The Board is responsible under section 172 of the Companies Act 2006 for promoting the long term success of the Company for the benefit of its shareholders, and acknowledges that its decisions have a long term impact on other stakeholders, the environment and the Company's reputation for high standards of business conduct. The Board appreciates that wider engagement with stakeholders is an important component of long term sustainability and success and believes that by engaging with all important stakeholders, the business is made stronger and more resilient. The table below shows who the Board has indentified as important stakeholders, why they feel it is important to engage, how they have engaged and where you can read more information on the Board's approach to their section 172 duty.
| Stakeholder | Why it is important to
engage | How we engage | Material interests | Where you can read more |
Employees
 | To make Dechra a great and safe place to work, and attract, retain and develop talent | - Group intranet
- Town Hall meetings
- Engagement surveys
- Employee Engagement Designated Non-Executive Director
- Performance Development Reviews, and employee development and training
| - Development opportunities
- Making a difference
- Agile and friendly place to work
| - Strategy in Action: People
- Corporate Social Responsibility
- Governance
|
Veterinary Professionals
 | To improve animal health and welfare | - Educational and training programmes
- Technical support via helplines and product information
- PhD veterinary student funding
| - Innovative and effective products
- Information on correct use of products
- Educational opportunities
| - Corporate Social Responsibility
- Governance
|
Shareholders
 | To instil trust and confidence and allow informed investment decisions to be made | - Annual Report and RNS announcements
- Annual General Meeting
- Investor presentations
- Corporate website
- One-on-one meetings
| - Financial performance
- Delivery of strategy
- Environmental, Social and Governance performance
| - Corporate Social Responsibility
- Governance
- Financial Review
- Financials
|
Communities
 | To give back to the communities in which we operate | - Community activities
- Group donations
- Product and local donations
- Development and education of young people
| - Prosperity within our communities
- Community projects and initiatives
| - Corporate Social Responsibility
- Governance
|
Suppliers
 | To trade with honesty and integrity, and to source quality raw materials, finished products and services | - Quality audits
- Due diligence
- ABC training
- Third Party Code of Conduct
| - Fair Payment Terms
- Long term relationships
| - Corporate Social Responsibility
- Governance
- Other Disclosures
|
Regulatory Authorities
 | To meet high standards of product safety and efficacy | - Regulatory training for employees
- Manufacturing facility inspections
- Market authorisation applications
- Product safety update reports (PSURs)
| - Safety
- Efficacy
- Responsible marketing of regulated pharmaceuticals
| - Product Development
- Corporate Social Responsibility
|
The following examples give an insight on how Directors have considered section 172 factors in their decision making in relation to material transactions during the year:
Equity Raising
In May, the Board considered the proposal to conduct a non-pre-emptive placing representing approximately 5% of the Company's existing issued share capital.
In consideration of section 172 duties, it was agreed by the Board that the placing would provide enhanced financial strength, resilience and flexibility through a period of uncertainty arising from COVID-19. This would improve the long term prospects for the business as it would not be constrained in taking advantage of any bolt-on acquisitions as these arise, with Acquisition and Pipeline Delivery being two of the strategic drivers of the business.
The Company had previously communicated a strategy of maintaining leverage below 2 times which could be increased to 2.5 times for the right acquisition. It was noted that following the proposed completion of the acquisition of Osurnia the pro forma leverage would be at the top end of the Company's policy.
In addition, the placing would be in the best interests of employees, suppliers and customers as although trading remains robust it is unclear how long the current COVID-19 situation would last, which may impact business performance, cash generation and the effect of foreign exchange volatility on leverage. A fundraising would provide additional prudence to the balance sheet. In particular:
- the fundraising would enable the Group to continue with the decision of not furloughing during the pandemic; and
- the business had invested significant resources to maintain an adequate supply of raw materials and finished goods to meet the market demands during the pandemic for customers.
Although the placing would only be offered to a select number of holders and non-holders, the Annual General Meeting authority permitted the allotment of ordinary shares for cash on a non-pre-emptive basis. The Directors considered the likely impact of COVID-19 on a conservative basis for the next financial year ended June 2021, and that this could impact the likely pricing of the equity issue and have a subsequent effect on the price of Dechra shares and the value of shareholder's investments, particularly those who were not able to participate in the placing.
Product Acquisitions
The Board approved the Mirataz and Osurnia product acquisitions during the year. The Board, in considering both proposals, noted that the acquisitions were in line with the strategic driver of portfolio focus. In relation to:
- Mirataz, the product is the only approved transdermal medication for weight gain in cats, and as it is indicated for cats with underlying medical conditions it would keep more cats alive; and
- Osurnia, the product is a two-dose effective treatment for otitis externa (inflammation of the outer ear) in dogs. This enables veterinarians to be in control of the accuracy and compliance of the medication, and therefore owners do not have to participate in what they (and their dog) often perceive as the painful daily or twice daily administration of ear medication.
In addition, the Board took into consideration the viewpoints of key commercial leads within the organisation in relation to the market opportunities of both of these products. In relation to Osurnia, it also considered a summary of the Group Quality and Supply Chain audit of the existing Contract Manufacturing Organisation.
The Board agreed that both of the acquisitions would:
- enhance Dechra's presence and provide a unique offering to veterinarians;
- deliver increased shareholder returns;
- broaden the portfolio of products for the sales team; and
- improve animal welfare.