On behalf of the Board, I am pleased to present Dechra’s Governance report for the year ended 30 June 2022. This is my first report on behalf of the Board, following my appointment as Chair on 1 January 2022.
There have been a number of Board changes in the 2022 financial year. In September 2021, the Company announced that Tony Rice, who had been Chair for five years, wished to retire from the Board to devote more time to family and other business and charitable activities. Tony retired on 31 December 2021.
Denise Goode decided to tender her resignation, in November 2021, due to other commitments, and the Board agreed that Julian Heslop should resume the role of Audit Committee Chair whilst a successor was appointed. After an extensive search, John Shipsey was appointed as a Non-Executive Director on 1 June 2022. He brings a wealth of financial and commercial experience to the business following his recent tenure as Chief Financial Officer at FTSE100 Smiths Group PLC and a number of senior finance and strategy roles over the last 20 years. We announced in May 2022 that John would replace Julian Heslop as Audit Committee Chair on 1 September 2022, at which point Julian was subsequently asked by the Committee to sign the Audit Committee Report for the financial year ended 30 June 2022, and has, therefore, agreed to defer his retirement to 5 September 2022.
As communicated in previous Committee reports, the Remuneration Committee Chair (and previously the Senior Independent Non-Executive Director), Ishbel Macpherson, will be retiring in the 2023 financial year. Cognisant of the Parker Review requirements and the new listing requirements regarding diversity targets, the Committee has retained a recruitment consultant who specialises in diverse recruitment to find our new Chair of Remuneration. Following my appointment as Chair, Lawson Macartney took over the role of Senior Independent Director earlier this year.
Purpose and Culture
Our Purpose is clearly defined and underpinned by our Culture and Values. Further details can be found on pages 10, 54 and 55, and 93. Our Values, entrepreneurial attitude and agile approach are the backbone of our Culture. We expect our people to make a difference by working together, and we support them by providing clear guidance on expectations.
This year marks Dechra’s 25th anniversary. Our Values, our Culture, people, and strategy have established Dechra as one of the leading and fastest growing global animal health companies in the world and it was a privilege to meet the 100 colleagues who attended the Global Team Meeting in Cheshire recently to celebrate this milestone.
During the year, the Board attended its first site visit in over two years at our site in Uldum, Denmark. Whilst the COVID-19 pandemic restricted our ability to travel, the Board made good use of technology to stay connected to colleagues around the Dechra network.
Throughout the year, we have routinely reviewed the policies which support and enable our Values. Core to this is our Code of Conduct, which includes a set of simple one page policy documents. A Code of Conduct e-learning course was rolled out globally in January 2022. The Board approved the launch of a third party confidential hotline, which went live globally in April 2022, and is available to both employees and Dechra’s third parties. Reports can be submitted through an online portal, which is available in 46 languages, or via a hotline, which is manned twenty-four hours a day and is supported in 170 languages.
Stakeholders and Section 172 Companies Act
The impact of our decisions on our key stakeholders is front of mind in our decision making. Details of how we consider stakeholders in the Board’s decisions and approvals of material transactions, our engagement with stakeholders and our approach to section 172 of the Companies Act 2006 can be found on pages 52 to 63 and 96 to 98
The current financial year has seen our continued focus on both strengthening the core operations and growing the business. We approved important investments in manufacturing enabling greater resilience and reducing reliance on third party suppliers. We secured the worldwide rights to verdinexor, a novel treatment of all forms and stages of canine lymphoma in dogs.
To achieve the Group’s aim of ensuring diversified sources of funding and to extend the Group’s debt maturity profile, the Board approved a private placing of EUR50 million seven year and EUR100 million ten year new senior unsecured notes, which was signed post year end on 14 July 2022. All proceeds from the placement were used to repay existing debt on the Group’s Revolving Credit Facility
Post year end, we also approved a placing of 5,247,813 new ordinary shares and a retail offer of 116,870 new ordinary shares. In aggregate, the placing shares and the retail offer shares represented approximately 4.95% of the Company’s existing issued share capital, raising gross proceeds of £184.0 million for the Company. The proceeds were used to fund the acquisition of Piedmont Animal Health, Inc. a research and development business with an active product pipeline in North Carolina, USA, and will also provide balance sheet flexibility to execute on an active acquisition pipeline. Piedmont specialises in developing novel and differentiated products for the companion animal market and has a strong development track record.
Compliance with the Code
The UK Corporate Governance Code 2018 (the Code) establishes the principles of good governance for companies; this Governance section of the 2022 Annual Report describes how the Company has applied these principles and complied with the provisions, as well as how it meets other relevant requirements, such as the provisions of the Listing Rules and Disclosure and Transparency Rules (DTR) of the Financial Conduct Authority
In the opinion of the Directors, the Company has complied with the Code throughout the period, with the exception of provision 38 of the Code ,which relates to the alignment of executive directors' pension contributions to those of the wider UK workforce. This has now been achieved as from 1 July 2022, two of our Executive Directors’ pension contributions were at 8%, which matches the minimum offered to our UK workforce. Tony Griffin's pension contribution is at 7.7%, which is aligned with the Dutch workforce contribution.
The Board remains committed to maintaining high standards of corporate governance. The Code can be found at www.frc.org.uk.
Relations with Shareholders
The Annual General Meeting will be held in Northwich on 20 October 2022 (the Meeting). All members of the Board are scheduled to attend the Meeting and the Chair of the Audit, Remuneration and Nomination Committees will be available to answer shareholders’ questions at the Meeting.
Finally, should you have any questions in relation to this report, please feel free to contact me or the Company Secretary.
5 September 2022