A 15 per cent one-day share price fall in response to these results from Dechra (DPH) appears overdone. True, new accounting standards, difficulties in Iran and potential Brexit expenses added roughly £3m to costs, which forced brokerages Stifel and Numis to trim guidance for the 2019 financial year. Overall, though, these were characteristically solid numbers: on an underlying basis, revenues and pre-tax profits were up 9 per cent and 24 per cent, respectively.
Investors could be banking some gains, too, after a strong few months left the shares trading on 36 times 2019 earnings one day prior to these results. Indeed, we recently called time on our buy tip on the basis that the valuation was starting to look stretched.
It's also worth noting that consolidation among veterinary practices has left Dechra more reliant on a small number of large customers. Europe is a particularly challenging market, and underlying revenue growth here of 4 per cent fell far behind the 18 per cent reported by the US division. Still, bosses insist the market isn't shrinking, and margins should be helped by the fact it costs less money to service big accounts.
Broker Numis expects pre-tax profits and EPS of £93.7m and 76.5p, respectively, in the year to June 2018 (from £77m and 64.3p in 2017).
| DECHRA PHARMACEUTICALS (DPH) | ||||
| ORD PRICE: | 2,644p | MARKET VALUE: | £2.7bn | |
| TOUCH: | 2640-2644p | 12-MONTH HIGH: | 3,180p | LOW: 1,943p |
| DIVIDEND YIELD: | 0.9% | PE RATIO: | 71 | |
| NET ASSET VALUE: | 494p* | NET DEBT: | 42% | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 194 | 21.4 | 22.2 | 15.4 |
| 2015 | 203 | 25.8 | 22.1 | 16.9 |
| 2016 | 248 | 14.5 | 14.0 | 18.5 |
| 2017 | 359 | 28.6 | 28.1 | 21.4 |
| 2018 | 407 | 28.9 | 37.2 | 25.0 |
| % change | +13 | +1 | +33 | +17 |
| Ex-div: | 25 Oct | |||
| Payment: | 16 Nov | |||
| *Includes intangible assets of £710m, or 694p a share | ||||
