Dechra makes good money by not frightening the horses. Its portfolio of animal health products is full of equine sedatives, treatments for fat cats and endocrinological imbalances in dogs. It is all low-key stuff compared with the blockbuster pet cures touted by big animal health companies such as Elanco and Zoetis.
Still, the Cheshire company’s revenues increased 18 per cent to £482m in the year to June while earnings were up 27 per cent at £127m. Group-wide operating margins were ahead of analysts’ forecasts at 26 per cent. They were close to 33 per cent in Europe, which brings in two-thirds of sales and profits. North America makes up the rest.
Small as Dechra may be, it is resilient. Management consultants — which make money from borrowing clients’ watches to tell them the time, or so the joke goes — talk of corporate resilience with the same awe of psychologists writing about personality types strengthened by trauma. This summer McKinsey consultants remarked that a 10th of companies emerged from the 2008 recession in better shape than their peers. In essence, it said these “resilient” businesses were quick to cut costs, clean up their balance sheets, find ways to retain high-value customers and at least preserve profitability if not increase it. And at the first sign of an uptick, they mopped up the competition.
In fact, Dechra had a mediocre financial crisis. But in the past five years it has doubled revenues and tripled its earnings, partly organically and partly by acquisition. Its shares quadrupled without anyone much noticing. Until last year that is, when it was hit by adverse publicity concerning one of its horse products in the US, restocking costs and fears that vets were banding together to cut prices. Ian Page, long-serving chief executive, outlined the £1m it would cost to duplicate its Skipton product testing facilities in the Netherlands in the “likely” event of a hard Brexit. The shares were savaged and have not quite recovered.
Future progress may be lumpy, too. Regulatory standards on petcare treatments are tightening all the time. Debt, albeit at easily managed levels, has been inching up. Dechra also has big plans to take the manufacture of products in-house from contractors while investing more in innovation.
The shares are not cheap. The group’s enterprise value is about 22 times forecast earnings before tax and other nasties. Nonetheless, that is on a par with rivals and Dechra is a good candidate for membership of Lombard’s Keep Calm and Carry On Index.
Billionaire no longer
It must be time to stop referring to Mike Ashley as the bashful billionaire. Shares in Sports Direct, in which he owns a 60-odd per cent stake, are worth £1.32bn in total. That is a quarter of their peak above 800p a share five years ago. This follows the tumult over Sports Direct’s acquisition of lossmaking House of Fraser last year, the delayed publication of its full-year results and the resignation of Grant Thornton as auditor expected next week.
It doesn’t stop there. Mr Ashley risked losing his Newcastle United shirt — as well as his investors’ — buying shares in Debenhams and countless other bricks’n’mortar emporiums. Sports Direct’s 29 per cent stake in Debs is all but worthless. But Mr A is not letting go. He is funding landlords who are challenging the decision of Deb’s creditors to approve a company voluntary arrangement or CVA in court. This allows the department store to cut rents and shut shops.
The Debs court crew is arguing that Mr Ashley wants to drive House of Fraser’s chief competitor into the ground and pick up its assets on the cheap. Viewed through another prism, Mr Ashley’s acquisition has been a Canutish effort to take control of the high street. But the problems of land-based retailing are too great for one tycoon. The tide was against him as it was for King Canute, who had a more perceptible sense of self-irony. Mr A will soon embody the old saw, if you want to be a media-shy millionaire, start bashfully with a billion.
Last year the International Banknote Society’s annual prize went to Bank of Canada’s $10 bill, printed by the Canadian Bank Note Co, for arresting images of social justice. This year Ulster Bank’s £5 note, printed by De La Rue and with jauntier pictures of flowers and beaches, is in with a chance. Not De La Rue’s shares, though, which have halved since June.
Now Kevin Loosemore, Micro Focus’s executive chairman, is to be chairman. Aside from finding a new chief executive, he must manage the decline of a currency business that prints almost a third of the world’s banknotes. He should know what won’t work. Last week Micro Focus, acquirer of mature software businesses, issued a whopping profit warning that knocked a third off its shares. That wasn’t exactly prizewinning.
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