3rd Apr 2009 07:00
United Drug 2009 First Half Trading Update
UDG.I UDG.L
Dublin, London, 3 April 2009: United Drug plc ("UD" or the "Group"), a leading international provider of services to healthcare manufacturers and pharmaceutical retailers, today issued the following Trading Update for the six months to 31 March 2009 being the first half of the 2009 financial year. The Group will announce results for the period on 6 May 2009.
Period in Review
In the six months to 31 March 2009 United Drug has experienced challenging trading conditions in some parts of the Group, very buoyant trading in other parts, and a 19% fall in the value of sterling relative to the euro that reduces sterling profits when translated to euro for reporting purposes. Overall profits and earnings (before exceptional costs) for the period are expected to be below those reported in the same period last year, in line with the guidance given in the Interim Management Statement (IMS) of 17 February 2009.
At the end of the 2008 financial year, United Drug announced plans to streamline its operating structure into three new divisions; Healthcare Supply Chain, Packaging & Speciality and Contract Sales & Marketing Services; to provide a more efficient and cost effective service to our clients. This restructuring is expected to result in a once-off exceptional cost this year, in the region of €10 million, and deliver annualised savings of €7-8 million. All elements of the restructuring programme are well underway and will be completed, before the end of the current financial year, in line with the timetable set.
Healthcare Supply Chain
The newly formed Healthcare Supply Chain division combines all the logistics based businesses under a single management and operating structure. The new division brings together the former Pharma Wholesale and Medical & Scientific divisions along with the contract distribution business of the former Supply Chain Services division.
In the Pharma Wholesale business UD continues to have strong and growing market positions in both the Republic of Ireland and Northern Ireland markets where prescription volumes are increasing. Revenues in these businesses have been impacted by the implementation of previously announced price reductions in both markets, lower consumer spending on over-the-counter products and the continuing move to a direct-to-pharmacy (DTP) distribution model in Northern Ireland.
During the period, the Group continued its expansion as an international healthcare services company with the acquisition of The Specials Laboratory (TSL), a leading manufacturer of unique formulations of medicines to meet patient prescriptions requirements, serving the retail pharmaceutical and hospital markets in the UK. The acquisition fits well with our existing specials business in the UK, Craig & Hayward, and both companies have performed well during the period.
The Group's contract distribution businesses in the UK and Ireland continue to perform solidly, however as previously indicated the Group's consumer products distribution business in Ireland has seen a marked reduction in consumer spending particularly on premium brand cosmetics.
In the Medical & Scientific business the slowdown in hospital spending on capital equipment in both the UK and Irish markets noted through the last financial year has continued into the current year, and has proven to be even more difficult in some areas. Revenues generated on the sale of consumable items and maintenance contracts to support installed equipment have not been impacted by the slower capital spending environment.
Overall profits for the division are expected to be below those reported in the same period last year, as a result of the issues noted on consumer and hospital spending and currency.
Contract Sales & Marketing Services
The Contract Sales & Marketing Services business, with operations in the UK, US and Irish markets, continues to perform strongly, well ahead of the prior year. The core contract sales outsourced business is continuing to win new clients by providing pharmaceutical manufacturers with a high quality, cost effective and more flexible means of deploying their sales efforts. New business wins during the period include contracts with Novartis, Lundbeck and NAPP Pharmaceuticals. This division has been broadened in recent years with the addition of a range of marketing services for pharmaceutical manufacturers that are complementary to the core sales offering. We are already benefiting from the ability to cross sell these related services in all markets.
Packaging & Speciality
The IMS in February commented on a delay in the release of a number of packaging orders in the US market. The start date for some of these orders has still to be confirmed but we have seen no further project delays impacting upon our US packaging business, Sharp Corporation. Sharp continues to win business based on existing strong client relationships and has been particularly successful in securing contracts with new clients. Furthermore, Sharp has a very strong pipeline of new business opportunities. In the European packaging businesses one key client has reduced the volume of outsourced packaging orders to our UK business but the rest of the European business, including our Dutch and Belgian facilities, continue to trade well, in line with expectations.
Overall profits for the division are expected to be well below those reported in the same period last year.
Outlook
United Drug remains positive about the fundamentals of its core markets and its position within those markets despite the current challenging economic environment. The Group continues to explore opportunities to expand its international healthcare services business, both organically and through acquisition, and has a strong balance sheet to support its growth objectives.
Based on current trading the Group expects profits (before exceptional costs) for the year to 30 September 2009 at least in line with the prior year, on a constant currency basis.
ENDS Friday, 3 April 2009
For reference:
Liam FitzGerald Pauline McAlester
United Drug plc Murray Consultants
Tel: +353-1-4598877 Tel: +353-1-4980300
Investors and Analysts
Mark Kenny/Jonathan Neilan
K Capital Source
Tel: +353-1-6315500
About United Drug plc
United Drug is a leading international provider of services to healthcare manufacturers and pharmaceutical retailers, with operations in the UK, Ireland, Holland, Belgium and the USA. The Company has a long-term track record of delivering strong profit, earnings and dividend growth.
At the end of the 2008 financial year the Company announced the streamlining of its divisional structure into three new divisions (see overleaf). This allows for a better alignment of the businesses with the management and operating structure in the Group, improved communications throughout the Group and the delivery of synergies. The restructuring brings together all parts of the business involved in the delivery of healthcare products under one management and operating structure within a newly formed Healthcare Supply Chain division. The Group's packaging operations and speciality services will form a new Packaging & Speciality division and the contract sales business will continue to be reported as the Contract Sales & Marketing Services division.
In Healthcare Supply Chain, United Drug is the largest pharmaceutical wholesaler in the island of Ireland. It is also the market leader in contract distribution outsourcing (pre-wholesaling) in Ireland and has achieved the No. 1 position in the UK through its joint venture business UniDrug Distribution Group (UDG). The Company provides specials medicines manufacturing and distribution services in the UK. The Company also provides sales & marketing and technical service solutions, including contract distribution services to Medical & Scientific equipment & consumable manufacturers, with a market leading position in Ireland and an emerging presence in the UK.
In the Packaging & Speciality division United Drug is a leading international provider of pharmaceutical contract packaging services with facilities in the US, UK, Dutch and Belgian markets. The Company also provides speciality distribution services in the UK and Irish markets.
In the Contract Sales & Marketing Services division United Drug is a leading provider of contract sales outsourcing and related marketing services to pharmaceutical manufacturers in the UK, US and Ireland.
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