We are pleased to report that the Group has delivered a strong financial performance, has continued to implement its strategic objectives and has invested in its infrastructure, people, product development and acquisitions to further its future objectives. Progress has been made in all aspects of our key strategic growth drivers:

• Portfolio Focus: we continue to outperform in the majority of therapeutic areas and markets in which we trade, significantly so within the US;
• Pipeline Delivery: our product development pipeline has delivered two novel global products and several regional and national registrations in the period;
• Geographical Expansion: we benefited from a solid performance in territories established in the previous financial year and have established positions in Austria, the Adriatic region and Mexico within the financial year;
• Acquisitions: three acquisitions have been made in the year, providing critical mass and an enhanced product development pipeline in the US market, poultry vaccine development capabilities to broaden our EU Food producing Animal Products (FAP) business and a marketing and registration platform for Dechra's portfolio in Mexico.

Portfolio Focus

Dechra Veterinary Products Europe (DVP EU)

Growth in the existing DVP EU business during the year was modest at 5.7% at CER. Including the eight months contribution from Genera, it was 13.9% at CER.

Our Companion Animal Product (CAP) sales were driven predominantly by strong performance in endocrinology, and anaesthetics and analgesics. Within endocrinology, Vetoryl® continues to grow in all major territories and the launch of Zycortal into 14 countries has strengthened our position in this key therapeutic sector. Our equine portfolio has also performed well. Osphos has been launched across all major territories and is performing to our expectations. We are also re-positioning Equipalazone® following palatability trials.

The recovery in FAP that was reported in the first half has continued in the remainder of the financial year. The decline in antibiotic sales in Germany has slowed and after several years of decline in the Netherlands we are now seeing sales flatten. Against this background, overall growth has been achieved by increasing market penetration in Poland and in countries where we had a lower market share historically, such as the UK, France, Italy and Spain. We have also launched Solamocta®, a new antibiotic lifecycle improvement which will be key to our recovery in Germany. Other new product registrations have been received within FAP and are being prepared for imminent launch in Europe which should ensure that we continue to see positive momentum within this important therapeutic sector.

Diet sales have not fully returned to previous levels following the supply problems in the previous financial year. We have appointed an experienced manager to focus on developing our therapeutic diets business and have recently won two new contracts with major veterinary groups which should ensure an improved position in the future.

DVP North America (DVP NA)

Performance within our existing North American business remains exceptional with revenue growth of 37.9% at CER. Including Putney and Brovel since acquisition it was 59.5% at CER. The US has driven the majority of this growth as we continue to gain strong market penetration in our key focus areas of dermatology and endocrinology. This growth has been enhanced by a good performance from Phycox, strong growth and traction with Osphos and the successful launch of Zycortal in March 2016. Furthermore, our biggest product, Vetoryl capsules, delivered double digit growth as we have maintained our educational and marketing campaign and introduced a low dose 5mg capsule to increase flexibility on dosing options. DVP Canada delivered a good performance across the portfolio which was also enhanced by the launch of Osphos and Zycortal. The business has also benefited from the acquisition and launch of HY-50® in the territory, a product which we have marketed in Europe since its acquisition in January 2012.

The primary focus of the management team towards the end of the trading period was to integrate the commercial team from the recent acquisition of Putney. The enlarged team will give Dechra improved penetration and more direct contact with US veterinary practices to enhance sales of the Dechra and Putney range of veterinary pharmaceuticals. Brovel, the newly acquired Mexican business, is managed by an internally promoted Country Manager, Arturo Bravo, and a newly appointed Finance Director, Rocío Aguirre, and reports under our DVP NA segment.

Pipeline Delivery

Team Integration

Following the acquisition of Putney and the assessment of the drivers behind the team's success, we have promoted its Director and Head of the Development function, Dr Anthony Lucas, to lead the enlarged Group's product development teams. Dr Anthony Lucas will retain his current regulatory team at Putney and will work closely with Dr Susan Longhofer to ensure effective utilisation of the Group's resources.

Successful Approvals

Zycortal, a novel canine endocrine product for the treatment of Addison's disease, has received approval throughout the EU, USA, Canada and Australia.

Following the successful registration of Osphos last year in the US and UK, approval was subsequently received in 17 additional EU countries in September 2015. Osphos is a unique product which treats navicular syndrome in horses.

We have also had numerous successes in our FAP portfolio in Europe: two new water soluble antibiotics, Solamocta and Phenocillin® have been approved in 17 member states; a liquid antibiotic, Metaxol, was approved in 18 member states; and our existing antibiotic aerosol, Cyclospray®, was extended into 12 new territories.

Our new Croatian facility has achieved approval for a poultry vaccine, Avishield ND, to treat Newcastle disease in 12 major European markets and has also achieved a number of other national registrations including Egypt and Ukraine.

We continue to gain international approvals to enhance our geographical expansion and have received several registrations in both established and developing markets around the globe.

Pipeline Progress

In the period, we have terminated an early stage project for canine ophthalmology and a canine cardiology project. We have, however, initiated eight new projects across both FAP and CAP. Furthermore, successful development has continued on the Genera vaccines and Putney generics since acquisition with significant filings being made from both locations. To facilitate the increased number of projects we have created a third pharmaceutical development laboratory in Zagreb, Croatia, staffed with five scientists who will expand our formulation and analytical development capabilities.

Geographical Expansion

Geographical expansion is progressing well. In addition to the acquisition of Brovel, which creates a foothold and an opportunity to develop a presence in the significant Mexican market, the acquisition of Genera provides access to the smaller markets of Croatia, Bosnia-Herzegovina, Serbia and Slovenia.

A greenfield start-up subsidiary has been established in Austria which commenced trading in January 2016. Initial sales are progressing well. Our subsidiaries in Canada and Poland, established in the prior financial year, are performing well, with Poland being above our expectations.

Acquisitions

Genera

In October 2015 Dechra acquired a controlling interest in the shares of Genera d.d. for €36.6 million (£26.8 million) which was funded from existing cash and revolving debt facilities. The objective of the acquisition was to broaden our EU FAP business by entering into the fast growing poultry vaccines market. The business also provides us with a variety of dose form manufacturing and technical know-how in a low cost environment and extends our geographical reach into the Adriatic region. We have successfully completed the first major steps of integration. Following consultation with the Croatian authorities and trade unions, we have rationalised the business to improve efficiency and effectiveness and have integrated the commercial, manufacturing and product development teams into our global operations. Additional focus has been provided to the poultry vaccines unit which historically sold products solely into less regulated developing markets. It is now pleasing to report that they have received their first approval for an EU registered vaccine. Whilst one vaccine on its own will not be commercially significant, it does demonstrate that we have the correct quality and regulatory capabilities in place to register the core range necessary to market poultry vaccines in Europe and other important world markets.

Brovel

In January 2016, Dechra acquired 100% of the share capital of Laboratorios Brovel S.A. de C.V. (Brovel), a veterinary pharmaceuticals company based in Mexico City. The Group paid US$5.0 million (£3.3 million) consideration in cash on completion and a further US$1.0 million (£0.6 million) is contingent upon Brovel reaching successful registration milestones for Dechra's products in Mexico. Brovel was a family owned business with more than 52 years' experience in the production and distribution of pharmaceutical veterinary products. It has a diverse product portfolio with a turnover of MxP$66.2 million (£2.6 million). The Board believes this acquisition will help open the significant Mexican animal health market to Dechra as well as offer the potential to access other Latin American markets in the future. The primary objective of this acquisition is to use it as a platform to register and market Dechra's product portfolio. Several of our products have been identified as suitable for the Mexican market and the registration process with the authorities has commenced.

Putney

In April 2016, Dechra acquired Putney Inc. for US$200.0 million (£134.2 million) which was funded by the refinancing of the existing debt facilities and a placing of new shares of approximately 5% of the Group's issued share capital. The acquisition was the most complementary US opportunity we had identified and provides significant scale and access to a strong drug pipeline in the key North American market. The business, which had a turnover of US$49.6 million in the year ended December 2015, markets 11 approved products and has a further 10 generic products in its pipeline which are expected to be launched over the next five years. Since acquisition we have started to deliver synergies with the rationalisation of duplicated functions and the integration of our commercial teams. The product development team, who have successfully registered 43.0% of all generic CAP approvals in the US since 2012, are a key resource for Dechra.

Strategic Enablers

People

Our people remain the most important enabler to deliver success to the Group. We have continued throughout the year to invest in performance and talent management systems and have also recently implemented a new Oracle-based integrated HR system in 16 countries enabling us to better standardise and monitor performance and reward packages throughout the organisation. The HR team have also been heavily engaged in our recent acquisition activity in the due diligence, communication, consultation and restructuring of the businesses.

We are currently undergoing significant change in our Board and Senior Executive Team (SET). The current Chairman, Michael Redmond, will step down from the Board in October 2016 at our Annual General Meeting. We have recruited his successor, Tony Rice, who has been appointed to the Board as a Non-Executive Director and will be appointed as Chairman with effect from the conclusion of the Company's Annual General Meeting, subject to his election. Chris Richards stepped down from the Board as a Non-Executive Director after almost six years of service with the Company to further other opportunities. We are currently engaged in the recruitment process to add additional expertise to the Non-Executive Directors on the Board. Anne-Francoise Nesmes, the Chief Financial Officer during the 2016 financial year, who supported significant changes for Dechra over the last three years, has also resigned from the Board. She left the Company at the end of July 2016 to take up a role as Chief Financial Officer with a FTSE 100 business. As announced on 17 August 2016, Richard Cotton is expected to join the Company in January 2017 as Chief Financial Officer. As outlined earlier in this report, the SET is also being strengthened with the promotion of Dr Anthony Lucas to head up the Group's product development teams, and the appointment of a new Group Manufacturing and Logistics Director, Greig Rooney.

Technology

Oracle Roll Out

The roll out of the Oracle ERP system continues to be one of the primary operational objectives of the business. In April 2016 the core Oracle solution was successfully implemented into DVP US. Following our go-live for the Oracle Group Financial Consolidation solution in June 2015, the full Oracle roll out programme continues. We are currently targeting a roll out to most sites in 2017 followed by an upgrade to the current Manufacturing Oracle system.

Technology Upgrades

We have commenced Windows 10 deployment across all Group devices and utilising Surface Pro 4 devices as standard laptops for all personnel. New firewall security models have been implemented and new cyber security initiatives have been taken to enhance system security and improve user awareness. The Group now operates on an MPLS network across all major sites following the transition of DVP NA early in the financial year. Work has begun to bring the recently acquired businesses onto the Group's standardised systems.

Communication Tools

We have developed and launched a Group Learning Management System, Delta, enabling us to train employees across the globe in a structured and standardised way. Initial modules focus on policies such as Anti-Bribery and Anti-Corruption and also, from a commercial perspective, on sales team training and the key technical and unique selling points of our major products. The Dechra Academy, which provides online certified training for veterinarians and veterinary nurses in our key therapeutic sectors, has been enhanced and is well received by veterinary professionals. We are also developing social media marketing tools with regular communications to our customers across several media platforms. The Group intranet is also undergoing complete redevelopment to provide improved capabilities for internal communication.

Manufacturing

People

Mike Annice, our Group Manufacturing Director, retired in July of this year following 25 years with the Group. In preparation for his retirement we have recruited his successor, Greig Rooney, who has extensive experience in the pharmaceutical, automotive and food industries. Greig will operate out of our Head Office site in Northwich and will have responsibilities for all our global manufacturing sites, Group logistics and supply chain management. To assist Greig we have appointed a new Manufacturing Finance Director, Milton McCann, who commenced his role with the Group in January 2016. We have also promoted Andrew Parkinson to Group Quality Director and have appointed Chris Ashcroft as the Skipton Site Director.

Efficiency Improvements

In our previous financial year we made an investment to upgrade the pre-mix department in Bladel to increase batch sizes and reduce the cost of goods. This department is now fully commissioned and product transfer to the new lines is under way. We have also invested in a new tablet and capsule blister packaging line in Skipton which will increase volumes and speed, therefore improving efficiency. This is currently being commissioned and it is anticipated it will be effective from the beginning of our new financial year. Other initiatives to reduce the cost of goods and improve efficiencies have been implemented, resulting in raw material price reductions, predominantly for our FAP. We have also seen a small reduction in material wastage rates and batch reject rates are lower than the previous year.

Contract Manufacturing

Manufacturing volumes have increased overall due to internal sales increasing; however, like-for-like external sales have decreased by 4.8% at CER due to reduced volume with some customers. Overall contract manufacturing has increased following the Genera acquisition. Contract manufacturing assists the Group in utilising capacity and contributes to fixed overheads, thereby improving the unit cost of goods for all products, including Dechra's own products. Service to customers has increased with on-time delivery ahead of internal targets and the previous year.

Dividend

The Board is proposing a final dividend of 12.91 pence per share (2015: 11.82 pence per share). Added to the interim dividend of 5.55 pence per share, this brings the total dividend for the financial year ended 30 June 2016 to 18.46 pence per share, representing 9.0% growth over the previous year.

Subject to shareholder approval at the Annual General Meeting to be held on 21 October 2016, the final dividend will be paid on 18 November 2016 to shareholders on the Register at 28 October 2016. The shares will be become ex-dividend on 27 October 2016.

Outlook

Although we anticipate a degree of uncertainty following Brexit, the business is naturally hedged by its geographical spread and international sourcing. Any significant downturn in the UK economy may impinge on growth rates; however, we do not anticipate any material effect on the Group.

Good progress has been made on the integration of the acquisitions. Our pipeline has also been strengthened through both new internally generated ideas and the integration of acquired development programmes. We have continued to invest in people and the infrastructure to ensure we maximise revenues and execute our strategy successfully.

The Group continues to deliver growth and identify opportunities across all aspects of our strategy; we therefore continue to look forward to the future with confidence.

The Strategic Report has been approved by the Board and signed on its behalf by: