Preliminary Announcement of Results

United Drug plc

Preliminary Announcement of Results

Year ended 30 September 2011

* EBITDA before exceptional item including annualised EBITDA of companies acquired during the year

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.

·; Revenues 1% ahead of 2010 despite significant regulatory pressures continuing to impact our Irish business.

·; Operating profit growth of 4% for the year with further margin improvement.

·; Successful working capital management has helped to deliver another good cash flow performance.

·; A 3% increase in dividend is proposed, reflecting good trading performance and cash flow.

·; The share buyback announced in May was completed just after year end with 5 million shares purchased.

·; Strong balance sheet at year end with modest debt levels and significant capital resources available.

·; The continued internationalisation of the Group with our US businesses now accounting for 20% of operating profit and in total 65% of profit is generated outside of Ireland.

·; Group restructuring announced in the year to deliver in excess of €5 million in annualised savings at a cost of €7.8 million, net of tax.

·; Increased market leadership positions in wholesale and pre-wholesale.

·; Very strong performance in the Sales, Marketing & Medical division. Expansion of our service offering during the year with the acquisition of World Events to provide global events management services.

·; Strong performance in our packaging business, particularly in the US.

Commenting on the 2011 performance, United Drug Chief Executive Officer, Liam FitzGerald said:

"2011 has been an important year for United Drug and the company reported a strong performance in the period. The continuing internationalisation of the Group now sees almost two-thirds of our earnings generated outside of Ireland with growth in our higher margin services businesses increasing overall Group margins. We have taken steps to address the more challenging environment facing our Irish business with a restructuring that will deliver significant cost savings in 2012. In addition, we have delivered another strong cash flow performance."

"Group revenues for the year of €1.75 billion are 1% higher than in 2010. Margins have increased during the year, as we grow our international services business, and operating profit for the year of €76.8 million is 4% ahead of the previous year."

For reference:

Dividends

The directors are proposing a final dividend of 6.25 cent per share. This gives a total dividend for the year of 8.66 cent per share, an increase of 3% on the 2010 total dividend.

Payments in respect of the final dividend or, alternatively, share certificates will be issued, on 20 February 2012 to shareholders on the Company's register at 5.00pm on 25 November 2011.

Group development and outlook

The internationalisation of the Group continues as we develop our range of outsourced healthcare services in the areas of distribution, sales and marketing and packaging. Our US businesses now account for 20% of operating profit and in total 65% of profits are now generated outside of Ireland.

The Group had another year of good cash flow performance with operating cash flow of €51.8 million. Consequently, the Board announced a share buyback in May and this has been completed since year end with 5 million shares purchased.

In the Healthcare Supply Chain division, despite healthcare markets experiencing significant austerity measures, we continued to gain market share during the period strengthening our market leading positions in our wholesale and pre-wholesale businesses in Ireland and the UK.

The Sales, Marketing & Medical division had another very successful year with significant business wins in the contract sales outsourcing area. Through the acquisition of World Events in December 2010, the division now has a leading global events management business specialising in serving the healthcare sector. The acquisition of InforMed made late last year, which has extended our offering into healthcare communication and consultancy services, has also been successfully integrated into the division.

In the Packaging & Specialty division, our US packaging business had an exceptional year of growth and our international business development efforts have been successful in winning a number of contracts across the US and EU. Our Irish specialty business has also grown its market leading position, winning contracts with both the pharmaceutical and private health insurance industry.

United Drug continues to develop and grow its range of international healthcare services and remains positive about the growth opportunities in its businesses. The Group has a strong balance sheet and good internally generated cash flow to support its objectives. Additionally, savings will start to be realised in 2012 from the Group restructuring announced in August to rationalise our cost base in Ireland, integrate recent acquisitions and offset the impact of healthcare austerity measures.

Healthcare Supply Chain

The Healthcare Supply Chain division combines all of the Group's healthcare logistics based businesses. In 2011, divisional revenue of €1.41 billion was 2% lower than last year.

Despite significant healthcare austerity measures in Ireland, revenue in the wholesale business is in line with 2010 due to the continued growth in our market share of the full-line wholesaling market. The total wholesale market has fallen in value by 4.6% during the year. In pre-wholesale, we also strengthened our market leading position in providing outsourced logistics services through a number of new contract wins in both the branded pharmaceutical, generic and consumer parts of the business.

In August we announced a Group restructuring programme. As part of this programme, we have implemented changes within our Irish business, including the outsourcing of all deliveries to third party operators, a reduction in working hours in certain locations and staff redundancies. This will yield significant cost savings beginning in the 2012 financial year to offset the impact of the austerity measures being implemented by government.

In Northern Ireland, despite ongoing government and economic pressure, our wholesale business continues to gain market share by focusing on providing a quality and cost effective service. We are also making market share gains by successfully moving to the Direct to Pharmacy model that is now being adopted by the majority of our major manufacturing partners.

Our UK joint venture with Alliance Boots has continued to perform well as the leading pre-wholesaling business in the growing UK outsourcing market. We have recently won a number of new contracts which will enable this business to grow significantly in 2012 and beyond.

Our medical and scientific businesses in Ireland, the UK and the Netherlands are benefiting from a strengthened management team which has begun to deliver an improved performance. Agency losses have reduced substantially and we have added a number of new agencies, including several new market entrants, which we believe can gain substantial market share with our support. We have also recently introduced an own brand consumable offering in the UK. Whilst the market place remains difficult, the management changes we have made together with our new agency offerings leave us confident that we are well placed to deliver profit growth in the coming years.

Our pharmaceutical 'specials' businesses in the UK continue to deliver strong results with margin improvements generated through improved sourcing and more efficient manufacturing. Revenues are down slightly driven by uncertainty surrounding the expected introduction of a drug tariff by the NHS, which will regulate the prices of some 'specials' products. To respond we are developing new offerings for manufacturers and hospitals to assist with sourcing, regulatory requirements and distribution of unlicensed products. We expect these new offerings and further efficiencies in sourcing and manufacturing to offset any potential impact from the introduction of a tariff.

Sales, Marketing & Medical (SMM)

The SMM division provides sales outsourcing and related marketing and medical services to the healthcare industry in the UK, the US, Ireland, Continental Europe and Asia. In 2011, divisional revenue grew by 19% to €199 million.

The Contract Sales Outsourcing (CSO) business has grown its market leading position in the UK and Ireland during the year. There has been an increase in opportunities for nursing services in the UK and significant business wins have led to nurse headcount increasing in excess of 100% in the period. The Irish market has been more challenging due to price reductions and a contraction in the budget allocated to contract services. However, the business has responded well by winning several key new contracts which position it well going into 2012. In the US, the business is growing through expansion with existing clients and adding new ones, leading to a positive outlook for next year.

Our medical and regulatory services business had another exceptional year in the US with very strong growth coming from three primary areas of services: medical affairs, patient adherence and telesales. We also launched this business in the UK to provide similar services across Europe. The business has almost 50 medically-trained specialists providing the following services: tele-detailing to support pharmaceutical and device brands, pharmacovigilance and medical information services including multi-lingual and out of hours services. We are the only provider in the UK market with its own compliance and medical departments, which is proving extremely attractive to existing and new clients.

Our healthcare communications and consultancy business had a very good first full year in the Group. The performance is both ahead of last year and current year targets. This has been achieved through good growth with existing clients and significant new business wins. The overall performance has been driven by strong results from both the UK and the US communications businesses and the market research business. We are also well positioned for 2012 with a number of new programmes in development for key clients, which highlights the group-wide benefits of adding this business to the division.

Our events management business is now a leading global player specialising in serving the healthcare sector. In December 2010, the Group acquired World Events to globalise the business and at the end of February 2011 merged it with our existing events management business to form Universal World Events. With offices in the US, across Europe and in Asia the business is global and well positioned to grow substantially in the coming years.

Packaging & Specialty

The Packaging & Specialty division combines the Group's packaging businesses in the US and EU and our speciality homecare businesses in Ireland and the UK. In 2011, divisional revenue grew by 14% to €138 million.

Our packaging business provides outsourced packaging solutions to the pharmaceutical industry. The global outsourced packaging market continues to grow as the pharmaceutical industry seeks flexible solutions to manage their fixed cost base. Market growth has also been driven by an increase in the number of virtual pharmaceutical and biotechnology companies. These virtual companies have no packaging infrastructure and therefore rely on outsourced providers to package their products for the market. We have a compelling packaging offering in this growing market, being able to offer capacity in both the US and Europe.

The US contract packaging business had an exceptional year, gaining market share and performing well ahead of targets and prior year. This success is the result of initiatives taken since acquisition in 2008 to provide high value-add packaging solutions, and to increase the focus on business development and customer service. Revenue growth has been combined with careful management of the cost base to produce excellent results in 2011.

The European contract packaging business continued to integrate and streamline its operations during the year and is now well placed to meet the increasing demand for region-wide packaging solutions. This supports the increased interest from big pharmaceutical and generic companies looking to enter into strategic packaging relationships across the region as well as the virtual companies looking for EU solutions. We have also focused on international business development and have won a number of packaging contracts across both the US and EU.

Our specialty business provides pharmacy, homecare and compliance services for pharmaceutical companies, health authorities and private health insurance companies. The core contracts typically involve treating complex diseases in the patient's home thereby ensuring that the patient remains out of hospital while at the same time improving compliance. The Irish business has grown its market leading position through contract wins with both the pharmaceutical and private health insurance industry. We recently announced the sale of our interest in our UK business to our partner Medco Health Solutions, Inc. following a proposed change of ownership of Medco Inc. We have gained considerable experience from this venture, retain a good relationship and will continue to provide nursing and logistics services to Medco UK.

Overview

Group revenue for the year of €1.75 billion is 1% higher than in 2010. Operating profit, before the exceptional item and amortisation of intangible assets, is 4% ahead of 2010 at €76.8 million. Pre-tax profit, on the same basis, is 1% ahead of 2010 at €68.5 million. Our interest charge for the year is higher than in 2010 due to the costs associated with the re-financing completed in 2010. The re-financing significantly increased the Group's financing capability and lengthened our debt maturities.

The revenues and profits for the year are directly comparable with the prior year with no major currency translation differences.

Strong cash flows throughout the Group resulted in a year end net debt of €121 million. This is after net acquisition-related expenditure of €28 million, €17 million on capital expenditure, and the majority of the share buyback.

The Group completed the share buyback and cancellation of 5 million shares on 1 November. At 30 September 2011, 4.6 million of the shares had been bought back and cancelled.

The Group's share of investment in the Medco joint venture has been classified as an asset held for sale at 30 September 2011. This asset has subsequently been sold to our joint venture partners as announced on 17 October 2011 for stg£8.2 million.

Revenue

Revenue for the year is 1% ahead of 2010 at €1.75 billion. Revenues in the Sales, Marketing & Medical and Packaging & Specialty divisions are ahead of last year while Healthcare Supply Chain division revenues are slightly down on the prior year as a result of reductions in medicine prices and lower capital spending in hospitals.

Adjusted Operating Profit*

Operating profit for the year of €76.8 million is 4% higher than in 2010. This is after taking account of the various regulatory changes introduced during the year.

Adjusted Profit before Tax*

Net interest costs for the year of €8.3 million are €1.8 million higher than in 2010. After interest costs profit before tax of €68.5 million is 1% higher than in 2010.

Adjusted Earnings per Share*

Earnings per share for the year of 22.81 cent is slightly ahead of 2010.

Cash Flow

Net cash flow from operating activities during the year is €51.8 million. A total of €19.7 million was spent during the year on acquisitions and on deferred consideration payments for acquisitions completed in prior years. A further €9.4 million was invested in joint ventures.

Balance Sheet

Year end net debt was €121 million. The net debt to EBITDA ratio is 1.31 times and interest is covered 11 times by EBITDA. Our financial covenants are based on net debt to EBITDA not to exceed 3.5 times and EBITDA interest cover to be greater than 3 times.

*before exceptional item and amortisation of intangible assets

The 2011 Annual Report and Accounts will be published in January 2012 and the Annual General Meeting of the Company will be held on 7 February 2012.

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.

This announcement and further information is available on our web-site:www.united-drug.ie.

Group income statement

Group statement of comprehensive income

Group statement of changes in equity

Group balance sheet

Group cash flow statement

Notes to the preliminary announcement 

1. Reporting entityUnited Drug plc (the "Company") is a company domiciled in Ireland. The preliminary consolidated financial statements of the Company for the year ended 30 September 2011, are comprised of the Company and its subsidiaries and joint ventures (together referred to as the "Group").

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 2010, on which the auditors gave an unqualified opinion, have been attached to the annual return of the Company and filed with the Registrar of Companies. The statutory financial statements for the year ended 30 September 2011 will be annexed to the next annual return of the Company and filed with the Registrar of Companies._____________________________________________________________________________________________

2. Basis of preparationThis announcement has been prepared on the basis of the results and financial position that the directors expect will be reflected in the audited statutory accounts when these are completed. The financial information presented in this report has been prepared in accordance with the Group's accounting policies under International Financial Reporting Standards (IFRS), as adopted by the EU and as set out more fully in the Group's last Annual Report. The Group has adopted the following standards and amendments to existing standards during the financial year:

- Amendments to IFRS 2 Share-Based Payments: Group Cash-Settled Share Based Payment Transactions

This amendment incorporates the changes previously applied under IFRIC 8 and IFRIC 11. This standard did not have a significant impact on the Group's financial statements.

- Amendment to IAS 32 - Financial Instruments: Presentation - Classification of Rights Issues

This amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. This standard did not have a significant impact on the Group's financial statements.

- IFRIC Interpretation 19 - Extinguishing Financial Liabilities with Equity Instruments

This interpretation addresses the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to extinguish all or part of the liability. This IFRIC will have no effect on the Group's financial statements.

- IFRIC Interpretation 18 - Transfer of Assets from Customers

This interpretation gives guidance for utility companies on receipt from customers of property, plant and equipment that must be used to connect those customers to a utilities network. The IFRIC had no effect on the Group's financial statements.

- Improvements to IFRSs

The improvements include changes in presentation, recognition and measurement plus terminology and editorial changes. These improvements have not had a significant impact on the Group's financial statements.

Prospective accounting changes

The following standards, amendments to existing standards, and interpretations published by the IASB are not yet effective for the year ended 30 September 2011 and have not been early adopted in preparing the financial statements.

• Amendment to IAS 24 - Related Party Disclosures

• Amendment to IFRIC 14 - Prepayments of a Minimum Funding Requirement

• Amendment to IAS 1 - Presentation of items of Other Comprehensive Income

• IFRS 9 - Financial Instruments: Recognition and Measurement

• IFRS 10 - Consolidated Financial Statements

• IFRS 11 - Joint Arrangements

• IFRS 12 - Disclosure of Interest in Other Entities

• IFRS 13 - Fair Value Measurement

A number of the standards set out above have not yet been EU endorsed and management are assessing whether these amendments will have a material impact on the Group.

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.

- Packaging & Specialty

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

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

The segmental analysis of the business corresponds with the Group's organisational structure, the nature of reporting lines to the Chief Operating Decision Maker (as defined in IFRS 8 Operating Segments), which the Group has identified as the Board of Directors, and the Group's internal reporting for the purpose of managing the business and assessing performance.

The amount of revenue and operating profit under the Group's operating segments is as follows:

4. Exceptional item

During the year, redundancy costs were incurred in relation to the rationalisation of the Group's businesses. This rationalisation gave rise to onerous leases and an impairment of property, plant & equipment.

The cash impact of these costs during the year amounted to €2,956,000, while the remaining costs are due to be paid within one year.

5. Share of joint ventures' profit after tax

6. Finance income and expense

7. Earnings per ordinary share

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

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

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

During the year, the Group completed the acquisition of the remaining 50% interest in Temperature Controlled Pharmaceuticals Limited ('TCP') that it did not previously own. As a result, TCP is now accounted for as a subsidiary undertaking and not as a joint venture undertaking. This gave rise to a gain of €2,530,000 being the difference between the fair value of the previously held interest in TCP and its carrying value which has been included within distribution expenses in the Group income statement.

The investment in joint ventures during the year represents the Group's share of the investment in Medco Health Solutions [Ireland] Limited. This investment has been classified as an asset held for sale at 30 September 2011. On the 17 October 2011, the Group agreed to dispose of this asset, see note 16.

During the year, acquisition consideration of €984,000 was refunded in relation to a warranty claim on a prior year acquisition.

9. Other reserves

The capital redemption reserve of €228,000 (2010:nil) is a legal reserve which arose during the year as the Company bought back and cancelled 4,560,611 of its ordinary shares.

10. Net debt

11. Provisions

12. Acquisition of subsidiary undertakings

During the year, the Group completed three acquisitions:

- On 1 December 2010, the Group acquired the entire issued share capital of World Events Group Limited ('World

Events'), a leading events management company providing event management, logistics and marketing services to international pharmaceutical companies.

- On 6 December 2010, the Group acquired the remaining 50% shareholding interest in Temperature Controlled

Pharmaceuticals Limited ('TCP), a leading supplier in Ireland of healthcare services at home, which brings the Group's interest up to 100%.

- On 27 June 2011, the Group acquired the entire issued share capital of Arjun Products Limited ('Arjun'), a batch manufacturer of specialty medical products.

The Group has also revised its estimate of the acquisition date fair value of current and deferred income tax in respect of prior year acquisitions. This has resulted in a corresponding increase 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 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:

12. Acquisition of subsidiary undertakings (continued)

None of the business combinations completed during the year were considered sufficiently material to warrant separate disclosure of the fair values attributable to those combinations.

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, customer relationships and technology.

The acquisition related costs for these acquisitions included in the Group income statement amounted to €199,847, which has been included in administration expenses in the Group income statement.

The Group's results for the year ended 30 September 2011 includes the following amounts in respect of the businesses acquired during the year:

*Other operating expenses consists of amortisation of intangible assets

Had these acquisitions been effected on 1 October 2010, the combined Group would have recorded total revenues of €1,753,541,000 and profit after interest and tax for the financial year of €36,373,000.

13. Employee benefits

13. Employee benefits (continued)