The shares of Dechra (LSE: DPH) slumped 7% to 694p during early London trade this morning after the pet treatment specialist revealed 13% annual revenue growth. The market was expecting greater combined results after Dechra’s €135m acquisition of Eurovet last year.
The US market, where pet numbers dwarf the UK, remains Dechra’s most obvious growth opportunity. Impressively, the company’s two most important treatments Vetoryl and Felimazole grew sales by 11% and 16% respectively in the States.
Dechra’s lucrative pet pharmaceuticals business was originally developed from cash flows siphoned from its low-margin wholesale and distribution division, NVS. Today, Dechra announced it would sell this services division, which still provides the majority of the company’s revenues, to Patterson Companies (NASDAQ: PDCO.US) in a deal worth £87.5m.
Ian Page, Dechra’s chief executive commented:
“The sale of our Services Segment represents a key strategic development for Dechra. It will create a focused, international, branded veterinary products business, with the resources to pursue further organic and acquisitive growth and thereby generate increased value for shareholders.”
Dechra will use part of the proceeds to pay down its net debt position, which stands at around £100m following a string of acquisitions in recent years.
With a market cap of £604m, Dechra’s shares trade at 18 times expected earnings, and offer a prospective dividend yield of 1.9%.
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> Mark does not own any share mentioned in this article.
