group, announced strong trading in the second quarter of its half year reporting period, resulting in overall revenue growth for the first half of the financial year, against a very tough comparator.
Today’s update for the period to December 31, 2022, revealed that the European business, excluding the international division and third party manufacturing, delivered growth of around three per cent at AER and approximately two per cent at CER.
The international division was impacted by the establishment of a new sales and marketing business unit in South Korea to replace a distribution partner and consequently no revenue was recognised in that territory during the period.
Integration of both acquisitions made at the start of the current financial year, Piedmont Animal Health and Med-Pharmex, is progressing well.
The outlook for the full financial year remains positive and the board continues to be confident in achieving current market expectations, which are underlying EBIT of £191m, based on the average of 11 analyst estimates, all of which have been updated since announcing 2022 preliminary results on September 5, 2022.
As previously outlined, on October 20, 2022, the balance of both revenue and profit will be more second half weighted. longer term, the board is confident in the historical resilience of the animal healthcare market and the positioning of Dechra within it.
Chief executive, Ian Page, said: “I am pleased with how the group has delivered revenue growth in the first half of our financial year, with our core markets of Europe and North America both having performed well.
“Although revenue growth has, as expected, slowed from the extraordinary levels of the past two years, we continue to remain agile in responding to market conditions and our product portfolio is resilient in times of global economic uncertainty.
“We remain confident in our future prospects given our recently expanded pipeline, which is stronger than ever, the synergies expected to be realised from the integration of Med-Pharmex, and the benefits from increased pet ownership seen during the COVID-19 pandemic.”
Dr Mike Mitchell and Dr Julie Simmonds, analysts with investment bank Panmure Gordon, said: “Dechra’s first half trading update sees the company report a strong second quarter, supporting a positive outlook for the full financial year where the board is ‘confident in achieving current market expectations’.
“Post-pandemic normalisation of market dynamics continues – albeit this is taking longer in North America compared with Europe, as reflected by double digit CER revenue growth rates in the former – and integration of the most recent acquisitions is ‘progressing well’.
“While we make no changes to our forecasts, we believe the current share price unduly discounts the stock in the context of peers even accounting for the subsector sell-off, and we move our target price to 3310p (previously 3790p) while raising our recommendation to Buy (previously Hold).”
Author: Neil Hodgson, Business Reporter, The Business Desk.com
Dr Mike Mitchell
Director, Research Analyst, Healthcare
Dr Julie Simmonds
Managing Director, Research Analyst, Healthcare