6th May 2008 07:00
United Drug plc First Half Results for the six months ended 31 March 2008 UDG.I UDG.L United Drug plc, a leading international provider of services to healthcaremanufacturers and pharmaceutical retailers today announced results for the sixmonths to 31 March, 2008. Financial & Operating Overview \* TFinancial highlights 2008 2007 Increase EUR 'mn EUR 'mn %------------------------- ------------------- ---------------- ---------------------Revenue 845.07 772.97 9------------------------- ------------------- ---------------- ---------------------Operating profit * 36.61 30.62 20------------------------- ------------------- ---------------- ---------------------Profit before tax * 33.28 29.01 15------------------------- ------------------- ---------------- ---------------------Diluted earnings per share (cent) * 12.13c 10.73c 13------------------------- ------------------- ---------------- ---------------------Dividend per share (cent) 2.23c 1.97c 13------------------------- ------------------- ---------------- ---------------------Net Debt 82.66 68.28**------------------------- ------------------- --------------------------------------Net Debt to EBITDA 0.91** (times) 0.99------------------------- ------------------- --------------------------------------\* T * before intangible amortisation. ** as at 30 September 2007. Operating highlights -- Continued double-digit profit, earnings and dividend growth. -- Strong performance and growth reported in each of our four operating divisions. -- Continued market share gains in both the Republic of Ireland and Northern Ireland wholesale businesses. -- Solid performance from our emerging pharma packaging business in Europe. -- Expansion of our presence in the Irish Medical & Scientific market through the acquisition of JVA. -- Broadening of our contract sales and marketing services with acquisitions in the US and UK markets. -- The fall in the value of sterling relative to the euro reduced the translated value of the sterling profits by approximately EUR 1 million when compared to last year. On a constant currency basis pre-tax profits are 18% ahead of the prior year. -- The expansion of the Group into higher margin activities has helped to drive a further increase in EBIT and pre-tax profit margins. -- Tight working capital management has helped to deliver another good cash flow performance in the period. -- At the end of the period our balance sheet remains strong, with modest debt levels and significant capital resources available. About United Drug plc United Drug is a leading international provider of services to healthcaremanufacturers and pharmaceutical retailers, with operations in the UK, Ireland,Holland, Belgium and the USA. The Company operates across four divisions, PharmaWholesale, Supply Chain Services, Medical & Scientific and Contract SalesOutsourcing. United Drug is the largest pharmaceutical wholesaler in the island of Ireland.It is the market leader in contract distribution outsourcing (pre-wholesaling)in Ireland and has achieved the No. 1 position in the UK through its jointventure business UniDrug Distribution (UDG). The Company also providesdistribution related services in the areas of pharmaceutical contract packagingand speciality distribution in the UK, Holland and Belgium. Through its Medical & Scientific division, United Drug provides sales &marketing and technical service solutions, including contract distributionservices to Medical & Scientific equipment & consumable manufacturers, with amarket leading position in Ireland and an emerging presence in the UK. United Drug is also a leading provider of contract sales outsourcing and relatedmarketing services to pharmaceutical manufacturers in the UK and Ireland andalso provides these services in the US market. \* TInvestors and analysts Media------------------------------------------------------ -----------------------------------------------Mark Kenny or Jonathan Neilan Pauline McAlesterK Capital Source Murray Consultants Tel: +353 1 631 5500 Tel: +353 1 498 0300Email: [email protected] Email: pmcalester@murrayconsult.ie------------------------------------------------------ -----------------------------------------------\* T Summary results for the six months to 31 March 2008 United Drug is reporting another period of double-digit profit, earnings anddividend growth for the six months to 31 March 2008. Revenue for the period isEUR 845.1 million, an increase of 9% over 2007, and pre-tax profits beforeintangible amortisation, increased by 15% to EUR 33.3 million. Fully dilutedearnings per share before intangible amortisation have increased by 13% to 12.13cent per share and the interim dividend declared at 2.23 cent is also 13% up on2007. These results have been achieved despite the weakening in the value of sterlingrelative to the euro during the period. The deterioration in the sterlingexchange rate impacts on the translation of profits and reduced the value ofthose translated profits by approximately EUR 1 million when compared with thesame period last year. On a constant currency basis pre-tax profits in theperiod are 18% ahead of 2007. Chief Executive Officer's comment: Commenting on the 2008 first half performance, United Drug Chief ExecutiveOfficer, Liam FitzGerald said: "United Drug has made an excellent start to 2008 with strong growth across allparts of the business. Operating profits in the period have increased by 20%(23% on a constant currency basis) when compared with the first half of 2007. Each of our four operating divisions has traded successfully during the period,and they are managing the challenges they face extremely well. Each division hasa number of opportunities to strengthen its position in the growth markets inwhich it operates. We also see further opportunities to expand the range ofservices we provide, both organically and through acquisition." Dividend The Board of Directors has declared an interim dividend of 2.23 cent per share.This is an increase of 13% over the 2007 interim dividend and continues theCompany's progressive dividend policy which is to increase dividends in linewith earnings growth. The Directors are pleased to advise that all shareholders will be given theopportunity of receiving all or part of the 2008 interim dividend as a scripdividend in the form of new shares. It is expected that the share alternativeelection/mandate forms, setting out details of the share alternative offer andthe procedures to be followed will be posted to shareholders on 30 May 2008. The interim dividend will be paid or alternatively, share certificates issued,on 11 July 2008 to holders of ordinary shares whose names appear on theCompany's register at the close of business on 16 May 2008. Outlook United Drug expects the strength of current trading to continue into the secondhalf of its financial year. The weakness in the value of sterling relative tothe euro will continue to adversely impact on the translation of profits butfull year profits and earnings are still expected to show strong growth over the2007 results. We remain positive about the fundamentals of our core markets and we have theopportunity and internal resources to continue to expand both organically andthrough acquisition to continue the development of United Drug. Principal risks and uncertainties Under the Transparency (Directive 2004/109/EC) Regulations 2007, the Group isrequired to give a description of the principal risks and uncertainties it faces. The key risks facing the Group in the six month period to 30 September 2008include the following: -- The Group faces strong competition in its various markets and if it fails to compete successfully, market share and profitability may decline. -- Distribution of third party products by the Group is currently by agreement. There is no certainty that these agreements will be renewed when they expire, which could lead to a decline in sales and profitability. -- Changes in Government regulations, particularly in the healthcare and pharmaceutical sectors, may adversely affect the Group. -- As an international group with substantial operations and interests outside the eurozone, the Group is subject to the risk of adverse movements in foreign currency exchange rates. -- Movements in interest rates may adversely affect the Group. -- The Group is subject to stringent medical, quality, environmental and health and safety regulations and failure by any part of the Group to fully comply with these regulations could adversely affect the Group. -- The Group requires access to capital to operate on a daily basis and for longer term development projects. Lack of availability of sufficient capital resources may adversely affect the Group. -- Should the Group not be able to fulfil the demand for its products due to circumstances such as the loss of a packaging or storage facility or disruptions to its supply chains, sales volumes and profitability could be affected. -- Group IT facilities could be subject to external interference or viruses, which could result in downtime, which in turn could lead to a decline in sales and profitability. -- The success of the Group is built upon a strong effective management team committed to achieving a superior performance in each of our divisions. The loss of key personnel could for a time have a significant impact on business performance. The Group has a comprehensive system of risk management and internal controls,which are an integral part of the Group's business processes, and are intendedto identify and mitigate such risks and uncertainties. Review of Operations Pharma Wholesale In our United Drug Wholesale business, which serves the Republic of Irelandmarket, turnover, profitability and market share have all increased during theperiod. This has been driven by new business won in a growth market, combinedwith the continued development of our service offerings and management of ourcost base. United Drug Wholesale has further improved its position as the leadingwholesaler in the Republic of Ireland, despite the competitive nature of themarket. Government intervention is having a significant impact on the retail pharmacymarketplace. A new agreement on drug prices, resulting in a reduction in theprice of off-patent drugs and medicines, took effect on 1 March 2007. The IrishHealth Service Executive (HSE), with effect from 1 March 2008, implemented itspreviously announced intention to reduce the reimbursement price it pays tocommunity pharmacy for medicines funded by the HSE. The recommendation of anindependent body, established by the Minister for Health and Children, to set anew community pharmacy dispensing fee, is expected at the end of May 2008. Anincreased dispensing fee should help offset some of the impact on pharmacistsfrom the reduction in the reimbursement price of medicines. United Drug Wholesale remains focused on delivering an improved service to ourcustomers whilst reducing our key cost to sales ratio via investment inautomation. In the first half of our current financial year we made furtherinvestments in warehouse automation. These investments facilitate anticipatedvolume growth, further improve customer service and efficiently control cost. United Drug Wholesale has continued to broaden its service offering to ourindependent community pharmacy customers. Our focus on niche areas such asOstomy supplies and our Profitlines over the counter offering has seen growth inthese areas well in excess of overall market growth. In Northern Ireland, our Sangers business has further increased its profits andmarket share during the period. The continued move by pharmaceuticalmanufacturers to Direct-to-Pharmacy (DTP) distribution arrangements changes therevenue model for Sangers as we now charge a fee-for-service rather than buyingand reselling the product. This market change has helped Sangers to continue tobuild on its clear market leadership position in the growing Northern Irelandmarket. This growth, combined with margin management and cost control, hasresulted in a good increase in overall profitability. Craig & Hayward, our UK based specials distributor acquired during 2007 has hada very strong performance during the period with revenue and profits exceedingexpectations. When combined with the Republic of Ireland and Northern Irelandwholesale businesses, the Group's total Pharma Wholesale division has had a verysuccessful six months and reported strong revenue and profit growth over thecorresponding period last year. Our Pharma Wholesale businesses operate in markets that are the focus ofGovernment cost savings initiatives and manufacturer changes to traditionalsupply chain models. Despite these cost pressures and market developments thereare sound fundamentals driving strong growth in these markets. Our wholesaledivision has shown resilience to these market challenges and is well placed tocontinue to prosper based on leading market positions, and our focus onefficiency and customer relationships. Supply Chain Services During the first six months of this financial year, the Supply Chain Servicesdivision has consolidated its activities into three main interrelated strands;Contract Distribution Outsourcing Services (CDO), Speciality and ClinicalServices and Contract Packaging Services. CDO, incorporating the Irish and UKpre-wholesaling and single channel supply consumer products businesses, performed very strongly in the period. UDG, our pre-wholesalebusiness in the UK held as a joint venture with Alliance Boots, benefited fromsignificant business wins whilst the pre-wholesale business in Ireland, UDD,gained from strong performances by key clients in the market. The small consumerproducts business in Ireland has been restructured and streamlined and is nowoperating efficiently, and profitably, off a smaller base. The Speciality and Clinical Services business includes MASTA in the UK andTemperature Controlled Pharmaceuticals (TCP) in Ireland. MASTA procures,markets, sells and distributes flu and travel vaccines to GPs and clinics andalso administers travel vaccines to the general public through partnered andself-owned clinics. Whilst MASTA's underlying performance is solid, it sufferedfrom a slow take-up of flu vaccinations in the UK at the beginning of the year.In June 2007, we took an interest in TCP. This business is in start-up mode butnow successfully operates three infusion clinics in Ireland and has recentlysecured two new contracts with Abbott and Amgen. With MASTA and TCP, we can nowoffer comprehensive solutions to pharma and Health Authority special logisticsand patient administration requirements in both Ireland and the UK. The Contract Packaging businesses include TD Packaging in the UK, EuropeanPackaging Centre (formerly PLI) in The Netherlands, and Enestia Belgium(formerly Budelpack). The latter two businesses were acquired in 2007. The threebusinesses together provide packaging services to the pharmaceutical branded andgenerics markets as well as the nutraceutical market. TD Packaging benefitedfrom a significant contract with Gerard Pharmaceuticals and continues to winbusiness on the back of flexible, cost efficient solutions. European PackagingCentre performed excellently in the period and has a very solid customer base.Both TD Packaging and European Packaging Centre are well on track to meetearn-out targets. Enestia Belgium operates on a project basis, whereby, in apartnered approach with key clients, it commits to long term projects. Thebusiness performed well during the period, successfully delivering on a keyproject with Laboratoire Besins. The Supply Chain Services division reported a very strong performance in thefirst half of the current financial year. Operating from a very strong base, thedivision is now well positioned to continue to grow as it provides a wide rangeof supply chain solutions to pharmaceutical manufacturers and nationalhealthcare agencies across Ireland, the UK and Continental Europe. Medical & Scientific The Medical & Scientific (M&S) division of United Drug provides best-in-classsales, technical services and back-office support to high quality,technology-driven, medical equipment and devices manufacturers. The divisionoperates in both the Irish and UK markets. In the first half of 2008 we have significantly increased our presence in theIrish market with the acquisition of JVA. JVA holds an enviable position as aservice-driven provider of sales and after-sales support, built around theVarian brand, to the specialist analytical chemistry market. The business hasperformed very well since the acquisition. We are already identifyingsignificant opportunities for co-operation between JVA and Unitech in theRepublic of Ireland and Vector Scientific in Northern Ireland, as we bring newJVA products to existing customers and introduce existing customers to JVA. We now occupy a unique position in the market in Ireland with a developedIndustrial, Scientific, Clinical and Analytical business base. This base can nowrealise significant synergies through co-operation and exchange of products andcustomers. In the period our core businesses continued to perform well. Project fundingfrom the Higher Education Authority (HEA) and other bodies has increased thisyear, and we are well placed in the scientific, industrial sector to maximisethis opportunity. Spending constraints in the HSE have slowed or delayed somecapital equipment projects, but despite this we are satisfied with progress todate and have a number of significant projects at an advanced stage ofdeliberation on a number of different fronts. In the UK, the development of a 'centre of excellence' at our Basingstokefacility continued with the establishment of a dedicated M&S marketing unit.This department will offer support to our sales teams, as well as complementingthe marketing output of our global manufacturing partners. Even moreimportantly, it will focus on creating primary demand for our products andservices through the dissemination and publication of pertinent clinical andeducational material. International practice has demonstrated that this approachcan be critical in gaining widespread acceptance of revolutionary techniquessuch as the daVinci operating robot. On the sales side we have also made progress. In the period we have leveragedthe common NHS customer base and shared best practice in our capital equipmentbusinesses by establishing closer managerial links between our existing teams.We have also developed a Key Account Management programme which is driving theselling process across the UK businesses, which will also allow us to introducean IT driven solution to maximise efficiencies in this area and create a best inclass, external-facing customer service focus across the whole division. These activities will contribute to growing our business position in the UK. Asin Ireland, the timing of some capital sales has been slower than originallyforecast but there is a strong pipeline of opportunities going into the secondhalf of the year. Pyramed, the UK based interventional cardiology businessacquired during the first half of 2007, has successfully completed its earn-outand this was paid out in full during the period. Growth in the M&S division in the period has been slower than our expectationsbut a strong pipeline going into the second half of the year should contributeto a stronger full year outcome. Contract Sales & Marketing Services (CSM) The Contract Sales Outsourcing division has significantly broadened its serviceoffering over the last six months and to better reflect the increased serviceoffering to healthcare clients the division is being renamed the Contract Sales& Marketing Services division. The core sales offering in this division is being extended to include marketingrelated services as we seek to continue to benefit from the trend amongstpharmaceutical manufacturers to outsource more of their non-core functions. Theservice offering and geographical reach of the division has been enhanced duringthe period with two bolt-on acquisitions. In October 2007, we acquired AllianceHealthcare, a US based company, which provides a range of call centre solutionsto support pharma companies' sales and marketing requirements, including medicalaffairs information, patient compliance support and clinical trials recruitment.In November 2007, we acquired Procon, a UK pharmaceutical conference servicescompany providing full corporate event management services targeted specificallyat the pharmaceutical and healthcare sector. Services include venue finding,association and secretariat membership, and delegate registration through tofull event management. Since the end of the reporting period we have made two further bolt-onacquisitions. Universal Conference and Incentive Travel provide event managementservices to pharmaceutical companies, both at pre and post approval stages ofproduct development based in the UK and the US and Business Edge Solutions andTraining provide a range of personal, sales and team effectiveness trainingprogrammes for pharmaceutical companies in the UK market. These businessescomplement our market leading and growing contract sales operations in the UKand Ireland and will allow us to provide additional value-added services toclients in existing and new markets. Ashfield In2Focus continues to be the supplier of choice for contract salesservices in the UK and Irish markets and has had a number of new business winsin the period. This performance plus a contribution from the new businessesadded to the division will deliver a strong outcome for the full year andpositions the division well for continued growth. Finance review Operating Profit Operating profits are ahead of last year in each of the four business divisions. The move into higher margin activities has helped to deliver a 20% increase inoperating profits before intangible amortisation from a 9% increase in revenues. Profit before Tax Net interest costs in the period of EUR 3.3 million are EUR 1.7 million higherthan in 2007 as we now have a cost for the full period of financing recentlycompleted acquisitions. After these interest costs, profit before tax andintangible amortisation of EUR 33.3 million is 15% higher than 2007. Earnings per Share Diluted earnings per share before intangible amortisation for the period of12.13 cent, is 13% up on 2007. EPS growth is lower than profit growth in theperiod as a result of a slight increase in the average tax rate, as a result ofthe acquisition of businesses in higher tax rate jurisdictions, and an increasein the number of shares in issue following share issues under the scrip dividendand other share schemes. Cash Flow Free cash flow for the six months to 31 March 2008, before capital andacquisition expenditure, amounted to EUR 24 million. The absolute value of theinvestment in working capital levels increased during the period but at a lowerrate than revenue growth as underlying working capital levels improved. Capitalexpenditure for the period amounted to EUR 6 million and a further EUR 32.5million was spent on acquiring new businesses or on deferred considerationpayments due on acquisitions completed in earlier years. The cash flow for theperiod was a net outflow of EUR 14.4 million. Balance Sheet Net debt at the end of the period was EUR 82.7 million giving a gearing ratio of25.9%. Debt levels remain modest given the cash flows of the business, and areless than one times EBITDA. Interest charges are covered more than 12 times byEBITDA. Net assets at 31 March 2008 are EUR 318.9 million. This is less than the levelof net assets at 30 September 2007 as a result of a fall in the value of foreigncurrency net assets arising from the significant reduction in the value ofsterling relative to the euro during the period. Forward-looking information Some statements in this announcement are forward-looking. They representexpectations for the Group's business, and involve risks and uncertainties. TheGroup has based these forward-looking statements on current expectations andprojections about future events. The Group believes that expectations andassumptions with respect to these forward-looking statements are reasonable.However, because they involve known and unknown risks, uncertainties and otherfactors, which are in some cases beyond the Group's control, actual results orperformance may differ materially from those expressed or implied by suchforward-looking statements. Statement of directors in respect of the half-yearly financial report We confirm our responsibility for the half yearly financial report and that tothe best of our knowledge: the condensed interim financial statements comprising the condensed interimincome statement, the condensed interim statement of recognised income andexpense, the condensed interim balance sheet, the condensed interim cash flowstatement, and the related notes have been prepared in accordance with IAS 34,Interim Financial Reporting as adopted by the EU; the interim management report includes a fair review of the information requiredby: (a) Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations2007, being an indication of important events that have occurred during thefirst six months of the financial year and their impact on the condensed set offinancial statements; and a description of the principal risks and uncertaintiesfor the remaining six months of the year; and (b) Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations2007, being related party transactions that have taken place in the first sixmonths of the current financial year and that have materially affected thefinancial position or performance of the entity during that period; and anychanges in the related party transactions described in the last annual reportthat could do so. The Group's auditor has not reviewed these condensed interim financialstatements. On behalf of the Board \* TR. Kells L. FitzGeraldDirector Director\* T 2 May 2008 Condensed consolidated interim income statement for the six months ended 31 March 2008 \* T Six months ended Six months ended 31 March 2008 31 March 2007 (Unaudited) (Unaudited) Notes EUR '000 EUR '000Revenue 3 845,065 772,970Cost of sales (715,689) (660,540)----------------------------------- ------- ----------------------------- ----------------------- Gross profit 129,376 112,430Distribution expenses (90,659) (80,250)Administration expenses (3,980) (2,875)Other operating expenses 6 (5,871) (2,021)Share of joint ventures' profit after tax 4 1,871 1,316----------------------------------- ------- ----------------------------- -----------------------Operating profit 30,737 28,600Finance income 1,091 762Finance expense (4,415) (2,371)----------------------------------- ------- ----------------------------- -----------------------Profit before tax 27,413 26,991Income tax expense (4,010) (4,601)----------------------------------- ------- ----------------------------- -----------------------Profit for the period attributableto equity holders of the Company 23,403 22,390----------------------------------- ------- ----------------------------- ----------------------- Earnings per shareBasic 5 10.22c 9.92cDiluted 5 10.15c 9.85c\* T Condensed consolidated statement of recognised income and expense for the six months ended 31 March 2008 \* T Six months ended Six months ended 31 March 2008 31 March 2007 (Unaudited) (Unaudited) Notes EUR '000 EUR '000Items of income/(expense) recogniseddirectly within equity:Foreign currency translation adjustment 9 (30,687) (1,133)Group cash flow hedges:Effective portion of cash flow hedges 9 1,068 993Movement in deferred tax 9 (134) (125)Group defined benefit pension schemes:Actuarial (loss)/gain 9 (2,017) 2,885Movement in deferred tax 9 (91) (653)----------------------------------- ------- --------------------------------- ---------------------- Net (expense)/income recognised directly within equity (31,861) 1,967Profit for the period 23,403 22,390----------------------------------- ------- --------------------------------- ----------------------Total recognised income and expensefor the period attributable to equityholders of the Company (8,458) 24,357----------------------------------- ------- --------------------------------- ----------------------\* T Condensed consolidated interim balance sheet as at 31 March 2008 \* T As at 31 March As at30 September As at 31 March 2008 2007 2007 (Unaudited) (Unaudited) (Audited) Notes EUR '000 EUR '000 EUR '000ASSETSNon-currentProperty, plant and equipment 68,488 54,649 68,093Goodwill 6 151,985 124,864 148,544Intangible assets 6 45,968 24,901 39,404Investment in joint ventures 6 18,002 20,203 20,857Employee benefits 1,250 - -Deferred tax assets - 40 --------------------------- ----- ---------------------------- ----------------- --------------------Total non-current assets 285,693 224,657 276,898-------------------------- ----- ---------------------------- ----------------- --------------------CurrentInventories 151,394 143,341 161,882Trade and other receivables 285,938 274,559 279,550Cash and cash equivalents 7 79,072 59,262 57,547-------------------------- ----- ---------------------------- ----------------- --------------------Total current assets 516,404 477,162 498,979-------------------------- ----- ---------------------------- ----------------- --------------------Total assets 802,097 701,819 775,877-------------------------- ----- ---------------------------- ----------------- -------------------- EQUITYEquity share capital 9 11,922 11,712 11,801Share premium 9 106,944 99,799 103,473Other reserves 9 (37,846) (3,544) (8,170)Retained earnings 9 237,879 199,480 223,965-------------------------- ----- ---------------------------- ----------------- --------------------Capital and reserves attributable to equity holders of the Company 318,899 307,447 331,069-------------------------- ----- ---------------------------- ----------------- -------------------- LIABILITIESNon-currentInterest-bearing loans and borrowings 7 140,782 77,548 74,873Other payables 7,323 10,208 9,161Provisions 216 1,362 216Employee benefits 6,834 9,986 6,334Derivative financial instruments 7 9,959 4,624 7,574Deferred tax liabilities 10,304 6,201 9,525-------------------------- ----- ---------------------------- ----------------- --------------------Total non-current liabilities 175,418 109,929 107,683-------------------------- ----- ---------------------------- ----------------- --------------------CurrentBank overdrafts 7 787 - 8,000Interest-bearing loans and borrowings 7 2,552 5,927 28,810Trade and other payables 288,108 264,263 286,369Current tax liabilities 8,218 7,890 6,915Provisions 463 230 463Derivative financial instruments 7 7,652 6,133 6,568-------------------------- ----- ---------------------------- ----------------- --------------------Total current liabilities 307,780 284,443 337,125-------------------------- ----- ---------------------------- ----------------- --------------------Total liabilities 483,198 394,372 444,808-------------------------- ----- ---------------------------- ----------------- --------------------Total equity and liabilities 802,097 701,819 775,877-------------------------- ----- ---------------------------- ----------------- --------------------\* T Condensed consolidated cash flow statement for the six months ended 31 March 2008 \* T Six months ended Six months ended 31 March 2008 31 March 2007 (Unaudited) (Unaudited) EUR '000 EUR '000Cash flows from operating activitiesProfit before tax 27,413 26,991Finance income (1,091) (762)Finance expense 4,415 2,371------------------------------------------- ------------------------------------ ---------------------Operating profit 30,737 28,600Share of joint ventures' profit after tax (1,871) (1,316)Depreciation charge 5,168 3,715Profit on disposal of property, plant and equipment (110) (333)Intangible amortisation 5,871 2,021Share-based payment expense 787 491Charge in respect of share entitlement scheme 29 30Decrease in inventories 6,893 12,636Increase in trade and other receivables (11,050) (8,063)Decrease in trade and other payables (797) (1,884)Interest paid (4,648) (2,276)------------------------------------------- ------------------------------------ ---------------------Income taxes paid (2,207) (1,386)------------------------------------------- ------------------------------------ ---------------------Net cash inflow from operating activities 28,802 32,235------------------------------------------- ------------------------------------ ---------------------Cash flows from investing activitiesInterest received 1,091 762Purchase of property, plant and equipment (6,685) (1,862)Proceeds from disposal of property, plant and equipment 711 493Acquisition of subsidiaries (net of cash and cash equivalents acquired) (28,981) (13,107)Deferred acquisition consideration paid (3,472) -Dividends received from joint ventures 2,734 -------------------------------------------- ------------------------------------ ---------------------Net cash outflow from investing activities (34,602) (13,714)------------------------------------------- ------------------------------------ ---------------------Cash flows from financing activitiesProceeds from issue of shares (including share premium thereon, net of scrip dividend) 3,592 5,509Purchase of treasury shares (617) -Proceeds from interest-bearing loans and borrowings 72,238 -epayments of interest-bearing loans and borrowings (27,697) (1,579)Repayments of finance leases (148) (28)Dividends paid to equity holders of the Company (7,503) (6,177)------------------------------------------- ------------------------------------ ---------------------Net cash inflow/(outflow) from financing activities 39,865 (2,275)------------------------------------------- ------------------------------------ ---------------------Net increase in cash and cash equivalents 34,065 16,246Translation adjustment (5,327) (132)Cash and cash equivalents at beginning of period 49,547 43,148------------------------------------------- ------------------------------------ ---------------------Cash and cash equivalents at end of period 78,285 59,262------------------------------------------- ------------------------------------ ---------------------Cash and cash equivalents are broken down as follows:Cash at bank and short term deposits 79,072 59,262Bank overdrafts (787) -------------------------------------------- ------------------------------------ --------------------- 78,285 59,262------------------------------------------- ------------------------------------ ---------------------\* T Notes to the interim accounts for the six months ended 31 March 2008 1. Reporting entity United Drug plc (the 'Company') is a company domiciled in Ireland. The unauditedcondensed consolidated interim financial statements of the Company for the sixmonths ended 31 March 2008, is comprised of the Company and its subsidiaries(together referred to as the 'Group'). The financial information presented herein does not amount to statutoryfinancial statements that are required by Section 7 of the Companies (Amendment)Act, 1986 to be annexed to the annual return of the Company. The statutoryfinancial statements for the year ended 30 September 2007 will be annexed to theannual return and filed with the Registrar of Companies. The audit report onthose statutory financial statements was unqualified and did not contain anymatters to which attention was drawn by way of emphasis. 2. Statement of compliance These unaudited condensed consolidated interim financial statements ('theinterim accounts') have been prepared in accordance with International FinancialReporting Standard, IAS34, Interim Financial Reporting. These interim accountsdo not include all of the information required for full annual financialstatements and should be read in conjunction with the most recent publishedconsolidated financial statements of the Group. The same accounting policies and methods of computation are followed in thesefinancial statements as were applied in the consolidated financial statementsfor the year ended 30 September 2007 and as those expected to apply for thefinancial year to 30 September 2008. The preparation of financial statements in conformity with IFRSs, as endorsed bythe EU, requires the use of certain critical accounting estimates andjudgements. The areas involving a high degree of judgement or complexity, orareas where assumptions and estimates are significant to the financialstatements, 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. Theassumptions and estimates made in the preparation of the interim accounts arethe same as those identified in our most recent annual report. The estimates andassociated assumptions are based on historical experience and various otherfactors that are believed to be reasonable under the circumstances, the resultsof which form the basis of making the judgements about carrying values of assetsand liabilities that are not readily apparent from other sources. There was nosignificant change to any of these key estimates or judgements in the six monthperiod, other than a change to certain actuarial assumptions. The income tax expense for the six month period is calculated by applying theDirectors' best estimate of the annual effective tax rate to the profit for theperiod. The Board approved the interim accounts on 2 May 2008. 3. Segmental analysis Business segment analysis \* T Six months ended Six months ended 31 March 2008 31 March 2007--------------------- ----------------------- ----------------------- Revenue Net result* Revenue Net result* EUR '000 EUR '000 EUR '000 EUR '000--------------------- ----------- ----------- ----------- -----------Pharma Wholesale 514,586 14,667 475,104 11,745--------------------- ----------- ----------- ----------- -----------Supply Chain Services 402,076 9,578 348,505 7,590--------------------- ----------- ----------- ----------- -----------Medical & Scientific 52,939 7,162 48,799 6,742--------------------- ----------- ----------- ----------- -----------Contract Sales & Marketing Services 56,477 5,201 50,282 4,544--------------------- ----------- ----------- ----------- -----------Inter-segment sales (181,013) - (149,720) ---------------------- ----------- ----------- ----------- ----------- 845,065 36,608 772,970 30,621--------------------- ----------- ----------- ----------- -----------\* T * Net result represents reported operating profit excluding intangibleamortisation of EUR 5,871,000 (2007: EUR 2,021,000). 4. Share of joint ventures' profit after tax \* T Six months Six months ended ended 31 March 31 March 2008 2007 EUR '000 EUR '000------------------------------------------- ----------- -----------Group share of revenue 261,425 256,361------------------------------------------- ----------- -----------Group share of expenses, inclusive of tax 259,554 255,045------------------------------------------- ----------- -----------Group share of profit after tax 1,871 1,316------------------------------------------- ----------- -----------\* T 5. Earnings per ordinary share \* T Six months Six months ended ended 31 March 31 March 2008 2007 EUR '000 EUR '000------------------------------------------- ----------- -----------Profit for the period 23,403 22,390------------------------------------------- ----------- -----------Adjustment for intangible amortisation (net of tax) 4,573 2,021------------------------------------------- ----------- -----------Earnings adjusted for intangible amortisation 27,976 24,411------------------------------------------- ----------- ----------- ------------------------------------------- ----------- ----------- Number of Number of shares shares------------------------------------------- ----------- -----------Weighted average number of shares 229,044,554 225,678,877------------------------------------------- ----------- -----------Number of dilutive shares under option 1,633,519 1,736,868------------------------------------------- ----------- -----------Weighted average number of shares, including share options 230,678,073 227,415,745------------------------------------------- ----------- -----------Basic earnings per share - cent 10.22 9.92------------------------------------------- ----------- -----------Diluted earnings per share - cent 10.15 9.85------------------------------------------- ----------- -----------Adjusted basic earnings per share - cent* 12.21 10.82------------------------------------------- ----------- -----------Adjusted diluted earnings per share - cent* 12.13 10.73------------------------------------------- ----------- -----------\* T * excluding intangible amortisation. Of the 7,764,737 (2007: 7,623,066) treasury shares held by the Group, 7,623,066(2007: 7,623,066) of these shares do not rank for dividend and have thereforebeen excluded from the weighted average number of shares in issue used in thecalculation of earnings per share. 6. Movement in goodwill, intangible assets and investment in joint ventures \* T Investment in Intangible joint Goodwill assets ventures Total EUR '000 EUR '000 EUR '000 EUR '000--------------------- ----------- ----------- ----------- -----------Balance at 1 October 2007 148,544 39,404 20,857 208,805--------------------- ----------- ----------- ----------- -----------Acquired during the period 17,714 16,048 - 33,762--------------------- ----------- ----------- ----------- -----------Revision to prior year acquisitions 389 - - 389--------------------- ----------- ----------- ----------- -----------Intangible amortisation - (5,871) - (5,871)--------------------- ----------- ----------- ----------- -----------Share of joint ventures' profit after tax - - 1,871 1,871--------------------- ----------- ----------- ----------- -----------Dividends received from joint ventures - - (2,734) (2,734)--------------------- ----------- ----------- ----------- -----------Translation adjustment (14,662) (3,613) (1,992) (20,267)--------------------- ----------- ----------- ----------- -----------Balance at 31 March 2008 151,985 45,968 18,002 215,955--------------------- ----------- ----------- ----------- -----------\* T 7. Net debt \* T As at As at As at 30 31 March 31 March September 2008 2007 2007 EUR '000 EUR '000 EUR '000-------------------------------- ----------- ----------- -----------Current Assets-------------------------------- ----------- ----------- -----------Cash at bank and short term deposits 79,072 59,262 57,547-------------------------------- ----------- ----------- -----------Current liabilities-------------------------------- ----------- ----------- -----------Bank overdrafts (787) - (8,000)-------------------------------- ----------- ----------- -----------Loan notes - (4,865) (3,604)-------------------------------- ----------- ----------- -----------Bank borrowings (2,071) (1,047) (24,630)-------------------------------- ----------- ----------- -----------Finance leases (481) (15) (576)-------------------------------- ----------- ----------- -----------Derivative financial instruments (7,652) (6,133) (6,568)-------------------------------- ----------- ----------- -----------Non-current liabilities-------------------------------- ----------- ----------- -----------Interest bearing loans and borrowings (140,512) (77,548) (74,404)-------------------------------- ----------- ----------- -----------Finance leases (270) - (469)-------------------------------- ----------- ----------- -----------Derivative financial instruments (9,959) (4,624) (7,574)-------------------------------- ----------- ----------- ----------- (82,660) (34,970) (68,278)-------------------------------- ----------- ----------- -----------\* T 8. Movements in debt The movement in current and non-current loan notes, bank borrowings, financeleases and derivative financial instruments during the six month period ended 31March 2008 is set out below. The analysis excludes the movement in cash and cashequivalents. \* T As at 31 March 2008 EUR '000------------------------------------------------------ -----------Balance at 1 October 2007 (117,825)------------------------------------------------------ -----------Amounts repaid 27,845------------------------------------------------------ -----------New drawdowns (72,238)------------------------------------------------------ -----------Translation adjustment 1,273------------------------------------------------------ -----------Balance at 31 March 2008 (160,945)------------------------------------------------------ -----------\* T 9. Equity \* T Other reserves---------------- --------- -------- -------------------------------------------- ----------- --------- Equity Share Cash Share- Foreign Treasury Retained Total share premium flow based exchange shares earnings equity capital EUR '000 hedge payment EUR '000 EUR '000 EUR '000 EUR '000 EUR '000 EUR '000 EUR '000---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------At 1 October 2007 11,801 103,473 566 2,987 (5,690) (6,033) 223,965 331,069---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------New shares issued 121 8,154 - - - - - 8,275---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Scrip issue - (4,683) - - - - 4,683 ----------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Effective portion of cash flow hedges - - 1,068 - - - - 1,068---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Deferred tax on cash flow hedges - - (134) - - - - (134)---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Movement in share-based payment reserve - - - 640 - - 147 787---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Translation adjustment - - - - (30,687) - - (30,687)---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Profit for the period - - - - - - 23,403 23,403---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Dividends to equity holders - - - - - - (12,186) (12,186)---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Transfer in respect of share entitlement scheme - - - - - - 29 29---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Actuarial loss on defined benefit pension schemes - - - - - - (2,017) (2,017)---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Deferred tax on defined benefit pension schemes - - - - - - (91) (91)---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Purchase of treasury shares - - - - - (617) - (617)---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------Re-issue of treasury shares - - - - - 54 (54) ----------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------At 31 March 2008 11,922 106,944 1,500 3,627 (36,377) (6,596) 237,879 318,899---------------- --------- -------- -------- -------- ----------- -------------- ----------- ---------\* T The translation adjustment arises on translation of non-euro denominated assetsand liabilities into euro at the reporting date. 10. Dividends The Board has declared an interim dividend of 2.23 cent per share. This dividendhas not been provided for in the balance sheet at 31 March 2008, as there was nopresent obligation to pay the dividend at the reporting date. During the firsthalf of the financial year, the final dividend for 2007, of 5.33 cent per share,was paid giving rise to a reduction in shareholders' funds of EUR 12,186,000. 11. Acquisition of subsidiary undertakings The principal acquisitions completed by the Group during the period, togetherwith percentages acquired were as follows: -- Alliance Healthcare Information Inc (100%): a pharmaceutical sales and marketing services company. This company was acquired on 15 October 2007. -- Procon Conferences Limited (100%): a pharmaceutical conference services company. This company was acquired on 20 November 2007. -- JVA Analytical Limited (100%): a distributor of specialist analytical chemistry equipment. This company was acquired on 13 December 2007. Including estimated deferred consideration payable of EUR 6,342,000, the totalconsideration for all these transactions was EUR 35,159,000. The Group has also reviewed its estimate of consideration in respect of prioryear acquisitions. Arising from this review, additional professional fees of EUR164,000 were paid during the period, as well as an adjustment of EUR 225,000 toinventory valuations. This has resulted in a corresponding increase in goodwillin excess of amounts previously recognised. None of the business combinations completed during the year were consideredsufficiently material as to warrant separate disclosure of fair valuesattributable to these combinations. The carrying amounts of assets andliabilities which were acquired, determined in accordance with IFRS, beforecompletion of the combinations were as follows: 11. Acquisition of subsidiary undertakings (continued) \* T Total in respect of current Adjustments to Fair value period prior period Book values adjustments acquisitions acquisitions Total EUR EUR '000 EUR '000 EUR '000 EUR '000 '000----------------------- ------------- ------------ ----------------- ----------------- -----------Property, plant & equipment 1,439 210 1,649 - 1,649----------------------- ------------- ------------ ----------------- ----------------- -----------Intangible assets - 16,048 16,048 - 16,048----------------------- ------------- ------------ ----------------- ----------------- -----------Inventories 784 - 784 (225) 559----------------------- ------------- ------------ ----------------- ----------------- -----------Trade and other receivables 4,812 - 4,812 - 4,812----------------------- ------------- ------------ ----------------- ----------------- -----------Trade and other payables (current) (3,240) - (3,240) - (3,240)----------------------- ------------- ------------ ----------------- ----------------- -----------Deferred tax - (2,608) (2,608) - (2,608)----------------------- ------------- ------------ ----------------- ----------------- -----------Net identifiable assets and liabilities acquired 3,795 13,650 17,445 (225) 17,220----------------------- ------------- ------------ ----------------- ----------------- -----------Goodwill arising on acquisition 17,714 389 18,103----------------------- ------------- ------------ ----------------- ----------------- ----------- 35,159 164 35,323----------------------- ------------- ------------ ----------------- ----------------- -----------Satisfied by:----------------------- ------------- ------------ ----------------- ----------------- -----------Cash consideration 29,867 - 29,867----------------------- ------------- ------------ ----------------- ----------------- -----------Professional fees incurred 832 164 996----------------------- ------------- ------------ ----------------- ----------------- -----------Net cash and cash equivalents acquired on acquisition (1,882) - (1,882)----------------------- ------------- ------------ ----------------- ----------------- ----------- 28,817 164 28,981----------------------- ------------- ------------ ----------------- ----------------- -----------Deferred consideration 6,342 - 6,342----------------------- ------------- ------------ ----------------- ----------------- ----------- 35,159 164 35,323----------------------- ------------- ------------ ----------------- ----------------- -----------\* T The initial assignment of fair values to identifiable net assets acquired hasbeen performed on a provisional basis in respect of the business combinationsdisclosed above given the timing of completion of these transactions. Anyamendments to these fair values within the twelve month timeframe from the dateof acquisition will be disclosable in the 2009 Annual Report as stipulated byIFRS 3, Business Combinations. 11. Acquisition of subsidiary undertakings (continued) Goodwill is attributable to the future economic benefits arising from assetswhich are not capable of being individually identified and separatelyrecognised. The significant factors giving rise to the goodwill include thevalue of the workforce and management teams within the business acquired and theenhancement of the competitive position of the Group in the marketplace and the strategic premium paid by United Drugplc to create the combined Group. The Group's results for the period ended 31 March 2008 include the followingamounts in respect of the businesses acquired during the period: \* T 2008 EUR '000------------------------------------------------------ -------------------------------------------Revenue 11,054------------------------------------------------------ -------------------------------------------Gross profit 4,255------------------------------------------------------ -------------------------------------------Distribution expenses (2,475)------------------------------------------------------ -------------------------------------------Other operating expenses* (996)------------------------------------------------------ -------------------------------------------Operating profit 784------------------------------------------------------ -------------------------------------------Net interest expense (668)------------------------------------------------------ -------------------------------------------Profit before tax 116------------------------------------------------------ -------------------------------------------Income tax (114)------------------------------------------------------ -------------------------------------------Profit after tax 2------------------------------------------------------ -------------------------------------------\* T *Other operating expenses consist of intangible amortisation. Had these acquisitions been effected on 1 October 2007, the combined Group wouldhave recorded total revenues of EUR 846,845,000 and profit after interest andtax for the financial period of EUR 23,310,000. 12. Related parties For the purposes of the disclosure requirements of IAS24, Related PartyTransactions, the Group has defined the term 'key management personnel' as itsexecutive and non-executive directors, together with Persons DischargingManagerial Responsibility ('PDMRs') as defined in Section 12(8) of the IrishMarket Abuse Directive (MAD) Regulations. Key management personnel receive compensation in the form of short-term employeebenefits, post-employment benefits and equity compensation benefits. Keymanagement personnel received total compensation of EUR 2,371,000 for the sixmonths ended 31 March 2008 (2007: EUR 2,092,000). 13. Events after the balance sheet date On 4 April 2008, the Group acquired the entire issued share capital of UniversalConference and Incentive Travel Limited ('Universal') and Business EdgeSolutions & Training Limited ('BEST'). Universal, headquartered in Slough in Berkshire, provides event managementservices across the UK to pharmaceutical companies, both at the pre and postapproval stages of product development. The company also has offices in the USand generates approximately half of its revenues in that market through theprovision of an equivalent service offering to US pharmaceutical companies. BEST is based in St. Albans in Hertfordshire and provides a range of personal,sales and team effectiveness training programmes for pharmaceutical companies inthe UK market. The consideration for the two acquisitions was Stg£11.4 million in cash, payableon completion, plus an additional consideration of up to Stg£2.75 millionpayable based on achievement of agreed targets over the next three years. The Group is currently reviewing the fair values of the individual assets andliabilities acquired in respect of the above acquisitions. Therefore, it isimpractical to provide the detailed disclosure requirements under IFRS 3, Business Combinations at this point in time. 14. Comparative figures Certain comparative figures have been reclassified to conform to the currentperiod presentation. Copyright Business Wire 2008Related Shares:
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