Anlysis of The Dechra PLC - Essay Example

36.6 million and ?11.7 million, respectively. The paper illuminates Dechra PLC’s investment, financing, and dividend payout trends in the recent years. Moreover, the paper will also conduct an in-depth analysis of the financing, investing, and dividend trends using tools such as standard deviation, averages and charts. Part 1: The company in the recent past has undertaken significant investments, changes in divided policy, and changes in its capital structure. Changes in capital structure In general, over the last five years the company has been experiencing increase in the indebtedness.

In the year 2009, the company was indebted to a tune of 23.08 while in the year 2013 the indebtedness has swollen to 103.84 in just a span of five years (Dechra, 2013). This is not a good indicator in the financial statement because the more the debts the company the company has the worse its leverage ratio gets. The thumps rule requires that the ratio should not be higher than 1. That is to say that the debt to equity ratio should be 50:50. In the case of Dechra PLC., this is not the case the leverage ratio judging from the table below.

In order to clear its debt and register a sound capital structure the company has embarked on an ambitious process to sell off its veterinary services wing at a cost of GBP 86.2 million with transaction costs and taxation on disposal cost expected to cost 0.9 million and 0.4 million respectively. The proceeds from these sales will be used to offset the debts of the company. This viable move will overhaul the financial structure of the company for the better and put its going concern concept back on track.

Capital structure of Dechra PLC in the last five years Year 2013 2012 2011 2010 2012 Non current debt (millions) 103.84 114.05 56.08 17.76 23.08 Shareholders equity (millions) 174.62 103.68 98.33 86.23 80.69 Leverage ratio 1.68 0.909 1.753 4.855 3.496 Retrieved on 8 November 2013 from http://www.hl.co.uk/shares/shares-search-results/d/dechra-pharmaceuticals-plc-ordinary-1p/financial-statements-and-reports Changes in investment The company is strategically involved in various investment activities that will ensure that it commands a sizeable share of the pharmaceutical industry.

One such investment is the acquisition of “Eurovet Animal Health B.V.” which was acquired on 5th of April, 2012. This acquisition is in line with the company expansion strategy. The strategy goes a long way to ensure that the company expands its foothold into the pharmaceutical market (Dechra, 2013). The other strategic investment that has been effected by the company is the successful exclusive worldwide licensing agreement with SCYNEXIS Inc. the exclusive license gives the company the authority to manufacture and commercialize SCY-641, a medication used in the treatment of KCS.

This world right to produce this drug is a great achievement for the company that cements the company’s going concern concept. Changes in dividend policy The company has been steadily increasing its dividend payout over the years judging by the financial reports in the last five years. It is worth noting that dividend policy is the discretion of the management of Dechra PLC. They have the freedom to settle on any kind of distribution policy whether stock repurchase, share split, or dividend policy (Booth & Maksimovic, 2001).

It is worth noting that Dechra has over the years stuck to dividend payout as their default distribution