Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

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May 22, 2023

Dechra Dilemma

Macro & Overnight

The dollar has recovered from recent lows as the G7 presented a united front in Japan, and the positive noises from Congress indicate progress in debt ceiling talks.

UK Company News

Dechra issued an update indicating its trading environment has been more volatile and challenging than anticipated when it reported interim results in February. De-stocking by US wholesalers has been deeper and longer than initially expected, impacting Q3 (January to March 2023) performance. More recent de-stocking has been experienced in the UK during April. FY profit to June will be below guidance. However, it remains in talks with EQT regarding a possible all-cash recommended offer of 4,070 pence per share. EQT is required to make its offer by 2 June. 

Dechra’s PE-backed bid approach signified the undervaluation of UK mid-market equities for investors and commentators. The reported downturn in trading activity risks a re-evaluation from bidder EQT. Most investors and policymakers will hold their breath, but those recently lamenting Dechra’s prospective departure can now look forward to buying more.     

Logistics operator Wincanton continues to forecast results for FY24 in line with expectations, which, as previously indicated, reflect the challenging external economic environment. It is confident in its long-term growth strategy, underpinned by the highly cash-generative business model and ability to deploy capital in its most profitable sectors. Wincanton also announced withdrawal from its closed book operations and highlighted a pension accounting surplus of £114.7m (2022: £114.5m) with the triennial review underway to determine lower funding commitments. 

Prognosticator 

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