Unleashed... drugs for pets firm booms
DOGS have always played an important role in Korean life. Once, they were a feature on restaurant menus. Today, they are more often seen at the end of a lead.
The shift is part of a broader trend across emerging markets, as pet ownership becomes something of a status symbol among aspiring consumers.
The more people own cats and dogs, the more they spend on looking after them, to the benefit of Dechra Pharmaceuticals, which makes and sells drugs for pets and other animals.
Midas originally recommended the stock in 2008, when it was £3.97. We recommended it again in 2015, by which time the price had surged to £9.85. Last Friday, the shares closed at £28.90, having almost tripled in the past four years alone.
Looking ahead, long-standing chief executive Ian Page is optimistic and recent figures suggest he has good reason to be.
Annual results to June 30, released earlier this month, showed a 17.5 per cent increase in revenues to £482 million, a 27 per cent rise in underlying profits to £127 million and a 24 per cent hike in the dividend to 31.6p. The company’s performance is all the more impressive, as many peers have struggled recently, and Dechra itself has had to cope with increasingly stringent regulation and potential issues around a No Deal Brexit.
The group’s resilience derives largely from a simple but effective strategy: listening to what vets need and creating products that satisfy those needs, particularly in specialist areas. Dechra’s best-selling drug, for example, is Vetoryl, used to treat dogs with Cushing’s disease, a hormonal disorder.
Initially, Dechra operated only in the UK. Today, it sells to vets around the world. Just over 70 per cent of sales relate to pets, but the group generates strong growth from farm animal and horse products too. Dechra manufactures half the drugs that it sells and buys the rest from third-party producers.
Over time, Page would like to make more drugs in-house and the company has a strong pipeline, including a diabetes treatment for cats and dogs that can be injected weekly instead of daily – a clear bonus for pets and their owners.
Growth is also likely to come from more geographic expansion and well-chosen acquisitions, as Page has bought several businesses over the years and successfully integrated them into the business. Brokers forecast a continued increase in sales, profits and dividends next year and beyond.