Quarterly consolidated revenue

Group revenue reached €236.2 million in the second quarter, slightly below when compared to the same period in 2017 
(-0.7% at real rates). At comparable exchange rates, second-quarter revenue continued to grow as it did in the first quarter, showing growth of +4.3%. This growth reflects solid performance, given the very high basis of comparison last year (recognition of the proceeds of a licensing agreement amounting to €2.9 million in the second quarter of 2017). The principle contributors to this growth are emerging countries, particularly India and Brazil, as well as other geographic areas such as the United Kingdom and the United States, where ex-distributor sales were very strong this quarter, at +16% compared to 2017, with a rebound in Sentinel sales related to the timing of first-quarter promotions. These results offset weaker activity in Southern European countries, affected by leishmaniosis vaccine competition. To note that in terms of ranges, growth is driven by income from products of the companion animal segment, such as specialty products, internal parasiticides (with the introduction of the Iverhart Max Soft Chew at the end of the quarter), and the dental range. Furthermore, products for cattle (food supplements and vaccines) are growing strongly, offsetting slowing aquaculture sales.

Cumulative revenue at the end of June

Throughout the first half-year, revenue decreased to €429.7 million versus €437.5 million over the same period in 2017, for an overall change of -1.8%. Excluding the negative effect of exchange rates, notably the American and Australian dollar, the Indian rupee and the Brazilian real, revenue is growing at +3.8%.

In the United States, first half-year activity shows a decline of -11.9% at real rates, including -4.1% at comparable exchange rates, a clear improvement, however, when compared to the first quarter, which showed a decline of -20% at constant exchange rates. This decrease in the first half-year is the result of inventory reductions by distributors of parasiticide ranges that mask strong growth, especially in ex-Virbac sales in the dental ranges and specialty products. The Iverhart range benefited from the introduction of the Iverhart Max Soft Chew at the end of the quarter. Note that the sales ex-distributors to veterinary clinics, in the United States, of Virbac products are showing overall growth of +2% for the half-year. While Sentinel made up for a large part of its losses by the end of March and now shows only a slight decline when compared to 2017, all other ranges are showing significant growth of +18% on average for the first half-year of 2018 compared to the first half-year of 2017.

Outside of the United States, the Group is stable at real rates for the first half-year, however, organic growth remains strong at +5.2%. Europe shows growth of +3.4% at real rates, including +4.0% at constant rates, due to a good contribution by the United Kingdom, France and Germany, offsetting difficulties encountered in Southern Europe, such as those noted above. In the rest of the world, the Asia-Pacific area shows a change of -1.6%, including +7.3% at constant exchange rates (+9.9% excluding an unfavorable comparison related to licensing revenue recognized in 2017), mainly due to the dynamism of India, Australia and New Zealand. Latin America shows an evolution of -0.8% at real rates and growing at +12.2% at constant rates fueled by the activity in Brazil and Mexico. Lastly, Chili shows a decline of -11.4% at real rates, including -5.2% at constant rates in particular, as anticipated, due to weaker antibiotic sales compared to the same period in 2017.

In terms of species, revenue in the companion animal segment is rising overall by +0.5%, including +5.0% at constant exchange rates. The ranges showing the most significant growth are the specialty ranges (especially Zoletil and Suprelorin), Petfood, and the dental range, which offset the decline in parasiticide ranges, which was due in part to the effects of inventory reductions at distributors. Please note that outside of the United States, organic growth reached +8.5% in this segment.

In the food producing animal segment, overall growth declined by -3.5%, including +3.6% at constant exchange rates. The negative effect of exchange rates primarily concerns Asia-Pacific and Latin America. At constant rates, performance varies, with the bovine sector growing at +10.2%, driven by nutritional products and ruminant vaccines, while industrial (swine and poultry) and aquaculture show respective declines of -5.7% and -14.2%, related to weaker sales of antibiotics and oral vaccines for salmon. 

Outlook

The Group anticipates growth in revenue at constant rates that should show a low single-digit increase in 2018 compared to 2017, and a current operating profit before depreciation of assets arising from acquisitions ratio on revenue growing at around 0.5 points at constant exchange rates compared to 2017. Debt relief should be around €30 million for the year at constant exchange rates. Furthermore, the Group obtained a relaxation of its financial covenant (net debt/Ebitda) with its bankers for 2018. Thus, it is at 5.0 at the end of June, 2018, and at 4.25 at the end of December, 2018. The Group’s financing is ensured primarily through an RCF (Revolving credit facility) of 420 million euros, maturing in 2022, as well as bilateral bank loans, European Investment Bank (EIB) and Schuldschein disintermediated contracts, whose terms are between four and ten years.

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