Q.How are the recent acquisitions progressing and is there anything else in the pipeline?
A. I will start with the acquisitions made in the previous financial year to the year being reported which would be AST/Le Vet. AST now has been completely amalgamated with our Dutch commercial business and we are now beginning to see revenue synergies from the enlarged product offering. The most significant part of this acquisition was Le Vet. The Le Vet products, to remind you, were sold through Dechra but also about 80% of them were sold through our competitors. We have now disintermediated about two thirds of those distribution agreements and have now started to bring the products back in-house to sell through our own sales organisations in Dechra livery and, clearly, there is a big uplift to margin by us doing that. We are actually delivering everything that we promised shareholders at the time of acquisition and that can be seen within the growth that we are starting to deliver within our European Segment in the second half of the financial year being reported and from which we will start to realise a greater benefit in the next financial year. So, all in all, it has been a terrific acquisition. The more recent significant acquisition has been Venco, a vaccine business in Brazil. A great step forward into what is now the third largest animal health country in the world, an excellent product portfolio and since working with the management team since we owned it, we have realised that we have got a great management team there as well. We will continue to develop the business, particularly looking at Brazil in the short term because there is a little bit of investment required over the next few years in the facility, particularly the upstream facility, the way that the vaccines are actually produced needs a little bit of investment to improve the quality systems and then we will hopefully get to expand the product sales into other South American markets. In terms of the pipeline, yes, we always have companies that we can talk to that we see as being ideal acquisition opportunities. Unfortunately, it is not an exact science; you are never entirely sure whether a business is going to sell or if they do sell, whether you will be considered the right partner. We do win more than our fair share of deals and we hope that that will continue, but we cannot rely on acquisitions because it is not a certainty, but to caveat that, we do and to repeat, we do have a decent pipeline and I would be very disappointed if we cannot bring more companies into the Group over the next few years.
Q.You have had a number of significant management changes recently; does this suggest some underlying issues?
A. No, absolutely categorically not. As you are aware Dechra has grown rapidly over the last few years. Commensurate with that growth you have to develop your sales team and add new skills into the Senior Executives. We did lose the Chief Financial Officer, Richard, recently, but that was nothing to do with the business in terms of disagreements or performance, but was entirely a personal decision. We have also appointed recently to the Senior Executive Team a new Manufacturing and Supply Chain Director which will add new skills into an ever expanding supply chain and complexity within our Manufacturing organisation. So, no, there is absolutely no reflection in the performance or issues within the business at all, it is all about strengthening the team to make us suitable for the future growth that is going to come.
Q.Can you provide the background and any more detail on the Akston licensing deal?
A. The first thing I would like to say is that we are really delighted to have completed this deal. We have been working hard for a long time now to convince Akston that we are the right partners from a sales perspective, from our market reach, but also because we are a good company to work with, we make decisions quickly and also, of course, because our key area of focus is endocrinology. The product is extremely exciting; it is the last major step that we need to complete our endocrine portfolio; it could be by far the biggest product in our portfolio once approved; it could change the welfare of pets with diabetes, both dogs and eventually cats; and could be a major product for veterinarians to dispense. Currently, insulins are given on a daily basis which you can imagine giving an injection to a dog every day is not a simple process, so to change that to a weekly injection is a major step forward for compliance; it makes it easier for the pet and it makes it easier for the pet owner. Whilst there is a big step up in our development costs over the next few years, the returns on this product could be huge and, as I said at the outset, it could become the biggest product in our portfolio and could help to drive the novel products within our portfolio.