Dechra Pharmaceuticals PLC
Annual Report and Accounts for the year ended 30 June 2021
Company Number: 3369634
Improving Global Animal
Health and Welfare
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Welcome to our 2021
Annual Report
About Dechra
Our purpose is the
sustainable improvement
of animal health and
welfare globally.
We are a global specialist veterinary
pharmaceuticals and related products
business. Our expertise is in the
development, manufacture, marketing
and sales of high quality products to
improve animal welfare, exclusively
for veterinarians worldwide.
A Snapshot of Our Year
a
b
c
Revenue
Growth
• Increase of 21.0%
to £608.0 million
• Existing revenue
growth of 16.2%
Underlying
EBIT Growth
Portfolio
Focus
• Increase of 29.2% to
£162.2 million
• COVID-19 related cost
savings
• All product categories
delivering growth, CAP
and Equine performance
exceptional
• Strong organic growth
in all key markets
Inside this report
Overview
Welcome to Dechra's 2021 Annual Report
Highlights
Our Key Strengths
Our Purpose, Strategy, Values and Culture
Dechra at a Glance
Chairman’s View
COVID-19 Update
Strategic Report
Our Marketplace
Our Business Model
Creating Value for Our Stakeholders
Delivering Our Strategy
Chief Executive Officer’s Statement
Financial Review
Key Performance Indicators
Strategy in Action
Product Development
Global Product Offering
Section 172 Statement
Non-Financial Information Statement
Corporate Social Responsibility
How the Business Manages Risk
Understanding Our Key Risks
Viability Statement
Governance
Letter from the Chairman on Governance
Board of Directors and Senior Executive Team
Board Leadership and Company Purpose
Division of Responsibilities
Composition, Succession and Evaluation
Audit, Risk and Internal Control
Directors’ Remuneration Report
Directors’ Report – Other Disclosures
Statement of Directors’ Responsibilities
Financial Statements
Independent Auditors' Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Shareholders’ Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Shareholders’ Equity
Notes to the Company Financial Statements
Financial History
Additional Information
Glossary
Shareholder Information
Advisers
IFC
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76
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112
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147
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IBC
Forward-Looking Statements
This document contains certain forward-looking statements. The forward-
looking statements reflect the knowledge and information available to the
Company during 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 and thereby involve a degree of
uncertainty. Therefore, nothing in this document should be construed as a
profit forecast by the Company.
01
View our online
Annual Report at:
dechra.annualreport2021.com
OverviewStock Code: DPH Highlights
Total Revenue
£608.0m
AER: +18.0% CER: +21.0%
2021
2020
2019
2018
2017
Underlying Operating Profit
£162.2m
AER: +26.4% CER: +29.2%
£608.0m
£515.1m
£481.8m
£407.1m
£359.3m
2021
2020
2019
2018
2017
£162.2m
£128.3m
£127.4m
£99.2m
£81.3m
Underlying Diluted Earnings Per Share
108.14p
AER: +17.3% CER: +19.4%
Dividend Per Share
40.50p
AER: +18.1% CER: +18.1%
2021
2020
2019
2018
2017
108.14p
92.19p
90.01p
2021
2020
2019
2018
2017
76.45p
64.33p
40.50p
34.29p
31.60p
25.50p
21.44p
Reported Operating Profit
£84.0m
AER: +60.9% CER: +63.0%
2021
2020
2019
2018
2017
£39.0m
£34.1m
£33.2m
£52.2m
£84.0m
Reported Diluted Earnings Per Share
51.03p
AER: +55.8% CER: +56.1%
2021
2020
2019
2018
2017
51.03p
32.76p
30.07p
37.04p
27.93p
Strategic Progress
•
All product categories delivering growth, CAP and Equine
performance exceptional.
•
•
•
Strong organic growth in all key markets.
Good progress continues to be made on product pipeline.
Mirataz® and Osurnia® both performing well
Financial Performance
•
Revenue growth of 21.0% to £608.0 million.
•
•
•
•
•
Underlying operating profit increased by 29.2% to £162.2 million.
Underlying EBIT margin increased by 170 bps to 26.7%.
Underlying diluted EPS increased by 19.4% to 108.14 pence.
Reported operating profit growth of 63.0%.
Full year dividend increased by 18.1% to 40.50 pence.
Our Product Pipeline
A key strategic priority for the Group is the delivery and strength of the pipeline. We currently have 33 projects in the product development process:
Feasibility
Research
Development
Registration
12
3
13
5
Read more about our
Product Development
on pages 42 to 45.
02
OverviewDechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.com Our Key Strengths
As well as our ability to improve the animal health and welfare industry
globally with our breadth of products and strong and innovative product
pipeline, we have a key set of strengths, summarised below:
1
2
3
4
5
Well
Recognised
Brand
We are recognised as a
global animal healthcare
company with a strong
and growing reputation
as a provider of high
quality, specialist veterinary
medicines and related
products.
Balance Sheet
Strength
The Group targets strong
cash generation which
allows us to pay down
debt quickly, resulting in
a robust balance sheet
which enables us to fund
internally many of our
strategic opportunities.
Manufacturing
Capabilities
Skilled
People
Our manufacturing
sites offer a wide range
of dosage forms and
packaging capabilities
which can be produced
in small to large-scale
production batches.
This flexibility is a key
requirement in producing
our varied product
portfolio.
We have attracted and
retained a qualified and
skilled workforce throughout
the organisation. This stable
and motivated team has
many years’ experience
within the markets we
serve. Our people strategy
is underpinned by our
Dechra Values.
Successful
Acquisition
History
In January 2008 we made
our first major acquisition
which, at the time, was
transformational to our EU
Pharmaceuticals business.
We have successfully
replicated the model since
then on several occasions
and have consistently
delivered pre-acquisition
strategic and financial
expectations on significant
transactions.
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8
9
10
Our
Purpose
Dechra’s purpose is the
sustainable improvement
of animal health and
welfare globally and this
is intrinsic in our Values,
the way we do business
and in the decisions we
make when developing
and implementing our
Environmental, Social
and Governance (ESG)
framework.
Our Breadth
of Breadth of
Products
Our Growing
Global
Footprint
We are a global leader in
veterinary endocrinology
and topical dermatology,
have a broad portfolio of
analgesia, anaesthetics
and products for the
prevention and treatment
of pain, and we are also
recognised as innovators
in other specialisations
such as the treatment of
equine lameness, nutrition
and differentiated generics
(generic plus).
Dechra’s origins lie in the
companion animal markets
of Western Europe and
North America. We have
built on this platform,
extending our footprint
globally through greenfield
sites and acquisitions.
Further international
expansion is one of
our four strategic
growth drivers.
Our Strong
and Innovative
Product
Development
Pipeline
We have a strong pipeline
of novel, generic and generic
plus pharmaceuticals,
vaccines and a specialist
nutrition range. We have
a track record of pipeline
delivery.
We are proactive and
innovative in recognising
new development
opportunities to extend
our portfolio.
Our High
Quality
Expertise
We support our customers
in our key therapeutic areas
with technical helplines,
continuing education
through online learning,
webinars and lectures
by key opinion leaders.
Our sales approach relies
on strong partnerships
with practice groups and
individual veterinarians,
strengthened by key
opinion leaders and
distribution partners.
03
OverviewStock Code: DPH Our Purpose, Strategy,
Values and Culture
We believe that our success is based upon providing our stakeholders with a
clear strategic plan that is aligned to our Purpose. We believe this alignment
drives improved focus, innovation, collaboration and efficiencies towards
delivering our objectives.
Our Purpose
Our Strategy
What we do
The sustainable
improvement of animal
health and welfare
globally
Our Approach to ESG
Our ESG strategy is based on our
Purpose and Values
We have chosen to support the United Nations Sustainable
Development Goals (SDGs).
How we achieve our purpose
Strategic Growth Drivers
Pipeline
Delivery
Portfolio
Focus
a
b
c
Geographical
Expansion
Acquisition
Strategic Enablers
Manufacturing &
Supply Chain
Technology
People
ESG
Read more about Our
Strategy on pages 20
to 23.
Read more about our
Strategic Growth Drivers case
studies on pages 38 to 40.
04
OverviewDechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.com Our Values
Our Culture
Fundamental beliefs that underpin everything we do
Ethical foundation enabling better decisions every day
Dedication
Enjoyment
Courage
Honesty
Relationships
Ambition
Our Values, entrepreneurial attitude
and agile approach to the way we
do things are the backbone of our
Culture.
We expect our people to make a
difference by collaborating with
each other and we support them
by providing clear guidance on
expectations.
Read more about our monitoring of Culture in
Our Governance Report on pages 93 and 94.
Everything we do is underpinned by our Culture and Values. They are important to us and have helped drive the Group’s success. We believe
that our Values encapsulate our business ethics and set out the standards that we wish to achieve and ultimately exceed. They outline the type
of people we are, the services we provide and the way we aim to do business. We deliver high quality products and services to veterinarians
worldwide through our employees and a network of third parties with the aim of sustainably improving global animal heath and welfare.
Global Policies that support Culture:
• Code of Conduct and Third Party Code of Conduct;
• Dignity at Work;
• Anti-Bribery and Anti-Corruption Policy;
• How to Raise a Concern Procedure; and
• Health and Safety Policy.
Dechra Values:
Our Values are a consistent part of how we lead the Dechra business. From recruitment through to investment in the development and
growth of our employees we use our Values to describe what matters at Dechra. To maintain that integrity we have formed a small group
of communications ambassadors who have helped us build the content for the Group intranet, further enabling us to demonstrate how
the Values are being lived every day.
As the Dechra business grows through acquisition, we have recognised the importance of onboarding new employees into the Dechra way
and enabling them to share and build on our Values as a route to unlocking value and success.
05
OverviewStock Code: DPH Dechra
at a Glance
Our Products
Our products can be divided into four categories, as set out below. All are targeted at
providing veterinary professionals with solutions for their customers’ needs.
Companion Animal Products (CAP)
Food producing Animal Products (FAP)
Species: Dogs and cats.
Species: Poultry, pigs and an increasing presence in cattle.
Key Therapeutic Sectors: Endocrinology, dermatology, analgesia
and anaesthesia, antibiotics, cardiovascular and critical care.
Key Therapeutic Sectors: Water soluble antibiotics, vaccines,
locomotion (lameness) and pain management.
72.8% of Group Revenue
Equine
Species: Horses and ponies.
12.7% of Group Revenue
Nutrition
Species: Dogs and cats.
Key Therapeutic Sectors: Locomotion (lameness) and pain
management.
Key Therapeutic Sectors: Our pet diets are available to support
the wellbeing of animals with numerous therapeutic conditions.
7.3% of Group Revenue
Our Structure
EU Pharmaceuticals
Dechra Veterinary Products EU
(DVP EU)
Markets and sells Dechra’s products
in 19 countries. The key products are
predominantly CAP, Equine and FAP.
DVP EU also markets a range of specialist,
therapeutic and maintenance pet diets,
branded Specific®.
517
Employees
Manufacturing &
Supply Chain
5.2% of Group Revenue
International
Pharmaceuticals
North America
Pharmaceuticals
Dechra Veterinary Products
International (DVP International)
Markets and sells Dechra’s veterinary products
in Australia, New Zealand and Brazil through
our own legal entities and via distributors
to countries worldwide (including Eastern
Europe). DVP ANZ manufactures, markets and
sells branded non-proprietary prescription and
other related companion animal products. DVP
Brazil predominately manufactures, markets
and sells vaccines in Brazil, other South
American markets and some Asian countries.
Dechra Veterinary Products NA
(DVP NA)
Markets and sells Dechra’s veterinary
products across Canada, Mexico and the
US. DVP US and Canada currently markets
CAP and Equine medicines. DVP Mexico
markets CAP, FAP and Equine medicines,
mainly in Mexico and also exports to
Central American countries.
354
Employees
245
Employees
Product Development and
Regulatory Affairs (PDRA)
Develops Dechra’s own branded veterinary product portfolio
of novel, generic and generic plus pharmaceuticals and related
medical products. It obtains licences for our products, manages
post approval adverse event reporting, periodic product renewals
and other activities required to maintain the product licences.
163
Employees
Dechra Pharmaceuticals Manufacturing and Supply
(DPM&S)
Produces approximately 40% of Dechra’s pharmaceuticals and
manufactures for a limited number of third parties on a contract basis.
Its objectives are to produce Dechra’s product range efficiently to the
highest quality standards, and to maintain a reliable supply chain.
640
Employees
06
OverviewDechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.com Our Global Footprint
We currently have sales and marketing organisations in 25 countries and market our
products in 68 other countries worldwide through distributors or marketing partners.
Key to map
Manufacturing Sites
Logistics Sites
Dechra Sales and
Marketing
Distribution Partners
North America
Europe
Rest of the World
36.1%
of Group Revenue by Region
51.9%
of Group Revenue by Region
12.0%
of Group Revenue by Region
Dechra Veterinary Products markets
and sells Dechra’s products via its own
sales and marketing organisations or via
distributors across Canada, Mexico and
the USA, the latter being the world’s largest
animal health market. In addition, there are
manufacturing sites in Florida and Texas.
Product Development and Regulatory
Affairs teams are also located
in the three countries.
Major geographies: United States
Dechra Veterinary Products markets and
sells Dechra’s products in 41 countries
either via its own sales and marketing
organisations or via distributors. Its main
distribution centre is in Denmark. There
are manufacturing sites and Product
Development and Regulatory Affairs
teams in Croatia, the Netherlands and
the UK.
Dechra has manufacturing facilities and
a Product Development and Regulatory
Affairs presence in Australia and Brazil.
Dechra Veterinary Products markets and
sells Dechra’s products in 39 countries
either via its sales and marketing
organisations (Australia, New Zealand
(ANZ) and Brazil) or via distributors.
Major geographies: France, Germany,
the Netherlands and the UK
Major geographies: Australia,
New Zealand, Asia and Brazil
07
OverviewStock Code: DPH Chairman’s
View
Tony Rice | Non-Executive Chairman
“ I would like to thank Ian, the
management team and all of our
employees for their dedication and
professionalism in delivering a terrific
result in a year where COVID-19 has
impacted so profoundly on our lives.”
Read Corporate Responsibility
Report on pages 52 to 75.
08
Welcome to the 2021 Annual Report in
which you can read about the strong
performance of the Group.
We have strengthened the Board with the appointment of Denise Goode
in April 2021 as a Non-Executive Director. It is the intention that Denise
will be appointed as Chair of the Audit Committee upon Julian Heslop’s
retirement from that role following the 2021 Annual General Meeting. We
will continue to evolve the Board as necessary to ensure continuity and
capability in Dechra going forward.
Environmental, Social and Governance
We have continued to develop our Environmental, Social and Governance
(ESG) strategy by setting targets for each of the four pillars: Our People,
Our Environment, Our Community and Our Business. The importance
of this critical area is reflected in our decision to add ESG as our fourth
enabler of our strategy alongside People, Technology, and Manufacturing
and Supply Chain.
Our People: We employ 1,975 employees in 25 countries in a wide range
of working environments, including manufacturing, logistics, laboratories,
offices and mobile working. Our underlying objective is to provide a great
and safe place to work. We ran our second Great Place To Work (GPTW)
survey during the year, 90% of our employees responded to the survey
and it is pleasing to report that 92% of the respondents feel that Dechra is
a physically safe place to work and 88% are proud to tell others that they
work at Dechra, which are eight percentage points above the average of
the best organisations in the UK as awarded by GPTW.
Our Environment: We have committed to set science-based emissions
reduction targets across the entire value chain that are consistent with
keeping global warming to 1.5°C above pre-industrial levels. Dechra has
also committed to a long term target to reach net zero emissions by no
later than 2050.
Our Business: We have progressed the development of our sustainable
packaging strategy. A cross functional team is looking at each stage of
the packaging life cycle with the aim of understanding how Dechra can
reduce its environmental impact when sourcing packaging materials
through to the post-consumer choices during disposal/recycling.
We have set a target to build a sustainability review into our Product
Development process by June 2023 and undertake a sustainability
review of all of our products by June 2025.
Our Community: For the 2022 financial year, we will no longer run a
centralised donations programme. Instead, we will allocate funds to our
sites to enable decisions to be made by Regional Giving Committees.
Remuneration
In the last four years underlying operating profit has grown by 18.8%,
dividends by 17.2% and our (12 month average) market capitalisation
has increased by 315% (all on a compound annual growth basis). Our
Remuneration Committee has been concerned for some time that
certain of our senior executives’ base salaries have not kept up with the
increased size and complexity of the Group. During the financial year
it has therefore undertaken a business wide review of remuneration,
focusing in particular on the lowest paid in our organisation and the
top 60 Senior Leaders. Further details can be found in the Directors’
Remuneration Report.
Conclusion
I would like to thank Ian, the management team and all of our employees
for their dedication and professionalism in delivering a terrific result in a
year where COVID-19 has impacted so profoundly on our lives. Thank
you for your continued support.
OverviewDechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.com COVID-19
Update
Ian Page | Chief Executive Officer
Overview
We are pleased to report that the business has continued to perform
strongly and remained fully operational throughout the COVID-19
pandemic influenced financial year. We reported in our 2020 Annual
Report the governance structures we put in place to mitigate the
impact of COVID-19 on our people and our business. We are pleased
to report that we have:
• not furloughed any of our employees;
•
•
not taken advantage of, or utilised, any government
assistance in any country; and
not undertaken any redundancy programmes related to
the pandemic.
Once the consequences of COVID-19 on the global economy began
to be understood, we introduced various measures that preserved
cash which gave us all security in the financial strength of the business.
We decided to delay the annual pay review process, normally
effective from 1 September, until 1 January 2021. This allowed us to
measure the ongoing impact of the pandemic, which along with other
measures, were acts of caution to preserve cash until we got a better
understanding of what the new ‘normal’ business would look like.
We have now conducted a full review of our global remuneration
policies and from 1 January 2021 no individual within Dechra will
work below their respective nationally recognised living wage or
equivalent. This was a year ahead of when we originally planned
in the UK and even earlier in the rest of the world.
Read more about Remuneration on pages 119 to 146.
Our People
I would like to thank all our employees for their hard work, dedication
and innovation throughout the year. Our employees have responded
positively during the pandemic and have adapted to new ways of
working demonstrating the agility that is a core part of our culture.
The measures that were put in place to enable all front line
employees to operate safely in our 2020 financial year have
remained; this has allowed all manufacturing and logistic sites and
laboratories to remain open and continue to function effectively. All
employees who can work from home have done so successfully.
Our employees are now slowly returning, where it is safe to do so,
to our offices, initially on a cohort basis, and in the field.
We have paid all of our site based employees (majority of our lowest
paid staff work in manufacturing or logistics) a bonus to reward their
commitment during the COVID-19 period. In March 2021, we were
pleased to be accredited as a Living Wage Employer in the UK.
We have also benchmarked individuals within all levels of the
Group, and have implemented above inflationary salary increases to
numerous employees, to continue to provide a competitive and fair
level of remuneration throughout the whole organisation, in line with
our commitment to the remuneration policies we adopted in 2019.
Our Community
For the last 10 years we have operated a Group Donations scheme,
whereby we encourage all employees to nominate a charity or
non-commercial organisation for a charitable donation. We decided
that we would give the 2021 financial year’s donation to charities
related to the effects of COVID-19. All the money this year was
allocated to each country in which we have a manufacturing
organisation in memory of Simon Francis, Group Manufacturing and
Supply Director, who sadly passed away from COVID-19 last year.
Please refer to our Corporate Social Responsibility section on pages
74 and 75 for further information.
09
OverviewStock Code: DPH We have developed a
strong reputation for
providing specialist
and clinically necessary
novel Companion Animal
Products
Read more about Companion
Animal Products on page 14.
Strategic Report
Our Marketplace
Our Business Model
Creating Value for Our Stakeholders
Delivering Our Strategy
Chief Executive Officer's Statement
Financial Review
Key Performance Indicators
Strategy in Action
Product Development
Global Product Offering
Section 172 Statement and Stakeholder
Engagement
Non-Financial Information Statement
Corporate Social Responsibility
How the Business Manages Risk
Understanding Our Key Risks
Viability Statement
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19
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24
28
36
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42
46
48
51
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76
79
83
Our
Marketplace
Global Market Dynamics
The Animal Health Market
Animal health globally is generally described as comprising two
segments: Food producing Animal Products (FAP) and Companion
Animal Products (CAP). FAP continued to show global growth due to
an increased demand for high quality protein production. CAP growth
(a sector in which horses are generally included) is driven by the pet
owners’ compassion for their animals which has had greater emphasis
during the COVID-19 pandemic, improved nutrition and a wider range of
medical products and treatments.
Our Position in the Animal Health Market
There are only a small number of international businesses in our
market, four of which have 42.7% of the world’s market share. Dechra’s
objective is to continue to outperform the market and increase its market
share, through the execution of its strategy.
Animal Pharmaceuticals vs. Human Pharmaceuticals
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, adhere to complex and highly regulated product
manufacturing, and market products based on approved clinical claims.
However, there are also significant differences between animal and
human pharmaceutical businesses, including:
• Generally faster, cheaper, more predictable and sustainable
product development: 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 directly prescribed and often dispensed and sold
by veterinarians which contributes to building brand loyalty, which
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.
Types of Veterinary Practices
The majority of our sales are made into veterinary practices that tend
to specialise in either companion animal or food producing animal
treatment; however, there are numerous practices that are classified
as mixed and service all species. There are also an increasing number
of equine practices and referral hospitals that provide high levels of
specialisation. The veterinary profession is going through significant
change as incorporated practice groups are consolidating practices
at an increasing rate. In many countries, our relationships with these
corporate groups are very important, and we continue to increase our
focus through experienced key account managers and technical support
services. With the ongoing integration of professional farming units, our
FAP sales efforts are now often focused on these major integrators;
however, the integrators themselves employ veterinarians who remain
responsible for the prescribing and administration of our products.
Veterinary Practices – Europe
Market Share by Competitor 2020
Independents
Buying Groups
Corporates
51%
29%
20%
Source: DVP EU Sales Data June 2020
Veterinary Practices – North America
Source: Animal Pharma 2021
& Grand View Research 2020
Independents
Corporates
80%
20%
Data as at 31 December 2020
except Dechra (as at 30 June
2020)
Source: DVP NA Sales Data June 2020
Zoetis
14.70%
Boehringer Ingelheim
Animal Health
10.37%
Merck/MSD Animal Health 10.36%
Elanco
IDEXX Laboratories
Ceva Santé Animale
Virbac
Philbro Animal Health
Huvepharma
7.21%
5.58%
3.27%
2.35%
1.76%
1.47%
Dechra Pharmaceuticals
1.43%
Other
41.50%
$45.4bn
Market Size
Source: Grand View Research 2020
12
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Key Trends and Our Response
1 Distributors looking to change their historic veterinary
supply route to provide a direct to consumer (dog and cat
owner) model.
2 The veterinary profession has been going through a period
of change for several years as corporates are continuing
to consolidate independent practices.
Our products are predominantly Prescription Only Medicines
(POMs), so our ultimate partner in the supply chain will remain the
veterinarian who will continue to write a prescription.
Through education, technical support and innovation, we
endeavour to ensure the medicine prescribed and dispensed
continues to be a Dechra product.
Our relationship with these groups is very important; we are
increasingly focused on key account management. We have
modified our sales and marketing approach to focus on building
relationships with our corporate and buying group customers
and to understand better their needs and expectations. We
have dedicated corporate account teams in Europe and North
America.
3 We have seen growth in the companion animal market for
many years due to veterinarians’ capabilities, improved
nutrition, increased longevity of pets and the owner’s
willingness to continue to increase spending on pets.
This trend has historically been in Western Europe, North
America and other selected markets; however, in the
developing world we are now seeing the status of pets
increase, creating new markets.
We will continue to innovate in specialist medicine and increase
our portfolio in our key areas of therapeutic specialisations. To
further the optimal use of our medicines we are increasing the
provision of technical support services through experienced
veterinarians. We are also expanding our geographical footprint
and investing money in product registrations in new developing
markets.
4 The veterinary market is seeing a continued increase in
global regulatory requirements and quality production
standards through more stringent site inspections.
We are strengthening our regulatory teams so we can comply
with the respective medicines agencies’ requirements and
expanding our quality function to enable manufacturing sites to
produce products which meet the highest standards.
5 With the global increase in population and the improvement in
developing countries’ economies, there is a huge increase in
demand for high quality animal protein and dairy products.
6 COVID-19 has had a wide ranging impact on the
global economy.
We are consistently strengthening our FAP business both with
new products and through international expansion. We are
enhancing our range which includes our market leading swine
and poultry water soluble antibiotics, and with our vaccines
we are increasing our registration activity to obtain marketing
authorisations in new markets.
We also own the global marketing rights to Animal Ethics’
ethical pain treatment for farm animals, Tri-Solfen®, which we are
registering for sheep, cattle and pigs in numerous global markets.
Dechra has benefited from the strong market dynamics. There
is conflicting evidence as to the reasons behind the growth. In
Europe, it is believed that pet ownership is increasing; however,
in the US there is strong evidence to say that veterinary
consultations are slightly down on previous years, and the
growth is due to people spending longer with their pets thereby
identifying more illnesses and also having more disposable
income to spend on their pets due to the lockdown.
13
Stock Code: DPHStrategic Report Our
Marketplace continued
Product Market Dynamics
Our products can be divided into four categories: Companion Animal Products
(CAP), Food producing Animal Products (FAP), Equine, and Nutrition. All
are targeted at providing veterinary professionals with solutions for their
customers’ needs.
Companion Animal Products (CAP)
Food producing Animal Products (FAP)
72.8%
of Group Revenue
12.7%
of Group Revenue
Species: Dogs and cats.
Species: Poultry, pigs and an increasing presence in cattle.
Key Therapeutic Sectors: Endocrinology, dermatology,
analgesia and anaesthesia, cardiovascular and critical care.
Key Therapeutic Sectors: Water soluble antibiotics, vaccines,
the treatment of mastitis, lameness and pain management.
Products: The majority of products in our portfolio are
Prescription Only Medicines (POMs) prescribed, administered
and dispensed by veterinarians working in companion animal
practices. We also have a range of associated non-prescription
products which complement the licensed pharmaceuticals, such
as ear cleaners, dermatologically active shampoos and other
topical and nutritional supplements.
Market Description: The principal driver of growth in
companion animal markets is the pet owners’ compassion for
their animals. The market has historically been orientated around
developed countries such as Western Europe, North America,
Australia and Japan. However, with increasing wealth in several
developing regions, the companion animal market is now also
emerging, particularly in South America and Eastern Europe.
Key Trends Shaping Our Markets: Expenditure on
companion animals continues to grow due to increasing pet
ownership, advances in nutrition, increased competence in
managing complex conditions by veterinarians, preventative
healthcare and wellness, and by increasing availability of more
specialist pharmaceuticals.
Our Market Position: This is the basis upon which Dechra
established its market position and continues to be our
strongest sector. Dechra has developed a strong reputation
for providing specialist and clinically necessary novel products.
We also supply a range of products which complement these
products in key therapeutic sectors where we are seen as the
company of choice by many veterinarians.
Margin: The highest gross margin category, averaging over
70%, with development costs high for relatively small volume
sales. However, sales and marketing costs are relatively high
compared to other categories.
Products: Our products are predominantly POMs that are
prescribed by veterinarians who work in either specialist veterinary
practices or professional farming units.
Market Description: As over 60% of all global animal health
sales are FAP, Dechra is underweight relative to the market and
our competitors and it is an increasing area of focus.
Key Trends Shaping Our Markets: The key driver for growth
in this sector is a huge increase in the global demand for high
quality animal protein and dairy products. Vaccines are the
biggest growth sector of the veterinary market and are anticipated
to continue to outgrow therapeutic treatments. There is also
a growing awareness of the need for better animal welfare
standards, including pain control during procedures such as pig
castration and tail docking in sheep.
Our Market Position: Dechra entered the FAP sector through
the acquisition of Eurovet in 2012; it currently represents 12.7% of
revenue. The majority of our sales are currently antibiotics which
are sold mainly into Europe. Western Europe has been extremely
proactive over the last five years in reducing antibiotic use due to
concerns over antimicrobial resistance and ‘super bugs’.
Dechra’s portfolio is positioned to match current best practice
prescribing habits. Additionally, our Brazilian vaccines business
and Croatian poultry vaccines are providing growth and are
anticipated to continue to provide growth opportunities in future
years as we seek global registrations.
Margin: Relatively low gross margins at approximately 35%.
However, volumes are high and sales costs are relatively low as
the products are sold mainly into large farm integrators.
14
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Equine
Nutrition
7.3%
of Group Revenue
5.2%
of Group Revenue
Species: Horses and ponies.
Species: Dogs and cats.
Key Therapeutic Sectors: Lameness and pain management.
Products: Dechra offers a wide range of products supporting
the equine veterinarian, from pain management to products
for anaesthesia, dermatology, critical care, reproduction and
euthanasia.
Market Description: Veterinarians that specialise in horses
operate out of either mixed practices or, increasingly, specialist
equine centres. There are approximately five million horses in the
USA, approximately one million horses in France and Germany
and less than one million in the UK. As such the market
potential is limited. The market can be divided roughly into high
performance sports horses, leisure horses and ponies.
Key Trends Shaping Our Markets: The market is variable and
can be linked to the economy; however, high value, insured,
sports horses will be treated at almost any cost.
Our Market Position: This is a sector in which few animal
health companies specialise due to the relatively small number
of horses in the world and the fact that in the majority of
European countries the horse is classed as a food producing
species which adds complexity to the licensing process.
Dechra has developed a strong position in lameness and pain
management with unique products that have superior efficacy
compared to historic treatments.
Margin: Similar margin returns to CAP; however, it is a relatively
small marketplace.
Key Therapeutic Sectors: Our pet diets are available to
support the wellbeing of animals with numerous therapeutic
conditions.
Products: Our range of pet foods is predominantly focused on
high quality nutrition to support therapeutic conditions in dogs
and cats such as allergies, obesity, heart disease and kidney
disease.
Market Description: The global pet food market is huge
and dwarfs the animal health pharmaceuticals market. The
veterinarian’s recommendation is respected by pet owners
which allows these products to take a small but significant part
of this nutrition market.
Key Trends Shaping Our Markets: Expenditure on
companion animals continues to grow due to increasing pet
ownership, advances in nutrition and increased competence
in managing complex conditions in dogs and cats such as
allergies, joint disorders, obesity, heart disease and kidney
disease.
Our Market Position: Dechra’s focus is predominantly
therapeutic diets which are not available for self-selection through
supermarkets and require advice from the veterinarian. There
are very few competitors in this specialist sector of the pet food
market and although we compete with huge global multinational
companies, we are able to differentiate our position through the
use of higher quality ingredients and through innovation. The
ability to offer our wide range of products, branded Specific®,
is necessary to remain competitive in this sector.
Margin: Highly competitive market where we compete with huge
multinational retail companies. However, gross margins are robust
at approximately 45%.
15
Stock Code: DPHStrategic Report Our Business
Model
Our products improve animal health and welfare. Our customer support, educational and
training programmes help to inform and educate veterinarians around the globe to further
improve animal health and welfare.
Our Key
Resources and
Relationships
Our Key
Activities
Our objectives are to innovate, develop,
register, manufacture, supply and market
high quality products to the veterinary
profession worldwide.
Our Values
Our Culture and Values are important and have
helped drive the Group’s success.
People
Our people strategy underpins everything
we do in the business. We have a well
defined plan to build talent, develop
people and strengthen the Dechra Culture.
Technology
We are implementing a strong technology
platform to enable us to operate efficiently.
We also offer Continuing Professional
Development (CPD) training via our
e-learning system (the Dechra Academy)
to veterinarians and veterinary nurses.
Manufacturing & Supply Chain
We have seven manufacturing sites
across the globe and strong relationships
with our CMO network. Our customers
are serviced from two major logistics
sites.
ESG
We empower our people to make
a difference in our business, our
communities and to our environment.
Read more about Delivering our
Strategy on pages 20 to 23.
16
Innovation, Partnership and RegisterManufacture and SupplyRoute to MarketCustomersRevenueVeterinary distributors and wholesalersor Direct supply of productsSales and Marketing21345Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
1
Innovation,
Partnership
and Register
2
Manufacture
and Supply
3
Route to
Market
We spread our development
portfolio across novel entities,
differentiated generics, generics
and lifecycle management projects
across multiple species.
Manufacturing is a key
competency of the Group; the
prime objective is to deliver safe,
efficacious, cost effective, quality
products.
Our products are distributed
from our major logistics sites via
wholesalers, distributors, or direct
supply.
Our Range of Competencies
We have a wide range of competencies across
our seven sites including tablets, creams,
liquids, ointments, powders, vaccines and
sterile injections that can be packed in a
multitude of different presentations. Currently
we manufacture approximately 40% of our
products in-house; however, we are working
on bringing more products in to our own
production facilities. There are competencies
and dosage forms that we do not have, and
we have long term agreements that prevent in-
house manufacturing of some products.
Batch runs for veterinary medicines are often
relatively small compared to human production.
Therefore, in some instances, outsourcing can
prove difficult and expensive. Our Contract
Manufacturing Organisation (CMO) network is
an important part of our business.
The principal objective is to deliver a
customer’s order on time and in full every time.
Types of Distribution Channels
Our European and International markets are
serviced from our own logistics facility based
in Uldum, Denmark, and Somersby, Australia.
North America and Brazil are supplied out of
third party logistics providers.
There are a few markets where we offer direct
supply, such as Germany and the Netherlands,
that are not fully supported by veterinary
wholesalers or where legislation enforces
all pharmaceuticals to be sold through
pharmacies, such as Denmark, Italy, Norway
and Sweden.
Specialised Veterinary Wholesalers
The majority of veterinary practices are
supplied through specialised veterinary
wholesalers that operate as one-stop shops.
They stock the majority of items veterinary
practices need and offer high levels of
service, often with a next day delivery. These
wholesalers are generally passive in selling
product; they predominantly supply to demand
where the demand is driven by Dechra’s own
sales activities within veterinary practices.
How Ideas are Generated:
•
regular cross functional meetings where all
senior staff are encouraged to bring new ideas
from their experience in the marketplace.
• networking with key opinion leaders,
especially in our focus therapeutic areas,
to identify and develop ideas.
• employing talented veterinary scientists
who extensively screen scientific papers
looking for new human medicine-
related technologies that might have an
application in our marketplace.
Innovative Products that Treat
a Range of Conditions
Our products give veterinarians the solutions
they need in the treatment of animals. The
majority of Dechra’s key products are novel
or have clear advantages over competitor
products. This allows veterinarians to offer a
high standard of care to animals that they treat.
Key Expertise for In-house
Product Development
Our formulation and development laboratories
are located at our manufacturing sites which
allows us to emulate the manufacturing
equipment at laboratory scale.
Product Development Process
Once all the studies are concluded, if the
product reaches the required safety, efficacy
and stable chemical formula, regulatory
dossiers are prepared for registration and filing
with the relevant regulatory authorities.
Read more about Our Product
Development on pages 42 to 45.
Stock Code: DPH
17
4
Customers
5
Sales and
Marketing
Our customers are veterinary
professionals operating in
veterinary practices and major
farming units.
The relationship with veterinarians is key and, to this end,
we provide added value services. Our customer channels
involve our telephone sales representatives, field based
representatives, educational programmes and technical
support programmes.
All our products and sales and marketing
activities are targeted at veterinary
professionals. The majority of veterinarians
prescribe and dispense pharmaceuticals,
although there are a few territories in the world
where the veterinarian writes a prescription
and the drugs are purchased by the animal
owner at a pharmacy.
The majority of our products are POMs;
however, we have a range of complementary
non-prescription products. Our product
range includes both novel and generic
products in key therapeutic areas, in particular
endocrinology and anaesthesia and analgesia.
Educational and Training
Programmes
We offer high level educational
programmes focused on the diagnosis
and treatment of conditions in our
key therapeutic areas. We deliver this
education through many channels,
including major conferences, regional
groups, individual practices and
increasingly through digital channels.
We help to improve the knowledge
and education of veterinarians. These
programmes are certified to offer
veterinarians and veterinary nurses
the continuing professional education
hours they require to maintain their
professional qualification.
Sales Representatives
Dechra operates its own sales force
and provides in-house marketing and
technical support in 25 countries,
predominantly in Europe, North
America and ANZ. In almost all of
these countries we have highly skilled
field based representatives who make
regular calls to all major veterinary
practices. The representatives’ brief
is to sell the product on a technical
basis, outlining the beneficial aspects
of our products and to provide
educational support on how best to
treat animals in our key therapeutic
areas.
Customer Support
We also provide high levels of technical
support and pharmacovigilance
through helplines in every country in
which we operate. These helplines
provide veterinarians with support on
how to best use our products and
free advice on any difficult or complex
cases that may be encountered.
Stock Code: DPH
18
Creating Value
for Our Stakeholders
Shareholders
Communities
We have consistently delivered on our strategic objectives
resulting in a strong record of growth.
21
Years of Dividend
per Share Growth
45.00
40.50p
Total Dividend per
Share in 2021
We contribute to the social and economic welfare of the
local communities in which we operate. Our community
ethos is aligned with our Purpose and Values.
£72k
Cash Donations
£310k
Product Donations
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
2
0
-
6
0
-
0
3
3
0
-
6
0
-
0
3
4
0
-
6
0
-
0
3
5
0
-
6
0
-
0
3
6
0
-
6
0
-
0
3
7
0
-
6
0
-
0
3
8
0
-
6
0
-
0
3
9
0
-
6
0
-
0
3
0
1
-
6
0
-
0
3
1
1
-
6
0
-
0
3
2
1
-
6
0
-
0
3
3
1
-
6
0
-
0
3
4
1
-
6
0
-
0
3
5
1
-
6
0
-
0
3
6
1
-
6
0
-
0
3
7
1
-
6
0
-
0
3
8
1
-
6
0
-
0
3
6
1
-
6
0
-
0
3
0
2
-
6
0
-
0
3
1
2
-
6
0
-
0
3
People
Veterinary Professionals
Our employees are our greatest asset. We employ 1,975
employees in 25 countries in a wide range of working
environments. Our ongoing objective is to continue to be
a high performing business, driven by highly skilled and
committed teams.
We provide high levels of service, technical support and
educational training to develop a strong relationship
with, and be recognised as an important partner to,
veterinarians. We invest in our Manufacturing and Supply
Chain competencies to meet demand.
326
New Employees
266
Delta (Employee)
Training Courses
549
Veterinary Academy
Courses
51,569
Shipments from
Uldum, Denmark
19
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021
www.dechra.com
Strategic Report
Delivering
Our Strategy
Our priorities for each Strategic Growth Driver and Enabler are clearly defined and
communicated and are outlined in the table on pages 22 and 23. In this section of
the Annual Report we describe the progress we have made towards achieving our
strategic objectives.
Our Purpose
The sustainable improvement of animal health and welfare globally
Our Strategic Growth Drivers
Pipeline
Delivery
a
b
c
Portfolio
Focus
Geographical
Expansion
Acquisition
Our Objective
Deliver our pipeline on time, at the
right costs and with the expected
returns. Refill the pipeline so that
we get a constant flow of new
products in future years.
Our Objective
Maximise our revenue by
increasing market penetration,
focusing on targeted therapeutic
sectors within CAP, Equine, FAP
and Nutrition.
Our Objective
Leverage our product portfolio into
new geographic regions through
distribution partners, in-country
presence and new country
product registrations.
Our Objective
Expand our geographical footprint
and/or enhance our product
portfolio through acquisition.
Link to our KPIs:
Link to our KPIs:
Link to our KPIs:
Link to our KPIs:
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
Link to our Risks:
Link to our Risks:
Link to our Risks:
Link to our Risks:
2
3
4
5
9
10
1
2
4
5
8
9
10
2
5
7
8
6
7
Our Strategic Enablers Support the Execution of Our Strategy
Manufacturing
and Supply Chain
People
Technology
ESG
Link to our KPIs:
Link to our Risks:
1
2
3
4
5
6
7
4
7
9
10
Key to KPIs:
1 Revenue Growth
5 New Product Revenue
Key to Risks:
1 Market Risk
2 Underlying Diluted EPS Growth
6 Lost Time Accident Frequency Rate
2 Competitor Risk
6 Acquisition Risk
7 People Risk
3 Return on Capital Employed
7 Employee Turnover
3 Product Development and Launch Risk
8 Antimicrobials Regulatory Risk
4 Cash Conversion
20
4 Supply Chain Risk
5 Regulatory Risk
9 Retention of People Risk
10 Climate Risk
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.com Our Progress in Numbers
2021
5,699
Product registrations
in 2021
68
Countries distributed
to in 2021
25
Sales and Marketing
organisations in 2021
7
Manufacturing sites
owned in 2021
1,975
Number of employees
in 2021
2020 Revenue £515.1m
a
b
c
2021 Revenue £608.0m
Acquisition of Osurnia
Expands our
product portfolio
Acquired a further 1.5%
of Medical Ethics
Strengthens pipeline
Acquisition of
Ampharmco
Supports US
manufacturing
a
b
c
Acquisition of Mirataz
Expands our
product portfolio
a
b
c
2018 Revenue £407.1m
Acquired Le Vet
Adds to EU
product portfolio
a
b
c
Acquired AST Farma
Strengthens Dutch
market position and
provides direct-to-vet
relationship
2016 Revenue £247.6m
Acquired Putney
Transformational
US deal
Acquired Apex
Access to Australian
CAP market
Acquired a further 15%
of Medical Ethics
Strengthens pipeline
Acquired Venco
Access to Brazil
and South American
markets
2019 Revenue £481.8m
Acquired trade and
assets of Caledonian
Access to equine
products
2017 Revenue £359.3m
Acquired RxVet
Access to New
Zealand
Acquired 33% of
Medical Ethics
Access to novel
product development
2015 Revenue £203.5m
Commenced
trading in Canada
and Poland
Acquired Genera
Entry into poultry
vaccines
a
b
c
2014 Revenue £193.6m
Commenced
trading in Italy
Acquired PSPC
US bolt-on
a
b
c
13
40
3
1,287
Countries distributed
Sales and Marketing
Manufacturing sites
Number of employees
to in 2014
organisations 2014
owned in 2014
in 2014
2014
1,327
Product registrations
in 2014
21
Stock Code: DPHStrategic Report Delivering
Our Strategy continued
Our Strategic Growth Drivers
Our Strategic Enablers
Pipeline
Delivery
a
b
c
Portfolio
Focus
Our Achievements
2017
• Signed Animal Ethics licensing
agreement, and building pipeline of
other in-licensing opportunities
Our Achievements
2017
• Strong CAP and Equine growth
continuing across the Group, FAP
returned to growth
Geographical
Expansion
Our Achievements
2017
• Several international product
registrations achieved
• Established Dechra Veterinary Products
East Asia
•
IT user hardware standardised across the Group
• Vaccines development strategy defined
• Enlarged NA business growth due
(DVP) International business
as new opportunities identified
• Amoxi-Clav tablet development
completed
2018
• Two further poultry vaccines registered
in EU: Avishield® IBH120 and ND B1
• Launch of further Amoxi-Clav dose
sizes to complete range for the USA
market
• Progress in co-development licensing
opportunities
2019
• Entered into a number of licensing
agreements, including a novel canine
sedative and an equine gastrointestinal
product
• A number of novel and generic
registrations in EU, Mexico and
rest of world
• 15 Le Vet pipeline product launches
2020
• Marboquin tablets, a CAP antibiotic,
approved in USA
• Cosacthen® approved in 23 EU
territories and Canada
• Akston proof of concept study
commenced
Our Progress
2021
• Favourable results on Akston dog
and cat proof of concept studies
• Entered into licensing and supply
agreement for Akston cat
• Mirataz® launched in EU and
registered in Canada
to unblocking of Putney distribution
channels
•
Increased effective use of tools in
EU and NA
2018
• Strong growth in European FAP
following antibiotic product alignment
and range additions
• Leveraging CAP product success to
increase penetration across Group
• Continued EU growth in Equine from
market penetration and range addition
2019
• Moved key Le Vet products from
distributors to Dechra companies to
generate significant synergies through
retention of full margin and enhancing
sales focus
• FAP growth accelerating against
a backdrop of declining antibiotic
markets
2020
• Delivered growth across all key
therapeutic sectors through
educational focus
• Continued to generate significant
synergies from AST Farma and
Le Vet acquisition
Our Progress
2021
• Completed Le Vet disintermediation
with final products brought back
in-house in Belgium
• Second consecutive year of strong
growth in all key therapeutics areas
• Commenced appointment of the
DVP International team
2018
• Over 80 new country registrations
of existing portfolio products
• Acquisition of RxVet expanded our
presence in New Zealand
• Successful establishment of the
DVP International team
2019
• Expanded into Latin America via the
acquisition of Laboratorios Vencofarma
do Brasil Ltda (Venco)
• 43 Product registrations across Israel,
South Korea, Macau, Macedonia,
Malaysia, Malta, Namibia, Serbia,
Ukraine, UAE and Zambia
2020
• 34 product registrations across
Indonesia, South Korea, Myanmar,
Nicaragua, Oman, Tanzania, Thailand,
UAE, Uruguay and Vietnam
• Key endocrine brands Vetoryl®,
Felimazole® and Zycortal® being
brought back in-house in Australia
and progressing through the fast track
process in Brazil
Our Progress
2021
•
Internationally received 38 approvals
for key brands in new countries
• Tri-Solfen® provides a meaningful FAP
presence in the Australian and New
Zealand market
• Launched Vetoryl in Brazil and gained
registrations for Felimazole and Zycortal
22
Acquisition
Manufacturing
People
Technology
ESG
and Supply
Chain
Our Achievements
2017
Our Achievements
2017
• Acquisition of Apex, opening up new
• Developed new Manufacturing and Supply Chain strategy
bridgehead into Australasia and South
• Ongoing progress in Oracle deployment
• Acquisition of 33% of Medical Ethics
Pty Ltd provides the Group with secure
access to novel therapeutic areas/
product development
2018
2018
• Progress made in Manufacturing remodelling strategy in Zagreb and Bladel
• 12 months without a lost time accident
• Completion of employee engagement survey
• Acquisition and successful integration
• Successful implementation of the Oracle project in DVP EU
of RxVet, expanding our presence in
2019
New Zealand
• Acquisition and successful initial
Supply Director
integration of AST Farma and Le
Vet, providing transformation in EU
Pharmaceuticals’ portfolio and pipeline
• Acquisition and successful integration
• Oracle ERP embedded
2020
• Appointment of additional Non-Executive Director and Group Manufacturing &
•
Investment in manufacturing and packaging at Skipton, a new solid dose facility
in Zagreb and an upgrade to the Bladel sterile facility
• Appointment of Non-Executive Director and Chief Financial Officer
• Restructured Product Development team and created new position of Chief
• Acquisition of trade and assets of
Caledonian Holdings Ltd in New
Scientific Officer
Zealand strengthening market position
• Remedied internal supply issues
2019
of Venco
in Equine
2020
Our Progress
2021
• Acquisition of an additional 15%
• Appointment of Non-Executive Director, Group Manufacturing & Supply Director
of Medical Ethics Pty Ltd
and Group Sustainability Director
• Acquisition of Ampharmco LLC in Fort
•
Improvements to supply chain and ongoing technical transfer of Dechra products
Worth, Texas, a FDA registered facility
into Zagreb facility
• Academy for veterinarians and veterinary nurses voted best in class in industry
• Received accreditation from Great Place to Work as ‘best place to work’
• Committed to Business Ambition for 1.5 degrees centigrade reduction and the
development of Science Based Targets
• Roll out of our global employee wellbeing programme branded Thrive
• Acquisition of worldwide rights and
assets of Mirataz, a transdermal
medication for cats
Our Progress
2021
• Acquisition of worldwide rights and
assets of Osurnia, a long acting
treatment of otitis externa in dogs
• Acquisition of the Australian and New
Zealand marketing rights for Tri-Solfen®,
completing our global rights to this
novel product
• Acquisition of an additional 1.5% of
Medical Ethics Pty Ltd taking our
holding to 49.5%
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Our Strategic Growth Drivers
Our Strategic Enablers
Pipeline
Delivery
a
b
c
Portfolio
Focus
Geographical
Expansion
Acquisition
Our Achievements
2017
• Acquisition of Apex, opening up new
bridgehead into Australasia and South
East Asia
• Acquisition of 33% of Medical Ethics
Pty Ltd provides the Group with secure
access to novel therapeutic areas/
product development
2018
• Acquisition and successful integration
of RxVet, expanding our presence in
New Zealand
• Acquisition and successful initial
integration of AST Farma and Le
Vet, providing transformation in EU
Pharmaceuticals’ portfolio and pipeline
2019
• Acquisition and successful integration
of Venco
• Acquisition of trade and assets of
Caledonian Holdings Ltd in New
Zealand strengthening market position
in Equine
2020
• Acquisition of an additional 15%
of Medical Ethics Pty Ltd
People
Technology
ESG
Manufacturing
and Supply
Chain
Our Achievements
2017
• Developed new Manufacturing and Supply Chain strategy
• Ongoing progress in Oracle deployment
•
IT user hardware standardised across the Group
2018
• Progress made in Manufacturing remodelling strategy in Zagreb and Bladel
• 12 months without a lost time accident
• Completion of employee engagement survey
• Successful implementation of the Oracle project in DVP EU
2019
• Appointment of additional Non-Executive Director and Group Manufacturing &
Supply Director
•
Investment in manufacturing and packaging at Skipton, a new solid dose facility
in Zagreb and an upgrade to the Bladel sterile facility
• Oracle ERP embedded
2020
• Appointment of Non-Executive Director and Chief Financial Officer
• Restructured Product Development team and created new position of Chief
Scientific Officer
• Remedied internal supply issues
Our Progress
2021
• Appointment of Non-Executive Director, Group Manufacturing & Supply Director
and Group Sustainability Director
• Acquisition of Ampharmco LLC in Fort
Worth, Texas, a FDA registered facility
•
Improvements to supply chain and ongoing technical transfer of Dechra products
into Zagreb facility
• Academy for veterinarians and veterinary nurses voted best in class in industry
• Received accreditation from Great Place to Work as ‘best place to work’
• Committed to Business Ambition for 1.5 degrees centigrade reduction and the
development of Science Based Targets
• Roll out of our global employee wellbeing programme branded Thrive
• Acquisition of worldwide rights and
assets of Mirataz, a transdermal
medication for cats
Our Progress
2021
• Acquisition of worldwide rights and
assets of Osurnia, a long acting
treatment of otitis externa in dogs
• Acquisition of the Australian and New
Zealand marketing rights for Tri-Solfen®,
completing our global rights to this
novel product
• Acquisition of an additional 1.5% of
Medical Ethics Pty Ltd taking our
holding to 49.5%
23
Our Achievements
2017
Our Achievements
2017
Our Achievements
2017
• Signed Animal Ethics licensing
• Strong CAP and Equine growth
• Several international product
agreement, and building pipeline of
continuing across the Group, FAP
registrations achieved
other in-licensing opportunities
returned to growth
• Established Dechra Veterinary Products
• Vaccines development strategy defined
• Enlarged NA business growth due
(DVP) International business
as new opportunities identified
to unblocking of Putney distribution
• Amoxi-Clav tablet development
completed
2018
channels
EU and NA
•
Increased effective use of tools in
2018
• Commenced appointment of the
DVP International team
• Over 80 new country registrations
of existing portfolio products
• Acquisition of RxVet expanded our
presence in New Zealand
• Successful establishment of the
DVP International team
2019
• Expanded into Latin America via the
acquisition of Laboratorios Vencofarma
do Brasil Ltda (Venco)
• 43 Product registrations across Israel,
South Korea, Macau, Macedonia,
Malaysia, Malta, Namibia, Serbia,
Ukraine, UAE and Zambia
2020
• 34 product registrations across
Indonesia, South Korea, Myanmar,
Nicaragua, Oman, Tanzania, Thailand,
UAE, Uruguay and Vietnam
• Key endocrine brands Vetoryl®,
Felimazole® and Zycortal® being
brought back in-house in Australia
• Two further poultry vaccines registered
2018
in EU: Avishield® IBH120 and ND B1
• Strong growth in European FAP
• Launch of further Amoxi-Clav dose
sizes to complete range for the USA
• Progress in co-development licensing
market
opportunities
2019
following antibiotic product alignment
and range additions
• Leveraging CAP product success to
increase penetration across Group
• Continued EU growth in Equine from
market penetration and range addition
• Entered into a number of licensing
2019
agreements, including a novel canine
• Moved key Le Vet products from
sedative and an equine gastrointestinal
distributors to Dechra companies to
generate significant synergies through
retention of full margin and enhancing
sales focus
• FAP growth accelerating against
a backdrop of declining antibiotic
markets
2020
• Delivered growth across all key
therapeutic sectors through
educational focus
product
• A number of novel and generic
registrations in EU, Mexico and
rest of world
• 15 Le Vet pipeline product launches
2020
• Marboquin tablets, a CAP antibiotic,
approved in USA
• Cosacthen® approved in 23 EU
territories and Canada
• Akston proof of concept study
commenced
Our Progress
2021
• Favourable results on Akston dog
and cat proof of concept studies
• Entered into licensing and supply
agreement for Akston cat
• Mirataz® launched in EU and
registered in Canada
• Continued to generate significant
and progressing through the fast track
synergies from AST Farma and
process in Brazil
Le Vet acquisition
Our Progress
2021
Our Progress
2021
•
Internationally received 38 approvals
• Completed Le Vet disintermediation
for key brands in new countries
with final products brought back
in-house in Belgium
• Tri-Solfen® provides a meaningful FAP
presence in the Australian and New
• Second consecutive year of strong
Zealand market
growth in all key therapeutics areas
• Launched Vetoryl in Brazil and gained
registrations for Felimazole and Zycortal
Stock Code: DPHStrategic Report Chief Executive
Officer’s Statement
Ian Page | Chief Executive Officer
“ Dechra has continued to outperform
a robust market throughout the
COVID-19 pandemic affected financial
year. As we start the new financial
year trading remains strong with the
momentum and market penetration
seen in the second half of the prior
financial year continuing.”
Glossary
CER: Constant Exchange Rates
AER: Actual Exchange Rates
CAP: Companion Animal Products
EMA: European Medicines Agency
ERP: Enterprise Resource Planning
EU Pharmaceuticals: European Pharmaceuticals
Segment comprising DVP EU, DVP International and
Dechra Pharmaceuticals Manufacturing
FDA: US Food and Drug Administration; a federal agency
of the US Department of Health and Human Services
FAP: Food producing Animal Products
NA Pharmaceuticals: North American Pharmaceuticals
Segment comprising DVP US, Canada and Mexico
24
Introduction
I am pleased to report that Dechra has continued to outperform a robust
market throughout the COVID-19 pandemic affected financial year. All
product groups; Companion Animal Products (CAP), Food producing
Animal Products (FAP), Equine and Nutrition have delivered solid growth
and the recent acquisitions of Osurnia® and Mirataz have delivered good
additional growth.
COVID-19
We have benefited from above average market growth in the majority
of our key CAP markets. The reasons for this market growth are not
yet fully defined. In the UK there have been reports of an increased
number of dogs; however, recent information from the United States
indicates that veterinary practice visits by pet owners have marginally
declined. What is clear is that people have been spending more time
with their pets and have therefore been more cognitive of their welfare,
and with disposable income being higher than normal due to lockdown,
expenditure per pet has increased.
Dechra has operated exceptionally well throughout the pandemic; all
manufacturing sites and laboratories have remained operational and
communication with customers through digital media by our highly
motivated commercial teams has been excellent.
Operational Review
EU Pharmaceuticals Segment
In the year our European (EU) Pharmaceuticals Segment reported net
revenues increased by 20.2% at CER (20.1% at AER). This Segment
includes our International business, which is detailed below. It also
includes non-core business, such as third party contract manufacturing,
which we continue to exit as strategically planned. Existing revenues,
excluding third party contract manufacturing and including the
like-for-like impact of recent acquisitions, increased by 16.7% at
CER (16.6% at AER).
This growth is due to improved supply combined with very successful
digital sales and marketing interaction with our customers, supported by
professional key account management. We have delivered high double
digit revenue growth in nearly all areas of the business, and almost all
countries in Europe delivered high single or double digit growth.
International Pharmaceuticals
Our International team continues to perform strongly, especially in the
territories where we have our Dechra branded sales and marketing
organisations: Australia, New Zealand and Brazil. Our geographical
expansion in other territories through distribution partners has also
delivered growth which has been enhanced with Osurnia which is now
sold into 15 international markets with exceptionally high sales in Japan.
Most of our key brands are now registered in Australia where we are
now also able to market our leading endocrine products in Dechra livery
as the previous distribution agreement with a third party has come to
term. In Brazil the growth from our core vaccines has been enhanced
with the successful registration of a number of our leading CAP
products.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report NA Pharmaceuticals Segment
Our North America (NA) Pharmaceuticals Segment net revenues
increased by 22.2% at CER (14.6% at AER), driven primarily by strong
organic growth on existing products (16.7% at CER, 9.4% at AER) and
incremental sales performance on recently acquired products, Mirataz
and Osurnia. Strong growth from Canada and Mexico also contributed
to North America’s success.
Organic growth can be attributed to an improved supply chain,
increased volumes from market growth as a result of higher pet spend
during the pandemic, and market share gains as we continue to execute
strategic marketing initiatives.
Due to the strong growth in the US, we have continued to expand our
commercial organisation. The CAP team has expanded to 88 field sales
representatives and 18 tele-sales representatives divided amongst nine
US regions.
Product Category Performance
CAP
Companion Animal Products (CAP), which represent 72.8% of Group
turnover, grew by 25.9% at CER (19.2% organically) in the Period.
Organic growth was driven by increased market shares in our key
therapy areas of Endocrinology, Anaesthesia/Analgesia, and Internal
Medicine in the EU and across all categories in the USA. Additionally, we
successfully launched our two key new products, Mirataz and Osurnia,
in several markets during the period. Marboquin, launched in the USA,
exceeded sales expectations.
FAP
The strong performance in Food Producing Animal Products (FAP)
during recent years, which represents 12.7% of Group turnover, has
slowed to 4.7% at CER (4.7% organically) this year due to a number of
factors. In certain key FAP markets we have seen a reduction in meat
consumption as restaurants closed as a result of COVID-19. Additionally
meat production in several markets has been negatively impacted by
outbreaks of African Swine Fever and Avian Influenza.
Equine
Equine, which represents 7.3% of Group turnover, grew by 25.5% at
CER (25.5% organically). This growth was driven partly by the life cycle
improvement to a key product, Equipalazone®, where we added an
additional flavouring, and by the launch of a number of Le Vet pipeline
products, which have strengthened our overall Equine portfolio.
Nutrition
Nutrition represents 5.2% of Group turnover and grew by 9.4% at CER
(9.4% organically). After several years of decline, it is very pleasing to report
that our Nutrition business has delivered strong growth in the year. This can
be attributed to the recently formed Business Unit which has worked closely
with key markets and key customers, to rebuild confidence in the range and
to attract new customers to the Specific brand.
Product Development and Regulatory Affairs (PDRA)
Overview
Our Regulatory and Development teams have continued to be effective
throughout the COVID-19 pandemic as our clinical trials group was
able to work remotely with veterinarians and laboratories that were
participating in clinical and non-clinical studies.
In preparation for full implementation of new regulations for the
authorisation and supervision of veterinary medicinal products (EU Reg
2019/6), which comes into effect in January 2022, an internal working
group has been formed to ensure Dechra remains in compliance.
The pharmaceutical development laboratories in the UK, Croatia
and Netherlands remained operational during the pandemic by
adopting staggered schedules. The laboratories increased formulation
capacity with additional people and new equipment, including a new
chromatography modelling system.
The vaccine development laboratory in Zagreb received Good
Laboratory Practice (GLP) certification and has expanded their
capacity for studies.
Pipeline Progress
Good progress continues to be made on the pipeline; the final sections
of a dossier for a new canine sedative for the USA have been submitted.
It is also pleasing to report that we are still delivering favourable results
on the dog and cat proof of concept studies for the diabetes drugs
being developed in partnership with Akston Biosciences. Following our
right to evaluate the cat product, we subsequently signed a licensing
and supply agreement on 4 February 2021.
Product Approvals
Numerous marketing authorisations have been achieved throughout
the year. Although none is material in its own right, they all strengthen
the existing portfolio in Dechra territories and enhance our International
portfolio, an increasing area of strategic importance. Major approvals in
Dechra territories are:
•
•
in Europe and the UK they included Apovomin Injection, Clindacutin
Ointment, Lodipred Tablets, Metomotyl Flavoured Tablets, and
Rexxolide® Injection. Apovomin is a gastrointestinal product for dogs;
Clindacutin is a topical dermatological product; Lodipred is a treatment
for hypertension in cats; Methomotyl is a gastrointestinal product for
dogs; Rexxolide is an antimicrobial for cattle, pigs and sheep;
the first approval in Europe for a product included in our agreement
with Medical Ethics was Equi-Solfen®, a topical anaesthetic for
horses. This is an equine version of Tri-Solfen® which was approved
in Portugal;
• Carprofen Flavoured Tablets, an anti-inflammatory for dogs, were
approved in the USA;
• Mirataz Transdermal Gel was registered in Canada;
•
three new products and one line extension were registered in
Australia and New Zealand, two new approvals in Mexico and
four new approvals in Brazil;
• a 5 mg strength for Vetoryl Capsules was registered in Europe, and
a number of established products already registered in the EU, have
now received approval in new territories, including Avishield® IB
GI-13, Avishield IBD Plus, Comfortan®, Myodine and Phenoleptil;
and
•
Internationally we have received 38 approvals across our key brands
in countries including Albania, Bolivia, Costa Rica, Israel, Jordan,
Kenya, Puerto Rico, South Africa, Tanzania, Ukraine, United Arab
Emirates and Venezuela.
25
Stock Code: DPHStrategic Report Chief Executive
Officer Statement continued
Acquisitions
The recent product acquisitions of Mirataz and Osurnia are both
performing strongly. Osurnia is performing above our expectations
in the EU, despite the launch of a competitor product, and has also
exceeded our expectations in Japan and Australia. In the USA we are
gaining market share having reduced the price to compete better
with the market leading product. We continue to pursue registrations
in new territories.
Mirataz continues to perform exceptionally well within the USA market
following a successful marketing campaign for this clinically necessary
unique product. It has now also been launched in all our major European
territories and initial sales are strong. We expect to receive approval to
market the product in other countries imminently.
We were pleased to announce on 8 February 2021 the acquisition
of the Australian and New Zealand marketing rights for Tri-Solfen®
from Animal Ethics Pty Ltd, a related party. Tri-Solfen® has already
been successfully introduced to the Australian market for pain relief in
lambs since 2008 and was approved and launched for use in cattle in
2019, achieving cumulative annualised sales of AUD9.1 million (£5.1
million). This acquisition allows us to create a meaningful FAP presence
in the Australian and New Zealand markets as we build a new sales
infrastructure. Additionally, we have acquired a further 1.5% of the
issued share capital, taking our holding in Animal Ethics Pty Ltd’s parent
company, Medical Ethics Pty Ltd, to 49.5%. We are in the process
of recruiting a FAP sales team and have commenced marketing the
product in Dechra livery post the end of the 2021 financial year.
Manufacturing and Supply
We have made huge progress with improvements to the supply chain.
Backorders have been materially reduced and quality systems and
processes enhanced. The upcoming implementation of a recently
approved new quality management system will further enhance our
manufacturing capabilities. We continue to make good progress on the
technical transfer of Dechra products, predominantly into our Zagreb
facility, where we have just been awarded Croatian Employer of the Year
for people with disabilities. Our Bladel, Netherlands, facility continues to
prepare for an FDA audit so that we can bring in-house sterile injectable
manufacturing for some of our US products. In Skipton, UK, we have
now ceased all the third party human products manufacturing so it now
purely produces Dechra’s own brands. Work has been completed in
Australia to prepare ourselves for TGA quality approval; we are now
awaiting inspection. If successful, we will be able to export products
from this site to outside of Australia. We have completed a capital
investment programme in a new water for injection system, a key
component in all production, in our Londrina vaccine facility in Brazil as
we continue to progress our site development and quality improvement
strategy. We have now closed our Mexican manufacturing facility and
have transferred the legacy products we wished to retain from the
original acquisition to local third party manufacturers.
26
Technology
I am pleased to report that an external research survey in the UK has
voted Dechra’s online Academy for veterinarians and veterinary nurses
as the best in class in the industry. This is an amazing achievement
given the scale of Dechra compared to the market leading companies
in animal health.
Digital communication with our customers has been enhanced with
upgraded video conferencing systems, improved security of key servers
and additional support for home workers’ queries.
We have relaunched both the Dechra Pharmaceuticals PLC and Dechra
Veterinary Products web sites on new, improved platforms and have
also developed and launched a new internal, advanced intranet site
branded OneDechra.
In the year we successfully launched a global payroll system, partnering
with ADP Celergo, which is live in 16 countries with the roll out across the
entire Group expected to be completed within the 2022 financial year.
Our sales and marketing database on the Salesforce software platform,
which we have used successfully for a number of years in the US, has
now gone live across Europe. This will improve our knowledge of, and
relationship with, our customers and will allow us to better measure
sales team performance and activity.
We have recently approved the implementation of a new quality
and document management system which will operate across
Manufacturing, Product Development and Regulatory Affairs.
Implementation has commenced in this new financial year.
People
The main factor behind Dechra’s success is its people. I would like to
thank all our employees for their hard work, dedication and innovation
throughout the year.
In a world affected by COVID-19 it is a great achievement for the Group
to be paying the minimum of a living wage in every country in which we
operate and we have now formally had accreditation for this status in
the UK. We conducted the Great Place to Work survey in the year to
which over 90% of all our global employees responded. We achieved
an excellent engagement and trust rating of 77%, far higher than the
vast majority of companies of our scale and ten points higher than the
previous time we ran the survey three years ago. We have launched a
Dechra Leadership Development Programme, incorporating diversity
and inclusion modules and we have also updated the global talent
review process. We have invested in our first in-house recruitment
team who are proving a great success in bringing talent to the Group,
delivering us considerable savings on recruitment costs.
After five years of successfully chairing the Group, Tony Rice has
indicated that he has decided to step down to devote more time to
his family and his other business and charitable activities. We will
commence the search for his replacement; at this time no specific date
has been set for his departure. He will continue as Chairman of the
Group until a successor has been appointed.
The Board was strengthened with the appointment of Denise Goode as
a Non-Executive Director in April 2021. It is the intention that Denise will
be appointed as Chairman of the Audit Committee upon Julian Heslop’s
retirement from the role following the 2021 Annual General Meeting.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Following the appointment of Milton McCann as Group Manufacturing
and Supply Director, we have increased the strength and depth of his
management team, most notably in the Quality function with a Group
Quality Director, an Internal Manufacturing Quality Director and a Third
Party Quality Director to monitor and manage the processes of our
outsourced products.
Environmental, Social and Governance (ESG)
Last year we refined our ESG strategy which is based on four pillars;
Our People, Our Environment, Our Business and Our Communities.
The world is facing significant global challenges such as climate
change and inequality and we strongly believe that a sustainable
and purposeful business in line with these pillars will drive superior
long term performance.
During the year, we appointed Carina Kjellberg as our first Group
Sustainability Director. Subsequently we have executed a ‘Making a
Difference’ plan which involves setting targets and the launch of some
major projects. In particular, we have delivered, ahead of plan, on our
ambition to be a living wage employer and have committed to setting
verifiable targets across the entire value chain through the Science
Based Target initiative (SBTi). We have set out how we plan to use
our available resources to benefit the local communities in which we
operate. This includes the provision of 100,000 community hours by
30 June 2030, roughly equivalent to one full day per year per employee.
We have also established Regional Giving Committees, which will allow
our employees to decide what matters most in their local communities
and which organisations will receive our annual charity donations.
Dividend
The Board is proposing a final dividend of 29.39 pence per share (2020:
24.00 pence per share). Added to the interim dividend of 11.11 pence
per share (2020: 10.29 pence per share), this brings the total dividend
for the financial year ended 30 June 2021 to 40.50 pence per share
(2020: 34.29 pence per share), representing 18.1% growth over the
previous year.
Subject to shareholder approval at the Annual General Meeting
to be held on 21 October 2021, the final dividend will be paid on
19 November 2021 to shareholders on the Register at 29 October
2021. The shares will become ex-dividend on 28 October 2021.
Outlook
As we start the new financial year trading remains strong with the
momentum and market penetration seen in the second half of the
prior financial year continuing. We have made significant operational
improvements by strengthening our infrastructure and by investment
in our greatest resource, our people. Although COVID-19 related travel
restrictions have limited acquisition activity, we have still been able to
identify and progress numerous strategic opportunities to strengthen
our product portfolio and development pipeline. We therefore remain
confident in our ability to successfully execute our strategy and in our
future prospects.
Ian Page
Chief Executive Officer
6 September 2021
27
Stock Code: DPHStrategic Report Overview of Reported Financial Results
To assist with understanding our reported financial performance, the
consolidated results below are split between existing and acquired
businesses; acquisition includes the incremental effect of those
businesses acquired in the current and prior year, reported on a ‘like-
for-like’ basis. Additionally, the following table shows the growth at both
reported actual exchange rates (AER), and constant exchange rates (CER)
to identify the impact of foreign exchange movements. The acquisition
operating loss includes underlying operating profit of £12.3 million and
non-underlying charges of £14.9 million. These non-underlying charges
comprise amortisation of acquired intangibles of £13.6 million and
acquisition costs of £1.3 million.
Including non-underlying items, the Group’s consolidated operating
profit increased by 63.0% at CER (60.9% at AER) whilst consolidated
profit before tax increased by 81.4% at CER (80.9% at AER), benefiting
from a reduction in net finance costs. Diluted EPS growth was restricted
to 56.1% at CER (55.8% at AER) primarily reflecting the impact of the
increase in the Netherlands and UK tax rates on deferred tax balances.
Financial
Review
Paul Sandland | Chief Financial Officer
“ The Group delivered excellent year
on year organic revenue and profit
growth supplemented by the product
acquisitions of Mirataz and Osurnia.”
Glossary
IFRSs: International Financial Reporting Standards as
adopted by the EU
CER: Constant Exchange Rates
AER: Actual Exchange Rates
CAP: Companion Animal Products
FAP: Food producing Animal Products
bps: basis points
Cash Conversion: cash generated from operating activities
before interest and taxation as a percentage of underlying
operating profit
Net Debt: cash and cash equivalents less borrowings and lease
liabilities
Working Capital: inventory plus trade and other receivables
less trade and other payables
28
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report As Reported
Revenue
Gross profit
Gross profit %
Operating profit/(loss)
EBIT %
Profit/(loss) before tax
Diluted EPS (p)
2021
Existing
£m
2021
Acquisition
£m
2021
Consolidated
£m
584.0
331.6
56.8%
86.6
14.8%
77.1
24.0
14.3
59.6%
(2.6)
(10.8%)
(3.1)
608.0
345.9
56.9%
84.0
13.8%
74.0
51.03
Growth at
AER
Growth at
CER
2020
£m
Consolidated
%
Consolidated
%
515.1
291.6
56.6%
52.2
10.1%
40.9
32.76
18.0%
18.6%
30bps
60.9%
370bps
80.9%
55.8%
21.0%
21.3%
20bps
63.0%
360bps
81.4%
56.1%
Overview of Underlying Financial Results
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. Underlying results reflect the Group’s trading performance excluding non-underlying items. A reconciliation of
underlying results to reported results in the year to 30 June 2021 is provided in the table below. In the commentary which follows, all references
will be to CER movement unless otherwise stated.
Revenue
Gross profit
Selling, general and administrative expenses
R&D expenses
Operating profit
Net finance costs
Share of associate profit
Profit before tax
Taxation
Profit after tax
Diluted EPS (p)
Amortisation
and related
costs of
acquired
intangibles
£m
–
–
(70.8)
(4.4)
(75.2)
–
(0.7)
(75.9)
16.5
(59.4)
Non-underlying Items
Acquisition,
impairments
and
restructuring
costs
£m
–
–
(3.0)
–
(3.0)
–
–
(3.0)
2.7
(0.3)
Tax rate
changes
and finance
expenses
£m
–
–
–
–
–
2.8
–
2.8
(5.2)
(2.4)
2021
Underlying
Results
£m
608.0
345.9
(151.3)
(32.4)
162.2
(11.7)
(0.4)
150.1
(32.5)
117.6
108.14
2021
Reported
Results
£m
608.0
345.9
(225.1)
(36.8)
84.0
(8.9)
(1.1)
74.0
(18.5)
55.5
51.03
In the year, Dechra delivered consolidated revenue of £608.0 million, representing an increase of 21.0% on the prior year. This included £584.0 million
from its existing business, an increase of 16.2%, and a £24.0 million contribution from acquired businesses.
Consolidated underlying operating profit of £162.2 million represents a 29.2% increase on the prior year. This included £149.9 million from Dechra’s
existing business, an increase of 19.5% on a like-for-like basis, and a £12.3 million contribution from acquired businesses.
Underlying EBIT margin increased by 170 bps to 26.7%, principally due to leverage from the acquisitions and also a reduction in Selling, General and
Administrative expenses (SG&A) spend as a percentage of revenue.
Underlying diluted EPS grew by 19.4% to 108.14 pence reflecting the profit growth from the existing and acquired businesses offset by higher net
finance costs, tax charges and the full year impact of the equity placing in June 2020.
A more detailed explanation of our non-underlying items is detailed further in this Financial Review.
29
Stock Code: DPHStrategic Report Financial
Review continued
Underlying
Revenue
Gross profit
Gross profit %
Underlying Operating profit
Underlying EBIT %
Underlying EBITDA
Underlying Diluted EPS (p)
Dividend per share (p)
2021
Existing
£m
584.0
331.6
56.8%
149.9
25.7%
165.3
2021
Acquisition
£m
24.0
14.3
59.6%
12.3
51.3%
12.4
2021
Consolidated
£m
608.0
345.9
56.9%
162.2
26.7%
177.7
108.14
40.50
2020
£m
515.1
291.6
56.6%
128.3
24.9%
142.5
92.19
34.29
Growth at CER
Existing
%
16.2%
16.3%
10bps
19.5%
70bps
18.6%
Consolidated
%
21.0%
21.3%
20bps
29.2%
170bps
27.4%
19.4%
18.1%
Reported Segmental Performance
Reported segmental performance is presented in note 2 on pages 175 to 176. The effect of acquisitions in the year was material; the reported
segmental performance is analysed between existing and acquired businesses, and at AER and CER in the table below. The acquisition elements
capture the additional base business coming into the Group up to the first anniversary of their acquisition, including the growth Dechra generated
in them during the year, and the synergies that have already been realised by the Group since acquisition. This analysis becomes less definitive the
further in time from the completion of the acquisition, as the acquired business is progressively integrated with the existing business.
Reported
Revenue by segment
EU Pharmaceuticals
NA Pharmaceuticals
Total
Operating profit/(loss)
by segment
EU Pharmaceuticals
NA Pharmaceuticals
Pharmaceuticals Research
and Development
Segment operating profit
Corporate and unallocated
costs
Underlying operating profit
Non-underlying operating
items
Reported operating profit
2021
Existing
£m
2021
Acquisition
£m
2021
Consolidated
£m
374.4
209.6
584.0
120.2
71.2
(32.4)
159.0
(9.1)
149.9
(63.3)
86.6
14.1
9.9
24.0
7.6
4.7
–
12.3
–
12.3
(14.9)
(2.6)
388.5
219.5
608.0
127.8
75.9
(32.4)
171.3
(9.1)
162.2
(78.2)
84.0
2020
£m
323.5
191.6
515.1
100.0
63.7
(28.4)
135.3
(7.0)
128.3
(76.1)
52.2
Growth at AER
Growth at CER
Existing
%
Consolidated
%
Existing
%
Consolidated
%
15.7%
9.4%
13.4%
20.2%
11.8%
(14.1%)
17.5%
(30.0%)
16.8%
20.1%
14.6%
18.0%
27.8%
19.2%
(14.1%)
26.6%
(30.0%)
26.4%
15.9%
16.7%
16.2%
20.2%
22.2%
21.0%
19.4%
19.6%
(17.3%)
20.0%
(28.6%)
19.5%
26.9%
27.5%
(17.3%)
29.2%
(28.6%)
29.2%
65.9%
60.9%
67.6%
63.0%
30
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Underlying Segmental Performance
European Pharmaceuticals
Revenue in European (EU) Pharmaceuticals grew by 20.2%. The existing business grew by 15.9%; excluding third party contract manufacturing,
which is being reduced in line with our strategy and replaced with own product manufacturing, revenues increased by 16.7%. This growth was
driven by a strong performance across all established European markets and also in the key International businesses in ANZ and Brazil. The
acquisitions of Mirataz and Osurnia contributed a combined £14.1 million to revenue for the Period where there is no comparative.
Operating Profit from existing business increased by 19.4%, with operating margin increasing to 32.1% and consolidated operating margin
increasing to 32.9%. This improvement was due to strong in market delivery as the demand for CAP products increased, whilst the rate of SG&A
spend was lower as a result of COVID-19.
Underlying
Revenue
Operating Profit
Operating Profit %
2021
Existing
£m
374.4
120.2
32.1%
2021
Acquisition
£m
14.1
7.6
53.9%
2021
Consolidated
£m
388.5
127.8
32.9%
2020
£m
323.5
100.0
30.9%
Growth at CER
Existing
%
15.9%
19.4%
90bps
Consolidated
%
20.2%
26.9%
170bps
North American Pharmaceuticals
Revenue from North American (NA) Pharmaceuticals grew by 22.2% to £219.5 million. The existing business grew by 16.7% reflecting strong demand
for our CAP products in the US, Canada and Mexico. The acquisitions of Osurnia and Mirataz added £9.9 million to revenue for the period.
Operating Profit from existing business grew 19.6% with operating margin increasing to 34.0% and consolidated operating margin increasing
to 34.6%.
Underlying
Revenue
Operating Profit
Operating Profit %
2021
Existing
£m
209.6
71.2
34.0%
2021
Acquisition
£m
9.9
4.7
47.5%
2021
Consolidated
£m
219.5
75.9
34.6%
2020
£m
191.6
63.7
33.2%
Growth at CER
Existing
%
16.7%
19.6%
90bps
Consolidated
%
22.2%
27.5%
150bps
Pharmaceuticals Research and Development
Pharmaceuticals Research and Development (R&D) expenses increased by 17.3% from £28.4 million to £32.4 million representing 5.5% of existing
revenue with some project spend being delayed due to COVID-19. This spend included £3.9 million in relation to Akston which remains on track for
launch in 2026.
R&D expenses
% of Revenue
2021
Existing
£m
(32.4)
5.5%
2021
Acquisition
£m
–
–
2021
Consolidated
£m
(32.4)
5.3%
2020
£m
(28.4)
5.5%
Growth at CER
Existing
%
(17.3%)
Consolidated
%
(17.3%)
Research and Development Spend
£32.4m
2021
2020
2019
2018
2017
£18.3m
£15.0m
£32.4m
17.3%
£28.4m
£25.1m
31
Stock Code: DPHStrategic Report Financial
Review continued
Underlying Diluted Earnings Per Share
108.14p
2021
2020
2019
2018
2017
76.45p
64.33p
Reported Diluted Earnings Per Share
51.03p
2021
2020
2019
2018
2017
30.07p
32.76p
27.93p
37.04p
EU Pharmaceuticals Revenue
£388.5m
2021
2020
2019
2018
2017
£226.9m
£258.7m
£388.5m
£323.5m
£304.0m
EU Pharmaceuticals Underlying Operating Profit
£127.8m
2021
2020
2019
2018
2017
£100.0m
£100.3m
£77.0m
£60.7m
£127.8m
NA Pharmaceuticals Revenue
£219.5m
2021
2020
2019
2018
2017
£132.4m
£148.4m
£219.5m
£191.6m
£177.8m
NA Pharmaceuticals Underlying Operating Profit
£75.9m
2021
2020
2019
2018
2017
£59.2m
£63.7m
£48.3m
£43.2m
£75.9m
32
108.14p
92.19p
90.01p
Revenue by Product Category
CAP revenue continues to be the largest proportion of Dechra’s business
at 72.8%, up from 70.1% in the prior year. CAP grew 25.9% in the year
from market penetration, product launches and the additions of Osurnia
and Mirataz. Equine revenue grew by 25.5% in the year with all key portfolio
products performing well. FAP revenue growth slowed to 4.7% with demand
in some of our markets impacted by COVID-19 restrictions, African Swine
Fever and Avian Influenza. Nutrition revenue improved by 9.4% on the
prior year reflecting the execution of our strategy with key customers in our
key markets.
Other revenue reduced by 8.1% to £11.9 million, now representing only
2.0% of the business as we continue our planned exit from third party
contract manufacturing in line with our manufacturing strategy, to improve
the production efficiency of Dechra’s own products.
51.03p
CAP
Equine
FAP
Subtotal Pharmaceutical
Nutrition
Other
Total
2021
£m
442.6
44.8
77.0
564.4
31.7
11.9
608.0
%
%
Change
Change
at AER
at CER
22.4% 25.9%
23.1% 25.5%
4.7%
19.4% 22.5%
10.8%
9.4%
(13.1%)
(8.1%)
18.0% 21.0%
2.9%
2020
£m
361.6
36.4
74.8
472.8
28.6
13.7
515.1
Revenue by Product Category (at AER)
CAP
Equine
FAP
Nutrition
Other
72.8%
7.3%
12.7%
5.2%
2.0%
Gross Profit
Gross Profit for the existing business increased by 10 bps to 56.8% and
the consolidated Gross Profit increased by 20 bps to 56.9%, reflecting
the greater proportion of CAP sales.
Underlying Selling, General and
Administrative Expenses (SG&A)
SG&A costs grew from £134.9 million in the prior year to £151.3 million
in the current year, an increase of 12.2% (at AER). This growth principally
represents investment in our people costs following the review of
compensation across the Group, higher delivery of bonus targets and
increased related bonus payments and additional cost incurred as a
result of improved vesting conditions across the Group’s employee share
schemes. Despite these increases, the Group did benefit from lower than
expected SG&A costs as a result of COVID-19, particularly in relation to
sales and marketing activities and travel and entertainment.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Non-underlying Items
Non-underlying items incurred in the year are fully described in note 5
on page 178. In summary, they relate to the following:
• Amortisation of acquired intangibles of £75.2 million: the
amortisation of the acquired intangibles has increased from
£69.6 million in 2020 principally due to new charges relating to the
Osurnia and Mirataz acquisitions and a reducing charge from the
AST Farma and Le Vet acquisition;
• Expenses relating to acquisition and subsequent integration activities
of £1.4 million (2020: £4.3 million): this includes the transaction and
integration costs associated with the acquisitions made in recent
years and principally relates to Osurnia acquisition costs;
• Rationalisation of manufacturing organisation of £1.6 million
(2020: £2.2 million): this comprises the final costs associated with
this strategic programme which has now been concluded;
• Finance credit of £2.8 million (2020: charge of £2.5 million): this
represents the net credit arising on the unwind of the discount
relating to the contingent consideration liability and associated
foreign exchange gain; and
• Taxation credit of £14.0 million (2020: £17.7 million): this represents the
tax impact of the above items (£16.6 million), as well as the revaluation
of deferred tax balance sheet items (£4.8 million charge) following
changes in corporate tax rates, including a further revision to the
Netherlands rate (which will now remain at 25%) and the UK rate which
will increase to 25% in 2023, offset by the release of certain fair value
provisions relating to previous acquisitions (£2.2 million).
Taxation
The reported effective tax rate (ETR) for the year is 25.0% (2020: 17.1%)
and includes the one-off impact of the substantively enacted increase in
corporate tax rates in the Netherlands (from 21.7% to 25%) and the UK
(from 19% to 25% effective 1 April 2023) on deferred tax balances. On an
underlying basis the ETR is 21.7% (2020: 20.6%); the main differences to
the UK corporation tax rate applicable of 19.0% (2020: 19.0%) relate to
differences in overseas tax rates and non-deductible expenses offset by
patent box allowances.
The underlying ETR is expected to increase to within a range of 22.5% to
23% in the current year, due to a reduction in the patent box allowance
following the expiry of certain patents.
We continue to monitor relevant tax legislation internationally as it may
affect our future ETR.
Reported Profit
Reported profit before tax increased by 80.9% at AER reflecting the
reported operating profit growth of 60.9% at AER and the reduction
in net finance costs which include a foreign exchange gain on the
remeasurement of the contingent consideration liability.
Earnings per Share and Dividend
Underlying diluted EPS for the year was 108.14 pence, a 19.4% growth
on the prior year reflecting the underlying EBIT growth of 29.2% offset
by higher net finance costs and the full year impact of the equity placing
in June 2020. The weighted average number of shares for the year was
108.8 million (2020: 103.5 million).
The reported diluted EPS for the year was 51.03 pence (2020: 32.76
pence). This represents an increase of 55.8% (at AER) in reported EPS
which is lower than the reported EBIT growth of 60.9% (at AER) and reflects
an increase in the reported tax charge due to the impact of the revaluation
of deferred tax balances for the Netherlands and the UK, as noted above.
The Board is proposing a final dividend of 29.39 pence per share
(2020: 24.00 pence), added to the interim dividend of 11.11 pence, the
total dividend per share for the year ended 30 June 2021 is 40.50 pence.
This represents 18.1% growth over the prior year. Dividend cover based
on underlying diluted EPS is 2.7 times (2020: 2.7 times). The Board
continues to operate a progressive dividend policy, recognising investment
opportunities as they arise.
Currency Exposure
The average rate for £/€ decreased by 1.0%, and the £/$ rate increased
by 6.9% during the financial year. The effect in the Consolidated Income
Statement and Statement of Financial Position is analysed in the above
paragraphs of this review between performance at AER and CER. CER
analysis compares the performance of the business on a like-for-like
basis applying constant exchange rates.
£/€
£/$
Average rates
2021
1.1287
1.3466
2020
1.1396
1.2601
% Change
(1.0%)
6.9%
Currency Sensitivity
Euro €: a 1% variation in the £/€ exchange rate affects underlying diluted
EPS by approximately +/- 0.4%.
US Dollar $: a 1% variation in the £/$ exchange rate affects underlying
diluted EPS by approximately +/- 0.4%.
Current exchange rates are £/€ 1.1646 and £/$ 1.3763 as at 1 September
2021. If these rates had applied throughout the year, the underlying diluted
EPS would have been approximately 2.5% lower.
Statement of Financial Position
The Statement of Financial Position is summarised in the table below.
• Non-current assets (excluding deferred tax) increased from £786.0 million
to £819.9 million and includes the intangible assets recognised on the
acquisitions of Osurnia and the marketing rights for Tri-Solfen® in ANZ,
partly offset by amortisation of acquired intangibles.
• Working capital has increased from £116.5 million to £142.7 million
(£26.2 million at AER, £36.0 million cash flow impact) mainly due to
an increase in inventory due to the growth of the Group, including
stockholdings for Osurnia and Mirataz, and also to maintain service
levels during a period of uncertainty.
• Net debt has increased in the year by £72.6 million from £127.6 million
to £200.2 million; this includes cash generation from operations at
£141.2 million, an outflow of £106.5 million relating to the acquisition of
Osurnia, net capital expenditure of £19.8 million, interest/tax outflows
of £51.6 million and £37.9 million in dividends. Exchange rate variations
positively impacted the net debt position by £15.5 million.
33
Stock Code: DPHStrategic Report Financial
Review continued
• Current and deferred tax has reduced from £78.7 million to
£45.8 million principally due to the realisation of deferred tax
liabilities relating to the amortisation of acquired intangibles.
Non-current assets
Working capital
Net debt
Current and deferred tax
Other liabilities
Total net assets
2021
£m
819.9
142.7
(200.2)
(45.8)
(83.7)
632.9
2020
£m
786.0
116.5
(127.6)
(78.7)
(58.7)
637.5
Cash Flow, Financing and Liquidity
The Group enjoyed good cash generation during the year, with a strong
Underlying EBITDA margin of 29.2% (2020: 27.7%). However, as
mentioned above, working capital has increased by £36.0 million, mainly
due to increases in inventory as a result of additional stock cover due
to growth of the Group’s trading activities, including the acquisitions of
Mirataz and Osurnia. This resulted in net cash generated from operations
of £141.2 million, representing cash conversion of 87.1% of underlying
operating profit.
Underlying operating profit
Depreciation and amortisation
Underlying EBITDA
Underlying EBITDA %
Working capital movement
Other
Cash generated from operations
before interest, taxation and non-
underlying items
Non-underlying items
Cash generated from operations
before interest and taxation
Cash conversion (%)
2021
£m
162.2
15.5
177.7
29.2%
(36.0)
2.5
144.2
(3.0)
141.2
87.1%
2020
£m
128.3
14.2
142.5
27.7%
(8.7)
1.0
134.8
(7.3)
127.5
99.4%
34
Net Debt Bridge
Notable cash items are listed below in the net debt reconciliation table:
• Net capital expenditure on tangible assets increased to £19.8 million
(2020: £14.2 million), representing 1.8 times depreciation.
• Acquisitions of subsidiaries, intangible assets and investment in
associates of £116.3 million includes the acquisition of Osurnia
(£106.5 million), the additional investment in Medical Ethics
(£0.8 million) and capitalised development expenditure including
milestones on licensing arrangements. Further details are provided
in notes 6 and 29.
• The net debt/underlying EBITDA leverage ratio per the borrowing
facilities’ leverage covenant, which includes the proforma adjustment
to full year EBITDA for the acquisitions, was 1.1 times (2020: 0.8
times) versus a covenant of 3 times.
Net Debt 30 June 2020
Net cash generated from operations before
non-underlying items
Non-underlying items
Net capital expenditure
Acquisition of intangible assets
Investment in associates
Acquisition of subsidiary
New lease liabilities
Interest and tax
Dividend paid
Other movements
Other non-cash movements
Foreign exchange on net debt
Net Debt 30 June 2021
£m
(127.6)
144.2
(3.0)
(19.8)
(114.6)
(0.8)
(0.9)
(5.8)
(51.6)
(37.9)
2.3
(0.2)
15.5
(200.2)
Net Assets
£632.9m
2021
2020
2019
2018
2017
£302.6m
£632.9m
£637.5m
£509.1m
£505.0m
Borrowing Facilities
As reported in preceding Annual Reports, the Group completed a
refinancing and entered into a multi-currency facilities agreement in July
2017 (the Facility Agreement), with a group of banks comprising Bank of
Ireland (UK) plc, BNP Paribas, Fifth Third Bank, HSBC Bank plc, Lloyds
Bank plc (replaced by Credit Industriel et Commercial, London branch
(CIC) in August 2019), Raiffeisen Bank International AG and Santander UK
plc (the Banks). The Facility agreement has a revolving credit facility
(the RCF) of £340.0 million, which is committed until July 2024.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
In January 2020 the Group undertook a Private Placement raising
€50.0 million and USD 100.0 million (under seven and ten year new senior
secured notes respectively), the proceeds of which were used to repay
existing debt. The placement achieved the Group’s aims of diversifying
the sources of debt financing and extending the debt maturity profile.
On 4 June 2020 the Group successfully completed a share placing of
5,132,500 new ordinary shares, representing approximately 5% of the
existing issued share capital of the Company, at a price of 2600 pence
per placing share, raising gross proceeds of £133.4 million which were
largely deployed to fund the Osurnia acquisition upon its completion on
27 July 2020.
Covenants
There are two covenants governing the RCF and the Private Placement:
• Leverage: Net Debt to underlying EBITDA not greater than 3:1 for
the RCF and 3.5:1 for the Private Placement (30 June 2021: 1.1:1);
and
•
Interest Cover: underlying EBITDA to Net Finance Charges not less
than 4:1 (30 June 2021: 22.8:1).
The above ratios are calculated excluding the impact of IFRS16 and
having adjusted for the pro-forma impact of acquisitions in accordance
with the terms of the RCF and Private Placement arrangements.
The current RCF is committed and has a non-utilisation fee of 35.0%
of the applicable margin. The margin over LIBOR (or equivalent) ranges
from 1.3% for leverage below 1.0 times, up to 2.2% for leverage above
2.5 times.
The weighted average coupon of the Private Placement fixed rate notes
will equate to 2.8%.
Return on Capital Employed (ROCE)
ROCE increased to 18.8% in the year (2020: 15.4%) reflecting the
increased contribution from the Group’s existing businesses.
Acquisitions
The Group has made several acquisitions in recent years. The
incremental performance during the first year of ownership of the
acquisitions made during the 2020 and 2021 financial years is separately
summarised compared to the existing business in the sections above.
In July 2020, the Group completed the acquisition of the worldwide
product rights to Osurnia from Elanco for consideration of £106.5 million.
The addition of Osurnia significantly enhances the Dechra portfolio and
complements the existing product offering to veterinarians. The acquisition
was financed from the equity placing in June 2020.
In February 2021 the Group acquired the Australian and New Zealand
marketing rights for Tri-Solfen® from Animal Ethics Pty Ltd, a related
party, for a total consideration of £17.2 million with an upfront payment
of £2.8 million made on signing and the balance paid on the first
commercial sale by Dechra in July 2021. This acquisition allows us to
create a meaningful FAP presence in these markets. The acquisition
was financed from the Group’s existing working capital resources.
In February 2021, the Group also acquired an additional 1.5% of the
shares of Medical Ethics Pty Ltd for a consideration of £0.8 million. This
takes the Dechra Group shareholding to 49.5%. The acquisition was
financed from the Group’s existing working capital resources.
Accounting Standards
The accounting policies adopted are outlined in note 1 to the Accounts.
There are no accounting policy changes which have materially impacted
the 2021 financial year.
Going Concern
The Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis of accounting
in preparing these annual financial statements.
In reaching this conclusion, the Directors have given due regard to the
following:
• The Group’s business activities together with factors likely to impact
the future growth and operating performance;
• The financial position of the Group, its cash flows, available debt
facilities and compliance with the financial covenants associated
with the Group’s borrowings, which are described in the financial
statements; and
• The cash generated from operations, available cash resources
and committed bank facilities and their maturities, which taken
together, provide confidence that the Group will be able to meet its
obligations as they fall due.
As at 30 June 2021, the Group had net debt of £200.2 million (2020: net
debt of £127.6 million), and had available cash balances and unutilised
committed borrowing facilities of £281.9 million. Further information on
available resources and committed bank facilities is provided in notes 18
and 21 to the financial statements.
Summary
Our business has benefited from strong market fundamentals which
accelerated growth in our existing business. This excellent revenue
performance has been facilitated by a much improved supply chain
and supplemented by healthy incremental contributions from our global
product acquisitions of Mirataz and Osurnia.
We have again increased our R&D expenditure and invested heavily in
our people, although certain SG&A costs were lower in the year as a
result of COVID-19.
The Group’s balance sheet is strong, enabling us to continue to consider
further relevant acquisition and investment opportunities as they arise.
Paul Sandland
Chief Financial Officer
6 September 2021
35
Stock Code: DPHStrategic Report Key Performance
Indicators
1
Existing Revenue Growth
Year-on-year CER sales growth including new products and excluding revenue from acquired businesses.
16.2%
2021
2020
2019
2018
2017
£584.0m
£515.1m
£481.8m
£407.1m
£359.3m
Commentary
Dechra’s existing business grew by 16.7% in EU Pharmaceuticals (excluding third party contract
manufacturing which declined), and by 16.7% in NA Pharmaceuticals.
Relevance to Strategy
a
b
c
A key driver of our strategy is to deliver sustainable sales growth through delivering our pipeline,
maximising our existing portfolio and expanding geographically.
2
Underlying Diluted EPS Growth
Underlying profit after tax divided by the diluted average number of shares, calculated on the same basis as note 11 to the Accounts.
19.4%
2021
2020
2019
2018
2017
108.14p
92.19p
90.01p
76.45p
64.33p
Commentary
This includes a 29.2% increase in underlying operating profit, offset by higher net finance costs, tax
charges and the full year impact of the equity placing in June 2020.
Relevance to Strategy
a
b
c
£
3
Underlying diluted EPS is a key indicator of our performance and the return we generate for our
stakeholders. It is one of the performance conditions of the LTIP.
Underlying Return on Capital Employed
Underlying operating profit expressed as a percentage of the average of the opening and closing operating assets
(excluding cash/debt and net tax liabilities).
Commentary
18.8%
There was an increase in ROCE during the year reflecting the increased contribution from the Group’s
existing business. The Group’s target is 15%.
Relevance to Strategy
15.4%
15.6%
15.4%
17.7%
a
b
c
As we look to grow the business, it is important that we use our capital efficiently to generate returns superior
to our cost of capital in the medium to long term. It underpins the performance conditions of the LTIP.
340bps
2021
2020
2019
2018
2017
£
4
Cash Conversion
Cash generated from operations before tax and interest payments as a percentage of underlying operating profit.
Commentary
87.1%
99.4%
85.0%
81.9%
Cash conversion decreased during the year as a result of increased working capital. This was primarily
due to increases in inventory as a result of additional stock cover due to the growth of the Group’s
trading activities including the acquisition of Mirataz and Osurnia.
Relevance to Strategy
115.9%
a
b
c
Our stated aim is to be a cash generative business. Cash generation supports investment in the
pipeline, acquisitions and people.
1230bps
2021
2020
2019
2018
2017
£
36
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
5
New Product Revenue
Revenue from new products as a percentage of total Group revenue. A new product is defined as any molecule launched in the
last five financial years.
370bps
2021
2020
2019
2018
2017
7.9%
20.4%
16.7%
16.7%
11.9%
Commentary
New product revenues reflect the strong market penetration of products launched in the year to
30 June 2021 and the previous four years, including the acquisitions of Osurnia and Mirataz.
Relevance to Strategy
a
b
c
This measure shows the delivery of revenue in each year from new products launched in the prior five
years, on a rolling basis. It shows the performance of our R&D and sales and marketing organisations
when launching newly developed or in-licensed or acquired products.
6
Lost Time Accident Frequency Rate (LTAFR)
All accidents resulting in the absence or inability of employees to conduct the full range of their normal working activities for
a period of more than three working days after the day when the incident occurred, normalised per 100,000 hours worked.
47.1%
2021
2020
2019
2018
2017
0
0.09
0.17
0.21
0.26
Commentary
The LTAFR decreased from 0.17 to 0.09. None of these incidents resulted in a work-related fatality
or disability.
Relevance to Strategy
The safety of our employees is core to everything we do. We are committed to a strong culture of
safety in all our workplaces.
7
Employee Turnover
Number of leavers during the period as a percentage of the average total number of employees in the period.
110bps
2021
2020
2019
2018
2017
2017
13.5%
12.4%
13.6%
15.9%
15.7%
Commentary
We saw an increase in employee turnover in the period due to the planned closure of the Mexican
manufacturing facility in October 2020.
Relevance to Strategy
Attracting and retaining the best employees is critical to the successful execution of our strategy.
Key to Strategic Growth Drivers:
Key to Strategic Enablers:
Pipeline Delivery
a
b
c Portfolio Focus
Technology
People
Geographical Expansion
Manufacturing and Supply Chain
Acquisition
ESG
£
Long Term Incentive Plan (LTIP)
performance condition
37
Stock Code: DPHStrategic Report
Strategy in Action
Strategic Growth Driver
Acquisition
Acquisition and Launch of
Mirataz: Transitioning a Product
into the Dechra Operation
On 16 April 2020, Dechra completed the acquisition of the worldwide
rights to Mirataz from Kindred Biosciences. Mirataz is the first and only
FDA and EMA approved transdermal product for management of weight
loss in cats; it is a complementary product to those already in the Dechra
portfolio, which often treat illnesses complicated by feline weight loss.
With any acquisition, it is critical for Dechra to hit the ground running to
convert purchased assets into value for the business quickly. In order
to achieve this, our approach begins by establishing a cross-functional
core project team with a dedicated project lead responsible for
managing transition specific activities through to business as usual. This
approach leads to high rates of transition success as the team is able to
build and follow an end-to-end project plan collectively, there is a high
level of cross-functional decision making and unexpected issues can be
managed efficiently if or when they arise.
At the time of acquisition, Mirataz was in different stages of
commercialisation in each territory, requiring a regional approach to
transition. As such, each market (USA, EU, Canada) had a unique
project plan tailored to meet the specific goals and challenges in
that region. That said, there were several transition activities that
were applicable globally. The core project team began the transition
process by gaining a deep understanding of the product and its
intricacies through document review and training sessions with Kindred
Biosciences. Marketing Authorisation transfers were then completed for
each region to bring regulatory ownership of the product under Dechra
control. The Manufacturing team quickly initiated the relationship with
the contract manufacturer to ensure continuity of supply. Marketing
messaging was developed globally, but customised to each region
based on knowledge of the market and the approved indication(s). Our
Veterinary Technical Services and Pharmacovigilance teams completed
technical assessments, FAQs, reporting, and training so that the
transition of the customer interface was seamless. Finally, regulatory
and quality compliance with all relevant authorities was maintained
throughout the transition and beyond.
In the United States, the key objectives for transition were to recognise
sales for Dechra as soon as possible after close and to maintain
continuity of supply. The first sale of Mirataz in the USA occurred
within seven days of close due to collaborative efforts to transport and
release purchased inventory. The core team partnered with the contract
manufacturer to ensure timely delivery of the next inventory shipment in
Dechra trade dress. Both objectives were achieved with zero backorders
throughout the transition, and to date, Mirataz has exceeded budgeted
sales estimates.
For the European market, in order to maximise the sales potential of
Mirataz the team concluded that it would be necessary to launch the
product in high-end, child resistant secondary packaging. Design,
selection, regulatory approval and implementation of the secondary
packaging configuration became a critical path to launch. The core team
demonstrated a high level of collaboration and micromanaged each key
task to ensure that the product would launch as quickly as possible.
Due to these efforts, the team successfully launched Mirataz in the EU
in February 2021 in the newly approved child resistant carton; to date
sales have exceeded expectations.
In Canada, Mirataz was still under regulatory review at the time of
acquisition. The team successfully fielded a round of questions from
Health Canada which ultimately led to product approval in September
2020. As with any project, there were some unexpected challenges.
In this instance, we encountered a change to the testing requirements
for a raw material that required additional validation. Due to the team
approach, we were able to identify this early and minimise the delay.
The validation is currently in progress with launch inventory ready to be
released once completed.
The purchase of Mirataz is an example of a highly complex global
product acquisition with unique challenges that were successfully
managed by the collective expertise and dedication of the core project
team. Overall, we were extremely effective in achieving critical transition
actions across the three regions and moving the product into Dechra’s
standard business procedures. Dechra is proactively applying the
learnings from this transition process to hone and optimise our approach
to product acquisitions further.
38
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Geographic Expansion
Launching Dechra’s
endocrinology range
into Brazil and Mexico
Brazil
One of the key strategic goals for Dechra Brazil, currently predominately a
FAP business, is to utilise its regulatory, sales and marketing expertise to
develop a bigger presence and reputation in the growing companion animal
pharmaceutical market through selling some of the key Dechra brands.
The decision was made to start this process with Dechra’s lead brand,
Vetoryl, which had previously been registered and sold in Brazil, but
due to a complex distribution structure had become too expensive for
the pet owners and the product was discontinued. The first step was
to unravel the distribution arrangements, transfer the Vetoryl files from
the previous distributors and resubmit to MAPA (Ministry for Agriculture,
Livestock and Food Supply) for approval as a Dechra registered and
distributed product. After many months of communication with the
regulators all four strengths of the product were finally approved in the
middle of 2020, a process which takes over two years.
The next steps were to develop and approve packaging and schedule
orders with manufacturing. Once the products were ready for shipment,
the organisation of the distribution proved a challenge due to the
pandemic. The products were finally air freighted from Uldum, Denmark
in early March and arrived in Curitiba, the capital of the state of Parana.
The products then had to pass through the necessary customs checks
and were approved for sale and dispatched on 29 March to the Dechra
distribution warehouse in Campinas, just north of Sao Paulo, a further
journey of some 475km.
This arrival was perfectly timed with the planned launch programme
for April 2021. The sales team, who are predominantly veterinarians,
were the first to be introduced to the product and trained on its merits.
The next audience was a pre-launch to the key opinion leaders (KOLs),
followed by distributor training and then a webinar to veterinarians.
These four events, which were online, resulted in the Vetoryl message
being communicated to over 30,000 customers, demonstrating the
huge interest for the product.
Dechra Brazil is at the forefront of utilising digital tools to support the
launch of products, this included a platform to present the disease and
product to the veterinarian, a podcast to deliver the messages to the
KOLs and other social media and digital mechanisms to communicate
case studies and videos. The Vetoryl training modules were made
available in Portuguese on the Academy. All these activities have
required a huge amount of skill and focus by the team to be able to
bring this novel and clinically necessary product to the market.
Dechra Brazil will continue to adapt further support tools and services
to build their position as the endocrine experts. Newly recruited
specialist technical veterinarians will focus on supporting customers
and expanding relationships with KOLs, while the marketing team will
prepare for the next endocrine product launches of Felimazole and
Zycortal later this year. The regulatory team are also busy with further
planned submissions of Forthyron and Cosacthen. Looking to the future,
a new business model is being created to support and build relationships
with pet owners with the sole aim of helping veterinarians provide a
service that recognises the importance of quality of life for the pet and
how this transmits into quality of life for the pet owner.
Mexico
After the acquisition of Brovel in 2016, Dechra Mexico began to
transform the business from a family laboratory focused on generics,
to a specialised pharmaceutical business focused on niche, regulated
products. Now under the name of Dechra Productos Veterinarios, the
company’s presence keeps growing and strengthening, becoming a
pure commercial organisation in the 2021 financial year. It has become
the fastest growing company in the Mexican animal health market in the
last three years according to Kynetec (Animal Health market data).
The management team was tasked with introducing Dechra and our
product range to customers. This required a significant amount of time
and effort to educate veterinarians and distribution partners on the
current product range and new Dechra products to be launched in
Mexico. To enhance the company image and increase profitability, the
team rationalised 57 low margin and non strategic products so they
could focus on Dechra key products. An additional strategy was to
optimise the distribution network and strengthening the relationship with
strategic business partners (the distribution partners were reduced from
250 to 74). The current distributor partners are engaged and focused on
increasing their business with Dechra through our specialised portfolio.
Key to sales and profit growth has been the approval of new products.
21 new marketing authorisations have been received from SADER
(Mexican Regulatory Authority) throughout the last three years.
In order to raise the awareness of the relevant clinical conditions,
educational materials and continuous education programmes are being
developed in partnership with KOLs; these are being implemented by
the sales force and through congresses and virtual training. Dechra is
now recognised for introducing new and specialised products to the
Mexican market, some of them to treat under diagnosed diseases and
in our key therapeutic area, Endocrinology.
39
Stock Code: DPHStrategic Report Strategy in Action
Strategic Growth Driver
a
b
c
Portfolio Focus
Nutrition Returns
to Growth
Following a number of disappointing years, our companion animal
nutrition range, Specific, experienced strong growth in the 2021
financial year. This was due to a change in the marketing mix and close
management of the supply chain.
Marketing Mix Update
Product: Veterinary customer needs are changing and products have
to clearly reflect a strong differentiation compared to the main players in
the pet food market. To facilitate identification and recommendation by
veterinarians, the range has been completely refreshed in two stages:
cat diet products in 2018, and then dog at the beginning of 2020. The
launch of the refreshed products were supported by a communication
campaign to the veterinarians, who remain the key to developing the
Specific range recommendation to pet owners, with the aim of obtaining
new veterinary clients.
The main differentiation of Specific is that it is a premium range of
veterinary pet food based on sustainability, due to the certified marine
based raw material, mainly fish, which gives undeniable technical
advantages for healthy diets but moreover a reduced impact on the
environment compared to other protein sources.
At the beginning of 2021, this positioning was reinforced by the launch
of the organic pet food range, which in addition to being the first
organic pet food range launched by one of the main pet food players
on the veterinary market, was also offered in recyclable packaging.
A commitment has now been made to continue the transition of all
Specific products to recyclable packaging by the end of 2023 and to
continue to select raw materials certified as sustainable.
Price: The refresh of the Specific range has allowed us to reduce the
price positioning in each market giving us a marketing advantage.
Promotion: Steps have been taken to increase the use of digital
communication. Although the Specific range remains mainly dedicated
to the veterinary channel, digital communications have also been geared
to owners explaining the benefits of using Specific for their pets and
directing them to veterinary practices that stock the product range.
Place: Historically, we have not actively sold the products online,
however, due to the rapid digitalisation of the veterinary market,
marketing support has been provided to veterinarian’s websites to help
veterinarians and pet owners find Specific products online when needed.
Supply Chain Management
The development of our relationships with suppliers, and new raw
material sourcing as well as precise monitoring of inventory have
drastically limited the impact of COVID-19 on the stock position. This
accurate supply chain management gave Specific a clear competitive
advantage that continues today compared to the main players in the
veterinary market.
Unfortunately, the COVID-19 crisis occurred during the relaunch of the
refreshed Specific range, but having secured the supply, new marketing
actions and improved digital orientation have made it possible to
successfully overcome this crisis. We have delivered additional benefits
to the range in terms of visibility and reliability, and delivered solid sales
growth in the year.
40
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Technology
Creating a Global
HR Platform
During the 2021 financial year the cross functional teams have been
creating resilience in our global network by using technology to create
a global HR platform.
The ADP Celergo Project Office set up has been replicated within
Dechra with two dedicated Project Managers and local in country
support from Dechra employees who currently process the payroll.
ADP Celergo Global Payroll Project
In September 2020, Dechra embarked on a two year project to roll out
a global payroll solution with ADP Celergo. Discussions around our
global payroll solution commenced back in 2016 with the original
project put on hold to prioritise the Oracle ERP roll out as both projects
impacted the same teams internally.
Prior to the project, payroll services across Dechra were independently
run in each country mainly through different outsource providers making
global reporting more difficult, raising questions around data security
and presenting difficulties when looking for solutions for newly acquired
businesses. The decision to move to ADP Celergo globally was taken
for a number of reasons, including:
•
•
•
secure and controlled global payroll services framework to support
any expansion plans;
local in-country payroll expertise and support that can be engaged
for any challenges;
regular, as well as ad hoc, risk assessments to meet the
requirements of the ever evolving regulatory landscape; and
• peace of mind in working with one of only a select few global
businesses to have Binding Corporate Rules approval from the
EU in respect of GDPR.
All of Dechra’s 25 countries are in scope for the project and to date we
have implemented the solution in 16 countries. The remaining countries
will go live in 2021 calendar year.
Diamond Integration
As part of the ADP Celergo global payroll system roll out, there is a
significant amount of work ongoing in order to have Diamond (our
Oracle HR Information System) ready and fit for purpose in each
of the countries where we have employees.
Employees will be required to use the self-service functionality in
Diamond in order to assist with accurate reporting, for example for
address changes or for absence information, to our Payroll teams.
In countries where we have 50 or more employees, there will be a
direct interface between Diamond and the ADP Celergo platform.
The interface will feed personal details, bank details, and pay changes
directly to ADP Celergo.
The integration project commenced mid-November 2020 and is
progressing with assistance being provided by Oracle and the ADP
teams. We are continuing to test the first integration files for the UK,
Australia, Denmark and France.
Time and Attendance Recording
We have also started a separate project to move from the various
local time and attendance (T&A) solutions, where used, to a standard
Oracle Time & Labour (OTL) application which will be embedded in
our Diamond system. This project is being jointly implemented by HR,
Payroll and IT.
Our teams within the UK, US, Australia and Germany are coming to
the end of their User Acceptance Testing (UAT) as part of Phase I. Go
live for Phase I OTL countries is expected to be completed by the end
of September 2021. Our Phase II OTL implementation project has
commenced for France, Denmark, Brazil, Croatia and the Netherlands
and is expected to be completed by the end of the calendar year.
Group HR Team
41
Stock Code: DPHStrategic Report Product
Development
Dechra’s pharmaceutical and vaccine development pipeline contains a mixture
of short, medium and long term new opportunities and lifecycle products.
12
Projects in Feasibility
3
Projects in Research
13
Projects in Development
5
Projects in Registration
Whilst retaining an opportunistic and entrepreneurial approach, Dechra
employs a structured development process consisting of six phases,
defined as: Evaluation, Feasibility, Research, Development, Registration
and Launch. Focus is given to the Group’s key therapeutic sectors,
and new development and in-license opportunities are evaluated for
strategic fit within these sectors. Therapies outside of the key areas are
considered for inclusion in the pipeline if they are novel and address
medical needs in the veterinary market.
A product’s return on investment can vary: novel developments tend to
have medium to long term realisation with attractive high value returns,
whilst generic developments generally have shorter timescales with
returns dependent upon the number of other entrants and speed to
market relative to competition.
Making the Chemistry Work
In the second phase of the development process, FEASIBILITY, proof
of concept level data are generated for pharmaceutical development
(formulation and manufacturing process), efficacy and safety, and a
regulatory pathway is identified. The purpose of this phase is to eliminate
as early as possible projects with low probability of success.
All the necessary pilot data are generated in the RESEARCH phase to:
• understand the efficacy and safety profile (innovation) or the
likelihood of establishing bioequivalence (generics);
• enable high quality pharmaceutical development; and
• establish the best strategy to maximise the probability of technical
and regulatory success.
In addition to developing new products, Dechra is also looking to
improve existing commercial products to retain and grow market
share. Lifecycle activities are varied but may include changing primary
packaging or dose form for improving convenience for the user,
treatment compliance for the patient or adding claims or species to
widen the addressable market. These lifecycle projects can lead to
substantial growth, even for established products.
The main purpose of the Research phase is to de-risk the expensive,
long and resource intensive Development phase. In addition, during
the Research phase the formulation and manufacturing process are
finalised, and the dose that is both safe and effective is determined.
For some projects, this phase can be relatively straightforward, while
for others it can be iterative, for example finding a formulation that gives
the desired safety and efficacy profile.
Generating and Prioritising Ideas
Ideas are usually generated by our Marketing and Business
Development functions, but Dechra encourages all employees to share
ideas for new or existing products. Ideas will be prioritised by Marketing
and the most attractive ones are evaluated by a small cross functional
Evaluation team. During the EVALUATION phase, the team defines
the scope of the project and assesses whether the cost benefit ratio is
favourable considering market need, market value, strategic fit and the
probability of technical and regulatory success. The team also defines
the work required to be completed in the Feasibility phase.
Entering the Development Phase
The DEVELOPMENT phase is the longest part of the process,
potentially taking between two to four years. After the formulation has
been demonstrated to be stable, up to three registration batches are
manufactured for use in safety studies, efficacy studies and stability
testing. For generic products, the batches are used in one or more
bioequivalence studies to demonstrate that activity will replicate the
pioneer product. If the studies conducted during Development phase
demonstrate the required safety, efficacy and chemical stability of the
product, regulatory dossiers are prepared for REGISTRATION.
The whole process from beginning to end can take between three and
ten years before LAUNCH, depending on the complexity and nature of
the product.
Stage Gate Process
The Pipeline Review Committee analyses each project after each phase
for technical or regulatory risks and issues, and for any changes to the
business case. Project decisions are endorsed by the Strategic Portfolio
Prioritisation Committee which also prioritises projects based on their
overall commercial and strategic value within resource constraints.
Read more about Our Product
Development on page 69.
42
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Strategic Portfolio Prioritisation Committee (SPPC)
Senior Management of Commercial, PDRA,
DPM&S and Finance
Prioritisation considering resource availability, commercial value,
pipeline balance, risk and Company strategy
Recommendations
Approvals and
Prioritisation Decisions
Experts and stakeholders from all relevant departments
Project recommendations based on technical feasibility,
valid business case and commercial need
Pipeline Review Committee (PRC)
GO/
NO GO
GO/
NO GO
GO/
NO GO
GO/
NO GO
Evaluation
Feasibility
Research
Development
Registration
Launch
Preliminary
Evaluation
of Ideas
Proof of
Concept
to Identify
Early Kill Points
Pilot Studies
to De-risk
Development
Programme
Pivotal
Development
Programme
Dossier
Submission
and Evaluation
Launch
Campaign
Output
Initial Target
Profile and
Feasibility Plan
Output
Feasibility
Report and
Research Plan
Output
Research Report
and Development
Plan
Output
Pivotal Data
Registration Dossier
Output
Approvals/
Authorisation
and Launch Plan
Output
Product
Launch
s
a
e
d
I
e
s
i
t
i
r
o
i
r
P
:
l
e
n
n
u
F
a
e
d
I
43
Stock Code: DPHStrategic Report
Product
Development continued
Product Pipeline
Delivering a strong and robust pipeline is one of the Group’s strategic priorities. The chart outlines the status of the major projects. Owing to the
nature of product development, the content of our pipeline will change over time as new projects progress from Evaluation to Launch or as projects
are terminated. For competitive reasons, exact project details are not disclosed.
CAP/Equine
1
Evaluation
New opportunities are constantly being evaluated and
will move into Feasibility quickly if of interest.
Read more about The Evaluation
Process on page 42.
CAP/Equine
Ophthalmic therapy for dogs
Endocrine therapy for cats
Endocrine therapy for dogs
Endocrine therapy for dogs
Gastrointestinal therapy for dogs
Ophthalmic therapy for dogs
Dermatological therapy for dogs
CAP/Equine
Gastrointestinal therapy for horses
Endocrine therapy for horses
CAP/Equine
Analgesic therapy for horses
Analgesic therapy for dogs
Lameness therapy for horses
Dermatological therapy for dogs
Lameness therapy for horses
Endocrine diagnostic
Dermatological therapy for dogs
Anaesthetic for dogs and cats
Endocrine therapy for cats
Endocrine for dogs
CAP/Equine
Anaesthetic for dogs
Antibiotic for dogs and cats
Analgesic therapy for dogs
Gastrointestinal therapy for dogs
2
Feasibility
3
Research
4
Development
5
Registration
44
FAP
FAP
FAP
FAP
Poultry Vaccine
Poultry Vaccine
Antibiotic for pigs and poultry
Swine Vaccine
Anaesthetic for pigs
Antibiotic for pigs
Poultry Vaccine
Paraciticide for poultry and pigs
Antibiotic for cattle
FAP
Antibiotic for cattle and pigs
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Key to Product Pipeline
Analgesic, Anaesthesia, Anti-inflammatory
Antibiotic
Antiparasitic
Opthalmology
Dermatology
Endocrinology
Gastrointestinal
Vaccines
Locomotion
1
Evaluation
2
Feasibility
3
Research
4
Development
5
Registration
CAP/Equine
New opportunities are constantly being evaluated and
will move into Feasibility quickly if of interest.
CAP/Equine
Ophthalmic therapy for dogs
Endocrine therapy for cats
Endocrine therapy for dogs
Endocrine therapy for dogs
Gastrointestinal therapy for dogs
Ophthalmic therapy for dogs
Dermatological therapy for dogs
CAP/Equine
Gastrointestinal therapy for horses
Endocrine therapy for horses
CAP/Equine
Analgesic therapy for horses
Analgesic therapy for dogs
Lameness therapy for horses
Dermatological therapy for dogs
Lameness therapy for horses
Endocrine diagnostic
Dermatological therapy for dogs
Anaesthetic for dogs and cats
Endocrine therapy for cats
Endocrine for dogs
CAP/Equine
Anaesthetic for dogs
Antibiotic for dogs and cats
Analgesic therapy for dogs
Gastrointestinal therapy for dogs
Read more about The Evaluation
Process on page 42.
FAP
FAP
Poultry Vaccine
Poultry Vaccine
Antibiotic for pigs and poultry
Swine Vaccine
Anaesthetic for pigs
FAP
Antibiotic for pigs
FAP
Poultry Vaccine
Paraciticide for poultry and pigs
Antibiotic for cattle
FAP
Antibiotic for cattle and pigs
Case Study
Clinical Studies during COVID-19:
Creative solutions maintain product
development progress
Members of the Product Development team recently presented to
the European Medicines Agency and other pharmaceutical industry
stakeholders on the challenges of conducting veterinary clinical studies
during the pandemic. Attendees were fascinated to learn that the
hurdles faced by animal health drug developers were almost identical to
those experienced by teams developing human medicines.
When the pandemic struck in March 2020, Dechra had several studies
in various stages of completion. It rapidly became apparent that
COVID-19 was going to have a significant impact on the conduct of
veterinary clinical field studies. Our immediate focus became how to
adapt to the changing landscape to deliver on our timelines. For studies
just starting, our relationship with sites willing to participate in studies
was even more critical because a large list of study sites became
unavailable for participation due to their stressed infrastructures as a
result of illness, inability to identify critical study materials and/or closing
their doors to pet owners. Inevitably, the participating clinics’ first priority
was to continue delivering veterinary services to sick animals in the face
of lockdowns, while keeping staff and pet owners safe. Leveraging these
long established relationships became imperative in asking our sites to
take on more work.
As the veterinary world adjusted to new safe working practices, the
Dechra teams had to act swiftly due to travel bans and quarantines,
and create contingency plans. Study teams built new processes for
training and monitoring, engaging in new ways to communicate and
collect data effectively. Frequent and thorough communication was key
in addition to accommodating individual study site challenges. Creative
study marketing strategies at targeted clinics best able to continue
study related activities and the identification of new study patients were
required. Remote oversight and flexibility were important to ensure
ongoing patients were not lost from the studies due to missed data or
inability to comply with study demands. For critical data points requiring
in person observation, study monitors local to the study location were
hired to observe procedures for compliance to ensure good study
conduct. Management of study drug and biological sample shipments
required careful planning and oversight to overcome delays due to
unreliable courier schedules.
Prior investment in a robust state of the art secure method to collect,
store and review data allowed veterinarians to record patient data
online and shift to a completely remote procedure for study oversight
and closeout. This ensured that the extremely high level of data quality
required for a clinical study was maintained. Paper study documents
transitioned to more accessible electronic documents. Some novel
process changes required advance discussions with the FDA.
Dechra was nimble enough to navigate through each of the hurdles that
COVID-19 created and successfully adapted. Some of these alternative
approaches will remain in our toolbox for future studies. Together with
the ongoing excellent relationships with our participating veterinary
clinics, Product Development delivered on its commitments.
45
Stock Code: DPHStrategic Report Global Product
Offering
Analgesia, Anaesthesia and Anti-inflammatory
COUNTRY
INTERNATIONAL*
Key Product
Atipam/Sedastop
Carprofren/Caprovet
Comfortan
Dexmedesed
Domidine
Meloxoral/Meloxicam Cats, Dogs
Rapidexon
Animal
Cats, Dogs
Dogs
Cats, Dogs
Cats, Dogs
Cattle, Horses
Cats, Dogs,
Cattle, Horses,
Pigs
Cats, Dogs
Cats, Dogs
Cats, Dogs
Sedator/Sedastart
Tilzolan
Tralieve/Tramadol
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Other products: Anesketin, Bupredine, Euthasol, Fentadon, Intubeaze, Ketamine, Meloxidolor, Myorelax, Nerfasin, Pardale -V, Relaquine,
Rominervin, Sedadex, Sympagesic, Tranquinervin, Willcain
Antibacterial and Antibiotics
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Endocrinology
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Felimazole
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5
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Lameness
Key Product
Cyclospray
Equipalazone
HY-50
Osphos
Phycox
Nutrition
Animal
Cattle, Pigs, Sheep
Horses
Horses
Horses
Dogs, Horses
Key Product
Specific
Animal
Cats, Dogs
Water Solubles
Key Product
Altidox
Centidox
Octacillin/Solamocta
Soludox
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Pigs, Chickens,
Turkeys
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Pigs, Chickens,
Turkeys
Pigs, Chickens,
Turkeys
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Other products: Metaxol, Methoxasol, Phenocillin, Solacyl, Tialin
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Vaccines
Key Product
Avishield ND
Excell 10
Other Brands
Key Product
Cardisure
Isathal
Libromide
Mirataz
Phenoleptil
Prednicortone
Prevomax
Vetivex
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Chickens, Turkeys
Cattle, Pigs,
Sheep, Goats
Animal
Dogs
Cats, Dogs,
Rabbits
Dogs
Cats
Dogs
Cats, Dogs
Dogs
Cat, Dogs, Cattle,
Horses
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Other products: Apovomin, Fruesdale, Hypertonic, Laxatract, Lubrithal, Ophtocycline, CleanOcular, Puralube, Vetropolycin
* Not all products are sold in each country within a continent.
7
6
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47
Stock Code: DPHStrategic Report Section 172 Statement and
Stakeholder Engagement
The Board is responsible under section 172 of the Companies Act 2006 for promoting the long term success of the Company for the benefit of its
shareholders, and acknowledges that its decisions have a long term impact on other stakeholders, the environment and the Company’s reputation
for high standards of business conduct. The Board appreciates that wider engagement with stakeholders is an important component of long term
sustainability and success and believes that by engaging with all important stakeholders, the business is made stronger and more resilient. The
following case studies illustrate how the Board has considered their section 172 duty in making principal decisions.
The Board also considered the potential disruption to the existing
business, but agreed that this would be minimal as the warehouse
was being built on unutilised land away from the current site, meaning
normal operations and traffic flows would be unaffected.
Outcome: The build commenced in January 2021 and we expect
the warehouse to be ready in September 2021.
Case Study
Expansion of
Uldum Warehouse
s172 Considerations:
In September 2020, the Board considered the proposal to expand the
Logistics hub in Denmark. The existing warehouse is based in Uldum,
Denmark which is very close to the main nutrition markets, has good
links to Germany and access to ports.
There are seven stages to the warehouse expansion plan and the
first phase is to build a new warehouse with an underground cold
storage facility. The underground cold storage facility will replace six
refrigerated containers and external facilities. In addition the capex of
€7.0 million will deliver 1,200 sustainable cold storage pallet spaces
in the basement and 6,600 ambient pallet spaces on the ground floor,
providing a strategic and cost effective solution for five to seven years.
In consideration of section 172 duties, it was agreed by the Board that
the Uldum Warehouse expansion will provide:
•
sufficient pallet spaces, reducing the need to rely on external
facilities and will enable the warehouse to grow with the business.
This will, in the long term, reduce costs and increase profitability
for the business and the shareholders;
• continued and new employment opportunities for the local
community;
• better motivation among current employees who see the increased
investment in the site; and
• a sustainable solution for the cold storage requirements of the
business.
Section 172 Factors Key
Likely consequences of decisions in the long term
The interests of the Company’s workforce
The need to foster relationships with suppliers, customers and others
Impact of operations on the community and environment
High standards of business conduct
The need to act fairly between members of the Company
48
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
Case Study
Implementation of an electronic
Quality Management System
Case Study
Skipton
s172 Considerations:
s172 Considerations:
As part of our continued investment in DPM&S, the Board
considered in June 2020 the implementation of an electronic Quality
Management System (eQMS) which would provide an integrated
system for the information and processes in the life cycle of our
products.
The Board considered the section 172 duties, noting that:
• Community: although there was no major impact expected, the
reduction in the reliance on paper based systems (and associated
storage) will assist further the sustainability agenda;
Following the acquisition of the freehold to Building 3 at Skipton, the
DPM&S team have considered the long term site master plan and
submitted for Board approval a capex request (of £5.5 million) as
the first part of the project to develop the site, which would deliver
a new state of the art QC laboratory, additional warehousing space,
new canteen, reception and office space, and a pilot plant and
training area. The Board considered their section 172 duties noting
that the Skipton site master plan phase 1 project was in line with
the manufacturing and supply chain enabler and would affect the
following:
• Employees: the system will provide an information source which will
• Employees: enable the right flow of traffic and movement
of goods on site making employees feel safer, providing an
improved environment to perform their roles, in particular the
QC department, a better training environment, a better canteen
facility, and allows the next step of building the potency suite
to further protect our employees from any potential harmful
substances;
• Customers: allows the next steps of increasing capacity of the
solid dose facility and maintaining the quality of the products
through new equipment, improving supply reliability from the
Skipton site, particularly with higher throughput testing in the
QC laboratory, and creates additional space to bring in more
products and be in control of the supply of these products to
our customers;
• Shareholders: the improvement in supply reliability will enhance
shareholder value through better financial performance and a
better reputation in the markets that we operate; and
• Community: improves the traffic flow in the immediate area and
provides long term security of the site to the local community.
Outcome: The Board approved the capex and it is anticipated that
work will commence in the 2022 financial year.
enable easier collaboration for complex processes across DPM&S
with a repository of information in one system. This will ultimately
increase employee productivity and job satisfaction and these
benefits will outway any short term disruption arising from the need
to train employees in the use of the new system;
• Suppliers: the new system provides a harmonised and consistent
platform allowing faster processing and improved communication
related to the management of our suppliers;
• Customers: the use of an electronic system will provide wider
visibility of the quality systems and data allowing us to be more agile
which will maintain the consistency of supply of Dechra’s products
and reduce the overall cost of supply; and
• Shareholders: the improvements in regulatory and quality systems
will enable faster and more consistent supply with lower cost;
this will enhance shareholder value through better financial
performance and a better reputation in the markets that we
operate. The new system will also support future acquisition and
growth, providing a Dechra platform and regulatory and quality
framework (system and business processes) to integrate new
products and entities. This will further enhance shareholder value.
The adoption of the eQMS system is clearly aligned with the Group’s
strategy to support growth by facilitating prior and future acquisitions
to be integrated by using the new platform. Its adoption will harmonise
and improve existing business processes, facilitating faster and more
effective time to market for new products and market extensions.
Crucially, it will make it easier to maintain our compliance standards
around existing business processes and current products. It also allows
the adoption of a cloud approach, which will future proof this major and
critical investment for Group.
Outcome: The Board approved the project which commenced
in July 2021.
49
Stock Code: DPHStrategic Report
Section 172 Statement and
Stakeholder Engagement continued
The table below shows who the Board has identified as important stakeholders, why they feel it is important to engage, how they have engaged and
where you can read more information on the Board’s approach to their section 172 duty.
Employees: To make Dechra a great and safe place to work, and attract, retain and develop talent
How We Engage
• Group intranet
• Town Hall meetings
• Engagement surveys
Material Interests
• Development opportunities
• Making a difference
• Agile and friendly place
Where You Can Read More
Read more on pages 19,
58 to 64, 96, 97 and 102.
• Employee Engagement Designated Non-Executive Director
to work
• Performance Development Reviews, and employee
development and training
• Direct communication to all employees from the
Chief Executive Officer
Veterinary Professionals: To improve animal health and welfare
How We Engage
• Educational and training programmes
Material Interests
•
Innovative and effective products
• Technical support via helplines and product information
•
Information on correct use of products
• PhD veterinary student funding
• Educational opportunities
Where You Can Read More
Read more on pages 19,
69 to 73 and 96.
Shareholders: To instil trust and confidence and allow informed investment decisions to be made
How We Engage
• Annual Report and RNS announcements
• Annual General Meeting
•
Investor presentations
• Corporate website
• One-on-one meetings
Material Interests
• Financial performance
• Delivery of strategy
• Environmental, Social and Governance
performance
Where You Can Read More
Read more on pages 19,
95 and 102.
Communities: To give back to the communities in which we operate
How We Engage
• Community activities
• Group donations
• Product and local donations
• Development and education of young people
Material Interests
• Prosperity within our communities
• Community projects
and initiatives
Where You Can Read More
Read more on pages 19,
74, 75 and 96.
Suppliers: To trade with honesty and integrity, and to source quality raw materials, finished products and services
How We Engage
• Quality audits
• Due diligence
• ABC training
• Third Party Code of Conduct
Material Interests
• Fair Payment Terms
• Long term relationships
Where You Can Read More
Read more on pages 69
to 73, 96 and 102.
Regulatory Authorities: To meet high standards of product safety and efficacy
How We Engage
• Regulatory training for employees
• Manufacturing facility inspections
• Market authorisation applications
Material Interests
• Safety
• Efficacy
• Responsible marketing of regulated
Where You Can Read More
Read more on pages 42
to 45.
• Product safety update reports (PSURs)
pharmaceuticals
50
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Non-Financial
Information Statement
This section of the Strategic Report constitutes the Group’s Non-Financial Information Statement, produced to comply with Sections 414 CA and
414 CB of the UK Companies Act 2006. The information is incorporated by cross-reference.
Reporting Requirement
1 Environmental matters
(including the impact of
the Company’s business
on the environment)*
2 Employees*
3 Social matters*
4 Respect for human rights*
5 Anti-Bribery and
Anti-Corruption*
6 Business Model
Where to read more
• Corporate Social Responsibility:
Page number
Our Environment
65 to 68
• Understanding our Key Risks
82
Policies and Handbook
• Code of Conduct
• Creating Value for Our
Stakeholders
• Chief Executive Officer’s
Statement
• Corporate Social Responsibility:
Our People
• Section 172 Statement
• Understanding our Key Risks
• Creating Value for Our
19
24 to 27
58 to 64
48 to 50
79 to 82
Stakeholders
19
• Staff Handbook
• Dignity at Work Policy
• Health & Safety Policy
• How to Raise a Concern
Handbook
• HR Policies
• Volunteer Service Toolkits for
Large and Small Events
• Corporate Social Responsibility:
• Donations Policy
Our Community
• Section 172 Statement
• Corporate Social Responsibility:
Our Business
• Section 172 Statement
74 and 75
48 to 50
72 to 73
48 and 50
• Human Rights Policy
• Modern Slavery Statement
• Code of Conduct
• Corporate Social Responsibility:
• ABC Policy
Our Business
72 and 73
• Audit, Risk and Internal Control
112 to 118
• Our Business Model
16 to 18
• Third Party Code of Conduct
• How to Raise a Concern
Handbook
7 Principal Risks in relation
to (1) to (5)
• How the Business Manages Risk
• Understanding our Key Risks
19
76 to 78
79 to 82
• Creating Value for Our
Stakeholders
8 Relevant non-financial KPIs
• Key Performance Indicators
37
* References to our policies, due diligence processes and information on how we are performing on various measures in these areas are contained throughout the
Strategic Report.
51
Stock Code: DPHStrategic Report
Corporate Social
Responsibility
Making a difference through
the sustainable improvement in
global animal health and welfare
Our ESG Strategy
Our ESG strategy is based around four pillars: Business; Community; Environment; and People. During the 2021
financial year we have set targets for each of the pillars. We have committed to a long term target to reach net zero
emissions by no later than 2050, backed by science based targets across the entire value chain. We will:
• continue the effort to understand and disclose the climate change risks and opportunities by transforming to a low
carbon economy; and
•
refine our environmental targets by setting verifiable science based targets through the Science Based Targets
initiative (SBTi).
Our People
Our Strategic Priority:
A great and safe place to work.
Our Community
Our Strategic Priority:
To contribute to the social and
economic welfare of the local
communities in which we operate
through the donation of our time,
products and cash donations.
52
Our Environment
Our Strategic Priority:
We are committed to
minimising the impact of our
operations on the environment
by adopting responsible
environmental practices and
complying with applicable
environmental legislations, by
achieving zero to landfill by
2025 and net zero emissions
by 2050.
Our Business
Our Strategic Priority:
To provide sustainable
innovative products, technical
and educational support and
to act responsibly and with
integrity with all stakeholders.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Our Leadership Structure
The Board takes ultimate responsibility for Corporate Social Responsibility and is committed to developing and implementing appropriate policies
that create and maintain long term value for shareholders. During the year Paul Sandland, was nominated as the Executive Director responsible
for ESG, and he took over the chairmanship of the ESG committee from the Company Secretary. A Group Sustainability Director was appointed
in March 2021. The ESG Committee is made up of representatives from across the Group.
Our Board
Our ESG Committee
Health, Safety
and Wellbeing
Committee
Sustainable
Packaging
Committee
Global Transport
Logistics and
Waste
Regional
Giving
Committees
Science Based Targets
Responsible climate action – preparing for net zero emission 2050
Dechra has committed to set science-based emissions reduction
targets across the entire value chain that are consistent with
keeping global warming to 1.5°C above pre-industrial levels.
Dechra has also committed to a long term target to reach net
zero emissions by no later than 2050.
The Board is responding to an urgent call-to-action for companies
to set emissions reduction targets in line with a 1.5°C future,
backed by a global network of UN agencies, business and
industry leaders.
Dechra will set verifiable science-based targets by June 2022
through the Science Based Targets initiative (SBTi), which
independently assesses corporate emissions reduction targets
in line with what climate scientists say is needed to meet the
goals of the Paris Agreement.
Real progress requires real transparency, we will continue the
effort to understand and disclose the risks posed to our business
by climate change as well as the opportunities presented by
transforming to a low carbon economy. We will also engage with
our stakeholders, working with them to minimise our combined
climate footprint.
During this important period of change, resources and effort
will be invested in order to advocate and embed sustainability
within the group at all levels. These are ambitious but achievable
commitments and we believe It is an opportunity for every member
of our business to contribute in the quest to reach net zero
emissions by 2050.
53
Stock Code: DPHStrategic Report Stakeholder
• Employees
SDG
Focus Area
Culture and Values
Objectives
Target
Status/Progress
•
strengthen and communicate the Dechra culture
•
trust Index target of 85% •
trust Index of 77%
Policy
A great and
safe place to work
and strive to ensure our Values encompass our
business ethics and standards;
Talent Management
and Engagement
Fair Employment
Practices
Diversity and
Inclusion
Safe Working
Practices
Focus Area
Waste
Energy
• attract, retain and develop talent to build and
• one day of training per
•
system in place to
maintain a top quality team;
employee per annum
capture data
• comply with national legal requirements regarding
• Living Wage Employer or
• achieved in January
wages and working hours;
equivalent by 2022
2021
•
value the difference and diversity of people,
•
reflect the markets and
• applicant tracking
recognise that their skills and abilities are
communities in which we
system implemented
strengths that can help us to achieve our best; and
operate
•
reinforce a culture of health and safety, with
•
zero lost time accidents
•
three lost time
a culture of zero harm.
accidents (a reduction
from six)
Policy
Objectives
Target
Status/Progress
We are committed to
• prudent use of all natural resources, the
•
zero to landfill by
• proportion of waste to
minimising the impact
minimisation of waste in all activities, and the
30 June 2025
of our operations on
the environment by
adopting responsible
appropriate disposal of waste; and
environmental practices
• optimise the energy we use, improve energy
•
reach net zero emissions
•
started to execute
and complying with
effectiveness through initiatives on transport and
by no later than 2050.
the Making Difference
applicable environmental
reduce our greenhouse gas emissions.
legislations
landfill or incinerated
with no energy
recovery reduced
from 17% to 14%
Initial target is 25%
plan and committed
reduction by 30 June
to the Science Based
2025. This will be refined
Target initiative
through the collaboration
and verification with
Science Based Targets
Stakeholder
• Employees
• Local community
SDG
Corporate Social
Responsibility continued
Our
People
Read more about Our People
on pages 58 to 64.
Our
Environment
Read more about
Our Environment on
pages 65 to 68.
54
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
Stakeholder
• Employees
SDG
Focus Area
Culture and Values
Policy
A great and
safe place to work
Objectives
•
strengthen and communicate the Dechra culture
and strive to ensure our Values encompass our
business ethics and standards;
Target
•
trust Index target of 85% •
trust Index of 77%
Status/Progress
Talent Management
and Engagement
Fair Employment
Practices
Diversity and
Inclusion
Safe Working
Practices
Focus Area
Waste
Energy
Stakeholder
• Employees
• Local community
SDG
Policy
We are committed to
minimising the impact
of our operations on
the environment by
adopting responsible
environmental practices
and complying with
applicable environmental
legislations
• attract, retain and develop talent to build and
maintain a top quality team;
• one day of training per
employee per annum
•
system in place to
capture data
• comply with national legal requirements regarding
• Living Wage Employer or
• achieved in January
wages and working hours;
equivalent by 2022
2021
•
•
value the difference and diversity of people,
recognise that their skills and abilities are
strengths that can help us to achieve our best; and
•
reflect the markets and
communities in which we
operate
• applicant tracking
system implemented
reinforce a culture of health and safety, with
a culture of zero harm.
•
zero lost time accidents
•
three lost time
accidents (a reduction
from six)
Objectives
• prudent use of all natural resources, the
minimisation of waste in all activities, and the
appropriate disposal of waste; and
Target
•
zero to landfill by
30 June 2025
Status/Progress
• proportion of waste to
• optimise the energy we use, improve energy
•
effectiveness through initiatives on transport and
reduce our greenhouse gas emissions.
•
reach net zero emissions
by no later than 2050.
Initial target is 25%
reduction by 30 June
2025. This will be refined
through the collaboration
and verification with
Science Based Targets
landfill or incinerated
with no energy
recovery reduced
from 17% to 14%
started to execute
the Making Difference
plan and committed
to the Science Based
Target initiative
55
Stock Code: DPHStrategic Report
Corporate Social
Responsibility continued
Our
Business
Stakeholder
• Employees
SDG
• Veterinary Professionals
• Suppliers and Distributors
• Universities and Key
Opinion Leaders
• Shareholders
Focus Area
Ethical and Sustainable
Products
Policy
Objectives
Target
Status/Progress
• To provide sustainable
• develop and promote products to improve animal
•
fund 5% to 6% of revenue
• Product Development
innovative products
health and welfare ethically and sustainably;
on product development
spend 5.3% of
that improve animal
health and welfare
per annum
revenue
• all paper material to be
•
review of all products
FSC by June 2023
and sites ongoing
• Product Development
• project with Product
Development initiated
process to include
sustainability review
by 2023
•
sustainability review of
•
to be initiated in the
existing products by June
2022 financial year
2025
Read more about Our Business
on pages 69 to 73.
Ethics
• We are committed to
• act with honesty and with integrity.
•
supply chain assessment
• project initiated
acting responsibly and
with integrity
of all suppliers’
sustainability by June 2030
Veterinary Professionals
• Provision of technical
• maintain and improve the knowledge and skills of
• provide 100,000 CPD
• 77,206 CPD hours
and educational
veterinarians who prescribe and use our products;
hours per annum
support to veterinarians
and
Stakeholder
• Local Community
SDG
• Charities and non-profit
organisations
• Employees
Focus Area
Community Activities
Community Donations
Our
Community
Policy
Objectives
Target
Status/Progress
• To contribute to the
• contribute towards local charitable causes through
• 100,000 community
•
re-initiated in the
social and economic
the donation of time, products and skills; and
hours between 1 July
2022 financial year
welfare of the local
communities in which
we operate
• establish Regional Giving Committee to allow
• £5 million donated in
• £381,524 in the 2021
our employees to make a difference in their local
cash or products between
financial year
communities.
1 July 2021 and 30 June
2021 and 30 June 2030;
and
2030
Read more about
Our Community on
pages 74 to 75.
56
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
Stakeholder
• Employees
SDG
• Veterinary Professionals
• Suppliers and Distributors
• Universities and Key
Opinion Leaders
• Shareholders
Focus Area
Ethical and Sustainable
Products
Policy
• To provide sustainable
innovative products
that improve animal
health and welfare
Objectives
• develop and promote products to improve animal
health and welfare ethically and sustainably;
Target
•
fund 5% to 6% of revenue
on product development
per annum
Status/Progress
• Product Development
spend 5.3% of
revenue
• all paper material to be
FSC by June 2023
•
review of all products
and sites ongoing
• Product Development
process to include
sustainability review
by 2023
• project with Product
Development initiated
•
sustainability review of
existing products by June
2025
•
to be initiated in the
2022 financial year
Veterinary Professionals
• Provision of technical
and educational
support to veterinarians
• maintain and improve the knowledge and skills of
veterinarians who prescribe and use our products;
and
• provide 100,000 CPD
hours per annum
• 77,206 CPD hours
Ethics
• We are committed to
• act with honesty and with integrity.
acting responsibly and
with integrity
•
supply chain assessment
of all suppliers’
sustainability by June 2030
• project initiated
Stakeholder
• Local Community
SDG
• Charities and non-profit
organisations
• Employees
Focus Area
Community Activities
Community Donations
Policy
• To contribute to the
social and economic
welfare of the local
communities in which
we operate
Objectives
• contribute towards local charitable causes through
the donation of time, products and skills; and
Target
• 100,000 community
hours between 1 July
2021 and 30 June 2030;
and
Status/Progress
•
re-initiated in the
2022 financial year
• establish Regional Giving Committee to allow
• £5 million donated in
• £381,524 in the 2021
our employees to make a difference in their local
communities.
cash or products between
1 July 2021 and 30 June
2030
financial year
57
Stock Code: DPHStrategic Report
Corporate Social
Responsibility continued
Our
People
Linkage to UN SDGs
13.5%
Employee
Turnover
52%
Females in
workforce
0.09
Lost Time Accident
Frequency Rate
We employ 1,975 employees in 25 countries in a wide range of working
environments including manufacturing, logistics, laboratories, offices
and mobile working. At Dechra, we acknowledge that our people are
our greatest asset and know that an inclusive culture is beneficial for
our business performance. Our ongoing objective is to continue to
be a purpose focused business driven by high performing and
committed teams.
We are committed to the following focus areas:
•
•
Culture and Values: strengthening and communicating the Dechra
Culture and striving to ensure our Values encompass our business
ethics and standards;
Talent Management and Engagement: attracting, retaining and
developing talent to build and maintain a top quality team;
• Fair Employment Practices: complying with national legal
requirements regarding wages and working hours;
•
•
Diversity and Inclusion: valuing the difference and diversity of people,
recognising that their skills and abilities are strengths that can help
us to achieve our best; and
Safe working practices: reinforcing a strong culture of health and
safety, within a zero harm environment.
Our People Plan
6
Common
Platforms and
Ways of
Working
5
Healthy Safe
Workplace
1
Accelerate
Performance
One
Dechra
A great place
to work
4
Engaged &
Committed
Workforce
2
Grow Our
Own Talent
3
Strong Culture
and Values
1 Accelerate
4 Engaged and
Performance:
Align employee efforts and
drive productivity through
effective goal setting,
feedback and focus on
development.
2 Grow Our Own Talent:
Attract, retain and develop
the right talent in the right
place at the right time.
3 Strong Culture
and Values:
How we do things around
here.
Committed Workforce:
A great place to work.
5 Healthy Safe
Workplace:
Improving the working
lives of our people in every
location.
6 Common Platforms
and Ways of Working:
Efficient infrastructure
supporting business
operations and alignment
over policy and practices.
Length of Service by
Headcount – Global
Employee Contract
Type – Global
<1 year
322
1–3 years 481
3–5 years 274
5–8 years 313
8–10 years 126
10 years+ 459
Full time
86%
Part time 10%
Contract
4%
58
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
Culture and Values
Our Values, entrepreneurial attitude and agile approach to the way we do things are the backbone of our Culture. We expect our people to make
a difference by working together and we support them by providing clear guidance on expectations. We believe that our Values encapsulate our
business ethics and set the standards that we wish to achieve and ultimately exceed. They outline the type of people we are, the services we
provide and the way we aim to do business.
Ambition
Dedication
Relationships
Dechra
Values
Enjoyment
Honesty
Courage
Read more on pages 04 to 05.
During the financial year we have found a number of ways to embed our
Values into the daily life of our employees. We have:
•
•
updated the look and feel of the Values with icons that help to
signpost the Values on the new One Dechra intranet;
significantly upgraded our approach to recruiting talent and
partnering with leading external organisations to use contemporary
instruments and interventions to allow recruiting managers to gain
a greater understanding of the candidates potential during the
recruitment process; and
• created a mandatory module, One Dechra, which facilitates a
deep dive into the Company Culture and Values and encourages
employees to consider what the Dechra Values mean to them
in the context of their function.
Our Values are supported by our Code of Conduct, which has
been translated into eight languages and is available in English
at www.dechra.com.
We encourage all employees if they see or suspect something which
they believe to be a breach of Dechra’s standards of conduct, to report
their concerns via our How to Raise a Concern procedure. We currently
offer four reporting channels for concerns to be raised: Line Manager;
the Senior Management Team; Group Management Team; and a mailbox
accessed only by the Company Secretary. Every effort will be made
to protect confidentiality to encourage reporting. The How to Raise a
Concern procedure has been translated into eight languages. During the
•
•
2021 financial year we provided training to 12 employees across the
Group on investigation training; and
2022 financial year we are planning to implement a confidential third
party hot line and provide investigation training to a further group of
employees.
We will fully investigate reports and take appropriate actions to address
these. The actions taken will depend on the circumstances and the
severity of the issues identified. These actions may include process
improvements, training and coaching, or formal disciplinary actions up
to and including termination of employment for the most severe issues.
The Board receives a summary of the investigation reports.
59
Stock Code: DPHStrategic Report Corporate Social
Responsibility continued
Talent Management and Engagement
15
Interns
266
Delta courses
Dechra is committed to enhancing the skills of our workforce, planning
for a successful future and creating a sustainable talent pipeline.
Training
Implemented in 2016, Delta is our internal e-learning management
system, hosting all of our internal interactive and digital training courses.
The COVID-19 pandemic has been a significant driving force behind our
Delta efforts over the past 12 months, not only in increased demand and
reliance upon the site itself, but also the need for new educational and
informative content, including health and wellbeing support.
We launched 70 new courses over the last year and have expanded our
team to increase the support that we can provide to the business. New
training processes and increased reporting functionality are empowering
our employees to take ownership of their own learning needs. This year
has also seen significant steps forward in digitalisation and consolidating
our training efforts.
Our Digital Learning team are being recognised for their efforts in the
education sector too and have been asked to speak at a number of
learning and development events on the best practice use of a Learning
Management System. Additionally the team have all been individually
accredited by the Learning and Performance Institute.
This is only one element of the training that we provide, and although
we do not currently collate training hours across the Group, we provide
other forms of training to our employees, placement students and
graduates. The next step in our continued investment in training will
be to record and collate the hours each of our employees spends in
training, enabling us to have a consistent process of development and
provide a basis for employee self certification in development.
Case Study: Global Applicant Tracking System
As part of the Global HR Shared Services and Systems Strategy,
we have recently invested in a global applicant tracking system. The
chosen solution, TribePad (known internally as DASH), will allow for
global alignment across our talent acquisition processes, as well as
supporting the increasing obligations on reporting against our global
recruitment practices.
DASH will allow us to track, report on and monitor key recruitment
metrics, including time to hire, source of hire, number of open
positions and in some countries (depending on local laws) the diversity
of our applicants. It provides a platform in which we can build on our
global talent brand so that we can continue to attract and retain the
best talent into the organisation.
DASH gives us the ability seamlessly to control and select where our
job advertisements are placed, retaining all applications in one single
dashboard, streamlining the time taken to recruit. DASH also provides
prospective applicants a platform to register their interest in future
vacancies with Dechra and the option to ‘opt-in’ to job alerts, creating
an active talent pool.
To support the Group’s diversity and inclusion policy further and to
enable our core recruitment messaging to be as inclusive as possible,
the system features a ‘gender bias decode’ tool which is capable
of analysing the text within our job adverts to help us understand
any hidden implications within the language that is used. Research
shows that many words can be associated with masculine or feminine
stereotypes. Having visibility of this data and information will help
inform future recruitment spend, track cost savings and maximise the
potential reach of our talent attraction campaigns, globally.
The global DASH roll out project is being led by our Group Talent Partner
in conjunction with our third party implementation partner, PeopleHub.
DASH has been live across our UK business since February 2021 and
since June 2021 for our Australia, USA and Canada, The Netherlands,
Croatia and Denmark businesses. France, Mexico, Brazil and Germany
are scheduled to go live later this calendar year.
60
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
Leadership Programme
Following the successful roll out of the Leadership Programme to
Dechra Pharmaceuticals Manufacturing & Supply (DPM&S), we
have launched this programme to our Dechra Veterinary Products
International and Corporate Leadership teams during the 2021 financial
year. The development programme’s strategic intent is:
•
•
to develop fit for purpose senior leadership by improving readiness
and capabilities that deliver success; and
building confidence for internal and external stakeholders that the
business has access to talented, ready now and emerging leaders.
The key learning objectives of the programme for the team are to build on
executional excellence, develop the capacity to build and establish value
creating teams, have an agile and future facing leadership, and continue
to focus on having an inclusive approach and being culturally aware.
As with DPM&S, the programme has been run via the virtual realm,
for 12 people, across two time zones and six European locations. The
launch of the programme took place at the start of May, commencing
with psychometric and cognitive assessments of the team, and has been
followed by online team business simulations, team and peer coaching and
virtual content which will continue to be delivered during the rest of 2021.
Apprenticeships and Internships
We believe that offering internships and apprenticeships is a great
way to attract new employees to Dechra. We offer a small number of
internship opportunities each year. We have been delighted with the
quality of young people who have worked with us and we hope that
the experiences of working with Dechra will support them in their future
careers. We currently have 15 interns in Europe, one in Australia and
11 in Brazil.
Engagement
Informing and engaging our employees through internal channels of
communication is of utmost importance to the Group. We have multiple
channels of communication to provide both formal and informal updates
including a Group newsletter that is issued twice a year (following
the half-yearly and year end results), intranet, management and team
meetings at the business units. These keep our employees informed of
the financial performance of the Group, as well as the sharing of updates
which are relevant to all Group employees such as management and
team changes, progress in relation to strategic objectives and updates
on corporate social responsibility objectives. Wherever possible, we
seek to engage our employees in change projects. We also have a small
number of Works Councils we regularly meet with.
In July 2021, we will launch our new intranet OneDechra which includes
improved two way communication encouraging comments, sharing and
community participation.
In order to continue to retain our qualified and skilled employees,
and to attract new employees, we conducted our second Employee
Engagement Survey in April 2021 using the Great Place to Work (GPTW)
survey. Further details are detailed below.
During the year, Lisa Bright, in her role as the Employee Engagement
Designated Non-Executive Director, met with a number of employees
across the business via virtual coffee mornings. Further information on
this can be found on page 97.
Global Moving Annual Turnover (Employee Turnover)
2021
2020
2019
2018
2017
13.5%
12.4%
13.6%
15.9%
15.7%
It is three years since we last ran an all employee engagement survey,
we had been due to run the survey in March 2020 but postponed it
due to the outbreak of the pandemic. We had 1,720 respondents to
the Great Place to Work (GPTW) survey, this equated to 90% of the
organisation which is positive when compared to the average response
rate for an organisation of our size (78%). Our high response rate
provides us with a strong mandate for action based on the survey
results. The survey asked about key areas that if done well can lead to
a high trust and highly engaged workplace where people are treated
well and work effectively together to drive up the bottom line.
There were some real highlights in the results. Across the Company,
employee perceptions improved on all 75 survey statements. For
example, 92% feel that Dechra is a physical safe place to work and
88% are ‘proud to tell others you work at Dechra’, which are eight
percentage points above the average of the best organisations in the
UK as awarded by GPTW.
Perceptions improved most of all about Reward, with a 20% increase
in employees agreeing with the statements than over 2018. The
improvement in employee experiences has extended across almost
all of the Company. We are particularly pleased that:
•
in our Group Manufacturing and Supply Chain division the Trust
Index has risen by 12 percentage points, this team has worked on
their sites throughout the pandemic and this is a measure of the
dedication of staff and managers in DPM&S;
• our scores on the three statements on diversity put us on an equal
footing with the Top 25 World’s best workplaces; and
• our overall level of engagement measured in the survey by the
Trust Index had risen by ten percentage points since the last survey
to 77%. We will now receive recognition as a Best Extra-Large
Workplace, 2021.
The results in Strategy & Direction, Career & Development and
Recognition really stood out for us as strengths against best-in-class
organisations as measured by GPTW. However, there were some areas
that we identified as areas of focus for the year ahead. These were
Collaboration, Communication and Wellbeing; we will be leading streams
of work across the Group on each of these areas, in addition to this,
each division will be invited to focus on one area of opportunity that is
specific to them when compared with the organisation overall and the
external benchmarks. Local HR teams will support managers to work
with their teams over the coming months to understand the reasons
behind the issues raised by the survey and to generate and implement
action plans where progress can be tracked and communicated.
61
Stock Code: DPHStrategic Report UK, only one of our subsidiaries is required to report under Gender
Pay Gap regulations, and we are pleased to report that our gender pay
median gap has reduced in year from 17.7% in 2017 to 5.5% in 2020.
This reduction is largely driven by an increase in the number of women
in senior and technical roles.
Following a business wide review of remuneration, we have increased
the pay of our lowest paid workers globally with effect from 1 January
2021 to the Living Wage or where there is no equivalent we have used
the OECD formulation, or pay at least twice the local/federal minimum
wage. In addition to implementing our Living Wage Employer changes
a year earlier than originally planned in the UK, and even earlier in
the rest of the world, we paid all of our site based employees (all of
our lowest paid staff work in manufacturing or logistics) a bonus to
reward their commitment during the COVID-19 period. We successfully
achieved the UK Living Wage accreditation in March 2021.
Furthermore, we have increased our employer pension contribution from
4% to 6% with effect from July 2021 in the UK and intend to increase the
employer pension contribution again to 8% during the 2022 financial year.
Dignity at Work
Our Dignity at Work Policy was drafted and launched within the UK in
January 2020, and is now incorporated into the Code of Conduct. In
accordance with the Dechra Values, we believe that our position on
diversity and inclusion is key to providing a place of work that is free
from bullying and harassment, and which is characterised by respect,
collaboration, openness, safety and equality. One of our aims is to
promote a climate in which employees feel able to raise complaints of
harassment, bullying or discrimination without fear of victimisation.
After initially launching training to our UK managers in the 2020 financial
year, we now provide online training to a wider audience using an
externally hosted online training portal where licensed Dechra managers
can deliver professionally developed training programmes globally using
virtual classrooms.
In addition to this, we have developed a Diversity and Inclusion
module which also covers unconscious bias which is one of three core
modules that will be included initially in all Leadership and Management
development programmes, but will later be rolled out more widely across
our employee base.
Gender Split
Across Group
Senior Leaders
Gender % Split
Corporate Social
Responsibility continued
Diversity and Inclusion
It is the Group’s policy to recruit and promote people on the basis of
their personal ability, contribution and potential, regardless of age,
gender, sexual orientation, marital status, race, colour, ethnicity, disability,
religion, political affiliation or union membership. We are committed to
seeing that everywhere across our Group we promote, support and
maintain a culture of fairness, respect and equal opportunity for all.
The Group gives full consideration to applications from disabled people,
where they adequately fulfil the requirements of the role. Where existing
employees become disabled, it is the Group’s policy, whenever practicable,
to provide continuing employment under the Group’s terms and conditions
and to provide training and career development whenever appropriate.
Genera d.d., our Croatian Company, was selected as the best large
employer for people with disabilities for 2020 in the Republic of Croatia by
the Institute for Expertise, Professional Rehabilitation and Employment of
Persons with Disabilities. The Institute awards recognition to employers
who have recognised their role in achieving a more positive attitude
towards the employment of persons with disabilities.
The Group does not tolerate bullying or harassment.
84% of our employees responded positively to the statement regarding
diversity in the workplace in our employee engagement survey (2021
Engagement Survey). We firmly believe that our Dechra Values support
the culturally diverse business that we have become, and although we
are separated by time zones, geographically and by language, we share
common goals and ways of working that are underpinned by our Values.
The Board, via the Nomination Committee, reviews the Diversity Policy
and its implementation on an annual basis. Further details can be found
in the Nomination Committee Report on pages 107 and 108.
Fair Employment Practices
We are committed to fair employment practices and comply with
national legal requirements regarding wages and working hours. In the
Headcount Per Country
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53%
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
Safe Working Practices
We believe that work related injuries and ill health are preventable and
that all employees have the right to work in safe and healthy conditions.
Achieving a mature culture of Health and Safety across our business
requires strong leadership, therefore in January 2021 we established our
new Group Health Safety and Wellbeing Committee (HSW Committee).
This new committee meets quarterly and is chaired by Paul Sandland,
the nominated Director responsible for health, safety and environmental
matters who is supported by the Group HSE Director. Committee
members include members of our Senior Executive Team and other
Senior Leaders from across the whole organisation who together see
that risks are identified and controlled, so that all workers are protected
to the same safe standard regardless of their role or geographical
location.
The core responsibility of the HSW Committee is to promote a strong
culture of Health and Safety through the development of Health, Safety
and Wellbeing strategies. Key achievements of the HSW Committee
this year include updating the Group Health and Safety Policy, which
extends our Safety Principles to the whole organisation. Our Health and
Safety Principles are aligned to the Dechra Values. Each principle sets
out our clear expectations in relation to protection of the health and
safety of people and property at Dechra.
Dedication: We will never look away and always step in if we see
someone in danger.
Enjoyment: Everyone has the right to work in safe and healthy
conditions.
Courage: Everyone is empowered to stop any process or work that
they feel is unsafe.
Honesty: No activity is so urgent or important that it cannot be
done safely.
Relationships: Health and Safety is everyone’s responsibility.
Ambition: We believe that work related injuries and ill health are
preventable.
The extended H&S Policy applies to all employees, contractors and
visitors to Dechra premises globally, as well as field-based and home
based employees.
In addition to monitoring the activities within our existing Health
and Safety Strategy, the HSW Committee has also overseen the
development of our THRIVE Wellbeing Strategy, in order to keep our
employees physically and mentally well.
Safety Alerts
The HSW Committee reviews the health and safety performance across
the business, to identify trends and take remedial action to reduce any
Health and Safety risks. Where learnings are identified from any incident,
Safety Alerts are issued across the Group to promote organisational
learning. Last year 25 Safety Alerts were issued, many of these relating
to COVID-19 safety learnings.
Engagement
This financial year we have launched our new online Health and Safety
reporting system, Dechra Assure, to further open up the ways in which
our employees can engage in our safety programme. The App based
system has initially been launched across our Manufacturing sites, with
roll out to Logistics and the wider business next year.
We encourage our employees to be vigilant at all times and to report
anything they feel is unsafe, however minor, whether this be unsafe
conditions (hazards) or working practices. We also empower our
employees to take action immediately to make situations safe for
themselves and their colleagues. In our Manufacturing Division, to
understand how proactively our teams are involved in our safety
programme, we monitor how many hazard reports are raised and also
how effectively these are made safe and closed out, to ensure our
workplaces remain safe at all times. Since 2019 we have more than
tripled the number of hazards raised,
which is an indicator of the ongoing
strengthening of our culture. Through
our communication campaign,
employees have also developed a
greater awareness of hazards and the
number of near miss reports which
have been raised, where accidents
could have happened if circumstances
were slightly different, have increased
from 9 to 37. Next year we will
continue to focus on proactive safety
measures, including launching our
behavioural safety programme for
Manufacturing Leaders.
High Level Risk Assessments
The HSW Committee is also responsible for maintenance of the high
level risk assessment which determines our priorities in the safety
programme. Many high risk activities reside in Manufacturing and include
Safety Critical Tasks such as Working at Height, Working with Electricity
and Working and Confined Space Entry. However, through the work of
the HSW Committee, other high risks such as business driving have
also been identified. COVID-19 remains a high risk across the business;
however, our COVID-secure Life Saving Rules have been effective in
minimising any work related transmission.
Safe Working Practices
The Group HSE team have established Communities of Practice,
drawing together subject matter experts from across the Group to
develop Group HSE Standards. This year the standards prioritised
for development focussed on safety critical tasks, including permit
controls and the control of non-routine and high risk engineering and
maintenance work. In addition to protecting our employees, these
standards are also applicable to any contractors who work on Dechra
sites such that they adhere to our high standards of Health and Safety.
At the current time Dechra locations conduct Health and Safety audits
according to their local internal audit plan, which is in addition to any
regulatory inspections and audits which may be conducted by external
bodies. A Group Audit schedule is now being established.
63
Stock Code: DPHStrategic Report
Corporate Social
Responsibility continued
LTA
For a number of years the Group has reported Lost Time Accident
Frequency Rate (LTAFR) as a non-financial key performance indicator (see
page 37). In previous years, we reported any LTA where the employee
was absent or unable to conduct their full range of normal working
activities for a period of more than three working days after the day
when the incident occurred. Using this definition over the course of the
last 12 months, the LTAFR has reduced from 0.17 to 0.09. The number
of incidents has reduced from six to three. Two incidents occurred
in our manufacturing facilities and one in the sales and marketing
organisations. There were no fatalities (employees or contractors). Two of
the manufacturing facilities, Bladel and Melbourne, have now had over 36
months without an LTA and one of the manufacturing facilities, Zagreb,
has had over 24 months without an LTA.
However, in order to improve transparency and increase learnings
related to injuries across the business, we are now reporting all lost time
accidents which resulted in any absence or inability to conduct the full
range of normal working activities (not including the day of the accident).
Using this new more rigorous reporting standard we have experienced
11 LTAs. Six of these accidents were caused by unsafe behaviours
and this will be addressed throughout the coming year through the
delivery of a Leadership Development module focusing on safe and
unsafe behaviours and positive safety conversations. This will be initially
launched across Manufacturing.
Any material health and safety issues or incidents that occur are
discussed in detail by our Health, Safety and Wellbeing Committee and
escalated to PLC Board meetings as required. Discussions include
details of incidents and any remedial action taken to mitigate or prevent
recurrence. Twice a year a comprehensive health and safety report is
presented to the PLC Board meeting by the Group HSE Director for
discussion and review by the Directors.
Case Study: THRIVE
THRIVE aims to provide a global programme
for Dechra employees which supports
positive physical, mental, emotional and
financial wellbeing, enabling employees to
THRIVE at work by increasing employee
energy, creativity and collaboration to drive
personal and business success.
Wellbeing has never been so important and
throughout the pandemic Dechra has supported the Wellbeing of all
colleagues at both a local and global level. Supporting employees to
be physically and mentally well brings benefits to individuals and the
business therefore the Health, Safety and Wellbeing Committee has
developed our THRIVE wellbeing strategy.
Our THRIVE strategy has four pillars Physical, Emotional, Financial
or Social:
Pillar
Physical
Purpose
Providing education, information and
support for employees to make healthy
lifestyle choices and remain fit and healthy.
Emotional
Building resilience in our employees and
supporting them in good times and bad.
Social
Encouraging good connections between
colleagues and with the communities in
which we operate.
Financial
Supporting long term stability and
achievement of life goals.
Each pillar has three levels to reflect that although making healthy
choices is up to each employee, there is some support that
Dechra as an employer can provide that we believe is essential to
employee Wellbeing.
• Foundation: providing consistent support across the business for
issues that are fundamental to wellbeing at work. Many of these
fundamental controls are contained in our HR Policies where we
have established the expected standards across the business to
achieve a consistently high level of support. In order to provide
information, advice and support to employees through any life
event we have established Employee Assistance Programmes
(or local country equivalent) in all regions.
• Employee Choice: providing elements that are specific to regions
or teams and for the forthcoming year will be developed from our
employee feedback from the Great Place to Work Survey.
• Optional Elements: employee driven and include events that are
organised locally, such as social events or local health promotions.
Although potentially light in impact, these optional elements
raise local awareness and can engage employees in the broader
programme.
Our strategy recognises that achieving overall wellbeing is a shared
responsibility where both Dechra and employees must work together.
Dechra commits to providing foundation support and encouraging
employees to take personal responsibility for their own wellbeing by
making use of all wellbeing information and interventions provided.
Our strategy will evolve throughout the 2022 financial year, with a focus
on employee engagement to help rebuild employee confidence, health
and wellbeing in the post pandemic work environment.
64
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
Our
Environment
Linkage to UN SDGs
31%
of waste recycled or reused
27.8%
Electricity used by
Zagreb by solar
We recognise the importance of good environmental practices. We
are committed to minimising the impact of our operations on the
environment by adopting responsible and sustainable environmental
practices and complying with applicable environmental legislation.
Our key focus areas are:
• Waste: prudent use of all natural resources, minimising waste in all
activities, and the appropriate disposal of waste; and
• Energy: optimising the energy we use; and improving energy
effectiveness through initiatives on transport and reducing our
greenhouse gas emissions.
Our carbon emission software, in addition to energy usage, captures
the impacts from waste generation, water use, effluent disposal and
refrigerant gas losses from locations where this is likely to be material.
The sites that have a material impact are our manufacturing and logistics
facilities.
Waste
We are committed to the prudent use of all natural resources and
the minimisation of waste in all activities from the specification of
incoming raw materials, the use of materials in production activities and
packaging, and the distribution of products into the supply chain. Where
waste is unavoidably created we will manage its disposal in the most
appropriate manner giving full consideration to environmental issues.
One of the most important impact areas for Manufacturing and Supply
is waste generation, the management of which must be carefully
controlled so that any hazardous substances or contaminated materials
are disposed of correctly. Hazardous waste volumes increased by
29% mainly due to one-off finished goods disposals and raw material
disposals. Despite this increase, the percentage of hazardous waste
verses non-hazardous waste reduced to 31% (2020: 33%).
Total Waste – Fate of Waste
e
t
s
a
W
f
o
s
’
G
K
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
33%
348,841
709,111
FY20
Dechra non-hazardous
Dechra hazardous
% hazardous rate
31%
448,609
982,340
FY21
33%
32%
31%
31%
31%
31%
31%
30%
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Our ultimate aim is to be zero to landfill and to achieve this target all of
our sites are encouraged to increase reuse, recovery, or recycling of
waste (where locally available).
Total Waste – Waste Disposal Method
29%
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
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35%
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Re-used – materials or components directly reused
Recycling – materials recycling
Recovery – solvent recovery
Recovery – incineration with energy recovery
Recovery – composting/anerobic digestion
Landfill
Disposed incineration (no energy recovery)
% of total waste
During the financial year a Community of Practice was formed and a Group
standard was developed. This standard implements the hierarchy for waste
principles and encourages sites to select waste options which are higher on
the waste hierarchy (not landfill or incineration with no energy recovery) and
to monitor waste volumes regularly. For waste which cannot be eliminated
we classify it according to the European Waste Classification codes. The
gap assessment for this standard has now been completed by the sites
and a focused improvement team has started to focus on sites who are
disposing waste to landfill and incinerating waste with no energy recovery.
65
Stock Code: DPHStrategic Report
Corporate Social
Responsibility continued
In the 2021 financial year the total volume of waste was 35% higher than
2020 financial year, however waste recovery, recycling and reuse rates
improved from 83% to 86%. 14% (2020: 16%) of Manufacturing and
Supply waste was landfilled or incinerated with no energy recovery.
Water
Our manufacturing sites aim to use water responsibly so that usage
does not negatively affect the communities where they operate,
by diminishing the supplies of clean water or degrading the quality
of that water. Water consumption is low in comparison with other
manufacturing sectors. Water is used from two sources as per below:
disposed of as process effluent. Any waste water with the potential to
adversely impact the environment is appropriately managed, controlled and
treated prior to release. For Dechra Manufacturing sites, this includes all
water used for cleaning purposes. In accordance with GMP requirements,
to prevent cross contamination and to enable product reconciliation, used
process equipment is generally drained, vacuumed or wiped clean prior to
being washed. This reduces contamination washed to the effluent stream.
During the 2021 financial year our Brazilian facility has started using water
from a rain water collection system for cleaning open areas. Effluent is
disposed of in a number of ways as shown below:
Water Consumption FY21 by Source of Water
Groundwater/borehole
Municipal supply/towns' water
0.3m
0.2m
0.1m
0.0m
3
s
e
r
t
e
M
Croatia,
Zagreb
Brazil,
Londrina HQ
UK,
Skipton
N’lands,
Bladel
Brazil,
Londrina
Farm
US,
Texas
Australia,
Somersby
Mexico,
Empresa
US,
Florida
Discharged directly to surface
water (e.g. river)
On-site water treatment plant
Municipal sewer
Water Effluent
3
s
e
r
t
e
M
0.3m
0.2m
0.1m
0.0m
Croatia,
Zagreb
Brazil,
Londrina HQ
UK,
Skipton
N’lands,
Bladel
Mexico,
Empresa
US,
Florida
Australia,
Somersby
US,
Texas
Water withdrawal compared to the previous year was lower, this was mainly
due to the lower production volumes of Mepron at Zagreb. Where water
usage has increased this has been largely linked to increased production
volumes. Water is used as an ingredient in products, for cleaning and
general production, and for cooling equipment and in processes. Any
contaminated water generated throughout the production process is
At Zagreb there is an on-site effluent treatment plant where settlement and
pH correction occurs prior to discharge. They also discharge cooling water
directly back to the river. The most frequent route of disposal for waste
water at the other sites is to the public sewer. In most countries a licence to
discharge is required and Manufacturing sites must monitor the effluent quality
and quantity to monitor that they are compliant with the requirements.
Energy
Greenhouse Gas Emissions
In order to determine our carbon emissions, we use the GHG Protocol Corporate Accounting and Reporting Standard and we report on emissions arising
from those sources over which we have operational control. Any acquisitions during the year are included from the first full month that they become part of
the Dechra Group. The disclosures below encompass:
Scope 1: includes emissions from combustion of fuel and operation of facilities;
Scope 2: includes emissions from purchased electricity, heat, steam and cooling; and
Scope 3: includes emissions from vehicles and from purchased electricity (which are not included in Scope 2) and, in the case of the 2020 and 2021
financial years, water.
1 July 2020
to 30 June
2021
7,027
5,261
1,934
14,222
23.3
% relates to
UK
6.5%
12.4%
4.2%
1 July 2019 to
30 June 2020
6,747
4,969
2,347
14,063
27.3
% relates to
UK
6.0%
10.1%
7.4%
1 July 2018 to
30 June 2019
5,521
3,712
2,420
11,653
24.2
Scope 1 (tonnes)
Scope 2 (tonnes)
Scope 3 (tonnes)
Total Carbon Footprint (tonnes of CO2e)
Intensity Ratio (tonnes of CO2e per £m)
66
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
Manufacturing
Our Manufacturing is the main contributor to our carbon footprint
representing 89.6% of our total carbon footprint, and in particular the
main contributors to Scope 1 are:
• Zagreb, due to the production of the nutrition supplement that is
manufactured at Genera. The coating spray solution is ethanol
based, and on completion of the coating, the ethanol vapour is
extracted into a recovery plant which recycles 95% of the ethanol
back into the production process. To meet environmental legislation,
the site has an ethanol recycling unit which alone consumes
approximately 60% of the energy utilised in this production area.
• Refrigerant gas losses contributed 21% of all Scope 1 emissions
(1,477 tonnes) in the 2021 financial year, with our Londrina site in
Brazil accounting for 86% of this total. This site produces vaccines,
and equipment containing refrigerant gases is used to control the
temperature of the working environment and is also necessary for
freeze drying and general process cooling applications. The site is
continually reviewing their strategy to manage equipment containing
refrigerant gases, including equipment management to prevent
leakages, renewal of older equipment and switching to refrigeration
processes that have a reduced environmental impact. This year the
site has installed a new boiler for industrial steam fuelled by liquid
petroleum gas, reducing the use of diesel.
Offices
Offices include our sales representatives and Scope 3 (which includes
vehicle emissions) account for 790 tonnes (2020: 1,159 tonnes) of
the 827 tonnes total. The number of electric vehicles within our fleet
is increasing year on year.
Warehousing
Our warehousing facilities contribute 618 tonnes of carbon (2020: 650
tonnes) and 67% of this is in relation to the fuel used in the buildings.
Our main facility in Uldum, Denmark (Dechra Service Center) is looking at
alternatives to fossil fuel, which have a lower environmental impact and
other energy improvements. During the 2021 financial year, the Uldum
warehouse handled 51,569 orders, an increase of 32% from 2020. The
increased activity was mainly due to a large number of new products
and incoming orders. The increased number of products has meant that
the storing capacity at Uldum had reached its maximum leading to the
use of external storage involving extra transportation and CO2 emissions.
Therefore, a 6,000 m2 warehouse extension was commenced during
the financial year. The warehouse will have a 2,000 m2 basement floor,
which will hold all cold store products at a constant temperature of two to
eight degrees centigrade. The advantage of building the cold store below
ground is the fact that the cooling process will be aided by the ground
temperature of eight degrees centigrade which will significantly reduce the
energy use of room cooling.
Kilowatt-Hour (kWh)
The kWh figures in the table below are the quantities of energy from
activities for which the Group is responsible worldwide and the annual
quantity of energy consumed resulting from the purchase of electricity,
heat, steam or cooling and vehicle fuel by the Group for its own use and
arising from those sources over which we have operational control.
1 July 2020
to 30 June
2021
31,522,041
17,185,952
6,610,981
55,318,974
% relates
1 July 2019
to energy
to 30 June
consumed
2020
in UK
6.3% 33,509,013
16.2% 16,647,278
0.9% 8,444,662
8.7% 58,600,953
% relates
to energy
consumed
in UK
6.3%
11.7%
6.1%
7.8%
Scope 1
Scope 2
Scope 3
Total kWh
Sustainable Energy
Solar Panels
Dechra has one of the largest solar panel installations of its type in Croatia,
and it has been operational since 28 June 2019. The solar panels have
generated 27.8% (2020: 29.6%) of the electricity used at the site.
HEP (kWh)
Solar power plant (kWh)
Total
% of solar
2021
Total
5,021,820
1,933,695
6,955,515
27.80%
2020
Total
5,366,447
2,254,633
7,621,080
29.58%
The management team at Zagreb have now taken a further significant
step towards improving the energy efficiency at the site by successfully
gaining accreditation to ISO 50001, the international standard for Energy
Management.
Improve energy effectiveness through transport initiatives
The Dechra Service Center (DSC) distributes goods to customers
worldwide. The majority of the pharmaceutical products received
by DSC are supplied from our manufacturing sites in Bladel, the
Netherlands and Skipton, the UK. The products from Bladel are
transported by road, whereas, the products from the UK are shipped by
sea and road. All road transport is only to be made with companies who
can guarantee that the vehicles used conform to the Euro6 standard
or higher. All sea transport agreements are with Shipping Conference
companies, which requires high standards for shipping.
The Global Transport team have identified the transatlantic shipments
from Europe to North America, Mexico and South America, as an
opportunity for significant reduction in CO2 emissions by making DSC
the central hub for all shipments in order to ship full container loads by
sea rather than shipping single pallet orders by air. For future planning of
transportation, the Global Transport team are working on a tool which
can calculate the CO2 emission on single order level, the new tool is
expected to be ready in the new financial year and will be accompanied
with a guidance for sustainable distribution planning and execution.
The increase in CO2 per kg is due to the increase in pharmaceutical
product shipments which are lighter in comparison to Nutrition products,
and the majority of pharmaceutical products require shipments to be
temperature controlled.
Shipments
Total Weight (GRT)
CO2 Outlet (kg)
CO2 per kg
2021
51,569
29,843,353
2,130,262
2020
39,067
19,304,216
1,684,872
2019
36,905
19,399,930
1,670,037
14.0
11.5
11.6
67
Stock Code: DPHStrategic Report Corporate Social
Responsibility continued
Taskforce for Climate-related Financial Disclosure (TCFD)
The TCFD was established to help identify the information needed by investors, lenders, and insurance underwriters to assess and price climate-
related risks and opportunities appropriately. The Taskforce structured its recommendations around four thematic areas that represent core elements
of how organisations operate: governance; strategy; risk management; and metrics and targets.
Recommendation
Governance
Disclose the organisation’s
governance around climate-related
risks and opportunities.
Strategy
Disclose the actual and potential
impacts of climate-related risks and
opportunities on the organisation’s
businesses, strategy, and financial
planning where such information is
material.
Risk Management
Disclose how the organisation
identifies, assesses, and manages
climate-related risks.
Metrics and Targets
Disclose the metrics and targets
used to assess and manage
relevant climate-related risks
and opportunities where such
information is material.
Dechra Approach
The Board is accountable for approving our ESG strategy and
overseeing the delivery of our climate-related objectives. Our Senior
Executive Team (SET) are responsible for delivering on these objectives
within their functional areas and business units. Each SET member will
have an ESG objective as part of their personal objectives within the
2022 financial year annual bonus plan.
The Board and the SET are supported by a cross-functional ESG
Committee who work with them to define our ESG strategy, and set
objectives and targets which are aligned with the United Nations
Sustainable Development Goals. To enhance our commitment towards
TCFD reporting further, a dedicated TCFD team has been appointed.
Our environment strategy and objectives are described in our
Corporate Social Responsibility Report.
Our policy is that we are committed to minimising the impact of our
operations on the environment by adopting responsible environmental
practices and complying with applicable environmental legislation.
We are committed to setting ambitious Science Based Targets and
help limit global warming to 1.5°C. We recognise the potential
business opportunities of:
• more efficient modes of transport and use of materials;
•
further improvements in packaging; and
• exploring increased opportunities on sites with production of
renewable energy (e.g. solar panels etc.).
We have identified the importance to acknowledge climate risks as
part of our normal risk management process. During the 2021 financial
year climate risk has been identified as a principal risk and has been
discussed with each SET member. Currently our actions are focused
on physical climate risks. We have created a risk assessment for
completion by every internal site. The sites were asked to identify
climate and natural disaster risks specific to their businesses now and
over a 15 year period. The assessment was circulated in July 2021.
The next step is for our dedicated TCFD team to assess the data
and discuss scenario planning with key management looking at both
physical and transitions risks.
Our environmental metrics and targets are described in our Corporate
Social Responsibility Report. The key targets are:
•
zero to landfill by 30 June 2025; and
• commitment to set a science-based target through the Science
Based Targets initiative, Ambitious Business Targets of 1.5 degree,
reaching net-zero emissions by 2050.
Further Information
Corporate Social Responsibility
(pages 52 to 75)
How the Business Manages Risk
(pages 76 to 78)
Emerging Risks (page 77)
Corporate Social Responsibility
(pages 54 and 55)
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Our
Business
Linkage to UN SDGs
33
Product Development
Projects
Our key focus areas are:
83,000
Academy
Users
• Ethical and Sustainable Products: the development and promotion
of products to improve animal health and welfare ethically and
sustainably;
• Veterinary Professionals: maintaining and improving the knowledge
and skills of veterinarians who prescribe and use our products; and
• Ethics: acting honestly and with integrity.
The Animal Welfare Committee aims to use a minimal number of animals
and that their treatment is humane, and Dechra inspects all facilities
which perform testing to confirm proper care and treatment of animals
is evident. Additionally, a full review of the study design will be approved
by the Animal Welfare Committee for clinical studies. In all instances only
animals with the disease the product is intended to treat will be used
and for clinical field trials, owner consent for the trial is obtained.
Pharmacovigilance
All employees, except production and logistics operatives, receive
pharmacovigilance training within one month of joining Dechra. This
is then verified by the pharmacovigilance e-learning module on Delta.
These employees undertake an annual pharmacovigilance refresher
training. The pharmacovigilance training outlines the procedure that
should be followed by all Dechra personnel if they are informed of a
product complaint.
Any time that Dechra receives a report of an adverse event occurring
after the administration of one of its products, the Company treats
the report seriously and it is Dechra’s obligation to review the case
to determine whether its product may have caused or contributed to
the adverse event. All suspect adverse reactions are reported to the
appropriate regulatory authorities.
Sustainable Packaging
We have previously reported on the steps our logistics operations have
taken to be more environmentally friendly. These steps have included using:
• 100% recycled paper for stuffing in shippers;
Ethical and Sustainable Products
• cardboard packing made from 70% to 90% recycled material; and
Product Development
It is our mission to develop products to improve animal welfare. In line
with that commitment, we carefully consider the responsible use and
humane treatment of animals in all of our required studies. When we
are required to conduct studies to achieve product registrations, we
minimise the number of animals to achieve the necessary outcomes.
Whenever possible, we will use information that can be derived from
existing publications in an effort to limit the number of studies needed.
The scientific purpose of involving animals in the development of our
products is reviewed and approved by Regulatory Agencies. For each
individual study, an Animal Welfare Committee approves the protocol.
We are committed to the following principles:
•
animals must be treated humanely with greatest consideration
given to their health and welfare and consistent with meeting the
necessary scientific objectives; and
• all animal studies should only be performed after considering
whether the numbers of animals can be reduced, replaced by in
vitro methods, or the procedures refined to minimise distress.
•
old newspapers as fillers in packaging.
In 2018 we changed the packaging of our cat food, reducing bag
height, using thinner bags and introducing a flat bottom, and in 2020
we made the same changes to our range of dog food. In total these
changes have saved 18,000 kg of plastic per year. All of our cardboard
cartons for our dry diets are now FSC certified. In 2020, we launched a
new range of organic diets including dry foods in recyclable bags. Our
new organic dry food bags are made from layers of the same type of
plastic but with a gas barrier between the layers. This gives packaging
that is both lighter and stronger than conventional bags but because it
is a single type of plastic, it can be recycled where collection systems
allow. The organic diets are the start and we are committed to having all
of our Specific diets in recyclable packaging by 2023.
During the 2021 financial year, Dechra has progressed the development
of our sustainable packaging strategy and established a packaging
committee, with representatives from research and development,
HS&E, manufacturing, supply management, sales and marketing. The
packaging strategy looks at each stage of the packing life cycle with the
aim of understanding how Dechra can reduce its environmental impact
when sourcing packaging materials through to the post consumer
choices during disposal/recycling.
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Corporate Social
Responsibility continued
Recycling
Raw Materials
Consumer use
and disposal
Design and
Development
Distribution
Manufacturing
During the 2022 financial year, we will focus on safeguarding biodiversity
and responsible forestry by implementing a framework to source
FSC certified fibre/paper, which will help achieve sustainable forest
management in the world, one of the targets of SDG 15 (Life on Land).
As a pharmaceutical company with a broad portfolio, our packaging
decisions are more complex due to the necessity of regulation in securing
product and administration safety as well as legal compliance. However,
we will endeavour to reduce packaging, and reduce the use of more than
one material in a dispensing carrier to improve recyclability and where
possible, use recycled materials in our packaging. We will work together
with our customers, veterinarians, as well as pet owners in order to
advocate awareness of the importance to recycle all material correctly
in order for it to be used again.
Sustainable Ingredients
All of the krill, fish oil and fish meal used in the dry Specific diets are
certified by either Marine Stewardship Council (MSC), IFFO RS Standard
or Friends of the Sea. We regularly review our top ten ingredients,
assessing the risk of scarcity and putting in place plans if we feel there is
a growing risk. We have recently started to use algae, in our new sardine
cat food, this ingredient is a rich source of omega-3 and has a number
of benefits:
There are a number of advantages to ring netting, and they are:
• by-catch is reduced because if the wrong species are in the net,
the whole catch can be released unharmed;
•
•
less seabed impact as the net does not come into contact with
the seabed; and
lower fuel consumption as the ring net is not towed through the
water and the vessels used are small inshore vessels.
Promotion of Products
To maintain the trust of veterinarians and the public, it is important that
we provide accurate, fair and objective information on our products and
medicines to support their safe and effective use. We do not make false
or misleading claims about our products.
We advertise and promote our products fairly using promotional materials
which contain balanced, accurate and truthful information. We only
promote based on the information included on the Summary of Product
Characteristics (SPC)/Product Insert which is a document that is approved
by the regulators as part of the marketing authorisation of each medicine.
We are members of the industry associations in the majority of countries
where we have our own sales teams, and follow the industry association’s
marketing and promotional guidelines in these countries. All our
promotional material is approved internally by an appropriately qualified
regulatory manager, technical product manager or veterinarian. In addition,
we train all customer-facing employees so that they have sufficient
product and disease knowledge to enable them to present information
on our products accurately and responsibly. We promote our products to
veterinary professionals and professional farming units, using promotional
materials approved by authorised persons independent of the sales force.
Promotional compliance is monitored by our country managers and
regional sales managers and the internal audit team also conduct a
regular review of compliance processes, and corrective actions are
taken to address any issues identified.
The volume and value of payments to animal health professionals is
very modest compared to payments to healthcare professionals by
the human pharmaceutical industry. We only make modest fee-for-
service payments to key opinion leaders who help us develop and
deliver educational materials events and to veterinarians who we use
to conduct clinical trials. There are currently no regulatory or industry
requirements to publicly disclose promotional violations or payments
to healthcare professionals.
• commercial algae production takes place onshore, so has no impact
on the marine environment;
•
it uses a highly controlled process that takes very little land and does
not use valuable drinking water or arable soil; and
• directly using algae as an ingredient helps preserve fish stocks.
Our Products
Our products are all targeted at providing veterinary professionals with
solutions for their customer needs. Our products can be divided into
four categories: Companion Animal Products (CAP), Food producing
Animal Products (FAP), Equine, and Nutrition.
As well as monitoring the provenance of our ingredients we are also
interested in how these ingredients are produced. The sardine used
in our new cat food are caught, in MSC certified fisheries, using a
low impact ring netting system. With trawl netting the nets are towed
through the water, whereas with ring netting, a net is used to encircle
a shoal of fish forming a deep curtain of netting suspended vertically
through the water, with the net then being drawn in.
We have developed a strong position in providing specialist and clinically
necessary novel CAP products, especially in internal medicine and
critical care products such as anaesthesia and analgesia, where we
have a wide range providing the veterinarian with an optimal solution
for most cases.
Our FAP products are positioned to match current best practice
prescribing habits and to meet the growing awareness for the need
for better animal welfare standards.
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Case Study
Use of digital training during COVID-19
Due to the restrictions imposed by COVID-19, our DVP International
business has been unable to visit and provide face to face training
with its distributors, and has had to switch to virtual events. It has
distributors in 68 countries, which has meant that the planning and
preparation of these events is vital as it has the added complexity
of offering training in different time zones, sometimes with language
barriers.
The multitude of customers that have been supported and trained
has varied from poultry veterinarians in South Africa, pig farmers in
Indonesia to companion animal vets in South Korea to name a few.
On top of this DVP International had to move its annual distributor
meeting online.
Over the past year, DVP International’s CAP team has conducted five
external webinars, three internal webinars and 28 internal product
trainings for its distributor partners. These sessions have focused
on new product launches such as Osurnia and Mirataz as well as
existing products like Cardisure, Prevomax and our endocrine and
dermatology ranges. The business has reached 828 veterinarians
with these external webinars. In April the first virtual CAP distributor
meeting was held for South Korean veterinarians focusing on
Vetoryl, Zycortal and Cosacthen from our endocrine portfolio. It was
hosted by an external speaker Dr. Imogen Schofield from the Royal
Veterinary College and speakers from Dechra.
All together 14 FAP training events have been held. The last event
was a two day SoluStab Webinar held in May 2021, which had
originally been planned as a live session.
Our relationship with veterinarians is key to our business and
therefore, we provided added value services in the form of educational
programmes and technical support to maintain and improve the
knowledge and skills of veterinarians who prescribe and use our
products. In addition, we provide scholarships to the next generation
of veterinarians.
Education
We deliver education through many channels, including conferences and
our online digital e-learning environment, the Dechra Academy.
During the year, the Dechra Academy undertook a rebrand. By listening
to our customers’ changing requirements we have developed a
new brand identity that is now in line with what they need. This also
enables our marketing and educational offering to be recognisable and
consistent across the globe. We were awarded “Best in Class” for CPD
that the veterinary community value by the UK CM research report.
Together with our new platform and modern learning design principles
we are consolidating our position as one of the best educational
resources for veterinary professionals. The Dechra Academy remains a
key differentiator for Dechra and our most important digital asset.
Noticeable achievements over the last 12 months are:
• courses available in 19 languages (2020: 18 languages);
• 83,000 registered users (2020: 68,000 registered users);
• 549 courses (2020: 334 courses);
• 2,400 average users per month (2020: 2,200 average users); and
• 19 local market domains (2020: four local market domains)
Our focus for the next 12 months will be the continued roll out of the
local domains, celebration of our 10 year UK Academy anniversary
and further integration with our other digital platforms. We are placing
a greater emphasis on the educational aspect of the Academy,
empowering our users and distinguishing ourselves from our
competitors.
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Corporate Social
Responsibility continued
CPD Events
During the financial year, we held 501 CPD events in North America
with 24,091 attendees. Our Mirataz pan-European live webinar was
translated simultaneously in eight languages, with 967 attendees across
15 countries, and 10,000 customers received training in Poland. Our
International business:
Ethics
• held two online distributor meetings, each spanning two days
of technical and marketing training, providing education to 75
participants;
•
in addition to local CPD activities, we have supported our
distributors with 8 online seminars delivering live education to
a further 591 veterinarians; and
• held the equivalent of 110 hours of distributor training.
Technical Support
With the wide range of products we offer, which includes those that treat
complex and less frequently occurring disorders such as Cushing’s and
Addison’s, the provision of a high quality veterinary technical support is
a service that the veterinarians truly value.
Veterinarians across the globe can email technical services or call the
telephone support lines provided in all the countries where Dechra
operates. Veterinarians call Dechra to discuss:
• diagnosis;
•
•
treatment options; and
the ongoing monitoring and management of conditions, particularly
those that are lifelong.
Our aim is to help veterinarians optimise the case management of each
individual patient, and some veterinarians will call a number of times for
support and advice on more complex cases.
In our smaller markets we will have a veterinarian responsible for providing
veterinary support. This compares to our larger markets where we have
more veterinarians that will collaborate across all sectors of the industry.
The UK has one of our largest teams, and in the last financial year this
team handled around 7,200 customer enquiries, 54% of which were
related to our endocrine treatments Vetoryl and Zycortal. In 2021, the US
Veterinary Technical Support team provided technical support for 9,740
new cases, with close to 40% specific to Vetoryl and Zycortal products.
In addition, these larger markets will also have field-based veterinarians
providing technical support and carrying out ‘lunch and learns’.
We are committed to acting responsibly and with integrity. We comply
with the laws and regulations and respect the traditions and cultures
of the countries in which we operate.
Honesty and Integrity
We are committed to acting responsibly and with integrity. This is
reflected through our Values. We expect our third parties to trade with
honesty and integrity, and to support this we have a Third Party Code
of Conduct, which communicates what we expect from our trading
partners in relation to health, safety and environmental standards,
internationally accepted standards of workers’ rights, use of child and
forced labour, ethical standards, anti-bribery and anti-corruption, and
compliance with relevant laws and regulations.
Our internal Code of Conduct has been updated during the financial
year, and an exercise has been completed to simplify and align the
Group Policies with the Code of Conduct which has resulted in the
development of a set of simple, one page policy documents. A Code of
Conduct e-learning course has been developed and was rolled out in
English at the end of June, it will be translated into eight languages by
the end of this calendar year. It will be a global mandatory course to be
completed on an annual basis.
Our employees are encouraged to report behaviours that are contrary to
our Code of Conduct via our How to Raise a Concern Procedure.
Anti-Bribery and Anti-Corruption
The development of the ABC legislative landscape elsewhere in the
world by the adoption of legal frameworks similar to those in the UK and
US, as well as increased enforcement by authorities across the globe,
means that ABC is, and continues to be, an area of key risk focus for
Dechra. Our continuous growth in new markets through product launch
and relationship development drives us to review and develop our
policies and procedures in this area on a continual basis.
Our commitment to conduct all business in an honest and ethical
manner is conveyed through our policies, procedures and training
programmes. Our zero tolerance approach to bribery and corruption
is communicated to our employee and third party network via such
programmes and we remain committed to acting professionally, fairly
and with integrity in all our business dealings and relationships wherever
we operate. We continue to implement and enforce effective systems
to counter bribery and corruption through our due diligence processes,
contractual arrangements and monitoring and audit programmes.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
All employees, officers and consultants are required to comply with
the Dechra ABC Policy and Code of Business Conduct, both of which
were updated during the 2021 financial year as part of an annual review.
The ABC Policy clearly defines what constitutes bribery and corruption,
outlines prohibited activities and provides guidance on what activities are
and are not allowed.
The Audit Committee and Senior Executive Team are kept regularly
informed of the ABC programme and Group Legal delivers face-to-face
updates and targeted training to different teams across the business,
addressing the areas of risk specific to their activities and the markets
in which they operate.
Every employee and sales agent engaged by Dechra is required to
complete our e-learning ABC course on an annual basis. A new course
was launched in February 2021, the content for which will be reviewed
and refreshed each year alongside our annual review of Group wide
policies. By June 2021, three months after its launch, 88% of our
employees had completed this course, which focuses on the principles
behind ABC laws and assists employees in identifying and mitigating
ABC risks.
Our third party onboarding programme is reviewed and developed
regularly throughout the year, taking into account feedback from
the business and the growth in our activities. Compliance with this
programme is monitored through regular audits. We continue to utilise,
and see the benefits of, our ABC and Sanctions screening software
which assesses Dechra’s new and existing third party network on
a continuous basis. In the next financial year we will develop a new
platform which will streamline the ongoing due diligence review of
existing third parties, thereby allowing resource to be dedicated to the
more detailed analysis and mitigation of ABC risk across the Group.
Human Rights
Dechra is committed to upholding and respecting human rights both
within our business and from our suppliers. During the year, the Board
approved a Human Rights Policy, a copy of which can be found on our
website. The following sets out our Human Rights principles which are
all embedded into our Code of Conduct for employees and our Third
Party Code of Conduct for our suppliers and customers.
We do not use forced, bonded or indentured labour or involuntary
prison labour or take part in human trafficking. We have a zero-tolerance
approach to modern slavery and we are committed to acting ethically
and with integrity in all our business dealings and relationships. We
are also committed to implementing and enforcing effective systems
and controls to prevent modern slavery from taking place anywhere
in our own business or any of our supply chains. Our Modern Slavery
Statement can be found at www.dechra.com.
• We do not use child labour. We comply with international standards
on the minimum age for employment. The minimum age for
employment is 16 years of age. However, if the local minimum
age law stipulates a higher age for work or mandatory schooling,
then the higher age will apply.
• We treat people fairly and do not tolerate bullying and harassment.
We do not discriminate for reasons such as age, gender, sexual
orientation, marital status, race, colour, ethnicity, disability, religion,
political affiliation or union membership.
• We provide a workplace free of harsh and inhumane treatment,
including any sexual harassment, sexual abuse, corporal
punishment, mental or physical coercion or verbal abuse of workers,
and no threat of any such treatment.
• We recruit and promote people on the basis of their personal
ability, contribution and potential. We are committed to promoting,
supporting and maintaining a culture of fairness, respect and equal
opportunity for all.
• We are committed to fair employment practices and comply with
national legal requirements regarding wages, including minimum
wages, overtime hours and mandated benefits, and working hours.
• We provide a safe working environment for those who work for us
or with us. We reinforce good safety management practices and
maintain awareness of safe ways of working.
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Stock Code: DPHStrategic Report Corporate Social
Responsibility continued
Our
Community
Linkage to UN SDGs
£72k
Cash Donations
£310k
Product Donations
We believe that it is important to give back to the communities in which
we live and operate. Our community ethos is aligned with our business
Purpose and Values, in particular, our Relationships and Enjoyment
Values. Our Community pillar focuses on:
• Community Activities
• Community Donations
Community Activities
We encourage our employees to engage in community activities, in
particular, volunteering in the fields of animal welfare, human service
and environmental stewardship. There is a particular focus on animal
welfare driven by the passion of our employees. We have committed to
74
giving our employees one day per year in the community. Unfortunately,
a lot of our community activities this year have been postponed due to
the social distancing restrictions imposed by COVID-19. However, the
following activities were undertaken:
• employees in Kansas and Portland, USA held two remote activities
early in the year; a walk to raise money for Not One More Vet (NOMV)
who support the mental wellbeing of veterinary professionals and
students, organised by the Veterinary Technical Services team in
Kansas, and a telethon to raise money for Good Shepherd Food
Bank in Portland;
•
in Fort Worth, USA approximately 60 hours of volunteer hours were
spent distributing essential personal care items during COVID-19 to
clients of the Fort Worth Hope Center;
• a group of 25 volunteers from the Nordics connected virtually while
Plogging, an event that combines exercise jogging with picking up
rubbish, and collected 197 kilos of rubbish;
• a community day for 25 employees from our Den Bosch office
providing much needed general maintenance at Oosterhoeve, a
farm caring primarily for older animals that is a safe haven; a place
that offers positivity, support and relaxation to those who need it;
and
•
in Belgium, employees held a community day in a retirement centre
for horses. The team helped out cleaning the pastures, building a
hay rack, and groomed the horses.
Community Donations
For the last ten years we have operated a Group Donations scheme, whereby
we encourage all employees to nominate a charity or non-commercial
organisation for a charitable donation. We decided that we would give the
2021 financial year’s donation to charities related to the effects of COVID-19.
A sum of money was allocated to each country in which we have a
manufacturing organisation as Simon Francis, Group Manufacturing and
Supply Director, sadly passed away from COVID-19 last year.
Our teams in Skipton, Zagreb, Bladel, Londrina and Australia/New
Zealand were each awarded the local equivalent of £10,000 and
Melbourne and Fort Worth were awarded the local equivalent of £5,000.
Donations included monetary contributions and the supply of food
parcels, pet food and hygiene products.
We have also donated €10,000 to Tour de Fundacja, a charity that funds
the holiday rehabilitation of children with disabilities in Poland.
In addition to the annual Group Donations, each business unit has the
discretion to allocate funds and/or products to local community charities
and/or animal welfare charities.
Dechra Veterinary Products (DVP) EU donated €10,000 to Voedselbank
Den Bosch, in the Netherlands. The charity helps more than a million
people who live below the poverty line, by temporarily providing them
with food parcels. Dechra Veterinary Products (DVP) North America
donated $10,000 each to two area food banks, Harvesters Community
Food Network serving the greater Kansas City area, and Good
Shepherd Food Bank serving the greater Portland area.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report
For the 2022 financial year, we will no longer run a centralised donations
programme instead we will allocate funds to our sites to enable
decisions to be made by Regional Giving Communities. During the
2021 financial year, we ran a pilot in the USA to establish and test the
framework of Regional Giving Committees. The US Regional Giving
Committee was made up of 23 employees, representing the various
businesses within the USA. Committee members offered suggestions
of their own, and then voted to narrow the selections to a reasonable
number of organisations given the budget. Three organisations were
awarded $3,000 each, and five organizations were awarded $1,200
each. Selections covered each of the three community pillars, Animal
Welfare, Human Service, and Environmental.
The majority of other product donations are short dated product which
otherwise would have had to be destroyed.
Case Study: Earthquake, Croatia
Dechra provided vermin control products
to support public health in affected areas
On 29 December 2020, an earthquake of magnitude 6.4 Mw hit
central Croatia, with an epicenter located roughly 3 km (1.9 mi) west-
south west of Petrinja – the strongest recorded in the region in 140
years. The earthquake was also felt in the Croatian capital, Zagreb,
as well as in neighbouring Bosnia and Serbia and as far away as Italy.
In Petrinja and neighbouring towns, there were unfortunately seven
deaths and many more injured and left homeless due to structural
damage with the loss of electricity and water supply.
One of the key challenges post an earthquake is vermin control.
This is to ensure public health is not adversely affected through the
use of contaminated water supplies. In response, our Croatian team
submitted a suggested list of products to donate to the Croatian
Government’s department of agriculture, who coordinated the crisis
response by reviewing suggested donations, letting each donor
know what would be beneficial and which recipients would benefit.
The net result was a Dechra donation of 38 pallets of stock, the
majority of which was Brodolin Blok, a vermin control product,
between the months of March and June. We hope our contribution
in this significant crisis helped in a small way to support a return to
normal life for the affected population.
Group Donations
Group
cash donations
Business units
cash donations
Business units
product donations
£56,564
£15,365
£309,595
75
Stock Code: DPHStrategic Report 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 provide
reasonable but not absolute assurance that the Group will be successful in delivering its objectives.
Board
Oversight of the
Group’s risk
management
and internal
controls
IDENTIFY
Audit Committee
Review the effectiveness
of the risk management
and internal audit
framework
R
O
T
I
N
O
M
Management
Structure
Policies and Procedures
Business Planning
Operational Level Controls
• Product Portfolio Reviews • Lifecycle Management
• Pricing Policies • Product Supply
• Financial Controls • Quality Assurance
• Pharmacovigilance
Dechra Values
A
S
S
E
S
S
Senior
Executive
Team
Owners of the risk
management process
and responsible for
embedding risk
management into
business units
Internal
Audit
Independent
assurance on the
design and operation
of the internal control
framework
MITIGATE
Business Units
Identification,
mitigation and
monitoring of risks
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Risk Management Process
Our strategy informs the setting of objectives across the business and
is widely communicated. Strategic risks and opportunities are identified
as an integral part of our strategy setting process, whilst operational,
financial, compliance and emerging risks are identified as an integral
part of our functional planning and budget setting processes.
Sales have continued to grow throughout the financial year against
the backdrop globally of COVID-19 limiting the impact on business
performance, whilst recognising that risks around our people and
travel restrictions still exist. Given the developing global responses
to COVID-19 we remain cautious and will continue to monitor and
respond to further changes where needed.
The Board oversees the risk management and internal control
framework and the Audit Committee reviews the effectiveness of
the risk management process and the internal control framework.
Our Senior Executive Team (SET) owns the risk management process
and is responsible for managing specific Group risks. The SET members
are 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.
SET members present their risks, controls and mitigation plans to the
Board for review on a rolling programme throughout the year, whilst
the Board undertake a full review of the risk management process
biannually. The SET is responsible for conducting self-assessments of
their risks and the effectiveness of their control processes. Where control
weaknesses are identified, remedial action plans are developed, and
these are included in the risk reports presented to the Board.
Internal Audit coordinate the ongoing risk reporting process and provide
independent assurance on the internal control framework.
Emerging Risks
Emerging risks are new risks that are unlikely to impact the business
in the next year but have the potential to evolve rapidly over a longer
term and could have a significant impact on our ability to achieve our
objectives. They may develop into key risks or may not arise at all.
As part of our risk management process, both the Board and SET are
tasked with identifying and assessing our emerging risks. These are then
monitored on an ongoing basis and reviewed alongside existing risks.
COVID-19
We have continued to operate our risk management and control
processes effectively throughout the COVID-19 pandemic, including
a formal assessment of emerging risks, climate risk and the potential
longer-term impact of COVID-19 on the business.
The operational impact of COVID-19 on the business during the last
financial year and the actions we have taken in response are described
in various parts of the Strategic and Governance Reports. Whilst the
virus has had an impact on how we conduct our operational activities,
we have continued to operate successfully throughout the pandemic
in all of our worldwide locations. We have not needed to use any
government support or job retention schemes, and have maintained
and in some cases increased our headcount during the year.
Dechra Culture
The Dechra Values are the foundation of our entire business culture
including our approach to risk management and control. The Board
expects that these Values should drive the behaviours and actions of
all employees. We encourage an open communication style where it is
normal practice to escalate issues promptly so that appropriate action
can be taken quickly to minimise any impact on the business.
Internal Control Framework
Our internal control framework is designed to ensure:
• proper financial records are maintained;
•
the Group’s assets are safeguarded;
• compliance with laws and regulations; and
• effective and efficient operation of business processes.
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 into
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 and How to Raise a Concern;
• Delegation of Authorities;
• Dechra Finance Manual, including Tax and Treasury policies;
• Anti-Bribery and Anti-Corruption;
• Data Protection;
• Health and Safety;
• Sanctions; and
• Charitable Donations.
Strategy and Business Planning
We have a five-year strategic plan which is developed by the SET and
endorsed 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.
77
Stock Code: DPHStrategic Report How the Business
Manages Risk continued
Operational Controls
Our key operational control processes are as follows:
• Product Pipeline Reviews: We review our pipeline regularly to
identify new product ideas and assess the fit to our product
portfolio, prioritise development projects, review whether products in
development are progressing according to schedule, and assess
the expected commercial return on new products.
Improvements in 2021
We have continued to strengthen and improve our governance and
control processes and the following changes have been implemented:
• New governance and oversight processes to provide transparency
of performance, decisions and actions across the manufacturing
and supply network.
• Recruitment of a new Group Quality Director to review and
• Lifecycle Management: We manage and monitor lifecycle management
coordinate the Group approach to quality.
activities for our key products to meet evolving customer needs.
• Recruitment of a new Internal Network Director to strengthen the
• Pricing Policies: We manage and monitor our national and European
management of our internal manufacturing sites.
pricing policies to deliver equitable pricing for each customer group.
• Product Supply: We continue to develop our demand forecasting
and supply planning processes, with monthly reviews of demand
and production forecasts, inventory controls, and remediation plans
for products that are out of supply.
• Quality Assurance: Each of our manufacturing sites has 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 and product
complaints related to the use of our products are reported and dealt
with promptly.
• Financial Controls: Our controls are designed to prevent and detect
financial misstatement or fraud and operate at three levels:
− Entity Level Controls performed by senior managers at Group
and business unit level;
− Month end and year end procedures performed as part of our
regular financial reporting and management processes; and
− Transactional Level Controls operated on a day-to-day basis.
The key controls in place to manage our principal risks are described
in further detail on pages 79 to 82. 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.
• We have continued to make improvements to our manufacturing,
quality and supply processes, with additional investments in people
and production facilities.
• Refreshed and relaunched our Code of Business Conduct, with
a commitment to host our How to Report a Concern Procedure
externally.
• Expansion of our financial control framework ahead of the proposed
government BEIS report on audit and corporate governance, with a
working group established to shape our preparation; and
• Our Environmental, Social and Governance (ESG) strategy has been
enhanced with the appointment of a Group Sustainability Director,
with an assessment underway to assess our climate risks further.
Plans for 2022
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. Our Manufacturing and Supply processes continue to be
the primary focus area for 2022.
We also plan to make further improvements and enhancements to our
financial control framework and our Group policies.
78
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Understanding Our
Key Risks
Principal Risks
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, cybersecurity, IT
systems failure and non-compliance with legislation. The risk
profile below therefore details the ten principal risks that are
specific to our business and provides information on:
•
their prioritisation;
• how they link to Group strategy;
•
their potential impact on the business; and
• what controls are in place to mitigate them.
h
g
H
i
t
c
a
p
m
I
w
o
L
Low
3
2
1
6
7 10
5
4
9
8
Likelihood
High
Risk increasing
Risk stable
Risk decreasing
New
Link to
Strategic
Growth
Driver and
Enabler
Risk
Potential Impact
Control and Mitigating Actions
Trends
a
b
c
1 Market Risk:
The growth of veterinary buying groups
and corporate customers impacts the
distribution landscape.
We sell and promote primarily to veterinary
practices and distribute our products through
wholesaler and distributor networks in most
markets.
In a number of mature markets, veterinarians
have established buying groups to
consolidate their purchasing, and corporate
customers are continuing to expand.
2 Competitor Risk:
Competitor products launched against
one of our leading brands (e.g. generics
or a superior product profile).
We depend on data exclusivity periods or
patents to have exclusive marketing rights
for some of our products.
Although we maintain a broad portfolio of
products, our unique products like Vetoryl
and Felimazole have built a market which
continue to be attractive to competitors.
a
b
c
The growth of corporate customers
and buying groups represents
an opportunity to increase sales
volumes and revenue but may
result in reduced margins.
We manage and monitor our national and European
pricing policies to deliver equitable pricing for each
customer group.
Our relationships with larger customers are managed
by key account managers.
Our marketing strategy is designed to support
veterinarians in retaining customers by promoting
the benefits of our product portfolio in our major
therapeutic areas.
Revenues and margins may
be adversely affected should
competitors launch a novel or
generic product that competes
with one of our unique products
upon the expiry or early loss of
patents.
Costs may increase due to
defensive marketing activity.
We focus on lifecycle management strategies for
our key products such that they can fulfil evolving
customer requirements.
Product patents are monitored, and defensive
strategies are developed towards the end of the
patent life or the data exclusivity period.
We monitor market activity prior to competitor products
being launched and develop a marketing response
strategy to mitigate competitor impact.
79
Stock Code: DPHStrategic Report Understanding Our
Key Risks continued
Risk
Potential Impact
Control and Mitigating Actions
Trends
3 Product Development
and Launch Risk:
Failure to deliver major products either
due to pipeline delays or newly launched
products not meeting revenue expectations.
The development of pharmaceutical
products is a complex, risky and lengthy
process involving significant financial, R&D
and other resources.
Products that initially appear promising may
be delayed or fail to meet expected clinical
or commercial expectations or face delays
in regulatory approval.
It can also be difficult to predict whether
newly launched products will meet
commercial expectations.
4 Supply Chain Risk:
Inability to maintain supply of key products
due to manufacturing, quality or product
supply problems in our own facilities or
from third party suppliers.
We rely on third parties for the supply
of all raw materials for products that we
manufacture in-house. We also purchase
many of our finished products from third
party manufacturers.
A succession of clinical trial failures
could adversely affect our ability to
deliver shareholder expectations
and could also damage our
reputation and relationship with
veterinarians.
Our market position in key therapeutic
areas could be affected, resulting in
reduced revenues and profits.
Where we are unable to recoup
the costs incurred in developing
and launching a product this
would result in impairment of any
intangible assets recognised.
Raw material supply failures may
cause:
•
increased product costs due
to difficulties in obtaining
scarce materials on
commercially acceptable
terms;
• product shortages due to
manufacturing delays; or
• delays in clinical trials due to
shortage of trial products.
Shortages in manufactured
products and third party supply
failures on finished products may
result in lost sales.
We have now addressed the
majority of our in-house quality
and supply challenges which
contributed to an increased
supply chain risk last year, and
our enhanced Governance and
controls in this area have seen
a reduction in the risk here.
Potential new development opportunities are assessed
from a commercial, financial and scientific perspective
by a multi-functional team to allow senior management
to make decisions on which ones to progress.
The pipeline is discussed regularly by senior management,
including the Chief Executive Officer and Chief Financial
Officer. Regular updates are also provided to the Board.
Each development project is managed by project leaders
who chair project team meetings.
Before costly pivotal studies are initiated, smaller proof of
concept pilot studies are conducted to assess the effects
of the 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 by a new product launch team.
The Group has detailed market knowledge and retains
close contact with customers through its management
and sales teams which are trained to a high standard.
We monitor the performance of our key suppliers and
act promptly to source from alternative suppliers where
potential issues are identified.
The top ten Group products are regularly reviewed
in order to identify the key suppliers of materials or
finished products.
A dedicated external network team exist who manage
and support our CMOs to deliver quality products to
our regulatory specifications.
Demand forecasting and supply planning processes,
with monthly reviews of demand and production
forecasts, inventory levels, and remediation plans for
products that are out of supply.
We plan to increase our working capital and carry
higher levels of safety stock on critical raw materials,
and finished products.
Processes are in place to monitor and improve product
robustness, including Quality and Technical analyses
of key products and engagement with internal and
external Regulatory stakeholders.
A business continuity plan is in place at Skipton,
Zagreb and Uldum, and similar plans are being
developed for other sites.
A project is in progress to review and improve our
supply planning processes.
Link to
Strategic
Growth
Driver and
Enabler
a
b
c
80
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Link to
Strategic
Growth
Driver and
Enabler
a
b
c
Risk
Potential Impact
Control and Mitigating Actions
Trends
5 Regulatory Risk:
Failure to meet regulatory requirements.
We conduct our business in a highly
regulated environment, which is designed
to ensure the safety, efficacy, quality,
and ethical promotion of pharmaceutical
products.
Failure to adhere to regulatory standards
or to implement changes in those
standards could affect our ability to
register, manufacture or promote our
products.
Delays in regulatory reviews and
approvals could impact the timing
of a product launch and have
a material effect on sales and
margins.
Any changes made to the
manufacturing, distribution,
marketing and safety surveillance
processes of our products may
require additional regulatory
approvals, resulting in additional
costs and/or delays.
Non-compliance with regulatory
requirements may result in delays
to production or lost sales.
6 Acquisition Risk:
Identification of acquisition opportunities
and their potential integration.
Identification of suitable opportunities and
securing a successful approach involves
a high degree of uncertainty.
Acquired products or businesses may fail
to deliver expected returns due to over-
valuation or integration challenges.
7 People Risk:
Failure to resource the business to achieve
our strategic ambitions, particularly on
geographical expansion and acquisition.
As Dechra expands into new markets
and acquires new businesses or science,
we recognise that we may need new
people with different skills, experience and
cultural knowledge to execute our strategy
successfully in those markets and business
areas.
Failure to identify or secure suitable
targets could slow the pace at
which we can expand into new
markets or grow our portfolio.
Acquisitions could deliver lower
profits than expected or result in
intangible assets impairment.
Failure to recruit or develop quality
people could result in:
•
•
•
capability gaps in new markets.
challenges in integrating new
acquisitions; or
overstretched resources.
This could delay implementation
of our strategy and we may not
meet shareholders’ expectations.
The Group strives to exceed regulatory requirements
and ensure that its employees have detailed experience
and knowledge of the regulations.
Manufacturing and Regulatory teams have established
quality systems and standard operating procedures in place.
A dedicated External Network Quality Director
supports our CMOs in complying with our regulatory
specifications.
Regular contact is maintained with all relevant
regulatory bodies in order to build and strengthen
relationships and facilitate good communication lines.
The Regulatory and Quality teams update their knowledge
of regulatory developments and implement changes in
business procedures to comply with new requirements.
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.
We have defined criteria for screening acquisition
targets, and we conduct commercial, clinical, financial,
environmental and legal due diligence.
The Board reviews acquisition plans and progress
regularly and approves all potential transactions.
The SET manages post acquisition integration and
monitors the delivery of benefits and returns through
a defined process. Whilst acquisition activity has
reduced across the year, our defined processes and
acquisition team strength have seen a reduced risk
against a backdrop of no global travel.
The Group HR Director reviews the organisational
structure with the SET and the Board twice a year
to confirm that the organisation is fit for purpose
and to assess the resourcing implications of planned
changes or strategic imperatives.
A development programme is in place to identify
opportunities to recruit new talent and develop existing
potential. A new talent acquisition team and applicant
tracking software have been embedded in the year.
81
Stock Code: DPHStrategic Report Understanding Our
Key Risks continued
Link to
Strategic
Growth
Driver and
Enabler
Risk
Potential Impact
Control and Mitigating Actions
Trends
8 Antimicrobials Regulatory
Risk:
a
b
c
Continuing pressure on reducing
antimicrobial use.
The issue of the potential transfer of
antibacterial resistance from animals to
humans is subject to regulatory discussions
globally.
In the EU new veterinary regulations are likely
to come into force in January 2022 to reduce
the use of antimicrobials in animals.
9 Retention of People Risk:
a
b
c
Failure to retain high calibre, talented
senior managers and other key roles
in the business.
Our growth plans and future success are
dependent on retaining knowledgeable and
experienced senior managers and key staff.
10 Climate:
a
b
c
Severe weather patterns caused by climate
change or natural disaster causes damage
to manufacturing or distribution facilities
impacting our ability to meet customer
demand.
Reduction in sales of our
antimicrobial product range.
Our reputation could be adversely
impacted if we do not respond
appropriately to government
regulations and recommendations.
Regular contact is maintained with relevant veterinary
authorities to enable us to have a comprehensive
understanding of regulatory changes.
We strive to develop new products and minimise
antimicrobial resistance concerns.
We communicate appropriate antimicrobial use in line
with best practice.
Loss of key skills and experience
could erode our competitive
advantage and could have an
adverse impact on results.
Inability to attract and retain
key personnel may weaken
succession planning.
The Nomination Committee oversees succession
planning for the Board and the SET.
Succession plans are in place for the SET together
with development plans for key senior managers.
Remuneration packages are reviewed on an annual
basis in order to help ensure that the Group can
continue to retain, incentivise and motivate its
employees.
Damage to our facilities as a result
of climate change could impact
our abilities to both supply and
manufacture product, which may
weaken customer confidence and
impact performance, both over a
shorter and longer term. Natural
disaster could impact on local
employability and the communities
in which our sites are based.
The Sustainability Director and Risk team are
engaged identifying the current risk threats and
opportunities across the Group sites.
N
Whilst there has been previous work in this area,
the Group has a renewed focus and commitment
towards its ESG responsibilities.
Key to Strategic Growth Drivers:
Key to Strategic Enablers:
Key to Risk Trend:
Pipeline Delivery
a
b
c Portfolio Focus
Technology
People
Geographical Expansion
Manufacturing and Supply Chain
Acquisition
ESG
Increased Risk
Decreased Risk
No Change
N New
82
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comStrategic Report Viability
Statement
Assessment of Prospects
Dechra has consistently delivered on its strategic objectives resulting
in a strong track record of growth. The Group’s strategy remains
unchanged and is set out on pages 20 to 23 of the Strategic Report.
The key factors supporting the Group’s prospects are explained
throughout the Annual Report and are summarised below:
• a clear strategic focus;
• a growing global animal health market;
• a clear portfolio focus with strong market positions in a number
of key therapeutic areas;
• a strong development pipeline and a track record of pipeline
delivery;
• manufacturing flexibility, with a wide range of dosage forms and
small and large scale production batches;
• an entrepreneurial and experienced management team;
• a recognised brand with a strong reputation for providing high
quality products with technical support;
• an expanding international focus;
•
talented people and expertise; and
• a sound track record of successful acquisitions to expand our
product portfolio and geographic reach.
The Board believes that the Group has adequate resilience due to its
diversified product portfolio, its geographic footprint, a strong balance
sheet, healthy cash generation and access to external financing, which
includes committed facilities.
The Assessment Process and Key Assumptions
The Group’s prospects are assessed primarily through its strategic and
financial planning processes over a five year time period. The strategic
plan is supported by a five year financial plan, both of which are updated
annually by the SET and reviewed by the Board. The Board also reviews
the Group’s principal risks on a rolling basis throughout the year, based
on updates from SET members.
The planning process considers risks to sales and cost forecasts for
each part of the Group, the Group’s consolidated income and cash
flow forecasts, and includes key assumptions to support longer term
projections. The financial plans are reviewed to confirm that adequate
financing facilities are in place for the period of the plan.
Progress against financial budgets, forecasts and key business
objectives are reviewed through monthly business performance reviews
at both Group and business unit levels. Mitigating actions are taken
to address under-performance. The latest updates to the plan were
reviewed in June 2021 and considered the Group’s current position,
its future prospects and reaffirmed the Group’s stated strategy.
Assessment of Viability and Time Period
The Board has determined that a three year period to 30 June 2024
is an appropriate period over which to provide its viability statement.
This time period is supported by the Group’s budget process, which
includes detailed projections for the next two financial years, and
broader projections from the third year of the five year strategic planning
process. The Board believes this provides a sound framework for
providing reasonable assurance on the Group’s viability given the
inherent uncertainty associated with longer term forecasts.
The Board’s assessment has been made with due regard to the Group’s
current position, its future prospects, adequacy of financing facilities, the
strategic plan and the management of the Group’s principal risks. The
viability assessment takes account of all the committed expenditure of
the Group.
Although the output of the Group’s strategic and financial planning
processes reflects the Board’s best estimate of the future prospects
of the business, the Group has also conducted stress testing to assess
the liquidity impact of a range of alternative scenarios.
These scenarios have been developed by considering those principal
risks that could have a material impact on viability. The potential
impact of each principal risks is described on pages 79 to 82 of the
Strategic Report. A number of severe but plausible stress tests have
been conducted on these areas including a significant pipeline delay,
significant profit reduction on the top ten products, and loss of key
high margin products alongside acquisition spend. A combination
of the individual scenarios and an overall reverse stress test on the
Group’s borrowing facilities and covenant commitments have also been
considered.
The Board believes the results of the stress testing demonstrate that
the Group should be able to withstand the impact in each case due to
its strong cash generation, strong balance sheet, and existing financing
arrangements.
Viability Statement
Based on the results of this analysis and the assumptions used in the
Group’s planning process, the Board has a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities as
they fall due over the three year period from 30 June 2021.
83
Stock Code: DPHStrategic Report Our FAP portfolio is
positioned to match
current best practice
prescribing habits
Read more about Food producing
Animal Products on page 14.
Our Governance
Letter from the Chairman on Governance
Board of Directors and Senior Executive Team
Board Leadership and Company Purpose
Division of Responsibilities
Composition, Succession and Evaluation
Audit, Risk and Internal Control
Directors' Remuneration Report
Directors' Report – Other Disclosures
Statement of Directors' Responsibilities
86
88
92
99
103
112
119
147
149
Letter from the
Chairman on Governance
Tony Rice | Non-Executive Chairman
“ The Board remains committed to
maintaining high standards of
corporate governance.”
86
Dear Shareholder
On behalf of the Board, I am pleased to present Dechra’s Governance
report for the year ended 30 June 2021.
Board Appointments
We welcomed Denise Goode as a Non-Executive Director in April 2021.
Denise brings a wealth of financial, commercial and life science industry
experience, both from her extensive career as a senior executive and
from board roles held since 2008. It is intended that Denise will be
appointed as Chairman of the Audit Committee upon the retirement of
Julian Heslop as Audit Committee Chairman following the 2021 Annual
General Meeting. Julian will remain on the Board as a Non-Executive
Director. Denise’s biographical details can be found on page 89.
Denise has been appointed as a member of the Audit, Nomination
and Remuneration Committees.
You will have seen the notification in the preliminary results
announcement of my intention to step down as Chairman once we
can appoint a successor. It has been my privilege and pleasure to work
with Ian, his management team and the Board these past five years as
Dechra has continued to evolve and grow and deliver great products
and service to our customers and strong returns to our shareholders.
This is a suitable time for me to leave to devote more time to my family
and my other business and charitable activities.
Purpose and Culture
Our Purpose is clearly defined and underpinned by our Culture and
Values. Further details can be found on pages 4 and 5, and 93 and 94.
Our Values, entrepreneurial attitude and agile approach to the way we
do things are the backbone of our Culture. We expect our people to
make a difference by working together and support them by providing
clear guidance on expectations.
During the year, the OneDechra training module has been developed
to facilitate a deep dive into our Culture and Values, providing a platform
for employees to explore how the Values underpin everything that we
do and drive decision making.
Our Values are supported by our Code of Conduct, which has been
updated to include a set of simple one page policy documents. A Code
of Conduct e-learning course has been developed and is ready to be
rolled out globally on an annual basis.
Stakeholders and Section 172 Companies Act
The impact of our decisions on our key stakeholders has always been
prevalent in our decision making. Details of how we consider stakeholders
in the Board’s decisions and approvals of material transactions, our
engagement with stakeholders and our approach to section 172 of the
Companies Act 2006 can be found on pages 48 to 50 and 95 to 97.
COVID-19
The measures that were put in place to enable front line employees to
operate safely in our 2020 financial year have remained; this has allowed
all manufacturing sites, logistic sites and laboratories to remain open and
continue to function effectively. All employees who can work from home
have done so successfully. Our employees are now slowly returning,
where it is safe to do so, to our offices initially on a cohort basis and to
meeting our customers in their practices.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance The continuity of product supply and support for our customers has
remained a key priority for Dechra during the pandemic. We invested
significant resources to maintain an adequate supply of raw materials
and finished goods to meet the needs of our customers. In addition, we
expanded our webinar programme in our Academy and provided CPD
events and conferences virtually.
Board Activities
The current financial year has been busy for Dechra operationally and
we have approved important investments in both manufacturing and
logistics. We have secured the rights to market Tri-Solfen® in Australia
and New Zealand and we have acquired a further 1.5% of the issued
share capital of Medical Ethics Pty Ltd. As a result, Dechra now has the
rights to sell Tri-Solfen®, an important pain management product, in all
markets globally as the product becomes approved.
Compliance with the Code
The UK Corporate Governance Code 2018 (the Code) establishes the
principles of good governance for companies; this Governance section
of the 2021 Annual Report describes how the Company has applied
these principles and complied with the provisions, as well as how it
meets other relevant requirements, such as the provisions of the Listing
Rules and Disclosure and Transparency Rules (DTR) of the Financial
Conduct Authority.
In the opinion of the Directors, the Company has complied with the Code
throughout the period, with the exception of provision 38 of the Code. In
respect of this provision, the steps intended to be taken to ensure more
effective alignment of Executive Director’s pension contributions to those
available to the workforce are set out on page 125. From 1 July 2021, two
of our Executive Directors’ pension contributions will be at 8%, and the
Chief Financial Officer’s pension contribution will be at 6% matching the
minimum offered to our UK workforce. The Chief Financial Officer and UK
workforce pension contributions will increase to 8% on 1 July 2022.
The Board remains committed to maintaining high standards of
corporate governance. The Code can be found at www.frc.org.uk.
Relations with Shareholders
The Annual General Meeting will be held in Northwich on 21 October
2021. All members of the Board are scheduled to attend the Annual
General Meeting (the Meeting) and the Chairmen of the Audit,
Remuneration and Nomination Committees will be available to
answer shareholders’ questions at the Meeting.
Looking Forward
Finally, should you have any questions in relation to this report, please
feel free to contact me or the Company Secretary.
Tony Rice
Non-Executive Chairman
6 September 2021
Board Leadership and
Company Purpose
The Board recognises that excellence in corporate governance is
important in order to generate and protect value for our investors.
Our governance structure is designed to maintain effective control
and oversight of our business whilst at the same time promoting the
entrepreneurial spirit that has underpinned Dechra’s success to date.
Details in relation to our prudent and effective controls can be found
on page 94, stakeholder engagement on pages 95 to 97 and culture,
purpose and values on pages 93 and 94.
Division of Responsibility
We have a strong and balanced Board with a range of complementary
skills to support the strategic and operational direction of the Group.
The Senior Executive Team (SET) has the responsibility for the overall
leadership of the Group, driving the successful implementation and
execution of the strategy.
Composition, Succession
and Evaluation
The report from our Nomination Committee on pages 103 to 111
sets out the appointment process, its approach to succession
for appointments to the Board and SET, the implementation and
progress of the Group’s diversity policy. Details in relation to our
succession planning and the external Board evaluation can be found
on pages 103, 110 and 111.
Audit Risk and Internal Control
The report from our Audit Committee Report on pages 112 to 118
contains details on how it has assisted the Board in reviewing the
financial reporting and internal financial control effectiveness, and
the monitoring of the effectiveness of the external audit process
and internal audit function. Further details in respect of the Group’s
risk management and internal control processes are provided on
pages 76 to 82 of the Strategic Report, along with the principal risks,
controls and mitigating actions, and emerging risks.
Remuneration
Our Remuneration Policy is designed to promote the long term
success of the Group and to reward the creation of long term value
for shareholders. The Remuneration Committee has taken into
account the pay and principles applied to the wider workforce and
the culture of the Company when setting the remuneration of both the
Executive Directors and the SET. During the year, we have undertaken
a shareholder consultation on the remuneration of our Executive
Directors. Further details can be found on pages 119 to 124
87
Stock Code: DPHGovernance Board of
Directors
Executive Directors
Ian Page
Chief Executive Officer
Appointed:
June 1997
Committee Membership:
Disclosure (Chairman).
Skills and Experience:
Ian has gained detailed knowledge and
experience through various positions he has
held within the pharmaceutical and veterinary
arena. He has a solid understanding of business
development both in the UK and globally. In
particular, he has extensive experience in M&A
and in the successful delivery of strategic plans.
Ian has played a key role in the development of
the Group’s growth strategy.
External Appointments:
None.
Pets:
Paul Sandland
Chief Financial Officer
Appointed:
October 2019
Committee Membership:
Disclosure.
Skills and Experience:
Paul qualified as a Chartered Certified Accountant
in 2005. He spent five years post qualification
at KPMG, during which time he was part of the
team which advised the Group on its acquisition
of VetXX in 2008. Paul joined Dechra in January
2010 and has worked both in Corporate as Group
Financial Controller and in our sales and marketing
organisation as the Group’s Dechra Veterinary
Products EU Finance Director. Paul is the Board
nominated Director responsible for health, safety
and environmental matters.
External Appointments:
None.
Pets:
Tony Griffin
Managing Director,
Dechra Veterinary Products EU
Appointed:
November 2012
Committee Membership:
Not applicable.
Skills and Experience:
Tony has over 30 years’ experience in the animal
health business and has substantial international
experience as a result of living and working
outside the UK since 1993. He gained broad
experience of running an international animal
health business with teams in different European
countries as Chief Executive Officer of the
AUV Group.
External Appointments:
None.
Pets:
Non-Executive Directors
Tony Rice
Non-Executive Chairman
Appointed:
May 2016
Committee Membership:
Nomination (Chairman), Remuneration.
Skills and Experience:
Tony has extensive board level experience
across a range of sectors, including aerospace,
healthcare, telecommunications and retail in both
UK and international markets.
External Appointments:
Tony is currently the Senior Independent
Non-Executive Director and Chairman of the
Remuneration Committee at Halma plc, and
Chair at Ultra Electronics Holdings plc.
Pets:
None.
88
Ishbel Macpherson
Senior Independent Non-Executive Director
Julian Heslop
Non-Executive Director
Appointed:
February 2013
Committee Membership:
Audit, Nomination, Remuneration (Chairman).
Skills and Experience:
Ishbel has a broad range of PLC Board
experience in a variety of roles, including
Chairman, Audit Committee and Remuneration
Committee Chairman. She has knowledge and
understanding of City matters gained over 20
years’ experience as an investment banker,
specialising in UK mid-market corporate finance.
External Appointments:
Ishbel is Non-Executive Director at Lloyd’s
Register Group Limited.
Pets:
Appointed:
January 2013
Committee Membership:
Audit (Chairman), Nomination, Remuneration.
Skills and Experience:
Julian has considerable financial experience as
a result of the senior finance roles he has held in
the pharmaceutical, food, property and brewing
sectors.
He is a Fellow of the Institute of Chartered
Accountants in England and Wales.
External Appointments:
None.
Pets:
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance
Non-Executive Directors
Dr Lawson Macartney
Non-Executive Director
Appointed:
December 2016
Committee Membership:
Audit, Nomination and Remuneration.
Skills and Experience:
Lawson is a veterinarian, with over 30 years’
experience in a range of senior roles in
pharmaceutical R&D, sales and marketing, as well
as spending several years in veterinary practices.
External Appointments:
He is the Chairman of Viking Therapeutics Inc.
as well as the Chairman of the Nomination and
Corporate Governance Committees.
Lisa Bright
Designated Non-Executive Director for
Employee Engagement
Appointed:
February 2019
Committee Membership:
Audit, Nomination and Remuneration.
Skills and Experience:
Lisa has strategic and operational leadership
experience in global market leading
pharmaceutical and emerging biotech companies
gained over her 30 year career in the industry.
External Appointments:
Lisa is also a Non-Executive Director at Ascendis
Pharma A/S, a Danish listed company.
Pets:
Pets:
Alison Platt
Non-Executive Director
Appointed:
March 2020
Committee Membership:
Audit, Nomination and Remuneration.
Skills and Experience:
Alison has extensive international and leadership
experience in customer-driven organisations in
the healthcare, insurance and property sectors.
Alison was awarded a CMG for services to the
Foreign Office in 2011 after six years on the FCO
Board.
External Appointments:
Alison is a Non-Executive Director at Tesco PLC,
Chair of Legal & General Financial Advice and
Spectrum Life.
Pets:
None.
1
4
55
Diversity
Characteristics
8
1
1
5
5
Age
41–50
51–60
61–70
Education
University
Vocational
1
4
5
5
5
Country of Residence
1
1
8
USA
Netherlands
UK
For further information on Board of Directors please see www.dechra.com
89
Denise Goode
Non-Executive Director
Appointed:
April 2021
Committee Membership:
Audit, Nomination and Remuneration.
Skills and Experience:
Denise brings a wealth of financial, commercial
and life science industry experience, both from
her extensive career as a senior executive and
from board roles held since 2008. She has a deep
understanding of the pharmaceuticals sector and
is highly experienced in business development.
She is a Fellow of the Institute of Chartered
Accountants in England and Wales.
External Appointments
Denise is currently a Non-Executive Director of
Abliva AB, a NASDAQ Sweden listed company
and Vice President, Business Development at
AnaMar AB, a Swedish based private company.
Pets:
None.
Stock Code: DPHGovernance
Senior Executive Team
Senior Executive Team
The Senior Executive Team was established in 2013 to lead the development and implementation of
the business strategy. The SET is led by the Chief Executive Officer and is comprised of the three Executive
Directors and the Business Directors responsible for leading each of the Group’s key functions. The SET is
scheduled to meet formally four times a year to discuss the implementation of the strategy, share best practice
and provide updates on their business or function as well as sharing market trends which impact the business.
Giles Coley
Dechra Veterinary Products International
Group Director
Background:
Giles joined Dechra in January 1999 as sales
and marketing manager for Arnolds Veterinary
Products having previously spent 14 years
primarily involved in dairy farming business
consultancy. During his time at Dechra he has
been responsible for the launch and market
development of our leading brand Vetoryl, as well
as a number of our other key brands. Giles has
also been an integral member of the teams that
ensured fast and smooth integrations of several
of our acquisitions, and in particular as lead in the
integration of Apex in 2016 and Venco in 2019.
In his role of Dechra Veterinary Products
International Group Director, his responsibilities
are extremely varied and involve managing and
growing our existing business through ANZ
and Latin American business and distribution
partners, as well as further developing our Dechra
International strategy through product registrations
and market development. Giles has a BSc
degree in Agricultural Technology. He is located in
Sansaw, UK.
Pets:
Mike Eldred
President North America
Dr Susan Longhofer
Chief Scientific Officer
Background:
Mike joined Dechra in 2004 and is responsible
for Dechra Veterinary Products’ North American
business. Mike has more than 20 years’
experience in the animal health sector, having held
senior positions in business development, sales
and operations at Virbac Corporation, Fort Dodge
Animal Health and Sanofi Animal Health.
As our first employee in the USA, he has built the
USA, Mexican and Canadian teams to 245 people
and has grown sales revenue to £219.5 million.
Mike has also been involved in several commercial
agreements and acquisitions for the Group
including Pharmaderm, DermaPet, Phycox Animal
Health and Putney. Mike has a BA in Business,
and an MBA. He is located in Kansas, USA.
Pets:
None.
Background:
Susan joined the Group in June 2005. A
veterinarian with over 30 years’ experience in
the industry, she leads a team of approximately
150 staff around the globe responsible for
product development, registering new products
and maintaining the registrations of our existing
products. She has assumed the Business
Development role in 2015, searching out
new products to continue to fill our product
development pipeline. Susan was appointed as
Chief Scientific Officer in January 2020, bringing
together Business Development, Product
Development and Regulatory Affairs.
Prior to joining Dechra, Susan worked for Virbac
Corporation, Heska Corporation and Merck
Research Laboratories. Susan holds an MS and
a DVM in Veterinary Science and is a Diplomate,
American College of Veterinary Internal Medicine.
She is located in Kansas, USA.
Pets:
90
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance
Senior Executive Team
Dr Anthony Lucas
Group Product Development Director
Milton McCann
Group Manufacturing and Supply Director
Katy Clough
Group HR Director
Background:
Anthony joined Dechra in 2016 following the
acquisition of Putney Inc. where he was Senior
Vice President of R&D. Anthony is originally a
veterinarian from Australia with five years in clinical
practice including a residency in emergency and
critical care. Following a Masters in veterinary
pharmacology, PhD in human pharmacology and
post-doc at the University of Kansas, he spent
six years at Elanco in early drug development,
technology acquisition and has a Six Sigma
blackbelt.
In his six years at Putney, Anthony built the R&D
team, which delivered ten FDA product approvals.
As the Group Product Development Director,
Anthony leads a team of around 80 scientists
across five global research centres, to efficiently
deliver the pipeline of products to meet Dechra’s
growth needs. He is located in Maine, USA.
Pets:
Background:
Milton was appointed as Group Manufacturing
& Supply Director on 1 April 2021, following
11 months as Interim Group Manufacturing &
Supply Director. He joined Dechra in January
2016 as Group Manufacturing Finance Director.
In February 2019, he was the Interim Site Director
at our Skipton Facility until being appointed as
Group Supply Chain and Procurement Director,
Dechra Pharmaceuticals Manufacturing & Supply
in October 2019.
Before joining Dechra, Milton had senior financial
roles in different manufacturing industries including
coatings, adhesives and chemicals. Just prior to
joining Dechra he worked for Aramark in the food
and facilities services sector.
Milton is responsible for our internal and external
manufacturing sites in Europe and the USA.
He is located in Skipton, UK.
Pets:
None.
Background:
Katy joined Dechra in April 2014 from AppSense
Ltd where she was the Vice President of HR
Europe and Rest of the World. With over 15
years’ experience operating at Director level
within Software, Health, Travel and Finance
industries, Katy brings with her a wealth of HR
expertise gained in both blue chip corporates and
smaller entrepreneurial companies.
She has strong international, leadership and M&A
experience and has taken responsibility for driving
the global people agenda for the Dechra Group.
She is located at Head Office, Northwich, UK.
Pets:
Allen Mellor
Group IT Director
Background:
Allen joined Dechra in April 2012 and has
developed and implemented the Group IT strategy
during this time. During the last 26 years, Allen
has gained a breadth of experience from the
implementation of diverse business solutions
across multiple industry sectors including Justice,
Education, Energy, Distribution and Retail. He
has held several senior management positions
encompassing software development, IT service
provision and IT departmental management. His
last role was as Head of IT for the BSS Group
PLC, a leading plumbing and heating distribution
company. Allen is currently responsible for all
Group IT support to a multitude of internal
customers. He is located in Sansaw, UK.
Pets:
Melanie Hall
Company Secretary
Committee Membership:
Disclosure.
Background:
Melanie joined Dechra in January 2010 as the
Assistant Company Secretary, and was promoted
to Deputy Company Secretary in May 2015, and
Company Secretary in July 2017. Prior to joining
Dechra she has gained over 25 years’ experience
in various company secretarial roles including at
GKN plc, TRW Automotive Inc and Pendragon
PLC. Melanie is a Fellow of the Institute of
Chartered Secretaries and Administrators. She is
located at Head Office, Northwich, UK.
Pets:
91
Stock Code: DPHGovernance
Board Leadership and
Company Purpose
Board Leadership and Company Purpose
Effective and Entrepreneurial Board
The Board’s primary responsibility is to promote the long term
success of the Company by the creation and delivery of sustainable
shareholder value.
Our Board is composed of highly skilled professionals who bring a range
of skills, perspectives and corporate experience to our boardroom. Our
entrepreneurial roots have led us to evolving an agile approach to the
way we do things.
The Board oversees the effective delivery of the Group’s strategy as set
out on pages 20 to 23 of the Strategic Report. Dechra has consistently
delivered on its strategic objectives resulting in a strong track record
of growth as can be illustrated by the dividend growth on page 19,
underlying diluted earnings per share growth on page 36 and our Total
Shareholder Return performance on page 137.
Strategy
The Group’s strategy remains unchanged and is set out on pages 20
to 23 of the Strategic Report. The key factors supporting the Group’s
prospects are explained throughout the Annual Report and are
summarised below:
• a clear strategic focus;
• a growing global animal health market;
• manufacturing flexibility, with a wide range of dosage forms, small
and large scale production batches;
• an entrepreneurial and experienced management team;
• a recognised brand with a strong reputation for providing high
quality products with technical support;
• an expanding international focus;
•
talented people and expertise; and
• a sound track record of successful acquisitions to expand our
product portfolio and geographic reach.
The Board believes that the Group is resilient due to its diversified
product portfolio, its geographic footprint, strong balance sheet, healthy
cash generation and access to external financing, which includes
committed facilities.
The Board undertook a review of the Strategy in December 2020, which
included high level discussions to challenge whether the strategy remains
fit for purpose and responsive enough to the market and environment.
Some of the main topics discussed by the Board during its strategy review
included:
• our market strategy for the next five to ten years;
• our vaccines strategy;
• our ESG and People strategy;
• a clear portfolio focus with strong market positions in a number of
• centralisation verses decentralisation; and
key therapeutic areas;
•
routes to market.
• a strong development pipeline and a track record of pipeline
delivery;
Case Study
KPIs have been designed to measure progress and delivery of the
strategic plan and our four growth drivers. Further details are provided
on pages 36 and 37.
Case Study
Collaborative and Entrepreneurial
Collaborative and Enthusiastic
During the financial year, our DVP International team and Digital
team created a Distributor Hub, which will sit within the new
Dechra.com website. The aim of the hub was to create an intuitive
area on our website to help our international partners find key
information about our products and services. The Distributor Hub’s
focus is on our existing distributors, potential new partners and
global veterinarians.
Our hub is unique and offers a tailored experience not seen on any
competitor websites. The hub identifies the location of a website user
and only displays information on products available in that territory.
The Hub in phase two will also offer the partners the opportunity to
access:
• Marketing asset database;
• Virtual calendar; and
• Blogs.
The market authorisation for Rexxolide® was issued on 3 December
2020. This has been a demanding project from start to finish with
challenges in Product Development, Manufacturing, QC, QA, and
Regulatory, all of which have been solved through teamwork. The
Marketing Authorisation would not have been achieved without the
contributions from the very large project team of over 100 people
from our sites in Bladel, Skipton, both US locations, as well as Central
Marketing. This accomplishment was the result of the joint efforts
of this cross-functional team which truly demonstrates the One
Dechra culture.
It is Dechra practice to pay an approval gift to the project team.
However, the Rexxolide team decided to donate the €2,000 gift
to the Stichting Voesdselbank, a Bladel based foodbank, in order
to support their mission of feeding the local community. This act
of kindness exemplifies our employees’ continued focus and
commitment to our core Values.
92
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance
Culture, Purpose and Values
Culture
Our Values, entrepreneurial attitude and agile approach to the way we do things are the backbone of our Culture.
We expect our people to make a difference by collaborating with each other and support them by providing clear guidance on expectations.
Our Purpose
The sustainable improvement of animal health and welfare globally
Our Values
Everything we do is underpinned by our Values
Dedication
We are dedicated
to delivering
products and
services that meet
the highest level of
service and quality
to our customers
Enjoyment
We endeavour
to create an
environment
where our people
want to come to
work and feel a
part of Dechra
Courage
We want a
business where we
dare to challenge
each other, where
innovation and
creativity can
flourish
Honesty
We are honest
and open in all
interactions and
act with integrity
and fairness
Relationships
We see our
customers and
suppliers as
business partners
and thereby work
together to ensure
common success
Ambition
We are goal
oriented and
deliver solid
results through
our energetic and
resilient approach
Our Culture Defined
Entrepreneurial & Agile
We move quickly to make
decisions and have ‘light
touch’ bureaucracy. We expect
accountability and encourage
our people to seek out new
opportunities to help us grow
Transparent
We are open and honest
with our people and our
suppliers and customers.
We tell it like it is
Collaborative
We know that the best
outcomes arise from true
team working. We operate in a
matrix structure, sharing best
practices around the globe and
harnessing the power of our
different cultures
Enthusiastic/Energetic
We want our people to enjoy
coming to work, we are informal
and look for people who share
our passion for what we do. We
love people that want to make
a difference
Monitoring Our Culture*
Moving Annual Turnover
of Employees
13.5%
Lost Time
Accidents
3
Employees who completed
GPTW survey
90%
* Please see page 94 for full details of the measures the Board use to monitor Culture.
93
Stock Code: DPHGovernance Board Leadership and
Company Purpose continued
How The Board Monitors Culture
Moving Annual Turnover of Employees
Retention of employees is an indicator of a positive culture
Employee engagement with the Board
via designated Non-Executive Director
Raise a Concern Reports
Health and Safety Updates
Engagement survey
Internal Audit Reports
Approval of Group Policies such as
Code of Conduct
External Culture audit with Great Place
to Work for the UK
Provide an update on employee views and any concerns raised
The How to Raise a Concern procedure encourages any individual who has genuine concerns
about any form of malpractice, including any breaches of the Values, within Dechra (or in relation
to its business) to report these concerns. Summaries of these are then discussed with the Board
along with the mitigating actions taken as well as updates on the actions taken
Enables the Board to assess the effectiveness of our safe working practices and behaviours
This helps to determine levels of employee engagement on a wide range of matters and provides
oversight of the implementation of the Values
Identifies any actions required in relation to deviations of Values and Culture
Enables the Board to monitor that the policies reflect the Values and Culture of the Group
Provides an external assessment of the Group’s Culture
Prudent and Effective Controls
Internal Controls and Risks
The Board retains overall responsibility for determining the nature and
extent of the risks it is willing to take in achieving its strategic objectives.
The Board is responsible for reviewing the effectiveness of the Group’s
risk management and internal control systems, and confirms that:
•
•
•
there is an ongoing process for identifying, assessing, managing
and monitoring the Group’s principal risks;
the SET’s assessment of the principal risks is considered to be
robust and those risks that have the potential to impact liquidity
have been considered in the assessment of the Group’s viability;
the principal risks and internal control processes have been
monitored by the SET throughout the year and reviewed by the
Board on a rolling programme throughout the year; and
• no significant failings or weaknesses in internal control processes
have been identified.
Based on its review throughout the year, the Board is satisfied that the
risk management and internal control systems in place remain effective
and provide reasonable but not absolute assurance that the Group will
be successful in delivering its objectives.
Further information on internal control and risk management can be
found in the Governance Report on page 116 and the Strategic Report
on pages 76 to 78.
Matters Reserved for the Board
There is a formal schedule of matters reserved for the Board. The
schedule of matters covers a number of areas including strategy,
approval of acquisitions and business development proposals, dividend
policy, budget, internal controls and risk management and Group
policies. The schedule of matters can be found on our website.
The schedule of matters is reviewed periodically and was last reviewed
in December 2020 along with the Delegation of Authority Policy.
The Delegation of Authority Policy defines who is authorised to make
decisions on behalf of the Group and their authority limits for both
monetary and non-monetary decisions.
94
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Key Stakeholders
The Board is responsible, under section 172 of the Companies Act 2006, for promoting the long term success of the Company for the benefit of its
shareholders, having regard for its stakeholders.
As disclosed above our Delegation of Authority Policy outlines who is authorised to make decisions and financial commitments throughout the Group.
This also supports our entrepreneurial nature and agile approach. Therefore a lot of decisions relating to the business and stakeholder engagement
are carried out below Board level. However, all material decisions are discussed and approved by the Board and the following provides an outline of
some of the matters that the Board had considered and engaged with our stakeholders on. The supporting Board papers for these decisions require
an assessment on how the key stakeholders are impacted by the proposal. Further details on how the Board and the Group considers key stakeholders
can be found on pages 48 to 50.
Shareholders
Principles:
The Board’s principal role is to promote the long term success of the Company for the benefit of its shareholders.
How the Board is kept informed:
• Relationships with shareholders receive high priority and a rolling programme of meetings between institutional shareholders and the Chief
Executive Officer and Chief Financial Officer have been held throughout the year (a summary of the main events is shown below). These
meetings seek to foster a mutual understanding of both the Company’s and shareholders’ objectives. Such meetings are conducted in a
format to protect price sensitive information that has not already been made generally available to all the Company’s shareholders;
• The Board reviewed and considered feedback, collated by the Company’s brokers, after investor roadshows;
• Where material changes in respect of remuneration or governance are proposed, the Board seeks to consult with its major shareholders
before implementing such changes. During the year, the Remuneration Chair consulted with our major shareholders with regard to the
proposed changes in the salary of the Chief Executive Officer, Chief Financial Officer and the Chairman;
• Board approval is required for significant announcements;
• The Board reviewed and approved the Investor Relations Manager recruitment; and
• The Chairman and Senior Independent Director are available to meet shareholders upon request, and all Directors normally meet
shareholders at the Annual General Meetings.
(CFO &
Company
Secretary)
(CFO)
(Chair &
Company
Secretary)
(CFO)
July
2020
Sept
2020
Nov
2020
Feb
2021
April
2021
May
2021
June
2021
(CEO &
CFO)
(CEO &
CFO)
Key:
ESG Meeting
Investor Conferences
Investor Roadshows
£ Remuneration Consultations
(Remuneration Committee
Chairman, Chair, Group HRD &
Company Secretary)
£
95
Stock Code: DPHGovernance Board Leadership and
Company Purpose continued
Employees
Customers
Principles:
The Board believes that the Group’s employees are its greatest
asset. Our ongoing objective is to continue to be a high performing
business driven by highly skilled and committed teams. A key
element of our People Plan is that we want Dechra to be
a great and safe place to work.
Principles:
To innovate, develop, register, manufacture, supply and market high
quality products to the veterinary profession worldwide. We provide
high levels of service, technical support and educational training
to develop a strong relationship with, and be recognised as an
important partner to, veterinarians.
How the Board is kept informed:
• The Board was provided with the results of the GPTW survey;
How the Board is kept informed:
• Each of the SET members for DVP EU, NA, and International
• The Group HR Director provided an update to the Board in June
2021 on the actions taken by teams throughout the Group on
the agreed priority areas emerging from the 2021 employee
engagement survey. In addition, the results of the pulse survey
relating to employees perceptions of how the Group dealt with
the pandemic and Group-wide agile working policies were
presented to the Board. The Group HR Director is now reviewing
Working from Home policies and guidelines for line managers
with the view of offering more flexible working from home on a
permanent basis;
• The Board met formally with the SET for business updates;
• Twice a year a comprehensive health and safety report is
provided to the Board for its review;
• The Board was provided with updates from the Corona
Committee on actions taken in respect of employees’ welfare
and safety during the pandemic and the slow return to offices
and travelling; and
• Lisa Bright, the Non-Executive Director designated for employee
engagement, provided three reports to the Board.
Due to COVID-19, the scheduled Board meeting at a business unit
was postponed.
has provided in-depth presentations on their markets, customer
requirements and customer consolidation. DVP EU presented
the results of perceptions surveys with Key Accounts and
Veterinarians;
• Approval of licensing arrangements which will bring new
technologies and products into our pipeline and product
portfolios;
• The Board reviews the Product Development Pipeline twice a
year and the Business Development pipeline at every meeting;
• The Board discussed the various initiatives taken by
manufacturing to reduce the backorder position and to enable
products to be delivered more quickly to the market from the
product development pipeline including the creation of a new
role, Product Launch Director;
• Two Quality updates were provided which covered both the
internal and external sites; and
• Feedback on our customer interactions was provided by the
Non-Executive Director Designated for Employee Engagement
following meetings held with sales representatives.
Community
Suppliers
Principles:
The Board encourages the business units to contribute to the
social and economic welfare of the local communities in which they
operate. It recognises that by taking voluntary action in this area it is
helping to protect and develop its own business.
Principles:
The Company is committed to acting responsibly and with integrity,
respecting the laws, regulations, of the countries in which it operates.
It expects its suppliers to trade with honesty and integrity.
How the Board is kept informed:
• Twice a year a report of the Group’s CO2 emissions are provided
How the Board is kept informed:
• The Board reviewed and approved the Modern Slavery
to the Board for its review;
Statement and Human Rights Policy;
• The Chief Financial Officer provided an update of the progress
of the ESG Committee in implementing the ESG strategy
including the various working groups, the setting of targets and
the approach taken with regards to the recommendations of the
Taskforce for Climate-related Financial Disclosures; and
• The Board is informed of the Group donations made to
local communities and these are made subject to our Group
Donations and ABC policies.
• The Audit Committee receives update on the Anti-Bribery and
Anti-Corruption (ABC) risk assessments of third parties and
reviews and approves the ABC policy and Third Party Code of
Conduct; and
• The Group Manufacturing and Supply Director presented to
the Board and this included a discussion on the Contract
Manufacturing Organisation strategy.
96
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Lisa Bright
Employee Engagement
Update
Areas of Focus this Year
• Employee support during COVID-19
• Key learnings from COVID-19 in relation to our customers
• Retaining our Culture during rapid growth
Remote Meetings with Employees
• Skipton (UK ): to follow up on the 2020 meeting
•
US: a cross functional group from manufacturing, product
development and regulatory affairs to, sales and marketing
• Europe: Four group calls representing Country Managers,
Sales and Marketing leaders and three individuals calls
with UK sales representative
Our Approach
The Board approved an approach which allows us to complete a cycle
of engagement, discussion with management and the Board of topics
arising followed by feedback to employees on action taken over the
financial year. Whilst all of our meetings this year have been remote,
in smaller groups (usually six to eight), it has provided an unexpected
benefit of connecting people from across different parts of the business
who may not usually work together.
Key Themes Emerging
The key themes emerging from the discussions are:
• appreciation of the support for employees and the innovation that
has flourished during COVID-19;
• maintaining and nurturing the Dechra Values as the Company grows
in size and complexity;
• creating more opportunities for personal and career development;
•
identifying the optimal balance of face-to-face versus remote
customer interactions from clinical trials through to commercial;
• amplifying the customer voice throughout the Company; and
• communicating the broader Dechra story to customers including
our commitment to ESG.
Key Highlights
Employees have voiced strong appreciation of the support provided by
the Company during COVID-19, including from new employees who
joined during lockdown. The decision not to furlough staff was seen as
a very positive reflection on the strength of the business. Morale is high
and pride in the Company is palpable.
The process is having tangible results. As a result of the feedback last
year, we will be building a new Quality Control lab in Skipton, following
Board approval in June 2021.
Plans for 2022 Financial Year
The plans for the forthcoming year include:
•
focused discussion on specific areas identified through the
Great Place to Work employee survey;
• broadening engagement beyond US and EU;
•
•
resuming scheduled site visits;
retaining remote informal conversations with delegates across
functions and geographies; and
• updates to the Board and employees.
97
Stock Code: DPHGovernance Board Leadership and
Company Purpose continued
Workforce Policies and Practices
The Board or the relevant Committee reviews all key policies/handbooks
on an annual basis, these include the Code of Conduct, Dignity at Work
Policy, Health and Safety Policy, Travel and Entertainment Policy and
How to Raise a Concern Procedure. These reviews concluded that all
policies/handbooks were operating effectively.
The Code of Conduct was updated, simplified and aligned with the
Group Policies which has resulted in the development of a set of simple
one page policy documents following the overarching Code of Conduct.
Our Code of Conduct can be found on our website. A Code of Conduct
e-learning course has been developed and is ready to be rolled out
globally on an annual basis.
Dechra had largely focussed its Health and Safety activities in
manufacturing which had been identified as the highest risk. During the
financial year, the Group established a Health, Safety and Wellbeing
(HSW) Committee, whose remit is to reinforce our culture of zero harm
across the entire business which involves employees being engaged in
the design and ownership of health, safety and wellbeing programmes
and providing them with the confidence to challenge unsafe behaviours.
The HSW Committee have launched a wellbeing strategy, THRIVE,
which provides centralised guidance with local deployment with:
•
foundation elements of the Wellbeing programme being mandatory
and non-negotiable;
• employee driven by local country requirement or market driven
expectation; and
• optional elements driven by population at facility.
Further details of which can be found on 64.
Employees have been encouraged to consider their physical and
mental wellbeing during the pandemic. Regular communications around
employee-wellbeing have been posted to the Group’s intranet and our
confidential Employee Assistance Programme has remained available
to all. Strategies to promote wellbeing include sanctioned additional time
off during daylight hours to allow employees to get out of their homes to
take exercise safely during the winter months.
How to Raise a Concern
The Board is committed to the highest possible standards of openness,
integrity and accountability and encourages any individual who has
genuine concerns about any form of malpractice, including any
breaches of the Values, within Dechra (or in relation to its business)
to raise those concerns at an early stage via its How to Raise a
Concern procedure.
We offer four reporting channels for concerns to be raised: Line
Manager; the Senior Management Team; Group Management Team;
and a mailbox accessed only by the Company Secretary. Every effort
is made to protect confidentiality to encourage reporting. We fully
investigate reports and take appropriate actions to address these.
A summary of any reported concerns is provided to the Board.
Further, we are planning to launch a third party confidential hot line
in the 2022 financial year.
98
Constructive use of the Annual General Meeting
Unfortunately due to the pandemic the Board were unable to meet
shareholders at the 2020 Annual General Meeting as it was held as a
closed meeting. Shareholders were provided with the opportunity to
submit questions in advance of the meeting with the view that the Board
would respond to those questions via the website. No questions were
submitted.
This year it is hoped that, subject to no further restrictions, all members
of the Board will attend the Annual General Meeting (the Meeting) and the
Chairmen of the Audit, Remuneration and Nomination Committees will be
available to answer shareholders’ questions at the Meeting. A live webcast
will be available to enable shareholders to watch the Meeting virtually
subject to prior registration.
The Notice of the Meeting is dispatched to shareholders at least 20
working days before the Meeting. The information sent to shareholders
includes a summary of the business to be covered, with a separate
resolution prepared for each substantive matter. When a vote is taken on a
show of hands, the level of proxies received for and against the resolution
and any abstentions are disclosed at the Meeting. The results of votes
lodged for and against each resolution are announced to the London
Stock Exchange and displayed on the Company’s website.
Conflicts of Interest and External Board Appointments
Under the Companies Act 2006 (the Act), all Directors have a duty to
avoid a situation in which they have, or could have, a direct or indirect
conflict of interest with the Company. As permitted under the Act, the
Articles of Association of the Company enable the Directors to consider
and, if appropriate, authorise any actual or potential conflict of interest
which could arise.
The Board has established procedures for the disclosure by Directors of
any such conflicts, and also for the consideration and authorisation of
these conflicts. Directors are required to submit any actual or potential
conflicts of interest they may have with the Company to the Board.
The non-conflicted Directors are able to impose limits or conditions
when giving or reviewing authorisation. The Board reviews the Conflicts
of Interest register annually and on an ad hoc basis when necessary.
Any potential conflicts of interest are considered by the Board prior to
the appointment of new Directors. During the financial year under review
no actual conflicts have arisen.
None of the Executive Directors have external Board appointments.
Tony Rice
Non-Executive Chairman
6 September 2021
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Division of
Responsibilities
Division of Responsibilities
The Board oversees the effective delivery of our strategy which is
developed and implemented by the SET. Further details of the Board
and SET can be found on pages 88 to 91.
Board Membership
Details of the Directors’ together with details of their respective
Committee membership, skills and experience, backgrounds and
external appointments can be found on pages 88 and 89, and/or the
website. As detailed in the pie chart below, the Board consists of one
Non-Executive Chairman, six independent Non-Executive Directors
and three Executive Directors. Therefore, in line with the Code, at least
half the Board, excluding the Chairman, is determined by the Company
to be independent. The Chairman was deemed independent on
appointment in accordance with provision 10 of the Code.
Board Membership
Non-Executive Chairman 10% (1)
Non-Executive Directors 60% (6)
Executive Directors 30% (3)
The Board has determined, following the results of the external board
evaluation, that the Non-Executive Directors have sufficient time to
meet their Board responsibilities and any proposed new appointments
are disclosed to the Board, for their approval, to assess whether there
are any conflicts of interest or time. Denise Goode’s position as Vice
President, Business Development at AnaMar AB is equivalent to a
consultancy role and involves a commitment of one day a week.
The Board has formally delegated specific responsibilities to Committees,
namely the Audit, Remuneration, Nomination and Disclosure Committees.
The Disclosure Committee members are the Chief Executive Officer, the Chief
Financial Officer, the Corporate Development Director and the Company
Secretary. The full terms of reference for each of these Committees are
available on the Company’s website (www.dechra.com) or on request from
the Company Secretary. Other matters have been delegated to the SET and
other committees such as the Data Protection Committee, ESG Committee,
Strategic Portfolio Priortisation Committee and Treasury Committee.
The SET is led by the Chief Executive Officer and is comprised of the three
Executive Directors and the Business Directors responsible for leading each of
the Group’s key functions. The SET is scheduled to meet formally four times
a year to discuss the implementation of the strategy, share best practice and
provide updates on their business or function as well as sharing market trends
which impact the business. During the height of the COVID-19 pandemic in
the 2020 financial year it met weekly to discuss the impact of the pandemic
on the business, in relation to suppliers and customers, and received reports
from the Corona Committee, which was established to implement policies
and procedures for the safety of our employees. It was agreed to reduce
these meetings in the 2021 financial year to seven as the Group had adopted
safe working practices and procedures and the impact of COVID-19 on the
business had settled. The Board was provided with regular updates on the
work of the Corona Committee.
Board Meetings
The Board is scheduled to meet seven times per year. During the year,
three additional meetings were held to discuss the 2021 financial year
Budget and proposed acquisition targets. Attendance at the Board
meetings during the year to 30 June 2021 is set out in the table below.
Where Directors cannot attend a meeting, the Board papers are still
provided allowing the Director to raise any queries or discussion points
through the Chairman.
The Non-Executive Directors normally meet informally before every
meeting; however, all meetings have been held virtually due to the
pandemic, with the exception of the meeting in June 2021. They
normally also meet once with the SET on an informal basis during the
year, however, due to the pandemic this was not possible in the 2021
financial year.
Number of Board Meetings and Attendance
Tony Rice
Joined: 5 May 2016
Ian Page
Joined: 13 June 1997
Tony Griffin
Joined: 1 November 2012
Paul Sandland
Joined: 30 October 2019
Lisa Bright
Joined: 1 February 2019
10
10
10
10
10
10
10
10
10
10
Julian Heslop
Joined: 1 January 2013
Lawson Macartney
Joined: 1 December 2016
Ishbel Macpherson
Joined: 1 February 2013
Alison Platt
Joined: 1 March 2020
Denise Goode
Joined: 26 April 2021
10
10
10
10
10
10
10
10
†
3
3
† Denise Goode has attended all meetings since her appointment.
Should Directors have concerns of any nature, which cannot be resolved within the Board meeting, they have the right to have their view recorded
in the minutes. In the months where there is no Board meeting scheduled, an update is provided on the business. In addition, arrangements are in
place should Board approval be required outside of the scheduled meeting dates.
99
Stock Code: DPHGovernance Division of
Responsibilities continued
The Dechra Board
Key Responsibilities
The Board is collectively responsible for the long term sustainable success of the Company for the benefit of shareholders taking into
account the impact of its decisions on the other stakeholders and the environment by:
•
setting the strategy and overseeing its implementation;
• monitoring the overall financial and operational performance of the Group;
• establishing a framework of prudent and effective controls, which enable risk to be assessed and managed;
• establishing the Company’s Purpose, Values and Culture, and promoting the desired behaviours; and
• establishing an effective corporate governance framework.
The Board Activities Table details the actions in relation to the above.
Details relating to the formal schedule of matters reserved for the Board can be found on page 94 and on our website.
The Board has delegated certain matters to the following Board Committees
Audit
Committee
The Audit Committee’s key
role is to review and report
to the Board on financial
reporting and internal financial
control effectiveness, and to
monitor the effectiveness of
the external audit process and
internal audit function.
Nomination
Committee
The purpose of the Nomination
Committee is to lead the
appointment process, satisfy
itself that plans are in place
for orderly succession for
appointments to the Board and
Senior Executive Team, and
oversee the development of a
diverse pipeline for succession.
Remuneration
Committee
The Remuneration
Committee’s key role is to
determine remuneration
policies, that are designed to
support strategy and promote
long term sustainable success,
and set the remuneration of
the Company’s Chairman,
Executive Directors and Senior
Executive Team.
Disclosure
Committee
The Disclosure Committee’s
key role is to develop and
maintain adequate procedures,
systems and controls to
comply with the Company’s
obligations regarding
identification and disclosure of
inside information.
Read more on
pages 112 to 118
Read more on
pages 103 to 111
Read more on
pages 119 to 146
Treasury
Committee
Established to implement
and monitor compliance with
Treasury Policies as approved
by the Audit Committee and
the Board.
Other Key Committees
Data Protection
Committee
To oversee and implement
the Data Protection Policy
and accompanying policies,
handbooks and procedures.
To monitor compliance with
the GDPR and other data
protection laws, and with the
Policies.
ESG
Committee
Oversee the development of
and to make recommendations
to the Board regarding
the Group’s ESG strategy,
establish objectives and
targets for the Group’s ESG
activities and oversee the
measurement and reporting
of performance against these
targets.
Health Safety and
Wellbeing Committee
Recommend and monitor the
implementation of priorities to
management and employees
to achieve Zero Harm across
the Group; actively monitor,
measure, review and report on
Health, Safety and Wellbeing
compliance and performance.
The Board has delegated the day-to-day management of the Group’s operations to the Senior Executive Team
• Leads the development and implementation of the business strategy; and
• Manage day-to-day operations of respective functions.
Senior Executive Team
100
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance 1
Non-Executive Chairman
2
Chief Executive Officer
3
Chief Financial Officer
• Leads the Board in the determination
of Group strategy and achievement of
its objectives;
• Manages day-to-day operations of the
Group and leads the Senior Executive
Team (SET);
• Drives the effectiveness of the Board in
• Drives performance and results of the
all aspects of its role;
Group;
• Facilitates the effective contribution
of the Non-Executive Directors,
enabling all decisions to be subject to
constructive debate and supported by
sound decision making processes; and
• Arranges for shareholder views to be
brought to the attention of the Board.
• Proposes strategy; and
• Executes strategy agreed by the Board.
• Responsible for financial planning and
reporting for the Group;
• Manages financial risk;
• Develops and executes the strategic plan
in conjunction with the Chief Executive
Officer;
• Secures funding as required; and
• Nominated Director for health, safety
and environmental matters.
4
Managing Director Dechra Veterinary
Products (DVP) EU
5
Designated Non-Executive Director
for Employee Engagement
6
Company Secretary
• Management of the segment which
contributes the majority of Group
revenue; and
• Gathers and understands the views of
the workforce; and
• Advises the Board on matters of
procedure and governance;
• Enables the voice of the workforce to be
• Provides all required information to the
• Development and execution of strategy
heard in the boardroom.
Board on a timely basis;
in the EU.
• Enables information flows between the
SET, the Board and its Committees;
• Provides support to the Chairman and
Non-Executive Directors; and
• Responsible for compliance with relevant
statutory and regulatory requirements.
7
Non-Executive Director
8
Senior Independent Non-Executive
Director
All of the Non-Executive Directors:
• are considered independent;
• are free of any business or other
relationship which could materially
interfere with, or compromise, their ability
to exercise independent judgement;
• are considered to have a breadth of
experience which adds value to the
decision making of the Board as well as
the formulation and progression of the
Dechra strategy;
• provide an independent and constructive
challenge; and
• evaluate strategy and risks.
• Provides a sounding board for the
Chairman and is available to shareholders
if they have concerns that have failed to
be resolved through the normal channels;
• Leads the annual evaluation of the
performance of the Chairman by the
Non-Executive Directors; and
• Chairs the Nomination Committee when
it is considering the succession
of the Chairman.
101
Stock Code: DPHGovernance
Division of
Responsibilities continued
Board Activities
At each meeting the Board receives trading, financial and strategic updates from the Chief Executive Officer and Chief Financial Officer. During the
year each SET member will present to the Board, providing the Board the opportunity to take a deep dive into the operations and strategic plans
of the respective businesses, as well as reviewing their specific risks. In addition to its routine business, the table below details the other matters
discussed during the year and the respective key stakeholders affected.
Topic
Strategy
and financial
performance
Key activities and discussions in 2020/2021
• Full Strategy Review
• Approval of five year plan
• Bi-annual update on product pipeline and product development
• Various acquisition and licensing agreements approvals, including the increased investment
Stakeholder
in Medical Ethics Pty Ltd
• Post acquisition review of Osurnia and Mirataz
• Approval of 2021 Half-Yearly Results and interim dividend
• Approval of 2020 Full Year Results and final dividend recommendation
• Approval of Half Year and Full Year principal risks and emerging risks
• Presentations from the SET on their respective risks
• Risk Assessment Review and Viability Statement review
• Review of Schedule of Matters and Delegation of Authority
Risk
management
and internal
controls
Governance
and Culture
Insurance renewal update
•
• Review of Disclosure Terms of Reference
• Review of 2021 External Board Evaluation
Oversight of
the Group’s
operations
• Approval of Non-Executive Director appointment and Committee membership
• Review of the bi-annual Health and Safety Report
• Review of Modern Slavery Statement
• Review of How To Raise Concern Procedure and Reports
• Employee Engagement updates
• Review of Group Policies such as the Code of Conduct and Approval of the Anti-Trust Policy
and Group H&S Policy
• Functional presentations from the SET, Head of Legal, Business Development Director,
Regulatory Affairs Director and DPM Internal Sites Director
• Quality Updates
• Approval of the 2021/2022 budget and capital expenditure projects
• Review of the people strategy and employee engagement
• Approval of Uldum warehouse expansion and Skipton site master plan
• COVID-19 Update
• Review of the Group’s ESG strategy and updates
Key
Customers
People
Shareholders
Suppliers
More details on the approval of the Uldum Warehouse and the Skipton site master plan can be found in the Section 172 statement on page 48
to 50.
Tony Rice
Non-Executive Chairman
6 September 2021
102
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Composition, Succession
and Evaluation
Tony Rice | Non-Executive Chairman
Letter from the Nomination
Committee Chairman
4
Nomination Committee
Meetings Held
Areas of Focus this Year
• Diversity
• Board appointments and succession planning
• SET succession planning and leadership needs of the Group
• Board and Committee Evaluation
Key Responsibilities
• To oversee the development of a diverse pipeline and to satisfy
itself that plans are in place for orderly succession
• To recommend appointments to the Board
• To review the results of the performance evaluation of the
Board, its individual members and its Committees
Dear Shareholder
On behalf of the Board, I am pleased to present this year’s Nomination
Committee (the Committee) report.
Succession Planning
The Committee has continued the work it commenced last year to
address the Board succession plans in relation to Non-Executive
Directors, and during the year Denise Goode was appointed as a
Non-Executive Director. She brings a wealth of financial, commercial
and life science industry experience, both from her extensive career
as a senior executive and from board roles held since 2008. Denise
will replace Julian Heslop as Audit Committee Chairman following the
conclusion of the Annual General Meeting and prior to his retirement
from the Board.
The Committee regularly considers succession and emergency planning
both for the Executive Directors and the Senior Executive Team (SET).
Following the death of Simon Francis, we have appointed Milton
McCann, previously Group Supply and Procurement Director, to the
role of Group Manufacturing & Supply Director.
Composition
The Committee believes that the Board continues to have the
appropriate skills, knowledge and experience to oversee the effective
delivery of our strategy. The Committee also believes that the Group
has an experienced SET to lead the development and implementation
of this strategy.
External Evaluation
During the financial year, I have led the annual board evaluation, which
was an external evaluation, with the support of the Company Secretary
and Senior Independent Director as appropriate. Independent Audit
Limited undertook an objective, tailored and rigorous evaluation, the
details of which can be found on pages 110 and 111 of this report.
The following report provides an overview of the work carried out during
the year under review.
Should you have any questions in relation to this report or the
Committee, please contact me or the Company Secretary.
Tony Rice
Nomination Committee Chairman
6 September 2021
Committee Membership and Attendance
Tony Rice
Joined: 5 May 2016
Lawson Macartney
Joined: 1 December 2016
4
4
Julian Heslop
Joined: 1 January 2013
Ishbel Macpherson
Joined: 1 February 2013
Denise Goode
Joined: 26 April 2021
4
4
4
4
1
1
Lisa Bright*
Joined: 1 February 2019
Alison Platt
Joined: 1 March 2020
4
4
3
4
4
4
* Lisa Bright was unable to attend one meeting due to a prior commitment.
103
Stock Code: DPHGovernance Composition, Succession
and Evaluation continued
Purpose
The purpose of the Committee is to lead the appointment process,
satisfy itself that plans are in place for orderly succession for
appointments to the Board and Senior Management, and oversee
the development of a diverse pipeline for succession.
Membership, Meetings and Attendance
The membership of the Committee, together with appointment dates
and attendance at meetings during the year, is set out above. Denise
Goode joined the Committee on her appointment to the Board in April
2021. All Committee members are Non-Executive Directors, all of which
were deemed to be independent. Other attendees at the meetings
include the Chief Executive Officer, the Group HR Director and the
Company Secretary (who acts as secretary to the Committee).
The Chairman does not chair the Committee meeting if it is dealing with
the appointment of his successor. The Senior Independent Director,
Ishbel Macpherson, takes the chair when required.
Effectiveness of the Committee
The Committee’s performance was evaluated as part of the 2021 Board
and Committee External Evaluation (further details of which are provided
on page 110 of the Governance Report). The findings of the external
evaluation were presented to the Committee for discussion at the June
2021 meeting. The Committee considered the results and it was agreed
that the Committee remained effective and was covering all areas within
its remit. However, it was acknowledged that Senior Executive Team
succession needs to remain a key focus of the Board.
Role and Responsibilities
The role and responsibilities of the Committee are set out in the written
terms of reference, which are available on the Company’s website at
www.dechra.com. The Committee’s terms of reference are reviewed
on an annual basis. During the 2021 financial year this took place at
the February meeting and they were amended to include additional
wording around the Committee’s duties and in particular the widening
of their remit to include senior management. Additional wording has
also been included in relation to induction and training of Directors and
the requirement to consider diversity in any appointments. An overview
of the terms of reference is detailed on pages 100 and 103 of the
Governance Report.
The Committee provides a report to the Board on its activities at the
Board’s next scheduled meeting.
Major Activities of the Committee during the Year
The Committee met four times since the last Annual Report was issued,
three of these meetings were scheduled and one was ad hoc and
dealt with the nomination of a Non-Executive Director. The Committee
Chairman and the Company Secretary have developed an annual
programme of business. This allows the Committee to consider standing
items of business alongside any exceptional matters that may arise
during the course of the year.
The table below shows the other key areas of the Committee activities:
Purpose and Function
(see page 104)
Composition
(see pages 105 and 106)
Succession
(see pages 109 and 110)
Evaluation
(see pages 110 and 111)
Diversity and Inclusion
(see pages 107 to 109)
• Review of the Committee’s terms of reference
• Review of the effectiveness of the Committee
• Review of Board skills, knowledge and experience
• Recruitment of Non-Executive Director
• Consideration of Non-Executive Directors’ tenure
• Review of SET succession plans and leadership needs
• Review of composition of Board
• Review of Director effectiveness
• Review and approval of Diversity Policy
• Review of the Dignity at Work Policy
104
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Composition
The Board seeks to ensure that both the Board and the Committees
have an appropriate composition to manage their duties effectively and
manage succession issues. It supports diversity in its broadest sense
and considers it an essential driver of Board effectiveness. The Board
recognises it is important that its composition is sufficiently diverse
and reflects a wide range of knowledge, skills and experience. The
Committee reviews the structure, size and composition (including the
skills, knowledge, experience and diversity) of the Board at least once
a year and usually at the June meeting. Both the Audit Committee
and Remuneration Committee undertake an annual review of their
composition, and any concerns would be reported to the Board.
Board Skills, Knowledge and Experience
7
8
Financial
Industry
Experience
Board Skills,
Knowledge and
Experience
6
Sector
Knowledge
7
10
Understanding
of Regulatory
Processes
Strategic
Thinking
10
Risk
10
Governance
Industry knowledge/expertise
Skills/experience of the Board
Following the review of the Board, the Committee concluded that
the Board had a combination of skills, experience and knowledge as
illustrated in the diagram above. The Non-Executive Directors have
relevant and complementary expertise, including industry and listed
company experience, international markets, finance, corporate finance,
pharmaceuticals, sales and marketing. Lawson Macartney is a veterinarian
by training with a pharmaceuticals background, which allows him to give
good insight into the customer base and the products. The Executive
Directors are highly regarded for their contribution to the Board, insights into
the business, and their high level of transparency and openness.
The Committee concluded that the Board is deemed to be of an
appropriate size, as the temporary increase in size was of benefit in the
short term for effective succession, and to allow for the wealth of knowledge
and experience of the outgoing Non-Executive Directors to be shared
with the new Non-Executive Directors. The external evaluation found
that the Non-Executive Directors provide an excellent range of relevant
and complementary skills, with the most recent Non-Executive Directors
providing fresh thinking and contribution.
Training
Regular briefings are provided to the Directors, which cover a number
of legal and regulatory changes and developments relevant to each
Director’s area of responsibility. In addition, the Company Secretary
informs the Directors of any external training courses which may be of
relevance, and all Directors are encouraged to raise any training needs
with the Company Secretary. During the year, DLA Piper LLP provided
training on Director’s duties, which included ongoing responsibilities and
obligations, to Denise Goode. The Remuneration Committee has been
provided with updates from Deloitte LLP. In addition all new Directors are
encouraged to enrol on the Deloitte Academy, which provides a wide-
ranging programme of technical briefings and education.
Paul Sandland is currently taking part in the Wavelength Connect
programme, which focuses on the future of businesses. This programme
allows Paul to meet and interact with a wide range of leaders from
other successful innovative companies with the opportunity to share
experiences and learnings from them.
Each Director is entitled, upon request, to receive information to enable
them to make informed judgements in order to discharge their duties
adequately. In addition, all Directors have access to the advice and
services of the Company Secretary and senior managers, and may
take independent professional advice at the Company’s expense in
connection with their duties.
In order to assist the Board in maintaining its knowledge and familiarity
with the Group’s operations, at least one Board meeting per year is held
at one of the Group’s operational sites. Due to COVID-19’s restrictions
on travel, the Board has been unable to visit any of the Group’s
operations during the 2021 financial year.
Board Appointments
The Board understands the importance of balance and refreshment
in terms of its composition and keeps these matters under review. During
the 2020 financial year, the Committee commenced the recruitment of an
additional Non-Executive Director who would both further strengthen the
Board and also have the relevant experience required for the role of an
Audit Committee Chairman. The search, conducted by Robert Walters,
produced two outstanding potential candidates who went through the full
scrutiny process. We were pleased to appoint Denise Goode to the Board
on 26 April 2021.
The Committee recommended the appointment of Denise due to her
wealth of financial, commercial and life science industry experience. She
also has a deep understanding of the pharmaceuticals sector and is highly
experienced in business development. In addition, her appointment will
provide continuity for the Board in light of the forthcoming retirement of
the Audit Committee Chairman in 2022.
Robert Walters were previously retained in 2020 in relation to the recruitment
of the DVP EU Finance Director, and have no other connection with the
Company or individual Directors.
105
Stock Code: DPHGovernance
Composition, Succession
and Evaluation continued
Appointment Process
1 Nomination Committee
One of the criteria was that the candidates should have financial
experience in an international company, as well as broad business
experience and be a good fit with the culture of the Company.
2 Engage
Robert Walters was appointed.
3 Meet
To assist Robert Walters with the understanding of the requirements
of the role, they met with the Group HR Director, Chief Executive
Officer and the Audit Committee Chairman.
4 Consider
The long list of candidates was circulated to the Committee for
comments before a short list was agreed.
5 Select
Induction
Any newly appointed Directors are provided with comprehensive
documentation in relation to the remit and obligations of the role, current
areas under consideration for the Board and the latest equity research
reports. New Directors visit the various business units in order to allow
them to meet with the management teams and to be shown around
the operations. Due to the impact of COVID-19, there has been some
restrictions around Denise’s induction, however, during the initial couple
of months we scheduled a number of one-to-one virtual meetings with
the Senior Executive Team, Corporate Development Director, Head of
Internal Audit and Risk Assurance, Group Financial Controller, Group
Treasury Manager, Group Legal Director and the Group Sustainability
Director. She also attended the Group Finance Lead Team meeting
and director’s duties training. In addition Denise has met with the Audit
Committee Chairman and the Lead Audit Engagement Partner.
It is hoped that in the Autumn we will be able to recommence a more
traditional induction and enable both Denise and Alison, whose induction
was also disrupted due to the pandemic, to complete step four of our
induction process as our teams start to return to offices and we are able
to allow visitors to our manufacturing and warehousing facilities.
Induction Process
1 Understanding the Business
All of the candidates had a broad range of experience from a wide
range of different backgrounds including executives in blue chip
FTSE organisations, partners in consulting firms and a number of
candidates with an established portfolio career.
Key documentation is provided such as a schedule of Board
and Committee dates, Schedule of Matters and Delegation
of Authority, Programmes of Business, Articles of Association,
and Group Policies and Procedures.
6 Interview
The first interviews were with the Chief Executive Officer and
Group HR Director, the second interviews were held with the Audit
Committee Chairman, and successful interviewees met with the
remaining Non-Executive Directors and the Chief Financial Officer
prior to appointment.
Denise’s other appointments were considered to check there was
no conflict of interest or time. References were taken.
7 Appoint
Denise Goode was appointed to the Board on 26 April 2021.
Further details relating to her background and experience can be
found on page 89.
8 Induct
See case study on page 107.
2 Meeting the Management Team
Meet the SET informally and formally.
Meet key management at Head Office and leadership teams
at the main sites.
3 Director and Committee Responsibilities
Receive induction/training on Director and Committee
responsibilities (if applicable).
Market Abuse Regulations online training course.
4 Visit the Business
Visit a key site for each function (PDRA, Manufacturing, Sales
and Marketing, and Head Office).
106
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Case Study
Denise Goode’s Induction
I formally joined the Dechra Board in April this year. Dechra’s Company
Secretary and her team put together a very well appreciated induction
programme for me. This programme was arranged entirely by digital
means and, after a year of us all embracing the technology, this
worked seamlessly and, importantly, safely for all. My discussions
have been not only with the internal team but also with key external
advisers, including investment, legal and audit. Internally, it included
all members of the Senior Executive Team and also members of their
teams, and I truly appreciate the time that has been given.
From the support and professionalism of this induction process I have
learnt more about the animal health market dynamics, its key trends,
and the competitive landscape. There are clear overlaps with my
experience with human pharma, but also some important differences.
I have been able to better understand the organisation and I have
seen a purpose and strategy being well executed, clearly underpinned
by Dechra Values and Culture. I have been given the time to ask my
questions to clarify my understanding of Dechra’s business direction,
its opportunities, its challenges and its governance structures. I am
a curious person and will fill the gaps in my knowledge by continuing
this process.
I plan to visit the sites and meet the wider teams. It’s important to
me to meet the Dechra people in person and that will happen as we
emerge from restrictions around the world and as the year progresses.
However, it has indeed been an efficient and comprehensive
introduction, allowing a concentration of focused ‘one-to-one’
sessions with Dechra people into just two months. I do wonder
whether so much could have been achieved so quickly with travel
and the challenges of diary management!
My key takeaways have been of a healthy, focused business being
delivered by in-depth experience and expertise, with a commitment
by each person I have met to driving Dechra’s success as part of
one motivated team. It’s a real privilege to have joined the Board.
Diversity and Inclusion
The Committee reviews the policy on diversity and its implementation
every year and, during 2021 this review took place in June. The Group
recognises that the diversity of thinking and skills and an inclusive culture
is beneficial for the Dechra business, its processes, and its performance.
Our objective is to continue to be a high performing business driven by
highly skilled and committed teams. In the market in which we compete,
we believe that the diversity of our workforce contributes significantly
to developing strong relationships with veterinarians, a significant and
growing proportion of whom are women, in the many markets and
cultures in which we trade.
As a global company with operations in 25 countries, we recognise that
a rich and diverse employee base is key to our continued success. We
are committed to providing an inclusive culture at Dechra and in the
last 12 months have developed two core modules that will be included
in all our company development programmes; Diversity and Inclusion
in Dechra and OneDechra; an exploration of our Company Culture and
Values and what they mean to our people.
The chart on page 89 illustrates the diversity characteristics of our
Board.
Hampton Alexander Review
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
2017
2018
2019
2020
● % of females on Board
● % of females on SET (excluding Executive Directors)
● % of females on SET and direct reports
Dechra excludes the Executive Directors from the Senior Management
data as per guidance from Hampton Alexander. However, the data
includes their direct reports.
Direct reports will cover employees at various grades of the Group and
will cover managers and junior professionals.
107
Stock Code: DPHGovernance Composition, Succession
and Evaluation continued
Progress on Diversity Policy
Policy
Dignity at Work
Progress
Our Dignity at Work Policy was drafted and launched within the UK in January 2020, and is now incorporated into the
Code of Conduct. In accordance with the Dechra Values, we believe that our position on diversity and inclusion is key to
providing a place of work that is free from bullying and harassment, and which is characterised by respect, collaboration,
openness, safety and equality.
One of our aims is to promote a climate in which employees feel able to raise complaints of harassment, bullying or
discrimination without fear of victimisation.
After initially launching training to our UK managers, we are now able to provide online training to a wider audience using
an externally hosted training portal. In addition to this, we have developed a Diversity and Inclusion module which also
covers unconscious bias which is one of three core modules that will be included initially in all Leadership and Management
development programmes, but will later be rolled out more widely across our employee base.
We encourage all employees to speak out and report any direct or indirect discrimination, harassment or bullying. This is
supported by our Grievance Policy and our How to Raise a Concern Handbook. All reports are investigated and acted upon.
In the forthcoming year we aim to launch an externally hosted ‘whistle-blowing’ hotline to facilitate this process further
and to provide further reassurance to employees. We have also trained 12 employees across the Group to be able to
investigate any concerns raised formally through this procedure.
Fair Pay
In the UK, only one of our subsidiaries, Dechra Limited, has to report under the Gender Pay Gap regulation. Dechra Limited
employees sit within our UK manufacturing, product development and regulatory affairs businesses.
We are pleased to report that as a result of our proactive management, the gender pay gap has reduced from 9.2% in
2018 to 7.4% in 2019 and further again to 5.5% in 2020. This is something that we are looking to continue to build upon
as we continue to make Dechra an increasingly attractive place to work.
We are very pleased to report that in March 2021, we were accredited with being a Living Wage employer in the UK.
This was following a review of our Group pay principles, whereby we implemented pay increases globally with effect from
1 January 2021 for all our lower paid employees. In countries where there is no equivalent of the Living Wage, we have
used the OECD low pay formulation, or pay at least twice the local/federal minimum wage.
Applicant
Tracking System
Our applicant tracking system allows us to track, report on and monitor key recruitment metrics, including time to hire,
source of hire, number of open positions and in some countries (depending on local laws) the diversity of our applicants. It
provides us a platform in which we can build on our global talent brand such that we can continue to attract and retain the
best talent into the organisation.
Board and
Senior Executive
Directors
To support the Group’s diversity and inclusion policy further and check that our core recruitment messaging is as inclusive
as possible, the system features a “gender bias decoder” tool which is capable of analysing the text within our job adverts
to help us understand any hidden implications within the language that is used. Research shows that many words can be
associated with masculine or feminine stereotypes.
During the forthcoming year, we will accurately analyse our metrics relating to diversity both relating to gender and ethnicity
and potentially identify areas for improvement.
We recognise that gender and ethnic diversity at Board level offers a competitive advantage to our organisation, as
a global company with a very wide range of stakeholders we are committed to greater alignment with our customer base
at home and overseas as our growth continues. Our approach to recruiting at Board level has always been based on
our stated policy; that everyone should be recruited and promoted on the basis of their personal ability, contribution and
potential. However, we acknowledge that we need to work harder to make sure that we are attracting a wider and more
diverse talent pool to these roles. To this end, we are working at Board level with the recruitment company, Robert Walters,
on an exercise to identify future potential candidates from a wide range of backgrounds, culture and experiences that we
can open dialogue with as part of our succession planning.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance The Board
as at 30 June 2021
Female
Male
40% (4)
60% (6)
Senior Executive Team (including Executive Directors)
as at 30 June 2021
Female
Male
27% (3)
73% (8)
Employees at Senior Leadership Level
as at 30 June 2021
Female
Male
47% (76)
53% (89)
UK Employee Ethnicity by Grade
A
B
C
D
E
F
4
2
16 2
1
G
5
1
83 10
100
26
9
54
12 10
60 7
3
0
20
40
60
80
100
120
140
White (all backgrounds)
Other (all backgrounds)
Not stated
Board Succession Planning
Non-Executive Directors
As reported in previous Committee reports, two of the Non-Executive
Directors (the Audit Committee Chairman and Senior Independent Non-
Executive Director) will be retiring in 2022. The Committee has now
concluded the recruitment process for the replacement Non-Executive
Directors with sufficient time to enable the wealth of knowledge to be shared.
After five years of successfully chairing the Group, Tony Rice has indicated
that he has decided to step down to devote more time to his family and his
other business and charitable activities. We will commence the search for his
replacement; at this time no specific date has been set for his departure. He
will continue as Chairman of the Group until a successor has been appointed.
Non-Executive Directors’ Tenure
as at 30 June 2021
Overall Workforce
as at 30 June 2021
Female
52% (1,036)
Male
48% (939)
Tony Rice
Julian Heslop
Ishbel Macpherson
Lawson McCartney
Lisa Bright
Alison Platt
Denise Goode
Numbers in brackets represent the number of females and males.
0
1
2
3
4
5
6
7
8
Number of Years
109
Stock Code: DPHGovernance Composition, Succession
and Evaluation continued
SET Succession Planning (including Executive Directors)
and Leadership Needs of the Group
Two of our key risks are people focused and they are the failure to:
of the Group and the Board undertakes an annual evaluation of its
performance and that of its Committees to monitor that they remain
fit for purpose.
• have robust succession plans in place leading to gaps in knowledge
and experience in key roles in the business; and
• adequately resource the business to meet strategic ambitions,
The 2020 Internal Board Evaluation
Below is an update from the actions arising from the 2020 internal
evaluation:
including geographical expansion, and acquisitions.
Action
Progress
To assist with this, the Group HR Director presents to the Committee
on the Group’s succession planning annually. The Committee discusses
the succession plan for the SET, which includes the Executive Directors,
and the Non-Executive Board. Plans are in place for sudden, unforeseen
absences, for medium term orderly succession and for longer term
succession. For each SET member, we have either identified an internal
candidate who is in the pipeline for succession, or we accept that for
some roles, where we have no successor we will need to approach the
open market. In these cases, we aim to build strength and depth in the
team below to allow a smooth transition to the new leader. Over the next
few years the Committee will prepare for a potential generational shift of
the Senior Executive Team, in particular the Chief Scientific Officer (CSO)
is scheduled to retire at the end of this year. Work has commenced on
recruitment of her successor.
The Committee has reviewed the emergency succession planning,
which clearly identified individuals capable of covering key management
roles on an interim basis. All these individuals will receive, or have
received, the necessary coaching to assist them in obtaining the
required skills to provide any critical support when needed. This planning
has facilitated the Group Supply Chain and Procurement Director for
Dechra Pharmaceuticals Manufacturing & Supply (DPM&S), Milton
McCann, being appointed as the Group Manufacturing & Supply
Director, following 12 months as Interim. Furthermore, a forward looking
review of the future anticipated shape of the organisation has been
undertaken to identify any potential gaps that may emerge, and plans
have been outlined to enable the organisation’s structure to remain fit
for purpose.
We encourage regular contact between members of the SET and the
Board, with all SET members presenting to the Board at least once a
year, leading site visits of their respective businesses and attending one-
to-one sessions with Non-Executive Directors to discuss specific issues
when applicable.
Evaluation
Annual Evaluation
The Board undertakes an annual evaluation of its performance and
that of its Committees to monitor that they remain fit for purpose,
details of which can be found on page 111. This year’s evaluation was
externally facilitated. The Committee’s review of the structure, size and
composition of the Board can found above on page 105.
Board Evaluation
The Chairman manages the Board and oversees the operation of its
Committees with the aim of monitoring that they operate effectively by
utilising the diverse range of skills and experience of the various Board
members. The effectiveness of the Board is imperative for the success
Succession
Planning
Non-Executive Directors succession planning actions
completed. An in depth update on the succession plans
for the SET was presented which showed that 60% of
the SET roles now have an internal successor identified.
Strategy
The last strategic update covered the areas under debate,
however it is acknowledged that further discussion/
understanding was required on routes to market.
The 2021 External Board Evaluation
The last external evaluation was in 2018. In October 2020, the
Committee invited three companies to tender for the evaluation, which
resulted in Independent Audit Limited (Independent Audit) being
engaged to carry out the external evaluation of the Board and its
Committees. This was the third time that Independent Audit has been
engaged to undertake the external evaluation, with this in mind a new
team were appointed to undertake the evaluation. Independent Audit
has no connection with the Company or individual Directors.
Overall, the review once again indicated that the Board has many
strengths, including:
• collegiate and inclusive dynamics fostered by the Chairman;
•
strong contributions to the Board from the executive team;
• well functioning committees;
• a commendable focus on workforce engagement; and
• a Company Secretarial function providing high quality support
to the Board.
The review noted that the following should be areas of future focus:
• Planning succession for SET members and strengthening diversity;
•
Providing opportunities for the Board to consider major strategic
themes as the Company emerges from the pandemic;
• Gaining further insight into stakeholders and in particular customers
and routes to market;
•
Continuing the focus on optimising the assurance framework to
mitigate non-financial risks; and
• Reviewing speak up channels.
Progress made on these action points during the forthcoming year will
be reported in next year’s Annual Report. The Board has agreed that an
internal evaluation will be undertaken during the 2022 financial year. The
results of the 2022 internal Board evaluation will be reported in next year’s
Annual Report.
110
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance External Board Evaluation Process
The process of the External Evaluation of the Board and its Committees were as follows:
1 Agree Scope
The Chairman and Company Secretary met with Independent Audit
to agree objectives, scope and the interview list.
2 Review Documents
Independent Audit reviewed the Board papers to assess the ways
information is communicated and assist them with understanding
the issues the Board is tackling.
3 Interviews
One-to-one meetings with each member of the Board, the Group HR
Director, Head of Internal Audit and Assurance, the 2020 financial
year External Audit Partner and the Company Secretary. Prior to the
meetings a list of ‘focus items’ was forwarded to each interviewee
which included the role of the Board and its Committees, focus on
strategic versus operational matters, the Chairman’s leadership,
relationships between Executive and Non-Executive Board members
along with areas for discussion such as risk, Board composition and
succession planning and how the Board dealt with the challenges
presented by the pandemic.
4 Observe
Independent Audit observed a Board, and Audit, Nomination and
Remuneration Committee meetings.
5 Report and Discussion
Independent Audit provided a draft report to the Chairman and
Company Secretary, which was discussed at a meeting so that all
suggestions were clear. Separately, the Senior Independent Director
had a meeting with the Chairman to discuss the feedback from the
draft report.
6 Meet with Board
Independent Audit presented their report to the Board at its April
meeting and answered questions to enable the Board to consider
its next steps.
7 Interviews
The Chairman held one to one interviews with the Executive Directors,
Non-Executive Directors and Company Secretary on the general
themes raised by the evaluation, and any other evaluation points they
wished to discuss.
8 Outcomes
Following an initial review of the responses, the Chairman discussed
with the Executive and Non-Executive Directors at the June 2021
Board meeting the general themes raised by the evaluation, and
any other survey-related points they wished to discuss. The Senior
Independent Director discussed with the Board (excluding the
Chairman) the feedback from the evaluation with regards to the
Chairman’s performance.
Effectiveness of Directors
Following the external evaluation, which concluded that the Board as a whole has responded well to the pandemic and is working smoothly in the
virtual world (further details of which, including the outcomes and actions, are provided on page 110 of the Governance Report), the Committee
has concluded that each of the Directors continues to perform effectively and demonstrates commitment, not only in respect of their roles and
responsibilities, but also in relation to the Group and its shareholders. At the forthcoming Annual General Meeting, Denise Goode, who was
appointed to the Board on 26 April 2021, will offer herself for election, and all of the remaining Directors will retire and offer themselves for re-election.
In addition, the Board has evaluated and determined that each Non-Executive Director has sufficient time to meet their Board responsibilities and
any proposed new appointments are disclosed to enable the Board to assess whether there are any conflicts of interest or time. The Chairman, at
the time of his appointment on 5 May 2016, met the independence criteria as set out in the Code.
Tony Rice
Nomination Committee Chairman
6 September 2021
111
Stock Code: DPHGovernance Audit, Risk and
Internal Control
Julian Heslop | Audit Committee Chairman
Letter from the Audit
Committee Chairman
4
Audit Committee
Meetings Held
Areas of Focus this Year
• Appointment of new Audit Committee Chairman
• Appointment of a new Head of Internal Audit and Risk Assurance
• COVID-19 changes to working practices and impact on
financial reporting and internal control environment
• Cyber Security
• BEIS Consultation
Key Responsibilities
• To review and oversee the Group’s financial and narrative reporting
processes and to monitor the integrity of the financial statements,
and advise the Board on whether the Annual Report, taken as a
whole, is fair, balanced and understandable
• To review the effectiveness of the Group’s internal financial control
systems and the work of the internal audit function
• To oversee the relationship with, and review the effectiveness of,
the external auditor, monitor their independence and objectivity,
and set the policy for non-audit work
Committee Membership and Attendance
Julian Heslop
Joined:1 January 2013
Lisa Bright
Joined: 1 February 2019
4
4
Ishbel Macpherson
Joined: 1 February 2013
Lawson Macartney
Joined: 1 December 2016
Alison Platt
Joined: 1 March 2020
Denise Goode
Joined: 26 April 2021
4
4
4
4
112
4
4
4
4
1
1
Dear Shareholder
On behalf of the Board, I am pleased to present this year’s Audit
Committee (the Committee) report, which will also be my last. During
the year, in addition to our regular duties, we focused on the following
matters:
Committee Membership
As disclosed in last year’s Annual Report, a recruitment process
commenced for an Audit Committee Chairman and I am pleased to
report that this resulted in the appointment of Denise Goode, who
brings a wealth of financial, commercial and life science industry
experience, both from her extensive career as a senior executive and
from board roles held since 2008. Denise joined at the end of April to
allow a smooth and orderly transition. It is intended that Denise will be
appointed as Chair of the Audit Committee upon my retirement as Audit
Committee Chairman following the 2021 Annual General Meeting.
Head of Internal Audit and Risk Assurance
During the year, the Head of Internal Audit and Risk Assurance, John
Wilson, gave notice of his intention to pursue an opportunity outside
the Group. Simon Hoolihan has been appointed to succeed John in
the role and took up his post in June 2021. To provide continuity in the
role we appointed an experienced Interim Head of Internal Audit and
Risk Assurance, Gareth Edwards, who will remain with Dechra until
September 2021 to facilitate an orderly handover.
Cyber Security
Due to the increasing importance of cyber security the Committee
focused on the Company’s adoption of the National Cyber Security
Centre (NCSC) 10 Step Framework. We have made progress with
implementing the recommendations from the framework during the year.
BEIS Consultation
The Committee reviewed a high level impact analysis on the Group from
the measures proposed in the BEIS consultation and also agreed that a
response would be submitted by the Group.
COVID-19
The finance team adapted well and quickly to home working for the
balance of our 2020 financial year and we made relevant changes to our
management and governance processes to maintain financial reporting
and internal controls. These controls have continued to operate
effectively in the 2021 financial year and the Committee continues to be
provided with comprehensive information to assist it in its duties.
Annual Report 2021
The following report sets out how the Committee has complied with
the principles of the Corporate Governance Code 2018 and specifically
provisions 25 and 26, and assisted the Board with its compliance in
respect of provisions 24, and 27 to 31. We specifically reviewed, at
the request of the Board, whether the 2021 Annual Report was fair,
balanced and understandable and concluded that it was. The basis
supporting our conclusion is set out on page 116.
Should you have any questions in relation to this report or the
Committee, please contact me or the Company Secretary.
Julian Heslop
Audit Committee Chairman
6 September 2021
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance The Purpose and Function of the Audit Committee
(the Committee)
Purpose
The Committee’s key role is to review and report to the Board on
financial reporting and internal financial control effectiveness, and to
monitor the effectiveness of the external audit process and internal
audit function.
Membership, Meetings and Attendance
The membership of the Committee, together with appointment dates
and attendance at meetings, are detailed on page 112. Denise Goode
joined the Committee on her appointment to the Board in April 2021.
All Committee members are Non-Executive Directors.
The Board considers that all members of the Committee are
independent and have competencies relevant to the sector in which
the Company operates. Both Julian Heslop and Denise Goode have
recent and relevant financial experience as a result of their financial
backgrounds and qualifications, and Ishbel Macpherson also brings
financial experience to the Committee following her career as an
Investment Banker. Alison Platt provides international commercial
experience, and Lawson Macartney and Lisa Bright provide product
development and commercialisation of pharmaceuticals experience
which support the Committee in meeting its objectives. The biographies
of all Committee members are detailed on pages 88 and 89.
The Company Secretary attends each meeting and acts as its secretary,
assisting the Chairman in circulating all papers prior to each meeting
in a timely manner and providing advice on all governance related
matters. Other members of the Board normally attend each meeting
together with the PricewaterhouseCoopers LLP (PwC) External Audit
Engagement Partner, the Group Financial Controller and the Head of
Internal Audit and Risk Assurance. In addition, the Committee Chairman
meets with the Chief Financial Officer, the Head of Internal Audit and
Risk Assurance and the External Audit Engagement Partner outside of
the Committee meetings in order to understand fully the key topics to
enable these subjects to be discussed meaningfully at the meetings.
The Committee usually meets with the external and internal auditors
without management being present, after each scheduled meeting, to
discuss their respective areas and any issues arising from their audits.
The Committee provides a report to the Board on its activities at the
Board’s next scheduled meeting.
Neither the Company nor its Directors have any relationships that impair
the external auditor’s independence.
Effectiveness of the Committee
The Committee’s performance was evaluated as part of the externally
facilitated review that took place in 2021 (further details of which can
be found on page 110 of the Governance Report). The evaluation
confirmed that the Committee is functioning well, supported by a
strong finance team, with meetings demonstrating good engagement
from Non-Executive Directors, management and assurance functions.
The evaluation also confirmed that the overall risk framework is well-
embedded and adding value.
Role and Responsibilities
The main role and responsibilities of the Committee are set out in the
written terms of reference which are available in the Corporate Governance
section of our Company’s website (www.dechra.com). The Board reviewed
the Committee’s terms of reference at the December 2020 meeting and
these were updated to include additional wording around arrangements for
employees, contractors and external parties to raise concerns, the criteria
governing compensation of individuals performing non-audit services and
the Committee Chairman’s engagement with shareholders. The main
responsibilities of the Committee are summarised on pages 100 and 112
of the Governance Report.
Major Activities of the Committee During the Year
The Committee met four times since the last Annual Report was issued.
These meetings were scheduled meetings, and are generally timed
to coincide with the financial reporting timetable of the Company. The
Committee Chairman and the Company Secretary have developed an
annual programme of business. This allows the Committee to consider
standing items of business alongside any exceptional matters that may
arise during the course of the year.
At each meeting, the Committee reviews the following items routinely:
•
status of statutory audits and reporting, global tax management and
compliance;
• non-audit fees (including actual and projected spend); and
•
the internal audit progress and assurance report.
The Committee have reviewed a high level impact analysis on the Group
from the proposals in the BEIS consultation. The Group’s response to
the BEIS consultation was reviewed and approved by the Committee
and the Board prior to its submission.
113
Stock Code: DPHGovernance Audit, Risk and
Internal Control continued
The table below shows the other key areas of the Committee activities:
Purpose and
Function
(see page 113)
Financial and
Narrative
Reporting
(see pages 114 to 115)
Internal Controls
and Risk
Management
(see page 116)
Internal Audit
(see page 117)
External Audit
(see pages 117 and
118)
• Review of the Committee’s terms of reference
• BEIS Consultation ‘Restoring trust in audit and corporate
• Review of the effectiveness of the Committee
governance: proposals on reforms’
• Review of the Accounting Treatment of R&D Projects
• Consideration of the Audit Memorandum prepared
and Technical Transfers
by the external auditor, including:
• Review of year end accounting treatment for acquisitions
and licensing arrangements, non-underlying items and
new accounting standards
• Review and endorsement of key judgements made by
management in determining half-year and full year results
− review of accounting treatment of non-underlying
items
− assessment of acquired intangible assets and
goodwill including impairment assessments
undertaken
• Review of the Group’s Half-Yearly Report and supporting
− commentary on the general control environment
papers
across the Group
• Consideration of the Half-Year Review Memorandum
• Fair, balanced and understandable recommendation
prepared by the external auditor
of the Annual Report
• Review of the Group’s preliminary statement, draft
• Review of Viability Statement process
Annual Report (including the Audit Committee Report)
for the year ended 30 June 2021 and management
presentation to investors
• Review and commend the Going Concern and Viability
Statements
• Review of the dividend policy and interim and final
dividend proposals
• Review of Anti-Bribery and Anti-Corruption (ABC) and
• General Data Protection Regulation (GDPR) compliance
Sanctions Policies
update
• ABC and Sanctions compliance update
• Review and approval of the internal control and
• Half-year and full year review of internal financial controls
risk management statements
• Review of tax strategy and policy framework
• Review of treasury policy and practice
• Review of the annual Internal Audit Plan, completed
projects and effectiveness of Internal Audit
• Review of cyber security and adoption of NCSC
10 Step Framework
• Review of Internal Audit Charter
• Review and approval of PwC Half-Yearly review plan
• Review of the external audit effectiveness
• Review and approval of PwC full year external audit
strategy (including timetable, risk assessment,
materiality, scope and fees)
• External Audit Engagement Partner Rotation
• Review of external auditor’s independence and
level of non-audit fees
• Review of the non-audit fee policy
• Discussion in relation to the Company’s expectations
• Review of findings from the external audit
of the external auditor and audit process
Financial and Narrative Reporting
All significant matters that the Committee considered during the year were supported by relevant justification papers and were fully discussed so
that due and appropriate consideration was given before any decision was approved. Further detail in relation to a number of significant matters is
provided below.
Financial Judgements
The Committee reviewed both the half-year and the annual financial statements. This process included an analysis by management of key
judgements made in determining the results. The Committee reviewed this in detail and endorsed management’s judgements.
The Committee gave particular attention to significant matters where judgement was involved, which were complex in nature, or where alternative
performance measures (APMs) were provided to enhance investors’ understanding of the underlying performance. The Group uses various non-
GAAP APMs within internal management reporting, the Half-Yearly Report and the Annual Report. The objective of these APMs is to isolate the
impact of exceptional, one-off or non-trading related items, to allow the Board and users of the accounts to understand better the underlying
performance of the business. The Group also uses constant exchange rate growth percentages to eliminate the impact of exchange rate fluctuations
and to show the underlying business growth. These matters were well supported by briefing papers provided by management and were specifically
reviewed and agreed by the external auditor in their reports to the Committee and in related discussions.
The key matters reviewed are shown in the table below:
114
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Significant risks considered by the Committee in
relation to the financial statements
Corresponding actions taken by the Committee
to address the issues
Review of the carrying value of intangible assets and goodwill of
£715.8 million, which represents 59.0% of total Group assets.
The Committee reviewed management’s process for reviewing and testing
goodwill and other intangible assets for potential impairment. In respect
of assets not subject to amortisation, it reviewed the papers provided by
management and noted the headroom between the value in use and the
carrying value of goodwill. In addition, it considered the ongoing viability
of capitalised R&D projects compared to their carrying value. Finally,
it reviewed the process adopted by management to review amortised
assets for impairment. It endorsed management’s conclusion that no
impairment of these assets had taken place. The Committee considered
PwC’s report on these matters.
Review of the remeasurement of the intangibles and associated
contingent consideration for the licensing transactions, which were
remeasured during the year.
The Committee reviewed the accounting basis of the adjustments which
supported the remeasurement and considered the appropriateness of the
accounting treatment.
Valuation and accounting for the acquired commercial licensing
agreement intangibles of £134.5 million together with the related
contingent consideration.
Review of the corporate tax rate for the year being a charge of 25.0%
(21.7% on underlying operations).
In order to assist investors with a better understanding of the underlying
performance of the business, management present within the financial
statements figures for underlying profit and earnings.
These measures are reconciled to the figures provided in the financial
statements and exclude items such as impairment and amortisation
of acquired intangible assets and related contingent consideration,
acquisition costs, manufacturing rationalisation restructuring costs,
and the fair value uplift on inventory acquired through business
combinations.
The Committee reviewed the calculations and and agreed the accounting
treatment for the assets acquired and their useful economic lives. The
Committee also reviewed the headroom existing between the carrying
value of Osurnia, the largest of the assets acquired, and its valuation.
The Committee discussed the key risks in respect of corporate tax and
reviewed that appropriate controls were in place to confirm that taxation
calculations were not materially misstated. Areas where significant
judgements, such as uncertain tax positions, had been applied were
reviewed and challenged and external audit work and conclusions were
considered. It reviewed progress in settling outstanding transfer pricing
and other matters.
The Committee reviewed the basis for calculating the underlying figures
and its consistency with the previous year’s figures. It also sought
confirmation from the external auditor, PwC, that they were satisfied that
the application of the accounting policy relating to this treatment was
appropriate.
The Committee also reviewed any material one-off income and costs
within the underlying results, and required that these were clearly
disclosed within the financial statements and notes.
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Internal Control continued
Going Concern and Viability Statements
The Committee reviewed the Group’s Going Concern and Viability
Statements set out on pages 35 and 83 of the Strategic Report. In
considering the Viability Statement, the Committee paid particular
attention to the robustness of the stress testing scenarios, the cash
flows forecast by the business and the committed bank facilities
available to the Group in the period under review. The external auditor
reviewed management’s assessment and discussed this review with
the Committee.
Fair, Balanced and Understandable Assessment
of the Annual Report
At the request of the Board, the Committee considered whether the
2021 Annual Report was fair, balanced and understandable and whether
it provided the necessary information for shareholders to assess the
Group’s performance (pages 28 to 35), business model (pages 16 to 18)
and strategy (pages 20 to 23).
The Committee based its assessment on a review of the processes
and controls put in place by management. This included:
•
•
the relevant senior management providing information on their own
business units and their confirmation that it was fair, balanced and
understandable; and
the Executive Directors and Company Secretary providing
conformation that each section of the report has been subject
to a rigorous review process built around four tiers:
− ongoing internal review by members of the Annual Report
project team;
− Board review of a full printed draft copy of the Annual Report
with all comments received being considered by the owners
of the respective reports;
− external review by advisers including the external auditor; and
− a final review by all members of the Senior Executive Team
(SET).
The above was an integral part of the process and each tier was invited
to comment so that issues could be debated and a final assessment
made. The Annual Report project team concluded that the 2021 Annual
Report met the fair, balanced and understandable test. In addition,
all members of the SET concluded that it met the fair, balanced and
understandable test.
An integral part of the process was the Committee’s final review; other
Board members and the external auditor were invited to comment
so that issues could be debated and a final assessment made.
The Committee was satisfied that all material matters which had
been disclosed in the Senior Executive Team’s reports to the Board
throughout the year had been adequately reflected in the Annual Report
and that the business model, strategy and the Group’s performance
were correctly reflected and clearly presented.
PwC have also concluded that the fair, balanced and understandable
statement is materially consistent with the financial statements and with
the knowledge they gained during their audit and their report can be
found on pages 152 to 160.
This assessment was carried out by the Committee on 31 August
2021, following which the Committee reported to the Board that it was
satisfied that, taken as a whole, the 2021 Annual Report is fair, balanced
and understandable.
Internal Controls and Risk Management
The Board retains overall responsibility for the management of the
Group’s risk management and internal control framework, and has
delegated the ongoing monitoring and review of the effectiveness of the
Group’s internal financial controls to the Committee.
The Group’s risk management and internal control processes include:
• confirmation that the rolling programme of risk and control reviews
by the Board has been completed;
• a review of the SET’s assessment of material internal control
effectiveness;
• a review of the Going Concern and Viability Statements together
with the financial stress testing conducted to support these
statements; and
• a review of baseline financial controls and management
representations on their effectiveness across the Group.
COVID-19 measures required the Group’s finance teams to work
remotely for part of the 2020 and all of the 2021 financial years. The
Committee reviewed the measures put in place to satisfy itself that the
Group’s internal control environment and financial reporting processes
were operating effectively given these changes. Due to the increasing
importance of cyber security, the Committee reviewed an internal audit
report on the Group’s cyber security arrangements, and received an
update from the Group IT Director on progress in the Group’s adoption
of the NCSC 10 Step Framework, and other mitigating actions. The
Committee was provided with management assurances on the key risk
areas and concluded that the mitigating controls were appropriate, and
that the financial control framework remains effective.
Further details in respect of the Group’s risk management and internal
control processes are provided on pages 76 to 78 of the Strategic
Report, along with the principal risks, controls and mitigating actions and
emerging risks. The Board’s statements on the effectiveness of these
processes are provided on page 94 of the Governance Report.
Review of Policies and Procedures
During the year, the Committee undertook the annual review of the
Group Tax Policy and Strategy, the Group Treasury Policy, the Sanctions
Policy the Anti-Bribery and Anti-Corruption Policy and the Third Party
Code of Conduct. The Third Party Code of Conduct was updated to
bring it in line with the Pharmaceutical Supply Chain Initiative (PSCI)
principles.
The Committee is provided with regular updates on the outcomes of the
risk assessments as part of both Anti-Bribery and Anti-Corruption and
Sanctions due diligence processes, as well as updates to procedures.
During the year, the internal Anti-Bribery and Anti-Corruption e-learning
course has been rolled out across the Group as compulsory training.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance During the year, it was highlighted to the Committee that whilst the How
to Raise a Concern Procedure was fundamentally strong, which was
supported by a positive culture and openness across the organisation,
awareness could be improved across all areas of the business. The
points raised are being addressed via the new Code of Conduct training,
the provision of investigator training and during the 2022 financial year
the implementation of a third party managed confidential hot line.
implementation of agreed actions is monitored monthly. Audit reports
are provided to the Committee together with regular progress reports on
management’s implementation of control improvements.
Independence and Effectiveness of Internal Audit
During the year, the Committee reviewed the Internal Audit Charter and
based on an assessment of the Internal Auditor’s work, agreed that:
Internal Audit Function
The Internal Audit and Risk Assurance function provides objective
assurance and advice on the management of the Group’s risks and
its systems of internal control. Internal Audit operates a co-sourced
arrangement with KPMG LLP (KPMG) with a mix of seconded and
specialist resources to provide a flexible resource model and access
to specialist expertise and language skills in worldwide geographies. In
accordance with a five year plan to develop the Internal Audit function in
line with projected business growth, an additional in-house resource has
been recruited during the year.
Following the resignation of John Wilson in February 2021, a recruitment
process has taken place to appoint a new Head of Internal Audit and
Risk Assurance. We are pleased to confirm the appointment of Simon
Hoolihan, who started on 28 June 2021. In the meantime, the Interim
Head of Internal Audit and Risk Assurance, Gareth Edwards, has
maintained continuity of the function and will remain with the Group until
September 2021 to enable a full handover and smooth transition.
Internal Audit Plan
Internal Audit operates a three year assurance plan which seeks to
provide balanced coverage of the Group’s material financial, operational
and compliance control processes. It consists of a rolling programme
of core assurance activities, together with initial control reviews on
new acquisitions and reviews of major business process and systems
changes. The annual audit plan, which defines the specific assurance
projects to be delivered each calendar year, is developed from the three
year plan. The annual plan for the year to June 2022 was approved by
the Committee in April 2021.
The Internal Audit process was amended in the 2020 financial year due
to COVID-19, and all of the audits are currently being delivered virtually
where practicable, which has significantly increased the time spent on
each audit, and lead to delays in the completion of the work originally
planned.
The key areas addressed in this year’s audit plan have been:
• Financial: Treasury, Baseline financial control framework, Tax
Governance;
•
•
•
•
•
•
the Internal Audit findings and reporting had well defined rating
scales and were clear and concise;
the function added value and additional assurance;
Internal Audit constructively challenged management and displayed
independence in providing their opinion and recommendations;
the dual reporting lines into the Chief Financial Officer and Audit
Committee Chairman worked well;
the Internal Audit delivery was based on clearly defined audit plans
which were adapted when relevant;
the Internal Audit resources were lean but sufficient at the present
time; and
• a clear Internal Audit plan, based on the major risks approved by the
Board, was presented annually to and agreed by the Committee, as
being well updated at each Committee meeting.
The Committee, based on this, concluded that the Internal Audit
function was effective and independent.
External Auditor
Following a competitive tender in 2015, PwC were appointed as the
Company’s external auditor effective from the 2016 audit. The Company
complies with the Competition and Markets Authority Order 2014
relating to audit tendering and the provision of non-audit services.
Audit Plan
PwC agreed their audit plan with the Committee, which included their audit
scope, key audit risk areas and materiality. The Committee discussed the
audit plan with PwC and approved it, together with the fees proposed.
Independence, Effectiveness and Objectivity of the
Audit Process
The Committee conducted a review of the external auditor’s
independence, effectiveness and objectivity based on:
•
the Committee’s own assessment of the quality of the audit plan, the
rigour of the audit findings and conclusions, the extent to which the
External Audit Engagement Partner understands the business and
constructively challenges management and the quality and clarity of
the technical and governance review provided;
• Operational: IT Disaster Recovery and Resilience, Global Payroll
implementation, Governance in Manufacturing and Supply Chain,
Sales and Operational Planning, post-acquisition review processes;
and
•
the results of a questionnaire on external auditor effectiveness and
efficiency (further detail on which is provided below);
• a report prepared by PwC setting out its processes to ensure
independence and its confirmation of compliance with them; and
• Compliance: Group policy framework, Data Privacy, ABC third
party programme together with South America Monitoring,
Pharmacovigilance and a review of the How To Raise a Concern
Procedure and controls.
Internal Audit recommendations are communicated to relevant business
leaders, appropriate control improvements agreed with them, and
•
the level of non-audit fees as a percentage of the audit fees paid
to the external auditor, which were 7.6% (2020: 5.5%) in relation to
services rendered by PwC.
Responses to the questionnaire have been received from the Finance
Leadership Team across the Group who provided information and
assistance to the external auditor.
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Internal Control continued
The questionnaire covered a number of areas, including:
• quality of the audit team;
• knowledge and understanding of the Group;
• appropriateness of the areas of audit focus;
•
•
interaction with audit specialists; and
timeliness and adequacy of communication by the external auditor.
The results of the questionnaire were reported to the Committee at the meeting on 31 August 2021.
Based on the review set out above, the Committee is satisfied with the external auditor’s independence, effectiveness and objectivity.
Re-Appointment of External Auditor
At the forthcoming Annual General Meeting, a resolution to re-appoint PwC as the external auditor and to authorise the Committee to set
their remuneration will be proposed.
In recommending the re-appointment of the external auditor at the Annual General Meeting, the Committee also takes into account EU guidance
and the Competition and Markets Authority (CMA) Order on mandatory audit tendering. Dechra will be required to retender its audit no later than for
the 2026 financial year. The Committee will complete this process well before the start of the year preceding the 2026 financial year to maximise the
firms able to tender and to permit the firm selected to have sufficient time to meet the required independence regulations.
External Audit Engagement Partner Rotation
In line with the FRC Ethical Standard, the External Audit Engagement Partner is rotated every five years. Following the 2020 financial year,
the previous External Audit Engagement Partner, Andrew Hammond, stood down and Mark Skedgel was appointed by the Board on the
recommendation of the Audit Committee.
Non-Audit Assignments
With respect to non-audit services undertaken by the external auditor, the Company’s policy is that the provision of such services does not impair
their independence or objectivity.
Since May 2018, the policy for the use of the auditors, PwC, for non-audit work, is capped at 30% for the ratio of non-audit fees to the audit fee and
the underlying principle is that the external auditor should never be used where another professional firm can provide the same or similar service.
This principle is stricter than the FRC guidance as it is expected that non-audit work performed by the external auditor will be limited to the review
of the half-year accounts and any other work required to be carried out by the statutory auditor in accordance with legislation. The annual review of
the policy was undertaken in April 2021 with the only change being the inclusion of a requirement for Audit Committee approval before appointing
any employee who had worked on an audit of the Group in the previous two years. Previously, this had required the approval of the Chief Executive
Officer, Chief Financial Officer and Audit Committee Chairman.
Should another professional firm be unable to provide the same or similar service, the Committee will continue to approve in advance any non-audit
work carried out by the external auditor. In all instances the Committee will assess the qualification, expertise, independence and objectivity of the
external auditor prior to granting approval. Safeguards are in place to provide for continued external auditor independence, including the use of
separate teams to undertake any non-audit work (other than the review of the Half-Yearly Report) and the audit work. As such, non-audit fee spend
is a standing item on the agenda for every Committee meeting.
A summary of audit and non-audit fees in relation to the year is provided in note 7 to the Group’s financial statements. This shows that non-
audit work carried out by the external auditor represented 7.6% (2020: 5.5%) of the annual audit fee. The 2021 other non-audit fees relate to the
engagement of PwC (as statutory auditor) to provide an annual attestation to NOMA (the regulator in Norway) and to provide attestation of the R&D
tax relief claim for Dechra Veterinary Products Srl (Italy), as such the services were permitted under the non-audit fee policy.
Audit fees including related assurance services (£m)
Non-audit fees (£m):
Review of Half-Yearly Report
Other work
Ratio of non-audit fees to audit fees
2021
PwC
1.4
0.1
0.006
7.6%
2020
PwC
1.1
0.06
0.002
5.5%
2019
PwC
0.89
0.04
0.002
6.7%
2018
PwC
0.80
0.04
0.52*
70.0%
2017
PwC
0.57
0.04
0.05
15.8%
* The 2018 Audit Committee Report sets out the reasons for the engagement of PwC.
Julian Heslop
Audit Committee Chairman
6 September 2021
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Directors’ Remuneration
Report
Ishbel Macpherson | Remuneration
Committee Chairman
Letter from the Remuneration
Committee Chairman
8
Remuneration Committee
Meetings Held
Areas of Focus this Year
• Review of compensation across the Group including the
Executive Directors
• Review of Chairman fee
• Shareholder consultation
• Executive Director and SET Performance Objectives including
ESG targets
Key Responsibilities
• To determine the remuneration, bonuses, long term incentive
arrangements, contract terms and other benefits in respect of the
Executive Directors, the Chairman and Senior Executive Team.
• To oversee any major changes in employee benefit structures.
• To approve the design of any employee share scheme.
Dear Shareholder
I am pleased to present the Directors’ Remuneration Report for the year
ended 30 June 2021.
Following this letter we have set out the following additional information:
• Our Pay Principles, which we adopted in 2020, together with
a summary of the market reference points considered by the
Committee and our approach to wider workforce remuneration.
• Remuneration Philosophy: The link between our Directors’
Remuneration Policy and our Strategy.
• Governance: How our Remuneration Policy is aligned with the
requirements of the UK Corporate Governance Code.
• Remuneration at a glance: Summary of Executive Director Total
Remuneration for the 2020 and 2021 financial years.
There then follows the two principal sections of the Remuneration
Report: the Annual Report on Remuneration followed by an abbreviated
form of the Directors’ Remuneration Policy (the full version can be found
at www.dechra.com). The Annual Report on Remuneration provides
details of the amounts earned in respect of the 2021 financial year and
how the Directors’ Remuneration Policy (the Policy) will be implemented
in the 2022 financial year.
The Directors’ Remuneration Report (excluding the Policy) will be subject
to an advisory vote at the 2021 Annual General Meeting.
Our Directors’ Remuneration Policy
The Policy was approved by shareholders at the Annual General Meeting
on 27 October 2020, with 90.81% of all votes cast in favour, and will
remain in force until 2023. We review the application of this Policy
regularly, with a view to it remaining appropriate, linked to strategy and
reflective of developing market practices. No changes to the Policy are
proposed for the forthcoming year.
Further details on how the Policy was implemented during the 2021
financial year and our approach to the implementation of the Policy
in the 2022 financial year, including our approach to performance
measures for the annual bonus and LTIP awards are described later
in this letter.
Committee Membership and Attendance
Ishbel Macpherson
Joined: 1 February 2013
Lawson Macartney
Joined: 1 December 2016
8
8
Tony Rice
Joined: 5 May 2016
Julian Heslop
Joined: 1 January 2013
Denise Goode
Joined: 26 April 2021
8
8
8
8
2
2
Lisa Bright
Joined: 1 February 2019
Alison Platt
Joined: 1 March 2020
8
8
8
8
8
8
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Report continued
Remuneration Committee Decisions in 2021
In last year’s Remuneration Report we reported that we had decided to postpone the next remuneration review until later in the 2021 financial year to
allow the Committee time to review any impact on the business of COVID-19. We are pleased to report that the business has continued to perform
strongly and successfully managed to remain operational throughout the COVID-19 period. In the 2021 financial year, the Group has delivered
revenue of £608.0 million, representing an increase of 21.0% (at constant exchange rates) on the prior year, and underlying operating profit of
£162.2 million, which represents an increase of 29.2% (at constant exchange rates) on the prior year. In addition, we have:
• not furloughed any of our employees;
• not taken advantage of, or utilised, any government assistance in any country; and
• not undertaken any redundancy programmes related to the pandemic.
Remuneration Review
The Committee has been concerned for some time that certain of our senior executives’ base salaries have not kept up with the growth of the Group
and its complexity and have become uncompetitive. As a result of this concern the Committee resolved to undertake a business wide review of
remuneration, focusing in particular on the lowest paid in our organisation and the top 60 Senior Leaders (the Review).
By way of context, in the last four years:
• underlying operating profit has grown by 18.8% on a compound annual growth rate basis;
• dividends have grown by 17.2% on a compound annual growth rate basis; and
• market capitalisation (12-month average) has increased by 315% (September 2016 to August 2021); and
• acquisitions have been made including manufacturing activities in Brazil and in the US, as well as of products, most recently Osurnia and
Mirataz.
The Group has operations in 25 countries; markets products in 68 other countries; has over 5,600 product registrations; and has a market
capitalisation of over £5.7 billion (as at 27 August 2021). The scope and complexity of the Executive Director roles have therefore increased
significantly.
Over this period, Ian Page, our Chief Executive Officer, has had one base salary increase of 4% in the 2020 financial year. Ian Page’s salary had not
previously been increased since 2016. Ian’s decision to waive increases in line with the workforce, combined with the increased complexity of the
role means that his current base salary is significantly below the lower end of the market competitive benchmark reference points.
We considered the conclusions of the Review in the context of the Dechra Pay Principles, which we adopted in 2020. See page 125 for further
details.
Our Lowest Paid
The Review identified where our pledge to become a Living Wage Employer required increases in employee pay. This has been implemented globally
with effect from 1 January 2021 for all of our lower paid employees. In countries where there is no equivalent of the Living Wage, we have used the
OECD formulation, or pay at least twice the local/federal minimum wage. In addition to implementing our Living Wage Employer changes a year
earlier than originally planned in the UK and even earlier in the rest of the world, we paid all of our site based employees (noting that the majority of
our lowest paid staff work in manufacturing or logistics) a bonus to reward their commitment during the COVID-19 period. In March 2021, we were
pleased to be accredited as a Living Wage Employer in the UK.
We have increased our employer pension contribution from 4% to 6% with effect from July 2021 in the UK and intend to increase the employer
pension contribution again to 8% on 1 July 2022.
Executives below Board Level
The Review of our top teams (which includes the Senior Executive Team and their direct reports) revealed that a number of them were not on
a competitive level of base pay. The affected executives were almost all longer serving colleagues, whose base pay had not kept pace with the
business’ growth nor the marketplace. In order to honour our Dechra Pay Principles commitment (as set out on page 125), and to satisfy ourselves
on internal integrity, 40 Senior Leaders below Board received increases in base salary above the average 3% awarded to the wider workforce (other
than those impacted by our Living Wage pledge). These increases were between 5% and 20% of basic salary and effective from 1 January 2021.
The approach adopted when setting these base salary levels was to pay 90% of the benchmarked median base salary level.
In addition, we have decided to increase the annual bonus potential of the direct reports of the Chief Executive Officer from 50% to 75%. This will still
leave them behind the benchmark median, but we feel takes this group to the level which will mitigate the risk of flight.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Executive Director Remuneration Decisions
The Review highlighted that the base pay of our Chief Executive Officer, Ian Page, and our Chief Financial Officer, Paul Sandland, was significantly
below the lower end of the market competitive range (looking at companies ranked 51 to 150 in the FTSE350 and companies with a market
capitalisation of £2.5 billion to £4.5 billion. The base salary of our third Executive Director, Tony Griffin, which was also benchmarked locally, is already
at a competitive level.
The Committee believes that the base salary of our top Executives should be positioned appropriately for a number of reasons:
• we are fortunate to have an exceptional top management team and wish to lock in continuity for at least the next three years;
• unless we raise salaries to an appropriate level, we are at risk of salary compression below Board level, which will impact our ability to recruit
successfully, particularly in the US and Europe;
• appropriate remuneration for our top executives is important to our succession planning, at and below Board level; and
•
the Committee, having embraced Dechra’s Pay Principles, believes that these principles should apply at every level in the organisation.
With this in mind we undertook extensive engagement with our shareholders to discuss:
•
•
increasing the base salary for our Chief Executive Officer and Chief Financial Officer with effect from 1 January 2021 in order to bring their base
salaries closer to the market median (consistent with the approach being adopted for executives below Board level as described above); and
increasing the bonus potential for the Executive Directors to 125% of salary for the 2022 financial year. This is below the maximum of 150% of
salary approved by shareholders when our Policy was approved last year.
Although we have used benchmarking as a guide; this is not the primary driver for the increases. As detailed above, over the last four years the
Group’s business has not only increased significantly in scale and profitability but has also increased in complexity. The scope and complexity of the
Executive Director roles have therefore increased significantly.
Furthermore, on his appointment in October 2019, the base pay for our Chief Financial Officer, Paul Sandland, was set at circa 19% less than that of
his predecessor. This was deliberately set at below market to allow him to prove himself in the role. It is the unanimous view of the Board that Paul
has excelled as our Chief Financial Officer, particularly during the COVID-19 period. In addition, he has taken on additional responsibility for IT and
our ESG strategy.
Responding to Shareholder Feedback
The consultation period with our largest shareholders has been important to us. Over a four month period we had a number of conversations with
investors and we had feedback from 35 shareholders, representing over 60% of our share capital. I am pleased to report that the vast majority of
shareholders consulted were supportive of the proposed increases.
Responding to the feedback received, the Committee decided to phase the base salary increases for both our Chief Executive Officer and Chief
Financial Officer over two financial years as detailed in the table below.
Ian Page – Chief Executive Officer
Market positioning for
Chief Executive Officer
Paul Sandland – Chief Financial
Officer
Market positioning for
Chief Financial Officer
Previous base salary
£520,000
Significantly below lower quartile
1 January 2021*
12% to £582,400
Around lower quartile
1 January 2022**
circa 5% to £612,000
Around 90% of market median
£300,000
20% to £360,000
12.5% to £405,000
Significantly below lower quartile
Below lower quartile
Around 90% of market median
* The increases were effective 1 January 2021, but were paid post year end following the end of the consultation with our shareholders.
** Subject to continued strong performance of the Group and excellent individual performance.
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Report continued
The table below summarises the implementation of the Policy for Executive Directors in respect of the 2021 financial year.
Element
Salary
Retirement Benefit
Annual Bonus
Implementation
As set out on page 121, Ian Page’s salary has been increased to £582,400 and Paul Sandland’s to £360,000. The
increases were effective from 1 January 2021, but were paid post year end following the end of the consultation with
our shareholders. The 2021 base salary increase for Ian Page moves his base to around the lower quartile of the market
range. The 2021 increase for Paul Sandland moves his base towards (albeit below) the lower quartile. Tony Griffin’s salary
was increased by 2.9% to €373,830 which was broadly in line with the average range of increases awarded to employees
throughout the Group.
Company pension contribution/cash in lieu of pension of 14% of salary for Ian Page, 11% for Tony Griffin, and 4% of salary
for Paul Sandland. In line with the commitment made in our 2020 Remuneration Report, these are being aligned to that of
the workforce by the end of 2022 (this includes enhancing the UK wider workforce rate alongside a reduction in the rate for
Executive Directors). Paul Sandland’s pension is already aligned with the wider workforce, and reflects a reduction in the
contribution rate on his appointment to the Board.
Maximum opportunity for the 2021 financial year of 100% of base salary.
The bonus for the 2021 financial year was based on underlying profit before tax (as regards 85% of the opportunity),
personal objectives (10%) and ESG measures (5%).
We have delivered underlying profit before tax during the year of £150.1 million, an improvement of 27.2% at constant
exchange rates (25.0% at actual exchange rates) on the prior year. Reflecting the performance of the Group in relation to
profit targets and the performance of Executive Directors against personal objectives and ESG measures as described on
page 131, bonuses for the year equal to 100% of salary have been earned by Ian Page and Paul Sandland.
The profit element of Tony Griffin’s bonus is calculated by reference to the underlying operating profit of Dechra Veterinary
Products EU (50%) and Group underlying profit before tax (50%). His bonus for the year is 83% of salary which reflects the
financial performance, his personal objectives and ESG measures.
The Committee considers the level of payout is reflective of the overall performance of the Group in the year and is
appropriate.
Long Term
Incentive Plan
The annual bonus is subject to malus and clawback provisions.
Awards of 200% of base salary for Ian Page, 150% of base salary for Paul Sandland and 100% of base salary for Tony
Griffin were granted during the 2021 financial year. All of these awards are subject to a two year holding period.
LTIP awards granted to Ian Page and Tony Griffin on 26 October 2018 are scheduled to vest on 6 September 2021:
• as to 100% of the TSR element (one third of the total award) reflecting upper quartile performance; and
• as to 60.7% of the underlying diluted EPS element (two thirds of the total award) reflecting that the compound annual
growth in the underlying diluted EPS at 13.2% was below the maximum threshold of 19% (with the assessment of EPS
taking into account the Akston licensing agreement, as referred to below).
In aggregate, taking into account the ROCE underpin (reflecting that the ROCE at 18.8% had not fallen below 10.0%), the
LTIP awards will vest as to 73.8%. The Committee considers the level of payout is reflective of the overall performance of
the Group over the three year performance period ended 30 June 2021 and is appropriate.
See page 132 for further details.
Awards made under the LTIP are subject to malus and clawback provisions.
Performance Conditions for LTIP Awards
As detailed in the Directors’ Remuneration Report last year, the impact of the Akston licensing agreement is relevant for the 2019 Grant (three year
performance period to 30 June 2021) and 2020 Grant (three year performance period to 30 June 2022). In order to measure performance on a
fair and consistent basis, the Committee has adjusted the final year EPS for the 2019 Grant to reflect the actual Akston R&D costs incurred at the
vesting date. This adjustment recognises that these R&D costs were not included in the base year of the performance period and maintains the
overall level of stretch in the targets so the targets are not less difficult to satisfy.
For the 2021 Grant (three year performance period to 30 June 2023) and future years, the Committee is mindful that the base year will have some
R&D actual costs from the Akston deal. Therefore, the actual Akston R&D costs will be adjusted for both the base year and the year of vesting
to enable performance to be measured on a like-for-like basis. The Committee believes that this is the right approach as the payments for the
development of Akston are lumpy and uncertain as to timing between financial years.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Forward Looking: Implementation of Policy for 2022 Financial Year
We will apply the Policy in the 2022 financial year as follows (more information is given on page 140):
• Salary: Executive Directors’ salaries will continue to be reviewed in January. As detailed above we are intending to make a further increase to
the base salary for Ian Page to £612,000 and Paul Sandland to £405,000 from 1 January 2022 which would move their base salaries closer to
(albeit below) market median. This second increase will be subject to the continued strong performance of the Group and excellent individual
performance. It is planned that any increases to Tony Griffin’s salary will be in line with the range of any increases proposed for the wider
workforce.
• Pension: In order to align the pension contributions/cash in lieu of pension for Ian Page and Tony Griffin to that of the workforce, from 1 July
2022, the pension contributions for Ian Page and Tony Griffin will decrease to 8%. Reflecting the enhanced employer contribution rate for wider
workforce rate, Paul Sandland’s pension increased to 6% from 1 July 2021 and will increase to 8% when the employer pension contribution rate
for the UK wider workforce increases to 8% on 1 July 2021.
• Bonus: Our Executive Directors’ current annual bonus opportunity is 100% of salary. Our Policy, approved by shareholders at the 2020 Annual
General Meeting, allows for a maximum opportunity of 150% of base salary. As noted above, for the 2022 financial year, we propose to utilise
some, but not all, of the additional headroom in our Policy. The maximum bonus opportunity for the 2022 financial year will increase from 100%
to 125% of salary, which still remains below lower quartile of the market range.
In line with our Policy for Executive Directors, we will also introduce bonus deferral, requiring that 20% of any bonus earned (and not just any
additional bonus earned) is deferred into Dechra shares for two years. In connection with the introduction of bonus deferral, we are seeking
shareholder approval at the 2021 Annual General Meeting for a new Deferred Bonus Plan, the principal terms of which are summarised in the
Notice of Annual General Meeting. As we explained in the Directors’ Remuneration Report last year, the level of deferral is set so that amount of
cash earned for any level of performance is not increased by the increase in the opportunity. Therefore, for instance, the level of deferral would
increase to 33% of bonus were the bonus opportunity be raised the 150% of base salary permitted by our Policy. The bonus will be based on
a mix of stretching underlying profit before tax targets (in respect of a bonus of up to 110% of salary), personal objectives (in respect of a bonus
of up to 10% of salary) and an ESG measure (in respect of a bonus of up to 5% of salary). For Tony Griffin, and consistent with the approach for
the 2021 financial year, half of the opportunity based on underlying profit (i.e. up to 55% of salary) will be assessed by reference to the underlying
operating profit of Dechra Veterinary Products EU, reflecting his responsibility for that part of our business, and the other half of the profit based
opportunity by reference to Group profit in line with the other Executive Directors, and so that a significant part of the profit based opportunity is
aligned with the shareholder experience in respect of overall Group performance.
The increase in the annual bonus opportunity for the 2022 financial year recognises the increase in the size and complexity of the Group. The
Committee has also reviewed the level of stretch in the annual bonus targets to reassure themselves that the higher maximum opportunity for
the 2022 financial year will only be earned for delivery of higher levels of performance. For the 2022 financial year the maximum bonus will only
be earned for materially improved year on year performance from a strong 2021 base year where we delivered 25% year on year improvement in
underlying profit before tax (on a constant currency basis). The threshold to maximum range has been set at 95% to 110% of a stretching target
level of performance in order to align the maximum level of potential reward with the achievement of more stretching performance targets.
• LTIP: No changes are proposed to the maximum LTIP opportunity for the 2022 financial year. Awards for the 2022 financial year will be granted
at the level of 200% of salary for Ian Page, 150% of salary for Paul Sandland and 100% of salary for Tony Griffin. Any shares that vest will
be subject to a two year holding period. The performance measures remain as per the grant of LTIP awards made on 22 September 2020,
details of which can be found on page 134. The upper target for the EPS performance condition will be 15% CAGR. Taking account of internal
forecasts of performance over the performance period, the markets in which the Group operates, our long-term growth ambitions and the
expectations of the investment community on the Group’s future potential performance, this upper target is considered to be a stretching and
ambitious upper target which requires significant out-performance. This also reflects the strong performance delivered in the 2021 financial year
which is the base year for the 2022 LTIP grant.
•
Impact of changes on overall total compensation: The Committee is mindful of the impact of base salary increases on the value of the total
package. However, the value of the total package continues to be modest against the market norm for a company of our size and complexity.
The changes outlined above move the value of total package for our Chief Executive Officer and Chief Financial Officer towards the lower quartile
of the market. The majority of the package continues to be performance related, which is aligned with the interests of our shareholders. We
also recognise that increasing the level of competitiveness in salaries and the annual bonus will require the continued delivery of performance,
coupled with stretching targets for annual variable and long term compensation. The proposed maximum targets for both the 2022 annual
bonus and LTIP grant require continued double digit growth from the strong performance delivered in 2021. This will deliver alignment to
shareholders’ interests as we continue to grow.
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Chairman and Non-Executive Directors
We have also taken the opportunity to review our Chairman fee level. We were mindful that the fee for Chairman varies considerably depending on
sector and time commitment. However, at less than £135,000 per annum, the total fee for our Chairman by any measure is very low. The Committee
agreed to increase the Chairman’s fee in two stages, with an increase to £159,000 (which includes the fee for being Chairman of the Nomination
Committee, currently £5,000) from 1 January 2021 and to £188,000 from 1 January 2022. This will position the Chairman’s fee between the lower
end and median of the market.
A committee appointed by the Executive Directors and the Chairman has reviewed fees for the other Non-Executive Directors. Details of the
proposed changes to the fee for the Non-Executives Directors are set out on page 134. These increases bring the fees closer to the market
median (consistent with the approach being adopted for executives below Board level as described above) and reflect the increase in the size and
complexity of the business over the last four years. A review of the Non-Executive Directors’ base and additional fees will be undertaken in January
2022 along with the pay review process for the wider workforce.
Wider Workforce remuneration and employee engagement
We recruit and promote people on the basis of their personal ability, contribution and potential. We are committed to promoting, supporting and
maintaining a culture of fairness, respect and equal opportunity for all. We are also committed to fair employment practices and comply with national
legal requirements regarding wages and working hours.
The Group aims to provide a remuneration package that is competitive in an employee’s country of employment and which is appropriate to promote
the long term success of the Group. The Company’s SAYE scheme and Employee Stock Purchase Plan (ESPP) encourage share ownership by
qualifying employees and enable them to share in value created for shareholders. In the 2022 financial year we propose to offer the SAYE more
widely than we have in the past, expanding its operation to 18 additional countries and so offering 921 additional employees the opportunity to
acquire shares in Dechra.
Further details on our pay principles and workforce remuneration are set out on page 125.
As the Non-Executive Director designated under the 2018 Code for employee engagement, Lisa Bright engages directly with employees on a range
of topics of interest to them. As discussed on page 97, workforce engagement activities during the 2021 financial year included five one-to-one
hour discussions with cross function teams in the EU and US. These have provided an upward channel for views, comments and debate, as well
as an opportunity to provide positive feedback on the Group’s decision not to furlough employees during the pandemic. The Committee provided
an update on the Remuneration Review, including the Executive Directors’ remuneration increases, to the wider workforce and a channel for further
information and discussion.
Gender Pay
We are pleased to report that as a result of our proactive management with regards to our gender pay gap in Dechra Limited (who employ 67.3%
of our UK employees), the gap has reduced from 9.2% in 2018 to 7.4% in 2019 and further again to 5.5% in 2020. This is something that we are
looking to build upon as we continue to make Dechra an increasingly attractive place to work.
In Conclusion
We greatly appreciate the feedback and the level of support we have received from our shareholders regarding our approach to remuneration and
the changes outlined above. We are firmly of the view they are in the best interests of the business and its shareholders. Dechra is a high performing
Group and we believe that setting the salaries of our top Executives at more appropriate levels will help to keep it so.
We remain committed to a responsible approach to executive pay, as I trust this Directors’ Remuneration Report demonstrates. We believe that
the Policy operated as intended and consider that the remuneration received by the Executive Directors in respect of the 2021 financial year was
appropriate, taking into account Group performance, personal performance and the experience of shareholders and employees.
On behalf of the Board, I would like to thank you, our shareholders, for your engagement, and I hope that we will continue to receive your support at
the Annual General Meeting later this year. Should you have any queries in relation to this report, please contact me or the Company Secretary.
Ishbel Macpherson
Remuneration Committee Chairman
6 September 2021
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Additional Remuneration Information
Dechra Pay Principles
Our pay principles adopted in the 2020 financial year and detailed below, support us in attracting, motivating and retaining the key talent required to
support the sustainable improvement of animal health and welfare globally.
Fair Pay
Market
Competitiveness
Living Wage
Stake in the
Company
Reward for
Contribution
Equal pay for work of equal value
We aim to remain competitive on compensation in our different marketplaces, whilst maintaining internal integrity
We have set a target to become a real Living Wage Employer* in the UK during the 2021/2022 financial year. Living wages
vary by country, but our aim does not. As we continue to grow in countries across the globe, a living wage target is being
explored**
We want to increase the number of employees who are able to hold a stake in the Company through employee share
ownership
In addition to base pay, we have a number of different local incentive schemes across the Group
* Defined in the UK by The Living Wage Foundation.
** Implemented early during the 2021 financial year.
Market Data
To assess our competitive pay positioning in our different marketplaces, we reviewed Willis Towers Watson pay data for the benchmarking
undertaken across the organisation. This data takes account of the size and complexity of the organisation, as well as the level of responsibility of
the role. Complexity of the organisation reflects a number of parameters including: (i) annual revenues; (ii) FTE employees; (iii) business diversity; and
complexity and (iv) geographic breadth. As an additional sense check for the Executive Directors, the Committee also considered benchmark data
based on companies with a market capitalisation of £2.5 billion to £4.5 billion. Our current and 12 month average market capitalisation is at/over the
upper end of this range. The lower quartile and median benchmark reference points are broadly consistent for both this market capitalisation group
and the FTSE 50 to 150 peer group.
Whilst market data provides a valuable insight into pay levels and structures, the Committee recognises that benchmarking should not be the sole
determinant when considering Executive Directors’ remuneration. In line with Dechra’s general approach to setting pay, the Committee therefore
considered many factors, alongside benchmarking, when reviewing proposed changes to remuneration packages and, in particular, the significant
increase in the size and complexity of the Group and the increased responsibilities taken on by Paul Sandland.
Workforce Remuneration
Base Salary
Executive Directors
Increases considered in the context of business wide review of remuneration, focussing
on the lowest paid in our organisation and the top 60 Senior Leaders.
Senior Executive Team
Pension
Ian Page and Tony Griffin: Reduced to 8% of base
salary with effect from 1 July 2021.
Paul Sandland: 6% of base salary with effect from
1 July 2021 and will increase to 8% when the employer
pension contribution rate for the UK wider workforce
increases to 8% on 1 July 2022.
Between 8% and 12% of
base salary dependent on
length of service.
Bonus
Max. 150% of base salary, 100% of base salary for the
2021 financial year, 125% of base salary
for the 2022 financial year.
Increased from 50% of salary
to 75% of salary for 2022
financial year.
Targets: personal (up to 10% of salary),
ESG (up to 5% of salary) and financial (up to 110% of
salary).
Targets: from 1 July 2021
financial and personal.
From 1 July 2022 financial,
ESG and personal.
Wider Workforce
In March 2021, we were pleased
to be accredited as a Living Wage
Employer in the UK.
For the 2021 financial year: between
4% and 12% of base salary
dependent on length of service
and/or grade*.
We have increased our minimum
employer pension contribution
from 4% to 6% with effect from
July 2021 in the UK and intend
to increase the employer pension
contribution again to 8% on
1 July 2022.
All senior managers and
professionals.
Max. 40% of base salary.
Targets: financial and personal.
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Report continued
Long Term
Incentive Plan
Executive Directors
Max. 200% of base salary.
Currently 200% of base salary for Ian Page, 150%
of base salary for Paul Sandland and 100% of base
salary for Tony Griffin.
Three year performance period, two year holding period.
Target: TSR (one third), EPS (two thirds) and ROCE
underpin.
Senior Executive Team
Max. 100% of base salary.
Three year performance period.
Target: TSR, EPS and ROCE
underpin.
Wider Workforce
All senior managers and
professionals.
Discretionary awards.
Market value options, three year
performance period.
Target: EPS growth 12% above
inflation.
Sharesave†
* Data provided for UK only
† UK and USA
up to £500 per month
Three year savings period or two years for the Employee Stock Purchase Plan (US)
Remuneration Philosophy
The Link between our Directors’ Remuneration Policy and our Strategy
The table below describes how certain remuneration elements are linked to our strategy.
Remuneration Element
Annual Bonus
Our annual bonus incentivises the delivery of the long term strategy through the achievement of
short term objectives.
Up to 110% of salary can be earned based on a stretching profit target which requires
performance above budget and market expectations to trigger the payment of a maximum bonus.
Up to 10% of salary can be earned based on the achievement of personal objectives which
reflect the priorities of the business, achievement of which is necessary to deliver the longer term
strategy.
Up to 5% of salary can be earned based on ESG measures.
Long Term Incentive Plan
The LTIP is designed to reward the generation of long term value for shareholders. Performance
measures reflect our long term objectives, including sustainable profit growth and the
enhancement of shareholder value. Awards are based on growth in underlying EPS and the
delivery of shareholder returns. For the 2021 and 2022 financial year awards, the weightings are
two thirds underlying EPS and one third total shareholder return.
The application of a ROCE underpin focuses Executives on using capital efficiently and
appropriately to allow the business to capitalise on growth opportunities in new territories and
markets, whilst maintaining returns.
The post vesting holding period aligns management with the long term interests of shareholders
and the delivery of sustained performance.
The performance conditions for LTIP awards made in respect of the year ended 30 June 2021
and future years include discretion to override formulaic outcomes.
Strategic
Growth Driver
and Enabler
a
b
c
Link to our Key
Performance Indicators
Sales Growth
Strong sales performance is
required to maximise profit
a
b
c
Underlying Diluted EPS Growth
Return on Capital Employed
New Product Sales
This measure encourages
innovation, growth and
sustainability
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Alignment of Policy with Code
In determining the Policy, the Committee took into account the principles of clarity, simplicity, risk, predictability, proportionality and alignment to
culture, as set out in the Code.
Principle
Clarity: remuneration arrangements should be transparent and
promote effective engagement with shareholders and the workforce
Simplicity: remuneration structures should avoid complexity and
their rationale and operation should be easy to understand
Risk: remuneration arrangements should ensure reputational and
other risks from excessive rewards, and behavioural risks that can
arise from target-based incentive plans, are identified and mitigated
Predictability: the range of possible values of rewards to individual
directors and other limits or discretions should be identified and
explained at the time of approving the policy
Proportionality: the link between individual awards, the delivery of
strategy and the long term performance of the Company should be
clear. Outcomes should not reward poor performance
Alignment to Culture: incentive schemes should drive behaviours
consistent with Company purpose, values and strategy
Our remuneration arrangements are transparent and aligned with our
Purpose, Values and strategy and our disclosures are clear to both our
shareholders and our employees. Performance targets are set in line with
Group budgets and plans and reviewed and tested by the Committee.
We believe that our remuneration structures are as simple as they possibly
can be. We follow a standard UK market approach to remuneration
with established variable incentive schemes that operate on a clear and
consistent basis.
• Both the annual bonus and LTIP are subject to malus and clawback
provisions, and the Committee has discretion to override formulaic
outcomes, which may not accurately reflect the underlying performance
of the Group.
• LTIP awards are subject to a two year post-vesting holding period, and
if a bonus opportunity in excess of 100% of salary is offered deferral
into shares will also apply. Each of these factors provides longer term
alignment with shareholders’ interests.
• The post-employment shareholding requirement means that alignment
with shareholders’ interests continues after an Executive Director has
left Dechra.
The range of possible values of rewards and other limits or discretions can
be found in the full Policy included in the 2021 Remuneration Report, and
the Risk section above refers to limits and Committee discretion.
The variable elements of awards are linked to base salary. The performance
targets are closely linked to the corporate, financial, strategic and other
non-financial objectives of the Company. This enables the Committee to
reward the Executive Directors’ contribution to both the annual financial
performance and the achievement of specific objectives of the Company, so
that poor performance cannot be rewarded. In determining the Policy, the
Committee was clear that this should drive the right behaviours, reflect our
Values and support the Company Purpose and strategy. The Committee will
review the remuneration framework regularly so that it continues to support
our strategy.
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Executive Director Total Remuneration
Ian Page
2020
2021
Paul Sandland
2020
2021
Tony Griffin
2020
2021
128
Fixed
Salary
Benefits
Pension
Performance-linked
Bonus
LTIP
Fixed
Salary
Benefits
Pension
Performance-linked
Bonus
LTIP
Fixed
Salary
Benefits
Pension
Performance-linked
Bonus
LTIP
2020
2021
29.3%
3.4%
4.1%
8.2%
55.0%
21.0%
2.6%
2.9%
21.0%
52.5%
2020
2021
72.0%
5.0%
2.9%
20.1%
N/A
46.9%
4.4%
1.8%
46.9%
N/A
2020
2021
43.4%
1.2%
4.6%
12.1%
38.7%
30.5%
0.8%
3.4%
25.2%
40.1%
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance 2021 Annual Report on Remuneration
The following section provides detail of remuneration earned by the Directors during the year in line with the Directors’ Remuneration Policy
approved by the shareholders at the Annual General Meeting held on 27 October 2020, along with details of how the Policy will be applied in the
2022 financial year. The sections of the 2021 Annual Report on Remuneration that are audited by PricewaterhouseCoopers LLP (PwC) are indicated
on pages 129 to 137.
Executive Directors’ Remuneration (Audited)
Single Total Figure of Remuneration
The table below sets out the total remuneration for each person who has served as an Executive Director in the period ended 30 June 2021. The
table shows the remuneration for each such person in respect of the year ended 30 June 2021 and in respect of the year ended 30 June 2020:
Executive Director
Ian Page
Paul Sandland
Tony Griffin
Total 2021
Total 2020
Year
2021
2020
2021
2020
2021
2020
2021
2020
Salaries
£000
551
517
330
200
327
330
1,208
1,047
Benefits
£000
68
59
31
14
9
9
108
82
Annual
Bonus
£000
551
145
330
56
271
92
1,152
293
Long Term
Incentive
£000
1,377
970
N/A
N/A
431
294
1,808
1,264
Pension
£000
77
72
13
8
36
35
126
115
Total
£000
2,624
1,763
704
278
1,074
760
4,402
2,801
Total
Fixed
£000
696
648
374
222
372
374
1,442
1,244
Total
Variable
£000
1,928
1,115
330
56
702
386
2,960
1,557
Please note the following methodologies have been used in respect of the above table:
1. Salaries – this is the cash paid or received in respect of the relevant period. This includes the base salary increases effective 1 January 2021 that were paid post year end.
2. Benefits – this represents the taxable value of all benefits paid or received in respect of the relevant period. The benefits provided include the use of a fully expensed
car, medical cover and life assurance. SAYE options granted in the year have also been included in the benefits column in respect of any year in which there was a
grant. These have been valued using the fair value as per note 26 to the Group’s financial statements.
3. Annual Bonus – this is the amount of cash bonus to be paid in respect of the financial year.
4. Long Term Incentives – this is the value of any relevant long term incentives vesting where the performance period ended in the relevant period.
5. Pension – this is the amount of the employer contribution to the Group stakeholder personal pension scheme or, in the case of Tony Griffin, defined contribution
pension plan, plus the value of any salary supplement paid. This includes the value of any contribution or salary supplement paid post year end in respect of the
salary increases effective 1 January 2021 that were paid post year end as referred to in note 1 above.
6. The 2020 value assigned to the long term incentives for Ian Page and Tony Griffin was shown in last year’s Annual Report as an estimate, with the value determined
by reference to a share price of £27.404 (being the average market value of a share over the last quarter of the Company’s financial period ended on 30 June 2020).
This has been restated to show the actual value determined by reference to a price of £33.00 (being the market value of a share on 7 September 2020, the date of
vesting).
7. Tony Griffin’s remuneration is paid in Euros but reported in Sterling for the purpose of this table. The exchange rate used for this purpose was 1.096 for 2020 and
1.1287 for 2021. His salary was €368,784 for 2021 and €361,632 for 2020.
8. Paul Sandland was appointed as an Executive Director on 30 October 2019 and the remuneration reported in the single figure table is from this date.
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Additional Disclosures in Respect of the Single Figure Table
Salaries and Fees
Our approach to Executive Directors’ salaries in the financial year is explained in the Committee Chairman’s letter on pages 119 to 124. The
Executive Directors’ salaries applying with effect from 1 January 2021 are as follows.
Executive Director
Ian Page
Paul Sandland
Tony Griffin
Salary with effect
from 1 January 2021
£582,400
£360,000
€373,830
Previous Salary
£520,000
£300,000
€363,396
% increase
12%
20%
3%
The Committee’s approach to Executive Directors’ salaries for the year ending 30 June 2022 is summarised in the Committee Chairman’s letter
on page 123.
Benefits
The Company provides benefits in line with market practice and each Executive Director has the use of a fully expensed car, medical cover and
life assurance.
Annual Bonus
Annual bonuses were awarded by the Committee in respect of the 2021 financial year having regard to the performance of the Group and personal
performance objectives for the year. The amount achieved for the year ended 30 June 2021 against targets for the 2021 financial year is set out
below. The Committee considers that the level of payout is reflective of the overall performance of the Group in the year and is appropriate.
Ian Page and Paul Sandland: Group underlying profit before tax
Threshold (10% of
salary) £130.6 million
Target (42.5% of
salary) £137.5 million
Maximum (85% of
salary) £151.2 million
Actual (at budgeted
rates) £152.8 million
Bonus earned (percentage of salary)
Ian Page
85%
Paul Sandland
85%
Tony Griffin: Group underlying profit before tax and Dechra Veterinary Products EU underlying operating profit
Group underlying profit
before tax
Dechra Veterinary
Products EU underlying
operating profit
Threshold (5% of salary)
£130.6 million
Threshold (5% of salary)
€121.7 million
Target (21.25% of
salary) £137.5 million
Target (21.25% of
salary) €128.1 million
Maximum (42.5% of
salary) £151.2 million
Maximum (42.5% of
salary) €140.9 million
Actual (at budgeted
rates) £152.8 million
Actual (at budgeted
rates) €130.7 million
Personal Objectives and ESG measure
Bonus earned
(percentage of
salary)
Tony Griffin
42.5%
25.5%
Personal Objectives
ESG measure
Each Executive Director could earn a bonus of up to 10% of salary
by reference to the achievement of personal objectives based on
key aspects of delivering the Group’s strategy (see table below)
Each Executive Director could earn a bonus of up to 5% of salary
by reference to the achievement of ESG measures aligned with their
area of responsibility (see table below)
Bonus earned (percentage of salary)
Ian Page
10%
Paul
Sandland
10%
Tony Griffin
10%
5%
5%
5%
The personal objectives of each Executive Director for the year ended 30 June 2021 are set on an individual basis and are closely linked to the
corporate, financial, strategic and other non-financial objectives of the Company. This enables the Committee to reward the Executive Directors’
contribution to both the annual financial performance and the achievement of specific objectives. A summary of the objectives is set out below along
with a description of the performance against them. The Committee reviewed the performance of each Executive Director against their specific
objectives based on a report by the Chief Executive Officer and, with respect to the Chief Executive Officer, a report by the Chairman.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance The ESG measure for each Executive Director was similarly set on an individual basis linked to the Executive Director’s area of responsibility. A
summary of the measure and performance against it is set out below.
Personal Objectives
Director
Ian Page
Link to Strategic
Enabler
Manufacturing
Commercial
Governance
Paul Sandland
Shareholder
Performance
Appointed Milton McCann as permanent Group
Manufacturing and Supply Chain Director and
worked closely with Milton to build a fit for the
future structure, adding expertise. Supply Chain
has been stabilised and is robust
Through regular stakeholder engagement and agile
adaptation of working practices we continue to see
growth across all markets
Objective
Work closely with the DPM&S Leadership team
to bring the manufacturing entities under one
function and develop the right organisational
design for the future. Continue to drive improved
continuity of supply
Maintain close focus on the sales channels and
monitor the impact of the pandemic, restructuring
and reshaping where required to respond to the
changing marketplace
Prepare the business for FTSE 100; ensure that
we are able to manage and comply with the
increasing regulatory burden. Continue to sponsor
and embed the stakeholder engagement agenda
into the organisation, act as the Executive Sponsor
to drive greater focus on our Diversity Agenda
across the Group
Review current Investor Relations arrangements Developed structure, proposal received Board
Worked closely with the Board on succession
planning, saw increased scores in the employee
engagement survey across the board.
Sponsored the development and roll out of new
education programmes for leaders and employees
that support the cultural diversity of our business
IT
IT
Drive efficiencies through implementation of
technology solutions
Act as sponsor for the roll out of the Global ADP
Celergo payroll project
Tony Griffin
Acquisition
Realise the planned synergies for AST Farma
and Le Vet acquisitions
People
Customers
Develop and strengthen the newly established
European senior management team and support
the OneDechra organisation agenda
Improve the market penetration through
implementation of Corporatisation Plan
approval, recruitment currently underway
Created and embedded steering committee
and internal frameworks to manage the multiple
technology priorities across the business.
Gained approval for and, commenced the roll
out, of the global payroll solution and the Group
document management system.
Project on time and on budget. Major milestones
achieved throughout the period with the project on
track for completion in the calendar year
All remaining contracts disintermediated and
budgeted margin synergies exceeded for the third
consecutive year
New Marketing and Finance directors fully
onboarded
Pan European CRM implemented in wave 1
countries, central marketing teams restructured
to fit customer needs better and all senior
managers have completed a change management
development programme
ESG Measure
Director
Ian Page
Paul Sandland
Objective
Work with the SET to ensure that our ESG strategy is
embedded into our approach to how we do business,
create an ESG function that enables us to implement
changes and monitor progress
Act as executive sponsor and owner of the new ESG
structure
Tony Griffin
Develop and implement a European ESG plan which
flows from the Group ESG Strategy
Performance
Development of comprehensive ESG strategy that has
become a critical enabler to the business success
Appointed and onboarded Sustainability Director. In
conjunction with key stakeholders developed stretching ESG
goals to be delivered both globally and locally
Comprehensive European plan developed and after agreed
with targets in place for roll out in the 2022 financial year
131
Stock Code: DPHGovernance Directors’ Remuneration
Report continued
Long Term Incentive Plan
The LTIP awards granted on 26 October 2018 are due to vest on 6 September 2021. The performance targets for these awards are as follows: one
third of the award is subject to a performance condition based on the Company’s total shareholder return (TSR) performance relative
to the constituent companies of the FTSE 250 index (excluding investment trusts) over the performance period as follows:
TSR performance
Below median
Median
Between median and upper quartile
Upper quartile
Vesting percentage
0%
25% of the TSR portion will vest
Pro rata vesting between 25% and 100% based on the Company’s
ranking in the comparator group
100% of the TSR portion will vest
Two thirds of each award is subject to a performance condition based on the growth in the Group’s underlying diluted earnings per share (EPS)
over the performance period as follows:
EPS compound annual growth rate (CAGR)
<8% CAGR
8% CAGR
CAGR between 8% and 19%
>19% CAGR
Vesting Percentage
0%
25% of the EPS portion will vest
Pro rata vesting between 25% and 100%
100% of the EPS portion will vest
Both the TSR element and the EPS element are subject to an additional return on capital employed (ROCE) performance measure. Unless the
Group’s ROCE is 10% or more in the final year of the performance period, the awards will lapse in full regardless of TSR and EPS performance.
The Company’s TSR performance was 50.54% compared with a 36.65% TSR for the upper quartile company in the comparator group (FTSE 250
Index (excluding investment trusts). Therefore, 100% of the TSR element will vest. As we explained in the 2019 Directors’ Remuneration Report,
having regard to the impact of the Akston licensing agreement and in order to measure performance on a fair and consistent basis, the Committee
has adjusted, for the purposes of the this LTIP grant, the underlying diluted EPS for financial year 2021 to reflect the actual Akston R&D costs
incurred as these costs were not included in the base year. This adjustment changes the 2021 underlying diluted EPS for the purposes of this LTIP
grant from 108.14 to 110.98 pence resulting in CAGR of 13.2% such that 60.7% of the EPS element will vest. Overall, taking into account that
ROCE performance for 2021 was 18.8%, the LTIP awards will vest as to 73.8% of the maximum opportunity.
The Committee considered that the level of vesting reflected the underlying performance of the Group over the period.
In the single figure table on page 129, the value attributable to this award is calculated by multiplying the number of shares in respect of which the
award is expected to vest by £40.422 (being the average market value of a share over the last quarter of the Company’s financial period ended on
30 June 2021).
The October 2018 awards were granted when the value of a share was £21.66 (being the three day average middle market quotation preceding
the grant). The following table shows the amount of the award attributable to share price appreciation from that value to £40.422 (being the average
market value of a share over the last quarter of the Company’s financial period ended on 30 June 2021).
Executive Director
Ian Page
Tony Griffin
Number of shares in
respect of which the
Award is expected
to vest
34,071
10,659
Amount of award
attributable to share
price at grant
£000
£738
£231
Amount attributable
to share price
appreciation
£000
£639
£200
Total award
£000
£1,377
£431
Each award is subject to a two year holding period. Other than shares sold to satisfy tax liabilities arising in connection with the acquisition of shares
or to fund the exercise price of the tax qualifying option, no shares acquired may be sold before the second anniversary of vesting. The Company
has measures in place to prevent the shares from being sold or transferred during the holding period. During the holding period, the Executive
Directors, as beneficial owners of the shares, will be entitled to any dividend payments and will be able to vote at any general meeting of the
Company.
132
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance SAYE
The following options were exercised under the SAYE Scheme by Executive Directors during the year:
Executive Director
Ian Page
Paul Sandland
Date of grant
12 October 2017
12 October 2017
Number of options
1,093
1,093
Option price
£16.46
£16.46
Exercise date
2 December 2020
2 December 2020
Pension
Ian Page and Paul Sandland were members of the Dechra Pharmaceuticals PLC Group Stakeholder personal pension scheme throughout the year.
Ian Page elected to receive his entire pension contributions as a salary supplement.
Tony Griffin was a member of the Basispensioen, a defined benefit pension plan established in the Netherlands up to 31 December 2018, the
transfer value as at this date was €283,000. This was transferred to a defined contribution scheme. From 1 January 2019, Tony Griffin has received
contributions to two defined contribution pension schemes (the existing defined contribution pension scheme and the defined contribution pension
scheme which replaced the Basisipension) in the Netherlands in respect of earnings up to €100,000 and a salary supplement in respect of earnings
above this amount.
Contributions made by Dechra Pharmaceuticals PLC on behalf of the Executive Directors during the year equated to no more than 14% of
pensionable/base salary for both Ian Page and Tony Griffin. The contributions for Ian Page and Tony Griffin reflect long standing contractual
entitlements. As detailed in our 2020 Remuneration Report these pension contributions/cash in lieu will be aligned with the rate available to the UK
wider workforce by the end of 2022. As explained in the Committee Chairman’s letter on pages 119 to 124 with effect from 1 July 2021, the wider
UK workforce are eligible for employer pension contributions of between 6% (increased from 4%) and 12% of base salary dependent on length of
service and/or grade. As noted above, we intend to increase the minimum employer pension contribution in the UK again to 8% from 1 July 2022.
The pension contributions/cash in lieu for Ian Page and Tony Griffin will be reduced to 8% with effect from 1 July 2021.
Our Chief Financial Officer, Paul Sandland’s, pension is already aligned with the wider workforce, and reflects a reduction in the contribution rate from
12% of salary to 4% of salary on his appointment to the Board.
Non-Executive Directors’ Remuneration (Audited)
Single Total Figure of Remuneration
The table below sets out the total remuneration for each person who has served as a Non-Executive Director in the period ended 30 June 2021.
The Chairman and the other Non-Executive Directors are paid a fee for their role. The table shows the remuneration for each such person in respect
of the year ended 30 June 2021 and, where relevant, the year ended 30 June 2020:
Additional responsibilities
Chairman and Nomination
Committee Chair
Senior Independent Director
and Remuneration Committee
Chair
Audit Committee Chair
Employee Engagement
Designated Non-Executive
Director
Tony Rice
Ishbel Macpherson
Julian Heslop
Lawson Macartney
Lisa Bright
Alison Platt*
Denise Goode†
Total
* Alison Platt was appointed on 1 March 2020.
† Denise Goode was appointed on 26 April 2021.
Base fee
£000
2021
144
2020
129
Additional fee
£000
2021
3
2020
5
54
54
54
54
54
11
425
52
52
52
52
17
–
354
20
12
–
8
–
–
43
15
10
–
5
–
–
35
Total
£000
2021
147
74
66
54
62
54
11
468
2020
134
67
62
52
57
17
–
389
The Non-Executives are not eligible to participate in any of the Company’s share schemes, incentive schemes or pension schemes.
133
Stock Code: DPHGovernance Directors’ Remuneration
Report continued
The Committee’s approach to the Chairman’s fee in the financial year is explained in the Committee Chairman’s letter on pages 119 to 124. As
explained in that letter, at the same time as the Committee considered the Executive Directors’ salaries and the Chairman’s fee, fees for the other
Non-Executive Directors were also reviewed. The Chairman’s and other Non-Executive Directors’ fees applying with effect from 1 January 2021
are as follows.
Office
Chairman
Non-Executive Director
Chair of the Audit Committee
Chair of the Remuneration Committee
Senior Independent Director
Designated Non-Executive Director
Chair of the Nomination Committee
Fee with
effect from
1 January
2021 Previous fee
130*
52
10
10
10
5
5*
159*
57
15
15
10
10
–*
* The Chairman has previously received a fee of £129,780 and a supplementary fee of £5,000 for chairing the Nomination Committee. With effect from 1 January 2021,
his base fee of £159,000 is inclusive of his fee for chairing the Nomination Committee.
The Committee’s approach to the Chairman’s and Non-Executive Directors’ fees for the year ending 30 June 2022 is summarised in the Committee
Chairman’s letter on page 124.
Further Information on Directors’ Remuneration
Long Term Incentive Arrangement and Share Scheme awards during the financial year
Long Term Incentive Awards (Audited)
Awards were made under the Dechra 2017 Long Term Incentive Plan on 22 September 2020, as set out in the table below.
Type of award
Ian Page†
Nil cost option under the LTIP
Paul Sandland Nil cost option under the LTIP
Tony Griffin
Maximum
opportunity
200% of salary
150% of salary
Conditional award under the LTIP 100% of salary
Number of
shares
32,128
13,901
10,303
Face value
at grant*
£1,039,983
£449,975
£333,508
* Based on a share price of £32.37 being the three day average middle market quotation preceding the grant.
% of award
vesting at
threshold
Performance Period
25% 1 July 2020 – 30 June 2023
25% 1 July 2020 – 30 June 2023
25% 1 July 2020 – 30 June 2023
† Ian Page has also been granted a tax qualifying option over 926 shares at an exercise price of £32.37 as part of his LTIP award. This tax qualifying option is linked to
the nil cost option such that, at the time of exercise, to the extent that there is a gain in the tax qualifying option, the nil cost option will be forfeited to the value of that
gain, to ensure that the pre-tax value of the LTIP award is not increased by the grant of the tax qualifying option.
One third of each award is subject to a performance condition based on the Company’s TSR performance over the performance period relative to
the constituent companies of the FTSE 250 index (excluding investment trusts) as follows:
TSR performance
Below median
Median
Between median and upper quartile
Upper quartile
Vesting percentage
0%
25% of the TSR portion will vest
Pro rata vesting between 25% and 100% based on the Company’s
ranking in the comparator group
100% of the TSR portion will vest
Two thirds of each award is subject to a performance condition based on the growth in the Group’s underlying diluted EPS over the performance
period. As noted in the letter from the Remuneration Committee Chairman in the 2019 Directors’ Remuneration Report, the EPS for the final year of
the performance period (the financial year to 30 June 2023) will be adjusted to reflect actual R&D costs associated with the Akston development,
recognising these are lumpy and uncertain as to timing between financial years.
EPS compound annual growth rate (CAGR)
<8% CAGR
8% CAGR
CAGR between 8% and 16%
>16% CAGR
Vesting Percentage
0%
25% of the EPS portion will vest
Pro rata vesting between 25% and 100%
100% of the EPS portion will vest
134
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Both the TSR element and the EPS element are subject to an additional ROCE performance measure. Unless the Group’s ROCE is 10% or more in
the final year of the performance period, the awards will lapse in full regardless of TSR and EPS performance. The awards are subject to a two year
holding period. Other than shares sold to satisfy tax liabilities arising in connection with the acquisition of shares, no shares acquired may be sold
before the second anniversary of vesting.
SAYE (Audited)
The following SAYE options were granted during the year ended 30 June 2021.
Executive Director
Ian Page
Paul Sandland
Date of grant
19 October 2020
19 October 2020
Number of options
627
627
Option price
£28.68
£28.68
Exercisable from
December 2023
December 2023
Payments to Past Directors (Audited)
There were no payments to past Directors during the period.
Payments for Loss of Office (Audited)
There were no payments for loss of office made to Directors during the period.
Dilution Limits
Awards granted under the Company’s LTIP, Executive Share Option Schemes and SAYE Schemes are met by the issue of new shares when the
awards/options are exercised. The Committee monitors the number of shares issued under each of these schemes and their impact on dilution
limits. The Company’s usage of shares compared to the Investment Association dilution limits as at 30 June 2021 is as follows:
Executive Share Plans
Limit: 5%
Usage: 2.47%
All Share Plans
Limit: 10%
Usage: 3.07%
Shareholdings (Audited)
Executive Directors
In respect of the financial year ended 30 June 2021, the Company’s shareholding guidelines required Executive Directors to have acquired and
retained half of any shares acquired under the LTIP and, if relevant, any recruitment award (after sales to cover tax) until such time as their holding
has a value equal to 200% of salary. Shares which are vested, but which remain subject to a holding period and/or clawback, may count towards
the holding requirement on a net of assumed tax basis. The holdings of each person who served as an Executive Director during the period ended
30 June 2021 and their families as at 30 June 2021 are as follows:
Name
Ian Page
Paul Sandland
Tony Griffin
Appointment
date
13 June 1997
30 October 2019
1 November 2012
Ordinary shares
Number
340,012
7,611
45,650
Ordinary shares
£000*
14,858
333
1,995
% of salary
2,551
92
602
* Calculated using the share price as at 30 June 2021 and the base salaries as at 30 June 2021.
Shareholding Requirement After Employment
As detailed in the Remuneration Policy approved by shareholders at the 2020 Annual General Meeting, the Committee has adopted a post-
employment shareholding requirement. Shares are subject to this requirement only if they are acquired from share plan awards (LTIPs, deferred
bonus awards and, if relevant, any recruitment award) granted after 1 July 2021. Following employment, an Executive Director must retain:
•
•
for the first year after employment, such of their shares which are subject to the post-employment requirement as have a value for these
purposes equal to the shareholding guideline that applies during employment (currently 200% of salary); and
for the second year after employment, such of those shares as have a value for these purposes equal to 50% of the shareholding guideline
that applies during employment, or in either case and if fewer, all of those shares.
135
Stock Code: DPHGovernance Directors’ Remuneration
Report continued
Executive Directors’ Total Interest under Shares Schemes (Audited)
Awards held under the Long Term Incentive Plan (and, in the case of Paul Sandland, market value options) for each person who was a Director
during the year ended 30 June 2021 are as follows:
Award
date
02-Mar-18
Type of
award
LTIP
Ian Page
Option
price for
market
value
options
(£)
N/A
Number
of shares
as at
1 July
2020 Granted
–
39,904
Lapsed Exercised
29,409
10,495
26-Oct-18
06-Sep-19
22-Sep-20
02-Mar-18
LTIP
LTIP
LTIP
LTIP
N/A
N/A
N/A
46,168
35,087
–
N/A
12,099
Tony Griffin
Paul
Sandland
LTIP
26-Oct-18
LTIP
06-Sep-19
LTIP
22-Sep-20
15-Sep-154
Approved
19-Sep-164
Approved
19-Sep-164 Unapproved
02-Mar-184
Approved
02-Mar-184 Unapproved
26-Oct-184 Unapproved
LTIP
06-Sep-19
LTIP
22-Sep-20
N/A
N/A
N/A
£9.75
£13.69
£13.69
£25.06
£25.06
£21.66
N/A
N/A
14,444
10,984
–
923
526
2,474
550
2,450
3,000
6,106
–
–
32,128
–
–
–
10,303
–
–
–
–
–
–
13,901
–
–
–
–
3,183
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,916
–
–
–
923
526
2,474
–
–
–
–
–
Number
as at
30 June
2021
–
46,168
35,087
32,128
–
–
14,444
10,984
10,303
–
–
–
550
2,450
3,000
6,106
13,901
Status
Vested and
exercised
in the year1
Unvested2
Unvested
Unvested3
Vested and
exercised
in the year
Unvested2
Unvested
Unvested
Vested
Vested
Vested
Vested
Vested
Unvested
Unvested
Unvested
Performance
Period
2017–2020
2018–2021
2019–2022
2020–2023
2017–2020
2018–2021
2019–2022
2020–2023
2015–2018
2016–2019
2016–2019
2017–2020
2017–2020
2018–2021
2019–2022
2020–2023
1.
Ian Page was granted a tax qualifying option over 1,197 shares at an exercise price of £25.06 as part of his LTIP award. This tax qualifying option is linked to the nil
cost option such that, at the time of exercise, to the extent there is a gain in the tax qualifying option, the nil cost option will be forfeited to the value of that gain. Ian
Page decided to waive his right to the tax qualifying option.
2. Will vest on 6 September 2021 as to 73.8%
3.
Ian Page was granted a tax qualifying option over 926 shares at an exercise price of £32.37 as part of his LTIP award. This tax qualifying option is linked to the nil
cost option such that, at the time of exercise, to the extent there is a gain in the tax qualifying option, the nil cost option will be forfeited to the value of that gain.
4. Paul Sandland holds market value options. These options and awards were granted to Paul Sandland prior to his appointment as an Executive Director. These
options are subject to a performance condition based on the percentage growth in the adjusted diluted EPS, which must exceed the sum of the percentage growth
in RPI and 12%.
The aggregate gain made by the Executive Directors on share options and LTIP awards exercised during 2021 was £1,319,184 (2020: £2,625,303 ).
136
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance
Non-Executive Directors (Audited)
By the third anniversary of their appointment to the Board, Non-Executive Directors are required to have acquired and retained a holding of Dechra
shares equivalent to the value of at least 50% of their annual base fee. The holdings of the Non-Executive Directors and their families as at 30 June
2021 are as follows:
Name
Tony Rice
Ishbel Macpherson
Julian Heslop
Lawson Macartney
Lisa Bright
Alison Platt
Denise Goode
Appointment
date
5 May 2016
1 February 2013
1 January 2013
1 December 2016
1 February 2019
1 March 2020
26 April 2021
Ordinary shares
number
20,000
5,848
6,000
5,880
788
1,363
Nil
Ordinary
shares
£000* % of base fee
550
448
460
451
60
104
N/A
874
256
262
257
34
60
N/A
* Calculated using the share price as at 30 June 2021 and the fees as at 30 June 2021.
There have been no changes in the holdings of the Company’s Directors between 30 June and 6 September 2021.
Performance and Chief Executive Remuneration
TSR
This graph shows the TSR performance of the Company over the past ten financial years compared with the TSR over the same period for the FTSE
250 Total Return Index. Throughout the financial year ended 30 June 2021 the Company has been a constituent of the FTSE 250; for this reason it is
considered that the TSR performance of the FTSE 250 Index is the appropriate comparator for this report.
1400
1200
1000
800
600
400
200
)
0
0
1
o
t
d
e
s
a
b
e
r
(
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S
l
l
a
t
o
T
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Dechra
FTSE 250
Chief Executive Officer Remuneration for Ten Previous Years
Year ended
30 June 2021
30 June 2020
30 June 2019
30 June 2018
30 June 2017
30 June 2016
30 June 2015
30 June 2014
30 June 2013
30 June 2012
Total single figure
remuneration
£000
2,624
1,763
3,035
3,058
3,420
2,480
1,934
1,589
1,201
682
Annual bonus
payout (% of maximum
opportunity)
100
28
72
76
92
72
80
80
36
60
LTIP vesting
(% of maximum
number of shares)
73.8
73.7
100.0
100.0
100.0
96.25
93.1
100.0
100.0
0
137
Stock Code: DPHGovernance
Directors’ Remuneration
Report continued
Annual Percentage Change in Remuneration of Directors and Employees
The table below shows the annual percentage change in each Director’s salary/fees, benefits and bonus between the year ended 30 June 2020 and
the year ended 30 June 2021, and the average percentage change in the same remuneration over the same period in respect of the employees of
the Company on a full time equivalent basis.
The average employee change has been calculated by reference to the mean of employee pay. Denise Goode was appointed during the year ended
30 June 2021 and, accordingly, has been excluded from the table below.
Average
employee
Ian
Page
Paul
Sandland2
Tony
Griffin3
Tony
Rice
Ishbel
Macpherson
Julian
Heslop
Lawson
Macartney
Lisa
Bright
Alison
Platt4
Salary/
fees
Taxable
benefits1
Annual
bonus5
2020–
2021
2019–
2020
2020–
2021
2019–
2020
2020–
2021
2019–
2020
32.8%
6.6%
10.0%
(0.9%)
9.0%
10.4%
6.5%
3.8%
8.8%
5.9%
(11.8%)
4%
N/A
6.8%
2.3%
3.2%
3.3%
4.0%
3.6%
(7.3%)
6.3%
20.8%
2.3%
16.3%
(1.7%)
N/A
(10.0%)
137.3% 280.0% 292.9% 194.6%
(47.4%)
(59.7%)
N/A
(58.7%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1. Excludes SAYE options granted during any relevant year.
2. Paul Sandland was appointed to the Board on 30 October 2019. To enable comparison and to provide meaningful reflection of the annual percentage change, his
remuneration for the year ended 30 June 2020 has been annualised.
3. Tony Griffin’s increase in salary was 2.9%, however due to exchange rates the above disclosure shows a decrease.
4. Alison Platt was appointed to the Board on 1 March 2020. To enable comparison and to provide meaningful reflection of the annual percentage change, her fee for
the year ended 30 June 2020 has been annualised.
5. The significant increase in bonuses for the Executive Directors reflect that strong performance in 2021 resulted in a higher bonus outturn than in 2020.
The increase in the average employee’s salary between the 2020 financial year and the 2021 financial year reflects the changes following the
business wide review of remuneration which were effective from 1 January 2021.
138
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Chief Executive Officer’s Pay Ratio
The table below shows the ratio of the Chief Executive Officer’s remuneration for 2021, 2020, 2019 and 2018 using the Single Total Figure as
disclosed on page 129 to the full time equivalent remuneration of the UK employee whose remuneration was ranked at the 25th percentile, median
and 75th percentile. Employees’ pay was calculated on the same basis as the Single Total Figure Remuneration except that anyone who joined
or left the business part way through the year has been excluded from the calculations along with anybody on reduced pay for illness, maternity,
paternity, adoption and shared parental leave. The Company believes that the ratio is consistent with the Company’s wider policies on employee pay,
reward and progression.
Year
2021
2020
2019
2018
25th
percentile
pay ratio
106:1
75:1
139:1
137:1
Median pay
ratio
76:1
58:1
107:1
109:1
75th
percentile
pay ratio
40:1
31:1
56:1
58:1
Method
Option A1
Option A1
Option A1
Option A1
1. The applicable regulations provide for three methods of calculating the pay ratio. We have chosen Option A and have calculated the pay and benefits of all of the
Group’s UK employees in order to identify the employees at the 25th, median and 75th percentile. We have chosen this approach reflecting that guidance recognises
this as the most statistically accurate method. In each year, the employees at the 25th, median and 75th percentile were identified by reference to remuneration at
30 June that year.
Chief Executive Officer
25th percentile employee
Median employee
75th percentile employee
2021
Total pay
and benefits
(salary)
£000
2,624
(551)
25
(23)
35
(31)
67
(44)
20201
Total pay
and benefits
(salary)
£000
1,763
(517)
24
(22)
(30)
(29)
57
(30)
1. The 2020 figure includes share options and awards, which have been valued by reference to £40.422 (being the average market value of a share over the last quarter
of the Company’s financial period ended 30 June 2021). SAYE options granted in 2020 and 2021 financial years have also been included in the benefits column in
respect of any year in which there was a grant. These have been valued using the fair value as per note 26 to the Group’s financial statements.
In 2021, there were a total of 478 UK employees (2020: 441 UK employees), 169 of which have been excluded for the above stated reasons (2020:
164), leaving 309 employees within the ‘full pay relevant’ data set (2020: 277) for comparison against the Chief Executive Officer. We believe that the
final figures detailed above are representative of the majority of the data set.
The above increase to the Chief Executive Pay Ratio can be explained by the significant increase in bonuses for the Executive Directors reflecting
that the strong performance in 2021 resulted in a higher bonus outturn than in 2020. The Chief Executive Officer bonus for the 2021 financial year
will represent 100% of his salary compared to 28% in the 2020 financial year.
Of the employees within the ‘full pay relevant’ data set, 177 worked in our Manufacturing business which is predominately shop floor workers (2020:
167). During the 2021 financial year, we addressed the pay levels of these employees moving them from minimum wage to National Living Wage.
These actions have contributed to the reduction in the ratio this year.
Relative Importance of Spend on Pay
The following table sets out the percentage change in distributions to shareholders (by way of dividend and share buyback) and total remuneration
paid to or receivable by all Group employees comparing the year ended 30 June 2020 and the year ended 30 June 2021.
Distributions to shareholders by way of dividend and share buyback
Overall expenditure on pay
Year ended
30 June 2021
£000
37,900
120,300
Year ended
30 June 2020
£000
33,300
104,000
% change
13.9%
15.7%
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Report continued
Implementation of the Directors’ Remuneration Policy in the Year Ending 30 June 2022
The Directors’ Remuneration Policy outlined on pages 142 to 146 will be implemented in the year ending 30 June 2022, as set in the Committee
Chairman’s letter on pages 119 to 124.
Further information on the performance targets for the annual bonus and LTIP are detailed below.
Annual Bonus
As noted in the letter from the Remuneration Committee Chairman, bonuses for financial year 2022 will increase to 125% of salary with a bonus
deferral, requiring that 20% of any bonus earned (and not just any additional bonus earned) is deferred into Dechra shares for two years. The
increase in the annual bonus opportunity for the 2022 financial year recognises the increase in the size and complexity of the Group. The Committee
has also reviewed the level of stretch in the annual bonus targets to satisfy itself that the higher maximum opportunity for the 2022 financial year
will only be earned for delivery of higher levels of performance. For the 2022 financial year the maximum bonus will only be earned for materially
improved year on year performance from a strong 2021 base year where we delivered 25% year on year improvement in underlying profit before tax
(on a constant current basis). The threshold to maximum range has been set at 95% to 110% of a stretching target level of performance in order to
align the maximum level of potential reward with the achievement of more stretching performance targets.
In the opinion of the Board, the performance targets applying to the annual bonus are commercially sensitive, and prospective disclosure could
provide competitors with insight into the Group’s business plans and expectations. However, the Company will disclose how any bonus earned
relates to performance against targets on a retrospective basis when the targets are no longer considered commercially sensitive, as shown on
page 130 in respect of bonuses for the Group’s 2021 financial year.
LTIP
The Committee proposes that LTIP awards for the year ending 30 June 2022 (the 2022 Grant) will be made at the level of 200% of salary for Ian
Page, 150% of salary for Paul Sandland and 100% of salary for Tony Griffin. The performance measures for the 2022 Grant will be based on TSR
(one third) and EPS (two thirds), with an underpin based on ROCE. The TSR targets will be the same as for the awards made in the 2021 financial
year, details of which can be found on page 132. Taking account of internal forecasts of performance over the performance period, the markets
in which the Group operates, our long-term growth ambitions and the expectations of the investment community on the Group’s future potential
performance, the upper target of 15% CAGR for the EPS performance condition is considered to be a stretching and ambitious upper target which
requires significant out-performance. This also reflects the strong performance delivered in the 2021 financial year which is the base year for the
2022 LTIP grant.
The EPS targets for the 2022 Grant are:
EPS compound annual growth rate (CAGR)
<8% CAGR
8% CAGR
CAGR between 8% and 15%
>15% CAGR
Vesting Percentage
0%
25% of the EPS portion will vest
Pro rata vesting between 25% and 100%
100% of the EPS portion will vest
As with the 2021 Grant, the Committee will retain discretion to adjust the vesting outcome where the formulaic outcome is inappropriate in the
context of underlying performance or other factors considered by the Committee to be relevant. The awards will ordinarily be subject to a two year
post vesting holding period.
Consideration by the Directors of Matters relating to Directors’ Remuneration
Purpose
The Board has overall responsibility for the Group’s Remuneration Policy and the setting of the Non-Executive Directors’ fees, although the task
of determining and monitoring the remuneration packages of the Executive Directors and SET and of agreeing the Chairman’s fee level has been
delegated to the Committee.
Membership, Meetings and Attendance
Details of each member’s attendance at the Committee’s meetings is detailed on page 119. The Chief Executive Officer and Group HR Director
both attended all meetings held during the financial year in order to assist on matters concerning remuneration of other senior executives within the
Group. However, neither was present during the part of the meetings where their own remuneration was discussed.
Effectiveness of Committee
The Committee’s performance was evaluated as part of the 2021 Board and Committee External Evaluation (further details of which can be found
on page 110 of the Corporate Governance Report). The Committee considered the results of the evaluation and it was agreed that the Committee
functions well with a clear remit and good support from executives and advisers.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Responsibilities
The Committee has its own terms of reference, which are approved by the Board. These are reviewed on an annual basis so that they continue to
adhere to best practice. During the 2021 financial year this review took place at the June 2021 meeting and they were amended to reflect the 2018
UK Corporate Governance Code requirements. Copies can be obtained via the Company website at www.dechra.com. The Committee Chairman
and the Company Secretary are available to shareholders to discuss the Remuneration Policy. An overview of the Committee’s terms of reference is
provided on pages 100 and 119.
Service contracts and letters of appointment
Details of the Executive Directors’ service contracts and Non-Executive Directors’ letters of appointment are set out below.
Name
Tony Rice
Ian Page
Paul Sandland
Tony Griffin
Lisa Bright
Julian Heslop
Lawson Macartney
Ishbel Macpherson
Alison Platt
Denise Goode
Commencement date
5 May 2016
1 September 2008
30 October 2019
1 November 2012
1 February 2019
1 January 2013
1 December 2016
1 February 2013
1 March 2020
26 April 2021
Notice Period
Director
3 months
6 months
6 months
6 months
3 months
3 months
3 months
3 months
3 months
3 months
Company
3 months
12 months
12 months
12 months
3 months
3 months
3 months
3 months
3 months
3 months
Advisers
The following have provided advice to the Committee during the year in relation to its consideration of matters relating to Directors’ remuneration:
• Chief Executive Officer, Chief Financial Officer, Group HR Director and Company Secretary; and
• Deloitte LLP (Deloitte).
Deloitte is retained to provide independent advice to the Committee as required. Deloitte is a member of the Remuneration Consultants Group and,
as such, voluntarily operates under the Code of Conduct in relation to executive remuneration consulting in the UK. Deloitte’s fees for providing
remuneration advice to the Committee, which were charged on a time and materials basis, were £19,875 for the year ended 30 June 2021. The
Committee considers the advice to be objective and independent, and assesses from time to time whether this appointment remains appropriate or
should be put out to tender; in doing so, it takes into account the Remuneration Consultants Group Code of Conduct. Deloitte was appointed by the
Committee following a competitive process and has provided share scheme advice and general remuneration advice to the Company.
During the year, Deloitte also performed tax advisory work for Dechra.
Policy on External Appointments
The Company recognises that Executive Directors may be invited to become Non-Executive Directors of other companies and that this can help
broaden the skills and experience of a Director. Executive Directors are only permitted to accept external appointments with the approval of the
Board. No Executive Director currently holds external appointments.
Statement of Voting at Previous Annual General Meeting
The Company remains committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. The following table sets
out actual voting in respect of the advisory vote on the Directors’ Remuneration Report and the binding vote on the Remuneration Policy at the
Company’s Annual General Meeting on 27 October 2020:
Resolution
To approve Remuneration Report
To approve Remuneration Policy
Ishbel Macpherson
Remuneration Committee Chairman
6 September 2021
Votes
for
81,088,589
74,112,644
% of vote
99.36
90.81
Votes
against
524,975
7,501,119
% of vote
0.64
9.19
Votes
withheld
6,968
6,768
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Report continued
Directors’ Remuneration Policy
The Remuneration Policy was approved by shareholders at the 2020 Annual General Meeting held on 27 October 2020, and became effective from
this date. The full Remuneration Policy as approved by shareholders is available at www.dechra.com. We have set out a summary below of those
parts of the Remuneration Policy which we consider shareholders will find most useful.
Policy Table for Executive Directors:
Element: Base Salary
Purpose and link to strategy:
Core element of fixed remuneration reflecting the individual’s role and experience.
Operation
Performance Measure
The Committee ordinarily reviews base salaries annually taking into
account a number of factors including (but not limited to) the value of
the individual, their skills and experience and performance.
Whilst no formal performance conditions apply, an individual’s
performance in role is taken into account in determining any salary
increase.
The Committee also takes into consideration:
• pay increases within the Group more generally; and
• Group organisation, profitability and prevailing market conditions.
Maximum Opportunity
Whilst there is no maximum salary, increases will normally be within the range of salary increases awarded (in percentage of salary terms) to other
employees in the Group. However, higher increases may be awarded in appropriate circumstances, such as:
• on promotion or in the event of an increase in scope of the role or the individual’s responsibilities;
• where an individual has been appointed to the Board at a salary set at a level that is lower than the Committee’s view of a market salary to
allow for growth in the role, in which case larger increases may be awarded to move salary positioning to a market level as the individual gains
experience;
• change in size and/or complexity of the Group; and/or
•
significant market movement.
Such increases may be implemented over such time period as the Committee deems appropriate.
Element: Retirement Benefits
Purpose and link to strategy:
Provide a competitive means of saving to deliver appropriate income in retirement.
Performance Measure
Not applicable.
Operation
Executive Directors are eligible to participate in defined contribution
pension arrangements. In appropriate circumstances, an Executive
Director may receive a salary supplement in lieu of contributions to a
pension scheme.
Executive Directors outside the UK may also participate in non-UK
pension arrangements (including the defined benefit pension scheme in
the Netherlands, benefits under which are based on career average pay).
Maximum Opportunity
For Executive Directors appointed on or after 1 July 2019, a Company contribution not exceeding the contribution available to the majority of the
Group’s workforce (currently 4% of salary).
For Executive Directors appointed before 1 July 2019, 14% of salary. However, the Company contribution will be aligned with the rate available
to the wider workforce by the end of 2022 (this will include enhancing the wider UK workforce rate alongside a reduction in the rate for Executive
Directors).
A salary supplement may be paid in lieu of some or all of the pension contributions otherwise payable.
Benefits under any non-UK pension arrangement may be provided in accordance with the terms of the applicable scheme.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Element: Benefits
Purpose and link to strategy:
Provided on a market competitive basis.
Operation
The Company provides benefits in line with market practice and
includes the use of a fully expensed car (or car allowance), medical
cover and life assurance scheme.
Other benefits may be provided based on individual circumstances,
which may include relocation costs and expatriate allowances.
Maximum Opportunity
Performance Measure
Not applicable.
Whilst the Committee has not set an absolute maximum on the level of benefits Executive Directors may receive, the value is set at a level which
the Committee considers to be appropriately positioned taking into account relevant market levels based on the nature and location of the role
and individual circumstances.
Element: Annual Bonus
Purpose and link to strategy:
The executive bonus scheme rewards Executive Directors for achieving financial and strategic targets in the relevant year by reference to
operational targets and individual objectives.
Operation
Performance Measure
Targets are reviewed annually and any pay-out is determined by the
Committee after the year end based on targets set for the financial period.
The Committee has discretion to amend the pay-out should any formulaic
output not reflect the Committee’s assessment of overall business
performance or if the Committee considers the formulaic outturn is not
appropriate in the context of other factors considered by the Committee
to be relevant.
If a bonus opportunity in excess of 100% of salary is awarded, up to
33% of any bonus earned will be deferred into shares for a period of
two years.
Deferred bonus awards may take the form of nil cost options, conditional
awards of shares or such other form as has a similar economic effect.
Additional shares may be delivered in respect of shares subject to
deferred bonus awards to reflect the value of dividends paid during the
period beginning with the date of grant and ending with the date of
release (this payment may assume that dividends had been reinvested in
Dechra shares on a cumulative basis).
Recovery provisions apply, as referred to below.
Operational targets (which may be based on financial or strategic
measures) and individual objectives are determined to reflect the
Group’s strategy.
The personal objectives for the Chief Executive Officer are set by the
Chairman. The personal objectives for other Executive Directors are
set by the Chief Executive Officer. The personal objectives are
reviewed and endorsed by the Committee.
At least 50% of the bonus opportunity is based on financial measures
(which may include profit before tax).
Subject to the Committee’s discretion to override formulaic outturns,
for financial measures, up to 15% of the maximum for the financial
element is earned for threshold performance, rising to up to 50%
of the maximum for the financial element for on target performance
and 100% of the maximum for the financial element for maximum
performance.
Subject to the Committee’s discretion to override formulaic outturns,
vesting of the bonus in respect of strategic measures or individual
objectives will be between 0% and 100% based on the Committee’s
assessment of the extent to which the relevant metric or objective has
been met.
Maximum Opportunity
The maximum bonus opportunity for Executive Directors is 150% of base salary.
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Element: Long Term Incentive Plan (LTIP)
Purpose and link to strategy:
The LTIP provides a clear link between the remuneration of the Executive Directors and the creation of value for shareholders by rewarding the
Executive Directors for the achievement of longer term objectives aligned to shareholders’ interests.
Operation
Performance Measure
Performance measures under the LTIP will be based on financial
measures (which may include, but are not limited to, earnings per
share growth, relative total shareholder return, return on capital
employed and free cash flow).
Subject to the Committee’s discretion to override formulaic outturns,
awards will vest as to 25% for threshold performance, increasing to
100% for maximum performance.
The Committee may grant awards as conditional shares, as nil (or nominal)
cost options, as forfeitable shares or as market value share options with a
per share exercise price equal to the market value of a share at the date
of grant. Other than in the case of ‘Qualifying LTIP awards’ as referred
to below, market value share options will not be granted to Executive
Directors. Awards will usually vest following the assessment of the
applicable performance conditions, which will usually be assessed over
three years, but will not be released (so that the participant is entitled to
acquire shares) until the end of a holding period of two years beginning
on the vesting date. Alternatively, awards may be granted on the basis
that the participant is entitled to acquire shares following the assessment
of the applicable performance conditions but that (other than as regards
sales to cover tax liabilities and any applicable exercise price) the award
is not released (so that the participant is able to dispose of those shares)
until the end of the holding period.
The Committee has discretion to vary the formulaic vesting outturn if it
considers that the outturn does not reflect the Committee’s assessment
of performance or is not appropriate in the context of other factors
considered by the Committee to be relevant.
Additional shares may be delivered in respect of shares which vest under
the LTIP to reflect the value of dividends which would have been paid
on those shares during the period beginning with the date of grant and
ending with the release date (this payment may assume that dividends
had been reinvested in Dechra shares on a cumulative basis).
Market value options may be granted under the LTIP as tax-advantaged
Company Share Option Plan (CSOP) options, offering tax savings to the
Group and the participant.
The Committee may at its discretion structure awards as Qualifying LTIP
Awards, consisting of a CSOP option and an ordinary nil-cost LTIP award,
with the ordinary award scaled back at exercise to take account of any
gain made on exercise of the CSOP option.
Recovery provisions apply, as referred to below.
Maximum Opportunity
The maximum award level under the LTIP in respect of any financial year is 200% of salary.
If a Qualifying LTIP award is granted, the value of shares subject to the CSOP option will not count towards the limits referred to above, reflecting
the provisions for the scale back of the ordinary LTIP award.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Element: All Employee Share Plans
Purpose and link to strategy:
Provision of the Save As You Earn Scheme (SAYE), including the Employee Stock Purchase Plan (ESPP) in the United States of America, to
Executive Directors creates staff alignment with the Group and provides a sense of ownership. Executive Directors may participate in such other
all employee share plans as may be introduced from time to time.
Operation
Performance Measure
SAYE and ESPP: Tax qualifying monthly savings scheme facilitating the
purchase of shares at a discount.
Not subject to performance conditions in line with typical market
practice.
Any other all employee share plan would be operated for Executive
Directors in accordance with its rules and on the same basis as for
other qualifying employees.
Maximum Opportunity
The limit on participation and the permitted discount under the SAYE scheme and ESPP will be those set in accordance with the applicable tax
legislation from time to time. The limit on participation under and other relevant terms of any other all employee share plan would be determined
in accordance with the plan rules (and, where relevant, applicable legislation) and would be the same for the Executive Directors as for other
relevant employees.
Recovery Provisions (Malus and Clawback)
The annual bonus and LTIP are subject to recovery provisions as set out below.
Malus provisions apply which enable the Committee to determine before the payment of an annual bonus or the vesting of an LTIP award, that the
bonus opportunity or LTIP award may be cancelled or reduced.
Clawback provisions apply which enable the Committee to determine for up to two years following the payment of a cash bonus or the vesting of an
LTIP award, that the amount of the bonus paid may be recovered (and any deferred bonus award may be reduced or cancelled, or recovery may be
applied to it if it has been exercised) and the LTIP award may be cancelled or reduced (if it has not been exercised) or recovery may be applied to it
(if it has been exercised).
The malus and clawback provisions may be applied in the event of material misstatement of Dechra’s financial statements, serious reputational
damage to Dechra, material corporate failure, gross misconduct on the part of the Executive Director, or if an annual bonus award has paid out
at a higher level than would have been the case but for a material misstatement or serious reputational damage.
Malus and clawback may be applied to any CSOP option granted under the LTIP to the extent permitted by the applicable tax legislation.
Shareholding Guidelines
To align the interests of Executive Directors with those of shareholders, the Committee has adopted formal shareholding guidelines.
Shareholding guidelines during employment
During employment, Executive Directors are required to retain half of any shares acquired under the LTIP, any deferred bonus award and, if relevant,
any recruitment award (after sales to cover tax) until such time as their holding has a value equal to 200% of salary.
Shares subject to LTIP awards which have vested but not been released (that is which are in a holding period), deferred bonus awards, or LTIP
awards which are exercisable but have not been exercised count towards the guidelines on a net of assumed tax basis.
Shareholding requirement after employment
The Committee has adopted a post-employment shareholding requirement. Shares are subject to this requirement only if they are acquired from
share plan awards (LTIPs, deferred bonus awards and, if relevant, any recruitment award) granted after 1 July 2020. Following employment, an
Executive Director must retain:
•
•
for the first year after employment, such of their shares which are subject to the post-employment requirement as have a value for these
purposes equal to the shareholding guideline that applies during employment (currently 200% of salary); and
for the second year after employment, such of those shares as have a value for these purposes equal to 50% of the in shareholding guideline
that applies during employment, or in either case and if fewer, all of those shares.
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Report continued
Policy Table for Non-Executive Directors
Element
Fees and
benefits
Purpose and link to strategy Operation
To provide fees within a market
competitive range reflecting the
experience of the individual,
responsibilities of the role and
the expected time commitment.
The fees of the Chairman are determined by the
Committee, and the fees of the Non-Executive
Directors are determined by the Board following
a recommendation from both the Chief Executive
Officer and the Chairman.
Non-Executive Directors are not eligible to
participate in any of the Company’s share
schemes, incentive schemes or pension
schemes.
Non-Executive Directors may be eligible to
receive benefits such as travel and other
reasonable expenses.
Opportunity
Fees are set taking into account the responsibilities
of the role and expected time commitment.
Non-Executive Directors are paid a basic fee with
additional fees paid for the chairing of Committees.
An additional fee is also paid for the role of Senior
Independent Director and may be paid for other
responsibilities or time commitments.
Where benefits are provided to Non-Executive
Directors they will be provided at a level
considered to be appropriate taking into account
the individual circumstances.
Recruitment Remuneration Policy
When hiring a new Executive Director, the Committee will typically align the remuneration package with the above Policy.
When determining appropriate remuneration arrangements, the Committee may include other elements of pay which it considers are appropriate.
However, this discretion is capped and is subject to the limits referred to below.
• Base salary will be set at a level appropriate to the role and the experience of the Executive Director being appointed. This may include
agreement on future increases up to a market rate, in line with increased experience and/or responsibilities, subject to good performance,
where it is considered appropriate.
• Pension will only be provided in line with the above Policy.
• The Committee will not offer non-performance related incentive payments (for example a ‘guaranteed sign-on bonus’).
• Other elements may be included in the following circumstances:
− an interim appointment being made to fill an Executive Director role on a short term basis;
− if exceptional circumstances require that the Chairman or a Non-Executive Director takes on an executive function on a short term basis;
− if an Executive Director is recruited at a time in the year when it would be inappropriate to provide a bonus or long term incentive award for that year
as there would not be sufficient time to assess performance. Subject to the limit on variable remuneration set out below, the quantum in respect of
the months employed during the year may be transferred to the subsequent year so that reward is provided on a fair and appropriate basis; and
− if the Director will be required to relocate in order to take up the position, it is the Company’s policy to allow reasonable relocation, travel and
subsistence payments. Any such payments will be at the discretion of the Committee.
• The Committee may also alter the performance measures, performance period, vesting period, holding period and deferral period of the annual
bonus or LTIP, subject to the rules of the LTIP, if the Committee determines that the circumstances of the recruitment merit such alteration. The
rationale will be clearly explained in the next Directors’ Remuneration Report.
• The maximum level of variable remuneration which may be granted (excluding ‘buyout’ awards as referred to below) is 350% of salary.
The Committee may make payments or awards in respect of hiring an employee to ‘buyout’ remuneration arrangements forfeited on leaving a previous
employer. In doing so, the Committee will take account of relevant factors including any performance conditions attached to the forfeited arrangements
and the time over which they would have vested. The Committee will generally seek to structure ‘buyout’ awards or payments on a comparable basis to
the remuneration arrangements forfeited. Any such payments or awards are excluded from the maximum level of variable remuneration referred to above.
‘Buyout’ awards will ordinarily be granted on the basis that they are subject to forfeiture or ‘clawback’ in the event of departure within 12 months of joining
Dechra, although the Committee will retain discretion not to apply forfeiture or clawback in appropriate circumstances.
Any share awards referred to in this section will be granted as far as possible under Dechra’s ordinary share plans. If necessary and subject to the
limits referred to above, recruitment awards may be granted outside of these plans as permitted under the Listing Rules which allow for the grant of
awards to facilitate, in unusual circumstances, the recruitment of an Executive Director.
Where a position is filled internally, any ongoing remuneration obligations or outstanding variable pay elements shall be allowed to continue in
accordance with their terms.
Fees payable to a newly appointed Chairman or Non-Executive Director will be in line with the policy in place at the time of appointment.
Ishbel Macpherson
Remuneration Committee Chairman
6 September 2021
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Directors’ Report and
Other Disclosures
The Directors present their annual report on the affairs of the Group,
together with the audited Group financial statements for the year ended
30 June 2021. Certain disclosure requirements, which form part of
the Directors’ Report, are included elsewhere in this Annual Report
as permitted by section 414C of the Companies Act 2006. They are
incorporated by reference into this Directors’ Report as follows:
Section of the
Annual Report
Strategic Report
Page Number
24 to 27
Strategic Report
Strategic Report
Strategic Report
20 to 23
16 to 18
26 and 35
Strategic Report
Governance Report
35, 76 to 78, 83
116
Strategic Report
Governance Report
Corporate Responsibility
Statement
48 to 50
95 to 97
62
Disclosure
Review of the Group’s
business during the year
and any likely future
developments
Strategy
Business Model s Model
Details of acquisitions and
disposals during the year
Going concern, viability
statements and risk
management
Section 172 statement and
Stakeholder Engagement
Diversity
Approach to employees
with disabilities
Company Employees
Governance Report
Corporate Responsibility
Statement
Corporate Responsibility
Statement
Corporate Responsibility
Statement
Environmental matters
including Greenhouse Gas
Emissions and Streamlined
Energy & Carbon Reporting
Social, community and
human rights issues
Corporate Governance
Statement
Board of Directors details
Financial risk management
(including the exposure to
price, credit and liquidity risk)
Post-balance sheet events Financial Statements
Governance Report
Financial Statements
Corporate Responsibility
Statement
Governance Report
107 to 109
62
58 to 64
65 to 68
73 to 75
87
88 and 89
192 to 199
209
Amendment of the Articles of Association
The Company’s Articles of Association may be amended by a special
resolution of its shareholders.
Significant Agreements/Change of Control
As detailed in the Going Concern Statement on page 35, the Group has
bank facilities with a group of banks comprising Bank of Ireland (UK)
plc, BNP Paribas, Fifth Third Bank, HSBC Bank plc, Credit Industriel
et Commercial SA (CIC Bank), Raiffeisen Bank International AG and
Santander UK plc (the Banks). These bank facilities include a change
of control provision whereby a change of control of the Company could
result in the withdrawal of these bank facilities.
No other agreements that take effect, alter or terminate upon a change
of control of the Company following a takeover bid are considered to be
significant in terms of their potential impact on the business as a whole.
The Company does not have agreements with any Director or employee
that provide compensation for loss of office or employment resulting
from a takeover, other than the Company share schemes. Under such
schemes outstanding options and awards normally vest and become
exercisable on a change of control, subject to the satisfaction of any
performance conditions at that time. In the event of a change of control,
unvested awards under the Long Term Incentive Plan will vest to the
extent determined by the Remuneration Committee taking into account
the relevant performance conditions and, unless the Remuneration
Committee determines otherwise, the extent of vesting so determined
shall be reduced to reflect the proportion of the relevant performance
period that has elapsed.
The Directors consider that there are no contracted or other single
arrangements, such as those with major suppliers, which are likely
to influence, directly or indirectly, the performance of the business
and its values. Furthermore, there are no contracts of significance
subsisting during the financial year between any Group undertaking
and a controlling shareholder or in which a Director is or was materially
interested.
Directors
The Articles of Association state that a Director may be appointed by
an ordinary resolution of the shareholders or by the Directors, either to
fill a vacancy or as an addition to the existing Board but so that the total
number of Directors does not exceed the maximum number of Directors
allowed pursuant to the Articles of Association. The maximum number of
Directors currently allowed pursuant to the Articles of Association is ten.
The Articles of Association also state that the Board of Directors is
responsible for the management of the business of the Company and
in doing so may exercise all the powers of the Company subject to the
provision of relevant legislation and the Company’s Articles of Association.
The powers of the Directors set out in the Articles of Association include
those in relation to the issue and buy-back of shares.
Director Insurance and Indemnities
The Company maintains an appropriate level of Directors’ and Officers’
insurance in respect of legal action against Directors as permitted under
the Company’s Articles of Association and the Companies Act 2006.
The Company also indemnifies the Directors under an indemnity deed
with each Director in respect of legal action to the extent allowed under
the Company’s Articles of Association and the Companies Act 2006. As
at the date of this report, qualifying third party indemnity provisions are in
force. A copy of the indemnity provisions will be available for inspection
at the forthcoming Annual General Meeting.
Overseas Branches
The Company, through its subsidiary Genera d.d., has established
branches in Bosnia-Herzegovina and Serbia.
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Other Disclosures continued
Political Donations and Expenditure
No political donations were made during the year ended 30 June 2021
(2020: nil). The Group has a policy of not making any donations to
political organisations or independent election candidates or incurring
political expenditure anywhere in the world as defined in the Political
Parties, Elections and Referendums Act 2000.
Research and Development
The Group has a structured development programme with the aim of
identifying and bringing to market new pharmaceutical products. Investment
in development is seen as key to strengthen further the Group’s competitive
position. Further information in relation to product development can be
found on pages 42 to 45. The underlying expense on this activity for the
year ended 30 June 2021 was £32.4 million (2020: £28.4 million) and a
further £1.5 million (2020: £1.8 million) was capitalised as development
costs.
Results and Dividends
The results for the year and financial position at 30 June 2021 are
shown in the Consolidated Income Statement on page 161 and
Consolidated Statement of Financial Position on page 163 The Directors
are recommending the payment of a final dividend of 29.39 pence per
share which, if approved by shareholders, will be paid on 19 November
2021 to shareholders registered at 29 October 2021. The shares will
become ex-dividend on 28 October 2021. An interim dividend of 11.11
pence per share was paid on 7 April 2021, making a total dividend for
the year of 40.50 pence per share (2020: 34.29 pence per share). The
total dividend payment is £43.8 million (2020: £36.5 million).
Share Capital
The issued share capital of the Company for the year is set out in note 25
to the Consolidated Financial Statements. As at the end of the financial
year 108,215,323 fully paid ordinary shares were in issue, which included
204,363 ordinary shares issued during the year in connection with the
exercise of options under the Company’s share option schemes.
Substantial Interests in Voting Rights
In accordance with the requirements in the Listing Rules and the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority, the Company had been notified of the following interests
exceeding the 3% notification threshold as at the end of the financial
year and a date not more than one month before the date of the notice
of the Annual General Meeting.
30 June 2021
12 August 2021
Aggregate
voting
rights Percentage
Aggregate
voting
rights Percentage
8,826,812
6,529,279
8.16
6.03
8,892,852
6,516,001
6,375,951
5.89
6,228,929
4,826,425
4.46
4,841,912
3,709,575
3.43
3,628,263
8.22
6.02
5.76
4.47
3.35
3,670,625
3.39
3,670,625
3.39
3,597,344
3.32
3,533,800
3.27
Fidelity
Management &
Research
BlackRock Inc
Standard Life
Aberdeen
The Vanguard
Group, Inc
Grandeur Peak
Global Advisors
Corporate
Stakeholders
(Netherlands)
Royal London
Mutual Assurance
Society
Auditor
A resolution to re-appoint PricewaterhouseCoopers LLP as external
auditor and to authorise the Audit Committee to determine their
remuneration will be proposed at the forthcoming Annual General
Meeting.
The holders of shares are entitled to receive dividends when declared,
to receive the Company’s Report and Accounts, to attend and speak at
general meetings of the Company, to appoint proxies and to exercise
voting rights. There are no restrictions on transfer or limitations on the
holding of shares in the Company, nor are there any requirements to
obtain prior approval in respect of any transfer of shares. The Directors
are not aware of any agreements which limit the transfer of shares or
curtail voting rights attached to those shares.
Audit Information
Each of the Directors who held office at the date of the approval of the
Directors’ Report confirms that, so far as he or she is aware, there is
no relevant audit information of which the external auditor is unaware,
and each Director has taken all steps that he or she ought to have
undertaken as a Director to make himself or herself aware of any
relevant audit information and to establish that the external auditor is
aware of that information.
The Directors’ Report has been approved by the Board and signed
on its behalf by:
Melanie Hall
Company Secretary
6 September 2021
At the Annual General Meeting of the Company held on 27 October
2020, the Company was authorised to purchase up to 10,801,676
of its ordinary shares, representing 10% of the issued share capital of
the Company as at 10 September 2020. No shares were purchased
under this authority during the financial year. A resolution will be put to
shareholders at the forthcoming Annual General Meeting to renew this
authority for a further period of one year. Under the proposed authority
shares purchased may be either cancelled or held in treasury.
The Directors require authority from shareholders to allot unissued
share capital in the Company and to disapply shareholders’ statutory
pre-emption rights. Such authorities were granted at the 2020 Annual
General Meeting and resolutions to renew these authorities will be
proposed at the 2021 Annual General Meeting.
148
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comGovernance Statement of
Directors’ Responsibilities
Statement of Directors’ Responsibilities in Respect
of the Financial Statements
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare Financial Statements
for each financial year. Under that law the Directors have prepared the
Group Financial Statements in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 and the Company Financial Statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law). Additionally, the Financial Conduct
Authority’s Disclosure Guidance and Transparency Rules require the
Directors to prepare the Group Financial Statements in accordance
with international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
Under Company law, Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and Company and of the profit or loss
of the Group for that period. In preparing the Financial Statements, the
Directors are required to:
•
•
select suitable accounting policies and then apply them consistently;
state whether applicable international accounting standards in
conformity with the requirements of the Companies Act 2006
and international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European
Union have been followed for the Group Financial Statements and
United Kingdom Accounting Standards, comprising FRS 101 have
been followed for the Company Financial Statements, subject to
any material departures disclosed and explained in the Financial
Statements;
• make judgements and accounting estimates that are reasonable
and prudent; and
• prepare the Financial Statements on the going concern basis unless
it is inappropriate to presume that the Group and Company will
continue in business.
The Directors are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group’s and Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to ensure
that the Financial Statements and the Directors’ Remuneration Report
comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of Financial Statements may differ from
legislation in other jurisdictions.
Directors’ Confirmations
The Directors consider that the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s and Company’s
position and performance, business model and strategy.
Each of the Directors, whose names and functions are set out on pages
88 and 89 confirm that, to the best of their knowledge:
•
•
•
the Group Financial Statements, which have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union, give a true and
fair view of the assets, liabilities, financial position and profit of the
Group;
the Company Financial Statements, which have been prepared
in accordance with United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair view of the assets,
liabilities, financial position and profit of the Company; and
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 it faces.
Signed by order of the Board.
Ian Page
Chief Executive Officer
Paul Sandland
Chief Financial Officer
6 September 2021
149
Stock Code: DPHGovernance We have developed
a strong position in
lameness and pain
management
Read more about Equine Products
on page 15.
Financial Statements
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in
Shareholders’ Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Changes in
Shareholders’ Equity
Notes to the Company Financial Statements
Financial History
152
161
162
163
164
165
166
210
211
212
221
Independent Auditors’ Report to the Members of
Dechra Pharmaceuticals PLC
Report on the audit of the financial statements
Opinion
In our opinion:
• Dechra Pharmaceuticals PLC’s Group financial statements and Company financial statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the Company’s affairs as at 30 June 2021 and of the Group’s profit and the Group’s cash flows for the
year then ended;
•
•
the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006;
the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law); and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise: the Consolidated
and Company Statements of Financial Position as at 30 June 2021; the Consolidated Income Statement and Consolidated Statement of
Comprehensive Income, the Consolidated Statement of Cash Flows, and the Consolidated and Company Statements of Changes in Shareholders’
Equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion in relation to international financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union
As explained in note 1 to the financial statements, the Group, in addition to applying international accounting standards in conformity with the
requirements of the Companies Act 2006, has also applied international financial reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
In our opinion, the Group financial statements have been properly prepared in accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in note 7 to the financial statements, we have provided no non-audit services to the Company or its controlled
undertakings in the period under audit.
152
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements Our audit approach
Overview
Audit scope
• Following our assessment of the risks of material misstatement of the Group financial statements we performed audits of the complete financial
information of 21 reporting units.
•
In addition, the Group engagement team audited the Company and certain centralised functions, including those covering Group treasury
operations, corporate taxation, and goodwill and intangible asset impairment assessments.
• The components on which audits of the complete financial information and centralised work was performed accounted for 89% of Group
revenue, 82% of Group underlying operating profit and 89% of Group profit before tax. In addition, one component team was instructed to
perform specified procedures over one reporting unit.
• For the full scope audits and the specified procedures performed by component audit teams, in addition to the issuance of formal written
instructions, throughout the audit process the Group engagement team held virtual meetings on approach and conclusions with the component
audit teams, performed 6 virtual file reviews of component auditors’ working papers and reviewed the formal reporting from component auditors.
In addition, the Group engagement team also audited all of the UK components that were in scope for the Group audit.
Key audit matters
• Licensing agreements and associated contingent considerations (Group)
• Taxation (Group)
•
Impairment of intangible assets (Group)
• Consideration of the impact of Covid-19 (Group & Company)
Materiality
• Overall Group materiality: £4.8 million (2020: £3.8 million) based on 3% of underlying operating profit.
• Overall Company materiality: £3.2 million (2020: £3.1 million) based on 0.5% of net assets.
• Performance materiality: £3.6 million (Group) and £2.4 million (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Acquisition accounting, which was a key audit matter last year, is no longer included because of the likelihood of a material misstatement
occurring in this area is considered to be low given the immateriality of corporate acquisitions during the current year. New product transactions
and consideration of whether or not these should be accounted for in accordance with IFRS 3 is considered within the licensing agreements and
associated contingent considerations key audit matter. Otherwise, the key audit matters below are consistent with last year.
153
Stock Code: DPHFinancial Statements Independent Auditors’ Report to the Members of
Dechra Pharmaceuticals PLC
continued
Key audit matter
Licensing agreements and associated contingent considerations (Group)
Refer to the Audit Committee Report on page 115, the critical
accounting estimates and judgements in note 1 (b) to the accounts
on page 166, and note 30 (Contingent consideration liabilities).
How our audit addressed the key audit matter
Tri-Solfen® (ANZ territories) and Osurnia
In respect of Tri-Solfen® (ANZ territories):
• We read the asset purchase agreement to corroborate the terms
Tri-Solfen® (ANZ territories)
On 5 February 2021 the Group entered into a licensing agreement with
Animal Ethics Pty Ltd for the marketing authorisation of Tri-Solfen® in
Australia and New Zealand. This was for an initial consideration of AUD
5 million with a contingent consideration of AUD 26 million, as well as a
future royalty payable for a finite period.
Management have concluded that the future royalty payment for a
finite period forms part of the consideration for the licensing agreement
and therefore, in accordance with IAS 38 and the Group’s accounting
policies, has recognised this as contingent consideration with a
corresponding increase to the related intangible asset.
The accounting for contingent consideration is inherently judgemental
and involves estimation uncertainty over the timing and quantum of
future cash flows and the discount rate to be used.
Osurnia
On 27 July 2020 the Group completed the acquisition of the worldwide
rights of the Osurnia product portfolio from Elanco Animal Health
Incorporated for a total consideration of USD 135.0 million
(£106.5 million). Inventory of USD 6.6 million (£4.7 million) was also
acquired as part of the transaction.
As a result of acquiring the trade and assets associated with the
product, management were required to assess whether or not this
met the definition of a business combination in accordance with IFRS
3. In applying the optional concentration test prescribed by IFRS 3,
management concluded that the fair value of the gross assets acquired
were concentrated in a single asset, being the product rights, and
therefore concluded that the acquisition represented a trade and asset
acquisition and so accounted for this accordingly.
The application of the optional concentration test under IFRS 3 is an
area of judgement, however given the significant concentration of value
into product rights for Osurnia this is not considered to be a critical
judgement.
Remeasurement of existing agreements
During the year, liabilities in respect of all existing licensing agreements,
the largest being Tri-Solfen® (legacy global rights excluding ANZ) and
Mirataz, were reassessed based on the most recent forecast of the
timing and quantum of future cash flows. The discount rate applied
was also reassessed. The variability of the timing and quantum of future
cash flows and the discount rate to be applied represents an area of
estimation uncertainty.
and consideration.
• We obtained management’s model and reperformed the calculations
forming the basis of the valuation.
• We obtained evidence to corroborate the key assumptions
underpinning management’s cash flow forecasts and benchmarked
longer term growth rates against external market data.
• We corroborated that the cash flows used are consistent with those
reviewed by the Board as part of the acquisition process. We also
performed sensitivity analysis on these cash flow forecasts and the
discount rate applied to corroborate that a material change is not
probable based on a reasonable change in key assumptions.
• Our valuation specialists confirmed that the discount rates applied
were consistent with those applied by other companies in the industry
of comparable size and geographical spread.
• We audited the disclosure note associated with acquisition to ensure
this meets the requirements of the applicable standards.
• Overall we found the accounting for this new licensing agreement and
related disclosures to be appropriate and consistent with the audit
evidence obtained.
In respect of Osurnia:
• We read the asset purchase agreement in order to understand the
nature of the transaction and to ensure that relevant clauses that
impact the accounting had been considered by management.
• We agreed the consideration paid to the terms of the asset purchase
agreement and to the bank statement.
• We obtained a copy of management’s concentration test performed in
accordance with IFRS 3 and challenged whether or not substantially
all of the fair value of the gross assets acquired were concentrated in
a single asset with reference to the asset purchase agreement and
valuation assigned to each asset.
• We audited the disclosure note associated with the trade and asset
acquisition to ensure that this met the requirements of the applicable
standards.
• Overall we found the accounting for this trade and asset acquisition
and related disclosures to be appropriate and consistent with the
audit evidence obtained.
Remeasurement of existing agreements
We obtained management’s model and reperformed the calculations
forming the basis of the valuation.
We have assessed and challenged the changes made to the assumptions
underpinning management’s cash flow forecasts within the model and
obtained evidence to corroborate the key assumptions.
We checked that the updated cash flow forecasts aligned to those
approved by the Board and we performed sensitivity analysis to take into
consideration reasonably possible changes to key assumptions.
Our valuation specialists assessed the discount rates applied and
confirmed that they were consistent with those applied by other
companies in the industry of comparable size and geographical spread.
We have audited the disclosure note associated with licensing agreements
and associated contingent considerations.
Overall we found the accounting for these licensing agreements,
contingent considerations and the related disclosures to be appropriate
and consistent with the audit evidence obtained.
154
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements Key audit matter
Taxation (Group)
Refer to the Audit Committee Report on page 115, the critical
accounting estimates and judgements in note 1 (b) to the accounts
on page 166, and note 9 (Income taxes).
The Group operates in a complex multi-national tax environment
and there are open tax matters and areas of judgement with various
overseas tax authorities. In addition, from time to time, the Group
enters into commercial transactions with complicated accounting
and tax consequences.
Judgement is required in assessing the level of provisions required
in respect of uncertain tax provisions.
Impairment of intangible assets (Group)
Refer to the Audit Committee Report on page 115, the critical
accounting estimates and judgements in note 1 (b) to the accounts
on page 166, note 12 (Intangible assets) and note 14 (Impairment
reviews).
In respect of finite lived intangibles, the Directors exercise judgement
as to whether impairment triggers, which require a full impairment
assessment to be performed, have been identified in relation to
intangible assets.
Goodwill and indefinite life assets are tested for impairment annually,
or more frequently if there are indications that amounts may be impaired.
The impairment tests involve determining the recoverable amount of the
relevant asset or cash generating unit, which corresponds to the higher
of the fair value less costs to sell or its value in use. In the Group’s case,
the recoverable amount is based on the value in use.
Where a full impairment assessment is required to support the carrying
value of the assets held, management have determined the cash
generating units and prepared discounted cash flows which include
a number of estimates. The assumption which is deemed to be the
most significant in these forecasts is in respect of the forecast cash
flows of products. The long term growth and discount rate also include
estimation uncertainty.
How our audit addressed the key audit matter
In conjunction with our tax specialists, we evaluated and challenged
management’s estimates of tax exposures and contingencies in order to
assess the adequacy of the Group’s tax provisions. Our procedures included
obtaining and evaluating certain third party tax advice that the Group has
obtained to assess the appropriateness of any assumptions used.
In understanding and evaluating management’s estimates, we considered
the status of recent and current tax authority audits and enquiries, the
outcome of previous uncertain positions, positions taken in tax returns
and developments in the tax environment. Our findings were then
considered in the context of the valuation of uncertain tax positions,
with reference to the appropriateness of valuation techniques used in
accordance with IFRIC 23, including amounts assigned to each probability
where the expected value method was used.
Additionally, we reviewed the disclosure note associated with uncertain
tax positions and confirmed that this was appropriate.
Overall we found the assessment of uncertain tax positions and associated
disclosures to be appropriate and consistent with the evidence obtained.
For finite life intangible assets, we reviewed the forecast financial
performance of individual intangible assets and held discussions with
management in respect of expected future market conditions to identify
any potential indicators of impairment. We also considered external market
factors and developments that could be indicative of an impairment trigger.
In respect of indefinite lived intangibles and goodwill, and where an
impairment trigger has arisen in respect of finite lived intangibles:
• We considered management’s determination of the cash generating
units for assessing impairment;
• Where an impairment model was used, we audited management’s
model and reperformed the calculations within the discounted cash
flow forecasts;
• The forecasts used for years 1 and 2 were agreed to the latest Board
approved budgets;
• Valuation specialists were utilised to benchmark, within a reasonable
range, the discount rate assumptions to the cost of capital for other
comparable companies;
• We corroborated key assumptions in respect of growth rates to
economic and industry data and challenged forecast margins based
on historic actuals and expected developments in the Group;
• We assessed the sufficiency of headroom through the performance of
sensitivity analysis on key assumptions, confirming that an impairment
is not reasonably possible;
• Management’s historical forecasting accuracy was also assessed
across multiple previous years; and
• We audited the disclosure note associated with the impairment review
and confirmed that this was appropriate.
Overall we found the assessment of the carrying value of intangible assets
and associated disclosures to be appropriate and consistent with the
evidence obtained.
155
Stock Code: DPHFinancial Statements
Independent Auditors’ Report to the Members of
Dechra Pharmaceuticals PLC
continued
Key audit matter
Consideration of the impact of Covid-19 (Group & Company)
Refer to the Going Concern statement on page 35 and the Viability
statement on page 83 of the Strategic Report, note 1 (b) (Basis of
preparation) and note (i) (Basis of preparation).
The emergence of Coronavirus (‘Covid-19’) during 2020 has impacted
all businesses, both financially and operationally. The Group has noted
an impact through the continuation of the global pandemic, however
this has been limited compared to other sectors. The key consideration
in respect of Covid-19 that has not already been considered in the
above key audit matters relates to the going concern status and
viability of the Group.
Management have performed a detailed assessment of the potential
impact of Covid-19, specifically in respect of the preparation of the
financial statements on a going concern basis.
In performing their assessment, management have considered a variety
of potential downside scenarios and have also considered possible
mitigating actions which could be taken to provide additional headroom
from both a liquidity and covenant compliance perspective.
The outcome of management’s assessment is that, in their view, it
remains appropriate to prepare the Group and Company financial
statements on a going concern basis.
How our audit addressed the key audit matter
We have evaluated management’s base cash flows, including challenging
key assumptions including forecast revenue and anticipated margins.
We checked the integrity of management’s models, as well as agreeing
key underlying data to source documents.
We assessed whether management’s mitigating actions are reasonably
achievable based on our understanding of the business, including the
nature of its cost base.
Finally, we obtained evidence to support disclosures within the financial
statements and checked that the disclosures within the Annual Report
are consistent with the financial statements and knowledge gained
on the audit.
Our conclusion in respect of going concern is included within the
“Conclusions relating to going concern” section below.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.
The Group is structured along three segments being European Pharmaceuticals, North American Pharmaceuticals and Pharmaceuticals Research
and Development, with each division set up to manage operations on both a regional and functional basis, consisting of a number of reporting units.
The Group financial statements are a consolidation of 57 active reporting units comprising the Group’s operating businesses and centralised
functions. These reporting units maintain their own accounting records and controls and report to the head office finance team in the UK.
Accordingly, of the Group’s 57 active reporting units we identified 21 which, in our view, required a full audit of their complete financial information
in order to ensure that sufficient audit evidence was obtained. The reporting units on which a full audit of their complete financial information was
performed accounted for 89% of Group revenue, 82% of underlying operating profit and 89% of profit before tax. Of these reporting units, 3 were
considered to be significant components due to their financial significance, being those units located in the USA, Germany and UK. In addition, we
instructed one component audit team to perform specified procedures on one reporting unit.
The Group consolidation, financial statements disclosures and a number of centralised functions were audited by the Group engagement team at
the head office. These included, but were not limited to, central procedures on treasury operations, UK and corporate taxation and goodwill and
intangible asset impairment assessments. We also performed Group level analytical procedures on all of the remaining out of scope active reporting
units to identify any unusual transactions. The Company was also subject to a full scope audit.
Where work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those reporting
units to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Consolidated
Financial Statements. We issued formal written instructions to all component auditors setting out the audit work to be performed by each of
them and maintained regular communication with the component auditors throughout the audit cycle. These interactions included attending
certain component clearance meetings and holding regular conference calls, as well as reviewing and assessing any matters reported. The Group
engagement team also reviewed selected audit working papers for certain component teams.
Due to the current restrictions on travel and social distancing measures, enacted as a response to the global pandemic, the group engagement
leader and senior members of the Group engagement team used video conferencing to oversee the component auditor work and had video
discussions with management of the 21 component locations (in 6 countries) in scope for an audit of their complete financial information. Senior
team members also attended, via video conference, the clearance meetings for all components. During the clearance meetings, the findings
reported by all component teams were discussed. The Group engagement team also evaluated the sufficiency of the audit evidence obtained
through discussions with, and remote review of the audit working papers of, component teams.
156
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - group
Overall materiality £4.8 million (2020: £3.8 million).
3% of underlying operating profit
How we
determined it
Rationale for
benchmark
applied
We believe the Group’s principal measure of performance
and earnings is underlying operating profit. Management
uses this measure as it believes that it eliminates material
non-operational items that may obscure the key trends and
factors in determining the Group’s operational performance.
Furthermore it is this measure which represents the primary
focus for management and key stakeholders.
Financial statements - company
£3.2 million (2020: £3.1 million).
0.5% of net assets
The Company is the ultimate holding Company of the
Dechra Group of Companies and with no trading activity, net
assets is considered to be the primary measure used by the
shareholders in assessing the performance of the entity, and is
a generally accepted auditing benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality
allocated across components was between £0.07 million and £4.1 million. Certain components were audited to a local statutory audit materiality that
was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and
extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% of overall materiality, amounting to £3.6 million for the Group financial statements and £2.4 million for the Company financial
statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation
risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.2 million (Group audit) (2020:
£0.2 million) and £0.2 million (Company audit) (2020: £0.2 million) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the Directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis of accounting
included:
• Evaluating management’s detailed cash flow forecasts and both liquidity and covenant headroom under both base case and downside
scenarios.
• Comparison of the going concern base case forecasts to Board approved forecasts and where applicable, we compared these forecasts for
consistency to those used elsewhere in the business, including for impairment assessments. We also considered whether they were reasonable
in light of previous performance, future expectations and management’s track record of accurate forecasting.
• Reading the key terms of all committed debt facilities to understand any terms, covenants or undertakings that may impact the availability of the
facility.
• Assessing there were no doubts over the ability of the Group to meet its debt covenants under both the base case and downside scenarios.
• Assessing the adequacy of disclosures in the going concern statement on page 35 and statements in note 1 of the Consolidated and Company
financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the Company’s
ability to continue as a going concern.
157
Stock Code: DPHFinancial Statements
Independent Auditors’ Report to the Members of
Dechra Pharmaceuticals PLC
continued
In relation to the Directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The
Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we
do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether
there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report
based on these responsibilities.
With respect to the Strategic report and Directors’ Report Other Disclosures (‘Strategic Report and Directors’ Report’), we also considered whether
the disclosures required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.
Strategic Report and Directors’ Report Other Disclosures
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ Report for the
year ended 30 June 2021 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006.
Corporate Governance statement
The Listing Rules require us to review the Directors’ statements in relation to going concern, longer-term viability and that part of the corporate
governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other
information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement,
included within the Governance section is materially consistent with the financial statements and our knowledge obtained during the audit, and we
have nothing material to add or draw attention to in relation to:
• The Directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
• The Directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material uncertainties to the Group’s and Company’s ability to continue to do so over
a period of at least twelve months from the date of approval of the financial statements;
• The Directors’ explanation as to their assessment of the Group’s and Company’s prospects, the period this assessment covers and why the
period is appropriate; and
• The Directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its
liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or
assumptions.
Our review of the Directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and only
consisted of making inquiries and considering the Directors’ process supporting their statement; checking that the statement is in alignment with the
relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements and
our knowledge and understanding of the Group and Company and their environment obtained in the course of the audit.
158
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• The Directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the Group’s and Company’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the Directors’ statement relating to the Company’s compliance with the
Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial statements
in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to
the UK Corporate Governance Code, the Listing rules, Tax legislation, Employment regulation, Health and Safety legislation, and other legislation
specific to the industries in which the Group operates (including Medicines & Healthcare products Regulatory Agency and U.S. Food & Drug
Administration), and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered
those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal entries to increase revenue or reduce expenditure to manipulate the financial performance
of the business, and management bias in accounting estimates. The Group engagement team shared this risk assessment with the component
auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the Group
engagement team and/or component auditors included:
• Discussions with management, internal audit and the Group’s legal counsel, including consideration of known or suspected instances of non-
compliance with laws and regulation and fraud;
• Consideration of any changes to the control environment as a result of Covid-19;
• Review of internal audit reports;
• Reading key correspondence with regulatory authorities, such as the Medicines & Healthcare products Regulatory Agency;
• Enquiries with component auditors;
•
Identifying and testing unusual journal entries which increase revenue or reduce expenditure to manipulate the financial performance of the
business;
• Consideration of the policy for the recognition of revenue and performed substantive testing to ensure compliance with this policy; and
• Assessing key judgements and estimates made by management for evidence of inappropriate bias, in particular in respect of the key audit
matters noted above. Details of our procedures in these areas are included in our key audit matters above.
159
Stock Code: DPHFinancial Statements Independent Auditors’ Report to the Members of
Dechra Pharmaceuticals PLC
continued
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws
and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However,
it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular
items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the
population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or
to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not
visited by us; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
•
the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting
records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the Directors on 23 October 2015 to audit the financial statements for
the year ended 30 June 2016 and subsequent financial periods. The period of total uninterrupted engagement is six years, covering the years ended
30 June 2016 to 30 June 2021.
Mark Skedgel (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
6 September 2021
160
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements Consolidated Income Statement
For the year ended 30 June 2021
Note
2
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Research and development expenses
Operating profit
Finance income
Finance expense
Share of (loss)/profit of investments
accounted for using the equity method
Profit before taxation
Income taxes
Profit for the year
Earnings per share
Basic
Diluted
Dividend per share (interim paid
and final proposed for the year)
2
3
4
6
7
9
11
11
10
2021
Non-
underlying*
(notes
3, 4 & 5)
£m
–
–
–
(73.8)
(4.4)
(78.2)
3.8
(1.0)
(0.7)
(76.1)
14.0
(62.1)
Underlying
£m
608.0
(262.1)
345.9
(151.3)
(32.4)
162.2
–
(11.7)
(0.4)
150.1
(32.5)
117.6
2020
Non-
underlying*
(notes
3, 4 & 5)
£m
–
–
–
(70.4)
(5.7)
(76.1)
–
(2.5)
(0.6)
(79.2)
17.7
(61.5)
Underlying
£m
515.1
(223.5)
291.6
(134.9)
(28.4)
128.3
3.0
(11.5)
0.3
120.1
(24.7)
95.4
Total
£m
608.0
(262.1)
345.9
(225.1)
(36.8)
84.0
3.8
(12.7)
(1.1)
74.0
(18.5)
55.5
51.33p
51.03p
40.50p
Total
£m
515.1
(223.5)
291.6
(205.3)
(34.1)
52.2
3.0
(14.0)
(0.3)
40.9
(7.0)
33.9
32.87p
32.76p
34.29p
* The Group presents a number of non-GAAP Alternative Performance Measures (APMs). This allows investors to understand better the underlying performance of the
Group, by excluding non-underlying items as set out in note 5.
161
Stock Code: DPHFinancial Statements
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2021
Profit for the year
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to profit or loss:
Foreign currency cash flow hedges
– fair value movements
Foreign currency translation differences for foreign operations
Income tax relating to components of other comprehensive (expense)/income
Total comprehensive income for the period
Note
2021
£m
55.5
2020
£m
33.9
9
(1.7)
(28.0)
(0.2)
(29.9)
25.6
0.1
(7.1)
1.8
(5.2)
28.7
162
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements Consolidated Statement of Financial Position
At 30 June 2021
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Deferred tax assets
Total non-current assets
Current assets
Inventories
Current tax receivables
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES
Current liabilities
Borrowings and lease liabilities
Trade and other payables
Contingent consideration
Current tax liabilities
Total current liabilities
Non-current liabilities
Borrowings and lease liabilities
Contingent consideration
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued share capital
Share premium account
Hedging reserve
Foreign currency translation reserve
Merger reserve
Retained earnings
Total equity
Note
12
13
6
15
16
20
17
18
21
19
30
20
21
30
22
15
25
2021
£m
715.8
87.0
17.1
2.0
821.9
149.5
17.6
106.7
118.4
392.2
1,214.1
(3.1)
(113.5)
(22.6)
(16.6)
(155.8)
(315.5)
(57.6)
(3.5)
(48.8)
(425.4)
(581.2)
632.9
1.1
411.6
–
(11.9)
84.4
147.7
632.9
The financial statements were approved by the Board of Directors on 6 September 2021 and are signed on its behalf by:
Ian Page
Chief Executive Officer
6 September 2021
Paul Sandland
Chief Financial Officer
6 September 2021
Company number: 3369634
2020
£m
692.2
76.4
17.4
2.7
788.7
120.8
6.8
93.9
227.4
448.9
1,237.6
(4.6)
(98.2)
(8.9)
(25.6)
(137.3)
(350.4)
(47.3)
(2.5)
(62.6)
(462.8)
(600.1)
637.5
1.1
409.3
–
16.3
84.4
126.4
637.5
163
Stock Code: DPHFinancial Statements Consolidated Statement of Changes in
Shareholders’ Equity
For the year ended 30 June 2021
Year ended 30 June 2020
At 1 July 2019
Profit for the period
Foreign currency cash flow hedge
– fair value movements
Foreign currency translation differences for foreign
operations
Income tax relating to components of other
comprehensive income/(expense)
Total comprehensive income/(expense)
Reclassified to cost of acquired intangibles
Transactions with owners:
Dividends paid
Share-based payments
Shares issued
Total contributions by and distributions to owners
At 30 June 2020
Year ended 30 June 2021
At 1 July 2020
Profit for the period
Foreign currency cash flow hedge
– fair value movements
Foreign currency translation differences for foreign
operations
Income tax relating to components of other
comprehensive expense
Total comprehensive (expense)/income
Reclassified to cost of acquired intangibles
Transactions with owners:
Dividends paid
Share-based payments
Shares issued
Total contributions by and distributions to owners
At 30 June 2021
Issued
share
capital
£m
Share
premium
account
£m
Hedging
reserve
£m
Foreign
currency
translation
reserve
£m
Merger
reserve
£m
Retained
earnings
£m
Total
equity
£m
1.0
–
277.9
–
–
–
21.6
–
84.4
–
124.2
33.9
509.1
33.9
–
–
–
–
–
–
–
0.1
0.1
1.1
1.1
–
–
–
–
–
–
–
–
–
–
1.1
–
–
–
–
–
–
–
131.4
131.4
409.3
409.3
–
–
–
–
–
–
–
–
2.3
2.3
411.6
0.1
–
–
(7.1)
–
0.1
(0.1)
–
–
–
–
–
–
–
1.8
(5.3)
–
–
–
–
–
16.3
16.3
–
(1.7)
–
–
(28.0)
–
(1.7)
1.7
–
–
–
–
–
(0.2)
(28.2)
–
–
–
–
–
(11.9)
–
–
–
–
–
–
–
–
–
84.4
84.4
–
–
–
–
–
–
–
–
–
–
84.4
–
–
–
33.9
–
(33.3)
1.6
–
(31.7)
126.4
126.4
55.5
–
–
–
55.5
–
(37.9)
3.7
–
(34.2)
147.7
0.1
(7.1)
1.8
28.7
(0.1)
(33.3)
1.6
131.5
99.8
637.5
637.5
55.5
(1.7)
(28.0)
(0.2)
25.6
1.7
(37.9)
3.7
2.3
(31.9)
632.9
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.
164
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements Consolidated Statement of Cash Flows
For the year ended 30 June 2021
Cash flows from operating activities
Operating profit
Non-underlying items
Underlying operating profit
Adjustments for:
Depreciation
Amortisation and impairment
Release of government grant
Loss on disposal of intangible assets
Equity settled share-based payment expense
Underlying operating cash flow before changes in working capital
Increase in inventories
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Cash generated from operating activities before interest, taxation and non-underlying items
Cash outflows in respect of non-underlying items
Cash generated from operating activities before interest and taxation
Interest paid
Interest on lease liabilities
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Proceeds from disposal of tangible assets
Proceeds from disposal of intangible assets
Interest received
Acquisition of subsidiaries (net of cash acquired)
Acquisition of investment in associates
Purchase of property, plant and equipment
Capitalised development expenditure
Purchase of other intangible non-current assets
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from the issue of share capital
New borrowings
Expenses of raising borrowing facilities
Repayment of borrowings
Principal elements of lease payments
Dividends paid
Net cash (outflow)/inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of period
Exchange differences on cash and cash equivalents
Cash and cash equivalents at end of period
Reconciliation of net cash flow to movement in net borrowings
Net (decrease)/increase in cash and cash equivalents
New borrowings and lease liabilities
Repayment of borrowings and lease liabilities
Expenses of raising borrowing facilities
Acquisition of subsidiary borrowings and lease liabilities
Changes in accounting policy for leases
Exchange differences on cash and cash equivalents
Retranslation of foreign borrowings
Other non-cash changes
Movement in net borrowings in the period
Net borrowings at start of period
Net borrowings at end of period
Note
5
13
2
7
26
6
10
18
18
27
2021
£m
84.0
78.2
162.2
11.0
4.5
(0.6)
0.3
2.8
180.2
(36.6)
(19.7)
20.3
144.2
(3.0)
141.2
(7.7)
(0.5)
(43.9)
89.1
0.2
0.2
–
(0.9)
(0.8)
(18.9)
(1.3)
(114.6)
(136.1)
2.3
–
–
(15.9)
(3.6)
(37.9)
(55.1)
(102.1)
227.4
(6.9)
118.4
(102.1)
(5.8)
20.0
–
–
–
(6.9)
22.4
(0.2)
(72.6)
(127.6)
(200.2)
2020
£m
52.2
76.1
128.3
9.9
4.3
(0.5)
–
1.5
143.5
(15.7)
6.9
0.1
134.8
(7.3)
127.5
(7.8)
(0.4)
(12.9)
106.4
0.2
–
0.3
(25.2)
(7.6)
(7.8)
(1.3)
(40.1)
(81.5)
131.5
297.3
(1.7)
(271.7)
(3.2)
(33.3)
118.9
143.8
80.3
3.3
227.4
143.8
(302.8)
275.3
1.7
(0.1)
(12.7)
3.3
(6.3)
(2.0)
100.2
(227.8)
(127.6)
Cash conversion is defined as cash generated from operating activities before interest and taxation as a percentage of underlying operating profit.
165
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
1. Accounting Policies
Dechra Pharmaceuticals PLC is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in
the United Kingdom. The address of its registered office is 24 Cheshire Avenue, Cheshire Business Park, Lostock Gralam, Northwich, CW9
7UA England. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below, these
have been applied consistently in all years presented with the exception of the adoption of new accounting standards as outlined below.
(a) Statement of Compliance
In accordance with the Companies Act 2006 and European Union (EU) regulations, these consolidated financial statements have been
prepared and approved by the Directors in accordance with international accounting standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the EU. The Company has elected to prepare its Parent Company financial statements in accordance with FRS 101 and they
are separately presented on pages 210 to 220.
(b) Basis of Preparation
The Group’s business activities together with the factors likely to affect its future development, performance and position are set out
in the Strategic Report on pages 12 to 83. The Directors have a reasonable expectation that the Company and Group have adequate
resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis
of accounting in preparing the annual financial statements. Refer to the Financial Review on page 35 for details. The consolidated
financial statements are presented in Sterling, rounded to the nearest 0.1 million. They are prepared on a going concern basis and under
the historical cost convention, except where IFRSs require an alternative treatment. The principal variations relate to derivative financial
instruments, cash settled share-based transactions, contingent consideration and assets and liabilities acquired through business
combinations that are stated at fair value. The preparation of consolidated financial statements in conformity with IFRSs requires the use
of accounting estimates and for management to exercise its judgement in the process of applying the Group’s accounting policies. These
judgements and estimates are based on historical experience and management’s best knowledge of the amounts, events or actions
under review and the actual results may ultimately differ from these estimates. Areas involving a high degree of judgement or complexity,
or areas where assumptions and estimates are significant to the consolidated financial statements, are, where necessary, disclosed
separately.
Critical Judgements in Applying the Group’s Accounting Policies and Key Sources of Estimation Uncertainty
In the process of applying the Group’s accounting policies, the Directors have made the following judgements and estimates where the
actual outcome may differ from that calculated. The key judgements and key sources of estimation uncertainty at the balance sheet date,
that have a significant risk of causing material adjustment to the carrying values of the assets and liabilities within the next financial year,
are summarised below.
Area
Key judgements
Impairment of goodwill and
indefinite life intangible assets
Determination of cash-
generating units for assessing
impairment
Key sources of
estimation uncertainty
Note
reference
Accounting
policy
reference
14
30
Timing, likelihood and quantum
of future royalty cash flows
and the determination of an
appropriate discount rate
1(i)
1(p)
1(r)
Assessment for uncertain
tax positions satisfying the
criteria for the recognition and
measurement of provisions
under IFRC 23
Assessment of expected
amounts to settle the obligation
9
Valuation of licensing
agreements and associated
contingent consideration
Uncertain tax position
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Non-underlying Items
The Group presents a number of non-GAAP measures. This is to allow investors to understand the underlying performance of the Group,
excluding items associated with areas such as: amortisation of acquired intangibles; downward remeasurement where there is not an
intangible asset and accounting for the passage of time in respect of contingent considerations; expenses relating to acquisition and
subsequent integration activities; rationalisation of the manufacturing organisation; loss on extinguishment of debt; and the revaluation of
deferred tax balances following substantial tax legislation changes. Management utilise this measure to isolate the impact of exceptional,
one-off or non-trading related items and consequently the classification of these items requires judgement. Further details can be found
in note 5.
New Standards and Amendments to Standards or Interpretations
A number of amendments to IFRSs became effective for the financial year beginning on 1 July 2020. None of these standards had any
impact on the Group’s accounting policies and did not require retrospective adjustments.
(c) Basis of Consolidation
Subsidiary Undertakings
Subsidiary undertakings are fully consolidated from the date on which control is transferred to the Group. They cease to be consolidated
from the date that the Group no longer has control. All subsidiary undertakings have been consolidated. Inter-company transactions,
balances and unrealised gains and losses on transactions between Group companies are eliminated on consolidation. The financial
statements of all subsidiary undertakings are prepared to the same reporting date as the Company, with the exception of Genera Pharma
d.o.o., Dechra Brasil Produtos Veterinarios LTDA and Dechra Produtos Veterinarios, S.A. de C.V. (all of which prepare local financial
statements to 31 December each year, in line with local tax authority regulations).
Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between
20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity
method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share
of the change in net assets of the investee after the date of acquisition. Intangible assets identified as part of the notional purchase price
allocation are amortised over the useful life of each asset, with the Group’s share recognised as a charge in the income statement.
The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements
in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of
the investment. Distributions received from an associate reduce the carrying amount of the investment.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired.
If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and
its carrying value and recognises the amount adjacent to share of profit/(loss) of associates in the income statement.
Gains and losses resulting from upstream and downstream transactions between the Group and its associate are only recognised to the
extent realised. Any unrealised gains or losses are eliminated, to the extent of the Group’s interest in the associate. Accounting policies of
associates have been aligned where necessary to ensure consistency with the policies adopted by the Group.
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continued
1. Accounting Policies continued
(d) Foreign Currency Translation
(i)
Functional and Presentational Currency
The consolidated financial statements are presented in Sterling, which is the Group’s presentational currency, and are rounded to
the nearest hundred thousand, except where it is deemed relevant to disclose the amounts to the nearest million. Items included
in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment
in which the entity operates (the functional currency).
(ii) Foreign Currency Translation
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, with the exception of
differences on transactions that are subject to effective cash flow hedges, which are recognised in other comprehensive income.
(iii) Foreign Operations
The income and expenses are translated to Sterling at the average rate for the period being reported. The assets and liabilities of
foreign operations are translated to Sterling at the closing rate at the reporting date. Foreign currency differences on all translations
are recognised in other comprehensive income in the foreign currency translation reserve, a separate component of equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate. On disposal of a foreign entity, accumulated exchange differences previously recognised in other
comprehensive income are recognised in the income statement in the same period in which the gain or loss on disposal is recognised.
(e) Accounting for Financial Assets and Liabilities, Derivative Financial Instruments and Hedging Activities
Financial Assets
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial
assets carried at FVPL are expensed in profit or loss.
Management determines the classification of its financial assets at initial recognition in accordance with IFRS 9, which defines three
categories that debt instruments may be classified as, depending on the purpose for which the assets are held. These categories are:
•
•
•
Amortised cost;
Fair value through other comprehensive income (FVOCI); and
Fair value through the profit and loss (FVPL).
Amortised cost relates to assets that are held for collection of contractual cash flows. Where those cash flows represent solely payments
of principal and interest, they are measured at amortised cost. Interest income from these financial assets is included in finance income
using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in the income statement. All
material financial assets of the Group are held at amortised cost.
Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred and the Group
has transferred substantially all risks and rewards of ownership. Gains and losses (both realised and unrealised) arising from changes in the
value of financial assets held at fair value through the income statement are included in the income statement in the period in which they arise.
Derivative Financial Instruments
The Group uses derivative financial instruments to manage its exposure to foreign exchange rate risks and interest rate risks. In
accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for speculative purposes. However,
derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivatives are initially recognised at fair
value on the date a derivative contract is entered into and are remeasured to fair value at each reporting date.
Cash Flow Hedges
Changes in the fair value of derivative financial instruments designated as cash flow hedges are recognised in other comprehensive
income to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised
immediately in the income statement. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold,
terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in
other comprehensive income remains there until the forecast transaction occurs.
Net Investment Hedge
For hedges of net investments in foreign operations, where the hedge is effective movements are recognised in other comprehensive
income. Ineffectiveness is recognised in the income statement. Gains and losses accumulated in equity are included in the income
statement when the foreign operation is partially disposed of or sold.
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(e) Accounting for Financial Assets and Liabilities, Derivative Financial Instruments and Hedging Activities continued
Trade Receivables
Trade receivables are recorded at aggregate invoice value (including value added tax or other sales taxes) less loss allowances, which are
calculated using the expected loss model. Where trade receivables contain a significant financing component, they are then carried at
amortised cost using the effective interest rate method, less loss allowances. Other receivables are recorded at their transaction value.
The Group assesses, on a forward-looking basis, the expected credit losses associated with its trade and other receivables. The Group
applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of
the receivables. Where there is a specific risk surrounding a receivable then a credit loss allowance of 100% is applied.
Trade and Other Payables
Trade and other payables are initially recognised at fair value and subsequently at amortised cost.
Borrowings and Borrowing Costs
Borrowings are recognised initially at fair value net of directly attributable transaction costs incurred. Borrowings are subsequently stated
at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income
statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the
Group has a right to defer settlement of the liability for at least 12 months after the reporting date.
Borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets, which are assets that take a
substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets
are substantially ready for their intended use. All other borrowing costs are recognised in the income statement in the period in which
they are incurred.
(f) Property, Plant and Equipment
Owned Assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Depreciation
Depreciation is charged to the income statement on a straight-line basis over the estimated useful life of each part of an item of property,
plant and equipment. Land is not depreciated. Assets in the course of construction are not depreciated until the date the assets become
available for use. The estimated useful lives are as follows:
freehold buildings
•
• short leasehold buildings
• motor vehicles
• plant and fixtures
25 years
period of lease
4 years
3 to 15 years
The residual value, where significant, is reassessed annually.
(g)
Intangible Assets
Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of
subsidiaries and associates. In respect of business acquisitions that have occurred before 1 July 2004, goodwill represents the difference
between the cost of the acquisition and the fair value of the separable assets, liabilities and contingent liabilities acquired.
Acquisitions after this date fall under the provisions of ‘IFRS 3 Business Combinations’. For these acquisitions, transaction costs, other
than share and debt issue costs, are expensed as incurred and subsequent adjustments to the fair value of consideration payable are
recognised in the income statement.
Contingent consideration is measured at fair value based on an estimate of the expected future payments.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised but is allocated to cash generating units
and is tested annually for impairment.
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continued
1. Accounting Policies continued
(g)
Intangible Assets continued
Research and Development Costs
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding,
is recognised in the income statement as an expense is incurred.
The Group is also engaged in development activity with a view to bringing new pharmaceutical products to market. Due to the strict
regulatory process involved, there is inherent uncertainty as to the technical feasibility of development projects often until regulatory
approval is achieved, with the possibility of failure even at a late stage. The Group considers that this uncertainty means that the criteria
for capitalisation are not met unless it is highly probable that regulatory approval will be achieved and the project is commercially viable.
Internally generated costs of development are capitalised, once the criteria are met, in the consolidated statement of financial position
unless those costs cannot be measured reliably or it is not probable that future economic benefits will flow to the Group, in which case
the relevant costs are expensed to the income statement as incurred.
Where development costs are capitalised, the expenditure includes the cost of materials, direct labour and an appropriate proportion of
overheads. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses.
Acquired Intangible Assets
Intangible assets recognised as a result of a business combination are stated at fair value at the date of acquisition less accumulated
amortisation and impairment losses. The Group has applied the optional concentration test in relation to the acquisition of Osurnia (refer to
note 29).
Other Intangible Assets
Other intangible assets that are acquired by the Group are stated at cost (including future milestone and royalty payments as applicable)
less accumulated amortisation and impairment losses. Expenditure on internally generated goodwill and other intangibles is recognised
in the income statement as an expense is incurred.
Intangible Assets Subsequent Expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied
in the specific asset to which it relates or extends the asset life. All other expenditure is expensed as incurred.
Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such
lives are indefinite or is otherwise stated below. Goodwill and intangible assets with an indefinite useful life are systematically tested for
impairment at each consolidated statement of financial position date. Intangible assets are amortised from the date that they are available
for use. Assets in the course of construction are not amortised until the date the assets become available for use.
The estimated useful lives are as follows:
• software
• capitalised development costs
• patent rights
• marketing authorisations
• product rights
• commercial relationships
• brand
• acquired capitalised development costs
• pharmacological process
5 to 7 years
5 to 10 years or period of patent
period of patent
indefinite life or period of marketing authorisation
10 to 18 years
7 years
3 to 10 years
5 to 15 years
10 years
The pharmacological process from the acquisition of Putney Inc. and capitalised developed technology from the acquisition of AST
Farma B.V. and Le Vet Beheer B.V. are amortised on a reducing balance method at a rate of 20% over a 10 year life based on the
expected profile of future cash flows. All amortisation on a reducing balance methodology is recognised within selling and general
administrative expenses with the exception of that in respect of the pharmacological process which is recognised within research
and development expenses.
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(g)
Intangible Assets continued
Amortisation continued
The amortisation of the intangible assets are classified as an administrative expense because they relate to the right to sell and distribute
the product. Within the acquired intangibles the product rights encompass market authorisations, and the capitalised development
costs encompass product authorisations subject to regulatory approval. The pharmacological process is classified as a research and
development expense as it relates to the process of taking a product through to registration.
When considering the basis of amortisation for our acquired intangibles, we consider a number of factors: the different market conditions which
surround the intangible; the age of the products within developed technology; and their corresponding place within the lifecycle of the product.
(h)
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and selling expenses.
The cost of inventories is determined on the first-in, first-out principle and includes expenditure incurred in acquiring the inventories and
bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an
appropriate share of overheads based on normal operating capacity.
(i) Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part
of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
(j)
Impairment
The carrying amounts of the Group’s assets are reviewed at each consolidated statement of financial position date to determine whether
there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
The recoverable amount of assets is the greater of their fair value less cost to sell, and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using an appropriate rate that reflects current market assessments of
the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash generating unit to which the asset belongs.
For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is
estimated at each consolidated statement of financial position date and when there is an indication that the asset is impaired.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount.
Impairment losses are recognised in the income statement.
Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the
cash generating units (group of units), and then to reduce the carrying amount of the other assets in the units (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(k) Dividends Paid
Dividends are recognised in the period in which they are approved by the Company’s shareholders or, in the case of an interim dividend,
when the dividend is paid.
(l) Employee Benefits
Pensions
The Group operates a stakeholder personal pension scheme for certain employees. Obligations for contributions are recognised as
an expense in the income statement as incurred.
Dechra Veterinary Products SAS and Dechra Veterinary Products BV participate in state-run pension arrangements. These are not
considered to be material to the Group financial statements and are accounted for as defined contribution schemes, with contributions
being recognised as an expense in the income statement as incurred.
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continued
1. Accounting Policies continued
(l) Employee Benefits continued
Share-based Payment Transactions
The Group operates a number of equity settled share-based payment programmes that allow employees to acquire shares in the
Company. The Group also operates a Long Term Incentive Plan for Directors and Senior Executives.
The fair value of shares or options granted is recognised as an employee expense over the vesting period on a straight-line basis in the
income statement with a corresponding movement to equity reserves. Fair values are determined by use of an appropriate pricing model and
by reference to the fair value of the options granted. The amount to be expensed over the vesting period is adjusted to reflect the number of
awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as
an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
At each consolidated statement of financial position date, the Group revises its estimates of the number of share incentives that are
expected to vest. The impact of the revisions of original estimates, if any, is recognised in the income statement, with a corresponding
adjustment to equity reserves, over the remaining vesting period.
The fair values of grants under the Long Term Incentive Plan have been determined using the Monte Carlo simulation model, as
performed by a qualified third party valuation expert.
The fair values of options granted under all other share option schemes have been determined using the Black–Scholes option pricing
model, as performed by a qualified third party valuation expert.
When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and share premium.
National Insurance contributions payable by the Company on the intrinsic value of share-based payments at the date of exercise are
treated as cash settled awards and revalued to market price at each consolidated statement of financial position date.
Bonus and Commission Payments
The Group operates sales incentives schemes for certain employees and third party sales representatives in particular territories. The
related bonuses and commissions are accrued in line with the related sales revenues.
(m) Revenue Recognition
Revenue from the sale of goods is measured at the fair value of the consideration and excludes intra-group sales and value added and
similar taxes. The primary performance obligation is the transfer of goods to the customer. Revenue from the sale of goods is recognised
when control of the goods is transferred to the customer, at an amount that reflects the consideration to which an entity expects to be
entitled in exchange for those goods. Revenue from third party manufacturing consists principally of the production of goods to customer
specification together with the provision of technical services. Revenues from third party manufacturing are recognised upon completion
of the work order, either the completion and agreed delivery of the product, or upon full provision of the service.
As sales arrangements differ from time to time (for example by customer and by territory), each arrangement is reviewed to ensure that
revenue is recognised when control of the goods have passed to the customer.
This review and the corresponding recognition of revenue encompasses a number of factors which include, but are not limited to the
following:
•
•
reviewing delivery arrangements and whether the buyer has accepted title – we recognise the revenue at the point at which full title
has passed; and/or
where distribution arrangements are in place, recognising when the goods pass to the third party customer (for example by
reviewing insurance arrangements) and recognising revenue at the point at which title has passed.
Provision for rebates, returns, discounts and other variable consideration is reflected in the transaction price at the point of recognition to
the extent that it is highly probable there will not be a significant reversal. The methodology and assumptions used to estimate rebates
and returns are based on the most likely method of calculation. This is adjusted in light of contractual and legal obligations, historical
trends, past experience and projected market conditions. Market conditions are evaluated using wholesaler and other third party
analysis, and internally generated information.
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(n) Leases
The Group leases various offices, warehouses, equipment and vehicles. Rental contracts are typically made for fixed periods of three
to five years, but may have extension options as described below.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and
non-lease components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do
not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be
used as security for borrowing purposes.
Extension and Termination Options
Extension and termination options are included in a number of property and equipment leases across the Group. These are used to
maximise operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination
options held are exercisable by both the Group and the respective lessor.
Measurement
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of
the following lease payments:
•
•
•
•
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the
commencement date;
amounts expected to be payable by the Group under residual value guarantees;
the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental
borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of
similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. The lease liability is not
materially sensitive to a reasonable change in discount rate and therefore will not represent a critical accounting estimate presented within
the Annual Report.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period
so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
•
•
•
•
the amount of the initial measurement of lease liability;
any lease payments made at or before the commencement date less any lease incentives received;
any initial direct costs; and
restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Payments associated with short term leases of equipment and vehicles and all leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short term leases are leases with a lease terms of 12 months or less. Low-value
assets comprise IT equipment and small items of office furniture.
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continued
1. Accounting Policies continued
(o) Net Financing Costs
Net financing costs comprise interest payable on borrowings, unwinding of discount on provisions and deferred considerations
measured at amortised cost, interest receivable on funds invested, gains and losses on hedging instruments that are recognised in the
income statement (see accounting policy (e)) and gains or losses on the retranslation of financial assets and liabilities denominated in
foreign currencies. Interest income is recognised in the income statement as it accrues. The Group capitalises borrowing costs directly
attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.
(p) Contingent Considerations
The Group has adopted the financial liability model when accounting for contingent consideration in respect of licensing agreements.
The estimated future amounts payable for contingent consideration are recorded on initial recognition at the present value of the future
cash flow payable, discounted with an appropriate discount rate, with a corresponding intangible asset recorded. The unwind of the
liability, reflecting discounting for the passage of time, is recognised within the income statement as a finance expense and calculated
using a risk-free discount rate. Contingent considerations are remeasured at each reporting date and any downward remeasurement of
the related liability is adjusted against the intangible, with any excess over the carrying value of the intangible recognised in the income
statement. Any upwards remeasurement is recognised as an increase to the intangible asset.
(q) Provisions
Provisions for legal claims, dilapidations, environmental remediation, deferred rent and advanced grants for property, plant and
equipment are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an
outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Provisions are not recognised for
future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required on settlement is
determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect
to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due
to passage of time is recognised as an interest expense.
(r) Basis of Charge for Taxation
Income tax expense comprises current and deferred tax. Current and deferred taxes are recognised in the income statement except to the
extent that it relates to a business combination or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantively enacted at the
consolidated statement of financial position date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the consolidated statement of financial position liability method and represents the tax payable or
recoverable on most temporary differences which arise between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes (the tax base). Temporary differences are not provided on: goodwill that is not
deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit and do not arise
from a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, and is based upon tax rates enacted or substantively enacted at the consolidated statement of financial
position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised. Deferred tax assets are reduced to the extent that it is not probable that the related tax benefit will be realised against future
taxable profits. The carrying amounts of deferred tax assets are reviewed at each consolidated statement of financial position date.
In respect of uncertain tax positions, where an outflow of funds is believed to be probable and a reliable estimate of the outcome of the
dispute can be made, management provides for its best estimate of the liability. Such provisions are measured using either the most likely
outcome method, or the expected value method depending on management’s judgement of which method better predicts the resolution
of the uncertainty. The methodology will be reviewed in each case upon the receipt of any new information.
The estimated annual benefit of global intellectual property and innovation incentives is accounted for within current and deferred tax.
Current and deferred tax credits received in respect of share-based payments are recognised in the income statement to the extent that
they do not exceed the standard rate of taxation on the income statement charge for share-based payments. Credits in excess of the
standard rate of taxation are recognised directly in equity.
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(s) Earnings per Share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit
attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the period.
Diluted EPS is determined by adjusting the profit attributable to ordinary shareholders and the weighted average number of ordinary
shares in issue for the effects of all potential dilutive ordinary shares, which comprise share options granted to employees.
The Group has also chosen to present an alternative EPS measure, with profit adjusted for non-underlying items. A reconciliation of this
alternative measure to the statutory measure required by IFRS is given in the Financial Review on page 29. A breakdown of the non-
underlying items is given in notes 3, 4 and 5.
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. In undertaking this aggregation, the assessment determined that the aggregated segments have
similar products, production processes, customers and overall regulatory environments.
The European Pharmaceuticals Segment comprises Dechra Veterinary Products EU, Dechra Veterinary Products International and Dechra
Pharmaceuticals Manufacturing. This Segment operates internationally and manufactures and markets Companion Animal, Equine, Food
producing Animal Products and Nutrition. This Segment also includes third party manufacturing and other revenues from non-core activities.
The North American Pharmaceuticals Segment consists of Dechra Veterinary Products US, Dechra Veterinary Products Canada, and Dechra
Produtas Veterinarios (Mexico), which sells Companion Animal, Equine and Food producing Animal Products in those territories. The Segment
also includes our manufacturing units based in Melbourne, Florida and Fort Worth, Texas. This Segment also includes third party manufacturing
and other revenues from non-core activities.
The Pharmaceuticals Research and Development Segment includes all of the Group’s pharmaceutical research and development activities.
This Segment has no revenue. Reconciliation of reportable segment revenues, profit or loss and liabilities and other material items:
Revenue by segment
European Pharmaceuticals
NA Pharmaceuticals
Underlying operating profit/(loss) by segment
European Pharmaceuticals
NA Pharmaceuticals
Pharmaceuticals Research and Development
Underlying segment operating profit
Corporate and other unallocated costs
Underlying operating profit
Amortisation of acquired intangibles
Rationalisation of manufacturing organisation
Expenses relating to acquisitions and subsequent integration activities
Total operating profit
Finance income
Finance expense
Share of losses in investment accounted for using the equity method
Profit before taxation
Total liabilities by segment
European Pharmaceuticals
NA Pharmaceuticals
Pharmaceuticals Research and Development
Segment liabilities
Corporate loans and revolving credit facility
Corporate accruals and other payables
Current and deferred tax liabilities
2021
£m
388.5
219.5
608.0
127.8
75.9
(32.4)
171.3
(9.1)
162.2
(75.2)
(1.6)
(1.4)
84.0
3.8
(12.7)
(1.1)
74.0
(137.5)
(60.5)
(5.9)
(203.9)
(302.7)
(9.2)
(65.4)
(581.2)
2020
£m
323.5
191.6
515.1
100.0
63.7
(28.4)
135.3
(7.0)
128.3
(69.6)
(2.2)
(4.3)
52.2
3.0
(14.0)
(0.3)
40.9
(110.3)
(53.1)
(5.1)
(168.5)
(340.0)
(3.4)
(88.2)
(600.1)
175
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
2. Operating Segments continued
Revenue by product category
CAP
Equine
FAP
Nutrition
Other
Additions to intangible non-current assets by segment (including through business combinations)
European Pharmaceuticals
NA Pharmaceuticals
Pharmaceuticals Research and Development
Corporate and central costs
Additions to Property, Plant and Equipment by segment (including through business combinations)
European Pharmaceuticals
NA Pharmaceuticals
Pharmaceuticals Research and Development
Corporate and central costs
Depreciation and amortisation by segment
European Pharmaceuticals
NA Pharmaceuticals
Pharmaceuticals Research and Development
Corporate and central costs
The total depreciation and amortisation charge is made up of the following:
Non-underlying
Amortisation – selling, general and administrative expenses
Amortisation – research and development expenditure
Underlying
Amortisation and impairment
Depreciation
2021
£m
442.6
44.8
77.0
31.7
11.9
608.0
97.1
40.2
0.1
1.4
138.8
19.8
5.9
0.4
0.3
26.4
67.1
22.4
0.5
0.7
90.7
70.8
4.4
75.2
4.5
11.0
15.5
2020
£m
361.6
36.4
74.8
28.6
13.7
515.1
22.3
47.5
0.4
1.5
71.7
12.1
4.3
0.7
0.2
17.3
64.1
18.5
0.5
0.7
83.8
63.9
5.7
69.6
4.3
9.9
14.2
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:
2021
Non-
current
assets
£m
30.8
3.1
406.3
215.2
166.5
821.9
2020
Revenue
£m
45.0
53.9
173.8
181.9
60.5
515.1
2020
Non-
current
assets
£m
30.4
2.8
419.8
213.2
122.5
788.7
2021
Revenue
£m
56.9
64.8
204.8
206.5
75.0
608.0
UK
Germany
Rest of Europe
USA
Rest of World
176
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 3. Finance Income
Underlying
Finance income arising from:
– Cash and cash equivalents
– Foreign exchange gains
Underlying finance income
Non-underlying
Finance income arising from:
– Foreign exchange gains on contingent consideration
Non-underlying finance income
Total finance income
4. Finance Expense
Underlying
Finance expense arising from:
– Financial liabilities at amortised cost
– Lease liability interest
– Foreign exchange losses
Underlying finance expense
Non-underlying
Finance expense arising from:
– Loss on extinguishment of debt
– Foreign exchange losses on contingent consideration
– Unwind of discount associated with contingent consideration
Non-underlying finance expense
Total finance expense
2021
£m
–
–
–
2021
£m
3.8
3.8
3.8
2021
£m
8.3
0.5
2.9
11.7
2021
£m
–
–
1.0
1.0
12.7
2020
£m
0.1
2.9
3.0
2020
£m
–
–
3.0
2020
£m
11.1
0.4
–
11.5
2020
£m
1.0
0.9
0.6
2.5
14.0
177
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
5. Non-underlying Items
Non-underlying items charged/(credited) comprise:
Amortisation of acquired intangibles
– classified within selling, general and administrative expenses
– classified within research and development expenses
Expenses relating to acquisitions and subsequent integration activities
Rationalisation of manufacturing organisation
Non-underlying operating loss items
Amortisation in relation to Medical Ethics Pty Ltd (net of tax)
Loss on extinguishment of debt
Foreign exchange (gains)/losses on contingent consideration
Unwind of discount associated with contingent consideration
Non-underlying loss before tax items
Tax on non-underlying loss before tax items
Revaluation of deferred tax balances following the change in the Dutch and UK tax rates
Release of fair value provision on acquisition
Non-underlying loss after tax items
2021
£m
70.8
4.4
1.4
1.6
78.2
0.7
–
(3.8)
1.0
76.1
(16.6)
4.8
(2.2)
62.1
2020
£m
63.9
5.7
4.3
2.2
76.1
0.6
1.0
0.9
0.6
79.2
(18.0)
0.3
–
61.5
Amortisation of acquired intangibles reflects the amortisation of the fair values of future cash flows recognised on acquisition in relation to the
identifiable intangible assets acquired.
Expenses relating to acquisitions and subsequent integration activities represents costs incurred during the acquisition and integration of
Osurnia (£1.3 million) and other product licensing agreements (£0.1 million).
Rationalisation of manufacturing organisation relates to the income statement cost associated with this strategic programme. Costs since the
inception of the programme have been £8.7 million and the programme has now been completed in the current financial year.
The loss on extinguishment of debt in the prior year related to the acceleration of the amortisation of arrangement fees relating to the
Term Loan on termination.
The revaluation of the deferred tax balances arises as a result of an increase in the Dutch and UK corporation tax rates from that previously
enacted in the prior year. The £4.8 million charge in the current year predominantly arises from the change in the Dutch corporation tax rate
which has been substantively enacted to remain at 25.0% (previously this was to reduce to 21.7% over the period to 2022).
During the year fair value corporation tax provisions on the acquisitions of Ampharmco LLC, Genera d.d. and AST Farma B.V./ Le Vet B.V. have
been released.
6.
Interests in Associate
(a) Losses in Associate
Set out below is the summarised financial information of Medical Ethics Pty Ltd for the year ended 30 June, which is accounted for using the
equity method. This is not Dechra Pharmaceuticals PLC’s share of the results.
Revenue
Pre-tax profit/(loss) from continuing operations
Post-tax profit/(loss) from continuing operations
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets of associate
178
2021
£m
3.5
0.6
0.6
2021
£m
2.5
3.1
5.6
–
(0.3)
(0.3)
5.3
2020
£m
0.7
(3.1)
(1.3)
2020
£m
2.6
2.5
5.1
–
(0.3)
(0.3)
4.8
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 6.
Interests in Associate continued
(b) Interest in Associate
1 July
Additions
Share of underlying (loss)/profit after tax
Share of amortisation of intangible asset identified on acquisition (net of tax)
30 June
2021
£m
17.4
0.8
(0.4)
(0.7)
17.1
2020
£m
10.1
7.6
0.3
(0.6)
17.4
On 5 February 2021 the Group acquired a further 1.5% of the issued share capital of Medical Ethics Pty Ltd for a total consideration of
AUD1.5 million (£0.8 million). Following the acquisition the Group holds 49.5% of the issued share capital of Medical Ethics Pty Ltd, which is
the holding company of Animal Ethics Pty Ltd. The increased shareholding to 49.5% of the issued share capital has not resulted in a change
of control or accounting treatment of the entity. The company is incorporated in Australia, which is also the principal place of business. The
registered address is c/o Level 3, 649 Bridge Road, Richmond, Victoria 3121, Australia. The company has share capital consisting solely of
ordinary shares, which are directly owned by the Group. Medical Ethics Pty Ltd is a private company and there is no quoted market price
available for its shares. There are no contingent liabilities relating to the Group’s interest in the associate.
The Group’s share of the loss arising from its investment in Medical Ethics includes the effect of harmonising the accounting policies and of
amortising the fair value adjustments (net of tax), which are treated as non-underlying.
(c) Reconciliation of Summarised Financial Information Presented to the Carrying Amount of its Interest
in Associates
Opening interest in associate
Fair value of associate acquired
Post-tax (loss)/profit from continuing operations
Amortisation of notional intangible asset recognised on acquisition (net of tax)
Interest in associate
Goodwill
Carrying value of investment in associate
7. Profit Before Taxation
The following items have been included in arriving at profit before taxation of continuing operations:
Cost of inventories recognised as an expense
Impairment of inventories included in above figure
Depreciation of property, plant and equipment
– owned assets
– right-of-use assets
Amortisation of intangible assets
Impairment of intangible assets
Loss on disposal of intangible assets
Recognition/(release) of impairment of receivables
Lease rental payables in respect of low value assets
Underlying research and development expenditure as incurred
Auditors’ remuneration
Analysis of total fees paid to the Auditors:
Audit of these financial statements
Audit of financial statements of subsidiaries pursuant to legislation
Other assurance services – audit related assurance services*
Total fees paid to Auditors
* This includes £0.10 million (2020: £0.06 million) in relation to the review of the Half-Yearly Report.
2021
£m
5.8
0.5
(0.4)
(0.7)
5.2
11.9
17.1
2021
£m
203.1
8.8
7.0
4.0
79.5
0.2
0.3
0.1
–
32.4
1.5
0.8
0.6
0.1
1.5
2020
£m
1.5
4.6
0.3
(0.6)
5.8
11.6
17.4
2020
£m
171.1
1.4
6.6
3.3
73.9
–
–
(0.4)
–
28.4
1.2
0.6
0.5
0.1
1.2
179
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
7. Profit Before Taxation continued
During the prior year, a fire occurred at one of the Group’s third party logistics provider locations in the Netherlands that resulted in inventory
to the value of £6.4 million being destroyed and written off. The inventory write off was included in the impairment of inventories value above
of £1.4 million and offset by amounts recovered through insurance proceeds of £5.3 million and a receivable from the insurers of £1.1 million
with no impact on the Income Statement. In the current year the insurance claim has been fully settled.
8. Employees
The average numbers of staff employed by the Group during the year, which includes Directors, were:
Manufacturing
Distribution
Sales and administration
Total
The costs incurred in respect of these employees were:
Wages and salaries
Social security costs
Other pension costs
Share-based payments charge (see note 26)
Total
Related party transactions – the remuneration of key management was as follows:
Short term employee benefits
Post-employment benefits
Share-based payments charge
2021
Number
2020
Number
639
148
1,158
1,945
2021
£m
98.8
12.3
5.5
3.7
120.3
2021
£m
6.1
0.3
1.3
7.7
656
141
1,053
1,850
2020
£m
86.7
11.1
4.7
1.5
104.0
2020
£m
5.5
0.2
0.7
6.4
Key management comprises the Board and the Senior Executive Team. Details of the remuneration, shareholdings, share options, pension
contributions and payments for loss of office of the Executive Directors are included in the Directors’ Remuneration Report on pages 129 to 139.
The Group operates a stakeholder personal pension scheme for certain employees and contributed between 4% and 14% of pensionable
salaries. The Group also participates in state-run pension arrangements for certain employees in Dechra Veterinary Products SAS and Dechra
Veterinary Products BV. Total pension contributions amounted to £5.5 million (2020: £4.7 million).
180
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 9.
Income Taxes
Current tax
– UK corporation tax
– overseas tax at prevailing local rates
– adjustment in respect of prior years
Total current tax expense
Deferred tax – origination and reversal of temporary differences
– adjustment in respect of tax rates
– adjustment in respect of prior years
Total deferred tax credit
Total income tax charge in the Consolidated Income Statement
2021
£m
2.8
26.8
(2.6)
27.0
(14.5)
4.8
1.2
(8.5)
18.5
2020
£m
3.5
18.2
(0.8)
20.9
(14.5)
1.4
(0.8)
(13.9)
7.0
The tax on the Group’s profit before taxation differs from the standard rate of UK corporation tax of 19.0% (2020: 19.0%). The differences to
this rate are explained below:
Profit before taxation
Tax at 19.0% (2020: 19.0%)
Effect of:
– expenses not deductible
– acquisition expenses
– research and development related tax credits
– patent box tax credits
– other incentives
– share of results in associates
– effects of overseas tax rates
– movement in unrecognised deferred tax
– adjustment in respect of prior years
– change in tax rates
Total income tax charge in the Consolidated Income Statement
2021
£m
74.0
14.1
1.8
–
(0.3)
(3.1)
(0.3)
–
2.9
–
(1.4)
4.8
18.5
2020
£m
40.9
7.8
1.4
0.6
(0.4)
(2.7)
(0.2)
(0.1)
(0.3)
1.1
(1.6)
1.4
7.0
Recurring items in the tax reconciliation include: research and development related tax credits and patent box incentives; expenses not deductible;
and the share of results in associates. The effective tax rate is 25.0% (excluding non-underlying items the effective tax rate is 21.7%).
Tax Credit/(Charge) Recognised Directly in Equity
Deferred tax on employee benefit obligations
Deferred tax on other equity movements
Tax recognised in Consolidated Statement of Comprehensive Income
Corporation tax on equity settled transactions
Deferred tax on equity settled transactions
Total tax recognised in Equity
2021
£m
–
(0.2)
(0.2)
0.2
0.7
0.9
2020
£m
–
1.8
1.8
0.4
(0.3)
0.1
On 15 September 2020, the Dutch Government submitted the 2021 tax plan, which included the reversal of the previously enacted rate
reduction from 25% to 21.7%, which was due to be effective from 1 January 2021. As a result, the Dutch corporate income tax headline rate
has remained at 25%, and Dutch deferred tax assets and liabilities as at 30 June 2021 have been recalculated accordingly.
UK Finance Bill 2021 was substantively enacted on 24 May 2021, which included the increase in main rate of UK corporation tax from 19%
to 25%, effective 1 April 2023. UK deferred tax assets and liabilities as at 30 June 2021 have been recalculated accordingly, based on the
Group’s best estimate of the timing of the unwind of existing temporary differences.
At 30 June 2021, the Group held a current provision of £5.7 million (2020: £5.6 million) in respect of uncertain tax positions. The resolution of these
tax matters may take many years. The range of reasonably possible outcomes within the next financial year is £2.1 million to £7.4 million.
181
Stock Code: DPHFinancial Statements
Notes to the Consolidated Financial Statements
continued
9.
Income Taxes continued
EU CFC Challenge
The Group continues to monitor developments in relation to EU State Aid investigations. On 25 April 2019, the EU Commission’s final decision
regarding its investigation into the UK’s Controlled Foreign Company (CFC) regime was published. It concluded that the legislation up until
December 2018 does partially represent State Aid. The Group considers that the potential amount of additional tax payable remains between
£nil and £4.0 million depending on the basis of calculation and the outcome of HMRC’s appeal to the EU Commission. Based on current
advice, the Group does not consider any provision is required in relation to this investigation. This judgement is based on current interpretation
of legislation and professional advice.
During the period, the Group received charging notices from HMRC under The Taxation (Post Transition Period) Bill for part of the exposure
(£2.75 million) and has paid this to HMRC. As the Group considers that the appeal will be successful, the charging notices have been settled
in full and a current tax receivable has been recorded in respect of the payment on the basis that the amount will be repaid in due course.
Future Tax Charge
The Group’s future tax charge, and its effective tax rate could be affected by several factors including the impact of the implementation of the
OECD’s Base Erosion and Profit Shifting (‘BEPS’) actions, and changes in applicable tax rates and legislation in the territories in which it operates.
10. Dividends
Final dividend paid in respect of prior year but not recognised as a liability in that year:
24.00 pence per share (2020: 22.10 pence per share)
Interim dividend paid: 11.11 pence per share (2020: 10.29 pence per share)
Total dividend 35.11 pence per share (2020: 32.39 pence per share) recognised as distributions
to equity holders in the period
Proposed final dividend for the year ended 30 June 2021: 29.39 pence per share
(2020: 24.00 pence per share)
Total dividend paid and proposed for the year ended 30 June 2021: 40.50 pence per share
(2020: 34.29 pence per share)
2021
£m
25.9
12.0
37.9
31.8
43.8
2020
£m
22.7
10.6
33.3
25.9
36.5
In accordance with IAS 10 ‘Events After the Balance Sheet Date’, the proposed final dividend for the year ended 30 June 2021 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 2022. There are no
income tax consequences. The final dividend for the year ended 30 June 2020 is shown as a deduction from equity in the year ended 30 June 2021.
11. Earnings per Share
Earnings per ordinary share have 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.
Basic earnings per share
– Underlying*
– Basic
Diluted earnings per share
– Underlying*
– Diluted
The calculations of basic and diluted earnings per share are based upon:
Earnings for underlying basic and underlying diluted earnings per share
Earnings for basic and diluted earnings per share
Weighted average number of ordinary shares for basic earnings per share
Impact of share options
Weighted average number of ordinary shares for diluted earnings per share
* Underlying measures exclude non-underlying items as defined in note 1.
2021
Pence
108.77
51.33
108.14
51.03
2021
£m
117.6
55.5
2020
Pence
92.50
32.87
92.19
32.76
2020
£m
95.4
33.9
Number
Number
108,119,864
630,725
108,750,589
103,133,142
348,393
103,481,535
At 30 June 2021, there are 401,672 options (2020: 373,439) that are excluded from the EPS calculations as they are not dilutive for the period
presented but may become dilutive in the future.
182
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 12. Intangible Assets
Goodwill
£m
Software
£m
Development
costs
£m
Patent
rights
£m
Marketing
authorisations
£m
Acquired
intangibles
£m
Cost
At 1 July 2019
Additions
Acquisitions through business
combinations
Remeasurement (note 30)
Foreign exchange adjustments
At 30 June 2020 and 1 July 2020
Additions
Disposals
Transfers between categories
Remeasurement (note 30)
Foreign exchange adjustments
At 30 June 2021
Accumulated Amortisation
At 1 July 2019
Charge for the year
Foreign exchange adjustments
At 30 June 2020 and 1 July 2020
Charge for the year
Impairments
Disposals
Transfers between categories
Foreign exchange adjustments
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
245.7
–
6.6
–
1.5
253.8
–
–
–
–
(17.7)
236.1
–
–
–
–
–
–
–
–
–
–
236.1
253.8
19.7
1.8
0.1
–
0.1
21.7
2.8
(0.9)
–
–
(0.5)
23.1
6.1
2.9
–
9.0
3.2
–
(0.8)
–
(0.2)
11.2
11.9
12.7
14.0
1.8
–
–
0.1
15.9
1.5
(0.6)
(1.2)
–
(0.5)
15.1
8.5
1.2
0.1
9.8
0.6
0.2
(0.2)
(0.8)
(0.1)
9.5
5.6
6.1
4.3
0.3
–
–
(0.1)
4.5
–
–
–
–
(0.1)
4.4
3.3
0.2
–
3.5
0.2
–
–
–
(0.1)
3.6
0.8
1.0
0.9
–
–
–
–
0.9
–
–
1.2
–
–
2.1
–
–
–
–
0.3
–
–
0.8
(0.1)
1.0
1.1
0.9
709.8
46.2
14.9
10.9
9.6
791.4
134.5
–
–
4.9
(49.5)
881.3
295.9
69.6
8.2
373.7
75.2
–
–
–
(27.9)
421.0
460.3
417.7
Total
£m
994.4
50.1
21.6
10.9
11.2
1,088.2
138.8
(1.5)
–
4.9
(68.3)
1,162.1
313.8
73.9
8.3
396.0
79.5
0.2
(1.0)
–
(28.4)
446.3
715.8
692.2
£0.8 million of the marketing authorisations relate to the Vetivex® range of products. Ownership of the marketing authorisations rests with
the Group in perpetuity. There are not believed to be any legal, regulatory or contractual provisions that limit their useful lives. Vetivex is an
established range of products which are relatively simple in nature and there are a limited number of players in the market. Accordingly, the
Directors believe that it is appropriate that the marketing authorisations are treated as having indefinite lives for accounting purposes.
The software intangible asset includes £9.3 million relating to the ERP system in the EU Pharmaceuticals Segment; this has a remaining
amortisation period of 4 years.
Goodwill is allocated across cash generating units that are expected to benefit from that business combination. Key assumptions made in
this respect are given in note 14.
183
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
12. Intangible Assets continued
In accordance with the disclosure requirements of IAS 38 ‘Intangible Assets’, the components of acquired intangibles are summarised below:
Cost
At 1 July 2019
Additions
Acquisitions through business combinations
Remeasurement
Foreign exchange adjustments
At 30 June 2020 and 1 July 2020
Additions
Remeasurement
Foreign exchange adjustments
At 30 June 2021
Accumulated Amortisation
At 1 July 2019
Charge for the year
Foreign exchange adjustments
At 30 June 2020 and 1 July 2020
Charge for the year
Foreign exchange adjustments
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
Commercial
relationships
£m
Pharmacological
process
£m
Capitalised
development
costs
£m
Brand
£m
Product
rights
£m
6.8
–
1.9
–
–
8.7
–
–
(0.6)
8.1
3.7
2.0
0.2
5.9
1.8
(0.4)
7.3
0.8
2.8
51.4
–
–
–
1.8
53.2
–
–
(6.1)
47.1
27.9
5.7
1.1
34.7
4.4
(4.1)
35.0
12.1
18.5
16.3
–
–
–
0.3
16.6
–
–
(1.7)
14.9
6.1
1.6
0.2
7.9
1.4
(0.9)
8.4
6.5
8.7
393.6
–
13.0
–
3.4
410.0
–
–
(27.6)
382.4
104.3
48.2
3.4
155.9
42.3
(11.5)
186.7
195.7
254.1
241.7
46.2
–
10.9
4.1
302.9
134.5
4.9
(13.5)
428.8
153.9
12.1
3.3
169.3
25.3
(11.0)
183.6
245.2
133.6
The table below provides further detail on the acquired intangibles and their remaining amortisation period.
Total
£m
709.8
46.2
14.9
10.9
9.6
791.4
134.5
4.9
(49.5)
881.3
295.9
69.6
8.2
373.7
75.2
(27.9)
421.0
460.3
417.7
Significant assets
Intangible assets arising from the
acquisition of Dermapet
Intangible assets arising from the
acquisition of Eurovet
Goodwill arising from the acquisition
of Vetxx
Intangible assets arising from the
acquisition of Genera
Description of acquired intangibles
Product, marketing and distribution rights
Technology, product, marketing and
distribution rights
Product, brand, technology, marketing
and distribution rights
Intangible assets arising from the
acquisition of Putney
Product, brand, technology,
pharmacological process, marketing
and distribution rights
Goodwill
carrying
value
£m
0.4
Acquired
intangibles
carrying
value
£m
12.8
Sub-Total
carrying
value
£m
13.2
37.7
16.4
5.3
47.3
7.9
–
0.3
0.2
5.8
4.4
12.5
33.1
45.6
16.4
11.6
97.3
Remaining
amortisation
period on
acquired
intangibles
4 ½ years
1 year
N/A
1 ½ years
4 ½ years
9 ½ years
Genera – total
5 years
5 years
7 years
Putney – total
184
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 12. Intangible Assets continued
Significant assets
Intangible asset arising from the
acquisition of Apex
Description
Product and technology
Intangible assets related to the licensing
and distribution of Tri-Solfen® (excluding
ANZ territories)
Intangible asset related to an injectable
solution licensing agreement
Intangible assets arising from the
acquisition of AST Farma and Le Vet
Marketing and distribution rights
Marketing and distribution rights
Product, brand, technology,
marketing and distribution rights
Intangible assets related to an
injectable solution licensing agreement
Intangible assets arising from the
acquisition of Caledonian
Intangible assets arising from the
acquisition of Dechra Brasil Produtas
Veterinarios LTDA
Marketing and distribution rights
Product, brand, technology, marketing
and distribution rights
Product, brand, technology, marketing
and distribution rights
Intangible assets arising from the
acquisition of Ampharmco
Product and technology rights
Intangible assets arising from the
acquisition of Mirataz
Product and technology rights
Intangible assets arising from the
acquisition of Osurnia
Intangible assets related to the licensing
and distribution of Tri-Solfen® (ANZ
territories)
Other individually immaterial goodwill
and acquired intangibles
Product, marketing and distribution rights
Product, marketing and distribution rights
Goodwill
carrying
value
£m
Acquired
Intangibles
carrying
value
£m
11.3
1.7
8.7
–
–
98.7
–
0.8
8.3
5.8
–
–
–
39.7
5.8
46.2
61.4
13.3
0.8
5.6
2.9
6.6
0.3
0.3
0.6
5.0
0.5
5.3
37.9
7.2
0.9
96.5
24.5
Sub-Total
carrying
value
£m
21.7
39.7
Remaining
amortisation
period on
acquired
intangibles
12 years
9 years
Apex – total
10 years
5.8
10 years
6 ½ years
5 ½ years
7 years
1 ½ years
220.4
AST Farma and
Le Vet – total
15 years
7 ½ years
7 ½ years
2 ½ years
5 ½ years
Brazil – total
1 ½ years
16 ½ years
13 ½ years
13 years
Ampharmco – total
8 ½ years
9 ½ years
9 ½ years
Mirataz – total
9 years
10 years
5.6
3.7
15.5
17.2
46.0
96.5
24.5
6.7
9.0
15.7
236.1
460.3
696.4
185
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
13. Property, Plant and Equipment
Freehold
land and
buildings
£m
Short
leasehold
buildings
£m
Motor
vehicles
£m
Plant and
fixtures
£m
Cost
At 1 July 2019
Additions
Acquired through business combinations
Changes in accounting policy
Disposals
Foreign exchange adjustments
At 30 June 2020 and 1 July 2020
Additions
Disposals
Foreign exchange adjustments
At 30 June 2021
Accumulated Depreciation
At 1 July 2019
Charge for the year
Disposals
Foreign exchange adjustments
At 30 June 2020 and 1 July 2020
Charge for the year
Disposals
Foreign exchange adjustments
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
Net book value of right-of-use assets
At 30 June 2021
At 30 June 2020
Depreciation charge of right-of-use assets
2021
2020
46.9
0.1
1.9
–
–
(0.8)
48.1
9.1
–
(2.7)
54.5
14.5
1.6
–
0.1
16.2
1.6
–
(1.0)
16.8
37.7
31.9
–
–
–
–
4.2
3.4
0.1
9.2
–
0.1
17.0
6.5
(0.8)
(0.5)
22.2
3.0
1.9
–
0.1
5.0
2.3
(0.2)
(0.1)
7.0
15.2
12.0
13.8
11.2
1.9
1.6
0.4
2.0
–
3.1
(0.2)
(0.1)
5.2
1.8
(0.9)
(0.2)
5.9
0.2
1.7
(0.1)
–
1.8
2.0
(0.6)
(0.1)
3.1
2.8
3.4
2.8
3.4
2.0
1.6
Contracted capital commitments
Assets in the course of construction included above
Included in additions are £7.5 million (2020: £5.5 million) of right-of-use assets.
49.3
8.4
1.4
0.4
(1.4)
(0.6)
57.5
9.0
(6.5)
(2.6)
57.4
24.7
4.7
(1.3)
0.3
28.4
5.1
(6.3)
(1.1)
26.1
31.3
29.1
0.3
0.3
0.1
0.1
2021
£m
0.7
13.3
Total
£m
100.8
13.9
3.4
12.7
(1.6)
(1.4)
127.8
26.4
(8.2)
(6.0)
140.0
42.4
9.9
(1.4)
0.5
51.4
11.0
(7.1)
(2.3)
53.0
87.0
76.4
16.9
14.9
4.0
3.3
2020
£m
1.1
5.8
186
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 14. Impairment Reviews
Goodwill and indefinite life assets are tested for impairment annually, or more frequently if there are indications that amounts might be impaired.
The impairment tests involve determining the recoverable amount of the relevant asset or cash generating unit, which corresponds to the higher
of the fair value less costs to sell or its value in use. In the Group’s case, the recoverable amount is based on the value in use calculations.
Intangible and tangible assets that are being amortised are reviewed for indicators of impairment annually, and in the event that impairment
indicators exist, a full value in use calculation is performed. A review was performed to establish that the carrying value of individual products
capitalised are reflective of the projected cash flow generation and that no impairment indicators exist. No impairment was recognised on
these assets.
Value in use calculations are performed by forecasting the future cash flows attributable to the asset being tested (or the relevant cash
generating unit in respect of goodwill). The forecast cash flows are discounted at an appropriate rate as described below.
The cash flow forecasts are derived as follows:
•
•
•
The latest available Board approved business plan for the first two years;
The business plan is extrapolated by applying a growth rate for years three, four and five of 3.0% (2020: 3.0%) for Dechra Veterinary
Products EU and Dechra Veterinary Products NA and 5.8% (2020: 9.5%) for Dechra Veterinary Products International; and
Thereafter, a terminal value is calculated based on year five cash flows, and assuming a long term growth rate of 0% (2020: 0%) for
Dechra Veterinary Products EU and Dechra Veterinary Products NA and 0.9% (2020: 1.2%) for Dechra Veterinary Products International.
The projections covered a period of five years as the Directors believe this to be the most appropriate timescale over which to review and
consider annual performances before applying a fixed terminal value.
Value in use calculations were performed at 30 June 2021 for the following cash generating units:
Cash generating unit
Dechra Veterinary Products EU
Dechra Veterinary Products NA
Dechra Veterinary Products International
Cash generating unit
Dechra Veterinary Products EU
Dechra Veterinary Products NA
Dechra Veterinary Products International
Goodwill
carrying
value
£m
162.2
56.2
17.7
236.1
2021
Indefinite
life assets
carrying
value
£m
0.9
–
–
0.9
2020
Goodwill
carrying
value
£m
172.2
Indefinite
life assets
carrying value
£m
0.9
63.4
18.2
253.8
–
–
0.9
Pre-tax
discount
rate
%
8.9
11.0
12.4
Pre-tax
discount
rate
%
9.8
10.7
13.8
Total
value
£m
163.1
56.2
17.7
237.0
Total
value
£m
173.1
63.4
18.2
254.7
187
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
14. Impairment Reviews continued
Key Assumptions
The key assumptions implicit in the impairment review are those regarding the cash flows in the Board approved business plan, medium and
long term growth rates and the discount rate.
The Board approved business plan incorporates a number of key input assumptions, most notably regarding market growth expectations, the
competitive and legislative environments, lifecycle management, selling prices, product margins and direct costs. The assumptions applied in
the business plan are based on past experience and the Group’s expectation of future market changes and, where applicable, are consistent
with external sources of information.
The medium and long term growth rates used (as set out above) reflect an estimate of expected future growth in the Group’s markets, are no
higher than those implicit in the Group’s strategic planning process, and do not exceed the long term growth rates in the countries in which
each CGU operates.
The pre-tax discount rates have been estimated using a market participant rate, which is adjusted after consideration of market information,
and risk adjusted dependent upon the specific circumstances of each asset or cash generating unit.
Indications of Impairment
Indications of impairment were noted for certain finite lived intangible assets and an impairment assessment was performed which confirmed
that the carrying value of the relevant assets continues to be supported by the recoverable value.
Sensitivity Analysis
Sensitivity analyses have been performed around the key assumptions for the impairment testing of goodwill and indefinite lived assets, and for
any finite lived intangible assets where there was an indication of impairment, with the conclusion for both being that no reasonable changes in
key assumptions would cause the recoverable amount to be materially less than the carrying value.
15. Deferred Taxes
(a) Recognised Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are analysed in the statement of financial position after offset, to the extent there is a legally enforceable right,
of balances within countries as follows:
Deferred tax assets
Deferred tax liabilities
Deferred tax assets and liabilities are attributable to the following, prior to any allowable offset:
2021
£m
2.0
(48.8)
(46.8)
Intangible assets
Property, plant and equipment
Inventories
Receivables/payables
Share-based payments
Losses
R&D tax credits
Employee benefit obligations
Assets
Liabilities
Net
2021
£m
–
–
0.9
4.1
1.7
0.7
0.5
0.1
8.0
2020
£m
–
–
1.4
3.2
0.7
0.5
0.3
0.4
6.5
2021
£m
(51.1)
(3.7)
–
–
–
–
–
–
(54.8)
2020
£m
(62.4)
(4.0)
–
–
–
–
–
–
(66.4)
2021
£m
(51.1)
(3.7)
0.9
4.1
1.7
0.7
0.5
0.1
(46.8)
2020
£m
2.7
(62.6)
(59.9)
2020
£m
(62.4)
(4.0)
1.4
3.2
0.7
0.5
0.3
0.4
(59.9)
(b) Unrecognised Deferred Tax
The aggregate amount of gross temporary differences associated with investments in subsidiaries for which deferred tax liabilities have not
been recognised is £2.5 million (2020: £1.2 million). The estimated unprovided deferred tax liability in relation to these temporary differences
is £0.1 million (2020: £0.1 million).
Deferred tax assets in relation to losses amounting to £2.0 million (2020: £1.1 million) have not been recognised due to uncertainty over their
recoverability. Included within unrecognised losses are £0.5 million of losses which expire prior to 2030. Other losses may be carried forward
indefinitely.
188
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 15. Deferred Taxes continued
(c) Movements During the Year
Intangible assets
Property, plant and equipment
Inventories
Receivables/payables
Share-based payments
Losses
R&D tax credits
Employee benefit obligations
Intangible assets
Property, plant and equipment
Inventories
Receivables/payables
Share-based payments
Losses
R&D tax credits
Employee benefit obligations
Balance at
1 July
2019
£m
(75.9)
(3.8)
1.8
1.4
1.0
1.6
–
0.3
(73.6)
Balance at
1 July
2020
£m
(62.4)
(4.0)
1.4
3.2
0.7
0.5
0.3
0.4
(59.9)
Acquired
through
business
combinations
£m
–
–
–
–
–
–
–
–
–
Acquired
through
business
combinations
£m
–
–
–
–
–
–
–
–
–
Recognised
in income
£m
14.9
(0.1)
(0.3)
–
–
(1.0)
0.3
0.1
13.9
Recognised
in income
£m
7.2
–
(0.4)
1.2
0.3
0.2
0.3
(0.3)
8.5
Recognised
in equity/OCI
£m
–
–
–
1.8
(0.3)
–
–
–
1.5
Recognised
in equity/OCI
£m
–
–
–
(0.2)
0.7
–
–
–
0.5
Foreign
exchange
adjustments
£m
(1.4)
(0.1)
(0.1)
–
–
(0.1)
–
–
(1.7)
Foreign
exchange
adjustments
£m
4.1
0.3
(0.1)
(0.1)
–
–
(0.1)
–
4.1
Balance at
30 June
2020
£m
(62.4)
(4.0)
1.4
3.2
0.7
0.5
0.3
0.4
(59.9)
Balance at
30 June
2021
£m
(51.1)
(3.7)
0.9
4.1
1.7
0.7
0.5
0.1
(46.8)
189
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
16. Inventories
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2021
£m
34.6
10.4
104.5
149.5
2020
£m
28.9
10.9
81.0
120.8
Included in finished goods and goods for resale £nil (2020: £nil) of inventory held at net realisable value having been acquired through business
combinations.
2021
£m
88.2
13.4
5.1
106.7
2021
£m
118.4
2021
£m
35.2
3.9
4.8
69.6
113.5
2021
£m
17.6
(16.6)
1.0
2020
£m
79.4
11.1
3.4
93.9
2020
£m
227.4
2020
£m
34.6
3.1
7.4
53.1
98.2
2020
£m
6.8
(25.6)
(18.8)
17. Trade and Other Receivables
Trade receivables
Other receivables
Prepayments and accrued income
18. Cash and Cash Equivalents
Cash at bank and in hand
19. Trade and Other Payables
Trade payables
Other payables
Other taxation and social security
Accruals
20. Current Tax Assets and Liabilities
Corporation tax receivable
Corporation tax payable
190
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 21. Borrowings and lease liabilities
Current liabilities:
Lease liabilities
Bank loans
Non-current liabilities:
Lease liabilities
Senior loan notes
Bank loans
Arrangement fees netted off
Total borrowings
2021
£m
3.1
–
3.1
12.8
115.1
189.7
(2.1)
315.5
318.6
2020
£m
3.2
1.4
4.6
11.8
127.1
214.2
(2.7)
350.4
355.0
At 30 June 2021, £189.7 million was drawn against the £340.0 million Revolving Credit Facility maturing 25 July 2024. The facility is not
secured on any specific assets of the Group but is supported by a joint and several cross guarantee structure. Interest is charged on this
facility at a minimum of 1.30% over LIBOR and a maximum of 2.20% over LIBOR, dependent upon the Leverage (the ratio of Total Net Debt
to Adjusted EBITDA) of the Group. As at 30 June 2021, interest being charged on this facility is 1.50% above LIBOR. All covenants were met
during the year ended 30 June 2021.
In January 2020, the Group undertook a Private Placement raising EUR50.0 million and USD100.0 million (under seven and ten year new
senior secured notes respectively) which remains fully drawn at 30 June 2021. The Private Placement amounts are not secured on any specific
assets of the Group, but are supported by a joint and several cross guarantee structure. Interest is charged on the EUR50.0 million amount at
a fixed rate of 1.19% until maturity (January 2027). Interest is charged on the USD100.0 million amount at a fixed rate of 3.34% until maturity
(January 2030).
No interest has been capitalised during the year (2020: £nil).
The borrowing facility of Genera of £4.6 million, of which £1.4 million was drawn at 30 June 2020, was fully repaid in March 2021 and the
facility was closed.
The maturity of the bank loans and senior loan notes is as follows:
Payable:
Within one year
Between one and two years
Between two and five years
Over five years
The maturity of the lease liabilities is as follows:
Payable:
Within one year
Between one and two years
Between two and five years
Over five years
Further information on the interest profile of borrowings is shown in note 24.
2021
£m
–
–
189.7
115.1
304.8
2021
£m
3.1
2.5
3.7
6.6
15.9
2020
£m
1.4
–
214.2
127.1
342.7
2020
£m
3.2
2.5
4.0
5.3
15.0
191
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
22. Provisions
At start of period
Provision recognised
Provision utilised
Foreign exchange differences
At end of period
Deferred
Rent
£m
(0.4)
–
0.1
–
(0.3)
Provision for
PPE grant
£m
(1.4)
–
0.5
–
(0.9)
Environmental,
Health &
Safety Grant
£m
(0.3)
–
0.2
0.1
–
Dilapidations
£m
(0.4)
(1.9)
–
–
(2.3)
Total
£m
(2.5)
(1.9)
0.8
0.1
(3.5)
The Group has received advanced payment for rental income on its facilities in Portland. This has been recognised at amortised cost and is
being utilised over the period of the rental contract expiring in January 2025.
Genera has received advanced funding (PPE grant) for the refurbishment of the manufacturing facility for a third party manufacturing contract.
The funding has been recognised at amortised cost and is being utilised over the life of the property, plant and equipment until 2025.
On the acquisition of Ampharmco, the Group established a fair value provision for dilapidations of a warehouse property. The provision will be
utilised over the period to the expiry of the lease on 31 December 2022.
The Group established a fair value provision of £1.9 million for dilapidations of two warehouse properties in Skipton. In line with IFRS 16, the
element of the provision that relates to reinstatement work as a result of alterations (£1.6 million) has been capitalised and will be depreciated
over the lease term. The remaining amount (£0.3 million) has been expensed to the income statement. The respective provisions for the two
buildings will be utilised over the period to the expiry of the lease in March 2025 and March 2030.
23. Employee Benefit Obligations
The defined benefit pension arrangements operated by the Netherlands, Germany and Croatia are unfunded: Jubilee awards of £0.3 million
(2020: £0.3 million) for employees are recognised within other payables in the Consolidated Statement of Financial Position as at 30 June 2021.
24. Financial Instruments and Related Disclosures
The Group’s financial instruments comprise private placements, bank loans and overdrafts, lease liabilities, derivatives used for hedging
purposes and trade receivables and payables.
Treasury Policy
The Group reports in Sterling and pays dividends in Sterling out of the Group profits which are repatriated to Dechra Pharmaceuticals PLC
through dividends. The role of the Group’s treasury activities is to manage and monitor the Group’s external and internal funding requirements
and change to financing risks in support of the Group’s corporate activities.
The Board of Directors has approved a policy which governs all treasury activities.
The Group uses a variety of financial instruments, including derivatives, to finance its operations and to manage market risks from these
operations. Derivatives, principally comprising forward foreign currency contracts, foreign currency options and interest rate swaps, are
used to hedge against changes in foreign currencies and interest rates. Hedges of net investments in foreign operations are also used
in the management of foreign currency risk.
The Group does not hold or issue derivative financial instruments for speculative purposes and the Group’s treasury policy specifically prohibits
such activity. All transactions in financial instruments are undertaken to manage the risks arising from underlying business activities, not for
speculation.
The Group actively manages its exposure to credit risk, reducing surplus cash balances wherever possible. This is part of the strategy to
concentrate cash centrally as much as possible. The table below sets out the credit exposure to counterparties by rating for liquid investments,
cash and cash equivalents and derivatives.
Credit ratings are assigned by Standard and Poor’s and Moody’s respectively. Where the opinions of the two rating agencies differ, the Group
assigns the lower rating of the two to the counterparty. Where local rating agency or Fitch data is the only source available, the ratings are
converted to global ratings equivalent to those of Standard and Poor’s or Moody’s using published conversion tables. These credit ratings
form the basis of the assessment of the expected credit loss on Treasury-related balances held at amortised cost being bank balances
and deposits.
192
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 24. Financial Instruments and Related Disclosures continued
Treasury Policy continued
AA/Aa
A/A
BBB/Baa
BB/Ba and below/unrated
Total bank balances and deposits
2021
£m
10.5
105.1
1.3
1.5
118.4
2020
£m
7.4
218.2
1.3
0.5
227.4
The Group measures expected credit losses over cash and cash equivalents as a function of individual counterparty credit ratings and
associated 12 month default rates. Expected credit losses over cash and cash equivalents are deemed to be immaterial and no such loss has
been experienced during 2021.
Capital Management
The capital structure of the Group consists of net borrowings and shareholders’ equity. At 30 June 2021, net borrowing was £200.2 million
(2020: £127.6 million), whilst shareholders’ equity was £632.9 million (2020: £637.5 million).
The Group maintains a strong capital base so as to maintain investors’, creditors’ and market confidence and to sustain future development
of the business.
The Group manages its capital structure to maintain a prudent balance between debt and equity that allows sufficient headroom to finance
the Group’s product development programme and appropriate acquisitions. There were no changes in the Group’s approach to capital
management during the year.
The Group operates globally, primarily through subsidiary companies established in the markets in which the Group trades. The Group’s
operating subsidiaries are generally cash generative and none are subject to externally imposed capital requirements.
There are financial covenants associated with the Group’s borrowings, which are interest cover (the ratio of underlying EBITDA to interest
costs), and leverage (the ratio of total net debt to underlying EBITDA). The Group complied with these covenants in 2021 and 2020.
Operating cash flow is used to fund investment in the development of new products as well as to make the routine outflows of capital
expenditure, tax, dividends and repayment of maturing debt.
The Group’s policy is to maintain borrowing facilities centrally which are then used to finance the Group’s operating subsidiaries, either by way
of equity investments or intercompany loans.
Financial Risk Management
The Group has exposure to the following risks from its use of financial instruments:
•
•
•
liquidity risk
market risk
credit risk
This note presents information about the Group’s exposure to each of the above risks, and the Group’s objectives, policies and processes for
measuring and managing risk.
193
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
24. Financial Instruments and Related Disclosures continued
Liquidity Risk
Liquidity risk is the risk that the Group will not have sufficient funds to meet liabilities as they fall due. Cash flows and covenants of the Group
are monitored half-yearly. These are reviewed to ensure that sufficient financial headroom exists for at least a 12 month period.
The Group manages its funding requirements through the following lines of credit:
•
•
•
£340.0 million multi-currency revolving credit facility;
Private Placements in the amounts of USD100.0 million and EUR50.0 million; and
£15.9 million lease liabilities;
The Group’s borrowing facilities at 30 June 2021 are detailed in note 21.
Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates or interest rates, will affect the Group’s income or the
value of its holding of financial instruments.
Interest Rate Risk Management
The Group’s borrowings bear interest at both floating rates linked to base rate or LIBOR and fixed rates, thereby reducing the exposure to cash
flow interest rate risk.
Foreign Exchange Risk Management
Foreign currency transaction exposure arising on normal trade flows is not hedged. The Group matches receipts and payments in the relevant
foreign currencies as far as practicable. To this end, bank accounts are maintained for all the major currencies in which the Group trades.
Translational exposure in converting the income statements of foreign subsidiaries into the Group’s presentational currency of Sterling
is not hedged.
The Group hedges selectively expected currency cash flows outside normal trading activities. The Group has designated a US Dollar borrowing
of $97.0 million as a net investment hedge of US Dollar net assets.
Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations.
The Group considers its maximum credit risk to be £101.6 million (2020: £90.5 million), which is the total carrying value of the Group’s financial
assets excluding cash and cash equivalents.
Our principal customers are pharmaceutical wholesalers and distributors. The failure of a large wholesaler could have a material adverse
impact on the Group’s financial results.
The largest customer of the Group sits within the NA Pharmaceuticals segment and accounted for approximately 13.3% of gross trade
receivables at 30 June 2021 (2020: 21.4%). This customer accounted for 18.4% (2020: 20.0%) of total Group revenues. One other customer
accounted for more than 10% of total Group revenues (2020: one).
All new customers are subject to a credit vetting process and existing customers will be subject to a review periodically. The vetting process
and subsequent reviews involve obtaining information including audited financial statements, credit bureau reports, debt rating agency (e.g.
Moody’s, Standard & Poor’s) reports and bank references.
Trade receivables consist of amounts due from a large number of customers, spread across geographical areas. Ongoing credit evaluation is
performed on the financial condition of accounts receivable.
The amount of information obtained is proportional to the level of exposure being considered. The information is evaluated quantitatively (i.e.
credit score) and qualitatively (i.e. judgement) in conjunction with the customer’s credit requirements to determine a credit limit.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of
recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group.
194
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 24. Financial Instruments and Related Disclosures continued
Fair Value of Financial Assets and Liabilities
The following table presents the carrying amounts and the fair values of the Group’s financial assets and liabilities at 30 June 2021 and 30 June
2020. The following assumptions were used to estimate the fair values:
•
•
•
•
Cash and cash equivalents – approximated to the carrying amount.
Derivatives (interest rate swaps) – based upon the amount that the Group would receive or pay to terminate the instrument at the balance
sheet date, being the market price of the instrument.
Receivables and payables – approximated to the carrying amount.
Borrowings, bank loans and overdrafts – based upon discounted cash flows using discount rates based upon facility rates.
Analysis of Financial Instruments
The financial instruments of the Group measured at amortised cost are analysed as follows:
Financial assets
Financial assets measured at amortised cost
– cash and cash equivalents
– trade receivables
– other receivables
Total financial assets
Financial liabilities
Bank loans and overdrafts
Senior loan notes
Lease liabilities
Trade payables
Other payables
Accruals
Contingent consideration
Total financial liabilities
Net financial liabilities
2021
2020
Carrying
value
£m
118.4
88.2
13.4
220.0
(189.7)
(115.1)
(15.9)
(35.2)
(3.9)
(69.6)
(80.2)
(509.6)
(289.6)
Fair
value
£m
118.4
88.2
13.4
220.0
(189.7)
(110.7)
(15.9)
(35.2)
(3.9)
(69.6)
(80.2)
(505.2)
(285.2)
Carrying
value
£m
227.4
79.4
11.1
317.9
(215.6)
(127.1)
(15.0)
(34.6)
(3.1)
(53.1)
(56.2)
(504.7)
(186.8)
Fair
value
£m
227.4
79.4
11.1
317.9
(215.6)
(126.8)
(15.0)
(34.6)
(3.1)
(53.1)
(56.2)
(504.4)
(186.5)
Senior loan notes are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the
balance sheet date. The fair value of borrowings is estimated by discounting contractual future cash flows (Level 2 as defined by IFRS 13).
Fair Value Hierarchy
The table below analyses the Group’s financial instruments carried at fair value, by valuation method. Where possible, quoted prices in active
markets are used (Level 1). Where such prices are not available, the asset or liability is classified as Level 2, provided all significant inputs to
the valuation model used are based on observable market data. If one or more of the significant inputs to the valuation model is not based on
observable market data, the instrument is classified as Level 3. There were no transfers between Level 1 and Level 2 during the year.
30 June 2021
Financial instruments held at fair value through the profit and loss
Derivative financial liabilities
Contingent consideration
Total
30 June 2020
Financial instruments held at fair value through the profit and loss
Derivative financial liabilities
Contingent consideration
Total
Level 1
£m
–
–
–
–
Level 1
£m
–
–
–
–
Level 2
£m
–
–
–
–
Level 2
£m
–
–
–
–
Level 3
£m
–
–
(80.2)
(80.2)
Level 3
£m
–
–
(56.2)
(56.2)
Total
£m
–
–
(80.2)
(80.2)
Total
£m
–
–
(56.2)
(56.2)
195
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
24. Financial Instruments and Related Disclosures continued
Fair Value Hierarchy continued
Contingent consideration is recorded at fair value based on risk-adjusted future cash flows discounted using appropriate interest rates, which
are reviewed annually. The inputs relating to future cash flows will include cash flows relating to the relevant contractual arrangements. Refer to
note 4 for amounts recognised in the Consolidated Income Statement in the year. Quantified information about significant unobservable inputs
is disclosed within note 30.
Credit Risk
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all
trade receivables. There has been no change in the estimation techniques or significant assumptions made during the current reporting period
in assessing the loss allowance for financial assets at amortised cost since the adoption of IFRS 9 at the start of the 2019 reporting period.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics, and the days
past due. The expected loss rates are based on the payment profiles of sales over a period of 36 months before 30 June 2021 and the
corresponding historical losses experienced within this period. The historical loss rates are adjusted to reflect current and forward looking
information on macroeconomic factors affecting the ability of the customers to settle the receivables.
The loss allowance provision as at 30 June 2021 and 30 June 2020 is determined as follows:
30 June 2021
Expected loss rate
Gross carrying amount – trade receivables
Loss allowance
Specific loss allowance
Total loss allowance
30 June 2020
Expected loss rate
Gross carrying amount – trade receivables
Loss allowance
Specific loss allowance
Total loss allowance
Past due
(up to one
month)
£m
0.04%
2.4
–
–
–
Past due
(one to three
months)
£m
0.04%
1.5
–
–
–
Past due
(up to one
month)
£m
0.02%
3.0
–
0.1
0.1
Past due
(one to three
months)
£m
0.02%
0.5
–
–
–
Past due
(over three
months)
£m
75.0%
0.7
0.2
0.5
0.7
Past due
(over three
months)
£m
75.0%
0.6
0.1
0.5
0.6
Not due
£m
0.04%
84.3
–
–
–
Not due
£m
0.02%
76.0
–
–
–
The movement in the loss allowances for trade debtors at 30 June 2021 reconcile to the opening loss allowances as follows:
At start of period
Impairment provision recognised/(released)
Impairment provision utilised
At end of period
2021
£m
0.7
0.1
(0.1)
0.7
Total
£m
88.9
0.2
0.5
0.7
Total
£m
80.1
0.1
0.6
0.7
2020
£m
1.1
(0.4)
–
0.7
196
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 24. Financial Instruments and Related Disclosures continued
Liquidity Risk – Contracted Cash Flows of Financial Liabilities
The following table shows the cash flow commitments of the Group in respect of financial liabilities at 30 June 2021 and 30 June 2020. Where
interest is at floating rates, the future interest payments have been estimated using current interest rates:
At 30 June 2021
Carrying value
Arrangement fees netted off
Future interest
Total committed cash flow
Payable:
Within 6 months
Between 6 months and 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Over 5 years
At 30 June 2020
Carrying value
Arrangement fees netted off
Future interest
Total committed cash flow
Payable:
Within 6 months
Between 6 months and 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Over 5 years
Bank loans
and
senior loan
notes
£m
Contingent
consideration
£m
Lease
liabilities
£m
Trade, other
payables and
accruals
£m
(80.2)
–
(33.8)
(114.0)
(17.3)
(5.9)
(7.1)
(6.7)
(11.1)
(8.2)
(57.7)
(114.0)
Contingent
consideration
£m
(56.2)
–
(27.6)
(83.8)
(4.5)
(5.0)
(4.1)
(9.6)
(6.2)
(5.3)
(49.1)
(83.8)
(302.7)
(2.1)
(1.6)
(306.4)
(1.6)
–
–
–
(25.0)
(164.7)
(115.1)
(306.4)
Bank loans
and
senior loan
notes
£m
(340.0)
(2.7)
(2.1)
(344.8)
(2.7)
(0.8)
–
–
–
(214.2)
(127.1)
(344.8)
(15.9)
–
(2.1)
(18.0)
(1.9)
(1.7)
(2.7)
(2.0)
(1.6)
(1.2)
(6.9)
(18.0)
(108.7)
–
–
(108.7)
(103.4)
(4.8)
–
(0.2)
–
–
(0.3)
(108.7)
Lease
liabilities
£m
(15.0)
–
(2.3)
(17.3)
Trade, other
payables and
accruals
£m
(90.8)
–
–
(90.8)
(2.1)
(1.6)
(2.9)
(1.9)
(1.4)
(1.1)
(6.3)
(17.3)
(85.3)
(5.4)
(0.1)
–
–
–
–
(90.8)
Total
£m
(507.5)
(2.1)
(37.5)
(547.1)
(124.2)
(12.4)
(9.8)
(8.9)
(37.7)
(174.1)
(180.0)
(547.1)
Total
£m
(502.0)
(2.7)
(32.0)
(536.7)
(94.6)
(12.8)
(7.1)
(11.5)
(7.6)
(220.6)
(182.5)
(536.7)
197
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
24. Financial Instruments and Related Disclosures continued
Foreign Currency Exposure
The Sterling equivalents of financial assets and liabilities denominated in foreign currencies at 30 June 2021 and 30 June 2020 were:
Australian
Dollar
£m
Danish
Krone
£m
0.2
–
2.1
2.3
–
–
–
–
(0.1)
(56.2)
(56.3)
(54.0)
–
–
0.5
0.5
–
–
–
–
–
–
–
0.5
Australian
Dollar
£m
Danish
Krone
£m
–
–
4.2
4.2
–
–
–
–
(0.1)
(33.0)
(33.1)
(28.9)
–
–
1.0
1.0
–
–
–
–
–
–
–
1.0
Euro
£m
9.3
1.2
48.3
58.8
(42.9)
(0.3)
(7.0)
(1.5)
(1.4)
(3.1)
(56.2)
2.6
Euro
£m
8.3
0.6
33.7
42.6
(47.0)
(0.3)
(7.3)
(0.1)
(2.7)
(5.9)
(63.3)
(20.7)
US
Dollar
£m
0.8
1.4
16.9
19.1
(72.2)
–
(0.9)
–
(0.7)
(17.8)
(91.6)
(72.5)
US
Dollar
£m
1.2
0.5
19.3
21.0
(97.8)
–
(1.0)
–
–
(16.4)
(115.2)
(94.2)
Other
£m
2.6
–
8.5
11.1
–
–
(0.4)
–
(1.1)
–
(1.5)
9.6
Other
£m
1.5
–
14.7
16.2
–
–
–
–
(1.0)
–
(1.0)
15.2
At 30 June 2021
Financial assets
Trade receivables
Other receivables
Cash balances
Financial liabilities
Bank loans and overdrafts
Lease liabilities
Trade payables
Other payables
Accruals
Contingent consideration
Net balance sheet exposure
At 30 June 2020
Financial assets
Trade receivables
Other receivables
Cash balances
Financial liabilities
Bank loans and overdrafts
Lease liabilities
Trade payables
Other payables
Accruals
Contingent consideration
Net balance sheet exposure
198
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 24. Financial Instruments and Related Disclosures continued
Sensitivity Analysis
Interest Rate Risk
A 2.0% increase in annual interest rates compared to those ruling at 30 June 2021 would reduce Group profit before taxation and equity by
£3.9 million (2020: £5.2 million).
Foreign Currency Risk
The Group has significant cash flows and net financial assets and liabilities in US Dollar, Euro, Danish Krone and Australian Dollar. The Group
does not hedge either economic exposure or the translation exposure arising from the profits of non-Sterling businesses. The Group is hedging
certain foreign currency translations through the designation of a US Dollar loan as a net investment hedge of US Dollar net assets.
During 2021, the Group have been exposed to transactional and translational currency risk. In addition to the transactional loss of £2.9 million
being recognised in the Consolidated Income Statement, £28.0 million foreign exchange loss translational impact was recognised in the
Consolidated Statement of Comprehensive Income in the year.
As part of our acquisition strategy, the Group seek to balance the foreign exchange debt and related interest payable risk associated with
non-Sterling acquisitions with the underlying related income and assets in foreign currencies.
The following table shows the impact on the Group’s profit after taxation of a 10% appreciation of Sterling against each of these currencies
compared to the rates prevailing at the year end date. In this analysis, only financial assets and liabilities held on the balance sheet at the year
end are assessed and are only considered sensitive to foreign exchange rates where they are not in the functional currency of the entity that
holds them. There is no impact on other equity reserves.
Australian Dollar
Danish Krone
Euro
US Dollar
Profit after
taxation
£m
(4.9)
0.0
0.2
(0.2)
The sensitivities on the above represent the Directors’ view of reasonably possible changes in each risk variable, not worst case scenarios or
stress tests. The outputs from the sensitivity analysis are estimates of the impact of the effect of changes in market risks assuming that the
specified changes occur at the year end and are applied to the risk exposures at that date. Accordingly, they show the impact on profitability
and the balance sheet from such movements.
Actual results in the future may differ materially from these estimates due to commercial actions taken to mitigate any potential losses from
such rate movements, to the interaction of more than one sensitivity occurring and to further developments in global financial markets. As
such, this table should not be considered as a projection of likely future gains and losses.
25. Share Capital
Allotted, called up and fully paid at start of year
New shares issued
Allotted, called up and fully paid at end of year
Ordinary shares of 1 pence each
2020
2021
£m
1.1
0.0
1.1
Number
108,010,960
204,363
108,215,323
£m
1.0
0.1
1.1
Number
102,651,602
5,359,358
108,010,960
The Companies Act 2006 abolishes the requirement for a company to have an authorised share capital. At the 2009 Annual General Meeting,
the shareholders approved a resolution whereby all provisions relating to the Company’s authorised share capital were removed from the
Company’s constitutional documents.
During the year, 204,363 new ordinary shares of 1 pence each (2020: 226,858 new ordinary shares of 1 pence each) were issued following
the exercise of options under the Long Term Incentive Plan, the Approved, the Unapproved, SAYE and the ESPP share option schemes.
The consideration received was £2,265,445 (2020: £981,083). The holders of ordinary shares are entitled to receive dividends as declared
or approved at General Meetings from time to time and are entitled to one vote per share at such meetings of the Company.
In the prior year the Company issued 5,132,500 shares of 1 pence each by way of a placing at an issue price of 2600 pence per share on
8 June 2020. The placing generated gross proceeds of £133.4 million. The placing price of 2600 pence per share was a 5.3% discount to the
closing middle market share price on 3 June 2020, being the date of the placing announcement.
199
Stock Code: DPHFinancial Statements
Notes to the Consolidated Financial Statements
continued
26. Share-based Payments
During the year, the Company operated the Unapproved Share Option Scheme, the Approved Share Option Scheme, the Save As You Earn
(SAYE) Share Option Scheme, the Long Term Incentive Plan 2017 and the Global SAYE Plan 2018 as described below:
Unapproved and Approved Share Option Schemes
Under these Schemes, options are granted to certain Executives and employees of the Group (excluding Executive Directors) to purchase
shares in the Company at a price fixed at the average market value over the three days prior to the date of grant. For the options to vest, there
must be an increase in basic earnings per share of at least 12% above the growth in the UK Retail Prices Index (RPI) over a three year period.
Once vested, options must be exercised within ten years of the date of grant.
SAYE Option Scheme
This scheme is open to all UK employees. Participants save a fixed amount of up to £500 per month for either three or five years and are
then able to use these savings to buy shares in the Company at a price fixed at a 20% discount to the market value at the start of the savings
period. The SAYE options must ordinarily be exercised within six months of the completion of the relevant savings period. The exercise of these
options is not subject to any performance criteria.
Long Term Incentive Plan 2017
(a) Long Term Incentive Plan Awards
Vesting is dependent on three performance conditions which must be satisfied over a three year performance period commencing from
the start of the financial year within which the award is granted. One third of each award is subject to a performance condition based
on the Company’s TSR performance over the performance period relative to an appropriate comparator over the performance period.
Two thirds of each award is subject to a performance condition based on the growth in the Group’s underlying diluted EPS over the
performance period. Both the TSR element and the EPS element are subject to an additional ROCE performance measure. Unless
the Group’s ROCE is 10% or more in the final year of the performance period, the awards will lapse in full regardless of TSR and EPS
performance. For the purposes of this note they are detailed under the heading Long Term Incentive Plan.
(b) Qualifying LTIP Awards
In addition, awards can be structured as Qualifying LTIP Awards, consisting of a Company Share Option Plan (CSOP) option and a nil-
cost LTIP award, with the ordinary award scaled back at exercise to take account of any gain made on exercise of the CSOP option. The
Qualifying LTIP Awards are granted to the UK Senior Executive Team which includes the UK resident Executive Directors. The performance
conditions are the same as those attached to the awards granted under Approved Share Option Schemes and Long Term Incentives Plan
2017. For the purposes of this note they are detailed under the heading Long Term Incentive Plan (Qualifying LTIP Awards).
(c) Market Value Options
Market value options may be granted under the LTIP 2017 as tax-advantaged CSOP options and as Unapproved share options.
These options are granted to certain Executives and employees of the Group (excluding Executive Directors) to purchase shares in the
Company at a price fixed at the average market value over the three days prior to the date of grant. For the options to vest, there must
be an increase in underlying diluted earnings per share of at least 12% above the growth in the UK Retail Prices Index (RPI) over a three
year period. Once vested, options must be exercised within ten years of the date of grant. For the purposes of this note they are detailed
under the headings Unapproved and Approved Share Option Schemes.
Global SAYE Plan 2018
The Global SAYE Plan 2018 is an international share option plan, with two schedules, one of which is a UK SAYE Scheme and the other
operates as a qualifying Employee Stock Purchase Plan for the benefit of employees in the USA. This scheme is currently open to all UK and
USA employees. Participants save a fixed amount of up to £500 (or the USD equivalent) per month for either three years (UK scheme) or two
years (USA Scheme). The employees are then able to use these savings to buy shares in the Company at a price fixed at a 10% discount to
the market value at the start of the savings period. The SAYE options must ordinarily be exercised within six months of the completion of the
relevant savings period. For USA employees, there is a 12 month holding period that applies. The exercise of these options is not subject to
any performance criteria.
200
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 26. Share-based Payments continued
Year ended 30 June 2021
Unapproved Share Option Scheme
16 September 2013†
11 September 2014†
15 September 2015†
19 September 2016†
2 March 2018†
26 October 2018
6 September 2019
22 September 2020
Approved Share Option Scheme
15 September 2015†
19 September 2016†
2 March 2018†
26 October 2018
6 September 2019
22 September 2020
Long Term Incentive Plan
2 March 2018†
26 October 2018
6 September 2019
22 September 2020
Exercise
Period
2016–2023
2017–2024
2018–2025
2019–2026
2020–2028
2021–2028
2022–2029
2023–2030
2018–2025
2019–2026
2021–2028
2021–2028
2022–2029
2023–2030
2020–2021
2021–2022
2022–2023
2023–2024
Long Term Incentive Plan (Qualifying LTIP Awards)
2 March 2018†
2 March 2018†
1 March 2019†
1 March 2019†
22 September 2020
22 September 2020
SAYE Option Scheme
12 October 2015
13 October 2016
12 October 2017
29 November 2018
Global SAYE Plan 2018
4 October 2019
16 October 2019
19 October 2020
19 October 2020
2021–2028
2020–2021
2022–2029
2022–2023
2023–2030
2023–2024
2018–2021
2019–2022
2020–2023
2021–2024
2022–2023
2021–2022
2023–2024
2022–2023
Total
Weighted average exercise price
† Total share options exercisable at 30 June 2021 are 93,967.
Exercise
price
per share
Pence
721.00
763.00
975.00
1369.00
2506.00
2166.00
2964.00
3237.00
975.00
1369.00
2506.00
2166.00
2964.00
3237.00
–
–
–
–
2506.00
–
2429.00
–
3237.00
–
792.00
1095.00
1646.00
1974.00
2573.00
2571.00
2868.00
2868.00
At
1 July
2020
Number
3,000
5,000
17,457
42,863
93,139
114,036
133,929
–
923
2,921
7,993
2,906
8,071
–
22,814
26,958
98,679
84,662
–
210,299
5,136
49,217
629
2,519
–
–
57,501
15,373
3,831
56,202
27,710
103,116
27,173
19,174
–
–
46,347
849,501
1338.99p
409,424
(72,121)
Exercised
Number
Granted
Number
Lapsed
Number
(3,000)
(3,000)
(14,957)
(23,663)
(27,501)
–
–
–
(923)
(921)
(3,086)
–
–
–
(4,930)
(19,864)
–
(478)
–
(20,342)
(2,902)
(35,327)
–
(2,519)
–
–
(40,748)
(15,373)
–
(50,358)
(45)
(65,776)
–
–
–
–
–
–
–
152,011
152,011
–
–
–
–
–
7,989
7,989
–
–
–
45,440
45,440
–
–
–
–
3,309
42,562
45,871
–
–
–
–
–
–
–
–
–
(2,278)
(5,528)
(9,676)
(5,693)
(23,175)
–
–
–
–
(658)
(753)
(1,411)
(7,094)
–
–
–
(7,094)
(2,234)
(13,890)
(629)
–
–
–
(16,753)
–
–
(1,620)
(2,614)
(4,234)
At
30 June
2021
Number
–
2,000
2,500
19,200
63,360
108,508
124,253
146,318
466,139
–
2,000
4,907
2,906
7,413
7,236
24,462
–
98,679
84,184
45,440
228,303
–
–
–
–
3,309
42,562
45,871
–
3,831
4,224
25,051
33,106
(358)
(81)
–
(7)
(446)
(204,363)
1144.13p
–
–
41,600
6,866
48,466
299,777
2227.09p
(2,877)
(3,270)
(2,417)
(768)
(9,332)
(61,999)
1759.30p
23,938
15,823
39,183
6,091
85,035
882,916
1853.10p
201
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
26. Share-based Payments continued
Year ended 30 June 2020
Unapproved Share Option Scheme
1 March 2010†*
16 September 2013†
11 September 2014†
15 September 2015†
18 March 2016†
19 September 2016
2 March 2018
26 October 2018
6 September 2019
Approved Share Option Scheme
16 September 2013†
11 September 2014†
15 September 2015†
19 September 2016
2 March 2018
26 October 2018
6 September 2019
Long Term Incentive Plan
19 September 2016
2 March 2018
26 October 2018
6 September 2019
Exercise
Period
2013–2020
2016–2023
2017–2024
2018–2025
2019–2026
2019–2026
2020–2028
2021–2028
2022–2029
2016–2023
2017–2024
2018–2025
2019–2026
2021–2028
2021–2028
2022–2029
2019–2020
2020–2021
2021–2022
2022-2023
Long Term Incentive Plan (Qualifying LTIP Awards)
2 March 2018
2 March 2018
26 October 2018
26 October 2018
1 March 2019
1 March 2019
2021–2028
2020–2021
2021–2028
2021–2022
2022–2029
2022–2023
SAYE Option Scheme
13 October 2014
12 October 2015
13 October 2016
12 October 2017
29 November 2018
Global SAYE Plan 2018
4 October 2019
16 October 2019
Total
Weighted average exercise price*
2017–2020
2018–2021
2019–2022
2020–2023
2021–2024
2022–2023
2021–2022
2573.00
2571.00
Exercise
price
per share
Pence
418.81
721.00
763.00
975.00
1118.00
1369.00
2506.00
2166.00
2964.00
721.00
763.00
975.00
1369.00
2506.00
2166.00
2964.00
–
–
–
–
2506.00
–
2166.00
–
2429.00
–
614.00
792.00
1095.00
1646.00
1974.00
Exercised
Number
Granted
Number
Lapsed
Number
At
1 July
2019
Number
2,177
3,000
7,000
18,983
475
72,352
98,639
120,036
–
322,662
500
2,000
955
9,148
7,993
2,906
–
23,502
143,969
28,240
98,679
–
270,888
5,136
49,217
1,350
3,115
1,235
4,940
64,993
13,419
15,373
39,192
61,576
33,389
162,949
–
–
–
844,994
994.14p
—
—
(2,000)
(1,526)
(475)
(26,489)
—
—
—
(30,490)
(500)
(2,000)
(32)
(6,227)
–
–
–
(8,759)
(138,687)
–
–
–
(138,687)
–
–
–
–
–
–
–
(13,419)
–
(34,413)
(759)
(331)
(48,922)
–
–
–
(226,858)
432.32p
At
30 June
2020
Number
–
3,000
5,000
17,457
–
42,863
93,139
114,036
133,929
409,424
–
–
923
2,921
7,993
2,906
8,071
22,814
–
26,958
98,679
84,662
210,299
5,136
49,217
–
–
629
2,519
57,501
–
15,373
3,831
56,202
27,710
103,116
–
–
–
–
–
–
–
–
133,929
133,929
–
–
–
–
–
–
8,071
8,071
–
–
–
88,232
88,232
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,177)
–
–
–
–
(3,000)
(5,500)
(6,000)
–
(16,677)
–
–
–
–
–
–
–
–
(5,282)
(1,282)
–
(3,570)
(10,134)
–
–
(1,350)
(3,115)
(606)
(2,421)
(7,492)
–
–
(948)
(4,615)
(5,348)
(10,911)
30,073
20,632
50,705
280,937
1498.16p
(2,900)
(1,458)
(4,358)
(49,572)
1117.27p
27,173
19,174
46,347
849,501
1338.99p
* Adjusted to reflect the bonus element of the Rights Issue — there has been no impact on the overall fair value of options in issue.
† Total share options exercisable at 30 June 2020 are 72,164.
202
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 26. Share-based Payments continued
The weighted average exercise price of options eligible to be exercised at 30 June 2021 was 2171.65p (2020: 1199.72p). For options
exercised during the year, the weighted average market price at the date of exercise was 3435.95p (2020: 2777.57p). The weighted average
remaining contractual lives of options outstanding at the Consolidated Statement of Financial Position date was 5.1 years (2020: 4.9 years).
Outstanding options on all Long Term Incentive, Approved and Unapproved plans prior to 30 June 2018 were exercisable at 30 June 2021.
No options issued under SAYE plans were exercisable at 30 June 2021 (2020: nil).
The fair values for shares granted under the Unapproved, Approved and SAYE Option Schemes have been calculated using the Black–Scholes
option pricing model. The fair values of shares awarded under the Long Term Incentive Plan have been calculated using a Monte Carlo
simulation model which takes into account the market-based performance conditions attaching to those shares. The assumptions used in
calculating fair value are as follows:
Unapproved and Approved Share Option Schemes
Date of grant
Holding period restriction
Number of shares awarded
Share price at date of grant
Exercise price
Expected life
Risk-free rate
Volatility
Dividend yield
Fair value per share
Long Term Incentive Plan 2017
Valuation date
Award date
Vesting date
Expected exercise
Type of awards
Holding period restriction
Number of awards at grant
Share price at date of grant
Exercise price
Expected life
Risk-free rate
Volatility
Dividend yield
Fair value per share
22/09/20
N/A
794
3164p
3237p
3.02 years
-0.90%
31.4%
N/A
902p
22/09/20
N/A
9,578
3164p
3237p
3.02 years
0.00%
31.4%
1.1%
993p
22/09/20
2 years
308
3164p
3237p
3.02 years
-0.90%
31.4%
N/A
812p
22/09/20
2 years
618
3164p
3237p
3.02 years
0.00%
31.4%
1.1%
894p
06/09/19
N/A
8,071
3036p
2964p
6.5 years
0.31%
28%
1.00%
928p
Standalone
Nil-cost options
N/A
Conditional
share awards
2 years
Nil-cost options
(CSOP linked and
standalone options)
2 years
10,556
3164p
Nil
3.02 years
-0.10%
31.4%
N/A
2353p
21,114
3164p
Nil
3.02 years
-0.10%
31.4%
1.1%
3062p
3,434
3164p
Nil
3.02 years
-0.10%
31.4%
N/A
2118p
6,869
3164p
Nil
3.02 years
-0.10%
31.4%
1.1%
2756p
15,342
3164p
Nil
3.02 years
-0.10%
31.4%
N/A
2118p
30,687
3164p
Nil
3.02 years
-0.10%
31.4%
1.1%
2756p
26/10/18
& 01/03/19
N/A
6,876
2188p
2166p
6.5 years
1.05%
28%
0.90%
596p
22/09/20
22/09/20
30/06/23
30/06/23
Market value
options
N/A
152,011
3164p
3237p
6.50 years
0.00%
31.4%
1.1%
993p
203
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
26. Share-based Payments continued
Long Term Incentive Plan 2017
Valuation date
Award date
Vesting date
Expected exercise
Type of awards
Holding period restriction
Number of awards at grant
Share price at date of grant
Exercise price
Expected life
Risk-free rate
Volatility
Dividend yield
Fair value per share
Long Term Incentive Plan 2017
Valuation date
Award date
Vesting date
Expected exercise
Type of awards
Holding period restriction
Number of awards at grant
Share price at date of grant
Exercise price
Expected life
Risk-free rate
Volatility
Dividend yield
Fair value per share
Standalone
Nil-cost options
2 years
Conditional
share awards
2 years
Nil-cost options
(CSOP linked and
standalone options)
N/A
11,696
3036p
Nil
3.07 years
0.34%
28.2%
N/A
1872p
23,391
3036p
Nil
3.07 years
0.34%
28.2%
1.0%
2647p
3,661
3036p
Nil
3.07 years
0.34%
28.2%
N/A
1872p
7,323
3036p
Nil
3.07 years
0.34%
28.2%
1.0%
2647p
14,053
3036p
Nil
3.07 years
0.34%
28.2%
N/A
2080p
28,108
3036p
Nil
3.07 years
0.34%
28.2%
1.0%
2941p
06/09/19
06/09/19
30/09/22
30/09/22
Market value
options
N/A
133,929
3036p
2964p
6.50 years
0.34%
28.2%
1.0%
928p
26/10/18 & 01/03/19
26/10/18 & 01/03/19
30/09/21
30/09/21
Standalone
Nil-cost options
2 years
Conditional
share awards
2 years
23,919
2188p
Nil
2.93 years
0.75%
27.95%
0.90%
943p
47,838
2188p
Nil
2.93 years
0.75%
27.95%
0.90%
1939p
4,815
2188p
Nil
2.93 years
0.75%
27.95%
0.90%
943p
9,629
2188p
Nil
2.93 years
0.75%
27.95%
0.90%
1939p
Nil-cost options
(CSOP linked and
standalone options)
N/A
15,374
2188p
Nil
2.93 years
0.75%
27.95%
0.90%
1036p
30,748
2188p
Nil
2.93 years
0.75%
27.95%
0.90%
2131p
Market value
options
N/A
130,209
2188p
2166p
6.5 years
1.05%
27.95%
0.90%
596p
204
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 26. Share-based Payments continued
–
3.0 years
–
2.0 years
–
–
19/10/2020
6,866
3474p
2868p
19/10/2020
41,600
3474p
2868p
Save As You Earn Option Scheme and Global SAYE Scheme
Date of grant
Number of shares awarded
Share price at date of grant
Exercise price
Expected life
– two year scheme
– three year scheme
– five year scheme
Risk-free rate
– two year scheme
– three year scheme
– five year scheme
Volatility
– two year scheme
– three year scheme
– five year scheme
Dividend yield
Fair value per share
– two year scheme
– three year scheme
– five year scheme
28.40%
–
–
1.00%
–
31.80%
–
1.00%
-0.08%
–
–
–
-0.10%
–
–
850p
–
758p
–
–
16/10/2019
20,632
2626p
2571p
2.0 years
–
–
04/10/2019
30,073
2736p
2573p
29/11/18
34,527
2136p
1974p
12/10/17
73,108
2175p
1646p
13/10/16
52,877
1370p
1095p
–
3.0 years
–
–
3.4 years
5.4 years
–
3.25 years
5.25 years
–
3.25 years
5.25 years
0.52%
–
–
32.10%
–
–
1.20%
486p
–
–
–
0.25%
–
–
28.60%
–
1.20%
–
504p
–
–
0.77%
0.91%
–
27.94%
25.09%
0.95%
–
485p
530p
–
0.54%
0.79%
–
21.6%
22.2%
1.91%
–
551p
587p
–
0.22%
0.44%
–
22%
24%
1.51%
–
302p
346p
Expected volatility was determined by calculating the historical volatility of the Group’s share price over its entire trading history.
National Insurance contributions are payable by the Company in respect of some of the share-based payments. These contributions are
payable on the date of exercise based on the intrinsic value of the share-based payments and are therefore treated as cash settled awards.
The Group had an accrual at 30 June 2021 of £1.5 million (2020: £0.6 million), of which £0.3 million (2020: £0.1 million) related to vested
options. The total charge to the Consolidated Income Statement within administrative expenses in respect of share-based payments was:
Equity settled share-based transactions
Cash settled share-based transactions
27. Changes in Net Debt
Cash and cash equivalents
Lease liabilities within one year
Bank loans within one year
Lease liabilities after one year
Bank loans and senior loan notes after
one year
Net debt
2021
£m
2.8
0.9
3.7
2020
£m
1.5
–
1.5
At
1 July 2020
£m
227.4
(3.2)
(1.4)
(11.8)
(338.6)
(127.6)
Cash
flows
£m
(102.1)
4.1
1.4
–
14.5
(82.1)
New lease
liabilities
£m
–
–
–
(5.8)
Foreign
exchange
movements
£m
(6.9)
–
–
0.4
Other
non-cash
movements
£m
–
(4.0)
–
4.4
At
30 June 2021
£m
118.4
(3.1)
–
(12.8)
–
(5.8)
22.0
15.5
(0.6)
(0.2)
(302.7)
(200.2)
205
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
28. Foreign Exchange Rates
The following primary exchange rates have been used in the translation of the results of foreign operations:
Australian Dollar
Brazilian Real
Danish Krone
Euro
US Dollar
29. Acquisitions
Average rate
for 2020
1.8784
5.6245
8.5080
1.1396
1.2601
Closing rate
at 30 June
2020
1.7913
6.6986
8.1681
1.0960
1.2273
Average rate
for 2021
1.8035
7.2518
8.3981
1.1287
1.3466
Closing rate
at 30 June
2021
1.8476
6.8819
8.6664
1.1654
1.3850
Acquisition of Osurnia
On 27 July 2020, the Group completed the acquisition of the worldwide rights of the Osurnia product portfolio from Elanco Animal Health
Incorporated for a total consideration of USD135.0 million (£106.5 million). The Group has adopted the amendments to IFRS 3 ‘Business
Combinations’ and applied the optional concentration test for this transaction. Accordingly, it has been concluded that substantially all
the value arising from the transaction relates to the product rights which are recognised as an intangible asset. The total intangible asset
recognised in relation to this acquisition is £106.5 million. A payment of £4.7 million was also made for inventory.
Prior Year Acquisitions
Following the acquisition of 100% of the share capital of Ampharmco LLC and its associated companies Dragon Fire Holdings LLC and Black
Griffin Holdings LLC (collectively Ampharmco), together with its manufacturing site based in Fort Worth, Texas in August 2019, the disclosure
of final fair values of the assets and liabilities acquired has been included in the financial statements for the year ended 30 June 2020.
206
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 30. Contingent Consideration Liabilities
Contingent consideration – less than one year
Contingent consideration – more than one year
2021
£m
22.6
57.6
80.2
2020
£m
8.9
47.3
56.2
The consideration for certain acquisitions and licensing agreements includes amounts contingent on future events such as development
milestones or sales performance. The Group has provided for the fair value of this contingent consideration as follows:
As at 1 July 2019
Additions
Remeasurement through intangibles
Cash payments: investing activities
Finance expense
Foreign exchange adjustments
At 30 June 2020
Additions
Remeasurement through intangibles
Cash payments: investing activities
Finance expense
Foreign exchange adjustments
At 30 June 2021
Tri-Solfen®
£m
22.0
–
9.9
–
0.4
0.7
33.0
24.7
2.3
(2.8)
0.6
(1.6)
56.2
StrixNB® &
DispersinB®
£m
0.7
0.2
–
(0.1)
–
–
0.8
–
0.1
(0.3)
–
–
0.6
Injectable
Solution 1
£m
4.4
–
0.2
(1.5)
0.1
0.1
3.3
–
(0.6)
(0.8)
–
(0.3)
1.6
Injectable
Solution 2
£m
5.2
–
–
(0.9)
0.1
–
4.4
–
(2.3)
(0.2)
–
(0.1)
1.8
Mirataz
£m
–
10.9
–
–
–
–
10.9
–
5.4
(0.6)
0.1
(1.4)
14.4
Phycox®
£m
2.2
–
0.8
(0.8)
–
0.1
2.3
–
(0.1)
(0.9)
0.1
(0.2)
1.2
Other
£m
1.5
0.2
–
(0.2)
–
–
1.5
3.2
0.1
(0.4)
0.2
(0.2)
4.4
Total
£m
36.0
11.3
10.9
(3.5)
0.6
0.9
56.2
27.9
4.9
(6.0)
1.0
(3.8)
80.2
The table below shows on an indicative basis the sensitivity to reasonably possible changes in key inputs to the valuations of the contingent
consideration liabilities. There will be a corresponding opposite impact on the intangible asset.
Tri-Solfen®
StrixNB® &
DispersinB®
Injectable
Solution 1
Injectable
Solution 2
Mirataz
Phycox®
Other
Increase/(decrease) in financial liability
10% increase in royalty forecasts £m
10% decrease in royalty forecasts £m
1% increase in discount rates £m
1% decrease in discount rates £m
5% appreciation in currency £m
5% depreciation in currency £m
Discount rate range in 2021
financial year
Discount rate range in 2020
financial year
3.5
(3.5)
(3.7)
3.7
(2.7)
2.7
0.1
(0.1)
–
–
–
–
N/A
N/A
–
–
(0.1)
0.1
N/A
N/A
–
–
(0.1)
0.1
1.4
(1.4)
(0.7)
0.7
(0.7)
0.7
0.1
(0.1)
–
–
(0.1)
0.1
0.2
(0.2)
(0.1)
0.1
(0.2)
0.2
0.0%–19.7% 10.4%–11.7%
9.2%
9.2% 7.5%–9.9%
10.4% 8.6%–10.4%
2.5%–16.6% 10.1%–13.1%
9.2%
9.2% 6.8%–10.2%
10.1%
9.4%
Aggregate cash outflow in relation to royalties (remaining term of royalty agreement)
2021 £m (years)
2020 £m (years)
58.5 (10.0)
50.6 (10.0)
0.8 (6.0)
1.1 (7.0)
N/A
N/A
N/A
N/A
22.5 (9.5)
17.6 (10.0)
1.3 (2.5)
2.8 (3.5)
3.4 (10.0)
N/A
207
Stock Code: DPHFinancial Statements Notes to the Consolidated Financial Statements
continued
30. Contingent Consideration Liabilities continued
The consideration payable for Tri-Solfen® is expected to be payable over a number of years, and relates to development milestones and sales
performance. During the year, the development milestones and sales performance royalties have been remeasured. On 5 February 2021,
the Group entered into a licensing agreement with Animal Ethics Pty Ltd for the marketing authorisations of Tri-Solfen® in Australia and New
Zealand for a total consideration of AUD31.0 million (£17.2 million) and sales performance royalties. At 30 June 2021, AUD26.0 million
(£14.1 million) of the total consideration was not discounted given that settlement took place in July 2021. The remaining liability was
discounted between 1.2% and 19.7%. The broad range of discount rates in respect of this licensing agreement reflects the commercial
makeup of the arrangement, with discount rates for milestone payments related to regulatory approvals being lower and based on a cost
of debt approach and those with more variability in timing and quantum of future cash flows being higher and based on a CAPM-based
approach, also taking into account systematic risk associated with elements of the future cash flows.
The consideration payable for Mirataz relates to sales performance and is expected to be payable over a number of years.
The consideration payable for StrixNB® and DispersinB® is expected to be payable over a number of years, and relates to sales performance.
During the year the contingent consideration has been remeasured based on management’s best estimate of forecasted sales performance.
An Addendum to the contract was agreed during the year for a development milestone and sales performance in the Brazilian market.
The consideration for two separate licensing agreements for injectable solutions both relate to development milestones. Phycox relates
to sales performance and arose as part of the acquisition of the trade and assets of PSPC Inc. in 2014.
Where a liability is expected to be payable over a number of years the total estimated liability is discounted to its present value. With the
exception of Phycox, all contingent consideration liabilities relate to licensing agreements.
31. Related Party Transactions
Subsidiaries
The Group’s ultimate Parent Company is Dechra Pharmaceuticals PLC. A listing of subsidiaries is shown within the financial statements of the
Company on pages 218 to 220.
Transactions with Key Management Personnel
The details of the remuneration, Long Term Incentive Plans, shareholdings, share options and pension entitlements of individual Directors are
included in the Directors’ Remuneration Report on pages 129 to 139. The remuneration of key management is disclosed in note 8.
Associates
On 5 February 2021, the Group entered into a licensing agreement with Animal Ethics Pty Ltd for the marketing authorisations of Tri-Solfen® in
Australia and New Zealand for a total consideration of AUD31.0 million (£17.2 million). An upfront payment of AUD5.0 million (£2.8 million) was
payable on signing, with the balance of the payment made in July 2021 on the first commercial sale by Dechra into the Australian market. A royalty
will also be paid on net sales. The Group also acquired a further 1.5% of the issued share capital of Medical Ethics Pty Ltd, the parent company
of Animal Ethics, for a total consideration of AUD1.5 million (£0.8 million) from the current shareholders. Following this acquisition the Group holds
49.5% of the issued share capital of Medical Ethics Pty Ltd, and this has not resulted in a change of control or accounting treatment of the entity.
Refer to note 6 for further information on the results of the associate in the period.
In 2017 the Group entered into a licensing agreement with Animal Ethics Pty Ltd for Tri-Solfen® for which the fair value of associated contingent
consideration is disclosed in note 30.
32. Off Balance Sheet Arrangements
The Group has no off balance sheet arrangements to disclose as required by S410A of the Companies Act 2006.
33. Contingent Liabilities
The Group continues to monitor developments in relation to EU State Aid investigations. On 25 April 2019, the EU Commission’s final decision
regarding its investigation into the UK’s Controlled Foreign Company (CFC) regime was published. It concluded that the legislation up until
December 2018 does partially represent State Aid. The Group considers that the potential amount of additional tax payable remains between
£nil and £4.0 million depending on the basis of calculation and the outcome of HMRC’s appeal to the EU Commission. Based on current
advice, the Group does not consider any provision is required in relation to this investigation. This judgement is based on current interpretation
of legislation and professional advice.
During the period, the Group received charging notices from HMRC under The Taxation (Post Transition Period) Bill for part of the exposure
(£2.75 million) and has paid this to HMRC. As the Group considers that the appeal will be successful, the charging notices have been settled in
full and a current asset has been recorded in respect of the payment on the basis that the amount will be repaid in due course.
At 30 June 2021, contingent liabilities arising in the normal course of business amounted to £13.0 million (2020: £11.4 million) relating to
licence and distribution agreements. The stage of development of the projects underpinning the agreements dictates that a commercially
stable product is yet to be achieved, and accordingly an intangible asset and a contingent consideration liability have not been recognised.
208
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements 34. Subsequent Events
On 2 July 2021 the Group acquired the marketing rights to two anaesthesia products for an initial payment of USD1.25 million. A final payment of
USD10.75 million will be made on 30 December 2021.
35. Underlying Operating Profit, EBITDA and Profit Before Taxation reconciliation
Operating profit
Underlying operating profit/EBIT is calculated as follows:
Operating profit
Non-underlying operating expenses (note 5)
Underlying operating profit/EBIT
Depreciation
Amortisation and impairment
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA)
Profit before taxation
Underlying profit before taxation is calculated as follows:
Profit before taxation
Non-underlying operating expenses
Amortisation of fair value adjustments relating to Medical Ethics (net of tax)
Fair value and other movements on contingent consideration
Loss on extinguishment of debt
Underlying profit before taxation
2021
£m
84.0
78.2
162.2
11.0
4.5
177.7
74.0
78.2
0.7
(2.8)
–
150.1
2020
£m
52.2
76.1
128.3
9.9
4.3
142.5
40.9
76.1
0.6
1.5
1.0
120.1
209
Stock Code: DPHFinancial Statements Company Statement of Financial Position
At 30 June 2021
Non-current assets
Investments
Intangible assets
Tangible assets
Current assets
Trade and other receivables (includes amounts falling due after more than one year of £47.9 million
(2020: £47.6 million))
Cash at bank and in hand
Borrowings
Trade and other payables
Net current assets
Total assets less current liabilities
Non-current liabilities
Borrowings
Net assets
Equity
Called up share capital
Share premium account
Foreign currency translation reserve
Merger reserve
At 1 July
Profit for the year attributable to the owners
Other changes in retained earnings
Retained earnings
Total shareholders’ funds
Note
iv
v
vi
vii
viii
x
ix
x
xii
2021
£m
758.9
8.1
1.1
768.1
91.1
82.0
173.1
(0.2)
(153.1)
19.8
787.9
(138.8)
649.1
1.1
411.6
0.6
82.6
137.2
50.2
(34.2)
153.2
649.1
2020
£m
743.6
9.3
1.2
754.1
110.7
200.1
310.8
(0.2)
(267.3)
43.3
797.4
(166.6)
630.8
1.1
409.3
0.6
82.6
136.6
32.3
(31.7)
137.2
630.8
The financial statements were approved by the Board of Directors on 6 September 2021 and are signed on its behalf by:
Ian Page
Chief Executive Officer
6 September 2021
Paul Sandland
Chief Financial Officer
6 September 2021
Company number: 3369634
210
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements Company Statement of Changes in
Shareholders’ Equity
For the year ended 30 June 2021
Year ended 30 June 2020
At 1 July 2019
Profit for the period
Total comprehensive income
Transactions with owners
Dividends paid
Share-based payment charge
Shares issued
Total contributions by and distributions to owners
At 30 June 2020
Year ended 30 June 2021
At 1 July 2020
Profit for the period
Total comprehensive income
Transactions with owners
Dividends paid
Share-based payment charge
Shares issued
Total contributions by and distributions to owners
At 30 June 2021
Called up
share
capital
£m
Share
premium
account
£m
Foreign
currency
translation
reserve
£m
Merger
reserve
£m
Retained
earnings
£m
Total
shareholders’
funds
£m
1.0
–
–
–
–
0.1
0.1
1.1
1.1
–
–
–
–
–
–
1.1
277.9
–
–
–
–
131.4
131.4
409.3
409.3
–
–
–
–
2.3
2.3
411.6
0.6
–
–
–
–
–
–
0.6
0.6
–
–
–
–
–
–
0.6
82.6
–
–
–
–
–
–
82.6
82.6
–
–
–
–
–
–
82.6
136.6
32.3
32.3
(33.3)
1.6
–
(31.7)
137.2
137.2
50.2
50.2
(37.9)
3.7
–
(34.2)
153.2
498.7
32.3
32.3
(33.3)
1.6
131.5
99.8
630.8
630.8
50.2
50.2
(37.9)
3.7
2.3
(31.9)
649.1
Refer to the Group notes for dividend paid (note 10), share-based payment charge (note 26) and shares issued (note 25).
211
Stock Code: DPHFinancial Statements Notes to the Company Financial Statements
(i) Principal Accounting Policies of the Company
Accounting Principles
The separate financial statements of the Company have been prepared on a going concern basis, under the historical cost convention,
in accordance with applicable UK accounting standards and the Companies Act 2006.
Basis of Preparation
The Directors opted to prepare the financial statements for the year ended 30 June 2021 in accordance with FRS 101 ‘Reduced Disclosure
Framework’ and the Companies Act 2006. The principal accounting policies applied in the preparation of these financial statements are set
out below, and have been applied consistently.
No income statement is presented for the Company as permitted by Section 408(2) and (3) of the Companies Act 2006. The profit within the
accounts of the Company was £50.2 million (2020: £32.3 million). The going concern of the Company is wholly interdependent on the going
concern basis of the Group, which is considered in Note 1(b).
The following exemptions have been taken in preparing the financial statements:
a.
b.
c.
d.
e.
f.
g.
The requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 ‘Share-based Payment’, exempting the Company from preparing share
based payment disclosures.
The requirements of IFRS 7 ‘Financial Instruments: Disclosures’
The following requirements of IAS 1:
−
−
−
−
−
Paragraphs 10(d) and 111, exempting the Company from providing a cash flow statement and information;
Paragraph 16, exempting the Company from providing a statement of compliance with all IFRSs;
Paragraph 38A, exempting the Company from the requirement for a minimum of two of each primary statement and the related notes;
Paragraph 38B to D, exempting the Company from the requirement to present additional comparative information; and
Paragraphs 134 to 136, exempting the Company from presenting Capital Management disclosures.
The requirements of IAS 7 ‘ Statement of Cash Flows’, exempting the company from preparing a cash flow statement.
The requirements of paragraph 17 of IAS 24 ‘Related Party Disclosures’, exempting the Company from disclosing details of all key
management compensation.
The requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party transactions with wholly-owned members of the Group.
The requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ exempting the
company from disclosing the impact of new accounting standards that have been issued but are not yet effective.
Adoption of New and Revised Standards
A number of amendments to IFRSs became effective for the financial year beginning on 1 July 2020. None of these standards had any impact
on the Company’s accounting policies and did not require retrospective adjustments.
Investments
Investments held as fixed assets are stated at cost less any impairment losses. Where the consideration for the acquisition of a subsidiary
undertaking includes shares in the Company to which the provisions of section 612 of the Companies Act 2006 apply, cost represents
the nominal value of the shares issued together with the fair value of any additional consideration given and costs. Where investments are
denominated in foreign currencies, they are treated as monetary assets and revalued at each year end date.
Intangible Assets
Intangible assets are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the income statement
on a straight line basis over the estimated useful economic life of the asset. The estimated useful lives are:
• product rights
• software
10 to 15 years
5 to 7 years
Tangible Assets
Tangible assets are stated at cost less accumulated depreciation and impairment losses. Depreciation is charged to the income statement
on a straight line basis over the estimated useful economic life of the asset. The estimated useful lives are:
• short leasehold buildings
• motor vehicles
• plant and fixtures
period of lease
4 years
3 to 15 years
212
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements (i) Principal Accounting Policies of the Company continued
Dividends
Dividends are recognised in the period in which they are approved by the Company’s shareholders or, in the case of an interim dividend, when
the dividend is paid. Dividends receivable from subsidiaries are recognised when either received in cash or applied to reduce a creditor balance
with the subsidiary.
Interest-Bearing Borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income
statement over the period of the borrowings on an effective interest basis.
Employee Benefits
(a) Pensions
The Company operates a Group stakeholder personal pension scheme for certain employees. Obligations for contributions are
recognised as an expense in the income statement as incurred.
(b) Share-based Payment Transactions
The Company operates a number of equity settled share-based payment programmes that allow employees to acquire shares of the
Company. The Company also operates Long Term Incentive Plans for Directors and Senior Executives.
The fair value of shares or options granted is recognised as an employee expense on a straight-line basis in the income statement with
a corresponding movement in equity. The fair value is measured at grant date and spread over the period during which the employees
become unconditionally entitled to the shares or options (the vesting period). The fair value of the shares or options granted is measured
using a valuation model, taking into account the terms and conditions upon which the shares or options were granted. The amount
recognised as an expense in the income statement is adjusted to take into account an estimate of the number of shares or options that
are expected to vest together with an adjustment to reflect the number of shares or options that actually do vest except where forfeiture
is only due to market-based conditions not being achieved.
The fair values of grants under the Long Term Incentive Plan have been determined using the Monte Carlo simulation model. The fair
values of options granted under all other share option schemes have been determined using the Black–Scholes option pricing model.
National Insurance contributions payable by the Company on the intrinsic value of share-based payments at the date of exercise are
treated as cash settled awards and revalued to market price at each statement of financial position date. Where the Company grants
options over its own shares to the employees of its subsidiaries, it recharges the expense to those subsidiaries.
Foreign Currency
Foreign currency transactions are translated into Sterling using the exchange rates prevailing at the dates of the transactions. Monetary
assets and liabilities are translated at the closing rate at the reporting date. Foreign exchange gains and losses are recognised in the income
statement.
Taxation
The income tax expense or credit for the period is the tax payable on the current period’s taxable income, based on the applicable income
tax rate for the UK, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially
enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability
is settled. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary
differences and losses. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity.
Financial Guarantee Contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group, the
Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee
contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the
guarantee.
Amounts owed by Subsidiary Undertakings
Amounts owed by subsidiary undertakings are initially recognised at fair value and subsequently measured at this value less loss allowances,
calculated using the three stage IFRS 9 model.
213
Stock Code: DPHFinancial Statements Notes to the Company Financial Statements
continued
(ii) Directors and Employees
Total emoluments of Directors (including pension contributions) amounted to £4.4 million (2020: £2.8 million). Information relating to Directors’
emoluments, share options and pension entitlements is set out in the Directors’ Remuneration Report on pages 129 to 139. Tony Griffin’s
remuneration is paid by Eurovet Animal Health B.V. in Euros but reported in Sterling for the purposes of these figures. The exchange rate
used was 1.1287 (2020: 1.096).
Administration
Total
The costs incurred in respect of these employees were:
Wages and salaries
Social security costs
Other pension costs
Share-based payments charge (see note 26)
Total
2021
Number
65
65
2020
Number
53
53
2021
£m
6.4
0.9
0.3
3.7
11.3
2020
£m
5.0
0.7
0.2
1.5
7.4
The Group operates a stakeholder personal pension scheme for certain employees and contributed between 4% and 14% of pensionable
salaries. Total pension contributions amounted to £0.3 million (2020: £0.2 million).
(iii) Profit Before Taxation
The following items have been included in arriving at profit before taxation of continuing operations:
Depreciation of property, plant and equipment
– owned assets
– right-of-use assets
Amortisation of intangible assets
Lease rental payables in respect of low value assets
Auditors’ remuneration – audit of these financial statements
(iv) Investments
Cost
At 1 July 2020
Additions
Disposals
At 30 June 2021
Impairment
At 1 July 2020
Charge for the period
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
2021
£m
0.1
0.2
2.6
–
0.1
2020
£m
0.1
0.2
2.2
–
0.1
Shares in
subsidiary
undertakings
£m
755.8
237.5
(222.2)
771.1
12.2
–
12.2
758.9
743.6
On 21 December 2021, the Company invested £15.3 million into the share capital of Eurovet Animal Health BV, a wholly owned subsidiary.
On 31 December 2021, the Company sold its shares in Eurovet Animal Health BV, Dechra Regulatory BV and Dechra Finance BV to Dechra
Holdings Netherlands BV, in exchange for shares in Dechra Holdings Netherlands BV.
A list of subsidiary undertakings is given in note (xiii).
214
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements (v)
Intangible Assets
Cost
At 1 July 2020
Additions
At 30 June 2021
Accumulated Amortisation
At 1 July 2020
Charge for the year
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
(vi) Tangible Assets
Cost
At 1 July 2020
Additions
At 30 June 2021
Accumulated Depreciation
At 1 July 2020
Charge for the year
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
Net book value of right-of-use assets
At 30 June 2021
At 30 June 2020
Depreciation charge of right-of-use assets
2021
2020
Included in additions are £0.2 million (2020: £0.2 million) of right-of-use assets.
Product
Rights
£m
Software
£m
Total Intangible
assets
£m
5.1
–
5.1
4.3
0.5
4.8
0.3
0.8
12.2
1.4
13.6
3.7
2.1
5.8
7.8
8.5
Short
leasehold
buildings
£m
Motor
vehicles
£m
Plant and
fixtures
£m
1.0
–
1.0
0.2
0.1
0.3
0.7
0.8
0.7
0.8
0.1
0.1
0.3
0.2
0.5
0.1
0.1
0.2
0.3
0.2
0.3
0.2
0.1
0.1
0.7
–
0.7
0.5
0.1
0.6
0.1
0.2
–
–
–
–
17.3
1.4
18.7
8.0
2.6
10.6
8.1
9.3
Total
£m
2.0
0.2
2.2
0.8
0.3
1.1
1.1
1.2
1.0
1.0
0.2
0.2
215
Stock Code: DPHFinancial Statements Notes to the Company Financial Statements
continued
(vii) Trade and Other Receivables
Amounts owed by subsidiary undertakings
Group relief receivable
Deferred taxation (see note (xi))
Other receivables
Prepayments and accrued income
2021
£m
84.8
2.5
1.5
1.5
0.8
91.1
2020
£m
104.7
3.8
0.4
1.0
0.8
110.7
Included in debtors are amounts of £1.5 million (2020: £0.4 million) due after more than one year relating to deferred tax assets.
Of the amounts owed by subsidiary undertakings, £46.4 million is due after more than one year (2020: £47.2 million). This is made up of
a balance of £0.9 million repayable in 2023 (interest of 1.5% above LIBOR), and a balance of £45.5 million repayable in 2027 (interest of 1.7%).
The remaining amounts owed by subsidiary undertakings of £38.4 million is unsecured and repayable on demand. Of the £38.4 million,
£29.0 million attracts interest of between 0.98% and 2.43% above LIBOR, with the remaining trade balance of £9.4 million being interest free.
The provision for impairment against amounts owed by subsidiary undertakings is immaterial and has been considered in accordance with
IFRS 9.
(viii) Cash at Bank and in Hand
Cash at bank and in hand
(ix) Trade and Other Payables
Trade payables
Other payables
Amounts due to subsidiary undertakings
Other taxation and social security
Accruals and deferred income
2021
£m
82.0
82.0
2021
£m
1.3
0.1
144.7
–
7.0
153.1
2020
£m
200.1
200.1
2020
£m
1.2
–
261.2
0.2
4.7
267.3
Amounts due to subsidiary undertakings are primarily unsecured and repayable on demand. £116.1 million attracts interest between 0.12%
and 0.25% below LIBOR, the balance is interest free.
In accordance with IAS 10 ‘Events after the Balance Sheet Date’, the proposed final dividend for the year ended 30 June 2021 of 29.39 pence
per share (2020: 24.00 pence per share) has not been accrued for in these financial statements. It will be shown in the financial statements for
the year ending 30 June 2022. The total cost of the proposed final dividend is £31.8 million (2020: £25.9 million).
(x) Borrowings
Borrowings due within one year
Lease liabilities
Borrowings due after more than one year
Aggregate bank loan and lease liabilities instalments repayable:
– between one and two years
– between two and five years
– over five years
Arrangement fees netted off
Total borrowings
216
2021
£m
0.2
0.2
25.2
115.5
(2.1)
138.8
139.0
2020
£m
0.2
0.2
41.5
127.6
(2.7)
166.6
166.8
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements (x) Borrowings continued
At 30 June 2021, £25.0 million was drawn against the £340.0 million Revolving Credit Facility maturing 25 July 2024 in the Company. Interest
is charged on this facility at a minimum of 1.30% over LIBOR and a maximum of 2.20% over LIBOR, dependent upon the Leverage (the ratio
of Total Net Debt to Adjusted EBITDA) of the Group. As at 30 June 2021, interest being charged on this facility is 1.50% above LIBOR.
In January 2020 the Company undertook a Private Placement raising EUR50.0 million and USD100.0 million (under seven and ten year new
senior secured notes respectively) which remains fully drawn at 30 June 2021 amounting to £115.1 million. The Private Placement amounts are
not secured on any specific assets of the Group, but are supported by a joint and several guarantee structure. Interest is charged on the EUR50.0
million amount at a fixed rate of 1.19% until maturity (January 2027). Interest is charged on the USD100.0 million amount at a fixed rate of 3.34%
until maturity (January 2030).
No interest has been capitalised during the year (2020: £nil).
Contingent Liabilities
The Company guarantees certain borrowings of other Group companies under the above facilities, which at 30 June 2021 amounted to
£164.7 million (2020: £174.3 million).
(xi) Deferred Tax
At 1 July 2020 (included in trade and other receivables)
Recognised in the income statement
Recognised in equity/OCI
At 30 June 2021 (included in trade and other receivables)
Deferred tax has been calculated using the rate of 19.0% or 25.0% based on the timing of when each individual deferred tax balance is
expected to reverse in the future as follows (2020: 17.0% or 19.0%):
Short term timing differences
Accelerated capital allowances
2021
£m
1.7
(0.2)
1.5
£m
0.4
0.4
0.7
1.5
2020
£m
0.7
(0.3)
0.4
Deferred tax assets in relation to losses amounting to £nil (2020: £nil) have not been recognised due to uncertainty over their recoverability.
(xii) Called up Share Capital
Issued share capital
Allotted, called up and fully paid at 1 July 2020
New shares issued
Allotted, called up and fully paid at 30 June 2021
Ordinary shares
of 1p each
£m
1.1
0.0
1.1
Number
108,010,960
204,363
108,215,323
Details of new ordinary shares issued following the exercise of options under the Long Term Incentive Plan and the Approved, Unapproved and
SAYE Share Option Schemes are shown in notes 25 and 26 to the Consolidated Financial Statements.
Share Options
Details of outstanding share options over ordinary shares of 1 pence at 30 June 2021 under the various Group share option schemes are
shown in note 26 to the Consolidated Financial Statements.
217
Stock Code: DPHFinancial Statements Dechra Holdings US Inc
Dechra Investments Limited
Dechra Limited
Dechra Holdings
Netherlands B.V.
Dechra Limited
Dechra Pharmaceuticals
PLC & Dechra Finance
Sterling Limited
Dechra Pharmaceuticals
PLC
Notes to the Company Financial Statements
continued
(xiii) Subsidiary Undertakings
Operating Subsidiaries
Name
Ampharmco, LLC
Country of
Incorporation
USA
Principal Activity
Manufacturer of veterinary
pharmaceuticals
AST Farma B.V.
The Netherlands Marketer of veterinary pharmaceuticals
and distributor of veterinary
pharmaceuticals and equipment
Registered Address
1401 Joel East Road, Fort Worth, TX76140-
6003, United States
Shareholder
Dechra Holdings US Inc
Wilgenweg 7, 3421TV Oudewater,
The Netherlands
Dechra Finance B.V.
Dechra Brasil Produtos
Veterinarios LTDA
Dechra Development
LLC
Brazil
USA
Contract regulatory and product
development services for the Group
Developer, regulatory, manufacturer and
marketer of veterinary pharmaceuticals
Travessa Dalva de Oliveira, 237, Industrias
Leves, Londrina, Parana 86030-370, Brazil
AST Farma B.V.
Dechra Limited
England and
Wales
Developer, regulatory, product
development, manufacturer and
marketer of veterinary pharmaceuticals
Dechra Finance
Australia Limited
England and
Wales
Financial services
Principal Place of Business: 7015 College
Blvd, Suite 510, Overland Park KS 66211,
United States
Snaygill Industrial Estate, Keighley Road,
Skipton, BD23 2RW, United Kingdom
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9
7UA, United Kingdom
Dechra Finance B.V.
The Netherlands
Financial services and Holding Company Pettelaarpark 38, 5216PD
Dechra Finance Ireland
Designated Activity
Company
Dechra Finance Limited
Republic of
Ireland
England and
Wales
Financial services
‘s-Hertogenbosch, The Netherlands
6th Floor, 2 Grand Canal Square, Dublin 2,
Ireland
Financial services and Holding Company 24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9
7UA, United Kingdom
Dechra Finance Sterling
Limited
England and
Wales
Financial services
Dechra Regulatory B.V.
The Netherlands
Regulatory
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9
7UA, United Kingdom
Handelsweg 25, 5531AE Bladel,
The Netherlands
Dechra Holdings
Netherlands B.V.
Australia
Austria
Belgium
Canada
Denmark
Developer, regulatory, manufacturer and
marketer of veterinary pharmaceuticals
2 Cal Close, Somersby NSW 2250,
Australia
Dechra Holding Australia
Pty Limited
Marketer of veterinary pharmaceuticals
and pet diets
Hintere Achmhlerstrasse 1a, 6850 Dornbirn,
Austria
Dechra Limited
Marketer of veterinary pharmaceuticals
and pet diets
Marketer of veterinary pharmaceuticals
and pet diets
Marketer of veterinary pharmaceuticals
and pet diets
Achterstenhoek 48 2275 Lille, Belgium
Eurovet Animal Health B.V.
100 King Street West, Suite 6100, 1 First
Canadian Place, Toronto ON M5X 1B8,
Canada
Mekuvej 9, DK-7171 Uldum, Denmark
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9
7UA, United Kingdom
Dechra Limited
Dechra Pharmaceuticals
PLC
Dechra Veterinary Products
A/S
England and
Wales
Marketer of veterinary pharmaceuticals
and pet diets
Finland
France
Germany
Italy
Marketer of veterinary pharmaceuticals
and pet diets
Linnoitustie 4, 02600 Espoo,
Finland
Dechra Veterinary Products
A/S
Marketer of veterinary pharmaceuticals
and pet diets
60 Avenue du Centre, 78180 Montigny le
Bretonneux, France
Dechra Veterinary Products
A/S
Marketer of veterinary pharmaceuticals
and distributor of veterinary
pharmaceuticals and equipment
Hauptstr. 6-8, Aulendorf, Germany
Eurovet Animal Health B.V.
Marketer of veterinary pharmaceuticals
and pet diets
Via Agostino da Montefeltro 2, 10134
Torino, Italy
Dechra Limited
The Netherlands Marketer of veterinary pharmaceuticals
and pet diets
Wilgenweg 7, 3421TV Oudewater,
The Netherlands
Dechra Veterinary Products
A/S
Dechra Veterinary
Products (Australia) Pty
Limited
Dechra Veterinary
Products GmbH
Dechra Veterinary
Products N.V.
Dechra Veterinary
Products, Inc
Dechra Veterinary
Products A/S
Dechra Veterinary
Products Limited
Dechra Veterinary
Products Oy
Dechra Veterinary
Products SAS
Dechra Veterinary
Products Deutschland
GmbH
Dechra Veterinary
Products S.r.l.
Dechra Veterinary
Products B.V.
218
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements Principal Activity
Marketer of veterinary pharmaceuticals
and distributor of veterinary
pharmaceuticals and equipment
Registered Address
Level 11, 41 Shortland Street, Auckland,
1010, New Zealand
Shareholder
Dechra Holding Australia
Pty Limited
Marketer of veterinary pharmaceuticals
and pet diets
Henrik Ibsens Gate 90, Postboks 2943 Solli,
0230 Oslo, Norway
Dechra Veterinary Products
A/S
Marketer of veterinary pharmaceuticals
and pet diets
1st Floor, 61 Moldlinska Str., 03-199
Warsaw, Poland
Dechra Limited
Marketer of veterinary pharmaceuticals
and pet diets
Tuset 20, 6º, 08006, Barcelona, Spain
Marketer of veterinary pharmaceuticals
and pet diets
Dechra Veterinary
Products, LLC
USA
Marketer of veterinary pharmaceuticals
and pet diets
Mexico
Developer, regulatory and marketer of
veterinary pharmaceuticals
Principal Place of Business: Stora Wäsby
Orangeriet 3, Upplands Väsby, 194 37,
Sweden
Principal Place of Business: 7015 College
Blvd, Suite 525, Overland Park KS 66211,
United States
Campus Corporativo Coyoacán Avenida
Coyoacán número 1622 Colonia Del Valle
C.P. 03100 Delegación Benito Juárez
Ciudad de México, México
Dechra Veterinary Products
A/S
Dechra Veterinary Products
A/S
Dechra Holdings US Inc
Dechra Limited
(xiii) Subsidiary Undertakings continued
Name
Dechra Veterinary
Products NZ Limited
Dechra Veterinary
Products AS
Dechra Veterinary
Products Sp. z o.o.
Dechra Veterinary
Products, S.L.
Unipersonal
Dechra Veterinary
Products AB
Country of
Incorporation
New Zealand
Norway
Poland
Spain
Sweden
Dechra Productos
Veterinarios, S.A. de
C.V. (Formerly
Dechra-Brovel, S.A.
de C.V.)
Eurovet Animal Health
B.V.
The Netherlands
Genera d.d.
Croatia
Genera d.o.o Sarajevo
Bosnia and
Herzegovina
Holding Company, developer, regulatory,
manufacturer and marketer of veterinary
pharmaceuticals
Holding Company, developer, regulatory,
manufacturer and marketer of veterinary
pharmaceuticals and crop protection
Marketer of veterinary pharmaceuticals
Handelsweg 25, 5531AE Bladel,
The Netherlands
Dechra Holdings
Netherlands B.V.
Svetonedeljska cesta 2, Kalinovica, 10436
Rakov Potok, Croatia
Eurovet Animal Health B.V.
Trg medunarodnog prijateljstva 10,
71000 Sarajevo,
Bosnia and Herzegovina
Genera d.d.
Gostivarska 70, Vozdovac, 11000 Beograd,
Serbia
Genera d.d.
Genera Pharma d.o.o.
Serbia
Marketer of veterinary pharmaceuticals
Genera Sl d.o.o
Slovenia
Marketer of veterinary pharmaceuticals
Parmova Ulica, Ljubljana, Slovenia
Genera d.d.
Le Vet. Beheer B.V.
The Netherlands
Holding Company
Wilgenweg 7, 3421TV Oudewater,
The Netherlands
Dechra Finance B.V.
Le Vet. B.V.
The Netherlands Marketer of veterinary pharmaceuticals Wilgenweg 7, 3421TV Oudewater,
Le Vet Beheer B.V.
The Netherlands
219
Stock Code: DPHFinancial Statements Notes to the Company Financial Statements
continued
(xiii) Subsidiary Undertakings continued
Other subsidiaries
Name
Arnolds Veterinary
Products Limited
Country of
Incorporation
England and
Wales
Black Griffin Holdings,
LLC
USA
Principal Activity
Non-trading
Holding Company
Broomco 4263 Limited
England and
Wales
Non-trading
Dales Pharmaceuticals
Limited
England and
Wales
Non-trading
Australia
Holding Company
Brazil
Holding Company
Dechra Holding
Australia Pty Limited
Dechra Holdings Brasil
Ltda (merged with
and into Dechra Brasil
Produtos Veterinarios
LTDA as of 18 January
2021)
Dechra Holdings US Inc USA
Holding Company
Dechra Investments
Limited
England and
Wales
Holding Company
Dechra Holdings
Netherlands B.V.
The Netherlands
Holding Company
Dragon Fire Holdings,
LLC
DermaPet, Inc
USA
USA
Holding Company
Non-trading
Farvet Laboratories B.V. The Netherlands
Non-trading
Veneto Limited
England and
Wales
Holding Company
Registered Address
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9
7UA, United Kingdom
1401 Joel East Road, Fort Worth TX TX
76140-6003, United States
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9
7UA, United Kingdom
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9
7UA, United Kingdom
2 Cal Close, Somersby NSW 2250,
Australia
Travessa Dalva de Oilveira No. 237, office
ADM I, Industrias Leves, Londrina, Parana
86030-370, Brazil
Shareholder
Veneto Limited
Dechra Holdings US Inc
Veneto Limited
Veneto Limited
Dechra Limited
AST Farma B.V.
Principal Place of Business: 7015 College
Blvd, Suite 525, Overland Park KS 66211,
United States
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9
7UA, United Kingdom
Pettelaarpark 38, 5216PD
‘s-Hertogenbosch, Netherlands
1401 Joel East Road, Fort Worth TX TX
76140-6003, United States
Principal Place of Business: 7015 College
Blvd, Suite 525, Overland Park KS 66211,
United States
Handelsweg 25, 5531AE Bladel,
The Netherlands
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9
7UA, United Kingdom
Dechra Limited
Dechra Pharmaceuticals
PLC
Dechra Pharmaceuticals
PLC
Dechra Holdings US Inc
Dechra Veterinary
Products LLC
Eurovet Animal Health
B.V.
Dechra Pharmaceuticals
PLC
220
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comFinancial Statements Financial History
Consolidated Income Statement
Revenue
Underlying operating profit
Underlying profit after taxation
Underlying earnings per share
– basic (pence)
– diluted (pence)
Dividend per share (pence)
Operating profit
Profit after taxation
Earnings per share
– basic (pence)
– diluted (pence)
Consolidated Statement of Financial Position
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Shareholders’ funds
Consolidated Statement of Cash Flows
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash (outflow)/inflow from financing activities
2021
£m
608.0
162.2
117.6
108.77
108.14
40.50
84.0
55.5
51.33
51.03
2020
£m
515.1
128.3
95.4
92.50
92.19
34.29
52.2
33.9
32.87
32.76
2019
£m
481.8
127.4
92.5
90.24
90.01
31.60
39.0
30.9
30.15
30.07
2018
£m
407.1
99.2
74.5
76.85
76.45
25.50
34.1
36.1
37.24
37.04
2017
£m
359.3
81.3
60.1
64.68
64.33
21.44
33.2
26.1
28.09
27.93
821.9
392.2
(155.8)
(425.4)
632.9
788.7
448.9
(137.3)
(462.8)
637.5
750.0
291.5
(118.1)
(414.3)
509.1
769.4
247.9
(91.6)
(420.7)
505.0
453.1
185.0
(66.4)
(269.1)
302.6
89.1
(136.1)
(55.1)
106.4
(81.5)
118.9
81.8
(61.9)
(20.1)
64.0
(241.7)
193.8
77.4
(57.2)
1.6
221
Stock Code: DPHFinancial Statements Our pet diets support
the wellbeing of
animals with numerous
therapeutic conditions
Read more about Nutrition on
page 15.
Additional Information
Glossary
Shareholder Information
Advisers
224
226
227
Glossary
The following is a glossary of a number of the terms and acronyms
which can be found within this document:
DPM&S
Dechra Pharmaceuticals Manufacturing and Supply
ABC
Anti-Bribery and Anti-Corruption
AER
Actual Exchange Rates
ANZ
Australia and New Zealand
APM
Alternative Performance Measures
BEIS
Department for Business, Energy and Industrial Strategy
BEPS
Base Erosion Profit Shifting
Bioequivalence
The demonstration that the proposed formulation has the same
biological effects as the pioneer product to which it is being compared.
This is usually demonstrated by comparing blood concentrations of the
active over time, but can be compared using a clinical endpoint (e.g.
lowering of a worm count) for drugs that are not absorbed or for which
blood levels cannot be determined
bps
Basis Points
CAGR
Compound Annual Growth Rate
CAP
Companion Animal Products
Capex
Capital Expenditure
Cash Conversion
Cash generated from operating activities before interest and taxation as
a percentage of underlying operating profit
CER
Constant Exchange Rates
CMA
Competition and Markets Authority
CMO
Contract Manufacturing Organisation
Code
UK Corporate Governance Code 2018
CPD
Continuing Professional Development
CRM
Client Relationship Management
CSOP
Company Share Option Plan
Dechra Values or Values
Dedication, Enjoyment, Courage, Honesty, Relationships and Ambition
224
DSC
Dechra Service Center
DTR
Disclosure and Transparency Rules
DVP
Dechra Veterinary Products
DVP EU
Dechra Veterinary Products EU or Dechra Veterinary Products Europe
DVP International
Dechra Veterinary Products International
DVP NA
Dechra Veterinary Products North America
DVP US
Dechra Veterinary Products US
EBIT
Earnings before interest and tax. This is the same as operating profit
EBITDA
Earnings before interest, tax, depreciation and amortisation
EMA
European Medicines Agency
EPS
Earnings Per Share
eQMS
Electronic Quality Management System
ERP
Enterprise Resource Planning
ESG
Environmental, Social and Governance
ESPP
Employee Stock Purchase Plan
ETR
Effective Tax Rate
EU Pharmaceuticals
European Pharmaceuticals Segment comprising DVP EU, DVP
International and DPM&S
Executive Directors
The Executive Directors of the Company, currently Ian Page, Paul
Sandland and Tony Griffin
FAP
Food producing Animal Products
FDA
US Food and Drug Administration
FRC
Financial Reporting Council
FRS
Financial Reporting Standards
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comAdditional Information FTSE
Companies listed on the London Stock Exchange
Ordinary Shares
An ordinary share of 1 pence in the share capital of the Company
FTSE 250/350 Index
An index comprising the 101st to 350th largest companies listed on the
London Stock Exchange in terms of their market capitalisation
GAAP
Generally Accepted Accounting Practices
GDPR
General Data Protection Regulation
GHG
Greenhouse Gas
GMP
Good Manufacturing Practices
GRT
Gross Registered Tonnage
GPTW
Great Place To Work
HR
Human Resources
IFRSs
International Financial Reporting Standards
IT
Information Technology
KPI
Key Performance Indicator
Leverage
The ratio of Net Debt to underlying EBITDA
LIBOR
The London Inter-Bank Offered Rate
LTA
Lost Time Accident
LTAFR
Lost Time Accident Frequency Rate
LTIP
Long Term Incentive Plan
MRL
Maximum Residue Limit
NCSC
National Cyber Security Centre
Non-Executive Directors
The Non-Executive Directors of the Company, currently Tony Rice,
Lisa Bright, Denise Goode, Julian Heslop, Lawson Macartney, Ishbel
Macpherson and Alison Platt
NA Pharmaceuticals
North American Pharmaceuticals Segment comprising DVP US, Canada
and Mexico
OECD
The Organisation for Economic Cooperation and Development
Oracle ERP
Enterprise Resources Planning (ERP) software
PDRA
Dechra’s Product Development and Regulatory Affairs team
PPE
Personal Protective Equipment
POMs
Prescription Only Medicines
Qualifying LTIP Award
Qualifying LTIP Awards comprises a CSOP option and an ordinary nil-
cost LTIP award, with the ordinary award scaled back at exercise to take
account of any gain made on exercise of the CSOP option
R&D
Research and Development
RCF
Revolving Credit Facility
RIDDOR
Reporting of Injuries, Diseases and Dangerous Occurrences Regulations
Rights Issue
The three for ten rights issue of 20,040,653 shares, details of which are
set out in the prospectus of the Company dated 25 April 2012
ROCE
Return On Capital Employed
RPI
Retail Price Index
SASB
Sustainability Accounting Standards Board
SAYE
Save As You Earn Share Scheme
SBTi
Science Based Target Initiative
SDG
United Nations Sustainable Development Goals
SET
Senior Executive Team
SG&A
Selling, General and Administrative Expenses
SPC
Summary of Product Characteristics
TCFD
Taskforce for Climate-related Financial Disclosures
TGA
Therapeutic Goods Administration
TSR
Total Shareholder Return
225
Stock Code: DPHAdditional Information Shareholder Information
Financial Calendar
2021 Annual General Meeting
Final Dividend Ex-Dividend Date
Final Dividend Record Date
Final Dividend Payment Date
Announcement of Half Yearly Results
21 October 2021
28 October 2021
29 October 2021
19 November 2021
21 February 2022*
Dates marked with an asterix are provisional and subject to change.
Annual General Meeting
The 2021 Annual General Meeting of the Company will be held at
9.30 am on 21 October 2021 at Dechra Pharmaceuticals PLC,
6 Cheshire Avenue, Cheshire Business Park, Lostock Gralam,
Northwich, CW9 7UA. The notice of meeting (the Notice), which
includes special business to be transacted at the Annual General
Meeting together with an explanation of the resolutions to be considered
at the meeting, is made available on the Company website or mailed to
shareholders, if they have elected to receive the Notice in paper format.
Share History
Dechra floated on the London Stock Exchange in September 2000 at
£1.20 per share, with a market capitalisation of £60.0 million.
On 15 January 2008, Dechra undertook a placing and open offer on
the basis of 11 Open Offer shares for every 50 existing shares held on
10 December 2007 at an issue price of 303 pence. On 9 January 2008,
11,624,544 shares were issued.
On 5 April 2012, a Rights Issue was announced on the basis of
three new ordinary shares for every existing ten shares held on
23 April 2012 at a subscription price of £3.00 per share. The Rights
Issue resulted in 20,040,653 shares being issued with dealings
commencing on 16 May 2012.
On 17 March 2016, 4,398,600 ordinary shares were offered by way of
a placing at an issue price of £11.00 per share.
Registrar
Dechra’s Registrar is Equiniti Limited. Equiniti should be contacted for
any matters relating to your shareholding, including:
• notification of change in name and address;
• enquiries about dividend payments; and
•
submission of proxy form for voting at the Annual General Meeting.
Shareholders who receive duplicate sets of Company mailings because
they have multiple accounts should contact Equiniti to have their
accounts amalgamated.
Equiniti offers a facility whereby shareholders are able to access their
shareholdings in Dechra via their website (www.shareview.co.uk).
Alternatively, Equiniti can be contacted at: Equiniti Limited, Aspect
House, Spencer Road, Lancing, West Sussex BN99 6DA. The
Registrars’ Shareholder Helpline for Dechra is 0371 384 2030 or
+44(0) 371 384 2030, if calling from outside of the UK.
Please have your Shareholder Reference Number to hand whenever you
contact the Registrar; this can be found on your share certificate or a
recent dividend tax voucher.
Share Dealing Service
Equiniti Financial Services Limited offer a Share Dealing Service to
buy or sell shares. Further information can be obtained from
www.shareview.co.uk/dealing or by telephoning 0345 603 7037.
Fee (on value of transaction)
up to £50,000
Balance over £50,000
Minimum charge
Stamp duty charge
(purchases only)
Telephone
share
dealing
Internet
share
dealing
Postal
share
dealing
1.5%
0.25%
£60.00
1.5%
0.25%
£45.00
1.9%
1.9%
£70.00
0.5%
0.5%
0.5%
On 30 January 2018, 5,121,952 ordinary shares were offered by way
of a placing at an issue price of £20.50 per share.
Equiniti Financial Services Limited and its agents are authorised and
regulated by the Financial Conduct Authority.
On 8 June 2020, 5,132,500 ordinary shares were offered by way of a
placing at an issue price of £26.00 per share.
Company Website
The Dechra website (www.dechra.com) is the best source of useful
and up-to-date information about Dechra and its activities, including
the latest news, financial and product information to help improve
understanding of our business. Additionally, the terms of reference of
all our Committees, Articles of Association, our Values and a number
of our internal policies are published on the website.
Electronic Communications
Shareholders now have the opportunity to receive shareholder
communications electronically, e.g. Annual Reports, Notice of the
Annual General Meeting and Proxy Forms. You can elect to receive
email notifications of shareholder communications by registering at
www.shareview.co.uk, where you can also set up a bank mandate to
receive dividends directly to your bank account and to submit proxy votes
for shareholder meetings. Receiving the Company’s communications
electronically allows the Company to communicate with its shareholders in
a more environmentally friendly, cost effective and timely manner.
Please note that the price of shares can go down as well as up, and you
are not guaranteed to get back the amount you originally invested. If you
are in any doubt, you should contact an independent financial adviser.
Warning to Shareholders
Shareholders are advised to be wary of any unsolicited advice, offers
to buy shares at a discount or offers of free Company Annual Reports.
If you receive any unsolicited investment advice, whether over the
telephone, through the post or by email:
• make sure you get the name of the person and organisation;
• check that they are properly authorised by the FCA before getting
involved by visiting https://register.fca.org.uk/; and
•
report the matter to the FCA by calling 0800 111 6768 or by
completing the online form at www.fca.org.uk/consumers/report-
scam-unauthorised-firm.
More detailed information and guidance is available on the shareholder
information pages of our website.
Additionally, feel free to report and/or discuss any shareholder security
matters with the Company. To do this, please call +44 (0)1606 814 730 and
ask to be put through to a member of the Company Secretarial department.
226
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2021www.dechra.comAdditional Information Advisers
Independent Auditor
PricewaterhouseCoopers LLP
One Chamberlain Square
Birmingham
B3 3AX
Stockbroker & Financial Advisers
Investec Bank plc
30 Gresham Street
London
EC2V 7QN
Lawyers
DLA Piper UK LLP
2 Chamberlain Square
Birmingham
B3 3AX
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Financial PR
TooleyStreet Communications
15 Colmore Row,
Birmingham,
B3 2BH
Principal Bankers
Bank of Ireland (UK) plc
40 Mespil Road
Dublin
Ireland
B3 2QZ
BNP Paribas, London Branch
3rd Floor
10 Harewood Avenue
London
NW1 6AA
Credit Industriel et Commercial
London Branch
Finsbury Circus House
15 Finsbury Circus
London
EC2M 7EB
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati
Ohio 45263
USA
HSBC Bank plc
Midlands Corporate Banking Centre
120 Edmund Street
Birmingham
B3 2QZ
Raiffeisen Bank International AG
Am Stadtpark 9
1030 Vienna
Austria
Santander UK PLC
2 Triton Square,
Regent’s Place,
London
NW1 3AN
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. StrixNB® and DispersinB® are trademarks licensed from Kane Biotech Inc.
227
Stock Code: DPHAdditional Information Dechra Pharmaceuticals PLC
24 Cheshire Avenue, Cheshire Business Park, Lostock, Gralam, Northwich CW9 7UA
T: +44 (0) 1606 814730 F: +44 (0) 1606 814731 E: corporate.enquiries@dechra.com
www.dechra.com
View our online Annual Report at: dechra.annualreport2021.com
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