Annual Report and Accounts
for the year ended 30 June 2022
Company Number: 3369634
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Celebrating 25 years of Continuous Growth
and Improvement in Animal Health and Welfare
Celebrating
25 Years
of Continuous
Growth and
Improvement in
Animal Health
and Welfare
Read more about our Top Ten
Key Strategic Developments
on pages 04 to 06
Welcome to our
Annual Report
and Accounts
Overview
Highlights
Chair’s View
25 Years
Top Ten Key Strategic Developments
Dechra at a Glance
Our Values and Culture
Our Key Strengths
Strategic Report
Chief Executive Officer’s Statement
Our Marketplace
Our Business Model
Delivering Our Strategy
Our Strategic Progress Over the Last Five Years
Strategy in Action
Product Development
Global Product Offering
Financial Review
Key Performance Indicators
Section 172 Statement Stakeholder Engagement
Our Environment
Sustainability
Task Force on Climate-related Financial Disclosures
Non-Financial Information Statement
How the Business Manages Risk
Understanding Our Key Risks
Viability Statement
Governance
Letter from the Chair on Governance
Governance at a Glance
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
IFC
01
02
04
08
10
11
14
18
22
26
28
30
35
40
42
50
52
64
68
70
74
75
78
81
84
86
88
92
103
107
117
125
151
153
Independent Auditors' Report
156
Consolidated Income Statement
165
Consolidated Statement of Comprehensive Income 166
Consolidated Statement of Financial Position
167
Consolidated Statement of Changes in
168
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
169
170
214
215
216
225
Additional Information
Glossary
Shareholder Information
Advisers
228
230
IBC
View our online Annual Report at:
dechra.annualreport2022.com
Highlights
Revenue
£681.8m
AER: +12.1.0% CER: +13.8%
Underlying Operating Profit
£174.3m
AER: +7.5% CER: +9.4%
2022
2021
2020
2019
2018
£681.8m
£608.0m
£515.1m
£481.8m
£407.1m
2022
2021
2020
2019
2018
Underlying Diluted Earnings Per Share
120.84p
AER: +11.7% CER: +14.0%
Dividend Per Share
44.89p
AER: +10.8% CER: +10.8%
2022
2021
2020
2019
2018
120.84p
108.14p
92.19p
90.01p
76.45p
2022
2021
2020
2019
2018
Reported Operating Profit
£95.5m
AER: +13.7% CER: +16.2%
Reported Diluted Earnings Per Share
53.40p
AER: +4.6% CER: +7.5%
2022
2021
2020
2019
2018
£95.5m
£84.0m
£52.2m
£39.0m
£34.1m
2022
2021
2020
2019
2018
£174.3m
£162.2m
£128.3m
£127.4m
£99.2m
44.89p
40.50p
34.29p
31.60p
25.50p
53.40p
51.03p
32.76p
30.07p
37.04p
Strategic Progress
• Strong organic growth in all key markets and across all therapeutic
Financial Performance
• Revenue growth of 13.8% to £681.8 million
segments
•
•
•
Pipeline strengthened through own innovation and acquisition
International portfolio strengthened through numerous product
approvals
Successfully completed two material company acquisitions post
year-end: Piedmont and Med-Pharmex
• Executed numerous bolt-on product acquisitions to complement
existing equine and CAP portfolios
Our Product Pipeline
•
Underlying operating profit increased by 9.4% to £174.3 million
• Reported operating profit increased by 16.2% to £95.5 million
• Strong cash generation of £163.3 million representing cash
conversion of 93.7%
• Underlying diluted EPS increase of 14.0% to 120.84 pence
• Full year dividend increased by 10.8% to 44.8 pence
A key strategic priority for the Group is the delivery and strength of the pipeline. We currently have 41 projects in the product development process:
Feasibility
Research
Development
Registration
14
7
15
5
Chair’s
View
We have delivered another
strong set of financial results
and we continue to execute our
strategy successfully."
Alison Platt
Introduction
Welcome to our 2022 Annual Report, which is my first report as
Chair of the Company.
This year marks Dechra’s 25th anniversary. Our Values, our Culture,
people, and strategy have established Dechra as one of the leading
and fastest growing global animal health companies in the world. It
was a privilege to meet the 100 colleagues who attended the Global
Team Meeting in Cheshire to celebrate this milestone, where it was
evident that the culture at Dechra is a major asset in attracting and
retaining high quality professionals and people spoke openly of the
empowerment they feel, the ability to operate at pace that affords
and the support they feel from the Group.
During the year, we were able to recommence site visits as pandemic-
related restrictions eased. The visit to Uldum, Denmark not only
provided an opportunity to meet the employees at this site, but also
to see the new warehouse recently commissioned. I look forward to
further site visits over the coming year.
Board Changes
There have been a number of Board changes in the 2022 financial year,
which included the retirement of Tony Rice on 31 December 2021and
the appointment of John Shipsey on 1 June 2022. Julian Heslop will
retire on 5 September 2022. I would, on behalf of the Board, like to
express our thanks and gratitude for the huge contribution both Tony
and Julian have made to the Board over their tenure as Non-Executive
Directors.
Diversity
Dechra is committed to building high performing diverse teams at all
levels in the organisation. It was always our plan to meet, and prior to
our recent elevation to the FTSE 100 (in December 2021), to exceed
the Parker Recommendations for FTSE 250 companies. We remain
cognisant of the ongoing requirements regarding diversity targets, and
the Committee has retained an executive search firm for diverse talent
to assist with the succession plan for our Remuneration Chair.
Progress this Year
Like all businesses, we have had to overcome a number of challenges
this year, from post-COVID-19 normalisation to rising inflation. However,
we have delivered another strong set of financial results and we continue
to execute our strategy successfully. We have made a number of
excellent acquisitions, have strengthened our development pipeline
and have increased our geographical footprint.
ESG
The external world is constantly changing, and the role businesses play
in tackling global and societal change is increasingly articulated through
codes of corporate governance and investor sentiment. As Dechra
Chair, I feel a key part of the role is to enable the whole Board to help
the business navigate the right path in terms of creating shareholder
value and positively impacting the animals, people and areas of our
planet touched by our operations. Our focus on human rights through
a commitment to a living wage globally and our significant investment
in a credible environmental sustainability programme are solid examples
of our ability to have a positive impact by living our Values. Further
information in relation to our Sustainability strategy and ambitions can
be found in our inaugural Sustainability Report on our website.
Looking Ahead
The acquisition of Piedmont Animal Health and Med-Pharmex together
with the new equity raise and refinancing of debt facilities, which took
place after the year end, all provide reasons to be optimistic for the year
ahead and beyond. The global animal health market remains resilient,
and Dechra is well positioned to continue its sustainable growth
strategy.
Alison Platt
Non-Executive Chair
5 September 2022
01
OverviewStrategic ReportGovernanceFinancial StatementsAdditional InformationStock Code: DPH Dechra marks its 25th year anniversary since its inception in 1997.
The last 25 years were marked by many milestones, the completion of
a number of acquisitions and growth of its footprint across the globe.
25 years
of Improving Animal Health and Welfare
Revenue
1998*
£137.2m
2022
£681.8m
Underlying Operating Profit
1998*
£5.5m
2022
£174.3m
2022
2,036
Read more about our Top Ten Key Strategic
Developments on pages 04 to 06
Read more about Dechra at a
Glance on pages 08 and 09
Employees†
1998*
343
* For the year ended 30 June 1998.
† Monthly average.
02
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Countries Distributed to
2022
63
1998
1
Manufacturing Locations
1998
1
2022
7
Sales and Marketing organisations
2022
25
1998
1
03
OverviewStrategic ReportGovernanceFinancial StatementsAdditional InformationStock Code: DPH Top Ten
Key Strategic Developments Over 25 Years
The Company was incorporated
in May 1997 to effect the
management buyout from
Lloyds Chemist plc.
01
2000
Three years later, in 2000, the issued
ordinary share capital of Dechra was
listed on the London Stock Exchange.
Since 2000, the Company has grown
strongly through a combination of
innovation, organic growth and
acquisition.
IPO
Although it could be argued that the management buyout
in 1997 should be the first key strategic development, it
was not until our UK market listing in 2000 that the strategic
vision for Dechra’s future started to materialise. We were
predominantly operating services through National Veterinary
Services (NVS), a veterinary distribution business; at the time
our strategy was not as clearly defined and was broad in its
objectives. In the placing prospectus for the IPO, one strand
of our strategy that has remained to this day, was to invest
cash, which at the time was mainly derived from services,
into developing novel products.
1997
Read more about our Product
Development on pages 35 to 39
Read more about our Acquisitions
on pages 29 and 31
Key to Strategic Growth Drivers:
Pipeline Delivery
a
b
c Portfolio Focus
Geographical Expansion
Acquisition
04
02
2001
Clear Focus on Product Development to Increase
our Presence as a Pharmaceutical Company
At this time over 80% of the Group’s profits and over 95% of
Group turnover was derived from NVS. Also in the Group were
Dales Pharmaceuticals that manufactured a few pharmaceutical
products and Arnolds Veterinary Products (prior to re-branding
as DVP), which sold these products alongside instruments
and consumables. At the time NVS had to sell many human
products to fulfil demand for new pet treatments as veterinarians’
capabilities in specialised areas of medicine proliferated and
pet expenditure increased due to the strengthening of pet/
human bond. Using this distribution data we identified product
usage trends and key therapeutic sectors in which to focus our
development spend, mainly on niche, novel products, initially with
an emphasis on endocrinology.
Strategic Growth Driver:
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 03
2003
05
2008
Acquisition Strategy
Although we had made acquisitions prior to 2003, they were
of diagnostic laboratories, which complemented the Services
segment of our business. This provided excellent experience in the
acquisition process helping us to form a strategy to strengthen our
pharmaceutical business. The first successes were the acquisitions of
the Vetivex® range of products and the rights to Equidone® Gel for the
US market. At the same time, our early product development efforts
started to produce results, with Vetoryl® and Felimazole® gaining
approval in the EU. At this time, however, we were only able to sell
them directly within the UK; we had to sell them through third party
companies within the EU, giving up a lot of margin. We therefore
started to research target acquisitions that would provide us with
reach into Europe.
Strategic Growth Driver:
Acquisition of VetXX
At this point in our development we had successfully
registered products across Europe but needed a platform to
sell them ourselves. With our burgeoning pipeline we found
a solution to retain margin in-house through the acquisition
of VetXX, a business we had been pursuing as an acquisition
target for two years. It provided a platform into 14 European
countries, significantly strengthened our Companion Animal
Market (CAP) portfolio and gave us critical mass. We now
had the ability to market and sell our own development
products across Europe.
Strategic Growth Driver:
04
2005
Geographical Expansion
As our product development portfolio expanded it became
evident that we needed to find a way to operate within the
world’s largest companion animal market, the USA. Our first
sales, marketing and regulatory office outside of the UK was
opened in Kansas City in 2005, as a future platform to market
products we had under The US Food and Drug Administration
(FDA) review at the time: Vetoryl, Felimazole and Equidone.
Although this was our first new market, geographical
expansion really took a greater priority with the formation of
our International team in 2016.
Strategic Growth Driver:
06
2008
US Trading Commences
Shortly prior to the approval of Vetoryl and Felimazole by the FDA,
we completed a long term licensing deal to sell the veterinary
products of Pharmaderm. The combined portfolio gave us sufficient
sales volumes to merit the development of a sales, marketing,
regulatory and technical support infrastructure, providing a platform
to grow and strengthen our presence in this critical market.
Strategic Growth Driver:
05
Stock Code: DPH
07
2012
Acquisition of Eurovet
Although prior to 2012 we had acquired Dermapet, Gentrix
and HY-50®, the acquisition of Eurovet was the first deal
that could be classed as truly transformational. It gave us
a significant presence in Germany, a country in which we
were not operating; it added significant critical mass to our
CAP portfolio and provided an entrance and a footprint in
Europe for FAP. Most significantly, it took us to a point where
we were no longer dependent on the services business
with the majority of profits now being derived from the
pharmaceutical business.
Strategic Growth Driver:
09
2015-2022
Rapid Development
Although there was no one single event during this period,
it has been a hugely important time in our development.
We added the fourth pillar to our strategy, Portfolio
Focus, which is about maximising the return from our key
products in all the major markets. Our four pillar strategy
has served us well as we accelerated our acquisition
activity, which included Putney, Genera, Apex, Brovel,
Venco, AST Farma and Le Vet and the acquisition of the
products Mirataz®, Osurnia® and Laverdia®. We expanded
geographically into Poland, Canada, Austria, Italy, Mexico,
Brazil, Australia and New Zealand. We have also put
greater emphasis on novel product development and have
significantly increased investment in our pipeline.
Strategic Growth Driver:
a
b
c
2022
10
2022
08
2013
Divestment of Services
Following the successful integration of Eurovet and a number
of other smaller acquisitions, although a very tough decision
for management to make, it became evident that NVS and
NationWide Laboratories were no longer relevant to our future
strategy. We managed the successful divestment of the services
businesses to a US acquirer, which cleared the debt off our
balance sheet, providing cash to make further acquisitions
and cemented our strategy as a fully focused veterinary
pharmaceutical company.
After 25 years our Strategy, our Values and our Strategic
Enablers, (People, Manufacturing and Supply Chain,
Technology and ESG) have established us as one of the
leading and fastest growing global animal health companies.
The evolution of our strategic objectives and the strengthening
of the business through all four pillars have served us well and
will continue to be the main drivers of future growth.
Strategic Growth Driver:
a
b
c
Stock Code: DPH
06
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Dechra is a global
specialist in 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.
07
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022
www.dechra.com
Dechra
at a Glance
Our Purpose
What we do
The sustainable
improvement of animal
health and welfare
globally
Our Strategy
How we achieve our Purpose
Strategic Growth Drivers
Pipeline
Delivery
Portfolio
Focus
Geographical
Expansion
Acquisition
a
b
c
Our Approach to ESG
Our new ESG strategy is based on our Purpose
and Values
We have chosen to support the United Nations Sustainable
Development Goals (SDGs) listed below.
Read more about our Strategic Drivers
on pages 26, 28 to 32
Strategic Enablers
Manufacturing
& Supply Chain
Technology
People
ESG
Read more about our Strategic
Enablers on pages 27, 29, 33 and 34
Our Structure
EU Pharmaceuticals
Dechra Veterinary Products
EU (DVP EU)
Markets and sells Dechra's products in 19
countries. The key products are predominately
CAP, Equine and FAP. DVP EU markets a
range of specialist, therapeutic pet diets,
branded Specific.
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 Pharmaceuticals
Manufacturing and Supply (DPM&S)
Manufactures and supplies Dechra’s product
range efficiently to the highest quality
standards maintaining a reliable supply
chain. Approximately 40% of Dechra’s
pharmaceuticals are produced within our
own manufacturing sites with the remaining
60% managed through external supply
relationships.
North America
Pharmaceuticals
Dechra Veterinary Products NA
(DVP NA)
Markets and sells Dechra's veterinary products
in Canada, Mexico and the US. DVP US and
Canada currently market CAP and Equine
medicines. DVP Mexico markets CAP, FAP
and Equine medicines, mainly in Mexico and
also exports to Central America countries.
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.
08
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022
www.dechra.com
Our Products
Our products can be divided into four categories. All are targeted at providing
veterinary professionals with solutions for their customers’ needs.
Companion Animal
Products (CAP)
Food producing
Animal Products (FAP)
Equine
Nutrition
Species: Dogs and cats.
Key Therapeutic Sectors:
Endocrinology, dermatology,
analgesia and anaesthesia,
antibiotics, cardiovascular and
critical care.
Species: Poultry, pigs and an
increasing presence in cattle.
Key Therapeutic Sectors:
Water soluble antibiotics,
vaccines, locomotion (lameness)
and pain management.
Species: Horses and ponies.
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.
Percentage of Revenue
Percentage of Revenue
Percentage of Revenue
Percentage of Revenue
74.6%
11.6%
7.2%
7.3%5.1%
Our Global Footprint
We currently have sales and marketing organisations in 25 countries and market our
products in 63 other countries worldwide through distributors or marketing partners.
Key to map
Dechra Sales and Marketing Countries
Distribution Partners
Dechra Distribution Centres
Dechra Manufacturing Sites
North America
Europe
Rest of the World
Dechra Veterinary Products markets and
sells Dechra’s products via its own sales and
marketing organisations or via distributors
in 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 39 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 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. Dechra has manufacturing facilities
and a Product Development and Regulatory
Affairs presence in Australia and Brazil.
Major geographies: France, Germany,
the Netherlands and the UK
Major geographies: Australia,
New Zealand, Asia and Brazil
Percentage of Revenue
Percentage of Revenue
Percentage of Revenue
40.0%
49.0%
11.0%
09
OverviewStrategic ReportGovernanceFinancial StatementsAdditional InformationStock Code: DPH Our Values
and Culture
Our Values, entrepreneurial
attitude and agile approach
to the way we do things are
the backbone of our Culture.
Ambition
Dedication
Relationships
Dechra
Values
Enjoyment
Honesty
Courage
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 health 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
• 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 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.
10
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Our Key
Strengths
As well as our ability to impact 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
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 100% cash generation as
strong cash generation allows us to pay down
debt quickly, resulting in a strong balance
sheet, which enables us to fund internally
many of our strategic opportunities.
4
5
Manufacturing
Capabilities
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.
Skilled
People
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 the Dechra Values.
3
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.
6
Key
Relationships
Our relationships with all key stakeholders
are very important to the Group. Our sales
approach revolves around partnership with
key practice groups, individual veterinarians,
key opinion leaders and distributors. The
relationship with our supply chain partners
is also important to establish continuity of
supply. Furthermore, our networking within the
industry is a key driver in finding new product
development and acquisition opportunities.
7
8
Strong Product
Development Pipeline
We have a strong pipeline of novel, generic
and generic plus pharmaceuticals, vaccines
and a specialist nutrition range. We have a
strong track record of pipeline delivery.
We are proactive and innovative in recognising
new development opportunities to extend our
portfolio.
Breadth of
Products
We are a global leader in veterinary
endocrinology and topical dermatology, have
a broad portfolio of analgesia, anaesthetics
and products for the treatment of pain. We
are also recognised as innovators in other
specialisations such as the treatment of
equine lameness, nutrition and differentiated
generics (generic plus).
Stock Code: DPH
11
OverviewStrategic ReportGovernanceFinancial StatementsAdditional Information Strategic
Report
Contents
Chief Executive Officer's Statement
Our Marketplace
Our Business Model
Delivering Our Strategy
Our Strategic Progress Over the Last Five Years
Strategy in Action
Product Development
Global Product Offering
Financial Review
Key Performance Indicators
Section 172 Statement Stakeholder Engagement
Our Environment
Sustainability
Task Force on Climate-related Financial Disclosures
Non-Financial Information Statement
How the Business Manages Risk
Understanding Our Key Risks
Viability Statement
14
18
22
26
28
30
35
40
42
50
52
64
68
70
74
75
78
81
Chief Executive
Officer’s Statement
We have continued to progress
on all aspects of our strategy;
the product development pipeline
was strengthened, material
acquisitions were completed post
year-end and a new subsidiary
was established in South Korea
as we continue our geographical
expansion."
Ian Page
Introduction
I am pleased to report that the Group has delivered strong growth
throughout our financial year as we continue to outperform the major
international markets in which we operate. After a very strong start to
the year, revenue in the second half started to return to more normalised
historical levels of growth as the benefit of increased spending on pets
seen during the COVID-19 restrictions slowed down. This growth was
delivered across all product categories, all major therapeutic areas and
in all the international markets in which we trade. We have continued to
progress on all aspects of our strategy; the product development pipeline
was strengthened, material acquisitions were completed post year-end
and a new subsidiary was established in South Korea as we continue our
geographical expansion. Excellent progress has been made on systems
and quality in our supply chain, which remained robust throughout the year.
Information technology implementations strengthened the infrastructure of
Glossary
AER: Actual Exchange Rates
ANZ: Australia and New
Zealand
CAP: Companion Animal
Products
CER: Constant
Exchange Rates
EMA: European
Medicines Agency
ERP: Enterprise Resource
Planning
EU Pharmaceuticals:
European Pharmaceuticals
Segment comprising DVP EU,
DVP International and
Dechra Pharmaceuticals
Manufacturing
FAP: Food producing Animal
Products
FDA: US Food and Drug
Administration; a federal
agency of the US Department
of Health and Human Services
NA Pharmaceuticals: North
American Pharmaceuticals
Segment comprising DVP US,
Canada and Mexico
* All numbers in this report are at
CER unless otherwise stated.
14
the Group and provided better management information. ESG is integrated
into the way we work and our people remain highly engaged, motivated
and dedicated in achieving our strategic goals.
Operational Review
EU Pharmaceuticals Segment
In the period our total European (EU) Pharmaceuticals Segment revenue
increased by 8.2% at CER (4.7% at AER). This includes a 12 month
contribution from the acquisition of Tri-Solfen® ANZ acquired in February
2021 and an additional month’s contribution from Osurnia acquired on
27 July 2020. Existing net revenues increased by 6.4% at CER (3.0% at
AER). This Segment includes our International business, which is detailed
below. It also includes non-core business, such as the Agricultural
Chemical business, which was originally acquired as part of the Genera
acquisition in 2015 and was divested in January 2022; annual sales from
this business were approximately £6.0 million.
The EU growth was delivered across all product segments and all
countries with Iberia, Poland, Italy and Austria all achieving double digit
growth. The main driver of growth was CAP; however, it is pleasing that
FAP remains in growth in a challenging market and that Equine and
Nutrition continue to perform well.
Education continues to be the main tool to engage our veterinary
customers. Throughout the year we provided technical support for
6,000 clinical cases in the UK alone and have provided over 85,000
hours of continuing professional development (CPD) training across
Europe to veterinarians through our Lunch and Learn programmes and
educational seminars. Digital communication has also been an area of
focus with 13,500 veterinarians and veterinary nurses in Europe and
17,600 globally, utilising our online Dechra Academy, which now has
596 educational modules in our key therapeutic areas.
International Pharmaceuticals
It is five years since we established a team to focus purely on
international expansion. During this time, we have established Dechra
Australia as the second largest company in CAP pharmaceuticals, have
significantly strengthened our New Zealand operation through two small
acquisitions and have established a strong foothold in South America
through our Brazilian subsidiary. Our ANZ and Brazilian businesses
delivered good growth in the year.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com We have extended our international footprint by establishing a new
subsidiary in South Korea. We terminated the agreement with our
previous distributor following their change of ownership. We have
appointed a senior management team, whom we have known for many
years, to manage this new entity which will commence trading in the
second quarter of the new financial year. Having our own operation will
give us greater transparency on the opportunities in this fast growing
market and will also allow us to better assess our future options for
expansion in this region.
NA Pharmaceuticals Segment
Our total North America (NA) Pharmaceuticals Segment revenues increased
by 23.8% at CER (25.3% at AER). This revenue includes a contribution
from various products we acquired in the year, the majority of which
were launched in the second half, and one month of additional Osurnia
sales on a like-for-like basis over the previous year. Existing net revenues
increased strongly by 21.3% at CER (22.7% at AER). This exceptional
performance was delivered despite increased competition to three of
our branded generics. We did manage to retain market share, albeit at a
lower price point, due to our strong relationship with our customers and
through a Dechra Rewards Scheme, managed by Vetcove, that now has
9,000 veterinary practice members. We continue to review and assess our
relationship with the veterinary distributors (wholesalers) who proactively
promote their own generic products that compete with ours.
In the USA we increased the marketing team with four specialists in digital
and product management to support the launch of the newly developed
and acquired products. We continue to increase the scale of our sales
team with the appointment of 18 new representatives in the year, a
number of which joined us as part of the Laverdia acquisition.
As with DVP EU, education and technical support are important tools in
our relationship with our customers. In the year, our veterinary technical
services team dealt with 8,500 technical queries, which involved
over 15,000 telephone calls; we also held 413 certified educational
presentations to 15,794 attending veterinarians. Furthermore, we
continued to invest in our University engagement programme to
educate veterinary graduates on our key therapeutic areas.
Product Category Performance
CAP
Companion Animal Products (CAP), which represent 74.6% of Group
turnover, grew by 16.0% at CER in the year. Our key therapeutic
sectors, endocrinology, dermatology, anaesthesia and analgesia were
the main drivers of this growth. At the end of the year, we launched
Zenalpha in the USA, a new novel canine sedative, approved by the
FDA, which contributed revenue of $1.3 million.
FAP
The strong performance in Food producing Animal Products (FAP)
during recent years, which represents 11.6% of Group turnover, slowed
to 6.0% at CER. This remains a solid performance as the European
market, a key area for our FAP sales, has been challenging due to
avian influenza, African swine fever and inflationary costs.
Equine
Equine, which represents 7.2% of Group turnover, grew by 12.1%. This
growth was driven by locomotion, a therapeutic sector, which includes
Osphos, Equipalazone® and HY-50 and by internal medicine, including
Equibactin® and Prednidale Horse. In the second half of the year we also
launched three acquired products in the USA, which are detailed later in
this report.
The majority of growth is delivered from the US; however, we also
delivered strong performances in Mexico and Canada. In Mexico,
we transitioned completely out of our old manufacturing site and
relocated to new sales offices. In Canada, we initiated a FAP business
unit with the launch of two products and added three internal sales
representatives to our sales team.
Nutrition
Nutrition, which represents 5.1% of Group turnover, continues to
perform well and grew by 15.1%. The majority of our Specific branded
diet sales are in the EU where we have continued to increase market
penetration, especially with our newly launched products, such as the
organic range.
15
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Chief Executive
Officer’s Statement
Product Development and Regulatory Affairs (PDRA)
Pipeline Progress
We have delivered another year of consistent progress on the pipeline.
We have generated positive dose range finding data in both the dog
and cat for the diabetes drugs being developed in partnership with
Akston Biosciences. Using its recently commissioned GMP biologics
production facility, Akston Biosciences is currently on track to deliver
active ingredient for our planned pivotal efficacy studies. Lifecycle
innovation of our key brands, such as Vetoryl and Osurnia, are ongoing
and showing good progress. New opportunities are constantly being
identified and new candidates have been added to the pipeline. With
the addition of the Piedmont projects (outlined later in this report), our
pipeline is stronger than ever and positioned to deliver material products
to support future growth.
Product Approvals
Numerous marketing authorisations have been achieved throughout the
year. Although only Zenalpha® is material in its own right, they all add
depth and breadth to the current product range and strengthen our
international portfolio. Major approvals in Dechra territories are:
•
in Europe, Metomotyl 10mg chewable tablet for dogs
(Metoclopramide hydrochloride), Bupredine® Multidose 0.3mg/ml
solution for injection for dogs, cats and horses (Buprenorphine),
Canergy 100mg coated tablets for dogs (Propentofylline),
Cefabam 1000mg, 250mg and 50mg tablets for dogs (Cephalexin
monohydrate), Clindacutin 10mg ointment for dogs (Clindamycin
hydrochloride), Lodisure® 1mg tablets for cats (Amlodipine besilate),
Octacillin® 800mg/g powder for use in water for pigs (Amoxicillin
trihydrate), Sedadex 0.1mg/ml solution for injection for dogs
and cats (Dexmedetomidine hydrochloride), Vomend® vet 10mg
chewable tablets for dogs (Metoclopramide hydrochloride);
•
in Great Britain and Northern Ireland, Tri-Solfen® Solution for
Pigs (Adrenaline tartrate, Lidocaine hydrochloride, Bupivacaine
hydrochloride, Cetrimide) was approved. An exemption from the
need for a maximum residue limit (MRL) for an equine product at an
advanced stage of development was also approved;
• a novel canine sedative injection Zenalpha (Medetomidine
hydrochloride, Vatinoxan hydrochloride), a generic antibiotic
Amoxicillin Trihydrate and Clavulanate Potassium Drops and
generic Carprofen Caplets have been approved in the USA;
•
•
•
•
two sedative products, Dexmedesed 0.5mg/ml (Dexmedetomidine
hydrochloride) and Dormazolam® (Midazolam) as well as the
antimicrobial Rexxolide® (Tulathromycin) were registered in Canada;
in Mexico, five new products were registered;
in Australia, four new products and in New Zealand three new
products were registered;
in Brazil, three new products were registered including two
vaccines; and
• additionally, in other international territories, we have received 52
approvals in countries including Egypt, Iran, Korea, Pakistan, Peru,
Puerto Rico, Serbia, Sri Lanka, Switzerland, Thailand, West Africa
(UEMOA), Ukraine, United Arab Emirates, Uruguay and Vietnam.
Acquisitions
We have successfully completed several product acquisitions and two
material company acquisitions.
In July 2022, post the year end, we acquired Piedmont Animal Health,
Inc for $210 million (£175 million), a product development company
with a long, successful track record of developing major international
16
products for multi-national animal health companies. Piedmont has
eight novel products in various stages of development, all in the CAP
market for cats and dogs and all within Dechra’s key therapeutic areas
of competence. The business significantly strengthens Dechra’s pipeline
of novel products with two near term opportunities, both expected to
be top ten products for Dechra. The development team of 19 people
who have joined Dechra, located in Greensboro, North Carolina, have
added additional strength and expertise to the Company’s existing
product development capabilities.
Also, post the year end in August 2022 we completed the acquisition of
Med-Pharmex Holdings, Inc for $260.0 million (£221.5 million).
Med-Pharmex, with sales of $43.0 million and adjusted EBITDA of
$15.3 million, is an established platform business located in Pomona,
California with manufacturing, product development and regulatory
capabilities. It has several products already approved and established
in the US market. As they have no sales and marketing capabilities,
these products are currently sold through third party partners. We are
planning to sell many of these products under a Dechra brand through
our existing sales and marketing channels, providing material margin
synergies and operational leverage. In the longer term, synergies
will also be realised from integration and improved utilisation of the
manufacturing facilities. The facility has the capability to produce
Cephalosporins, a type of antibiotic that is required to be manufactured
in a dedicated suite. They currently have one product registered and
one product in the development pipeline that fall into this category,
which is expected to be first entrant generic in product markets of
material scale in the USA.
We executed numerous bolt on product acquisitions, which
complement our equine and CAP portfolios. The equine products
acquired are all for the US market and are:
•
Rompun® (xylazine injection) and Butorphanol Tartrate Injection from
Elanco™ Animal Health, which complement our anaesthesia and
analgesia portfolio;
• Sucromate™ Equine (deslorelin acetate) sterile suspension from
Thorn Bioscience LLC, which expands our US Equine portfolio into
reproduction; and
• ProVet APC™ (Autologous Platelet Concentrate) and ProVet BMC™
(Bone Marrow Concentrate) systems from Hassinger Biomedical.
These two patented medical devices harness growth factors from the
horse’s whole blood, which when injected back into the horse positively
enhance healing results in soft tissue injuries. The ProVet APC™
system is a revolutionary device and is arguably the fastest and most
transportable platelet concentrator available to the veterinary industry.
The CAP products acquired are:
•
LAVERDIA® -CA1, a novel oral SINE (selective inhibitor of nuclear
export) drug and the first oral tablet for canine lymphoma acquired
from Anivive Lifesciences Inc. It is currently sold under a conditional
approval by the FDA Center for Veterinary Medicine in the USA
with full dossier submissions planned for the USA, UK, EU, Brazil,
Australia, Japan and Canada;
•
Isoflurane®, USP and Sevoflurane®, USP from Halocarbon, both
inhalant anaesthetics, which expand our US veterinary surgical suite;
• Atopivet® range of products for cats and dogs in collaboration
with Bioiberica, which offer unique alternatives to multi-modal
dermatology therapy; and
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com •
Malaseb®, a leading dermatological medicated shampoo which
we already market across Europe, was acquired from Dermcare
for the US market, an excellent addition to our leading topical
dermatology range.
Enablers
Manufacturing and Supply Chain
The investment made in Manufacturing and Supply Chain over the
last two years has resulted in higher levels of stock availability with
backorders at the end of the year being at a three year low. The
huge improvements in our quality systems are clearly demonstrated
by successful regulatory inspections at our sites in Zagreb, Croatia,
Skipton, UK and Fort Worth, USA. Investment has continued across
our Manufacturing sites:
•
•
•
•
•
two new automated lines were installed at Zagreb;
a new autoclave system for sterilisation of finished goods has
been installed in Bladel, Netherlands;
a high speed tablet press was commissioned at our Fort Worth
site in the USA;
a new water for injection facility has been commissioned in
Brazil; and
work has commenced on a new building in Skipton, which will
expand the site and improve work flows.
We have extended our European logistics centre in Uldum, Denmark
creating over 6,000 new pallet spaces with a subterranean store for
temperature controlled drugs that materially reduces the electricity
required to maintain low temperatures. We have also increased our
warehousing capacity in Australia.
This ongoing investment in our Manufacturing and Supply Chain will
allow us to continue our strategy to bring more production in-house;
nine products were transferred into Zagreb, Melbourne (USA), Bladel
and Fort Worth within the year.
Technology
Information technology remains a key area of focus for the business.
We are working on numerous projects which strengthen the
infrastructure, improve internal information, provide educational support
and improve employee and customer engagement. We are making
excellent progress on two major projects outlined in the Half Year
Report, these being the new quality document management system to
support Manufacturing, Product Development, Regulatory Affairs and
Technical Services, and in addition we have also established a project
team to upgrade the Manufacturing ERP system to one consolidated
cloud-based Oracle platform. Salesforce, a customer relationship
management system, is now being utilised across the majority of
countries in which we operate and we have also fully rolled out a new
global payroll system across the Group. We have restructured and
recruited new hires to increase our digital communication capabilities as
we continue to expand our on-line training capabilities to our employees
and to our customers through the Dechra Academy, a platform which
we are constantly upgrading in both its technical capabilities and
increased content.
People
On 1 January 2022, Alison Platt was appointed Chair of the Board following
the retirement of Tony Rice. On 1 June 2022, John Shipsey was appointed
as Non-Executive Director with the view to being the successor to Julian
Heslop as Audit Committee Chair. The Board and I would like to express
our thanks and gratitude for the huge contribution both Tony and Julian
have made to the Board over their tenure as Non-Executive Directors.
We have commenced the recruitment process to find a successor to
Ishbel Macpherson as Remuneration Chair as Ishbel is in her tenth year
as a Non-Executive Director on the Dechra Board.
Following the retirement of Dr Susan Longhofer as Chief Scientific
Officer, we are pleased to announce the appointment of Patrick Meeus
as her replacement. Patrick, who has joined the Senior Executive Team,
is a veterinary surgeon and brings a wealth of experience gained in
multi-national pharmaceutical companies in animal health.
Isabelle Gaillet has been appointed as EU Commercial Director.
Isabelle, who previously worked for the Company from 2015 to 2019
as French Country Manager will join the European Senior Management
Team. She will support the EU Country Managers and lead our
commercial strategy for the EU alongside Tony Griffin, European
Pharmaceuticals Managing Director.
We have launched a Future Facing Leaders programme with 24
employees from across our global subsidiaries joining the scheme,
which is designed to develop our management talent and will support
the future growth of Dechra. Furthermore, we have launched leadership
development programmes for our International, North America and
Manufacturing management teams.
We have rolled out a Group wide applicant tracking system and also
an automated talent review process that allows us to monitor our talent
pipeline, succession plans, employee mobility and individuals’ progress.
ESG
To enable our business to adapt to climate change, we have focused on
mitigating our impact through the decarbonisation of the business. We
remain committed to the Science Based Target initiatives, working towards
a Net-Zero ambition by 2050. We have also released our inaugural separate
Sustainability Report and provided enhanced Task Force on Climate-related
Financial Disclosures, which are included later in this report.
Dividend
The Board is proposing a final dividend of 32.89 pence per share (2021:
29.39 pence per share). Added to the interim dividend of 12.00 pence per
share (2021: 11.11 pence per share), this brings the total dividend for the
financial year ended 30 June 2022 to 44.89 pence per share (2021: 40.50
pence per share), representing 10.8% growth over the previous year.
Subject to shareholder approval at the Annual General Meeting
to be held on 20 October 2022, the final dividend will be paid on
18 November 2022 to shareholders on the Register at 28 October
2022. The shares will become ex-dividend on 27 October 2022.
Outlook
As the market returns to normal levels of trading post the impact of
COVID-19 and as current macroeconomic uncertainties are expected to
continue, the veterinary pharmaceutical market, particularly in the CAP
sector, is resilient and in growth.
The acquisition, post year end, of Med-Pharmex strategically
strengthens our position in the US market. The acquisition of Piedmont
adds several novel exciting products to our development pipeline and
we continue to identify new opportunities as we successfully execute
our strategy.
We remain confident in our ability to outperform the markets in which
we operate and in the prospects for the current financial year.
Ian Page
Chief Executive Officer
5 September 2022
17
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Our
Marketplace
Market Overview
Historically, the global animal healthcare market has been characterised by a small number
of large international businesses together accounting for almost half of the overall market
worth an estimated $43.0 billion in 2022. Beyond this concentration of competitors the
market is very fragmented, consisting of a large number of smaller businesses with either
global or more localised operations.
Animal Types
Animal health globally is generally described as comprising two
segments: Food producing Animal Products (FAP) and Companion
Animal Products (CAP). FAP has demonstrated continued global growth
due to an increased demand for high quality protein production, whilst
CAP growth (a sector in which horses are generally included) is driven
by the pet owners’ compassion for their animals, which has had even
greater emphasis during the COVID-19 pandemic, improved nutrition
and a wider range of medical products and treatments.
Product Types
The animal healthcare market typically consists of key segments such
as vaccines, pharmaceuticals, diagnostics, medical devices and feed
additives, along with other smaller revenue streams. Within the overall
market, pharmaceuticals represents the largest segment at over 35%*,
and it is this segment where Dechra mostly competes.
Territories
The geographical breakdown of the market differs between the FAP
and CAP markets, but in both cases is generally viewed as consisting
of the well developed European and North American markets together
with the emerging markets encompassing regions such as South
America, Asia-Pacific, the Middle East and Africa.
Market Dynamics and Outlook
Dechra Positioning
There has been growth in the companion animal
market for many years due to veterinarians’
capabilities, improved nutrition, increased
longevity of pets and the owners’ willingness
to continue to increase spending on their pets.
This trend has historically been in Western Europe, North America
and other selected markets; however, we are now also seeing
the status of pets increase in the developing world, creating
opportunities in new markets.
Given the ongoing rise in the global population and the
corresponding need to ensure that food supply is capable of
keeping pace with this growth through the heightened production
of animal-based food products, the FAP market also remains
robust. In addition, increasing awareness of animal welfare is also
supportive of the healthcare market for food producing animals.
Given these mega-trends, the global animal healthcare market is
typically resilient and able to overcome any short term challenges
(such as African swine fever in 2019 and the COVID-19 pandemic)
to maintain buoyant growth over a longer period. These trends
are expected to continue, with the market expected to grow at a
CAGR of approximately 10% over the coming years to reach an
estimated $93.0 billion by 2030.
Despite not competing in market segments
such as diagnostics and medical devices, and
only having a very small contribution from FAP
vaccines, we are still positioned within the
top ten in terms of total market share.
We have a track record of outperforming the underlying market
through our strategy of organic growth supplemented by carefully
chosen acquisitions. This growth is also being driven across
multiple territories, with Dechra now operating in a total
of 26 countries.
We already have a wide range of existing CAP products and
will continue to innovate in specialist medicine to develop our
portfolio in key areas of therapeutic specialisations. We are also
expanding our geographical footprint and investing in product
registrations in developing markets to extend the reach of both
novel and generic treatments.
In our FAP business, we are consistently strengthening our
position through new products and international expansion. We
are enhancing our product range, including our market leading
swine and poultry water soluble antibiotics and continue to seek
marketing authorisations in new markets for our vaccines. We
also own the global marketing rights to Tri-Solfen®, Animal Ethics’
ethical pain treatment for farm animals, which we are registering for
sheep, cattle and pigs in numerous markets across the globe.
Against this backdrop, there remains a number of market share
growth opportunities for Dechra. By leveraging our existing
products, developing our pipeline of new products, and remaining
attuned to potential acquisition opportunities to further expand
the breadth and depth of our proposition, we believe we are well
positioned to continue performing well within a growing market.
* Grand View Research 2022
18
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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, contributing to building brand loyalty, which often
continues after the loss of patent protection or regulatory exclusivity.
• Lower pricing pressure: Livestock producers and pet owners
generally pay for animal healthcare themselves. Pricing decisions
are not influenced by government payors that are involved in
product and pricing decisions for human medicines.
• Less price erosion by generic competition: Generic competition
in animal healthcare, whilst playing an important role, has a lower
impact on prices compared to human pharmaceuticals because
of the smaller average market size of each product opportunity,
stronger customer relationships and brand loyalty.
Veterinary Practices – Europe
Independents
Large-scale Pig and
Poultry Customers
Local Consolidated Groups
Pan-EU Consolidated Groups
43%
7%
27%
23%
Source: DVP EU Sales Data June 2022
Veterinary Practices – North America
Independents
Corporates
75%
25%
Source: DVP NA Sales Data June 2022
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 is 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.
19
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Our
Marketplace
Product Market Dynamics
Companion Animal Products (CAP)
Food Producing Animal Products (FAP)
74.6%
Group Revenue
11.6%
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, parts of Asia 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 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.
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 11.6% 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 is
providing growth and is anticipated to continue to provide growth
opportunities in future years as we seek global registrations.
Margin: Relatively low gross margins. However, volumes are high
and sales costs are relatively low as the products are sold mainly
into large farm integrators.
20
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Equine
Nutrition
7.2%
Group Revenue
5.1%
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 historical 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.
21
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Our Business
Model
Our Key Activities
Our objectives are to innovate, develop, register, manufacture,
supply and market high quality products to the veterinary
profession worldwide.
h i p a n d R e g i s ter
e r s
Innovation, P art n
Manufa
ctu
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S
u
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arket
Veterinary distribution and w
e
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Customers
Sales and Marke t i n g
Read more about our Key Activities on pages 23 and 24
22
12345Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
2
3
Manufacture
and Supply
Route to
Market
Manufacturing is a key
competency of the Group;
the prime objective is to
deliver safe, efficacious,
cost effective, high quality
products.
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
into 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.
Our products are distributed
from our major logistics sites
via wholesalers, distributors,
or direct supply.
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 facilities 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.
1
Innovation,
Partnership
and Register
We spread our development
portfolio across novel entities,
differentiated generics, generics
and lifecycle management
projects across multiple species.
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. A number of our 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.
Stock Code: DPH
23
4
5
Customers
Sales and
Marketing
Our customers are veterinary
professionals operating in
veterinary practices and
major farming units.
Our products and sales and
marketing activities are mainly
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
prescription only medicines (POMs);
however, we have a range of
complementary non-prescription
products. Our product range
includes novel, generic-plus and
generic products in key therapeutic
areas, in particular endocrinology and
anaesthesia and analgesia.
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.
Sales Representatives
Dechra operates its own sales force
and provides in-house marketing and
technical support in 25 countries,
predominantly in Europe, North
America, Brazil 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.
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 development
hours they require to maintain their
professional qualification.
View our Website for more details at:
dechra.com/about/our-business
Stock Code: DPH
24
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25
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022
www.dechra.com
Delivering
Our Strategy
Since 2013, our priorities for each Strategic Growth Driver and Enabler have
been clearly defined and communicated and are outlined in the table below.
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
Our pipeline is a key driver of
organic growth. Over the last
few years we have focused on
increasing the number of novel
products in development and
have successfully identified a
number of exciting candidates.
a
b
c
Portfolio
Focus
We are a specialist veterinary
pharmaceuticals business
focused on Companion
Animal, Food producing Animal
Products, Equine and Nutrition.
Our portfolio is well positioned
in our therapeutic focus sectors
to maximise returns.
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 net revenue by increasing
market penetration and market
development, focusing on
targeted therapeutic sectors
within CAP, Equine, FAP and
Nutrition.
Geographical
Expansion
The animal health market in
emerging countries is growing
rapidly due to the demand for
high quality protein and the
increase in pet ownership.
We have identified a number
of markets that present both
volume and profit opportunities
in the medium to long term
and we are considering various
entry strategies.
Our Objective: Leverage
our product portfolio into new
geographic regions through
distribution partners, in-country
presence and new country
product registrations.
Acquisition
We recognise acquisitions
could accelerate our expansion
by providing entry into new
geographies, enhancing our
portfolio and giving access
to new technologies. We
have established well-defined
criteria through which potential
acquisition targets can be
screened.
Our Objective: Expand our
geographical footprint and/
or enhance product portfolio
through acquisitions.
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
2 3 6 7
Link to our Risks:
Link to our Risks:
Link to our Risks:
Link to our Risks:
2 3 4 5 7
1 2 4 5 7 8
2 5 7 8 10
6 7
26
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022
www.dechra.com Our Strategic Enablers Support the Execution of Our Strategy
Manufacturing
& Supply Chain
People
Technology
ESG
Our manufacturing and supply
chain organisation is focused on
running our operations efficiently
and to high quality standards to
maintain or improve margins.
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.
We are implementing a strong IT
platform to enable us to operate
efficiently and are exploring
how IT can provide a source of
competitive advantage.
Our Sustainability strategy is fully
embedded within the business.
Our sustainability ambition is
to 'Make a Difference' in four
key areas: Our People; Our
Business; Our Environment;
and Our Community.
Link to our KPIs:
Link to our KPIs:
Link to our KPIs:
Link to our KPIs:
6
6 7
3
6 7
Link to our Risks:
Link to our Risks:
Link to our Risks:
Link to our Risks:
4 10
7
10
7 9 10
Read more in our Business
Model on pages 22 to 25
See our website for details:
dechra.com/sustainability/
our-people
Read more in the
Technology case study
on page 33
View our online sustainability
report at: dechra.com/
sustainability/reporting
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 Underlying Return on Capital Employed
7 Employee Turnover
3 Product Development and Launch Risk
8 Antimicrobials Regulatory Risk
4 Cash Conversion
4 Supply Chain Risk
5 Regulatory Risk
9 Retention of People Risk
10 Climate Risk
27
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Our Strategic Progress
Over the Last Five Years
Our Strategic Growth Drivers
Pipeline Delivery
a
b
c Portfolio Focus
Geographical
Expansion
Our Achievements
Our Achievements
Our Achievements
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
2018
• Strong growth in European FAP
following antibiotic product alignment
and range additions
2018
• Over 80 new country registrations
of existing portfolio products
• Acquisition of RxVet expanded our
• Leveraging CAP product success to
presence in New Zealand
increase penetration across the Group
• Successful establishment of the
• Progress in co-development licensing
• Continued EU growth in Equine from
DVP International team
opportunities
market penetration and range addition
2019
• Entered into a number of licensing
2019
• Moved key Le Vet products from
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
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
Our Progress
2022
• Launch of Zenalpha, a novel
therapeutic product that is safe
and effective for sedation in dogs
• Equine Strangles vaccine launched
in the EU
• Amoxi-Clav suspension launched
in the US market
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
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
Our Progress
2022
• All product categories delivered
strong growth
• Strong organic performance in key
markets driven by market growth
and product penetration
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
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
Our Progress
2022
• Launched Osphos and Zycortal
in Brazil
• Established a new legal entity in
South Korea
• Successful establishment of FAP
business unit in Australia and New
Zealand to support the launch of
Tri-Solfen®
28
Acquisition
Our Achievements
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
• Acquisition and successful integration
• Acquisition of trade and assets of
Caledonian Holdings Ltd in New
Zealand strengthening market position
2019
of Venco
in Equine
2020
• Acquisition of an additional 15%
of Medical Ethics Pty Ltd
• Acquisition of Ampharmco LLC in Fort
Worth, Texas, a FDA registered facility
• Acquisition of worldwide rights and
assets of Mirataz, a transdermal
medication for cats
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%
Our Progress
2022
• Acquisition of six main products for
North American market
• Acquisition of the worldwide rights to
Verdinexor, branded Laverdia, a new
treatment of all form and stages of
canine lymphoma
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Our Strategic Growth Drivers
Pipeline Delivery
a
b
c Portfolio Focus
Geographical
Expansion
Acquisition
Our Achievements
Our Achievements
Our Achievements
Our Achievements
USA market
opportunities
2019
2018
2018
2018
• Two further poultry vaccines registered
• Strong growth in European FAP
• Over 80 new country registrations
in EU: Avishield® IBH120 and ND B1
following antibiotic product alignment
of existing portfolio products
• Launch of further Amoxi-Clav dose
and range additions
• Acquisition of RxVet expanded our
sizes to complete range for the
• Leveraging CAP product success to
presence in New Zealand
increase penetration across the Group
• Successful establishment of the
• Progress in co-development licensing
• Continued EU growth in Equine from
DVP International team
market penetration and range addition
2019
2019
• Expanded into Latin America via the
• Entered into a number of licensing
• Moved key Le Vet products from
acquisition of Laboratorios Vencofarma
agreements, including a novel canine
distributors to Dechra companies to
do Brasil Ltda (Venco)
sedative and an equine gastrointestinal
generate significant synergies through
product
• A number of novel and generic
retention of full margin and enhancing
sales focus
• 43 Product registrations across Israel,
South Korea, Macau, Macedonia,
Malaysia, Malta, Namibia, Serbia,
registrations in EU, Mexico and
• FAP growth accelerating against
Ukraine, UAE and Zambia
rest of world
a backdrop of declining antibiotic
• 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
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
Our Progress
2022
• Launch of Zenalpha, a novel
therapeutic product that is safe
and effective for sedation in dogs
• Equine Strangles vaccine launched
in the EU
• Amoxi-Clav suspension launched
in the US market
markets
2020
• Delivered growth across all key
therapeutic sectors through
educational focus
• Continued to generate significant
synergies from AST Farma and
Le Vet acquisition
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
2021
• Completed Le Vet disintermediation
2021
with final products brought back
•
Internationally received 38 approvals
in-house in Belgium
for key brands in new countries
• Second consecutive year of strong
• Tri-Solfen® provides a meaningful FAP
growth in all key therapeutics areas
presence in the Australian and New
Our Progress
2022
• All product categories delivered
strong growth
• Strong organic performance in key
markets driven by market growth
and product penetration
Zealand market
• Launched Vetoryl in Brazil and gained
registrations for Felimazole and Zycortal
Our Progress
2022
in Brazil
South Korea
• Launched Osphos and Zycortal
• Established a new legal entity in
• Successful establishment of FAP
business unit in Australia and New
Zealand to support the launch of
Tri-Solfen®
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
• Acquisition of Ampharmco LLC in Fort
Worth, Texas, a FDA registered facility
• Acquisition of worldwide rights and
assets of Mirataz, a transdermal
medication for cats
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%
Our Progress
2022
• Acquisition of six main products for
North American market
• Acquisition of the worldwide rights to
Verdinexor, branded Laverdia, a new
treatment of all form and stages of
canine lymphoma
Our Strategic Enablers
Manufacturing and
Supply Chain
Technology
Our Achievements
People
ESG
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 in DVP EU
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
2021
• Appointment of Non-Executive Director, Group Manufacturing & Supply Director
and Group Sustainability Director
•
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
Our Progress
2022
• Supply chain robust and supporting high level of growth
• Expanded Danish distribution centre, opened in April 2022
• Alison Platt appointed Chair of the Board
• Appointment of Non-Executive Director, Chief Scientific Officer and Chief Information Officer
• Commenced work on new quality management systems and to move most manufacturing
sites onto a single consolidated ERP system
• Task Force on Climate-related Financial Disclosures significantly strengthened
•
Inaugural Dechra climate race completed improving employee ESG engagement
29
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Strategy in Action
Strategic Growth Driver:
Pipeline Delivery
Development of
an anaesthesia
product
In February 2019, Dechra executed an exclusive license and distribution
agreement with Vetcare Oy of Finland for the sales and marketing of
an innovative combination sedative and analgesic for dogs, Zenalpha.
Vetcare had early research on the combination from the University of
Helsinki Veterinary School and knew they wanted to bring the drug to
the market, but they needed to collaborate with a global animal health
company to capitalise on the drug’s market potential fully. Dechra’s
Business Development team successfully won the bid to be Vetcare’s
partner and then, throughout the drug’s further development, clinical
testing and registration, the Business Development team was advising
Vetcare as needed on regulatory, manufacturing and commercial
strategies. The joint research team has also conducted work on
additional indications and additional species and built relationships
with Key Opinion Leaders in anaesthesia and sedation.
Zenalpha (medetomidine and vatinoxan hydrochlorides injection) has
been approved by the European Medicines Agency (EMA) and the US
Food and Drug Administration (FDA) and will be fully launched in the US,
UK and EU in the 2023 financial year by Dechra (with the exceptions of
Finland, Latvia, Estonia and Lithuania where commercialisation will be
Vetcare’s responsibility).
Dechra has developed the commercial launch materials and plans for
Zenalpha and will introduce the drug to veterinarians and veterinary
nurses as a drug that improves the cardiovascular function, as
compared to medetomidine alone, while the dog is sedated. Vatinoxan
decreases the negative cardiovascular effects of medetomidine because
it keeps the heart rate closer to normal. Medetomidine is a widely used
drug in the EU; however safety concerns, which Zenalpha addresses,
have limited the sales in the USA. Thus the combination of drugs found
in Zenalpha improve upon the safety profile of medetomidine.
Zenalpha represents another great collaboration with a business
development partner to deliver an innovative drug to the market that
answers a need in veterinary practices globally. Dechra and Vetcare
have worked together for the last three and a half years to deliver the
long term commercial success of Zenalpha.
30
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Strategic Growth Driver:
Acquisition
Acquisition of
worldwide rights
to Laverdia®
to build relationships with the external suppliers and to communicate our
forecast. Inventory purchase and transfer from Anivive was completed in
March, and Dechra successfully launched the product in mid-April with
a secure supply chain.
The next phase of the transition plan focuses on gaining full regulatory
approval for Laverdia-CA1 in the USA, UK, EU, Brazil, Australia, Japan,
and Canada. Managing the continued and timely development through
to approval in these markets is critical; to facilitate this, a joint council of
subject matter experts from Anivive and Dechra has been formed. This
joint council will maintain alignment with the Transition Lead on the status
of registration progress globally. As we approach additional approvals,
the Transition Lead will re-form the core team to ensure Dechra is able
to leverage each asset to the fullest extent quickly.
The purchase of Laverdia-CA1 is an example of a highly complex
product acquisition where Dechra acted with agility to take advantage
of a unique opportunity successfully. The collaborative effort between
the Dechra core transition team and Anivive allowed us to tackle
immediate actions efficiently and quickly move into the routine course
of business. Furthermore, we developed a healthy working relationship
with Anivive, critical to the ongoing collaboration on global approvals
over the upcoming years. Dechra is proactively applying the learnings
from this transition process and others to hone and optimise our
approach to product acquisitions further.
Acquisition and Transition of Laverdia-CA1
On 10 January 2022, Dechra acquired the worldwide rights to Laverdia-
CA1 from Anivive Life Sciences, Inc. Laverdia-CA1 is an oral treatment
for canine lymphoma and the first small-molecule selective inhibitor of
nuclear export (SINE) drug designed specifically for veterinary use. This
is a strategic acquisition which expands Dechra’s niche therapy portfolio
and fills an unmet market need for a convenient, low-cost alternative to
traditional cancer therapies.
Laverdia-CA1 is currently conditionally approved and commercially
available in the United States and is at various stages of regulatory
approval globally. Due to the conditional approval status, the team faced
challenges to transition that we have not experienced previously. Whilst
Dechra took on all commercial and customer facing responsibilities,
Anivive had to retain accountability for all quality and regulatory aspects
of the product. Dechra’s established approach of forming a cross-
functional core transition team with a dedicated Transition Lead has
enabled the successful management of this novel complexity and the
team to address the challenges quickly. Anivive and Dechra were able
to work collaboratively to create procedures clarifying each company’s
ongoing roles and responsibilities under the conditional approval and
beyond. We chose to take a multi-phased approach to cover the short,
medium and long term requirements of the project.
The first phase of transition focused on the immediate activities required
in the USA post-close. As the product was already commercialised there,
it was crucial to facilitate a seamless transfer to Dechra. To achieve this,
weekly meetings were held with Anivive to identify and action critical
path items, create a platform for troubleshooting, and to maintain team
alignment and momentum. This joint team first prioritised transfer of tasks
focused on customer support, compliance, and securing product supply.
We aligned on cooperative processes for handling pharmacovigilance
and product quality complaint calls, analysis, and reporting. The team
agreed on quality and manufacturing roles and responsibilities under
the conditional approval. Next, we coordinated intensive training for
Tech Services and Sales Teams on the mechanism of action, safety,
efficacy, and dosing plans for Laverdia-CA1. Marketing, training, and
sales materials were developed and deployed. The final priority for the
first phase was for the External Manufacturing and Supply Chain teams
31
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Strategy in Action
Strategic Growth Driver:
Geographical Expansion
South Korean sales
and marketing
organisation
In all projects people engagement is clearly important. The key being to
find like-minded, energetic and knowledgeable people, starting at the
top. In South Korea we were fortunate to work with somebody whom
we had known for several years and who had all the right credentials
and connections in the market. Quickly establishing our values and
expectations meant that the new employees were given the freedom
to take ownership and execute the plan. Once again, legal and HR
guidance meant we could formulate service and contract agreements,
leaving the project team to focus on the establishment of the business.
Without products to sell, we have no business, we have no margin
to self-fund the infrastructure and no rationale for existence. Once
we had established the legal entity we could hold the necessary
marketing authorisations and obtain our import permit. These activities
all take time and have a process to follow that adds time to a tight
schedule. Without a clear understanding of this process, it is difficult to
communicate to the customer as to when products will be available.
This leads to the final and most important piece of the process, the
customers. At every step of establishing our entity, it was important
to keep the customer informed. The objective is to deliver high quality
products that support their business by delivering high quality health
and welfare services to an increasingly demanding population of South
Korean pet owners.
Next Steps
We hope to be in a position to begin marketing and distributing some
of our products in South Korea by the end of the calendar year.
South Korea, where we are establishing our latest sales and marketing
organisation, has been one of the most challenging projects for the
International business unit to date. The practicalities of language, culture
and the time difference all created complexity; however, the need to
complete the task in only four months to ensure continuity of supply
increased the challenge still further.
The Rationale
We are constantly reviewing opportunities to deliver on our strategic
goal of geographical expansion. South Korea, as our largest distribution
market, was an obvious choice to establish the next Dechra sales and
marketing organisation. The companion animal market of 6.3 million
dogs and 2.4 million cats, makes this the world’s eighth largest CAP
market at €2.4 billion and is projected to grow to €4.4 billion by 2027.
Research data also suggests that on average owners spend €1,240
per year on their pets with 50% of this being on pet food and snacks
and a further 14% on medications for their pet’s health and welfare. We
believe that setting up a Dechra company will be the next step to deliver
growth utilising the strength of the Dechra brand to introduce more
products and to provide an enhanced technical service to support this
market, which is hungry for knowledge and development. Setting up
this Asian hub also provides a convenient location for collaboration with,
and management of, neighbouring markets which may be suitable for
future development.
Key Considerations
The four key steps for success of this project have been professional
support, people engagement, product focus and customer
communication.
The professional support has been managed by our internal team with
the collaboration of local lawyers. The first and most critical step has
been to set up a legal entity as rapidly as possible because without this,
we had no rights to trade, no status for retaining licenses, were unable
to import products, were unable to set up an office or a bank account
nor could we offer people employment contracts. Once we had decided
on using a contractual service to provide an office and registered
address, this process took around six weeks, and represented a
key step.
32
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Strategic Enabler:
Technology
Implementing an
Electronic Quality
Management System
As reported in the 2021 Annual Report, the Board approved the
implementation of an Electronic Quality Management System, which
will provide an integrated system for the information and processes
in the life cycle of our products.
Why do we need a new system?
Currently our manufacturing, product development, regulatory and
quality functions operate on independent and non-integrated systems
which are largely manual and therefore lead to inefficiencies and a
higher risk profile in critical business processes.
What are we doing?
We have selected Veeva which offers a high specification, cloud based
application tailored for specific sectors, including the pharmaceutical
and veterinarian pharmaceutical sectors. The application provides a
system of best practice processes largely pre-configured but also, to
some extent, configurable to flex to the needs of Dechra’s requirement.
Dechra will utilise specific modules of the platform relating to:
• QDocs – Quality document management and approval system.
• eQMS – an Electronic Quality Management System which manages
key documents within a quality management system such as
Deviations, Change controls, and corrective and preventive actions
(CAPAs).
• Submissions – manages the regulatory submissions electronically
for all documents becoming the single authoritative source.
• Registrations – provides a global application for planning and
tracking of new product submissions.
What are the benefits?
In summary, the benefits that are to be realised are significant.
The realisation of these benefits will be critical in:
•
•
reducing the overall risk around product supply and compliance;
faster and more accurate submissions;
• enabling quicker product launch times, and supporting ongoing
growth and acquisition;
• harmonising and optimising our business processes; and
•
integrating different divisions and functions, allowing one version
of a document available to all.
One of the key advantages to a cloud-based system versus on
premises hosted application is that the system functionality is
constantly being upgraded to meet the changing regulatory and
quality developments as well as general system improvements and
enhancements.
How long will it take?
Development and implementation of the Veeva platform is being
executed in a phased approach and the initial phase is expected to
take three years. A dedicated Dechra team supported by the software
provider and an experienced installation partner throughout the initial
phase will implement the system.
The QDocs module has been the main focus of the project so far with
a successful configuration, and testing of the system now complete. In
quarter three of 2022 the system will be trained and deployed in Skipton
to over 200 users, with a roll out plan to the other manufacturing sites
and logistic sites in the remainder of 2022 and 2023. Work is continuing
on the submissions module, with configuration in the final stages and
master data and meta data being aligned across PDRA and Quality. It is
anticipated that the roll out will be in quarter three of 2023 and done on
a product by product basis.
33
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Strategy in Action
Strategic Enabler:
People
Future Facing
Leaders
Future Facing Leaders Programme
As we continue to grow our organisation and our successful track
record of internal promotion and effective succession planning, a
key focus continues to be developing our internal talent to create a
sustainable pipeline for our future growth and driving engagement.
We are pleased that in January we launched our first global Future
Facing leaders programme.
We aim to build:
•
strength in our leadership pipeline to support succession;
• agile, future facing, leadership skills;
•
strategic and executional excellence;
• an inclusive leadership style that is inspiring and culturally aware;
• consistency in understanding of our business; and
• capacity to build and support high performing teams.
The concept of the programme first started in 2020 when initial
scoping of leaders' skill sets for the future in Dechra were defined and
identified. Talent and succession planning discussions which have
been undertaken since then led to a fair, inclusive group being selected
to support the growth requirements needed to continue the ongoing
sustainable talent pipeline within the business.
The current cohort has 24 attendees from all parts of the Dechra business
both geographically and in specialist and leadership areas. The length of
service of this group varies from recently joined up to nearly twenty years’
service and a gender split which represents the business demographics.
This is a two year tailor made programme which is utilising a balance of
virtual events to ensure frequency of learning and connection with the
attendees, and live events to facilitate greater relationships and cultural
experiential learning opportunities. The business needs have been
identified and this programme is customised to meet these, along with
personalised elements of assessments to gain greater depth of personal
understanding to support the individuals in their own development
journeys. Working across the globe this balance of self-learning, team
coaching and personalised strategic assessment has proven a solid
platform which has enabled the live learning to create synergy across
the wider business groups within this programme.
34
Guest speakers have been well received in sharing their experiences,
providing an in depth view of their own career journeys, challenges
and the behaviours that have enabled them to drive their careers to
be effective leaders.
There is a great understanding of the importance of recovery being vital
to sustainable performance. New habit formation to build resilience,
and brain and body fitness have been key to continue to drive the
development of these individuals. Self-care has been key to support
a growth mindset and leverage this opportunity for personal and
professional growth.
The first live event was held at Holly Bush Farm in the Peak District,
where having no phone signal proved helpful to ensure engagement
with each other.
The engagement in person, which has been missed over the past few
years, has provided a greater understanding across the business for
all participants. There was much discussion about how this team can
provide a conduit between their parts of the business and the Senior
Executives to drive greater engagement, and delivery of an aligned
business strategy to continue driving growth.
The team coaching and virtual events since this live event have
had an even higher level of honesty and ambition and plans for the
commencement of the second cohort are beginning, for 2023.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Product
Development
Product Development
It is our mission to develop products to improve animal welfare, and
as such animal health and wellbeing is always a top priority in our drug
development efforts. 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.
Regulatory agencies, governmental bodies, or animal welfare
review boards approve the scientific purpose for involving animals
in development of our products as dictated by specific country
requirements. Dechra’s Animal Welfare Committee is made up of
Dechra employees and Community Members and reviews all studies
conducted in the field.
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.
The Animal Welfare Committee ensures that a minimal number of
animals are used and that their treatment is humane, and Dechra
inspects all facilities which perform testing to confirm proper care and
treatment of animals is evident. Dechra consistently oversees that all
studies conducted by or on behalf of Dechra have been reviewed by
an animal welfare committee. Additionally, any clinical trials will only be
conducted in animals with the disease the product is intended to treat
and owner consent for inclusion in the study will be obtained.
The difference between Novel, Generic and Generic Plus product
Novel and Generic products are the main types of new animal drug
applications that Dechra applies for:
• Novel: for new animal drugs three key sections, known as the
dossier, for the registration process:
1. Safety: includes a study in healthy animals that evaluates the
effects of multiples of the intended dose;
2. Efficacy: includes the study(ies) in which the effectiveness
of the drug is demonstrated in animals with the targeted
disease; and
3. Manufacturing: the quality and purity of the drug product are
demonstrated along with proof that the drug product can be
manufactured consistently through the production of several
independent large scale batches.
• Generic: a generic is a pharmaceutical product that contains the
same chemical substance as the novel drug. Approvals for a
generic drug require demonstration of in vivo bioequivalence of
the proposed product to the novel (reference) product. There are
exceptions for some classes of drugs, primarily those intended for
injection. The manufacturing section for a generic drug may require
fewer pilot batches than for a pioneer drug, but the emphasis on
quality and purity is identical.
• Generic Plus: is a product which is approved as a generic but
improves on it through the development of a better formulation,
dosage form, delivery system or packaging.
35
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Product
Development
Animal Welfare
Committee
The Committee holds twice yearly meetings in which the Community
Members are required to attend at least one meeting in a 12 month
period. Protocols are reviewed on a continuous basis throughout the
year and a Community Member is required to participate in those
reviews on a rotational basis.
All members of the Committee are required:
•
•
to attend an orientation session with additional sessions offered
as needed and as different circumstances arise;
to participate in training on Dechra’s Animal Welfare Statement,
the Animal Welfare Committee Mission Statement and to review
any other guidance/resources that are provided; and
•
to participate in training on protocol review procedures.
As a veterinary pharmaceutical company, we work diligently to maintain
the highest standards of putting animal health and welfare as a priority in
everything we do. When we run clinical trials we have the study protocols
reviewed by our Animal Welfare Committee to ensure that all aspects of
the study that affect the animal have been robustly evaluated for proper
ethical treatment and that, if applicable, owner interests have been
addressed in the owner consent form. To achieve this, Dechra’s Animal
Welfare Committee:
• protects animal welfare by providing ethical review of studies, when
requested, for best practices and appropriate ethical treatment;
• promotes awareness of animal welfare and subscribes to the
guiding principles of reduction, replacement, and refinement
whenever possible;
•
•
•
•
assesses that animal risks are minimised and outweighed by the
potential benefits of the study;
reviews informed consent documents ensuring that the information
provided fully outlines the nature, purpose and risks to the animal
and is comprehensive and understandable to the owner;
provides critical feedback by asking questions and freely
communicating with the researchers; and
is comprised of veterinary professionals, members educated in
science and regulations, and member(s) that represent the public-
at-large who ensure the research follows the Company’s position
on animal welfare.
36
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Dechra’s pharmaceutical and vaccine development pipeline contains a mixture
of short, medium and long term new opportunities and lifecycle products.
14
Projects in
Feasibility
7
Projects in
Research
15
Projects in
Development
5
Projects in
Registration
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 processes 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.
Entering the Development Phase
The DEVELOPMENT phase is the longest part of the process,
potentially taking between two and 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 Pipeline Delivery on page 30
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; innovative products 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.
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.
Making the Chemistry Work
In the second phase of the development process, FEASIBILITY, proof
of concept level data is 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.
37
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Product
Development
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
Pipeline Review Committee (PRC)
Experts and stakeholders from all relevant departments
Project recommendations based on technical feasibility,
valid business case and commercial need
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
Idea Funnel: Prioritise Ideas
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
38
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Product Pipeline
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.
1
Evaluation
4
Development
CAP/Equine
FAP
CAP/Equine
FAP
Poultry Vaccine
Poultry Vaccine
Poultry Vaccine
Poultry Vaccine
Anaesthetic for dogs
and cats
Analgesic therapy
for horses
Horse Vaccine
Horse Vaccine
Horse Vaccine
Endocrine therapy
for cats
Dermatological
therapy for dogs
Lameness therapy
for horses
Dermatological
therapy for dogs
Endocrine diagnostic
Endocrinology for dogs
5
Registration
CAP/Equine
FAP
Gastrointestinal therapy
for dogs
Parasiticides for poultry
and pigs
Analgesic therapy for
dogs
Antibiotic for cattle
Antibiotic for cattle
and pigs
New opportunities are constantly being evaluated and
will move into Feasibility quickly if of interest.
2
Feasibility
CAP/Equine
FAP
Poultry Vaccine
Swine Vaccine
Swine Vaccine
Anti-inflammatory therapy
for poultry
Poultry Vaccine
Anaesthetic for dogs
and cats
Ophthalmic therapy
for dogs
Endocrine therapy
for dogs
Endocrine therapy
for dogs
Endocrine therapy
for cats
Gastrointestinal therapy
for dogs
Cardiovascular
therapy for dogs
Ophthalmic therapy
for dogs
Antibiotic for dogs
and cats
3
Research
CAP/Equine
FAP
Analgesic therapy
for dogs
Gastrointestinal therapy
for horses
Endocrine therapy
for horses
Poultry Vaccine
Poultry Vaccine
Poultry Vaccine
Antibiotic for pigs
Key to Product Pipeline
Analgesic, Anaesthesia, Anti-inflammatory
Dermatology
Antibiotic
Antiparasitic
Ophthalmology
Endocrinology
Gastrointestinal
Vaccines
Locomotion
Cardiovascular
39
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report
Global Product
Offering
Analgesia, Anaesthesia and Anti-inflammatory
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5
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com a
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Cats, Dogs
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Animal
Altidox
Centidox
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Pigs, Chickens,
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Other products: Metaxol, Methoxasol, Phenocillin, Solacyl, Tialin
Vaccines
COUNTRY
INTERNATIONAL*
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Animal
Avishield ND
Excell 10
Vencomax
Other Brands
Chickens, Turkeys
Cattle, Pigs,
Sheep, Goats
Dogs
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Animal
Cardisure
Isathal
Libromide
Mirataz
Phenoleptil
Prednicortone
Prevomax
Vetivex
Dogs
Cats, Dogs,
Rabbits
Dogs
Cats
Dogs
Cats, Dogs
Dogs
Cat, Dogs, Cattle,
Horses
Other products: Apovomin, Fruesdale, Hypertonic, Laxatract, Lubrithal, Ophtocycline, CleanOcular, Puralube, Vetropolycin
* Not all products are sold in each country within a continent.
2
5 5 7
3
1 1 6
7 7
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1 1
41
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Financial
Review
Our excellent trading performance
has been facilitated by a robust
global supply chain, supplemented
by healthy contributions from our
product acquisitions in the year."
Paul Sandland
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 profit of £1.8 million includes underlying operating
profit of £6.7 million and non-underlying charges of £4.9 million relating
to amortisation of acquired intangibles.
Including non-underlying items, the Group’s consolidated operating
profit increased by 16.2% at CER (13.7% at AER) whilst consolidated
profit before tax increased by 7.8% at CER (4.9% at AER), impacted by
an increase in net finance costs. Diluted EPS growth was 7.5% at CER
(4.6% at AER) reflecting the marginal reduction in the effective tax rate.
As Reported
Revenue
Gross profit
Gross profit %
Operating profit
EBIT %
Profit before tax
Diluted EPS (p)
2022
Existing
£m
2022
Acquisition
£m
2022
Consolidated
£m
669.4
377.0
56.3%
93.7
14.0%
75.8
12.4
7.8
62.9%
1.8
14.5%
1.8
681.8
384.8
56.4%
95.5
14.0%
77.6
53.40
Growth at
AER
Growth at
CER
2021
£m
Consolidated
%
Consolidated
%
608.0
345.9
56.9%
84.0
13.8%
74.0
51.03
12.1%
11.2%
(50bps)
13.7%
20bps
4.9%
4.6%
13.8%
12.9%
(40bps)
16.2%
30bps
7.8%
7.5%
Glossary
IFRSs: UK-adopted International Accounting Standards
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
42
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Overview of Underlying Financial Results
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 certain non-underlying items as set out in notes 3, 4, 5, 6 and 35. As underlying results include the benefits
of acquisitions but exclude significant costs such as amortisation of acquired intangibles, they should not be regarded as a complete picture of
the Group's financial performance, which is presented in its total Reported results. The exclusion of non-underlying items may result in underlying
earnings being materially higher or lower than total Reported earnings. In particular, when significant amortisation of acquired intangibles is excluded,
underlying earnings will be higher than total Reported earnings. A reconciliation of underlying results to Reported results in the year to 30 June 2022
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)
Non-underlying Items
Amortisation
and related
costs of
acquired
intangibles
£m
–
–
(69.1)
(3.7)
(72.8)
–
(0.1)
(72.9)
17.3
(55.6)
Acquisition,
impairments
and cloud
computing
costs
£m
–
(0.5)
(5.5)
–
(6.0)
–
–
(6.0)
1.2
(4.8)
Tax rate
changes
and finance
expenses
£m
–
–
–
–
–
(13.5)
–
(13.5)
0.4
(13.1)
2022
Underlying
Results
£m
681.8
385.3
(178.6)
(32.4)
174.3
(3.1)
(1.2)
170.0
(38.3)
131.7
120.84
2022
Reported
Results
£m
681.8
384.8
(253.2)
(36.1)
95.5
(16.6)
(1.3)
77.6
(19.4)
58.2
53.40
In the year, Dechra delivered consolidated revenue of £681.8 million, representing an increase of 13.8% on the prior year. This included £669.4 million
from its existing business, an increase of 11.8%, and a £12.4 million contribution from acquired product rights.
Consolidated underlying operating profit of £174.3 million represents a 9.4% increase on the prior year. This included £167.6 million from Dechra’s
existing business, an increase of 5.2% on a like-for-like basis, and a £6.7 million contribution from acquired product rights.
Underlying EBIT margin decreased by 110 bps to 25.6%, principally due to the increase in Selling, General and Administrative expenses (SG&A)
spend as a percentage of revenue with our cost base normalising following lower levels of spend during the COVID-19 pandemic.
Underlying diluted EPS grew by 14.0% to 120.84 pence reflecting the profit growth from the existing and acquired businesses and benefiting from
lower net finance costs driven by realised foreign exchange gains.
43
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Financial
Review
A more detailed explanation of our non-underlying items is included later in this Financial Review.
Underlying
Revenue
Underlying gross profit
Underlying gross profit %
Underlying operating profit
Underlying EBIT %
Underlying EBITDA
Underlying diluted EPS (p)
Dividend per share (p)
2022
Existing
£m
669.4
377.5
56.4%
167.6
25.0%
183.9
2022
Acquisition
£m
12.4
7.8
62.9%
6.7
54.0%
6.7
2022
Consolidated
£m
681.8
385.3
56.5%
174.3
25.6%
190.6
120.84
44.89
2021
£m
608.0
345.9
56.9%
162.2
26.7%
177.7
108.14
40.50
Growth at CER
Existing
%
11.8%
10.8%
(50bps)
5.2%
(170bps)
5.3%
Consolidated
%
13.8%
13.1%
(40bps)
9.4%
(110bps)
9.2%
14.0%
10.8%
Reported Segmental Performance
Reported segmental performance is presented in note 2 on pages 179 to 180. 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.
2022
Existing
£m
2022
Acquisition
£m
2022
Consolidated
£m
Reported
Revenue by segment
EU Pharmaceuticals
NA Pharmaceuticals
Total
Underlying operating
profit/(loss) by segment
EU Pharmaceuticals
NA Pharmaceuticals
Pharmaceuticals Research
and Development
Underlying segment
operating profit
Corporate and
unallocated costs
Underlying operating
profit
Non-underlying
operating items
Reported operating profit
400.0
269.4
669.4
127.7
84.8
(32.4)
180.1
(12.5)
167.6
(73.9)
93.7
2021
£m
388.5
219.5
608.0
127.8
75.9
Growth at AER
Growth at CER
Existing
%
Consolidated
%
Existing
%
Consolidated
%
3.0%
22.7%
10.1%
4.7%
25.3%
12.1%
6.4%
21.3%
11.8%
8.2%
23.8%
13.8%
(0.1%)
11.7%
2.9%
15.5%
3.8%
9.7%
6.9%
13.6%
406.7
275.1
681.8
131.5
87.7
(32.4)
(32.4)
0.0%
0.0%
(1.5%)
(1.5%)
186.8
171.3
5.1%
9.0%
6.9%
10.9%
(12.5)
(9.1)
(37.4%)
(37.4%)
(37.4%)
(37.4%)
174.3
162.2
3.3%
7.5%
5.2%
9.4%
6.7
5.7
12.4
3.8
2.9
–
6.7
–
6.7
(4.9)
1.8
(78.8)
95.5
(78.2)
84.0
11.5%
13.7%
13.9%
16.2%
Underlying Diluted Earnings Per Share
120.84p
Reported Diluted Earnings Per Share
53.40p
120.84p
108.14p
92.19p
90.01p
76.45p
2022
2021
2020
2019
2018
53.40p
51.03p
32.76p
30.07p
37.04p
2022
2021
2020
2019
2018
44
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Underlying Segmental Performance
European Pharmaceuticals
Revenue in European (EU) Pharmaceuticals grew by 8.2% to £406.7 million. The existing business grew by 6.4% with this growth driven by a robust
performance across all established European markets and also in the key International businesses in ANZ and Brazil. The acquisitions of Tri-Solfen®
(for the ANZ market) and Osurnia (July sales) contributed a combined £6.7 million to revenue for the period where there is no comparative.
Operating profit from existing business increased by 3.8%, with operating margin decreasing to 31.9% and consolidated operating margin
decreasing to 32.3% as our cost base normalised following COVID-19.
Underlying
Revenue
Operating profit
Operating profit %
2022
Existing
£m
400.0
127.7
31.9%
2022
Acquisition
£m
6.7
3.8
56.7%
2022
Consolidated
£m
406.7
131.5
32.3%
2021
£m
388.5
127.8
32.9%
Growth at CER
Existing
%
6.4%
3.8%
(100bps)
Consolidated
%
8.2%
6.9%
(60bps)
North American Pharmaceuticals
Revenue from North American (NA) Pharmaceuticals grew by 23.8% to £275.1 million. The existing business grew by 21.3% reflecting strong demand
for our CAP products in the US, Canada and Mexico. Osurnia (July sales), along with the product acquisitions made in the latter part of 2021 and early
in 2022, contributed a combined £5.7 million to revenue for the period where there is no comparative.
Operating profit from existing business grew 9.7% with operating margin decreasing to 31.5% and consolidated operating margin decreasing
to 31.9% as our cost base normalised following COVID-19.
Underlying
Revenue
Operating profit
Operating profit %
2022
Existing
£m
269.4
84.8
31.5%
2022
Acquisition
£m
5.7
2.9
50.9%
2022
Consolidated
£m
275.1
87.7
31.9%
2021
£m
219.5
75.9
34.6%
Growth at CER
Existing
%
21.3%
9.7%
(310bps)
Consolidated
%
23.8%
13.6%
(270bps)
Pharmaceuticals Research and Development
Pharmaceuticals Research and Development (R&D) expenses of £32.4 million represented 4.8% of existing revenue with some project spend being
delayed due to the impact of COVID-19 and specifically our ability to recruit and perform clinical study work. This spend included £3.3 million in
relation to Akston.
R&D expenses
% of revenue
2022
Existing
£m
(32.4)
4.8%
2022
Acquisition
£m
–
–
2022
Consolidated
£m
(32.4)
4.8%
2021
£m
(32.4)
5.3%
Growth at CER
Existing
%
(1.5%)
Consolidated
%
(1.5%)
Research and Development Spend
£32.4m
2022
2021
2020
2019
2018
1.5%
£32.4m
£32.4m
£28.4m
£25.1m
£18.3m
45
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Financial
Review
EU Pharmaceuticals Revenue
£406.7m
2022
2021
2020
2019
2018
EU Pharmaceuticals Underlying Operating Profit
£131.5m
2022
2021
2020
2019
2018
NA Pharmaceuticals Revenue
£275.1m
2022
2021
2020
2019
2018
NA Pharmaceuticals Underlying Operating Profit
£87.7m
2022
2021
2020
2019
2018
46
£406.7m
£388.5m
£323.5m
£304.0m
£258.7m
£131.5m
£127.8m
£100.0m
£100.3m
£77.0m
£275.1m
£219.5m
£191.6m
£177.8m
£148.4m
£87.7m
£75.9m
£63.7m
£59.2m
£48.3m
Revenue by Product Category
CAP revenue continues to be the largest proportion of Dechra’s business
at 74.6%, up from 72.8% in the prior year. CAP grew 16.0% in the year
with further market penetration across all therapeutic areas. Equine revenue
grew by 12.1% in the year driven by the US product rights acquisitions.
FAP revenue growth was 6.0% benefiting from the launch of Tri-Solfen®
in ANZ following the acquisition of rights in July 2021, but offset by the
divestment of the non-core Agricultural Chemicals business in January
2022 (revenue growth on an existing basis was 5.6%). Nutrition revenue
increased by 15.1% on the prior year reflecting the continuing success of
our strategy with key customers in our key markets.
Other revenue reduced by 12.6% to £10.1 million, now representing
only 1.5% 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.
CAP
Equine
FAP
Subtotal Pharmaceutical
Nutrition
Other
Total
2022
£m
508.4
49.5
78.8
636.7
35.0
10.1
681.8
%
%
Change
Change
at AER
at CER
14.9% 16.0%
10.5% 12.1%
6.0%
12.8% 14.3%
10.4% 15.1%
(15.1%)
(12.6%)
12.1% 13.8%
2.3%
2021
£m
442.6
44.8
77.0
564.4
31.7
11.9
608.0
Revenue by Product Category (at AER)
CAP
Equine
FAP
Nutrition
Other
74.6%
7.2%
11.6%
5.1%
1.5%
Underlying Gross Profit
Underlying gross profit margin for the existing business decreased by
50 bps to 56.4% on an Existing basis and decreased by 40 bps to
56.5% on a consolidated basis reflecting the strong CAP performance
offset by the increased generic competition, particularly in our NA
Business.
Underlying Selling, General and
Administrative Expenses (SG&A)
SG&A costs grew from £151.3 million in the prior year to £178.6 million in
the current year, an increase of 19.8%. This growth principally represents
the full year impact of the investment in our people costs following the
review of compensation across the Group in January 2021 and the
normalisation of our cost base (including sales & marketing and travel &
entertainment costs) following COVID-19 lockdowns in the prior year.
Non-underlying Items
Non-underlying items incurred in the year are fully described in note 5
on page 182. In summary, they relate to the following:
• Amortisation of acquired intangibles of £72.8 million has decreased
from £75.2 million in 2021 principally due to new charges relating
to the product acquisitions more than offset by the reducing charge
from the AST Farma and Le Vet acquisition;
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Cloud computing arrangement costs of £2.8 million relating to the
initial costs of the programme to implement the Manufacturing and
Supply function’s new ERP and Electronic Quality Management
systems;
This represents 10.8% growth over the prior year. Dividend cover based
on underlying diluted EPS is 2.7 times (2021: 2.7 times). The Board
continues to operate a progressive dividend policy, recognising investment
opportunities as they arise.
•
•
•
•
•
•
Impairment costs of £2.9 million predominately relating to the sale of
the Agricultural Chemicals business (£1.0 million) and an impairment
of a small number of In-Process R&D assets recognised on the
acquisition of AST Farma and Le Vet (£1.7 million);
Finance charge of £13.5 million (2021: credit of £2.8 million)
represents the charge arising on the unwind of the discount
relating to the contingent consideration liability of £3.4 million and
associated foreign exchange loss of £10.1 million driven by the
depreciation of Sterling against the US and Australian Dollars;
Taxation credit of £18.9 million (2021: £14.0 million) represents
the tax impact of the above items (£21.1 million), offset by the
revaluation of deferred tax balance sheet items (£2.2 million charge)
following changes in corporate tax rates, including a further revision
to the Netherlands rate (which is increasing to 25.8%);
Expenses relating to acquisition and subsequent integration
activities were £0.3 million (2021: £1.4 million) with costs relating
to the product rights acquisitions in the current year being
immaterial so treated as underlying; and
Costs relating to rationalisation of the manufacturing organisation
were nil (2021: £1.6 million), as this programme was completed in
the prior year.
Taxation
The reported effective tax rate (ETR) for the year is 25.0% (2021: 25.0%)
and includes the one-off impact of the substantively enacted increase
in corporate tax rates in the Netherlands (from 25.0% to 25.8%) on
deferred tax balances. On an underlying basis the ETR is 22.5% (2021:
21.7%); the main differences to the UK corporation tax rate applicable
of 19.0% (2021: 19.0%) relate to differences in overseas tax rates and
non-deductible expenses offset by patent box allowances and other
incentives.
The underlying ETR is expected to remain at a similar level in the
year to 30 June 2023. We continue to monitor relevant tax legislation
internationally as it may affect our future ETR.
Reported Profit
Reported profit before tax increased by 4.9% at AER reflecting the
reported operating profit growth of 13.7% at AER and the increase in net
finance costs which include a foreign exchange loss of £10.1 million on
the remeasurement of the contingent consideration liabilities driven by the
depreciation of Sterling against the US and Australian Dollars.
Earnings per Share and Dividend
Underlying diluted EPS for the year was 120.84 pence, a 14.0% growth on
the prior year reflecting the underlying EBIT growth of 9.4% and the benefit
from a lower net finance expense principally due to foreign exchange gains
realised. The weighted average number of shares for diluted earnings per
share for the year was 109.0 million (2021: 108.8 million).
The reported diluted EPS for the year was 53.40 pence (2021: 51.03 pence).
This represents an increase of 4.6% (at AER) in reported EPS which is lower
than the reported EBIT growth of 13.7% (at AER) reflecting the increase
in net finance expense due to the foreign exchange losses recognised on
contingent liabilities.
The Board is proposing a final dividend of 32.89 pence per share (2021:
29.39 pence); added to the interim dividend of 12.00 pence, the total
dividend per share for the year ended 30 June 2022 is 44.89 pence.
Currency Exposure
The average rate for £/€ increased by 4.6%, and the £/$ rate decreased
by 1.1% 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
2022
1.1807
1.3316
2021
1.1287
1.3466
% Change
4.6%
(1.1%)
Currency Sensitivity
Euro €: a 1% variation in the £/€ exchange rate affects underlying
diluted EPS by approximately +/- 0.5%.
US Dollar $: a 1% variation in the £/$ exchange rate affects underlying
diluted EPS by approximately +/- 0.5%.
Current exchange rates are £/€ 1.1623 and £/$ 1.1623 as at 1 September
2022. If these rates had applied throughout the year, the underlying diluted
EPS would have been approximately 8.3% higher.
Statement of Financial Position
The Statement of Financial Position is summarised in the table on the
next page.
• Non-current assets (excluding deferred tax) increased from
£819.9 million to £846.6 million and include the intangible assets
recognised on the product acquisitions, partly offset by amortisation
of acquired intangibles.
• Working capital increased from £142.7 million to £175.7 million
(£33.0 million at AER, £27.8 million cash flow impact) mainly due
to the growth of the Group with an investment in inventory made to
maintain service levels during this continuing period of heightened
growth and uncertainty.
• Net debt increased in the year by £8.0 million from £200.2 million
to £208.2 million; this includes cash generation from operations
at £166.1 million, an outflow of £54.4 million relating to product
acquisitions made during the year, net capital expenditure of
£20.3 million, net interest/tax outflows of £39.8 million and
£44.8 million in dividends. Exchange rate variations negatively
impacted the net debt position by £7.2 million.
• Current and deferred tax assets and liabilities reduced from
£45.8 million to £34.7 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
2022
£m
846.6
175.7
(208.2)
(34.7)
(112.6)
666.8
2021
£m
819.9
142.7
(200.2)
(45.8)
(83.7)
632.9
47
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report
Financial
Review
Cash Flow, Financing and Liquidity
The Group enjoyed good cash generation during the year, with a strong
Underlying EBITDA margin of 28.0% (2021: 29.2%). However, as
mentioned above, working capital has increased by £27.8 million, mainly
due to the growth of the Group with an investment in inventory made to
maintain service levels during this continuing period of heightened growth
and uncertainty. This resulted in net cash generated from operations after
non-underlying items of £163.3 million, representing cash conversion
of 93.7% of underlying operating profit.
Net Assets
£666.8m
2022
2021
2020
2019
2018
£666.8m
£632.9m
£637.5m
£509.1m
£505.0m
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 (%)
2022
£m
174.3
16.3
190.6
28.0%
(27.8)
3.3
166.1
(2.8)
163.3
93.7%
2021
£m
162.2
15.5
177.7
29.2%
(36.0)
2.5
144.2
(3.0)
141.2
87.1%
Net Debt Bridge
Notable cash items are listed below in the net debt reconciliation table:
• Net capital expenditure on tangible assets increased to £20.3 million
(2021: £19.8 million), representing 1.8 times depreciation.
• Acquisitions of intangible assets of £57.3 million includes the product
acquisitions (see below) and capitalised development expenditure
(£1.2 million).
• 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 1.0 times
(2021: 1.1 times) versus a covenant of 3 times.
Net Debt 30 June 2021
Net cash generated from operations before
non-underlying items
Non-underlying items
Net capital expenditure
Acquisition of intangible assets
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 2022
£m
(200.2)
166.1
(2.8)
(20.3)
(57.3)
(0.8)
(3.8)
(39.8)
(44.8)
2.3
0.4
(7.2)
(208.2)
48
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.
In January 2020 the Group undertook a Private Placement raising
€50.0 million and USD100.0 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 14 July 2022 the Group undertook a further Private Placement raising
€50.0 million and €100.0 million (under seven and ten year new senior
secured notes respectively), the proceeds of which were used to repay
existing debt.
Capital Management
On 21 July 2022 the Group successfully completed a share placing of
5,364,683 new ordinary shares, representing 4.95% of the existing issued
share capital of the Company, at a price of 3430 pence per placing share,
raising gross proceeds of £184.0 million which were largely deployed to
fund the Piedmont Animal Health, Inc acquisition upon its completion on
20 July 2022.
Covenants
There are two covenants governing the RCF and the Private Placements:
• Leverage: Net Debt to underlying EBITDA not greater than 3.0:1
for the RCF and 3.5:1 for the Private Placements (30 June 2022:
1.0:1); and
•
Interest Cover: underlying EBITDA to Net Finance Charges not less
than 4.0:11 (30 June 2022: 24.6:1).
The above ratios are calculated excluding the impact of IFRS 16 and
having adjusted for the pro-forma impact of acquisitions in accordance
with the terms of the RCF and Private Placements arrangements.
On 22 December 2021, the Group entered into an Amendment and
Restatement Agreement in relation to the £340.0 million Revolving
Credit Facility (RCF) maturing 25 July 2024. With effect from 1 January
2022, any new Borrowings drawn on the RCF will now use Risk Free
Reference (RFR) rates instead of LIBOR rates. The relevant RFR rates
for the principal Borrowings of the Group will be SONIA (for Borrowings
in GBP), SOFR (for Borrowings in USD) and EURIBOR (for Borrowings
in EUR). The interest rate charged on any new Borrowings drawn under
the RCF will be the relevant RFR rate plus the Margin plus a Credit
Adjustment Spread (CAS). The CAS charged on the RCF will be a
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
minimum of 0.0326% and a maximum of 0.42826%, dependent upon
the term and currency of the new Borrowings. The CAS will not be
charged on any new Borrowings that are drawn in EUR currency. The
margin over LIBOR (or equivalent) remains in the range from 1.3% for
leverage below 1.0 times, up to 2.2% for leverage above 2.5 times.
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.
The weighted average coupon of the Private Placements fixed rate notes
equates to 3.2%.
In reaching this conclusion, the Directors have given due regard to the
following:
Underlying Return on Capital Employed (ROCE)
Underlying ROCE increased to 19.5% in the year (2021: 18.8%)
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 2021 and 2022 financial years is
separately summarised compared to the existing business in the
sections above.
During the year the Group completed the following product rights
acquisitions:
•
•
•
•
•
In July 2021 the rights to Isoflurane® and Sevoflurane® were
acquired from Halocarbon Life Sciences LLC for USD12.0 million
(£8.7 million).
In September 2021 the rights to ProVet APC™ and ProVet BMC
systems were acquired from Hassinger Biomedical and DSM
Medical for USD4.0 million (£3.0 million). A payment of £0.1 million
was also made for inventory.
In October 2021 the rights to Rompun® (xylazine injection) and
Butorphanol Tartrate injection were acquired from Elanco™ Animal
Health for USD4.0 million (£3.0 million). A payment of £0.2 million
was also made for inventory.
In October 2021 the rights to Sucromate™ Equine sterile
suspension were acquired from Thorn Bioscience LLC for
USD9.0 million (£6.5 million). A minor payment was also made
for inventory.
In January 2022, the global product rights to Verdinexor, a novel
treatment for all forms and stages of canine lymphoma in dogs,
including a first right of refusal for other species along with the
trademark (Laverdia) were acquired from Anivive Lifesciences Inc.
Following the initial payment of USD19.0 million (£14.0 million)
there are subsequent milestone payments totalling USD45.5
million (£33.5 million) due on the achievement of various approval
and sales milestones for the product in the USA, UK, EU, Brazil,
Australia, Japan and Canada. Royalties are also payable as part of
this transaction and have been accrued as part of the contingent
consideration liabilities.
Accounting Standards
The accounting policies adopted are outlined in note 1 to the Accounts.
In April 2021, the IFRS Interpretations Committee published its final
agenda decision on Configuration and Customisation costs in a Cloud
Computing Arrangement. The agenda decision considers how a
customer accounts for configuration or customisation costs in
a cloud computing arrangement. The agenda decision does not have
a material impact on the Group in respect of the current period or prior
periods (note 5). There are no other accounting policy changes which have
materially impacted the 2022 financial year.
• 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;
• The cash generated from operations, available cash resources and
committed bank and other facilities and their maturities, which taken
together, provide confidence that the Group will be able to meet its
obligations as they fall due; and
• Post balance sheet events see note 34 to the financial statements.
As at 30 June 2022, the Group had net debt of £208.2 million (2021:
£200.2 million), and had available cash balances and unutilised
committed borrowing facilities of £271.2 million. Further information
on available resources and committed bank facilities is provided in notes
18 and 21 to the financial statements.
Subsequent Events
On 20 July 2022, the Group acquired 100% of the share capital of
Piedmont Animal Health, Inc. (Piedmont) for US$210.0 million (£175.0
million) in cash. Piedmont is an established product development
business with a strong track record of developing products for multi-
national animal health companies.
On 26 August 2022, the Group acquired 100% of the share capital of
the Med-Pharmex Holdings, Inc. group of companies (Med-Pharmex)
for US$260.0 million (£221.5 million) in cash. Med-Pharmex is an
established platform business with manufacturing, product development
and regulatory capabilities, and has several products already approved
and being sold in the US market.
Summary
Our business continued to benefit from strong market conditions which
remained heightened from pre COVID-19 levels accelerating growth in
our existing business. This excellent revenue performance, particularly in
North America, has been facilitated by a robust global supply chain and
supplemented by healthy incremental contributions from our product
acquisitions in the year.
R&D expenditure was lower than expected during the period, but we
continued to invest heavily in our people and have seen the rest of our
cost base return to more normalised levels following COVID-19.
The Group’s balance sheet and cash flows are strong, enabling us
to continue to consider further relevant acquisition and investment
opportunities as they arise.
Paul Sandland
Chief Financial Officer
5 September 2022
49
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Key Performance
Indicators
Existing Revenue Growth
Existing revenue includes the impact of previous acquisitions where
there is a comparator period, and therefore growth rates are stated
on a like-for-like basis.
Commentary
Dechra's existing business grew by 6.4% in EU Pharmaceuticals (excluding
third party manufacturing), and by 21.3% in NA Pharmaceuticals.
Relevance to Strategy
A key driver of our strategy is to deliver sustainable sales growth
through delivering our pipeline maximising our existing portfolio and
expanding geographically.
a
b
c
Performance
2022
2021
2020
2019
2018
Underlying Diluted Earnings Per Share Growth
£
Underlying profit after tax divided by the diluted average number of
shares, calculated on the same basis as note 11 to the Accounts.
Performance
Commentary
This reflects profit growth from the existing and acquired products
and benefiting from lower net finance costs driven by foreign
exchange gains realised.
Relevance to Strategy
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.
2022
2021
2020
2019
2018
a
b
c
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
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
As we look to grow the business, it is important that we use our capital
efficiently to generate returns superior to our costs of capital in the
medium to long term. It underpins the performance conditions of the LTIP.
Performance
2022
2021
2020
2019
2018
a
b
c
Cash Conversion
Cash generated from operations before tax and interest payments as
a percentage of underlying operating profit.
Performance
Commentary
Cash conversion increased during the year as a result of the increase
in working capital representing a smaller proportion of the underlying
operating profit compared to the prior year.
Relevance to Strategy
Our stated aim is to be a cash generative business. Cash generation
supports investment in the pipeline, acquisitions and people.
2022
2021
2020
2019
2018
a
b
c
50
11.8%
£669.4m
£608.0m
£515.2m
£481.8m
£407.1m
14.0%
120.84p
108.14p
92.19p
90.01p
76.45p
70bps
19.5%
18.8%
15.4%
15.6%
15.4%
660bps
93.7%
87.1%
99.4%
85.0%
81.9%
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
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 years.
Performance
Commentary
New product revenue reflects market penetration of product
launches in the year and new product right acquisitions made in the
second half offset by products no longer defined as new. The new
product right acquisitions will deliver a greater uplift next year.
Relevance to Strategy
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.
2022
2021
2020
2019
2018
a
b
c
Lost Time Accident Frequency Rate (LTAFR)
All accidents resulting in the absence or inability of employees to
conduct a full range of their normal working activities for a period
of more than three workings days after the day when the incident
occurred, normalised per 100,000 hours worked.
Commentary
The lost time accident frequency increased this year to 0.17. All of
the incidents occurred in our manufacturing sites. 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.
Performance
2022
2021
2020
2019
2018
Employee Turnover
Number of leavers during the period as a percentage of the average
total number of employees in the period.
Performance
Commentary
We saw an increase in employee turnover in the period due to
a reorganisation at Londrina, Brazil and resignations across the
business.
Relevance to Strategy
Attracting and retaining the best employees is critical to the
successful execution of our strategy.
2022
2021
2020
2019
2018
960bps
10.8%
20.4%
16.7%
16.7%
11.9%
88.9%
0.17
0.09
0.17
0.21
0.00
250bps
16.0%
13.5%
12.4%
13.6%
15.9%
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
51
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report
Section 172 Statement
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 Board has identified six key internal and
external stakeholder groups that they believe are
important to engage with regularly to continue to
make Dechra successful: employees; veterinary
professionals; suppliers, communities; shareholders
and regulatory authorities.
The table below and the stakeholder sections on
pages 54 to 63 detail how the Group engages
with the its key stakeholders, and why the key
stakeholders are important. Further details on how
the Board engages with key stakeholders and how
they influence decisions can be found on pages
96 to 98.
1
Employees
Objective
To make Dechra a great and safe place
to work by attracting, retaining and
developing talent
2
Veterinary
Professionals
Objective
To improve animal welfare
3
Suppliers
Objective
To trade with honesty and integrity, and
to source quality raw materials, finished
products and services
Material Issue
• Development opportunities
• Making a difference
Material Issue
•
Innovative and effective products
Material Issue
• Fair payment terms
•
Information on correct use of products
• Long term relationships
• Agile and friendly place to work
• Educational opportunities
• Living Wage/Fair pay
How We Engage
• Group intranet site
How We Engage
• Educational and training programmes
• Regular site visits by Senior Management
• Technical support via helplines and
• Engagement surveys
product information
How We Engage
• Quality audits
• Due diligence
• ABC training
• Employee meetings with the Employee
• PhD veterinary student funding
• Third Party Code of Conduct
Engagement Designated Non-
Executive Director, Lisa Bright
• Employee development and training
Performance
• Living Wage employer or local
equivalent since 2021
• 16,611 Delta courses completed
• 77% Trust Index (Engagement Survey)
• Seven meetings with the Employee
Engagement Designated Non-
Executive Director
Performance
• 130,290 CPD hours
Performance
• 11 Quality/CMO audits completed
• 14,499 Technical support enquiries
• 85 ABC training courses provided
• 2,962 Lunch and learn events
Where to Read More
• Stakeholder Engagement: Employees
Where to Read More
• Stakeholder Engagement: Veterinary
Where to Read More
• Stakeholder Engagement: Suppliers
• People Enabler
• Governance Report
• Sustainability Report
52
Professionals
• Sustainability Report
• Governance Report
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 4
Communities
5
Shareholders
6
Regulatory
Authorities
Objective
To give back to the communities in which
we operate
Objective
To instil trust and confidence and allow
informed investment decisions to be made
Objective
To meet high standards of product safety
and efficacy
Material Issue
• Prosperity within our communities
Material Issue
• Financial performance
• Community projects and initiatives
• Delivery of strategy
Material Issue
• Safety
• Efficacy
• Environmental, Social and Governance
• Responsible marketing of regulated
performance
pharmaceuticals
How We Engage
• Community activities
• Group donations
• Product and local donations
• Development and education of
young people
Performance
• 4,390 Community hours
• £314,163 Donations
• £31,965 Product donations
How We Engage
• Annual Report and RNS
announcements
• Annual General Meeting
•
Investor presentations
• Corporate website
• One-on-one meetings
How We Engage
• Regulatory training for employees
• Manufacturing facility inspections
• Market authorisation applications
• Product Safety Update Reports
Performance
• 9.2% growth in underlying EBITDA to
Performance
• 95 Product registrations
£190.5 million
• 10.8% growth in total dividend to
44.89 pence
• Publication of inaugural standalone
Sustainability Report
• Three manufacturing facility inspections
Where to Read More
• Stakeholder Engagement:
Communities
• Governance Report
• Sustainability Report
Where to Read More
• Stakeholder Engagement: Shareholders
Where to Read More
• Stakeholder Engagement: Regulatory
• Strategy
• Governance Report
Affairs
• Product Development
53
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report
Section 172 Statement
Stakeholder Engagement
1
Employees
16.0%
Employee
Turnover
53%
Females in
Workforce
0.17
Lost Time
Accident
Frequency
Rate
We employ 2,163 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;
• 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;
• Fair Employment Practices: complying with national legal
requirements regarding wages and working hours; and
• Safe Working Practices: reinforcing a strong culture of health
and safety, within a zero harm environment.
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.
Dedication
Enjoyment
Courage
Honesty
Relationships
Ambition
54
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
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. During the financial year, our training programme was
also translated into eight languages and rolled out to all employees.
The training programme is mandatory for all employees to complete on
an annual basis.
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. In addition
to our existing four internal reporting channels, we have launched a
third party confidential hotline, which went live globally in April 2022,
and is available to both employees and Dechra’s third parties. Reports
can be submitted through an online portal, which is available in 46
languages, or via a hotline, which is available twenty-four hours a day
and is supported in 170 languages. All reports are treated with utmost
confidentiality by independent staff, who will summarise the content
of the call or online report and pass it to the Company Secretary,
Group HR Director and Head of Internal Audit and Risk Assurance for
investigation.
Every effort is made to protect confidentiality to encourage reporting.
We fully investigate reports and take appropriate actions to address
these issues. 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 once a year.
Talent Management and Engagement
Talent Management
Dechra is committed to enhancing the skills of our workforce, planning
for a successful future and creating a sustainable talent pipeline.
Delta
Delta is our dedicated internal digital learning platform for Dechra
employees across the world. As well as launching brand new modules
around Dechra’s Code of Conduct, Information Security and Health,
Safety and Wellbeing, the Digital Learning team has also consolidated
the onboarding process for new employees joining the business and
launched a mandatory course calendar. The team has been working
closely with our Global Quality Assurance teams to streamline the rollout
of Standard Operating Procedure (SOP) and Guidance Note training. Next
year, the team also plans to update the design and user experience of
Delta to make it easier for employees to navigate the system and find
courses most relevant to them.
This is only one element of training that we provide, and during the 2022
financial year we have introduced a system whereby all employees can log
their training with the view to self-certification at the end of the 2023 financial
year. Our employees have logged a total of 36,676 hours in the 2022 financial
year, which equates to 17 hours per employee. In addition, we provide other
forms of training to our employees, placement students and graduates.
Leadership Programme
We have been running our Leadership programme since 2020. The
programme is run virtually and a total of 50 people across the North
American, PDRA, International and Corporate teams have taken part. The
development programme’s strategic intent is:
•
to develop future 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 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. The
programme commences with psychometric and cognitive assessments
of the team, and has been followed by online team business
simulations, team and peer coaching and virtual content.
Following a refinement of our talent planning process, in the 2022 financial
year 24 people were selected to attend the first Future Facing Leaders
programme. This programme focuses on three core elements: leading self;
leading others; and the wider leading enterprise elements across a two year
learning pathway.
Refer to People Case Study – Future Facing Leaders on page 34
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 hope that the
experiences of working with Dechra will support them in their future
careers. We currently have 24 interns in Europe, two in the USA, one in
Australia and ten in Brazil. For further information on our internships and
partnerships with universities please refer to our Sustainability Report on
www.dechra.com.
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), intranets, and 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. Our intranet, OneDechra, includes two way communication
encouraging comments, sharing and community participation.
We conducted our second Employee Engagement Survey in April
2021 using the Great Place to Work (GPTW) survey. We had 1,720
respondents to the 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%) (further information can be found in the
2021 Annual Report). Across the Company, employee perceptions
improved on all 75 survey statements. Perceptions improved most of all
about Reward, with high levels of improvement also seen in Leadership
Effectiveness, Innovation, and Values with double digit improvement.
Since the survey took place we have spent time communicating the
results to our employees. Initially, we produced a short video with the
overall highlights of the survey, and this was followed by feedback of the
results at a business unit, department, site or country level through key
meetings with employees or team briefings.
55
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Section 172 Statement
Stakeholder Engagement
Employees continued
Action planning took place with employee groups across the Group
where employees had the opportunity to identify areas that they
wanted to address as a result of the survey and we built a database
of plans, predominantly led by the employee groups. A huge variety of
approaches has been taken depending on the size of the teams and
the types of development areas identified.
As a Group, there are two key areas of focus for us for the year ahead:
communication and wellness. Our focus on wellbeing has been
strengthened by our launch of THRIVE which covers four key aspects
of wellbeing for a holistic approach. These being social, emotional,
physical and financial. These reflect local requirements and a global
approach where suitable. Further information on THRIVE can be found
on page 58.
Communication continues to be an area of focus and during the second
half of the year we had the benefit of being able to reconnect with much
of Dechra as travel reopened. This enabled greater understanding
and strengthening of relationships across divisions and geographies.
We have also strengthened our communication teams across various
divisions to support flexibility in how we provide access to all our
employees to information and communication using online, face to face
and more formal employee representation bodies such as our works
councils.
Our next GPTW survey will run in March 2023 and we look forward to
gaining further feedback to continue our employee experience.
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 and in person coffee mornings. Further
information on this can be found on page 101.
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. The Group does not tolerate
bullying or harassment.
84% of our employees responded positively to the statement regarding
diversity in the workplace in our most recent employee 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 Governance Report on page 112. The gender diversity statistics
required to be disclosed under the Companies Act can be found on
page 113 of the Governance Report.
56
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Fair Employment Practices
We are committed to fair employment practices and comply with
national legal requirements regarding wages and working hours. In the
UK, only one of our subsidiaries, Dechra Limited, is required to report
under Gender Pay Gap regulations, and we are pleased to report that
our gender pay median gap has reduced from 17.7% in 2017 to 2.8%
in 2021. However, the latest decrease relates largely to the payment
of COVID-19 bonuses to all site-based staff at the Skipton site during
the pandemic and the gap will rise again next year as this is unlikely to
remain applicable on an ongoing basis. Manufacturing makes up the
largest proportion of workers within Dechra Limited and traditionally this
sector has a talent pool available externally that is predominantly male;
however, we are pleased that our male/female representation remains
at almost 50/50, largely reflective of the UK population. At Dechra we
pride ourselves on our fair and honest recruitment process; however,
we acknowledge that we need to do more to support our females into
technical and senior positions. Over the last 12 months in particular, we
have focused efforts around our talent attraction and development and
organisational design.
Since 1 January 2021, our lowest paid workers globally have been
paid the Living Wage or where there is no equivalent we have either
used the OECD formulation, or paid at least twice the local/federal
minimum wage. Furthermore, we have increased our employer pension
contribution from 6% to 8% with effect from July 2022 in the UK.
Dignity at Work
Our Dignity at Work Policy has been rolled out globally during the
financial year, and it is 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.
In the UK we provide online training to a wider audience using an
externally hosted online training portal where licensed Dechra managers
can deliver professionally developed training programmes using virtual
classrooms. In addition, a Diversity and Inclusion module, which also
covers unconscious bias, is one of three core modules that has been
included initially in all Leadership and Management development
programmes, and will later be rolled out more widely across our
employee base.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
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. Our Group Health, Safety and Wellbeing
Committee (HSW 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 monitor 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 Strategies
and Policies related to Health, Safety and Wellbeing. During the 2022
financial year, we launched our Group Health and Safety Policy which
was supported with a video from Paul Sandland on the importance of
health and safety. This was translated into ten languages. The extended
Policy applies to all employees, contractors and visitors to Dechra
premises globally, as well as field-based and home based employees.
The HSW Committee has also reviewed and approved the Corporate
Health and Safety and Wellbeing Induction for all new starters, the
High Level Risk Assessment for the business to guide priorities for risk
management and the Drive Responsibly Campaign.
Safety Alerts
The HSW Committee has a duty to regularly review 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. The number of safety alerts
reduced to ten this year (2021:23).
Assure
Our online Health and Safety reporting system, Dechra Assure,
is available to all employees and opens up the ways in which our
employees can engage in our safety programme, including employees
working hybrid patterns and our mobile employees.
We encourage employees to remain vigilant at all times and empower
them to take action to resolve unsafe situations. By reporting accidents,
near misses and hazards we are constantly monitoring the risks across
our business and can take appropriate actions to make workplaces and
working practices safer. Hazards are unsafe conditions which if left could
cause an accident and spotting and resolving hazards is an important
part of a successful safety programme. In addition to monitoring the total
number of hazards raised across each site, we also set a target for each
person to report hazards, demonstrating their personal commitment
to safety. This year our Manufacturing sites increased the number of
hazards raised by 37%, this is equivalent to 2.3 hazards raised for each
employee, with 71% of all Manufacturing employees involved in actively
raising a hazard report in the year. Through our communication campaigns,
employees have also developed a greater awareness of potential risks.
The number of near miss reports which have been raised, where accidents
could have happened if circumstances were slightly different, have
increased from 38 to 57.
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. HSE Standards have been developed initially for
High Risk activities, most of which reside in Manufacturing. These
standards are developed by subject matter experts working together
with the site representatives and set out our expected standards
for HSE compliance. Each Group Standard has an accompanying
self-assessment compliance checklist and each location conducts
an internal gap analysis to establish an action plan to achieve full
compliance with each internal standard. 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. In addition, the Group HSE team has
visited the manufacturing facilities in Zagreb, Fort Worth and Melbourne
during the 2022 financial year.
Life Saving Rules
Human behaviour is a factor in over 85% of all accidents; therefore
to reach our Zero Harm goal this year we have been focusing on safe
behaviours. From our high level risk assessments for our organisation,
we recognised that there are some risks associated with safety critical
tasks where incidents could occur with a low frequency but very high
severity. We have safe systems of work for these tasks; however
we have launched our Life Saving Rules to reinforce positively safe
behaviours and allow people to recognise the unsafe behaviours which
could lead to injury.
We have identified seven Life Saving Rules which apply to both
Manufacturing & Logistics and Road Safety. Clear Life Saving Rules,
and consistent enforcement of our non-negotiable behavioural
standards, aim to reduce the risk of a fatality and/or severe injury
significantly.
Behavioural Safety
Strong safety leadership is the most impactful way to influence safety
on a daily basis. The behaviours demonstrated by our leaders, their
attitudes to safety and the conversations they have in relation to
safety have the most powerful influence on the safety culture of our
organisation.
In the 2022 financial year, we therefore launched our B-Safe training for
leaders across our manufacturing sites. B-Safe is our new behavioural
safety programme which teaches our manufacturing leaders to hold
positive conversations about safety, focusing on safe behaviours,
including our Life Saving Rules.
Further information can be found in our Sustainability Report
Lost Time Accidents (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 51). 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 increased from 0.09 to 0.17.
The number of incidents has increased from three to six. All incidents
occurred in our manufacturing facilities. There were no fatalities
(employees or contractors). Two of the manufacturing facilities, Bladel
and Melbourne, have now had over 48 months without an LTA and one
of the manufacturing facilities, Zagreb, has had over 36 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
57
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Section 172 Statement
Stakeholder Engagement
Our strategy recognises that achieving overall wellbeing is a shared
responsibility where both Dechra and employees must work together.
As an employer, 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.
During the 2022 financial year, highlights of progress made against each
pillar include:
Emotional Wellbeing: Dechra has offered subscriptions to all
employees globally to an online platform, which provides sessions of
guided meditation and promotes mindfulness. This was launched in
October 2021, and is now regularly used by over a quarter of all Dechra
employees. Our employees are encouraged to use the platform on
a private and voluntary basis at any time they choose. We have also
provided live global webinars to promote the benefits of meditation and
mindfulness in a more communal way.
Physical Wellbeing: Menopause is not just an issue for women;
it is a critical business issue. At Dechra we recognised that, if left
unsupported, some women could actually leave the workforce, resulting
in a loss of valuable experience for our business. In the UK we hosted a
live webinar, delivered by a medical practitioner and this was attended
by an audience of over 50 employees; both male and female employees
were encouraged to attend. The webinar was very positively received
and following the session we have developed a short guide available to
all employees and Line Managers stating simple adaptations which are
available to support women during this life stage.
Social Wellbeing: The return to the workplace following the pandemic
has occurred at different times across our regions. We believe strongly
in supporting social interactions but we also recognise the benefits
of hybrid working and how this can help to create a good work-life
balance. We have established our principles for hybrid working and
developed training for all employees who continue to work from their
home either full or part time, including health, safety and wellbeing
content. Many of our locations have organised events to welcome
employees back to the workplace and re-establish face to face contact
and promote use of our safe office spaces. These events have been
organised locally and have been very diverse, including yoga, BBQs,
quizzes, and lunches.
Financial Wellbeing: Financial wellbeing supports all other aspects
of our life as it provides stability. We are committed to providing our
employees with resources and access to information that enables them
to understand their finances better, take action and plan their future. In
addition to being a Living Wage employer across the globe, we have
launched a third party financial education platform as a free resource
for all employees, initially in the UK, to provide financial information and
coaching. Over 48% of UK employees have signed up to the service
and we will be looking to extend similar support to other countries
where this is available.
Employees continued
the full range of normal working activities (not including the day of
the accident). Using this new and more rigorous reporting standard
we have experienced 12 LTAs resulting in an AFR of 0.34 compared
to 0.31 last year (11 accidents). Seven of the accidents occurred
at our manufacturing sites in Australia and Brazil, who joined the
Manufacturing Safety programme in 2020 and have a developing safety
culture. Eight of these accidents were influenced by unsafe behaviours
and this will be addressed throughout the coming year through the
delivery of our B-Safe programme for leaders.
Any material health and safety issues or incidents that occur are
discussed in detail by our HSW 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 Board
meeting by the Group HSE Director for discussion and review by the
Directors.
THRIVE
THRIVE aims to provide a
global programme for Dechra
employees which supports
positive physical, emotional,
social and financial wellbeing,
enabling employees to
THRIVE at work by increasing
employee energy, creativity
and collaboration to drive
personal and business
success. In the 2022 financial
year we have evolved THRIVE
to provide meaningful support
to all employees globally.
Building on the firm foundations of effective HR policies and
safe working practices, THRIVE aims to provide information and
opportunities for employees to empower them to take ownership of
their own wellbeing, making use of the resources provided on our
OneDechra platform.
Our THRIVE strategy has four pillars of Physical, Emotional, Social and
Financial:
Pillar
Purpose
Physical
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.
58
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
2
Veterinary Professionals
Our relationship with veterinarians is key to our business and therefore we
provide 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.
We are committed to the following focus areas:
• The development and promotion of products to improve animal
health and welfare.
• To provide high levels of technical support and pharmacovigilance.
• To maintain and improve the knowledge and skills of veterinarians
who prescribe and use our products.
Our Products
Our products are all targeted at providing veterinary professionals with
solutions for their customer needs. We have developed a strong position
in providing specialist and clinically necessary novel companion animal
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 Food producing
Animal Products are positioned to match current best practice prescribing
habits and to meet the growing awareness of the need for better animal
welfare standards. 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.
For further information on our Product Development please refer
to pages 35 to 39
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. 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.
For further information on promotional compliance and payments
to animal health professionals, please refer to the Sustainability
section of www.dechra.com
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 diseases, the provision of 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 the last financial year, our UK and US teams handled
a total of 14,499 technical customer enquiries, many of which related to
endocrinology. In addition, these larger markets also have field-based
veterinarians providing technical support and carrying out ‘lunch and
learn’ events; 2,962 of which were held in the 2022 financial year.
For information on Pharmacovigilance please refer to page 63
Education
We deliver education through many channels, including conferences
and our online digital e-learning environment, the Dechra Academy,
helps veterinary professionals across the globe to upskill and keep up-
to-date with the latest thinking through completely free, modern learning
experiences. With over ten years of experience of educating veterinary
professionals, we are passionate and proud to provide reputable
learning resources which help veterinary professionals continuously
evolve their knowledge.
We differentiate ourselves from our competitors by focusing on
challenging and interactive educational experiences. Each Dechra
market has its own tailored Academy with courses that are relevant to
their veterinary professionals. Where possible our educational resources
are accredited by local professional/regulatory bodies. The Academy
now has a total of 730 courses available across 24 markets and 43,883
learners from across the world have enrolled. In addition to 23,039 CPD
hours provided directly via the Academy, we also held a large number
of in-person events and presentations covering the full range of species
and therapeutic areas this year. In total, these educational events
delivered a further 107,251 hours of CPD hours globally.
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Section 172 Statement
Stakeholder Engagement
3
Suppliers
Acting with Integrity and Honesty
We are committed to acting responsibly and with integrity. We comply
with all applicable laws and regulations and respect the traditions and
cultures of the countries in which we operate.
are kept regularly informed of the ABC programme and the Group Legal
team 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.
The Code of Conduct, Third Party Code of Conduct, ABC Policy,
Sanctions Policy, the How to Raise a Concern Procedure, Human Rights
and Modern Slavery Statements are all reviewed annually by the Board.
Honesty and Integrity
We are committed to acting responsibly and with integrity, which 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. This
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 supported by the mandatory Code of
Conduct training, sets out the standards of behaviour that we expect of
them and others, including third parties. Our employees are encouraged
to report behaviours that are contrary to our Code of Conduct via
our How to Raise a Concern Procedure which provides five reporting
channels. Further details of which can be found on page 55.
Anti-Bribery and Anti-Corruption (ABC)
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 an area of 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 an ongoing 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.
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
Previously every employee and sales agent engaged by Dechra was
required to complete our e-learning ABC course on an annual basis.
This year we have analysed the global list of course recipients and
agreed to remove employees engaged in operational roles such as
packing line operatives, cleaners and canteen staff from the course
circulation list. The rationale for this decision is that those individuals
are engaged in low risk roles and do not interact with third parties, and
therefore the ABC risk is low. The content of the ABC course has been
reviewed during the year and the updated course was rolled out in
May 2022. We have also delivered some refresher training to business
leaders in Mexico, together with further guidance on Dechra’s hosting of
CPD and/or sponsorship events.
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. If a third party does not
have in place its own ABC policies and procedures, we provide them with
access to our training course in order to educate them on the legislative
landscape. We have also extended access to the external hotline to our
third parties so that they can report any concerns in relation to adherence
to our Third Party Code of Conduct.
Human Rights and Modern Slavery
Dechra is committed to upholding and respecting human rights both
in our business and from our suppliers. During the year, the Board
reviewed the Human Rights Policy, a copy of which can be found on our
website. Our Human Rights Policy 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.
Our Modern Slavery Statement can be found at www.dechra.com.
During the year we have undertaken a risk assessment of CMOs, API
suppliers and excipient suppliers by initially reviewing the list of third
parties against the US Department of Labor's 2020 List of goods
produced by child labour or forced labour. Any third party identified as
being located in a high risk country or in a high risk industry was screened
via a third party screening software, and no issues were identified.
60
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
4
Communities
Community Donations
We have operated a Group Donations scheme for 12 years, but 2022
was the first year we have operated a decentralised global process,
after a successful trial in 2021 in the USA. A budget of £300,000 was
allocated across the countries based on the number of employees
employed at 30 June 2021. Each country established a regional giving
committee which consisted of volunteer employees who have agreed
to be members of their respective committee for two years. Half of the
regional giving committees decided to reallocate a portion of their funds
this year to Poland to support local Ukrainian relief efforts that were
already underway.
In addition to the Group Donations scheme, each business unit has
the discretion to allocate funds and/or products to local community,
environmental and/or animal welfare charities.
Donations by Cash and Product
Cash Donations £314,163
Product Donations £31,965
Included in the products donated were 10 tonnes of SPECIFIC dog
and cat food to support Ukrainian refugees, many of whom are coming
across the Polish border with their pets.
Further details of our Community Donations can be found in our
Sustainability Report
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, in the fields of animal welfare, human service and
environmental stewardship. We committed, in the 2019 financial year,
to give every employee one day in the community, and we were able
to provide 935 hours in the 2020 financial year before all activities were
halted due to the COVID-19 pandemic. In the 2021 financial year, we
were able to recommence activities in only a small number of locations
so it is pleasing this year that we have been able to dedicate a total of
4,390 community hours across our global operations, which equates to
2.2 hours per employee using the base figure of employees (1,975).
Our Brazilian team organised nine events, which included planting
40 seedlings, and assisting with leisure and care activities for 186
children and 83 senior people in the local community, while the Polish
team spent their volunteer day on the Polish-Ukrainian border helping
displaced families. Further details of our activities can be found in our
Sustainability Report.
Dechra explored a partnership with Not One More Vet (NOMV), a US
based charitable organisation whose mission is to transform the status
of mental wellbeing within the profession so veterinary professionals can
survive and thrive through education, resources, and support. Dechra
has plans in place, in partnership with NOMV, to raise awareness of this
topic and the resources that are available to veterinary professionals.
In 2022, Dechra sponsored the Student Support and Mentorship
programme, a new initiative by NOMV aimed at providing a support
system for veterinary and veterinary technical students. Dechra has
also encouraged its employees globally to participate in NOMV’s
annual fundraiser Race Around the World to help raise funds and
raise awareness. In 2019 a small team of veterinarians and veterinary
technicians participated in the race, and by 2020 over 60 employees in
the US participated. We are excited to encourage global participation in
their 2022 race, furthering our support of an organisation that supports
the wellbeing of our customers.
61
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report
Section 172 Statement
Stakeholder Engagement
5
Shareholders
22
years of dividend
per share
growth
44.89p
total dividend
per share
in 2022
Dividend Growth
Pence
50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
2
2
0
2
We have consistently delivered on our strategic objective resulting in a strong record of growth.
Relationships with shareholders receive high priority and a rolling
programme of meetings between institutional shareholders and the
Chief Executive Officer and Chief Financial Officer has been running
throughout the year (a summary of the main events is shown opposite).
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.
Investor
Meetings
40 individual meetings
during the year
Investor
Roadshow
September 2021 and
February 2022
Investor
Conference
Remuneration
Consultation
November 2021
July 2021
Chief Executive Officer
and Chief Financial
Officer
Chief Executive Officer
and Chief Financial
Officer
Chief Financial Officer
Remuneration
Committee Chair,
Company Secretary
and Group HR Director
Further details on how the Board engages with shareholders can
be found in the Governance report on page 96
62
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
6
Regulatory Authorities
It is vital to our business that our products meet the appropriate
standards for quality and safety. This ensures safety for our customers,
animals, the environment and the food chain.
We engage with our Regulators through formal channels and
through more informal connections. At the initiation of a new product
development programme, communication is key to opening a two
way dialogue with the Regulators to build a productive partnership
to bring innovation to the market. Communication is then maintained
through update meetings and exchanges of information throughout the
development of the product and the scientific review of the marketing
authorisation application.
Our manufacturing sites are regularly inspected by authorities as
required under Good Manufacturing Practice (GMP), and our distribution
centres under Good Distribution Practice (GDP). This is a collaborative
process whereby our teams and inspectors identify, and implement best
practices to ensure product quality and robust supply.
Work with Regulatory Agencies continues throughout the life of
all products, as we provide updates to manufacturing processes,
availability, and changes to the registrations. Dechra is required to
provide full adverse event reports for all of our products though periodic
safety update reports (PSURs) and deviation reports (DERs). We have
developed signal detection processes which analyse trends in adverse
events to identify emerging issues early so that we can inform our
Regulators and take appropriate action pro-actively.
Regulatory Agencies
AVMPA: Australian
Pesticides and Veterinary
Medicines Authority
(Australia)
EMA: European
Medicines Agency
FDA: Food and Drug
Administration (USA)
MAPPA: Multi-Agency Public
Protection Arrangements
(Brazil)
VDD: Veterinary Drugs
Directorate (Canada)
VMD: Veterinary Medicines
Directorate (UK)
We participate in Industry Associations and Agency led consultations
providing scientific and technical input into drafting of new legislation
and guidance documents, helping to shape the regulatory landscape
that we operate in. Good examples would be a recent review of
antimicrobials proposed to be reserved for human use, and the recent
survey of plastic use in veterinary products.
Several of our regulatory staff have worked in key Regulatory
Agencies prior to joining Dechra, this enables our relationships to be
both personal and professional, and helps support a collaborative
relationship. This high level of trust and esteem in which Dechra’s
regulatory and product development teams are held enables Dechra
to successfully launch new products, to maintain our existing portfolio
and where necessary, to challenge constructively the decisions of our
Regulatory Agencies when it is appropriate to do so.
Pharmacovigilance
All employees receive pharmacovigilance (PV) training within one
month of joining Dechra. This is then verified by the pharmacovigilance
e-learning module on Delta or in person training. All employees
undertake an annual pharmacovigilance refresher training. The
pharmacovigilance training outlines the procedure that should be
followed by all Dechra personnel if they become aware of a product
complaint or defect.
Any time that Dechra receives a report of an adverse event occurring
after the administration of one of its products, it is our obligation to
review the case to determine whether our product may have caused
or contributed to the adverse event. The PV team actively monitors
adverse events to determine if any trends can be identified which may
indicate an underlying issue (signal detection). All suspect adverse
reactions are reported to the appropriate regulatory authorities who also
perform data analysis across groups of products with similar ingredients
and indications to look for signals that require further investigation. As
Dechra continues to grow, we are moving more local PV work into our
central PV group so that we can have clear consolidated oversight
of our products at a global level, which further enhances our signal
detection capability.
63
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report
Our Environment
We are committed to
minimising the impact
of our operations on
the environment
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.
In the 2022 financial year, hazardous waste volumes decreased by
40,088 kgs (9.0%). The overall percentage of hazardous waste reduced
to 23.0% of Total Waste (2021: 31.0%). The reduction in the hazardous
waste rate across Manufacturing has been supported by improved
classification and segregation of hazardous waste across the sites.
This also helped to drive a reduction of 33.0% in hazardous waste
from warehouses, in addition to the more accurate calculation of non-
hazardous waste from Oudewater, the Netherlands. In Manufacturing
sites, hazardous waste is generated from general production and
laboratory analysis waste, whereas in Warehousing most hazardous
waste is associated with stock write offs.
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.
Recycled and Recovered
Waste Volumes and Fate
Kgs
Waste
Total waste, which includes waste from all activities across Dechra
manufacturing and logistic sites, can fluctuate according to production
volumes, project activities and obsolete stock/packaging material
clearances. Our goal is therefore to make responsible decisions to
minimise waste at source and reduce the environmental impact of
treatment/disposal for any remaining waste, whilst continuing to support
the efficient management, development and growth of the business.
For this reason, we have selected two indicators for waste which we
aim to improve:
2,000,000
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
738,323
441,637
785,019
839,355
167,984
36,308
2021
128,497
65,823
2022
282,144
599,841
159,173
16,796
2020
• percentage of hazardous waste generated of total waste
Recycling/Reuse
Recovery
generated; and
Disposed of to landfill
Disposed of by incineration (no energy recovery)
• percentage of waste which is recovered and recycled of total waste
generated.
Hazardous Waste
Waste contaminated with pharmaceutical products is often classified as
hazardous waste. Waste management for Manufacturing and Logistics
facilities must be carefully controlled in order that any hazardous
substances, or contaminated materials are disposed of correctly.
The fate of waste significantly influences the environmental impact. For
waste that cannot be eliminated at source, Dechra has set a strategic
goal to achieve zero waste to landfill by June 2025, and will look to
achieve this by reusing, recycling or recovering waste where these
options are available. Our approach to responsible waste management
is formalised in the Group HSE Standard – HSE 203 – Waste
Minimisation and Management.
64
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
In the 2022 financial year, the total volume of waste was 23.8% higher than the prior year due to increased production; however, waste recovery,
recycling and reuse rates improved from 86% to 89%. The portion of waste materials for reuse and recycling increased significantly from 30.0% in
the 2021 financial year to 42.0% in 2022. This has been achieved by directly targeting Manufacturing sites to increase waste recycling and reuse.
Waste for disposal reduced to 11.0% (2021: 14.0%) and the percentage of waste landfilled reduced to 7.3% (2021: 12.0%).
For further information on Waste and Water Consumption please read our Sustainability Report
Energy
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 under the location-based method. 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 water, and waste in the 2022 financial
year. A full review of all categories of the GHG Protocol is near completion, and we hope to be in a position to disclose them in the 2023 financial year.
Scope 1 (tonnes)
Scope 2 (tonnes)
Scope 3 (tonnes)
Total Carbon Footprint (tonnes of CO2e)
Intensity Ratio (tonnes of CO2e per £m revenue)
tCO2e by location type (excluding waste)
Site
Manufacturing
Offices
Warehousing
TOTAL
% relates
to UK
7.3%
12.4%
5.2%
2022
6,709
4,896
2,770
14,375
21.1
2021
7,027
5,261
1,934
14,222
23.4
% relates
to UK
6.5%
12.4%
4.2%
2022
11,907
1,501
708
14,116
2020
6,747
4,969
2,347
14,063
27.3
2021
12,768
830
624
14,222
% relates
to UK
6.0%
10.1%
7.4%
Variance
(6.7%)
80.8%
13.5%
(0.7%)
Our Manufacturing is the main contributor to our carbon footprint representing 85.0% of our total carbon footprint. During the 2022 financial year
carbon emissions increased by only 1.1%, which was mainly due to the substantial savings achieved by the Brazilian site from reducing refrigerant
gas emission by 992 tonnes of CO2e (further details are provided below) as well as a change in carbon factors assigned to grid electricity production
with nations adopting more renewable energy sources. Our Offices contribute 10.4% to our carbon footprint, and the 80.8% increase was due to the
return to the workplace and the facility in Mexico changing from a manufacturing facility to an office. The 13.5% increase in CO2e emissions from the
warehouses was due to the commissioning of the new warehouse in Uldum, Denmark, which is now fully operational. The new warehouse needed
to be brought up to the correct temperature and this was achieved through gas heating.
65
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Our Environment
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.
% relates
to energy
consumed
in UK
5.9%
15.1%
3.6%
8.3%
2021
31,522,041
17,185,952
6,610,981
55,318,974
% relates
to energy
consumed
in UK
6.3%
16.2%
0.9%
8.7%
2020
33,509,013
16,647,278
8,444,662
58,600,953
% relates
to energy
consumed
in UK
6.3%
11.7%
6.1%
7.8%
2022
35,418,610
19,229,812
9,528,775
64,177,197
The Zagreb Manufacturing site has the highest energy consumption
across the Group and in the 2022 financial year accounted for 63%
of all energy used (2021: 61%). The high energy demand is linked to
the volumes and range of products manufactured at the site including
Mepron, which uses 70% of site gas and 40% of site electricity. The
team at Zagreb has already made many improvements to make the site
more sustainable. In 2019 the site installed what was at the time the
largest solar power plant in Croatia and in the 2022 financial year this
generated 22% of electricity used at the site in addition to exporting
excess electricity to the national grid (48,715 kWh). They also operate
a solvent recovery plant to recover sustainably and reuse 95% of
all ethanol from one of their key manufacturing processes. The site
has successfully retained ISO 50001 accreditation, the international
standard for Energy Management, following their first annual surveillance
audit and continues to set targets and objectives to reduce energy in
line with the requirements of this standard. The site has identified a
number of projects to reduce energy consumption and also to switch
to renewable energy sources. Examples include:
•
•
•
investigating the availability of geothermal energy at the site, with
exploratory drilling scheduled for the 2023 financial year;
installation of a new heat pump for heating the QC/Immuno-
biological lab in June 2022, which is powered by renewable
electricity from the national grid. This area was previously serviced
by heat from the site gas fired boiler. The site is also exploring
the use of these localised heaters in other site buildings to
reduce distribution losses from the central boiler house, once the
technology is proven; and
the installation of an economiser on one steam boiler flue gas to
recover heat from emissions to atmosphere. Commissioning for this
project is expected by August 2023 and is projected to provide an
annual saving of 2% gas.
Scope 1
Scope 2
Scope 3
Total kWh
Fuel Source
Fuel Source % Usage
FY20–FY22
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
58.91%
57.32%
57.94%
0.14%
4.46%
2.01%
3.71%
3.19%
3.02%
32.49%
34.85%
34.42%
2020
2021
2022
Steam/heat
Other petroleum gas
Natural gas
Liquid petroleum gas
Generated electricity
used on site
Gas oil
Fuel oil
Electricity
Diesel
The fuel mix across the business remains consistent. Natural gas
continues to be the predominant source of fuel across Dechra,
accounting for 58.0% of overall fuel usage (2021: 57.0%). Electricity
from the grid accounts for 34.0% of energy (2021: 35%). The use of
LPG increased slightly to 3.19% (2021: 2.01%) of overall energy due
to the fact that the Brazilian site installed a new boiler; however the
corresponding Diesel usage declined by 59.0%.
Manufacturing continues to be the major user of energy across
the Group accounting for 95.0% of all energy used, whereas the
Warehouses use 4.4% and the Offices 0.6%.
66
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Refrigerant Gases
Refrigerant gases from cooling equipment lost to the atmosphere pose
a threat to the environment because of their global warming potential.
Minor gas losses are generally identified during annual maintenance
of cooling equipment, when gas top ups are added. More significant
losses are identified through leak detection systems or when equipment
fails to operate correctly.
A total of 200 kgs of refrigerant gas was lost to atmosphere in the 2022
financial year (2021: 521 kgs) which was a reduction of 62.0%. This was
mainly achieved through a reduction of 292 kgs from the Londrina site in
Brazil. Overall global refrigerant gas losses reduced by 321 kgs, a carbon
equivalent saving of 1050 tonnes. The total carbon impact from refrigerant
gas losses has been reduced from 21% of all Scope 1 emissions in the
2021 financial year to 6.3%.
Improve Energy Effectiveness Through Transport Initiatives
The main activity at Dechra Service Center (DSC) in Uldum, Denmark
is warehousing and distribution of 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 Committee, a team of logistics and distribution
experts from Europe and North America, is responsible for identifying
and implementing sustainable optimisation solutions within distribution,
logistics and warehousing.
By bringing all own-manufactured products from our sites and all
in-licensed products from external suppliers to Uldum, we have an
opportunity to consolidate the shipments to North America, Mexico
and Canada and are able to ship full containers by sea. This solution
reduces the number of small and inefficient shipments and the aim is
to eliminate air shipment completely.
For Europe, the committee is working with the DVP EU markets to
optimise the road transportation by reducing the shipping frequencies
and increasing the amounts shipped per delivery. This optimisation
plan has already been implemented in Belgium and the Netherlands
where service level agreements have been signed. The goal is to reduce
shipments in Europe by 20% for the 2023 financial year.
Another action of this committee is the optimisation of pallet wrapping
where we have changed from black plastic which is not recyclable to
white plastic which is recyclable and a better sustainable solution.
2022
2021
2020
2019
Shipments
46,515
51,569
39,067
36,905
Total Weight (GRT)
22,667,426 29,843,353 19,304,216 19,399,930
CO2 Outlet (kg)
CO2 per kg
1,705,256
2,130,262 1,684,872 1,670,037
13.29
14.0
11.5
11.6
Case Study:
Refrigerant Gas
Loss Reduction
at Londrina
In the 2021 financial year, across Dechra globally, refrigerant gas
losses contributed 21% of all Scope 1 emissions (1,477 tonnes),
with the 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
also for process cooling applications.
One of the key processes at the site involves freeze drying
vaccines. The lyophilisation (freeze drying) plant uses refrigerant gas
R404A to achieve the correct process temperatures to desiccate
the vaccine. In the 2021 financial year, Londrina lost 254.0 kgs of
refrigerant gas to atmosphere from this equipment which prompted
the site to run a project to improve losses from equipment. Working
with the Engineering team at the Zagreb manufacturing site, best
practices for equipment operation and maintenance were shared.
The Londrina team applied these shared learnings to the equipment
in Brazil and also conducted an investigation to identify the root
cause of current losses. Actions included:
•
•
installation of a new level sensor with an audible alarm for
recognition of low-level condition at the cooling tower
and water tank;
installation of interlocks between the cooling tower and
freeze-dryer, when the tower is at low water level;
• engaging the equipment manufacturer to refurbish the
equipment compressors and optimise plant operation;
•
reducing equipment vibration and replacing fixed pipework
with flexible pipework to reduce the opportunities for leaks
from joint fractures; and
• engaging a specialist engineer to continue to maintain the
equipment according to an optimised planned maintenance
schedule.
Through improved equipment management the Londrina site has
reduced refrigerant gas losses from the freeze-drying process by
91% to just 21.9 kgs. This is equivalent to a CO2e saving of 911.78
tonnes, or 13.6% of Dechra’s total Scope 1 emissions globally. The
site has also reduced losses from other equipment reducing total
refrigerant gas losses by 292.94 kgs, which is equivalent to 991.78
tonnes of carbon (14.8% of Annual Scope 1 emissions).
67
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report
Sustainability
Making a difference
in global health
and welfare
Our Materiality Assessment
We have conducted a sustainability materiality assessment for the first time this year to identify the most important sustainability topics to
us as a business and to our stakeholders. The results of this assessment have helped shape our sustainability strategy, drive our engagement
with stakeholders and prioritise areas of focus and target setting whilst guiding our reporting and disclosure in this area moving forward. For further
information please read our Sustainability Report.
Human
rights
Animal
health &
welfare
Trust and
transparency
Section
Our Business
Our Community
Our Environment
Our People
Equality in the
workspace
Customer satisfaction
Living wage policy
Waste management
Integrated climate strategy
Plastic leakage
5.0
4.8
4.6
4.4
4.2
4.0
3.8
Community
involvement
Philanthropic activities
on grassroot level
3.6
3.8
4.0
4.2
4.4
4.6
4.8
5.0
Importance to Dechra
l
s
r
e
d
o
h
e
k
a
t
S
s
'
a
r
h
c
e
D
o
t
e
c
n
a
t
r
o
p
m
I
68
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
Our Sustainability Strategy
Our sustainability strategy is based around four pillars: Business; Community; Environment; and People. During the 2021 financial year we set
targets for each pillar. We have committed to a long term strategy 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 Environment
Our Business
Our Communities
Our Strategic Priority: A great
and safe place to work.
Read more in Employees on
pages 54 to 58
Our Strategic Priority: We
are committed to minimising
the impact of our operations on
the environment and complying
with applicable environmental
legislations, by achieving zero
to landfill by 2025 and net zero
emissions by 2050.
Read more in Environment
on pages 64 to 67
Our Strategic Priority: To
provide sustainable innovative
products, technical and
educational support and to act
responsibly and with integrity with
all stakeholders.
Our Strategic Priority: To
contribute to the social and
economic welfare of the local
communities in which we operate
through the giving of our time,
products and cash donations.
Read more in Veterinary
Professionals on page 59
Read more in Communities
on page 61
Read more about all our pillars in our Sustainability Report
Pillar
Sustainability
Topic
Focus Area
Objective
Target (s)
Status
Animal Health
and Welfare
Ethical and sustainable
products
Develop and promote products to
improve animal health and welfare
sustainably
Invest 5% to 6% of revenue
on product development per
annum
Business
Customer
Satisfaction
Supporting veterinary
professionals
Maintain and improve the knowledge
and skills of veterinarians
Provide 100,000 CPD hours
per annum
Trust and
Transparency
Ethics
Act with honesty and integrity
Perform value chain
sustainability assessment
by June 2030
Wage Policy
Fair employment
practices
Comply with national legal requirements
regarding wages and working hours
Living Wage Employer or
equivalent by 2022
People
Human Rights
Safe working practices
Reinforce health and safety practices,
with a culture of zero harm
Zero lost time accidents
Equality in the
Workspace
Fair employment
practices
Integrated
Climate Strategy
Emissions, Land &
water and Biodiversity
Eliminate the gender pay gap
Increase the number of women
in senior and technical roles
Reduce GHG emissions and waste
to landfill, use water responsibly and
protect biodiversity
Achieve net-zero by latest
2050. Initial target is 25%
reduction by 30 June 2025
Environment
Waste
Management
Circularity
Recover, reduce, recycle, reuse
Plastic Leakage
Responsible sourcing
Implement sustainable packaging
and decrease plastic usage
Zero to landfill by 30 June
2025
100% FSC paper by June 2023
and review full product range by
30 June 2025
Community
Involvement
Community
activities
The donation of time, products and
skills to local charities
100,000 community hours
by 30 June 2030
Community
Philanthropic
Activities
Community donations
Establish Regional Giving Committees
to allow our people to make a
difference locally
£5 million donated in cash
or products by June 2030
69
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report
Task Force on Climate-related
Financial Disclosures
Our response to
climate change
Task Force on Climate-related Financial Disclosures (TCFD)
We believe that companies should be transparent about how they plan
to mitigate and be resilient in the face of climate change. Therefore, we
support efforts, such as the TCFD to increase transparency and to
promote stakeholders' understanding of companies’ strategies to
respond to the risks and opportunities presented by climate change.
During the year, we have worked to achieve alignment to TCFD and
are pleased to confirm that the disclosures included in the Annual
Report are consistent with the TCFD recommendations, except for the
completion of our review into all material Scope 3 emission categories,
which will be concluded in the 2023 financial year. We acknowledge
that the disclosures around the metrics used to assess our climate risks
and opportunities can, and will, be improved following submission and
verification of our targets to the Science Based Targets initiative (SBTi).
This is an evolving process that we hope to conclude in 2023.
Governance
Climate change presents various economic, business and social risks
which will affect our business over the short, medium and longer term.
Given its importance, climate change is overseen at the highest level of
the Company and integrated into business processes.
The Dechra Board is accountable for approving our Sustainability
strategy and overseeing the delivery of our climate-related objectives,
with Executive responsibility belonging to the Chief Financial Officer
with support provided by the Group Sustainability Director. Our Senior
Executive Team (SET) is responsible for delivering on these objectives
within their functional areas and business units.
At an operational level the Board and SET are supported by a cross-
functional ESG Committee and associated sub committees (see the
governance diagram in our Sustainability Report) who work with them to
define our Sustainability strategy, and set objectives and targets which
are aligned with the United Nations Sustainable Development Goals
and SBTi.
The Board formally discusses climate change-related updates at least
biannually, and the Chief Financial Officer updates the Board on any
significant matters arising as and when required.
Given the importance of managing climate risk, factors relevant to it are
considered as part of the remuneration of the Executive Directors and
SET. Specifically each senior leader will have an ESG objective as part
of their personal objectives within the annual bonus plan (introduced in
2021) and constitutes 5% of Executive Directors' and 5% of SET annual
salary under the terms of the plan, increasing to 10% for Executive
Directors in the 2023 financial year.
Strategy
Understanding the potential impact of future climate scenarios, together
with proactive mitigation, intervention plans and targeted investment,
will help future proof our business and build resilience to protect our
long term financial sustainability and continued supply of products to
customers.
We have assessed the impact of climate risk to our business using the
Intergovernmental Panel on Climate Change (IPCC) data under two
transition scenarios over a 30-year time horizon; the first modelled a
1.5°C temperature rise in accordance with the Paris Agreement and
the second a 4°C temperature rise deemed to be a worst case. These
assessments have enabled us to identify climate risks, strategies to
mitigate risk and any climate opportunities. The impact of climate-
related risks and opportunities on the organisation’s businesses,
strategy and financial planning is included in the table on the
following pages.
To respond to the identified climate risks and opportunities we have
developed our 'Making a Difference' plan. As part of this plan we have
committed to a long term target to reach net zero emissions by no later
than 2050. We will continue to transition to a low carbon business and
by setting greenhouse gas (GHG) emissions targets verified through
the SBTi. We also support the UN-backed Race to Zero. For further
information please refer to our Sustainability Report.
Risk
During the previous financial year, in response to developing climate
science, government action and the concerns of our stakeholders,
the Board classified climate risk as a principal risk to the Group. To
understand fully the implications of climate change, the Board instigated
a review of the key risks and opportunities to the Group’s business
model, considering both the physical effects of changing weather and
the economic and regulatory transitions required either to mitigate
climate change or adapt to a new environment. This involved consulting
with external experts and senior management representing disciplines
from across the Group to determine possible climate outcomes.
70
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Key
Low Risk
Medium Risk
High Risk
Opportunity
Time Horizons for Impact
Short term:
1 to 2 years
Mid term:
2 to 5 years
Long term:
5 to 25 years
Risk or Opportunity
Time Horizon
Potential impact
How it is managed
Short Mid
Long
Key Physical Risks
Increased frequency
of extreme weather
and climate-related
natural disasters
Detailed manufacturing site-level
climate risk assessments have been
completed. Outcomes indicate
potential for:
Identified risks have been addressed in site
continuity plans and/or incorporated into the
site master plans. Any investments required are
integrated into our financial planning process.
•
increased exposure to extreme
heat events. This risk has
the potential to impact our
manufacturing and logistic sites
in North America, Croatia and
Australia;
• heavy rainfall causing local
flooding. This risk has the potential
to impact our manufacturing and
logistics sites in Florida, Northern
Europe and Australia; and
•
increased risk of storms that can
damage site structures. This risk
has the potential to impact our
manufacturing site in Florida.
Risks relate primarily to disruption or
delays at a site, along with potential
for higher energy consumption and
cost for cooling to maintain GMP
compliance, delays and/or losses
in distribution and damage to site
infrastructure resulting in increased
insurance premiums and reputational
damage.
We do not foresee a material
business impact arising from these
short term events.
Our customers will increasingly look
to select suppliers based on their
GHG footprint to reduce their own
Scope 3 footprint, as part of their
net-zero targets.
Future revenue from our generic
portfolio could be at risk should
substitution become widespread
before we are able to transition.
We have an opportunity to gain
market share if we can transition
in the short term.
The risks are currently deemed to
be low and more likely to occur in a
medium term timeframe on products
which are 'me too' in nature.
For example to improve business resilience our site
in Zagreb, Croatia produces approximately 30%
of its energy requirement via on-site solar panels
complemented by emergency generators.
We also aim to mitigate risk by reducing the number
of contract manufacturers we engage with and
produce more of our own products in-house.
Metrics: Please refer to our Environmental pillar
on page 69.
As part of our Making a Difference plan we have
committed to reach net zero emissions by no later
than 2050, backed by science based targets.
All new products to market will include a
sustainability review pre-launch by 2023 (initiated
2021). This review will focus on utilising sustainable
ingredients and packaging.
In 2022 we have initiated a project utilising an IT
system to review the GHG footprint for existing
products to help assess and manage risks and
target interventions to reduce the environmental
footprint of our products.
Metrics: Please refer to our Environmental pillar
on page 69.
71
Transition Risks and Opportunities
Increased demand for
low carbon products
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Task Force on Climate-related
Financial Disclosures
Risk or Opportunity
Time Horizon
Potential impact
How it is managed
Transition Risks and Opportunities
Short Mid
Long
Carbon pricing and
future environmental
taxation
Supply-demand of
renewable energy
(power and heat)
Change in raw material
or sourcing cost
72
There is uncertainty over the future
environmental policy and fiscal
landscape of many countries in which
we operate. We anticipate increased
regulation and other developments
related to carbon pricing and broader
environmental taxation over the
medium to long term.
We do not foresee a material impact.
Competition for renewable energy
due to increased demand.
Security of renewable energy supply
due to impact of climate change.
Opportunity to adopt energy
efficiency measures to reduce
operating costs and exposure to
future fossil fuel price/ carbon price
increases.
We do not foresee a material impact.
Costs and availability associated
with low carbon products from core
sectors, particularly in areas such as
raw materials and packaging.
There could be a significant risk
associated with increased costs for
using high carbon transport modes.
Use of lower-emission sources of
energy will reduce costs and will
reduce exposure to fossil fuel and
carbon price changes.
Use of more efficient production and
distribution processes will reduce
operational and logistical costs
We do not believe the net impact to
be material as we envisage being
able to pass on any increased costs
to customers.
Our Making a Difference plan and associated
net zero commitments will help to mitigate some
exposure to future carbon pricing and environmental
taxation for our operations and our wider value
chain. Managed correctly, this may actually present
a commercial opportunity where peers have yet to
establish a path to decarbonisation and net zero.
As part of our 2023 budget process we have
incorporated an internal carbon price on emissions
at all of our manufacturing facilities which will
support our transition to net zero.
Metrics: Please refer to our Environmental pillar
on page 69.
Energy efficiency reviews are conducted across our
sites and incorporated into our capital expenditure
and financial planning processes and are a primary
metric alongside return on investment.
• Our management team at Zagreb successfully
gained accreditation to ISO 50001, the
international standard for Energy Management
and are currently exploring the potential viability
of geothermal energy at the site.
• Our Brazilian team reduced refrigerant gas
losses in 2022 by 91.0% through collaboration
with our European engineering and
maintenance team.
Transition to renewable power at all sites as quickly
as possible including exploring the viability of solar
panel utilisation at manufacturing sites beyond our
existing installation at the Zagreb site.
Metrics: Please refer to our Environmental pillar on
page 69.
We have identified four key industries that are
crucial to Dechra’s value chain; chemicals/plastic,
aluminium, pulp, and paper and glass. Risk
assessments have been performed on each and
we have started collaborating with key suppliers
to mitigate transition risks and maximise transition
opportunities.
Commencing engagement with upstream and
downstream partners to recognise sustainable
performance during contract renewal processes.
Many of the risks associated with incremental cost
exposure are not unique to Dechra. They will also
be faced by our peers and the wider animal health
sector, which should encourage collaboration.
Metric: Please refer to our Business pillar on
page 69.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Metrics and targets
We are committed to mitigating our impact on climate change. We have committed to SBTi, continued to work towards a net-zero ambition by 2050
and released our first separate Sustainability Report this year. Our GHG emissions (Scope 1, Scope 2 and Scope 3) can be found on page 65 and a
number of our key metrics and targets are set out below:
Near term targets
•
submission and verification of Science Based Targets;
• all paper and wood material to be FSC by June 2023;
•
•
zero waste to landfill by 30 June 2025; and
sustainability review of all products by June 2023.
Long term target
• net-zero by no later than 2050.
These metrics and targets will help us to track our progress and ability to mitigate the risks to our business, safeguarding our ability to improve
animal health and welfare sustainably over the longer term (see page 69 and our separate Sustainability Report).
TCFD Compliance
The below provides an explanation of where in this Annual Report (or other relevant document or location in respect of supplementary information)
the various TCFD recommended disclosures can be found:
Annual Report
Sustainability Report
Governance: The Company’s governance around climate-related risks and opportunities
12 and 23
12 and 23
10
12
12
The Board’s oversight of climate-related risks and opportunities
Management’s role in assessing and managing climate-related risks and opportunities
Strategy: The actual and potential impact of climate-related risks and opportunities on the Company’s business,
strategy, and financial planning where such information is material
The climate-related risks and opportunities which have been identified over the short,
medium, and long term
The impact of climate-related risks and opportunities on the businesses, strategy, and
financial planning
The resilience of the strategy, taking into consideration different climate-related scenarios,
including a 2°C or lower scenario
70, 104 and 106
70, 76 and 106
69, 70 to 73 and 80
71 to 73 and 80
70 and 80
Risk: How the Company identifies, assesses, and manages climate-related risks
The processes for identifying and assessing climate-related risks
The processes for managing climate-related risks
How processes for identifying, assessing, and managing climate-related risks are integrated
into the overall risk management
70 to 73 and 80
70 to 73 and 80
70 to 73 and 80
12, 23 to 24
Metrics and Targets: The metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material
The metrics used to assess climate-related risks and opportunities in line with the strategy and
risk management process
Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the
related risks
The targets used to manage climate-related risks and opportunities and performance against
targets.
64 to 67 and 69
10 and 12
65, 69, 71 and 72
10 and 16
69 and 73
10 and 12
73
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic 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.
Where to read more
• Stakeholders: Our Environment
Page number
64 to 67
Policies and Handbook
• Code of Conduct
Reporting Requirement
1 Environmental matters
(including the impact of the
Company’s business on the
environment)*
2 Employees*
• Understanding Our Key Risks
78 to 80
• Stakeholders: Employees
54 to 58
• Chief Executive Officer’s
14 to 17
Statement
• Section 172 Statement
52
• Understanding Our Key Risks
78 to 80
3 Social matters*
4 Respect for human rights*
5 Anti-Bribery and
Anti-Corruption*
• Sustainability Report
• Stakeholders: Communities
dechra.com/sustainability
61
• Sustainability Report
dechra.com/sustainability
• Section 172 Statement
• Stakeholders: Suppliers
53
60
• Sustainability Report
• Stakeholders: Suppliers
dechra.com/sustainability
60
• Audit, Risk and Internal Control
117 to 124
• Sustainability Report
dechra.com/sustainability
6 Business Model
7 Principal Risks in relation
to (1) to (5)
8 Relevant non-financial KPIs
• Our Business Model
22 to 25
• Stakeholders; Veterinary
59
Professionals
• How the Business Manages Risk
75 to 77
• Understanding Our Key Risks
• Key Performance Indicators
78 to 80
51
• 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
• Donations Policy
• Human Rights Policy
• Modern Slavery Statement
• Code of Conduct
• ABC Policy
• Third Party Code of Conduct
• How to Raise a Concern
Handbook
* 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.
74
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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
75
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report How the Business
Manages Risk
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.
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
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 undertakes 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 coordinates 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 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.
Ukraine
Russia’s invasion of Ukraine has had some impact on our business,
with increased energy costs and additional supply chain uncertainty.
Our sales to Russia, which were not material, have also ceased. We will
continue to monitor the situation in Ukraine and the associated impacts
this may have on our principal risks, with regard to our markets, supply
chain and people.
Dechra Culture
The Dechra Values are the foundation of our entire business culture
including our approach to risk management and control. The Board
expects these Values to 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.
• 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.
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 with 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.
• Lifecycle Management: We manage and monitor lifecycle
management activities for our key products to meet evolving
customer needs.
• Pricing Policies: We manage and monitor our national and European
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.
76
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com • 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 78 to 80. Internal Audit provides independent
and objective assurance and advice on the design and operation of
the Group’s internal control framework. The internal audit plan seeks to
provide balanced coverage of the Group’s material financial, operational
and compliance control processes.
Improvements in 2022
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.
• We have continued to make improvements to our manufacturing,
quality and supply processes, with additional investments in people
and production facilities.
• Recruitment of a new Head of Good Distribution Practices and
Head of Good Practices to further strengthen the Quality team.
• Launched an independent hotline to enable employees to submit
confidential reports using our How to Report a Concern Procedure.
• Roll out of an enhanced Financial Control Framework in response
to the BEIS white paper on Restoring Trust in Audit and Corporate
Governance. This will put the business in a strong position to
comply with the potential requirements of the BEIS proposals.
• Our Environmental, Social and Governance (ESG) strategy has been
further enhanced. We continue to execute our 'Making a Difference'
plan as well as working towards our commitment of setting
verifiable targets across the entire value chain through the Science
Based Targets initiative.
Plans for 2023
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 2023.
We also plan to make further improvements and enhancements to our
Sustainability strategy, financial control framework and Group policies.
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 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
3
2
1
5
6
10
9
4
7
8
w
o
L
Low
Likelihood
High
Risk increasing
Risk stable
Risk decreasing
New
77
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Understanding
Our Key Risks
Link to
Strategic
Growth
Driver and
Enabler
Risk
Potential Impact
Control and Mitigating Actions
Trends
a
b
c
1 Market Risk:
a
b
c
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 Zycortal have built a market which
continues to be attractive to competitors.
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.
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.
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.
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 as to 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.
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
78
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Risk
Potential Impact
Control and Mitigating Actions
Trends
Link to
Strategic
Growth
Driver and
Enabler
a
b
c
4 Supply Chain Risk:
Inability to maintain supply of key products
due to manufacturing, quality or product
supply problems in our own facilities or
those of 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
b
c
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.
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.
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.
Whilst the impact of COVID-19
on the supply chain is receding,
materials price inflation and the
Russian invasion of Ukraine
have created new supply chain
challenges. However our robust
response to recent developments
has seen the supply chain risk
remain stable.
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.
Regulatory risk is increasing due to
a lack of clarity around Regulation
2019/6; with the new veterinary
regulation that legislates for the
authorisation, use and monitoring
of veterinary medicinal products in
the European Union. The Regulation
was applied in all EU Member States
from January 2022.
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.
We monitor the performance of our key suppliers and
act promptly to source from alternative suppliers where
potential issues are identified.
The Group’s top products are regularly reviewed
in order to identify the key suppliers of materials or
finished products.
A dedicated external network team exists to manage
and support our CMOs to deliver quality products to
our regulatory specifications.
Demand forecasting and supply planning processes
are in place, with monthly reviews of demand and
production forecasts, inventory levels, and remediation
plans for products that are out of supply.
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.
Business continuity plans are in place at our key
manufacturing sites.
A new procurement structure and performance
measures are being implemented to improve supplier
performance management and implement a second
source strategy.
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.
Our Regulatory team operates a robust
Pharmacovigilance (PV) process to report any adverse
reactions and product complaints related to the use of
our products.
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.
79
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Understanding
Our Key Risks
Link to
Strategic
Growth
Driver and
Enabler
Risk
Potential Impact
Control and Mitigating Actions
Trends
7 People Risk:
Failure to recruit, develop and retain
quality people could result in:
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 additional people
with different skills, experience and cultural
knowledge to execute our strategy successfully
in those markets and business areas.
Our growth plans and future success are also
dependent on retaining knowledgeable and
experienced senior managers and key staff.
Post COVID-19, recruitment has been
challenging with increased competition
for the best talent.
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.
Whilst new EU regulations restricting
antimicrobial use in animals were not
implemented in 2022, there remains
continuing pressure on reducing antibiotic
risk. This is driven by market & cultural trends.
9 Climate:
Severe weather patterns caused by climate
change or natural disaster cause damage
to manufacturing or distribution facilities
impacting our ability to meet customer
demand. In addition, the business will
face transition risk, such as carbon
pricing, change in raw material pricing and
movement to renewable energy sources.
overstretched resources;
•
• weakened succession planning;
•
capability gaps in new
markets; or
•
challenges in integrating new
acquisitions.
This could lead to erosion of our
competitive advantage, and delay
implementation of our strategy.
Recent wage inflation has the
potential to impact workforce
stability.
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 talent acquisition team and applicant
tracking software are in place.
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.
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.
Damage to our facilities as a result
of climate change could impact
our abilities both to 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.
Please read about TCFD
on pages 70 to 73
Dechra has committed to setting verifiable targets
across the entire value chain through the Science
Based Target initiative (SBTi), with a Letter of Intention
already submitted. Dechra has also joined the UNFCCC
Race to Zero.
Scenario planning has been conducted for both
physical and transition risks to enable us to mitigate
climate related risks.
The share of key products manufactured by Dechra,
as opposed to CMOs, will be increased in order to
manage physical risks better.
Dechra is preparing to implement an internal shadow
carbon price to bring clarity and to identify climate-
related opportunities and the best areas to reduce
emissions.
Renewable electricity is generated from an existing
solar plant at our Zagreb site. We are investigating
other renewable energy sources across the Group.
10 Cybersecurity and IT
Failure Risk
Information security breach or significant
disruption to our IT systems, resulting from
a cyber-attack or failure of key IT software
or infrastructure.
Failure to prevent or adequately
respond to a data breach or cyber-
attack could result in business
disruption, fines, loss of personal
data or loss of intellectual property/
commercially sensitive information.
Software or infrastructure failure
could result in significant disruption
to operations and management
decision making.
Regular information security and data protection
training for employees.
N
Key systems are replicated across dual servers and
backed-up. Disaster and data recovery plans are in
place and tested regularly.
Data encryption and multi-factor authentication is
employed on mobile devices.
Business interruption and cyber insurance is in place.
a
b
c
80
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 26 to 27 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. This review
is based on the reasonable assumption that the Group will be able to
refinance its £340.0 million revolving credit facility, which is currently
committed until July 2024.
Progress against financial budgets, forecasts and key business
objectives is 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 2022 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 2025
is an appropriate period over which to base 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 risk is described on pages 78 to 80 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 top ten products, and loss of key high
margin products. 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 2022.
81
GovernanceFinancial StatementsAdditional InformationStock Code: DPHOverviewStrategic Report Governance
Contents
Letter from the Chair on Governance
Governance at a Glance
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
84
86
88
92
103
107
117
125
151
153
Letter from the Chair
on Governance
This year marks Dechra’s 25th
anniversary. Our Values, our
Culture, people, and strategy have
established Dechra as one of the
leading and fastest growing global
animal health companies in the
world."
Alison Platt
Dear Shareholder
On behalf of the Board, I am pleased to present Dechra’s Governance
report for the year ended 30 June 2022. This is my first report on behalf
of the Board, following my appointment as Chair on 1 January 2022.
Board Appointments
There have been a number of Board changes in the 2022 financial year.
In September 2021, the Company announced that Tony Rice, who had
been Chair for five years, wished to retire from the Board to devote
more time to family and other business and charitable activities. Tony
retired on 31 December 2021.
Denise Goode decided to tender her resignation, in November 2021,
due to other commitments, and the Board agreed that Julian Heslop
should resume the role of Audit Committee Chair whilst a successor
was appointed. After an extensive search, John Shipsey was appointed
as a Non-Executive Director on 1 June 2022. He brings a wealth of
financial and commercial experience to the business following his recent
tenure as Chief Financial Officer at FTSE100 Smiths Group PLC and
a number of senior finance and strategy roles over the last 20 years.
We announced in May 2022 that John would replace Julian Heslop as
Audit Committee Chair on 1 September 2022, at which point Julian
was subsequently asked by the Committee to sign the Audit Committee
Report for the financial year ended 30 June 2022, and has, therefore,
agreed to defer his retirement to 5 September 2022.
As communicated in previous Committee reports, the Remuneration
Committee Chair (and previously the Senior Independent Non-Executive
Director), Ishbel Macpherson, will be retiring in the 2023 financial year.
Cognisant of the Parker Review requirements and the new listing
requirements regarding diversity targets, the Committee has retained
a recruitment consultant who specialises in diverse recruitment to find
our new Chair of Remuneration. Following my appointment as Chair,
Lawson Macartney took over the role of Senior Independent Director
earlier this year.
Purpose and Culture
Our Purpose is clearly defined and underpinned by our Culture and
Values. Further details can be found on pages 10, 54 and 55, and
93. Our Values, entrepreneurial attitude and agile approach 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.
This year marks Dechra’s 25th anniversary. Our Values, our Culture,
people, and strategy have established Dechra as one of the leading and
fastest growing global animal health companies in the world and it was
a privilege to meet the 100 colleagues who attended the Global Team
Meeting in Cheshire recently to celebrate this milestone.
During the year, the Board attended its first site visit in over two years at
our site in Uldum, Denmark. Whilst the COVID-19 pandemic restricted
our ability to travel, the Board made good use of technology to stay
connected to colleagues around the Dechra network.
Throughout the year, we have routinely reviewed the policies which
support and enable our Values. Core to this is our Code of Conduct,
which includes a set of simple one page policy documents. A Code of
Conduct e-learning course was rolled out globally in January 2022. The
Board approved the launch of a third party confidential hotline, which
went live globally in April 2022, and is available to both employees and
Dechra’s third parties. Reports can be submitted through an online
portal, which is available in 46 languages, or via a hotline, which is
manned twenty-four hours a day and is supported in 170 languages.
Stakeholders and Section 172 of the Companies Act
The impact of our decisions on our key stakeholders is front of mind
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 52 to 63 and 96 to 98.
Board Activities
The current financial year has seen our continued focus on both
strengthening the core operations and growing the business. We
approved important investments in manufacturing enabling greater
resilience and reducing reliance on third party suppliers. We secured the
worldwide rights to verdinexor, a novel treatment of all forms and stages
of canine lymphoma in dogs.
84
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com To achieve the Group’s aim of ensuring diversified sources of funding
and to extend the Group’s debt maturity profile, the Board approved a
private placing of EUR50 million seven year and EUR100 million ten year
new senior unsecured notes, which was signed post year end on 14
July 2022. All proceeds from the placement were used to repay existing
debt on the Group’s Revolving Credit Facility.
Post year end, we also approved a placing of 5,247,813 new ordinary
shares and a retail offer of 116,870 new ordinary shares. In aggregate,
the placing shares and the retail offer shares represented approximately
4.95% of the Company’s existing issued share capital, raising gross
proceeds of £184.0 million for the Company. The proceeds were used
to fund the acquisition of Piedmont Animal Health, Inc. a research and
development business with an active product pipeline in North Carolina,
USA, and will also provide balance sheet flexibility to execute on an
active acquisition pipeline. Piedmont specialises in developing novel
and differentiated products for the companion animal market and has
a strong development track record.
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 2022 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 ,which relates to the alignment of executive directors' pension
contributions to those of the wider UK workforce. This has now been
achieved as from 1 July 2022, two of our Executive Directors’ pension
contributions were at 8%, which matches the minimum offered to our
UK workforce. Tony Griffin's pension contribution is at 7.7%, which is
aligned with the Dutch workforce contribution.
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 20 October
2022 (the Meeting). All members of the Board are scheduled to attend
the Meeting and the Chair 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.
Alison Platt
Non-Executive Chair
5 September 2022
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 92, stakeholder engagement on pages 96 to 98
and Culture, Purpose and Values on page 93.
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 107 to 116
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 107, 114 and 115.
Audit, Risk and Internal Control
The report from our Audit Committee on pages 117 to 124
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 75 to 80 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. Further details
can be found on pages 128 and 129. During the year, we have
undertaken a shareholder consultation on the remuneration of our
Executive Directors.
85
Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance Governance
at a Glance
Our Board
Non-Executive Directors’ Tenure
as at 30 June 2022
Alison Platt
Julian Heslop
Ishbel Macpherson
Lawson Macartney
Lisa Bright
John Shipsey
0
1
2
3
4
5
6
7
8
9
10
Number of Years
Gender Diversity
Board Independence
Female
Male
33.3% (3)
66.7% (6)
Non-Executive Chair
11.1% (1)
Executive Directors
33.3% (3)
Non-Executive Directors 55.6% (5)
Leadership
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I
Skills and Experience
Name
Ian Page
Paul Sandland
Tony Griffin
Alison Platt
Julian Heslop
Ishbel Macpherson
Lawson Macartney
Lisa Bright
John Shipsey
86
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
Board and Committee Attendance
The Board is scheduled to meet seven times a year, the Remuneration and Audit Committees four times a year and the Nomination Committee three
times a year. The June 2022 meetings were rescheduled to July 2022 to coincide with the Global Team Meeting. All meetings up to and including
these dates, 12 and 13 July 2022, have been included in this table.
Board
Audit
Remuneration
Nomination
10 10
10 10
10 10
10 10
10 10
9 10
10 10
10 10
4 4
3 3
2 2
2 2
6 6
4 5
N/A
N/A
N/A
4 4
4 4
4 4
4 4
N/A
N/A
1 1
N/A
N/A
N/A
6 6
5 6
6 6
6 6
1 1
3 3
2 2
N/A
N/A
N/A
5 5
5 5
5 5
5 5
1 1
2 2
1 1
Alison Platt Ω
Ian Page
Tony Griffin
Paul Sandland
Lisa Bright
Julian Heslop¶
Lawson Macartney
Ishbel Macpherson
John Shipsey*
Tony Rice†
Denise Goode‡
Key
Number of meetings attended
Number of meetings
† Tony Rice attended all meetings until his retirement.
‡ Denise Goode attended all meetings until her resignation.
* John Shipsey attended all meetings since his appointment.
Ω Alison Platt did not attend one Nomination Committee meeting as the meeting had been convened solely to discuss the candidates for the role of Chair. Alison attended
all Audit Committee meetings prior to her appointment as Chair.
¶ Julian Heslop was unable to attend an adhoc Board meeting due to a prior commitment; however, he provided the Board with his comments and questions on the
subject matter under discussion. He was also unable to attend one adhoc Remuneration Committee due to a prior commitment.
87
Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance Board of
Directors
Executive Directors
IAN PAGE
Chief Executive Officer
Appointed:
June 1997
PAUL SANDLAND
Chief Financial Officer
Appointed:
October 2019
Committee Membership:
Disclosure (Chairman).
Committee Membership:
Disclosure.
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:
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:
1
4
4
9
Diversity
Characteristics
45
7
1
1
Age
41–50
51–60
61–70
Education
Vocational
University
Country of Residence
USA
Netherlands
UK
Ethnicity
White (all backgrounds)
1
4
4
4
5
1
1
7
9
For further information on the Board of Directors, please see www.dechra.com
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
Non-Executive
Chair
Non-Executive
Directors
ALISON PLATT
Non-Executive Chairman
ISHBEL MACPHERSON
Non-Executive Director
JULIAN HESLOP
Non-Executive Director
Appointed:
May 2020
Appointed:
February 2013
Committee Membership:
Nomination (Chair) 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 member of the
Hampton-Alexander Review steering
group.
Pets: None.
Committee Membership:
Audit, Nomination, Remuneration
(Chair).
Skills and Experience:
Ishbel has a broad range of PLC
Board experience in a variety of roles,
including Chair, Audit Committee and
Remuneration Committee Chair. 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:
None.
Pets:
Appointed:
January 2013
Committee Membership:
Audit (Chair), 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:
DR LAWSON MACARTNEY
Senior Independent
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 Chair of Viking Therapeutics
Inc. as well as the Chair of the
Nomination and Corporate
Governance Committees.
Pets:
LISA BRIGHT
Designated Non-Executive Director
JOHN SHIPSEY
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:
Appointed:
June 2022
Committee Membership:
Audit, Nomination and Remuneration.
Skills and Experience:
John has considerable financial and
commercial experience as a result of
senior financial roles he has held in
engineering, technology and beverage
sectors over the last 20 years. He
also has valuable experience leading
innovative, high growth international
companies.
John is a Chartered Accountant and
has an MBA from INSEAD.
External Appointments
None.
Pets:
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Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance
Senior Executive
Team
MIKE ELDRED
President North America
KATY CLOUGH
Group HR Director
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 414 people.
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:
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:
The Senior Executive Team
(SET) 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 South 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:
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
Senior Executive Team
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 Chartered
Governance Institute.
Melanie is responsible for the
Company Secretarial and Legal team.
She is located in Northwich, UK.
Pets:
MILTON MCCANN
Group Manufacturing and
Supply Director
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 Northwich, UK.
Pets:
None.
PATRICK MEEUS
Group Scientific Officer
Background:
Patrick joined Dechra in July 2022,
and has over 30 years’ experience
in animal health covering vaccine,
small molecule and diagnostics
product development across all
animal species, large and small. He
also brings substantial international
experience having lived and worked
in academia and industry on four
different continents. Prior to moving
into industry, he spent time doing
research and teaching at the
University of Zambia, the Tropical
Institute of Antwerp (Belgium) and
the University of Florida (USA). In
2004 Patrick joined Pfizer Animal
Health, now Zoetis, where he led
a wide range of teams, projects
and strategic initiatives from
early discovery through product
development and launch. He also
led regional R&D hubs in Latin
America and APAC for Zoetis, before
joining Elanco in 2018 as the Senior/
Executive Director of Companion
Animal Product Development.
Patrick has a Veterinary Degree
from the University of Gent
(Belgium), a PhD in Infectious
Diseases from the University of
Florida (USA) and was a founding
Diplomate of both the European
Veterinary Parasitology College and
the American College of Veterinary
Microbiologist-Parasitology.
Patrick is currently based in Basel,
Switzerland within close proximity of
Dechra’s UK and Netherlands teams.
Pets:
91
Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance
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 26 to 29 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 62,
underlying diluted earnings per share growth on page 50 and our
Total Shareholder Return performance on page 141.
Strategy
The Group’s strategy remains unchanged and is set out on pages 26
to 27 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,
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.
KPIs have been designed to measure progress and delivery of the
strategic plan and our four growth drivers. Further details are provided
on pages 50 and 51.
Strategy Day
The Strategy Day held in November 2021 provided an opportunity to
update the Board on emerging trends in the animal health sector and
across the markets in which we operate. It created the space for the
Senior Executive Team (SET) to share the challenges and opportunities
they see in their business and enabled the Board to contribute their
experience and perspectives. The first session of the day saw an update
on the Group’s Sustainability strategy, which was presented by the Group
Sustainability Director and allowed the Board to consider their role in
supporting Dechra’s Sustainability programme, ‘Making a Difference’.
The context for the day was provided by the Chief Financial Officer
sharing the five year financial plan and ambitions and updating the
Board on the Group’s financial and economic performance to date.
There were four strategy sessions which covered:
• Geographical Expansion: the next steps;
• Pipeline: a brief overview and vaccines strategy;
• Future of veterinary distribution; and
• Future of the Veterinary Practices.
Guest speakers, one of which was from a UK wholesaler and the other
from an EU Buying Group, contributed to the latter two sessions. These
presentations provided evidence of the good relationships Dechra has
with our key stakeholders and both presentations were insightful, enabling
the Board to have a better understanding of the routes to market and the
consolidation of the market.
This session was followed by a debate at the Board meeting in
December, which included high level discussions to challenge whether
the strategy remains fit for purpose and responsive enough to the
market and environment. The five year plan was approved and the
Board deemed that the strategy remains fit for purpose.
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 122 and the Strategic Report
on pages 75 to 80.
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 2021 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.
92
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 for
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
No of
acquisitions*
7
* Product acquisitions
Lost Time
Accidents
6
Employees Engagement
90% of employees completed
the survey in 2021, Dechra's trust index
has increased to 77% (2018: 67%)
93
Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance Board Leadership
and Company Purpose
How The Board Monitors Culture
Moving Annual Turnover of Employees
Retention of employees is an indicator of a positive culture
Engagement survey
This helps to determine levels of employee engagement on a wide
range of matters and provides oversight of the implementation of
the Values
Employee engagement with the Board via designated
Non-Executive Director
Provide an update on employee views and any concerns raised
Internal Audit Reports
Identifies any actions required in relation to deviations of Values
and Culture
Site Visits
Provides the Board with direct interaction with the Culture of the
Company
Approval of Group Policies such as Code of Conduct
Enables the Board to monitor that the policies reflect the Values
and Culture of the Group
Raise a Concern Reports
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
Health and Safety Updates
Enables the Board to assess the effectiveness of our safe working
practices and behaviours
External Culture audit with Great Place to Work for the UK
Provides an external assessment of the Group’s Culture
Acquisitions
Provides an indicator of our entrepreneurial Culture
OneDechra
All of the Board has access to our intranet, OneDechra, which
contains news items posted by our employees on activities and
achievements
Case Study:
Denmark Site Visit
In April, we held the Board, Remuneration and Nomination Committee
Meetings in Uldum, Denmark. This was the Board’s first site visit since
the pandemic. Denmark was chosen as the warehouse expansion,
which the Board had approved in the 2021 financial year, had been
completed (see 2021 Annual Report). This was the first phase of the
proposed seven step plan to the warehouse expansion plan and
included the building of a new warehouse with an underground cold
storage facility. The underground cold storage facility has replaced six
refrigerated containers and external facilities. In addition, the capital
expenditure of €7.0 million has delivered 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 to meet our
expected storage requirements for five to seven years.
On day one of the visit, the Designated Non-Executive Director for
Employee Engagement and the Remuneration Committee Chair met
with a group of employees from various departments. This provided
the Board an opportunity not only to hear the views of the employees
but also to experience the Culture of the organisation. On day two,
the Board were taken on a site tour of the new warehouse facility
by the EU Logistics Director and the Logistics Manager. This was
followed by the opening of the facility by the spouse of the founder of
the original business and the local mayor. All employees of the facility
were present, which gave the Board further opportunity to engage
with the employees.
94
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Case Study:
Global Team Meeting
A Global Team Meeting was held in Knutsford, UK, at which 100
delegates from across the Group attended the three day event,
11 to 13 July 2022. Delegates came from as far afield as Australia
and Brazil and represented each of our divisions (Corporate, Product
Development, Regulatory Affairs, Manufacturing, DVP EU, DVP NA
and DVP International). This provided the delegates an opportunity to
share ideas and attend a number of presentations and workshops,
which covered subjects such as market developments, sustainability,
branding, regulatory and manufacturing updates.
Presentations in the Board meeting itself from the North America,
International and Product Development teams gave the Board insight
to the markets, the competitors and the priorities for the Dechra
teams. It afforded the Board the opportunity to learn more and to gain
insight into the challenges and opportunities in each area. Having all
the team in the room to listen and comment on each other’s data
was hugely valuable and allowed them to gain an understanding of
the unique characteristics at play in the various markets in which
we trade.
The Board welcomed the opportunity to meet a number of colleagues
from Dechra’s businesses around the world. The restrictions set by
COVID-19 have hampered the Board’s ability to meet our people in
their own markets; so to be able to meet both formally and informally
was extremely rewarding.
Supplementing this were two opportunities over evening functions to
meet and talk with colleagues in a much more informal setting. The
Board were struck by the positive energy and commitment articulated
consistently by Dechra people, whether long standing or new to the
organisation. It is evident that the Culture at Dechra is a major asset
in attracting and retaining high quality professionals and people spoke
openly of the empowerment they feel, the ability to operate at pace
that this affords and the support they feel from the Group.
95
Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance Board Leadership
and Company Purpose
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 to 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 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 52 to 63.
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 Engages:
Direct:
• The Chair and Senior Independent Director are available to meet shareholders upon request, and all Directors normally meet shareholders
at the Annual General Meetings
• The Chair and Senior Independent Director met an analyst group
• The Chair has engaged with institutional shareholders regarding the diversity of the Board
• Where material changes in respect of remuneration or governance are proposed, the Board seeks to consult with its major shareholders
before implementing such changes. Post year end, the Remuneration Chair wrote to our major shareholders (approximately 68.8%) with
regard to the proposed changes to the Executive bonus percentage and the Chair salary increase, both of which were in line with the
Remuneration Policy
• A rolling programme of meetings between institutional shareholders and the Chief Executive Officer and Chief Financial Officer has been
running throughout the year (a summary of the main events is on page 62). These meetings seek to foster a mutual understanding of both
the Company’s and shareholders’ objectives
Indirect:
• The Board reviewed and considered feedback, collated by the Company’s brokers, after investor roadshows
• Board approval is required for significant announcements
• The Stockbrokers and Financial Advisers attended the January meeting to update the Board on the market and a July 2022 meeting
to advise the Board in relation to funding considerations
Influencing Decisions:
• During the year, we have discussed the financing of potential acquisitions and in particular the likely views of shareholders on the acquisition
of Piedmont Animal Health, Inc., which increases the research and development spend of the Group. With regards to the financing of
Piedmont, we discussed the quantum of the equity placing in light of shareholder views and market conditions
96
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Employees
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.
How the Board Engages:
Direct:
• Site Visit to Uldum, Denmark (see case study on page 94)
• Dinners with Senior Executive Team (SET) in the UK and senior leaders in Denmark
• Chair visited the offices at Sansaw and Northwich and the manufacturing site at Skipton where she attended the senior leaders meeting
• Lisa Bright, the Non-Executive Director designated for employee engagement, attended seven meetings (see Employee Engagement Update)
• 25th Anniversary/Global Team Meeting, which was attended by 100 employees from across the Globe, representing all divisions
Indirect:
• The Group HR Director provided an update to the Board in April 2022 on the Future Facing Leaders programme
• 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
• Global SAYE was launched in September 2021 with a participation rate of 38.4%
• Lisa Bright, the Non-Executive Director designated for employee engagement, provided three reports to the Board
Influencing Decisions:
• Remuneration payouts for Executive Directors, pension contributions and to be a living wage employer
• Capital investments such as DPM&S ERP system which will require additional employees to resource the project (see case study on page 99)
• Approval of the Global SAYE scheme to increase employee ownership
Customers
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 Engages:
Direct:
• Meet UK wholesaler and EU Buying Group at Strategy Day
Indirect:
• Each of the SET members for DVP EU, NA, and International has provided in-depth presentations on their markets, customer requirements
and customer consolidation. DVP EU presented a summary of the customer insights research
• 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 enable products to be delivered more quickly to the market from
the product development pipeline
• Two Quality updates were provided, which covered both the internal and external sites
• Feedback on our customer interactions was provided by the Non-Executive Director Designated for Employee Engagement following
meetings held with sales representatives and leaders
Influencing Decisions:
• Executive Directors approved the Manufacturing budget, which included additional people resource in Manufacturing and in particular
in Quality to enable products to be released in a timely manner
• DPM&S ERP system will improve planning and supply reducing risk around product delivery and reducing the likelihood of delays and
backorders
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and Company Purpose
Suppliers
Principles:
The Company is committed to acting responsibly and with integrity, respecting the laws and regulations of the countries in which it operates.
It expects its suppliers to trade with honesty and integrity.
How the Board Engages:
Direct:
• The Board reviewed and approved the Modern Slavery Statement and Human Rights Policy
• The Audit Committee receives updates 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
Indirect:
• The Group Manufacturing and Supply Director presented to the Board and this included a discussion on the Contract Manufacturing
Organisation strategy
• The Board has discussed, as part of the budget approval process, the rising cost of raw materials and energy as well as the Group's
strategy with regards to alternative sources of energy
Influencing Decisions:
• The Board approved a CMO contract for the manufacture, testing, release and supply of approximately 80 products, which would
maintain the supply of products to customers; maintain one of the key partner relationships by providing clear contract terms; and
guarantee supply from a key supply partner to drive the profitability of the business going forward
Community
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.
How the Board Engages:
Direct:
• Executive Directors attend community days
Indirect:
• The Chief Financial Officer provided an update of the progress of the ESG Committee in implementing the Sustainability strategy, including
the various working groups, the setting of targets and the approach taken with regards to the recommendations of the Task Force on
Climate-related Financial Disclosures
• 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 Group Sustainability Director provide an update of the progress of the Sustainability strategy at the Strategy day
Influencing Decisions:
• The Board supported the Science Based Target initiative application
98
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Case Study:
Principal Decisions
DPM&S ERP System
Customers
People
Shareholders
Suppliers
Background
In December 2021, the Board was asked to consider the
implementation of a fit for purpose ERP system for DPM&S, as there
were various ERP systems across the organisation, which were not
harmonised and were receiving different levels of support. The capital
implementation costs were expected to be £21.2 million, which under
the delegation of authority and schedule of matters required Board
approval.
Stakeholder Considerations
In consideration of section 172 duties it was noted that the project
was in line with the strategic drivers and enablers and:
•
•
•
it would provide an information source which will 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. Training
would be provided to all employees who would be system users,
which would require a time commitment from the employees;
the approach would allow better visibility and management of
suppliers globally, and processes such as invoice payment and
billing would be made more efficient;
the improvements in planning, supply and manufacturing
processes would enable
− products to reach the customer more quickly and
consistently. The improvement in planning and supply
systems would mean reduced risks around product delivery
and a reduction in the likelihood of significant delays and
back orders. In the longer term, more efficient and effective
planning, supply and manufacturing systems would increase
the consistency of supply and reduce the overall cost of
supply;
− faster and more consistent supply with reduced quality
events and lower cost; this would enhance shareholder value
through greater financial efficiency and a better reputation
within the markets in which we operate. The new system
would 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 would further enhance shareholder
value; and
• although no major impact was expected on the Community,
the reduction on the reliance on paper based systems (and
associated storage) would help further the sustainability agenda.
Outcome
The Board approved the chosen ERP solution for DPM&S, the
recruitment of resource to the project delivery team (critical path
constraint) including the backfilling of any substantive roles; and that
the governance and oversight of the project be delegated to the
Steering Committee who would provide periodic progress updates
to the Board.
The Board agreed that the ERP solution would facilitate the delivery of
DPM&S strategic objectives, and it would also underpin the strategy to
support growth by facilitating previous and future acquisitions (products
and entities), which are, and can be, integrated into a harmonised
system with common and consistent processes by using a common
operating platform. The adoption of one core business application
across all DPM&S sites will harmonise and significantly improve existing
business processes, facilitate faster and more effective time to market
for new products and market extensions. It will allow the collection,
interrogation and reporting of key performance data, which will increase
regulatory compliance, reduce supply risk, identify key business trends
and facilitate cost reduction through having a common, consistent and
real time data source. It also allows the adoption of a cloud approach,
which will future proof this major and critical investment for the Group.
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and Company Purpose
Case Study:
Principal Decisions
Acquisition of Piedmont Animal Health, Inc
Customers
People
Shareholders
Background
Originally, the Group were in negotiations to acquire the global rights
to a novel new injectable indicated for cats for treatment of upper
respiratory infections. Further analysis and engagement with the
sellers highlighted the attractiveness of the wider opportunity to
acquire the remaining product portfolio of Piedmont Animal Health,
Inc (Piedmont). In April 2022, the Board was asked to consider a
non-binding offer for Piedmont, which was in line with the Pipeline
Delivery strategic driver.
Stakeholder Considerations
In considering section 172 duties the Board noted:
•
the increasing challenges in recruiting highly experienced
development and regulatory staff. The acquisition would bring
a new team of people whose main priority would be to focus on
the Piedmont projects and add strength and expertise throughout
the Group;
Case Study:
Principal Decisions
Equity Placing
Shareholders
In June 2022, we reviewed the funding considerations in relation to
the acquisition of Piedmont and the future acquisition pipeline. Over
the course of four meetings, and after reviewing a number of financing
options, we agreed that a placing and a retail offer (together the Capital
Raise) would provide balance sheet flexibility to fund the acquisition of
Piedmont and execute on an active acquisition pipeline thereafter. Our
brokers, Investec Bank plc, attended two of the meetings to provide
advice on market and other funding considerations.
Stakeholder Considerations
In considering our S172 duties, the Board noted that the Capital
Raise would:
• allow the Group to have the necessary funds for the acquisition
of Piedmont and other potential acquisitions which are in line
with the Group’s strategy of Pipeline Delivery, Portfolio Focus and
Acquisition as well as the Manufacturing Enabler; and
100
•
•
the novel pipeline is complementary to Dechra's existing CAP
portfolio, providing the opportunity to strengthen significantly
Dechra's presence in key therapeutic areas of dermatology,
pain management and anti-infectives, which will assist with
retaining Dechra’s margin profile; and
the provision of specialist novel products is the basis for
Dechra’s strong relationship with veterinarians, which in turn
allows us to sell branded generic products.
Outcome
The Board approved the non-binding offer and the subsequent
acquisition. The acquisition of Piedmont for $210 million (£175 million)
completed post year end on 25 July 2022. Integration commenced
in August 2022, and updates will be provided to the Board in the
2023 financial year.
• at the same time enable the Company to maintain the previously
communicated strategy of maintaining leverage below 2 times,
or for the right acquisition 2.5 times, as long as the Company
was able to return leverage to below 2 within a 12 month
reporting period.
It was agreed to provide a retail offer to enable non-institutional
investors to participate in the Capital Raise.
Outcome
Post year end, the Group raised gross proceeds of approximately
£184 million through a non-pre-emptive placing of 5,247,813 new
ordinary shares and issue of 116,870 new ordinary shares via a retail
offer, which together represents approximately 4.9% of the existing
issued share capital.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Employee
Engagement
Update
Lisa Bright
Areas of Focus
• Focused discussion on specific areas identified through the
Great Place to Work (GPTW) employee survey, in particular
wellbeing and ESG
Key Themes and Highlights:
• As reflected in the result of the GPTW survey, staff engagement
and morale generally remain high, with only a few areas of concern
where management has prioritised action
• Broadening engagement
• Resuming scheduled site visits in addition to remote discussions
Meetings with Employees
• Great Places to Work Discussion groups: Remote attendance
at four sessions in Skipton (UK), Fort Worth (US) and Bladel
(Netherlands)
• Logistics: In person meeting with representatives at our Uldum
site (Denmark)
• Europe: In person attendance at the European Senior Leadership
meeting over two days
•
International: Remote discussion with members of
International team
• Monthly discussions with the Group HSE Director and Group
HR Director
Our Approach
At the beginning of the year, the Board agreed priority areas of focus
for employee engagement. We incorporated the governance of the
Designated NED activities into the Nomination Committee as well as
providing a summary to the broader Board. The excellent feedback from
the GPTW provided us with a great platform to engage with employees
as they worked through the feedback and agreed priority actions at
a local level. The ability to resume in person visits has provided an
opportunity to attend larger events as well as combine Board meetings
with broader site visits.
• Gratitude for colleagues, especially those in manufacturing and
distribution, who enabled continuity of supply during lockdown
under difficult circumstances
• Establishing a new normal in terms of working practices with the
reopening of offices and access to our customers, whilst retaining
the benefits and innovative practices that remote working created.
In particular, supporting leaders to be mindful of colleagues’
wellbeing and adapting the ways we work to be more customer
centric
•
Increasing communication internally as Dechra grows in scale and
complexity to maintain our culture and values
• A strong commitment to our ESG plans
Plans for 2022/2023 Financial Year
• Expanding in person and remote conversations with delegates
across functions and geographies
• Confirming actions arising from the GPTW survey have been
delivered by management
• Creating further opportunities for employee development
• GPTW survey scheduled for March 2023
• Attend Future Facing Leaders course
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and Company Purpose
This now means that we offer five reporting channels for concerns
to be raised: Line Manager; the Senior Management Team; Group
Management Team; a mailbox accessed only by the Company Secretary;
and a confidential hot line. 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.
Constructive use of the Annual General Meeting
The 2021 Annual General Meeting was held at offices of the Company in
Northwich. In addition, we offered a live webcast to enable shareholders
to watch the Meeting virtually, subject to prior registration. 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 or at the Meeting. No questions were submitted and no
shareholders used the online facility.
All members of the Board are scheduled to attend the Annual General
Meeting (the Meeting) and the Chairs of the Audit, Remuneration and
Nomination Committees will be available to answer shareholders’
questions at the Meeting.
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 adhoc 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.
Alison Platt
Non-Executive Chair
5 September 2022
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.
Our internal Code of Conduct includes a set of simple one page policy
documents, which are summaries of the main Group policies. A Code
of Conduct e-learning course has been developed and was rolled
out in English at the end of June 2021, and was translated into eight
languages rolled out globally in January 2022. It is a global mandatory
course completed on an annual basis.
The Dechra Health, Safety and Wellbeing (HSW) Committee 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 has continued to develop the 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 page 58.
The wellbeing programme is particularly important, as following the
results of the Great Place to Work survey, one of the two key areas of
focus Group-wide is wellbeing. With this is mind, we have provided a
subscription to all employees to a third party app to support Emotional
Wellbeing, and developed an online training module aimed at Line
Managers to help them identify issues relating to wellbeing and signpost
employees to the right place for support. Regular communications
around employee wellbeing have been posted to the Group’s intranet
and our confidential Employee Assistance Programme has remained
available to all.
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.
In December, the Board approved the amended How To Raise a Concern
procedure which had been updated in light of the changes to the EU
Directive on Whistleblowing. Dechra has adopted the changes proposed
by the Directive due to the number of its operations that are within the EU.
In addition, the Board approved the launch of a third party confidential
hot line, which went live globally in April 2022, and is available to both
employees and Dechra’s third parties. Reports can be submitted through
an online portal, which is available in 46 languages, or via a hotline, which
is manned twenty-four hours a day and is supported in 170 languages.
All reports are treated with utmost confidentiality by independent staff,
who will summarise the content of the call or online report and pass it to
the Company Secretary, the Group HR Director and the Head of Internal
Audit and Assurance for investigation.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 86 and 89, and on the website. As
detailed in the pie chart below, the Board consists of one Non-Executive
Chair, five Non-Executive Directors and three Executive Directors.
Non-Executive Chair
11.1% (1)
Non-Executive Directors 55.6% (5)
Executive Directors
33.3% (3)
Two of the Non-Executive Directors have exceeded nine year tenure,
Julian Heslop in January 2022 and Ishbel Macpherson in February
2022. On the resignation of Denise Goode in November 2021,
Julian agreed to remain on the Board until a successor for the role
of Audit Committee Chair could be appointed. In January 2022, the
Board concluded that both Julian and Ishbel remained independent
due to the fact that Julian had indepth financial expertise and had
consistently shown independent judgement, and Ishbel’s knowledge
and understanding of City matters gained over 20 years’ experience
as an investment banker provided an independent view on the
Board discussions on financing and the financial risks of acquisitions.
Therefore, in line with the Code, at least half the Board, excluding the
Chair, is determined by the Company to be independent. The Chair was
deemed independent on appointment in accordance with provision 10
of the Code. Following the appointment of Alison Platt as Chair of the
Company, Lawson Macartney was appointed the Senior Independent
Director. Julian is retiring from the Board on 5 September 2022.
The Board has determined, following the results of the internal 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.
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 Prioritisation 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.
Board Meetings
The Board is scheduled to meet seven times per year. During the year,
three additional meetings were held to discuss the 2022 financial year
Budget, financing and proposed acquisition targets. The scheduled
June 2022 meeting was postponed to July 2022 to coincide with the
Global Team Meeting and the attendance at the Board meetings during
the year includes the July meeting. Where Directors cannot attend a
meeting, the Board papers are still provided allowing the Director to
raise any queries or discussion points through the Chair. A schedule
of the number of meetings and attendance can be found on page 87.
Julian Heslop was unable to attend an adhoc meeting due to a prior
commitment. However, he provided the Board with his comments and
questions on the subject matter under discussion.
The Non-Executive Directors meet informally before every meeting. They
also meet once with the SET on an informal basis during the year.
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.
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Responsibilities
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
• 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 92 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 management, 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
Chair, 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 117 to 124
Read more on
pages 107 to 116
Read more on
pages 125 to 150
Treasury
Committee
To establish, implement and
monitor compliance with
Treasury Policies as approved
by the Audit Committee.
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
To oversee the development of,
and to make recommendations
to, the Board regarding the
Group’s Sustainability 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
To 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.
• Leads the development and implementation of the business strategy.
• Manages day-to-day operations of respective functions.
Senior Executive Team
104
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 1
Non-Executive Chair
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
• Drives performance and results of
in all aspects of its role;
the Group;
• Responsible for IT, financial planning
and reporting for the Group;
• Manages financial risk;
• Develops and executes the strategic
plan in conjunction with the Chief
Executive Officer;
• Proposes strategy; and
• Executes strategy agreed by the Board.
• Secures funding as required; and
• Nominated Director for health, safety
and environmental matters.
• 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.
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
• Provides all required information to the
• Development and execution of strategy
be 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 Chair
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 Chair by the
Non-Executive Directors; and
• Chairs the Nomination Committee
when it is considering the succession
of the Chair.
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Division of
Responsibilities
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.
Strategic
Driver/Enabler
a
b
c
a
b
c
a
b
c
a
b
c
a
b
c
a
b
c
Key responsibility
Key activities, discussions and outcomes in 2021/2022
Stakeholder
Setting the strategy
and overseeing its
implementation
• Full Strategy Review and approval of five year plan
• Bi-annual update on product pipeline and product development
•
Incorporation of new subsidiaries in Korea and Switzerland
• Approval of Acquisition Proposals
Monitoring the
overall financial
and operational
performance of
the Group
• Approval of 2021 Full Year Results, final dividend recommendation,
2022 Half-Yearly Results and interim dividend
• Functional presentations from the SET, Head of Legal, Business Development
Director, Regulatory Affairs Director and DPM Internal Sites Director
• Approval of the 2022/2023 budget and capital expenditure projects
Establishing a
framework of prudent
and effective controls,
which enable risk to
be assessed and
managed
• Consideration of private placement and equity placing
• 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 and approval of Schedule of Matters and Delegation of Authority
Establishing the
Company’s Purpose,
Values and Culture,
and promoting the
desired behaviours
Establishing an
effective corporate
governance
framework
•
Insurance renewal update
• Quality Updates and approval of DPM&S ERP system
• Review and approval of the people strategy and employee engagement
• Review of the bi-annual Health and Safety Report
• Review and approval of Modern Slavery Statement
• Review and approval of How To Raise Concern Procedure and Reports
• Review of Disclosure Committee's Terms of Reference, Share Dealing
Code and Inside Information Policy
• Review and approval of Group Policies, such as the Code of Conduct
and Approval of the Anti-Trust Policy and Group H&S Policy
• Approval of appointments of Non-Executive Director, Chair and
Committee membership and Committees' Terms of Reference
• Review of Task Force on Climate-related Financial Disclosures
• Review of 2022 Internal Board Evaluation
Stakeholder Key:
Strategic Driver/Enabler Key:
Customers
People
Pipeline Delivery a
b
c Portfolio Focus
Geographic Expansion
Acquisitions
Shareholders
Suppliers
Manufacturing and Supply Chain
Technology
People
ESG
Details relating to the formal schedule of matters reserved for the Board can be found on page 92 and on our website.
Alison Platt
Non-Executive Chair
5 September 2022
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
Composition, Succession
and Evaluation
Letter from
the Nomination
Committee Chair
5
Nomination Committee
Meetings Held
Areas of Focus This Year
• Diversity
• Board appointments and succession planning
• SET succession planning and leadership needs of the Group
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
Read more about Our Committee Membership and
Attendance on page 87
Dear Shareholder
On behalf of the Board, I am pleased to present this year’s Nomination
Committee (the Committee) report.
Succession Planning
There have been a number of Board changes in the 2022 financial year.
In September 2021, the Company announced that Tony Rice wished to
retire from the Board. Following a comprehensive search process, I was
pleased to be appointed as Chair with effect from 1 January 2022. Tony
retired on 31 December 2021.
Denise Goode decided to tender her resignation, in November 2021,
and Julian Heslop resumed the role of Audit Committee Chair whilst
a successor was appointed. John Shipsey was appointed as a
Non-Executive Director on 1 June 2022. He brings a wealth of financial
and commercial experience to the business and will replace Julian
Heslop as Audit Committee Chair on 5 September, at which point Julian
will retire from the Board.
The Remuneration Committee Chair (previously the Senior Independent
Non-Executive Director), Ishbel Macpherson, will be retiring in the 2023
financial year. The commencement of the recruitment process for a new
Remuneration Committee Chair was delayed as the Committee's first
priority this year was to find a replacement Audit Committee Chair.
There have also been a number of changes in the Senior Executive
Team (SET), which included the retirement of Susan Longhofer as Chief
Scientific Officer on 31 December 2021. Her replacement, Patrick
Meeus, commenced employment with Dechra on 1 July 2022.
Diversity
Dechra is committed to building high performing diverse teams at all
levels in the organisation. As a Board our focus is to further our diversity
through the planned succession process and we will work hard to
broaden the Board’s make up further over the coming year. To assist
us in this, as stated in our 2021 Annual Report, we have worked with
an external recruitment company to identify future potential candidates
from a wide range of backgrounds, cultures, and experience. This has
always been our plan and prior to our recent elevation into the FTSE
100 (December 2021) we were on track to meet and indeed exceed
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Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance Composition, Succession
and Evaluation
the target and deadline of 2024 (the Parker Review target date for FTSE
250 companies). Cognisant of the Parker Review requirements and the
new listing requirements regarding diversity targets, the Committee has
retained Audeliss, an executive search firm for diverse talent, to assist
with the recruitment of a Remuneration Chair.
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.
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.
Internal Evaluation
During the financial year, I have led the annual Board evaluation, which
was an internal evaluation, with the support of the Company Secretary
and Senior Independent Director as appropriate, the details of which
can be found on pages 115 and 116 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.
Alison Platt
Non-Executive Chair
5 September 2022
Membership, Meetings and Attendance
The membership of the Committee, together with appointment dates
and attendance at meetings during the year, is set out in Governance at
a Glance. John Shipsey joined the Committee on his appointment to the
Board in June 2022, and Denise Goode resigned from the Committee
on her resignation from the Board on 30 November 2021. Tony Rice
resigned from the Committee on his retirement from the Board on
31 December 2021. Alison Platt was appointed Chair of the Committee
on 1 January 2022 on her appointment as Chair of the Company;
following this appointment, on 1 March 2022, Lawson Macartney was
appointed the Senior Independent Director.
All Committee members are Non-Executive Directors, and are 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 Chair does not chair the Committee meeting if it is dealing with
the appointment of her successor. The Senior Independent Director,
Lawson Macartney, takes the chair when required.
Effectiveness of the Committee
The Committee’s performance was evaluated as part of the 2022 Board
and Committee internal evaluation (further details of which are provided
on page 115 of the Governance Report). The findings of the internal
evaluation were presented to the Committee for discussion at the April
and the July 2022 meetings. 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 more
time should be allocated to enable enough focus and time to be given
to agenda items and for regular discussions between Non-Executive
Directors and the Chief Executive Office to be held to discuss the SET‘s
development. In relation to concerns raised, the Nomination Committee's
meetings have been rescheduled so that they are the first meeting of the
day, and the Chief Executive Officer has attended one meeting with
Non-Executive Directors to discuss the development of the SET.
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 2022 financial year, this took place at
the February meeting, and the terms of reference were updated to
cover the fact that the Designated Non-Executive Director for Employee
Engagement would report into the Nomination Committee, as well
as the Board, going forward. It was noted that there was a technical
non-compliance with the terms of reference as both Julian Heslop and
Ishbel Macpherson had exceeded the nine year tenure limit in January
and February 2022, respectively. The Board concluded both remained
independent due to the fact that Julian had in-depth financial expertise
and had consistently shown independent judgement, and Ishbel’s
knowledge and understanding of City matters gained over 20 years’
experience as an investment banker and subsequent other board
experience provided an independent view on the Board discussions on
financing and the financial risks of acquisitions. An overview of the terms
of reference is detailed on pages 104 and 107 of the Governance Report.
108
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 five times since the last Annual Report was issued, three of these meetings were scheduled and two were ad hoc and dealt with
the nomination of a Non-Executive Director. The Committee Chair 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 108)
Composition
(see pages 109 to 113)
Succession
(see pages 113 and 114)
Evaluation
(see pages 114 and 115)
Diversity and Inclusion
(see pages 112 and 113)
• 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
• Appointment of Chair
• Consideration of Non-Executive Directors’ tenure
• Review of SET succession plans and leadership needs
• Review of composition of the Board
• Review of Director effectiveness
• Review and approval of the Diversity Policy
• Review of the Dignity at Work Policy
Composition
The Board seeks to ensure that both the Board and the Committees have
an appropriate composition to manage their duties succession issues
effectively. 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,
which this year was postponed to July to tie in with our 25th Anniversary
Celebration and Global Team 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
Financial
9
Industry
Experience
Board Skills,
Knowledge and
Experience
7
Sector
Knowledge
6
9
Understanding
of Regulatory
Processes
Strategic
Thinking
9
Risk
9
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 on this page. 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
excellent 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, and any increase in size is temporary to allow for effective
succession, and for the wealth of knowledge and experience of the
outgoing Non-Executive Directors to be shared with the new Non-Executive
Directors. The internal evaluation found that the Non-Executive Directors
continue to provide an excellent range of relevant and complementary skills.
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. 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 completed the Wavelength Connect programme, which
focuses on the future of businesses, in the 2022 financial year. This
programme allowed 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.
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Composition, Succession
and Evaluation
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. Following two years of
COVID-19’s restrictions on travel, the Board were able to resume this
practice and visited the logistics centre in Uldum, Demark. Prior to the
Board meeting, the Designated Director for Employee Engagement and
the Remuneration Committee Chair met with a group of employees
from this site (further details can be found on page 94). During the
visit the Board had a tour around the new warehouse, which the
Board had approved in September 2020, and met employees at
the opening ceremony as well as attending a dinner with the senior
management team.
Board Appointments
The Board understands the importance of balance and refreshment in
terms of its composition and keeps these matters under review.
As part of the Committee’s overall succession discussions, it was agreed
to identify potential successors for the role of the Chair of the Company,
and a horizon scan was undertaken for potential candidates should
the Chair of the Company decide to retire. As part of this exercise, the
recruitment consultant, Heidrick & Struggles interviewed Alison Platt
and provided feedback to the Committee on her suitability as a potential
candidate. The Committee agreed that although Alison had been
identified as an excellent candidate, further candidates would be identified
when the Chair notified the Board that he wished to retire. Following the
announcement on 6 September 2021 that the Chair wished to retire, the
Committee commenced a recruitment process and a shortlist, which
included Alison Platt, was approved by the Committee for the interview
Audit Committee Chair Appointment Process
process. The Committee was pleased to recommend to the Board that
Alison Platt be appointed as Chair of the Company.
Following the resignation of Denise Goode, 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 Chair. An independent
recruitment consultancy, Odgers Berndston (Odgers), was retained.
Odgers was provided with a role description, detailing the skills (both
cognitive and personal strengths) and experience required for the role of
Audit Committee Chair. The Committee, in drafting the role description,
took into account the challenges and opportunities facing the Group and
what skills and expertise were needed. In particular, it was determined
that the individual should have relevant financial experience in an
international company. In addition, they were required to have a broad
business experience and be a good fit with the culture and values of the
Company. The search produced two outstanding potential candidates
who went through the full scrutiny process. We were pleased that John
Shipsey was appointed to the Board on 1 June 2022.
The Committee recommended the appointment of John due to his wealth
of financial and commercial experience in the business following his
recent tenure as Chief Financial Officer at FTSE100 Smiths Group PLC
and a number of senior finance and strategy roles over 20 years.
Odgers was previously retained in 2020 in relation to the recruitment of
the DVP EU Finance Director, and Heidrick & Struggles was previously
retained in 2019 in relation to the recruitment of the Group Financial
Controller. Neither recruitment consultants have any other connections
with the Company or individual Directors.
1 Nomination Committee
6 Interview
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
Odgers was appointed.
3 Meet
The first interviews were with the Chair and Senior Independent
Director. The shortlist was then reduced to three candidates who
were interviewed by the Chief Executive Officer, the Group HR
Director and the Chief Financial Officer. Further interviews were
held with the Audit Committee Chair, and successful interviewees
met with the remaining Non-Executive Directors, and Company
Secretary prior to appointment.
John’s other appointments were considered to check there was
no conflict of interest or time. References were taken.
To assist Odgers with the understanding of the requirements of the
role, they met with the Chair and the Senior Independent Director.
7 Appoint
4 Consider
John Shipsey was appointed to the Board on 1 June 2022.
Further details relating to his background and experience can be
found on page 89.
The long list of candidates (14) was circulated to the Committee for
comments before a short list of seven was agreed.
8 Induct
5 Select
Please refer to the process on page 111.
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.
110
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Induction
All 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. During the initial couple of months, we
scheduled a number of meetings for John with members of the Senior
Executive Team and the Head of Internal Audit as well as meeting a
significant number of employees at the Global Team Meeting. He will
also attend the next scheduled Group Finance Lead Team meeting. In
addition, John has met with the Audit Committee Chair and the Lead
Audit Engagement Partner. Deloitte LLP has provided an introduction to
UK executive remuneration and governance to John.
In the Autumn we will continue with step two and commence steps
three and four of our induction process as described below.
Induction Process
1 Understanding the Business
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.
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).
Case Study:
Alison Platt:
Transition from
Non-Executive
Director to
Chair
It was my great privilege to join the Dechra Board in March 2020
and commence the process of learning and induction, albeit through
the pandemic. Like many businesses, COVID-19 and its impacts
provided a test of not only the strength of the demand for Dechra’s
products but also the resilience of its processes, systems and
Values, which underpin the organisation. Throughout that period,
the Board continued to support Ian and his team in leading through
significant uncertainty. The decisions taken were a testament to
the integrity of the espoused Values of the business at all levels,
with no use of government funds, no enforced redundancy and no
colleagues furloughed. Our manufacturing operations continued
with colleagues covering for those forced to isolate and our ability to
supply our customers went uninterrupted.
The value of continuity at Board level was evident throughout and
the collegiate approach taken enabled strong and swift decision
making in support of the management team. Dechra’s strong track
record of growth has depended on swift and efficient decision
making supported by an open and inclusive approach in the
boardroom. The culture is straightforward and relies on a shared
intent, to do the right thing by all our stakeholders. It was against
that backdrop that, just ahead of my second anniversary, I was
delighted to be appointed to the role of Chair.
The selection process was both rigorous and robust, conducted
independently and led by the Nomination Committee, chaired by
the Senior Independent Non-Executive Director, and took just over
three months to conclude. It afforded me the opportunity to think
about the key tasks for the role over the next five years, the critical
characteristics to hold on to and those areas we might consider
developing. Since taking up the position, I have thoroughly enjoyed
building a partnership with Ian as Chief Executive Officer and further
strengthening my knowledge and experience inside the business.
Facing into succession driven changes at Board level has also been
important and I have been delighted by our ability to attract really high
calibre candidates to join the Board. Equally important is to hold onto
the open, professional and collaborative approach the Non-Executive
Directors have to bringing positive challenge to Ian and the team.
Despite being early days, I am confident we are continuing in the high
standard set my be my predecessors in that regard.
I look forward to continuing my development and, as travel routes
open up again, taking the opportunity to meet colleagues in Dechra’s
other markets around the world.
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and Evaluation
We are also working hard to ensure diversity is not solely a Board issue. Led
by our Group HR Director, we are working hard and investing in developing
and growing talent across all our communities worldwide. As a global
company with operations in 26 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 rolled out two core modules that are included in all
our Company management development programmes: Diversity, Equity,
and Inclusion in Dechra and OneDechra; and an exploration of our
Company Culture and Values and what they mean to our people.
During the year, we have launched a new development programme
called Future Facing Leaders (further details of which can be found
in SET Succession Planning on page 114 and the Case Study on
page 34).
The chart on page 113 illustrates the diversity characteristics of
our Board.
Diversity and Inclusion
The Committee reviews the policy on diversity and its implementation
every year and, during 2022 this review took place in July. The policy
was expanded to cover Board Committees; and factors such as
ethnicity, sexual orientation, disability and socioeconomic background,
as well as age, gender, education and professional background. The
Group recognises that 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 substantial and growing proportion of whom are
women, in the many markets and cultures in which we trade.
As a Board our focus is to further our diversity through the planned
succession process and we will work hard to broaden the Board’s make
up further over the coming year. To assist us in this, we have worked with
an external recruitment company to identify future potential candidates
from a wide range of backgrounds, cultures, and experience. This has
always been our plan and prior to our recent elevation into the FTSE
100 (December 2021) we were on track to meet, and indeed exceed
the target and deadline of 2024 (the Parker Review target date for FTSE
250 companies). Our progress towards a more diverse Board is detailed
under Board Succession Planning.
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.
We are now able to provide online training globally using an externally hosted training portal and supported by licensed
trainers within the Company. In addition to this, we have developed a Diversity, Equity and Inclusion module, which is
one of three core modules that is included in all Leadership and Management development programmes.
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.
During the 2022 financial year, we have launched an externally hosted ‘whistle-blowing’ hotline to facilitate this process
and to provide further reassurance to employees.
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 17.7% in
2017 to 2.8% in 2021. However, the latest decrease relates largely to the payment of COVID-19 bonuses to all site-based
staff at the Skipton site during the pandemic and will rise again next year as this is not applicable on an ongoing basis.
Following our accreditation in the UK in March 2021, we are a Living Wage employer and 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. It is our intention to retain this approach to fair pay.
Board and
Senior Executive
Directors
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. We are currently recruiting working with Audeliss, an executive search firm for diverse
talent, who are supporting us with the recruitment of a new Remuneration Committee Chair.
112
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Numbers in brackets represent the number of females and males.
The Board
as at 30 June 2022
Female
33.3% (3)
Male
66.7% (6)
Senior Executive Team (including Executive Directors)
as at 30 June 2022
Female
25% (2)
Male
75% (6)
Overall Workforce
as at 30 June 2022
Female
53% (1,146)
Male
47% (1,017)
Diversity
as at 30 June 2022
60
40
20
0
2018
2019
2020
2021
2022
% Females on Board
% Females on SET (excluding Executive Directors)
% Females on SET and Direct Reports
% Females in Group
Dechra excludes the Executive Directors from the Senior Management data.
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.
UK Employee Ethnicity by Grade
2
A
B
C
D
E
F
14 1
5
G
5
1
73 12 9
63
13
23
64 7
13
108
28
22
0
20
40
60
80
100
120
140
160
White (all backgrounds)
Other (all backgrounds)
Not stated
Board Succession Planning
Non-Executive Directors
It was originally planned that both the Audit Committee Chair and
Remuneration Committee Chair would retire in 2022. The Audit
Committee Chair was due to retire in early 2022, however due
to the decision of Denise Goode to resign from the Company he
agreed to remain on the Board until a successor was appointed The
Remuneration Committee Chair (previously the Senior Independent
Non-Executive Director), Ishbel Macpherson, will be now retiring in the
2023 financial year. The commencement of the recruitment process
was delayed as the Committee's first priority this year was to find a
replacement Audit Committee Chair.
Cognisant of the Parker Review requirements and the new listing
requirements regarding diversity targets, the Chair and Group HR
Director interviewed two recruitment consultants who specialise in
diverse recruitment, one of which was a non-profit organisation. The
Committee has retained Audeliss and they were provided with a
description, detailing the skills (both cognitive and personal strengths)
and experience required for the role of Remuneration Committee Chair.
The Committee, in drafting the role description took into account
the challenges and opportunities facing the Group and what skills
and expertise were needed. In particular, it was determined that
the individual should have relevant remuneration experience in an
international company. In addition, they were required to have a broad
business experience and be a good fit with the Culture and Values of
the Company.
SET Succession Planning (including Executive Directors)
and Leadership Needs of the Group
One of our key risks is people focused and this is the failure to resource
adequately the business to meet strategic ambitions, including
geographical expansion, and acquisitions.
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
external market. In these cases, we aim to build strength and depth in
the team below to allow a smooth transition to the new leader.
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Composition, Succession
and Evaluation
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 Chair 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
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, details of which can be found on page 116.
This year’s evaluation was internally facilitated, led by the Chair and
Company Secretary. The Committee’s review of the structure, size
and composition of the Board can found above on page 109.
During the financial year, Susan Longhofer retired as Chief Scientific
Officer on 31 December 2021, and following a recruitment process
her replacement, Patrick Meeus, commenced employment with
Dechra on 1 July 2022. In addition, the Group HR Director has
worked on strengthening the team below the SET, which has
resulted in the appointment of a Chief Information Officer and Head
of Investor Relations reporting into the Chief Financial Officer and a
General Counsel reporting into the Company Secretary. The DPM&S
management team has been strengthened with the appointment of a
Group Quality Director and Group Supply Chain Director and the DVP
EU management team has been strengthened by the appointment
of a Commercial Director.
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. 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. A number of the individuals identified
as emergency cover or a successor to the SET are on the Future Facing
Leaders development programme, which was launched in April 2022
or the Wavelength Connect Programme. Further details of the Future
Facing Leaders programme can be found in the case study on page 34.
The 2021 External Board Evaluation
Below is an update on the actions arising from the 2021 external evaluation:
Action
Progress
Planning succession for SET
members and strengthening diversity
The Nomination Committee was updated in February 2022 on the succession plans for the SET.
The participants of the Future Facing Leaders programme are gender and ethnically diverse, and in
the majority of cases, the successors for the SET are within this group.
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
Reviewing speak up channels
The Group Strategy day provided the Board an opportunity to consider the routes to market and strategic
themes.
Customers: The Group Strategy day provided an opportunity for the Board to meet a UK wholesaler
group and a European Buying Group. Presentations were provided on the future of veterinary
distribution, including white labelling, and the future of Veterinary practices. In addition, a presentation
on insights of the DVP EU customers was provided at the April meeting.
Shareholders: The Board receives shareholder (fund manager) feedback following presentations and is
updated on Shareholder Governance recommendations and queries and responses at each meeting.
Employees: The Designated Non-Executive Director for Employee Engagement continues to update
the Board and the Nomination Committee has been tasked with reviewing the plans of the Designated
Non-Executive Director for Employee Engagement.
The newly appointed Quality Director has introduced the strategic foundation for Dechra’s growth based
around three areas: Compliance, Technical Competencies, and Business and Operational Performance.
The Quality Director presents once a year and provides a report every six months to the Board.
The How to Raise a Concern Procedure (HTRC) has been reviewed internally and by external counsel
in light of the forthcoming changes due to the EU Directive on Whistleblowing. The Board approved the
HTRC Procedure in December 2021.
The hotline was launched globally on 4 April 2022.
As each EU country adopts the EU Directive, a country specific addendum will be provided where
relevant.
114
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com The 2022 Internal Board Evaluation
Following the external evaluation in 2021, it was agreed to undertake an internal evaluation for the 2022 financial year, focusing on the following areas:
(i) Strategy; (ii) Working Together; (iii) Management of the Board; (iv) Culture; (v) Engagement with stakeholders; (vi) Progress on External Board Evaluation
Matters; and (vii) specific questions on the function and effectiveness of the Board and future strategy days.
The internal evaluation process is detailed below and took the format of a questionnaire, which was distributed to all of the Board, with the survey results
presented on an anonymous basis. The responses were received in March, and were discussed at the April Board Meeting. In addition, the Chair held
individual interviews with the Board members prior to the results of the questionnaire being known and afterwards to discuss any particular concerns raised.
The Senior Independent Director discussed the performance of the Chair with the Directors and the Chair in April. The Board discussed the findings of the
internal Board evaluation at the July meeting with the view of determining actions for the 2023 financial year.
Internal Board Evaluation Process
The process of the Internal Evaluation of the Board and its Committees was as follows:
1 Preparation
The questionnaires were updated to reflect the themes derived from the External Board Evaluation.
2 Questionnaire
Questionnaires were made available electronically for online completion and submission. One was in relation to the effectiveness of the Audit
Committee and one each in relation to the Remuneration and Nomination Committees. They were forwarded to both the members of the
Committees and the regular attendees of the respective Committees, which included the Group HR Director, the External Audit Engagement
Partner, the Head of Internal Audit and Risk Assurance and the Company Secretary. The third questionnaire related to the Board and was sent
to the Board members only.
3 Interviews
The survey results were presented on an anonymous basis to the Chair and the Senior Independent Director for discussion with the individual
Directors. The Senior Independent Director discussed the performance of the Chair with the Directors and the Chair in April.
4 Review
A presentation was provided to:
• each of the Committees, to allow them to discuss their effectiveness; and
•
the Board in relation to the various findings and suggested actions.
5 Outcomes
Following a review of the responses and a discussion with the participants, the Chair discussed at the July 2022 Board meeting the general themes
raised by the survey, and any other survey-related points they wished to discuss.
Overall, the review once again indicated that the Board operates effectively but noted the following focus areas:
• Bring the customer's voice into Board discussions;
• Focus on future proofing Dechra in relation to people, product portfolio and pipeline delivery; and
• Better understanding of key trends in the financial markets and stakeholder views on issues such as ESG.
These findings are consistent with the Board’s expressed desire to give more time to the strategic and mid to long range risks and plans
for Dechra.
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and Evaluation
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 2023 financial year.
The results of the 2023 internal Board evaluation will be reported in next
year’s Annual Report.
Effectiveness of Directors
Following the internal evaluation, which concluded that the Board
remained fit for purpose; any comments received related to evolving
the Board’s contribution rather than any under performance or issues
of cohesion. Each of the Board members commented that they
appreciate the culture and atmosphere at the Board (further details of
which, including the outcomes and actions, are provided on page 115
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, John Shipsey, who was appointed to the
Board on 1 June 2022, will offer himself 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 Board in August 2022 reconsidered Ishbel's independence
and concluded that she remained independent. The Board confirmed
that Alison Platt met the independence criteria as set out in the Code
on appointment as Chair of the Company due to the fact that she
was declared independent on her appointment as a Non-Executive
Director in March 2020; and that there have been no changes to her
circumstances that would affect this independence.
Alison Platt
Nomination Committee Chair
5 September 2022
116
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Audit, Risk and
Internal Control
Letter from the Audit
Committee Chair
4
Audit Committee
Meetings Held
Areas of Focus This Year
• Appointment of new Audit Committee Chair
• BEIS 'Restoring Trust In Audit and Corporate Governance'
• Anti-Bribery and Anti-Corruption and Sanctions
Key Responsibilities
• To review and oversee the Group’s financial and narrative
reporting processes, 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
Read more about our Committee Membership and
Attendance on page 87
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
Following Denise Goode’s decision to tender her resignation, in
November 2021, I resumed the role of Audit Committee Chair whilst a
successor was appointed. The independence of all Board members
is regularly reviewed but my independence was subject to particular
scrutiny when I resumed the role of Audit Committee Chair. The Board
determined that I remained independent and continued to provide
sufficient challenge to the Executive Team. I am pleased to report that the
recruitment process resulted in the appointment of John Shipsey, who
brings a wealth of financial and commercial experience to the business
following his recent tenure as Chief Financial Officer at FTSE100 Smiths
Group PLC and a number of senior finance and strategy roles over
20 years. John joined on 1 June 2022 to allow a smooth and orderly
transition. John will be appointed as Chair of the Audit Committee upon
my retirement on 5 September 2022.
BEIS 'Restoring Trust in Audit and Corporate Governance'
The Committee has considered how the implementation of BEIS
'Restoring Trust in Audit and Corporate Governance' would impact
the Group, and has identified where the Group already meets the
requirements, the gaps and the corresponding actions required to
mitigate the gaps. The development and launch of a new Financial
Control Framework during the financial year extends the scope of
the Group’s control standards. In the event that a control cannot be
performed as intended, then the risk will be assessed and mitigating
controls put in place, whilst options to implement the control as
intended in the future are investigated and progressed.
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Internal Control
Anti-Bribery and Anti-Corruption and Sanctions
The Committee has received two updates during the year on the
Company’s Anti Bribery and Anti-Corruption processes, which it
believes are operating effectively. As increased sanctions have been
applied to Russia, the Committee has reviewed the policy on sanctions
and obtained assurances that the Company’s activities do not breach
any of them.
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.
Annual Report 2022
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 reviewed, at the request
of the Board, whether the 2022 Annual Report was fair, balanced and
understandable and concluded that it was. The basis supporting our
conclusion is set out on page 122.
Membership, Meetings and Attendance
The membership of the Committee, together with appointment dates
and attendance at meetings, are detailed on page 87. John Shipsey
joined the Committee on his appointment to the Board in June 2022,
and Denise Goode left the Committee on her resignation from the Board
on 30 November 2021. Alison Platt also resigned from the Committee
on her appointment as Chair of the Company on 1 January 2022. All
Committee members are Non-Executive Directors.
Should you have any questions in relation to this report or the
Committee, please contact my successor as Audit Committee Chair,
John Shipsey, or the Company Secretary.
Julian Heslop
Audit Committee Chair
5 September 2022
118
The Board considers that all members of the Committee are
independent and have competencies relevant to the sector in which
the Company operates. Julian Heslop has relevant financial experience
as a result of his financial background and qualifications, and Ishbel
Macpherson also brings financial experience to the Committee following
her career as an Investment Banker. Lawson Macartney and Lisa Bright
provide product development and commercialisation of pharmaceuticals
experience, which support the Committee in meeting its objectives.
John Shipsey brings recent and relevant financial experience to the
Committee, following his recent tenure as Chief Financial Officer at
FTSE100 Smiths Group PLC, and his previous experience in a number
of senior finance and strategy roles. 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 Chair 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. During the year, other employees
also attended the meetings to provide updates on specific matters:
Attendee
Group IT Director
Group Treasurer
Head of Tax and Transfer Pricing
Head of Group Reporting
Senior Legal Counsel
Matter
Cyber Security Update
Treasury and Group’s Borrowing
Facilities Update
Tax Strategy, Risk and Compliance
Update
Reporting and Accounting Update
Anti-Bribery and Sanctions Update
In addition, the Committee Chair 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 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.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Effectiveness of the Committee
The Committee’s performance was evaluated as part of the internal review of the effectiveness of the Board and all its Committees that took place
in 2022 (further details of which can be found on page 115 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 2021 meeting
and it was agreed that no changes would be made to them; however, it was noted that there was a technical non-compliance with the terms
of reference as the Committee Chair had exceeded the nine year tenure limit in January 2022 and Ishbel Macpherson had exceeded the limit in
February 2022. The Board concluded that Julian Heslop had in-depth expertise and had consistently shown independent judgement, and therefore
deemed that Julian remained independent. The Board agreed that they considered Ishbel Macpherson as independent, and that her knowledge and
understanding of City matters gained over 20 years’ experience as an investment banker and subsequent considerable board experience provided
an independent view on the Board discussions on financing and the financial risks of acquisitions.
The main responsibilities of the Committee are summarised on pages 104 and 117 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 Chair 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.
Annual Programme of Business
August
December
February
April
• Review of Committee
Terms of Reference
• Review and approval of
interim plan of external
auditor
• Review of Half Year
• Approval of External
Results
• Review of Interim
Audit strategy, scope,
fees and independence
dividend and distributable
reserves
• Review of Committee
Effectiveness
• Review of Internal
Controls
• Review and approval of
Internal Audit Charter
• Tax, Treasury and GDPR
Compliance Update
• Review of Board’s Risk
Controls
• Borrowing Powers
Confirmation
• Approval of internal
audit plan
• Review of preliminary
results and
announcement
• Review of draft
Annual Report
• Review of external audit
findings, report and
representation letter
• Confirmation of Going
Concern and Viability
• Fair, Balanced and
Understandable Review
• Compliance relating to
financial statements
• Review of final dividend
and distributable reserves
• External auditor
effectiveness
• Review of Risk
Management process
effectiveness
• Auditor reappointment
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Internal Control
The table below shows the key areas of the Committee activities:
Purpose and
Function
(see page 118 and 119)
Financial and
Narrative Reporting
(see pages 121 and
122)
• Review of the Committee’s terms of reference
• BEIS Requirements ‘Restoring trust in audit and
• Review of the effectiveness of the Committee
corporate governance'
• 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 the Group’s Half-Yearly Report and
supporting papers
• Consideration of the Half-Year Review Memorandum
prepared by the external auditor
• Review of the Group’s preliminary statement, draft
Annual Report (including the Audit Committee Report)
for the year ended 30 June 2022 and management
presentation to investors
−
review of accounting treatment of
non-underlying items
− assessment of acquired intangible assets and
goodwill including impairment reviews undertaken
− accounting for licensing agreements
− commentary on the general control environment
across the Group
• Fair, Balanced and Understandable recommendation
of the Annual Report
• Review of Viability Statement process
• Review and commend the Going Concern and Viability
Statements
• Review of the dividend policy and interim and final
dividend proposals
Internal Controls
and Risk
Management
(see page 122)
Internal Audit
(see page 123)
External Audit
(see pages 123 and
124)
• 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 Internal Audit Plan, completion of audit
recommendations and effectiveness of Internal Audit
• Review of cyber security and adoption of NCSC
10 Step Framework
• Review and approval 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)
• Review of external auditor’s independence and
level of non-audit fees
• Review of the non-audit work and fee policy
• Review of findings from the external audit
• Discussion in relation to the Company’s expectations
of the external auditor and audit process
BEIS 'Restoring Trust in Audit and Corporate Governance'
The Committee has considered the requirements based on the initial consultation document and is now considering the draft Audit Reform Bill
published on 31 May 2022. This includes assessments and planning for the requirements relating to strengthening our Internal Control Framework
and Fraud Prevention Measures, a Resilience Statement, Dividends and Capital Maintenance, and an Audit & Assurance Policy.
ESEF Reporting
The Committee has considered the new requirement to prepare the Company’s consolidated financial statements in digital form and is satisfied
that the necessary actions have been taken including the appointment of a third party.
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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:
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
£730.5 million, which represents 56.5% 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 remeasurements and considered the appropriateness of
the accounting treatment.
Valuation and accounting for the acquired commercial licensing
agreement intangibles of £96.1 million together with the related
contingent consideration.
Review of the corporate tax rate for the year being a charge of 25.0%
(22.5% 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 cloud computing arrangement
costs, and the fair value uplift on inventory acquired through business
combinations.
The Committee reviewed the calculations and agreed the accounting
treatment for the assets acquired and their useful economic lives.
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. The Committee 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 to see if there were any material one
off income or costs within the underlying results meriting separate
disclosure and endorsed management's conclusion that there were no
such items during the year.
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Going Concern and Viability Statements
The Committee reviewed the Group’s Going Concern and Viability
Statements set out on pages 49 and 81 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 and management's conclusion that it would be
able to refinance the £340.0 million revolving credit facility, which is currently
committed until July 2024. The external auditor reviewed management’s
assessment and discussed their review with the Committee.
Fair, Balanced and Understandable Assessment
of the Annual Report
At the request of the Board, the Committee considered whether the
2022 Annual Report was fair, balanced and understandable and
whether it provided the necessary information for shareholders to
assess the Group’s performance (pages 42 to 49), business model
(pages 22 to 25) and strategy (pages 26 to 34).
The Committee based its assessment on a review of the processes
and controls put in place by management. These 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
confirmation 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 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 2022 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 SET'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 156 to 164.
This assessment was carried out by the Committee on 30 August
2022, following which the Committee reported to the Board that it
was satisfied that, taken as a whole, the 2022 Annual Report is fair,
balanced and understandable.
122
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 as to their effectiveness across the Group.
During the 2022 financial year, a Financial Control Framework has been
launched. This framework extends the scope of the baseline controls
standards to an increased number of controls. Prior to launch, the
Divisional Finance Directors undertook an initial review and confirmed
that the majority of the controls were in place or there were other
controls that would mitigate the risk.
The Committee has continued to oversee 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.
The Committee confirms that it has not been advised of, or identified,
any failings or weaknesses which it would classify as significant to the
Group’s internal control system. The Committee further confirms that
the Group’s internal control systems have been in place for the year
under review and up to the date of approval of this Annual Report and
Accounts are in accordance with the Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting issued
by the FRC.
Further details in respect of the Group’s risk management and internal
control processes are provided on pages 75 to 77 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 92 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 (ABC) Policy and the Third
Party Code of Conduct.
The Committee is provided with regular updates on the outcomes of
the risk assessments as part of both ABC and Sanctions due diligence
processes, as well as updates to procedures. During the year, all
relevant employees have been required to complete the ABC e-learning
courses. The Committee has monitored completion rates during the
year of the ABC and Pharmacovigilance courses.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 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 strategy to develop the Internal Audit function in line with
projected business growth, an additional in-house resource will be
recruited in the 2023 financial year. This will bring the team to three
permanent employees and one overseas contractor.
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 financial year, is developed from the three
year plan. The annual plan for the year to June 2023 was approved
by the Committee in April 2022, and was based on meetings with key
stakeholders from across the Group to understand the risks, challenges
and projects/initiatives within each area of the business and priorities
for internal audit coverage; and consideration of core operational and
financial processes to provide cyclical assurance to the Committee and
the Board.
Throughout the course of the COVID-19 pandemic, audits have been
delivered virtually where practicable. Initially this significantly increased
the time spent on each audit, and led to delays in the completion of the
work originally planned. However, as the team has adapted to delivering
audits remotely, and the impact of COVID-19 has receded, output has
returned to, and exceeded, pre-pandemic levels.
Independence and Effectiveness of Internal Audit
During the year, the Committee reviewed and approved the updated
Internal Audit Charter, which has been amended to align it with the
Institute of Internal Audit’s Model Internal Audit Activity Charter. The
Committee, based on an assessment of the internal auditor’s work,
agreed that the internal audit team continued to have sufficient
resources (particularly following the proposed new resource being in
place) and access to technical experience to act as an effective
third line of defence for Dechra. The Committee 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;
•
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
The key areas addressed in this year’s audit plan have been:
independence and its confirmation of compliance with them; and
• Financial: Payment Cycle Controls, Group Treasury, Financial
Control Framework, DVP EU Pricing and Discounting Controls,
DVP NA Order to Cash Controls;
•
the level of non-audit fees as a percentage of the audit fees paid
to the external auditor, which were 6.0% (2021: 7.6%) in relation to
services rendered by PwC.
• Operational: IT Governance, Cyber risk, Governance in DVP EU
and DVP International, New Products Launch Process, and Fraud
Investigations; and
Responses to the questionnaire have been received from the Finance
Leadership Team across the Group who provided information and
assistance to the external auditor.
• Compliance: Fraud Procedures and Awareness, UK Gender
Pay Gap Reporting, Payroll System Steering Committee, the
Fraud Prevention Programme, South America Monitoring and
Pharmacovigilance.
Internal audit recommendations are communicated to the relevant
business leaders, appropriate control improvements are agreed
with them, and the 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.
The questionnaire covered a number of areas, including:
• planning and preparation;
• quality of the audit team and continuity;
• 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 30 August 2022.
Based on the review set out above, the Committee is satisfied with the
external auditor’s independence, effectiveness and objectivity.
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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 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. The current External Audit
Engagement Partner, Mark Skedgel, was appointed by the Board
on the recommendation of the Audit Committee for the 2021
financial year.
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 permitted in accordance with FRC guidance, 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 2022 and there were no proposed changes. 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 6.0%
(2021: 7.6%) of the annual audit fee. The 2022 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 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
2022
PwC
1.8
0.1
0.002
6.0%
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%
* The 2018 Audit Committee Report sets out the reasons for the engagement of PwC.
Julian Heslop
Audit Committee Chair
5 September 2022
124
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Directors’ Remuneration
Report
Letter from the
Remuneration Committee
Chair
6
Remuneration Committee
Meetings Held
Areas of Focus This Year
• Review of compensation across the Group, including the
Executive Directors
• Review of Chair’s fee
• Executive Director and Senior Executive Team (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 Chair and SET
• To oversee any major changes in employee benefit structures
• To approve the design of any employee share scheme
• To oversee workforce pay policies
Read more about our Committee Membership and
Attendance on page 87
Dear Shareholder
I am pleased to present the Directors’ Remuneration Report for the year
ended 30 June 2022. 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 Directors' Total
Remuneration for the 2021 and 2022 financial years.
There then follows the two principal sections of the Remuneration
Report: the Annual Report on Remuneration and an abbreviated form
of the Directors’ Remuneration Policy (the 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 2022 financial
year and how the Policy will be implemented in the 2023 financial year.
The Directors’ Remuneration Report (excluding the Policy) will be
subject to an advisory vote at the 2022 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 2022
financial year and our approach to the implementation of the Policy in the
2023 financial year, including our approach to performance measures for
the annual bonus and LTIP awards, are described later in this letter.
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Remuneration Committee Decisions in 2022
Our 2022 financial year has been another one of success for Dechra, with continued strong progress and a move into the FTSE100. On
remuneration, our aim is to always consider the wider workforce, our shareholders and other stakeholders by taking a fair, prudent and balanced
approach. The table below summarises the implementation of the Policy for Executive Directors in respect of the 2022 financial year.
Element
Salary
Retirement Benefit
Annual Bonus
Implementation
As discussed with shareholders during our consultation process last year, Ian Page’s salary was increased to £612,000
and Paul Sandland’s to £405,000. The increases were effective from 1 January 2022. The 2022 base salary increase for
Ian Page and Paul Sandland moved their base to around 90% of the market median of companies ranked 51 to 150 in the
FTSE 350 and companies with a market capitalisation of £2.5 billion to £4.5 billion (based on 12 month average market
capitalisation to 31 December of 2020). Tony Griffin’s salary was increased by 3% to €385,043, 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 8% of salary for Ian Page and 6% of salary for Paul Sandland.
Tony Griffin received an employer’s contribution of 7.7% of salary into the Netherlands pension scheme. In line with the
commitment made in our 2020 Remuneration Report, the employer pension contribution rate for our UK employees was
increased to 8% from 1 July 2022.
Maximum opportunity for the 2022 financial year of 125% of base salary.
The bonus for the 2022 financial year was based on underlying profit before tax (as regards up to 110% of salary),
personal objectives (up to 10% of salary) and ESG measures (up to 5% of salary).
We have delivered underlying profit before tax during the year of £170.0 million, an improvement of 15.5% at constant
exchange rates (13.3% 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
pages 134 to 136, bonuses for the year equal to 92.0% 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 (up to 55% of salary) and Group underlying profit before tax (up to 55% of salary). His bonus earned for the
year is 76.5% of salary, which reflects the financial performance and the satisfaction of 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 bonus is subject to a bonus deferral, requiring that 20% of any bonus earned is deferred into Dechra shares for
two years. 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 in September 2021. All of these awards are subject to a two year post vesting holding period.
LTIP awards granted on 6 September 2019 are scheduled to vest on 5 September 2022:
• as to 96% of the TSR element (one third of the total award) reflecting just under upper quartile performance; and
• as to 50.3% of the underlying diluted EPS element (two thirds of the total award) reflecting that the compound annual
growth in the underlying diluted EPS at 11.0%, whilst strong, was below the maximum threshold of 17% (with the
assessment of underlying 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 19.5% had not fallen below 10.0%), the
LTIP awards will vest as to 65.5%. 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 2022 and is appropriate.
See page 139 for further details.
Awards made under the LTIP are subject to malus and clawback provisions.
Chair's Fee
In last year’s Remuneration Report we reported that we decided to increase the Chair’s fee in two stages, with an increase to £159,000 (which
included the fee for being Chair of the Nomination Committee, £5,000) from 1 January 2021 and to £188,000 from 1 January 2022.
As part of the Shareholder Consultation on Remuneration, which was undertaken between February and July 2021, we highlighted that we
would revisit the appropriate fee level in the event of Dechra becoming a constituent of the FTSE 100, or in the event of a change of Chair. On the
appointment of Alison Platt as Chair in January 2022 the Chair’s fee was set at £200,000. This positions the Chair fee below lower quartile
compared to the FTSE 30–100 and around lower quartile of the FTSE 100–150. As at 1 July 2022, Dechra was ranked 95 in the FTSE 100.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 2020 Grant (three year
performance period to 30 June 2022) and 2021 Grant (three year performance period to 30 June 2023). In order to measure performance on a fair
and consistent basis, the Committee has adjusted the final year underlying EPS for the 2020 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 2022 Grant (three year performance period to 30 June
2024) 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 as
was agreed for the 2021 Grant. 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.
Forward Looking: Implementation of Policy for 2023 Financial Year
We will apply the Policy in the 2023 financial year as follows (more information is given on page 144):
• Salary: Executive Directors’ salaries will continue to be reviewed in January. It is planned that any increases to Executive Directors’ salaries
will be in line with the range of any increases proposed for the wider workforce.
• Pension: From 1 July 2022 the employer pension contribution for the wider UK workforce (including Paul Sandland) was increased to 8%.
This aligns the pension contribution to that of Ian Page (who may receive cash in lieu). Tony Griffin received an employer’s contribution of
7.7% of salary, in line with the wider Dutch workforce.
• Bonus: Our Policy, approved by shareholders at the 2020 Annual General Meeting, allows for a maximum annual bonus opportunity of 150%
of base salary. Taking into account the growth in the size and complexity of the Group since the Policy was approved, the maximum bonus
opportunity for the 2023 financial year with respect to the Chief Executive Officer and the Chief Financial Officer will increase from 125% to 150%
of salary. This positions the maximum bonus at lower quartile compared to the FTSE 30–100 for the Chief Executive Officer (around median for
the Chief Financial Officer) and around median of the FTSE 100–150. The value of the total package continues to be modest against the market
norm for a company of our size and complexity. The value of total package for our Chief Executive Officer and Chief Financial Officer continues
to be positioned towards the lower quartile of the market.
In line with our Policy for the Chief Executive Officer and the Chief Financial Officer, the level of bonus deferred into Dechra shares for two years
will increase from 20% to 33% of any bonus earned (and not just any additional bonus earned). The increase in the level of deferral alongside the
increase in the maximum bonus opportunity means that the amount of cash earned for any level of performance is not increased. The increase
in the bonus opportunity is, therefore, delivered in deferred shares, which further enhances the alignment with shareholders. The bonus will be
based on a mix of stretching underlying profit before tax targets (in respect of a bonus of up to 130% 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 10% of salary).
The bonus opportunity for Tony Griffin will remain at 125%. The level of bonus deferred into Dechra shares for two years will be 20% of any
bonus earned (and not just any additional bonus earned). The bonus will be based on a mix of stretching underlying profit targets (in respect of
a bonus of up to 105% 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 10% of salary). For Tony Griffin, and consistent with the approach for the 2022 financial year, half of the opportunity based on underlying
profit (i.e. up to 52.5% 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 underlying profit in line with
the other Executive Directors, so that a significant part of the profit based opportunity is aligned with the shareholder experience in respect of
overall Group performance.
The Committee has also reviewed the level of stretch in the annual bonus targets to reassure itself that the higher maximum opportunity for the
2023 financial year will only be earned for delivery of appropriately stretching levels of performance.
• LTIP: No changes are proposed to the maximum LTIP opportunity for the 2023 financial year. Awards for the 2023 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.
The Remuneration Committee is aware that, despite strong performance in line with expectations, the Company’s share price is lower than
the £49.09 share price used to determine the number of shares subject to the LTIP awards granted on 19 September 2021. It is intended that
the LTIP awards for the 2023 financial year will be granted in the 42 days following the announcement of the Company full year results. The
Committee will finalise the quantum of the grants at that time having regard to business and share price performance and market conditions
at that time. Taking into account the fact that the current share price is higher than the share price used for the LTIP awards granted in 2020
and 2019 (£32.37 and £25.06 respectively) our current intention is that LTIP awards for the 2023 financial year will be granted in line with our
standard approach (with the number of shares to be awarded based on the three day average middle market quotation preceding the grant).
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
19 September 2021, details of which can be found on page 139. The upper target for the underlying diluted EPS performance condition will be
15% CAGR. Taking account of internal forecasts of performance over the performance period including the impact of the recent acquisitions, the
markets in which the Group operates, our long term growth ambitions and the expectations of the investment community of the Group’s future
potential performance, this upper target is considered to be a stretching and ambitious upper target, which requires significant out-performance.
The strong performance delivered in the 2022 financial year, which is the base year for the 2023 LTIP grant, also adds to the stretch.
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Chair and Non-Executive Directors
A review of the Chair and Non-Executive Directors’ base and additional fees will also be undertaken in January 2023 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 offered SAYE to 1,636 employees
in 19 countries, and received a 38.57% take up. In the 2023 financial year, we propose to offer the SAYE to our employees in Brazil, so offering 270
additional employees the opportunity to acquire shares in Dechra.
Further details on our pay principles and workforce remuneration are set out on page 129.
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 101, workforce engagement activities during the 2022 financial year included seven 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 via the OneDechra intranet.
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 69.3%
of our UK employees), the gap has reduced from 17.7% in 2017 to 2.8% in 2021. However, the latest decrease relates largely to the payment
of COVID-19 bonuses to all site-based staff at the Skipton site during the pandemic and will rise again next year as this is not applicable on an
ongoing basis.
Looking Ahead: Key Focus Areas for the Committee for 2023
During the course of the 2023 financial year, we will be reviewing our Policy to check that it continues to support our strategic priorities. The
Committee is mindful of the need to attract and retain high calibre individuals in an increasingly competitive market and to remunerate executives
fairly and responsibly. As part of this review, and alongside the development of our science based climate targets, we will also consider the extent
to which we should enhance the focus on ESG targets in the reward framework. We will consult with our shareholders in advance of the next
triennial shareholder vote on the policy at the 2023 Annual General Meeting.
I will also transfer Remuneration Committee responsibilities to a new Committee Chair during the course of the year.
In Conclusion
We greatly appreciate the feedback and the level of support we have received from shareholders regarding our approach to remuneration.
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 2022 financial
year was appropriate, taking into account Group performance, personal performance and the experience of shareholders and employees.
I trust 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 Chair
5 September 2022
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Additional Remuneration Information
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 set a target to become a real Living Wage Employer* in the UK during the 2021 financial year. Living wages vary
by country, but our aim does not. As we continue to grow in countries across the globe, we will implement elsewhere
in the world**
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.
Workforce Remuneration
Base Salary
Executive Directors
Increases considered in the context of business wide review of remuneration, focusing
on the lowest paid in our organisation and the top 60 Senior Leaders.
Senior Executive Team
Pension
Ian Page: Reduced to 8% of base salary with effect
from 1 July 2021.
Bonus
Long Term
Incentive Plan
Paul Sandland: 8% of base salary with effect from
1 July 2022 in line with the increase in the employer
pension contribution rate for the UK wider workforce.
Tony Griffin: 7.7% of base salary pension contribution
in line with the employer pension contribution for the
wider Dutch workforce.
125% of base salary for the 2022 financial year, 150%
of base salary for the 2023 financial year for Ian Page
and Paul Sandland and 125% for Tony Griffin.
Ian Page and Paul Sandland: Targets for the 2023
financial year: personal (up to 10% of salary), ESG (up
to 10% of salary) and financial (up to 130% of salary).
Tony Griffin: Targets for the 2023 financial year:
personal (up to 10% of salary), ESG (up to 10% of
salary) and financial (up to 105% of salary).
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), underlying diluted EPS (two
thirds) and ROCE underpin.
Between 8% and 12% of
base salary dependent on
length of service.
Wider Workforce
We are accredited as a Living
Wage Employer in the UK and
have implemented the equivalent
elsewhere in the world.
For the 2021 financial year: between
6% and 12% of base salary
dependent on length of service
and/or grade*.
We increased our minimum
employer pension contribution
from 6% to 8% with effect from
1 July 2022 in the UK.
Increased from 50% of salary
to 75% of salary for 2022
financial year.
All senior managers and
professionals.
Max. 40% of base salary.
Targets: from 1 July 2021
financial and personal.
From 1 July 2022 financial,
ESG and personal.
Targets: financial and personal.
Max. 100% of base salary.
Three year performance
period.
All senior managers and
professionals.
Discretionary awards.
Target: TSR and underlying
diluted EPS with a ROCE
underpin.
Market value options, three year
performance period.
Target: EPS growth 12% above
inflation.
Sharesave†
Up to £500 per month
Three year savings period or two years for the Employee Stock Purchase Plan (US)
* Data provided for UK only.
† Austria, Belgium, Canada, Croatia, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Slovenia, Spain, Sweden, UK and USA.
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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 130% 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.
Strategic
Growth Driver
and Enabler
a
b
c
Link to our Key
Performance Indicators
Sales Growth
Strong sales performance is
required to maximise profit
Up to 10% 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 diluted EPS and
the delivery of shareholder returns. For the 2022 and 2023 financial year awards, the weightings
are two thirds underlying diluted EPS and one third total shareholder return.
a
b
c
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 2022
and future years include discretion to override formulaic outcomes.
Underlying Diluted EPS
Growth
This is a key measure of our
performance and the return we
generate for our stakeholders
Return on Capital
Employed
This measures how efficiently
we use our capital to generate
returns in the medium and long
term
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 2022www.dechra.com 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
practicably 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
any bonus opportunity in excess of 100% of salary requires deferral
into shares also applies. 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 2020 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
2021
2022
Fixed
Salary
Benefits
Pension
Performance-linked
Bonus
LTIP
Fixed
Salary
Benefits
Pension
Performance-linked
Bonus
LTIP
Fixed
Salary
Benefits
Pension
Performance-linked
Bonus
LTIP
Paul Sandland
2021
2022
Tony Griffin
2021
2022
132
2021
2022
18.4%
2.3%
2.6%
18.4%
58.3%
28.8%
3.1%
2.3%
26.5%
39.3%
2021
2022
46.9%
4.4%
1.8%
46.9%
N/A
41.1%
3.5%
2.5%
37.7%
15.2%
2021
2022
27.5%
0.8%
3.0%
22.8%
45.9%
37.7%
1.0%
2.9%
28.6%
29.8%
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 2022 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 2023 financial year. The sections of the 2022 Annual Report on Remuneration that are audited by PricewaterhouseCoopers LLP (PwC) are
indicated on pages 133 to 141.
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 2022. The
table shows the remuneration for each such person in respect of the year ended 30 June 2022 and in respect of the year ended 30 June 2021:
Executive Director
Ian Page
Paul Sandland
Tony Griffin
Total 2022
Total 2021
Year
2022
2021
2022
2021
2022
2021
2022
2021
Salary
£000
597
551
383
330
322
327
1,302
1,208
Benefits
£000
65
68
33
31
9
9
107
108
Annual
Bonus
£000
549
551
351
330
245
271
1,145
1,152
Long Term
Incentive
£000
814
1,748
142
N/A
255
547
1,211
2,295
Pension
£000
48
77
23
13
25
36
96
126
Total
£000
2,073
2,995
932
704
856
1,190
3,861
4,889
Total
Fixed
£000
710
696
439
374
356
372
1,505
1,442
Total
Variable
£000
1,363
2,299
493
330
500
818
2,356
3,447
Please note the following methodologies have been used in respect of the above table:
1. Salary – this is the cash paid or received in respect of the relevant period. Included in the 2021 base salary, are increases which were effective
1 January 2021 and paid post 2021 year end.
2. Benefits – this represents the taxable value of all benefits paid or received in respect of the relevant period. The Company provides benefits in
line with market practice and each Executive Director has the use of a fully expensed car (Ian Page: £53,372), medical cover and life assurance.
SAYE options granted in the 2021 financial 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 and deferred shares bonus earned in respect of the financial year.
4. Long Term Incentive – 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. The value of any contribution or salary supplement for the 2021
financial year in respect of the salary increases effective 1 January 2021 were paid post year end as referred to in note 1 above.
6. The 2021 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 £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). This has been restated to show the actual value determined by reference to a price of £51.30 (being
the market value of a share on 20 September 2021, 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
1.1287 for 2021 and 1.1807 for 2022. His salary was €385,043 from 1 January 2022 and €373,831 from 1 January 2021.
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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 Chair’s letter on pages 125 to 128. The Executive
Directors’ salaries applying with effect from 1 January 2022 are as follows.
Executive Director
Ian Page
Paul Sandland
Tony Griffin
Salary with effect
from 1 January 2022
£612,000
£405,000
€385,043
Previous Salary
£582,400
£360,000
€373,831
% increase
5.1%
12.5%
3.0%
The Committee’s approach to Executive Directors’ salaries for the year ending 30 June 2023 is summarised in the Committee Chair’s letter
on page 127.
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 2022 financial year having regard to the performance of the Group and personal
performance and ESG objectives for the year. The amount achieved for the year ended 30 June 2022 against targets for the 2022 financial year is
set out below. Bonuses for the year equal to 92.0% of salary have been earned by Ian Page and Paul Sandland. Tony Griffin’s earned a bonus for the
year of 76.5% of salary. In line with the Policy, 20% of any bonus earned will be deferred into Dechra shares for two years. 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) £156.9 million
Target (55% of
salary) £165.2 million
Maximum (110% of
salary) £181.7 million
Actual (at budgeted
rates) £171.6 million
Bonus earned (percentage of salary)
Ian Page
77%
Paul Sandland
77%
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)
£156.9 million
Threshold (5% of salary)
€132.7 million
Target (27.5% of
salary) £165.2 million
Target (27.5% of
salary) €139.7 million
Maximum (55% of
salary) £181.7 million
Maximum (55% of
salary) €153.7 million
Actual (at budgeted
rates) £171.6 million
Actual (at budgeted
rates) €137.8 million
Personal Objectives and ESG measure
Bonus earned
(percentage of
salary)
Tony Griffin
38.0%
23.0%
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 opposite)
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 opposite)
Bonus earned (percentage of salary)
Ian Page
10%
Paul
Sandland
10%
Tony Griffin
10%
5%
5%
5%
134
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com The personal objectives of each Executive Director for the year ended 30 June 2022 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 Chair. 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
Strategic Enabler
People
Pipeline Delivery
Governance
Objective
Recruit and onboard a new Chief Scientific Officer
to replace Dr Longhofer, bringing new experience
and innovation to the PDRA group
Through business development; expand our new
product pipeline for 2022/23 and beyond, through
acquisition, investment or partnering arrangement
Work with the Chair and the Nominations
Committee to continue to shape the Board
structure to build stability and continuity for the
long term
Provide mentorship to the Chief Financial Officer
to continue to develop a succession strategy
Paul Sandland
Shareholder
Improve effective engagement with shareholders
IT
Drive efficiencies through implementation of
technology solutions
Governance
Sponsor transition to Internal Controls Over
Financial Reporting (ICOFR)
Tony Griffin
Commercial
Drive the European change programme to ensure
the organisation is ready for the future
People
People
Agree focus areas for improvement as a result
of the Great Place to Work (GPTW) survey
Support the One Dechra organisation working
closely with the SET in building a strong
cohesive team
Performance
Patrick Meeus, a veterinarian with wide experience
in product development and regulatory affairs,
commenced employment on 1 July 2022
A number of new candidates were explored;
Laverdia was added to the pipeline through
acquisition and Piedmont significantly strengthened
the scale and novelty of the pipeline
We have successfully appointed Alison Platt
as Chair of the Board and in the year we have
recruited a new Non-Executive Director, John
Shipsey, as Audit Chair and have commenced the
search for a new Remuneration Committee Chair
The Chief Financial Officer continues to develop
and has exceeded expectations. We have recruited
a number of talented people below the Senior
Executive Team to strengthen the organisation with
a view to potential future succession opportunities
Established investor relations function, onboarded
Head of Investor Relations (post year end),
developed IR plan, timetable and investor
engagement programme, improved guidance
and consensus tracking
Appointed Chief Information Officer (joined June
2022). Successful implementation of/progress
against key milestones on pivotal Group IT projects
(Veeva, eQMS, Oracle, ADP, Concur). Enhanced
security and reduced risk of cyber-attacks through
sponsoring delivery of NCSC 10 steps
Launched Financial Control Framework, identified
and remediated any weaknesses, established BEIS
project team with a view to full transition in the
2023 financial year in line with anticipated timetable
and requirements
Workshops held with senior team to determine
future model/framework, and roll out has
commenced. All markets now on Sales Force
CRM. All country managers trained in Change
Management and all have carried out training of
own teams. Analysis of top 20 products completed
for pricing alignment
Career and development were the agreed focus
areas for DVP EU. A mentor programme has
commenced and all product managers have
received specific training
Monthly meetings with the Group DPM&S Director,
resulting in the establishment of cross functional
teams to solve problems as they arise
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Report
ESG Measure
Director
Ian Page
Paul Sandland
Objective
Provide sponsorship to the Sustainability strategy of the
Group and drive changes through the organisation to
support meeting the targets set in the Group Strategy. Act
as sponsor of the One Dechra Engagement actions during
the financial year specifically the Group wide actions on
Communication and Wellbeing
Sponsor and execute the agreed Sustainability strategy
Tony Griffin
Work closely with the Sustainability Director to reduce the
carbon footprint of the European business and in delivering
the Group’s science based goals for the 2022 financial year
Performance
ESG is permanently embedded within the organisation.
All global team members understand and are engaged in
achieving the objectives set by the ESG Committee
Established carbon reduction targets in accordance with
Science Based Targets, met TCFD reporting requirements
and enhanced employee engagement through roll out
of Deedster application, execution of multi-channel
communication plan and recruitment of ESG ambassadors
All DVP EU facilities have established and are implementing
a sustainability plan which includes green electricity,
recycling, and LED lighting. Uldum has completed the
shipment analysis to reduce the number of small inefficient
shipments. All countries are now offering either hybrid or
fully electric cars
Long Term Incentive Plan
The LTIP awards granted on 6 September 2019 are due to vest on 5 September 2022. 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 17%
>17% 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 underpin. 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 34.8% compared with a 11.5% TSR for the median company and 35.7% TSR for the upper quartile
company in the comparator group (FTSE 250 Index (excluding investment trusts)). Therefore, 96% 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 this LTIP grant, the underlying diluted EPS for financial year 2022
to exclude the actual Akston R&D costs incurred as these costs were not included in the base year. This adjustment changes the 2022 underlying
diluted EPS for the purposes of this LTIP grant from 120.84 pence to 123.23 pence resulting in CAGR of 11.0% such that 50.3% of the EPS
element will vest. Overall, taking into account that ROCE performance for 2022 was 19.5%, the LTIP awards will vest as to 65.5% 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 133, 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 £35.405 (being the average market value of a share over the last quarter of the Company’s financial period ended
on 30 June 2022).
136
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com The September 2019 awards were granted when the value of a share was £29.64 (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 £35.405 (being the average
market value of a share over the last quarter of the Company’s financial period ended on 30 June 2022).
Executive Director
Ian Page
Paul Sandland
Tony Griffin
Number of shares in
respect of which the
Award is expected
to vest
22,981
3,999
7,194
Amount of award
attributable to share
price at grant
£000
£681
£119
£213
Amount attributable
to share price
appreciation
£000
£133
£23
£42
Total award
£000
£814
£142
£255
Each award is subject to a two year post vesting 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.
SAYE
No options were exercised under the SAYE Scheme by Executive Directors during the year.
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.
Contributions made by Dechra Pharmaceuticals PLC on behalf of the Executive Directors during the year equated to no more than 8% of
pensionable/base salary for both Ian Page and Tony Griffin. Tony Griffin received an employer’s contribution of 7.7% of salary into the Netherlands
pension scheme. As explained in the Committee Chair’s letter on pages 125 to 128 with effect from 1 July 2022, the wider UK workforce are eligible
for employer pension contributions of between 8% (increased from 6%) and 12% of base salary dependent on length of service and/or grade.
Our Chief Financial Officer, Paul Sandland’s, pension was already aligned with the wider workforce, and therefore increased from 6% to 8% with
effect from 1 July 2022.
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Non-Executive Directors’ Remuneration (Audited)
(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 2022.
The Chair 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 2022 and, where relevant, the year ended 30 June 2021:
Base fee
£000
Additional fee
£000
Benefits
£000
Total
£000
2021
144
2022
–
2021
3
2022
4
2021
–
Tony Rice π
Alison Platt
Additional
responsibilities
Chair and Nomination
Committee Chair
Chair and Nomination
Committee Chair (from
1 January 2022)
2022
80
129
54
54
–
22
–
20
Ishbel Macpherson Senior Independent Director
58
Julian Heslop
(to 28 February 2022) and
Remuneration Committee
Chair
Audit Committee Chair
(apart from between the
period 22 October to
1 December 2021)
Lawson Macartney Senior Independent
Director (from 1 March
2022)
Employee Engagement
Designated Non-Executive
Director
Lisa Bright
Denise Goode†
John Shipsey*
Total
58
54
14
12
58
58
24
5
470
54
54
11
–
425
3
10
1
–
50
–
8
–
–
43
Π Tony Rice retired on 31 December 2021.
† Denise Goode was appointed on 26 April 2021 and resigned on 30 November 2021.
* John Shipsey was appointed on 1 June 2022.
2022
84
132
83
2021
147
54
74
74
66
78
72
26
5
554
54
62
11
–
468
3
3
2
17
4
1
–
34
–
–
–
–
–
–
–
–
The Non-Executives are not eligible to participate in any of the Company’s share schemes, incentive schemes or pension schemes.
The Committee’s approach to the Chair’s fee in the financial year is explained in the Committee Chair’s letter on pages 125 to 128. As explained
in the letter, at the same time as the Committee considered the Executive Directors’ salaries and the Chair’s fee, fees for the other Non-Executive
Directors were reviewed by the Board. The Chair's and other Non-Executive Directors’ fees applying with effect from 1 January 2022 are as follows.
Office
Chair
Non-Executive Director
Chair of the Audit Committee
Chair of the Remuneration Committee
Senior Independent Director
Designated Non-Executive Director for Employee Engagement
Fee with
effect from
1 January
2022
200
58
15
15
10
10
Previous fee
159*
57
15
15
10
10
* The Chair had previously received a fee of £159,000 inclusive of his fee for chairing the Nomination Committee. Alison Platt on her appointment received a base fee
of £200,000.
The Committee’s approach to the Chair’s and Non-Executive Directors’ fees for the year ending 30 June 2023 is summarised in the Committee
Chair’s letter on page 128.
138
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 16 September 2021, are 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
23,727
11,000
6,508
Face value
at grant*
£1,164,758
£539,900
£319,478
% of award
vesting at
threshold
Performance Period
25% 1 July 2021 – 30 June 2024
25% 1 July 2021 – 30 June 2024
25% 1 July 2021 – 30 June 2024
* Based on a share price of £49.09 being the three day average middle market quotation preceding the grant.
† Paul Sandland has also been granted a tax qualifying option over 330 shares at an exercise price of £49.09 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 Chair in the 2019 Directors’ Remuneration Report, the underlying EPS for the
final year of the performance period (the financial year to 30 June 2024) will be adjusted to exclude actual R&D costs associated with the Akston
development, recognising that 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 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
Both the TSR element and the EPS element are subject to an additional ROCE performance underpin. 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
post vesting 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 options, no shares acquired may be sold before the second anniversary of vesting.
SAYE (Audited)
No SAYE options were granted to Executive Directors during the year ended 30 June 2022.
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 2022 is as follows:
Executive Share Plans
Limit: 5%
Usage: 2.1%
All Share Plans
Limit: 10%
Usage: 2.6%
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Report
Shareholdings (Audited)
Executive Directors
In respect of the financial year ended 30 June 2022, 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, and deferred bonus
scheme shares 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 2022 and their families as at 30 June 2022 are as follows:
Name
Ian Page
Paul Sandland
Tony Griffin
Appointment
date
13 June 1997
30 October 2019
1 November 2012
Ordinary shares
Number
392,388
9,651
33,463
Ordinary shares
£000*
13,568
333
1,157
% of salary
2,217
82
355
* Calculated using the share price as at 30 June 2022 and the base salaries as at 30 June 2022.
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.
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 2022 are as follows:
Award
date
26-Oct-18
Type of
award
LTIP
Ian Page
Option
price for
market
value
options
(£)
N/A
Number
of shares
as at
1 July
2021 Granted
–
46,168
06-Sep-19
22-Sep-20
19-Sep-21
Tony Griffin 26-Oct-18
LTIP
LTIP
LTIP
LTIP
N/A
N/A
N/A
N/A
06-Sep-19
22-Sep-20
19-Sep-21
02-Mar-184
LTIP
LTIP
LTIP
Approved
N/A
N/A
N/A
£25.06
Paul
Sandland
35,087
32,128
–
14,444
10,984
10,303
–
550
02-Mar-184 Unapproved
£25.06
2,450
26-Oct-184 Unapproved
£21.66
3,000
–
–
23,727
–
–
–
6,508
–
–
–
06-Sep-19
22-Sep-20
19-Sep-21
LTIP
LTIP
LTIP
N/A
N/A
N/A
6,106
13,901
–
–
–
11,000
1. Will vest on 5 September 2022 as to 65.5%.
Lapsed Exercised
34,071
12,097
–
–
–
3,785
–
–
–
10,659
–
–
–
–
–
–
–
–
–
–
–
–
550
2,450
3,000
–
–
–
Number
as at
30 June
2022
35,087
32,128
23,727
10,984
10,303
6,508
Status
– Vested and exercised
in the year
Unvested1
Unvested2
Unvested
– Vested and exercised
in the year
Unvested1
Unvested
Unvested
– Vested and exercised
in the year
– Vested and exercised
in the year
– Vested and exercised
in the year
Unvested1
Unvested
Unvested3
6,106
13,901
11,000
Performance
Period
2018–2021
2019–2022
2020–2023
2020–2023
2018–2021
2019–2022
2020–2023
2021–2024
2017–2020
2017–2020
2018–2021
2019–2022
2020–2023
2021–2024
2.
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.
3. Paul Sandland was granted a tax qualifying option over 330 shares at an exercise price of £49.09 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.
4. Paul Sandland held 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%.
140
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
The aggregate gain made by the Executive Directors on share options and LTIP awards exercised during 2022 was £2,491,641 (2021: £1,319,184).
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
2022 are as follows:
Name
Alison Platt
Ishbel Macpherson
Julian Heslop
Lawson Macartney
Lisa Bright
John Shipsey
Tony Rice†
Denise Goode‡
Appointment
date
1 March 2020
1 February 2013
1 January 2013
1 December 2016
1 February 2019
1 June 2022
5 May 2016
26 April 2021
Ordinary shares
number
3,709
5,848
6,000
5,880
788
Nil
20,000
136
Ordinary
shares
£000*
128
202
207
203
27
N/A
692
5
% of base fee
64
344
353
346
46
N/A
435
8
* Calculated using the share price as at 30 June 2022 and the fees as at 30 June 2022.
† Retired on 31 December 2022.
‡ Resigned on 30 November 2022.
There have been no changes in the holdings of the Company’s Directors between 30 June and 5 September 2022, with the exception of Ishbel
Macpherson who acquired 874 ordinary shares in the Company via the Retail Offer and these shares were admitted on 25 July 2022.
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. During the period 1 July 2021 to 19 December 2021, the Company was a constituent of the FTSE 250. From
20 December 2021, it was a constituent of FTSE 100; for this reason it is considered that the TSR performance of the FTSE 250 Index is the
appropriate comparator for this report In line with the regulations the TSR chart should show only ten years (1 July 2012 to 30 June 2022).
)
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
2,000.00
1,800.00
1,600.00
1,400.00
1,200.00
1,000.00
800.00
600.00
400.00
200.00
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Dechra
FTSE 250
141
Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance
Directors’ Remuneration
Report
Chief Executive Officer Remuneration for Ten Previous Years
Year ended
30 June 2022
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
Total single figure
remuneration
£000
2,073
2,995
1,763
3,035
3,058
3,420
2,480
1,934
1,589
1,201
Annual bonus
payout (% of maximum
opportunity)
92
100
28
72
76
92
72
80
80
36
LTIP vesting
(% of maximum
number of shares)
65.5
73.8
73.7
100.0
100.0
100.0
96.25
93.1
100.0
100.0
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 2021
and the year ended 30 June 2022, 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 average of the percentage change in each of salary, benefits and bonus for
every employee of the listed parent company except that anyone who joined or left the business part way through the year has been excluded from
the calculations. John Shipsey was appointed during the year ended 30 June 2022 and, accordingly, has been excluded from the table below. Alison
Platt has also been excluded as the increase in her fee is a result of her being appointed as Chair in January 2022.
Salary/fees
Taxable
benefits1
Annual
bonus3
2021– 2022
2020– 2021
2019– 2020
2021– 2022
2020– 2021
2019– 2020
2021– 2022
2020– 2021
2019– 2020
Average
employee
6.4%
32.8%
(11.8%)
(2.1%)
(7.3%)
16.3%
(4.8%)
137.3%
(47.4%)
Ian
Page
8.3%
6.6%
4.0%
(4.4%)
6.3%
(1.7%)
(0.4%)
280.0%
(59.7%)
Paul
Sandland
16.1%
10.0%
N/A
6.5%
20.8%
N/A
6.4%
292.9%
N/A
Tony
Griffin
3.0%
(0.9%)
6.8%
1.2%
2.3%
(10.0%)
(9.6%)
194.6%
(58.7%)
Ishbel
Macpherson
8.1%
10.4%
3.2%
N/A
N/A
N/A
N/A
N/A
N/A
Julian
Heslop
9.1%
6.5%
3.3%
N/A
N/A
N/A
N/A
N/A
N/A
Lawson
Macartney2
13.0%
3.8%
4.0%
N/A
N/A
N/A
N/A
N/A
N/A
Lisa
Bright
9.7%
8.8%
3.6%
N/A
N/A
N/A
N/A
N/A
N/A
1. Excludes SAYE options granted during any relevant year.
2.
Included in Lawson Macartney fee for the 2022 financial year is the fee for Senior Independent Director which was effective from 1 March 2022.
3. The difference in bonuses for the Executive Directors is due to the increase in the bonus potential of up to 125% compared to 100% in the 2021 financial year.
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.
142
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Chief Executive Officer’s Pay Ratio
The table below shows the ratio of the Chief Executive Officer’s remuneration for 2022, 2021, 2020 and 2019 using the Single Total Figure as
disclosed on page 133 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 or shared parental leave. The Company believes that the ratio is consistent with the Company’s wider policies on employee
pay, reward and progression.
Year
2022
2021
2020
2019
25th
percentile
pay ratio
78:1
121:1
75:1
139:1
Median pay
ratio
58:1
87:1
58:1
107:1
75th
percentile
pay ratio
30:1
44:1
31:1
56:1
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
20221
Total pay
and benefits
(salary)
£000
2,073
(597)
26
(25)
36
(29)
69
(47)
2021
Total pay
and benefits
(salary)
£000
2,995
(551)
25
(23)
35
(31)
67
(44)
1. The 2022 figure includes share options and awards, which have been valued by reference to £35.405 (being the average market value of a share over the last quarter
of the Company’s financial period ended 30 June 2022). SAYE options granted in 2021 and 2022 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 2022, there were a total of 556 UK employees (2021: 478 UK employees), 239 of whom have been excluded for the above stated reasons (2021:
169), leaving 317 employees within the ‘full pay relevant’ data set (2021: 309) 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 ratio of Chief Executive Officer's total remuneration to that of employees has reduced as a result of the lowering of his employer’s pension
contribution to align it with that of the UK workforce. Further, the Chief Executive Officer's annual bonus at 92% of base salary was lower than that
in 2021 (100%) as was the value and percentage vesting of his LTIP in the year at 65.5% as opposed to 73.8% in 2021. In addition the number of
employees eligible for a bonus was increased in the 2022 financial year.
Of the employees within the ‘full pay relevant’ data set, 186 worked in our Manufacturing business, which is predominately shop floor workers (2021:
177). During the 2021 financial year, we addressed the pay levels of these employees moving them from minimum wage to National Living Wage and
we have retained this in the 2022 financial year. 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 2021 and the year ended 30 June 2022.
Distributions to shareholders by way of dividend and share buyback
Overall expenditure on pay
Year ended
30 June 2022
£000
44,800
131,600
Year ended
30 June 2021
£000
37,900
120,300
% change
18.2%
9.4%
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Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance Directors’ Remuneration
Report
Implementation of the Directors’ Remuneration Policy in the Year Ending 30 June 2023
The Directors’ Remuneration Policy outlined on pages 146 to 150 will be implemented in the year ending 30 June 2023, as set out in the Committee
Chair’s letter on pages 125 to 128.
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 Chair, the maximum bonus potential for the Chief Executive Officer and Chief Financial
Officer for the financial year 2023 will increase to 150% of salary, with a bonus deferral requiring that 33% 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 2023 financial year
recognises the increase in the size and complexity of the Group since the last Remuneration Policy was approved by shareholders. The Committee
has also reviewed the level of stretch in the annual bonus targets to reassure itself that the higher maximum opportunity for the 2023 financial year
will only be earned for delivery of appropriately stretching levels of performance. This positions the maximum bonus at lower quartile compared to
the FTSE 30–100 for the Chief Executive Officer (around median for the other executive directors) and around median of the FTSE 100–150. The
value of the total package continues to be modest against the market norm for a Company of our size and complexity. The value of total package for
our Chief Executive Officer and Chief Financial Officer continues to be positioned towards the lower quartile of the market.
Tony Griffin’s bonus arrangements will not change, save that the ESG measure will represent up to 10% of his maximum bonus and underlying profit
105%. Personal objectives will continue to comprise up to 10% of maximum bonus.
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 134 in respect of bonuses for the Group’s 2022 financial year.
LTIP
The Committee proposes that LTIP awards for the year ending 30 June 2023 (the 2023 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 2023 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 2022 financial
year, details of which can be found on page 139. Taking account of internal forecasts of performance over the performance period including the
impact of the recent acquisitions, the markets in which the Group operates, our long-term growth ambitions and the expectations of the investment
community of the Group’s future potential performance, the upper target of 15% CAGR for the underlying diluted 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 2022 financial year, which is the base year for the 2023 LTIP grant.
As noted in the letter, the Committee is aware that, despite a strong financial performance in line with expectations, the Company’s share price is
lower than the £49.09 share price used to determine the number of shares subject to the LTIP awards granted on 19 September 2021. Taking into
account the fact that the current share price is higher than the share price used for the LTIP awards granted in 2020 and 2019, our current intention
is that LTIP awards for the 2023 financial year will be granted in line with our standard approach (with the number of shares to be awarded based on
the three day average middle market quotation preceding the grant). The underlying diluted EPS targets for the 2023 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 2022 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 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 Chair’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 87. 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 2022 Board and Committee Internal Evaluation (further details of which can be found
on page 115 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.
144
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 2022 financial year, this review took place at the July 2022 meeting and only minor changes were made. Copies
can be obtained via the Company website at www.dechra.com. The Committee Chair 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 104 and 125.
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
Alison Platt
Ian Page
Paul Sandland
Tony Griffin
Lisa Bright
Julian Heslop
Lawson Macartney
Ishbel Macpherson
John Shipsey
Commencement date
1 March 2020
1 September 2008
30 October 2019
1 November 2012
1 February 2019
1 January 2013
1 December 2016
1 February 2013
1 June 2022
Notice Period
Director
3 months
6 months
6 months
6 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
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 £17,750 for the year ended 30 June 2022. 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 at the Company’s Annual General Meeting on 21 October 2021
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 Chair
5 September 2022
Votes
for
73,810,257
74,112,644
% of vote
92.98
90.81
Votes
against
5,568,679
7,501,119
% of vote
7.02
9.19
Votes
withheld
876,657
6,768
145
Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance Directors’ Remuneration
Report
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
that date. The full Remuneration Policy as approved by shareholders is available in the Corporate Governance section of our website 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.
146
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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
Chair. 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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Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance Directors’ Remuneration
Report
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.
148
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 shareholding guideline that
applies during employment, or in either case and if fewer, all of those shares.
149
Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance Directors’ Remuneration
Report
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 Chair 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 Chair.
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 Chair 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 Chair or Non-Executive Director will be in line with the policy in place at the time of appointment.
Ishbel Macpherson
Remuneration Committee Chair
5 September 2022
150
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Directors’ Report –
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 2022. 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:
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
Environmental matters
including Greenhouse Gas
Emissions and Streamlined
Energy & Carbon Reporting
Section of the
Annual Report
Strategic Report
Page Number
14 to 17
Strategic Report
Strategic Report
Strategic Report
26 to 34
22 to 24
16 and 49
Strategic Report
Governance Report
49, 75 to 77,
81 and 122
Strategic Report
52 to 63
Governance Report
Stakeholder Engagement
96 to 98
56
Governance Report
Stakeholder Engagement
112 and 113
56
Stakeholder Engagement
Environment
54 to 58
64 to 69
Task Force on Climate-
related Financial
Disclosures
Stakeholder Engagement
Governance Report
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
70 to 73
52 to 63
85
88 and 89
196 to 203
213
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 referred to in the Going Concern Statement on page 49, 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. 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. In addition, the seven and
ten year senior secured notes (the Private Placement Notes) include
a change of control provision whereby a change of control of the
Company may result in the Private Placement Notes having to be
repaid in full.
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.
During the financial year and 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.
151
Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance
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 2022
11 August 2022
Aggregate
voting
rights Percentage
Aggregate
voting
rights Percentage
Fidelity
Management &
Research
BlackRock Inc
abrdn plc
The Vanguard
Group, Inc
Grandeur Peak
Global Advisors
9,661,493
8,089,624
6,027,663
8.91
7.46
5.56
9,850,645
8,096,782
6,124,028
4,428,557
4.09
4,502,613
3,530,661
3.26
3,808,113
8.66
7.12
5.38
3.96
3.35
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.
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
5 September 2022
Directors’ Report –
Other Disclosures
Political Donations and Expenditure
No political donations were made during the year ended 30 June 2022
(2021: nil). The Group has a policy of not making any donations to
political organisations nor independent election candidates nor 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 35 to 39. The underlying expense
on this activity for the year ended 30 June 2022 was £32.4 million (2021:
£32.4 million) and a further £1.8 million (2021: £1.5 million) was capitalised
as development costs.
Results and Dividends
The results for the year and financial position at 30 June 2022 are
shown in the Consolidated Income Statement on page 165 and
Consolidated Statement of Financial Position on page 167. The
Directors are recommending the payment of a final dividend of 32.89
pence per share which, if approved by shareholders, will be paid on
18 November 2022 to shareholders registered at 28 October 2022.
The shares will become ex-dividend on 27 October 2022. An interim
dividend of 12.00 pence per share was paid on 7 April 2022, making a
total dividend for the year of 44.89 pence per share (2021: 40.50 pence
per share). The total dividend payment is £48.6 million (2021: £43.8
million).
Share Capital
The issued share capital of the Company for the year is set out in note 26
to the Consolidated Financial Statements. As at the end of the financial
year, 108,392,737 fully paid ordinary shares were in issue, which included
177,414 ordinary shares issued during the year in connection with the
exercise of options under the Company’s share option schemes.
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.
At the Annual General Meeting of the Company held on 21 October
2021, the Company was authorised to purchase up to 10,821,766 of
its ordinary shares, representing 10% of the issued share capital of the
Company as at 9 September 2021. 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 2021 Annual
General Meeting and resolutions to renew these authorities will be
proposed at the 2022 Annual General Meeting.
152
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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.
Directors’ Confirmations
Each of the Directors, whose names and functions are listed in the
Governance section of the Annual Report confirm that, to the best of
their knowledge:
•
•
•
the Group Financial Statements, which have been prepared in
accordance with UK-adopted international accounting standards,
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 and financial position 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
5 September 2022
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 UK-adopted
international accounting standards 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).
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 UK-adopted international accounting
standards 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 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 also 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.
153
Strategic ReportFinancial StatementsAdditional InformationStock Code: DPHOverviewGovernance Financial
Statements
Contents
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
156
165
166
167
168
169
170
214
215
216
225
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 2022 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 UK-adopted international accounting standards;
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 2022; 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.
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 Audit, Risk and Internal Control, we have provided no non-audit services to the Company or its controlled
undertakings in the period under audit.
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 18 reporting units.
•
In addition, the Group engagement team audited the Company and certain centralised functions, including those covering Group treasury
operations, corporate taxation, goodwill and intangible asset impairment assessments and licensing agreements and their associated contingent
consideration balances.
• The components on which audits of the complete financial information and centralised work was performed accounted for 85% of Group
revenue, 88% of Group underlying operating profit and 96% of Group profit before tax. In addition, one component team was instructed to
perform specified procedures over one reporting unit.
• 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 to evaluate the sufficiency of audit evidence obtained and fully
understand the mattes arising from the component audits. In addition, the Group engagement team visited four locations in the Netherlands,
Denmark, Germany and Croatia. 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)
•
Impairment of intangible assets (Group)
• Carrying value of the Company’s investments (parent)
Materiality
• Overall Group materiality: £5.2 million (2021: £4.8 million) based on 3% of underlying operating profit.
• Overall Company materiality: £3.2 million (2021: £3.2 million) based on 0.5% of net assets.
• Performance materiality: £3.9 million (2021: £3.6 million) (Group) and £2.4 million (2021: £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.
156
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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.
Carrying value of the Company’s investments is a new key audit matter this year. Taxation and Consideration of the impact of Covid-19, which were key
audit matters last year, are no longer included because of the settlement of certain uncertain tax positions during the period and the reduced level of
uncertainty in respect of the impact of Covid-19 on the Group and Company. Otherwise, the key audit matters below are consistent with last year.
Key audit matter
Licensing agreements and associated contingent considerations (Group)
Refer to the Audit, Risk and Internal Control Report on page 117, note
1(b) to the consolidated financial statements (Key sources of estimation
uncertainty) on page 170 and note 30 (Contingent consideration
liabilities) on page 211.
How our audit addressed the key audit matter
Laverdia addition
In respect of the Laverdia addition:
• We read the asset purchase agreement to corroborate the key terms
used by management in the calculation;
Laverdia addition
On 10 January 2022 the Group entered into a licensing agreement with
Anivive Lifesciences, Inc. in respect of verdinexor, branded Laverdia.
This was for an initial consideration of £14 million with a contingent
consideration of £57.9 million, including a royalty payable for a finite
period.
Management have concluded that the future royalty payable 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 involves estimation
uncertainty over the timing and quantum of future cash flows and
the discount rate to be used.
Remeasurement of existing agreements
During the year, liabilities in respect of all existing licensing agreements,
the largest being Tri-Solfen, 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.
• We obtained management’s model and reperformed the calculation
of the contingent consideration;
• We obtained evidence to evaluate the key assumptions underpinning
management’s cash flow forecasts, including considering the
existence of contradictory evidence, 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;
• Our valuation experts evaluated the discount rates used by
management against our experts’ own independent expectations,
which included consideration of other companies in the industry of
comparable size and geographical spread; and
• We audited the disclosures relating to Laverdia to ensure these were
consistent with the requirements of the applicable standards.
• Overall we found the accounting for this new licensing agreement and
related disclosures to be materially appropriate and consistent with
the evidence obtained.
Remeasurement of existing agreements
We obtained management’s model and reperformed the calculation of the
contingent consideration;
We have assessed and challenged the changes made to the assumptions
underpinning management’s cash flow forecasts within the model and
evaluated the key assumptions, including considering the existence of
contradictory evidence;
We checked that the updated cash flow forecasts were consistent with
those approved by the Board;
Our valuation experts evaluated the discount rates used by management
against our experts’ own independent expectations, which included
consideration of other companies in the industry of comparable size and
geographical spread; and
We audited the disclosures relating to licensing agreements and
contingent consideration to ensure these were consistent with the
requirements of the applicable standards.
Overall we found the accounting for these licensing agreements and
contingent consideration, and the related disclosures, to be consistent
with the audit evidence obtained.
157
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Independent Auditors’ Report to the
Members of Dechra Pharmaceuticals PLC
Key audit matter
Impairment of intangible assets (Group)
Refer to the Audit, Risk and Internal Control Report on page 117, note
12 to the consolidated financial statements (Intangible assets) on page
187 and note 14 (Impairment Reviews) on page 191.
In respect of finite lived intangibles, the Directors exercise judgement
as to whether impairment triggers have been identified in relation
to intangible assets. No triggers have been identified as part of
management’s assessment.
Goodwill, indefinite lived assets and in process research and
development (‘IPR&D’) 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. For the Group, the
recoverable amount is typically based on the value in use. IPR&D is
tested for impairment on a product by product basis.
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 cashflows
of products. The long term growth and discount rate also include
estimation uncertainty. No impairment has been recognised in respect
of goodwill.
How our audit addressed the key audit matter
For finite life intangible assets, we reviewed management’s assessment
of impairment triggers and held discussions with various members of
management 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 IPR&D, we reviewed management’s assessment of
potentially impaired assets and held discussions with staff outside of
the finance function to enable us to evaluate the completeness of this
assessment. We also obtained evidence to corroborate that the relevant
assets were impaired and that the calculation was appropriate.
In respect of indefinite lived intangibles and goodwill:
• We considered management’s determination of the cash generating
units for assessing impairment;
• We audited management’s model and reperformed the calculations
within the discounted cash flow forecasts;
• We agreed the forecasts used for years 1 and 2 to the latest Board
approved budgets;
• We used our valuation experts to evaluate the discount rate
assumptions;
• We corroborated key assumptions in respect of growth rates to
economic and industry data and compared forecast margins to
historical actuals and expected developments in the Group;
With the exception of IPR&D, where an impairment of £1.7 million was
identified and recognised in respect of certain products in development
that were cancelled, no other impairments have been recognised.
• We assessed the sufficiency of headroom through the performance
of sensitivity analysis on key assumptions;
• We assessed management’s historical forecasting accuracy across
several previous years; and
• We audited the disclosure note associated with the impairment
review.
Overall we found the assessment of the carrying value of intangible
assets and associated disclosures to be consistent with the evidence
obtained.
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Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com
Key audit matter
Carrying value of the Company’s investments (parent)
Refer to note (i) to the Company financial statements on page 216
and note (iv) (Investments) on page 218.
Investments in subsidiaries of £735.7 million (2021: £758.9 million) are
accounted for in the Company balance sheet at cost less provision for
impairment.
Investments are tested for impairment if impairment indicators exist.
If such indicators exist, the recoverable amounts of the investments
in subsidiaries are estimated in order to determine the extent of the
impairment loss, if any. Any such impairment loss is recognised in the
income statement.
A review for indicators of impairment was performed by management,
including considering the latest available forecasts and developments
in the Group during the year.
How our audit addressed the key audit matter
We audited the Group restructuring and reperformed the calculation of
the impairment recognised.
We evaluated management’s determination of whether there were any
other indicators of impairment. Our procedures, in addition to the above,
included:
• comparing the carrying value of investment with the market
capitalisation of the Group at 30 June 2022; and
• considering the carrying value of investment with the carrying
amount of investees’ net assets.
In respect of management's value-in-use calculations where indicators
of impairment were identified:
Management’s assessment identified an impairment indicator in respect
of the investments in Dechra Finance Limited and Dechra Finance
Sterling Limited following the restructuring of certain Dutch entities.
•
We audited management’s model and reperformed the calculations
within the discounted cash flow forecasts;
• We tested the key assumptions underpinning management’s model
Following identification of indicators of impairment, the recoverable
amount was assessed based over value-in-use calculations. These
calculators indicated that an impairment of £119.1 million was required
and this impairment has been recognised in the income statement.
to contractual agreements; and
•
We audited the disclosure note associated with the impairment
review.
Overall we found the assessment of the carrying value of the Company’s
investments and associated disclosures to be consistent with the
evidence obtained.
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Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Independent Auditors’ Report to the
Members of Dechra Pharmaceuticals PLC
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 with three reportable segments, with each segment 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 52 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.
We identified 18 of the Group’s 52 active reporting units 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 85% of Group revenue, 88% of underlying operating profit and 96% of profit before tax. Of these reporting units, 4 were considered to
be significant components due to their financial significance, being those units located in the USA, Germany, UK and Denmark.
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 to evaluate the sufficiency of audit evidence obtained and fully understand the matters
arising from the component audits.
In addition, senior members of the Group engagement team visited component teams in Denmark, the Netherlands, Germany and Croatia, which
included meetings with the respective component auditor.
In planning and executing our audit, we also considered the potential impact of climate change on the Group’s business and the financial
statements. The Group has set out its intention, as part of the ‘Making a Difference’ plan, to achieve net-zero greenhouse gas emissions (‘GHG’) by
no later than 2050, with an initial target of a 25% reduction by 30 June 2025.
As a part of our audit we made enquiries of management to understand the extent of the potential impact of the physical and transitional climate
change risk on the financial statements. We also discussed the climate change initiatives and commitments from the Making a Difference plan and
other initiatives to reduce CO2 emissions, and the impact these have on the Group including on future cash flow forecasts.
Management considers that the impact of climate change does not give rise to a material financial statement impact. We evaluated management’s
risk assessment and understood the Group’s governance processes, including the Sustainability Committee. We reviewed relevant Board and Audit
Committee papers related to climate change and performed a risk assessment of how the impact of the Group’s commitments in respect of climate
change including the Making a Difference plan may affect the financial statements and our audit.
Using our knowledge of the Group, we assessed that the key areas in the Financial Statements which are more likely to be materially impacted by
climate change are those areas that are based on future cash flows. As a result, we particularly considered how climate change risks and the impact
of climate commitments made by the Group would impact the assumptions made in the forecasts prepared by management that are used in the
Group’s impairment reviews, for going concern purposes and for the valuation of intangible assets and related contingent consideration liabilities.
Based on our procedures, we have not identified any material error in the assessment of the impact of climate on the financial statements.
We have also checked the consistency of the disclosures in the Task Force on Climate-related Financial Disclosures section of the Annual Report
with the financial statements, including note 14 and with our understanding of the business, in accordance with ISA 720 (Revised).
160
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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:
Overall materiality
How we determined it
Rationale for benchmark
applied
Financial statements – Group
£5.2 million (2021: £4.8 million).
3% of underlying operating profit
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 (2021: £3.2 million).
0.5% of net assets
The Company is the ultimate holding Company of the
Dechra Group of companies. As the Company has 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 £0.05 million and £4.6 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% (2021: 75%) of overall materiality, amounting to £3.9 million (2021: £3.6 million) for the Group financial statements and
£2.4 million (2021: £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 £0.25 million (Group audit)
(2021: £0.2 million) and £0.16 million (Company audit) (2021: £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 122 and statements in note 1b of the Consolidated and
Note (i) of the 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.
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Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview
Independent Auditors’ Report to the
Members of Dechra Pharmaceuticals PLC
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.
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, which includes reporting based on the Task Force on Climate-related Financial Disclosures
(TCFD) recommendations. 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 and 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
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 2022 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.
162
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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.
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 and other legislation specific to the industries in which the Group operates (including
Veterinary Medicines Directorate, Medicines & Healthcare products Regulatory Agency, European Medicines 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 and Tax legislation. 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, such as the valuation of contingent consideration. 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;
• Review of internal audit reports;
• Reading key correspondence with regulatory authorities, such as the Veterinary Medicines Directorate;
• 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 respect of the key audit matters
noted above. Details of our procedures in these areas are included in our key audit matters above.
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Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Independent Auditors’ Report to the
Members of Dechra Pharmaceuticals PLC
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 seven years, covering the years
ended 30 June 2016 to 30 June 2022.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements form part of the
ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual financial report has been
prepared using the single electronic format specified in the ESEF RTS.
Mark Skedgel (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
5 September 2022
164
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Consolidated Income Statement
For the year ended 30 June 2022
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 of investments accounted
for using the equity method
Profit/(loss) before taxation
Income taxes
Profit/(loss) 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
2022
Non-
underlying*
(notes
3, 4 & 5)
£m
–
(0.5)
(0.5)
(74.6)
(3.7)
(78.8)
–
(13.5)
(0.1)
(92.4)
18.9
(73.5)
Underlying
£m
681.8
(296.5)
385.3
(178.6)
(32.4)
174.3
5.7
(8.8)
(1.2)
170.0
(38.3)
131.7
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
Total
£m
681.8
(297.0)
384.8
(253.2)
(36.1)
95.5
5.7
(22.3)
(1.3)
77.6
(19.4)
58.2
53.72p
53.40p
44.89p
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
* 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.
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Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Consolidated Statement of
Comprehensive Income
For the year ended 30 June 2022
Profit for the year
Other comprehensive income/(expense):
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 income/(expense)
Total comprehensive income for the period
Note
2022
£m
58.2
2021
£m
55.5
9
–
15.7
(0.4)
15.3
73.5
(1.7)
(28.0)
(0.2)
(29.9)
25.6
166
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Consolidated Statement of Financial Position
At 30 June 2022
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Deferred tax assets
Total non-current assets
Current assets
Inventories
Corporation tax receivable
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
Corporation tax payable
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
2022
£m
730.5
100.3
15.8
2.3
848.9
175.7
11.0
136.8
120.9
444.4
1,293.3
(3.3)
(136.8)
(6.4)
(12.2)
(158.7)
(325.8)
(104.0)
(2.2)
(35.8)
(467.8)
(626.5)
666.8
1.1
413.9
–
3.4
84.4
164.0
666.8
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 on pages 156 to 213 were approved by the Board of Directors on 5 September 2022 and were signed on its behalf by:
Ian Page
Chief Executive Officer
5 September 2022
Paul Sandland
Chief Financial Officer
5 September 2022
Company number: 3369634
167
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Consolidated Statement of
Changes in Shareholders’ Equity
For the year ended 30 June 2022
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
Year ended 30 June 2022
At 1 July 2021
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
Total comprehensive income
Transactions with owners:
Dividends paid
Share-based payments
Shares issued
Total contributions by and distributions to owners
At 30 June 2022
Issued
share
capital
£m
Share
premium
account
£m
Hedging
reserve
£m
Foreign
currency
translation
reserve
£m
Merger
reserve
£m
Retained
earnings
£m
1.1
–
409.3
–
–
–
16.3
–
84.4
–
126.4
55.5
–
–
–
–
–
–
–
–
–
1.1
1.1
–
–
–
–
–
–
–
–
–
1.1
–
–
–
–
–
–
–
2.3
2.3
411.6
411.6
–
–
–
–
–
–
–
2.3
2.3
413.9
(1.7)
–
–
(28.0)
–
(1.7)
1.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
(28.2)
–
–
–
–
–
(11.9)
(11.9)
–
–
15.7
(0.4)
15.3
–
–
–
–
3.4
–
–
–
–
–
–
–
–
–
84.4
84.4
–
–
–
–
–
–
–
–
–
84.4
–
–
–
55.5
–
(37.9)
3.7
–
(34.2)
147.7
147.7
58.2
–
–
–
58.2
(44.8)
2.9
–
(41.9)
164.0
Total
equity
£m
637.5
55.5
(1.7)
(28.0)
(0.2)
25.6
1.7
(37.9)
3.7
2.3
(31.9)
632.9
632.9
58.2
–
15.7
(0.4)
73.5
(44.8)
2.9
2.3
(39.6)
666.8
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. There have been no cash flow hedges in the current year.
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.
168
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Consolidated Statement of Cash Flows
For the year ended 30 June 2022
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 leased assets
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 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 generated from operating activities
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment
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 acquired intangible non-current assets
Purchase of other intangible non-current assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from the issue of share capital
Repayment of borrowings
Principal elements of lease payments
Dividends paid
Net cash used in financing activities
Net decrease 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 in cash and cash equivalents
New borrowings and lease liabilities
Repayment of borrowings and lease liabilities
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
7
26
5
10
18
18
27
2022
£m
95.5
78.8
174.3
11.1
5.2
(0.7)
0.7
–
3.3
193.9
(19.3)
(23.4)
14.9
166.1
(2.8)
163.3
(7.0)
(0.5)
(32.9)
122.9
–
–
0.1
(0.8)
–
(20.3)
(1.2)
(54.4)
(1.7)
(78.3)
2.3
–
(3.6)
(44.8)
(46.1)
(1.5)
118.4
4.0
120.9
(1.5)
(3.8)
4.1
4.0
(11.2)
0.4
(8.0)
(200.2)
(208.2)
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)
(111.2)
(3.4)
(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)
Cash conversion is defined as cash generated from operating activities before interest and taxation as a percentage of underlying operating profit.
169
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
1. Accounting Policies
Dechra Pharmaceuticals PLC is a public limited company, which is limited by shares and 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
The consolidated financial statements have been prepared and approved by the Directors in accordance with UK-adopted International
Accounting Standards in conformity with the requirements of the Companies Act 2006 as it applies to companies reporting under those
standards. The Company has elected to prepare its Parent Company financial statements in accordance with FRS 101 and they are
separately presented on pages 214 to 224.
(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 14 to 81. 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 49 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 and contingent consideration. 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 estimates where the actual outcome
may differ from that calculated. The Group has made no critical judgements in applying the Group's accounting policies. The 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 sources of
estimation uncertainty
Valuation of licensing
agreements and associated
contingent consideration
Timing, likelihood and quantum of future royalty cash flows,
timing of future approval milestones and the determination of an
appropriate discount rate
Note
reference
Accounting
policy
reference
30
1(p)
170
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 1. Accounting Policies continued
(b) Basis of Preparation (continued)
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; impairment of assets; cloud
computing arrangement costs; 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 utilises 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 2021. None of these standards had any
impact on the Group’s accounting policies and did not require retrospective adjustments.
In April 2021, the IFRS Interpretations Committee published its final agenda decision on Configuration and Customisation costs in a
Cloud Computing Arrangement. The agenda decision considers how a customer accounts for configuration or customisation costs in
a cloud computing arrangement. The agenda decision does not have a material impact on the Group in respect of the current period or
prior periods (note 5).
The Group has adopted the amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 as
issued in August 2020. In accordance with the transition provisions, the amendments have been adopted retrospectively to hedging
relationships and financial instruments. Comparative amounts have not been restated, and there was no impact on the current period
opening reserves amounts on adoption. Refer to note 21.
(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 Productos 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.
171
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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 date of the
transactions. 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 of foreign operations 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 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.
172
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 1. Accounting Policies continued
(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.
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.
173
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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 as 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.
Intangible assets that are acquired by the Group as a result of an asset acquisition are stated at cost (including future milestone and royalty
payments as applicable) less accumulated amortisation and impairment losses. 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.
Other Intangible Assets
Other intangible assets (which primarily includes software and marketing rights) are stated at cost less accumulated amortisation and
impairment losses. Expenditure on internally generated goodwill and other intangibles is recognised in the income statement as an
expense as 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 not amortised but are
systematically tested for impairment at each consolidated statement of financial position date. Other 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% 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.
Where an other intangible asset has been remeasured, the adjustment is amortised prospectively over the remaining useful life of the asset.
174
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 1. Accounting Policies continued
(g)
Intangible Assets continued
Amortisation continued
The amortisation of the intangible assets is 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 acquired intangibles, management considers 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 labour and 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 of Non-current Assets
The carrying amounts of the Group’s non-current 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 B.V. 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.
175
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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 has passed to the customer.
This review and the corresponding recognition of revenue encompass a number of factors which include, but are not limited to the
following:
•
•
reviewing delivery arrangements and whether the buyer has accepted title, recognising revenue at the point at which full title has
passed; and/or
where distribution arrangements are in place, recognising revenue when the goods pass to the third party customer (for example
by reviewing insurance arrangements) 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.
176
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 1. Accounting Policies continued
(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 term of 12 months or less. Low-value
assets comprise IT equipment and small items of office furniture.
177
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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 IFRIC 1 approach when accounting for contingent consideration in respect of the acquisition of intangible
assets in the form licensing agreements (outside of a business combination) where the product has not been registered and launched in
all key markets. Under the IFRIC 1 approach, 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 rate. Contingent consideration payable is 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.
For licensing agreements where the product has been registered and launched in all key markets, the Group has adopted the cost
accumulation model. An intangible asset is initially recognised, at the date of acquisition, at the cost paid. Variable payments (normally in
the form of sales based royalties to another third party) are recognised as the sales are made and not included in the carrying amount of
the asset at acquisition, and no liability is recognised for the contingent consideration.
(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 they relate 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.
178
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 1. Accounting Policies continued
(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 43. A breakdown of the
non-underlying items is given in notes 3, 4 and 5.
2. Operating Segments
As discussed below, the Group has three reportable segments which are based on information provided to the Board of Directors, 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 & Supply. This Segment operates internationally and manufactures and markets Companion Animal Products
(CAP), Equine, Food producing Animal Products (FAP) and Nutrition. This Segment also includes third party manufacturing and other revenues
from non-core activities.
The NA Pharmaceuticals Segment consists of Dechra Veterinary Products US, Dechra Veterinary Products Canada, and Dechra Productos
Veterinarios (Mexico), which sell CAP, Equine and FAP 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
Cloud computing arrangement costs
Impairment of assets
Rationalisation of manufacturing organisation
Expenses relating to acquisitions and subsequent integration activities
Total operating profit
Finance income
Finance expense
Share of loss of investments 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
2022
£m
406.7
275.1
681.8
131.5
87.7
(32.4)
186.8
(12.5)
174.3
(72.8)
(2.8)
(2.9)
–
(0.3)
95.5
5.7
(22.3)
(1.3)
77.6
(141.3)
(110.6)
(4.7)
(256.6)
(313.7)
(8.2)
(48.0)
(626.5)
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)
179
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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, impairment and amortisation by segment
European Pharmaceuticals
NA Pharmaceuticals
Pharmaceuticals Research and Development
Corporate and central costs
The total depreciation, impairment and amortisation charge is made up of the following:
Non-underlying
Amortisation and impairment – selling, general and administrative expenses
Amortisation – research and development expenditure
Underlying
Amortisation and impairment
Depreciation
2022
£m
508.4
49.5
78.8
35.0
10.1
681.8
23.5
75.1
0.3
–
98.9
20.5
2.4
0.5
0.8
24.2
63.4
26.1
0.5
0.8
90.8
70.8
3.7
74.5
5.2
11.1
16.3
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
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:
2022
Revenue
£m
58.2
62.3
212.9
258.3
90.1
681.8
2022
Non-
current
assets
£m
31.8
2.9
378.8
278.3
157.1
848.9
2021
Revenue
£m
56.9
64.8
204.8
206.5
75.0
608.0
2021
Non-
current
assets
£m
30.8
3.1
406.3
215.2
166.5
821.9
UK
Germany
Rest of Europe
USA
Rest of World
180
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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:
– Foreign exchange losses on contingent consideration
– Unwind of discount associated with contingent consideration
Non-underlying finance expense
Total finance expense
2022
£m
0.1
5.6
5.7
2022
£m
–
–
5.7
2022
£m
8.3
0.5
–
8.8
2022
£m
10.1
3.4
13.5
22.3
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
181
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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
Cloud computing arrangement costs
Impairment of assets
Expenses relating to acquisitions and subsequent integration activities
Rationalisation of manufacturing organisation
Non-underlying operating loss
Amortisation of notional acquired intangibles from equity accounting for associates
Share of realised non-underlying profit of investments accounted for using the equity method
Foreign exchange losses/(gains) on contingent consideration
Unwind of discount associated with contingent consideration
Non-underlying loss before tax
Tax on non-underlying loss before tax items
Revaluation of deferred tax balances following the change in the US, Dutch and UK tax rates
Release of fair value provision on acquisition
Non-underlying loss after tax
2022
£m
69.1
3.7
2.8
2.9
0.3
–
78.8
0.7
(0.6)
10.1
3.4
92.4
(21.1)
2.2
–
73.5
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
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.
Cloud computing arrangement costs of £2.8 million relate to the initial costs of the programme to implement the Manufacturing and Supply
function’s new ERP and Electronic Quality Management systems, the total cost of which is expected to be £25.0 million over the next five years.
Included within underlying administrative expenses is £1.5 million of other cloud computing arrangement costs which relate to the implementation
of the Salesforce customer relationship management system in Europe, and the implementation of a global payroll platform. The £2.8 million of
non-underlying expenses have been settled in the year.
Impairment of assets predominantly relates to the impairment of certain assets prior to the sale of the Agricultural Chemicals business in
January 2022 (£1.0 million) and the impairment of a small number of In-Process Research and Development assets recognised on the
acquisition of AST Farma and Le Vet (£1.7 million).
Expenses relating to acquisitions and subsequent integration activities represent costs incurred during the acquisition of Piedmont Animal
Health, Inc. (£0.3 million). Additional acquisition expenses of c. £3.0 million are expected to be incurred in relation to the acquisition and
integration of Piedmont Animal Health, Inc. and the Med-Pharmex Holdings, Inc. group of companies over the next two years. Costs of
£0.2 million relating to the product rights acquisitions made during the year have been taken through underlying expenses.
Foreign exchange losses on contingent consideration is driven by the depreciation of Sterling against the US and Australian Dollars.
The revaluation of the deferred tax balances arises as a result of an increase in the US (£1.1 million), Dutch (£0.8 million) and UK (£0.3 million)
corporation tax rates.
182
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 6.
Interests in Associate
(a) Profit/(loss) 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 before the elimination of unrealised transactions and adjustments to align to the Group's accounting policies, and is not
Dechra Pharmaceuticals PLC’s share of the results.
Revenue
Pre-tax profit from continuing operations
Post-tax profit from continuing operations
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets of associate
(b) Interest in Associate
1 July 2021 and 2020
Additions
Share of underlying loss after tax
Non-underlying realised profit from continuing operations
Share of amortisation of notional intangible asset identified on acquisition (net of tax)
30 June 2022 and 2021
2022
£m
15.1
9.1
6.2
2022
£m
2.9
11.4
14.3
–
(2.5)
(2.5)
11.8
2022
£m
17.1
–
(1.2)
0.6
(0.7)
15.8
2021
£m
3.5
0.6
0.6
2021
£m
2.5
3.1
5.6
–
(0.3)
(0.3)
5.3
2021
£m
17.4
0.8
(0.4)
–
(0.7)
17.1
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
Group has considered other factors when assessing control, and concluded that it has significant influence but not control of the associate.
There is no change in the accounting treatment of the entity from the prior year. 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. The milestone of AUD26.0 million that was paid
to Animal Ethics Pty Ltd in the year relating to the licensing agreement for the marketing authorisations of Tri-Solfen in Australia and New
Zealand is eliminated in the Group's income statement. The Group's share of this will be realised over the life of the agreement.
(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
Share of underlying loss after tax
Non-underlying realised profit from continuing operations
Share of amortisation of notional intangible asset identified on acquisition (net of tax)
Interest in associate
Goodwill
Carrying value of investment in associate
2022
£m
5.2
–
(1.2)
0.6
(0.7)
3.9
11.9
15.8
2021
£m
5.8
0.5
(0.4)
–
(0.7)
5.2
11.9
17.1
183
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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 leased assets
Loss on disposal of intangible assets
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 £0.1 million (2021: £0.1 million) in relation to the review of the Half-Yearly Report.
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
2022
£m
236.3
7.3
7.2
3.9
77.3
2.4
0.7
–
0.8
–
32.4
1.9
0.9
0.9
0.1
1.9
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
2022
Number
2021
Number
686
147
1,203
2,036
2022
£m
108.6
13.6
6.5
2.9
131.6
2022
£m
6.6
0.3
1.5
8.4
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
Key management comprises the Board and the Senior Executive Team. Details of the remuneration, shareholdings, share options and pension
contributions of the Executive Directors are included in the Directors’ Remuneration Report on pages 133 to 143.
The Group operates a stakeholder personal pension scheme for certain employees and contributed between 3% and 12% of pensionable
salaries. The Group also participates in state-run pension arrangements for certain employees in Dechra Veterinary Products SAS and Dechra
Veterinary Products B.V.. Total pension contributions amounted to £6.5 million (2021: £5.5 million).
184
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 9.
Income Taxes
Current tax
– UK corporation tax
– overseas tax
– 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
2022
£m
2.2
29.7
2.8
34.7
(15.7)
2.2
(1.8)
(15.3)
19.4
2021
£m
2.8
26.8
(2.6)
27.0
(14.5)
4.8
1.2
(8.5)
18.5
The tax on the Group’s profit before taxation differs from the standard rate of UK corporation tax of 19.0% (2021: 19.0%). The differences to
this rate are explained below:
Profit before taxation
Tax at 19.0% (2021: 19.0%)
Effect of:
– expenses not deductible
– research and development related tax credits
– patent box tax credits
– other incentives
– share of results in associates
– effects of overseas tax rates
– adjustment in respect of prior years
– change in tax rates
Total income tax charge in the Consolidated Income Statement
2022
£m
77.6
14.7
0.8
(0.2)
(1.5)
(1.6)
0.2
3.8
1.0
2.2
19.4
2021
£m
74.0
14.1
1.8
(0.3)
(3.1)
(0.3)
–
2.9
(1.4)
4.8
18.5
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 22.5%).
Tax (Charge)/Credit Recognised Directly in Equity
Deferred tax on other equity movements
Tax charge recognised in Consolidated Statement of Comprehensive Income
Corporation tax on equity settled transactions
Deferred tax on equity settled transactions
Total tax (charge)/credit recognised in Equity
2022
£m
(0.4)
(0.4)
0.3
(0.7)
(0.4)
2021
£m
(0.2)
(0.2)
0.2
0.7
0.9
On 27 December 2021, the Dutch government enacted legislation to increase the top rate of corporate income tax from 25.0% to 25.8% with
effect from 1 January 2022. Dutch deferred tax assets and liabilities have been recalculated accordingly.
The UK Finance Bill 2021 substantively enacted on 24 May 2021, included an increase in the main rate of UK corporation tax from 19%
to 25%, effective 1 April 2023. UK deferred tax assets and liabilities as at 30 June 2022 have been recalculated accordingly, based on the
Group’s best estimate of the timing of the unwind of existing temporary differences.
At 30 June 2022, the Group held a current provision of £5.9 million (2021: £5.7 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 a release of the provision of between
£0.3 million to £3.9 million.
185
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview
Notes to the Consolidated Financial Statements
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. This decision was upheld by the EU General Court on 8 June 2022, when it dismissed the
UK Government’s annulment application. The UK Government has since confirmed its intention to lodge an appeal to the EU Court of Justice.
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 Court of Justice. 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.
The Group received charging notices from HMRC in January and February 2021 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 HMRC’s appeal will be successful, the charging notices
which were settled in full during the previous period (£2.75 million) are recorded as current tax receivables 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:
29.39 pence per share (2021: 24.00 pence per share)
Interim dividend paid: 12.00 pence per share (2021: 11.11 pence per share)
Total dividend 41.39 pence per share (2021: 35.11 pence per share) recognised as distributions
to equity holders in the period
Proposed final dividend for the year ended 30 June 2022: 32.89 pence per share
(2021: 29.39 pence per share)
Total dividend paid and proposed for the year ended 30 June 2022: 44.89 pence per share
(2021: 40.50 pence per share)
2022
£m
31.8
13.0
44.8
35.6
48.6
2021
£m
25.9
12.0
37.9
31.8
43.8
In accordance with IAS 10 ‘Events After the Balance Sheet Date’, the proposed final dividend for the year ended 30 June 2022 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 2023. There are no
income tax consequences. The final dividend for the year ended 30 June 2021 is shown as a deduction from equity in the year ended 30 June 2022.
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
* Underlying measures exclude non-underlying items as defined in note 1.
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
2022
Pence
121.57
53.72
120.84
53.40
2022
£m
131.7
58.2
2021
Pence
108.77
51.33
108.14
51.03
2021
£m
117.6
55.5
Number
Number
108,332,583
654,836
108,987,419
108,119,864
630,725
108,750,589
At 30 June 2022, there are 305,468 options (2021: 401,672) that are excluded from the EPS calculations as they are not dilutive for the period
presented but may become dilutive in the future.
186
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 12. Intangible Assets
Goodwill
£m
Software
£m
Development
costs
£m
Patent
rights &
marketing
authorisations
£m
Other
intangibles
£m
Acquired
intangibles
£m
Cost
At 1 July 2020
Additions
Disposals
Transfers between categories
Remeasurement (note 30)
Foreign exchange adjustments
At 30 June 2021 and 1 July 2021
Additions
Disposals
Transfers between categories
Remeasurement (note 30)
Foreign exchange adjustments
At 30 June 2022
Accumulated Amortisation
At 1 July 2020
Charge for the year
Impairments
Disposals
Transfers between categories
Foreign exchange adjustments
At 30 June 2021 and 1 July 2021
Charge for the year
Impairments
Disposals
Foreign exchange adjustments
At 30 June 2022
Net book value
At 30 June 2022
At 30 June 2021
253.8
–
–
–
–
(17.7)
236.1
–
–
–
–
9.3
245.4
–
–
–
–
–
–
–
–
–
–
–
–
245.4
236.1
21.7
2.8
(0.9)
–
–
(0.5)
23.1
1.0
–
0.2
–
0.1
24.4
9.0
3.2
–
(0.8)
–
(0.2)
11.2
3.5
–
–
0.1
14.8
9.6
11.9
15.9
1.5
(0.6)
(1.2)
–
(0.5)
15.1
1.8
–
(1.7)
–
0.2
15.4
9.8
0.6
0.2
(0.2)
(0.8)
(0.1)
9.5
0.6
–
–
–
10.1
5.3
5.6
5.4
–
–
1.2
–
(0.1)
6.5
–
(3.3)
0.4
–
0.1
3.7
3.5
0.5
–
–
0.8
(0.2)
4.6
0.4
–
(3.4)
0.1
1.7
2.0
1.9
–
–
–
–
–
–
–
–
–
1.1
–
0.1
1.2
–
–
–
–
–
–
–
–
0.7
–
0.1
0.8
0.4
–
791.4
134.5
–
–
4.9
(49.5)
881.3
96.1
(0.7)
–
(24.2)
27.4
979.9
373.7
75.2
–
–
–
(27.9)
421.0
72.8
1.7
(0.6)
17.2
512.1
467.8
460.3
Total
£m
1,088.2
138.8
(1.5)
–
4.9
(68.3)
1,162.1
98.9
(4.0)
–
(24.2)
37.2
1,270.0
396.0
79.5
0.2
(1.0)
–
(28.4)
446.3
77.3
2.4
(4.0)
17.5
539.5
730.5
715.8
£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 net book value includes £7.4 million relating to the ERP system in the EU Pharmaceuticals Segment; this has
a remaining amortisation period of 3 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.
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Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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 2020
Additions
Remeasurement
Foreign exchange adjustments
At 30 June 2021 and 1 July 2021
Additions
Remeasurement
Disposals
Foreign exchange adjustments
At 30 June 2022
Accumulated Amortisation
At 1 July 2020
Charge for the year
Foreign exchange adjustments
At 30 June 2021 and 1 July 2021
Charge for the year
Impairments
Disposals
Foreign exchange adjustments
At 30 June 2022
Net book value
At 30 June 2022
At 30 June 2021
Commercial
relationships
£m
Pharmacological
process
£m
Capitalised
development
costs
£m
Brand
£m
Product
rights
£m
8.7
–
–
(0.6)
8.1
–
–
–
0.2
8.3
5.9
1.8
(0.4)
7.3
1.3
–
–
(0.8)
7.8
0.5
0.8
53.2
–
–
(6.1)
47.1
–
–
–
6.8
53.9
34.7
4.4
(4.1)
35.0
3.6
–
–
5.3
43.9
10.0
12.1
16.6
–
–
(1.7)
14.9
–
–
–
1.8
16.7
7.9
1.4
(0.9)
8.4
1.2
–
–
2.0
11.6
5.1
6.5
410.0
–
–
(27.6)
382.4
–
–
–
12.0
394.4
155.9
42.3
(11.5)
186.7
37.0
1.7
–
5.5
230.9
163.5
195.7
302.9
134.5
4.9
(13.5)
428.8
96.1
(24.2)
(0.7)
6.6
506.6
169.3
25.3
(11.0)
183.6
29.7
–
(0.6)
5.2
217.9
288.7
245.2
Total
£m
791.4
134.5
4.9
(49.5)
881.3
96.1
(24.2)
(0.7)
27.4
979.9
373.7
75.2
(27.9)
421.0
72.8
1.7
(0.6)
17.2
512.1
467.8
460.3
The table below provides further detail on the goodwill, acquired intangibles and their remaining amortisation period.
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
11.2
Sub-total
carrying
value
£m
11.6
37.9
16.4
10.7
37.7
16.4
5.3
0.2
–
0.1
0.2
5.1
4.0
10.3
32.4
54.1
100.8
Remaining
amortisation
period on
acquired
intangibles
3 ½ years
½ year
N/A
½ year
3 ½ years
8 ½ years
Genera – total
4 years
4 years
6 years
Putney – total
188
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Goodwill
carrying
value
£m
Acquired
Intangibles
carrying
value
£m
10.9
1.6
Sub-total
carrying
value
£m
21.5
28.4
Remaining
amortisation
period on
acquired
intangibles
11 years
8 years
Apex – total
10 years
5.8
10 years
5 ½ years
4 ½ years
6 years
½ year
AST Farma and
Le Vet – total
15 years
6 ½ years
192.0
5.9
3.5
6 ½ years
1 ½ years
4 ½ years
Brazil – total
½ year
15 ½ years
12 ½ years
12 ½ years
Ampharmco – total
7 ½ years
8 ½ years
8 ½ years
Mirataz – total
8 years
14 years
15.7
18.6
39.1
85.9
22.1
28.4
5.8
37.1
45.8
10.1
0.3
5.9
2.6
6.3
0.2
0.2
0.1
5.4
0.5
5.9
34.5
3.9
0.7
85.9
22.1
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 Produtos
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)
Intangible assets arising from the
acquisition of Laverdia
Intangible assets arising from
the acquisition of Isoflurane and
Sevoflurane
Intangible assets arising from the
acquisition of Sucromate
Other individually immaterial goodwill
and acquired intangibles
Product, marketing and distribution rights
Product, marketing and distribution rights
Product, marketing and distribution rights
Product, marketing and distribution rights
Product, marketing and distribution rights
9.0
–
–
98.7
–
0.9
9.0
6.7
–
–
–
–
–
–
62.7
62.7
10 years
8.4
8.4
9 ½ years
6.1
6.1
9 ½ years
7.2
12.9
20.1
245.4
467.8
713.2
189
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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 2020
Additions
Disposals
Foreign exchange adjustments
At 30 June 2021 and 1 July 2021
Additions
Disposals
Transfers between categories
Foreign exchange adjustments
At 30 June 2022
Accumulated Depreciation
At 1 July 2020
Charge for the year
Disposals
Foreign exchange adjustments
At 30 June 2021 and 1 July 2021
Charge for the year
Disposals
Foreign exchange adjustments
At 30 June 2022
Net book value
At 30 June 2022
At 30 June 2021
Net book value of right-of-use assets
At 30 June 2022
At 30 June 2021
Depreciation charge of right-of-use assets
2022
2021
48.1
9.1
–
(2.7)
54.5
5.8
(0.8)
1.6
0.7
61.8
16.2
1.6
–
(1.0)
16.8
1.8
(0.8)
0.1
17.9
43.9
37.7
–
–
–
–
17.0
6.5
(0.8)
(0.5)
22.2
1.6
(2.7)
1.1
1.2
23.4
5.0
2.3
(0.2)
(0.1)
7.0
2.2
(0.7)
0.3
8.8
14.6
15.2
12.2
13.8
1.9
1.9
5.2
1.8
(0.9)
(0.2)
5.9
2.2
(1.2)
–
0.1
7.0
1.8
2.0
(0.6)
(0.1)
3.1
1.9
(1.1)
0.1
4.0
3.0
2.8
3.1
2.8
1.9
2.0
Contracted capital commitments
Assets in the course of construction included above
Included in additions are £3.8 million (2021: £7.5 million) of right-of-use assets.
57.5
9.0
(6.5)
(2.6)
57.4
14.6
(1.0)
(2.7)
1.4
69.7
28.4
5.1
(6.3)
(1.1)
26.1
5.2
(0.9)
0.5
30.9
38.8
31.3
0.1
0.3
0.1
0.1
2022
£m
6.0
5.3
Total
£m
127.8
26.4
(8.2)
(6.0)
140.0
24.2
(5.7)
–
3.4
161.9
51.4
11.0
(7.1)
(2.3)
53.0
11.1
(3.5)
1.0
61.6
100.3
87.0
15.4
16.9
3.9
4.0
2021
£m
0.7
13.3
190
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 ('CGU'), 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 value in use calculations.
Intangible assets under development and not available for use (typically In-Process Research and Development (‘IPR&D’)) are tested for
impairment annually and other intangible assets are tested when there is an indication of impairment loss or reversal. Where testing is required,
the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss or reversal. Where it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which it belongs.
No indicators of impairment were noted during 2022 in respect of finite lived intangible assets.
In 2022, impairment charges recorded against IPR&D, which was based on fair value less costs to sell, totalled £1.7 million and related to IPR&D
acquired as part of the 2018 acquisition of Le Vet and AST Farma. Assets in respect of five products within the pipeline were fully impaired
following the decision to discontinue development of these products.
We have assessed the qualitative and quantitative impact of climate related risks on asset recoverable amounts and concluded that their impact
does not cause material impairments.
Goodwill Impairment Assessment
Goodwill is tested for impairment at the operating segment level, this being the level at which goodwill is monitored for internal management
purposes. Note, for the purposes of this assessment, Dechra Veterinary Products International is not aggregated with Dechra Veterinary
Products EU as goodwill is monitored separately. An immaterial quantum of intangible assets which have an indefinite life are also allocated
with goodwill as follows:
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
64.3
18.9
245.4
2022
Indefinite
life assets
carrying
value
£m
0.9
–
–
0.9
2021
Goodwill
carrying
value
£m
162.2
Indefinite
life assets
carrying value
£m
0.9
56.2
17.7
236.1
–
–
0.9
Total
value
£m
163.1
64.3
18.9
246.3
Total
value
£m
163.1
56.2
17.7
237.0
Pre-tax
discount
rate
%
10.2
12.0
13.1
Pre-tax
discount
rate
%
8.9
11.0
12.4
Recoverable amount of each CGU is determined using value in use calculations with the key assumptions being 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% (2021: 3.0%) for Dechra Veterinary
Products EU and Dechra Veterinary Products NA and 6.6% (2021: 5.8%) 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% (2021: 0%) for
Dechra Veterinary Products EU and Dechra Veterinary Products NA and 1.2% (2021: 0.9%) 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.
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.
191
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
14. Impairment Reviews continued
Goodwill Impairment Assessment continued
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 CGU.
Sensitivity analyses have been performed around the key assumptions for the impairment testing of goodwill and indefinite life assets with the
conclusion for both being that given the headroom in each CGU, 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:
2022
£m
2.3
(35.8)
(33.5)
Intangible assets
Property, plant and equipment
Inventories
Receivables/payables
Share-based payments
Losses
R&D tax credits
Employee benefit obligations
Assets
Liabilities
Net
2022
£m
–
–
1.5
7.2
0.9
0.6
3.0
1.0
14.2
2021
£m
–
–
0.9
4.1
1.7
0.7
0.5
0.1
8.0
2022
£m
(42.9)
(4.8)
–
–
–
–
–
–
(47.7)
2021
£m
(51.1)
(3.7)
–
–
–
–
–
–
(54.8)
2022
£m
(42.9)
(4.8)
1.5
7.2
0.9
0.6
3.0
1.0
(33.5)
2021
£m
2.0
(48.8)
(46.8)
2021
£m
(51.1)
(3.7)
0.9
4.1
1.7
0.7
0.5
0.1
(46.8)
(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 £2.2 million (2021: £2.5 million). The estimated unprovided deferred tax liability in relation to these temporary differences
is £0.1 million (2021: £0.1 million).
Deferred tax assets in relation to losses amounting to £2.6 million (2021: £2.0 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.
192
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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
2020
£m
(62.4)
(4.0)
1.4
3.2
0.7
0.5
0.3
0.4
(59.9)
Balance at
1 July
2021
£m
(51.1)
(3.7)
0.9
4.1
1.7
0.7
0.5
0.1
(46.8)
Recognised
in income
£m
7.2
–
(0.4)
1.2
0.3
0.2
0.3
(0.3)
8.5
Recognised
in income
£m
9.9
(1.0)
0.6
2.9
(0.1)
(0.2)
2.4
0.8
15.3
Recognised
in equity/OCI
£m
–
–
–
(0.2)
0.7
–
–
–
0.5
Recognised
in equity/OCI
£m
–
–
–
(0.4)
(0.7)
–
–
–
(1.1)
Foreign
exchange
adjustments
£m
4.1
0.3
(0.1)
(0.1)
–
–
(0.1)
–
4.1
Foreign
exchange
adjustments
£m
(1.6)
(0.1)
–
0.6
–
0.1
0.1
–
(0.9)
Balance at
30 June
2021
£m
(51.1)
(3.7)
0.9
4.1
1.7
0.7
0.5
0.1
(46.8)
Balance at
30 June
2022
£m
(42.8)
(4.8)
1.5
7.2
0.9
0.6
3.0
0.9
(33.5)
193
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
2022
£m
38.0
10.1
127.6
175.7
2022
£m
122.1
9.0
5.7
136.8
2022
£m
120.9
2022
£m
46.0
3.1
4.6
83.1
136.8
2022
£m
11.0
(12.2)
(1.2)
2021
£m
34.6
10.4
104.5
149.5
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
16. Inventories
Raw materials and consumables
Work in progress
Finished goods and goods for resale
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
194
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 21. Borrowings and Lease Liabilities
Current liabilities:
Lease liabilities
Non-current liabilities:
Lease liabilities
Senior loan notes
Bank loans
Arrangement fees netted off
Total borrowings
2022
£m
3.3
3.3
12.1
125.5
189.7
(1.5)
325.8
329.1
2021
£m
3.1
3.1
12.8
115.1
189.7
(2.1)
315.5
318.6
On 22 December 2021, the Group entered into an Amendment and Restatement Agreement in relation to the £340.0 million Revolving
Credit Facility (RCF) maturing 25 July 2024. With effect from 1 January 2022, any new Borrowings drawn on the RCF will now use Risk Free
Reference (RFR) rates instead of LIBOR rates. The relevant RFR rates for the principal Borrowings of the Group will be SONIA (for Borrowings
in GBP), SOFR (for Borrowings in USD) and EURIBOR (for Borrowings in EUR). The interest rate charged on any new Borrowings drawn under
the RCF will be the relevant RFR rate plus the Margin plus a Credit Adjustment Spread (CAS). The Margin on this Facility is a minimum of 1.3%
and a maximum of 2.2%, dependent upon the Leverage (the ratio of Total Net Debt to Adjusted EBITDA) of the Group. The CAS charged on
the RCF will be a minimum of 0.0326% and a maximum of 0.42826%, dependent upon the term and currency of the new Borrowings. The
CAS will not be charged on any new Borrowings in EUR currency. At 30 June 2022, £189.7 million was drawn against the £340.0 million RCF.
The facility is not secured on any specific assets of the Group but is supported by a joint and several cross guarantee structure. All covenants
were met during the year ended 30 June 2022.
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 2022. 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).
On 14 July 2022 the Group undertook a further Private Placement raising EUR50.0 million and EUR100.0 million (under seven and ten year
new senior secured notes respectively), refer to note 34.
No interest has been capitalised during the year (2021: £nil).
'Phase 2' of the amendments to IFRS 9, IAS 39 and IFRS 7 requires that, for financial instruments measured using amortised cost
measurement, changes to the basis for determining the contractual cash flows required by interest rate benchmark reform are reflected
by adjusting their effective interest rate. No immediate gain or loss is recognised. These expedients are only applicable to changes that are
required by interest rate benchmark reform, which is the case if, the change is necessary as a direct consequence of interest rate benchmark
reform and the new basis for determining the contractual cash flows is economically equivalent to the previous basis. For the year ended 30
June 2022, the Group has applied the practical expedients provided under 'Phase 2' to amendments to its RCF.
The maturity of the bank loans and senior loan notes is as follows:
Between two and five years
Over five years
The maturity of the lease liabilities is as follows:
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.
2022
£m
232.6
82.6
315.2
2022
£m
3.3
2.5
3.5
6.1
15.4
2021
£m
189.7
115.1
304.8
2021
£m
3.1
2.5
3.7
6.6
15.9
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Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
22. Provisions
At start of period
Provision released
Provision utilised
Foreign exchange differences
At end of period
Deferred
Rent
£m
(0.3)
–
0.1
(0.1)
(0.3)
Provision for
PPE grant
£m
(0.9)
–
0.1
0.2
(0.6)
Dilapidations
£m
(2.3)
1.0
–
–
(1.3)
Total
£m
(3.5)
1.0
0.2
0.1
(2.2)
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, the manufacturing site in Croatia, 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.
In the prior year, the Group established a fair value provision of £1.9 million for dilapidations of two warehouse properties in Skipton. During
the year the Group acquired one of the warehouse properties in Skipton and consequently £1.0 million of the provision has been released,
£0.2 million credited to the income statement and £0.8 million released against the fixed asset in line with IFRS 16. The provision for the
remaining warehouse will be utilised over the period to the expiry of the lease in March 2025.
23. Employee Benefit Obligations
Jubilee awards in Netherlands, Germany and Croatia of £0.3 million (2021: £0.3 million) for employees are recognised within other payables in the
Consolidated Statement of Financial Position as at 30 June 2022.
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.
196
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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
2022
£m
16.4
101.1
2.4
1.0
120.9
2021
£m
10.5
105.1
1.3
1.5
118.4
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 2022.
Capital Management
The capital structure of the Group consists of net borrowings and shareholders’ equity. At 30 June 2022, net borrowing was £208.2 million
(2021: £200.2 million), whilst shareholders’ equity was £666.8 million (2021: £632.9 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 the year to 30 June 2022
and 2021 and is forecast to continue to do so in the future.
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; and
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.
197
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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. Post year end the Group undertook a further Private
Placement raising EUR50.0 million and EUR100.0 million under seven and ten year new senior secured notes respectively (see note
34); and
•
£15.4 million lease liabilities.
The Group’s borrowing facilities at 30 June 2022 are detailed in note 21.
Market Risk
Market risk is the risk that changes in market prices, such as interest rates or foreign exchange 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 Risk Free Reference rates 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 £131.1 million (2021: £101.6 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 25.5% of gross trade
receivables at 30 June 2022 (2021: 13.3%). This customer accounted for 21.2% (2021: 18.4%) of total Group revenues. One other customer
accounted for more than 10% of total Group revenues (2021: 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 mostly 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.
198
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 2022 and 30 June
2021. 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
2022
2021
Carrying
value
£m
120.9
122.1
9.0
252.0
(189.7)
(125.5)
(15.4)
(46.0)
(3.1)
(83.1)
(110.4)
(573.2)
(321.2)
Fair
value
£m
120.9
122.1
9.0
252.0
(189.7)
(115.2)
(15.4)
(46.0)
(3.1)
(83.1)
(110.4)
(562.9)
(310.9)
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)
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 2022
Contingent consideration
Total
30 June 2021
Contingent consideration
Total
Level 1
£m
–
–
Level 1
£m
–
–
Level 2
£m
–
–
Level 2
£m
–
–
Level 3
£m
(110.4)
(110.4)
Level 3
£m
(80.2)
(80.2)
Total
£m
(110.4)
(110.4)
Total
£m
(80.2)
(80.2)
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Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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 5 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.
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 2022 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 2022 and 30 June 2021 is determined as follows:
30 June 2022
Expected loss rate
Gross carrying amount – trade receivables
Loss allowance
Specific loss allowance
Total loss allowance
30 June 2021
Expected loss rate
Gross carrying amount – trade receivables
Loss allowance
Specific loss allowance
Total loss allowance
Past due
(up to one
month)
£m
0.03%
4.1
–
–
–
Past due
(up to one
month)
£m
0.04%
2.4
–
–
–
Past due
(one to three
months)
£m
0.03%
1.8
–
–
–
Past due
(one to three
months)
£m
0.04%
1.5
–
–
–
Past due
(over three
months)
£m
75.0%
1.2
0.3
0.7
1.0
Past due
(over three
months)
£m
75.0%
0.7
0.2
0.5
0.7
Not due
£m
0.03%
116.0
–
–
–
Not due
£m
0.04%
84.3
–
–
–
The movement in the loss allowances for trade debtors at 30 June 2022 reconciles to the opening loss allowances as follows:
At start of period
Impairment provision recognised
Impairment provision utilised
At end of period
2022
£m
0.7
0.8
(0.5)
1.0
Total
£m
123.1
0.3
0.7
1.0
Total
£m
88.9
0.2
0.5
0.7
2021
£m
0.7
0.1
(0.1)
0.7
200
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 2022 and 30 June 2021.
Where interest is at floating rates, the future interest payments have been estimated using current interest rates:
At 30 June 2022
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 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
Contingent
consideration
£m
Bank loans
and
senior loan
notes
£m
Lease
liabilities
£m
Trade, other
payables and
accruals
£m
(110.4)
–
(65.1)
(175.5)
(3.3)
(3.6)
(7.6)
(32.0)
(16.8)
(14.7)
(97.5)
(175.5)
Contingent
consideration
£m
(80.2)
–
(33.8)
(114.0)
(17.3)
(5.9)
(7.1)
(6.7)
(11.1)
(8.2)
(57.7)
(114.0)
(313.7)
(1.5)
(2.1)
(317.3)
(2.1)
–
–
(189.7)
–
(42.9)
(82.6)
(317.3)
Bank loans
and
senior loan
notes
£m
(302.7)
(2.1)
(1.6)
(306.4)
(1.6)
–
–
–
(25.0)
(164.7)
(115.1)
(306.4)
(15.4)
–
(1.9)
(17.3)
(1.9)
(1.8)
(2.8)
(2.1)
(1.4)
(1.1)
(6.2)
(17.3)
(132.2)
–
–
(132.2)
(119.6)
(11.9)
–
(0.2)
(0.1)
–
(0.4)
(132.2)
Lease
liabilities
£m
(15.9)
–
(2.1)
(18.0)
Trade, other
payables and
accruals
£m
(108.7)
–
–
(108.7)
(1.9)
(1.7)
(2.7)
(2.0)
(1.6)
(1.2)
(6.9)
(18.0)
(103.4)
(4.8)
–
(0.2)
–
–
(0.3)
(108.7)
Total
£m
(571.7)
(1.5)
(69.1)
(642.3)
(126.9)
(17.3)
(10.4)
(224.0)
(18.3)
(58.7)
(186.7)
(642.3)
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)
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Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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 2022 and 30 June 2021 were:
Australian
Dollar
£m
Danish
Krone
£m
–
–
5.8
5.8
–
–
(0.2)
–
–
(34.5)
(34.7)
(28.9)
–
–
–
–
–
–
–
–
–
–
–
–
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
Euro
£m
8.9
1.0
50.2
60.1
(42.9)
(0.3)
(5.2)
–
(2.1)
(1.9)
(52.4)
7.7
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
US
Dollar
£m
0.6
0.5
19.2
20.3
(82.6)
–
(0.9)
–
(1.3)
(73.2)
(158.0)
(137.7)
US
Dollar
£m
0.8
1.4
16.9
19.1
(72.2)
–
(0.9)
–
(0.7)
(17.8)
(91.6)
(72.5)
Other
£m
0.3
0.2
12.2
12.7
–
–
(0.2)
–
(1.3)
–
(1.5)
11.2
Other
£m
2.6
–
8.5
11.1
–
–
(0.4)
–
(1.1)
–
(1.5)
9.6
At 30 June 2022
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 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
202
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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 2022 would reduce Group profit before taxation and equity by
£3.8 million (2021: £3.9 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 2022, the Group has been exposed to transactional and translational currency risk. In addition to the transactional loss of £4.5 million
(2021: £0.9 million transactional gain) being recognised in the Consolidated Income Statement, £15.7 million foreign exchange gain (2021:
£28.0 million foreign exchange loss) translational impact was recognised in the Consolidated Statement of Comprehensive Income in the year.
As part of its acquisition strategy, the Group seeks 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
Euro
US Dollar
Profit after
taxation
£m
(2.6)
0.7
(5.2)
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. Issued 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
2021
2022
£m
1.1
0.0
1.1
Number
108,215,323
177,414
108,392,737
£m
1.1
0.0
1.1
Number
108,010,960
204,363
108,215,323
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, 177,414 new ordinary shares of 1 pence each (2021: 204,363 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, the Global SAYE and the ESPP share
option schemes. The consideration received was £2,258,853 (2021: £2,265,445). 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.
Post year end the Company issued 5,247,813 shares of 1 pence each by way of a placing and 116,870 ordinary shares via a retail offer, both
at an issue price of 3430 pence per share on 25 July 2022. The placing generated gross proceeds of £184.0 million. The placing price of 3430
pence per share was a 8.0% discount to the closing middle market share price on 20 July 2022, being the date of the placing announcement.
See note 34.
203
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview
Notes to the Consolidated Financial Statements
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.
Long Term Incentive Plan 2017
(a) Long Term Incentive Plan Awards
Vesting is dependent on two 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 underpin. 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 Incentive 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.
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.
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 employees
in 18 countries. 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.
204
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 26. Share-based Payments continued
Year ended 30 June 2022
Unapproved Share Option Scheme
11 September 2014†
15 September 2015†
19 September 2016†
2 March 2018†
26 October 2018†
6 September 2019
22 September 2020
16 September 2021
Approved Share Option Scheme
19 September 2016†
2 March 2018†
26 October 2018†
6 September 2019
22 September 2020
16 September 2021
Long Term Incentive Plan
26 October 2018
6 September 2019
22 September 2020
16 September 2021
Exercise
Period
2017–2024
2018–2025
2019–2026
2020–2028
2021–2028
2022–2029
2023–2030
2024–2031
2019–2026
2021–2028
2021–2028
2022–2029
2023–2030
2024–2031
2021–2028
2022–2029
2023–2030
2024–2031
Exercise
price
per share
Pence
763.00
975.00
1369.00
2506.00
2166.00
2964.00
3237.00
4909.00
1369.00
2506.00
2166.00
2964.00
3237.00
4909.00
–
–
–
–
Long Term Incentive Plan (Qualifying LTIP Awards)
22 September 2020
22 September 2020
16 September 2021
16 September 2021
2023–2030
2023–2030
2024–2031
2024–2031
3237.00
–
4909.00
–
SAYE Option Scheme
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
13 October 2021
13 October 2021
2019–2022
2020–2023
2021–2024
1095.00
1646.00
1974.00
2022–2023
2021–2022
2023–2024
2022–2023
2024–2025
2023–2024
2573.00
2517.00
2868.00
2868.00
4493.00
4493.00
Total
Weighted average exercise price
† Total share options exercisable at 30 June 2022 were 139,503.
At
1 July
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
23,938
15,823
39,183
6,091
–
–
85,035
882,916
1853.10p
–
–
(7,000)
(18,253)
(35,737)
–
–
–
(60,990)
–
(3,107)
(234)
–
–
–
(3,341)
(72,820)
–
–
–
(72,820)
–
–
–
–
–
(3,813)
–
(20,619)
(24,432)
(118)
(15,341)
(372)
–
–
–
(15,831)
(177,414)
1277.88p
Exercised
Number
Granted
Number
Lapsed
Number
At
30 June
2022
Number
2,000
2,500
12,200
45,107
71,937
115,419
134,066
167,138
550,367
2,000
1,696
2,063
7,272
7,236
4,888
25,155
–
83,312
43,388
43,043
169,743
3,201
41,772
1,461
16,567
63,001
–
4,224
4,158
8,382
–
–
–
–
–
–
–
181,001
181,001
–
–
–
–
–
5,499
5,499
–
–
–
43,043
43,043
–
–
1,811
17,505
19,316
–
–
–
–
–
–
–
–
(834)
(8,834)
(12,252)
(13,863)
(35,783)
–
(104)
(609)
(141)
–
(611)
(1,465)
(25,859)
(872)
(2,052)
–
(28,783)
(108)
(790)
(350)
(938)
(2,186)
(18)
–
(274)
(292)
–
–
–
–
76,212
8,236
84,448
333,307
3911.84p
(1,118)
(482)
(2,629)
(731)
(4,559)
(477)
(9,996)
(78,505)
2289.13p
22,702
–
36,182
5,360
71,653
7,759
143,656
960,304
2638.28p
205
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial 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
2021–2028
2022–2029
2023–2030
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
2020–2028
2022–2029
2022–2029
2023–2030
2023–2030
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 were 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
2517.00
2868.00
2868.00
At
1 July
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
27,173
19,174
–
–
46,347
849,501
1338.99p
Exercised
Number
Granted
Number
Lapsed
Number
(3,000)
(3,000)
(14,957)
(23,663)
(27,501)
–
–
–
(72,121)
(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
206
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 26. Share-based Payments continued
The weighted average exercise price of options eligible to be exercised at 30 June 2022 was 2157.48 pence (2021: 2171.65 pence). For
options exercised during the year, the weighted average market price at the date of exercise was 4716.85 pence (2021: 3435.95 pence). The
weighted average remaining contractual life of options outstanding at the Consolidated Statement of Financial Position date was 5.0 years
(2021: 5.1 years).
Outstanding options on all Long Term Incentive, Approved and Unapproved plans prior to 30 June 2019 were exercisable at 30 June 2022.
973 options issued under SAYE plans were exercisable at 30 June 2022 (2021: 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
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
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
16/09/21
N/A
493
4976p
4909p
3.0 years
0.4%
27.2%
N/A
1400p
22/09/20
N/A
794
3164p
3237p
3.02 years
-0.9%
31.4%
N/A
902p
16/09/21
N/A
988
4976p
4909p
3.0 years
0.5%
27.2%
0.8%
1518p
22/09/20
N/A
9,578
3164p
3237p
3.02 years
0.0%
31.4%
1.1%
993p
16/09/21
N/A
5,449
4976p
4909p
3.0 years
0.5%
27.2%
0.8%
1523p
22/09/20
2 years
308
3164p
3237p
3.02 years
-0.9%
31.4%
N/A
812p
16/09/21
2 years
220
4976p
4909p
3.0 years
0.4%
27.2%
0.8%
1260p
22/09/20
2 years
618
3164p
3237p
3.02 years
0.0%
31.4%
1.1%
894p
16/09/21
2 years
110
4976p
4909p
3.0 years
0.5%
27.2%
0.8%
1366p
06/09/19
N/A
8,071
3036p
2964p
6.5 years
0.3%
28.0%
1.00%
928p
16/09/21
16/09/21
30/09/24
30/09/24
Standalone
Nil-cost options
N/A
6,437
4976p
Nil
3.04 years
0.3%
27.2%
N/A
3866p
12,876
4976p
Nil
3.04 years
0.3%
27.2%
0.8%
4854p
Conditional
share awards
2 years
2,169
4976p
Nil
3.04 years
0.3%
27.2%
N/A
3480p
4,339
4976p
Nil
3.04 years
0.3%
27.2%
0.8%
4369p
Nil-cost options
(CSOP linked and
standalone options)
2 years
11,575
4976p
Nil
3.04 years
0.3%
27.2%
N/A
3480p
23,152
4976p
Nil
3.04 years
0.3%
27.2%
0.8%
4369p
Market value
options
N/A
181,001
4976p
4909p
6.5 years
0.6%
27.2%
0.8%
1253p
207
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
26. Share-based Payments continued
Long Term Incentive Plan
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
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
10,556
3164p
Nil
3.02 years
-0.1%
31.4%
N/A
2353p
21,114
3164p
Nil
3.02 years
-0.1%
31.4%
1.1%
3062p
Conditional
share awards
2 years
3,434
3164p
Nil
3.02 years
-0.1%
31.4%
N/A
2118p
6,869
3164p
Nil
3.02 years
-0.1%
31.4%
1.1%
2756p
Nil-cost options
(CSOP linked and
standalone options)
N/A
15,342
3164p
Nil
3.02 years
-0.1%
31.4%
N/A
2118p
30,687
3164p
Nil
3.02 years
-0.1%
31.4%
1.1%
2756p
22/09/20
22/09/20
30/06/23
30/06/23
Market value
options
N/A
152,011
3164p
3237p
6.50 years
0.0%
31.4%
1.1%
993p
06/09/19
06/09/16
30/09/22
30/09/22
Standalone
Nil-cost options
2 years
11,696
3036p
Nil
3.07 years
0.3%
28.2%
N/A
1872p
23,391
3036p
Nil
3.07 years
0.3%
28.2%
1.0%
2647p
Conditional
share awards
2 years
3,661
3036p
Nil
3.07 years
0.3%
28.2%
N/A
1872p
7,323
3036p
Nil
3.07 years
0.3%
28.2%
1.0%
2647p
Nil-cost options
(CSOP linked and
standalone options)
N/A
14,053
3036p
Nil
3.07 years
0.3%
28.2%
N/A
2080p
28,108
3036p
Nil
3.07 years
0.3%
28.2%
1.0%
2941p
Market value
options
N/A
133,929
3036p
2964p
6.50 years
0.3%
28.2%
1.0%
928p
208
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 26. Share-based Payments continued
Save As You Earn Option Scheme and Global SAYE Plan
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
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
19/10/20
41,600
3474p
2868p
–
3.0 years
–
19/10/20
6,866
3474p
2868p
2.0 years
–
–
16/10/19
20,632
2626p
2571p
2.0 years
–
–
–
-0.1%
–
–
31.8%
–
1.0%
–
850p
–
-0.1%
–
–
28.4%
–
–
1.0%
758p
–
–
0.5%
–
–
32.1%
–
–
1.2%
486p
–
–
13/10/21
18,952
4756p
4493p
–
3.0 years
–
–
0.6%
–
–
27.4%
–
0.9%
–
886p
–
04/10/19
30,073
2736p
2573p
–
3.0 years
–
–
0.3%
–
–
28.6%
–
1.2%
–
504p
–
27/10/21
8,236
4756p
4493p
2.0 years
–
–
13/10/21
57,192
4756p
4493p
–
3.0 years
–
30/11/21
68
5045p
4493p
–
3.0 years
–
0.5%
–
–
27.4%
–
–
0.8%
761p
–
–
–
0.6%
–
–
27.4%
–
0.9%
–
892p
–
–
0.5%
–
–
26.6%
–
0.8%
–
1020p
–
29/11/18
34,527
2136p
1974p
12/10/17
73,108
2175p
1646p
13/10/16
52,877
1370p
1095p
–
3.4 years
5.4 years
–
3.25 years
5.25 years
–
3.25 years
5.25 years
–
0.8%
0.9%
–
27.9%
25.1%
1.0%
–
485p
530p
–
0.5%
0.8%
–
21.6%
22.2%
1.9%
–
551p
587p
–
0.2%
0.4%
–
22.0%
24.0%
1.5%
–
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 2022 of £0.9 million (2021: £1.5 million), of which £0.3 million (2021: £0.3 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
2022
£m
3.3
(0.4)
2.9
2021
£m
2.8
0.9
3.7
209
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
27. Changes in Net Debt
Cash and cash equivalents
Lease liabilities within one year
Lease liabilities after one year
Bank loans and senior loan notes after
one year
Net debt
28. Foreign Exchange Rates
At
1 July 2021
£m
118.4
(3.1)
(12.8)
(302.7)
(200.2)
Cash
flows
£m
(1.5)
4.1
–
–
2.6
New lease
liabilities
£m
–
(0.3)
(3.5)
Foreign
exchange
movements
£m
4.0
(0.1)
(0.6)
Other
non-cash
movements
£m
–
(3.9)
4.8
At
30 June 2022
£m
120.9
(3.3)
(12.1)
–
(3.8)
(10.5)
(7.2)
(0.5)
0.4
(313.7)
(208.2)
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
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
Average rate
for 2022
1.8347
6.9892
8.7826
1.1807
1.3316
Closing rate
at 30 June
2022
1.7594
6.3189
8.6684
1.1652
1.2103
29. Acquisitions and Disposals
The Group completed the following product rights acquisitions in the year:
•
•
•
•
•
the acquisition of Rompun® (xylazine injection) and Butorphanol Tartrate Injection from Elanco™ Animal Health for USD4.0 million
(£3.0 million). A payment of £0.2 million was also made for inventory;
the acquisition of Sucromate™ Equine sterile suspension from Thorn Bioscience LLC for USD9.0 million (£6.5 million). A payment
of £8,000 was also made for inventory;
the acquisition of ProVet APC™ and ProVet BMC systems from Hassinger Biomedical and DSM Medical for USD4.0 million (£3.0 million).
A payment of £0.1 million was also made for inventory;
the acquisition of Isoflurane® and Sevoflurane® from Halocarbon Life Sciences LLC for USD12.0 million (£8.7 million); and
the acquisition of verdinexor (Laverdia®) from Anivive Lifesciences, Inc for USD97.5 million (£71.9 million). Following the initial payment
of USD19.0 million (£14.0 million) there are subsequent milestone payments totalling USD45.5 million (£33.5 million) due in future years
on the achievement of various approval and sales milestones for the product in the USA, UK, EU, Brazil, Australia, Japan and Canada.
Royalties payable as part of the transaction have been accrued as part of the contingent consideration liabilities recognised.
The Group has considered the amendments to IFRS 3 ‘Business Combinations’ and applied the optional concentration test to the transactions
noted above that include the acquisition of inventory. 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.
On 26 January 2022, Genera dd (a 100% subsidiary of the Group) sold the trademarks and registrations, inventory and accounts receivable
balances associated with the Agricultural Chemicals business for HRK27.0 million (£3.0 million). The assets were fair valued to be HRK27.0
million (£3.0 million) following a non-underlying impairment of £1.0 million (£0.5 million to cost of sales and £0.5 million to administrative
expenses). In the period to 30 June 2022, the business contributed £0.4 million to net revenue (2021: £5.1 million), this reflecting the
seasonality of revenue. The Group has concluded that this disposal does not represent a discontinued operation.
210
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 30. Contingent Consideration Liabilities
Contingent consideration – less than one year
Contingent consideration – more than one year
2022
£m
6.4
104.0
110.4
2021
£m
22.6
57.6
80.2
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:
Tri-Solfen®
£m
33.0
24.7
StrixNB® &
DispersinB®
£m
0.8
–
Injectable
Solution 1
£m
3.3
–
Injectable
Solution 2
£m
4.4
–
Mirataz
£m
10.9
–
Phycox®
£m
2.3
–
Laverdia®
£m
–
–
As at 1 July 2020
Additions
Remeasurement
through intangibles
Cash payments:
investing activities
Finance expense
Foreign exchange
adjustments
At 30 June 2021
Additions
Remeasurement
through intangibles
Cash payments:
investing activities
Finance expense
Foreign exchange
adjustments
At 30 June 2022
2.3
(2.8)
0.6
(1.6)
56.2
–
(12.0)
(14.6)
1.5
1.5
32.6
0.1
(0.3)
–
–
0.6
–
0.3
(0.4)
–
0.1
0.6
(0.6)
(0.8)
–
(0.3)
1.6
–
–
(0.8)
0.1
0.2
1.1
(2.3)
(0.2)
–
(0.1)
1.8
–
0.1
(1.9)
–
–
–
5.4
(0.6)
0.1
(1.4)
14.4
–
(2.9)
(0.7)
0.4
1.8
13.0
(0.1)
(0.9)
0.1
(0.2)
1.2
–
0.3
(0.8)
–
0.1
0.8
Other
£m
1.5
3.2
0.1
(0.4)
0.2
(0.2)
4.4
2.7
Total
£m
56.2
27.9
4.9
(6.0)
1.0
(3.8)
80.2
60.6
–
–
–
–
–
57.9
(7.9)
(2.1)
(24.2)
–
1.2
6.3
57.5
(0.5)
0.2
0.1
4.8
(19.7)
3.4
10.1
110.4
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.
StrixNB® &
DispersinB®
Injectable
Solution 1
Injectable
Solution 2
Mirataz
Phycox®
Laverdia®
Other
0.1
(0.1)
–
–
–
–
N/A
N/A
–
–
(0.1)
0.1
N/A
N/A
–
–
–
–
1.2
(1.4)
(0.6)
0.5
(0.6)
0.7
0.1
(0.1)
–
–
–
–
2.9
(2.9)
(2.7)
3.0
(2.7)
3.0
0.2
(0.2)
(0.1)
0.1
(0.2)
0.1
2.6
(2.6)
Tri-Solfen®
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
Sterling £m
5% depreciation in
Sterling £m
Discount rate range in
2022 financial year
Discount rate range in
2021 financial year
(1.9)
(1.6)
2.1
1.7
5.2%–25.0% 11.6%–27.1%
0.0%–19.7% 10.4%–11.7%
11.6%
11.6% 7.3%–9.4%
11.6% 5.1%–14.6% 10.2%–11.6%
9.2%
9.2% 7.5%–9.9%
10.4%
N/A 8.6%–10.4%
Aggregate undiscounted cash outflow in relation to royalties (remaining term of royalty agreement)
19.8 (8.5)
0.8 (5.0)
2022 £m (years)
22.5 (9.5)
0.8 (6.0)
2021 £m (years)
50.4 (14.0)
58.5 (15.0)
N/A
N/A
N/A
N/A
0.9 (1.0)
1.3 (2.5)
51.3 (10.0)
N/A
2.9 (5.0)
3.4 (10.0)
211
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Consolidated Financial Statements
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. At 30 June 2022,
the liability was discounted between 5.2% and 25.0%. 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 Capital Asset
Pricing Model based approach, also taking into account systematic risk associated with elements of the future cash flows. The gross value of
the development milestone is AUD13.0 million.
The consideration payable for Laverdia is expected to be payable over a number of years, and relates to approval milestones and sales
performance. At 30 June 2022, the liability was discounted between 5.1% and 14.6% reflecting the commercial makeup of the arrangement
similar to Tri-Solfen®. The gross value of the approval and sales performance (non-royalty) milestones is USD45.5 million.
The consideration payable for Mirataz, StrixNB® and DispersinB® relates to sales performance and is expected to be payable over a number
of years.
The consideration remaining for a licensing agreement for an injectable solution relates 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 222 to 224.
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 133 to 143. 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 (£16.9 million). An upfront payment of AUD5.0 million (£2.8 million) was
payable on signing, with the balance of AUD26.0 million (£14.1 million) paid in July 2021 on the first commercial sale by Dechra into the Australian
market. Royalty payments of AUD0.9 million (£0.5 million) were paid on net sales in the year. The contingent consideration in relation to sales
milestones is disclosed in note 30.
The Group holds 49.5% of the issued share capital of Medical Ethics Pty Ltd. 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. This decision was upheld by the EU General Court on 8 June 2022, when it dismissed the
UK Government’s annulment application. The UK Government has since confirmed its intention to lodge an appeal to the EU Court of Justice.
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 Court of Justice. 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.
The Group received charging notices from HMRC in January and February 2021 under The Taxation (Post Transition Period) Act for part of
the exposure (£2.75 million) and has paid this to HMRC. As the Group considers that HMRC’s appeal will be successful, the charging notices
which were settled in full during the previous period (£2.75 million) are recorded as current tax receivables on the basis that the amount will be
repaid in due course.
At 30 June 2022, contingent liabilities arising in the normal course of business amounted to £12.4 million (2021: £13.0 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.
212
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 34. Subsequent Events
On 14 July 2022 the Group undertook a further Private Placement raising EUR50.0 million and EUR100.0 million (under seven and ten year new
senior secured notes respectively), the proceeds of which were used to repay existing debt. Interest is charged on the EUR50.0 million senior
secured notes at a fixed rate of 3.64% until maturity, and 3.93% on the EUR100.0 million senior secured notes.
On 20 July 2022, the Group acquired 100% of the share capital of Piedmont Animal Health Inc (Piedmont) for USD210.0 million in cash. Piedmont
is an established product development business with a track record of developing products for multi-national animal health companies. The initial
assessment of the assets and liabilities acquired is that they comprise Intangible Assets (principally In-Process Research and Development) and
an immaterial amount of Working Capital and Other Assets/Liabilities. A fair value assessment is in the process of being performed and this, along
with the other requirements of IFRS 3 ‘Business Combinations’, will be reported in the Group’s Half Year Report and Financial Statements for the
year to 30 June 2023.
On 21 July 2022 the Group successfully completed a share placing of 5,364,683 new ordinary shares, representing approximately 5% of the
existing issued share capital of the Company, at a price of 3430 pence per placing share, raising gross proceeds of £184.0 million which were
largely deployed to fund the Piedmont acquisition.
On 26 August 2022, the Group acquired 100% of the share capital of the Med-Pharmex Holdings Inc group of companies (Med-Pharmex) for
USD260.0 million in cash. Med-Pharmex is an established platform business with manufacturing, product development and regulatory capabilities
and has several products already approved and being sold in the US market. The initial assessment of the assets and liabilities acquired is
incomplete due to additional analysis needed on certain areas, which could be material, including the tax assets and liabilities arising on closing.
Whilst a preliminary assessment of fair values has not been finalised, the net assets acquired include Intangible Assets, Property, Plant and
Equipment and Working Capital. A fair value assessment is in the process of being performed and this, along with the other requirements of IFRS
3 ‘Business Combinations’, will be reported in the Group’s Half Year Report and Financial Statements for the year to 30 June 2023.
35. Underlying Operating Profit, EBITDA, ROCE 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 notional acquired intangibles from equity accounting for associates
Share of realised non-underlying profit of investments accounted for using the equity method
Foreign exchange losses/(gains) on contingent consideration
Unwind of discount associated with contingent consideration
Underlying profit before taxation
Return on capital employed
Net assets
Adjusted for:
Net debt
Net corporate tax liability/(asset) (note 20)
Net deferred tax liability (note 15)
Closing operating assets
Opening operating assets
Average operating assets
Underlying operating profit
Average operating assets
Return on capital employed
2022
£m
95.5
78.8
174.3
11.1
5.2
190.6
77.6
78.8
0.7
(0.6)
10.1
3.4
170.0
2022
£m
666.8
208.2
1.2
33.5
909.7
878.9
894.3
2022
£m
174.3
894.3
19.5%
2021
£m
84.0
78.2
162.2
11.0
4.5
177.7
74.0
78.2
0.7
–
(3.8)
1.0
150.1
2021
£m
632.9
200.2
(1.0)
46.8
878.9
843.8
861.4
2021
£m
162.2
861.4
18.8%
213
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Company Statement of Financial Position
At 30 June 2022
Fixed assets
Investments
Intangible assets
Tangible assets
Current assets
Trade and other receivables (includes amounts falling due after more than one year of £51.1 million
(2021: £47.9 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
2022
£m
735.7
6.2
1.6
743.5
115.0
85.8
200.8
(0.2)
(147.3)
53.3
796.8
(150.2)
646.6
1.1
413.9
0.6
82.6
153.2
37.1
(41.9)
148.4
646.6
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
The financial statements were approved by the Board of Directors on 5 September 2022 and were signed on its behalf by:
Ian Page
Chief Executive Officer
5 September 2022
Paul Sandland
Chief Financial Officer
5 September 2022
Company number: 3369634
214
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com Company Statement of Changes in
Shareholders’ Equity
For the year ended 30 June 2022
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
Year ended 30 June 2022
At 1 July 2021
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 2022
Called up
share
capital
£m
Share
premium
account
£m
Foreign
currency
translation
reserve
£m
Merger
reserve
£m
Retained
earnings
£m
Total
shareholders’
funds
£m
1.1
–
–
–
–
–
–
1.1
1.1
–
–
–
–
–
–
1.1
409.3
–
–
–
–
2.3
2.3
411.6
411.6
–
–
–
–
2.3
2.3
413.9
0.6
–
–
–
–
–
–
0.6
0.6
–
–
–
–
–
–
0.6
82.6
–
–
–
–
–
–
82.6
82.6
–
–
–
–
–
–
82.6
137.2
50.2
50.2
(37.9)
3.7
–
(34.2)
153.2
153.2
37.1
37.1
(44.8)
2.9
–
(41.9)
148.4
630.8
50.2
50.2
(37.9)
3.7
2.3
(31.9)
649.1
649.1
37.1
37.1
(44.8)
2.9
2.3
(39.6)
646.6
Refer to the Group notes for dividend paid (note 10), share-based payment charge (note 26) and shares issued (note 25).
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 Company.
215
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview 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 2022 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 £37.1 million (2021: £50.2 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.
There are no significant accounting estimates or judgements. The main area of estimation uncertainty, which does not meet the definition under
IAS 1 of a significant accounting estimate is in respect of the impairment of investments (Note iv)
Adoption of New and Revised Standards
A number of amendments to IFRSs became effective for the financial year beginning on 1 July 2021. None of these standards had any impact
on the Company’s accounting policies and did not require retrospective adjustments.
In April 2021, the IFRS Interpretations Committee published its final agenda decision on Configuration and Customisation costs in a Cloud
Computing Arrangement. The agenda decision considers how a customer accounts for configuration or customisation costs in a cloud
computing arrangement. The agenda decision does not have a material impact on the Company in respect of the current period or prior
periods.
The Company has adopted the amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 as issued in
August 2020. In accordance with the transition provisions, the amendments have been adopted retrospectively to hedging relationships and
financial instruments. Comparative amounts have not been restated, and there was no impact on the current period opening reserves amounts
on adoption.
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
216
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com (i) Principal Accounting Policies of the Company continued
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
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.
217
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Company Financial Statements
(i) Principal Accounting Policies of the Company continued
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.
(ii) Directors and Employees
Total emoluments of Directors (including pension contributions) amounted to £3.9 million (2021: £4.9 million). Information relating to Directors’
emoluments, share options and pension entitlements is set out in the Directors’ Remuneration Report on pages 133 to 143. 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 1.1807 (2021: 1.1287).
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
2022
Number
71
71
2021
Number
65
65
2022
£m
7.9
1.5
0.4
2.9
12.7
2021
£m
6.4
0.9
0.3
3.7
11.3
The Group operates a stakeholder personal pension scheme for certain employees and contributed between 6% and 12% of pensionable
salaries. Total pension contributions amounted to £0.4 million (2021: £0.3 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 30 June 2021
Additions
At 30 June 2022
Impairment
At 30 June 2021
Charge for the year
At 30 June 2022
Net book value
At 30 June 2022
At 30 June 2021
2022
£m
0.1
0.2
2.6
–
0.1
2021
£m
0.1
0.2
2.6
–
0.1
Shares in
subsidiary
undertakings
£m
771.1
95.9
867.0
12.2
119.1
131.3
735.7
758.9
On 6 June 2022, the Company invested £95.9 million into the share capital of Dechra Holdings Netherlands B.V., a wholly owned subsidiary
as part of a wider restructuring of the Group, which also resulted in an impairment of £119.1 million.
A list of subsidiary undertakings is given in note (xiii).
218
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com (iv) Investments continued
Impairment
Investments in subsidiaries are assessed annually to determine if there is any indication that these may be impaired. In June 2022, the receipt of dividends
from Dechra Finance Limited and Dechra Finance Sterling Limited, as part of the reorganisation of financing our Dutch business, represented an indicator
of impairment in respect of the Company’s investments in these entities. The recoverable amount for both investments was determined based on a value-
in-use calculation. The recoverable amount calculated in respect of Dechra Finance Sterling Limited exceeded the carrying value of the investment and
thus no impairment was recognised. The recoverable amount calculated in respect of Dechra Finance Limited was £119.1 million lower than the carrying
value of the investment and therefore an impairment loss of this amount has been recognised. The calculation of value-in-use uses cash flow projections
based on financial budgets approved by management covering an appropriate period. Given the nature of these two entities, this period was considered
to be the term of the financing loans. The following sets out the key assumptions within the two value-in-use calculations:
−
−
−
Intercompany receivables, inclusive of interest, are recoverable from the counterparty and are assessed for recovery in accordance with IFRS 9;
Timing of expected cash flows in respect of amounts due to the Company; and
A post-tax discount rate of 7.88%. There is no material difference in the approach taken to using pre-tax cash flows and a pre-tax rate
compared to post-tax cash flows and a post-tax rate, as required by IAS 36.
The two key assumptions that are sensitive to a reasonable change are in respect of the timing of repayment of amounts due to the Company and
the discount rate: (i) a one year delay in amounts due to the Company would reduce the impairment loss by £6.2 million; (ii) a 2% increase in the
post-tax discount rate would increase the impairment loss by £3.8 million. A 2% decrease, would decrease the impairment loss by £0.2 million.
(v)
Intangible Assets
Cost
At 1 July 2021
Additions
At 30 June 2022
Accumulated Amortisation
At 1 July 2021
Charge for the year
At 30 June 2022
Net book value
At 30 June 2022
At 30 June 2021
(vi) Tangible Assets
Cost
At 1 July 2021
Additions
Disposals
At 30 June 2022
Accumulated Depreciation
At 1 July 2021
Charge for the year
Disposals
At 30 June 2022
Net book value
At 30 June 2022
At 30 June 2021
Net book value of right-of-use assets
At 30 June 2022
At 30 June 2021
Depreciation charge of right-of-use assets
2022
2021
Included in additions are £0.5 million (2021: £0.2 million) of right-of-use assets.
Product rights
£m
Software
£m
Total
intangible
assets
£m
5.1
–
5.1
4.8
0.3
5.1
–
0.3
13.6
0.7
14.3
5.8
2.3
8.1
6.2
7.8
Short
leasehold
buildings
£m
Motor
vehicles
£m
Plant and
fixtures
£m
1.0
0.6
–
1.6
0.3
0.1
–
0.4
1.2
0.7
1.2
0.7
0.1
0.1
0.5
–
(0.1)
0.4
0.2
0.1
(0.1)
0.2
0.2
0.3
0.2
0.3
0.1
0.1
0.7
0.2
–
0.9
0.6
0.1
–
0.7
0.2
0.1
–
–
–
–
18.7
0.7
19.4
10.6
2.6
13.2
6.2
8.1
Total
£m
2.2
0.8
(0.1)
2.9
1.1
0.3
(0.1)
1.3
1.6
1.1
1.4
1.0
0.2
0.2
219
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Company Financial Statements
(vii) Trade and Other Receivables
Amounts owed by subsidiary undertakings
Group relief receivable
Deferred taxation (see note (xi))
Other receivables
Prepayments and accrued income
2022
£m
107.8
4.1
0.8
1.2
1.1
115.0
2021
£m
84.8
2.5
1.5
1.5
0.8
91.1
Included in debtors are amounts of £0.8 million (2021: £1.5 million) due after more than one year relating to deferred tax assets.
Of the amounts owed by subsidiary undertakings, £50.3 million is due after more than one year (2021: £46.4 million). This is made up of
a balance of £1.3 million repayable in 2025 (interest of 3.5% above Canadian Dollar offered rate), and a balance of £49.0 million repayable in
2027 (interest of 1.7%). The remaining amounts owed by subsidiary undertakings of £57.5 million is unsecured and repayable on demand.
Of the £57.5 million, £46.4 million attracts interest of between 0.591% and 1.83% above Risk Free Reference rate, with the remaining trade
balance of £11.1 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
Accruals and deferred income
2022
£m
85.8
85.8
2022
£m
1.0
0.1
139.7
6.5
147.3
2021
£m
82.0
82.0
2021
£m
1.3
0.1
144.7
7.0
153.1
Amounts due to subsidiary undertakings are primarily unsecured and repayable on demand. £110.3 million attracts interest between 0.186%
and 0.25% below Risk Free Reference rate; 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 2022 of 32.89 pence
per share (2021: 29.39 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 2023. The total cost of the proposed final dividend is £35.6 million (2021: £31.8 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
2022
£m
0.2
0.1
68.3
83.3
(1.5)
150.2
150.4
2021
£m
0.2
0.2
25.2
115.5
(2.1)
138.8
139.0
220
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com (x) Borrowings continued
On 22 December 2021, the Company entered into an Amendment and Restatement Agreement in relation to the £340.0 million Revolving
Credit Facility (RCF) maturing 25 July 2024. With effect from 1 January 2022, any new Borrowings drawn on the RCF will now use Risk
Free Reference (RFR) rates instead of LIBOR rates. The relevant RFR rates for the principal Borrowings of the Company will be SONIA (for
Borrowings in GBP). The interest rate charged on any new Borrowings drawn under the RCF will be the relevant RFR rate plus the Margin plus
a Credit Adjustment Spread (CAS). The Margin on this Facility is a minimum of 1.3% and a maximum of 2.2%, dependent upon the Leverage
(the ratio of Total Net Debt to Adjusted EBITDA) of the Group. The CAS charged on the RCF will be a minimum of 0.0326% and a maximum
of 0.42826%, dependent upon the term and currency of the new Borrowings. At 30 June 2022, £25.0 million was drawn against the £340.0
million RCF. The facility is not secured on any specific assets of the Group but is supported by a joint and several cross guarantee structure. All
covenants were met during the year ended 30 June 2022. As at 30 June 2022, interest being charged on this facility is 1.30% above RFR.
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 2022 amounting to £125.5 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 (2021: £nil).
Contingent Liabilities
The Company guarantees certain borrowings of other Group companies under the above facilities, which at 30 June 2022 amounted to
£164.7 million (2021: £164.7 million).
(xi) Deferred Tax
At 1 July 2021 (included in trade and other receivables)
Recognised in the income statement
Recognised in equity/OCI
At 30 June 2022 (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 (2021: 19.0% or 25.0%):
Short term timing differences
Accelerated capital allowances
2022
£m
1.0
(0.2)
0.8
£m
1.5
–
(0.7)
0.8
2021
£m
1.7
(0.2)
1.5
Deferred tax assets in relation to losses amounting to £nil (2021: £nil) have not been recognised due to uncertainty over their recoverability.
(xii) Called Up 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
2021
2022
£m
1.1
0.0
1.1
Number
108,215,323
177,414
108,392,737
£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 2022 under the various Group share option schemes are
shown in note 26 to the Consolidated Financial Statements.
Post year end the Company issued 5,247,813 shares of 1 pence each by way of a placing and 116,870 ordinary shares via a retail offer, both
at an issue price of 3430 pence per share on 25 July 2022. The placing generated gross proceeds of £184.0 million. The placing price of 3430
pence per share was a 8.0% discount to the closing middle market share price on 20 July 2022, being the date of the placing announcement.
See note (iv).
221
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Company Financial Statements
(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
Mexico
Developer, regulatory and marketer of
veterinary pharmaceuticals
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9
7UA, United Kingdom
Campus Corporativo Coyoacán Avenida
Coyoacán número 1622 Colonia Del Valle
C.P. 03100 Delegación Benito Juárez
Ciudad de México, México
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
Dechra Limited
The Netherlands
Regulatory
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 Productos
Veterinarios, S.A. de
C.V. *
Dechra Regulatory
B.V. *
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. *
222
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com (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 *
Dechra Veterinary
Products, LLC *
Dechra Veterinary
Products Korea Yuhan
Hoesa *
Eurovet Animal Health
B.V. *
Country of
Incorporation
New Zealand
Norway
Poland
Spain
Sweden
USA
Korea
The Netherlands
Genera d.d. *
Croatia
Genera d.o.o. Sarajevo * Bosnia and
Herzegovina
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
Marketer of veterinary pharmaceuticals
and pet diets
Marketer of veterinary pharmaceuticals
and pet diets
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
10th floor, 97, Uisadang-daero,
Yeongdeungpo-gu, Seoul, Korea (Youido-
dong, Kyobo Securities Building)
Dechra Veterinary Products
A/S
Dechra Veterinary Products
A/S
Dechra Holdings US Inc
Dechra Limited
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
All the above related undertakings are 100% owned by the Company. For those marked with *, these are indirectly owned through other
related undertakings within the list.
223
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Notes to the Company Financial Statements
(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
Non-trading
Wales
Dales Pharmaceuticals
Limited *
England and
Wales
Non-trading
Dechra Holding
Australia Pty Limited *
Dechra Holdings
Netherlands B.V.
Dechra Holdings US
Inc *
Australia
Holding Company
The Netherlands
Holding Company
USA
Holding Company
Dechra Investments
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
Pettelaarpark 38, 5216PD
‘s-Hertogenbosch, Netherlands
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
Shareholder
Veneto Limited
Dechra Holdings US Inc
Veneto Limited
Veneto Limited
Dechra Limited
Dechra Pharmaceuticals
PLC
Dechra Limited
Dechra Pharmaceuticals
PLC
Dechra Veterinary
Products Suisse
GmbH *
Switzerland
Holding Company
Aeschenplatz, 4, Basel 4052, Switzerland
Dechra Limited
DermaPet, Inc *
USA
Non-trading
Dragon Fire Holdings,
LLC *
USA
Holding Company
Farvet Laboratories
B.V. *
Veneto Limited
The Netherlands
Non-trading
England and
Wales
Holding Company
Principal Place of Business: 7015 College
Blvd, Suite 525, Overland Park KS 66211,
United States
1401 Joel East Road, Fort Worth TX TX
76140-6003, United States
Handelsweg 25, 5531AE Bladel,
The Netherlands
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9
7UA, United Kingdom
Dechra Veterinary
Products LLC
Dechra Holdings US Inc
Eurovet Animal Health
B.V.
Dechra Pharmaceuticals
PLC
All the above related undertakings are 100% owned by the Company. For those marked with *, these are indirectly owned through other
related undertakings within the list.
(xiv) Subsequent Events
On 14 July 2022 the Company undertook a further Private Placement raising EUR50.0 million and EUR100.0 million (under seven and ten year
new senior secured notes respectively), the proceeds of which were used to repay existing debt. Interest is charged on the EUR50.0 million senior
secured notes at a fixed rate of 3.64% until maturity, and 3.93% on the EUR100.0 million senior secured notes.
On 20 July 2022 the Dechra Group acquired 100% of the share capital of Piedmont Animal Health Inc for USD210.0 million (£175.0 million) in
cash. The acquisition was funded a few days later using the proceeds of the share placing completed by the Company (as noted below).
On 21 July 2022 the Company successfully completed a share placing of 5,364,683 new ordinary shares, representing approximately 5% of the
existing issued share capital of the Company, at a price of 3430 pence per placing share, raising gross proceeds of £184.0 million which were
largely deployed to fund the Piedmont acquisition.
On 26 August 2022 the Dechra Group acquired 100% of the share capital of the Med-Pharmex Holdings Inc group of companies for USD260.0
million (£221.5 million) in cash. The acquisition was funded by a drawdown of USD260.0 million by the Company from the Group’s Revolving
Credit Facility.
224
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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
2022
£m
681.8
174.3
131.7
121.57
120.84
44.89
95.5
58.2
53.72
53.40
848.9
444.4
(158.7)
(467.8)
666.8
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
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
122.9
(78.3)
(46.1)
89.1
(136.1)
(55.1)
106.4
(81.5)
118.9
81.8
(61.9)
(20.1)
64.0
(241.7)
193.8
225
Strategic ReportGovernanceAdditional InformationStock Code: DPHFinancial StatementsOverview Additional
Information
Contents
Glossary
Shareholder Information
Advisers
228
230
IBC
Glossary
The following is a glossary of a number of the terms and acronyms
which can be found within this document:
DVP
Dechra Veterinary Products
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
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
CAS
Credit Adjustment Spread
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
CSOP
Company Share Option Plan
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
ESEF
European Single Electronic Format
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
EURIBOR
The Euro Interbank Offer Rate
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
Dechra Values or Values
Dedication, Enjoyment, Courage, Honesty, Relationships and Ambition
FRC
Financial Reporting Council
DPM&S
Dechra Pharmaceuticals Manufacturing and Supply
FRS
Financial Reporting Standards
DSC
Dechra Service Center
DTR
Disclosure and Transparency Rules
228
FTSE
Companies listed on the London Stock Exchange
FTSE 100 Index
An index comprising the 1st to 100th largest companies listed on the
London Stock Exchange in terms of their market capitalisation
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com FTSE 250 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 Principles
GDPR
General Data Protection Regulation
GHG
Greenhouse Gas
GMP
Good Manufacturing Practices
GPTW
Great Place To Work
GRT
Gross Registered Tonnage
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
NA Pharmaceuticals
North American Pharmaceuticals Segment comprising DVP US, Canada
and Mexico
Non-Executive Directors
The Non-Executive Directors of the Company, currently Alison Platt, Lisa
Bright, Julian Heslop, Lawson Macartney, Ishbel Macpherson and John
Shipsey
OECD
The Organisation for Economic Cooperation and Development
Ordinary Shares
An ordinary share of 1 pence in the share capital of the Company
Oracle ERP
Enterprise Resources Planning (ERP) software
PDRA
Dechra’s Product Development and Regulatory Affairs team
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
RFR
Risk Free Reference
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
SOFR
Secured Overnight Financing Rate
SONIA
Sterling Overnight Index Average
SPC
Summary of Product Characteristics
TCFD
Task Force on Climate-related Financial Disclosures
TSR
Total Shareholder Return
229
Strategic ReportGovernanceFinancial StatementsStock Code: DPHAdditional InformationOverview Shareholder Information
Financial Calendar
2022 Annual General Meeting
Final Dividend Ex-Dividend Date
Final Dividend Record Date
Final Dividend Payment Date
Announcement of Half Yearly Results
20 October 2022
27 October 2022
28 October 2022
18 November 2022
27 February 2023
Annual General Meeting
The 2022 Annual General Meeting of the Company will be held at
9.30 am on 20 October 2022 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.
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.
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.
On 25 July 2022, 5,247,813 shares were offered by way of a placing
and 116,870 ordinary shares via a retail offer, both at an issue price of
£34.30 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.
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) 121 415 7047, if calling from outside 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%
Equiniti Financial Services Limited and its agents are authorised and
regulated by the Financial Conduct Authority.
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.
230
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2022www.dechra.com 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.
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.annualreport2022.com
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