Interim Report 2019

UDG Healthcare plc

Interim Report 2019

21 May 2019: UDG Healthcare plc ("UDG Healthcare" or "Group"), a leading international healthcare services provider, announces its results for the six months to 31 March 2019, in which the Group delivered a solid first half performance, with full year guidance increased to reflect latest acquisitions.

Results highlights (on an IAS 18 basis2)

· Adjusted diluted earnings per share (EPS) increased by 5% (7% on a constant currency basis).

· Net underlying* revenue growth of 6%. Total net revenue declined 4% (1% on constant currency basis).

· Adjusted underlying* operating profit growth of 3%. Total adjusted operating profit increased by 1% (3% on a constant currency basis), reflecting continued growth in Ashfield and Sharp, offset by the divestment of Aquilant in August 2018.

o Ashfield's operating profit increased by 3% (6% on a constant currency basis) driven by the benefit of acquisitions completed in FY18.

o Sharp's operating profit increased by 12% (12% on a constant currency basis) driven by the continued strong performance of Sharp US.

· Adjusted net operating margin increased from 11.8% to 12.5%.

· Strong cash flow performance with a positive working capital inflow.

· Net debt to EBITDA of 0.33x with $56.8 million net debt at 31 March 2019.

· In May 2019, completed the acquisitions of Putnam Associates ("Putnam"), a US-based strategic management healthcare consultancy, and Incisive Health, a UK-based healthcare policy and communications consultancy, for a combined consideration of up to $106 million (including contingent consideration of up to $36 million).

· Interim dividend per share increased 5% to 4.46 $ cent per share.

· Reflecting the acquisitions, full year guidance increased to adjusted EPS growth on a constant currency basis of between 5% and 7%.

*underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity, including Aquilant

Commenting on the performance, Chief Executive Officer, Brendan McAtamney said:

"UDG Healthcare delivered good EPS growth during the first half of FY19. Today, we have also announced the acquisitions of two businesses, Putnam, a US-based strategic management healthcare consultancy, and Incisive Health, a UK-based healthcare policy and communications consultancy. Both businesses are aligned with our strategy to expand into higher growth and higher margin areas, complementary to our existing service offering. Reflecting the benefit of these acquisitions and continued trading performance in line with expectations, we have increased our full year guidance to adjusted EPS growth on a constant currency basis to between 5% and 7%."

Corporate Development

In May 2019, we completed the acquisitions of Putnam, a US-based strategic management healthcare consultancy, and Incisive Health, a UK-based healthcare policy and communications consultancy, for a combined consideration of up to $106 million (including contingent consideration of up to $36 million).

Based in the US, Putnam is a specialist consultancy focused on product commercialisation strategy, exclusively for the life sciences industry. Founded in 1988, Putnam has grown to become a respected advisory brand for biopharmaceutical companies, and attracts top class talent from several of the leading US universities. With 120 employees across offices in Boston and San Francisco, Putnam primarily offers consultancy services across the product life cycle with particular strengths in product commercialisation, pricing, reimbursement and market access strategy. Over the past 10 years, Putnam has advised on the commercialisation of several products that have achieved blockbuster sales status in the US.

Putnam is being acquired for a total consideration of up to $88.6 million to be satisfied in cash, with $60 million paid upfront, in addition to an earn-out of up to $20.1 million over three years, and a further five year earn-out of up to an additional $8.5 million. For the year ending 31 December 2018, Putnam had gross assets of $20.5 million, with an adjusted operating profit of approximately $8 million. 

Incisive Health is a UK-based healthcare communications consultancy, which specialises in healthcare policy, public affairs and communication services. Across its head office in London and an office in Brussels, the consultancy employs 36 people and provides a suite of consultancy and communications services including clinical advocacy, corporate and digital communications, direct payer engagement, public affairs, stakeholder campaigning, strategic and policy development and training programmes. Incisive Health has a diversified client base of predominately pharmaceutical and biotech companies.

Incisive Health is being acquired for a total consideration of up to £13.6 million ($17.7 million). This includes initial consideration of £8 million ($10.4 million), with an earn-out of up to £5.6 million ($7.3 million) payable over the next three years, based on the achievement of agreed profit targets.

The Group's net debt was $56.8 million (0.33x net debt to EBITDA) at 31 March 2019, leaving it well placed to fund the continued inorganic development of its two global growth platforms, Ashfield and Sharp.

Exceptional Item

During the first half, the Group incurred an exceptional charge of $15.2 million pre-tax related to two legal matters. As disclosed in the Group's 2018 Annual Report, the Group received a claim from McKesson arising from its purchase of United Drug from the Group in 2016. A full and final settlement of this claim (without admission by any party) was concluded in April 2019, resulting in an exceptional charge (including legal costs incurred) of $14.4 million. This compares to the total consideration of $464 million received from the original transaction.  Additionally, a charge of $0.8 million relating to legal costs was incurred in defending an Ashfield trademark. For further information on these items, please refer to page 20.

Outlook

Reflecting the acquisitions and continued trading performance in line with expectations, the Group has increased its full year guidance for constant currency adjusted diluted earnings per share (EPS) growth, under IAS 18, for the year to 30 September 2019 to between 5% and 7%. The Group expects to continue its 30+ year history of dividend growth in FY19. The Board has declared an interim dividend of 4.46 $ cent per share, a 5% increase on the 2018 interim dividend.

Preliminary Results

The Group will issue preliminary results for the year to 30 September 2019 on Tuesday, 26 November 2019.

Notes:

1Alternative performance measures ("APMs) are financial measurements that are not required under International Financial Reporting Standards (IFRS) which represent the generally accepted accounting principles (GAAP) under which the Group reports. APMs are presented to provide readers with additional financial information that is regularly reviewed by management. The Group believes that the presentation of these non-IFRS measurements provides useful supplemental information which, when viewed in conjunction with IFRS financial information, provides stakeholders with a more meaningful understanding of the underlying financial and operating performance of the Group and its divisions. APMs are presented on an IAS 18 basis to enable like-to-like analysis with the comparative period. APMs should not be considered in isolation or as a substitute for an analysis of results as reported under IFRS. See "Additional Information" on page 33 for definitions and reconciliations to the closest respective equivalent GAAP measure.

2IFRS 15 was adopted on 1 October 2018 for our statutory reporting, without restating prior year figures. As a result, the discussion of our operating results is primarily on an IAS 18 basis for all periods presented. The impact of IFRS 15 which is outlined in Note 18 of the interim financial statements was not significant for the Group.

Review of Operations

Ashfield

1 Net revenue represents reported revenue adjusted for revenue associated with pass-through costs, for which the Group does not earn a margin. There are no pass-through revenues in Sharp.

2 Underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity.

3 Adjusted operating profit is operating profit before amortisation of acquired intangible assets, transaction costs and exceptional items.

All commentary is on an IAS 18 basis

Ashfield continues to broaden and enhance its Communications & Advisory service offering, which now accounts for approximately 64% of Ashfield's operating profit3. The acquisitions of Putnam and Incisive Health further strengthen and expand Ashfield's capabilities in this higher growth and higher margin business.

Ashfield generated net revenue of $379.5 million and operating profit of $47.2 million, 2% and 3% respectively ahead of the same period last year. Adjusting for the impact of currency translation movements and the contribution from acquisitions, underlying net revenue growth was 1% and underlying operating profit was flat. Net operating margin increased from 12.3% to 12.4%.

Ashfield Communications & Advisory performed well during the period. Net revenue increased by 13% and operating profit increased by 6%, including the benefit of acquisitions. Underlying net revenue growth was 6%, however, underlying operating profit was marginally down including the impact of STEM aXcellerate investments of $2.3 million.

Ashfield Commercial & Clinical recorded broadly flat underlying net revenue and operating profit compared to the prior year. This reflected continued good momentum in the US, offset by weakness in Europe.

The outlook for Ashfield over the medium term remains positive, as the business continues to diversify its service offering and expand its global market positions by adding complementary capabilities to meet the evolving needs of its client base.

Sharp

1 Underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity.

2 Adjusted operating profit is operating profit before amortisation of acquired intangible assets, transaction costs and exceptional items.

All commentary is on an IAS 18 basis

Sharp generated revenue of $168.8 million and operating profit2 of $21.1 million, 18% and 12% ahead of the same period last year respectively.

Sharp US's revenue and operating profit was 22% and 23% respectively ahead of the same period last year. This has been driven by continued growth in demand for the packaging of biotech injectable products, as the market seeks quality packaging services to support the requirements of more complex drugs. Demand for traditional packaging has also remained strong. While Sharp Europe's underlying revenue growth improved, the business generated an operating loss of $1.6 million.

Based on the current activity levels and the pipeline of new business, Sharp continues to be well positioned to deliver underlying operating profit growth in line with the Group's medium-term expectations of double-digit growth in FY19 and beyond.

Analyst presentation

A presentation for investors and analysts will be held at the London Stock Exchange at 8.30am BST today, Tuesday, 21 May 2019. If you wish to attend, please contact Powerscourt. Alternatively, to dial into the conference call or webcast, the details are as follows:

Audio webcast

https://edge.media-server.com/m6/p/oszdxsto 

Conference call

UK number: +44 (0) 20 7192 8000

Ireland number: +353 (0) 1 431 9615

US number: +1 631 510 7495

Participant Code: 2746549

If you wish to ask questions, please do so via the conference call.

A replay of the audio webcast can be accessed via the same webcast link above.

About UDG Healthcare plc

UDG Healthcare plc (LON: UDG) is a leading international partner of choice delivering advisory, communication, commercial, clinical and packaging services to the healthcare industry, employing 9,000 people with operations in 26 countries and delivering services in over 50 countries.

UDG Healthcare plc operates across two divisions: Ashfield and Sharp.

Ashfield - Ashfield is a global leader in commercialisation services for the pharmaceutical and healthcare industry, operating across three broad areas of activity: advisory, communications and commercial & clinical services. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle. The division provides field and contact centre sales teams, healthcare communications, patient support, audit, advisory, medical information and event management services to over 300 healthcare companies.

Sharp - Sharp is a global leader in contract commercial packaging and clinical trial packaging services for the pharmaceutical and biotechnology industries, operating from state-of-the-art facilities in the US and Europe.

The company is listed on the London Stock Exchange and is a constituent of the FTSE 250.

For more information, please go to: www.udghealthcare.com.

Forward-looking information

Some statements in this announcement may be forward-looking statements. They represent expectations for the Group's business, including statements that relate to the Group's future prospects, developments and strategies, and involve risks and uncertainties both general and specific. The Group has based these forward-looking statements on assumptions regarding present and future strategies of the Group and the environment in which it anticipates operating in the future. However, because such statements involve known and unknown risks, uncertainties and other factors including but not limited to general economic, political, financial and business factors, which in some cases are beyond the Group's control, you should note that actual results, performance, operations or achievements expressed or implied by such forward-looking statements may differ materially from those expressed or implied by such statements and accordingly you should not rely on such forward-looking statements in making investment decisions. Except as required by applicable law or regulation, neither the Group nor any other party intends to update or revise any such forward-looking statements after the date these statements are published, whether as a result of new information, the passage of time, any future events, or otherwise.

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Finance Review

Following the adoption of IFRS 15 "Revenue from Contracts with Customers" on 1 October 2018, the Group's statutory results for the six months ended 31 March 2019 are presented on an IFRS 15 basis, whereas the Group's statutory results for the comparative period ended 31 March 2018 are presented on an IAS 18 basis as previously reported. Comparisons between the two bases of reporting are not considered meaningful. Consequently, the review of the performance of the Group and review of operations is primarily on an IAS 18 basis for all periods presented. Note 18 to the interim financial information outlines the transition impact for the Group and discloses the financial statement line items impacted on an IAS 18 basis for the period ended 31 March 2019.

Revenue

Revenue of $656.6 million for the period is 3% behind 2018 (in line with 2018 on a constant currency basis).

Under IAS 18, revenue is 2% behind 2018 (in line with 2018 on a constant currency basis) with a 2% increase in Ashfield revenue and an 18% increase in Sharp revenue. Group underlying net revenue increased by 6%, excluding the impact of foreign exchange, acquisitions, disposals and IFRS 15 adjustments.

Adjusted operating profit

Adjusted operating profit of $65.6 million is 3% behind 2018 (1% on a constant currency basis).

Under IAS 18, adjusted operating profit has increased 1% (3% on a constant currency basis).

Adjusted net operating margin

The adjusted net operating margin for the businesses for the period is 12.0%.

Under IAS 18, this is 12.5%, an increase on the 11.8% margin reported in 2018.

Adjusted profit before tax

Net interest costs, pre-exceptional items, for the period of $3.8 million are 10% lower than 2018, due to interest income on US cash deposits. This delivered an adjusted profit before tax of $61.8 million.

Under IAS 18, the adjusted profit before tax is $64.5 million, which is 2% ahead of 2018 (4% on a constant currency basis).

Taxation

The effective taxation rate has decreased from 20.1% in 2018 to 17.8% in 2019, due to a full period impact of the US Tax Cuts and Jobs Act enacted on 1 January 2018.

Adjusted diluted earnings per share

Adjusted diluted earnings per share (EPS) is 1% ahead (2% on a constant currency basis) of 2018 at 20.32 $ cent.

Under IAS 18, adjusted diluted earnings per share (EPS) is 5% ahead (7% on a constant currency basis) of 2018 at 21.21 $ cent.

1 See "Additional Information" on page 33 for more information and reconciliations to the closest respective equivalent GAAP measures.

Exceptional items

The Group incurred an exceptional charge of $15.2 million before tax in the period.

In 2018, the Group received notification of a potential claim from McKesson arising from its purchase of United Drug from the Group in 2016. The potential claim was settled in April 2019 (without admission by any party) and a provision of $14.4 million has been recognised. The Group also incurred trademark litigation costs during the period to the amount of $0.8 million.

Foreign exchange

The Group operates in 26 countries, with its primary foreign exchange exposure being the translation of local income statements and balance sheets into US dollar for Group reporting purposes. The retranslation of overseas profits to US dollar has decreased IAS18 constant currency EPS growth of 7% to a reported EPS growth rate of 5%, which is primarily due to the strengthening of the US dollar against sterling and euro in the first six months of 2019 versus the same period in 2018.

The average H1 2019 exchange rates were $1: £0.7725 and $1: €0.8783 (2017: $1: £0.7357 and $1: €0.8310).

Cash flow

The table displayed below includes information for the periods ended 31 March 2019 and 2018.

Net cash inflow from operating activities

The net cash inflow from operating activities was $63.5 million (2018: $65.4 million).

Working capital decreased by $2.1 million (2018: $17.6 million increase). The decrease in working capital is principally due to the reversal of the temporary cash flow delays and timing of supplier payments arising from the implementation of Oracle under the Future Fit programme in 2018. Other cash outflows of $8.1 million relates to transaction costs paid of $0.7 million and exceptional items outflow of $7.4 million (2018 cash flows of $10.7 million relate to transaction costs paid of $2.8 million and exceptional items inflow of $13.5 million).

Net cash outflow from investing activities

Net cash outflow from investing activities is $43.7 million, compared to $26.4 million in 2018. This increase is principally due to deferred consideration outflows on acquisitions of $23.7 million. During the period, $17.7 million was invested in property, plant and equipment. This included investment in Sharp's facilities, in particular the investments in Sharp Clinical's sites in the US and UK, and its commercial packaging facility in the Netherlands. Computer software outflows of $4.3 million included investments in Future Fit.

Net cash outflow from financing activities

Net cash outflow from financing activities increased by $5.2 million to $28.2 million in the period, principally due to payment of the 2018 final dividend.

Balance sheet

Net debt at the end of the period is $56.8 million ($169.2 million cash and $226.0 million debt). The net debt to annualised EBITDA ratio is 0.33 times debt (2018: 0.28 times, IAS18) and net interest is covered 24.1 times (2018: 20.2 times, IAS18) by annualised EBITDA. Financial covenants in our principal debt facilities are based on net debt to EBITDA being less than 3.5 times and EBITDA interest cover being greater than three times.

Return on capital employed

The Group's ROCE is 12.2% down from 12.9% at 31 March 2018. The decrease in part reflects the adoption of IFRS15. Under IAS 18, the Group's ROCE at 31 March 2019 is 12.4% Details on how this was calculated are on page 35.

Dividends

The directors are proposing an interim dividend of 4.46 $ cent per share representing an increase of 5% on the 2018 interim dividend. The interim dividend is payable to shareholders on the Company's register at 5.00 pm on 31 May 2019 and will be paid on 26 June 2019.

The Transparency (Directive 2004/109/EC) Regulations 2007 require the 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.

The Group operates within a highly regulated environment and the expectations of our key stakeholders, which include our clients and regulators, are very high. Our services include communicating to healthcare professionals, pharmaceutical packaging and the distribution of pharmaceutical products for use in clinical trials. We focus on making sure that we deliver these services correctly and in a compliant way. However, failure to do so could result in adverse consequences for patients and our clients, so the risks that we face in delivering our services are potentially significant.

The Group's ability to avoid or mitigate these risks is underpinned by detailed risk registers maintained by each of the Group's divisions and business units. These risk registers identify the risks, as well as the plans for addressing them, and the consolidated Group risk register is reviewed by the executive directors on a regular basis. The consolidated risk register is also reviewed by the Risk, Investment and Finance Committee and the Chairman of that committee reports to the Board on the outcome of each review.

The principal risks and uncertainties identified by the risk management process as facing the Group are detailed below:

Statement of Directors

Each of the directors confirms 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)

20 May 2019

(i) The Board of UDG Healthcare plc is disclosed on the Company's website, www.udghealthcare.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

1. Reporting entity

UDG Healthcare plc (the "Company") is a company domiciled in Ireland. The unaudited condensed consolidated interim financial information of the Company for the six months ended 31 March 2019, 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 347 of the Companies Act, 2014 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 2018 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 and basis of preparation

Basis of preparation

These unaudited condensed consolidated interim financial statements ("the interim accounts") for the six months ended 31 March 2019 have been prepared in accordance with IAS 34, Interim Financial Reporting, as endorsed 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 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 goodwill impairment testing, revenue recognition, income tax expense, employee benefit obligations, share-based payments and valuation of provisions. Other than the changes in accounting policies outlined in Note 18, 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 effective tax rate applicable 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.udghealthcare.com. However, if a physical copy is required, please contact the Company Secretary.

Accounting policies

The accounting policies applied in the interim accounts are the same as those applied in the 2018 Annual Report, except for the adoption of new standards, interpretations and standard amendments effective for the Group for the period commencing 1 October 2018. The Group has had to change its accounting policies as a result of adopting the following new standards:

· IFRS 9 Financial Instruments

· IFRS 15 Revenue from Contracts with Customers

The impact of adoption of these standards and the new accounting policies are disclosed in Note 18. A number of other changes to IFRS became effective in the period beginning on 1 October 2018, however they did not have a material effect on the Group accounting policies and the condensed consolidated interim financial statements. 

3. Segmental analysis

The Group's operations are divided into the following operating segments each of which operates in a distinct sector of the healthcare services market:

Ashfield - Ashfield is a global leader in commercialisation services for the pharmaceutical and healthcare industry, operating across three broad areas of activity: advisory, communications and commercial & clinical services. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle. The division provides field and contact centre sales teams, healthcare communications, patient support, audit, advisory, medical information and event management services to over 300 healthcare companies.

Sharp - Sharp is a global leader in contract commercial packaging and clinical trial packaging services for the pharmaceutical and biotechnology industries, operating from state-of-the-art facilities in the US and Europe.

Aquilant, a distributor of specialist medical and scientific products in the UK and Ireland, was disposed of in 2018.

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 Brendan McAtamney (Chief Executive Officer). The amount of revenue and operating profit under the Group's operating segments is as follows:

Revenue is recognised when a customer obtains control of a good or service and therefore has the ability to direct the use and obtain the benefits from the good or service. Revenue is recognised over time where i) there is a continuous transfer of control to the customer; or ii) there is no alternative use for any asset created and there is an enforceable right to payment for performance completed to date. Other revenue contracts are recognised at a point in time when control of the good or service transfers to the customer.

4. Share of joint ventures' (loss)/profit after tax

5. Exceptional items

Exceptional items are those which, in management's judgement, should be disclosed separately by virtue of their nature or amount. Such items are included within the Income Statement caption to which they relate and are separately disclosed in the notes to the Group Interim Financial Statements.

The Group reports the following exceptional items:

Legal costs and settlements expense primarily relates to the previously disclosed claim received from McKesson in 2018 arising from its purchase of United Drug from the Group in 2016. McKesson had notified the Group of potential claims pursuant to indemnification and warranty provisions contained in the sale and purchase agreement relating to the disposal of United Drug. This claim was settled in April 2019 (without admission by any party) resulting in a total expense for the Group in the period of $14,410,000 (including defense costs). The Group does not expect any further costs to arise as a result of the disposal. Additionally, the Group incurred legal costs of $754,000 protecting an Ashfield trademark. These two exceptional items resulted in a total expense for the Group in the period of $15,164,000 with a tax impact amounting to $209,000.

In the prior period, the Group recognised $36.6 million of an exceptional charge. A goodwill impairment charge of $57.6 million was recognised in relation to Aquilant, partially offset by an exceptional gain of $8.9 million relating to the exit of two Aquilant clients in the period. A tax charge of $1.0 million was incurred in relation to these items. Following the enactment of the US Tax Cuts and Jobs Act, the Group recognised an exceptional tax gain of $9.7 million in the income statement arising on the one-off remeasurement of certain US tax liabilities. Deferred contingent consideration of $3.5 million in respect of Cambridge BioMarketing was released following review of expected performance against earn-out targets.

6. Finance income and expense

 7. Earnings per ordinary share

1 Adjusted profit attributable to owners of the parent is stated before the amortisation of acquired intangible assets ($11.9m, net of tax), transaction costs ($0.8m, net of tax) and exceptional items ($15.0m, net of tax).

Non-IFRS information

The Group reports certain financial measurements that are not required under International Financial Reporting Standards (IFRS) which represent the generally accepted accounting principles (GAAP) under which the Group reports. The Group believes that the presentation of these non-GAAP measurements provides useful supplemental information which, when viewed in conjunction with our IFRS financial information, provides investors with a more meaningful understanding of the underlying financial and operating performance of the Group and its divisions. These measurements are also used internally to evaluate the historical and planned future performance of the Group's operations and to measure executive management's performance based remuneration.

Treasury shares have been excluded from the weighted average number of shares in issue used in the calculation of earnings per share. A total of 2,247,738 (2018: 2,297,264) anti-dilutive share options have been excluded from the calculation of diluted 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. Property, plant and equipment