21st May 2019 10:00
LONDON (Alliance News) - UDG Healthcare PLC on Tuesday announced two acquisitions, Putnam Associates and Incisive Health, for up to just over USD100 million.
Shares in the healthcare services provider were up 7.9% at 707.00 pence in morning trade.
The company also said its profit multiplied in the first half of its financial year after a goodwill impairment the year before.
UDG is acquiring Putnam, a US-based strategic healthcare consultancy, for up to USD88.6 million in cash. This consists of USD60 million upfront plus an earn-out payment of up to another USD20.1 million over three years and a further five-year earn-out payment of up to USD8.5 million.
In 2018, Putnam's operating profit was approximately USD8 million. This operating profit figure is "adjusted to reflect transition from a partnership model". The company had gross assets of USD20.5 million at the end of 2018.
Incisive Health, meanwhile, is UK-based and is a healthcare communications consultancy. It is being acquired for as much as GBP13.6 million in total and include an initial GBP8 million payment plus an earn-out of of up to GBP5.6 million payable over three years based on profit targets.
The two acquisitions are to be funded through existing cash and debt facilities with the return on capital expected to beat UDG's 15% target within three years.
UDG Chief Executive Brendan McAtamney said: "We are pleased to announce the acquisitions of Putnam Associates and Incisive Health, which further enhance our capabilities in Ashfield Communications & Advisory. Putnam strengthens our growing advisory pillar in the US, adding significant expertise in product commercialisation, pricing, reimbursement and market access strategy. Incisive Health adds specialist capability in the growing area of public health advocacy, supporting clients to secure market access for their brands, in addition to wider communications services.
"Both transactions are a good strategic and cultural fit, meet our target financial hurdle rates and further expand our current capabilities."
Meanwhile, UDG said its pretax profit was USD30.3 million for the six months ended March 31, many times its USD1.7 million profit the year before. This was largely a result of a USD57.6 million impairment of goodwill in relation to Aquilant the year before, which took other operating expenses to USD75.5 million. Aquilant was divested in August 2018 and other operating expenses for the first half of 2019 were much lower at USD34.4 million.
Other contributing factors in UDG's profit rise were a drop in selling and distribution expenses to USD96.8 million from USD111.3 million.
Revenue for UDG's financial first half was USD656.6 million, a drop of 2.8% from USD675.3 million year-on-year. Diluted earnings per share was 9.27 US cents, rising considerably from 0.44 cent per share. Adjusted diluted earnings per share growth was 5.1% to 21.21 cents from 20.19 cents, and excludes amortisation of acquired intangible assets, transaction costs, and exceptional items.
The company raised its interim dividend by 4.9% to 4.46 cents per share from 4.25 cents.
"UDG Healthcare delivered good [earnings per share] growth during the first half of FY19. Today, we have also announced the acquisitions of two businesses, Putnam, a US-based strategic management healthcare consultancy, and Incisive Health, a UK-based healthcare policy and communications consultancy. Both businesses are aligned with our strategy to expand into higher growth and higher margin areas, complementary to our existing service offering. Reflecting the benefit of these acquisitions and continued trading performance in line with expectations, we have increased our full year guidance to adjusted EPS growth on a constant currency basis to between 5% and 7%."
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