Shares in takeover target Dechra fell after the pet healthcare company warned its annual profits will miss City forecasts.
The company, which makes medicines for pets and treatments for farm animals, said wholesalers in the US and the UK are holding less inventory, creating a blip in sales.
The impact of destocking ‘has been deeper and longer than initially expected’, the FTSE 250 group told investors, having ‘material’ impact on its performance for the first three months of the year.
Dechra said wholesalers in the US and the UK are holding less inventory, creating a blip in sales
Dechra, which is in talks with Swedish private equity group EQT about a £4.6billion takeover bid, now expects profit for the full-year to come in below £186million.
Analyst forecasts had been for profit to be between £186million and £199million.
The trading update sent Dechra shares falling 6 per cent to £34.26 in early trading on Monday.
However, they remain 30 per cent higher since the start of the year, having surged 33 per cent after EQT’s takeover proposal.
EQT has until 2 June to make a firm offer or walk away. Dechra said there was no certainty that any firm offer will be made.
During the pandemic lockdowns, there was a boom in pet ownership, boosting the fortunes of pet companies like Dechra.
But the group said the trading environment since the start of the year had been more ‘volatile and challenging’ than anticipated.
The market seems to be slowing due to the cost-of-living crisis that has prompted some families to spend less on their dogs and cats’ wellbeing.
However, Dechra said there were encouraging signs that the situation was improving both in the US and the UK.
The group insisted that it remained ‘very well positioned’ to continue to grow over the medium and longer term despite the ‘unprecedented’ and ‘short term trading headwinds’.
‘The fundamentals of the business and strategy remains strong, our underlying markets remain in structural growth, we continue to grow in our chosen markets and we have an established, highly experienced and focused management team,’ it told shareholders.
‘Our strategy is robust, including a very attractive development pipeline of new products to underpin our future growth, supported by a strong balance sheet.’
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