Broker snap: Dechra eyes European expansion

1st Dec 2010 12:46

Dechra Pharmaceuticals' latest acquisition has prompted finnCap to increase its expectations as the veterinary products group brings more products into its portfolio, offering the opportunity to expand its market.Dechra has bought the private veterinary pharmaceutical company Genitrix for £5.4m, with an additional contingent £0.8m which is linked to sales targets.Genitrix recorded revenues of £2.4m in its last financial year, "which will obviously augment Dechras' top line," says analyst Keith Redpath.While there will be some minimal restructuring costs, the broker expects the acquisition to add about £0.5m to operating profit in the year ending June 2012. "This will fall through to increased earnings per share, making the deal earnings-enhancing", Redpath adds.Additionally, Dechra hopes to put new products (from Genitrix) through EU approval processes, expanding its opportunities in Europe.The broker is currently reviewing its forecasts but expects to upgrade them. For the time being its 620p target price and 'buy' recommendation are retained.