MARKET REPORT: Dechra takes a tumble after fresh profit warning

Shares in takeover target Dechra Pharmaceuticals tumbled after it warned profits will be even lower than feared this year.

The FTSE 250 group, which makes medicines and treatments for pets and farm animals, said it will make less than £186million in the 12 months to June 30.

It came after an earlier profit warning in February when it said profits for the year would be at the ‘lower end of market expectations’ at £186million.

Shares in the company, which is in talks about a £4.6billion takeover by Swedish private equity firm EQT, fell 13 per cent, or 476p, to 3174p.

Dechra said business between January and April was ‘more volatile and challenging’ than expected. Demand has been hit as customers in the US and Europe whittle down excess stocks before buying more.

Dechra said that while there have been signs of improvement in both the US and UK in recent weeks, trading remained tough across the rest of Europe.

Dechra insisted it remains ‘very well positioned’ to grow over the medium and longer term even in the face of such difficult trading conditions. The group added that talks were ongoing with EQT over a possible 4070p a share offer.

Earlier this month, the pair pushed back the date to finalise its £4.6billion bid by three weeks to June 2.

If a firm offer is made and subsequently accepted by Dechra, then the mid-cap firm will join a growing list of British companies to be gobbled up by private equity predators. 

Despite the bleak update, Liberum analyst Seb Jantet struck an optimistic tone on the chances of a deal being reached.

He said: ‘While it is never helpful for trading to weaken during an offer period we don’t think this will change EQTs appetite to make an offer.

‘The key determinants of whether EQT will make a formal offer remain, in our view, getting comfortable about Dechra’s ability to sustain growth and what remain tight debt markets.

Stock Watch –  Enwell Energy

Enwell Energy will suspend its shares from trading in July after warning that it is likely to miss the deadline to publish its results.

The Ukraine-focused oil firm is still searching for an auditor after the previous one resigned last year. The group has made progress in hiring a Ukrainian auditor but is ‘highly unlikely’ to find one in the UK.

Enwell’s annual report and accounts for 2022 must be published by the end of June 2023. 

Shares plunged 10.5 per cent, or 1.95p, to 16.6p.

‘What it probably does is that it increases the likelihood that investors will accept an offer if one is put on the table.’

The FTSE 100 gained 0.2 per cent, or 14.12 points, to 7770.99 and the FTSE 250 lost 0.1 per cent, or 15.76 points, to 19273.34.

Global stock markets made a sluggish start to the week amid concerns over whether the US was likely to clinch a deal on extending its debt ceiling.

Back in London, Johnson Matthey teamed up with Hystar, a Norwegian high-tech hydrogen company, in a three-year strategic partnership to accelerate renewable green production.

The chemicals giant said this delivers on its target of winning at least two strategic partnerships in hydrogen technologies, following on from its deal with the US firm Plug Power earlier this year.

Shares inched up 0.8 per cent, or 15.5p, to 1904p.

William Hill owner 888 agreed to sell its Latvian business to Paf Consulting in a deal worth up to £24.6million.

Lord Mendelsohn, chairman of the gambling giant, said the Baltic region was not among the core or growth markets where the gambling firm is prioritising investments. Shares remained flat at 77p.

Belfast-based software group Kainos said revenue rose 24 per cent to £374.8million in the year to the end of March while profit was up 18 per cent to £54.3million. Shares rose 6.1 per cent, or 75p, to 1299p.

There was little respite for Polymetal after its Russian operations were hit by US sanctions.

The London-listed gold and silver producer insisted the restrictions did not impact its business outside Russia.

But shares plunged 18.6 per cent, or 42.7p, to 187.3p.