Annual Report and Accounts
for the year ended 30 June 2023
Company Number: 3369634
Making a Difference
Worldwide
The Veterinary Perspective
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Overview
Highlights
Chair’s Statement
Chief Executive Officer’s Statement
Our Purpose Framework
Dechra at a Glance
Strategic Report
Our Marketplace
Business Model
Delivering Our Strategy
Strategy in Action
Product Development
Global Product Offering
Financial Review
Key Performance Indicators
Non-Financial and Sustainability Information
Statement
Section 172 Statement and Stakeholder
Engagement
Sustainability
Task Force on Climate-related
Financial Disclosures
Our Environment
How the Business Manages Risk and
Viability Statement
Understanding Our Key Risks
Governance
Letter from the Chair on Governance
Governance at a Glance
01
02
03
08
10
24
28
32
36
38
42
44
52
54
56
67
69
76
79
83
90
92
Board of Directors and Senior Executive Team 94
Board Leadership and Company Purpose
Division of Responsibilities
Composition, Succession and Evaluation
Audit, Risk and Internal Control
Directors’ Remuneration Report
Directors’ Report – Other Disclosures
Statement of Directors’ Responsibilities
Financial Statements
Independent Auditors' Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
98
108
113
123
132
166
169
172
182
183
Welcome to Our
2023 Annual Report
Dechra is a global specialist in veterinary
pharmaceuticals and related products business.
Our expertise is in the development,
manufacture and sales of high quality products
exclusively for veterinarians worldwide.
Year in Review
Strategic
• Board recommended offer for the Group, which was
subsequently approved by shareholders
• Acquisition of Piedmont Animal Health, Inc bolstered our
new product pipeline, making it stronger than ever with 39
projects now in various stages of development
• Acquisition of Med-Pharmex Holdings, Inc increased the
breadth and scale of our portfolio in the US
Read more on pages 02 to 07
Operational
• Navigated unprecedented changes within the veterinary
wholesaler channel
• Resilient supply chain performance with 50% of
manufacturing now performed in-house
• Changes made within International division to help deliver
future growth
Read more on pages 03 to 07
Consolidated Statement of Financial Position 184
Sustainability
Consolidated Statement of Changes in
Shareholders’ Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial
Statements
Company Statement of Financial Position
Company Statement of Changes in
Shareholders’ Equity
Notes to the Company Financial Statements
Financial History
Additional Information
Glossary
Shareholder Information
Advisers
185
186
187
235
236
237
247
250
252
IBC
• Significant progress made in a number of sustainability
focus areas
• Making a Difference Sustainability strategy further
embedded across the business
• ESG repositioned as its own underpin to delivery of the
Group growth strategy
Read more on pages 67 to 78
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Highlights
Financial Highlights
Revenue
£761.5m
AER: +11.7% CER: +5.5%
Research & Development Investment
as a % of Revenue
7.6%
£57.5m +280 bps
23
22
21
20
19
£761.5m
£681.8m
£608.0m
£515.1m
£481.8m
23
22
21
20
19
7.6%
4.8%
5.3%
5.5%
5.2%
Underlying Operating Profit
£165.1m
AER: (5.3)% CER: (10.8)%
Underlying Diluted Earnings Per Share
94.57p
AER: (21.7)% CER: (26.8)%
23
22
21
20
19
£165.1m
£174.3m
£162.2m
£128.3m
£127.4m
23
22
21
20
19
94.57p
120.84p
108.14p
92.19p
90.01p
Reported Operating Profit
£6.3m
AER: (93.4)% CER: (89.8)%
Reported Diluted Earnings Per Share
(24.59)p
AER: (146.0)% CER: (140.7)%
23
22
21
20
19
£6.3m
(24.59)p
£95.5m
£84.0m
£52.2m
£39.0m
23
22
21
20
19
53.40p
51.03p
32.76p
30.07p
For further KPIs see pages 52 and 53
Forward-Looking Statements
This document contains certain forward-looking
statements. The forward-looking statements reflect
the knowledge and information available to the
Company during preparation and up to the publication
of this document.
By their very nature, these statements depend upon
circumstances and relate to events that may occur in
the future and thereby involve a degree of uncertainty.
Therefore, nothing in this document should be construed
as a profit forecast by the Company.
Stock Code: DPH
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Chair’s Statement
“We have navigated a year of
significant change and continue
to have an exciting future ahead.”
Alison Platt
Non-Executive Chair
Introduction
Welcome to our 2023 Annual Report, which will be the last
before the Company transfers to private ownership following
the approval by shareholders on 20 July 2023 to accept the
offer of £38.75 per share from Freya Bidco Limited, a newly
formed company to be indirectly owned by (i) EQT X EUR
SCSp and EQT X USD SCSp, each represented by its manager
(gérant) EQT Fund Management S.à r.l. (collectively referred to
as EQT) and (ii) Luxinva S.A.
The 2023 financial year was incredibly eventful. A year that
began with a refinancing of debt facilities and equity raise
to help fund the acquisitions of Piedmont Animal Health, Inc
and Med-Pharmex Holdings, Inc then saw unprecedented
industry-wide changes within the US wholesaler channel
at the turn of the calendar year, which later extended to
the UK market. Although the animal health market remains
highly resilient, it has not been completely immune to the
macroeconomic challenges posed by the ongoing cost of
living crisis, creating a more unpredictable environment in
some of our major European markets in particular.
Focused on implementing Dechra’s five year plan, the
Board’s agenda centred on integrating both US acquisitions,
the planned uplift in investment in R&D and navigating
the significant market dynamics that were outside of our
control. In the midst of this the Board was approached by EQT
who signalled their desire to buy the business. After some
weeks of negotiation, we indicated that we were minded to
recommend the offer, and subsequently granted EQT access
to undertake due diligence. This involved considerable
additional work by Dechra’s management team and I want
to take this opportunity, on behalf of the Board, to express
my thanks for their tireless efforts in guiding the transaction
through to a successful conclusion.
Board Changes
Following ten years as a Non-Executive Director at Dechra,
Ishbel Macpherson stepped down from the Board on
22 June 2023. Ishbel’s contribution to the Board over that time
has been outstanding and on behalf of the Board I would
like to thank her for her tenure, including the additional time
committed to enable us to appoint a replacement Non-
Executive Director and Remuneration Committee Chair.
We were delighted that Geeta Gopalan joined as a Non-
Executive Director on 1 January 2023, later succeeding Ishbel
as Remuneration Committee Chair on 1 March 2023.
Diversity
Dechra is committed to building high performing diverse
teams at all levels in the organisation. We have long been
cognisant of the ongoing requirements regarding diversity
targets for listed businesses, and highlighted last year our
intention to address these as part of the succession plan for
our Remuneration Chair. Following the appointment of Geeta
as noted above, we now have one director from a minority
ethnic background and have maintained 37.5% female
representation on the Board.
Sustainability
Dechra places great importance on our ability to positively
impact the animals, people and areas of our planet touched
by our operations. As you will see throughout this Report we
have further integrated our Sustainability strategy within
our business and corporate reporting, illustrating the extent
to which it is woven within the fabric of the Group. Tangible
examples of this include our commitment to a Living Wage
globally, particularly pertinent this year as employees
navigate rising inflation and other cost of living pressures, and
our ambitious carbon emission reduction plans which have
been submitted to the Science Based Targets initiative.
Looking Ahead
Throughout all of the events noted above and many more
besides, our Values and Culture have shone through. Dechra
remains a special business with special people. Along with the
rest of the Non-Executive Directors, I will step down from the
Board once the business has transferred to private ownership
believing that it is well positioned to continue its sustainable
growth strategy and has an exciting future ahead.
Alison Platt
Non-Executive Chair
12 October 2023
02
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Chief Executive
Officer’s Statement
“Our strategy remains very much
unchanged and we are making a
number of investments to deliver
long term value.”
Ian Page
Chief Executive Officer
Introduction
The 2023 financial year was amongst the most eventful in our
history. We delivered a robust performance in the first half
against tough comparators from the prior year as the global
companion animal market returned to more normalised
levels of growth following the COVID-19 pandemic, before a
second half that proved challenging.
Unprecedented changes within the US wholesaler channel at
the turn of the calendar year, which subsequently extended
to the UK market, led to significant industry wide disruption
as the levels of inventory carried by intermediaries were
materially reduced. Rising inflation, unpredictable country
specific dynamics within some of our key European markets,
and ongoing integration of the two US acquisitions made
in July and August 2022 all required navigating. We also
dedicated considerable time and effort in facilitating the
approach by Freya Bidco Limited, a newly formed company
to be indirectly owned by (i) EQT X EUR SCSp and EQT X USD
SCSp, each represented by its manager (gérant) EQT Fund
Management S.à r.l. (collectively referred to as EQT) and (ii)
Luxinva S.A to acquire the Company, which I will reflect on
further at the end of this statement.
Despite the above, we retained a clear focus on delivering
our strategy. We have, as planned, significantly increased
investment in our product development pipeline, with an
increasing emphasis on innovation in Companion Animal
Products (CAP); we made strategic changes within our
International business, the results of which are disclosed
separately for the first time this year; and we have further
strengthened our sales force within the key US market.
I am proud of the way in which all Dechra employees have
responded to the events of the past year, proving once again
that they really are our greatest asset. The way in which
we work remains an important differentiator relative to our
competitors and, ultimately, is a key factor in delivering our
strategic goals.
Operational Review
European Pharmaceuticals Segment
Revenue in our European (EU) Pharmaceuticals segment
increased by 4.3% at CER (6.3% at AER), all of which was
existing revenue growth as there were no acquisitions in
Europe over the past twelve months. Revenue from
non-core third party contract manufacturing, reported within
this segment, saw a planned decline. Excluding the impact of
this revenue, EU Pharmaceuticals revenue growth was 5.5% at
CER (7.5% at AER).
Growth was delivered across all major European countries
with the exception of the Netherlands, where the impact of
portfolio rationalisation and local competition impacted
year-on-year performance. The main driver of growth was
CAP; however, it is pleasing that FAP remained in growth
despite a challenging market and that Equine and Nutrition
both delivered double digit growth.
Although macroeconomic uncertainties created a mixed
picture in some European markets, the nature of the
Dechra portfolio with its emphasis on prescription only,
non-discretionary medicines helped us to outperform the
market overall. This was particularly evident towards the
end of the financial year when territories such as the UK,
France and Germany showed positive signs of increased
demand, contributing to a record sales month for the EU
Pharmaceuticals segment in June 2023.
Education continues to be the main tool we use to engage
our veterinary customers. Our commitment to providing
technical support and Continuing Professional Development
(CPD) training to veterinarians remains crucial to our success,
particularly in relation to our novel portfolio.
See the Glossary on page 07 for definitions
Stock Code: DPH
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Chief Executive
Officer’s Statement
North American Pharmaceuticals Segment
Total North American (NA) revenue increased by 8.9% at CER
(20.3% at AER). Existing revenue, which excludes the impact
of acquisitions made over the last twelve months, decreased
by (2.0)% at CER but increased 8.3% at AER. Although it was
disappointing to see like-for-like revenues decline in constant
currency terms, this nonetheless represented a solid outcome
given the out-performance over the previous two years
(when existing revenue growth at CER was 16.7% and 21.3% in
financial years 2021 and 2022 respectively) and the severe
disruption seen within the US wholesaler channel during the
second half.
Despite the wholesaler de-stocking being deeper and longer
than we had initially anticipated, we saw consistently strong
end customer demand for Dechra products throughout the
year. Independent data for sales from wholesalers out to
veterinary clinics showed sales growth of over 10% for the
year as a whole and over 12% for the second half of the year
despite the wholesaler disruption, offering reassurance that
the de-stocking impact on our performance should be
one-off in nature rather than a structural headwind.
We continue to leverage our relationship with Vetcove, an
online purchasing platform used by over 19,000 US veterinary
hospitals, to extend the reach of our Dechra Rewards
Scheme, deepen brand loyalty and help us compete with
the increasing challenge posed by distributor private label
alternatives. We have also increased the scale of our sales
team and now have approximately 140 sales representatives
in North America.
International Pharmaceuticals Segment
Having previously reported our International business,
representing 11.4% of Group revenue, within the European
Pharmaceuticals segment, we are now disclosing it
separately in order to provide greater transparency between
the global markets in which we operate.
International Pharmaceuticals revenue for the year as a
whole decreased by (0.8)% at CER but increased 4.3% at AER.
Within this full year outturn, there was a significantly improved
performance during the second half of the year when sales
grew 10.0% at CER, following a decline of (9.0)% in the first
half. The revenue decline during the first half was due to two
strategic changes. In South Korea, we established our own
sales and marketing business unit to replace the previous
distribution partner. Due to this transition, there was a period
of approximately seven months during which no revenue
was recognised in South Korea. We re-commenced sales
through our own subsidiary in February 2023 and revenue
contribution during the final five months of the financial year
was £1.0 million. We also experienced disruption to our sales
of nutrition products in Japan due to a change of distribution
partner; however, we expect to commence trading through a
new distributor shortly.
The International segment covers a large number of
countries, many of which are smaller, emerging markets
that we serve via numerous distribution partners. In the more
established markets of Brazil, Australia and New Zealand,
where we have our own sales and marketing presence,
we delivered good revenue growth of 10.3% at CER. These
territories collectively represent approximately 65% of total
International Pharmaceuticals revenue.
Product Category Performance
Companion Animal Products (CAP) continue to represent the
majority of our business at 73.8% of Group revenues and grew
by 3.9% at CER, with performance in EU being the main driver.
Therapeutic sectors such as dermatology, anaesthesia and
analgesia and cardiovascular performed the strongest.
Food producing Animal Products (FAP), representing 11.7% of
Group revenue, grew by 8.5% at CER. This reflected the net
impact of challenges in the key European FAP market of the
Netherlands offset by a positive contribution from the small
FAP portfolio acquired through Med-Pharmex for sale in the
US market.
Equine, representing 8.6% of Group revenue, grew by 25.1% at
CER. Performance was particularly strong in NA, with growth of
35.1% at CER supported by the product acquisitions made in
the prior year and the contribution from the new
Med-Pharmex portfolio.
Nutrition represents 5.1% of Group revenue and increased by
8.6% at CER. The majority of our Specific® branded diet sales
are made in Europe where we delivered strong growth with
around 300 new clinics starting to use Specific for the first
time, and this performance offset the decline in international
sales due to the operational changes in South Korea and
Japan as noted above.
Strategic Growth Drivers
Acquisitions
We completed two material company acquisitions at the
start of the financial year; Piedmont Animal Health, Inc in July
2022 and Med-Pharmex Holdings, Inc in August 2022, for a
combined consideration of approximately $474.1 million. The
strategic rationale for both acquisitions remains unchanged,
with both businesses having the potential to deliver
considerable value over the coming years.
Piedmont is a product development company with eight
novel products in various stages of development, all in the
CAP market and all within Dechra’s key therapeutic areas
of competence. We invested £7.7 million of research and
development spend in the Piedmont pipeline during the year.
In light of a negative opinion received from the FDA relating to
one of the near term candidates which could result in a delay
or cancellation of the project, we have also recognised a
non-underlying impairment of £69.6 million. Further details
can be found in the Financial Review later in this report.
Conversely, Med-Pharmex is an established manufacturing
business with a number of products already approved
and established in the US market. The ten month revenue
contribution from Med-Pharmex was £28.9 million. This
was lower than we had expected at the time of making the
acquisition due to quality improvement works that were
brought forward and supply chain challenges on certain
products, both of which adversely impacted performance.
The process of re-branding and migrating a selection
of the acquired portfolio to our own in-house sales and
marketing teams is underway. Notwithstanding the short term
operational challenges noted above, the acquisition should
provide a material margin benefit and operational leverage
opportunity and also offers longer term optionality with
regard to our US manufacturing footprint.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Product Developments
and Regulatory Affairs
Pipeline Progress
It has been a year of strong progress on our product
development pipeline having invested a record £57.5 million
into R&D, representing 7.6% of Group revenue, and with an
increasing emphasis on innovation. This investment has been
made across a combination of our existing pipeline together
with the eight candidates from the Piedmont acquisition as
noted above.
Our partnership with Akston Biosciences to develop a
breakthrough long acting insulin for dogs and cats remains
on track for a calendar year 2026 approval of the dog
product. Scaling up production of the active pharmaceutical
ingredient by Akston Biosciences and our final drug product
development work are both progressing as planned. The
next stage of development is to perform our pivotal efficacy
studies, which are expected to start in late 2024.
In collaboration with our partner Animal Ethics Pty Ltd and a
contract manufacturer, we are developing a cost-effective
method to manufacture sterile Tri-Solfen® for use in piglet
castration, as mandated by the European regulator. If the
planned pivotal manufacturing batches are successful, we
will have a more direct path towards EU-wide approval.
New opportunities are constantly being identified and our
pipeline remains stronger than ever and well positioned
to deliver material products to support future growth,
particularly in the US.
Product Approvals
A number of marketing authorisations have been achieved
throughout the year. These represent both the extended
reach of existing products into new territories and also the
approval of new products delivered out of our pipeline and
partnerships. The main product milestones of note were:
• Approval of Zycosan® (pentosan polysulfate sodium
injection), a novel treatment for the control of clinical signs
associated with osteoarthritis in horses, for use in the US
market;
• Following approval in the US and EU, we also received
Canadian approval for Zenalpha®, a novel canine sedative
injection;
• A number of developments with regard to Tri-Solfen®, a
food producing animal product with multiple possible
applications where we hold the global distribution rights:
॰ Approval for use in its non-sterile form in Brazil,
Canada and Portugal;
॰ Grant of a four day withdrawal period relating to the
New Zealand licence, opening up the significant tail
docking market in sheep; and
॰ Approval for sale under a special licence to a major
dairy integrator in Saudi Arabia;
• Registration of CosACTHen® in Brazil to support the sales
and clinical use of our endocrinology portfolio of solutions;
• Registration of Forthyron® in a third international distribution
market that will be unique to that territory; and
• Approval of Prevomax® for use in the Australian market.
Stock Code: DPH
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Chief Executive
Officer’s Statement
We continue to have a focus on quality standards across
the Group, and in that regard it was pleasing that Somersby
received zero issues raised from their APVMA audit and that
both Bladel and Zagreb sites had successful European GMP
audits in the year.
Technology
Information technology continues to be a key strategic focus
and we have made good progress in establishing a clear IT
strategy that is aligned to our business priorities and future
growth opportunities. The first phase of our new quality and
document management system, Veeva, has now been rolled
out across five manufacturing sites and there are further
modules planned for release over the coming years. Our key
manufacturing ERP systems are also being upgraded to one
consolidated cloud-based Oracle platform to help deliver
consistency of systems, processes and KPIs between sites,
and this multi-year project remains on track. The estimated
combined investment remaining for these two projects over
the next four years is £23.9 million.
In addition, we have begun to develop our thinking around the
potential strategic advantages that can be delivered through
digital activities and the better use of data. In DVP EU, we also
launched the Dechra endocrine and anaesthesia apps aimed
at helping veterinarians with the correct dosing of products.
People
As one of our ESG targets, we remain committed to paying
the Living Wage (or its equivalent) to all our employees on a
global basis. Cognisant of the challenges many employees
are facing as a result of the cost of living crisis, we carefully
considered individual job roles and country specific
considerations such as local rates of inflation as part our
annual salary review this year. We implemented a weighted
average salary increase of 6.6% from 1 January 2023 and also
introduced a number of other improved benefits.
We have been making carefully chosen strategic investments
in people across different parts of the Group. We have grown
our sales team in North America; we have strengthened our
PDRA and quality teams and recruited new site directors for
all three US manufacturing sites and the facility in Bladel, the
Netherlands.
We were pleased to appoint Geeta Gopalan as a
Non-Executive Director with effect from 1 January 2023. Geeta
subsequently became Chair of the Remuneration Committee
on 1 March 2023 as successor to Ishbel Macpherson, who
retired as a Non-Executive Director on 22 June 2023 following
ten years of outstanding service for which I am extremely
grateful.
Portfolio Focus
We regard our broad portfolio of products as a competitive
strength and are focused on becoming the partner of choice
for veterinarians worldwide in our chosen therapeutic areas.
To support this approach, we were pleased to launch a
new Dechra brand positioning in February 2023 called ‘The
Veterinary Perspective’. By seeing things from the Veterinary
Perspective, we strive to support veterinarians through
science and education, especially around uncommon
diseases and difficult to treat cases.
The category mix differs considerably between the various
territories in which we operate. This is a consequence of both
the maturity of our operations in each individual country and
also underlying market dynamics, such as the pace at which
the companion animal market is developing. This creates a
number of possible growth opportunities to pursue across
the Group.
The main new product launches over the past year were
Zenalpha in the US and a number of European markets, and
Zycosan in the US in June 2023, following approval during the
first half of the year as noted above.
Geographical Expansion
As of the year end, we operated in a total of 88 countries,
with our own sales and marketing teams in 26 and a
presence in the remaining 62 countries via a number of
distribution partners. During the year, we transitioned South
Korea to an in-house team as already explained, and we
will shortly commence sales out of a newly established entity
in Switzerland.
Strategic Enablers
Manufacturing and Supply Chain
Migrating the manufacture of key products in-house rather
than using third party Contract Manufacturing Organisations
(CMOs) has a number of strategic benefits such as improved
reliability of our supply chain, greater control over quality
standards and more efficient inventory level management.
We transferred a number of products into our Zagreb and
Skipton facilities during the first half of the year, taking the
proportion of products manufactured across our eight sites
to approximately 50%. This process will continue over the
coming years, albeit at a considered, steady pace so as
to avoid unnecessary execution risk. In the meantime, we
have rationalised the number of CMOs we work with and
are increasingly focused on partnering with fewer external
manufacturers to help facilitate stronger, closer relationships
and better overall performance.
At our Skipton, UK site we have now completed a significant
phase of the capital investment programme to create
additional space and improve work flows. These changes
have been very well received by employees working on site
and we are already benefitting from increased efficiencies.
In our manufacturing facility in Somersby, Australia, a new
secondary packaging line has delivered better throughput,
increasing production efficiency and providing scope for
further expansion.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Glossary
AER: Actual Exchange Rates
APVMA: Australian Pesticides and Veterinary Medicines
Authority
CAP: Companion Animal Products
CER: Constant Exchange Rates
ERP: Enterprise Resource Planning
ESG: Environmental, Social and Governance
EU Pharmaceuticals: European Pharmaceuticals
Segment comprising DVP EU and Dechra
Pharmaceuticals Manufacturing
FAP: Food producing Animal Products
GMP: Good Manufacturing Practices
International Pharmaceuticals: International
Pharmaceuticals Segment comprising a large number
of direct and distribution markets
KPIs: Key Performance Indicators
NA Pharmaceuticals: North American Pharmaceuticals
Segment comprising DVP US, Canada and Mexico
R&D: Research & Development
Sustainability
This year, we have made a subtle but important change to
reflect the extent to which sustainability is firmly embedded in
our strategy. Rather than ESG sitting as a standalone Strategic
Enabler, it is now re-positioned as a fundamental underpin to
delivering our strategy and, ultimately, our Purpose.
For further information on how we have integrated
sustainability across the Group, and highlights of our progress
during the financial year, please see the second edition of our
Sustainability Report available on our website.
In particular, we have submitted our ambitious carbon
reduction targets for Scope 1, 2 and 3 emissions to the Science
Based Targets initiative and also made a philanthropic
investment in AgCo Tech, a business that has developed a
unique product that improves cattle welfare and productivity
whilst at the same time reducing methane intensity and
generating strong social benefits in the communities where
it is used.
Dividend
An interim dividend of 12.50 pence per share was paid on 13
April 2023. The ongoing acquisition of the Company by Freya
Bidco Limited remains conditional upon the receipt of antitrust
approval in the European Union and foreign direct investment
approval in Australia, in each case to the extent required,
as well as the sanction of the Scheme by the Court at the
Sanction Hearing (each as defined in the scheme document
dated 26 June 2023) and is expected to occur in late 2023 or
early 2024. If prior to the acquisition becoming effective, any
dividend is announced, declared, made or paid or becomes
payable in respect of the ordinary share capital of the
Company (Dechra Shares), Freya Bidco Limited reserves the
right to reduce the consideration payable under the terms of
the acquisition for the Dechra Shares by an amount up to the
aggregate amount of such dividend. Therefore the Directors
are not recommending the payment of a final dividend.
Outlook
It is with mixed feelings that I complete this, the last of my
reports as the Chief Executive Officer of a listed company.
Since the Initial Public Offering in 2000 and my appointment
as Chief Executive Officer in 2001, being a listed company
has served Dechra well due to the help and support
demonstrated by our shareholders throughout this period.
I am very grateful for the personal support and guidance
provided to me by many stakeholders, not least shareholders,
and would like to thank everyone who has contributed to
Dechra’s success over this time.
Despite a challenging period, we ended the last financial year
strongly and have started the new one on a secure footing.
I look forward to the challenges ahead as a private company
and remain confident in our people, strategy and future
prospects.
Ian Page
Chief Executive Officer
12 October 2023
Stock Code: DPH
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Our Purpose Framework
Our purpose is the sustainable improvement of global animal health and welfare.
How We Make a Difference
We believe that our success is based upon providing
our stakeholders with a clear strategic plan that is
aligned with our Purpose. We then deliver this strategy
by focusing on three strategic enablers, all of which are
underpinned by our Sustainability strategy.
What we are focused on:
Areas supporting the delivery
of our strategy
The way we do things:
Ensuring value is created for key
stakeholder groups
nce
a
ern
v
o
G
Manufacturing
& Supply Chain
People
Technology
G
o
v
e
r
n
a
n
c
e
Our
Business
Our
Environment
Our
People
Our
Community
Read more on pages 32 to 35
Dedication
Enjoyment
Courage
Honesty
Relationships
Ambition
Governance
Our
Purpose
Growth
Strategy
Strategic
Enablers
Sustainability
Strategy
Dechra
Culture
Dechra
Values
Our Culture and Values
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.
Our Values are a consistent part of how we lead
the Dechra business. From recruitment through to
investment in the development and growth of our
employees we use our Values to describe what
matters at Dechra. To maintain that integrity our
employees are encouraged to contribute new items
or blogs which demonstrate how our Values are being
lived every day.
As the Dechra business grows through acquisition, we
have recognised the importance of onboarding new
employees into the Dechra way and enabling them to
share and build on our Values as a route to unlocking
value and success.
Read more on pages 58, 99 and 100
Ambition
Relationships
Dedication
Dechra
Values
Honesty
Enjoyment
Courage
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Overview
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Report
Governance
Financial
Statements
Additional
Information
Our Integrated Approach
to Sustainability
This year, we have made a change to how we think about
and present the interaction between our corporate strategic
enablers and our Sustainability strategy. Rather than ESG
being a standalone Strategic Enabler we have taken the
opportunity to reposition our Sustainability strategy such that
it now serves as a fundamental underpin to delivering our
corporate growth strategy and, ultimately, our Purpose.
Read more on pages 33 and 67
Our Impact
Since 2020, we have chosen to link our Sustainability
strategy to the United Nations Sustainable Development
Goals. This allows us to contribute to a number of goals
through our Making a Difference plan.
The Importance of Our Stakeholders
Engagement with stakeholders is a vital component of our
long term sustainability and success, and helps make the
business stronger and more resilient. We have identified six
key stakeholder groups that we believe are important to
engage with regularly to continue to make Dechra successful:
• People: our employees are our greatest asset and we
aim to make Dechra a great and safe place to work by
attracting, retaining and developing talent;
• Veterinary Professionals: we engage with veterinary
professionals to improve animal health and welfare
through the use of our innovative and effective products
supplemented by daily engagement with our people,
utilisation of the Dechra Academy, lunch and learns and
technical support helpline;
• Shareholders: engagement is key to instilling trust and
confidence, whilst also facilitating informed investment
decisions;
• Suppliers: we aim to trade with honesty and integrity,
and to source sustainable, ethically produced, quality raw
materials and finished products;
• Communities: we believe it is important to give something
back to the communities in which we operate; and
• Regulatory Authorities: it is vital to our business that our
products meet the highest possible safety and quality
standards and we work collaboratively with the relevant
bodies worldwide.
Read more on pages 58 to 66
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Dechra at a Glance
Our Structure
Corporate
Product
Development and
Regulatory Affairs
(PDRA)
Dechra
Pharmaceutical
Manufacturing
and Supply
(DPM&S)
Dechra
Veterinary
Products
Europe
(DVP EU)
Dechra
Veterinary
Products
International
(DVP International)
Dechra
Veterinary
Products
North America
(DVP NA)
Support Functions
Revenue Generating Divisions
Support Functions
Corporate
Number of Employees 87
90% of Corporate employees are
located out of the UK, with the majority
out of the Northwich office. Corporate
includes Group Finance, Company
Secretarial, Compliance and Legal,
Group HR, Sustainability, Group IT and
Digital.
Product Development and
Regulatory Affairs
(PDRA)
Number of Employees 228
Dechra Pharmaceuticals
Manufacturing and Supply
(DPM&S)
Number of Employees 901
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 in every country that we
operate.
Laboratories are located in UK,
Netherlands and Croatia with teams
also located in Australia, Brazil and US.
Manufactures and supplies Dechra’s
product range efficiently and to the
highest quality standards maintaining
a reliable supply chain. Approximately
50% of Dechra’s pharmaceuticals
are produced within our eight
manufacturing sites with the remaining
50% managed through external supply
relationships.
In Europe, our manufacturing sites
are located in Skipton, UK, Bladel, the
Netherlands and Zagreb, Croatia. We
also have three sites in the United States
with facilities in Fort Worth, Melbourne
and Pomona, and a further two sites
located in Brazil and Australia.
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Governance
Financial
Statements
Additional
Information
Revenue Generating Divisions
Dechra Veterinary Products
Europe
(DVP EU)
Dechra Veterinary
Products International
(DVP International)
45.1% of Revenue
Number of Employees 561
11.4% of Revenue
Number of Employees 385
Markets and sells Dechra’s products in
18 countries via our own legal entities
and via two distributors. It has sales
teams in Austria, Belgium, Bosnia-
Herzegovina, Croatia, Denmark,
Finland, France, Ireland, Italy, Germany,
Netherlands, Norway, Poland, Portugal,
Slovenia, Spain, Sweden, UK. The
business has opened an office in
Switzerland and is due to commence
trading during the 2024 financial year.
Products are sold across all key
categories of CAP, Equine and FAP. DVP
EU also markets a range of specialist,
therapeutic pet diets, branded Specific.
The major geographies are France,
Germany, the Netherlands and UK.
Markets and sells Dechra’s veterinary
products in Australia, New Zealand,
Serbia, South Korea and Brazil through
our own legal entities and via 80
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.
The products sold by DVP International
vary significantly by country, largely due
to the different rates at which the CAP
market is developing in each territory.
The major geographies are Australia,
New Zealand, Brazil and South Korea.
Dechra Veterinary Products NA
(DVP NA)
43.5% of Revenue
Number of Employees 295
Markets and sells Dechra’s veterinary
products in Canada, Mexico and the
US via our own legal entities and via six
distributors to other countries in Central
America.
DVP US predominantly markets CAP
and Equine medicines. Following the
acquisition of Med-Pharmex in
August 2022, it also now sells a small
range of FAP products. DVP Canada
and DVP Mexico both market CAP and
Equine medicines, whilst the latter also
sells FAP and exports to Central America
countries.
The major geographies are Canada,
Mexico and US.
Our Global Footprint
We have eight manufacturing sites, our own sales and marketing teams in 26 countries and market our products in 62 other
countries through distributors.
Key to map
Dechra Sales and Marketing
Countries
Distribution Partners
Dechra Distribution Centres
Dechra Manufacturing Sites
Stock Code: DPH
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We have developed a vast
We Have a Broad Range of Products
We Have a Broad Range of Products
That Treat a Selection of Animals . . .
basket of effective products...
basket of effective products...
That Treat a Selection of Animals . . .
basket of effective products...
That Treat a Selection of Animals . . .
basket of effective products...
Companion Animals
Focus Areas
• Anaesthesia and Analgesia
• Dermatology
• Endocrinology
• Internal Medicine
• Cardiovascular
• Nutrition
What Differentiates Us
Our broad portfolio serves specialist therapy
Our broad portfolio serves specialist therapy
areas and is predominantly prescription only
areas and is predominantly prescription only
medicines rather than ‘blockbuster’ vaccines
medicines rather than ‘blockbuster’ vaccines
or regular healthcare treatments. As such, our
or regular healthcare treatments. As such, our
portfolio is largely non-discretionary in nature
portfolio is largely non-discretionary in nature
and also benefits from a high degree of novelty.
and also benefits from a high degree of novelty.
We also offer a specialist range of pet food
We also offer a specialist range of pet food
for dogs and cats under our Speciifc® brand,
for dogs and cats under our Speciifc® brand,
providing high quality nutrition to support many
providing high quality nutrition to support many
of the therapeutic conditions treated by our
of the therapeutic conditions treated by our
pharmaceuticals.
Food Producing Animals
Focus Areas
• Water soluble antibiotics
• Vaccines
• Lameness
• Pain management
What Differentiates Us
Our focus is on water soluble antibiotics
Our focus is on water soluble antibiotics
and vaccines, both of which help to
and vaccines, both of which help to
maintain productivity of food producing
maintain productivity of food producing
animals globally in the face of a rising
animals globally in the face of a rising
world population.
We also play a prominent role in looking
We also play a prominent role in looking
to develop products aimed at improving
to develop products aimed at improving
animal welfare and husbandry.
Equine
Focus Areas
• Lameness
• Pain management
What Differentiates Us
The equine market is relatively small and serviced
The equine market is relatively small and serviced
by very few animal health companies.
by very few animal health companies.
Dechra’s specialism in lameness and pain
Dechra’s specialism in lameness and pain
management for horses and ponies allows us to
management for horses and ponies allows us to
be a leading brand within equine pharmaceuticals
be a leading brand within equine pharmaceuticals
and we offer a range of highly efficacious products
and we offer a range of highly efficacious products
to support the equine veterinarian.
Read more on pages 42 to 43
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Governance
Financial
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Additional
Information
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. . . With the Help of our Talented
. . . With the Help of our Talented
and Professional Colleagues . . .
and Professional Colleagues . . .
Highly Skilled People Working
across the Group
Our people are the heartbeat of our business and they
reinforce our Culture every single day, helping to create
the special place to work that Dechra is.
All 2,457 employees are crucial to our success. Whether
it is the highly talented scientists in our Product
Development and Regulatory Affairs teams, front line
manufacturing employees across our various sites, the
hugely passionate sales representatives or the teams
providing central support functions in our Corporate
division, everyone who works for Dechra has an important
role to play in delivering our success year after year.
We empower our people to take responsibility and foster
a collaborative, supportive and ambitious environment
within which to perform to the best of their ability.
How we Attract and Retain
the Best Talent
We are rightly proud of the fact that we are a Living Wage
employer globally. Never has this been more important
than today given the cost of living challenges being felt by
many people worldwide.
In addition to ensuring an appropriate approach to reward
In addition to ensuring an appropriate approach to reward
and recognition, we also provide a wide range of other
and recognition, we also provide a wide range of other
support to employees. This is all underpinned by a shared
support to employees. This is all underpinned by a shared
passion for fulfilling our purpose every single day.
passion for fulfilling our purpose every single day.
We invest heavily in training and development, which
We invest heavily in training and development, which
includes our internal digital learning platform, Delta, and
includes our internal digital learning platform, Delta, and
encourage employees to take responsibility for their own
encourage employees to take responsibility for their own
career knowing that Dechra will support and encourage
career knowing that Dechra will support and encourage
those endeavours wherever possible.
those endeavours wherever possible.
An Employer of Choice
An Employer of Choice
Within the Industry
Many Dechra employees have been with the
Many Dechra employees have been with the
business for a number of years, and it is also not
business for a number of years, and it is also not
uncommon for former employees to return to
uncommon for former employees to return to
us after leaving to pursue an opportunity
us after leaving to pursue an opportunity
elsewhere. This speaks volumes about how
elsewhere. This speaks volumes about how
well regarded Dechra is within the animal
well regarded Dechra is within the animal
health industry and is something we
health industry and is something we
know will be important as we look ahead to
know will be important as we look ahead to
our next phase of growth.
2,457
Employees
Globally
26
7,807
Countries with
Sales Team
Delta Training
Hours
55%
Females in
Workforce
Case Study
Future Facing Leaders
In January 2022, we launched our inaugural Future
Facing Leaders programme designed to help develop
our internal talent and create a sustainable pipeline
for future leaders within the business.
The current cohort of 24 employees, taken from across
the Group both in terms of geography and business
function, have now reached the end of the course.
The programme has been an undoubted success
over the past two years. Much has been learnt, both
by the participants themselves on an individual
level but also by the wider business and the Senior
Executive Team thanks to the candid and thoughtful
feedback provided during the various sessions.
As the business enters a new chapter in its
As the business enters a new chapter in its
history, these employees will have a crucial role
history, these employees will have a crucial role
to play in helping to keep Dechra successful.
to play in helping to keep Dechra successful.
We are currently developing plans for the next
We are currently developing plans for the next
iteration of the programme so that it remains closely
iteration of the programme so that it remains closely
aligned to the business strategy over the coming
aligned to the business strategy over the coming
years and addresses the need to maintain the flow of
years and addresses the need to maintain the flow of
high calibre individuals who can enact that strategy.
high calibre individuals who can enact that strategy.
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Additional
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. . . Whose Knowledge Sharing
. . . Whose Knowledge Sharing
Enables the Best Care . . .
Our Broad Range of Products Help to Improve the
Health and Welfare of Animals Globally
Innovation at the Heart
of What we do
Our portfolio, particularly within CAP, has a high degree
of novelty and addresses conditions in relatively niche
therapeutic areas. This makes Dechra the partner of
choice for many veterinarians when it comes to certain
conditions and allows our sales teams to engage
with them on products that can help grow their own
practice rather than just price or the role of generic
alternatives. The fact that a large proportion of our
sales representatives are qualified veterinarians in their
own right only adds to the credible and differentiated
nature of our portfolio.
Dechra collaborates with veterinary professionals,
academic institutions and industry experts to enhance
our understanding of animal health and develop
innovative solutions. Through this collaboration we
foster knowledge exchange and develop products and
services that address emerging healthcare challenges
and meet the evolving needs of the veterinary
community. Our pipeline of potential new products is as
community. Our pipeline of potential new products is as
strong as ever and has an increasing focus on bringing
strong as ever and has an increasing focus on bringing
novel CAP products to market over the coming years.
novel CAP products to market over the coming years.
Continuous Education and
Continuous Education and
Support for Veterinarians
Support for Veterinarians
Dechra supports veterinary professionals through
Dechra supports veterinary professionals through
continuing education programs and resources. We
continuing education programs and resources. We
provide training, workshops, webinars, and educational
provide training, workshops, webinars, and educational
materials that help veterinarians stay updated with
materials that help veterinarians stay updated with
the latest advancements in veterinary medicine
the latest advancements in veterinary medicine
and improve their clinical skills.
The Dechra Academy provides a digital platform
The Dechra Academy provides a digital platform
through which our extensive educational
through which our extensive educational
resources are shared with the veterinary
resources are shared with the veterinary
community, whilst our technical support teams
community, whilst our technical support teams
provide expert advice in how to best use
provide expert advice in how to best use
Dechra products and enable veterinarians to
Dechra products and enable veterinarians to
provide the best possible care to animals in
provide the best possible care to animals in
their care.
206
New Marketing
Authorisations
5,994
Marketing
Authorisations
205,012
CPD Training
Hours Provided
16,300
Technical
Support Enquiries
00%
00%
employee
employee
turnover
turnover
Case Study
The Veterinary Perspective
We regard our broad portfolio of products as
a competitive strength and are focused on
becoming the partner of choice for veterinarians
worldwide in our chosen therapeutic areas. To
support this approach, we were pleased to launch
a new Dechra brand positioning in February 2023
called The Veterinary Perspective.
By seeing things from the Veterinary Perspective,
we strive to support veterinarians through science
and education, especially around uncommon
diseases and difficult to treat cases.
Dechra continues to grow because we understand
the challenges veterinarians face. We provide
training, support and information that helps them
training, support and information that helps them
help animals. We provide accessible science
help animals. We provide accessible science
that enables veterinarians to communicate with
that enables veterinarians to communicate with
owners and farmers better. It is this perspective
owners and farmers better. It is this perspective
that makes us a preferred supplier. Understanding
that makes us a preferred supplier. Understanding
customers is built into our business model. We
customers is built into our business model. We
give veterinarians what they need, from everyday
give veterinarians what they need, from everyday
evidence-based treatments to knowledge on rarer
evidence-based treatments to knowledge on rarer
diseases.
To ensure our growth, we are not just an animal
To ensure our growth, we are not just an animal
pharmaceutical company. We are the veterinary
pharmaceutical company. We are the veterinary
professionals’ pharmaceutical company.
professionals’ pharmaceutical company.
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. . . To a Marketplace With
. . . To a Marketplace With
Global Opportunities . . .
Global Opportunities . . .
Dechra’s Extensive Footprint Enables our Products to Reach
Veterinary Professionals Around the Globe
Dechra’s heritage is as a UK based veterinary distribution
business, but by 2013 we had become a fully focused
veterinary pharmaceutical business. Through a combination
of both organic growth and a number of business
acquisitions, we have since grown to become a truly global
business with operations in a total of 88 countries.
Whilst we already have a strong presence in the well
developed markets of Western Europe and North America,
these markets continue to represent significant further growth
opportunities; particularly the largest animal health market in
the world, the US. We already have a talented US sales team
but intend to invest in more representatives commensurate
with our future growth aspirations.
In addition, we continue to extend the reach of our
products to animal health markets worldwide
through our International division. This is typically
achieved by using local distribution partners to
obtain a foothold in new markets initially, before
bringing operations in-house once sufficient
critical mass has been achieved.
There are Significant Opportunities for Further
Growth Across Territories
3%
20%
5%
72%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
i
n
o
i
t
a
p
c
i
t
r
a
p
e
u
n
e
v
e
r
3
2
Y
F
2%
3%
48%
40%
16%
7%
2%
14%
59%
91%
25%
6%
8%
61%
47%
45%
28%
UK
USA
Brazil
France
Poland
Sweden
CAP
FAP
Equine
Nutrition
Dechra’s revenue profile differs by country depending
on underlying market dynamics and the maturity of our
operations. For example, the UK market is very mature
whereas in Brazil sales are heavily weighted towards FAP;
indicative of both the large numbers of livestock in Brazil but
also the nascent companion animal market that is slowly
developing.
We have a significant opportunity to grow market
share in product categories where we are currently
underweight, but this will likely be achieved slowly given
market dynamics and the time taken to register products
in each country.
Education of veterinarians, increasing brand awareness
and leveraging our novel portfolio will all remain crucial
to our future success and allow us to capitalise on the
strong structural growth drivers within the animal
health industry.
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. . . That is Improving the Health
. . . That is Improving the Health
and Welfare of Animals for Their
and Welfare of Animals for Their
Entire Lifetime
With increasing numbers of both companion and food producing
With increasing numbers of both companion and food producing
animals, which are also living longer, Dechra’s Purpose has never been
animals, which are also living longer, Dechra’s Purpose has never been
more relevant. Through our focus on innovation and providing a portfolio
more relevant. Through our focus on innovation and providing a portfolio
of products that can be used across an animal’s entire lifetime, we will
of products that can be used across an animal’s entire lifetime, we will
support veterinarians to administer the best possible clinical care.
support veterinarians to administer the best possible clinical care.
Greater propensity to use Dechra
CAP products as the pet ages and
clinical spend increases
Example Companion
Animal Therapy Area
Endocrinology
Ophthalmology
Dermatology
Anaesthetics &
Analgesics
Puppy
Junior
Adult
Senior
Geriatric
Increasing pet
life expectancy +
Higher number
of pets
=
Long term
growth driver
Case Study
Cushing’s Detective Campaign
Cushing’s syndrome is a condition treated by our
innovative product Vetoryl®. As part of our strategy
to defend Vetoryl against potential competitors,
we developed a “Suspecting Cushing’s” marketing
campaign.
hair loss to excessive urination,
increased appetite to excessive panting,
and lethargy. Additionally, the online
investigation room had a symptoms
checklist designed to help dog owners
uncover their dog’s symptoms, as well as
a treatment and monitoring logbook.
Aimed directly at dog owners, the campaign was
developed to raise awareness of the condition by inviting
owners to become a ‘Cushing’s Detective’ and enter
an online investigation room hosting multiple helpful
resources. These included a humorous but informative
video series starring the Cushing’s Prime Suspects; a
series of characters designed to educate dog owners
about Cushing’s symptoms including everything from
The feedback received from veterinarians
was extremely positive, who noted that it really
helped pet owners recognise the signs of Cushing’s.
In addition to being a successful campaign from an
animal health industry perspective, it also won
two awards at the B2B Marketing’s Elevation Awards
in the USA.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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Strategic
Report
Contents
Our Marketplace
Business Model
Delivering Our Strategy
Strategy in Action
Product Development
Global Product Offering
Financial Review
Key Performance Indicators
Non-Financial and Sustainability Information Statement
Section 172 Statement and Stakeholder Engagement
Sustainability
Task Force on Climate-related Financial Disclosures
Environment
How the Business Manages Risk and Viability Statement
Understanding Our Key Risks
24
28
32
36
38
42
44
52
54
56
67
69
76
79
83
The Veterinary Perspective
Read more about us at:
www.dechra.com
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Stock Code: DPH
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Our Marketplace
Market Overview
The animal health market is large, highly resilient and benefits
from a number of long term structural growth drivers.
There is a wide range of estimates for the size of the global
animal health market, likely due to the inclusion (or not, as
the case may be) of certain areas of the market such as food,
veterinary services and testing/diagnostics.
Animal Types
Animal health globally is generally described as comprising
two segments of animals, with approximately two thirds of
revenue generated from the Food producing Animal Products
(FAP) segment and the remaining one third derived from
Companion Animal Products (CAP), which also typically
includes horses.
Grand View Research estimates that the total market,
including key segments such as vaccines, pharmaceuticals,
diagnostics, medical devices and feed additives along with
other smaller revenue streams was worth over $58 billion
in 2022. Within this, pharmaceuticals is the largest product
segment representing over 40% share, and it is here where
Dechra mostly competes.
Our Global Markets
The geographical breakdown of the market differs between
the FAP and CAP segments, but North America is the largest
animal health market in the world, comprising over 30% of the
global market overall.
Territory
Market trends
Our response
Outlook
North America
43.5%
of Group revenue
Europe
45.1%
of Group revenue
Rest of the World
11.4%
of Group revenue
Well developed CAP
markets, with an
acceleration in pet
ownership supported by
widespread adoption of
hybrid working patterns.
Large numbers of livestock
with an emphasis on
increasing productivity.
Key focus area for future
growth as we extend the
reach of our portfolio
through new product
launches and a growing
sales team.
Market has normalised
against the heightened
growth rates seen during the
pandemic but is expected to
remain in growth.
Continue to leverage our
heritage in markets where
we already have a strong,
established position.
Within Europe, pet ownership
is becoming increasingly
common in Eastern
countries.
Emerging markets such as
South America, Asia Pacific,
the Middle East and Africa
have a greater bias towards
FAP revenues, with the
companion animal market
still maturing.
Steadily grow brand
awareness and presence in
selected countries, typically
through FAP initially. Pursue
registrations of existing
products in new territories.
CAP markets are expected
to develop at varying
rates as the status of pets
increases, whilst FAP growth
will likely remain strong due
to burgeoning populations.
Competitors
Over the past 25 years, the global animal health market has
become characterised by a small group of large international
businesses that have emerged via a series of mega mergers
and together now account for over half of the overall market.
Routes to Market
In addition to manufacturers supplying direct to veterinary
practices, the market is also serviced by a relatively small
number of large veterinary wholesalers who play an
important role within the animal health value chain.
Beyond this concentration of large players, the market is
very fragmented with a long tail of smaller sized companies
operating on either a global or more localised basis and
typically with an expertise in specific product segments
and/or species.
Dechra is positioned within the top ten in terms of total market
share, despite not operating in the high value ‘blockbuster’
categories such as regular flea, tick and worm treatments.
Instead, the Dechra portfolio consists of a very broad range of
products in niche therapy areas with an increasing emphasis
on offering veterinarians novel treatments for a variety of
conditions and with a strong bias towards prescription only
medicines.
This wholesaler channel is the main route to market for
Dechra, particularly in the US, Australia, New Zealand and
many Western European countries, although there are
instances where we supply direct or via pharmacies. Within
less developed markets, international distributors act as a
vital interface between the manufacturer and veterinary
practice or farmer. These distributors can be both smaller,
local players as well as larger conglomerates.
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Types of Veterinary Practice
Most veterinary practices tend to specialise in either
companion animals or food producing animals; however,
there are numerous practices that are classified as mixed
and service all species. There is also an increasing number of
specialist equine practices and referral hospitals.
The veterinary profession continues to see a degree of
consolidation as large corporate groups are increasing their
share of companion animal practices. This has been a well
established trend within the UK, but is also being seen in other
developed markets such as the US and Western Europe,
albeit from a relatively fragmented starting position. As such,
our relationships with these corporate groups are becoming
increasingly important and we continue to increase our focus
through experienced key account managers and technical
support services.
Dechra sales by type of Veterinary Practice
Europe
North America
24%
25%
39%
29%
8%
Independents
Large scale pig and
poultry customers
Local
consolidated Groups
Pan-EU
consolidated groups
75%
Independents
Corporates
Source: Dechra sales data, June 2023
A Resilient Animal
Health Market
Total veterinary care has proven
itself to be highly resilient over a
multi-decade time horizon.
The Dechra product portfolio is
positioned at the most resilient
end of this resilient market, given
the largely non-discretionary
nature of our prescription only
medicines.
Growth Rate
20%
15%
10%
5%
0%
1980
1985
1990
1995
2000
2005
2010
2015
Expenditure on Veterinary Care and Other Pets' Services
US GDP
Expenditure on Pets, Pet Products and Related Services
Period of Recession
Market Growth Drivers and Outlook
There has been growth in the CAP market for many years
driven by a number of well established trends:
• Increasing pet population in both developed and
developing markets driven by positive demographic
trends, widespread adoption of hybrid working
arrangements, improved pet nutrition and increased pet
life expectancy
• Humanisation of pets by owners who are increasingly
willing to spend on the wellbeing of their pet, regarding
them as a member of the family
• Growing awareness and knowledge allows veterinarians
to manage increasingly complex conditions through
improved diagnosis and treatment
• Greater medical innovation providing an increasing
choice of treatments available to veterinarians and
pet owners
The FAP market also remains robust given the ongoing rise
in the global population, which the United Nations predicts
will reach 10 billion by 2050, and the growing awareness
of animal welfare. This creates a corresponding need to
ensure that food supply is capable of keeping pace through
the heightened production of animal based food products,
but in a responsible way.
Given these trends, the global animal health market is
regarded as being highly resilient and able to overcome
any short term challenges. Although growth of the market
has normalised following the heightened levels seen during
the COVID-19 pandemic, when increasing pet ownership
fuelled exceptional levels of growth in the CAP market, the
market is expected to remain in growth over the coming
years. This expectation, despite the current macroeconomic
uncertainties, is supported by the historical performance
of the market through periods of recession during which
spend on animal health remained robust, as illustrated
above. Against that context, Grand View Research expects
the market overall to grow at a high single digit CAGR over
the coming years.
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Our Marketplace
Product Market Dynamics
Our Products
Companion Animal
Products (CAP)
73.8%
of Group revenue
Species: Dogs and cats.
Key therapeutic sectors: Endocrinology, dermatology,
analgesia and anaesthesia, cardiovascular and internal
medicine.
Products: The majority of products in our portfolio are
Prescription Only Medicines (POMs) that are 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, which together
create a broad offering within each therapeutic area.
Food producing Animal
Products (FAP)
Species: Poultry, pigs and an increasing presence in
cattle.
Key therapeutic sectors: Water soluble antibiotics,
vaccines, locomotion (lameness) and pain
management.
Products: Our products are predominantly POMs
that are prescribed by veterinarians who work in
either specialist veterinary practices or professional
farming units.
11.7%
of Group revenue
Equine
Species: Horses and ponies.
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, euthanasia
and vaccines.
8.6%
of Group revenue
Nutrition
Species: Dogs and cats.
Key therapeutic sectors: Our specialist 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.
5.1%
of Group revenue
Description of market
Key trends and our response
Our position and growth opportunity
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 in new territories.
With approximately two thirds of all
global animal health sales being
FAP, Dechra is underweight relative
to the overall market and many
competitors.
Veterinarians that specialise in
horses operate out of either mixed
practices or, increasingly, specialist
equine centres.
Compared to companion and food
producing animals, the number of
horses in the world is relatively small
and as such, the market potential is
limited. The market can be divided
roughly into high performance
sports horses, leisure horses and
ponies.
The global pet food market is
huge and dwarfs the animal
pharmaceuticals market. The
veterinarian’s recommendation is
highly respected and valued by their
client, the pet owner, which allows
specialist nutrition products to take
a small but significant part of the
overall pet food market.
The principal driver of growth in companion animal markets
The CAP market was where Dechra established its market
is increasing pet ownership, particularly among younger
position and continues to be by far our main sector.
demographics, and the pet owners’ compassion for their
Dechra has developed a strong reputation for providing
animals.
Expenditure on companion animals continues to grow
due to advances in nutrition, increased competence
in managing complex conditions by veterinarians, and
specialist and clinically necessary novel products. We also
supply a range of complementary generic products in key
therapeutic sectors where we are seen as the company of
choice by many veterinarians.
increasing options for preventative healthcare and wellness.
We will continue to invest in R&D 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.
The key driver for growth in this sector is a huge increase in
Dechra entered the FAP sector through the acquisition of
the global demand for high quality animal protein and dairy
Eurovet in 2012 and it currently represents 11.7% of Group
products due to the rise in world population. Vaccines are
revenue. The majority of our FAP sales are our market
the biggest growth sector of the veterinary market and are
leading swine and poultry water soluble antibiotics sold
anticipated to continue to outgrow therapeutic treatments.
mainly into Europe.
There is also increasing awareness of the need for better
We also have a growing vaccines portfolio, where we
animal welfare standards, such as pain control during
continue to seek marketing authorisations in new territories,
procedures such as pig castration and tail docking in sheep.
particularly in those countries where livestock numbers are
significant.
The market is variable and can be linked to the economy;
This is a sector in which few animal health companies
however, high value, insured, sports horses will be treated at
specialise due to the relatively small number of horses in the
almost any cost.
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.
Expenditure on companion animals continues to grow
Dechra’s focus lies in therapeutic diets sold under the
due to increasing pet ownership, willingness to spend
Specific brand, which are not available for self-selection
on the pet’s health, advances in nutrition and increased
through supermarkets and require advice from the
competence in managing complex conditions in dogs and
veterinarian. Despite the highly competitive nature of the
cats such as allergies, joint disorders, obesity, heart disease
pet food market, we are able to differentiate our position
and kidney disease.
through the use of higher quality ingredients, innovation and
the complementary nature of our pharmaceuticals.
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Product Market Dynamics
Our Products
Products (CAP)
Companion Animal
Species: Dogs and cats.
Key therapeutic sectors: Endocrinology, dermatology,
analgesia and anaesthesia, cardiovascular and internal
medicine.
Products: The majority of products in our portfolio are
Prescription Only Medicines (POMs) that are 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, which together
create a broad offering within each therapeutic area.
73.8%
of Group revenue
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 in new territories.
Food producing Animal
Species: Poultry, pigs and an increasing presence in
With approximately two thirds of all
Products (FAP)
cattle.
global animal health sales being
FAP, Dechra is underweight relative
to the overall market and many
competitors.
Key therapeutic sectors: Water soluble antibiotics,
vaccines, locomotion (lameness) and pain
management.
Products: Our products are predominantly POMs
that are prescribed by veterinarians who work in
either specialist veterinary practices or professional
farming units.
11.7%
of Group revenue
Equine
Species: Horses and ponies.
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, euthanasia
and vaccines.
8.6%
of Group revenue
5.1%
of Group revenue
Nutrition
Species: Dogs and cats.
Key therapeutic sectors: Our specialist 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.
Veterinarians that specialise in
horses operate out of either mixed
practices or, increasingly, specialist
equine centres.
Compared to companion and food
producing animals, the number of
horses in the world is relatively small
and as such, the market potential is
limited. The market can be divided
roughly into high performance
sports horses, leisure horses and
ponies.
The global pet food market is
huge and dwarfs the animal
pharmaceuticals market. The
veterinarian’s recommendation is
highly respected and valued by their
client, the pet owner, which allows
specialist nutrition products to take
a small but significant part of the
overall pet food market.
Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Description of market
Key trends and our response
Our position and growth opportunity
The principal driver of growth in companion animal markets
is increasing pet ownership, particularly among younger
demographics, and the pet owners’ compassion for their
animals.
Expenditure on companion animals continues to grow
due to advances in nutrition, increased competence
in managing complex conditions by veterinarians, and
increasing options for preventative healthcare and wellness.
The CAP market was where Dechra established its market
position and continues to be by far our main sector.
Dechra has developed a strong reputation for providing
specialist and clinically necessary novel products. We also
supply a range of complementary generic products in key
therapeutic sectors where we are seen as the company of
choice by many veterinarians.
We will continue to invest in R&D 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.
The key driver for growth in this sector is a huge increase in
the global demand for high quality animal protein and dairy
products due to the rise in world population. Vaccines are
the biggest growth sector of the veterinary market and are
anticipated to continue to outgrow therapeutic treatments.
Dechra entered the FAP sector through the acquisition of
Eurovet in 2012 and it currently represents 11.7% of Group
revenue. The majority of our FAP sales are our market
leading swine and poultry water soluble antibiotics sold
mainly into Europe.
There is also increasing awareness of the need for better
animal welfare standards, such as pain control during
procedures such as pig castration and tail docking in sheep.
We also have a growing vaccines portfolio, where we
continue to seek marketing authorisations in new territories,
particularly in those countries where livestock numbers are
significant.
The market is variable and can be linked to the economy;
however, high value, insured, sports horses will be treated at
almost any cost.
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.
Expenditure on companion animals continues to grow
due to increasing pet ownership, willingness to spend
on the pet’s health, 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.
Dechra’s focus lies in therapeutic diets sold under the
Specific brand, which are not available for self-selection
through supermarkets and require advice from the
veterinarian. Despite the highly competitive nature of the
pet food market, we are able to differentiate our position
through the use of higher quality ingredients, innovation and
the complementary nature of our pharmaceuticals.
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O
u
r
I
m
p
a
c
t
a
n
d
V
a
l
u
e
C
r
e
a
t
i
o
n
Business Model
We Operate Across the Entire Animal Health Value Chain
Our objectives are to innovate, develop, register, manufacture, supply and market high quality products to the veterinary
profession worldwide. We also offer high levels of service, technical support and educational training to promote the Dechra
brand and to develop a strong relationship with, and be recognised as an important partner to, veterinarians worldwide.
Our Key Assets and Resources
Values and Culture
As a relatively small business in a very large market, the
agile and entrepreneurial way in which we operate gives us
a competitive edge against companies several times larger
than ourselves.
Technology
We are increasingly investing in technology to underpin
our future growth aspirations. Embracing new technologies
also extends to the way in which we engage with our end
customer, the veterinarian.
The Best People
From research and development teams through to the
sales representatives who educate veterinarians on
the clinical benefits of our products, we believe we
have the very best in the industry.
Financial Discipline
Our high profit margins and strong cash generation allow
us to pay down debt quickly, resulting in a robust balance
sheet. This enables us to adhere to our capital allocation
policy by investing in organic growth, paying a dividend
and pursuing opportunistic acquisitions.
Sustainable Mindset
We are a Purpose driven organisation, and this long term,
sustainable way of thinking extends across the Group.
We have made significant progress over recent years in
developing an ambitious Sustainability strategy, increasing
awareness within the business and driving genuine change.
Manufa
ctu
r
e
R e g i s t e r
d
n
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p
2
Innovate, D e v e l o
1
e
u
n
e
v
e
R
Read more about
Our Strategy
on pages 32 to 35
Veterinary
professionals
109,691
Dechra Academy users
Shareholders
3,471%
Total shareholder return
from IPO to 12 April 2023
4
5
Customers
Sales and Marketi n g
People
602
New employees
Communities
£432k
Cash donations
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Read more about
Our Products
on pages 26 and 27
Suppliers
15 Number of
quality audits
Environment
13%
Reduction in GHG emissions
intensity ratio
Our Impact and Value Creation
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Our Key Activities
1
2
3
Innovate, Develop
and Register
Our development pipeline is spread
across novel entities, differentiated
generics, generics and lifecycle
management projects in all 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.
• our talented veterinary scientists
extensively screen scientific papers
looking for new human medicine-
related technologies that might have
an application in animal health.
Innovative Products that Treat
a Range of Conditions
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 and
positions Dechra as a market leader
within our chosen therapeutic areas.
In-house Product Development
vs External Partnership
Our R&D laboratories are located at
our manufacturing sites, allowing us to
emulate the manufacturing processes
and making the in-house R&D cycle
more effective. In addition, we also
pursue opportunities to partner with
select third parties to develop new
products in areas where we do not
necessarily have the required expertise.
Global Registration 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. This is an ongoing
process in territories where we already
hold marketing authorisations and
also new international markets we are
looking to enter.
Manufacture
and Supply
The principal objective of our
Manufacturing & Supply division
is to deliver safe, efficacious, cost
effective, high quality products on
time and in full every time. Batch runs
for veterinary medicines are often
relatively small compared to human
medicines, making manufacturing a
key competency of the Group and an
important barrier to entry.
Our Range of Competencies
We have a wide range of competencies
across our eight manufacturing sites
including tablets, creams, liquids,
ointments, powders, vaccines and
sterile injections that can be packed in a
multitude of different presentations.
In-house vs Third Party
Manufacturing
We currently manufacture around
50% of our products in-house. To
complement our in-house production,
we also have a network of third party
Contract Manufacturing Organisations
(CMOs) that is an important part of
our business. This network is utilised
where there are competencies and
dosage forms that we do not have, or
where we have long term agreements
that prevent in-house manufacturing
of some products. However, we have
a long term strategy to migrate more
products into our own production
facilities through an ongoing process of
technical transfers.
An International Supply Chain
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.
Route
to Market
Our products are distributed from our
major logistics sites via wholesalers,
distributors or direct supply.
Specialised Veterinary
Wholesalers
The majority of veterinary practices
worldwide are supplied through
specialised veterinary wholesalers
that operate as one-stop shops.
They stock the majority of items
veterinary practices need such as
pharmaceuticals, equipment and
consumables, 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.
As such, although our customer is the
veterinarian, in most major markets
it is the wholesaler who we actually
generate direct revenue from.
International Distribution
Partners
We have a presence in 62 countries
where we do not have our own sales
and marketing organisation and
instead sell through international
distribution partners. This network
provides a valuable entry point to
emerging markets where we look to
establish a presence.
Country Specific Exceptions
There are a few markets, such as
Germany and the Netherlands, that
are not fully supported by veterinary
wholesalers and where we therefore
offer direct supply.
There are also some instances
where legislation enforces all
pharmaceuticals to be sold through
pharmacies, such as Denmark, Italy,
Norway and Sweden.
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023
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Overview
Strategic
Report
Our
Governance
Financial
Statements
Additional
Information
Our Key Activities
4
5
Customers
Our customers are veterinary
professionals operating in veterinary
practices and major farming units.
It is they who our products and sales
and marketing activities are mainly
targeted at, and is why the Dechra
brand is deliberately positioned as
‘The Veterinary Perspective’.
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 also have a range of
complementary non-prescription
products. Our product range includes
novel, generic-plus (or differentiated
generic) and generic products in
key therapeutic areas, in particular
endocrinology and anaesthesia
and analgesia.
Sales and Marketing
Our relationship with veterinarians is crucial and, to this end,
we provide added value services to complement our broad
product portfolio. 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 26 countries,
predominantly in Europe,
North America, Brazil and
ANZ. In 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:
dechra.com/about/
our-business
Stock Code: DPH
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Our Key Strengths
We have a number of key strengths that supplement our business model,
support the delivery of our strategy and help us to impact animal health
and welfare globally.
1
2
Well Recognised Brand
We are recognised as a global animal health company
with a strong and growing reputation as a provider of
high quality, specialist veterinary medicines and related
products in our chosen therapeutic areas. This has been
underpinned further this year by the launch of our new
brand positioning, the Veterinary Perspective.
Breadth of Products
We are a global leader in veterinary endocrinology
and topical dermatology and 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 and specialist nutrition. We have a highly
diversified portfolio covering novel, generic and generic
plus products that are typically non-discretionary
prescription only medicines.
3
Weighting Towards CAP
and Innovation
Although we have a presence across different product
categories, we are deliberately focused on bringing
innovation to the higher margin CAP market that is
proven to be highly resilient and set to benefit from
numerous long term structural growth drivers.
5
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.
4
Strong Industry
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.
Furthermore, our networking within the industry is a
key driver in finding new product development and
acquisition opportunities. We also have an important
network of third party CMOs who produce around half of
all our products.
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Our Key Strengths
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.
Portfolio Focus
We are a specialist
veterinary pharmaceuticals
business focused on
Companion Animal
Products, Food producing
Animal Products, Equine
and Nutrition. Our portfolio
is well positioned in our
therapeutic focus sectors
to maximise returns.
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
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.
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
our product portfolio
through acquisitions.
Link to our KPIs
2 3 4 5
1
Link to our KPIs
2 3 4 5
1
Link to our KPIs
2 3 4 5
1
Link to our KPIs
2 3 4 5
Link to our risks
2 3 4 5 9
Link to our risks
2 4 5 8 9
1
Link to our risks
2 5 7 8
Link to our risks
6 7
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Our Strategic Enablers
Manufacturing
& Supply Chain
Our manufacturing and supply chain
organisation is focused on running
our operations efficiently and to high
quality standards to maintain or
improve margins.
Technology
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.
People
Our people strategy underpins
everything we do in the business. We
have a well-defined plan to build
talent, develop people and strengthen
the Dechra Culture.
Link to our KPIs
6
Link to our risks
4
Link to our KPIs
3
Link to our risks
10
Link to our KPIs
6 7
Link to our risks
7 9
What we are focused on:
Areas supporting the delivery
of our strategy
The way we do things:
Ensuring value is created for key
stakeholder groups
Strategic Enablers
Sustainability Strategy
Our Sustainability Strategy
Our Business
Provide sustainable
products, education
and technical support to
veterinarians
Our Environment
Minimise our impact on the
environment
Our People
Be a great and safe place
to work
Our Community
Give back to the
communities in which we
operate
Key to KPIs
Key to Risks
1 Existing Revenue Growth
4 Cash Conversion
2 Underlying Diluted EPS Growth
5 New Product Revenue
1 Market Risk
6 Acquisition Risk
2 Competitor Risk
7 People Risk
3 Underlying Return on
Capital Employed
6 Lost Time Accident Frequency Rate
3 Product Development
8 Antimicrobials Regulatory Risk
7 Employee Turnover
and Launch Risk
4 Supply Chain Risk
5 Regulatory Risk
9 Climate Risk
10 Cyber Security and IT Failure Risk
View our sustainability website:
dechra.sustainabilityreport2023.com/
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Delivering Our Strategy
Our Strategic Growth Drivers
Pipeline
Delivery
Portfolio
Focus
Geographical
Expansion
Our Achievements
Our Achievements
Our Achievements
2019
• Entered into a number of licensing
agreements, including a novel
canine sedative and an equine
gastrointestinal product
• A number of novel and generic
registrations in EU, Mexico and
rest of world
• 15 Le Vet pipeline product launches
2019
2019
• Moved key Le Vet products from
distributors to Dechra companies
to generate significant synergies
through retention of full margin and
enhancing sales focus
• FAP growth accelerating against
a backdrop of declining antibiotic
markets
• 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
2020
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
2022
• Launch of Zenalpha, a novel
therapeutic product that is safe
and effective for sedation in dogs,
in the US
• Equine Strangles vaccine launched
in the EU
• Amoxi-Clav suspension launched in
the US market
Our Progress in 2023
• Invested a record £57.5 million into
R&D in the year, representing 7.6%
of revenue
• Zenalpha rolled out across Europe
• Launched Zycosan in the US market
• 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
2022
• All product categories delivered
strong growth
• Strong organic performance in key
markets driven by market growth
and product penetration
Our Progress in 2023
• 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 market
2022
• Launched Osphos® and Zycortal
in Brazil
• Established a new legal entity in
• Entered the US FAP market for the
South Korea
first time through acquired
Med-Pharmex portfolio
• Launched new brand positioning
‘The Veterinary Perspective’
Our Progress in 2023
• Commenced trading in South Korea
• Established own sales and
marketing organisation in
Switzerland
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Acquisition
Our Achievements
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%
2022
• Acquisition of six main products for
North American market
• Acquisition of the worldwide rights
to Verdinexor, branded Laverdia®,
a new treatment for all forms and
stages of canine lymphoma
Our Progress in 2023
• Acquired Piedmont Animal Health,
Inc, a product development
company in the US
• Acquired Med-Pharmex Holdings,
Inc, an established platform
business with a number of products
already approved and established
in the US market
Our Strategic Growth Drivers
Our Strategic Enablers
Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Pipeline
Delivery
Portfolio
Focus
Geographical
Expansion
Our Achievements
Our Achievements
Our Achievements
2019
• Entered into a number of licensing
agreements, including a novel
canine sedative and an equine
gastrointestinal product
• A number of novel and generic
registrations in EU, Mexico and
rest of world
2019
2019
• Moved key Le Vet products from
• Expanded into Latin America via
distributors to Dechra companies
the acquisition of Laboratorios
to generate significant synergies
Vencofarma do Brasil Ltda (Venco)
through retention of full margin and
enhancing sales focus
• 43 product registrations across
Israel, South Korea, Macau,
• FAP growth accelerating against
Macedonia, Malaysia, Malta,
a backdrop of declining antibiotic
Namibia, Serbia, Ukraine, UAE
• 15 Le Vet pipeline product launches
markets
2020
2020
and Zambia
2020
• Marboquin® tablets, a CAP antibiotic,
• Delivered growth across all key
• 34 product registrations across
approved in USA
therapeutic sectors through
Indonesia, South Korea, Myanmar,
• Mirataz® launched in EU and
registered in Canada
2022
2022
• Launch of Zenalpha, a novel
therapeutic product that is safe
and effective for sedation in dogs,
• All product categories delivered
strong growth
• Strong organic performance in key
markets driven by market growth
2022
• Equine Strangles vaccine launched
Our Progress in 2023
educational focus
• Continued to generate significant
Nicaragua, Oman, Tanzania,
Thailand, UAE, Uruguay and Vietnam
synergies from AST Farma and Le
• Key endocrine brands Vetoryl,
Vet acquisition
2021
• Completed Le Vet disintermediation
with final products brought back in-
house in Belgium
2021
• Second consecutive year of strong
growth in all key therapeutics areas
Felimazole® and Zycortal® being
brought back in-house in Australia
and progressing through the fast
track process in Brazil
• Internationally received 38
approvals for key brands in new
countries
• Tri-Solfen® provides a
meaningful FAP presence in the
Australian market
• Entered the US FAP market for the
South Korea
first time through acquired
Med-Pharmex portfolio
• Launched new brand positioning
‘The Veterinary Perspective’
in Brazil
• Established a new legal entity in
Our Progress in 2023
• Commenced trading in South Korea
• Established own sales and
marketing organisation in
Switzerland
• 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
in the US
in the EU
• Amoxi-Clav suspension launched in
the US market
Our Progress in 2023
• Invested a record £57.5 million into
R&D in the year, representing 7.6%
of revenue
• Zenalpha rolled out across Europe
• Launched Zycosan in the US market
Acquisition
Our Achievements
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%
and product penetration
• Launched Osphos® and Zycortal
2022
Technology
People
Manufacturing
& Supply Chain
Our Achievements
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
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
• Acquisition of six main products for
North American market
• Acquisition of the worldwide rights
to Verdinexor, branded Laverdia®,
a new treatment for all forms and
stages of canine lymphoma
• Appointment of Non-Executive Director, Chief Scientific Officer and Chief
Information Officer
• Commenced work on a new quality management system (Veeva) and to
move most manufacturing sites onto a single consolidated ERP system
Our Progress in 2023
Our Progress in 2023
• In-house manufacturing now approximately 50% following a number of
• Acquired Piedmont Animal Health,
Inc, a product development
company in the US
• Acquired Med-Pharmex Holdings,
Inc, an established platform
business with a number of products
already approved and established
in the US market
technical transfers into Skipton and Zagreb sites
• Significant capital investment in Skipton site to create additional space and
improve workflows
• First phase of Veeva rollout successfully completed across five
manufacturing sites
• Appointment of Non-Executive Director
• Remained a Living Wage (or equivalent) employer globally, supporting
employees through the cost of living challenges
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Strategy in Action
Strategic Enabler
Manufacturing & Supply Chain
Investment at the Skipton Facility
The Skipton site manufactures a comprehensive range
of products, across solid dosage forms of tablets and
capsules, liquids, creams and ointments and terminally
sterilised, principally for CAP. The site employs 250
people, is licensed by the VMD and FDA and includes a
Pharmaceutical Product Development laboratory.
In 2021 the Board approved the first of a three phase
development plan, and the site has recently embarked on
its implementation. The investment of £5.7 million included
the expansion of the site footprint through the acquisition
and refurbishment of a neighbouring building. This has
enabled the site to increase volumes by transferring
product previously manufactured at third party contract
manufacturers and the introduction of new products. It has
also delivered a number of other key benefits, namely:
• more efficient material storage and workflow around the
site, with segregation of traffic types providing improved
levels of employee protection;
• enhanced sustainability credentials, through the
installation of photovoltaic cells and increased levels of
insulation;
• further improved levels of quality and security
compliance;
• better work environment for employees and visitors;
including open plan office areas, welfare facilities,
meeting rooms, visitors reception, training facilities,
a collaboration space and increased parking and EV
charging facilities;
• a new Quality Control laboratory with increased footprint
and modernised facilities, fixtures and fittings; and
• expansion and refurbishment of the Product
Development laboratory and pilot facilities.
As well as the physical changes to site, the team has
also led the way in adopting new ways of working by
implementing a 36 hour week with revised start and finish
times to facilitate a nine day fortnight (further information
can be found in Stakeholder Engagement: Employees).
These improvements are part of the site’s ambition to build
a great place to work which attracts and retains a talented
workforce and provides them with the facilities and culture
in which they can thrive.
Phase 1 was completed in August 2023 and was delivered
to budget with no disruption to product supply. This is
testament to the dedication of the team involved, both
Dechra employees and the locally based contractors who
have contributed to the success of the project.
As Phase 1 ends the focus turns to Phase 2, which will
involve the installation of the next generation of processing
equipment to provide Skipton with further levels of
capacity, capability and compliance to support growth in
volumes and revenue, and will position the Skipton site as
the ‘centre of excellence’ for solid dose supply.
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Strategic Growth Driver
Acquisition
Acquisition of Piedmont Animal Health
On 21 July 2023, Dechra acquired Piedmont Animal
Health Inc, a Greensboro, North Carolina based company
specialising in the development and approval of novel
products for the companion animal market. This strategic
acquisition added several complementary and innovative
CAP products to Dechra’s PDRA pipeline, a team of 18
development experts and an in-house laboratory with
early stage development capability. The primary goal
of the transition was to preserve the development and
approval timelines for the pipeline products whilst
simultaneously assimilating the Greensboro team into
the Dechra systems and ways of working. To achieve
this objective, we approached the integration from
three angles:
Seamless transition of the legal and financial processes
that support development work
While early stage investigative work was done
in-house, Piedmont partnered with contract development
organisations to fully develop and obtain product
approvals. Within three months of acquisition, all existing
Piedmont suppliers and open purchase orders were
successfully transitioned into Oracle and the team was
leveraging Dechra systems and processes to pay for
development work. Further, this workstream necessitated
close interaction with the Dechra legal and finance
teams; as a result the Greensboro team mastered Dechra
processes for new quotation and contract review and
execution, as well as supplier approval and set-up
within Oracle.
Enable the Greensboro team to successfully operate
within the greater Dechra network
The integration lead worked closely with personnel across
several divisions to map out the roles and responsibilities
of each department, how each department would
interact with Greensboro and to set up introductory
calls or
in-person visits. This included, but was not limited to
Quality, HSE, Product Launch, Labelling, External Network
and Marketing. This enabled the Greensboro team to
understand which departments they needed to work with
for the various scopes of work and to form relationships
with key stakeholders across the business.
A strong focus on talent retention
It was critical to retain the significant expertise and
experience of the team through the integration period
and beyond. A heavy emphasis was placed on routine
face to face check ins with each team member and
proactively fielded feedback, concerns, questions and
unexpected issues. In this manner, the anxiety and stress
that inevitably accompanies change was minimised,
allowing for more rapid and smoother adjustment to
Dechra by the team.
Summary
This acquisition is an example where Dechra needed
to balance the competing tension between integration
and development work in order to achieve a successful
transition. The collaborative effort between the Dechra
and the Piedmont teams allowed us to successfully
strike this balance as evidenced by on-time, per plan
submission of major technical sections for lead pipeline
projects, the Greensboro team effectively leveraging
Dechra systems and processes, and retention of all key
talent throughout the transition. That said, Dechra is
proactively applying the learnings from this integration
process to further hone and optimise our approach to
company acquisitions.
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Product Development
Product Development
It is our mission to improve animal health and welfare
globally, and as such the wellbeing of animals used in the
development of our products is always a top priority. In line
with that commitment, we carefully consider the responsible
use and humane treatment of animals in all of our 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 in vitro systems,
computer models or 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 as dictated by country specific requirements.
We are committed to the following principles:
• We will comply with all relevant regulations.
• Any 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 3”R’s”.
• Animals will be treated humanely with greatest
consideration given to their health and welfare and
consistent with meeting the necessary scientific objectives.
• All studies conducted by or on behalf of Dechra will be
reviewed by an Animal Welfare Committee or similar
oversight committee.
• For clinical trials involving client owned animals an owner
consent will be obtained and the study will be reviewed by
Dechra’s Animal Welfare Committee.
The Difference Between Novel,
Generic and Generic Plus Products
Novel and Generic products are the main types of new animal
drug applications that Dechra applies for:
• Novel: are products registered for the first time and require
the submission of a dossier containing three key sections
for the registration process:
॰ Safety: examines risks to the environment, the human
administrator of the product, as well as the safety of
the product in the target animal at multiples of the
intended dose
॰ Efficacy: includes the study(ies) in which the best
dose is identified, and the effectiveness of the drug is
demonstrated in animals with the targeted disease
॰ Manufacturing: the quality and purity of the product
are demonstrated along with proof that the product
can be manufactured consistently through the
production of several independent large scale batches
• Generic: are products that are near identical to an
already registered pioneer product and contain the
same chemical substance(s). Approvals for a generic
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 intravenous injection or those not absorbed
from the digestive system. The manufacturing section for a
generic may require fewer pilot batches than for a pioneer
drug, but the emphasis on quality and purity is identical.
• Generic Plus: are products which are approved as a
generic but improve on it through the development of
a better formulation, dosage form, delivery system or
packaging. It may include use in additional species or for
additional indications.
Animal Welfare Committee
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 for best practices and appropriate ethical
treatment;
• promotes awareness of animal welfare and subscribes to
the guiding principles of 3R’s (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.
The Committee holds twice yearly meetings in which the
Committee 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 Committee
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.
38
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023
www.dechra.com
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31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Dechra’s pharmaceutical and vaccine development pipeline contains a mixture
of short, medium and long term new opportunities and lifecycle products.
Feasibility
Research
Development
Registration
10
8
16
5
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-licence opportunities are evaluated for
strategic fit within these sectors. Therapies outside the key
areas are considered for inclusion in the pipeline if they are
novel and address medical needs in the veterinary market.
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.
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 cross-functional
Therapeutic Area Leadership (TALT) and Business
Development (BD) Teams, 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 necessary pilot data is 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.
Entering the Development Phase
The DEVELOPMENT phase is often 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 Governance Team (PGT) analyses each project
after each phase for technical or regulatory risks and issues,
and for any changes to the business case. Pipeline strategy
and annual project resource allocations are endorsed by the
Strategic Portfolio Prioritisation Committee (SPPC) based on
their overall commercial and strategic value within resource
constraints.
Read more about our Pipeline
Delivery on pages to 40 and 41.
Stock Code: DPH
31565 Dechra AR2023 Strategic.indd 39
31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
39
13/10/2023 08:52:11
Product Development
Innovation
Strategy
1. Endorse innovation strategies (5 to 15 year horizon)
2. Approves annual project funding (fiscal year horizon)
Strategic Portfolio Prioritisation Committee (SPPC)
3. Approval of business case internal projects from Research to Development
(as needed)
4. Approve business development projects (as needed)
Pipeline Governance Team (PGT)
1. Manages annual resources to maximise pipeline NPV and progression
2. Endorses project technical approach, budget, FTE needs, timelines, and
probability of success
n
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Commercial Sign off of Business
case and Target profile
Stage Gate (Project plan
aligns with Target profile and
business case)
Manufacturing:
Project Review Board
Internal
projects
External
projects
Pipeline by Number of Projects
15.0%
CAP
FAP
Equine
22.5%
18.6%
25.6%
62.5%
18.6%
37.2%
Generic
Innovation
Lifecycle
Vaccine
40
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023
www.dechra.com
31565 Dechra AR2023 Strategic.indd 40
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31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Product Pipeline
The table below 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.
Evaluation
CAP/Equine
Development
FAP
CAP/Equine
FAP
New opportunities are constantly being evaluated and will
move into Feasibility quickly if of interest.
Feasibility
CAP/Equine
FAP
Antibiotic for Dogs and Cats
Renal Therapy for Cats
Poultry Vaccine
Poultry Vaccine
Antibiotic for Dogs and Cats
Dermatological Therapy for Dogs
Dermatological Therapy for Dogs
Anti-Viral Therapy for Cats
Endocrine Therapy for Dogs
Ophthalmic Therapy for Dogs
Research
CAP/Equine
Anaesthetic for Dogs and Cats
Poultry Vaccine
Dermatological Therapy for Dogs
Poultry Vaccine
Dermatological Therapy for Dogs
Poultry Vaccine
Cardiovascular Therapy for Dogs
Poultry Vaccine
Dermatological Therapy for Dogs
Endocrine Therapy for Dogs
Gastrointestinal Therapy for Cats
Analgesic Therapy for Horses
Horse Vaccine
Horse Vaccine
Horse Vaccine
Endocrine Therapy for Horses
Registration
CAP/Equine
FAP
FAP
Antibiotic for Cats
Antibiotic for
Cattle and Pigs
Ophthalmic Therapy for Dogs
Poultry Vaccine
Endocrine Therapy for Cats
Endocrine Therapy for dogs
Antibiotic for Dogs
Analgesic Therapy for Dogs
Analgesic Therapy for Dogs
Gastrointestinal Therapy for Horses
Gastrointestinal Therapy for Dogs
Endocrine Diagnostic
Endocrine Therapy for Dogs
Key to Product Pipeline
Analgesic, Anaesthesia, Anti-inflammatory
Dermatology
Endocrinology
Gastrointestinal
Renal
Antibiotic
Anti-Viral
Stock Code: DPH
Vaccines
Ophthalmology
Cardiovascular
31565 Dechra AR2023 Strategic.indd 41
31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
41
13/10/2023 08:52:12
Global Product Offering
Analgesia, Anaesthesia and Anti-inflammatory
Key Product
Animal
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Cattle, Horses
Melexoral/Meloxicam (cid:694)at(cid:671)(cid:3)(cid:695)(cid:738)g(cid:742)
Pardale V
Sedator/Sedastart
Tilzolan
Tralieve/Tramadol
Isoflurane
Butorphanol
Rapidexon
(cid:695)(cid:738)g(cid:742)
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Cattle, Horses
● ● ●
● ● ● ● ● ● ● ● ● ●
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Other products: Anesketin, Bupredine, Euthasol, Fentadon, Intubeaze,Ketamine, Meloxidolor, Myorelax, Nerfasin, Relaquine, Rominervin, Sedadex, Sympagesic,
Tranquinervin, Willcain
Antibacterial and Antibiotics
Key Product
Animal
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Amoxi-Clav/
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Diatrim
Doxybactin
Equibactin
Enroquin
Marboquin
Metrobactin
Animax
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(cid:707)ig(cid:742)
(cid:694)at(cid:742)(cid:671)(cid:3)(cid:695)(cid:738)g(cid:742)
Horses
Cats, Dogs
(cid:694)at(cid:742)(cid:671)(cid:3)(cid:695)(cid:738)g(cid:742)
Cats, Dogs
(cid:694)at(cid:742)(cid:671)(cid:3)(cid:695)(cid:738)g(cid:742)
● ●
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Other products: Gentacalm, Muricin
Dermatology and Care
Key Product
Animal
Canaural
Isaderm
Malaseb/Miconahex
Malacetic
Osurnia
Triz Range
Cats, Dogs
Dogs
Cats, Dogs
Cats, Dogs
Dogs
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Endocrinology
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● ● ●
● ●
3 5
4 8
5 10
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42
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023
www.dechra.com
31565 Dechra AR2023 Strategic.indd 42
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31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Lameness
Key Product
Cyclospray
Equipalazone
HY-50
Osphos
Phycox
Nutrition
Animal
Cattle, Pigs, Sheep
Horses
Horses
Horses
Dogs, Horses
Key Product
Specific
Animal
Cats, Dogs
Water Solubles
Key Product
Animal
Altidox
Otacillin/Solamocta
Soludox
Pigs, Chickens,
Turkeys
Pigs, Chickens,
Turkeys
Pigs, Chickens,
Turkeys
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Other FAP products: Metaxol, Methoxasol, Phenocillin, Solacyl, Tialin
Vaccines
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Key Product
Avishield ND
Excell 10
Vencomax
Animal
Chickens, Turkeys
Cattle, Pigs,
Sheep, Goats
Dogs
● ● ●
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●
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Other Brands
Key Product
Cardisure
Isathal
Libromide
Mirataz
Phenoleptil
Prednicortone
Prevomax
Tri-Solfen
Vetivex
Animal
Dogs
Cats, Dogs,
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Dogs
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Sheep
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Other products: Apovomin, Fruesdale, Hypertonic, Laxatract, Lubrithal, Ophtocycline, CleanOcular, Puralube, Vetropolycin
* Not all products are sold in each country within a continent.
Stock Code: DPH
31565 Dechra AR2023 Strategic.indd 43
31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
43
13/10/2023 08:52:13
Financial Review
“End user demand for our products
“End user demand for our products
has remained strong and our
has remained strong and our
increased investment in R&D will
increased investment in R&D will
help to fuel future growth.”
help to fuel future growth.”
Paul Sandland
Paul Sandland
Chief Financial Officer
Chief Financial Officer
Glossary
IFRSs: UK-adopted International Financial Reporting
Standards
CER: Constant Exchange Rates
AER: Actual Exchange Rates
CAP: Companion Animal Products
FAP: Food producing Animal Products
bps: basis points
Operating profit (EBIT) margin: operating profit as a
percentage of revenue
Underlying 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
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 and
product rights 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.
Including non-underlying items, the Group’s consolidated
operating profit decreased by (89.8)% at CER ((93.4)% at
AER). Consolidated profit before tax decreased by (141.4)% at
CER ((146.5)% at AER), a greater decline than operating profit
due to an increase in net finance costs including a higher
impact from the unwind of the discount associated with
contingent consideration liabilities.
Existing operating profit of £96.0 million includes underlying
operating profit of £168.8 million and non-underlying
charges of £(72.8) million principally relating to amortisation
of intangibles and cloud computing costs (further detail is
provided below). The acquisition operating loss of
£(89.7) million includes an underlying operating loss of
£(3.7) million and non-underlying charges of £(86.0) million
reflecting to the impairment of an acquired intangible
relating to one of the near term candidates in the Piedmont
product pipeline, the amortisation of acquired intangibles,
the unwind of the fair value uplift on inventory, expenses
relating to acquisitions and subsequent integration activities,
and costs associated with the acquisition of the Company
by Freya Bidco Limited.
Diluted EPS was (140.7)% lower than the prior year at CER
((146.0)% at AER) reflecting the combined effect of a lower
profit before tax and higher share capital following the
equity raise in July 2022.
Reported segmental performance is presented in note 2.
Reported
Revenue
Gross profit
Gross profit %
Operating profit/(loss) (EBIT)
Operating profit (EBIT) %
Profit/(loss) before tax
Diluted EPS (p)
2023
Existing
£m
2023
Acquisition
£m
2023
Consolidated
£m
728.6
418.4
57.4%
96.0
13.2%
64.5
32.9
7.9
24.0%
(89.7)
(272.6)%
(100.6)
761.5
426.3
56.0%
6.3
0.8%
(36.1)
(24.59)
2022
£m
Growth at AER
Consolidated
Growth at CER
Consolidated
681.8
384.8
56.4%
95.5
14.0%
77.6
53.40
11.7%
10.8%
(40) bps
(93.4)%
(1,320) bps
(146.5)%
(146.0)%
5.5%
4.9%
(30) bps
(89.8)%
(1,270) bps
(141.4)%
(140.7)%
44
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023
www.dechra.com
31565 Dechra AR2023 Strategic.indd 44
13/10/2023 08:52:17
31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
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 and expenses related to acquisitions and subsequent integration activities, 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, impairments and costs associated with acquisitions and
subsequent integration activities are excluded, underlying earnings will be higher than total Reported earnings.
A reconciliation of underlying results to total Reported results in the year to 30 June 2023 is provided in the table below. In the
commentary which follows, all references will be to CER movement unless otherwise stated.
Non-underlying Items
Amortisation
and related
credits of
acquired
intangibles
and associates
£m
Acquisition,
impairments
and cloud
computing
costs
£m
2023
Underlying
Results
£m
Tax rate
changes
and finance
expenses
£m
Revenue
Gross profit
Selling, general and administrative (SG&A) expenses
Research & Development (R&D) expenses
Operating profit (EBIT)
Net finance costs
Share of associate (loss)
Profit/(loss) before tax
Taxation
Profit/(loss) after tax
Diluted EPS (p)
761.5
429.6
(207.0)
(57.5)
165.1
(23.8)
(1.0)
140.3
(32.4)
107.9
94.57
-
-
(67.4)
(3.3)
(70.7)
-
0.1
(70.6)
16.8
(53.8)
-
(3.3)
(84.8)
-
(88.1)
-
-
(88.1)
20.1
(68.0)
-
-
-
-
-
(17.7)
-
(17.7)
3.7
(14.0)
2023
Reported
Results
£m
761.5
426.3
(359.2)
(60.8)
6.3
(41.5)
(0.9)
(36.1)
8.2
(27.9)
(24.59)
Consolidated revenue increased 5.5% on the prior year to £761.5 million. This included £728.6 million from the existing
business, an increase of 1.2% on a like-for-like basis and £32.9 million from acquired businesses and product rights.
Consolidated underlying EBIT decreased (10.8)% to £165.1 million. This included £168.8 million from Dechra’s existing business,
a decrease of (8.8)%, where underlying EBIT growth in European (EU) Pharmaceuticals and Corporate cost savings were
offset by a decline in both North American and International Pharmaceuticals plus an increase in Research & Development
(R&D) costs due to ongoing investment in our existing pipeline. There was a £(3.7) million loss relating to acquired businesses
and product rights in the year, mostly reflecting the net impact of R&D costs relating to the acquisition of Piedmont Animal
Health, Inc and the profit contribution from Med-Pharmex Holdings, Inc. Although underlying EBIT declined overall, excluding
the £25.1 million increase in R&D expenses it actually increased 1.4% to £222.6 million, largely driven by performance in the EU
Pharmaceuticals segment.
Underlying EBIT margin decreased by (400) bps to 21.7%. The main driver of this was the planned increase in R&D as noted
above, whilst there were also strategic investments made within operating costs to underpin the Group’s future growth.
Underlying diluted EPS declined by (26.8)% to 94.57 pence due to the combined effect of a lower underlying operating profit,
higher finance costs and the dilutive impact of the equity raise.
A detailed explanation of our non-underlying items is included later in this Financial Review.
Underlying
Revenue
Gross profit
Gross profit %
Operating profit/(loss) (EBIT)
Operating profit (EBIT) %
EBITDA
Diluted EPS (p)
Dividend per share (p)
Stock Code: DPH
2023
Existing
£m
2023
Acquisition
£m
2023
Consolidated
£m
728.6
418.4
57.4%
168.8
23.2%
186.0
32.9
11.2
34.0%
(3.7)
(11.2)%
(2.3)
761.5
429.6
56.4%
165.1
21.7%
183.7
94.57
12.50
2022
£m
681.8
385.3
56.5%
174.3
25.6%
190.6
120.84
44.89
Growth at CER
Existing Consolidated
1.2%
2.9%
100 bps
(8.8)%
(260) bps
(7.9)%
5.5%
5.6%
0 bps
(10.8)%
(400) bps
(9.1)%
(26.8)%
(72.2)%
45
31565 Dechra AR2023 Strategic.indd 45
13/10/2023 08:52:17
31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
Financial Review
Underlying Segmental Performance
The effect of acquisitions in the year was material; the underlying 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
that first year of ownership, 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.
2023
Existing
£m
2023
Acquisition
£m
2023
Consolidated
£m
2022
£m Existing Consolidated
Existing Consolidated
Growth at AER
Growth at CER
Underlying
Total revenue
EU Pharmaceuticals
NA Pharmaceuticals
International Pharmaceuticals
Gross profit
Gross profit %
SG&A expenses
R&D expenses
Underlying operating profit
EU Pharmaceuticals
NA Pharmaceuticals
International Pharmaceuticals
Pharmaceuticals R&D
Corporate & unallocated costs
Net finance costs
Share of associate (loss)
Profit before tax
728.6
343.5
298.0
87.1
418.4
57.4%
(199.8)
(49.8)
168.8
107.7
92.2
25.5
(49.8)
(6.8)
(12.9)
(1.0)
154.9
32.9
-
32.9
-
11.2
34.0%
(7.2)
(7.7)
(3.7)
-
4.0
-
(7.7)
-
(10.9)
-
(14.6)
6.9%
681.8
761.5
6.3%
323.2
343.5
8.3%
275.1
330.9
4.3%
83.5
87.1
8.6%
385.3
429.6
56.4% 56.5% 90 bps
(178.6)
(11.9)%
(207.0)
(32.4) (53.7)%
(57.5)
165.1
107.7
96.2
25.5
(57.5)
(6.8)
(23.8)
(1.0)
140.3
174.3
103.4
87.7
28.1
(3.2)%
4.2%
5.1%
(9.3)%
(32.4) (53.7)%
45.6%
(12.5)
(3.1) (316.1)%
(1.2) (16.7)%
11.7%
1.2%
6.3%
4.3%
20.3%
(2.0)%
4.3%
(0.8)%
11.5%
2.9%
(10) bps
100 bps
(15.9)%
(6.6)%
(77.5)% (45.4)%
(5.3)%
4.2%
9.7%
(8.8)%
2.3%
(5.6)%
(9.3)% (13.9)%
(77.5)% (45.4)%
45.6%
45.6%
(667.7)% (335.5)%
(16.7)% (16.7)%
5.5%
4.3%
8.9%
(0.8)%
5.6%
0 bps
(10.3)%
(67.0)%
(10.8)%
2.3%
(1.6)%
(13.9)%
(67.0)%
45.6%
(651.6)%
(16.7)%
(22.9)%
170.0
(8.9)%
(17.5)% (15.1)%
Underlying Diluted Earnings Per Share
94.57p
Research and Development Spend
£57.5m
23
22
21
20
19
94.57p
120.84p
108.14p
92.19p
90.01p
23
22
21
20
19
£57.5m
£32.4m
£32.4m
£28.4m
£25.1m
Reported Diluted Earnings Per Share
(24.59)p
(24.59)p
23
22
21
20
19
53.40p
51.03p
32.76p
30.07p
46
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023
www.dechra.com
31565 Dechra AR2023 Strategic.indd 46
13/10/2023 08:52:18
31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
European Pharmaceuticals
Revenue in European (EU) Pharmaceuticals increased by 4.3% to £343.5 million, with all of this growth coming from the
existing business. The EU segment now excludes the International Pharmaceuticals division, which is disclosed separately
below, but does include revenue of £6.2 million related to third party contract manufacturing (2022: 9.5 million), which is a
non-core part of the Group and decreased again this year. Excluding this third party revenue, growth of the core European
Pharmaceutical business was 5.5%, reflecting a robust performance given country specific dynamics such as wholesaler de-
stocking in the UK, local generic competition in the Netherlands and unpredictable demand in other European markets.
Operating profit increased by 2.3% with operating margin decreasing by (60) bps to 31.4%, which was largely driven by higher
distribution and operating costs although we have remained pro-active in looking to offset inflationary headwinds through
sales price action taken during the year.
Underlying
Revenue
Operating profit
Operating profit %
2023
Existing
£m
2023
Acquisition
£m
2023
Consolidated
£m
343.5
107.7
31.4%
-
-
-
343.5
107.7
31.4%
Growth at CER
2022
£m
323.2
103.4
32.0%
Existing Consolidated
4.3%
2.3%
(60) bps
4.3%
2.3%
(60) bps
North American Pharmaceuticals
Total revenue from North American (NA) Pharmaceuticals increased 8.9% year-on-year to £330.9 million, reflecting existing
revenue of £298.0 million and acquisition revenue of £32.9 million. Like-for-like revenues decreased (2.0)% as the NA business
was impacted by significant wholesaler de-stocking across the industry during the second half of the financial year. The vast
majority of our NA revenue is derived from sales made to wholesalers rather than direct to veterinary practices; therefore
although sales out from wholesalers to practices remained consistently strong, we experienced a one-off adverse impact
whilst wholesalers reduced their inventory levels.
Acquisition revenue consists of £28.9 million related to Med-Pharmex (acquired on 26 August 2022) and a further £4.0 million
from various product rights acquired during the prior year for which there is no comparative.
Operating profit from the existing business decreased (5.6)% with operating margin decreasing (120) bps due to investment
in sales and marketing teams to support future growth of the business as we expect the NA business to become the largest
part of the Group next financial year. Consolidated operating margin decreased (310) bps due to the dilutive impact from
Med-Pharmex this year, where the revenue and profit contribution were lower than originally expected due to one-off factors
related to planned quality improvement works and supply chain challenges on some of the higher margin products.
Underlying
Revenue
Operating profit
Operating profit %
2023
Existing
£m
298.0
92.2
30.9%
2023
Acquisition
£m
2023
Consolidated
£m
32.9
4.0
12.2%
330.9
96.2
29.1%
Growth at CER
2022
£m
275.1
87.7
31.9%
Existing Consolidated
(2.0)%
(5.6)%
(120) bps
8.9%
(1.6)%
(310) bps
International Pharmaceuticals
Revenue from our International Pharmaceuticals segment, disclosed for the first time in this report, was £87.1 million. This
represented a decline of (0.8)% for the year overall, but a strong recovery in the second half of the year when sales grew
10.0% following a decline of (9.0)% in the first half. The marked difference in performance during the year reflects the impact
of establishing our own sales and marketing organisation in South Korea, whereby no revenue was generated during the first
seven months, and disruption caused by a change of nutrition distribution partner in Japan.
Operating profit decreased (13.9)% compared to the prior year, largely due to a full year of costs relating to the newly
established South Korean subsidiary but without a full year profit contribution.
2023
Existing
£m
87.1
25.5
29.3%
2023
Acquisition
£m
2023
Consolidated
£m
-
-
-
87.1
25.5
29.3%
Growth at CER
2022
£m
83.5
28.1
33.7%
Existing Consolidated
(0.8)%
(13.9)%
(450) bps
(0.8)%
(13.9)%
(450) bps
Underlying
Revenue
Operating profit
Operating profit %
Stock Code: DPH
31565 Dechra AR2023 Strategic.indd 47
31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
47
13/10/2023 08:52:18
Financial Review
Pharmaceuticals Research and Development
Pharmaceuticals Research and Development (R&D)
expenses grew significantly in the year to £57.5 million or
7.6% of revenue (2022: £32.4 million and 4.8% of revenue).
This represented a 280 bps increase in R&D expenditure and
therefore was a key driver of the overall EBIT margin decline
of (400) bps.
The increase in spend was as planned and in line with our
original guidance of between 7% and 8% of revenue, driven
by both ongoing investment in our existing pipeline together
with development of the eight candidates acquired from
Piedmont. In particular, spend included £14.2 million in
relation to Akston (2022: £3.3 million), which remains on track
for approval of the dog insulin product in 2026.
Revenue by Product Category
The pharmaceutical product categories of CAP, FAP and
Equine all delivered growth in the year. CAP continues to
be the largest proportion of the business at 73.8% of total
revenue and we delivered another year of growth despite
the high comparatives and disruption in the wholesaler
channel as explained above. FAP performed well, reflecting
a benefit from the Med-Pharmex portfolio applied to a
relatively small base, whilst Equine was the strongest
category this year.
Nutrition sales were impacted by operational changes in
South Korea and Japan as noted above, but nonetheless
grew in total. Other revenue decreased year-on-year and
remains a small, non-core part of the business. The majority
of this revenue is generated from one remaining third party
contract manufacturing arrangement relating to a feed
supplement at our Zagreb facility.
Revenue
CAP
FAP
Equine
Subtotal Pharmaceuticals
Nutrition
Other
Total
2023
£m
562.6
89.0
65.2
716.8
38.5
6.2
761.5
2022
£m
Change
at AER
Change
at CER
508.4
78.8
49.5
636.7
35.0
10.1
681.8
10.7%
12.9%
31.7%
3.9%
8.5%
25.1%
12.6%
10.0%
(38.7)% (40.7)%
6.1%
8.6%
11.7%
5.5%
* ‘Other’ includes third party contract manufacturing
revenue and other non-veterinary business
Revenue by Product Category (at AER)
0.8%
5.1%
11.7%
8.6%
CAP
Equine
FAP
Nutrition
Other
73.8%
Underlying Gross Profit
Underlying gross profit margin increased by 100 bps to 57.4%
on an existing basis, reflecting a strong margin performance
of our novel CAP portfolio in particular and effective
pass-through of cost inflation through carefully implemented
pricing action. On a consolidated basis, underlying gross
margin was largely flat year-on-year at 56.4% due to the
dilutive impact from Med-Pharmex where there was an
adverse sales mix towards lower margin products.
Underlying Selling, General and
Administrative Expenses (SG&A)
Group SG&A costs grew from £178.6 million in the prior year
to £207.0 million in the current year, an increase of 10.3%
principally driven by people costs. Such costs include the
annualised impact of salary increases across the Group,
investment in additional heads, particularly in Manufacturing
and the NA sales team, and consolidation of the
Med-Pharmex cost base for the first time. Total SG&A costs
now represent 27.2% of revenue (2022: 26.2%) reflecting
good management of inflation in the like-for-like operating
cost base from last year and the additional operating costs
associated with Med-Pharmex and South Korea.
Corporate and Unallocated Costs
Corporate costs decreased to £6.8 million (2022: £12.5
million), driven by a lower year-on-year charge relating
to incentive arrangements. Central functions remain well
invested to support the continued expansion of the Group.
Finance Expense
Net underlying finance expense increased to £23.8 million
(2022: £3.1 million), largely due to the additional level of
borrowing as a result of the Med-Pharmex acquisition, a
higher variable interest rate compared to the prior year and
foreign exchange movements.
Non-underlying Items
Non-underlying items incurred in the year are fully described
in note 5. In summary, they relate to the following:
• Amortisation of acquired intangibles of £71.1 million has
decreased from £72.8 million in 2022 principally due to
new charges relating to the Med-Pharmex acquisition
being more than offset by the reducing charge from
the AST Farma and Le Vet acquisition and the Eurovet
acquisition intangible becoming fully amortised in the
prior year;
• Unwind of a non-cash inventory adjustment of £3.3 million
arising through a fair value increase in the valuation of
acquisition inventory of Med-Pharmex in line with IFRS 3
‘Business Combinations’;
• Impairment of assets of £69.6 million relates to an
acquired intangible of one of the candidates in the
Piedmont product pipeline;
• Cloud computing arrangement costs of £8.5 million
relating to the costs of the programme to implement
the Manufacturing and Supply function’s new ERP and
Electronic Quality Management systems;
• Expenses relating to acquisition and subsequent
integration activities of £7.5 million predominantly relating
to the acquisition of Med-Pharmex (£2.8 million) and to
the pending acquisition of the Company by Freya Bidco
Limited (£5.0 million);
48
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023
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31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
• Finance charge of £17.7 million (2022: £13.6 million)
represents the charge arising on the unwind of the
discount relating to the contingent consideration liability
of £20.8 million, the loss on extinguishment of debt of
£0.6 million and associated foreign exchange gain of
£3.7 million; and
• Taxation credit of £40.6 million (2022: £18.9 million)
represents the tax impact of the above items.
Currency Exposure
The average rate for £/€ decreased by (2.6)%, and the £/$
rate decreased by (9.6)% 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.
In addition to costs relating to the acquisition of the
Company by Freya Bidco Limited that have been incurred in
the year, there are anticipated future costs of £26.0 million,
of which £25.0 million are contingent on completion.
£/€
£/$
Average rates
2023
1.1504
1.2038
2022
1.1807
1.3316
% Change
(2.6)%
(9.6)%
Taxation
The reported effective tax rate (ETR) for the year, including
the tax impact of non-underlying items, was 22.8% (2022:
25.0%). On an underlying basis the ETR increased to 23.1%
(2022: 22.5%), largely reflecting the regional mix of operating
profits. The main differences to the UK corporation tax rate
applicable of 20.5% (2022: 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 2024. We continue to monitor relevant
tax legislation internationally as it may affect our future ETR.
Earnings per Share and Dividend
Underlying diluted EPS declined by (26.8)% to 94.57 pence
(2022: 120.84 pence) due to the combined effect of a lower
underlying operating profit, higher finance costs driven by
higher borrowing costs and additional debt taken following
the acquisition of Med-Pharmex and the dilutive impact of
the equity raise. The weighted average number of shares for
diluted earnings per share for the year was 114.1 million
(2022: 109.0 million).
The reported diluted EPS for the year was (24.59) pence
(2022: 53.40 pence). The year-on-year decline in reported
diluted EPS is greater than the decline in underlying diluted
EPS due to the significant increase in non-underlying costs
as noted above.
An interim dividend of 12.50 pence per share was paid on
13 April 2023. The ongoing acquisition of the Company by
Freya Bidco Limited remains conditional upon the receipt of
antitrust approval in the European Union and foreign direct
investment approval in Australia, in each case to the extent
required, as well as the sanction of the Scheme by the Court
at the Sanction Hearing (each as defined in the scheme
document dated 26 June 2023) and is expected to occur in
late 2023 or early 2024. If prior to the acquisition becoming
effective, any dividend is announced, declared, made or
paid or becomes payable in respect of the ordinary share
capital of the Company (Dechra Shares), Freya Bidco Limited
reserves the right to reduce the consideration payable
under the terms of the acquisition for the Dechra Shares by
an amount up to the aggregate amount of such dividend.
Therefore the Directors are not recommending the payment
of a final dividend.
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 +/- 0.6%.
Current exchange rates are £/€ 1.1559 and £/$ 1.2210 as at 6
October 2023. If these rates had applied throughout the year,
the underlying diluted EPS would have been approximately
1.0% lower.
Statement of Financial Position
The Statement of Financial Position is summarised in the
table below.
• Non-current assets (excluding deferred tax) increased
from £846.6 million to £1,096.6 million and include the
intangible assets recognised on the acquisitions of
Med-Pharmex and Piedmont, partly offset by amortisation
of acquired intangibles.
• Working capital increased from £175.7 million to
£234.7 million, largely driven by a higher inventory and
trade receivables balance at year end.
• Net debt increased in the year by £221.9 million from
£208.2 million to £430.1 million; this includes cash
generated from operations before interest, tax and non-
underlying items of £122.7 million, an outflow of £396.9
million principally relating to acquisitions made during the
year, net capital expenditure of £22.6 million, net interest/
tax outflows of £44.4 million and £51.7 million in dividends.
Exchange rate variations positively impacted the net debt
position by £17.8 million.
• Current and deferred tax net liabilities increased from
£34.7 million to £68.6 million principally due to the
recognition of deferred tax liabilities on the acquired
intangible recognised on the acquisition of Piedmont and
Med-Pharmex.
Non-current assets
Working capital
Net debt
Current and deferred tax
Other liabilities
Total net assets
2023
£m
1,096.6
234.7
(430.1)
(68.6)
(77.4)
755.2
2022
£m
846.6
175.7
(208.2)
(34.7)
(112.6)
666.8
Stock Code: DPH
31565 Dechra AR2023 Strategic.indd 49
31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
49
13/10/2023 08:52:18
Financial Review
Cash Flow, Financing and Liquidity
The Group delivered an underlying EBITDA margin of 24.1% this
year (2022: 28.0%). Working capital increased by
£60.2 million mainly due to the increase in the proportion of
products now manufactured in-house and the deliberate
decision to invest in stock levels to maintain a robust supply
chain. In addition, the impact of the significant wholesaler
de-stocking seen during the second half of the year had
not fully unwound by the year end, further contributing to
higher inventory levels. There was also an increase in cash
flows from non-underlying items relating to cloud computing
arrangement costs and acquisition and integration expenses.
This resulted in cash generated from operations after non-
underlying items of £109.3 million, representing underlying
cash conversion of 66.2% of underlying operating profit.
Underlying operating profit
Depreciation and amortisation
Underlying EBITDA
Underlying EBITDA margin %
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
Underlying cash conversion (%)
2023
£m
165.1
18.6
183.7
24.1%
(60.2)
(0.8)
122.7
(13.4)
109.3
66.2%
2022
£m
174.3
16.3
190.6
28.0%
(27.8)
3.3
166.1
(2.8)
163.3
93.7%
Net Debt Bridge
Net debt at the year end was £430.1 million, an increase
of £221.9 million from £208.2 million at 30 June 2022. The
Adjusted Net Debt to Adjusted underlying EBITDA (adjusted
for the impact of acquisitions) banking covenant leverage
(on a pre IFRS 16 basis) was 2.3 times (2022: 1.0 times) versus
a covenant of 3.0 times. This reflects both a higher net debt
balance due to the increase in RCF borrowings following the
acquisition of Med-Pharmex and elevated levels of working
capital, and the lower underlying EBITDA compared to the
prior year due to the increased investment in R&D.
Net Debt 30 June 2022
Net cash generated from operations before
non-underlying items
Non-underlying items
Net capital expenditure
Acquisition of intangible assets
Acquisition of subsidiaries
New lease liabilities
Interest and tax
Dividend paid
Equity raised
Other non-cash movements
Foreign exchange on net debt
Net Debt 30 June 2023
£m
(208.2)
122.7
(13.4)
(22.6)
(7.5)
(396.9)
(5.7)
(44.4)
(51.7)
181.9
(2.1)
17.8
(430.1)
Borrowing Facilities
On 31 March 2023, the Group entered into a new
multi-currency Revolving Credit Facility Agreement in the
maximum amount of £340.0 million and maturing 31 March
2028. This RCF is provided by a syndicate of banks comprising
BNP Paribas, CaixaBank SA UK branch, Crédit Industriel et
Commercial, London Branch, Handelsbanken Capital Markets,
Handelsbanken plc, HSBC UK Bank plc, PNC Capital Markets
LLC, Santander UK plc and The Governor and Company of the
Bank of Ireland. The covenant requirements in the RCF remain
unchanged from the prior RCF Agreement (being Interest
Cover in respect of any Relevant Period shall not be less than
4:1 and Leverage in respect of any Relevant Period shall not
exceed 3:1).
The RCF uses Risk Free Reference (RFR) rates, with the
relevant RFR rates for the principal Borrowings of the Group
being 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. The Margin on the RCF
is a minimum of 1.40% and a maximum of 2.30%, dependent
upon the Leverage (the ratio of Adjusted Net Debt to Adjusted
underlying EBITDA) of the Group. At 30 June 2023, £241.4
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 2023.
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 2023. 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), the proceeds of which were used
to repay existing debt. Both facilities remain fully drawn at 30
June 2023. Interest is charged on the EUR50.0 million senior
secured notes at a fixed rate of 3.64% until maturity (July
2029), and on the EUR100.0 million senior secured notes at a
fixed rate of 3.93% until maturity (July 2032).
The weighted average coupon of the Private Placements fixed
rate notes equates to 3.2%.
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 3,430 pence per placing share, raising gross proceeds
of £184.0 million which were largely deployed to fund the
Piedmont acquisition upon its completion on 25 July 2022.
50
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023
www.dechra.com
31565 Dechra AR2023 Strategic.indd 50
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31565 Dechra AR2023 Strategic
12 October 2023 3:05 pm
Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Covenants
There are two covenants governing the RCF and the Private
Placements:
• Leverage: Adjusted Net Debt to Adjusted underlying EBITDA
not greater than 3.0:1 for the RCF and 3.5:1 for the Private
Placements (30 June 2023: 2.3:1); and
• Interest Cover: Adjusted underlying EBITDA to Net Finance
Charges not less than 4.0:1 (30 June 2023: 8.0:1).
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.
Underlying Return on Capital Employed (ROCE)
Underlying ROCE decreased to 15.3% in the year (2022: 19.5%)
reflecting the lower level of profitability during the year and
the investments made in Piedmont and Med-Pharmex, the
return on which we expect to realise in future years (see
note 35).
Acquisitions
During the 2023 financial year the Group acquired Piedmont
Animal Health, Inc and Med-Pharmex Holdings, Inc. See note
29 for further details.
The Group has made several acquisitions in recent years. The
incremental performance during the first year of ownership
of the acquisitions made during the 2022 and 2023 financial
years is separately summarised compared to the existing
business in the sections above.
Accounting Standards
The accounting policies adopted are outlined in note 1 to the
financial statements in the 2023 Annual Report.
Going Concern
The Directors have a reasonable expectation that the
Group and Company has adequate resources to continue
in operational existence for the foreseeable future and will
continue to be able to meet its liabilities as they fall due,
within 12 months of the date of approval of these financial
statements. Accordingly, they continue to adopt the going
concern basis of accounting in preparing these annual
financial statements.
In reaching this conclusion, the Directors have given due
regard to the following:
• The Group’s business activities, together with factors likely
to impact future growth and operating performance
including the principal risks and uncertainties and an
assessment of a number of severe but plausible stress tests
on these areas (as set out on pages 79 to 87);
• The current and projected future financial position of
the Group, its cash flows, available cash resources and
committed debt facilities and compliance with the financial
covenants associated with the Group’s borrowings, which
are described in the financial statements; and
• Subsequent events (see note 34 and below).
On 2 June 2023, the boards of directors of Dechra and Freya
Bidco Limited (Bidco) announced that they had reached
agreement on the terms and conditions of a recommended
cash acquisition by Bidco of the entire issued, and to be
issued, ordinary share capital of Dechra (the Acquisition). The
Acquisition is being implemented by means of a
Court-sanctioned scheme of arrangement under Part 26 of
the Companies Act 2006 (the Scheme) and is subject to the
terms and conditions set out in the circular in relation to the
Scheme sent to Dechra Shareholders dated 26 June 2023 (the
Scheme Document). As announced by Dechra on
20 July 2023, the Scheme and its implementation were
approved by the requisite majority of Scheme Shareholders
and Dechra Shareholders (as applicable) on 20 July 2023
and the Acquisition is expected to complete after the date of
approval of the Annual Report and Accounts.
The going concern assessment of the Group and Company
is therefore subject to uncertainties relating to the potential
change in ownership of the Group and Company and the
actual funding requirements and financing arrangements
post completion. For this reason, the Directors cannot
reasonably predict the financial position of the Group and
Company post-completion, including the details of any
financing arrangements related to the transaction that
could affect the Group and Company. This indicates the
existence of a material uncertainty which may cast significant
doubt on the Group and Company’s ability to continue as
going concern. As noted above, the financial statements do
however not include the adjustments that would result if the
Group and Company were unable to continue as a going
concern.
Notwithstanding this uncertainty, based on the circumstances
described above, the Directors have a reasonable expectation
that the Group and Company has adequate resources to
continue in operational existence for the foreseeable future
and the accounts are prepared on the assumption that the
Group and Company is a going concern.
Subsequent Events
On 20 July 2023, shareholders voted in favour of the proposed
cash offer for the Company by Freya Bidco Limited.
Summary
The Group delivered a satisfactory financial performance
during the year considering the factors that were outside of
our control. The strength of the business and attractiveness of
the market in which we operate are evident by the takeover
and we are well positioned to deliver future growth.
Paul Sandland
Chief Financial Officer
12 October 2023
Stock Code: DPH
31565 Dechra AR2023 Strategic.indd 51
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12 October 2023 3:05 pm
51
13/10/2023 08:52:19
Key Performance Indicators
KPI and Definition
Performance
Commentary
Relevance to Strategy
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 using constant exchange rates.
Underlying Diluted EPS Growth
Underlying profit after tax divided by the diluted
average number of shares, calculated on the
same basis as note 11 to the Accounts using
constant exchange rates.
£
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).
£
Underlying Cash Conversion
Cash generated from operations before tax and
interest payments as a percentage of underlying
operating profit.
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.
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.
Employee Turnover
Number of leavers during the period as a
percentage of the average total number of
employees in the period.
23
22
21
20
19
18
23
22
21
20
19
18
23
22
21
20
19
18
23
22
21
20
19
18
23
22
21
20
19
18
23
22
21
20
19
23
22
21
20
19
18
£728.6m
£681.8m
1.2%
£608.0m
£515.1m
£481.8m
£407.1m
94.57p
120.84p
108.14p
(26.8)%
92.19p
90.01p
76.45p
15.3%
19.5%
18.8%
15.4%
15.6%
15.4%
66.2%
93.7%
87.1%
99.4%
85.0%
81.9%
(420)bps
(2,740)bps
15.6%
10.8%
480bps
20.4%
16.7%
16.7%
11.9%
0.21
0.20
5.0%
0.09
0.17
0.21
12.6%
16.0%
(340)bps
13.5%
12.4%
13.6%
15.9%
Dechra’s existing business grew by
5.5% in EU Pharmaceuticals (excluding
third party manufacturing) which was
offset by the one-off adverse impact
of the US wholesaler destocking in NA
Pharmaceuticals.
A key driver of our strategy is to deliver
sustainable sales growth through delivering
our pipeline, maximising our existing portfolio
and expanding geographically.
This reflects a lower operating profit, higher
financing costs and the dilutive impact of
the July 2022 equity raise.
A decline in the underlying return on
capital employed reflects the lower level
of profitability during the year and the
investments made in Piedmont and
Med-Pharmex.
Underlying 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.
As we look to grow the business, it is
important that we use our capital efficiently
to generate returns superior to our cost
of capital in the medium to long term. It
underpins the performance conditions of
the LTIP.
Lower cash conversion is driven by an
investment in stock levels to maintain
a robust supply chain, and higher non-
underlying cash outflows driven by
acquisition costs and cloud computing
investment in the pipeline, acquisition and
arrangement costs.
people.
Our stated aim is to be a cash generative
business. Cash generation supports
Increase in new product revenue is driven
by the acquisition of Med-Pharmex during
the year.
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 products.
The lost time accidents increased to 0.21.
The majority of the incidents occurred at
our Manufacturing sites with one incident
The safety of our employees is core to
at our central logistics centre in Denmark.
everything we do. We are committed to a
None of these incidents resulted in a work
strong culture of safety in all our workplaces.
related fatality or disability.
We are pleased to see that moving annual
turnover has reduced back to 12.6%. We
felt the post Covid impact of the changing
Attracting and retaining the best employees
nature of the workforce and increased
is critical to the successful execution of our
competition for talent, particularly in more
strategy.
specialist roles. We have introduced a
range of measures to manage turnover.
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KPI and Definition
Performance
Commentary
Relevance to Strategy
Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
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 using constant exchange rates.
Underlying Diluted EPS Growth
Underlying profit after tax divided by the diluted
average number of shares, calculated on the
same basis as note 11 to the Accounts using
constant exchange rates.
£
£
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).
Underlying Cash Conversion
Cash generated from operations before tax and
interest payments as a percentage of underlying
operating profit.
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.
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.
Employee Turnover
Number of leavers during the period as a
percentage of the average total number of
employees in the period.
1.2%
Dechra’s existing business grew by
5.5% in EU Pharmaceuticals (excluding
third party manufacturing) which was
offset by the one-off adverse impact
of the US wholesaler destocking in NA
Pharmaceuticals.
A key driver of our strategy is to deliver
sustainable sales growth through delivering
our pipeline, maximising our existing portfolio
and expanding geographically.
(26.8)%
This reflects a lower operating profit, higher
financing costs and the dilutive impact of
the July 2022 equity raise.
A decline in the underlying return on
capital employed reflects the lower level
of profitability during the year and the
investments made in Piedmont and
Med-Pharmex.
Underlying 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.
As we look to grow the business, it is
important that we use our capital efficiently
to generate returns superior to our cost
of capital in the medium to long term. It
underpins the performance conditions of
the LTIP.
Strategic Driver/Enabler Key:
Pipeline
Delivery
Portfolio
Focus
Geographical
Expansion
Acquisition
Manufacturing
& Supply Chain
Technology
People
£
Long Term Incentive Plan (LTIP)
performance condition
Lower cash conversion is driven by an
investment in stock levels to maintain
a robust supply chain, and higher non-
underlying cash outflows driven by
acquisition costs and cloud computing
arrangement costs.
Our stated aim is to be a cash generative
business. Cash generation supports
investment in the pipeline, acquisition and
people.
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 products.
The safety of our employees is core to
everything we do. We are committed to a
strong culture of safety in all our workplaces.
Attracting and retaining the best employees
is critical to the successful execution of our
strategy.
Increase in new product revenue is driven
by the acquisition of Med-Pharmex during
the year.
The lost time accidents increased to 0.21.
The majority of the incidents occurred at
our Manufacturing sites with one incident
at our central logistics centre in Denmark.
None of these incidents resulted in a work
related fatality or disability.
We are pleased to see that moving annual
turnover has reduced back to 12.6%. We
felt the post Covid impact of the changing
nature of the workforce and increased
competition for talent, particularly in more
specialist roles. We have introduced a
range of measures to manage turnover.
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(420)bps
(2,740)bps
480bps
5.0%
(340)bps
Non-Financial and Sustainability
Information Statement
This section of the Strategic Report constitutes the Group’s Non-Financial and Sustainability Information Statement, produced
to comply with Sections 414 CA and 414 CB of the UK Companies Act 2006. The information is incorporated by cross-reference.
Reporting
Requirement
Environmental
matters
(including the
impact of the
Company’s
business on the
environment)*
Where to read more
Policies and Handbook
Task Force on Climate-related
Financial Disclosures
Pages 69 to 75
Our Group Code of Conduct confirms the Groups commitment to
adopting responsible environmental practices and compliance
with the applicable legislation.
Environment Pages 76 to 78
Understanding Our Key Risks
Page 87
Section 172 Statement
Pages 56 and 57
Sustainability Report
dechra.com/sustainability
Our Group Third Party Code of Conduct outlines what is expected
of those we work with to minimise the impact of our operations on
the environment.
Our Group Environmental Policy applies to all Dechra employees,
Directors, temporary staff, agency workers, contractors and other
persons acting on behalf of the Group.
Employees*
Chief Executive Officer’s Statement
Pages 03 to 07
Composition, Succession and
Evaluation Pages 113 to 122
Stakeholders: Employees
Pages 58 to 61
Section 172 Statement
Pages 56 and 57
Understanding Our Key Risks
Page 86
Sustainability Report
dechra.com/sustainability
Social matters*
Stakeholders: Communities
Page 64
Section 172 Statement
Pages 56 and 57
Sustainability Report
dechra.com/sustainability
Our Group Diversity Policy recognises that the diversity of our
team and an inclusive culture is beneficial for our business, its
processes, and its performance.
Our Group How to Raise a Concern handbook encourages
individuals to report genuine concerns.
Our external audit of our Culture with Great Place to Work for
the UK.
Our Group Code of Conduct outlines what is expected of our
employees during the course of our business.
Our Dignity at Work Policy outlines how we treat people fairly and
do not tolerate bullying and harassment. We do not discriminate
for reasons such as age, gender, sexual orientation, marital status,
race, colour, ethnicity, disability, religion, political affiliation or
union membership.
Our Health & Safety Policy sets out our requirements for all
aspects of our business to be conducted in compliance with the
applicable Health and Safety laws, regulations, Company policies,
standards and best practices to ensure the Health and Safety of
our employees, contractors and visitors.
Our Group Human Rights Policy confirms our commitment
to acting responsibly and with integrity, respecting the laws,
regulations, traditions and cultures of the countries within which
we operate, whilst supporting the dignity, wellbeing and human
rights of our employees.
Our Group Third Party Code of Conduct outlines what is expected
of the third parities we engage with.
Our Group Donations Policy promotes engagement between our
employees and the community and in particular the support of
local community groups and charities
Our Volunteer Service Toolkits for Large and Small Events
provides guidance on how to develop and manage volunteer
service events.
Our Group Data Protection Policy outlines how our people protect
suppliers and customers data.
54
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Reporting
Requirement
Where to read more
Policies and Handbook
Our Group Human Rights Policy confirms our commitment
to acting responsibly and with integrity, respecting the laws,
regulations, traditions and cultures of the countries within which
we operate, whilst supporting the dignity, wellbeing and human
rights of our employees.
Our Modern Slavery Statement confirms our commitment to
ethical behaviour and sourcing products from suppliers who
share this value.
Our Group Third Party Code of Conduct outlines our commitment
to conducting business in a way that is honest and fair. It confirms
that we are committed to preventing bribery and corruption
and outlines how third parties should act in respect of this
commitment.
Our Group ABC Policy provides guidance on business practices
that are acceptable and those that are not. The policy applies to
officers, employees and consultants of the Group.
Our Group Code of Conduct confirms we do not give or receive
bribes or participate in corruption.
Our Group How to Raise a Concern handbook encourages
individuals to report genuine concerns.
Respect for human
rights*
Stakeholders: Suppliers
Page 63
Sustainability Report
dechra.com/sustainability
Anti-Bribery and
Anti-Corruption*
Stakeholders: Suppliers
Page 63
Audit, Risk and Internal Control
Pages 123 to 131
Sustainability Report
dechra.com/sustainability
Business Model
Description of
Principal Risks and
Impact of Business
Activity
Our Business Model
Pages 28 to 31
Stakeholders: Veterinary
Professionals
Page 62
How the Business Manages Risk
Pages 79 to 82
Understand Our Key Risks
Pages 83 to 87
Our Business Model
Pages 28 to 31
Non-Financial
Key Performance
Indicators
Key Performance Indicators
Pages 52 and 53
Strategic Report
Pages 24 to 87
* 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.
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Section 172 Statement and
Stakeholder Engagement
The Board is responsible under section 172 of the
Companies Act 2006 for promoting the long term success
of the Company for the benefit of its shareholders, and
acknowledges that its decisions have a long term impact
on other stakeholders, the environment and the Company’s
reputation for high standards of business conduct.
all important stakeholders, the business is made stronger and
more resilient. The Board has identified six key stakeholder
groups that it believes are important to engage with regularly
to continue to make Dechra successful: employees; veterinary
professionals; suppliers, communities; shareholders and
regulatory authorities.
The Board appreciates that wider engagement with
stakeholders is an important component of long term
sustainability and success and believes that by engaging with
Our business model sets out the impact and the value we
generate for stakeholders on pages 28 to 31. The section
on understanding our key risks includes an overview of
Employees
Veterinary Professionals
Suppliers
Communities
Shareholders
Regulatory Authorities
Objective
• To make Dechra a great and
safe place to work by attracting,
retaining and developing talent
Material Issue
• Development opportunities
welfare
Material Issue
• Innovative and effective products
• Information on correct use of
Objective
• To improve animal health and
Objective
• To trade with honesty and
• Making a difference
products
• Agile and friendly place to work
• Educational opportunities
• Living Wage/Fair pay
How We Engage
• Group intranet site
• Regular site visits by Senior
Management
• Engagement surveys
How We Engage
• Educational and training
programmes
• Technical support via helplines and
• ABC training
product information
• PhD veterinary student funding
integrity, and to source quality raw
materials, finished products and
services
Material Issue
• Fair payment terms
• Long term relationships
How We Engage
• Quality audits
• Due diligence
• Third Party Code of Conduct
Performance
• 15 Quality/CMO audits completed
• 107 ABC training courses provided
Where to Read More
• Stakeholder Engagement: Suppliers
page 63)
• Understanding Our Key Risks (page
84)
• Governance Report (pages 103 to
105, 111 and 112)
• Sustainability Report (pages 08
and 14)
• Employee meetings with the
Employee Engagement Designated
Non-Executive Director, Lisa Bright
Performance
• 205,012 CPD hours
• 16,300 Technical support enquiries
• Employee development and
(USA and UK)
training
Performance
• Living Wage employer or local
equivalent since 2021
Where to Read More
• Stakeholder Engagement:
Veterinary Professionals page 62)
• Understanding Our Key Risks
• 20,207 Delta courses completed
(pages 83 to 87)
• 77% Trust Index (Engagement
• Governance Report (pages 102, 104,
Survey)
105, 111 and 112)
• Sustainability Report (pages 08, 13
and 14)
Where to Read More
• Stakeholder Engagement:
Employees (pages 58 to 61)
• Understanding Our Key Risks
(page 86)
• Governance Report (pages 102
to 112)
• Sustainability Report (pages 08
and 22 to 24)
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Objective
Objective
Objective
• To give back to the communities in
• To instil trust and confidence
• To meet high standards of product
which we operate
and allow informed investment
safety and efficacy
Material Issue
• Prosperity within our communities
• Community projects and initiatives
How We Engage
• Community activities
• Group donations
• Product and local donations
• Development and education of
young people
Performance
• 3,147 Community hours
• £432,181 Cash donations
• £201,464 Product donations
Where to Read More
• Stakeholder Engagement:
Communities (page 64)
• Governance Report (pages 103 to
105, 111 and 112)
and 25 to 27)
• Sustainability Report (pages 08, 14
decisions to be made
Material Issue
• Financial performance
• Delivery of strategy
• Environmental, Social and
Governance performance
How We Engage
• Annual Report and RNS
announcements
• Annual General Meeting
• Investor presentations
• Corporate website
• One-to-one meetings
Performance
• 3,471% total shareholder return
(TSR) between IPO and 12 April 2023
Where to Read More
• Stakeholder Engagement:
Shareholders page 65)
• Governance Report (pages 101, 104,
105, 111 and 112)
• Sustainability Report (page 08)
Material Issue
• Safety
• Efficacy
• Responsible marketing of regulated
pharmaceuticals
How We Engage
• Regulatory training for employees
• Manufacturing facility inspections
• Market authorisation applications
• Product Safety Update Reports
Performance
• 206 new market authorisations
• 15 manufacturing facility
inspections
Where to Read More
• Stakeholder Engagement:
Regulatory Authorities (page 66)
• Product Development (pages 38
to 41)
• Understanding Our Key Risks
(pages 84 to 86)
• Governance Report (pages 103, 104,
105, 111 and 112)
• Sustainability Report (pages
08 to 11)
Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
the potential impacts, controls and mitigating actions in
connections with our key stakeholders. Our Sustainability
strategy is centred around the four pillars of Business,
Environment, People and Community, and we believe
that effective engagement drives sustainable value for all
stakeholders. Details on our Group’s Sustainability strategy
can be found on pages 66 to 78 and in our Sustainability
Report.
Engagement with all our stakeholders is led by our Senior
Executive Team, who provide updates to Board members,
via Board papers and presentations. The table below and
the stakeholder sections on pages 58 to 66 detail how
the Board and the Group as a whole engages with the
its key stakeholders, and why the key stakeholders are
important. This section should be read in conjunction with
the Governance Report, on pages 101 to 103, which contains
information on how the Board engages with key stakeholders
and their impact on principal decisions made over the year.
Employees
Veterinary Professionals
Suppliers
Communities
Shareholders
Regulatory Authorities
Objective
Objective
Objective
• To make Dechra a great and
• To improve animal health and
• To trade with honesty and
Objective
• To give back to the communities in
Objective
• To instil trust and confidence
Objective
• To meet high standards of product
safe place to work by attracting,
welfare
retaining and developing talent
Material Issue
• Development opportunities
Material Issue
• Innovative and effective products
• Information on correct use of
• Making a difference
products
• Agile and friendly place to work
• Educational opportunities
• Living Wage/Fair pay
How We Engage
• Group intranet site
• Regular site visits by Senior
Management
• Engagement surveys
How We Engage
• Educational and training
programmes
• Technical support via helplines and
• ABC training
product information
• PhD veterinary student funding
• Employee meetings with the
Employee Engagement Designated
Non-Executive Director, Lisa Bright
Performance
• 205,012 CPD hours
• Employee development and
(USA and UK)
• 16,300 Technical support enquiries
Where to Read More
• Stakeholder Engagement:
Veterinary Professionals page 62)
84)
• Understanding Our Key Risks
• 20,207 Delta courses completed
(pages 83 to 87)
• 77% Trust Index (Engagement
• Governance Report (pages 102, 104,
105, 111 and 112)
and 14)
• Sustainability Report (pages 08, 13
integrity, and to source quality raw
materials, finished products and
services
Material Issue
• Fair payment terms
• Long term relationships
How We Engage
• Quality audits
• Due diligence
• Third Party Code of Conduct
Performance
• 15 Quality/CMO audits completed
• 107 ABC training courses provided
Where to Read More
• Stakeholder Engagement: Suppliers
page 63)
• Understanding Our Key Risks (page
• Governance Report (pages 103 to
105, 111 and 112)
• Sustainability Report (pages 08
and 14)
training
Performance
• Living Wage employer or local
equivalent since 2021
Survey)
Where to Read More
• Stakeholder Engagement:
Employees (pages 58 to 61)
• Understanding Our Key Risks
(page 86)
• Governance Report (pages 102
to 112)
• Sustainability Report (pages 08
and 22 to 24)
which we operate
Material Issue
• Prosperity within our communities
• Community projects and initiatives
How We Engage
• Community activities
• Group donations
• Product and local donations
• Development and education of
young people
Performance
• 3,147 Community hours
• £432,181 Cash donations
• £201,464 Product donations
Where to Read More
• Stakeholder Engagement:
Communities (page 64)
• Governance Report (pages 103 to
105, 111 and 112)
• Sustainability Report (pages 08, 14
and 25 to 27)
and allow informed investment
decisions to be made
Material Issue
• Financial performance
• Delivery of strategy
• Environmental, Social and
Governance performance
How We Engage
• Annual Report and RNS
announcements
• Annual General Meeting
• Investor presentations
• Corporate website
• One-to-one meetings
Performance
• 3,471% total shareholder return
(TSR) between IPO and 12 April 2023
Where to Read More
• Stakeholder Engagement:
Shareholders page 65)
• Governance Report (pages 101, 104,
105, 111 and 112)
• Sustainability Report (page 08)
safety and efficacy
Material Issue
• Safety
• Efficacy
• Responsible marketing of regulated
pharmaceuticals
How We Engage
• Regulatory training for employees
• Manufacturing facility inspections
• Market authorisation applications
• Product Safety Update Reports
Performance
• 206 new market authorisations
• 15 manufacturing facility
inspections
Where to Read More
• Stakeholder Engagement:
Regulatory Authorities (page 66)
• Product Development (pages 38
to 41)
• Understanding Our Key Risks
(pages 84 to 86)
• Governance Report (pages 103, 104,
105, 111 and 112)
• Sustainability Report (pages
08 to 11)
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Section 172 Statement and
Stakeholder Engagement
Employees
We employ 2,457 employees in 26 countries in manufacturing,
logistics, laboratories, offices as well as 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.
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. Our training programme which is also
translated into eight languages 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 the four internal reporting channels, we
have a third party confidential hotline, which 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.
Dedication Enjoyment Courage
Honesty Relationships Ambition
12.6%
Employee
Turnover
55.0%
Females in
Workforce
0.41
Accident
Frequency
Rate
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.
Further details can be found in the Governance Report.
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.
Training
Delta is our dedicated internal digital learning platform for
Dechra employees across the world. Training includes Dechra’s
Code of Conduct, Information Security and Health, Safety and
Wellbeing. This is only one element of training that we provide;
our employees have logged a total of 24,687 hours in the 2023
financial year, which equates to 10.0 hours per employee.
We have been running our Leadership programme since 2020.
The programme is run as a mixture of virtual and live sessions and
the leadership teams across all functions except DVP EU (which
has its own programme) have attended or are currently on a
programme. The strategic intent of this development activity 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 some virtual and face
to face content.
This year we have reached the conclusion of our first pilot of
the Future Facing Leaders programme, which commenced in
February 2022. With 24 employees in attendance, the course
was delivered both virtually and via three live sessions, two in
the UK and one in Croatia, including an immersion experience
at our site in Zagreb. The final stage of the programme focused
on leading enterprise, and the group worked in teams to present
strategic proposals to a selection of the Senior Executive team
and the Executive Board. Two of the four proposals are planned
for implementation in the 2024 financial year. Deemed a success,
the next cohort of Future Facing Leaders will commence their
programme in early 2024.
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Overview
Strategic
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Governance
Financial
Statements
Additional
Information
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 a total of
31 Apprenticeships/Internships of which 14 are in Europe and 17
are in Brazil.
Engagement
Case Study: Employee Engagement
One of our strategic objectives this year was to continue to adapt
to the changing needs of our workforce. We face challenging
labour markets with candidates having more options as well as
seeing an increased focus on wellbeing and work-life balance,
and particularly in our manufacturing environments flexibility is an
opportunity for us to pursue.
During the 2023 financial year the Skipton site explored flexible
options for the team to improve work-life balance; without
impacting on pay and business output, continue building a great
place to work for our employees, and create an attraction and
retention tool in a competitive labour market.
The leadership team worked closely with the Works Council to
generate ideas from the workforce. A number of options were
put forward and worked through, evaluating feasibility as well as
impact on the objectives of the pilot. In January, the site started a
trial with two working patterns, a nine day fortnight and a four and
half day week, reducing working hours from 37.5 to 36 hours per
week with no impact to pay and benefits. Success criteria were
defined, linked to site performance metrics and communicated to
all teams.
The trial was initially for three months with the Works Council and
site team meeting regularly to review feedback from employees
as well as the success criteria. It was agreed to extend the trial to
allow for the implementation of some suggested changes from
the employees to improve ways of working, one of which was
to align all employees to the nine day fortnight to give them a
regular full day away from work.
The trial successfully concluded after six months with the changes
becoming permanent. The trial has been a fantastic engagement
tool with the site team, demonstrating great teamwork and
collaboration as well as encouraging innovative solutions to
problems they faced. We have seen increased levels of employee
engagement and an improvement in the overall site productivity
across a range of key performance indicators. The new working
pattern is being utilised as a recruitment tool helping us to
become an employer of choice in the local area. Following the
success of this trial, we are also adapting flexible working patterns
across the rest of the UK and planning for similar trials in both
Australia and Brazil.
Informing and engaging our employees through internal channels
of communication is of utmost importance to the Group. We have
multiple channels of communication to provide both formal and
informal updates including a Group newsletter that is issued twice
a year (following the half-yearly and year end results), intranet,
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 our
Sustainability strategy. Wherever possible, we seek to engage our
employees in change projects. We also have a small number of
Works Councils, in Croatia, France, Netherlands, Spain and Skipton,
the UK, who we regularly meet with. Our intranet, OneDechra,
includes two way communication encouraging comments,
sharing and community participation.
Our next GPTW survey was scheduled to run in March 2023;
however this was postponed until the first half of the 2024
financial year, following the acquisition of both Piedmont and
Med-Pharmex, as we wanted to allow our newest employees the
opportunity of having a year of experience working as part of
Dechra before being surveyed. We look forward to gaining further
feedback to continue developing 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. Further information on
how the Board engages with Employees can be found on pages
102 and 106 in the Governance Report.
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.
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. 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. The Group does not tolerate bullying, harassment
or discrimination.
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.
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 118. The gender
diversity statistics required to be disclosed under the Companies
Act can be found on page 119 of the Governance Report.
Stock Code: DPH
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Section 172 Statement and
Stakeholder Engagement
Headcount Per Country
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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 1.3% in 2022. 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 benchmarking and reward.
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 to 8% with effect from July
2022 in the UK.
Further information can be found in our
Sustainability Report page 22
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.
The Committee discussed the safety priorities highlighted during
2023 financial year audits of four manufacturing sites (Londrina,
Pomona, Somersby and Bladel) and the proposed remedial
actions. An update of the status of the actions is provided at
each meeting until they are resolved. The HSW Committee has
also reviewed and approved the THRIVE Line Manger training and
the High Level Risk Assessment for the business to guide priorities
for Workplace Transport and Pedestrian Safety.
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 remained at ten this year.
Assure
Our online Health and Safety reporting system, Dechra Assure,
is available to all 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. 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 17%, and with
the exception of one site, 100% of employees across all our
Manufacturing facilities were involved in reporting and resolving
at least one hazard. Through our communication campaigns
and B-Safe walks, 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, increased from 58 to 87.
60
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
High Level Risk Assessments
The HSW Committee is also responsible for maintenance of the
safety critical tasks which determines our priorities in the safety
programme. HSE Standards have been developed initially for High
Risk activities, most of which reside in Manufacturing. 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.
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. 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:
Behavioural Safety
Strong safety leadership is the best 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. B-Safe is our behavioural safety programme
which teaches our manufacturing leaders to hold positive
conversations about safety, including our Life Saving Rules.
Further information can be found in our
Sustainability Report pages 23 to 24
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; this measures 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 (see pages 52 and 53). In
order to improve transparency and increase learnings related
to injuries across the business, we are now also reporting all
lost time accidents which resulted in any absence or inability to
conduct the full range of normal working activities (not including
the day of the accident). Using this new and more rigorous
reporting standard we have experienced 17 LTAs resulting in an
AFR of 0.41 compared to 0.36 last year (13 accidents). Fourteen
of these accidents occurred within our Manufacturing sites, with
three of the accidents occurring in the newly acquired facility
in Pomona, California. Ten of these accidents were influenced
by unsafe behaviours and this will be addressed throughout
the coming year through the continued delivery of our B-Safe,
behavioural safety programme for leaders. In addition, there
were four contractor accidents reported in Brazil. There were no
fatalities (employees or contractors).
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.
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.
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.
At a foundation element we have committed to providing
an Employee Assistance Programme (EAP) to all employees
globally. Following a gap assessment, it was identified that
approximately 600 employees do not have access to an EAP.
Following a review of potential providers, we have chosen a
service which covers emotional, physical, financial and social
support. This service is being launched in all countries who
currently do not have an EAP with the exception of Croatia
(as it was not available in this language) in August 2023. An
alternative provider is being evaluated for Croatia. In addition,
the Global EAP provision is being enhanced to provide financial
information to employees. The support from existing EAPs will be
evaluated to ensure they meet our target standards.
In order to make THIRVE feel more connected into each country,
the THRIVE Champion team has been formed. This group of 23
employees cover all countries and regions and their role is to:
• understand the THRIVE wellbeing programme and local
employee benefits;
• be a point of contact for employees to ask questions about
THRIVE and wellbeing; and
• quickly signpost employees to official sources of information
and support and not attempt to provide any health, emotional,
financial or legal advice themselves.
Stock Code: DPH
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Section 172 Statement and
Stakeholder Engagement
Veterinary Professionals
Our relationship with veterinarians is key to our business and
therefore we are committed to the following focus areas:
• the development and promotion of products to improve animal
health and welfare;
• the provision of high levels of technical support and
pharmacovigilance; and
• maintaining and improving the knowledge and skills of
veterinarians who prescribe and use our products.
Development and Promotion
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. 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 page 38
To maintain the trust of veterinarians and the public, it is
important that we provide accurate, fair and objective
information on our products and medicines to support their safe
and effective use. We do not make false or misleading claims
about our products. We advertise and promote our products
fairly using promotional materials which contain balanced,
accurate and truthful information. We only promote based on the
information included on the Summary of Product Characteristics
(SPC)/Product Insert which is a document that is approved by
the regulators as part of the marketing authorisation of each
medicine. We train all customer-facing employees so that
they have sufficient product and disease knowledge to enable
them to present information on our products accurately and
responsibly. We promote our products to veterinary professionals
and professional farming units, using promotional materials
approved by authorised persons independent of the sales force.
Promotional compliance is monitored by our country managers
and regional sales managers, and the internal audit team also
conduct a regular review of compliance processes, and corrective
actions are taken to address any issues identified.
The volume and value of payments to animal health professionals
is very modest compared to payments to healthcare
professionals by the human pharmaceutical industry. We only
make modest fee-for-service payments to key opinion leaders
who help us develop and deliver educational materials events
and to veterinarians who we use to conduct clinical trials.
Technical Support and
Pharmacovigilance
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 16,300 technical customer enquiries, many of
which related to endocrinology, procedural sedation and in the
US oncology. In addition, these larger markets also have field-
based veterinarians providing technical support and continuing
professional development events.
For further information on Pharmacovigiliance
please refer to page 66
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.
During the financial year the Dechra Academy was awarded
the status of being an internationally recognised accredited
Learning Provider by the Learning and Performance Institute (the
LPI). Dechra Academy is the first veterinary education provider
that has been accredited by the LPI. The accreditation was due
to the Academy’s commitment to high quality and process
improvement in the provision of learning and development
services to veterinary professionals across the world.
The Academy now has a total of 945 courses available across
markets and learners from across the world have enrolled.
In addition to 20,196 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 184,818 hours of CPD hours globally.
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Overview
Strategic
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Governance
Financial
Statements
Additional
Information
Suppliers
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.
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. These policies are integral to our risk management
programme and reinforce our expectation of compliant
behaviours across the business.
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 our employees. 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 pages 58 and 107.
Risk Management System
During the year we have developed a Third Party Risk
Management (TPRM) Platform, which will be integral to our risk
management programme. The TPRM Platform is designed to
manage the full third party risk management life cycle, from initial
entity creation, profiling, tiering and risk assessing, followed by
due diligence, ongoing monitoring and potential offboarding. The
TPRM Platform provides a Group-wide consistent approach to risk
management, as well traceability of decisions, risk rejection or risk
mitigation and acceptance.
The TRPM Platform currently covers risk assessments and
screening on areas of Anti-Bribery and Anti-Corruption, Sanctions,
Data Privacy, IT, Modern Slavery, ESG and Health and Safety, with
other compliance topics due to be added throughout the next
year. The system will generate automated reminders for the
business to refresh the due diligence on an annual or triennial
basis, subject to the risk level associated with the vendor and
is the central storage point for risk records, with assessments
being completed by both employees and third parties within the
Platform itself.
A phased launch of the Platform commenced in July 2023 with
our DVP International business who were selected due to the
territories in which they operate, together with the nature of their
distribution activities, being generally considered to pose a higher
compliance risk. It is envisaged that the system will be rolled out
across all divisions by the end of the calendar year.
Anti-Bribery and Anti-Corruption (ABC)
We remain committed to acting professionally, fairly and with
integrity in all our business dealings and relationships wherever
we operate. 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
Stock Code: DPH
by authorities across the globe, means that ABC is an area of
focus for Dechra. Our continuous growth in new markets through
geographical expansion, 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 employees and third
party network via such programmes. 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, and the linchpin of these
programmes will be the TPRM Platform.
The ABC Policy clearly defines what constitutes bribery and
corruption, outlines prohibited activities and provides guidance
on what activities are and are not allowed. The Audit Committee
and Senior Executive Team are kept regularly informed of the ABC
programme and the Group Legal team, together with the newly
formed Compliance function, delivers face-to-face updates
and targeted training to different teams across the business,
addressing the areas of risk specific to their activities and the
markets in which they operate. Every employee and sales agent
engaged by Dechra is required to complete our e-learning ABC
course on an annual basis, with the exception of operational
blue collar workers who are engaged in low risk roles and do not
interact with third parties.
Human Rights and Modern Slavery
Dechra is committed to upholding and respecting human rights
both in our own business and within our supply chain, and has
put in place steps aimed at ensuring there is no modern slavery
or human trafficking in any part of our business. 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
also be found on our website.
The new TPRM Platform will enable us to risk assess all suppliers
for modern slavery risks, and where relevant, undertake modern
slavery due diligence. In addition, any identified high risk suppliers
(identified using key information such as supplier type, supplier
services/products, spend and geographical location) are subject
to further due diligence and screening, as well as being required
to adhere to the Dechra Third Party Code of Conduct. This risk
assessment and due diligence are refreshed for high risk third
parties, such as contract manufacturing organisations, on a
regular basis.
Reporting
Our employees and third parties have access to the independent
externally provided hotline to report any situations that they feel
violate any of the standards detailed in the Third Party Code of
Conduct, which includes ABC and Modern Slavery. No concerns
have been raised during the 2023 financial year.
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Section 172 Statement and
Stakeholder Engagement
Communities
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 Purpose and Values, in particular, our Relationships and
Enjoyment Values. Our Community pillar focuses on Community
Activities and 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. In the 2023 financial year, we
dedicated a total of 3,147 hours across our global operations.
We have a ten year target to achieve 100,000 hours by 30 June
2030. As at 30 June 2023 we have achieved 7,537 hours. We
acknowledge that we are currently running short of our ten year
target and that whilst some elements of our business have taken
the community ethos to heart and are continuing year on year to
participate, prioritisation in other parts of our business has been
slow. To achieve our target, we have made available a Volunteer
Service Toolkit and encourage all of our employees to identify and
lead events. Additionally, we have established a reporting tool
where employees are able to log their volunteer hours following
an event; quarterly reporting of average hours per employee and
total by division are communicated to the senior leadership team
to track progress against their Community KPIs.
Dechra has 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. We partner 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 aimed
at providing a support system for veterinary and veterinary
technical students. Dechra has also encouraged its employees
globally to participate in NOMV’s Race Around the World, to help
raise funds and 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 were excited
to encourage global participation in their 2022 and now 2023
sponsored race, furthering our support of an organisation that
supports the wellbeing of our customers. Dechra also partnered
with NOMV in 2023 with their development of an accredited
course in Dechra’s Academy, with the first module released in
September 2023 focused on the Flavors of Fatigue. Modules will
be released periodically to provide wellbeing education and
resources to veterinarians worldwide. To increase international
awareness of NOMV’s resources, Dechra will sponsor the
development of international Chapters; an ambassador
programme to create and grow local networks to unite and
support the veterinary community.
Community Donations
We have operated a Group Donations scheme for 13 years, and in
the last two years we have empowered our employee community
by setting up decentralised regional giving committees. A
budget of £368,000 was allocated across the countries based
on the number of employees as at 30 June 2022. Each country
has a regional giving committee which consists of volunteer
employees who have agreed to be members of their respective
committee for two years. All employees are given the opportunity
to nominate non-profit organisations meaningful to them and the
community in which they live, and donations are awarded after
the committee’s due diligence on the organisations is conducted.
In many instances, the nominator and the committee member
visit the organisation to make the donation in person. This new
scheme is empowering and moving for all involved, making a
difference in and outside of Dechra.
In addition to the regional giving committees, each business
unit has the discretion to allocate funds and/or products to local
community, environmental and/or animal welfare charities.
Total Donations
31.8%
68.2%
Cash Donations £432,181
Product Donations £201,464
Further details of our Community Donations and Activities
can be found in our Sustainability Report
The Group has also committed to the provision of finance in the
form of a AUD 6 million loan and minority investment in AgCo
Tech Ltd, an Australian private limited company which provides
practical help to livestock owners in developing countries (further
details can be found on page 14 and in the Sustainability Report).
The loan will be repayable, following a one year repayment
holiday, over a six year period in the form of verified carbon credits
(calculated at market value), which will be retired through our
income statement upon receipt. This will be treated as a donation.
Due to the philanthropic nature of the investment we will not look
to profit from this investment, with any income being reinvested in
other climate stewardship projects.
Further details on how the Board engages with Communities can
be found in the Governance report on page 103
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
3,471%
TSR between
IPO and
12 April 2023
99%
votes cast in
favour of the
acquisition
Equity raise
July 2022
Rolling
programme of
investor
meetings until
11 April 2023
Results
Roadshow
Over 60
individual
meetings
throughout
the year
September
2022 and
February 2023
Chief Executive Officer
and Chief Financial
Officer
Chief Executive Officer,
Chief Financial Officer
and Head of Investor
Relations
Chief Executive Officer,
Chief Financial Officer
and Head of Investor
Relations
Investor
Conferences
November 2022 Chief Financial Officer
and Head of Investor
Relations
Remuneration
Consultation
January and
February 2023
Shareholder
calls relating to
the proposed
acquisition
Numerous calls
during the Offer
Period from
12 April 2023 to
2 June 2023
Remuneration Committee
Chair, Company
Secretary and Group HR
Director
Chief Executive Officer,
Chief Financial Officer
and Head of Investor
Relations, all of which
were chaperoned by
Investec in their role
as corporate broker
under the rules of the
Takeover Panel
Further details on how the Board engages with
Shareholders can be found in the Governance report
on page 101
Shareholders
Creating Value for Shareholders
We have a strong track record of delivering against our strategic
objectives, resulting in consistent growth and value creation ever
since IPO on 21 September 2000 when Dechra shares were first
admitted to the London Stock Exchange at a price of £1.20 per
share. Between IPO and 12 April 2023, being the latest practicable
date prior to the announcement that we had received a
proposal from EQT to acquire the Company, Dechra delivered a
total shareholder return (TSR) of 3,471% compared to the FTSE 100
of 177% and FTSE 250 of 425% over the same period.
TSR for the period 21 September 2000 to 12 April 2023
4000%
3500%
3000%
2500%
2000%
1500%
1000%
500%
0%
FTSE 100
FTSE 250
Dechra
In recommending that shareholders accepted the price of
£38.75 per share offered by Freya Bidco Limited, the Dechra
Board believed this was at a level that enabled shareholders to
accelerate the crystallisation of value in full and in cash, at a
level commensurate with its judgments, the opportunities and
risks of future potential performance. This offer was subsequently
accepted at the shareholder vote on 20 July 2023, with over 99%
of votes cast being in favour.
Investor Relations Strategy
Prior to the approach by Freya Bidco Limited, the Company had
been developing its long standing approach to shareholder
engagement with the support of the recently appointed Head of
Investor Relations. This aimed to build on the strong relationships
already established with a number of long term shareholders
whilst extending the reach of investor communication to
potential new shareholders.
The Company placed a high priority on relationships with
shareholders and a summary of the main events during the
year is shown below. These meetings sought to foster a mutual
understanding of both the Company’s and shareholders’
objectives and were conducted in a format to protect price
sensitive information that had not already been made generally
available to all the Company’s shareholders.
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Section 172 Statement and
Stakeholder Engagement
Regulatory Authorities
It is vital to our business that our products meet the appropriate
standards for quality, safety and efficacy. 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, sales data and changes to the registrations. Dechra
is required to provide full adverse event reports for all of our
products through regular signal detection analyses and periodic
Drug Experience 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. We have
an obligation to notify our Regulators of any new evidence which
emerges which may alter the benefit: risk assessment of any of
our products, and the Global Safety Council is key to providing
cross functional input into this process.
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, negotiation for the ongoing use
of NMPs (N-methyl pyrrolidone) in veterinary medicines and the
recent survey of plastic use in veterinary products. We engage
with Regulators on how their fees are set and how the approval
process operates, holding them accountable for a high standard
of scientific review and timely service delivering new products to
market and maintaining supply of our existing ones.
Several of our regulatory staff have worked in key Regulatory
Agencies at National, Regional or International levels 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 PV
e-learning module on Delta or in person training. All employees
undertake an annual pharmacovigilance refresher training. The
PV 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.
Regulatory Agencies
ACVM: Agricultural Compounds and Veterinary Medicines
(New Zealand)
APQA: Animal and Plant Quarantine Agency (South Korea)
APVMA: Australian Pesticides and Veterinary Medicines
Authority (Australia)
EMA: European Medicines Agency (EU)
FDA: Food and Drug Administration (USA)
MAPA: Ministério da Agricultura, Pecuária e Abastecimento
(Department of Agriculture, Livestock and Food Supply)
(Brazil)
VDD: Veterinary Drugs Directorate (Canada)
VMD: Veterinary Medicines Directorate (UK)
Further details on how the Board engages with Regulatory
Authorities can be found in the Governance report on page 103
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Overview
Strategic
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Governance
Financial
Statements
Additional
Information
Sustainability
Our Sustainability Framework
Our Purpose, the sustainable improvement of animal health and welfare globally, continues to
guide all that we do and we are embedding our Making a Difference sustainability strategy deeper
within the business.
Our Purpose
Growth Strategy
Strategic Enablers
nce
a
ern
v
o
G
Manufacturing
& Supply Chain
People
Technology
G
o
v
e
r
n
a
n
c
e
e
c
n
a
n
r
e
v
o
G
Our
Community
Sustainability Strategy
Our
Business
Our
Environment
Our
People
Our
Community
Dechra Culture
Dechra Values
Dedication
Enjoyment
Courage
Honesty
Relationships
Ambition
Governance
Our
Environment
e
c
n
a
n
r
e
v
o
G
Our
Business
Making a
Making a
Difference
Difference
Our
People
Our Integrated Approach
This year, we have made a subtle but important change to
how we think about and present the interaction between our
corporate strategic enablers and our Sustainability strategy.
Our corporate growth strategy remains very much
unchanged, consisting of four clear strategic drivers as
discussed on page 32. Historically, we have regarded delivery
of this strategy as being driven by the Strategic Enablers of
Manufacturing & Supply, Technology, People and ESG.
However, such is the importance that we place on building a
resilient, sustainable business capable of delivering superior
long term performance, it became clear to us that ESG is no
longer a standalone Strategic Enabler. Rather, it has in fact
become central to all that we do. In recognition of this, we
have taken the opportunity to re-position our sustainability
strategy such that it now serves as a fundamental underpin
to delivering our corporate growth strategy and, ultimately,
our Purpose. Doing so will help deliver even better alignment
between our corporate and sustainability strategies, including
a clearer way of demonstrating their interdependencies.
Our long term approach to sustainability, articulated through
our Making a Difference strategy, remains centred around the
four pillars of Business, Environment, People and Community,
and more information on our progress this year can be found
in our standalone Sustainability Report.
Our Business
Provide sustainable products, education and technical
support to veterinarians
Our Environment
Minimise our impact on the environment
Our People
Be a great and safe place to work
Our Community
Give back to the communities in which we operate
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Sustainability
Our Approach to Materiality
Our Material Issues
Animal Health & Welfare
Human Rights
Equality and the Workplace
Trust and Transparency
Customer Satisfaction
Living Wage Policy
Waste Management
Integrated Climate Strategy
Plastic Leakage
Community Involvement
Philanthropic Activities on
Grass Root Level
Read more about our Material
Issues in our Sustainability Report
Sustainability Strategy Update
Sustainability Pillar
Sustainability topic
Target(s)
Performance in the 2023 financial year
Our
Business
Animal Health and
Welfare
Invest 5% to 6% of revenue on product
development per annum
7.6% invested in Research &
Development (see note 1 below)
Customer
Satisfaction
Provide 100,000 of continuous professional
development (CPD) hours per annum
204,912 CPD hours provided globally
Trust and
Transparency
Perform value chain sustainability
assessment by June 2030
Project remains on track
Our
Environment
Integrated Climate
Strategy
Reduce Scope 1, 2 and 3 emissions in line
with climate science through the Science
Based Targets initiative (SBTi);
Achieve net zero by 2050;
100% FSC paper & wood by June 2023
Waste
Management
Zero to landfill by June 2025
13% reduction in GHG emissions
intensity ratio (see note 2 below);
Science based targets submitted to
the SBTi;
66% FSC paper & wood (see note
3 below)
Reduced waste sent to landfill from
7% to 5%
Plastic Leakage
Review full product range by June 2025
Project remains on track
Our
People
Wage Policy
Remain a Living Wage Employer or
equivalent
Retained UK accreditation and pay
relative to OECD standards
Human Rights
Zero lost time accidents (LTAs)
17 LTAs
Equality in the
Workspace
Increase the number of women in senior
and technical roles
Reduced gender pay gap from 1.7%
to 1.3%
Our
Community
Community
Involvement
100,000 community hours by June 2030
3,147 hours this year
7,537 hours cumulative (three years)
Philanthropic
Activities
£5 million donated in cash or products by
June 2030
£633,645 this year
£1,361,297 cumulative (three years)
1. Our longer term target is to invest between 5% and 6% of revenue on R&D. However, for financial years 2023 to 2025 inclusive, we have committed to temporarily
increasing this investment to between 7% and 8% to help drive further innovation and future growth.
2. The GHG emissions intensity ratio is calculated with reference to our Scope 1, 2 & 3 emissions reported historically under the GHG Protocol Corporate Accounting and
Reporting Standard, which differs to our carbon footprint for the purposes of Science Based Targets. See our Annual Report for further details.
3. We did not meet our target to source 100% of our internally procured paper & wood from FSC sources by the end of June 2023, with 66% of our suppliers currently
FSC approved. Wherever possible, we have endeavoured to adopt a localised approach to sourcing FSC materials and to work collaboratively with existing suppliers
rather than adopt a blanket approach across all Dechra operations. This process has taken longer than anticipated, however we expect to achieve our target by
June 2024.
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Overview
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Governance
Financial
Statements
Additional
Information
Task Force on Climate-related
Financial Disclosures
Our Commitment to
Climate Change
We support the Task Force on Climate-related Financial
Disclosures (TCFD) framework, and our disclosures are
consistent with its four TCFD core elements and the eleven
recommended disclosures, in line with the compliance
requirements of Listing Rule 9.8.6R(8) of the UK Financial
Conduct Authority. The required disclosures are set out in
detail along with an explanation where further information
can be found on pages 69 to 75. Further information can
also be found in our Sustainability Report which is published
separately to this Annual Report.
We have disclosed our assessment of our compliance to
the TCFD framework annually since 2020 and continue to
apply it to describe our activities in 2023. All our business
operations worldwide are in scope, unless otherwise stated.
The framework applies a risk-based approach focusing on
material risks and opportunities.
During the year, we have completed our initial review into all
material Scope 3 emission categories, which has enabled
us to establish our base year data, calculate our corporate
footprint and submit our near term targets to the Science
Based Targets initiative (SBTi) which are in the process of
being validated. Our footprint is dominated by Scope 3
indirect value chain emissions with Scope 1 and 2 emissions
together accounting for 8% of our footprint.
Further information on our Science Based Targets can be
found on page 78
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 and the Group HSE
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
well established groups including a global cross-functional
ESG Committee and associated sub committees (see the
governance diagram in our Sustainability Report) who work
with them to deliver our Sustainability strategy, and set
objectives and targets which are aligned with the United
Nations Sustainable Development Goals and SBTi. The
outcomes from these groups were reported directly to the
Board at meetings in February 2023 and June 2023. The Audit
Committee also discussed and approved the TCFD disclosures
for 2022 in August 2022, updated disclosures for 2023 in
October 2023 and climate risk, which continues to be identified
as a principal risk to the Group, in June 2023.
Given the importance of managing climate risk, factors
relevant to it have been considered as part of the
remuneration of the Executive Directors and SET since 2021. As
part of their personal objectives within the annual bonus plan,
which constitutes 10% of Executive Directors’ and 5% of SET
annual salary, each senior executive team member had an
ESG objective in the 2023 financial year.
Identifying and Managing Climate
Risk and Opportunity
To inform the wider Group risk management process of any
specific risks and opportunities posed by climate change,
and/or the transition to a low carbon economy, we have
integrated climate assessments into the overall Group risk
management process. As a Company with a global footprint
and with operations across the entire animal health value
chain, from research and development through to after-sales
support, we are potentially exposed to a number of varied
factors.
Climate Change and Our Strategy
for Physical Risks
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. It is critical to understand the physical hazards
from climate change (e.g. extreme heat, floods and storm
damage) and the risks to our value chain, which includes
our workforce, local communities, suppliers, partners and
customers as well as our physical assets. Working in a
preventative way, we will implement planned response
strategies and minimise interruptions from extreme weather
events across our operations and value chain. During the
2022 financial year, we assessed the impact of climate risk to
our business using the Intergovernmental Panel on Climate
Change (IPCC) data under two transition scenarios and two
physical scenarios over a 30 year time horizon; the first two
modelled a positive scenario – Representative Concentration
Pathway (RCP 1.9) indicating a 1.5°C temperature rise in
accordance with the Paris Agreement and the second two
(RCP 7.5) a 4°C temperature rise deemed to be a worst
case which assumes that there will be no significant change
in people’s attitudes and priorities, or no major changes
in technology, economics, or policies, so that normal
circumstances are expected to continue unchanged.
Using these assessments we have screened climate
impacts across our own business critical operations and
identified that all were potentially exposed to some form
of risk, with three sites warranting further assessment. We
have prioritised our Pomona site for a more detailed review
in the 2024 financial year due to the high risk of earthquake
and increasing risk of extreme heat over the time horizon
assessed. We will then review our Bladel and Somersby sites,
both of which were identified as having an increasing risk of
water scarcity in the medium to long term. We will now also
start to focus on our strategic partners with a critical role in
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Task Force on Climate-related
Financial Disclosures
our value chain that are most exposed to climate-related
hazards in our predictions, to understand their resilience
to climate change and to work collaboratively across the
animal health industry. This will include, but not be limited
to, Contract Manufacturing Organisations (CMO’s), Active
Pharmaceutical Ingredient (API) producers, packaging
suppliers and transport and distribution service providers.
Climate Change and Our Strategy for
Transition Risks and Opportunities
The nature of the risks and opportunities we face is not
solely driven by the physical aspects of climate change.
Regulatory, technical, and commercial changes in the
markets in which we operate, are already resulting in
pressures to reduce the greenhouse gas (GHG) footprint of
specific pharmaceutical products.
Near Term Targets
• Reduce Scope 1, 2 and 3 GHG emissions in line with climate
science through the SBTi
• Eliminate the remaining 34% of suppliers who are non FSC
approved by June 2024;
• Zero waste to landfill by 30 June 2025;
• Maximise our transition to electric vehicles in our road fleet
by end of June 2027; and
• Complete the AUD$6 million investment in AgcoTech
by the end of June 2024, representing an investment in
beyond value chain activities aiming to eliminate 100
million tonnes of CO2 per annum by June 2032.
Further information on our Science Based Targets can be
found on page 78
To respond to the identified climate risks and opportunities,
we are taking action across the Group, and are
committed to:
Long Term Targets
• Become science-based net zero by 2050.
We recognise that cross-sector collaboration and supplier
engagement are essential to decarbonise pharmaceutical
supply chains. To reduce our Scope 3 emissions we will need
to engage our suppliers across our entire value chain as well
as continuing to bring more of our manufacturing in-house.
For further information please refer to our Sustainability
Report.
• achieving science-based net zero GHG emissions by
maximising our energy efficiency, shifting to renewable
energy sources, and investing in beyond value chain
mitigation activities (such as our recent investment
in AgCoTech) to support the global objective to halve
emissions by 2030 and achieve science-based net zero by
2050; and
• building resilience by managing the physical and
transitional risks and opportunities from climate change
in the value chain, through adaptation and business
continuity planning.
As part of our ‘Making a Difference’ sustainability plan we
have submitted our near term targets for Scope 1, 2 and 3
emissions to the SBTi and are awaiting validation. We remain
committed to a long term target to reach science-based net
zero emissions across our full value chain by no later than
2050. We will continue to transition to a low carbon business
and since 2021 we have also supported the UN-backed Race
to Zero.
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Financial
Statements
Additional
Information
Risk or
Opportunity
Time
Horizon
Short Mid Long
Key Physical Risks
Increased
frequency
of extreme
weather and
climate-
related natural
disasters
Potential impact
How it is managed
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, Skipton, Bladel 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.
For example to improve business resilience
we are continuing to invest at our sites to
mitigate reliance on third party energy suppliers
via increased on-site use of solar panels
complemented by emergency generators.
During the financial year, solar panels were
installed at our Skipton facility and we already
have a significant solar power capability at our
site in Zagreb.
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.
We have a broad portfolio and therefore are not
overly reliant on a small number of individual
products. For those more important products,
we look to dual source from CMOs or to
manufacturer at two different in-house locations
insofar as is possible.
Metrics: Please refer to our Sustainability
strategy update on page 68.
Key:
Low Risk
Medium Risk
High Risk
Opportunity
Time Horizons for Impact
Mid term:
Short term:
2 to 5 years
1 to 2 years
Long term:
5 to 25 years
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Task Force on Climate-related
Financial Disclosures
Risk or
Opportunity
Time
Horizon
Short Mid Long
Potential impact
How it is managed
Transition Risks and Opportunities
Increased
demand for
low carbon
products
Carbon pricing
and future
environmental
taxation
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.
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 brought to market for the
first time now include a sustainability review
pre-launch. This review will focus on utilising
sustainable ingredients and packaging.
In 2023 we have continued the project to screen
the carbon footprint of our existing product
range utilising an IT system to review the GHG
footprint to help assess and manage risks and
target interventions to reduce the environmental
footprint of our products (initiated in 2022).
Metrics: Please refer to our Sustainability
strategy update on page 68.
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.
Our Making a Difference plan and associated
net zero commitment 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.
Increased carbon pricing based on the
International Energy Agency Net-Zero
Emissions by 2050 scenario forecast
which follows the 1.5°C warming
pathway ($140/tCO2 by 2030).
In the 2023 financial year we incorporated an
internal carbon price of $100/Tco2 on emissions
at all of our manufacturing facilities which will
support our transition to net zero. In 2024 we will
increase this to $140/Tco2.
We do not foresee a material impact.
Metrics: Please refer to our Sustainability
strategy update on page 68.
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Risk or
Opportunity
Time
Horizon
Short Mid Long
Potential impact
How it is managed
Transition Risks and Opportunities
Supply-demand
of renewable
energy
(power and heat)
Competition for renewable energy due
to increased demand.
Security of renewable energy supply
due to impact of climate change.
Access to clean heat alternatives to
natural gas, such as biomethane,
generally requires higher investment.
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.
Change in raw
material or
sourcing cost
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.
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 holds the
ISO 50001 accreditation, the international
standard for Energy Management and have
obtained planning permission to explore the
potential viability of geothermal energy at the
site as well as increasing the utilisation of solar
energy.
• 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 and newly
installed panels at our Skipton site.
Metrics: Please refer to our Sustainability
strategy update on page 68.
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.
Exploring positive recognition for sustainable
ambition and performance within the
procurement process.
Metrics: Please refer to our Sustainability
strategy update on page 68.
Monitoring Our Progress
We report on our GHG emissions and progress towards near and long term targets in line with the World Resources Institute
GHG Protocol guidance for defining and calculating our GHG footprint. Our Sustainability Report reflects how we plan to
decarbonise the business and by that, reduce exposure to transition risks and unlock future opportunities for the Group. During
2023, we were recognised for our efforts by being included in Sustainalytics’ 2023 Top-Rated ESG Companies List.
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Task Force on Climate-related
Financial Disclosures
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:
Governance
Describe the Board’s oversight of climate-related
risks and opportunities.
Managing climate-related risks and
opportunities.
Strategy
Describe the climate-related risks and
opportunities which have been identified over
the short, medium, and long term.
Describe the impact of climate-related risks and
opportunities on the businesses, strategy, and
financial planning.
Describe the resilience of the strategy, taking
into consideration different climate-related
scenarios, including a 2°C or lower scenario.
Links to More
Information on Key
Developments
• TCFD
statement
• Page 109
• Sustainability
Report pages
21 to 28
• TCFD
statement
• Page 103
• Sustainability
Report pages
2 and 21
• TCFD
statement
• Page 87
• Sustainability
Report page 21
• TCFD
statement
• Page 78
• Sustainability
Report pages
18 and 21
• TCFD
statement
• Sustainability
Report page 21
Dechra’s Current Status
Our Board and SET are supported by well
established groups including a global cross-
functional ESG Committee and associated sub
committees to monitor the execution of our
sustainability strategy.
Our Chief Financial Officer is responsible to the
Board for the development and performance
of our climate strategy and related risks and
opportunities, as part of his overall responsibilities.
The ESG committee coordinates management of
physical and transitional risks and opportunities.
Physical risks from climate change are primarily
disruption or delays to manufacturing or
distribution and increased liability insurance
premiums and reputational damage.
Transition risks and opportunities are primarily
regulatory and market changes, and/or pressure
and ability to reduce product carbon footprints
and decarbonise our value chain.
We are taking Group-wide action to reduce our
GHG emissions from our global operations by
2030 (from a 2021 base year). We are committed
to reducing Scope 1, 2 and 3 emissions in line with
climate science through the SBTi to fully prepare
for a low carbon economy. Near term targets have
been submitted and are awaiting validation. We
have disclosued our transition plan to science-
based net zero.
We are building resilience against a worse-
case scenario (RCP 7.5) in our supply chain by
investing in at risk sites, supply chain design and
inventory levels to manage interruption risks. No
material business impact from short term events is
foreseen.
Value chain decarbonisation, with net zero targets
aligned to a 1.5°C scenario, will secure low carbon
business resilience with the opportunity to continue
to add scale.
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Risk Management
Describe the processes for identifying and
assessing climate-related risks.
Describe the processes for managing climate-
related risks.
Dechra’s Current Status
Climate assessments integrated into overall Group
risk management inform the Group of specific risks
and opportunities posed by climate change and/
or the transition to a low carbon economy.
Identified risks are owned by the responsible SET
member and addressed in local site continuity
plans or by technical mitigation in site master
plans. Short, mid and long term financial planning
includes required investments.
Our ‘Making a Difference’ plan includes initiatives
aimed at reducing our GHG footprint, mitigating
some physical and transition risks and making our
business more resilient to climate change.
Describe how processes for identifying,
assessing, and managing climate-related risks
are integrated into the overall risk management.
Identified risks are managed locally and escalated
to the SET member responsible and Board level if
material.
Metrics and Targets
Disclose the metrics used to assess climate-
related risks and opportunities in line with the
strategy and risk management process.
Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (GHG) emissions, and
the related risks.
Describe the targets used to manage climate-
related risks and opportunities and performance
against targets.
Our GHG footprint for the full value chain (Scopes
1, 2 and 3) for our base year (calendar year 2021)
are disclosed in our Annual Report and Accounts
and separately in our Sustainability Report. Scope
3 includes 15 categories, of which 11 categories are
material to Dechra. Our Scope 2 emissions have
been calculated on a market based approach.
We have continued to disclose our GHG emissions
relating to emissions arising from sources over
which we have operational control as in previous
financial years. In addition we have disclosed our
expanded base year carbon footprint emissions
which have been submitted to SBTi along with our
targets for verification. The related risks can be
found in this TCFD report and Understanding Our
Key Risks.
Relevant metrics and KPI’s disclosed in our
Annual Report and Accounts and separately
in our Sustainability Report reflect the extent
of decarbonisation and thereby reduced
exposure to transition risks as well as showing
future opportunities. We have also disclosed our
proposed pathway to net zero.
Links to More
Information on Key
Developments
• TCFD
statement
• Page 80
• Sustainability
Report page 21
• TCFD
statement
• Page 87
• Sustainability
Report page 21
• TCFD
statement
• Page 80
• Sustainability
Report page 21
• TCFD
statement
• Pages 76 to 78
• Sustainability
Report pages
07, 17 and 21
• TCFD
statement
• Pages 76 to 78
• Sustainability
Report pages
07, 17 and 21
• TCFD
statement
• Pages
68 and 78
• Sustainability
Report pages
07, 18 and 21
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Environment
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 disclosed in our
Sustainability Report along with how we have performed during the 2023 financial year. This section of the Annual Report will
focus mainly on the Companies Act requirements in relation to Greenhouse Gas (GHG) emissions. It will also provide some
details in relation to our commitment to reduce Scope 1, 2 and 3 emissions in line with climate science through the SBTi.
Our Emissions
Group Greenhouse Gas Emissions
Our carbon emission software, in addition to energy usage, records 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.
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, purchased electricity (which are not included in Scope 2), water and waste.
The GHG emissions are in relation to our financial year (1 July to 30 June). For continuity of reporting with previous years, we
have excluded flights in this data. However, we have recently improved our capture of flight data and will be included in future
years’ reporting.
Scope 1 (tonnes)
Scope 2 (tonnes)
Scope 3 (tonnes)
Total Carbon Footprint (tonnes of CO2e)
Intensity Ratio (tonnes of CO2e per £m
revenue)
% relates
to UK
9.0%
11.0%
9.5%
2023
5,927
5,067
2,982
13,975
18.4
2022
6,709
4,896
2,770
14,375
21.1
% relates
to UK
7.3%
12.4%
5.2%
2021
7,027
5,261
1,934
14,222
23.4
% relates
to UK
6.0%
10.1%
7.4%
The decrease in Scope 1 emissions is due to a 10% decrease in natural gas used, and an improvement in refrigerant gas
management in minimising losses.
The increase in Scope 2 emissions is a factor of increased electricity consumption of 13%; however, the total carbon associated
with this reduced, due to a change in carbon conversion factors used for national grid electricity as countries adopt more
renewable fuel sources in their national energy strategies. There was also a 113% (79.7 tCO2e) increase in energy use from
steam/heat, primarily driven by Uldum as the new Warehouse went into full use. This resulted in an overall 3% increase in Scope
2 emissions.
The main contributor to the increase in Scope 3 is increased business driving, as well the corresponding Scope 3 (transmission
losses / impacts) related to higher use of electricity (Scope 2).
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Overview
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Governance
Financial
Statements
Additional
Information
The predominate source of Scope 1 emissions is Natural Gas.
Scope 1 Emissions by Source
88.62%
3.92%
6.03%
0.44%
0.99%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
Natural Gas
Refrigerant
Liquified Petroleum Gas
Diesel
Gas Oil
Manufacturing
Offices
Warehousing
Total
1
The 2022 financial year figures have been restated to include waste
tCO2e by Manufacturing Site
2022
Restated
Variance
2023
11,232
2,039
704
12,156
1,501
718
13,975
14,375
(7.6%)
36.1%
(2.0%)
(2.8%)
5,641
Our Manufacturing facilities are the main contributor to
our carbon footprint representing 80.3% of our total carbon
footprint. During the 2023 financial year carbon emissions
decreased by 7.6% despite the acquisition and inclusion of
new facilities during the period. As in previous years, our site
in Croatia contributed the highest amount of carbon in the
2023 financial year which is linked to the production of the
energy intensive product, Mepron. In the 2023 financial year,
total Mepron volumes declined by 16%, reducing energy
consumption and in combination with investment in energy
conservation measures the site achieved a total reduction
in carbon emissions of 21% versus the 2022 financial year.
Projects included installation of local ground source heat
pumps (to reduce heat loss in distribution) and the fitting
of an economiser on one of the main production boilers to
recover stack heat losses and pre heat boiler feed water. A
further economiser will be fitted to the second site boiler in the
2024 financial year.
At our largest warehousing site, Uldum, a migration away
from the use of natural gas to the use of steam district
heating, decreased carbon emissions by 17 teCO2e. Office
teCO2e increased due to the inclusion of new sites in South
Korea and North Carolina, and also improved reporting at
existing office sites.
For further information on Waste and Water Consumption
please read our Sustainability Report
1,157
1,117
1,089
1,027
464
446
291
0
1,000
2,000
3,000
4,000
5,000
6,000
Zagreb, Croatia
Pomona, US
Skipton, UK
Londrina, Brazil
Bladel, Netherlands
Fort Worth, US
Somerbsy, Australia
Melbourne, US
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.
Scope 1
Scope 2
Scope 3
Total kWh
% relates
to energy
consumed
in UK
8.3%
13.0%
8.5%
9.9%
% relates
to energy
consumed
in UK
5.9%
15.1%
3.6%
8.3%
2022
35,418,610
19,229,812
9,528,775
64,177,197
% relates
to energy
consumed
in UK
6.3%
16.2%
0.9%
8.7%
2021
31,522,041
17,185,952
6,610,981
55,318,974
2023
32,207,280
22,141,070
11,801,497
66,149,847
The reasons for the increases and decreases in KWH are the same as for the GHG emissions, that is the reduction in Scope 1
kWh is linked to the reduction in natural gas usage, the increase in Scope 2 KWh is due to the increased electricity use, and the
increase in Scope 3 KWh is linked to the increased business driving and improved reporting/collection of this data through the
implementation of Concur.
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Environment
Science Based Targets
During the 2023 financial year, we concluded the
comprehensive data collection (Scopes 1, 2 and 3) for our
carbon footprint base year, which is the 2021 calendar year.
This work expands our Scope 3 emissions, which includes data
from across our supply chain. Dechra’s near term targets
have been submitted to the SBTi and are awaiting validation,
and we are committed to reaching net zero by 2050. Unlike
our Greenhouse Gas Emissions disclosed on pages 76 and 77,
the emissions below are shown for the calendar year:
3.7%
4.6%
91.7%
Scope 1
Scope 2
Scope 3
The chart above shows that our footprint is dominated by
Scope 3 (indirect value chain emission) with Scope 1 and
2 combined only accounting for 8.3% (13kt CO2e) of the
footprint. Natural gas combustion for manufacturing and
warehousing is the major source for direct emissions (natural
gas accounts for 74% of Scope 1 emissions, being 4% of the
total footprint).
Scope 2 (Indirect emissions associated with generated
electricity and purchased heat and steam) have been
calculated on a market based approach and accounts for
4.5% of the total footprint. This differs to the GHG emissions
reported on page 79, which have been calculated under the
location-based approach and relate to the 2023 financial
year as opposed to the 2021 calendar year shown above.
Going forward we will disclose our Scope 2 emissions using
both market-based and locations methods. The market-
based calculation uses both supplier-specific emission
factors and factors from emission factor libraries. The
location-based calculation method takes into consideration
the national average mix of energy sources available in the
countries we operate in.
Scope 3 includes 15 categories, of which 11 categories are
material to Dechra. Due to the indirect nature of Scope 3
emissions and the variety of the emissions sources, our
footprint calculations include both collected primary data
and applied relevant data with verified emission factors. We
will continue to improve the accuracy of our calculations as
we proceed with our road map.
The main contributors to Scope 3 emissions are purchased
goods and services, upstream and downstream distribution,
acquisition of capital goods and business travel and
employee commuting:
%
ktCO2e
Scope 1
Scope 2
Cat 1 - Purchased goods and services
Cat 2 - Capital goods
Cat 3 - Fuel and energy related activities
Cat 4 - Upstream distribution
Cat 5 - Waste in operations
Cat 6 - Business Travel
Cat 7 - Employee commuting
Cat 9 - Downstream distribution
Cat 11 - Use of sold products
Cat 12 - End of life of sold products
Cat 15 - Investments
3.7%
4.6%
65.2%
7.3%
2.2%
8.8%
0.3%
3.6%
1.2%
2.8%
<0.1%
0.3%
0%
5.8
7.2
102.0
11.4
3.5
13.7
0.5
5.7
1.8
4.8
0.001
0.5
0
Our Road Map
In order to be resource efficient, it is essential to increase
energy efficiency and reduce the energy intensity of our
processes. To reach our reduction targets for Scope 2, we
will continue to focus on increasing the share of renewable
energy in our operations by procuring renewable electricity
alongside our implementations of solar panels. A key focus
area will be to engage with our supply chain and improving
visibility of our Scope 3 emissions across our supply chain
and contracted manufacturing partners. To strengthen
collaboration within our supply chain, we have included
environmental questions in our new third party onboarding
tool. This will enable us to collate environmental information
on our third parties and tailor our communications
accordingly. In the 2024 financial year we will develop our
roadmap to reduce Scope 1, 2 and 3 emissions in line with
climate science through the SBTi to achieve net zero by 2050
at the latest.
Furthermore, we will continue the effort to understand
and disclose the risks posed by climate change as well as
opportunities by transforming to a low carbon economy.
Further information on climate impacts and how we propose
to manage them can be found in the TCFD report and our
proposed actions to address particular emission hotspots
can be found in our Sustainability Report.
Submission of science based targets to the SBTi
As noted throughout this report, we have submitted our near
term carbon reduction targets to the Science Based Targets
initiative for validation. These targets will be used to help us
manage climate risks and opportunities, and illustrate our
commitment to decarbonising our business.
These near term targets:
• Make reference to a base year of the 2021 calendar year;
• Have a 10 year time horizon to 2030;
• Represent an absolute reduction target for Scope 1 and 2
emissions; and
• Represent an intensity reduction target for the 11 categories of
Scope 3 emissions that are material to us.
We are hopeful that the validation process will be complete
by the end of the 2023 calendar year and therefore we expect
to be able to disclose the targets in our 2024 Annual Report
and Sustainability Report. In the meantime, we have already
commenced work to engage the wider business on various
initiatives that will help us achieve these targets.
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Governance
Financial
Statements
Additional
Information
How the Business
Manages Risk
Effective risk management and control is key to the delivery
of our business strategy and objectives.
Our risk management and control processes are designed to identify, assess, mitigate and monitor significant risks,
and provide reasonable, but not absolute, assurance that the Group will be successful in delivering its objectives.
Board
Oversight of the
Group’s risk
management
and internal
controls
Identify
Audit Committee
Review the
effectiveness
of the risk
management
and internal audit
framework
r
o
t
i
n
o
M
Management
Structure
Policies and Procedures
Business Planning
Operational Level Controls
• Product Portfolio Reviews • Lifecycle
Management • Pricing Policies • Product Supply
• Financial Controls • Quality Assurance
• Pharmacovigilance
Dechra Values
A
s
s
e
s
s
Senior
Executive Team
Owners of the risk
management
process and
responsible for
embedding risk
management into
business units
Internal Audit
Independent assurance
on the design and
operation of the internal
control framework
Mitigate
Business Units
Identification,
mitigation and
monitoring of risks
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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.
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 Audit Committee 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. No material emerging risks
were identified in the 2023 financial year.
Dechra Culture
The Dechra Values are the foundation of our entire business
culture including our approach to risk management
and control. The Board expects 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.
Internal Control Framework
Our internal control framework is designed to ensure:
• proper financial records are maintained;
• the Group’s assets are safeguarded;
• compliance with laws and regulations; and
• effective and efficient operation of business processes.
The key elements of the control framework are
described below:
Management Structure
Our management structure has clearly defined reporting
lines, accountabilities and authority levels. The Group is
organised into business units. Each business unit is led by a
SET member and has its own management team.
Policies and Procedures
Our key financial, legal and compliance policies that apply
across the Group are:
• Code of Business Conduct and How to Raise a Concern;
• Delegation of Authorities;
• Dechra Finance Manual, including Tax and Treasury
policies;
• Anti-Fraud;
• 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.
• 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.
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Governance
Financial
Statements
Additional
Information
• 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
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 32
and 33 of the Strategic Report. The key factors supporting
the Group’s prospects are explained throughout the Annual
Report and are summarised below:
॰ Transactional Level Controls operated on a
• a clear strategic focus;
• a growing global animal health market;
• a clear portfolio focus with strong market positions in a
number of key therapeutic areas;
• a strong development pipeline and a track record of
pipeline delivery;
• manufacturing flexibility, with a wide range of dosage forms
and small and large scale production batches;
• an entrepreneurial and experienced management team;
• a recognised brand with a strong reputation for providing
high quality products with technical support;
• an expanding international focus;
• talented people and expertise; and
• a sound track record of successful acquisitions to expand
our product portfolio and geographic reach.
The Board believes that the Group has adequate resilience
due to its diversified product portfolio, its geographic footprint,
a strong balance sheet, healthy cash generation and access
to external financing, which includes committed facilities.
The Assessment Process
and Key Assumptions
The Group’s prospects are assessed primarily through its
strategic and financial planning processes over a five year
time period. The strategic plan is supported by a five year
financial plan, both of which are updated annually by the
SET and reviewed by the Board. The Board also reviews the
Group’s principal risks on a rolling basis throughout the year,
based on updates from SET members. The planning process
considers risks to sales and cost forecasts for each part of
the Group, the Group’s consolidated income and cash flow
forecasts, and includes key assumptions to support longer
term projections. The financial plans are reviewed to confirm
that adequate financing facilities are in place for the period
of the plan. Progress against financial budgets, forecasts
and key business objectives are reviewed through monthly
business performance reviews at both Group and business
unit levels. Mitigating actions are taken to address under-
performance. The latest updates to the plan were reviewed
in June 2023 and considered the Group’s current position, its
future prospects and reaffirmed the Group’s stated strategy.
day-to-day basis.
The key controls in place to manage our principal risks are
described in further detail on pages 83 to 87. 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 2023
We have continued to strengthen and improve our
governance and control processes and the following changes
have been implemented:
• Recruitment of a Compliance Manager to support Dechra’s
compliance with key legislation including Data Protection,
Anti-Competitive Practices, Anti-Money Laundering, Fraud
and Fraud Awareness, Modern Slavery, Anti-Bribery and
Anti-Corruption, and Sanctions.
• We have continued to make improvements to our
manufacturing, quality and supply processes, with
additional investments in people and production facilities.
• We completed the 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
requirements of the BEIS proposals.
• Our Environmental, Social and Governance (ESG) strategy
has been further enhanced with the appointment of a
Sustainability Project Manager. 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.
• We commenced the roll out of a Global Travel and Expense
management and reporting system. This will help to
ensure that travel and expenses costs deliver value for the
company, and improve the efficiency and accuracy of
reporting.
• We continued with our project to upgrade the
Manufacturing ERP system to one consolidated
cloud-based Oracle platform.
Plans for 2024
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 2024.
We also plan to make further improvements and
enhancements to our Sustainability strategy, financial control
framework and Group policies.
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How the Business
Manages Risk
Assessment of Viability and Time Period
The Board has determined that a three year period to 30
June 2026 is an appropriate period over which to provide
its viability statement. This time period is supported by the
Group’s budget process, which includes detailed projections
for the next two financial years, and broader projections
from the third year of the five year strategic planning
process. The Board believes this provides a sound framework
for providing reasonable assurance on the Group’s viability
given the inherent uncertainty associated with longer term
forecasts. The Board’s assessment has been made with due
regard to the Group’s current position, its future prospects,
adequacy of financing facilities, the strategic plan and the
management of the Group’s principal risks. The viability
assessment takes account of all the committed expenditure
of the Group. Although the output of the Group’s strategic
and financial planning processes reflects the Board’s best
estimate of the future prospects of the business, the Group
has also conducted stress testing to assess the liquidity
impact of a range of alternative scenarios. These scenarios
have been developed by considering those principal risks
that could have a material impact on viability. The potential
impact of each principal risk is described on pages 83 to
87 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 and Company will be
able to continue in operational existence for the foreseeable
future and meet its liabilities as they fall due over the three
year period from 30 June 2023. On 2 June 2023, the Board
reached an agreement with Freya Bidco Limited (Bidco) on
the cash acquisition by Bidco of the entire issued ordinary
share capital of Dechra (the Acquisition). The Acquisition
is being implemented by means of a Court-sanctioned
scheme of arrangement (the Scheme). On 20 July 2023
the Scheme and its implementation were approved by
the Scheme Shareholders and Dechra Shareholders and
the Acquisition is expected to complete after the date of
approval of the Annual Report and Accounts. The going
concern and viability assessments of the Group and
Company are therefore subject to uncertainties relating
to the potential change in ownership of the Group and the
actual funding requirements and financing arrangements
post completion. For this reason, the Board cannot
reasonably predict the financial position of the Group
and Company post-completion, including the details of
any financing arrangements related to the transaction
that could affect the Group and Company. This indicates
the existence of a material uncertainty which may cast
significant doubt on the Group and Company’s ability to
continue as a going concern. The financial statements do
however not include the adjustments that would result if
the Group and Company were unable to continue as a
going concern. Notwithstanding this uncertainty, based
on the circumstances described above, the Board has a
reasonable expectation that the Group and Company has
adequate resources to continue in operational existence for
the foreseeable future and is able to meet its liabilities as
they fall due over the three year period from 30 June 2023.
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
w
o
L
Low
3
5
1
2
6
4
9
10
7
8
Likelihood
High
Risk increasing
Risk stable
Risk decreasing
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Understanding
Our Key Risks
Link to
Strategic
Growth
Driver and
Enabler
Trends
Potential Impact
Control and Mitigating Actions
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 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.
Risk
1
Market Risk:
The growth of veterinary
buying groups and corporate
customers impacts the
distribution landscape.
We sell and promote
primarily to veterinary
practices and distribute our
products through wholesaler
and distributor networks in
most markets.
In a number of mature
markets, veterinarians have
established buying groups to
consolidate their purchasing,
and corporate customers are
continuing to expand.
2
Competitor Risk:
Competitor products
launched against one of our
leading brands (e.g. generics
or a superior product profile).
We depend on data
exclusivity periods or patents
to have exclusive marketing
rights for some of our
products.
Although we maintain a
broad portfolio of products,
our unique products like
Vetoryl and Zycortal have
built a market which
continues to be attractive to
competitors.
Strategic Driver/Enabler Key:
Risk Trend
Pipeline
Delivery
Portfolio
Focus
Geographical
Expansion
Acquisition
Increased Risk
Decreased Risk
No Change
Manufacturing
& Supply Chain
Technology
People
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Understanding
Our Key Risks
Risk
3
Product
Development
and Launch Risk:
Failure to deliver major
products either due to
pipeline delays or newly
launched products
not meeting revenue
expectations.
The development of
pharmaceutical products is
a complex, risky and lengthy
process involving significant
financial, R&D and other
resources.
Products that initially appear
promising may be delayed or
fail to meet expected clinical
or commercial expectations
or face delays in regulatory
approval. It can also be
difficult to predict whether
newly launched products
will meet commercial
expectations.
4
Supply Chain Risk:
Inability to maintain supply
of key products due to
manufacturing, quality or
product supply problems in
our own facilities or 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.
Potential Impact
Control and Mitigating Actions
Link to
Strategic
Growth
Driver and
Enabler
Trends
A succession of clinical trial failures
could adversely affect our ability to
deliver shareholder expectations
and could also damage our
reputation and relationship with
veterinarians.
Our market position in key
therapeutic areas could be
affected, resulting in reduced
revenues and profits.
Where we are unable to recoup
the costs incurred in developing
and launching a product this
would result in impairment of any
intangible assets recognised.
Raw material supply failures
may cause:
• increased product costs due to
difficulties in obtaining scarce
materials on commercially
acceptable terms;
• product shortages due to
manufacturing delays; or
• delays in clinical trials due to
shortage of trial products.
Shortages in manufactured
products and third party supply
failures on finished products may
result in lost sales.
Our robust response to recent
global supply chain challenges,
such as the impact of the Russian
invasion of Ukraine, has seen the
supply chain risk remain stable.
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.
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 have been put in
place to improve supplier performance
management and implement a second
source strategy.
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Link to
Strategic
Growth
Driver and
Enabler
Trends
Potential Impact
Control and Mitigating Actions
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 high due to the
increasing regulatory burden,
including compliance with the
European Medicines Agency’s
(EMA) Union Product Database
(UPD). However, we have increased
resource in our Regulatory Affairs
team. Additionally, the proportion
of our products manufactured
by CMOs, which present higher
regulatory compliance risks, has
declined.
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.
Failure to identify or secure suitable
targets could slow the pace at
which we can expand into new
markets or grow our portfolio.
We have defined criteria for screening
acquisition targets, and we conduct
commercial, clinical, financial, environmental
and legal due diligence.
Acquisitions could deliver lower
profits than expected or result in
intangible assets impairment.
The Board reviews acquisition plans
and progress regularly and approves all
significant potential transactions.
The SET manages post acquisition integration
and monitors the delivery of benefits and
returns through a defined process.
Risk
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 overvaluation or
integration challenges. The
risk has increased due to the
complexity of integrating
Piedmont Animal Health,
Inc and Med-Pharmex
Holdings, Inc.
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Understanding
Our Key Risks
Link to
Strategic
Growth
Driver and
Enabler
Trends
Potential Impact
Control and Mitigating Actions
Failure to recruit, develop and
retain quality people could result in:
• 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.
Rising cost of living challenges
and ongoing wage inflation have
the potential to impact workforce
stability.
The Chief People Officer 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.
Risk
7
People Risk:
Failure to resource the
business to achieve our
strategic ambitions,
particularly on geographical
expansion and acquisition.
As Dechra expands into
new markets and acquires
new businesses or science,
we recognise that we may
need 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.
Increased competition in
the market, particularly in
specialist roles, challenges
the recruitment and retention
of key talent and skills.
8
Antimicrobials
Regulatory Risk:
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 EU regulations
(Regulation (EU) 2019/6)
restricting antimicrobial use
in animals became effective
in 2022, the impact on our
FAP antimicrobial portfolio is
limited as our products are
used for treatment rather
than prevention. However,
there remains continuing
pressure on reducing
antimicrobial risk. This is
driven by market and cultural
trends.
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Overview
Strategic
(cid:709)e(cid:739)(cid:738)rt
Governance
Financial
Statements
Additional
Information
Potential Impact
Control and Mitigating Actions
Link to
Strategic
Growth
Driver and
Enabler
Trends
Risk
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.
Damage to our facilities as a
result of climate change could
impact our ability 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 69 to 75
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.
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 United Nations Framework
Convention on Climate Change 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, is being
increased in order to manage physical risks
better. Dechra has implemented 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.
Site based ESG committees will be established
to manage sustainability, including energy
efficiency, renewables and effluent.
Key systems, including email and ERP,
are being migrated to cloud based
hosting. Remaining on-premise 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 are employed on mobile
devices.
Endpoint protection and intrusion prevention/
detection are in place.
Regular information security and data
protection training for employees.
Business interruption and cyber insurance are
in place.
The Chief Executive Officer’s Statement and the Strategic Report covering pages 03 to 07 and 24 to 87 respectively of the
Annual Report and Accounts 2023, has been approved by the Board of Directors in accordance with the Companies Act 2006
(Strategic Report and Directors’ Report) Regulations 2013.
Melanie Hall
Company Secretary
12 October 2023
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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
90
92
94
98
108
113
123
132
166
169
The Veterinary Perspective
The Veterinary Perspective
Read more about us at:
Read more about us at:
www.dechra.com
www.dechra.com
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Heading
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Letter from the
Chair on Governance
“The impact of our decisions on our
key stakeholders is front of mind in
our decision making.”
Alison Platt
Non-Executive Chair
Dear Shareholder
On behalf of the Board, I am pleased to present Dechra’s
Governance report for the year ended 30 June 2023. This will
be my last report on behalf of the Board, as the
Non-Executive Directors and I will resign upon the acquisition
of the Company by Freya Bidco Limited (a newly formed
company to be indirectly owned by (i) EQT X EUR SCSp and
EQT X USD SCSp, each acting through its manager (gérant)
EQT Fund Management S.à r.l. (collectively referred to as EQT),
and (ii) Luxinva S.A.) becoming effective, which is expected to
occur in late 2023 or early 2024.
Board Appointments
There have been a number of Board changes in the 2023
financial year. In September 2022, Julian Heslop retired from
the Board and in June 2023 Ishbel Macpherson also retired.
As communicated in the 2022 Annual Report, we had
commenced the search for a new Non-Executive Director
to succeed Ishbel as Remuneration Committee Chair.
Cognisant of the Parker Review requirements and the
new listing requirements regarding diversity targets, the
Nomination Committee retained a recruitment consultant
who specialised in diverse candidates to find our new
Remuneration Committee Chair. We were very pleased to
appoint Geeta Gopalan on 1 January 2023. She has a breadth
of Non-Executive Director experience as well as chairing
risk, audit and remuneration committees since 2017. Geeta
was appointed Remuneration Committee Chair on 1 March
2023, allowing Ishbel Macpherson to step down from that
role. Ishbel remained as a member of the Remuneration
Committee to enable a smooth handover until she retired as
a Non-Executive Director on 22 June 2023.
Purpose and Culture
Our Purpose is clearly defined and underpinned by our Culture
and Values. Further details can be found on pages 08, 58 and
99. 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.
Our Values, Culture, people, and strategy have established
Dechra as a global leader in therapeutic areas such as
endocrinology and topical dermatology, as well as an
innovator in specialisations such as the treatment of equine
lameness and differentiated generics.
In June the Board attended a site visit of Skipton, UK, where
it was great to see the increased engagement following the
investment at the site and adoption of the revised shorter
working week.
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 is
mandatory for all employees. It is important to the Board that
all employees are able to report any concerns they have and
in particular in relation to violations of our Code. We have five
reporting channels which include a third party confidential
hotline, 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 58 to 66 and 101 to 105. The most important
decision we have had to take as a Board was whether to
recommend the offer by Freya Bidco Limited. The Dechra
Board considers EQT, together with the Abu Dhabi Investment
Authority (Luxinva), to be highly experienced investors with
a strong sector understanding who will, we believe, prove to
be responsible and supportive owners of Dechra, who can
build on its legacy and further accelerate the Group’s growth.
Having being advised by Investec Bank plc it is our view
that accepting this proposal represents the best interests of
all stakeholders and in particular represents a compelling
opportunity for shareholders to realise, in cash and with
certainty, Dechra’s potential for future value creation.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Sustainability
In March 2023, the Board was asked to consider a proposal
for provision of finance in the form of a loan and minority
investment in AgCo Tech Ltd, an Australian private limited
company which provide practical help to livestock owners in
developing countries (further details can be found on page
104 and in the Sustainability Report). This opportunity is rare
as it meets all of the ‘Beyond the Value Chain’ requirements,
is aligned to our strategy and also to the recent output from
COP 27 which stated the need to reduce carbon and methane
emissions simultaneously whilst also supporting those on
the front lines of climate change. This investment is also
strongly aligned with one of our key sustainability objectives
(to donate £5 million to philanthropic actions by 30 June
2030). This initiative will accelerate our progress against this
objective.
Compliance with the Code
The UK Corporate Governance Code 2018 (the Code)
establishes the principles of good governance for companies;
the Governance section of the 2023 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. The Board remains
committed to maintaining high standards of corporate
governance. The Code can be found at www.frc.org.uk.
Relations with Shareholders
A Court Meeting and General Meeting was held on 20 July
2023 to consider and approve the Scheme Document and
the Resolution to approve the proposed cash offer for the
Company by Freya Bidco Limited. The Shareholders voted in
favour of the Scheme at the Court Meeting and the Resolution
at the General Meeting.
The following reports make reference to an Annual General
Meeting being scheduled for 13 December 2023; however this
is subject to the Company remaining listed at the time.
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
12 October 2023
Principle
Page
Board Leadership and
Company Purpose
Effective and Entrepreneurial Board
98
Purpose, Values, Strategy
and Culture
Framework of Prudent and
Effective Controls
98 to 100
98, 101
Stakeholder Engagement
101 to 105
Workforce Policies and Practices
Division of Responsibility
Role of the Chair
Composition of the Board
Role of Non-Executive Directors
107
110
108
110
Policies, Processes, Information,
Time and Resources
108 to 110
Composition, Succession and
Evaluation
Board Appointments
Board Composition
116
115
Board Evaluation
120 to 121
Audit, Risk and Internal Control
Independence and effectiveness
of Internal and External Audit
Fair Balanced and
Understandable Assessment
Risk and Internal Control
Remuneration
Alignment to Purpose,
Values and Strategy
129 to 131
128
128, 129
138, 139
Remuneration Policy Procedure
133, 135, 139
Independent Judgement
and Discretion
134, 154
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
Stock Code: DPH
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Governance
at a Glance
Our Board
Non-Executive Directors’ Tenure as at 30 June 2023
1 years
2 years
3 years
4 years
5 years
6 years
7 years
8 years
9 years
Director
Alison Platt
Lawson Macartney
Lisa Bright
John Shipsey
Geeta Gopalan
Board Age and Gender
Country of Residence, Ethnicity and Education
41-50
Key
Female
Male
Non-Executive Chair
Executive Directors
Non-Executive Director
51-60
61-70
Rolling Three Year Female Representation %
1
5
1
1
3
7
6
Target
Listing Rule
30 June
2023
30 June
2022
30 June
2021
40%
Key
37.5%
108
33.3%
Country of Residence
USA
Netherlands
UK
40%
Ethnicity
White (all backgrounds)
Asian (all backgrounds)
Education
University
Vocational
1
1
6
7
1
5
3
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Board and Committee Attendance
The Board is scheduled to meet seven times per year. During the year, four additional meetings were held to discuss the 2023
financial year interim results, financing and proposed acquisition targets. The Remuneration Committee is scheduled to meet
four times a year, the Audit Committee is scheduled to meet five times a year and the Nomination Committee three times a
year. There were two additional meetings for the Remuneration Committee to discuss the Remuneration Policy and for the
Nomination Committee to discuss and recommend the appointment of a Non-Executive Director.
Number of meetings attended:
Alison Platt
Ian Page
Tony Griffin‡
Paul Sandland
Lisa Bright π
Julian Heslop†
Lawson Macartney
Ishbel Macpherson
John Shipsey
AGM
1
1
1
1
1
N/A
1
1
1
Geeta Gopalan*
N/A
Key to Attendance
Number of meetings attended
Number of meetings held
† Julian Heslop attended all meetings until his retirement.
Board
11
11
11
11
10 11
11
11
11
11
3 3
11
11
11
11
11
11
6 6
Audit
Nomination
Remuneration
N/A
N/A
N/A
N/A
5 5
1
1
5 5
5 5
5 5
2 3
5 5
N/A
N/A
N/A
4 5
1
1
5 5
5 5
5 5
2 2
6 6
N/A
N/A
N/A
6 6
1
1
6 6
6 6
6 6
3 3
‡ Tony Griffin did not attend an adhoc meeting to discuss the acquisition of Med-Pharmex due to a prior DVP EU meeting with Country Managers.
* Geeta Gopalan attended all meetings since her appointment apart from one Audit Committee meeting due to prior commitment arranged
pre-appointment.
π Lisa Bright did not attend a Nomination Committee meeting due to a medical emergency.
In addition, there were a further nine Board meetings held
at short notice for the specific purpose of discussing the
proposed cash offer for the Company and one Remuneration
Committee meeting to discuss the treatment of the share
schemes for the Cooperation Agreement. Due to the fact that
these were held at very short notice, there were a number
of meetings where not all of the Board could attend. The
majority of these meetings were for the purposes of providing
an update to the Non-Executive Directors. Ian Page met with
the Chair prior to any meetings that he was unable to attend.
Board
Remuneration
8 9
3 9
7 9
8 9
8 9
8 9
7 9
9 9
9 9
1
1
N/A
N/A
N/A
1
1
1
1
1
1
1
1
1
1
Alison Platt
Ian Page
Tony Griffin
Paul Sandland
Lisa Bright
Lawson Macartney
Ishbel Macpherson
John Shipsey
Geeta Gopalan
Stock Code: DPH
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Board of
Directors
Executive Directors
Non-Executive
Chair
Ian Page
Chief Executive Officer
Paul Sandland
Chief Financial Officer
Tenure:
Twenty six years
Tenure:
Four years
Committee Membership:
Disclosure (Chairman).
Committee Membership:
Disclosure.
Background:
Ian joined NVS, Dechra’s former
services business, at its formation
in 1989, becoming its Managing
Director in 1998. He joined the
Board in 1997 and became
Chief Executive Officer in 2001.
Ian has played a key role in the
development of the Group’s
growth strategy.
Skills and Experience which
Supports the Long Term Success
of the Company:
Ian has a detailed knowledge
and experience through
various positions he has held
within the pharmaceutical
and veterinary arena. He has
extensive experience in M&A
and in the successful delivery
of strategic plans. Ian has a
breadth of business development
experience both in the UK and
globally.
Background:
Paul 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 as the Group Financial
Controller. Paul was appointed as
an Executive Director and Chief
Financial Officer of the Company
on 30 October 2019.
Skills and Experience which
Supports the Long Term Success
of the Company:
Paul is a Chartered Certified
Accountant. Paul is the Board
Director responsible for Health
and Safety and ESG matters. Paul
has strong technical, strategic
and commercial skills and
has demonstrated a practical
understanding of all parts of
the Group.
Key External Appointments
None.
Key External Appointments
None.
Pets:
Pets:
Tony Griffin
Managing Director,
Dechra Veterinary
Products EU
Tenure:
Eleven years
Committee Membership:
Not applicable.
Background:
Tony joined the AUV Group in
1993 as Director of Exports and
was appointed as Chief Executive
Officer in 2006. Having previously
worked at Norbrook Laboratories
and Moy Park, Tony was
appointed Managing Director
of DVP EU in May 2012 following
the acquisition of Eurovet Animal
Health BV.
Skills and Experience which
Supports the Long Term Success
of the Company:
Tony has over 30 years’
experience in the animal
health business. He has broad
experience of running an
international animal health
business with teams in different
European countries.
Key External Appointments
None.
Pets:
Alison Platt
Non-Executive Chairman
Tenure:
Three years
Committee Membership:
Nomination (Chair) and
Remuneration.
Background:
Alison served as the CEO of
Countrywide between 2014 and
2018. Alison served as Non-
Executive Chair of Legal & General
Finance Advice until 2022 and
previously held various positions
at Bupa between 1993 and 2014.
Alison was awarded a CMG for
services to the Foreign Office in
2011 following six years on the
FCO Board.
Skills and Experience which
Supports the Long Term Success
of the Company:
Alison has extensive international
and leadership experience in
customer driven organisations
in healthcare, insurance and
property sectors. She is an
experienced senior leader in both
private and listed companies.
Key External Appointments
Alison is a Non-Executive Director
at Tesco PLC.
Pets: None.
Dr Lawson Macartney
Geeta Gopalan
Senior Independent
Non-Executive Director
Tenure:
Seven years
Committee Membership:
Audit, Nomination and
Remuneration.
Background:
Lawson held various positions
with GSK from 1999 to 2011 and
served as Chief Executive Officer
of Ambrx Inc. between 2013
and 2015. Lawson has a PhD
in viral pathobiology and is a
pathologist, holding Fellowship of
the Royal College of Pathologists,
as well as a Membership of
the Royal College of Veterinary
Surgeons.
Skills and Experience which
Supports the Long Term Success
of the Company:
Lawson has 30 years’ experience
in a range of senior roles in
pharmaceutical R&D, sales
and marketing. Lawson is
a veterinarian, with several
years’ experience in veterinary
practices.
Key External Appointments
Lawson is the Chair of Viking
Therapeutics Inc.
Pets:
Non-Executive Director
Tenure:
Under one year
Committee Membership:
Audit, Nomination and
Remuneration (Chair).
Background:
Geeta was previously a
Non-Executive Director and
Chair of the Remuneration
Committee of Ultra Electronic
Holdings Plc and a member of
the Remuneration Committee
of VocaLink. Geeta also served
as a Non-Executive Director and
Chair of the Risk Committee at
John Shipsey
Non-Executive Director
Tenure:
One year
Committee Membership:
Audit (Chair), Nomination and
Remuneration.
Background:
John is the Chief Financial Officer
of Featurespace Ltd. John held
the position of Chief Financial
Officer for Smiths Group plc until
2022, having previously served as
Chief Financial Officer of Dyson
for 12 years. Prior to this, John held
a number of senior finance and
strategy roles at Diageo plc.
Wizink Bank SA. She was formerly
Skills and Experience which
Executive Chair of Monitise
Supports the Long Term Success
Europe, and Vice Chair of the Big
of the Company:
Lottery Fund England.
John has extensive financial and
commercial experience gained
from senior financial roles held
in multiple sectors over the last
20 years. He is experienced in
leading innovative, high growth
international companies.
Key External Appointments
John is the Chief Financial Officer
of Featurespace Ltd.
Pets:
Skills and Experience which
Supports the Long Term Success
of the Company:
Geeta has a breadth of
Non-Executive Director
experience, as well as experience
as Chair of risk, audit and
remuneration committees.
She has 25 years’ experience
of financial services and retail
banking.
Key External Appointments
Geeta is a Non-Executive Director
at Virgin Money UK plc and
Clydesdale Bank plc. She is also
a Senior Independent Director,
Funding Circle Holdings.
Pets:
Lisa Bright
Designated Non-Executive
Director for Employee
Engagement
Tenure:
Four years
Committee Membership:
Audit, Nomination and
Remuneration.
Background:
Lisa has over 35 years’ experience
in the pharmaceutical and
biotech Industry. She sits on the
Board of several companies,
listed and private. Lisa served
as President International, and
Chief Commercial and Corporate
Affairs Officer of Intercept
Pharmaceuticals, Inc, a global
biopharmaceutical company
focused on the development
and commercialisation of novel
therapeutics until January 2021.
Skills and Experience which
Supports the Long Term Success
of the Company:
Lisa has strategic and operational
leadership as well as Non-
Executive Director and Chair
experience in global market
leading pharmaceutical and
emerging biotech companies.
Key External Appointments
Lisa is a Non-Executive Director
at Ascendis Pharma A/S.
Pets:
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Ian Page
Paul Sandland
Chief Executive Officer
Chief Financial Officer
Tenure:
Twenty six years
Committee Membership:
Disclosure (Chairman).
Background:
Tenure:
Four years
Disclosure.
Background:
Committee Membership:
Ian joined NVS, Dechra’s former
Paul spent five years post
services business, at its formation
qualification at KPMG, during
in 1989, becoming its Managing
which time he was part of the
Director in 1998. He joined the
team which advised the Group
Board in 1997 and became
on its acquisition of VetXX in 2008.
Chief Executive Officer in 2001.
Paul joined Dechra in January
Ian has played a key role in the
2010 as the Group Financial
development of the Group’s
Controller. Paul was appointed as
growth strategy.
Skills and Experience which
Supports the Long Term Success
an Executive Director and Chief
Financial Officer of the Company
on 30 October 2019.
of the Company:
Skills and Experience which
Ian has a detailed knowledge
Supports the Long Term Success
and experience through
of the Company:
various positions he has held
Paul is a Chartered Certified
within the pharmaceutical
Accountant. Paul is the Board
and veterinary arena. He has
Director responsible for Health
extensive experience in M&A
and Safety and ESG matters. Paul
and in the successful delivery
has strong technical, strategic
of strategic plans. Ian has a
and commercial skills and
breadth of business development
has demonstrated a practical
experience both in the UK and
understanding of all parts of
globally.
the Group.
Key External Appointments
Key External Appointments
None.
Pets:
None.
Pets:
Tony Griffin
Managing Director,
Dechra Veterinary
Products EU
Tenure:
Eleven years
Committee Membership:
Not applicable.
Alison Platt
Non-Executive Chairman
Tenure:
Three years
Committee Membership:
Nomination (Chair) and
Remuneration.
Background:
Background:
Tony joined the AUV Group in
1993 as Director of Exports and
was appointed as Chief Executive
Officer in 2006. Having previously
worked at Norbrook Laboratories
and Moy Park, Tony was
appointed Managing Director
of DVP EU in May 2012 following
the acquisition of Eurovet Animal
Health BV.
Alison served as the CEO of
Countrywide between 2014 and
2018. Alison served as Non-
Executive Chair of Legal & General
Finance Advice until 2022 and
previously held various positions
at Bupa between 1993 and 2014.
Alison was awarded a CMG for
services to the Foreign Office in
2011 following six years on the
FCO Board.
Skills and Experience which
Supports the Long Term Success
Skills and Experience which
Supports the Long Term Success
of the Company:
Tony has over 30 years’
experience in the animal
health business. He has broad
experience of running an
international animal health
business with teams in different
European countries.
Key External Appointments
None.
Pets:
of the Company:
Alison has extensive international
and leadership experience in
customer driven organisations
in healthcare, insurance and
property sectors. She is an
experienced senior leader in both
private and listed companies.
Key External Appointments
Alison is a Non-Executive Director
at Tesco PLC.
Pets: None.
Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Non-Executive
Directors
Dr Lawson Macartney
Senior Independent
Non-Executive Director
Tenure:
Seven years
Committee Membership:
Audit, Nomination and
Remuneration.
Background:
Lawson held various positions
with GSK from 1999 to 2011 and
served as Chief Executive Officer
of Ambrx Inc. between 2013
and 2015. Lawson has a PhD
in viral pathobiology and is a
pathologist, holding Fellowship of
the Royal College of Pathologists,
as well as a Membership of
the Royal College of Veterinary
Surgeons.
Skills and Experience which
Supports the Long Term Success
of the Company:
Lawson has 30 years’ experience
in a range of senior roles in
pharmaceutical R&D, sales
and marketing. Lawson is
a veterinarian, with several
years’ experience in veterinary
practices.
Key External Appointments
Lawson is the Chair of Viking
Therapeutics Inc.
Pets:
Geeta Gopalan
Non-Executive Director
John Shipsey
Non-Executive Director
Tenure:
One year
Committee Membership:
Audit (Chair), Nomination and
Remuneration.
Background:
John is the Chief Financial Officer
of Featurespace Ltd. John held
the position of Chief Financial
Officer for Smiths Group plc until
2022, having previously served as
Chief Financial Officer of Dyson
for 12 years. Prior to this, John held
a number of senior finance and
strategy roles at Diageo plc.
Skills and Experience which
Supports the Long Term Success
of the Company:
John has extensive financial and
commercial experience gained
from senior financial roles held
in multiple sectors over the last
20 years. He is experienced in
leading innovative, high growth
international companies.
Key External Appointments
John is the Chief Financial Officer
of Featurespace Ltd.
Pets:
Tenure:
Under one year
Committee Membership:
Audit, Nomination and
Remuneration (Chair).
Background:
Geeta was previously a
Non-Executive Director and
Chair of the Remuneration
Committee of Ultra Electronic
Holdings Plc and a member of
the Remuneration Committee
of VocaLink. Geeta also served
as a Non-Executive Director and
Chair of the Risk Committee at
Wizink Bank SA. She was formerly
Executive Chair of Monitise
Europe, and Vice Chair of the Big
Lottery Fund England.
Skills and Experience which
Supports the Long Term Success
of the Company:
Geeta has a breadth of
Non-Executive Director
experience, as well as experience
as Chair of risk, audit and
remuneration committees.
She has 25 years’ experience
of financial services and retail
banking.
Key External Appointments
Geeta is a Non-Executive Director
at Virgin Money UK plc and
Clydesdale Bank plc. She is also
a Senior Independent Director,
Funding Circle Holdings.
Pets:
Lisa Bright
Designated Non-Executive
Director for Employee
Engagement
Tenure:
Four years
Committee Membership:
Audit, Nomination and
Remuneration.
Background:
Lisa has over 35 years’ experience
in the pharmaceutical and
biotech Industry. She sits on the
Board of several companies,
listed and private. Lisa served
as President International, and
Chief Commercial and Corporate
Affairs Officer of Intercept
Pharmaceuticals, Inc, a global
biopharmaceutical company
focused on the development
and commercialisation of novel
therapeutics until January 2021.
Skills and Experience which
Supports the Long Term Success
of the Company:
Lisa has strategic and operational
leadership as well as Non-
Executive Director and Chair
experience in global market
leading pharmaceutical and
emerging biotech companies.
Key External Appointments
Lisa is a Non-Executive Director
at Ascendis Pharma A/S.
Pets:
Stock Code: DPH
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Senior
Executive Team
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 a number of our key brands,
including Vetoryl. 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 APAC
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.
Giles is located in Sansaw, UK.
Pets:
Mike Eldred
President North America
Katy Clough
Chief People Officer
Melanie Hall
Milton McCann
Patrick Meeus
Jamie Adams*
Company Secretary
Group Manufacturing and
Chief Scientific Officer
Chief Information Officer
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.
Katy is located at Head Office,
Northwich, UK.
Pets:
Background:
Mike joined Dechra in 2004
and is responsible for Dechra
Veterinary Products’ North
American business. Mike has
more than 25 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 North American
commercial team to greater than
250 employees and $400 million
in revenue. Mike has also been
involved in several commercial
agreements and acquisitions for
the Group including Pharmaderm,
DermaPet, Putney, Ampharmco
and Med-Pharmex. Mike has a BA
and MBA in Business.
Mike is located in Overland Park,
Kansas, USA.
Pets:
Director, Dechra Pharmaceuticals
and strategic initiatives from
Manufacturing & Supply in October
early discovery through product
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
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
Chartered Governance Institute.
2019.
Melanie is responsible for the
Company Secretarial, Compliance
Before joining Dechra, Milton
had senior financial roles in
Melanie is located at Head Office
and Legal team.
in Northwich, UK.
Pets:
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 sites in Europe and USA,
and external manufacturing sites
globally.
Milton is located at Head Office
in Northwich, UK.
Pets:
None
Background:
Background:
Patrick joined Dechra in July 2022
Jamie joined Dechra in June 2022
and has over 30 years’ experience
as Chief Information Officer. Prior
in animal health covering vaccine,
to joining, he held the same role
small molecule and diagnostics
for Scapa plc, a global healthcare
product development across
and industrial products group
all animal species. He also
and has gained over 25
brings substantial international
years’ experience in various IT
experience having lived and
leadership roles in large scale
worked in academia and industry
pharmaceutical & medical device
on four different continents. In
organisations including Smith &
2004 Patrick joined Pfizer Animal
Nephew and AstraZeneca.
Jamie leads the global IT team
and is responsible for IT Strategy
development and execution,
including all IT change &
innovation activity as well as core
IT service provision. He has an
MBA from Durham University and
a BSc (Hons) degree in Business &
IT from Northumbria University.
He is located at Head Office,
Northwich, UK.
Pets:
* Appointed to the SET on 1 July 2023.
Health, now Zoetis, where he led
a wide range of teams, projects
development and launch. He
joined 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 Microbiologists-
Patrick is currently based in Basel,
Parasitology.
Switzerland.
Pets:
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Giles Coley
Mike Eldred
Katy Clough
Dechra Veterinary Products
President North America
Chief People Officer
International Group Director
Background:
Background:
Mike joined Dechra in 2004
Katy joined Dechra in April 2014
and is responsible for Dechra
from AppSense Ltd where she
Veterinary Products’ North
was the Vice President of HR
American business. Mike has
Europe and Rest of the World.
more than 25 years’ experience
With over 15 years’ experience
in the animal health sector,
operating at Director level
having held senior positions in
within Software, Health, Travel
business development, sales and
and Finance industries, Katy
operations at Virbac Corporation,
brings with her a wealth of HR
Fort Dodge Animal Health and
expertise gained in both blue
Sanofi Animal Health. As our
first employee in the USA, he
has built the North American
commercial team to greater than
250 employees and $400 million
in revenue. Mike has also been
involved in several commercial
agreements and acquisitions for
the Group including Pharmaderm,
DermaPet, Putney, Ampharmco
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.
Katy is located at Head Office,
Northwich, UK.
and Med-Pharmex. Mike has a BA
Pets:
and MBA in Business.
Mike is located in Overland Park,
Kansas, USA.
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 a number of our key brands,
including Vetoryl. 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 APAC
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.
Giles is located in Sansaw, UK.
Pets:
and South American business
Pets:
Melanie Hall
Company Secretary
Committee Membership:
Disclosure.
Background:
Melanie joined Dechra in
January 2010 as the Assistant
Company Secretary, and was
promoted to Deputy Company
Secretary in May 2015, and
Company Secretary in July 2017.
Prior to joining Dechra, she has
gained over 25 years’ experience
in various company secretarial
roles including at GKN plc, TRW
Automotive Inc and Pendragon
PLC. Melanie is a Fellow of the
Chartered Governance Institute.
Melanie is responsible for the
Company Secretarial, Compliance
and Legal team.
Melanie is located at Head Office
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 sites in Europe and USA,
and external manufacturing sites
globally.
Milton is located at Head Office
in Northwich, UK.
Pets:
None
Patrick Meeus
Chief Scientific Officer
Jamie Adams*
Chief Information Officer
Background:
Jamie joined Dechra in June 2022
as Chief Information Officer. Prior
to joining, he held the same role
for Scapa plc, a global healthcare
and industrial products group
and has gained over 25
years’ experience in various IT
leadership roles in large scale
pharmaceutical & medical device
organisations including Smith &
Nephew and AstraZeneca.
Jamie leads the global IT team
and is responsible for IT Strategy
development and execution,
including all IT change &
innovation activity as well as core
IT service provision. He has an
MBA from Durham University and
a BSc (Hons) degree in Business &
IT from Northumbria University.
He is located at Head Office,
Northwich, UK.
Pets:
* Appointed to the SET on 1 July 2023.
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. He also
brings substantial international
experience having lived and
worked in academia and industry
on four different continents. 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
joined 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 Microbiologists-
Parasitology.
Patrick is currently based in Basel,
Switzerland.
Pets:
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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 34 and 35 of the Strategic
Report. Dechra has consistently delivered on its strategic
objectives resulting in consistent growth and value creation
ever since the IPO on 21 September 2000 as detailed on page
65. Our strong track record is also illustrated by our Total
Shareholder Return performance on page 161.
Strategy
The Group’s strategy remains unchanged and is set out
on pages 32 and 33 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 efficient batch manufacturing;
• 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 52 and 53.
Strategy Day
The annual Strategy Day was held in December 2022 where
the Chief Information Officer, Head of Investor Relations, the
Group Financial Controller and the Sustainability Director
joined the Board and the Senior Executive Team (SET). The
SET had met the day before to discuss three key themes of
People, Technology and Product Portfolio Analysis, which they
presented at the first session of the Board Strategy Day.
The five strategy sessions covered:
• Strategic Enablers of People and Technology and the
Strategic Driver Product Portfolio;
• Deep Dive into Dechra’s Business;
• Update on the Five Year Plan;
• The strategic choices for the R&D Innovation Pipeline versus
Competitors; and
• The current veterinary pharmaceuticals market and
Dechra’s place within it.
A guest speaker from Stonehaven provided the presentation
for the last strategy session, which provided an insight into
how Dechra was perceived in the veterinary market, enabling
the Board to have a better understanding of the development
opportunities for the Group.
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.
Following the meeting, the Chief Information Officer has
taken the lead in a digital transformation project which was
highlighted as an area of improvement for the business. In
addition, a four and half day working week has been piloted
in the UK.
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 Audit Committee 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
systems can be found in the Governance Report on pages 128
and 129 and the Strategic Report on pages 80 and 81.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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
Acquisitions
Lost Time Accidents
2
9
Employee Engagement
90% of employees completed the survey in 2021,
Dechra's trust index has increased to 77% (2018: 67%)
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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
Employee Engagement with the Board via Designated
Non-Executive Director
Provides an update on employee views and
any concerns raised
Site Visits
Provides the Board with direct interaction with the Culture
of the Company
Raise a Concern Reports (Whistleblowing)
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
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
Internal Audit Reports
Identifies any actions required in relation to deviations of
Values and Culture
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
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
Skipton Site Visit
In June, we held the Board, Audit, Remuneration and
Nomination Committee meetings in Skipton, UK. Skipton
was chosen as the Board had approved in the 2021
financial year the refurbishment of Building 3 and the
newly acquired adjacent building. This is the first phase of
a three stage investment in the site. This phase includes
the installation of new Quality Control laboratories, a pilot
production room and stability room, and the relocation
of the raw materials warehouse and dispensary room as
well as providing improved offices and meeting rooms for
employees.
Prior to the Committee meetings, the Board met
representatives from the Works Council and long serving
employees for lunch and had an opportunity to speak
to them on an individual basis regarding the improved
facilities, the shortened working week and the proposed
offer for the Group by Freya Bidco, amongst other topics.
The Board noted the increased engagement of the
employees following the investment in the site and the
revised working week.
The following day, prior to the Board meeting, the Board
were taken on a site tour of Skipton by the Site Director and
the Manufacturing, Supply and Technical Lead.
The Board thought that it was incredibly inspiring to see
the progress made at Skipton, both in terms of the site’s
development and the effectiveness and efficiency of the
organisation at all levels. The Board commented that there
had been a material shift in performance and ambition
and the leadership team should take huge credit for the
change they have led.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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 2022 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. The main change to the Schedule of Matters was to
transfer the responsibility for the review of the principal and
emerging risks, and related controls and mitigating actions
from the Board to the Audit Committee.
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, having regard to
all 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 56 to 66.
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:
• The Chair and Senior Independent Director are available to meet shareholders upon request, and all Directors normally
are in attendance to meet shareholders at the Annual General Meeting
• The Chair met three institutional shareholders as part of a programme of meetings which was then halted due to the
proposed cash offer for the Group
• Where material changes in respect of remuneration or governance are proposed, the Board seeks to consult with
its major shareholders before implementing such changes. During the year, the Remuneration Chair consulted with
our major shareholders with regards to the Remuneration Policy. This involved writing to our major shareholders
(approximately 83% of our issued share capital) with regard to the proposed changes and she met with two institutional
shareholders
• A rolling programme of meetings between institutional shareholders and the Chief Executive Officer, Chief Financial
Officer and Head of Investor Relations has been running throughout the year (a summary of the main events is on page
65). These meetings seek to foster a mutual understanding of both the Company’s and shareholders’ objectives
• The Head of Investor Relations provided investor feedback throughout the year and maintained a latest view of analyst
consensus on an ongoing basis
• Investec Bank plc attended the October meeting to update the Board on the impact of inflation on the equity market
and general market conditions, including feedback from shareholders in particular in relation to genericisation. They also
attended a number of meetings in 2023 to advise the Board on the proposed cash offer for the Group, which included a
detailed paper outlining valuation considerations and an analysis of shareholder sentiment regarding the offer
• Board approval is required for significant announcements
• DLA Piper UK LLP provided training on Directors’ responsibilities under the Takeover Code, and provided guidance on the
Board’s responsibilities in relation to the Scheme Document and announcements connected to the proposed acquisition
Influencing Decisions:
• Approval of Investor Relations strategy
• Advised by Investec as to the financial terms of the proposed acquisition, which resulted in the Board reaching an
agreement with Freya Bidco on the terms and conditions of the recommended cash acquisition of the entire, issued
ordinary share capital of the Company
• Approval of Med-Pharmex and Piedmont acquisitions and Recommended Cash Offer for the Company (refer to Principal
Decisions case studies)
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Board Leadership
and Company Purpose
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:
• Site Visit to Skipton, UK (see case study on page 100)
• Dinners with Senior Executive Team (SET) in the UK and senior DPM&S leaders in Skipton
• Chair visited the offices at Northwich and the manufacturing site at Skipton
• Lisa Bright, the Non-Executive Director designated for employee engagement, attended a number of meetings with
employees (see Employee Engagement Update) and provided reports to the Board
• Geeta Gopalan met a number of employees as part of her induction
• The Group HR Director provided an update to the Board in April 2023 on the flexible working pilot in the UK, Diversity, Equity
and Inclusion, the THRIVE programme and the succession planning from a Group wide perspective
• 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 offered for the second year in September 2022 and included Brazil for the first time. The participation
rate was 28.6%
Influencing Decisions:
• The continued commitment to pay the Real Living Wage (or its equivalent) on a global basis to support all employees
with the challenges faced as a result of the cost of living crisis
• The UK pilot of four and half working day week
• Approval of the Global SAYE scheme grant and the inclusion of Brazil to increase employee ownership
• Recommended Cash Offer for the Company
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:
• 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 provided information on the corporate account strategy
• 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 impact of the wholesaler destocking in particular in the USA
• 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:
• Approval of Licensing agreement for a development project
• Approval of digital transformation project outline
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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:
• The Board reviewed 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
• The Board discussed various manufacturing initiatives to enable more products to be manufactured in-house
• The Board has discussed the rising cost of raw materials and energy
• The Audit Committee discussed the Third Party Risk Management system implementation which will enable the Group to
have a more effective system of assessing its suppliers
Influencing Decisions:
The Board approved the Modern Slavery Statement and Human Rights Policy
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:
• Executive Directors attend community days
• 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 on the progress of the Sustainability strategy including the Science
Based Target initiative
• Update on Antimicrobials in animal agriculture
Influencing Decisions:
The Board approved the AgCo Tech proposal (refer to Principal Decisions case studies)
Regulatory Authorities
Principles:
To meet high standards of product safety and efficacy.
How the Board Engages:
• The Board receives two updates from the Group Quality Director per annum, as well as updates contained within the
Group Manufacturing & Supply Directors Board reports. The Quality Director updates cover both internal site and CMOs,
product recalls, and manufacturing facility inspections
• The Board receives updates on market authorisation applications
Influencing Decisions:
The Board approved the 2024 financial year budget which included capital expenditure in relation to continuing
investments in Manufacturing (in terms of quality and systems)
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Board Leadership
and Company Purpose
Outcome
The Board approved the non-binding offer and the subsequent
acquisition. The acquisition of Med-Pharmex for $264.6 million
(£223.7 million) completed on 30 August 2022.
Case Study
Background
Dechra had known Med-Pharmex for a number of years, and
it had been a long term acquisition target. Med-Pharmex
employed approximately 130 people, was founded in 1983 and
served the CAP, FAP and equine markets. It manufactured its
own products at its facilities in California, and had expertise in
topical, oral and certain injectable products. In June 2022, the
Board was asked to consider a non-binding offer for
Med-Pharmex, which was in line with the Portfolio Focus and
Pipeline Delivery strategic drivers and Manufacturing enabler.
Stakeholder Considerations
In considering section 172 duties the Board noted the
acquisition would:
• provide six portfolio products which would increase the
product scale to the US business, as well as adding future
pipeline products;
• decrease reliance on Contract Manufacturers, by
strengthening Dechra’s manufacturing capabilities; and
• leverage the existing US infrastructure with minimal SG&A
costs and provide attractive financial returns.
Case Study
Background
In March 2023, the Board was asked to consider a proposal
for provision of finance in the form of a loan and minority
investment in AgCo Tech Ltd, an Australian private limited
company which provide practical help to livestock owners
in developing countries (further details can be found in the
Sustainability Report). Whilst the proposal was within the
delegated authority of the Executive Directors, it was presented
to the Board for their approval of the transaction, as the
co-founders of AgoTech were connected to Medical Ethics
Pty Ltd.
The proposed investment of AUD$6.0 million (£3.3 million) will
be paid in two equal tranches over the next 12 months to fund
the building of the first manufacturing unit in Kenya as well as
a second manufacturing unit in Laos. The investment will take
the form of a loan which will be repayable, following a one year
repayment holiday, over a six year period in the form of verified
carbon credits (calculated at market value), which will be
retired through our income statement upon receipt. The loan
will also attract interest, and Dechra will also take a 5% minority
interest holding in AgCo Tech in return for the investment.
Stakeholder Considerations
In considering section 172 duties the Board noted that the
proposal was in line with the Group’s purpose of sustainably
improving animal health and welfare. It was further noted that:
• AgCo Tech provided practical help to livestock owners in
developing countries to improve community wellbeing;
• the product reduced methane intensity and emissions as
well as generating verified carbon offsets; and
• the offsets created provided a potential income stream
for AgCo Tech which allowed them to deliver the product
for free to farmers in need which generated social and
environmental benefits.
Outcome
The Board approved the proposal and authorised the
Chief Financial Officer to proceed with the proposal, which
completed in July 2023. Due to the philanthropic nature of the
investment we will not look to profit from this investment, with
any income being reinvested in other climate stewardship
projects.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Outcome
The Board reached an agreement with the terms and
conditions of the Proposed Acquisition which was announced
on 2 June 2023. It was their view that accepting this
proposal represented the best interests of all stakeholders
and in particular represents a compelling opportunity for
shareholders to realise, in cash and with certainty, Dechra’s
potential for future value creation. The Shareholders voted in
favour of the Scheme at the Court Meeting and the Resolution
at the General Meeting. The Acquisition and Scheme is subject
to certain other terms and conditions including the receipt
of antitrust approvals or expiry of applicable waiting periods
in the European Union, United States of America, Austria,
Brazil and Germany and foreign direct investment approvals
or deemed approvals in Australia and Spain, in each case
to the extent required. To date, only Australia foreign direct
investment approval and the European Union antitrust
approval are outstanding.
Case Study
Background
The Board received a series of unsolicited proposals from EQT
Fund Management S.à r.l. (EQT) to acquire Dechra. Following
initial rejections and further discussion, the Dechra Board
indicated to EQT on 3 April 2023 that it had made a proposal
which the Dechra Board was minded to recommend and
granted EQT access to undertake due diligence. The Board met
a number of times to discuss the proposals and were advised
by Investec Bank plc and DLA Piper UK LLP.
Stakeholder Considerations
In considering our S172 duties, the Board noted that the
Proposed Acquisition:
• would allow the Group to continue with its commitment to:
॰ higher levels of investment than it has incurred historically
to support the delivery of the pipeline as planned. These
longer term investments have, and will continue to have a
negative impact on the Dechra Group’s reported earnings
and corresponding growth rates in the short term;
॰ prioritise its existing product portfolio and pipeline over the
pursuit of new potential opportunities; and
॰ would not mean a reduction in employees, apart from
potentially a very limited number of listed company
related functions. Nor would there be any changes to
the conditions of employment, employment rights and
pensions or the balance of skills and functions of the
employees and management;
• would not mean any changes to the locations of the
manufacturing or research and development facilities
subject to a strategic review; and
• was fair and reasonable.
The icons below highlight the Stakeholders considered and impacted by the proposals presented to the Board and
demonstrate how the Board discharged their duties under Section 172 of the Companies Act. The Section 172 Statement can
be found on pages 56 and 57.
Key:
Customers
People
Shareholders
Community
Environment
Suppliers
Regulatory Authorities
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Board Leadership
and Company Purpose
Employee
Engagement
Update
Lisa Bright
Areas of Focus
• Wellbeing
• Learning and Development
• Diversity, Equity and Inclusion
Meetings with Employees
• Remote attendance at a session in Skipton (UK)
• Future Facing Leaders face to face meeting
• Remote attendance at a THRIVE Champion meeting
• Monthly discussions with the Group HSE Director
Our Approach
At the beginning of the year, the Board agreed priority
areas of focus for employee engagement. The Designated
NED activities are reported into the Nomination Committee
with a summary provided to the broader Board.
Key Themes and Highlights:
Wellbeing was identified as an area of focus following the
last Group wide engagement survey results. I attended
a virtual meeting with the Works Council in Skipton to
review the impact of the change to working hours and
introduction of shorter working week. I am pleased to
report that the introduction of the shorter working week
and increased flexibility received excellent feedback.
In addition, this has enhanced the culture at the site
resulting in a hugely positive impact on staff engagement
and productivity. I also attended one of the THRIVE working
group meetings and discussed the wellbeing priorities
and interventions that were taking place at both global
and local levels.
Diversity, Equity and Inclusion is one of the current
strategic priorities for the Group HR function and I am
pleased to note the progress in particular with regard
to the number of women represented at all levels of
management below the SET.
Learning and Development is an area of strategic focus
and an area of improvement identified from the Great
Place to Work (GPTW) survey. I attended the final Future
Facing Leaders face to face programme in April 2023
where the current cohort presented their strategic
recommendations to myself and some of the SET.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
The Notice of the Meeting was dispatched to shareholders
at least 20 working days before the Meeting. The information
sent to shareholders included 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, with the exception of Ian Page who holds one
directorship in a private limited company.
Alison Platt
Non-Executive Chair
12 October 2023
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, remain consistent with
our Values and support the long term sustainable success of
the Company.
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 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, with
the launch of the line manager training which provides
an overview of the THRIVE programme and outlines the
manager’s responsibility in relation to employee wellbeing.
Further details can be found on page 61.
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.
There are 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 hotline. 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. There were 12 reports of which four
were deemed to be HR Grievances and the remaining were
eight against our Code of Conduct.
Constructive use of the
Annual General Meeting
The 2022 Annual General Meeting (the 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 attended the Meeting and
the Chairs of the Audit, Remuneration and Nomination
Committees were available to answer shareholders’
questions at the Meeting.
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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 94 to 97.
Board Composition
Details of the Directors, together with details of their respective
Committee membership, skills and experience, backgrounds
and external appointments can be found on pages 94 and 95,
and on the website. As detailed in the pie chart below, during
the majority of the year and at year end, the Board consists
of one Non-Executive Chair, four Non-Executive Directors and
three Executive Directors. During the period 1 January 2023 to
22 June 2023, there were five Non-Executive Directors.
12.5%
50.0%
Non-Executive Chair
Executive Directors
37.5%
Non-Executive Directors
Julian Heslop and Ishbel Macpherson had exceeded the nine
year tenure in January 2022 and February 2022 respectively.
The Board concluded in January 2022 and August 2022 that
they both remained independent for the reasons set out in the
2022 Annual Report. Julian retired on 5 September 2022 and
Ishbel retired on 22 June 2023. 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.
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 Head of Investor Relations 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 ESG Committee, Strategic
Portfolio Prioritisation Committee and Treasury Committee.
During the year, the Data Protection Committee was replaced
with a Data Protection Officer.
The SET is led by the Chief Executive Officer and is comprised
of the three Executive Directors, the Company Secretary 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. They met six times this financial year.
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.
Board Meetings
The Board is scheduled to meet seven times per year. During
the year, four additional meetings were held to discuss
the 2023 financial year, the interim results, financing and
proposed acquisition targets. Where Directors cannot attend
a meeting, the Board papers are still provided in advance
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 94 to 97. Geeta Gopalan
was unable to attend one Audit Committee meeting due to
commitments arranged prior to her appointment. However,
she provided the Board with her comments and questions on
the subject matter under discussion.
In addition, there were a further nine meetings which were
held for the specific purpose of discussing the proposed
acquisition of the Group. A number of the meetings were held
for the purpose of providing updates to the Non-Executive
Directors or for advisers to provide updates to the Board. Due
to the fact that these were held at very short notice, there
were a number of meetings which not all the Board could
attend.
The Non-Executive Directors meet informally before every
meeting, and 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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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Division of
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; and
• establishing an effective corporate governance framework.
The Board Activities Table details the actions in relation to the
above on pages 111 and 112.
Details relating to the formal Schedule of Matters reserved for
the Board can be found on page 101 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 123 to 131
Read more on
pages 113 to 122
Read more on
pages 132 to 165
Other Key Committees
Treasury
Committee
To establish, implement and monitor
compliance with Treasury Policies as
approved by the Audit Committee.
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.
Senior Executive Team
Key Responsibilities
• Leads the development and implementation of the business strategy
• Manages day-to-day operations of respective functions
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Division of
Responsibilities
Non-Executive Chair
Chief Executive Officer
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)
• Responsible for IT, financial
planning and reporting for
the Group
• Drives the effectiveness of the Board in
• Drives performance and results of
• Manages financial risk
all aspects of its role
the Group
• Facilitates the effective contribution
• Proposes strategy
of the Non-Executive Directors,
enabling all decisions to be subject to
constructive debate and supported by
sound decision making processes
• Arranges for shareholder views to be
brought to the attention of the Board
• Executes strategy agreed by
the Board
• Develops and executes the
strategic plan in conjunction with
the Chief Executive Officer
• Secures funding as required
• Nominated Director for health,
safety and environmental matters
and Sustainability
Managing Director Dechra
Veterinary Products (DVP) EU
Designated Non-Executive
Director for Employee
Engagement
Company Secretary
• Management of the segment which
contributes the largest proportion of
Group revenue
• Gathers and understands the views of
• Advises the Board on matters of
the workforce
procedure and governance
• Enables the voice of the workforce to
• Provides all required information to the
• Development and execution of
be heard in the boardroom
Board on a timely basis
strategy in the EU
• Enables information flows between the
SET, the Board and its Committees
• Provides support to the Chair and
Non-Executive Directors
• Responsible for compliance with
relevant statutory and regulatory
requirements
Non-Executive Director
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
• evaluate strategy and risks
• Provides a sounding board for the
Key to Responsibilities
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
• Chairs the Nomination Committee
when it is considering the succession
of the Chair
Dechra Board
Audit Committee
Nomination Committee
Remuneration Committee
Disclosure Committee
Treasury Committee
ESG Committee
Health Safety and Wellbeing
Committee
Senior Executive Team
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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.
Key responsibility
Key activities, discussions and outcomes in 2022/2023 Stakeholder
Strategic Driver/Enabler
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 subsidiary in South Africa
• Approval of AgCo Tech investment
• Consideration and recommendation of offer
for the Group
• Approval of Med-Pharmex and Piedmont
acquisitions
• Approval of 2022 Full Year Results, final
dividend recommendation, 2023 Half-Yearly
Results, interim dividend and profit re-forecast
• Functional presentations from the SET, General
Counsel, Business Quality Director and Chief
Information Officer
• Approval of the 2023/2024 budget and capital
expenditure projects
• Approval of Revolving Credit Facility
Agreement
• Risk Assessment Review and Viability
Statement review
• Presentations from the SET on their respective
risks statement
• Review and approval of Schedule of Matters
and Delegation of Authority
• Quality Updates and approval of DPM&S
ERP system
• Update from Chief Information Officer
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
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Division of
Responsibilities
Stakeholder Key:
Strategic Driver/Enabler Key:
Customers
People
Shareholders
Pipeline
Delivery
Portfolio
Focus
Manufacturing
& Supply Chain
Technology
Suppliers
Community
Regulatory Authorities
Geographical
Expansion
Acquisition
Our People
ESG
Key responsibility
Key activities, discussions and outcomes in 2022/2023 Stakeholder
Strategic Driver/Enabler
Establishing the
Company’s Purpose,
Values and Culture,
and promoting the
desired behaviours
Establishing an
effective corporate
governance
framework
• 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, Anti-Trust Policy and
Group Health & Safety Policy
• Approval of appointments of Non-Executive
Director, Committee membership and
Committees' Terms of Reference
• Review of Task Force on Climate-related
Financial Disclosures
• Review of 2023 Internal Board Evaluation
Details relating to the formal Schedule of Matters reserved for the Board can be found on page 101 and on our website.
Alison Platt
Non-Executive Chair
12 October 2023
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Composition, Succession
and Evaluation
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 93
Alison Platt
Non-Executive Chair
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 2023
financial year. Julian Heslop retired from the Board on 5
September 2022 and was replaced as Audit Chair by John
Shipsey. Geeta Gopalan was appointed as a
Non-Executive Director on 1 January 2023. She has a breadth
of Non-Executive Director experience as well as chairing
risk, audit and remuneration committees since 2017. Geeta
was appointed Remuneration Committee Chair on 1 March
2023, allowing Ishbel Macpherson to step down from that
role. Ishbel remained as a member of the Remuneration
Committee to enable a smooth handover until she retired as
a Non-Executive Director on 22 June 2023.
The Chief Information Officer Jamie Adams, joined the Senior
Executive Team (SET) on 1 July 2023 having been with the
business since June 2022.
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
Non-Executive Director as appropriate, the details of which
can be found on page 121 of this report.
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Composition, Succession
and Evaluation
Diversity and Inclusion
We continue to see increasing representation of women
across all role types within the Group, where the talent
analytics data from the global talent review process provides
information to the Committee on the diversity of talent below
the Senior Executive team. Dechra’s performance in closing
the gender pay gap in the UK continues to improve year
on year. Work has commenced with an external partner,
Inclusive Employers, and will focus our inclusion agenda on
areas where we can make the most impact in some of our
key employment markets including UK, Europe and North
America.
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
12 October 2023
Purpose
The purpose of the Committee is to lead the appointment
process, satisfy itself that plans are in place for orderly
succession for appointments to the Board and Senior
Management, and oversee the development of a diverse
pipeline for succession.
Membership, Meetings and Attendance
The membership of the Committee, together with
appointment dates and attendance at meetings during the
year, is set out on pages 93 to 95. Geeta joined the Committee
on her appointment to the Board in January 2023, and Julian
Heslop and Ishbel Macpherson resigned from the Committee
on their retirements from the Board on 5 September 2022 and
22 June 2023 respectively.
All Committee members are Non-Executive Directors, and are
deemed to be independent. Other attendees at the meetings
include the Chief Executive Officer, the Chief People Officer
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 2023 Board and Committee internal evaluation (further
details of which are provided on page 121). The findings of
the internal evaluation were presented to the Committee
for discussion at the June 2023 meeting. The Committee
considered the results, and it was agreed that the Committee
remained effective and was covering all areas within its remit.
However, it was acknowledged that more time should be
allocated to focus on succession in particular in relation to
Executive Directors and Senior Executive Team.
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 2023 financial year, this took place at the February
meeting, and there were no material changes made
to the terms of reference. It was noted that there was a
technical non-compliance with the terms of reference as
Ishbel Macpherson had exceeded the nine year tenure
limit in February 2022. The Board concluded she remained
independent due to the fact that her 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 109 and 113 of the Governance Report.
The Committee provides a report to the Board on its activities
at the Board’s next scheduled meeting.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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 114)
Composition
(see pages 115 to 117)
Succession
(see page 120)
Evaluation
(see pages 120 and 121)
Diversity and Inclusion
(see pages 118 and 119)
• Review of the Committee’s terms of reference
• Review of the effectiveness of the Committee
• Review of Board skills, knowledge and experience • Recruitment of Non-Executive Director
• Consideration of Non-Executive Directors’ tenure • Review of SET succession plans and
leadership needs
• Review of composition of the Board
• Review of Director effectiveness
• Review and approval of the Diversity Policy
• Review of the Dignity at Work Policy
Board Skills, Knowledge and Experience
Sector
Knowledge
Understanding of
Regulatory
Product
Development
M&A
4
5
Board
Skills
Knowledge
and
Experience
8
8
3
6
3
8
6
Global Industry
Experience
Strategic
ESG
Governance
Financial
Key
Industry knowledge/expertise
Skills/experience of the Board
Stock Code: DPH
Composition
The Board seeks to ensure that both the Board and
the Committees have an appropriate composition to
manage their duties and manage succession issues
effectively. All appointments to the Board are subject
to a formal, rigorous and transparent procedure. The
Board supports diversity in its broadest sense and
considers it an essential driver of Board effectiveness.
The Board recognises it is important that its composition
is sufficiently diverse and reflects a wide range of
knowledge, skills and experience. The Committee reviews
the structure, size and composition (including the skills,
knowledge, experience and diversity) of the Board at
least once a year and, usually at the June meeting. Both
the Audit Committee and Remuneration Committee
undertake an annual review of their composition, and
any concerns would be reported to the Board.
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. The internal evaluation found
that the Non-Executive Directors continue to provide an
excellent range of relevant and complementary skills.
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Composition, Succession
and Evaluation
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.
Geeta Gopalan attended a remuneration refresher course
with Deloitte which also covers remuneration matters
specific to the Company. John Shipsey has undertaken
training modules on Cyber Security, ABC and Risk. Alison
Platt attended a day’s training for Chairs and Non-Executive
Directors with the FCA and Prudential Regulation Authority
as well as two remuneration roundtables held by PwC
and Deloitte. DLA provided the Board training on Director’s
responsibilities under the Takeover Code.
Each Director is entitled, upon request, to receive information
to enable them to make informed judgements in order to
discharge their duties adequately. In addition, all Directors
have access to the advice and services of the Company
Secretary and senior managers and may take independent
professional advice at the Company’s expense in connection
with their duties.
In order to assist the Board in maintaining its knowledge and
familiarity with the Group’s operations, at least one Board
meeting per year is held at one of the Group’s operational
sites. In June, the Board visited the manufacturing facility in
Skipton, UK. Prior to the Board meeting, all of the Board met a
group of employees from this site which included members
of the site’s senior leadership team (further details can be
found on page 100). During the visit the Board had a tour of
the facility which included the recently refurbished Building 3,
which the Board had approved in the 2021 financial year.
Board Appointments
The Board understands the importance of balance and
refreshment in terms of its composition and keeps these
matters under review.
As reported in the 2022 Annual Report 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
a Remuneration Committee Chair. As previously reported
cognisant of the Parker Review requirements and the new
listing requirements regarding diversity targets, the Chair
and Chief People Officer interviewed two recruitment
consultants who specialise in diverse recruitment, one of
which was a non-profit organisation. The Committee retained
an independent recruitment agency, Audeliss, in the 2022
financial year. Audeliss had no previous connections with the
Company or individual Directors.
Audeliss 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.
The search produced four outstanding potential candidates
who went through the full scrutiny process, before being
short listed to two. We were pleased that Geeta Gopalan was
appointed to the Board on 1 January 2023.
The Committee recommended the appointment of Geeta
due to her breadth of Non-Executive Director experience as
well as chairing risk, audit and remuneration committees
since 2017.
Case Study
Geeta Gopalan’s Introduction
Geeta Gopalan’s Introduction
On joining the Dechra Board in January, I was provided with a comprehensive
On joining the Dechra Board in January, I was provided with a comprehensive
induction programme. I spent two days at the head office meeting employees
induction programme. I spent two days at the head office meeting employees
as well as a number of virtual meetings with senior executive team members.
as well as a number of virtual meetings with senior executive team members.
I met with the Remuneration Advisors who provided me with overview of
I met with the Remuneration Advisors who provided me with overview of
the UK executive remuneration, current remuneration trends and executive
the UK executive remuneration, current remuneration trends and executive
remuneration at Dechra. I have enjoyed the time spent to get to know the
remuneration at Dechra. I have enjoyed the time spent to get to know the
team and leaders across the Dechra Group. I am sorry that my tenure as a
team and leaders across the Dechra Group. I am sorry that my tenure as a
Non-Executive Director has been cut short due to the proposed acquisition, but
Non-Executive Director has been cut short due to the proposed acquisition, but
I wish the business well in its future endeavours.
I wish the business well in its future endeavours.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Remuneration Committee Chair
Appointment Process
1 Nomination Committee
One of the criteria was that the candidates should have
relevant remuneration experience in an international
company, as well as broad business experience and be a
good fit with the culture of the Company.
2 Engage
Audeliss was appointed.
3 Meet
To assist Audeliss with the understanding of the
requirements of the role, they met with the Chair and the
Chief People Officer.
4 Consider
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 Geeta with members
of the Senior Executive Team, the Head of Internal Audit, the
Head of Investor Relations and the Business Development
Director. In addition, Geeta met the Remuneration Committee
advisers, Deloitte LLP, who provided an overview of Dechra’s
remuneration policy as well as the Lead Audit Engagement
Partner. The induction process is 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.
The Chair met with each of the candidates on the long
list, which was then circulated to the Committee for
comments before a short list of four was agreed.
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).
5 Select
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.
6 Interview
The first interviews were with the Remuneration
Committee Chair, Chief People Officer and Company
Secretary, followed by interview with the Senior
Independent Director and Audit Committee Chair. The
short list was then reduced to two candidates who were
interviewed by the Chief Executive Officer, and the Chief
Financial Officer, and then by the Chair and the Employee
Engagement Designated Non-Executive Director.
Geeta’s other appointments were considered to check
there was no conflict of interest or time. References
were taken.
7 Appoint
Geeta Gopalan was appointed to the Board on
1 January 2023.
Further details relating to her background and experience
can be found on page 95.
8 Induct
Please refer to the induction process.
Stock Code: DPH
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Composition, Succession
and Evaluation
Diversity and Inclusion
The Committee reviews the policy on diversity and its
implementation every year and, during 2023 this review took
place in June. There were no changes to the Diversity Policy, a
copy of which can be found at www.dechra.com. The policy is
Group-wide and includes the Board and its Committees.
The Group recognises that diversity of thinking and skills
and an inclusive culture are 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. The Committee and the Board believe that diversity
should be less around hitting targets but more around being
seen as an inclusive employer.
We are working hard to ensure diversity is not solely a Board
issue. Led by our Chief People Officer, we continue to focus
on and invest 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.
Work was commenced in April 2023 with an external partner
focusing our inclusion agenda on areas where we can make
the most impact. We are committed to providing an inclusive
culture at Dechra and two core modules are included in all
our Company management development programmes:
Diversity, Equity, and Inclusion in Dechra and OneDechra; an
exploration of our Company Culture and Values and what
they mean to our people.
During the 2022 financial year we launched a new
development programme called Future Facing Leaders
(further details of which can be found in SET Succession
Planning on page 120).
The chart on page 92 illustrates the diversity characteristics of
our Board.
Progress on Diversity Policy
Policy
Progress
Dignity at Work
We have planned a series of facilitated discussions to be rolled out in the next financial year
supporting Dechra Culture and Behaviours, the Code of Conduct and inclusivity at Dechra. These will
be hosted in local languages over the four quarters of the year.
We have a Diversity and Inclusion module which also covers unconscious bias which is one of three
core modules that are included in all Leadership and Management development programmes. We
also have access to online training modules and incorporate inclusion training into off site meetings.
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.
We have launched the external hotline which provides all employees with access to an external and
anonymous reporting process in all languages. This makes raising a concern easier and independent.
We supported this launch with a communications campaign and all sites have visible signposts to the
system.
In the 2022 financial year, the Committee retained a recruitment consultant who specialise in
diverse recruitment. Following a robust process, Geeta Gopalan was appointed to the Board and its
Committees. Geeta Gopalan replaced Ishbel Macpherson who retired in June 2023.
Despite the inflationary pressures experienced across the globe, we remain a Living Wage employer in
the UK and equivalent in our other employing countries. In the UK, only one of our subsidiaries, Dechra
Limited, is required 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 in relation to our gender pay
gap, the gap has continued to reduce over time reducing from 17.7% in 2017 to 1.3% in 2022.
Board and
Committees
Fair Pay
As of 30 June 2023:
• 37.5% of the Board of Directors are women, which is lower than the required 40%. Prior to the retirement of a female
Non-Executive Director on 22 June 2023, the Group exceeded this target;
• the Chair is female; and
• one individual on the Board of Directors is from a minority ethnic background.
The data was collated from Director Confirmations completed by both Executive and Non-Executive Directors.
118
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Reporting on Gender Identity or Sex as at 30 June 2023
Number of board
members
Percentage of the
board
Number of senior
positions on the
board (CEO, CFO, SID
and Chair)
Number in
executive
management*
Percentage
of executive
management
Men
Women
Not specified/prefer not to say
5
3
-
62.5%
37.5%
N/A
3
1
-
4
2
-
66.7%
33.3%
N/A
Reporting on Ethnic Background as at 30 June 2023
Number of board
members
Percentage of the
board
Number of senior
positions on the
board (CEO, CFO, SID
and Chair)
Number in
executive
management*
Percentage
of executive
management
White British or other White
(including minority-
white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/
Black British
Other ethnic group,
including Arab
Not specified/prefer not to say
7
-
1
-
-
-
87.5%
N/A
12.5%
N/A
N/A
N/A
4
-
-
-
-
-
6
-
-
-
-
-
100.0%
N/A
N/A
N/A
N/A
N/A
*Senior Executive Team, excluding Executive Directors
The Board as at 30 June 2023
Group Diversity
Female (3)
Male (5)
37.5%
62.5%
60
50
40
30%
20
10
0
Senior Executive Team (including Executive
Directors) as at 30 June 2023
Female (2)
Male (7)
22.2%
% Females on Board
% Females on SET (excluding Executive Directors)
% Females on SET and Direct Reports
% Females in Group
2019
2020
2021
2022
2023
77.8%
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 as at 30 June 2023
0.2%
3.1%
White British or other White
Overall Workforce as at 30 June 2023
Female (1,342)
Male (1,115)
0.6%
8%
1.6%
45%
55%
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/
Black British
Other Ethnic Group
86.5%
Not specified/prefer not to say
Numbers in brackets represent the number of females and males.
Stock Code: DPH
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Composition, Succession
and Evaluation
Board Succession Planning
SET Succession Planning (including Executive
Directors) and Leadership Needs of the Group
One of our key risks is people focused and this risk is
the failure to resource adequately the business to meet
strategic ambitions, including geographical expansion, and
acquisitions.
To assist with this, the Chief People Officer 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.
The Committee have been reviewing the SET succession plan
for a number of years and we acknowledge that we have
succession gaps for a number of key senior roles and that
whilst continuing to develop internal talent we may need to
acquire external talent to fill some of these roles. Focus has
continued on building stability and strength across the key
functions in the business, and growth through acquisition
also brings new talent to the Group that we have been able
to exploit. The Group HR function has evolved the process
for reviewing Talent and is investing more than ever in the
ongoing development of our people. The Group HR Director
in April provided a more detailed focus than previous years
on the SET, their direct reports and then one level down
which was enlightening, and the Board felt that it was a
step in the right direction. 435 employees were reviewed
for the talent pool, which represented at the time of the
Action
Progress
review approximately 20% of global employees; 48 of those
reviewed were already identified as successors, 24 of the
employees had been enrolled in the pilot Future Facing
Leaders programme and 82 emerging leaders were identified
of which 15 were ready now and 20 are deemed to be ready
in three to five years. The first cohort on the Future Facing
Leaders programme completed the course in July 2023, and a
number of them have been identified as potential successors
to the SET.
The Committee has reviewed the emergency succession
plan, 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.
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 121.
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 115.
The 2022 Internal Board Evaluation
Below is an update on the actions arising from the 2022
external evaluation:
Bring the customer’s voice into
the Board discussions
DVP EU presentation included commentary on the consolidation of the EU market and
the shift of focus to customer centricity.
Focus on future proofing Dechra
in relation to people, product and
pipeline delivery
Acquired Piedmont Animal Health Inc in July 2022 which specialises in developing
novel and differentiated products for the companion animal market and has a strong
development track record. It had eight novel products in the pipeline which significantly
strengthens the pipeline and the team of 19 people added additional strength and
expertise to the Company’s existing product development team.
Strategy day discussion on the strategic choices for our R&D innovation pipeline.
Better understanding of key
trends in the financial markets
and stakeholder views on issues
such as ESG
Stonehaven attended a session at the Strategy Day which discussed the current
veterinary pharmaceuticals market and Dechra’s place within this.
Investec attended the October 2022 meeting to discuss the impact of inflation/
economic turmoil and the state of the market with the Board.
Chair engaged directly with investors via invitation from Company Secretary.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
The 2023 Internal Board Evaluation
Following the external evaluation in 2021, it was agreed to
undertake an internal evaluation for the 2023 financial year,
focusing on the following areas: (i) Strategy; (ii) Working
Together; (iii) Management of the Board; (iv) Culture; (v)
Engagement with stakeholders; (vi) Board Chair Evaluation;
(vii) progress on 2022 Internal Board Evaluation; and (viii)
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 2024 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 Internal Board Evaluation as well as additional
questions of the Chair’s performance.
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 June 2023 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:
• Focus on succession planning, in particular for Non-Executive Directors and the Senior Executive Team; and
• Aligning strategy with five year plan.
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.
Stock Code: DPH
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Composition, Succession
and Evaluation
Subject to the Company remaining listed progress made
on these action points during the forthcoming year will be
reported in next year’s Annual Report, an external evaluation
will be undertaken during the 2024 financial year and the
results of the 2023 internal Board evaluation will be reported in
next year’s Annual Report.
Effectiveness of Directors
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 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.
The internal evaluation concluded that the Board remained
fit for purpose. Any comments received related to evolving
the Board’s knowledge of the business and animal health
industry rather than any underperformance or issues
of cohesion. 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. All Directors are normally subject to annual
election, or in the case of Geeta Gopalan; election. The
specific reasons why their contribution is, and continues to be,
important to the Company’s long term sustainable success
would normally be found in the Notice of the Annual General
Meeting. A separate notice convening the Annual General
Meeting will be sent to shareholders within the timeframes
required by the Companies Act 2006 and the Listing Rules.
As mentioned in the Governance letter the Annual General
Meeting (the AGM) is subject to the Company remaining
listed at the date of the AGM. On the acquisition of the Group
by Freya Bidco Limited becoming effective, all of the
Non-Executive Directors will resign.
Alison Platt
Nomination Committee Chair
12 October 2023
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Audit, Risk and
Internal Control
5
Audit Committee
Meetings Held
Areas of Focus This Year
• Appointment of new Audit Committee Chair
• Review and approval of the Anti-Fraud Policy
• Review of the Third Party Risk Management system
• Review of Business Combination accounting for
Piedmont and Med-Pharmex acquisitions
• Key Responsibilities
• To review and oversee the Group’s financial and
narrative reporting processes, to monitor the
integrity of the financial statements and formal
announcements relating to financial performance,
and advise the Board on whether the Annual
Report and Half-Yearly Statements, taken as a
whole, are fair, balanced and understandable
• To review the adequacy and effectiveness of the
Group’s internal control systems (including the risk
management system) and the work of the internal
audit function
• To review the Group’s procedures and internal
control for reporting fraud
• 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 93
John Shipsey
Audit Committee Chair
Dear Shareholder
On behalf of the Board, I am pleased to present the 2023 Audit
Committee (the Committee) report, which is my first as Chair,
having succeeded Julian Heslop following his retirement
on 5 September 2022. It will also be my last report following
shareholder approval of the recommended cash offer for the
Company. This report is intended to provide shareholders with
a clear understanding of how the Committee discharged the
responsibilities delegated to it by the Board over the course of
the year ending 30 June 2023 and the key topics it considered
in doing so. During the year, in addition to our regular duties,
we focused on the following matters:
Committee Membership
I am pleased to report that, following the completion of a
recruitment process, Geeta Gopalan joined the Committee
on her appointment to the Board in January 2023. Geeta has
over 25 years of experience of financial services and retail
banking, particularly payments and digital innovation. Geeta
is a Chartered Accountant and has been chairing risk and
audit committees since 2017. Ishbel Macpherson ceased to
be a member of the Committee on her retirement from the
Board on 22 June 2023. All members of the Audit Committee
remain independent Non-Executive Directors.
Anti-Fraud Policy
The Committee reviewed and approved an Anti-Fraud Policy
which formalised the existing procedures in place. The policy
provides employees with guidance on preventing, identifying,
reporting and investigating fraud and was designed to
complement the existing Code of Conduct. Further details can
be found on page 129.
Appointment of Data Protection Officer and
Compliance Manager
In December the Committee approved a proposal to replace
the Data Protection Committee with a Data Protection Officer.
The role was initially covered by a data protection consultant
but now forms part of the role of the Compliance Manager,
who joined Dechra in April 2023. The Compliance Manager will
report to the Committee on Dechra’s compliance with
Anti-Bribery and Anti-Corruption, Anti-Trust, Data Protection
and Sanctions regulations.
Stock Code: DPH
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Audit, Risk and
Internal Control
Third Party Risk Management System
During the 2022 financial year, the Committee approved the
implementation of a centralised software solution to replace
the current manual third party due diligence processes.
Following a tender process, a small cross-functional team
has been working since January on the design, build and
testing of the system. In July 2023 a phased launch of the
platform commenced with our DVP International business
whose customers have been classified as higher risk due to
the territories in which they operate and the nature of the
distribution activities. It is envisaged that the system will be
rolled out across all divisions by the end of the calendar year.
Piedmont and Med-Pharmex Acquisitions
Following the acquisitions of Piedmont Animal Health Inc and
Med-Pharmex Holdings Inc during the year, the Committee
has reviewed the business combination accounting proposed
by management and third party experts, which supports
the assessment of the completeness and valuation of
acquired assets and liabilities. Furthermore, the Committee
considered management’s impairment review of the
Piedmont product pipeline and endorsed the conclusion
that one of the near term In Process R&D assets was
impaired. Finally, the Committee has reviewed the progress
made by management on the integration of the acquired
businesses, including the initial assessment of, and plans for
improvement to, the control environment.
Preliminary Statement Date Change
In April and May 2023, the project team which works on the
Annual Report and Accounts was re-directed to answer the
due diligence requests in relation to the proposed cash offer
for the Group by Freya Bidco Limited. This meant that the
pre-year-end audit work scheduled for May and June was
delayed. Following discussion with the external auditors and
the project team, it was agreed to delay the announcement
of the Preliminary Statement.
Annual Report 2023
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
2023 Annual Report was fair, balanced and understandable
and concluded that it was. The basis supporting our
conclusion is set out on page 128.
Should you have any questions in relation to this report or the
Committee please contact me or the Company Secretary.
John Shipsey
Audit Committee Chair
12 October 2023
The Purpose and Function of the
Audit Committee (the Committee)
Purpose
The Committee’s key role is to review and report to the
Board on financial reporting and internal financial control
effectiveness, and to monitor the effectiveness of the external
audit process and internal audit function.
Membership, Meetings and Attendance
The membership of the Committee, together with
appointment dates and attendance at meetings, are detailed
on pages 93 to 95. John Shipsey succeeded Julian Heslop
as Chair of the Committee on 5 September 2022, and Geeta
Gopalan joined the Committee on her appointment to the
Board on 1 January 2023. Ishbel Macpherson retired from the
Committee on 22 June 2023. All Committee members are
Independent Non-Executive Directors.
The Board considers that all members of the Committee
are independent and have competencies relevant to the
sector in which the Company operates, with the Chair and
Geeta Gopalan being chartered accountants. John Shipsey
has relevant financial experience as a result of his financial
background and qualifications, and Ishbel Macpherson
brought financial experience to the Committee following
her career as an investment banker. Lawson Macartney
and Lisa Bright provide experience of product development
and commercialisation of pharmaceuticals, which support
the Committee in meeting its objectives. Geeta Gopalan
also brings recent and relevant financial experience to the
Committee, with a breadth of experience chairing audit, risk
and remuneration committees and over 25 years’ experience
in financial services and retail banking. 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
Matter
Head of Investor Relations
Group Treasurer
Review of Half Year and Full
Year Accounts
Treasury and Group’s
Borrowing Facilities Update
Head of Tax and Transfer
Pricing
Tax Strategy, Risk and
Compliance Update
Head of Group Reporting
Senior Legal Counsel
Reporting and Accounting
Update
Anti-Bribery and Sanctions
Update
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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 and to enable these subjects to be discussed
meaningfully at the meetings. The Committee meets with the
external and internal auditors without management present,
after each scheduled meeting, to discuss their respective
areas and any issues arising from their audits. The Committee
provides a report to the Board on its activities at the Board’s
next scheduled meeting. Neither the Company nor its
Directors have any relationships that impair the external
auditor’s independence.
Effectiveness of the Committee
The Committee’s performance was evaluated as part of the
internal review of the effectiveness of the Board and all its
Committees which took place in April 2023 (further details of
which can be found on page 121 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 2022 meeting. It was
agreed to amend the terms of reference to include the
assessment of principal and emerging risks and to review
regular reports from the Compliance Manager, on her
appointment, and keep under review the adequacy and
effectiveness of the compliance function. It was noted that
there was a technical non-compliance with the terms of
reference as Ishbel Macpherson had exceeded the nine-year
limit in February 2022. The Board agreed in August 2022 that it
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 109 and 123 of the Governance Report.
Major Activities of the Committee
During the Year
The Committee met five 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.
Month
Progress
August
• Review of preliminary results and announcement
• Review of draft Annual Report and Accounts
• 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
• Confirmation of covenants
• Auditor reappointment
December
• Review of Committee Terms of Reference
• Agree programme of business for 2024
• Review and approval of interim plan of external
auditor
• Review internal audit progress report
February
• Review of Half Year Results
• Annual Review of dividend policy
• Review of Interim dividend and distributable
reserves
• Review of Internal Controls
• Status of statutory accounts and tax computations
• Review and approval of Internal Audit Charter
• Review of external auditors’ interim review findings
April
• Approval of External Audit strategy, scope and fees
• Review of Committee Effectiveness
• Confirmation of Auditor Independence
• Review of ABC, Code of Conduct and Data
Protection Policies
• Tax, Treasury and GDPR Compliance Update
• Report on compliance with Data Protection Policy
• Review of Risks and Controls
• Borrowing Powers Confirmation
• Approval of internal audit plan
June
• Assessment of principal and emerging risks
and annual review of Risk Management Process
Effectiveness
Stock Code: DPH
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Audit, Risk and
Internal Control
The table below shows the key areas of the Committee activities:
Purpose and
Function
(see pages 124
and 125)
Financial and
Narrative
Reporting
(see pages 127
and 128)
• 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
• Consideration of the Audit Memorandum
Projects and Technical Transfers
prepared 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 2023
॰ 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 pages 128
and 129)
• Review of Anti-Bribery and Anti-Corruption
• General Data Protection Regulation (GDPR)
(ABC) and Sanctions policies
compliance update
• ABC and Sanctions compliance update
• Review and approval of the internal control and
• Half-year and full year review of internal
risk management statements
financial controls
• Review of cyber security and adoption of NCSC
• Review of tax strategy and policy framework
10 Step Framework
• Review of treasury policy and practice
Internal Audit
(see pages 129
and 130)
• Review of the Internal Audit Plan, completion of
audit recommendations and effectiveness of
Internal Audit
• Review and approval of Internal Audit Charter
External Audit
(see pages 130
and 131)
• Review and approval of PwC Half-Yearly
• Review of the external audit effectiveness
review plan
• Review of external auditor’s independence and
• Review and approval of PwC full year external
level of non-audit fees
audit strategy (including timetable, risk
assessment, materiality, scope and fees)
• Review of findings from the external audit
• Review of the non-audit work and fee policy
• 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 will continue to consider any changes to Dechra’s policies and processes in light of the BEIS ‘Restoring Trust in
Audit and Corporate Governance’ requirements including:
• the draft Companies (Strategic Report and Directors’ Report) (Amendment) Regulations 2023 (Regulations) and associated
explanatory memorandum published on 19 July 2023, which introduce reporting measures relating to an Audit & Assurance
Policy, a statement on steps taken to prevent and detect material fraud, a Resilience Statement, and a statement on
distributions and capital allocation; and
• any changes to the UK Corporate Governance Code that will affect the requirements around Audit, Risk and Internal Control.
• the FRC’s ‘Audit Committees and the External Audit: Minimum Standards’ issued in May 2023
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Financial and Narrative Reporting
All significant matters that the Committee considered during the year were supported by relevant justification papers and
were fully discussed so that due and appropriate consideration was given before any decision was approved. Further detail in
relation to a number of significant matters is provided below.
Financial Judgements
The Committee reviewed both the half-year and the annual financial statements. This process included an analysis by
management of key judgements made in determining the results. The Committee reviewed this in detail and endorsed
management’s judgements.
The Committee gave particular attention to significant matters where judgement was involved, which were complex in nature,
or where alternative performance measures (APMs) were provided to enhance investors’ understanding of the underlying
performance. The Group uses various non-GAAP APMs within internal management reporting, the Half-Yearly Report and the
Annual Report. The objective of these APMs is to isolate the impact of exceptional, one-off or non-trading related items, to allow
the Board and users of the accounts to understand better the underlying performance of the business. The Group also uses
constant exchange rate growth percentages to eliminate the impact of exchange rate fluctuations and to show the underlying
business growth. These matters were well supported by briefing papers provided by management and were specifically
reviewed and agreed by the external auditor in their reports to the Committee and in related discussions.
The key matters reviewed are shown in the table below:
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 £922.4 million, which represents 58.8% of total
Group assets.
The Committee reviewed management’s process for reviewing
and testing goodwill, In Process R&D (IPR&D) and other intangible
assets for potential impairment. It then endorsed management’s
conclusion that no impairment of these assets had taken place
other than one of the near term IPR&D assets (as noted above).
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 of the acquired intangible assets and goodwill
acquired through business combinations in the year which
totalled £409.7 million.
Review of the corporate tax rate for the year being a credit of
22.8% (23.1% charge on underlying profit before tax).
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.
Stock Code: DPH
The Committee reviewed the calculations and assumptions
provided by management and third party experts which
support the valuation of those acquired assets and any related
contingent consideration, and the valuations were assessed for
completeness. The Committee reviewed the useful economic
lives of the identifiable intangible assets and the future growth
rate assumptions applied in the valuations.
The Committee discussed the key risks in respect of corporate
tax and reviewed whether 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 rulings 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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Audit, Risk and
Internal Control
Going Concern and Viability Statements
The Committee reviewed the Group’s Going Concern and
Viability Statements set out on pages 51, 81 and 82 of the
Strategic Report. In considering the Viability Statement, the
Committee paid particular attention to the robustness of
the stress testing scenarios, the cash flows forecast by the
business and the committed bank facilities available to the
Group in the period under review. The Group had completed
a refinancing and entered into a facilities agreement in March
2023 with a group of banks under which a facility of £340.0
million was made available and which is currently committed
until March 2028. The Committee also considered the position,
and statements made by the Directors, relating to the material
uncertainty over going concern that arises due to the proposed
acquisition of the Group by Freya Bidco Limited as set in the
Strategic Report on page 82. The external auditor reviewed
management’s assessment and discussed their review with
the Committee.
Task-force for Climate-related
Financial Disclosures (TCFD)
The Committee discussed the assurance processes
underpinning the provision of the TCFD report and concluded
that the impact of climate change does not give rise to a
material financial statement impact. The Board statement on
TCFD can be found on page 69. The external auditor did not
identify risks related to climate change as a key audit matter.
Fair, Balanced and Understandable
Assessment of the Annual Report
At the request of the Board, the Committee considered
whether the 2023 Annual Report was fair, balanced and
understandable and whether it provided the necessary
information for shareholders to assess the Group’s
performance (pages 44 to 51), business model (pages 28 to
31) and strategy (pages 32 to 35).
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:
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 172
to 181.
This assessment was carried out by the Committee on 5
October 2023, following which the Committee reported to the
Board that it was satisfied that, taken as a whole, the 2023
Annual Report is fair, balanced and understandable.
Financial Reporting Council (FRC) Review Letter
During the year, the Company received a letter from the
Financial Reporting Council (FRC) in relation to its review of the
Company’s Annual Report and Accounts for the year ended
30 June 2022. Based on their review, there were no questions
or queries that they wished to raise. They did note a number
of matters where they believe that the users of the accounts
would potentially benefit from improvements to existing
disclosures and these have been considered and incorporated
in the preparation of the 2023 Annual Report and Accounts.
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 principal and emerging risks and effectiveness
of the Group’s risk management and internal financial
controls to the Committee.
The Group’s risk management and internal control processes
include:
• a review of the SET’s assessment of their strategic risks and
internal controls;
• a review of the Group’s principal and emerging risks, and
॰ ongoing internal review by members of the Annual
related controls and mitigating actions;
Report project team;
• a review of the procedures in place to identify
॰ Board review of the Annual Report with all comments
emerging risks;
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 2023 Annual Report met the fair,
balanced and understandable test. In addition, all members
• a review of the risk statements for recommendation to
the Board;
• 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 2023 financial year, a new Financial Control
Framework (FCF) has been implemented. This framework
extends the scope of the baseline controls standards to an
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
increased number of controls and work has continued to
monitor adherence to the FCF and to identify any gaps or
deficiencies requiring mitigating controls or remediation.
The Committee confirms that it has not been advised of, nor
has it 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, and 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 79 to 82 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 98 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 Data Protection Policy, the Sanctions Policy, the
Anti-Bribery and Anti-Corruption (ABC) Policy and the Third
Party Code of Conduct. The Committee is also provided with
updates on relevant due diligence processes, updates to
procedures and any non-compliance in relation to these
policies.
The Committee in the previous financial year approved the
implementation of a centralised software solution to replace
the current manual onboarding due diligence processes. The
project was initiated to deal with the challenges faced by a
manual refresh of due diligence for medium to higher risk
customers and suppliers. However, the early stage scoping
exercise and consultation with stakeholders from each
division across the Group highlighted the potential gaps in the
Group’s wider due diligence of areas such as modern slavery,
tax, health and safety and ESG. The consultation recognised
that the current systems are resource intensive, it being time
consuming to gather information and liaise with internal
stakeholders through a variety of de-centralised and manual
processes.
Four suppliers were invited to tender, with two selected for
a Proof of Concept. Work commenced with the preferred
supplier in January 2023, with the design of a three stage
risk assessment process. The assessment process has been
engineered to capture basic information for the purposes of
entity creation, followed by an internal profiling and tiering
exercise to gather more detailed risk-based information,
which will in turn generate assessments to be completed
by the third party. The system will also generate automated
reminders for the business to refresh the due diligence on an
annual or triennial basis, subject to the risk level associated
with the vendor.
Following completion of the build and testing phase, a phased
launch of the platform commenced in July 2023. The first
division selected for a pilot launch was DVP International, the
rationale being that this division has higher risk customers
due to their territories and the nature of their distribution
activities. Completion of the roll out to the whole of the Dechra
Group is scheduled by the end of the calendar year.
During the 2023 financial year the Committee approved a
Group Anti-Fraud Policy, which provides employees with
guidance regarding the definition of fraud, standards
required, measures to prevent and identify fraud, procedures
for reporting concerns, procedures for investigating
allegations of fraud, and actions which may follow a breach
of the policy. The policy has been designed to complement
Dechra’s existing Code of Conduct.
Following approval of the Group Anti-Fraud Policy, the Internal
Audit team has supported its initial implementation, before
handing responsibility for the Policy over to the Compliance
Manager. During the year, the Internal Audit team reported
two cases of fraud to the Committee, both of which resulted
in mitigating controls being implemented; neither fraud was
material and both were perpetrated by third parties.
Internal Audit
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
was recruited in the 2023 financial year. This brings the team
to four permanent employees, one of whom is based in the
Kansas City office.
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 2024 was approved by the Committee in April 2023, 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 key risks and
core operational and financial processes to provide cyclical
assurance to the Committee and the Board.
The 2023 Internal Audit Plan comprised 30 audits covering
financial, operational, IT, and compliance risks across
Dechra’s global operations.
The key areas addressed in this year’s audit plan have been:
• Financial: Financial Controls Framework, Payment Controls,
Treasury, and TCFD;
• IT: Cyber Security and SAP;
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Audit, Risk and
Internal Control
• Operational: Pricing, Rebates and Discounting, Product
Registration Management, and HR & Payroll, and Fraud
Investigations; and
• the results of a questionnaire on external auditor
effectiveness and efficiency (further detail on which is
provided below);
• Compliance: Gifts and Hospitality, and PDRA Governance.
• a report prepared by PwC setting out its processes to
The audit plan also included advisory work such as a
Modern Slavery Risk Assessment review, Financial Controls
Framework support, and ongoing assurance to support the
Group’s project to upgrade the Manufacturing ERP system
to one consolidated cloud-based Oracle platform. Support
of the Oracle implementation consists of a set of regular
risk-based assessments of the project to assess the status of
key items which will be critical to the effective and successful
delivery of the platform. Internal audit recommendations
and control improvements are agreed with process owners
and communicated to the relevant business leaders via
internal audit reports. Details of all audit reports are provided
to the Committee, together with regular progress reports on
management’s implementation of control improvements.
Independence and Effectiveness
of Internal Audit
During the year, the Committee reviewed and approved the
updated Internal Audit Charter, which has been amended to
align 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 addition of new resource) and access to technical
experience to act as an effective third line of defence. 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 and the FRC’s ‘Audit
Committees and the External Audit: Minimum Standard’ (issued
in May 2023).
Audit Plan
PwC agreed their audit plan with the Committee which
included audit scope, key audit risk areas and materiality. The
Committee discussed the audit plan with PwC and approved
it, together with the fees proposed. The key audit matters, and
how the audit addressed them, can be found on page 127.
The Committee did not ask the external auditors to look at
specific areas.
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;
ensure independence and its confirmation of compliance
with them; and
• the level of non-audit fees as a percentage of the audit fees
paid to the external auditor, which were 21.2% (2022: 6.0%) in
relation to services rendered by PwC.
Responses to the questionnaire have been received from the
Finance Leadership Team across the Group who provided
information and assistance to the external auditor.
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 5 October 2023.
Based on the review set out above, the Committee is satisfied
with the external auditor’s independence, effectiveness and
objectivity.
Re-Appointment of External Auditor
At the forthcoming Annual General Meeting, a resolution to
re-appoint PwC as the external auditor and to authorise the
Committee to set their remuneration will be proposed. In
recommending the re-appointment of the external auditor
at the Annual General Meeting, the Committee also took into
account the Competition and Markets Authority (CMA) Order
on mandatory audit tendering.
Dechra will be required, if the Company remains listed, to
retender its audit no later than for the 2026 financial year.
If required, the Committee will complete this process well
before the start of the year preceding the 2026 financial year,
to maximise the number of firms able to tender and to permit
the firm selected to have sufficient time to meet the required
independence regulations.
Audit Tender Process
At the February meeting the Committee endorsed the proposal
for the tender of the external audit services and the proposed
timetable to select and appoint the successful firm for the
financial year to 30 June 2026. It was proposed that invitations
to tender would commence in October 2023 with a view to a
decision and recommendation for approval by April 2024 in
advance of the 2024 shareholders’ annual meeting. In light of
the EU Audit Reforms which require that the tender process
does not in any way preclude the participation in the selection
procedure of non-Big 4 firms, we commenced discussion with
a challenger firm. However, this firm felt that, due to the fact
that the Group is a global pharmaceutical company, they were
unable to deliver an audit of the quality that would meet their,
the Group’s and the FRC’s expectations.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
The Committee considered whether the Group should continue
with the audit tender process at the October 2023 meeting. It
was agreed to postpone the tender process as post delisting
the Group would not meet the definition of a Public Interest
Entity under the Companies Act and would therefore not be
required to retender the audit services.
External Audit Engagement Partner Rotation
In line with the FRC Ethical Standard, the External Audit
1.
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 must not impair the auditor’s 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
2023 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
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
* The reasons for the engagement of PwC are set out above.
John Shipsey
Audit Committee Chair
12 October 2023
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 21.2% (2022: 6.0%) of the annual audit
fee. The non-audit fees are higher than in previous years,
and this is due to the PwC providing the services of reporting
accountant with respect to the profit reforecast in the
Scheme Document in relation to the proposed acquisition
of the company by Freya Bidco Limited. The Board fully
considered this engagement, noting that the work would be
completed by another team within PwC. It did not consider
that the performance of this non-audit work impacted upon
or impaired the external auditor’s independence or the
integrity of their work. The 2023 non-audit fees also include
the engagement of PwC (as statutory auditor) to provide
an annual attestation to NOMA (the regulator in Norway), to
perform an interim review in accordance with ISRE2410 and
as such the services were permitted under the non-audit fee
policy.
2023
PwC
2.5
0.1
0.4*
21.2%
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%
Stock Code: DPH
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Directors’
Remuneration Report
Remuneration Report
7
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 93
Geeta Gopalan
Geeta Gopalan
Remuneration Committee Chair
Remuneration Committee Chair
Dear Shareholder
I am pleased to present the Directors’ Remuneration Report
for the year ended 30 June 2023. Having joined the Board on
1 January 2023, I was appointed as Chair of the Committee
with effect from 1 March 2023 succeeding Ishbel Macpherson,
who I would like to thank for her considerable contribution as
Chair of the Committee.
There have, of course, been two key considerations for the
Committee during the 2023 financial year: the renewal of our
Directors’ Remuneration Policy and the proposed acquisition
of the Company by Freya Bidco Limited (a newly formed
company to be indirectly owned by (i) EQT X EUR SCSp and
EQT X USD SCSp, each acting through its manager (gérant)
EQT Fund Management S.à r.l., and (ii) Luxinva S.A.) (the
Proposed Acquisition).
• In line with the usual position, our Directors’ Remuneration
Policy which was approved by shareholders at the 2020
Annual General Meeting is due for renewal at the 2023
Annual General Meeting. As we reported last year, during
the course of the 2023 financial year we reviewed the policy
approved in 2020 to ensure that it continues to support our
strategic priorities. We consulted with shareholders during
the year in relation to our proposals. I have set out below
further information in relation to our approach to the new
Directors’ Remuneration Policy.
• The other key development in the 2023 financial year is
the Proposed Acquisition. This impacts our approach to
remuneration in respect of the 2024 financial year, and I
comment further on that below. Assuming the acquisition
completes during the 2024 financial year, “in-flight”
incentive awards held by Executive Directors (including
the deferred bonus awards granted in respect of bonuses
for the 2023 financial year) and other colleagues will be
treated in accordance with the applicable incentive plan
rules, the Cooperation Agreement entered into in respect of
the potential acquisition and, where relevant, the applicable
Directors’ Remuneration policy.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Following this letter we have set out the following additional
information:
• Our Pay Principles, which we adopted in 2020, and our
approach to wider workforce remuneration.
• Remuneration Philosophy: The link between our Directors’
Remuneration Policy and our Strategy.
• Governance: The alignment of the Policy with the
requirements of the UK Corporate Governance Code.
• Remuneration at a Glance: Summary of Executive Directors’
Total Remuneration for the 2022 and 2023 financial years.
There then follow the two principal sections of the
Remuneration Report: the Directors’ Remuneration Policy
(the Policy) for which approval is proposed to be sought at
the 2023 Annual General Meeting subject to the Company
remaining listed at the time of the proposed Annual General
Meeting and the Annual Report on Remuneration. The Annual
Report on Remuneration provides details of the amounts
earned in respect of the 2023 financial year and subject to
the impact of the Proposed Acquisition how the Policy will be
implemented in the 2024 financial year.
The Directors’ Remuneration Report (excluding the Policy) will
be subject to an advisory vote at the 2023 Annual General
Meeting. The Policy will be subject to a binding vote at the
2023 Annual General Meeting to the extent that the same will
be held.
Our Proposed New 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. During the 2023 financial year, we reviewed
that policy to ensure that it continues to support our strategic
priorities. We were satisfied that its overall structure remained
appropriate and continues to support the delivery of our
strategy. We consulted with shareholders in relation to our
proposed new Policy. Although the Proposed Acquisition will,
if it completes, impact the implementation of the new Policy
in the 2024 financial year, we have set out in this report the
full new Policy in the usual way. I have summarised below the
principal differences between the proposed new Policy and
the policy approved at the 2020 Annual General Meeting;
other changes have been made to reflect the appropriate
amendments referred to below and to take account of the
practical operation of the Policy.
• Annual bonus and Long Term Incentive Plan headroom: The
current policy provides for an overall incentive opportunity
of 350% of salary, consisting of an annual bonus of up to
150% of salary and an LTIP of up to 200% of salary.
The 150% of salary bonus opportunity was introduced
when the current policy was approved at the 2020 Annual
General Meeting, in substitution for the previous 100%
maximum. However, none of that additional headroom
was utilised in the 2021 financial year; only part of it was
utilised in the 2022 financial year (when the opportunity
was increased to 125% of salary); and the full headroom has
only been utilised in the 2023 financial year (for which Ian
Page and Paul Sandland have bonus opportunities of 150%
of salary, with Tony Griffin’s bonus opportunity remaining at
125% of salary).
Stock Code: DPH
The 200% of salary LTIP opportunity has been in place
since our first binding directors’ remuneration policy was
approved in 2014. Our current practice is to grant at 200%
of salary for Ian Page, 150% of salary for Paul Sandland and
100% of salary for Tony Griffin.
The new Policy increases the overall incentive pay
opportunity from 350% of salary to 400% of salary. Within
this overall limit, further limits are set such that the annual
bonus cannot exceed 175% of salary and the LTIP cannot
exceed 250% of salary, or 300% of salary in exceptional
circumstances. The inclusion of this additional headroom
is to ensure there is appropriate flexibility in the Policy to
take account of increases in the size and complexity of the
business over its potential three year life. This additional
headroom will also be balanced with the inclusion of the
changes to the new Policy set out below.
• None of the additional headroom will be utilised in respect
of the 2024 financial year. Annual bonus opportunities
for that year will remain 150% of salary for Ian Page and
Paul Sandland and 125% of salary for Tony Griffin. As noted
below, no LTIPs are currently intended to be granted in
respect of the 2024 financial year; if that were to change,
the grants would remain at the level of 200% of salary for
Ian Page, 150% of salary for Paul Sandland and 100% of
salary for Tony Griffin.
• Stretch in performance conditions: If relevant for any
future year, the Committee would review the stretch in
the performance targets (also taking into account market
conditions at the time) to ensure that any increase in
quantum is commensurate with an appropriate level of
stretch in the performance targets.
• Increase in the percentage of bonus deferred: If relevant
for any future year, were we to increase the annual bonus
opportunity in line with the additional headroom in the new
Policy the level of deferral would increase to 50% of the
bonus earned if the bonus opportunity increased to the
maximum of 175% of salary.
• In-service shareholding guideline: Under the current policy,
this is set at 200% of salary. In the new Policy, the in-service
requirement is set as the higher of the Executive Director’s
usual annual LTIP award or 200% of salary.
• Post-employment shareholding requirement: The current
policy applies a post-employment shareholding guideline
on a tapered basis; 100% of the in-service requirement must
be retained for the first year after employment, and 50%
for the second year. In the new Policy, we have removed
this tapering approach for any newly appointed Executive
Director, for whom the 100% of the in-service requirement
will apply for the full two year period.
• Enhanced malus and clawback provisions: The recovery
(malus and clawback) provisions in the current policy
already reflect best practice. However, a change has been
made in the new Policy to further enhance them, including
an explicit reference to their application being possible in
the event of a material failure of risk management.
• LTIP performance measures: Our current policy requires
that financial performance measures be used for the LTIP.
Recognising the importance of ESG, which is integrated
into the way we work at Dechra, the new Policy permits
the utilisation of non-financial measures, but with a
requirement that financial measures account for at least
70% of the LTIP award.
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Directors’
Remuneration Report
Remuneration Committee Decisions in 2023
We delivered a robust performance in the first half of the 2023 financial year; however the second half of the year proved more
challenging. 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 2023 financial year.
Element
Implementation
Salary
In line with our usual practice, salaries were reviewed with effect from 1 January 2023. We adopted a
tiered approach with the lower paid members of the workforce receiving higher increases which were
weighted taking into account specific country inflation. The average increase across the Group was
6.6%. In the UK, all employees earning a base salary of less than £45,000 received a minimum increase
of 7%. Against this background, the Executive Directors’ salaries were increased by 3% with effect from 1
January 2023 (a level of increase which also applied to the Senior Executive Team) as follows:
• Ian Page salary with effect from 1 January 2023: £630,360
• Paul Sandland salary with effect from 1 January 2023: £417,150
• Tony Griffin salary with effect from 1 January 2023: €396,594
Retirement
Benefit
Our Executive Directors’ retirement benefit provision is aligned with the wider workforce provision in the
relevant country, as set out on page 137.
Annual Bonus
Maximum opportunity for the 2023 financial year of 150% of base salary for Ian Page and Paul
Sandland and 125% of base salary for Tony Griffin. The increase (compared to the bonus for the 2022
financial year) for Ian Page and Paul Sandland took into account the competitive positioning of their
remuneration packages, as disclosed in last year’s Directors’ Remuneration Report.
The bonus for the 2023 financial year was based on underlying profit before tax (as regards up to 130%
of salary in the case of Ian Page and Paul Sandland and 105% of salary in the case of Tony Griffin),
personal objectives (up to 10% of salary) and ESG measures (up to 10% of salary).
Information in relation to the outturns is disclosed on page 153.
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 153 to 155, bonuses for
the year equal to 20% of salary have been earned by Ian Page, Paul Sandland and Tony Griffin.
The Committee considers the level of payout is reflective of the overall performance of the Group in
the year and is appropriate.
The bonus is subject to a bonus deferral, requiring that 33% of the bonus earned by Ian Page and Paul
Sandland and 20% of the bonus earned by Tony Griffin is deferred into Dechra shares for two years. The
annual bonus is subject to malus and clawback provisions.
Long Term
Incentive Plan
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 2020. All of these awards are subject to a two year
post vesting holding period.
The awards are scheduled to vest in October 2023:
• as to 50.4% of the TSR element (one third of the total award) reflecting performance between
median and upper quartile; and
• as to none of the underlying diluted EPS element (two thirds of the total award) reflecting that the
compound annual growth in the underlying diluted EPS at 3.6%, was below the threshold of 8% (with
the assessment of underlying EPS taking into account the Akston licensing agreement, as referred to
on page 156).
In aggregate, taking into account the ROCE underpin (reflecting that the ROCE at 15.3% had not fallen
below 10.0%), the LTIP awards will vest as to 16.8%. The Committee considers the level of payout is
reflective of the overall performance of the Group over the three year performance period ended 30
June 2023 and is appropriate.
See page 156 for further details.
Awards made under the LTIP are subject to malus and clawback provisions.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Chair’s Fee and Non-Executive
Directors’ Fees
The Committee considered the Chair’s fee at the same time
as the Executive Directors’ salaries in line with the usual wider
workforce salary review timetable. At that time, the Board
reviewed the Non-Executive Directors’ base fee. The Chair’s
fee and Non-Executive Directors’ base fees were increased
by 3% with effect from 1 January 2023. No change was made
to the supplementary fees for Non-Executive Directors’
additional duties. Details of the fees with effect from 1 January
2023 are set out on page 158.
Forward Looking: Implementation
of Policy for 2024 Financial Year
As noted above, the Proposed Acquisition impacts our
approach to remuneration in respect of the 2024 financial
year. However, I have summarised below our proposed
approach assuming the 2023 Annual General Meeting is held
and the Policy is approved at that meeting and taking into
account, where relevant, the proposed acquisition (more
information is given on pages 141 to 151):
• Salary: In line with our usual practice, it is currently
intended that Executive Directors’ salaries will continue to
be reviewed in January 2024, along with those of the wider
workforce.
• Pension: The employer pension contribution for Ian Page
and Paul Sandland will be 8% of salary. The employer
contribution for Tony Griffin will be 7.7% of salary, in line
with the wider Dutch workforce. Executive Directors may
continue to take a cash payment in lieu of employer
pension contributions.
• Bonus: As noted above, notwithstanding the increased
headroom in the new Policy, the annual bonus opportunity
for 2024 will remain at 150% of salary for Ian Page and Paul
Sandland (with a 33% deferral) and 125% of salary for Tony
Griffin (with a 20% deferral).
Bonuses will be based on a mix of stretching underlying
profit before tax targets (in respect of a bonus of up to 130%
of salary for Ian Page and Paul Sandland and 105% of salary
for Tony Griffin), 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).
• LTIP: Due to the Proposed Acquisition the Committee will
not be granting any awards for the 2024 financial year.
Should the acquisition not complete then the Committee
will consider whether to grant awards later in the year,
with information on performance conditions and targets
disclosed at the time of grant.
Chair and Non-Executive Directors
It is currently intended that a review of the Chair and Non-
Executive Directors’ base and additional fees will also be
undertaken in January 2024 (if Dechra remains a listed
company at that point) 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.
Our approach to salaries with effect from 1 January 2023 is
summarised above.
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. During the 2023 financial year we enhanced our UK
employee offering with the introduction of:
• an online GP service to support the health and well-being of
the workforce;
• a cash plan for medical benefits; and
• a reduction in the working week by 1.5 hours for our UK
manufacturing employees via reduced working week or a
nine day fortnight, whilst maintaining pay and benefits at
current levels.
In addition, in July 2022, we increased the employers
contribution to the UK Company Pension Scheme to 8% of
base pay and introduced flexibility as to the permitted level of
employee contribution to address cost-of-living pressures.
Further details on our pay principles and workforce
remuneration are set out on page 137.
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 106, workforce engagement activities
during the 2023 financial year included meeting the Future
Facing Leaders, the THRIVE champions and employees
at Skipton. 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 to adopt
a more flexible approach to the working week in the UK. The
Committee provided an update on the Remuneration Review,
including the Executive Directors’ remuneration increases,
to the wider workforce via the OneDechra intranet. The
Remuneration Review update compares the various elements
of remuneration of the Executive Directors, Senior Executive
Team and the wider workforce to enable the wider workforce
to ascertain how the executive remuneration aligns with the
wider Company pay policy.
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 (which employs 68.0% of our UK employees), the gap
has reduced from 17.7% in 2017 to 1.3% in 2022.
Stock Code: DPH
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Directors’
Remuneration Report
Looking Ahead: Key Focus Areas
for the Committee for 2024
Our approach in the 2024 financial year will depend upon
the outcome of the Proposed Acquisition. I have set out our
intended approach in this letter and the later sections of this
Directors’ Remuneration Report. If Dechra remains a listed
company at the end of the 2024 financial year, we will provide
further information in the Directors’ Remuneration Report for
that year as to the approach we adopted.
We remain committed to a responsible approach to
executive pay, as I trust this Directors’ Remuneration Report
demonstrates. We believe that the directors’ remuneration
policy operated as intended and consider that the
remuneration received by the Executive Directors in respect
of the 2023 financial year was appropriate, taking into
account Group performance, personal performance and the
experience of shareholders and employees.
Should you have any queries in relation to this report, please
contact me or the Company Secretary.
In Conclusion
We greatly appreciate the feedback and the level of support
we have received from shareholders regarding our approach
to remuneration.
Geeta Gopalan
Remuneration Committee Chair
12 October 2023
Additional Remuneration Information
Dechra Pay Principles
Our pay principles adopted in the 2020 financial year and detailed below, support us in attracting, motivating and retaining the
key talent required to support the sustainable improvement of animal health and welfare globally.
Fair Pay
Equal pay for work of equal value
Market
Competitiveness
We aim to remain competitive on compensation in our different marketplaces, whilst maintaining
internal integrity
Living Wage
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**
Stake in the
Company
We want to increase the number of employees who are able to hold a stake in the Company
through employee share ownership
Reward for
Contribution
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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Workforce Remuneration
Executive Directors
Senior Executive Team
Wider Workforce
Base Salary
Increases considered in the context of business wide review of
remuneration, focusing on the lowest paid in our organisation.
Pension
Ian Page and Paul Sandland: 8% of base
salary in line with the employer pension
contribution rate for the UK wider workforce.
Between 8% and 12% of
base salary dependent
on length of service.
We are accredited as a
Living Wage Employer in the
UK and have implemented
the equivalent elsewhere in
the world.
We increased our minimum
employer pension
contribution from 6% to 8%
with effect from 1 July 2022 in
the UK*.
Bonus
Tony Griffin: 7.7% of base salary pension
contribution in line with the employer pension
contribution for the wider Dutch workforce.
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).
75% of salary for 2023
financial year.
All senior managers and
professionals.
Targets: for 2023 financial
year, financial, ESG and
personal.
Maximum 40% of base salary.
Targets: financial and
personal.
Long Term
Incentive
Plan
Maximum 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.
Maximum 100% of base
salary.
All senior managers and
professionals.
Three year performance
period.
Target: TSR and
underlying diluted EPS
with a ROCE underpin.
Discretionary awards.
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, Brazil, Canada, Croatia, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Slovenia,
Spain, Sweden, UK and USA.
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Directors’
Remuneration Report
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.
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.
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.
Strategic
Growth Driver
and Enabler
Link to our Key
Performance Indicators
Sales Growth
Strong sales
performance is required
to maximise profit
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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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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.
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.
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.
The range of possible values of rewards and other limits
or discretions can be found in the full Policy on page 147
and 148, and the Risk section above refers to limits and
Committee discretion.
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.
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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Directors’
Remuneration Report
Executive Director Total Remuneration
Ian Page
2022
2023
Fixed
Salary
Benefits
Pension
Performance-linked (Variable)
Bonus
LTIP
2022
2023
30.9%
3.4%
2.5%
28.4%
34.8%
59.9%
5.1%
4.8%
12.0%
18.2%
Paul Sandland
2022
2023
Tony Griffin
2022
2023
Fixed
Salary
Benefits
Pension
Performance-linked (Variable)
Bonus
LTIP
2022
2023
42.2%
3.7%
2.5%
38.7%
12.9%
64.0%
5.2%
5.2%
12.8%
12.8%
Fixed
Salary
Benefits
Pension
Performance-linked (Variable)
Bonus
LTIP
2022
2023
39.8%
1.0%
3.1%
30.2%
25.9%
67.5%
1.8%
5.1%
13.5%
12.1%
140
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Directors’ Remuneration Policy
This part of the Directors’ Remuneration Report sets out Dechra’s Directors’ Remuneration Policy which, subject to shareholder
approval at the 2023 Annual General Meeting (to the extent the same is being held), shall take binding effect from the close of
that meeting. The Policy has been determined by the Committee.
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. The Committee also takes
into consideration:
• Pay increases within the Group more generally; and
• Group organisation, profitability and prevailing market
conditions.
Maximum Opportunity
Whilst no formal performance conditions apply, an
individual’s performance in role is taken into account in
determining any salary increase.
Whilst there is no maximum salary, increases will normally be within or below 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.
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Directors’
Remuneration Report
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 some or all of the contributions to a
pension scheme.
Executive Directors outside the UK may also participate in
non-UK pension arrangements.
Maximum Opportunity
The Company contribution will not exceed the contribution available to the majority of the Group’s UK workforce (currently
8% of salary), subject to any increase to take account of any higher rate which applies to the majority of the workforce in any
other country or countries relevant to a particular Executive Director.
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.
Element: Benefits
Purpose and Link to Strategy:
Provided on a market competitive basis.
Operation
Performance Measure
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.
Not applicable.
Other benefits may be provided based on individual
circumstances, which may include relocation costs and
expatriate allowances.
Maximum Opportunity
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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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.
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.
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 of 100% of salary is awarded, no
deferral will apply. If a bonus opportunity in excess of 100% of
salary is awarded, a proportion of any bonus earned will be
deferred into shares for a period of two years.
• If a bonus opportunity of 125% of salary is awarded, 20% of
any bonus earned will be deferred.
• If a bonus opportunity of 150% of salary is awarded, 33% of
any bonus earned will be deferred.
• If a bonus opportunity of 175% of salary is awarded, 50% of
any bonus earned will be deferred.
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 such basis as the Committee determines).
Recovery provisions apply, as referred to on page 145.
Maximum Opportunity
The maximum bonus opportunity for Executive Directors is 175% of salary.
As referred to in the Remuneration Committee Chair’s statement on page 135 , annul bonus opportunities for the financial
year ending 30 June 2024 will be 150% of salary for Ian Page and Paul Sandland and 125% of salary for Tony Griffin.
The maximum combined annual bonus and Long Term Incentive Plan opportunity for any year is 400% of salary.
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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 include financial metrics and may
also include non-financial metrics.
At least 70% of an award will be subject
to one or more performance measures
based on financial metrics (which
may include, but are not limited to,
earnings per share growth, relative
total shareholder return, return on
capital employed and free cash
flow). Any balance of an award will be
subject to one or more performance
measures based on non-financial
metrics determined to reflect the
Group’s strategy (which may include
ESG measures).
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 such basis as the Committee determines).
Recovery provisions apply, as referred to on page 145.
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.
The provisions of this Policy will apply to any CSOP option granted under the LTIP to
the extent permitted by the applicable tax legislation.
Maximum Opportunity
The maximum award level under the LTIP in respect of any financial year is 250% of salary (or, 300% of salary in exceptional
circumstances). As referred to in the Remuneration Committee Chair’s statement on page 135 , the Committee does not
currently intend to grant LTIP awards for the financial year ending 30 June 2024.
The maximum combined LTIP and annual bonus opportunities for any year is 400% of salary.
If a Qualifying LTIP award is granted, the value of shares subject to the CSOP option will not count towards the limits referred
to above, reflecting the provisions for the scale back of the ordinary LTIP award.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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, material failure of risk management, 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.
Operation of Share Plans
The Committee may amend the terms of awards and
options under its share plans in accordance with the plan
rules in the event of a variation of Dechra’s share capital
or a demerger, special dividend or other similar event or
otherwise in accordance with the rules of those plans. Awards
may be settled, in whole or in part, in cash, although the
Committee would only settle an Executive Directors’ award in
cash in appropriate circumstances, such as where there is a
regulatory restriction on the delivery of shares or in respect of
the tax liability arising in connection with an award.
Explanation of Performance Metrics
Performance measures for the LTIP and annual bonus
are selected to reflect the Group’s strategy. Stretching
performance targets are set each year by the Committee
taking into account a number of different factors.
Annual Bonus
The Committee considers that the underlying profit before
tax is closely aligned to the Group’s key performance metrics;
together with annual personal objectives linked to the
achievement of strategic milestones, we consider that this
encourages sustainable growth year by year.
LTIP
The application of EPS and TSR targets to the LTIP aligns
management’s objectives with those of shareholders for
the longer term. The elements of the LTIP awards based
on financial metrics are subject to an underpin based on
Return on Capital Employed. This ROCE underpin focuses
executives on using capital efficiently and appropriately to
allow the business to capitalise on growth opportunities whilst
maintaining returns.
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Directors’
Remuneration Report
Variation or Substitution of
Performance Measures
The Committee may vary or substitute any performance
measure applying to the annual bonus or LTIP if an event
occurs which causes it to determine that it would be
appropriate to do so (which may include an acquisition),
provided that any such variation or substitution is fair and
reasonable and (in the opinion of the Committee) the change
would not make the measure materially less demanding. If
the Committee were to make such a variation, an explanation
would be given in the next Directors’ Remuneration Report.
Shareholding Guidelines
To align the interests of Executive Directors with those
of shareholders, the Committee has adopted formal
shareholding guidelines.
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.
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 the higher of:
Following employment, an Executive Director appointed on or
after 1 July 2023 must retain for two years, such of their shares
which are subject to the post-employment requirement
as have a value for these purposes equal to 100% of the
shareholding guideline that applies during employment, or if
fewer, all of those shares.
• 200% of salary; and
• the value at grant (as a percentage of salary) of the
Executive Director’s usual annual LTIP award.
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.
Policy Table for Non-Executive Directors
Element
Purpose and link to strategy
Operation
Fees and
benefits
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.
Reimbursed expenses may include
a gross-up to reflect any tax or
social security due in respect of the
reimbursement.
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, holding
the role of Senior Independent Director,
and holding the role of Employee
Engagement Designated Non-
Executive Director. Additional fees may
also 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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Policy for the Remuneration of
Employees More Generally
The Group aims to provide a remuneration package that
is competitive in an employee’s country of employment,
which is appropriate to promote the long term success of
the Group and which is determined having regard to the
Dechra Pay Principles which are summarised on page 136. The
Company intends to apply this policy fairly and consistently
and does not intend to pay more than is necessary to attract
and motivate staff. In respect of the Executive Directors, a
greater proportion of the remuneration package is ‘at risk’
and determined by reference to performance conditions.
The Company’s SAYE scheme and ESPP encourage share
ownership by qualifying employees and enable them to share
in value created for shareholders.
The following charts provide an illustration, for each of the
Executive Directors, of the application of the Policy for the
2024 financial year. The charts show the split of remuneration
between fixed pay (that is base salary, benefits and employer
pension contributions/salary supplement), annual bonus
and long term incentive pay on the basis of minimum
remuneration, remuneration receivable for performance in
line with Dechra’s expectations, maximum remuneration, and
maximum remuneration also assuming a 50% increase in the
Company’s share price for the purposes of the LTIP element.
As referred to in the Remuneration Committee Chair’s
statement on page 135, the Committee does not currently
intend to grant LTIP awards for the financial year ending 30
June 2024. However, in the interests of transparency and for
consistency with prior years we have assumed LTIP grants for
the purposes of the following chart.
Minimum
performance
Performance
in line with
expectations
Annual Bonus
LTIP
Fixed Pay
No bonus.
No LTIP vesting.
Bonus equal to 50% of
maximum opportunity is
earned.
• 75% of salary in the case
of Ian Page and Paul
Sandland.
• 62.5% of salary in the
case of Tony Griffin.
LTIP vests as to 25% of the
maximum award.
• 50% of salary for Ian Page.
• 37.5% of salary for Paul Sandland.
• 25% of salary for Tony Griffin.
• Base salary (being the latest
known salary as at 1 July 2023).
• Employer pension contributions
at an assumed rate of 8% (in
the case of Ian Page and Paul
Sandland) and 7.7% of salary (in
the case of Tony Griffin) on the
latest known salary.
• Benefits as disclosed in the single
figure table on page 152 for the
2023 financial year.
Maximum
performance
Bonus equal to 100% of
maximum opportunity is
earned.
• 150% of salary in the case
of Ian Page and Paul
Sandland.
• 125% of salary in the case
of Tony Griffin.
Maximum
performance
plus share
price increase
LTIP vests in full.
• 200% of salary for Ian Page.
• 150% of salary for Paul Sandland.
• 100% of salary for Tony Griffin.
LTIP vests in full as above, plus an
assumed 50% increase in the share
price.
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Directors’
Remuneration Report
In illustrating the potential reward, the following assumptions have been made:
Ian Page
Paul Sandland
)
0
0
0
£
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
4000
3500
3000
2500
2000
1500
1000
500
0
£3,570k
53%
26%
21%
£2,940k
43%
32%
25%
£1,522k
21%
31%
48%
£734k
100%
Minimum
performance
Performance
in line with
expectations
Maximum
performance
Maximum
performance
(with 50% share
price increase)
)
0
0
0
£
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
2500
2000
1500
1000
500
0
£2,048k
46%
30%
24%
£1,735k
36%
36%
28%
£953k
16%
33%
51%
£484k
100%
Minimum
performance
Performance
in line with
expectations
Maximum
performance
Maximum
performance
(with 50% share
price increase)
Tony Griffin
)
0
0
0
£
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
1400
1200
1000
800
600
400
200
0
£1,328k
Base salary, benefits and pension
Annual bonus
LTIP
£1,156k
30%
39%
37%
32%
£682k
13%
31%
£380k
100%
56%
33%
29%
Minimum
performance
Performance
in line with
expectations
Maximum
performance
Maximum
performance
(with 50% share
price increase)
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
400% of salary.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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.
Policy on Service Contracts
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
Lawson Macartney
John Shipsey
Geeta Gopalan
Commencement date
1 March 2020
1 September 2008
30 October 2019
1 November 2012
1 February 2019
1 December 2016
1 June 2022
1 January 2023
Notice Period
Director
3 months
6 months
6 months
6 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
Whilst the Committee’s policy is for the service contract of any newly appointed Executive Director to have a notice period of
not more than 12 months, the Committee retains discretion to set an initial notice period of up to 24 months, reducing to 12
months over the initial 12 months of employment.
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Policy on Payment for Loss of Office
Eligibility for the various elements of compensation is set out below:
Provision
Treatment upon loss of office
Payments in
Lieu of Notice
The Company has discretion to make a payment in lieu of notice at any time after notice has been given
by either the Company or the Director. Such a payment would consist of basic salary for the unexpired
period of notice and may also include benefits (including pension contributions or applicable salary
supplement) for that period.
Annual Bonus
Deferred
Bonus Awards
LTIP
This will be reviewed on an individual basis and the decision whether or not to award a bonus in full or
in part will be dependent upon a number of factors including the circumstances of their departure and
their contribution to the business during the bonus period in question, such that a bonus will be paid only
in circumstances that the Committee considers are “good leaver” circumstances. Any bonus payment
would typically be pro-rated for time in service to termination and paid at the usual time (although the
Committee retains discretion to pay the bonus earlier in appropriate circumstances, and may pay the full
bonus in cash in compassionate circumstances).
Awards lapse on the date of termination in the event of dismissal for gross misconduct.
In other circumstances, awards will ordinarily continue and be released on the ordinary release date,
although the Committee retains discretion to release any such award on the date of termination in
appropriate circumstances (such as in the event of cessation due to death or ill-health). In either case,
the award will vest in full.
If an Executive Director ceases employment with the Group before an award under the LTIP vests as a
result of ill-health, injury, death, transfer of their employing entity out of the Group or any other reason, at
the discretion of the Committee, the award will usually be released on the normal release date, although
the Committee has discretion to permit the award to be released on cessation or at some other time
(such as following the end of the performance period). In either case, the award will vest to the extent
determined by reference to the relevant performance conditions and as reduced to take account of the
period of time from the start of the performance period to the date of cessation as a proportion of the
performance period.
If an Executive Director ceases employment for any reason after the vesting date of an award under the
LTIP but before it is released (that is if they cease employment during the holding period), that award
will continue to subsist in accordance with the rules of the LTIP (unless the cessation is due to summary
dismissal, in which case the award will lapse) and will ordinarily be released at the normal release date,
although the Remuneration Committee has discretion to release the award at the date of cessation. The
award will be released to the extent it vested by reference to the performance conditions.
If an Executive Director ceases employment for any reason after the release date of an award under the
LTIP, that award will continue to subsist in accordance with the rules of the LTIP (unless the cessation is due
to summary dismissal, in which case the award will lapse).
Other
Payments
In appropriate circumstances, payments may also be made in respect of accrued holiday pay, and
outplacement and legal fees.
Options under the Company’s SAYE scheme, ESPP and any other all employee share plans will vest on
cessation in accordance with the plan rules, which do not allow for discretionary treatment.
Change of
Control
In the event of a change of control:
• unvested awards under the LTIP will be released to the extent determined by the Committee taking into
account the relevant performance conditions and, unless the Committee determines otherwise, the
extent of vesting so determined shall be reduced to reflect the proportion of the relevant performance
period that has elapsed;
• awards under the LTIP which are in a holding period will be released to the extent vested by reference to
the performance conditions;
• deferred bonus awards will be released in full; and
• options under the SAYE scheme, ESPP and any other all employee share plan will vest on a change of
control.
In appropriate circumstances, share plan participants may be invited (or required) to exchange their
awards over Dechra shares for equivalent awards over shares in the acquiring company.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Where appropriate, the Committee will have regard to the
departing Executive Director’s duty to mitigate loss, except
in the event of dismissal following a change of control of
the Company. Other than as described above, there are no
express provisions within the Directors’ service contracts for
the payment of compensation or liquidated damages on
termination of employment.
Where a ‘buyout’ or other award is made, the leaver
provisions would be determined at the time of the award.
The Committee reserves the right to make additional exit
payments where such payments are made in good faith
in discharge of an existing legal obligation (or by way of
damages for breach of such an obligation) or by way of
settlement or compromise of any claim arising in connection
with the termination of a Director’s office or employment.
The Non-Executive Directors are entitled to compensation on
termination of their appointment confined to three months’
remuneration.
Consideration of Employment Conditions
Elsewhere in the Group
The Committee does not formally consult with employees as
part of its process when determining Executive Director pay.
However, as noted in the Policy table on page 137, the level
of salary increases of employees within the wider Group is
considered when setting base salary for Executive Directors.
In line with the Corporate Governance Code the Committee
reviews workforce remuneration and related policies and
the alignment of incentives and reward with culture, taking
these into account when setting the Policy for Executive
Director remuneration, and sets the remuneration of the
Senior Executive Team. The Non-Executive Director designated
under the Corporate Governance Code for employee
engagement engages directly with employees on a range of
topics of interest to them, providing an upward channel to the
Committee for views, comments and debate. The Committee
is also kept informed of general decisions made in relation to
employee pay and related issues.
Consideration of Shareholders’ Views
The Committee believes that ongoing dialogue with major
shareholders is of key importance. During the 2023 financial
year, the Committee consulted with shareholders in relation
to the new Policy.
Legacy Remuneration Arrangements
The Committee reserves the right to make remuneration
payments and payments for loss of office notwithstanding
that they are not in line with the Policy set out above where
the terms of payments were agreed:
• before the Policy came into effect (provided that, in the
case of any payments agreed on or after 24 October 2014
they are in line with any applicable shareholder approved
directors’ remuneration policy in force at the time they were
agreed or were otherwise approved by shareholders); or
• at a time when the relevant individual was not a Director
of the Company (or other person to whom the Policy set
out above applies) and, in the opinion of the Committee,
the payment was not in consideration for the individual
becoming a Director of the Company (or other such
person).
For these purposes, ‘payments’ includes the satisfaction
of variable remuneration and, in relation to an award over
shares, the terms of the payment are ‘agreed’ no later than
the time the award is granted.
Geeta Gopalan
Remuneration Committee Chair
12 October 2023
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Directors’
Remuneration Report
2023 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. This section
also includes information on how the Policy to be proposed to the shareholders at the 2023 Annual General Meeting (to the
extent the same is being held), is intended to be applied in the 2024 financial year, although as noted in the letter from the
Remuneration Committee Chair, the application of that Policy will depend upon the proposed acquisition of the Company by
Freya Bidco Limited (the Proposed Acquisition). The sections of the 2023 Annual Report on Remuneration that are audited by
PricewaterhouseCoopers LLP (PwC) are indicated on pages 152 to 161.
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 2023. The table shows the remuneration for each such person in respect of the year ended 30 June 2023 and in respect
of the year ended 30 June 2022:
Executive Director
Ian Page
Paul Sandland
Tony Griffin
Total 2023
Total 2022
Salary
£000
Benefits
£000
Annual
Bonus
£000
Long Term
Incentive
£000
Pension
£000
621
597
411
383
340
322
1,372
1,302
53
65
33
33
9
9
95
107
124
549
82
351
68
245
274
1,145
189
672
82
117
61
210
332
999
50
48
33
23
26
25
109
96
Year
2023
2022
2023
2022
2023
2022
2023
2022
Total
£000
1,037
1,931
641
907
504
811
2,182
3,649
Total
Fixed
£000
Total
Variable
£000
724
710
477
439
375
356
1,576
1,505
313
1,221
164
468
129
455
606
2,144
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.
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:
£51,176), medical cover and life assurance.
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.
6. The 2022 value assigned to the long term incentives was shown in last year’s Annual Report as an estimate, with the value
determined by reference to a share price of £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). This has been restated to show the actual value determined by
reference to a price of £29.22 (being the market value of a share on 20 September 2022, 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 1.1807 for 2022 and 1.1504 for 2023. His salary was €396,594 from 1 January 2023 and €385,043 from
1 January 2022.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Additional Disclosures in Respect of the Single Figure Table (Audited)
Salaries and Fees
Our approach to Executive Directors’ salaries in the financial year is explained in the Committee Chair’s letter on pages 134. The
Executive Directors’ salaries applying with effect from 1 January 2023 are as follows.
Executive Director
Ian Page
Paul Sandland
Tony Griffin
Salary with effect
from 1 January 2023
£630,360
£417,150
€396,594
Previous Salary
% increase
£612,000
£405,000
€385,043
3.0%
3.0%
3.0%
The Committee’s approach to Executive Directors’ salaries for the year ending 30 June 2024 is summarised in the Committee
Chair’s letter on page 135.
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 2023 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 2023
against targets for the 2023 financial year is set out below. Bonuses for the year equal to 20% of salary have been earned
by Ian Page, Paul Sandland and Tony Griffin. In line with the Directors’ Remuneration Policy, 33% of any bonus earned will be
deferred into Dechra shares for two years for Ian Page and Paul Sandland and 20% for Tony Griffin. Deferred bonus awards are
not subject to any further performance conditions but remain subject to the leaver provision in the Deferred Bonus Plan and
Policy. 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)
£168.1 million
Target
(65% of salary)
£177.0 million
Maximum
(130% of salary)
£194.7 million
Actual
(at budgeted rates)
£131.1 million
Tony Griffin: Group underlying profit before tax and
Dechra Veterinary Products EU underlying operating profit
Bonus earned (percentage of salary)
Ian Page
Paul Sandland
0%
0%
Group underlying
profit before tax
Dechra Veterinary
Products EU
underlying
operating profit
Threshold
(5% of salary)
£168.1 million
Threshold
(5% of salary)
€138.8 million
Target
(26.25% of salary)
£177.0 million
Target
(26.25% of salary)
€146.1 million
Maximum
(52.5% of salary)
£194.7 million
Maximum
(52.5% of salary)
€160.7 million
Actual
(at budgeted rates)
£131.1 million
Actual
(at budgeted rates)
€127.7 million
Personal Objectives and ESG Measure
Bonus earned
(percentage of
salary)
Tony Griffin
0%
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 10% of
salary by reference to the achievement of ESG measures
aligned with their area of responsibility (see table below)
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Bonus earned (percentage of salary)
Ian Page
10%
Paul
Sandland
Tony Griffin
10%
10%
10%
10%
10%
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Directors’
Remuneration Report
The personal objectives of each Executive Director for the year ended 30 June 2023 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.
The Committee considered achievements against each of the objectives in the round in determining the overall outturn.
Notwithstanding the challenges faced by the business over the 2023 financial year including embedding the acquisitions
made, the Committee considered the pivotal role played by the Executive Directors in supporting the Proposed Acquisition
that crystallised value for shareholders. In doing so, the Committee judged that a full payout against personal objectives was
warranted.
Personal Objectives
Director
Strategic Enabler
Ian Page
Acquisition
Pipeline Delivery
Objective
Performance
Bring in a balance of
strategic acquisitions (novel
versus generic) which future
proof Dechra alongside
those which strengthen
us operationally and are
immediately profit accretive.
Navigate the use of
financing appropriately to, in
combination, enable growth,
innovation and continued
low leverage over the next
three to five years
Embed the new Chief
Scientific Officer and the
restructured PDRA teams
enabling greater value
from the pipeline and
better utilising resource
(people) to strengthen both
Business Development and
Regulatory capability
Piedmont acquisition integrated into the pipeline
and Med-Pharmex acquisition completed and
integration plan underway
The Chief Scientific Officer onboarded and with
support from the Chief Executive Officer have
developed clear plan and outcomes for pipeline
of products contributing to the five and ten year
plan horizons. Some restructuring has taken place
and investments made into resources
Succession
Planning
To assess the strengths and
gaps for the Senior Executive
Team succession plan
The first cohort on the Future Facing Leaders
programme (sponsored by the Chief Executive
Officer) completed the course in July 2023, and a
number of them have been identified as potential
successors to the SET.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Director
Strategic Enabler
Objective
Performance
Paul Sandland
Shareholder
IT
Improve effective
engagement with
shareholders
New Head of Investor Relations role successfully
recruited and onboarded, Investor Relations plan
implemented with sustained improvement to
guidance and consensus tracking
Develop, support and
strengthen the IT function,
whilst driving efficiencies
through implementation of
technology solutions
Chief Information Officer role recruited and
onboarded, review of major projects undertaken
and seeing on time implementation and progress
of significant IT projects (Travelpool/Concur,
Oracle, Veeva and eQMS)
Internal Controls
Strengthen our internal
control environment through
sponsoring transition to
Internal Controls Over
Financial Reporting (ICOFR)
Successfully transitioned to Financial Control
Framework during this timeframe
Finance
Lead re-financing of the
business
Private placement and equity raise successfully
completed
Tony Griffin
Commercial
Commercial
People
To define the next phase
of the European change
programme Iceberg 2028 to
ensure the organisation is
ready for the future
Roll out the Vetoryl defence
plan and ensure the
organisation is prepared
for the launch of the first
generic in 2023
Strategy defined, communicated and relevant
change management programmes to support
transition have been developed and rolled out
across European team
Pet owner portal and engagement plan
implemented
Support the One Dechra
organisation working closely
with the SET in building a
strong cohesive team
Significant work undertaken with DPM&S
leadership team and management levels
below to drive improved supply levels across all
countries
ESG Measure
Director
Objective
Ian Page
Embed the Sustainability agenda within the
organisational culture through the provision of
resources and setting of clear, accountable and
challenging measures
Paul Sandland
Act as Executive 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 2023 financial year
Performance
Continued to lead Executive sponsorship of the
sustainability agenda and provide direction
and resources to all parts of the Group. Holding
functional Directors accountable for delivering
measures
Established and submitted the carbon reduction
targets in accordance with science based targets.
Have continued to meet the TCFD reporting
requirements
All countries have local sustainability plans in
place. Focus on the logistics centre in Uldum to
reduce the number of shipments within EU
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Directors’
Remuneration Report
Long Term Incentive Plan
The LTIP awards granted on 22 September 2020 are due to vest on 12 October 2023. 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:
Diluted EPS compound annual growth rate (CAGR)
Vesting Percentage
<8% CAGR
8% CAGR
CAGR between 8% and 16%
>16% CAGR
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 32.4% compared with a 16.1% TSR for the median company and 62.7% TSR for the upper
quartile company in the comparator group (FTSE 250 Index (excluding investment trusts)). Therefore, 50.4% of the TSR element
will vest. As we explained in previous Directors’ Remuneration Reports, 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 the base year (financial year 2020) and for financial year 2023 to take into
account the actual Akston R&D costs recognising that these are lumpy and uncertain as to timing between financial years. For
the purpose of this LTIP grant, this adjustment changes the 2020 underlying diluted EPS from 92.19 pence to 93.83 pence and the
2023 underlying diluted EPS from 94.57 pence to 104.17 pence resulting in CAGR of 3.5% such that 0% of the EPS element will vest.
Overall, taking into account that ROCE performance for 2023 was 15.3%, the LTIP awards will vest as to 16.8% of the maximum
opportunity.
The Committee considered that the level of vesting reflected the underlying performance of the Group over the period.
In the single figure table on page 152, 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 £34.9997 (being the average market value of a share over the last quarter of
the Company’s financial year ended on 30 June 2023).
The September 2020 awards were granted when the value of a share was £32.37 (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 £34.9997 (being the average market value of a share over the last quarter of the Company’s financial year
ended on 30 June 2023).
Executive Director
Ian Page
Paul Sandland
Tony Griffin
Number of shares
in respect of
which the Award
was granted
Number of shares
in respect of
which the Award
is expected to
vest
Amount of award
attributable to
share price at
grant
£000
32,128
13,901
10,303
5,397
2,335
1,730
£174,700.89
£75,583.95
£56,000.10
Amount
attributable
to share price
appreciation
£000
£14,192.49
£6,140.35
£4,549.38
Total award
£000
£188,893.38
£81,724.30
£60,549.48
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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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 and both Ian Page
and Paul Sandland received a contribution of 8% of base salary. 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.
Tony Griffin received an employer’s contribution of 7.7% of salary into the Netherlands pension scheme in line with the wider
Dutch workforce.
Non-Executive Directors’ Remuneration
Single Total Figure of Remuneration (Audited)
The table below sets out the total remuneration for each person who has served as a Non-Executive Director in the year ended
30 June 2023. 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 2023 and, where relevant, the year ended 30 June 2022:
Additional responsibilities
2023
2022
2023
2022
2023
2022
2023
2022
Base fee
£000
Additional fee
£000
Benefits‡
£000
Total
£000
Alison Platt
Chair and Nomination Committee Chair
(from 1 January 2022)
203
129
Ishbel
Macpherson†
Senior Independent Director
(to 28 February 2022) and Remuneration
Committee Chair (to 1 March 2023)
58
58
–
10
–
22
10
58
3
14
4
1
2
3
3
2
207
132
69
83
15
74
Julian
Heslopπ
Audit Committee Chair until
5 September 2022
(apart from between the period
22 October to 1 December 2021)
Lawson
Macartney
Senior Independent Director
(from 1 March 2022)
Lisa
Bright
John
Shipsey
Geeta
Gopalan*
Total
Employee Engagement Designated
Non-Executive Director
Audit Committee Chair from
5 September 2022
Remuneration Committee Chair from
1 March 2023
60
60
60
30
58
58
5
–
10
10
12
5
3
10
–
–
37
17
107
2
1
1
4
–
–
72
73
36
78
72
5
–
481
366
50
49
48
29
579
444
Π Julian Heslop retired on 5 September 2022.
† Ishbel Macpherson retired on 22 June 2023.
* Geeta Gopalan was appointed on 1 January 2023.
‡ Benefits relate to PAYE Settlement Agreement amounts on travel and expenses reimbursed from attending Board Meetings. Lawson Macartney
benefits includes his flights to and from the USA and UK. He attended more meetings face to face in the 2023 financial year compared to the
2022 financial year.
The Non-Executives are not eligible to participate in any of the Company’s share schemes, incentive schemes or pension
schemes.
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Directors’
Remuneration Report
The Committee’s approach to the Chair’s fee in the financial year is explained in the Committee Chair’s letter on pages 132 to
136. 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 2023 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
2023
Previous fee
206
60
15
15
10
10
200
58
15
15
10
10
The Committee’s approach to the Chair’s and Non-Executive Directors’ fees for the year ending 30 June 2024 is summarised in
the Committee Chair’s letter on page 135.
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 9 September 2022, as set out in the table below.
Type of award
Maximum
opportunity
Number of
shares
Face value
at grant*
% of award
vesting at
threshold
Performance Period
Nil cost option under the LTIP 200% of salary
150% of salary
Ian Page
Paul Sandland† Nil cost option under the LTIP
Conditional award under the
Tony Griffin
LTIP
38,261 £1,223,969
£607,490
18,990
25% 1 July 2022 – 30 June 2025
25% 1 July 2022 – 30 June 2025
100% of salary
10,429
£333,624
25% 1 July 2022 – 30 June 2025
* Based on a share price of £31.99 being the three day average middle market quotation preceding the grant.
† Paul Sandland has also been granted a tax qualifying option over 431 shares at an exercise price of £31.99 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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
EPS compound annual growth rate (CAGR)
Vesting Percentage
<8% CAGR
8% CAGR
CAGR between 8% and 15%
>15% CAGR
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.
Deferred Bonus Plan Awards (Audited)
Awards were made under the Dechra 2021 Deferred Bonus Plan on 20 September 2022 in respect of bonuses earned for the
year ended 30 June 2022 as set out in the table below.
Type of award
Basis of award
Number of
shares
Face value
at grant*
Deferral
period
Ian Page
Paul Sandland
Tony Griffin
Nil cost option under the DBP
Nil cost option under the DBP
Conditional awards under the DBP
20% of the bonus earned
20% of the bonus earned
20% of the bonus earned
3,580
2,293
1,655
£109,870 Two years
£70,372 Two years
£50,792 Two years
* Based on a share price of £30.69, being the three day average middle market quotation preceding the grant
SAYE (Audited)
No SAYE options were granted to Executive Directors during the year ended 30 June 2023.
Payments to Past Directors (Audited)
There were no payments to past Directors during the period.
Payments for Loss of Office (Audited)
There were no payments for loss of office made to Directors during the period.
Dilution Limits
Awards granted under the Company’s LTIP, Executive Share Option Schemes and SAYE Schemes are met by the issue of new
shares when the awards/options are exercised. The Committee monitors the number of shares issued under each of these
schemes and their impact on dilution limits. The Company’s usage of shares compared to the Investment Association dilution
limits as at 30 June 2023 is as follows:
Executive Share Plans
Limit: 5%
Usage: 2.0%
All Share Plans
Limit: 10%
Usage: 2.58%
Shareholdings (Audited)
Executive Directors
In respect of the financial year ended 30 June 2023, 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 2023 are as follows:
Name
Ian Page
Paul Sandland
Tony Griffin
Appointment
date
Ordinary shares
Number
Ordinary shares
£000*
13 June 1997
30 October 2019
1 November 2012
404,535
11,714
37,049
14,911
432
1,366
% of salary
2,365
104
402
* Calculated using the share price as at 30 June 2023 and the base salaries as at 30 June 2023.
Shareholding Requirement After Employment
The post-employment shareholding requirement that is proposed be included in the new Directors’ Remuneration Policy for
which approval is proposed to be sought at the 2023 Annual General Meeting (to the extent the same is being held) is set out in
that Policy.
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Directors’
Remuneration Report
Executive Directors’ Total Interest under Shares Schemes (Audited)
Awards held under the Long Term Incentive Plan for each person who was a Director during the year ended 30 June 2023
are as follows:
Option
price for
market
value
options
(£)
Number
of shares
as at
1 July
2022 Granted
Award
date
Type of
award
Ian Page
06-Sep-19
LTIP
N/A
35,087
Number
as at
30 June
2023
Lapsed Exercised
12,106
22,981
–
–
–
–
38,261
32,128
23,727
–
10,984
10,303
6,508
–
6,106
–
–
–
–
–
–
–
3,790
7,194
–
–
10,429
–
–
–
–
–
–
–
3,999
2,107
32,128
23,727
38,261
–
10,303
6,508
10,429
–
13,901
11,000
–
–
–
18,990
–
–
–
-
–
–
13,901
11,000
18,990
Status
Performance
Period
Vested and
exercised
in the year
Unvested12
Unvested
Unvested
Vested and
exercised
in the year
Unvested1
Unvested
Unvested
Vested and
exercised
in the year
Unvested1
Unvested3
Unvested4
2019–2022
2020–2023
2021–2024
2022–2025
2019–2022
2020–2023
2021–2022
2021–2024
2019–2022
2020–2023
2021–2024
2022–2025
Tony
Griffin
Paul
Sandland
22-Sep-20
19-Sep-21
09-Sep-22
06-Sep-19
22-Sep-20
19-Sep-21
09-Sep-22
06-Sep-19
22-Sep-20
19-Sep-21
09-Sep-22
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1 Will vest on 12 October 2023 as to 16.8%.
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 was granted a tax qualifying option over 431 shares at an exercise price of £31.99 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.
The aggregate gain made by the Executive Directors on share options and LTIP awards exercised during 2023 was £950,311
(2022: £2,491,641).
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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 2023 are as follows:
Name
Alison Platt
Ishbel Macpherson†
Julian Heslop‡
Lawson Macartney
Lisa Bright
John Shipsey
Geeta Gopalan
Appointment
date
Ordinary shares
number
Ordinary
shares
£000*
% of base fee
1 March 2020
1 February 2013
1 January 2013
1 December 2016
1 February 2019
1 June 2022
1 January 2023
3,709
6,722
6,000
5,880
1,373
600
-
137
248
221
217
51
22
-
66
410
367
358
84
37
-
* Calculated using the share price as at 30 June 2023 and the fees as at 30 June 2023.
† Retired on 22 June 2023.
‡ Retired on 5 September 2022.
There have been no changes in the holdings of the Company’s Directors between 30 June and 12 October 2023.
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. For the majority of the period, the Company was a constituent of the FTSE 250 and for
this reason it is considered that the TSR performance of the FTSE 250 Index is the appropriate comparator for this report.
1000
900
800
700
600
500
400
300
200
100
0
0
0
1
o
t
d
e
s
a
b
e
R
-
R
S
T
June 13
Feb 14
Oct 14
Jun 15
Feb 16
Oct 16
Jun 17
Feb 18
Oct 18
Jun 19
Feb 20
Oct 20
Jun 21
Feb 22
Oct 22
Jun 23
Dechra 515.4%
FTSE 250: 73.3%
Stock Code: DPH
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Directors’
Remuneration Report
Chief Executive Officer Remuneration for Ten Previous Years
Year ended
30 June 2023
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
Total single figure
remuneration
£000
Annual bonus
payout (% of maximum
opportunity)
LTIP vesting
(% of maximum
number of shares)
1,037
1,931
2,995
1,763
3,035
3,058
3,420
2,480
1,934
1,589
13.3
73.6
100
28
72
76
92
72
80
80
16.8
65.5
73.8
73.7
100.0
100.0
100.0
96.25
93.1
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 2022 and the year ended 30 June 2023, 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. Julian Heslop retired from the Board during the year ended 30
June 2023 and Geeta Gopalan was appointed during that year. Accordingly, each has been excluded from the table below.
Information in relation to the changes between 2022 and 2023 is noted below the table. Information in relation to the changes
between other years is included in the relevant Directors’ Remuneration Reports.
Salary/
fees
Taxable
benefits1
Annual
bonus3
2022– 2023
2021– 2022
2020– 2021
2019– 2020
2022– 2023
2021– 2022
2020– 2021
2019– 2020
2022– 2023
2021– 2022
2020– 2021
2019– 2020
Average
employee
7.3%
6.4%
32.8%
(11.8%)
(14.3%)
(2.1%)
(7.3%)
16.3%
(79.7%)
(4.8%)
137.3%
(47.4%)
Ian
Page
4.0%
8.3%
6.6%
4.0%
(18.5%)
(4.4%)
6.3%
(1.7%)
(77.4%)
(0.4%)
280.0%
(59.7%)
Paul
Sandland
7.3%
16.1%
10.0%
N/A
0%
6.5%
20.8%
N/A
(76.6%)
6.4%
292.9%
N/A
Tony
Griffin
3.0%
3.0%
(0.9%)
6.8%
1.3%
1.2%
2.3%
(10.0%)
(72.2%)
(9.6%)
194.6%
(58.7%)
1
Excludes SAYE options granted during any relevant year.
Alison
Platt2
Ishbel
Macpherson3
Lawson
Macartney
Lisa
Bright
John
Shipsey
57.4%
138.9%
3.8%
N/A
33.3%
100%
N/A
N/A
N/A
N/A
N/A
N/A
(12.9%)
8.1%
10.4%
6.3%
(66.7%)
100%
N/A
N/A
N/A
N/A
N/A
N/A
14.8%
13.0%
3.8%
4.0%
2.9%
9.7%
8.8%
14.0%
117.6% (50.0%)
100%
N/A
N/A
100%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2.9%
N/A
N/A
N/A
100%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2 Alison Platt was appointed Chair in January 2022. The increase shown is the increase between her fee as Chair with effect from 1 January
2022 and her fee as Chair with effect from 1 January 2023.
3
Ishbel Macpherson retired from the board with effect from 22 June 2023. Her remuneration for 2023 is annualised for the purposes of
calculating the percentage change between 2022 and 2023. Her fee was reduced in March 2023 when she stepped down as Remuneration
Committee Chair and in March 2022 when she stepped down as Senior Independent Director.
4 No benefits were provided to Non-Executive Directors prior to 2022. Therefore, the change in benefits between 2022 and 2021 is not
considered a meaningful disclosure.
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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Chief Executive Officer’s Pay Ratio
The table below shows the ratio of the Chief Executive Officer’s remuneration for years since 2019 using the Single Total Figure
as disclosed on page 163 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
2023
2022
2021
2020
2019
Method
Option A1
Option A1
Option A1
Option A1
Option A1
25th
percentile
pay ratio
Median pay
ratio
75th
percentile
pay ratio
35:1
73:1
121:1
75:1
139:1
25:1
54:1
87:1
58:1
107:1
13:1
28:1
44:1
31:1
56:1
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
20231
Total pay
and benefits
(salary)
£000
2022
Total pay
and benefits
(salary)
£000
1,037
(621)
30
(28)
41
(38)
80
(53)
1,931
(597)
26
(25)
36
(34)
69
(47)
1.
The 2023 figure includes share options and awards, which have been valued by reference to £34.9997 (being the average market value of a
share over the last quarter of the Company’s financial year ended 30 June 2023). SAYE options granted in 2022 and 2023 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 2023, there were a total of 572 UK employees (2022: 556 UK employees), 186 of whom have been excluded for the above
stated reasons (2022: 239), leaving 386 employees within the ‘full pay relevant’ data set (2022: 317) 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 increase in the
employers contribution to the UK Company Pension Scheme to 8% of base pay for all UK employees who are members of the
pension scheme. Furthermore, we adopted a tiered approach to base salary increases with the lower paid members of the
workforce receiving higher increases which were weighted taking into account specific country inflation. The average increase
across the Group was 6.6%. In the UK, all employees earning a base salary of less than £45,000 received a minimum increase
of 7%. Against this background, the Chief Executive Officer’s salary was increased by 3% with effect from 1 January 2023. In
addition, the Chief Executive Officer’s annual bonus at 20% of base salary was lower than that in 2022 (92%) as was the value
and percentage vesting of his LTIP in the year at 16.8% as opposed to 65.5% in 2022.
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 2022 and the year
ended 30 June 2023.
Distributions to shareholders by way of dividend and share buyback
Overall expenditure on pay
Year ended
30 June 2023
£000
Year ended
30 June 2022
£000
51,700
163,800
44,800
131,600
% change
15.4%
24.4%
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Directors’
Remuneration Report
Implementation of the Directors’
Remuneration Policy in the
Year Ending 30 June 2024
As noted in the letter from the Remuneration Committee
Chair, the Proposed Acquisition impacts our approach to
remuneration in respect of the 2024 financial year. Subject to
the completion of the transaction and to the approval at the
2023 Annual General Meeting (to the extent it is being held),
the Directors’ Remuneration Policy outlined on pages 141 to 151
will be implemented in the year ending 30 June 2024, as set
out below.
Salary and Fees
The approach to Executive Directors’ salaries and to the fees
for the Chair and Non-Executive Directors is described in the
letter from the Remuneration Committee Chair.
Annual Bonus
As noted in the letter from the Remuneration Committee
Chair, notwithstanding the additional flexibility in the new
Policy, bonuses for the 2024 financial year will continue for:
• the Chief Executive Officer and Chief Financial Officer at
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; and
• Tony Griffin at 125% of salary with a bonus deferral of 20%.
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.
LTIP
Due to the Proposed Acquisition the Committee will not
be granting any awards for the year ending 30 June 2024.
Should the acquisition not complete then the Committee
will consider whether to grant awards for the year ending 30
June 2024 later in the year, with information on performance
conditions and targets disclosed at the time of grant.
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 Senior Executive Team and of agreeing the
Chair’s fee level has been delegated to the Committee. The
Committee exercises independent judgement and discretion
when authorising remuneration outcomes.
Membership, Meetings and Attendance
The Committee comprises of the Non-Executive Directors.
Geeta Gopalan was appointed as Committee Chair on
1 March 2023, succeeding Ishbel Macpherson. Geeta had
previously served as a Chair of a Remuneration Committee
for over 12 months prior to her appointment. Details of each
member’s attendance at the Committee’s meetings is
detailed on pages 93 to 95. 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
2023 Board and Committee Internal Evaluation (further details
of which can be found on page 121 of the 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.
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 2023 financial year, this review took place at the June 2023
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 109 and 132.
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 £38,200 for the year
ended 30 June 2023. 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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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 20 October 2022 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
Geeta Gopalan
Remuneration Committee Chair
12 October 2023
Votes
for
79,297,256
74,112,644
% of vote
95.31
90.81
Votes
against
3,901,808
7,501,119
% of vote
4.69
9.19
Votes
withheld
3,933
6,768
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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 2023. 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
Strategic Report
Strategic Report
Strategic Report
Strategic Report
Governance Report
Strategic Report
Governance Report
Stakeholder Engagement
Governance Report
Stakeholder Engagement
Stakeholder Engagement
Environment
Task Force on Climate-related Financial
Disclosures
Social, community and human rights issues
Stakeholder Engagement
Corporate Governance Statement
Board of Directors details
Financial risk management (including the exposure to price,
credit and liquidity risk)
Governance Report
Governance Report
Financial Statements
Page
Number
103 to 107
32 to 37
28 to 31
4 and 51
81 and 82
128
56 to 66
101 to 105
59 and 60
118 and 119
59
58 to 61
76 to 78
69 to 75
63 and 64
91
94 and 95
217 to 223
Post-balance sheet events
Financial Statements
234
Disclosures Pursuant to Listing Rule 9.8.4:
Listing Rule
Topic
Location within Annual Report
9.8.4 (4)
9.8.4 (12)
9.8.4 (13)
Details of long term incentive plans
Shareholder waivers of dividends
Shareholder waivers of future dividends
See Directors’ Remuneration Report, starting on page 160
Page 167
Page 167
Other information requirements set out in LR 9.8.4R are not applicable to the Company.
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
51, the Group has bank facilities with a group of banks
comprising, BNP Paribas, HSBC UK Bank plc, Crédit Industriel et
Commercial SA (CIC Bank), Santander UK plc, CaixaBank SA,
Handelsbanken plc, PNC Bank and the Bank of Ireland. 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
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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 names and biographical details of the Directors as at the
date of this report are set out on pages 94 and 95 and are
incorporated by reference into this report. With regard to the
appointment of Directors, the Company adheres to the Code
and is governed by the Articles of Association. 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 (to the
extent it is being held).
Overseas Branches
The Company, through its subsidiary Genera d.d., has an
established branch in Bosnia-Herzegovina. The Serbian
branch of Genera d.d. closed on 12 May 2023.
Political Donations and Expenditure
No political donations were made during the year ended 30
June 2023 (2022: 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 38 to 41. The underlying expense on this activity for
the year ended 30 June 2023 was £57.5 million (2022: £32.4
million) and a further £1.6 million (2022: £1.7 million) was
capitalised as development costs.
Results and Dividends
The results for the year and financial position at 30 June 2023
are shown in the Consolidated Income Statement on page
182 and Consolidated Statement of Financial Position on page
184. An interim dividend of 12.50 pence per share was paid
on 13 April 2023. The ongoing acquisition of the Company by
Freya Bidco Limited remains conditional upon the receipt of
antitrust approval in the European Union and foreign direct
investment approval in Australia, in each case to the extent
required, as well as the sanction of the Scheme by the Court
at the Sanction Hearing (each as defined in the scheme
document dated 26 June 2023) and is expected to occur in
late 2023 or early 2024. If prior to the acquisition becoming
effective, any dividend is announced, declared, made or paid
or becomes payable in respect of the ordinary share capital
of the Company (Dechra Shares), Freya Bidco reserves the
right to reduce the consideration payable under the terms of
the acquisition for the Dechra Shares by an amount up to the
aggregate amount of such dividend. Therefore the Directors
are not recommending the payment of a final dividend.
Share Capital
The issued share capital of the Company for the year is set
out in note 25 to the Consolidated Financial Statements. As
at the end of the financial year, 113,888,190 fully paid ordinary
shares were in issue, which included 130,770 ordinary shares
issued during the year in connection with the exercise of
options under the Company’s share option schemes.
In July 2022, 5,247,813 new ordinary shares were offered by
way of a placing and 116,870 new ordinary shares were offered
via a retail offer, both at an issue price of 3430 pence per
share, raising gross proceeds of £184.0 million. The placing
price of 3430 pence per share was a 8% discount to the
closing middle market share price on 20 July, being the date
of the placing announcement. These new ordinary shares
were issued on 25 July 2022, fully paid and rank pari passu in
all respects with the existing ordinary shares.
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. The only exception to this is the Trustees of the Dechra
Employee Benefit Trust, who hold 7,528 shares and have
waived their rights to dividends and they abstain from voting
at General Meetings.
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Directors’ Report –
Other Disclosures
At the Annual General Meeting of the Company held on 20 October 2022, the Company was authorised to purchase up to
11,376,439 of its ordinary shares, representing 10% of the issued share capital of the Company as at 9 September 2022. 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 2022 Annual General Meeting and resolutions to renew these
authorities will be proposed at the 2023 Annual General Meeting (to the extent that it is being held).
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 any notice of the Annual General Meeting, to
the extent that the Proposed Acquisition does not become effective before the time that the Annual General Meeting notice is
required to be sent to Shareholders in accordance with applicable laws.
UBS Group AG
Société Générale
BlackRock Inc
The Vanguard Group, Inc
The Goldman Sachs Group, Inc
BPCE
JPMorgan Chase & Co
abrdn plc
Government of Norway
30 June 2023
5 October 2023
Aggregate
voting
rights
7,801,526
7,080,863
6,068,466
5,151,816
4,908,934
4,681,050
4,483,591
3,877,889
3,651,699
Percentage
Aggregate
voting
rights
Percentage
6.85
6.22
5.33
4.52
4.31
4.11
3.94
3.41
3.21
1,344,007
3,755,755
5,261,853
4,935,610
5,447,055
5,475,549
2,795,675
443,808
3,908,560
1.18
3.30
4.62
4.33
4.78
4.81
2.45
0.39
3.43
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 (to the extent it is being held).
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
12 October 2023
168
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023www.dechra.com Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Statement of
Directors’ Responsibilities
Directors’ Confirmations
The Directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group’s and Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and functions are 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
12 October 2023
Statement of Directors’ Responsibilities
in Respect of the Financial Statements
The Directors are responsible for preparing the Annual
Report and Accounts in accordance with applicable law and
regulation.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the
Directors have prepared the Group Financial Statements
in accordance with 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.
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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
172
182
183
184
185
186
187
235
236
237
247
The Veterinary Perspective
Read more about us at:
www.dechra.com
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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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 2023 and of the Group’s loss
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 as applied in accordance with the provisions of the Companies Act 2006;
• the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, including 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 2023; 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 the Audit, Risk and Internal Control Report, we have provided no non-audit services to the
Company or its controlled undertakings in the period under audit.
Material uncertainty related to going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure
made in note 1(b) to the financial statements concerning the Group’s and the Company’s ability to continue as a going
concern. On 20 July 2023 Dechra Shareholders approved the recommended cash acquisition by Freya Bidco Limited of the
entire issued, and to be issued, ordinary share capital of Dechra. The acquisition is expected to complete in late 2023, after the
date of approval of the Annual Report and Accounts. The going concern assessment of the Company and Group is therefore
subject to uncertainties relating to the potential change in ownership of the Group and the actual funding requirements and
financing arrangements post completion. For this reason, the Directors cannot reasonably predict the financial position of the
Group post-completion, including the details of any financing arrangements related to the transaction that could affect the
Group. These conditions, along with the other matters explained in note 1(b) to the financial statements, indicate the existence
of a material uncertainty which may cast significant doubt about the Group’s and the Company’s ability to continue as a going
concern. The financial statements do not include the adjustments that would result if the Group and the Company were unable
to continue as a going concern.
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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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 the performance against debt covenants under both the base case and downside scenarios.
• Assessing the adequacy of disclosures in the going concern statement on page 187 and statement in note 1(b) of the
financial statements.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, other than the material
uncertainty identified in note 1(b) to the financial statements, 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, or in respect of the directors’ identification in the financial statements of any other material
uncertainties to the Group’s and the 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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
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 16 reporting units.
• As well as auditing the Company, 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 were performed accounted
for 83% of Group revenue, 80% of Group underlying operating profit and 85% of Group loss before tax. In addition, two
component teams were instructed to perform specified procedures over two reporting units, and a further component team
was instructed to perform specified procedures over elements of the opening balance sheet for one component acquired
during the year.
• 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, the Group engagement team visited two overseas locations. The Group engagement team
also audited all of the UK components that were in scope for the Group audit.
Key audit matters
• Material uncertainty related to going concern
• Licensing agreements and associated contingent considerations (Group and Company)
• Impairment of in-process research and development (IPR&D) (Group)
• Business combinations - valuation of intangible assets (Group)
• Carrying value of the Company’s investments (Company)
Materiality
• Overall Group materiality: £4.95 million (2022: £5.22 million) based on 3% of underlying operating profit.
• Overall Company materiality: £4.1 million (2022: £3.2 million) based on 0.5% of net assets.
• Performance materiality: £3.7 million (2022: £3.9 million) (Group) and £3.1 million (2022: £2.4 million) (Company).
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The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether
or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the
matters described below to be the key audit matters to be communicated in our report. This is not a complete list of all risks
identified by our audit.
The valuation of intangible assets acquired through business combinations is a new key audit matter this year. Otherwise, the
key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Licensing agreements and associated contingent considerations (Group)
Refer to the Audit, Risk and Internal Control Report, note
1(b) to the consolidated financial statements (Key sources
of estimation uncertainty) and note 30 (Contingent
Consideration Liabilities).
During the year, liabilities in respect of all existing licensing
agreements, the largest being Laverdia and 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 represent an area of estimation uncertainty.
The accounting for contingent consideration involves
estimation uncertainty over the timing and quantum of future
cash flows and the discount rate to be used.
In respect of the remeasurement of contingent consideration:
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;
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 licensing agreements
and associated contingent consideration, and the related
disclosures, to be consistent with the audit evidence obtained.
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Strategic
Report
Governance
Financial
Statements
Additional
Information
Key audit matter
How our audit addressed the key audit matter
Impairment of in-process research and development (IPR&D) (Group)
Refer to the Audit, Risk and Internal Control Report, note 1(b)
to the consolidated financial statements (Key sources of
estimation uncertainty) and note 14 (Impairment Reviews).
The Group recognised £173.4m of IPR&D on acquisition
of Piedmont Animal Health Inc. IAS 36 requires entities to
annually test for impairment any intangible assets not yet
available for use.
As such, management have reviewed each of the Piedmont
products acquired for impairment.
This has resulted in management recognising an
impairment of £69.1m in relation to one product, driven by
a reduction of the estimated probability of success of the
product.
There is significant complexity and estimation uncertainty
associated with the assumptions made in the impairment
review of IPR&D assets.
In respect of the IPR&D impairment assessment:
• We considered management’s determination of the cash
generating units for assessing impairment, being the
individual product level;
• We audited management’s model and reperformed the
calculations within the discounted cash flow forecasts;
• We corroborated key assumptions back to those tested as
part of our audit of acquisition accounting, and challenged
management on assumptions that had, or had not,
changed;
• We reviewed correspondence from the FDA;
• We held discussions with Dechra’s internal experts including
the Chief Scientific Officer;
• We used our valuation experts to evaluate the discount rate
assumptions;
• We performed sensitivity analysis on management’s model
in order to identify key assumptions by assessing whether
reasonable changes could result in a material error; and
• We audited the disclosures associated with the
impairment review
Overall, we found the assessment of the carrying value of
IPR&D and associated disclosures to be consistent with the
evidence obtained.
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Key audit matter
How our audit addressed the key audit matter
Business combinations - valuation of intangible assets (Group)
Refer to the Audit, Risk and Internal Control Report, note 1(b)
to the consolidated financial statements (Key sources of
estimation uncertainty) and note 29 (Acquisitions).
In respect of Med-Pharmex Holdings Inc.:
• We audited management’s model and reperformed the
calculations within the discounted cash flow forecasts;
During the year the Group undertook two corporate
acquisitions, Med-Pharmex Holdings Inc, and Piedmont
Animal Health Inc. As a result of meeting the definition of a
business combination the Group are required to apply the
principles of IFRS 3 and to identify and value the identifiable
assets and assumed liabilities.
• We performed sensitivity analysis on management’s model
in order to identify key assumptions by assessing whether
reasonable changes could result in a material error;
• We obtained evidence to evaluate the key assumptions
underpinning management’s cash flow forecasts, including
considering the existence of contradictory evidence;
The Group recognised £173.4m of intangible assets on the
acquisition of Piedmont Animal Health Inc, relating entirely to
IPR&D. The Group recognised £137.6m of intangible assets on
the acquisition of Med-Pharmex Holdings Inc, relating largely
(£134.9m) to six developed products.
There is significant complexity and estimation uncertainty
associated with the assumptions made in the fair value
measurement exercise for intangible assets.
• We held discussions with Dechra’s internal commercial and
veterinary experts to understand the planned strategy for
the products and expected impact on assumptions taken in
the cash flow forecasts;
• Our valuation experts assessed the appropriateness of
the methodology used in the models and also certain
economically driven assumptions such as discount rates
and long-term growth rates; and
• We audited the disclosures relating to business
combinations to ensure these were consistent with the
requirements of the applicable standards.
In respect of Piedmont Animal Health Inc:
• We audited management’s model and reperformed the
calculations within the discounted cash flow forecasts;
• We performed sensitivity analysis on management’s model
in order to identify key assumptions by assessing whether
reasonable changes could result in a material error;
• We obtained evidence to evaluate the key assumptions
underpinning management’s cash flow forecasts, including
considering the existence of contradictory evidence;
• We reviewed regulatory correspondence and held
discussions with the Product Development and Regulatory
Affairs department, to assess whether the information used
by management was complete and accurate;
• Our valuation experts assessed the appropriateness of
the methodology used in the models and also certain
economically driven assumptions such as discount rates
and long-term growth rates; and
• We audited the disclosures relating to business
combinations to ensure these were consistent with the
requirements of the applicable standards.
Overall, we found the accounting for intangible assets
acquired through business combinations, and the related
disclosures, to be consistent with the audit evidence
obtained.
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Governance
Financial
Statements
Additional
Information
Key audit matter
How our audit addressed the key audit matter
We audited the distribution of the 14% stake in Dechra
Finance Limited from Dechra Finance Sterling Limited to the
Company.
We audited the share capital reduction in Dechra Finance
Limited and the dividend payment to the Company.
We evaluated management’s determination of whether there
were any other indicators of impairment. Our procedures, in
addition to the above, included:
• We compared the carrying value of investments with the
market capitalisation of the Group at 30 June 2023;
• We compared the carrying value of investment with the
carrying amount of investees’ net assets;
• We audited management’s calculation of the recoverable
amount of the investments in Dechra Finance Limited and
Dechra Finance Sterling Limited; 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.
Carrying value of the Company’s investments (Company)
Refer to note (i) to the Company financial statements and
note (iv) (Investments).
Investments in subsidiaries of £920.1 million (2022: £735.7
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.
In March 2023, Dechra Finance Sterling Limited distributed its
14% stake in Dechra Finance Limited to the Company, taking
the Company’s total shareholding in Dechra Finance Limited
to 100%. Following the distribution, the Company’s investment
in Dechra Finance Sterling Limited was considered for
impairment and no impairment was identified.
In March 2023, Dechra Finance Limited reduced its share
capital and paid a dividend equivalent to the amount of the
capital reduction to the Company. In addition, as a result of
the unwinding of an internal Group financing arrangement,
certain loan receivables and payables of an equal amount
were settled and going forward Dechra Finance Limited’s
future net interest cash inflow will be less.
As a consequence, the Company’s investment in the entity
was tested for impairment. Management’s assessment
identified an impairment of £18.9 million.
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 and made up of a number of individual reporting units.
The Group financial statements are a consolidation of 50 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 16 of the Group’s 50 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 83% of Group revenue, 80% of underlying operating profit
and 85% of loss before tax. Of these reporting units, one was considered to be a significant components due to its financial
significance. In addition, we instructed two component audit teams to perform specified procedures on two reporting units.
The Group consolidation, financial statements disclosures and a number of centralised functions were audited by the Group
engagement team at the head office. These areas of the audit 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.
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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 two overseas locations.
The impact of climate risk on our audit
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 science-based
net-zero greenhouse gas emissions (‘GHG’) for Scopes 1, 2 and 3 by no later than 2050. The Group has also submitted near
term targets for Scopes 1, 2 and 3 to the Science Based Targets initiative (SBTi) for validation, using 2021 as a base year.
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 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.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group
Financial statements – Company
Overall materiality
£4.95 million (2022: £5.22 million).
£4.1 million (2022: £3.2 million).
How we determined it
3% of underlying operating profit
0.5% of net assets
Rationale for
benchmark applied
We believe the Group’s principal measure
of performance and earnings is underlying
operating profit. Management uses this
measure as it believes that it eliminates material
non-operational items that may obscure the
key trends and factors in determining the
Group’s operational performance. Furthermore
it is this measure which represents the primary
focus for management and key stakeholders.
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 £0.6 million and £4.5 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% (2022: 75%) of overall materiality, amounting to
£3.7 million (2022: £3.9 million) for the Group financial statements and £3.1 million (2022: £2.4 million) for the Company financial
statements.
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Financial
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Additional
Information
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) (2022: £0.25 million) and £0.20 million (Company audit) (2022: £0.16 million) as well as misstatements
below those amounts that, in our view, warranted reporting for qualitative reasons.
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 - 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 2023 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, except for the matters reported in the section headed ‘Material uncertainty related
to going concern’, 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.
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Our review of the directors’ statement regarding the longer-term viability of the Group and Company 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 regulations specific to the industries in
which the Group operates (including those set by the Veterinary Medicines Directorate, European Medicines Agency and U.S.
Food and 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. 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 and U.S. Food and
Drug Administration;
• Enquiries with component auditors;
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Information
• Identifying and testing unusual journal entries which increase revenue or reduce expenditure to manipulate the financial
performance of the business; 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.
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 eight years, covering the years ended 30 June 2016 to 30 June 2023.
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
12 October 2023
Stock Code: DPH
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Consolidated Income Statement
For the year ended 30 June 2023
Revenue
Cost of sales
Note
2
Gross profit
Selling, general and administrative
expenses
Research and development
expenses
Operating profit/(loss)
Finance income
Finance expense
Share of (loss)/profit 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
2
3
4
6
7
9
11
11
10
2023
Non-
underlying*
(notes
3, 4 & 5)
£m
-
(3.3)
(3.3)
Underlying
£m
761.5
(331.9)
429.6
2022
Non-
underlying*
(notes
3, 4 & 5)
£m
–
(0.5)
(0.5)
Total
£m
681.8
(297.0)
384.8
Total
£m
761.5
(335.2)
426.3
Underlying
£m
681.8
(296.5)
385.3
(207.0)
(152.2)
(359.2)
(178.6)
(74.6)
(253.2)
(57.5)
165.1
0.8
(24.6)
(1.0)
140.3
(32.4)
107.9
(3.3)
(158.8)
3.7
(21.4)
0.1
(176.4)
40.6
(135.8)
(60.8)
6.3
4.5
(46.0)
(0.9)
(36.1)
8.2
(27.9)
(24.59)p
(24.59)p
12.50p
(32.4)
174.3
5.7
(8.8)
(1.2)
170.0
(38.3)
131.7
(3.7)
(78.8)
–
(13.5)
(0.1)
(92.4)
18.9
(73.5)
(36.1)
95.5
5.7
(22.3)
(1.3)
77.6
(19.4)
58.2
53.72p
53.40p
44.89p
* 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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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Consolidated Statement of
Comprehensive Income
For the year ended 30 June 2023
(Loss)/profit for the year
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to profit or loss:
Foreign currency cash flow hedges
– fair value movements
Foreign currency translation differences for foreign operations
Income tax relating to components of other comprehensive expense
Total comprehensive (expense)/income for the year
Note
2023
£m
(27.9)
2022
£m
58.2
9
(2.0)
(15.0)
(1.1)
(18.1)
(46.0)
–
15.7
(0.4)
15.3
73.5
Stock Code: DPH
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Consolidated Statement
of Financial Position
As 30 June 2023
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
Own shares
Hedging reserve
Foreign currency translation reserve
Merger reserve
Retained earnings
Total equity
Note
2023
£m
2022
£m
12
13
6
15
16
20
17
18
21
19
30
20
21
30
22
15
25
922.4
159.3
14.9
4.9
1,101.5
217.3
14.3
161.9
74.4
467.9
1,569.4
(3.9)
(144.5)
(4.1)
(11.5)
(164.0)
(500.6)
(71.6)
(1.7)
(76.3)
(650.2)
(814.2)
755.2
1.1
596.0
(0.2)
–
(12.7)
84.4
86.6
755.2
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
The financial statements on pages 182 to 247 were approved by the Board of Directors on 12 October 2023 and were signed on
its behalf by:
Ian Page
Chief Executive Officer
12 October 2023
Paul Sandland
Chief Financial Officer
12 October 2023
Company number: 3369634
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Consolidated Statement of
Changes in Shareholders’ Equity
For the year ended 30 June 2023
Issued
share
capital
£m
Share
premium
account
£m
Own
Shares
£m
Hedging
Reserve
£m
Foreign
currency
translation
reserve
£m
Merger
reserve
£m
Retained
earnings
£m
Year ended 30 June 2022
At 1 July 2021
Profit for the year
Foreign currency translation
differences for foreign operations
Income tax expense 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
Year ended 30 June 2023
At 1 July 2022
Loss for the year
Foreign currency cash flow hedge
– fair value movements
Foreign currency translation
differences for foreign operations
Income tax expense relating
to components of other
comprehensive income
Total comprehensive expense
Reclassified to cost of acquired
intangibles
Transactions with owners:
Dividends paid
Share-based payments
Shares issued
Own share purchases
Total contributions by and
distributions to owners
At 30 June 2023
1.1
–
–
–
–
–
–
–
–
1.1
1.1
–
–
–
–
–
–
–
–
–
–
–
1.1
411.6
–
–
–
–
–
–
2.3
2.3
413.9
413.9
–
–
–
–
–
–
–
–
182.1
–
182.1
596.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
(0.2)
(0.2)
–
–
–
–
–
–
–
–
–
–
–
–
(2.0)
–
–
(2.0)
2.0
–
–
–
–
–
–
(11.9)
84.4
–
15.7
(0.4)
15.3
–
–
–
–
3.4
3.4
–
–
(15.0)
(1.1)
(16.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
84.4
84.4
–
–
–
–
–
–
–
–
–
–
–
(12.7)
84.4
Total
equity
£m
632.9
58.2
15.7
(0.4)
73.5
(44.8)
2.9
2.3
(39.6)
666.8
666.8
(27.9)
(2.0)
(15.0)
(1.1)
(46.0)
147.7
58.2
–
–
58.2
(44.8)
2.9
–
(41.9)
164.0
164.0
(27.9)
–
–
–
(27.9)
–
2.0
(51.7)
2.2
–
–
(49.5)
86.6
(51.7)
2.2
182.1
(0.2)
132.4
755.2
Hedging Reserve
The hedging reserve represents the cumulative fair value gains or losses on derivative financial instruments for which cash flow
hedge accounting has been applied, net of tax.
Foreign Currency Translation Reserve
The foreign currency translation reserve contains exchange differences on the translation of subsidiaries with a functional
currency other than Sterling and exchange gains or losses on the translation of liabilities that hedge the Company’s net
investment in foreign subsidiaries.
Merger Reserve
The merger reserve represents the excess of fair value over nominal value of shares issued in consideration for the acquisition
of subsidiaries where statutory merger relief has been applied in the financial statements of the Parent Company.
Stock Code: DPH
31565 Dechra AR2023 Financials.indd 185
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Consolidated Statement
of Cash Flows
For the year ended 30 June 2023
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
Equity settled share-based payment (income)/expense
Note
5
13
2
7
26
Underlying operating cash flow before changes in working capital
Increase in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operating activities before interest, taxation & non-underlying items
Cash outflows in respect of non-underlying items
5
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
Interest received
Acquisition of subsidiaries (net of cash acquired)
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
New borrowings
Repayment of borrowings
Principal elements of lease payments
Dividends paid
Net cash generated from/(used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at start of the year
Exchange differences on cash and cash equivalents
Cash and cash equivalents at end of the year
Reconciliation of net cash flow to movement in net borrowings
Net decrease in cash and cash equivalents
New borrowings and lease liabilities
Expenses of raising new borrowings
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 year
Net borrowings at start of the year
Net borrowings at end of the year
10
18
18
27
2023
£m
6.3
158.8
165.1
13.7
4.9
(0.1)
0.1
(0.8)
182.9
(31.1)
(21.5)
(7.6)
122.7
(13.4)
109.3
(17.8)
(0.5)
(27.4)
63.6
0.2
0.8
(396.9)
(22.8)
(2.0)
(3.9)
(1.6)
(426.2)
181.9
357.4
(166.8)
(4.3)
(51.7)
316.5
(46.1)
120.9
(0.4)
74.4
(46.1)
(367.2)
4.1
171.6
(0.4)
18.2
(2.1)
(221.9)
(208.2)
(430.1)
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)
Underlying cash conversion is defined as cash generated from operating activities before interest and taxation as a
percentage of underlying operating profit.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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 and 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 235 to 246.
(b) Basis of Preparation
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 accordance 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.
Going Concern
The Directors have a reasonable expectation that the Group and Company has adequate resources to continue in
operational existence for the foreseeable future and will continue to be able to meet its liabilities as they fall due, within
12 months of the date of approval of these financial statements. Accordingly, they continue to adopt the going concern
basis of accounting in preparing these annual financial statements.
In reaching this conclusion, the Directors have given due regard to the following:
• The Group’s business activities, together with factors likely to impact future growth and operating performance
including the principal risks and uncertainties, and an assessment of a number of severe but plausible stress tests on
these areas (as set out on pages 79 to 82);
• The current and projected future financial position of the Group, its cash flows, available cash resources and
committed debt facilities and compliance with the financial covenants associated with the Group’s borrowings, which
are described in the financial statements;
• Subsequent events (see note 34 and below).
On 2 June 2023, the boards of directors of Dechra and Freya Bidco Limited (“Bidco”) announced that they had reached
agreement on the terms and conditions of a recommended cash acquisition by Bidco of the entire issued, and to
be issued, ordinary share capital of Dechra (the “Acquisition”). The Acquisition is being implemented by means of a
Court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006 (the Scheme) and is subject to
the terms and conditions set out in the circular in relation to the Scheme sent to Dechra Shareholders dated 26 June
2023 (the Scheme Document). As announced by Dechra on 20 July 2023, the Scheme and its implementation were
approved by the requisite majority of Scheme Shareholders and Dechra Shareholders (as applicable) on 20 July 2023
and the Acquisition is expected to complete later in the calendar year, after the date of approval of the Annual Report
and Accounts. The going concern assessment of the Group and Company is therefore subject to uncertainties relating
to the potential change in ownership of the Group and Company and the actual funding requirements and financing
arrangements post completion. For this reason, the Directors cannot reasonably predict the financial position of the
Group and Company post-completion, including the details of any financing arrangements related to the transaction
that could affect the Group and Company. This indicates the existence of a material uncertainty which may cast
significant doubt on the Group and Company’s ability to continue as a going concern. As noted above, the financial
statements do not however include the adjustments that would result if the Group and Company were unable to
continue as a going concern.
Notwithstanding this uncertainty, based on the circumstances described above, the Directors have a reasonable
expectation that the Group and Company has adequate resources to continue in operational existence for the
foreseeable future and the accounts are prepared on the assumption that the Group and Company is a going concern.
Stock Code: DPH
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Notes to the Consolidated
Financial Statements
1. Accounting Policies continued
(b) Basis of Preparation (continued)
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
Valuation of acquired
intangibles as part of a
business combination
Valuation of In-Process
Research and Development
intangibles
Timing, likelihood and quantum of future cash flows, and
the determination of an appropriate discount rate
Timing, likelihood and quantum of future cash flows, and
the determination of an appropriate discount rate
Note
reference
Accounting
policy
reference
30
29
14
1(p)
1(g)
1(j)
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; loss on extinguishment of debt; and the revaluation of deferred tax balances
following substantial tax legislation changes. Management utilises non-underlying items 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 2022. The Group has
applied the amendments to IAS1, Practice Statement 2, IAS8 and IAS12 (deferred tax related to assets and liabilities arising
from a single transaction and International tax reform pillar 2 model rules). None of these amendments had any impact
on the Group’s accounting policies or required retrospective adjustments.
(c) Basis of Consolidation
Subsidiary Undertakings
Subsidiary undertakings are fully consolidated from the date on which control is transferred to the Group. They cease to
be consolidated from the date that the Group no longer has control. All subsidiary undertakings have been consolidated.
Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are
eliminated on consolidation. The financial statements of all subsidiary undertakings are prepared to the same reporting
date as the Company, with the exception of Genera Pharma d.o.o. 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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
1. Accounting Policies continued
(c) Basis of Consolidation (continued)
Associates (continued)
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.
(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 year 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 year 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 year in which they arise.
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Notes to the Consolidated
Financial Statements
1. Accounting Policies continued
(e) Accounting for Financial Assets and Liabilities, Derivative Financial Instruments and Hedging Activities (continued)
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.
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 year 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.
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1. Accounting Policies continued
(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 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.
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 asset, with any excess over the carrying value of the intangible asset recognised in the
income statement. Any upwards remeasurement is recognised as an increase to the intangible asset. Refer to note 1 (p).
Other Intangible Assets
Other intangible assets (which primarily include software and marketing rights) are stated at cost less accumulated
amortisation and impairment losses. Expenditure on internally generated goodwill and other intangible assets 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 as 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.
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Notes to the Consolidated
Financial Statements
1. Accounting Policies continued
(g)
Intangible Assets (continued)
The estimated useful lives are as follows:
• software
5 to 7 years
• capitalised development costs
5 to 10 years or period of patent
• patent rights
period of patent
• marketing authorisations
indefinite life or period of marketing authorisation
• product rights
• commercial relationships
• brand
• acquired capitalised
development costs
• pharmacological process
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.
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 acquired intangible assets 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 intangible assets, management considers a number of
factors: the different market conditions which surround the intangible assets; 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)
(j)
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.
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.
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Governance
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1. Accounting Policies continued
(j)
Impairment of Non-current Assets (continued)
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 year 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.
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.
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Notes to the Consolidated
Financial Statements
1. Accounting Policies continued
(m) Revenue Recognition
Revenue from the sale of goods is measured at the transaction price that the entity is entitled to. 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.
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.
(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 year.
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Governance
Financial
Statements
Additional
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1. Accounting Policies continued
(n)
Leases (continued)
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.
(o) Net Financing Costs
Net financing costs comprise interest payable on borrowings, unwinding of discount on provisions and cost of debt on
contingent considerations measured, 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’s accounting for contingent consideration in respect of the acquisition of intangible assets in the form of
licensing agreements where the product has not been registered and launched in all key markets is consistent with
the principles of IFRS 3 and IFRIC 1. The contingent consideration is initially and subsequently measured at fair value.
Subsequent fair value movements in remeasuring the contingent consideration related to changes in the cost of debt
and foreign exchange are recognised as finance expenses in the income statement. All other movements are considered
related to the utility of the asset and therefore are adjusted against the cost of the asset.
For licensing agreements where the product has been registered and launched in all key markets, 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 an expense in cost of sales as the sales are made.
(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.
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Notes to the Consolidated
Financial Statements
1. Accounting Policies continued
Basis of Charge for Taxation (continued)
(r)
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.
(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 year. 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 45. A breakdown of the non-underlying items is given in notes 3, 4 and 5.
2. Operating Segments
As discussed below, the Group has four reportable segments which are based on information provided to the
Board of Directors, deemed to be the Group’s chief operating decision maker. In previous periods the International
Pharmaceuticals operating segment had been aggregated into the European Pharmaceuticals segment on the basis
of similar products, production processes, customers and overall regulatory environments. Given the significance of this
operating segment to the Group, International Pharmaceuticals is disclosed as a separate reporting segment, and the
prior year figures have been restated to align with this disclosure.
The European Pharmaceuticals Segment comprises Dechra Veterinary Products EU and includes our manufacturing
units based in Bladel (The Netherlands), Skipton (UK) and Zagreb (Croatia). This Segment operates in Europe 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 North American Pharmaceuticals Segment consists of Dechra Veterinary Products (DVP) US, DVP Canada, and DVP
Mexico, which sells CAP, Equine and FAP in those territories. The Segment also includes our manufacturing units based
in Pomona (California), Melbourne (Florida) and Fort Worth (Texas), and includes third party manufacturing and other
revenues from non-core activities.
The International Pharmaceuticals Segment consists of Dechra Veterinary Products (DVP) ANZ, DVP Brazil, DVP Korea, and
DVP Export. This Segment operates internationally and manufactures and markets CAP, Equine, FAP and Nutrition.
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Governance
Financial
Statements
Additional
Information
2. Operating Segments continued
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
International Pharmaceuticals
Underlying operating profit/(loss) by segment
European Pharmaceuticals
NA Pharmaceuticals
International 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
Unwind of fair value uplift of acquisition inventory
Remeasurement of contingent consideration
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
(Loss)/profit before taxation
Total liabilities by segment
European Pharmaceuticals
NA Pharmaceuticals
International Pharmaceuticals
Pharmaceuticals Research and Development
Segment liabilities
Corporate loans and revolving credit facility
Corporate accruals and other payables
Current and deferred tax liabilities
2023
£m
343.5
330.9
87.1
761.5
107.7
96.2
25.5
(57.5)
171.9
(6.8)
165.1
(71.1)
(8.5)
(69.6)
(3.3)
1.2
(7.5)
6.3
4.5
(46.0)
(0.9)
(36.1)
(122.3)
(82.0)
(12.0)
(7.4)
(223.7)
(487.6)
(15.1)
(87.8)
(814.2)
2022
£m
323.2
275.1
83.5
681.8
103.4
87.7
28.1
(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
(132.9)
(110.6)
(8.4)
(4.7)
(256.6)
(313.7)
(8.2)
(48.0)
(626.5)
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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
International 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
International Pharmaceuticals
Pharmaceuticals Research and Development
Corporate and central costs
Depreciation, impairment and amortisation by segment
European Pharmaceuticals
NA Pharmaceuticals
International 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
2023
£m
562.6
65.2
89.0
38.5
6.2
761.5
2.3
411.0
0.9
0.2
0.4
414.8
17.4
52.6
3.9
2.3
0.7
76.9
42.2
106.0
9.3
0.6
0.7
158.8
136.9
3.3
140.2
4.9
13.7
18.6
2022
£m
508.4
49.5
78.8
35.0
10.1
681.8
16.1
75.1
7.4
0.3
–
98.9
18.0
2.4
2.5
0.5
0.8
24.2
54.6
26.1
8.8
0.5
0.8
90.8
70.8
3.7
74.5
5.2
11.1
16.3
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
2. Operating Segments continued
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:
UK
Germany
Rest of Europe
USA
Rest of World
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
– Loss on extinguishment of debt
Non-underlying finance expense
Total finance expense
2023
Revenue
£m
60.7
68.7
224.3
310.1
97.7
761.5
2023
Non-
current
assets
£m
38.4
2.7
348.0
583.5
128.9
1,101.5
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
2023
£m
0.8
–
0.8
2023
£m
3.7
3.7
4.5
2023
£m
22.6
0.5
1.5
24.6
2023
£m
–
20.8
0.6
21.4
46.0
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
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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
Unwind of fair value uplift of inventory on acquisitions
Remeasurement of contingent consideration
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
Loss on extinguishment of debt
Foreign exchange (gains)/losses on contingent consideration
Unwind of discount associated with contingent consideration
Non-underlying loss before tax
Tax on non-underlying loss before tax item
Revaluation of deferred tax balances following the change in the US, Dutch and UK tax rates
Non-underlying loss after tax
2023
£m
67.8
3.3
8.5
69.6
7.5
3.3
(1.2)
158.8
0.8
(0.9)
0.6
(3.7)
20.8
176.4
(40.6)
–
135.8
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
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 £8.5 million relate to the costs of the programme to implement the
Manufacturing and Supply function’s new ERP and Electronic Quality Management systems, the total future cost of which
is expected to be £23.9 million over the next four years. Included within underlying administrative expenses is £0.7 million
of other cloud computing arrangement costs which predominantly relate to the integration of the Group HR systems with
the Group’s global payroll platform. The £8.5 million of non-underlying expenses have been settled in the year.
Impairment of assets of £69.6 million relate to an acquired intangible asset (£69.1 million) for one of the near term
products in the Piedmont product pipeline, and the associated inventory write off of £0.5 million. The prior year charge
predominantly related 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 B.V. and Le Vet Beheer B.V. (£1.7 million).
Expenses relating to acquisitions and subsequent integration activities represent costs incurred during the acquisition
of Piedmont Animal Health, Inc. (£0.2 million) and the Med-Pharmex Holdings, Inc. group of companies (£2.8 million).
No further significant expenditure is expected in relation to these acquisitions. On the acquisition of Ampharmco, LLC,
the Group established a fair value provision of £0.5 million for dilapidations of a warehouse property. This has been fully
released in the year. Acquisition expenses also include costs associated with the pending acquisition of the Company by
Freya Bidco Limited (£5.0 million), which includes £3.5 million relating to accelerated charges on equity and cash settled
share based transactions. Further expenses of £26.0 million are expected in the 2024 financial year, of which £25.0 million
are contingent on the completion of the acquisition. Acquisition and integration expenses of £4.4 million have been
settled in the year.
The fair value uplift of inventory acquired through business combinations is recognised in accordance with IFRS 3
‘Business Combinations’ to record the inventory acquired at fair value and its subsequent release into the income
statement.
The remeasurement of the contingent consideration balance relates to the net credit of £1.2 million to the income
statement on the reassessment of future milestone and royalty payments on a licensing agreement.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Investments in Associate
6.
(a) Profit/(loss) of 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 (loss)/profit from continuing operations
Post-tax (loss)/profit from continuing operations
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets of associate
(b)
Interest in Associate
1 July 2022 and 2021
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 2023 and 2022
2023
£m
2.1
(3.5)
(2.9)
2023
£m
0.2
6.9
7.1
–
(0.5)
(0.5)
6.6
2023
£m
15.8
(1.0)
0.9
(0.8)
14.9
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
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 Pty Ltd 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 AUD1.5 million that was paid to Animal Ethics Pty Ltd in the year relating to the licensing agreement for the
global marketing authorisations of Tri-Solfen (excluding 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.
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Notes to the Consolidated
Financial Statements
Interests in Associate continued
6.
(c) Reconciliation of Summarised Financial Information Presented to the Carrying Value of Investment in Associate
Opening interest in associate
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
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
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
2023
£m
3.9
(1.0)
0.9
(0.8)
3.0
11.9
14.9
2023
£m
256.6
12.5
9.1
4.6
76.0
69.1
–
0.1
0.3
57.5
3.0
1.3
1.2
0.5
3.0
2022
£m
5.2
(1.2)
0.6
(0.7)
3.9
11.9
15.8
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
* This includes £0.1 million (2022: £0.1 million) in relation to the review of the Half-Yearly Report and £0.4 million (2022: £nil) in relation to
assurance services in respect of a listing rule requirement arising as a result of the proposed acquisition of the company by Freya Bidco
Limited.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
8. Employees
The monthly average number 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
2023
Number
2022
Number
818
159
1,358
2,335
2023
£m
136.7
16.5
8.3
2.3
163.8
2023
£m
5.4
0.3
1.9
7.6
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
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
152 to 163.
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 £8.3 million (2022:
£6.5 million).
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 (credit)/charge in the Consolidated Income Statement
2023
£m
0.2
23.4
0.9
24.5
(30.4)
(0.6)
(1.7)
(32.7)
(8.2)
2022
£m
2.2
29.7
2.8
34.7
(15.7)
2.2
(1.8)
(15.3)
19.4
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Notes to the Consolidated
Financial Statements
9.
Income Taxes continued
The tax on the Group’s profit before taxation differs from the standard rate of UK corporation tax of 20.5% (2022: 19.0%).
The differences are explained below:
(Loss)/profit before taxation
Tax at 20.5% (2022: 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 (credit)/charge in the Consolidated Income Statement
2023
£m
(36.1)
(7.4)
3.1
(1.2)
(0.7)
(1.3)
0.2
0.5
(0.8)
(0.6)
(8.2)
2022
£m
77.6
14.7
0.8
(0.2)
(1.5)
(1.6)
0.2
3.8
1.0
2.2
19.4
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 22.8% (excluding non-underlying
items the effective tax rate is 23.1%).
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 recognised in Equity
2023
£m
(1.1)
(1.1)
–
(0.2)
(0.2)
2022
£m
(0.4)
(0.4)
0.3
(0.7)
(0.4)
UK Finance Bill 2021 was substantively enacted on 24 May 2021, including an increase in the main rate of UK corporation
tax from 19% to 25%, effective 1 April 2023. The impact of the UK rate change is reflected in the deferred tax balances as at
1 July 2022, based on the Group’s best estimate of the timing of unwind of temporary contracts. At 30 June 2023, the Group
held a current provision of £5.7 million (2022: £5.9 million) in respect of uncertain tax provisions, comprising a current liability
provision of £14.3 million and a current asset of £8.6m. The resolution of these tax matters may take many years. The range
of reasonably possible outcomes within the next twelve months is an outflow of £nil to £3.5 million.
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 lodged an appeal to the EU Court of Justice in August 2022.
At 30 June 2023, the Group considers that the potential amount of additional tax payable is between £nil and £2.75 million
(2022: £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 the full 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 2021 (£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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
9.
Income Taxes continued
OECD Pillar 2
On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK, introducing a global minimum effective
tax rate of 15%. The legislation implements a domestic top-up tax and a multinational top-up tax, effective for accounting
periods starting on or after 31 December 2023. The Group has applied the exception under IAS 12 to recognising and
disclosing information about deferred tax assets and liabilities related to top-up income taxes. The Group is continuing to
assess the potential impact of Pillar 2 on the Group.
10. Dividends
Final dividend paid in respect of prior year but not recognised as a liability in that year:
32.89 pence per share (2022: 29.39 pence per share)
Interim dividend paid: 12.50 pence per share (2022: 12.00 pence per share)
Total dividend 45.39 pence per share (2022: 41.39 pence per share) recognised as
distributions to equity holders in the year
Proposed final dividend for the year ended 30 June 2023: nil per share
(2022: 32.89 pence per share)
Total dividend paid and proposed for the year ended 30 June 2023: 12.50 pence per share
(2022: 44.89 pence per share)
2023
£m
37.4
14.3
51.7
–
14.3
2022
£m
31.8
13.0
44.8
35.6
48.6
The ongoing acquisition of the Company by Freya Bidco Limited remains conditional upon the receipt of antitrust approval
in the European Union and foreign direct investment approval in Australia, in each case to the extent required, as well as
the sanction of the Scheme by the Court at the Sanction Hearing (each as defined in the scheme document dated 26
June 2023) and is expected to occur in late 2023 or early 2024. If prior to the acquisition becoming effective, any dividend is
announced, declared, made or paid or becomes payable in respect of the ordinary share capital of the Company (Dechra
Shares), Freya Bidco Limited reserves the right to reduce the consideration payable under the terms of the acquisition
for the Dechra Shares by an amount up to the aggregate amount of such dividend. Therefore the Directors are not
recommending the payment of a final dividend. The final dividend for the year ended 30 June 2022 is shown as a deduction
from equity in the year ended 30 June 2023.
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 year by the weighted average number of ordinary shares in issue during the year.
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
2023
Pence
95.09
(24.59)
94.57
(24.59)
2023
£m
107.9
(27.9)
2022
Pence
121.57
53.72
120.84
53.40
2022
£m
131.7
58.2
Number
Number
113,476,509
108,332,583
618,369
654,836
114,094,878
108,987,419
At 30 June 2023, there are 557,781 options (2022: 305,468) that are excluded from the EPS calculations as they are not
dilutive for the period presented but may become dilutive in the future.
Stock Code: DPH
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Notes to the Consolidated
Financial Statements
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 2021
Additions
Disposals
Transfers between
categories
Remeasurement (note 30)
Foreign exchange
adjustments
At 30 June 2022 and 1 July
2022
Additions
Acquired through Business
Combinations
Disposals
Transfers between
categories
Remeasurement (note 30)
Foreign exchange
adjustments
At 30 June 2023
Accumulated Amortisation
At 1 July 2021
Charge for the year
Impairments
Disposals
Foreign exchange
adjustments
At 30 June 2022 and 1 July
2022
Charge for the year
Impairments
Disposals
Foreign exchange
adjustments
At 30 June 2023
Net book value
At 30 June 2023
At 30 June 2022
236.1
–
–
–
–
9.3
245.4
–
98.7
–
–
–
(9.6)
334.5
–
–
–
–
–
–
–
–
–
–
–
334.5
245.4
23.1
1.0
–
0.2
–
0.1
24.4
0.6
–
(0.2)
0.2
–
–
25.0
11.2
3.5
–
–
0.1
14.8
3.6
–
(0.2)
–
18.2
6.8
9.6
15.1
1.8
–
(1.7)
–
0.2
15.4
1.6
–
(0.2)
(1.1)
–
-
15.7
9.5
0.6
–
–
–
10.1
0.7
–
(0.2)
–
10.6
5.1
5.3
6.5
–
(3.3)
0.4
–
0.1
3.7
-
–
(0.1)
0.9
-
–
4.5
4.6
0.4
–
(3.4)
0.1
1.7
0.5
–
–
–
2.2
2.3
2.0
Total
£m
1,162.1
98.9
(4.0)
881.3
96.1
(0.7)
–
–
(24.2)
(24.2)
27.4
37.2
979.9
1.6
311.0
–
-
1,270.0
5.1
409.7
(0.5)
–
(49.6)
(49.6)
–
–
–
1.1
–
0.1
1.2
1.3
–
–
–
–
(0.1)
2.4
(29.4)
(39.1)
1,213.5
1,595.6
–
–
0.7
–
0.1
0.8
0.1
–
–
–
0.9
1.5
0.4
421.0
72.8
1.7
(0.6)
17.2
512.1
71.1
69.1
–
(11.0)
641.3
572.2
467.8
446.3
77.3
2.4
(4.0)
17.5
539.5
76.0
69.1
(0.4)
(11.0)
673.2
922.4
730.5
£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.
Goodwill is allocated across cash generating units that are expected to benefit from the relevant business combination.
Key assumptions made in this respect are given in note 14.
Included in the cost at 30 June 2023 are £46.9 million (2022: £41.8 million) of fully amortised assets which predominately
relate to product rights where sales are still being made by the Group.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
12.
Intangible Assets continued
In accordance with the disclosure requirements of IAS 38 ‘Intangible Assets’, the components of acquired intangibles are
summarised below:
Commercial
relationships
£m
Pharmacological
process
£m
Cost
At 1 July 2021
Additions
Remeasurement
Foreign exchange adjustments
At 30 June 2022 and 1 July 2022
Additions
Acquisitions through business
combinations
Remeasurement
Foreign exchange adjustments
At 30 June 2023
Accumulated Amortisation
At 1 July 2021
Charge for the year
Impairments
Disposals
Foreign exchange adjustments
At 30 June 2022 and 1 July 2022
Charge for the year
Impairments
Foreign exchange adjustments
At 30 June 2023
Net book value
At 30 June 2023
At 30 June 2022
8.1
–
–
–
0.2
8.3
–
–
–
–
8.3
7.3
1.3
–
–
(0.8)
7.8
0.5
–
(0.1)
8.2
0.1
0.5
47.1
–
–
–
6.8
53.9
–
–
–
(2.4)
51.5
35.0
3.6
–
–
5.3
43.9
3.3
–
(2.0)
45.2
6.3
10.0
Capitalised
development
costs
£m
382.4
–
–
–
12.0
394.4
0.1
–
–
(5.0)
389.5
186.7
37.0
1.7
–
5.5
230.9
32.4
–
(2.8)
260.5
129.0
163.5
Brand
£m
14.9
–
–
–
1.8
16.7
–
–
–
(0.6)
16.1
8.4
1.2
–
–
2.0
11.6
1.3
–
(0.5)
12.4
3.7
5.1
Product
rights
£m
428.8
96.1
(24.2)
(0.7)
6.6
506.6
1.5
311.0
(49.6)
(21.4)
748.1
183.6
29.7
–
(0.6)
5.2
217.9
33.6
69.1
(5.6)
315.0
433.1
288.7
Total
£m
881.3
96.1
(24.2)
(0.7)
27.4
979.9
1.6
311.0
(49.6)
(29.4)
1,213.5
421.0
72.8
1.7
(0.6)
17.2
512.1
71.1
69.1
(11.0)
641.3
572.2
467.8
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Notes to the Consolidated
Financial Statements
12.
Intangible Assets continued
The table below provides further detail on the goodwill, acquired intangibles and their remaining amortisation period.
Significant assets
Description of acquired intangibles
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
Intangible assets arising
from the acquisition of
Putney
Product, marketing and distribution
rights
Technology, product, marketing and
distribution rights
Product, brand, technology,
marketing
and distribution rights
Product, brand, technology,
pharmacological process, marketing
and distribution rights
Intangible assets arising
from the acquisition of Apex
Product and technology
Marketing and distribution rights
Goodwill
carrying
value
£m
Acquired
intangibles
carrying
value
£m
Sub-total
carrying
value
£m
Remaining
amortisation
period on
acquired
intangibles
0.4
7.5
7.9
2 ½ years
37.7
16.4
5.3
51.7
8.3
–
–
–
0.1
4.5
2.8
6.7
25.7
9.1
1.3
14.7
37.7
16.4
N/A
N/A
2 ½ years
7 ½ years
9.9 Genera – total
3 years
3 years
5 years
Putney – total
10 years
7 years
Apex – total
10 years
86.9
18.7
14.7
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 B.V. and Le Vet
Beheer B.V.
Intangible assets related
to an injectable solution
licensing agreement
Intangible assets arising
from the acquisition of
Caledonian
Marketing and distribution rights
–
5.6
5.6
9 years
Product, brand, technology,
marketing and distribution rights
29.0
32.9
8.8
98.7
169.4
4 ½ years
3 ½ years
5 years
AST Farma B.V.
and
Le Vet Beheer
B.V – total
Marketing and distribution rights
–
5.2
5.2
15 years
Product, brand, technology,
marketing
and distribution rights
0.8
2.0
2.8
5 ½ years
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Overview
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Report
Governance
Financial
Statements
Additional
Information
12.
Intangible Assets continued
Significant assets
Description
Goodwill
carrying
value
£m
Acquired
Intangibles
carrying
value
£m
Sub-total
carrying
value
£m
Intangible assets arising
from the acquisition of
Dechra Brasil Produtos
Veterinarios LTDA
Intangible assets arising
from the acquisition of
Ampharmco
Intangible assets arising
from the acquisition of
Mirataz
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
Intangible assets arising
from the acquisition of
Piedmont Animal Heath Inc.
Intangible assets arising
from the acquisition of Med-
Pharmex Inc.
Other individually immaterial
goodwill and acquired
intangibles
Product, brand, technology,
marketing
and distribution rights
Product and technology rights
Product and technology rights
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
9.3
6.4
–
–
–
–
–
–
Remaining
amortisation
period on
acquired
intangibles
5 ½ years
½ years
3 ½ years
Brazil – total
14 ½ years
15.0
11 ½ years
11 ½ years
16.9 Ampharmco –
total
6 ½ years
7 ½ years
7 ½ years
5.4
0.1
0.2
4.8
0.5
5.2
28.0
1.4
0.1
29.5 Mirataz – total
75.2
75.2
7 years
20.5
20.5
13 years
30.6
30.6
10 years
7.6
7.6
8 ½ years
5.4
5.4
8 ½ years
Product rights
40.1
93.6
133.7
21 years
Product and distribution rights
52.3
123.6
175.9
24 years
7.1
14.1
21.2
334.5
572.2
906.7
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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 2021
Additions
Disposals
Transfers between categories
Foreign exchange adjustments
At 30 June 2022 and 1 July 2022
Additions
Acquired through Business Combinations
Disposals
Transfers between categories
Foreign exchange adjustments
At 30 June 2023
Accumulated Depreciation
At 1 July 2021
Charge for the year
Disposals
Foreign exchange adjustments
At 30 June 2022 and 1 July 2022
Charge for the year
Disposals
Transfers between categories
Foreign exchange adjustments
At 30 June 2023
Net book value
At 30 June 2023
At 30 June 2022
Net book value of right-of-use assets
At 30 June 2023
At 30 June 2022
Depreciation charge of right-of-use assets
2023
2022
54.5
5.8
(0.8)
1.6
0.7
61.8
2.0
44.2
(0.6)
4.1
(3.4)
108.1
16.8
1.8
(0.8)
0.1
17.9
2.8
(0.5)
0.1
(0.1)
20.2
87.9
43.9
–
–
–
–
22.2
1.6
(2.7)
1.1
1.2
23.4
1.9
0.2
(0.7)
(1.4)
(0.4)
23.0
7.0
2.2
(0.7)
0.3
8.8
2.4
(0.6)
(0.1)
(0.2)
10.3
12.7
14.6
11.8
12.2
2.1
1.9
5.9
2.2
(1.2)
–
0.1
7.0
3.7
–
(2.1)
–
–
8.6
3.1
1.9
(1.1)
0.1
4.0
2.5
(2.6)
–
–
3.9
4.7
3.0
4.7
3.1
2.5
1.9
Contracted capital commitments
Assets in the course of construction included above
Included in additions are £5.6 million (2022: £3.8 million) of right-of-use assets.
Included in the cost at 30 June 2023 are £61.3 million (2022: £52.7 million) of fully depreciated assets.
Total
£m
140.0
24.2
(5.7)
–
3.4
161.9
28.7
48.2
(9.4)
–
(4.7)
57.4
14.6
(1.0)
(2.7)
1.4
69.7
21.1
3.8
(6.0)
(2.7)
(0.9)
85.0
224.7
26.1
5.2
(0.9)
0.5
30.9
6.0
(5.5)
–
(0.4)
31.0
54.0
38.8
0.1
0.1
–
0.1
2023
£m
5.1
14.9
53.0
11.1
(3.5)
1.0
61.6
13.7
(9.2)
–
(0.7)
65.4
159.3
100.3
16.6
15.4
4.6
3.9
2022
£m
6.0
5.3
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
14. Impairment Reviews
Goodwill and indefinite life asset Impairment Assessment
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.
Goodwill is tested for impairment at the operating segment level, this being the level at which goodwill is monitored
for internal management purposes. 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
153.9
18.4
334.5
2023
Indefinite
life assets
carrying
value
£m
0.9
–
–
0.9
2022
Goodwill
carrying
value
£m
Indefinite
life assets
carrying value
£m
162.2
64.3
18.9
245.4
0.9
–
–
0.9
Total
value
£m
163.1
153.9
18.4
335.4
Total
value
£m
163.1
64.3
18.9
246.3
Pre-tax
discount
rate
%
11.5
12.2
16.0
Pre-tax
discount
rate
%
10.2
12.0
13.1
The 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% (2022: 3.0%) for Dechra
Veterinary Products EU and Dechra Veterinary Products NA and 6.8% (2022: 6.6%) 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% (2022: 0%) for Dechra Veterinary Products EU and Dechra Veterinary Products NA and 1.3% (2022: 1.2%) for Dechra
Veterinary Products International.
The projections covered a period of five years as the Directors believe this to be the most appropriate timescale over
which to review and consider annual performances before applying a fixed terminal value.
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 and are no higher than those implicit in the Group’s strategic planning process, and do not exceed the
long term growth rates in the countries in which each CGU operates.
The pre-tax discount rates have been estimated using a market participant rate, which is 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.
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Notes to the Consolidated
Financial Statements
14. Impairment Reviews continued
Intangible assets under development and not available for use Impairment assessment
Intangible assets under development and not available for use (typically In-Process Research and Development
(‘IPR&D’)) are tested for impairment annually.
In 2023, the impairment charges recorded against NA Pharmaceuticals IPR&D, totalled £69.1 million and related to IPR&D
recognised as part of the acquisition of Piedmont Animal Heath Inc. Assets in respect of one near term candidate product
within the pipeline was fully impaired following a reduction in the likelihood of success of this product. The recoverable
amount of the asset was valued based on fair value less costs of disposal using the multi-period excess earnings
method, and was categorised at Level 3 in the fair value hierarchy. The key assumptions in the valuation being the
probability of success of the product (0%).
The key assumptions for the remainder of the IPR&D intangible assets which have been valued on a combination of both
the multi-period excess earnings method and the replacement cost method are; (a) Post-tax discount rates (10.75% -
11.25%); (b) forecasted cash flows based on Board approved business plan; (c) 30% volume attrition upon patent expiry;
and (d) 5% volume attrition post patent expiry.
The table below shows on an indicative basis the sensitivity to reasonably possible changes in significant assumptions
used in the valuation of the intangible assets;
1% increase in discount rates (£m)
1% decrease in discount rates (£m)
10% increase in cash flows (£m)
10% decrease in cash flows (£m)
5% increase in ongoing volume attrition (£m)
5% decrease in ongoing volume attrition (£m)
Intangible
assets
(11.2)
13.3
11.3
(11.3)
(5.8)
12.5
Other intangible asset impairment assessment
Other intangible assets are tested when there is a trigger 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. The CGUs for the purposes of this assessment are deemed to be countries or clusters of
countries. During the year a trigger was identified in two CGUs. No impairment was identified and there is no reasonable
change in key assumptions underpinning these assessments that would cause a material impairment.
We have assessed the qualitative and quantitative impact of climate related risks on asset recoverable amounts and
concluded that their impact does not have a material impact on the Group’s impairment assessments performed.
212
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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
2023
£m
4.9
(76.3)
(71.4)
Deferred tax assets and liabilities are attributable to the following, prior to any allowable offset:
Intangible assets
Property, plant and equipment
Inventories
Receivables/payables
Share-based payments
Losses
R&D tax credits
Employee benefit obligations
Interest
Assets
Liabilities
Net
2023
£m
–
–
2.8
6.6
1.0
8.1
8.5
0.1
0.7
27.8
2022
£m
–
–
1.5
7.2
0.9
0.6
3.0
1.0
–
14.2
2023
£m
(88.5)
(10.7)
–
–
–
–
–
–
–
(99.2)
2022
£m
(42.9)
(4.8)
–
–
–
–
–
–
–
(47.7)
2023
£m
(88.5)
(10.7)
2.8
6.6
1.0
8.1
8.5
0.1
0.7
(71.4)
2022
£m
2.3
(35.8)
(33.5)
2022
£m
(42.9)
(4.8)
1.5
7.2
0.9
0.6
3.0
1.0
–
(33.5)
(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 £108.4 million (2022: £2.2 million). The estimated unprovided deferred tax liability
in relation to these temporary differences is £5.4 million (2022: £0.1 million). No deferred tax liability has been recognised
in respect of unremitted earnings of subsidiaries because the Group is able to control the timing of the reversal of the
temporary difference, and it is probable that such differences will not reverse in the foreseeable future. The increase in the
unrecognised deferred tax liability arises as a result of the pending acquisition of the Group by Freya Bidco Limited which
would mean that, as a non-listed group, withholding tax at a rate of 5% would likely be suffered on dividends paid by the
Group’s US business.
Deferred tax assets in relation to losses amounting to £1.5 million (2022: £2.6 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.
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Notes to the Consolidated
Financial Statements
15. Deferred Taxes continued
(c) Movements During the Year
Intangible assets
Property, plant and equipment
Inventories
Receivables/payables
Share-based payments
Losses
R&D tax credits
Employee benefit obligations
Balance at
1 July
2021
£m
Recognised
in income
£m
Recognised
in equity/OCI
£m
Foreign
exchange
adjustments
£m
Balance at
30 June
2022
£m
(51.1)
(3.7)
0.9
4.1
1.7
0.7
0.5
0.1
(46.8)
9.9
(1.0)
0.6
2.9
(0.1)
(0.2)
2.4
0.8
15.3
–
–
–
(0.4)
(0.7)
–
–
–
(1.1)
(1.6)
(0.1)
–
0.6
–
0.1
0.1
–
(0.9)
(42.8)
(4.8)
1.5
7.2
0.9
0.6
3.0
0.9
(33.5)
Balance at
1 July
2022
£m
Recognised
in income
£m
Recognised
in equity/OCI
£m
Foreign
exchange
adjustments
£m
Acquisitions
through
business
combinations
£m
Balance at
30 June
2023
£m
Intangible assets
Property, plant and equipment
Inventories
Receivables/payables
Share-based payments
Losses
R&D tax credits
Employee benefit obligations
Interest
(42.8)
(4.8)
1.5
7.2
0.9
0.6
3.0
0.9
–
(33.5)
27.9
1.2
1.8
(0.7)
–
(1.5)
4.2
(0.9)
0.7
32.7
–
–
–
(1.1)
(0.2)
–
–
–
–
(1.3)
4.1
0.6
(0.1)
–
0.3
(0.5)
(0.1)
0.1
–
4.4
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
(77.7)
(7.7)
(0.4)
1.2
–
9.5
1.4
–
–
(73.7)
2023
£m
58.7
10.0
148.6
217.3
2023
£m
144.2
11.1
6.6
161.9
(88.5)
(10.7)
2.8
6.6
1.0
8.1
8.5
0.1
0.7
(71.4)
2022
£m
38.0
10.1
127.6
175.7
2022
£m
122.1
9.0
5.7
136.8
Trade receivables are presented net of a loss allowance to reflect the expected credit losses. The details of this allowance
for credit losses are disclosed in note 24.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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
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
2023
£m
74.4
2023
£m
43.4
2.3
10.1
88.7
144.5
2023
£m
14.3
(11.5)
2.8
2023
£m
3.9
3.9
13.0
250.7
241.3
(4.4)
500.6
504.5
2022
£m
120.9
2022
£m
46.0
3.1
4.6
83.1
136.8
2022
£m
11.0
(12.2)
(1.2)
2022
£m
3.3
3.3
12.1
125.5
189.7
(1.5)
325.8
329.1
On 31 March 2023, the Group entered into a new multi-currency Revolving Credit Facility Agreement (“RCF”) with a
maximum amount of £340.0 million and maturing 31 March 2028. This RCF is provided by a syndicate of banks comprising
BNP Paribas, CaixaBank SA UK branch, Crédit Industriel et Commercial, London Branch, Handelsbanken Capital Markets,
Handelsbanken plc, HSBC UK Bank plc, PNC Capital Markets LLC, Santander UK plc and The Governor and Company of
the Bank of Ireland. The covenant requirements in the RCF remain unchanged from the prior Revolving Credit Facility
Agreement (being Interest Cover in respect of any Relevant Period shall not be less than 4:1 and Leverage in respect of
any Relevant Period shall not exceed 3:1).
The RCF uses Risk Free Reference (RFR) rates, with the relevant RFR rates for the principal Borrowings of the Group being
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. The Margin on the RCF is a
minimum of 1.40% and a maximum of 2.30%, dependent upon the Leverage (the ratio of Adjusted Net Debt to Adjusted
underlying EBITDA) of the Group. At 30 June 2023, £241.3 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 2023.
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Notes to the Consolidated
Financial Statements
21. Borrowings and Lease Liabilities continued
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 2023. 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), the proceeds of which were used to repay existing debt. Both
facilities remain fully drawn at 30 June 2023. Interest is charged on the EUR50.0 million senior secured notes at a fixed rate
of 3.64% until maturity (July 2029), and on the EUR100.0 million senior secured notes at a fixed rate of 3.93% until maturity
(July 2032).
No interest has been capitalised during the year (2022: £nil).
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.
22. Provisions
2023
£m
284.3
207.7
492.0
2023
£m
3.9
3.2
4.4
5.4
16.9
At 1 July 2022
Provision released
Provision utilised
Foreign exchange differences
At 30 June 2023
At 1 July 2021
Provision released
Provision utilised
Foreign exchange differences
At 30 June 2022
Deferred
Rent
£m
Provision for
PPE grant
£m
Dilapidations
£m
(0.3)
–
0.1
–
(0.2)
(0.6)
–
–
(0.1)
(0.7)
(1.3)
0.5
–
–
(0.8)
Deferred
Rent
£m
Provision for
PPE grant
£m
Dilapidations
£m
(0.3)
–
0.1
(0.1)
(0.3)
(0.9)
–
0.1
0.2
(0.6)
(2.3)
1.0
–
–
(1.3)
2022
£m
232.6
82.6
315.2
2022
£m
3.3
2.5
3.5
6.1
15.4
Total
£m
(2.2)
0.5
0.1
(0.1)
(1.7)
Total
£m
(3.5)
1.0
0.2
0.1
(2.2)
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
22. Provisions continued
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 of £0.5 million for dilapidations of a
warehouse property. This has been fully released in the year through non-underlying expenses.
In the financial year 2021, the Group established a fair value provision of £0.8 million for dilapidations of a warehouse
property in Skipton 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 £0.2 million (2022: £0.3 million) for employees are recognised
within other payables in the Consolidated Statement of Financial Position as at 30 June 2023.
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 from subsidiary companies through dividends. The role of the Group’s treasury activities is to
manage and monitor the Group’s global cash resources, to manage external and internal funding requirements and to
manage financing risks in support of the Group’s corporate activities.
The Board of Directors has approved a Treasury 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 to our bank counterparties by Standard and Poor’s and Moody’s respectively. Where the
opinions of the rating agencies differ, the Group assigns the lower rating 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.
AA/Aa
A/A
BBB/Baa
BB/Ba and below/unrated
Total bank balances and deposits
2023
£m
48.2
21.9
3.4
0.9
74.4
2022
£m
16.4
101.1
2.4
1.0
120.9
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 2023.
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Notes to the Consolidated
Financial Statements
24. Financial Instruments and Related Disclosures continued
Capital Management
The capital structure of the Group consists of net borrowings and shareholders’ equity. At 30 June 2023, net borrowing
was £430.1 million (2022: £208.2 million), whilst shareholders’ equity was £755.2 million (2022: £666.8 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 Adjusted
underlying EBITDA to Net Finance Charges), and leverage (the ratio of Adjusted Net Debt to Adjusted underlying EBITDA).
The Group complied with these covenants in the Years to 30 June 2023 and 2022 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 meet 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.
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. Please refer to Note (1b) for more detail on the Directors’ considerations in respect of
going concern, including reference to the material uncertainty that exists due to the proposed acquisition by Freya Bidco
Limited.
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 EUR200.0 million; and
• £16.9 million lease liabilities.
The Group’s borrowing facilities at 30 June 2023 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 $357.0 million as a net investment hedge of US Dollar net assets.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
24. Financial Instruments and Related Disclosures continued
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 £155.3 million (2022: £131.1 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.
Two customers of the Group individually accounted for more than 10% of total Group revenues (2022: two). These
customers sit within the NA Pharmaceuticals segment and accounted for approximately 28.2% and 11.5% of gross trade
receivables at 30 June 2023 (2022: 25.5% and 15.2%). These customers also accounted for 20.9.% and 13.2% of total Group
revenues (2022: 21.2% and 13.7%).
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.
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 2023 and 30 June 2022. 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.
Stock Code: DPH
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Notes to the Consolidated
Financial Statements
24. Financial Instruments and Related Disclosures continued
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
2023
2022
Carrying
value
£m
74.4
144.2
11.1
229.7
(241.3)
(250.7)
(16.9)
(43.4)
(2.3)
(88.7)
(75.7)
(719.0)
(489.3)
Fair
value
£m
74.4
144.2
11.1
229.7
(241.3)
(234.4)
(16.9)
(43.4)
(2.3)
(88.7)
(75.7)
(702.7)
(473.0)
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)
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 2023
Contingent consideration
Total
30 June 2022
Contingent consideration
Total
Level 1
£m
–
–
Level 1
£m
–
–
Level 2
£m
–
–
Level 2
£m
–
–
Level 3
£m
(75.7)
(75.7)
Level 3
£m
(110.4)
(110.4)
Total
£m
(75.7)
(75.7)
Total
£m
(110.4)
(110.4)
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 year 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 2023 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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
24. Financial Instruments and Related Disclosures continued
The loss allowance provision as at 30 June 2023 and 30 June 2022 is determined as follows:
30 June 2023
Expected loss rate
Gross carrying amount – trade receivables
Loss allowance
Specific loss allowance
Total loss allowance
30 June 2022
Expected loss rate
Gross carrying amount – trade receivables
Loss allowance
Specific loss allowance
Total loss allowance
Past due (up
to one month)
£m
Past due
(one to three
months)
£m
Past due
(over three
months)
£m
0.02%
0.02%
4.8
–
0.1
0.1
1.2
–
–
–
75%
1.6
0.3
0.9
1.2
Past due
(up to one
month)
£m
Past due
(one to three
months)
£m
Past due
(over three
months)
£m
0.03%
4.1
–
–
–
0.03%
1.8
–
–
–
75.0%
1.2
0.3
0.7
1.0
Not due
£m
0.02%
137.9
–
–
–
Not due
£m
0.03%
116.0
–
–
–
Total
£m
145.5
0.3
1.0
1.3
Total
£m
123.1
0.3
0.7
1.0
The movement in the loss allowances for trade debtors at 30 June 2023 reconciles to the opening loss allowances
as follows:
At start of Year
Impairment provision recognised
Impairment provision utilised
At end of Year
2023
£m
1.0
0.3
–
1.3
2022
£m
0.7
0.8
(0.5)
1.0
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 2023
and 30 June 2022. Where interest is at floating rates, the future interest payments have been estimated using current
interest rates:
At 30 June 2023
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
(75.7)
–
(52.1)
(127.8)
(1.4)
(3.1)
(8.7)
(24.4)
(13.0)
(7.5)
(69.7)
(127.8)
(487.6)
(4.4)
(6.8)
(498.8)
(6.8)
–
–
–
(42.9)
(241.4)
(207.7)
(498.8)
(16.9)
–
(2.1)
(19.0)
(2.2)
(2.1)
(3.6)
(3.1)
(1.4)
(1.1)
(5.5)
(19.0)
(134.4)
–
–
(134.4)
(120.5)
(13.0)
(0.3)
–
–
–
(0.6)
(134.4)
Total
£m
(714.6)
(4.4)
(61.0)
(780.0)
(130.9)
(18.2)
(12.6)
(27.5)
(57.3)
(250.0)
(283.5)
(780.0)
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Notes to the Consolidated
Financial Statements
24. Financial Instruments and Related Disclosures continued
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
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)
(313.7)
(1.5)
(2.1)
(317.3)
(2.1)
–
–
(189.7)
–
(42.9)
(82.6)
(317.3)
(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)
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)
Foreign Currency Exposure
The Sterling equivalents of financial assets and liabilities denominated in foreign currencies at 30 June 2023 and 30 June
2022 were:
At 30 June 2023
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 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
Australian
Dollar
£m
Danish
Krone
£m
–
–
6.2
6.2
–
–
(1.5)
–
(0.7)
(23.9)
(26.1)
(19.9)
Australian
Dollar
£m
–
–
5.8
5.8
–
–
(0.2)
–
–
(34.5)
(34.7)
(28.9)
–
–
0.5
0.5
–
–
–
–
–
–
–
0.5
Danish
Krone
£m
–
–
–
–
–
–
–
–
–
–
–
–
Euro
£m
7.2
–
28.8
36.0
(171.7)
–
(5.3)
–
(3.4)
(1.7)
(182.1)
(146.1)
Euro
£m
8.9
1.0
50.2
60.1
(42.9)
(0.3)
(5.2)
–
(2.1)
(1.9)
(52.4)
7.7
US
Dollar
£m
0.3
0.1
2.4
2.8
(284.4)
–
(1.6)
–
(2.5)
(45.2)
(333.7)
(330.9)
US
Dollar
£m
0.6
0.5
19.2
20.3
(82.6)
–
(0.9)
–
(1.3)
(73.2)
(158.0)
(137.7)
Other
£m
2.9
–
11.8
14.7
–
–
(0.2)
–
(1.7)
–
(1.9)
12.8
Other
£m
0.3
0.2
12.2
12.7
–
–
(0.2)
–
(1.3)
–
(1.5)
11.2
222
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023
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31565 Dechra AR2023 Financials
11 October 2023 5:21 pm
Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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 2023 would increase Group loss before
taxation and equity by £4.4 million (2022: £3.8 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 2023, the Group has been exposed to transactional and translational currency risk. In addition to the transactional
gain of £2.2 million (2022: £4.5 million transactional loss) being recognised in the Consolidated Income Statement, £15.0
million foreign exchange loss (2022: £15.7 million foreign exchange gain) 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
(1.8)
(12.9)
(22.5)
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
2023
2022
£m
Number
£m
Number
1.1
–
1.1
108,392,737
5,495,453
113,888,190
1.1
–
1.1
108,215,323
177,414
108,392,737
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, 130,770 new ordinary shares of 1 pence each (2022: 177,414 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 £1,845,278 (2022: £2,258,853). 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.
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 mid market share price on 20 July 2022,
being the date of the placing announcement.
Stock Code: DPH
31565 Dechra AR2023 Financials.indd 223
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223
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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 Long Term Incentive Plan 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.
Deferred Bonus Plan
The Dechra 2021 Deferred Bonus Plan (the 2021 DBP) is a discretionary share plan under which the deferred part of any
bonus may be delivered. Any current or former employee is eligible to participate in the 2021 DBP at the discretion of
the Board.
224
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31565 Dechra AR2023 Financials
11 October 2023 5:21 pm
Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
26. Share-based Payments continued
Year ended 30 June 2023
Exercised
Number
Granted
Number
Lapsed
Number
Exercise
Period
Unapproved Share Option Scheme
11 September 2014†
2017-2024
15 September 2015†
19 September 2016†
2 March 2018†
26 October 2018†
6 September 2019†
22 September 2020
16 September 2021
9 September 2022
2018-2025
2019-2026
2020-2028
2021-2028
2022-2029
2023-2030
2024-2031
2025-2032
Approved Share Option Scheme
19 September 2016†
2019-2026
2 March 2018†
26 October 2018†
6 September 2019†
22 September 2020
16 September 2021
9 September 2022
Long Term Incentive Plan
6 September 2019
22 September 2020
16 September 2021
9 September 2022
2021-2028
2021-2028
2022-2029
2023-2030
2024-2031
2025-2032
2022-2029
2023-2030
2024-2031
2025-2032
Exercise
price
per share
Pence
763.00
975.00
1369.00
2506.00
2166.00
2964.00
3237.00
4909.00
3199.00
1369.00
2506.00
2166.00
2964.00
3237.00
4909.00
3199.00
At
1 July
2022
Number
2,000
2,500
12,200
45,107
71,937
115,419
134,066
167,138
–
–
–
(2,000)
(11,896)
(17,115)
(14,711)
–
–
–
550,367
(45,722)
2,000
1,696
2,063
7,272
7,236
4,888
–
(2,000)
(104)
(1,385)
(871)
–
–
–
25,155
(4,360)
–
–
–
–
83,312
43,388
43,043
–
(54,562)
–
–
–
169,743
(54,562)
Long Term Incentive Plan (Qualifying LTIP Awards)
22 September 2020
2023-2030
3237.00
22 September 2020
2023-2030
–
16 September 2021
16 September 2021
9 September 2022
9 September 2022
2024-2031
4909.00
2024-2031
2025-2032
2025-2032
–
3199.00
–
3,201
41,772
1,461
16,567
–
–
63,001
4,224
4,158
8,382
–
–
–
–
–
–
–
(4,224)
(973)
(5,197)
2020-2023
2021-2024
1646.00
1974.00
2022-2023
2573.00
22,702
(20,929)
2023-2024
2022-2023
2024-2025
2023-2024
2025-2026
2025-2026
2868.00
2868.00
4493.00
4493.00
2762.00
2762.00
36,182
5,360
71,653
7,759
-
–
–
–
–
–
-
–
SAYE Option Scheme
12 October 2017
29 November 2018
Global SAYE Plan 2018
4 October 2019
19 October 2020
19 October 2020
13 October 2021
13 October 2021
12 October 2022
12 October 2022
Total
At
30 June
2023
Number
2,000
2,500
10,200
33,211
52,822
88,599
128,699
159,971
185,174
663,176
–
1,592
678
6,401
6,824
4,888
5,826
–
–
–
–
(2,000)
(12,109)
(5,367)
(7,167)
(2,000)
(28,643)
–
–
–
–
(412)
–
–
(412)
26,209
(28,750)
–
–
–
(28,750)
–
–
-
–
–
–
–
–
–
–
(1,773)
(5,790)
(5,360)
(55,053)
(2,856)
(5,862)
(364)
–
43,388
43,043
84,277
170,708
3,201
41,772
1,461
16,567
1,368
20,240
84,609
–
3,185
3,185
–
30,392
–
16,600
4,903
158,221
18,147
–
–
–
–
–
–
–
–
187,174
187,174
–
–
–
–
–
–
5,826
5,826
–
–
–
84,277
84,277
–
–
–
–
1,368
20,240
21,608
–
–
–
–
–
–
–
–
164,083
18,511
143,656
(20,929)
182,594
(77,058)
228,263
960,304
(130,770)
481,479
(134,863)
1,176,150
Weighted average exercise price
2638.28p
1411.09p
2300.14p
3082.87p
2605.24p
† Total share options exercisable at 30 June 2023 were 198,003.
Stock Code: DPH
31565 Dechra AR2023 Financials.indd 225
31565 Dechra AR2023 Financials
11 October 2023 5:21 pm
225
13/10/2023 08:55:57
Notes to the Consolidated
Financial Statements
26. Share-based Payments continued
Year ended 30 June 2022
Exercise
price
per share
Pence
Exercise
Period
Unapproved Share Option Scheme
11 September 2014†
15 September 2015†
2017–2024
2018–2025
763.00
975.00
19 September 2016†
2019–2026
1369.00
2 March 2018†
26 October 2018†
6 September 2019
2020–2028
2506.00
2022–2029
2964.00
22 September 2020
2023–2030
3237.00
16 September 2021
2024–2031
4909.00
Approved Share Option Scheme
19 September 2016†
2019–2026
1369.00
2 March 2018†
26 October 2018†
6 September 2019
2021–2028
2506.00
2021–2028
2166.00
2022–2029
2964.00
22 September 2020
2023–2030
3237.00
16 September 2021
2024–2031
4909.00
2021–2028
2166.00
108,508
(35,737)
Long Term Incentive Plan
26 October 2018
6 September 2019
22 September 2020
16 September 2021
2021–2028
2022–2029
2023–2030
2024–2031
–
–
–
–
98,679
84,184
45,440
–
(72,820)
–
–
–
228,303
(72,820)
Long Term Incentive Plan (Qualifying LTIP Awards)
22 September 2020
2023–2030
3237.00
22 September 2020
2023–2030
–
16 September 2021
16 September 2021
2024–2031
4909.00
2024–2031
–
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
Total
2019–2022
2020–2023
2021–2024
1095.00
1646.00
1974.00
2022–2023
2573.00
2021–2022
2023–2024
2022–2023
2517.00
2868.00
2868.00
2024–2025
4493.00
2023–2024
4493.00
Exercised
Number
Granted
Number
Lapsed
Number
At
1 July
2021
Number
2,000
2,500
19,200
63,360
–
–
(7,000)
(18,253)
124,253
146,318
–
–
–
–
466,139
(60,990)
2,000
4,907
2,906
7,413
7,236
–
–
(3,107)
(234)
–
–
–
24,462
(3,341)
3,309
42,562
–
–
45,871
3,831
4,224
25,051
33,106
23,938
15,823
39,183
6,091
–
–
–
–
–
–
–
(3,813)
–
(20,619)
(24,432)
(118)
(15,341)
(372)
–
–
–
At
30 June
2022
Number
2,000
2,500
12,200
45,107
71,937
115,419
134,066
167,138
–
–
–
–
(834)
(8,834)
(12,252)
(13,863)
(35,783)
550,367
–
(104)
(609)
(141)
–
(611)
(1,465)
(25,859)
(872)
(2,052)
–
2,000
1,696
2,063
7,272
7,236
4,888
25,155
–
83,312
43,388
43,043
(28,783)
169,743
(108)
(790)
(350)
(938)
(2,186)
(18)
–
(274)
(292)
(1,118)
(482)
(2,629)
(731)
(4,559)
(477)
3,201
41,772
1,461
16,567
63,001
–
4,224
4,158
8,382
22,702
–
36,182
5,360
71,653
7,759
–
–
–
–
–
–
–
181,001
181,001
–
–
–
–
–
5,499
5,499
–
–
–
43,043
43,043
–
–
1,811
17,505
19,316
–
–
–
–
–
–
–
–
76,212
8,236
85,035
(15,831)
84,448
(9,996)
143,656
882,916
(177,414)
333,307
(78,505)
960,304
Weighted average exercise price
1853.10p
1277.88p
3911.84p
2289.13p
2638.28p
† Total share options exercisable at 30 June 2022 were 139,503.
226
Dechra Pharmaceuticals PLC Annual Report and Accounts for the year ended 30 June 2023
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31565 Dechra AR2023 Financials.indd 226
13/10/2023 08:55:57
31565 Dechra AR2023 Financials
11 October 2023 5:21 pm
Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
26. Share-based Payments continued
The weighted average exercise price of options eligible to be exercised at 30 June 2023 was 2538.37 pence
(2022: 2157.48 pence). For options exercised during the year, the weighted average market price at the date of exercise
was 3186.84 pence (2022: 4716.85 pence). The weighted average remaining contractual life of options outstanding at the
Consolidated Statement of Financial Position date was 5.1 years (2022: 5.0 years).
Outstanding options on all Long Term Incentive, Approved and Unapproved plans prior to 30 June 2020 were exercisable
at 30 June 2023. 7,422 options issued under SAYE plans were exercisable at 30 June 2023 (2022: 973).
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 2023 of £0.9million (2022: £0.9 million), of
which £0.6 million (2022: £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
27. Changes in Net Debt
2023
£m
2.4
(0.1)
2.3
2022
£m
3.3
(0.4)
2.9
Liabilities from financing
activities
Lease liabilities within one year
Lease liabilities after one year
Bank loans after one year
Senior loan notes after one year
Sub-total
Other assets
Cash and cash equivalents
Net debt
Liabilities from financing
activities
Lease liabilities within one year
Lease liabilities after one year
Bank loans after one year
Senior loan notes after one year
Sub-total
Other assets
Cash and cash equivalents
Net debt
At
1 July 2022
£m
Cash
flows
£m
New lease
liabilities
£m
Foreign
exchange
movements
£m
Other non-cash
movements
£m
At
30 June 2023
£m
(3.3)
(12.1)
(188.7)
(125.0)
(329.1)
120.9
(208.2)
4.8
–
(64.4)
(126.2)
(185.8)
(46.1)
(231.9)
(1.8)
(3.9)
–
–
(5.7)
–
(5.7)
0.2
0.2
16.1
1.7
18.2
(0.4)
17.8
(3.8)
2.8
(1.0)
(0.1)
(2.1)
–
(2.1)
(3.9)
(13.0)
(238.0)
(249.6)
(504.5)
74.4
(430.1)
At
1 July 2021
£m
Cash
flows
£m
New lease
liabilities
£m
Foreign
exchange
movements
£m
Other non-cash
movements
£m
At
30 June 2022
£m
(3.1)
(12.8)
(188.2)
(114.5)
(318.6)
118.4
(200.2)
4.1
–
–
–
4.1
(1.5)
2.6
(0.3)
(3.5)
–
–
(5.6)
–
(3.8)
(0.1)
(0.6)
(0.1)
(10.4)
11.2
4.0
(7.2)
(3.9)
4.8
(0.4)
(0.1)
0.4
–
0.4
(3.3)
(12.1)
(188.7)
(125.0)
(329.1)
120.9
(208.2)
Stock Code: DPH
31565 Dechra AR2023 Financials.indd 227
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11 October 2023 5:21 pm
227
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Notes to the Consolidated
Financial Statements
28. Foreign Exchange Rates
The following primary exchange rates have been used in the translation of the results of foreign operations:
Australian Dollar
Brazilian Real
Danish Krone
Euro
US Dollar
29. Acquisitions
Average rate
for 2022
Closing rate
at 30 June
2022
Average rate
for 2023
Closing rate
at 30 June
2023
1.8347
6.9892
8.7826
1.1807
1.3316
1.7594
6.3189
8.6684
1.1652
1.2103
1.7832
6.2134
8.5616
1.1504
1.2038
1.9106
6.1504
8.6771
1.1651
1.2660
Acquisition of Piedmont Animal Health Inc
On 25 July 2022, Dechra acquired 100% of the share capital of Piedmont Animal Health Inc, for a total consideration of
£175.7 million (USD209.5 million). The fair value of the assets and liabilities acquired are now final.
Recognised amounts of identifiable assets and liabilities acquired
Property, plant and equipment
Other receivables
Trade and other payables
Contingent consideration liabilities (note 30)
Cash
Intangible assets
Deferred tax liabilities
Net identifiable assets
Goodwill
Total consideration
Purchase consideration:
Cash
Total purchase consideration
Net cash outflow arising on acquisition:
Cash consideration
Less: Cash and cash equivalents
Net cash outflow arising on acquisition
Fair value
£m
0.3
0.3
(1.3)
(4.6)
0.5
173.4
(35.7)
132.9
42.8
175.7
175.7
175.7
175.7
(0.5)
175.2
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Overview
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Report
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Statements
Additional
Information
29. Acquisitions continued
Acquisition of Piedmont Animal Health Inc continued
The intangible assets, which relate to the intellectual property acquired, were valued based on a combination of both
the excess earnings method and the replacement cost method. The approach adopted was dependent on the stage
of the development of the intellectual property which relates to In-Process Research and Development assets. The
table below shows on an indicative basis the sensitivity to reasonably possible changes in significant assumptions
used in the valuation of the intangible assets. There would be a corresponding impact to the deferred tax liability (at the
substantively enacted tax rate) and goodwill. The goodwill is not tax deductible.
1% increase in discount rates (£m)
1% decrease in discount rates (£m)
10% increase in cash flows (£m)
10% decrease in cash flows (£m)
10% increase in volume attrition upon patent expiry (£m)
10% decrease in volume attrition upon patent expiry (£m)
5% increase in ongoing volume attrition (£m)
5% decrease in ongoing volume attrition (£m)
Intangible
assets
(19.1)
22.4
17.8
(17.9)
(5.7)
5.7
(10.3)
20.2
The goodwill of £42.8m million arising from the acquisition has predominantly arisen due to the deferred tax on the
intangible assets which was not considered when pricing the acquisition, given there is no intention to sell the vast majority
of intangible assets. In addition goodwill also represents Piedmont’s proven ability to develop new products, and therefore
the ability to generate new opportunities. This is aligned with the market participation view of the acquisition.
Acquisition related costs (included in operating expenses) amounted to £0.2 million. Piedmont Animal Health Inc’s results
are reported within the Pharmaceuticals Research and Development Segment.
Piedmont Animal Health Inc contributed £nil revenue and £5.8 million loss to the Group’s underlying operating profit for
the period between the date of acquisition and the balance sheet date. If the acquisition had been completed on the
first Day of the financial year, the contribution to the Group revenues for the Year would have been £nil and to the Group’s
underlying operating profit have would have been a loss of £7.1 million. The reported operating loss after taking into
account non-underlying items for acquisition and integration costs would be £7.3 million.
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Notes to the Consolidated
Financial Statements
29. Acquisitions continued
Acquisition of Med-Pharmex Holdings, Inc
On 26 August 2022, Dechra acquired 100% of the share capital of Med-Pharmex Holdings Inc., and its subsidiaries Med-
Pharmex Property LLC, Med-Pharmex Inc and Cephazone Pharma LLC (collectively ‘Med-Pharmex’). The Group paid
£223.7 million ($264.6 million) consideration. The fair value of the assets and liabilities acquired is now final.
Recognised amounts of identifiable assets and liabilities acquired
Property, plant and equipment
Inventory
Trade and other receivables
Trade and other payables
Cash
Intangible assets
Current tax assets
Deferred tax liabilities
Net identifiable assets
Goodwill
Total consideration
Purchase consideration:
Cash
Total purchase consideration
Net cash outflow arising on acquisition:
Cash consideration
Less: Cash and cash equivalents
Net cash outflow arising on acquisition
Fair value
£m
47.9
14.8
6.9
(5.3)
2.6
137.6
1.3
(38.0)
167.8
55.9
223.7
223.7
223.7
£m
223.7
(2.6)
221.1
The intangible assets, which relate to the intellectual property acquired principally relating to Developed Technology
and In-Process Research and Development assets, were valued based on the excess earnings method. The table below
shows on an indicative basis the sensitivity to reasonably possible changes in significant assumptions used in the
valuation of the intangible asset. There would be a corresponding impact to the deferred tax liability (at the substantively
enacted tax rate) and goodwill.
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29. Acquisitions continued
1% increase in discount rates (£m)
1% decrease in discount rates (£m)
10% increase in cash flows (£m)
10% decrease in cash flows (£m)
Intangible
assets
(14.7)
17.7
13.9
(13.9)
The goodwill of £55.9 million arising from the acquisition has predominantly arisen due to the deferred tax on the
intangible assets which was not considered when pricing the acquisition, given there is no intention to sell the vast
majority of intangible assets. Goodwill also represents value stemming from future products developed, the acquired
workforce, and strategic benefits from being able to transfer existing Dechra products into Med-Pharmex’s under-utilised
facilities, reducing external manufacturing costs and reliance on Contract Manufacturing Organisations. This is aligned
with the market participation view of the acquisition. The goodwill is not tax deductible.
Inventory includes a fair value uplift of £3.3 million (USD4.0 million). A non-underlying charge of £3.3 million (USD4.0
million) relating to the fair value uplift on inventory that has been sold in the year has been taken to cost of sales in the
income statement.
The gross contractual receivables amount to £6.2 million, which are expected to be fully recoverable.
Acquisition and related costs (included in operating expenses) amounted to £2.8 million. Med-Pharmex’s results are
reported within the NA Pharmaceuticals Segment.
Med-Pharmex contributed £28.9 million revenue and £0.5 million to the Group’s underlying operating profit for the period
between the date of acquisition and the balance sheet date. If the acquisition had been completed on the first Day of
the financial year, the contribution to the Group revenues for the Year would have been £34.5 million and to the Group’s
underlying operating profit would have been £0.6 million. The reported operating loss after taking into account non-
underlying items for the amortisation of intangible assets, fair value inventory adjustment and acquisition and integration
costs would have be £10.6 million.
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Notes to the Consolidated
Financial Statements
30. Contingent Consideration
Contingent consideration – less than one year
Contingent consideration – more than one year
2023
£m
4.1
71.6
75.7
2022
£m
6.4
104.0
110.4
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
Injectable
Solution 1
£m
Mirataz
£m
Laverdia®
£m
Piedmont
£m
Other
£m
As at 1 July 2021
Additions
Remeasurement through intangibles
Cash payments: investing activities
Finance expense
Foreign exchange adjustments
At 30 June 2022
Additions
Group acquisitions
Remeasurement through intangibles
Remeasurement through income
statement
Cash payments: investing activities
Finance expense
Foreign exchange adjustments
At 30 June 2023
56.2
–
(12.0)
(14.6)
1.5
1.5
32.6
–
–
(13.6)
(0.9)
(2.2)
8.7
(1.9)
22.7
1.6
–
–
(0.8)
0.1
0.2
1.1
–
–
–
–
(0.6)
0.1
–
0.6
14.4
–
(2.9)
(0.7)
0.4
1.8
13.0
–
–
(4.9)
–
(1.7)
2.6
(0.4)
8.6
–
57.9
(7.9)
–
1.2
6.3
57.5
–
–
(28.2)
–
(0.1)
7.3
(1.2)
35.3
–
–
–
–
–
–
–
–
4.6
(0.7)
–
–
0.6
(0.4)
4.1
8.0
2.7
(1.4)
(3.6)
0.2
0.3
6.2
0.8
–
(2.2)
(0.3)
(1.5)
1.5
(0.1)
4.4
Total
£m
80.2
60.6
(24.2)
(19.7)
3.4
10.1
110.4
0.8
4.6
(49.6)
(1.2)
(6.1)
20.8
(4.0)
75.7
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 would be a corresponding opposite impact on the
intangible asset.
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
Tri-Solfen®
Injectable
Solution 1
Mirataz
Laverdia®
Piedmont
Other
1.8
(1.8)
(1.3)
1.4
(1.1)
1.2
N/A
N/A
–
–
–
–
0.8
(0.9)
(0.3)
0.3
(0.4)
0.5
1.2
(1.2)
(1.6)
1.7
(1.7)
1.9
0.3
(0.3)
(0.4)
0.1
(0.2)
0.2
0.2
(0.2)
(0.1)
0.1
(0.2)
0.2
Discount rate range in 2023 financial year
6.5%–21.0%
12.7% 10.1%–10.8% 6.5%–18.8% 6.7%–10.0% 11.0%–23.5%
Discount rate range in 2022 financial year
5.2%–25.0%
11.6% 7.3%–9.4% 5.1%–14.6%
N/A 10.2%–27.1%
Aggregate undiscounted cash outflow in relation to royalties (remaining term of royalty agreement)
2023 £m (years)
2022 £m (years)
39.5 (13.0)
50.4 (14.0)
N/A
N/A
13.6 (7.5)
19.8 (8.5)
23.3 (9.0)
51.3 (10.0)
7.2 (15.0)
N/A
0.9 (4.0)
4.6 (5.0)
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Overview
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Governance
Financial
Statements
Additional
Information
30. Contingent Consideration 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 royalties. During the year, the development milestones and sales performance
royalties have been remeasured. At 30 June 2023, the liability was discounted between 6.5% and 21.0%. 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 milestones is AUD11.0 million.
The consideration payable for Laverdia® is expected to be payable over a number of years, and relates to approval
milestones and sales performance royalties. During the Period, approval milestones and sales performance royalties
have been remeasured. At 30 June 2023, the liability was discounted between 6.5% and 18.8% reflecting the commercial
makeup of the arrangement similar to Tri-Solfen®. The gross value of the approval and sales performance (non-royalty)
milestones is USD40.5 million.
The consideration for products acquired under Piedmont Animal Health Inc is expected to be payable over fifteen years,
and relates to approval milestones and sales performance royalties under pre-existing licensing arrangements.
The consideration for Mirataz® 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.
31. Related Party Transactions
Subsidiaries
The Group’s ultimate Parent Company is Dechra Pharmaceuticals PLC. A list of subsidiaries is shown within the financial
statements of the Company on pages 244 to 246.
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 152 to 163. The remuneration of key
management is disclosed in note 8.
Associates
The Group holds a 49.5% stake in Medical Ethics Pty Ltd, which is the holding company of Animal Ethics Pty Ltd. 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. During the year AUD2.0 million (£1.1 million) of approval
milestones has been paid.
In 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. An associated royalty payment of AUD2.0 million (£1.1 million) has also been
paid in the Year.
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 lodged an appeal to the EU Court of Justice in August 2022.
At 30 June 2023, the Group considers that the potential amount of additional tax payable is between £nil and £2.75 million
(2022: £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 the full 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 2021 (£2.75 million) are recorded as current tax
receivables on the basis that the amount will be repaid in due course.
At 30 June 2023, contingent liabilities arising in the normal course of business amounted to £7.1 million
(2022: £12.4 million) relating to licence and distribution agreements. The stage of development of the projects
underpinning the agreements dictates that a commercially stable product is yet to be achieved, and accordingly an
intangible asset and a contingent consideration liability have not been recognised.
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Notes to the Consolidated
Financial Statements
34. Subsequent Events
On 20 July 2023, the shareholders voted in favour of the proposed cash offer for the Company by Freya Bidco Limited. The
pending acquisition of the Company is conditional upon respective antitrust approvals or the expiry of the applicable
waiting periods in the relevant jurisdictions.
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:
(Loss)/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
Loss on extinguishment of debt
Foreign exchange (gains)/ losses 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
2023
£m
6.3
158.8
165.1
13.7
4.9
183.7
(36.1)
158.8
0.8
(0.9)
0.6
(3.7)
20.8
140.3
2023
£m
755.2
430.1
(2.8)
71.4
1,253.9
909.7
1,081.8
2023
£m
165.1
1,081.8
15.3%
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%
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Overview
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Governance
Financial
Statements
Additional
Information
Company Statement of
Financial Position
At 30 June 2023
Fixed assets
Intangible assets
Tangible assets
Investments
Current assets
Trade and other receivables (includes amounts falling due after more than one
year of £364.8 million (2022: £51.1million))
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
v
vi
iv
vii
viii
x
ix
x
xii
2023
£m
4.3
2.0
920.1
926.4
446.4
49.6
496.0
(0.3)
(134.1)
361.6
1,288.0
(468.2)
819.8
1.1
596.0
0.6
82.6
148.4
37.8
(46.7)
139.5
819.8
2022
£m
6.2
1.6
735.7
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
The financial statements were approved by the Board of Directors on 12 October 2023 and were signed on its behalf by:
Ian Page
Chief Executive Officer
12 October 2023
Paul Sandland
Chief Financial Officer
12 October 2023
Company number: 3369634
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Company Statement of
Changes in Shareholders’ Equity
For the year ended 30 June 2023
Year ended 30 June 2022
At 1 July 2021
Profit for the year
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
Year ended 30 June 2023
At 1 July 2022
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
Dividends paid
Share-based payment charge
Shares issued
Total contributions by and distributions to
owners
At 30 June 2023
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
411.6
0.6
82.6
–
–
–
–
2.3
2.3
413.9
413.9
–
–
–
–
–
182.1
182.1
596.0
–
–
–
–
–
–
0.6
0.6
–
–
–
–
–
–
–
–
–
–
–
–
–
82.6
82.6
–
–
–
–
–
–
–
0.6
82.6
153.2
37.1
37.1
(44.8)
2.9
–
(41.9)
148.4
148.4
37.8
2.8
40.6
(51.7)
2.2
–
(49.5)
139.5
649.1
37.1
37.1
(44.8)
2.9
2.3
(39.6)
646.6
646.6
37.8
2.8
40.6
(51.7)
2.2
182.1
132.6
819.8
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.
236
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Overview
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Governance
Financial
Statements
Additional
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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 2023 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 £40.6 million (2022: £37.1 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.
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.
b. The requirements of IFRS 7 ‘Financial Instruments: Disclosures’
c. 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.
d.
e.
f.
The requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party transactions with wholly-owned
members of the Group.
g.
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 estimates or judgements.
Adoption of New and Revised Standards
A number of amendments to IFRSs became effective for the financial year beginning on 1 July 2022. The Company has
applied the amendments to IAS1, Practice Statement 2, IAS8 and IAS12 (deferred tax related to assets and liabilities
arising from a single transaction and International tax reform pillar 2 model rules). None of these amendments had
any impact on the Company’s accounting policies and did not require retrospective adjustments.
Investments
Investments held as fixed assets are stated at cost less any impairment losses. Where the consideration for the
acquisition of a subsidiary undertaking includes shares in the Company to which the provisions of section 612 of the
Companies Act 2006 apply, cost represents the nominal value of the shares issued together with the fair value of any
additional consideration given and costs. Where investments are denominated in foreign currencies, they are treated
as monetary assets and revalued at each year end date.
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Notes to the Company
Financial Statements
(i)
Principal Accounting Policies of the Company continued
Intangible Assets
Intangible assets are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged
to the income statement on a straight line basis over the estimated useful economic life of the asset. The estimated
useful lives are:
• product rights
• software
10 to 15 years
5 to 7 years
Tangible Assets
Tangible assets are stated at cost less accumulated depreciation and impairment losses. Depreciation is charged
to the income statement on a straight line basis over the estimated useful economic life of the asset. The estimated
useful lives are:
• short leasehold buildings
• motor vehicles
• plant and fixtures
period of lease
4 years
3 to 15 years
Dividends
Dividends are recognised in the year 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.
238
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
(i)
Principal Accounting Policies of the Company continued
Taxation
The income tax expense or credit for the year is the tax payable on the current year’s taxable income, based on
the applicable income tax rate for the UK, adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the end of the reporting period. Deferred tax is provided in full, using the
liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax
asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax is
recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or
directly in equity.
Financial Guarantee Contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies
within its Group, the Company considers these to be insurance arrangements, and accounts for them as such. In this
respect, the Company treats the guarantee contract as a contingent liability until such time as it becomes probable
that the Company will be required to make a payment under the guarantee.
Amounts Owed by Subsidiary Undertakings
Amounts owed by subsidiary undertakings are initially recognised at fair value and subsequently measured at this
value less loss allowances, calculated using the three stage IFRS 9 model.
(ii) Directors and Employees
Total emoluments of Directors (including pension contributions) amounted to £1.9 million (2022: £3.9 million).
Information relating to Directors’ emoluments, share options and pension entitlements is set out in the Directors’
Remuneration Report on pages 152 to 163. 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 1.1504 (2022: 1.1807).
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
2023
Number
2022
Number
86
86
2023
£m
7.0
1.0
0.5
2.3
10.8
71
71
2022
£m
7.9
1.5
0.4
2.9
12.7
The Group operates a stakeholder personal pension scheme for certain employees and contributed between 3% and
12% of pensionable salaries. Total pension contributions amounted to £0.5 million (2022: £0.4 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
Auditors’ remuneration – audit of these financial statements
Stock Code: DPH
31565 Dechra AR2023 Financials.indd 239
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2023
£m
0.1
0.3
2.3
0.1
2022
£m
0.1
0.2
2.6
0.1
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Notes to the Company
Financial Statements
(iv)
Investments
Cost
At 1 July 2022
Additions
At 30 June 2023
Impairment
At 1 July 2022
Impairment
At 30 June 2023
Net book value
At 30 June 2023
At 1 July 2022
Shares in
subsidiary
undertakings
£m
867.0
203.3
1,070.3
131.3
18.9
150.2
920.1
735.7
On 25 July 2022, the Company invested £176.0 million into the share capital of Dechra Investments Limited, a wholly
owned subsidiary. On 1 March 2023, the Company invested £24.5 million into the share capital of Dechra Holdings
Netherlands B.V., a wholly owned subsidiary as part of a wider restructuring of the Group. On 16 February 2023, Dechra
Finance Sterling Limited (DFS Limited) distributed its 14% stake in Dechra Finance Limited (DF Limited) to the Company,
taking the Company’s total shareholding in DF Limited to 100%. The addition to investments of £2.8m has been treated
as a return on capital and measured at fair value. A list of subsidiary undertakings is given in note (xiii).
Impairment
Investments in subsidiaries are assessed annually to determine if there is any indication that these may be impaired.
In March 2023, DF Limited reduced its share capital by EUR 18.3 million (£15.8 million) and paid a dividend equivalent
to the amount of the capital reduction to the Company. In addition, as a result of the unwinding of an internal group
financing arrangement, certain loan receivables and payables of an equal amount were settled and going forward
DF Limited’s future net interest cash inflows will be less. As a consequence the Company’s investment in this entity was
tested for impairment.
The recoverable amount of the investment was determined based on a value-in-use calculation. The recoverable
amount calculated in respect of DF Limited was £3.9m, which was £18.9 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 contractual cash flow projections based on financial budgets approved by management covering an
appropriate period. Given the nature of this entity, this period was considered to be the term of the financing loans.
A post-tax discount rate of 8.88% was used to calculate the recoverable amount. 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. No reasonable change in the discount rate used would result in a material change to the
impairment recognised. Following DFS Limited’s distribution of its 14% stake in DF Limited, the Company’s investment in
DFS Limited was considered for impairment and no impairment was identified.
(v)
Intangible Assets
Cost
At 1 July 2022
Additions
At 30 June 2023
Accumulated Amortisation
At 1 July 2022
Charge for the year
At 30 June 2023
Net book value
At 30 June 2023
At 30 June 2022
Product rights
£m
Software
£m
Total
intangible
assets
£m
5.1
–
5.1
5.1
–
5.1
–
–
14.3
0.4
14.7
8.1
2.3
10.4
4.3
6.2
19.4
0.4
19.8
13.2
2.3
15.5
4.3
6.2
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
(vi) Tangible Assets
Short
leasehold
buildings
£m
Motor
vehicles
£m
Plant and
fixtures
£m
Cost
At 1 July 2022
Additions
Disposals
At 30 June 2023
Accumulated Depreciation
At 1 July 2022
Charge for the year
Disposals
At 30 June 2023
Net book value
At 30 June 2023
At 30 June 2022
Net book value of right-of-use assets
At 30 June 2023
At 30 June 2022
Depreciation charge of right-of-use assets
2023
2022
1.6
0.4
–
2.0
0.4
0.2
–
0.6
1.4
1.2
1.4
1.2
0.2
0.1
0.4
0.4
(0.2)
0.6
0.2
0.1
(0.2)
0.1
0.5
0.2
0.5
0.2
0.1
0.1
Included in additions are £0.8 million (2022: £0.5 million) of right-of-use assets.
(vii) Trade and Other Receivables
Amounts owed by subsidiary undertakings
Group relief receivable
Deferred taxation (see note (xi))
Other receivables
Prepayments and accrued income
0.9
–
–
0.9
0.7
0.1
–
0.8
0.1
0.2
–
–
–
–
2023
£m
433.2
4.0
1.5
6.4
1.3
446.4
Total
£m
2.9
0.8
(0.2)
3.5
1.3
0.4
(0.2)
1.5
2.0
1.6
1.9
1.4
0.3
0.2
2022
£m
107.8
4.1
0.8
1.2
1.1
115.0
Included in debtors are amounts of £1.5 million (2022: £0.8 million) due after more than one year relating to deferred
tax assets.
Of the amounts owed by subsidiary undertakings, £363.9 million is due after more than one year (2022: £50.3 million).
This is made up of a balance of £2.8 million repayable in 2026 (interest of 1.50% above Mexican National Bank Base
Rate), £1.8 million repayable in 2027 (interest of 3.5% above Canadian Dollar offered rate), £205.3 million repayable
in 2030 (interest between 5.00 - 5.35%), and a balance of £154.0 million repayable in 2032 (interest of 2.25%). The
remaining amounts owed by subsidiary undertakings of £69.3 million are unsecured and repayable on demand. Of
the £69.3 million, £57.1 million attracts interest of between 0.976% and 1.98% above Risk Free Reference rate, with the
remaining trade balance of £12.2 million being interest free. The provision for impairment against amounts owed by
subsidiary undertakings is £4.1 million and have been calculated based on a six month period where repayable on
demand, and on a twelve month period for the remainder. Amounts owed by subsidiary undertakings are considered
to have low credit risk.
(viii) Cash at Bank and in Hand
Cash at bank and in hand
Stock Code: DPH
2023
£m
49.6
49.6
2022
£m
85.8
85.8
241
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Notes to the Company
Financial Statements
(ix) Trade and Other Payables
Trade payables
Other payables
Amounts due to subsidiary undertakings
Accruals and deferred income
2023
£m
1.8
0.1
122.9
9.3
134.1
2022
£m
1.0
0.1
139.7
6.5
147.3
Amounts due to subsidiary undertakings are primarily unsecured and repayable on demand. £84.0 million attracts
interest between 0.026% and 0.25% below Risk Free Reference rate; the remaining 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
2023 is nil per share (2022: 32.89 pence per share).
(x) Borrowings
Borrowings due within one year
Lease liabilities
Borrowings due after more than one year
Aggregate bank loan, senior loan notes and lease liabilities instalments repayable:
– between one and two years
– between two and five years
– over five years
Arrangement fees netted off
Total borrowings
2023
£m
0.3
0.3
263.8
208.5
(4.4)
468.2
468.5
2022
£m
0.2
0.1
68.3
83.3
(1.5)
150.2
150.4
On 31 March 2023, the Company entered into a new multi-currency Revolving Credit Facility Agreement (“RCF”) in
the maximum amount of £340.0 million and maturing 31 March 2028. This RCF is provided by a syndicate of banks
comprising BNP Paribas, CaixaBank SA UK branch, Crédit Industriel et Commercial, London Branch, Handelsbanken
Capital Markets, Handelsbanken plc, HSBC UK Bank plc, PNC Capital Markets LLC, Santander UK plc and The Governor
and Company of the Bank of Ireland. The covenant requirements in the RCF remain unchanged from the prior
Revolving Credit Facility Agreement (being Interest Cover in respect of any Relevant Period shall not be less than 4:1
and Leverage in respect of any Relevant Period shall not exceed 3:1).
The RCF uses Risk Free Reference (RFR) rates, with the relevant RFR rates for the principal Borrowings of the Company
being 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. The Margin on the
RCF is a minimum of 1.40% and a maximum of 2.30%, dependent upon the Leverage (the ratio of Adjusted Net Debt to
Adjusted underlying EBITDA) of the Group. At 30 June 2023, £220.4 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 2023.
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 2023 amounting to
£121.9 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).
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.
Both facilities remain fully drawn at 30 June 2023 amounting to £128.7 million. Interest is charged on the EUR50.0 million
senior secured notes at a fixed rate of 3.64% until maturity (July 2029), and on the EUR100.0 million senior secured notes
at a fixed rate of 3.93% until maturity (July 2032).
No interest has been capitalised during the year (2022: £nil).
The Company guarantees certain borrowings of other Group companies under the above facilities, which at 30 June
2023 amounted to £21.0 million (2022: £164.7 million).
242
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
(xi) Deferred Tax
At 1 July 2022 (included in trade and other receivables)
Recognised in the income statement
At 30 June 2023 (included in trade and other receivables)
£m
0.8
0.7
1.5
Deferred tax has been calculated using the rate of 25.0% based on the timing of when each individual deferred tax
balance is expected to reverse in the future as follows (2022: 19.0% or 25.0%):
Short term timing differences
Losses
Accelerated capital allowances
2023
£m
0.9
0.4
0.2
1.5
2022
£m
1.0
–
(0.2)
0.8
Deferred tax assets in relation to losses amounting to £nil (2022: £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
2023
2022
£m
Number
£m
Number
1.1
–
1.1
108,392,737
5,495,453
113,888,190
1.1
–
1.1
108,215,323
177,414
108,392,737
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.
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 mid market share price on 20 July 2022,
being the date of the placing announcement.
Share Options
Details of outstanding share options over ordinary shares of 1 pence at 30 June 2023 under the various Group share
option schemes are shown in note 26 to the Consolidated Financial Statements.
Stock Code: DPH
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243
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Notes to the Company
Financial Statements
(xiii) Subsidiary Undertakings
Operating Subsidiaries
Name
Country of
Incorporation Principal Activity
Registered Address
Shareholder
Ampharmco, LLC *
USA
Manufacturer of veterinary
pharmaceuticals
1401 Joel East Road, Fort Worth,
TX76140-6003, United States
Dechra Holdings US Inc
AST Farma B.V. *
The
Netherlands
Marketer of veterinary
pharmaceuticals and distributor
of veterinary pharmaceuticals
and equipment
Wilgenweg 7, 3421TV Oudewater,
The Netherlands
Dechra Finance B.V.
Cephazone Pharma
LLC*
USA
Dechra Brasil
Produtos
Veterinarios LTDA *
Dechra
Development LLC *
Brazil
USA
Dechra Limited *
England and
Wales
Developer, regulatory and
manufacturer of veterinary
pharmaceuticals
Principal Place of Business: 7015
College Blvd, Suite 510, Overland
Park KS 66211, United States
Developer, regulatory,
manufacturer and marketer of
veterinary pharmaceuticals
Travessa Dalva de Oliveira,
237, Industrias Leves, Londrina,
Parana 86030-370, Brazil
Contract regulatory and product
development services for the
Group
Principal Place of Business: 7015
College Blvd, Suite 510, Overland
Park KS 66211, United States
Med-Pharmex Inc.
AST Farma B.V.
Dechra Holdings US Inc
Developer, regulatory, product
development, manufacturer
and marketer of veterinary
pharmaceuticals
Snaygill Industrial Estate,
Keighley Road, Skipton, BD23
2RW, United Kingdom
Dechra Investments
Limited
Dechra Finance
Australia Limited *
England and
Wales
Financial services
Dechra Finance
B.V. *
The
Netherlands
Financial services and Holding
Company
Dechra Finance
Ireland Designated
Activity Company *
Republic of
Ireland
Dechra Finance
Limited
England and
Wales
Financial services
Financial services
Dechra Finance
Sterling Limited
England and
Wales
Financial services
Dechra Productos
Veterinarios, S.A. de
C.V. *
Mexico
Developer, regulatory and
marketer of veterinary
pharmaceuticals
24 Cheshire Avenue, Cheshire
Business Park, Lostock Gralam,
Northwich, CW9 7UA, United
Kingdom
Pettelaarpark 38, 5216PD
‘s-Hertogenbosch, The
Netherlands
Dechra Limited
Dechra Holdings
Netherlands B.V.
6th Floor, 2 Grand Canal Square,
Dublin 2, Ireland
Dechra Limited
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
Campus Corporativo Coyoacán,
Avenida Coyoacán, número
1622, Colonia Del Valle, C.P.
03100 Delegación Benito Juárez,
Ciudad de México, México
Dechra
Pharmaceuticals PLC
Dechra
Pharmaceuticals PLC
Dechra Limited
Dechra Regulatory
B.V. *
The
Netherlands
Regulatory
Dechra Veterinary
Products (Australia)
Pty Limited *
Australia
Developer, regulatory,
manufacturer and marketer of
veterinary pharmaceuticals
Handelsweg 25, 5531AE Bladel,
The Netherlands
Dechra Holdings
Netherlands B.V.
2 Cal Close, Somersby NSW 2250,
Australia
Dechra Holding
Australia Pty Limited
Dechra Veterinary
Products GmbH *
Dechra Veterinary
Products N.V. *
Dechra Veterinary
Products, Inc *
Austria
Belgium
Canada
Marketer of veterinary
pharmaceuticals and pet diets
Hintere Achmhlerstrasse 1a, 6850
Dornbirn, Austria
Dechra Limited
Marketer of veterinary
pharmaceuticals and pet diets
Achterstenhoek 48, 2275 Lille,
Belgium
Eurovet Animal Health
B.V.
Marketer of veterinary
pharmaceuticals and pet diets
100 King Street West, Suite 6100, 1
First Canadian Place, Toronto ON
M5X 1B8, Canada
Dechra Limited
Dechra Veterinary
Products A/S
Denmark
Marketer of veterinary
pharmaceuticals and pet diets
Mekuvej 9, DK-7171 Uldum,
Denmark
Dechra Veterinary
Products Limited *
England and
Wales
Marketer of veterinary
pharmaceuticals and pet diets
24 Cheshire Avenue, Cheshire
Business Park, Lostock Gralam,
Northwich, CW9 7UA, United
Kingdom
Dechra
Pharmaceuticals PLC
Dechra Veterinary
Products A/S
Dechra Veterinary
Products Oy *
Finland
Marketer of veterinary
pharmaceuticals and pet diets
Linnoitustie 4, 02600 Espoo,
Finland
Dechra Veterinary
Products A/S
244
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
(xiii) Subsidiary Undertakings continued
Operating Subsidiaries
Name
Dechra Veterinary
Products SAS *
Dechra Veterinary
Products
Deutschland
GmbH*
Dechra Veterinary
Products S.r.l. *
Country of
Incorporation Principal Activity
Registered Address
Shareholder
France
Germany
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, 88326, Aulendorf,
Germany
Eurovet Animal Health
B.V.
Italy
Marketer of veterinary
pharmaceuticals and pet diets
Via Agostino da Montefeltro 2,
10134 Torino, Italy
Dechra Limited
Dechra Veterinary
Products B.V. *
The
Netherlands
Marketer of veterinary
pharmaceuticals and pet diets
Wilgenweg 7, 3421TV Oudewater,
The Netherlands
Dechra Veterinary
Products A/S
New Zealand Marketer of veterinary
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. *
Norway
Poland
Spain
Sweden
USA
Korea
The
Netherlands
Genera d.d. *
Croatia
Genera d.o.o.
Sarajevo *
Bosnia and
Herzegovina
Genera Pharma
d.o.o. *
Genera Sl d.o.o. *
Serbia
Slovenia
Le Vet. B.V. *
The
Netherlands
Med-Pharmex, Inc * USA
pharmaceuticals and distributor
of veterinary pharmaceuticals
and equipment
Marketer of veterinary
pharmaceuticals and pet diets
Marketer of veterinary
pharmaceuticals and pet diets
Marketer of veterinary
pharmaceuticals and pet diets
Marketer of veterinary
pharmaceuticals and pet diets
Marketer and manufacturer of
veterinary pharmaceuticals and
pet diets
Marketer of veterinary
pharmaceuticals and pet diets
Holding Company, developer,
regulatory and manufacturer of
veterinary pharmaceuticals
Holding Company, developer,
regulatory, manufacturer
and marketer of veterinary
pharmaceuticals and crop
protection
Marketer of veterinary
pharmaceuticals
Marketer of veterinary
pharmaceuticals
Marketer of veterinary
pharmaceuticals
Marketer of veterinary
pharmaceuticals
Developer, regulatory and
manufacturer of veterinary
pharmaceuticals
Med-Pharmex
Property LLC *
USA
Property Company
Level 11, 41 Shortland Street,
Auckland, 1010, New Zealand
Dechra Holding
Australia Pty Limited
Henrik Ibsens Gate 90, Postboks
2943 Solli, 0230 Oslo, Norway
1st Floor, 61 Moldlinska Str., 03-199
Warsaw, Poland
C Tunset, Num. 20, Planta 6,
Barcelona, 08006, Spain
Dechra Veterinary
Products A/S
Dechra Limited
Dechra Veterinary
Products A/S
Stora Wäsby Orangeriet 3,
Upplands Väsby, 194 37, Sweden
Principal Place of Business: 7015
College Blvd, Suite 525, Overland
Park KS 66211, United States
4, 5th floor, Royal Building, 19,
Saemunan-ro 5-gil, Jongno-gu,
Seoul, Korea
Handelsweg 25, 5531AE Bladel,
The Netherlands
Dechra Veterinary
Products A/S
Dechra Holdings US Inc
Dechra Limited
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
Gostivarska 70, Vozdovac, 11000
Beograd, Serbia
Parmova Ulica, Ljubljana,
Slovenia
Wilgenweg 7, 3421TV Oudewater,
The Netherlands
Principal Place of Business: 7015
College Blvd, Suite 510, Overland
Park KS 66211, United States
Principal Place of Business: 7015
College Blvd, Suite 510, Overland
Park KS 66211, United States
Genera d.d.
Genera d.d.
Genera d.d.
Le Vet Beheer B.V.
Med-Pharmex Holdings,
Inc
Med-Pharmex Holdings,
Inc
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.
Stock Code: DPH
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Notes to the Company
Financial Statements
(xiii) Subsidiary Undertakings continued
Other subsidiaries
Name
Country of
Incorporation
Principal Activity
Registered Address
Arnolds Veterinary
Products Limited *
England and
Wales
Non-trading
Black Griffin
Holdings, LLC *
Broomco 4263
Limited *
Dales
Pharmaceuticals
Limited *
Dechra Holding
Australia Pty Limited
*
Dechra Holdings
Netherlands B.V.
Dechra Holdings US
Inc *
USA
Holding Company
England and
Wales
England and
Wales
Non-trading
Non-trading
Australia
Holding Company
The
Netherlands
USA
Holding Company
Holding Company
Dechra Investments
Limited
England and
Wales
Holding Company
Switzerland
Holding Company
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9 7UA,
United Kingdom
1401 Joel East Road, Fort Worth 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
Shareholder
Veneto Limited
Dechra Holdings US
Inc
Veneto Limited
Veneto Limited
Dechra Limited
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
Messeplatz 10, CH-4058, Basel, Switzerland
Dechra
Pharmaceuticals PLC
Dechra Limited
Dechra
Pharmaceuticals PLC
Dechra Limited
Dechra Veterinary
Products Suisse
GmbH *
DermaPet, Inc *
Dragon Fire
Holdings, LLC *
Farvet Laboratories
B.V. *
Le Vet. Beheer B.V. *
Med-Pharmex
Holdings, Inc *
USA
USA
The
Netherlands
The
Netherlands
Non-trading
Holding Company
Non-trading
Principal Place of Business: 7015 College
Blvd, Suite 525, Overland Park KS 66211,
United States
1401 Joel East Road, Fort Worth TX 76140-
6003, United States
Handelsweg 25, 5531AE Bladel,
The Netherlands
Holding Company
Wilgenweg 7, 3421TV Oudewater,
The Netherlands
Dechra Veterinary
Products LLC
Dechra Holdings US
Inc
Eurovet Animal Health
B.V.
Dechra Finance B.V.
USA
Holding Company
Piedmont Animal
Health Inc *
USA
Non-trading
Veneto Limited
England and
Wales
Holding Company
Principal Place of Business: 7015 College
Blvd, Suite 525, Overland Park KS 66211,
United States
Dechra Holdings US
Inc
Principal Place of Business: 7015 College
Blvd, Suite 510, Overland Park KS 66211,
United States
Dechra Veterinary
Products LLC
24 Cheshire Avenue, Cheshire Business
Park, Lostock Gralam, Northwich, CW9 7UA,
United Kingdom
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 20 July 2023, the shareholders voted in favour of the proposed cash offer for the Company by Freya Bidco Limited. The
pending acquisition of the Company is conditional upon respective antitrust approvals or the expiry of the applicable
waiting periods in the relevant jurisdictions.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
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
(Loss)/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
2023
£m
761.5
165.1
107.9
95.09
94.57
12.50
6.3
(27.9)
(24.59)
(24.59)
1,101.5
467.9
(164.0)
(650.2)
755.2
2022
£m
681.8
174.3
131.7
121.57
120.84
44.89
95.5
58.2
53.72
53.40
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
848.9
444.4
(158.7)
(467.8)
666.8
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
Consolidated Statement of Cash Flows
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash (outflow)/inflow from financing activities
63.6
(426.2)
316.5
122.9
(78.3)
(46.1)
89.1
(136.1)
(55.1)
106.4
(81.5)
118.9
81.8
(61.9)
(20.1)
Stock Code: DPH
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Additional
Information
Contents
Glossary
Shareholder Information
Advisers
250
252
IBC
The Veterinary Perspective
Read more about us at:
www.dechra.com
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Stock Code: DPH
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Glossary
The following is a glossary of a number of the terms and
acronyms which can be found within this document:
ABC
Anti-Bribery and Anti-Corruption
AER
Actual Exchange Rates
ANZ
Australia and New Zealand
APM
Alternative Performance Measures
API
Active Pharmaceutical Ingredient
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
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
ERP
Enterprise Resource Planning
ESEF
European Single Electronic Format
ESG
Environmental, Social and Governance
ESPP
Employee Stock Purchase Plan
ETR
Effective Tax Rate
Cash Conversion
Cash generated from operating activities before interest and
taxation as a percentage of underlying operating profit
EU Pharmaceuticals
European Pharmaceuticals Segment comprising DVP EU
and DPM&S
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
Dechra Values or Values
Dedication, Enjoyment, Courage, Honesty, Relationships and
Ambition
DPM&S
Dechra Pharmaceuticals Manufacturing and Supply
DTR
Disclosure and Transparency Rules
DVP
Dechra Veterinary Products
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
FRC
Financial Reporting Council
FRS
Financial Reporting Standards
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
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
FTSE 250 Index
An index comprising the 101st to 350th largest companies
listed on the London Stock Exchange in terms of their market
capitalisation
Non-Executive Directors
The Non-Executive Directors of the Company, currently Alison
Platt, Lisa Bright, Lawson Macartney, John Shipsey and Geeta
Gopalan
GAAP
Generally Accepted Accounting Principles
GDPR
General Data Protection Regulation
GHG
Greenhouse Gas
GMP
Good Manufacturing Practices
GPTW
Great Place To Work
HR
Human Resources
IFRSs
International Financial Reporting Standards
Interest Cover (covenants)
The ratio of Adjusted underlying EBITDA (on a pre IFRS16 basis)
to Net Finance charges
International Pharmaceuticals
International Pharmaceuticals Segment comprising DVP
International
IPO
Initial Public Offering
IT
Information Technology
KPI
Key Performance Indicator
Leverage
The ratio of Net Debt to underlying EBITDA
Leverage (covenants)
The ratio of Adjusted Net Debt (on a pre IFRS16 basis) to
Adjusted underlying EBITDA (adjusted for the impact of
acquisitions and on a pre IFRS16 basis).
LPI
Learning and Performance Institute
LTA
Lost Time Accident
LTAFR
Lost Time Accident Frequency Rate
LTIP
Long Term Incentive Plan
NCSC
National Cyber Security Centre
NA Pharmaceuticals
North American Pharmaceuticals Segment comprising DVP
US, Canada and Mexico
OECD
The Organisation for Economic Cooperation and
Development
Ordinary Share
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 comprise 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
ROCE
Return On Capital Employed
RPI
Retail Price Index
SAYE
Save As You Earn Share Scheme
SBTi
Science Based Targets 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
TPRM
Third Party Risk Management
TSR
Total Shareholder Return
Stock Code: DPH
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Shareholder
Information
Annual General Meeting
The 2023 Annual General Meeting of the Company will be held
at 11.00 am on 13 December 2023 at Dechra Pharmaceuticals
PLC, 4 Cheshire Avenue, Cheshire Business Park, Lockstock
Gralam, Northwich, CW9 7UA. The notice of the 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.
• 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 offers a Share Dealing
Service to buy or sell shares. Further information can
be obtained from www.shareview.co.uk/dealing or by
telephoning 0371 384 2030.
Telephone
share
dealing
Internet
share
dealing
Postal
share
dealing
Fee (on value of
transaction) up to £50,000
Balance over £50,000
1.5%
0.25%
1.5%
0.25%
1.9%
1.9%
Minimum charge
£60.00
£45.00
£70.00
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.
Stamp duty charge
(purchases only)
0.5%
0.5%
0.5%
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;
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.
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Overview
Strategic
Report
Governance
Financial
Statements
Additional
Information
Advisers
Independent Auditor
PricewaterhouseCoopers LLP
One Chamberlain Square
Birmingham
B3 3AX
Stockbroker & Financial Advisers
Investec Bank plc
30 Gresham Street
London
EC2V 7QN
Lawyers
DLA Piper UK LLP
2 Chamberlain Square
Birmingham
B3 3AX
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Financial PR
TooleyStreet Communications
15 Colmore Row
Birmingham
B3 2BH
Principal Bankers
Bank of Ireland (UK) plc
40 Mespil Road
Dublin
Ireland
B3 2QZ
BNP Paribas, London Branch
3rd Floor
10 Harewood Avenue
London
NW1 6AA
Caixa Bank S.A.
UK Branch
63 St. Mary Axe
London
EC3A 8AA
Crédit Industriel et Commercial London Branch
Finsbury Circus House
15 Finsbury Circus
London
EC2M 7EB
Handelsbanken
3rd Floor
101 Barbirolli Square
Manchester
M2 3BG
HSBC Bank plc
Midlands Corporate Banking Centre
120 Edmund Street
Birmingham
B3 2QZ
PNC Bank
10851 Mastin Street
Suite 700
Overland Park
Kansas 66210
USA
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.
The production of this report supports the work of the Woodland Trust,
the UK’s leading woodland conservation charity. Each tree planted
will grow into a vital carbon store, helping to reduce environmental
impact as well as creating natural havens for wildlife and people.
Stock Code: DPH
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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
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View our online Annual Report at:
dechra.annualreport2023.com
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