Half Yearly Report

9 May 2013

United Drug plc

Interim Report 2013

*amortisation of intangible assets, acquisition costs and exceptional items

United Drug believes that the adjusted operating profit, adjusted profit before tax and adjusted diluted earnings per share are more appropriate measures of the underlying group performance than those measurements set out in the primary financial statements, as this information is in a format communicated to and reviewed by the investment community.

Strategic & operating highlights

·; Strong growth across the Group with operating profits up by 13%.

·; All five acquisitions completed in 2012 have been successfully integrated, with the emphasis now on generating further revenue and cost synergies from these businesses.

·; Continued internationalisation of the Group with the US becoming the largest profit contributor in the period, generating 34% of operating profits, followed closely by the UK and the rest of Europe.

·; Following a thorough review, we have decided that the optimal infrastructure configuration for our European packaging business is to maintain only state-of-the art facilities with capacity for future growth, in each of the countries in which we operate. As a result we will close our UK commercial packaging facility. With the production that will transfer to our other European facilities and recent significant long term business wins we expect the European packaging business will return to profit in 2014 and beyond.

·; Good growth throughout our Sales, Marketing & Medical division.

·; Further profit growth in our Healthcare Supply Chain division.

·; Another very strong performance in our US packaging business.

Financial highlights

·; Revenue for the period of €1,017 million is 14% ahead of the same period in 2012.

·; Operating profit has increased by 13% during the period.

·; Earnings per share are up 7% on the same period in 2012.

·; Strong cash flow performance with operating cash flow of €55.8 million in the period, significantly up on the €20.4 million generated in the same period of 2012.

·; 5% increase in interim dividend to 2.61 cent per share.

·; An exceptional charge of €10.5 million has been incurred in the period and the charge for the year is expected to be €21-24 million. The full year charge primarily relates to the closure of the UK commercial packaging facility and the previously communicated restructuring costs associated with our recently acquired businesses.

·; Net debt at 31 March 2013 was €220.5 million and the net debt to EBITDA ratio has been reduced to 2.07 times (30 Sept 2012: 2.22 times).

Chief Executive Officer's comment:

Commenting on the 2013 interim performance, United Drug Chief Executive Officer, Liam FitzGerald said:

"United Drug is a major international provider of outsourced services to healthcare companies. The first half of 2013 has seen us integrate our recent acquisitions, structure our business for future growth and deliver 13% operating profit growth. During the period, the US became our largest profit contributing region, followed closely by the UK and the rest of Europe. We continue to work hard to provide a range and quality of professional outsourcing solutions that enable our international healthcare clients to operate more effectively.

Cash generation has again been strong in the period, with net cash inflow from operating activities of €55.8 million, significantly ahead of the €20.4 million generated in the first half of 2012.

In September, we plan to re-brand our Group as 'UDG Healthcare plc' subject to shareholder approval and to apply brand consistency within each division, so that we can better communicate and market our full service offering to our international healthcare clients and all our other stakeholders. An EGM notice seeking approval for this change will be circulated to shareholders in the coming weeks."

Dividend

The Board of Directors has declared an interim dividend of 2.61 cent per share, a 5% increase on the 2012 interim dividend.

The interim dividend is payable to shareholders on the Company's register at 5.00 p.m. on 17 May 2013 and will be paid on 16 July 2013. A Dividend Reinvestment Plan, which enables shareholders who elect to participate to use their cash dividend to acquire additional shares in the Company, is available in respect of the interim dividend.

Outlook

Based on the strong trading performance for the year to date and the outlook for the remainder of the year, the Group continues to expect constant currency adjusted diluted earnings per share for the year to 30 September 2013, before non-recurring costs associated with acquisition activity and exceptional items, to be between 5% and 8% ahead of last year.

The Group also expects to deliver another strong cash flow performance in the year, which coupled with modest debt levels relative to earnings and significant financing facilities available leaves the Group well positioned to support its future growth objectives both organically and through additional acquisitions.

Analyst presentation:

A presentation for investors and analysts will be held at 9.00 BST, today at the London Stock Exchange.

The conference call dial-in details are as follows: - Standard International Access +44 (0)20 3003 2666 - UK Toll Free 0808 109 0700 - Password: United Drug  

For Enquiries:

About United Drug plc

Sales, Marketing & Medical

The Sales, Marketing & Medical division provides outsourced sales and related marketing and medical services to the healthcare industry in the UK, North America, Europe and Asia. Revenue for the division of €182 million is 113% higher than the same period in 2012. Much of this growth came from the recently acquired Pharmexx businesses, which had lower margins than our existing business at the time of acquisition. Operating profits have grown by 29% during the period.

We continue to win new business and remain the clear market leader in the provision of Contract Sales Outsourcing (CSO) services in the relatively mature UK market, as clients look for more flexible and efficient ways to service their market. Our newly formed Japanese CSO business continues to make good progress, allowing us to utilise the local contacts of our Japanese partner and business contacts from other parts of the Group.

The acquisition of Pharmexx in late 2012 has enabled us to expand our geographic service offering and to become one of the leading global providers of sales, marketing and medical services to the healthcare industry. The integration of Pharmexx has progressed well, with a major emphasis being placed on improving business development and pricing models to augment its strong performance since acquisition and to raise net margin to the levels of our existing CSO business. The Pharmexx Head Office in Stuttgart has been closed, with support services now being provided from our existing Head Office in the UK. There is considerable potential to strengthen the Pharmexx business in the main markets in which we operate (Germany, Spain, Austria and Canada) and we believe that Pharmexx will provide a strong platform for future profit growth in our global CSO business.

Our medical and regulatory services business in the US is having another good year with a strong pipeline of both medical affairs and telesales opportunities. We continue to have success in combining this offering with our US CSO business and formally merged the two businesses during the period. In response to market demand, the company can now offer its clients a more complete range of solutions, combining field and phone capabilities to create tailored, multichannel programmes to meet increasingly complex business needs. This has resulted in a number of new business wins, most notably a nationwide clinical nurse programme with a leading biotechnology company, a three year contract that represents one of the largest contract awards of its type within the US market. DSA and Synopia have performed well since acquisition and enable us to provide a broader range of services to existing clients and to provide other Group services to their clients.  

Our events management business has also performed well in the first half of the year and the business has continued to consolidate its position as the largest global event management group specialising in the healthcare sector. Global client development has helped facilitate new business wins, which will be further enhanced by the opening of a new office in Shanghai.

Our healthcare communications and consultancy business has delivered another strong performance in the first half of the year, through a combination of new business wins and growth from existing clients. Watermeadow has been successfully integrated into the business and is providing us with further cross-selling opportunities.

Healthcare Supply Chain

The Healthcare Supply Chain division combines all the Group's healthcare logistics based businesses and operates in the UK, Ireland and the Netherlands. Revenue for the division for the period of €736 million is 1% ahead of 2012. Operating profits have increased by 2% over the same period in 2012.

Our Pharma Wholesale business has increased revenues and profits over the same period last year. In the Republic of Ireland, underlying volume growth and market share gains have helped to offset on-going regulatory pressure. Our business continues to focus on providing a top class, full-line wholesale service to retail and hospital pharmacy customers while, at the same time, driving efficiencies through a significant automation investment programme which continues to progress well. In Northern Ireland, wholesale revenue is also ahead of last year, despite lower consumer spending on over-the-counter products. We have also invested in further warehouse expansion and automation in the Belfast depot during the first half of the financial year, whilst closing our satellite depot in Omagh. These investments will facilitate further volume growth, enhanced customer service and greater operational efficiency.

In pre-wholesale, we have strengthened our market leading positions in the provision of third party logistics services for healthcare clients in both the Republic of Ireland and the UK. New business wins, in both Ireland and the UK, are contributing to another strong performance that is expected to continue for the remainder of the year.

Our pharmaceutical specials business in the UK continues to be significantly impacted by the NHS introduction of a "drug tariff" which sets the reimbursement price on the most popular products in this market. The impact of this market change has more than offset the positive momentum in the business. These positive factors include our own brand "Arjun" range of affordably priced specials and new services to source named patient medicines from overseas and the distribution of these medicines on behalf of pharmaceutical manufacturers.

Our Medical & Scientific business has continued to show strong growth in the first half of the year. Whilst our full service offering combining sales, distribution, engineering and other services has always been attractive to niche medical device clients, we have recently started targeting larger medical device companies. We are having considerable success selling our services to larger clients, who are attracted by the focus and flexibility we can bring to commercialising specific product ranges within their portfolios. A number of our clients have expressed interest in utilising our services in other European countries, which has led to the continued growth of our business in Holland.

Packaging & Specialty

The Packaging and Specialty Division provides outsourced commercial and clinical trial packaging services to healthcare companies in the US and Europe. The division also provides specialty homecare and distribution services in Ireland and the UK. Divisional revenue for the period of €99 million is 26% higher than the same period in 2012, with operating profit growing by 25%.

We have now integrated the recently acquired Sharp Clinical business (formerly Bilcare GCS) into our commercial packaging business. As anticipated at the time of acquisition, this business will not be a substantial profit contributor in its first year, and we continue to believe that both business development and cost synergies with our commercial packaging businesses will enable this business to achieve strong profit growth in future years.

Our US packaging business has continued to perform strongly in the first half of 2013. Revenues and profits are well ahead of the same period last year. The volume of business continues to grow as the level of outsourcing of packaging operations from the pharmaceutical industry increases and we expect to continue to trade strongly during the remainder of the year. We have commenced a $20 million investment programme over three years to build further packaging capacity to meet anticipated strong business growth.

We have undertaken a thorough review of our European packaging facilities to decide upon the optimal infrastructure configuration for this business. Following this review we concluded in May 2013 that our UK commercial packaging facility will not meet our future requirements and accordingly have decided to close the facility. We believe that we have sufficient capacity in our remaining 'state of the art' facilities to service the European market and to manage significant volume growth in the future. With the production volume that will transfer to our other facilities combined with a number of recent long term contract wins, mainly from existing US packaging clients, our European packaging business will deliver revenue and profit growth in 2014 and beyond.

Both our UK and Irish specialty businesses have begun the year well with revenue tracking well ahead of the same period last year. We have invested heavily in our Irish specialty homecare business in advance of the up-lift in activity as a result of winning a major Irish Government tender to provide infusion services in patients' homes. This investment will impact profits in the short term as we work to scale up the business. However, we believe that this contract will drive good profit growth for this business in 2014.

Revenue

Revenue for the six months to 31 March 2013 of €1,017 million is ahead of the same period in 2012 by 14%. The increase was a result of organic growth and the impact of the acquisitions made towards the end of 2012. Each of the three divisions within the Group reported revenue ahead of the prior period.

Adjusted Operating Profit*

Operating profit of €44.6 million is 13% ahead of the first half of 2012, primarily due to the impact of acquisitions made towards the end of 2012.

Adjusted Profit before Tax*

Net interest costs for the period are €6.6 million. After this interest charge, profit before tax of €38 million is 8% higher than in 2012.

Adjusted Earnings per Share*

Diluted earnings per share for the period of 12.58 cent, is 7% ahead of 2012. Operating profit growth is partially offset by increased interest charges, a higher effective tax rate and an increase in the number of shares following share issues under various share schemes.

Exceptional Items

The Group has incurred an exceptional charge of €10.5 million in the period. The charge primarily relates to previously communicated restructuring costs of recently acquired businesses and the non-cash write down of goodwill in our European Packaging business. The Group anticipates incurring an exceptional charge of €21-24 million (net of tax) for the full year. The charge primarily relates to the closure of the UK commercial packaging facility and the restructuring costs associated with our recently acquired businesses. The annualised savings arising from these actions should be in the region of €7-9 million.

Cash Flow

Net cash inflow from operating activities for the period was €55.8 million. This operating cash flow includes €2.5 million paid in relation to the restructuring undertaken in the current period. Capital expenditure for the period was €23.9 million, as the Group continues to invest in its infrastructure to manage and maximise the potential of the growing business. For the six months to 31 March 2013 net debt has increased by €2.8 million.

Balance Sheet

Net debt at the end of the period was €220.5 million. The net debt to EBITDA ratio is 2.07 times and net interest is covered 8 times by EBITDA. The financial covenants in our debt facilities are based on net debt to EBITDA not to exceed 3.5 times and EBITDA to net interest cover to be greater than 3 times.

*before amortisation of intangible assets, exceptional items and acquisition costs

Forward-looking Information

Some statements in this announcement are forward-looking. They represent expectations for the Group's business, and involve risks and uncertainties. The Group has based these forward-looking statements on current expectations and projections about future events. The Group believes that expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which in some cases are beyond the Group's control, actual results or performance may differ materially from those expressed or implied by such forward-looking statements.

The Transparency (Directive 2004/109/EC) Regulations 2007 require disclosure of the principal risks and uncertainties which could have a material impact on the Group's performance over the remainder of the financial year.

Risk management is an integral part of the Group's business process. A detailed risk register is maintained by each division within the Group and plans to address the identified risks are updated and reviewed by the executive directors on a regular basis. The consolidated risk register is also reviewed by the Risk, Acquisitions and Finance Committee and the Chairman of the Committee reports to the Board regarding this matter.

The principal risks and uncertainties facing the Group in the six month period to 30 September 2013 include the following:

Statement of Directors

Each of the directors confirm that to the best of their knowledge and belief:

·; the condensed set of interim financial statements comprising the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, and the related notes have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the EU;

·; the half-yearly financial report includes a fair review of the information required by:

(a) Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

The Group's auditor has not reviewed this condensed half-yearly financial report.

On behalf of the Board(i)

P. Gray L. FitzGerald

Director Director

8 May 2013

(i) The Board of United Drug plc is disclosed on the Company's website, www.united-drug.com.

Condensed consolidated income statement

Condensed consolidated statement of

comprehensive income

Condensed consolidated statement of changes in

equity

Condensed consolidated balance sheet

Condensed consolidated cash flow statement

Notes to the condensed interim financial statements

for the six months ended 31 March 2013

_____________________________________________________________________________________________

1. Reporting entity

United Drug plc (the "Company") is a company domiciled in Ireland. The unaudited condensed consolidated interim financial statements of the Company for the six months ended 31 March 2013 are comprised of the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in joint ventures and associates.

The financial information presented herein does not amount to statutory financial statements that are required by Section 7 of the Companies (Amendment) Act, 1986 to be annexed to the annual return of the Company. The financial information does not include all the information and disclosures required in the annual financial statements. The statutory financial statements for the year ended 30 September 2012 will be annexed to the annual return and filed with the Registrar of Companies. The audit report on those statutory financial statements was unqualified and did not contain any matters to which attention was drawn by way of emphasis.

2. Statement of compliance

These unaudited condensed consolidated interim financial statements ("the interim accounts") have been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the European Union. These interim accounts do not include all of the information required for full annual financial statements and should be read in conjunction with the most recent published consolidated financial statements of the Group.

The following are the standard amendments that are effective for the financial year of the Group ending on 30 September 2013. The amendments have resulted in some presentational changes but had no significant impact on the results or financial position of the Group in the period to 31 March 2013.

• Amendments to IAS 1 - Presentation of Items of Other Comprehensive Income

• Amendments to IAS 12 - Deferred Tax: Recovery of underlying assets

The Group has also adopted the Improvements to IFRS issued by the International Accounting Standards Board ("IASB"). This standard amends a number of other standards, basis of conclusions and guidance. The improvements included changes in presentation, recognition and measurement plus terminology and editorial changes. These amendments do not have a significant impact on the Group condensed consolidated interim financial statements.

All other accounting policies applied in these interim financial statements are the same as those which applied in the consolidated financial statements for the year ended 30 September 2012 and as those expected to apply for the financial year to 30 September 2013.

The preparation of interim financial statements requires the use of certain critical accounting estimates, judgements and assumptions. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, relate primarily to accounting for defined benefit pension schemes, financial instruments, share-based payments, property, plant and equipment, intangible assets, provisions, goodwill impairment and deferred tax. The nature of the assumptions and estimates made in the preparation of the interim accounts are the same as those identified in our most recent annual report. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. There was no significant change to any of these key estimates or judgements in the six month period, other than a change to certain actuarial assumptions as set out in note 13.

The income tax expense for the six month period is calculated by applying the Directors' best estimate of the annual effective tax rate to the profit for the period.

The directors have a reasonable expectation that the Company, and the Group as a whole, have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

As permitted by the Transparency (Directive 2004/109/EC) Regulations 2007 this Interim Report is available on www.united-drug.com. However, if a physical copy is required, please contact the Company Secretary.

3. Segmental analysis

The Group's operations are divided into the following segments:

Healthcare Supply Chain - The Healthcare Supply Chain segment combines all of the Group's healthcare logistics based businesses.

Sales, Marketing & Medical - The Sales, Marketing & Medical segment provides contract sales outsourcing and related marketing and medical services to healthcare manufacturers.

Packaging & Specialty - The Packaging & Specialty segment provides outsourced packaging solutions to healthcare manufacturers.

The segmental analysis of the business corresponds with the Group's organisational structure and the Group's internal reporting for the purpose of managing the business and assessing performance as reviewed by the Group's Chief Operating Decision Maker (CODM), which the Group has defined as Liam FitzGerald (Chief Executive Officer) with effect from 1 October 2012. The amount of revenue and operating profit under the Group's operating segments is as follows:

4. Exceptional items

Exceptional restructuring costs, mainly comprising redundancy costs, were incurred in relation to recently acquired and existing Group businesses. The other costs include legal costs for a matter where the Group is a defendant in a complaint made in the State of New York. The complaint alleges breach of a non-disclosure agreement which the Group denies. The matter is ongoing and sub-judice, so no further comment can be made at this time.

There was a non-cash goodwill impairment charge. An impairment review was performed for each cash-generating unit ("CGU") to which a carrying amount of goodwill has been allocated. The Group has written down the carrying value of goodwill in relation to the European Packaging CGU and accordingly a charge of €4.7 million has been taken in the period ended 31 March 2013.

Onerous lease costs are in relation to the recently acquired and existing portfolio of leased properties no longer in use.

5. Share of joint ventures' profit after tax

The reduction in revenue and expenses on 2012 is attributable to our significant joint venture, UniDrug Distribution Group Limited, accounting for their contractual relationships on an agent basis.

6. Finance income and expense

7. Earnings per ordinary share

* excluding amortisation of intangible assets, acquisition costs and exceptional item (net of tax)

The adjusted figures for earnings per share are intended to demonstrate the results of the Group after eliminating the impact of amortization of intangible assets, acquisition costs and exceptional items (net of tax) and are deemed by management to be a key metric of monitoring group performance.

Treasury shares have been excluded from the weighted average number of shares in issue used in the calculation of earnings per share.

The average market value of the Company's shares for the purposes of calculating the dilutive effect of share options was based on quoted market prices for the period.

8. Movement in goodwill, intangible assets and investment in joint ventures and associates

The Group has revised its estimate of the fair value of intangible assets in respect of prior year acquisitions. This has resulted in a corresponding decrease in goodwill relative to amounts previously recorded. On the basis that this adjustment was not deemed to be material, it was accounted for in the current period.

9. Other reserves

10. Net debt

11. Provisions

12. Acquisition of subsidiary undertakings

During the six months ended 31 March 2013, the Group completed two acquisitions:

- On 20 November 2012, the Group completed the acquisition of the UK and Republic of Ireland subsidiaries of Pharmexx GmbH.

- On 31 January 2013, the Group acquired the entire issued share capital of Pharmaceutical Trade Services, Inc., ("PTSI"), a leading supplier of unlicensed medicines internationally on a named patient basis to countries where the products are not yet licensed.

The Group has also revised its estimate of the acquisition date fair value of intangibles in respect of the prior year acquisitions, Drug Safety Alliance Inc. ("DSA") and Synopia RX LLC ("Synopia"). This has resulted in a corresponding decrease in goodwill relative to amounts previously recorded. On the basis that this adjustment was not deemed to be material, it was accounted for in the current period. The initial assignment of fair values for the other prior year acquisitions remains provisional.

The carrying amount of the assets and liabilities which were acquired, determined in accordance with IFRS, before completion of the combination, together with the adjustments made to those carrying values to arrive at the fair values were as follows:

The financial asset previously recognised represented the fair value of the Group's share of net assets in the UK and Republic of Ireland subsidiaries of Pharmexx GmbH. The Group assumed control of these subsidiaries on 20 November 2012. The put and call option liability is the fair value of the option to acquire the non-controlling interests in these subsidiaries. This liability is classified within trade and other payables in the balance sheet.

The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of the business combinations disclosed above given the timing of completion of these transactions. Any amendments to these acquisition date fair values within the twelve month timeframe from the date of acquisition will be disclosed in the relevant Annual Report as stipulated by IFRS 3 (Revised 2008), Business Combinations.

Goodwill is attributable to the future economic benefits arising from assets which are not capable of being individually identified and separately recognised. The significant factors giving rise to the goodwill include the value of the workforce and management teams within the businesses acquired and the enhancement of the competitive position of the Group in the marketplace and the strategic premium paid by United Drug plc to create the combined Group.

The intangible assets arising on the acquisitions are primarily related to the trade names and customer relationships.

The acquisition related costs for these acquisitions, which amounted to €308,000, are presented separately in the income statement.

The Group's results for the period ended 31 March 2013 includes the following amounts in respect of the businesses acquired during the period: