Acquisition of Apex

On 14 October 2016, Dechra acquired certain trade and assets of Apex Laboratories Pty Ltd, a veterinary pharmaceuticals company based in New South Wales, Australia. The Group paid £34.2 million (AUD$ 55.0 million) consideration in cash on a debt free, cash free basis.

Fair value
£000
Recognised amounts of identifiable assets acquired and liabilities assumed
Identifiable assets
Property, plant and equipment6,545
Software78
Inventories2,120
Trade and other receivables1,575
Trade and other payables(462)
Non-current liabilities(171)
Identifiable intangible assets21,323
Net deferred tax liability(6,683)
Net identifiable assets24,325
Goodwill9,906
Total consideration34,231
Satisfied by:
Cash34,231
Total consideration transferred34,231
Net cash outflow arising on acquisition
Cash consideration34,231
34,231

The fair values shown above are provisional and may be amended if information not currently available comes to light. The provisional fair value adjustments principally relate to harmonisation with Group IFRS accounting policies, including the application of fair values on acquisition, principally being the recognition of fair value uplift on acquired inventory and intangibles in accordance with IFRS 3.

The goodwill of £9.9 million arising from the acquisition consists of technical expertise of the assembled workforce, access to the Australasian and Asia Pacific regions to continue geographical expansion, and future sales expected to be achieved through the registration of Dechra products in these countries. None of the goodwill is expected to be deductible for income tax purposes.

Acquisition related costs (included in operating expenses) amounted to £1.6 million. Apex's results are reported within the EU Pharmaceuticals Segment. Apex contributed £7.1 million revenue and £1.1 million to the Group's pre-tax profit for the period between the date of acquisition and the balance sheet date. If the acquisition of Apex had been completed on the first date of the financial year, the contribution to Group revenues for the period would have been £9.9 million and the Group pre-tax profit would have been £2.1 million.

Prior Year Acquisitions

In the prior year the Group acquired Putney and Brovel. The fair values of the assets and liabilities acquired have been reconsidered as part of the hindsight period.

In relation to Putney, there was a reduction in provisions of £0.4 million to true-up the position at acquisition. Intangible assets were reduced by £0.8 million to reflect an agreement that at the point of acquisition was not required due to the existence of other supplier relationships. Hindsight adjustments have also been made in respect of deferred tax assets on losses (£2.9 million), inventory (£0.2 million), R&D credits (£0.6 million), intangibles (£0.3 million) and receivables (£0.3 million).

In relation to Brovel, there was a reduction in receivables (£0.1 million) and an increase in payables of £0.1 million following a true-up of the final working capital position. A deferred tax asset of £0.3 million has been recognised following a detailed assessment of the recoverability of these assets.

Following the acquisition of Genera in October 2015, the disclosure of the final fair values of the assets and liabilities acquired have been included in the financial statements for the year ended 30 June 2016.

Acquisition of Brovel

The revised fair values of the acquired assets and liabilities on the acquisition of Brovel are detailed below:

Fair value
£000
Recognised amounts of identifiable assets acquired and liabilities assumed
Identifiable assets
Property, plant and equipment243
Inventories1,152
Trade and other receivables346
Cash and cash equivalents202
Trade and other payables(465)
Net deferred tax asset120
Net identifiable assets1,598
Goodwill2,466
Total consideration4,064
Satisfied by:
Cash3,473
Contingent consideration arrangement591
Total consideration transferred4,064
Net cash outflow arising on acquisition
Cash consideration3,473
Less cash and cash equivalents acquired(202)
3,271

Acquisition of Putney

The revised fair values of the acquired assets and liabilities on the acquisition of Putney are detailed below:

Fair value
£000
Recognised amounts of identifiable assets acquired and liabilities assumed
Identifiable assets
Property, plant and equipment466
Inventories14,037
Trade and other receivables5,699
Cash and cash equivalents1,541
Trade and other payables(7,160)
Provisions(546)
Debt(6,299)
Identifiable intangible assets112,580
Net deferred tax liability(31,517)
Net identifiable assets88,801
Goodwill45,391
Total consideration134,192
Satisfied by:
Cash134,192
Total consideration transferred134,192
Net cash outflow arising on acquisition
Cash consideration134,192
Less cash and cash equivalents acquired(1,541)
132,651