Preliminary Report 2020

UDG Healthcare plc

Preliminary Report 2020

Strong and resilient FY20 performance, trading ahead of guidance

24 November 2020: UDG Healthcare plc ("UDG Healthcare" or "Group"), a leading international healthcare services provider, announces its results for the year ended 30 September 2020, in which the Group delivered a strong and resilient trading performance despite the challenges presented by COVID-19.

Key highlights

· Adjusted diluted earnings per share (EPS) of 47.71c (FY19's EPS of 47.31c), ahead of EPS guidance of 43c to 45c announced in August 2020

· Group net revenue increased by 5%*

· Group adjusted operating profit increased by 7%*, driven by:

o An exceptionally strong performance from Sharp with adjusted operating profit increasing by 34%*

o A resilient performance from Ashfield with adjusted operating profit decreasing by 4%*

· Adjusted Group net operating margins increased from 14.0% to 14.3%

· Continued strong cash flow performance with a free cash flow conversion rate of 111%

· Robust balance sheet and liquidity position with net debt to EBITDA of 0.1x

· ROCE increased from 13.1% in FY19 to 13.5% in FY20

· Proposed 1.6% increase in final dividend to 12.54 $ cent per share, giving a full year dividend increase of 1.2% to 17.00 $ cent per share.

*on a constant currency basis

Chief Executive Officer, Brendan McAtamney commented:

"We are pleased to report a strong and resilient trading performance for FY20, which was ahead of our EPS guidance. This was driven by exceptionally strong growth in Sharp, in particular for serialised biotech and specialty packaging. Despite some parts of Ashfield being impacted by COVID-19, we adapted rapidly to support clients virtually and overall Ashfield performed in line with expectations.

I'd like to thank all of our people for their continued resilience, adaptability and commitment throughout the pandemic. They have been instrumental in supporting our clients during this challenging time, enabling them to deliver for their patients.

UDG Healthcare is a strong and well diversified business, underpinned by excellent long-term market fundamentals as evidenced by our strong financial performance in FY20. We have a robust financial position and will continue to leverage our investments in people, technology and infrastructure to remain well positioned for continued future growth."

COVID-19 update - Protecting the wellbeing of our people, while continuing to deliver for our clients

From the outset of the pandemic the Group's priority has been to protect the health and wellbeing of our people and to serve our clients.

Across all of our businesses, we immediately introduced a range of additional health and safety measures and processes to protect our people while they carried out essential work for clients and their patients. The significant commitment and dedication of our people across the various businesses and geographies has allowed us to continue to serve our clients successfully through this challenging period.

In Sharp, where we package critical and in many cases life-saving medicines for patients, almost 2,000 of our employees were categorised as essential workers. We introduced new working processes and cleaning regimes, adapted shift patterns, provided additional PPE for all employees and placed restrictions on non-essential visits. Within Ashfield, as a dynamic and technology-enabled business, the majority of our employees successfully pivoted to serve our clients remotely.

We also continue to use our expertise to support our clients in their efforts to find a treatment for COVID-19. Sharp remains involved in supporting the packaging and distribution of multiple clinical trials and treatments related to COVID-19. Ashfield continues to support on multiple projects, ranging in scale and at various stages of progress, including providing contact centre support to the US government's national "The Fight Is in Us" campaign working to mobilise people in the USA who have recovered from the infection to donate their blood plasma.

Corporate development

The Group continued to make good progress from a corporate development perspective, completing three acquisitions / investments over the past 12 months, one in Ashfield and two in Sharp, for a total combined consideration of up to $75 million. These investments, all of which have a strong strategic fit and expand the Group's capabilities, included:

o In November 2019, Ashfield Healthcare Communications completed the acquisition of Canale Communications, a US based scientific strategic communications agency, for up to $31 million. Canale provides a range of public relations, investor relations and communications services to life science and biotech companies;

o In May 2020, Sharp completed the acquisition of a packaging facility in the U.S., adding incremental capacity to the U.S. commercial packaging business;

o In July 2020, Sharp acquired a 25% shareholding in Berkshire Sterile Manufacturing Inc, a Massachusetts based sterile packaging and manufacturing services business, for $37.5 million. This investment expands Sharp's capabilities into sterile fill/finish manufacturing and is highly complementary to its existing clinical trial, packaging and related services;

Additionally, in January 2020, the Group completed the disposal of Ashfield's Pharmacovigilance business.

Balance sheet, liquidity and dividend

The Group retains a robust financial position with a strong balance sheet and liquidity profile, with a net debt to EBITDA ratio of 0.1x at 30 September 2020 (as defined by our debt agreements). This compares to the Group's banking covenant of 3.5x net debt to EBITDA. The Group also has access to fully committed undrawn debt facilities of $246 million.

In August 2020, taking into account the Group's strong liquidity position and improved trading visibility, the Board declared an interim dividend of 4.46 $ cent per share relating to the first half of the year which had not been impacted by the pandemic. This was in line with the 2019 interim dividend. Given the continued strong liquidity position of the Group and following the Group's long track record of annual dividend increases the Board has proposed a 1.6% increase in final dividend to 12.54 $ cent per share, yielding a full year dividend increase of 1.2% to 17.00 $ cent per share.

From April until July 2020, the Group accessed government support in light of COVID-19 related uncertainty. Reflecting the Group's strong trading performance and its strong financial position, while not material, the Group has now repaid any specific government support related to the COVID-19 pandemic.

Group outlook

UDG Healthcare remains a strong and well diversified business, supported by excellent long-term fundamentals, as evidenced by the strong financial performance in FY20. While some parts of Ashfield continue to be impacted by the pandemic, the Group's resilient business model leaves UDG Healthcare well positioned for continued future growth.

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 should not be considered in isolation or as a substitute for an analysis of results as reported under IFRS. See "Additional Information" on page 31 for definitions and reconciliations to the closest respective equivalent GAAP measure.

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.

Following a strong H1 FY20 performance, COVID-19 had an adverse impact on trading in Ashfield during H2 FY20 particularly in-field activities (including the Meetings and Events business, field-based representatives and audit services in STEM). While the remainder of Ashfield experienced some project deferrals and cancellations, the business has shown considerable resilience through the pandemic.

Ashfield generated net revenue of $765.8 million and adjusted operating profit of $105.2 million. While net revenue was 1% ahead of the same period last year, adjusted operating profit was 4% behind. Adjusting for the impact of currency translation movements and the contribution from acquisitions, underlying net revenue and operating profit declined by 4% and 15% respectively, reflecting the impact of the pandemic on the H2 FY20 trading performance.

Ashfield Communications & Advisory, now represents approximately 72% of Ashfield's operating profits. Net revenue increased by 13% and operating profit increased by 1%, including the benefit of the FY19 acquisitions of Putnam and Incisive Health. On an underlying basis, net revenue declined by 1% and operating profit declined by 14% principally due to COVID-19 impacts on STEM during the second half of the year, offset by modest underlying growth in the remainder of the business.

Ashfield Commercial & Clinical performed in line with revised expectations. Net revenue and operating profit both declined compared to the same period last year, including the disposal of Ashfield's Pharmacovigilance business. During the second half of FY20, in-field based activities (predominantly in Meetings and Event and field-based representatives) experienced reduced activity levels. However, having invested in omni-channel capabilities and digital engagement prior to the pandemic, the business has been able to successfully adapt to ensure it can continue to deliver services such as training, clinical educators, patient support programs and live virtual events for clients.

Ashfield continues to deliver on its strategy to diversify and expand its service offering, increase collaboration across the division and execute strategic acquisitions to complement existing business capabilities. Ashfield's investments have positioned it well for continued underlying growth in line with the Group's medium-term outlook. However, the Group anticipates some parts of the business will continue to be impacted in the near term as COVID-19 restrictions continue and it continues to adjust to new hybrid models of working.

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.

Sharp delivered a very strong performance during the year despite the multiple challenges presented by the pandemic. Revenue grew to $387.7 million with adjusted operating profit of $60.1 million, 11% and 34% respectively ahead of the same period last year. Sharp's operating margin improved from 12.9% to 15.5%. This growth was driven by increased demand, improved mix and operational improvements, resulting in increased capacity utilisation, in particular during the second half of FY20.

Over the past number of years, Sharp has invested in its technology, infrastructure and capabilities, especially in its biotech and speciality services. This strategy has delivered for the business as evidenced by strong growth across all parts of the division. Supporting this growth in FY20, Sharp expanded capacity in Allentown and Conshohocken and in May 2020 acquired a commercial US packaging facility in Macungie, PA. Together these investments leave Sharp well placed to meet the increasing demand from new and existing clients across all packaging formats. Additionally, in August 2020, Sharp's investment in Berkshire Sterile Manufacturing, a Massachusetts based sterile packaging and manufacturing services business, has further expanded its capabilities into sterile fill/finish manufacturing and is highly complementary to its existing clinical trial, packaging and related services.

Sharp continues to experience strong demand for its services, supported by positive market dynamics, and is well positioned to deliver continued strong growth in line with the division's medium-term underlying operating profit growth outlook.

Analyst presentation

Management will host a presentation for analysts and investors to discuss the company's full year results and provide an update on each of the Group's divisions, followed by a Q&A.

Results presentation will be available to watch on demand from 7.00am, via a pre-recorded video webcast

https://secure.emincote.com/client/udghealthcare/udg006

A live Q&A will commence at 9.00am, available via audio webcast and conference call.

Q&A conference call registration link: https://secure.emincote.com/client/udghealthcare/udg005/vip_connect

Q&A webcast registration link: https://secure.emincote.com/client/udghealthcare/udg005

Please note: If you wish to ask a question during the live Q&A at 9.00am, please dial into the conference call, as participants on the webcast will be in listen-only mode and therefore unable to ask questions.

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

About UDG Healthcare plc

UDG Healthcare plc (LON: UDG) is a FTSE 250 global leader in the healthcare advisory, communications, commercial, clinical and packaging services industries. UDG employs 9,000 people across operations in 29 countries, delivering services in over 50 countries.

Operating across two divisions, Ashfield and Sharp, UDG provides outsourced services which enable over 300 healthcare companies from large pharmaceutical to small biotech to bring their products to market.

Ashfield is a global leader in commercialisation services for the pharmaceutical and healthcare industry, operating across three business areas: Advisory, Communications and Commercial & Clinical. The division focuses on supporting patients to access and adhere to their medications and educating and communicating effectively with healthcare professionals and patients on these products at all stages of the product life cycle. Ashfield provides strategic consulting, advisory services, patient solutions, scientific and creative communications, PR, on-demand advertising services, field and contact centre sales teams, and medical information and event management services.

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

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

Forward-looking information

Some statements in this announcement are or may be forward looking statements. In particular, any statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing, anticipated cost savings and synergies and the execution of the Group's strategy, are 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, because they relate to events and depend upon circumstances that will occur in the future. The Group has based these forward looking statements on assumptions regarding present and future strategies of the Group and the environment in which it will operate in the future. However, because they involve known and unknown risks, uncertainties and other factors including but not limited to general economic, political, financial, health, security and business factors, as well as international, national and local conditions which are beyond the Group's control, actual results, performance, operations or achievements expressed or implied by such forward looking statements may differ materially from those expressed or implied by such forward looking statements and accordingly you should not rely on these forward looking statements in making investment decisions. Any forward looking statements speak only as of the date they are made and, except as required by applicable law or regulation, neither the Group nor any other party intends to update or revise these forward-looking statements after the date these statements are published, whether as a result of new information, future events or otherwise. Nothing in this document should be construed as a profit forecast. UDG Healthcare plc and its directors accept no liability to third parties.

Finance Review

IFRS based

1 See "Additional Information" on page 31 for more information and reconciliations to the closest respective equivalent GAAP measures.

Revenue

Revenue of $1,279.2 million for the year is 1% behind 2019 (1% on a constant currency basis). Ashfield revenue decreased by 6% and Sharp revenue increased by 11%. Group net revenue is 5% ahead of 2019 and net revenue on an underlying basis is 1% ahead of prior year, excluding the impact of foreign exchange, acquisitions and disposals.

Adjusted operating profit

Adjusted operating profit of $165.3 million is 7% ahead of 2019 (7% on a constant currency basis).

Adjusted net operating margin

The adjusted net operating margin for the businesses for the year is 14.3%, ahead of 14.0% in 2019.

Adjusted profit before tax

Net interest costs, pre-exceptional items, for the year of $13.3 million are higher than 2019, primarily due to the Group's adoption of IFRS 16 Leases on 1 October 2019. Interest income was also impacted by lower interest income on U.S. cash deposits. This delivered an adjusted profit before tax of $152.0 million.

Taxation

The effective taxation rate has increased from 19.1% in 2019 to 20.9% in 2020, due to an increase in the proportion of profit earned in the U.S.

Adjusted diluted earnings per share

Adjusted diluted earnings per share ('EPS') is 1% ahead (1% on a constant currency basis) of 2019 at 47.71 $ cent.

Exceptional items

The Group incurred an exceptional loss of $2.7 million after tax in the year.

A charge of $8.1 million, net of tax, was incurred in relation to restructuring of Ashfield's operations due to market conditions arising from the COVID-19 pandemic, primarily within the Meetings and Events business and the STEM business. The charge primarily relates to redundancy.

The Group completed the rationalisation of Sharp's European operations with the closure of the plant in Oudehaske, Netherlands. The costs of the rationalisation were lower than estimated in the prior year, resulting in an exceptional credit in the current year of $1.9 million, net of tax.

Impairment of assets relating to impairment of property, plant and equipment and impairment of right of use assets resulted in a cost of $2.5 million, net of tax, in the year.

During the year, Ashfield disposed of Ashfield Pharmacovigilance, a U.S. based subsidiary that provides safety and risk management services supporting healthcare organisations. The business was not considered core to Ashfield's operations and the disposal resulted in a gain of $5.3 million. The related tax charge was $0.1 million.

Deferred contingent consideration of $3.5 million, primarily in respect of Putnam Associates in Ashfield, increased during the year following a review of expected performance against earn-out targets.

In the measurement of the Group's current tax liabilities, there are transactions and calculations, for which the ultimate tax determination can be both complex and uncertain. During the year, the Group recognised a credit of $4.4 million on the remeasurement of current tax liabilities as a consequence of the resolution of a historic uncertain tax position.

Foreign exchange

The Group operates in 29 countries, with its primary foreign exchange exposure being the translation of local income statements and balance sheets into U.S. dollar for Group reporting purposes. The retranslation of non-U.S. dollar profits to U.S. dollar has resulted in a change to the reported adjusted diluted EPS growth of less than 1%.

The average 2020 exchange rates were $1: £0.7844 and $1: €0.8924 (2019: $1: £0.7839 and $1: €0.8865).

Cash flow

The following table displays cash flow information for the years ended 30 September 2020 and 2019:

Net cash inflow from operating activities

The net cash inflow from operating activities is $230.7 million (2019: $129.3million).

Adjusted EBITDA in 2020 benefited from the inclusion of $18.9 million due to the adoption of IFRS 16 Leases on 1 October 2019. Income taxes paid decreased mainly due to overpayments in 2019 offsetting payments due in 2020 and lower taxable profits in certain jurisdictions due to the impact of COVID-19. Working capital decreased by $63.0 million (2019: $6.5 million). The decrease in working capital is principally due to the impact of COVID-19 on customer billings, in addition to improvements in cash management underpinned by strong cash collection in the year. Other cash outflows of $16.1 million relates to transaction costs paid of $2.0 million and exceptional items outflow of $14.1 million relating to both the 2020 and 2019 exceptional charge (2019 cash flows of $31.8 million relate to transaction costs paid of $2.5 million and exceptional items outflow of $29.3 million).

Net cash outflow from investing activities

Net cash outflow from investing activities is $105.2 million, compared to $130.7 million in 2019. During the year, $37.9 million was invested in property, plant and equipment and computer software primarily for Sharp's U.S. operations. Acquisition activity in the year resulted in net cash payments of $64.4 million, and deferred and contingent consideration outflows of $13.9 million. The Group received net cash of $9.9 million following the disposal of Ashfield Pharmacovigilance in the year.

Net cash outflow from financing activities

Net cash outflow from financing activities decreased by $18.1 million to $21.0 million in the year. This was due to the issuance of $99.9 million private placement loan notes in August, net of a scheduled repayment of $63 million in September 2020 of maturing private placement notes. The Group's adoption of IFRS 16 Leases during the year also impacted financing activities by $17.1 million relating to capital lease payments.

Balance sheet

Net debt at the end of the year was $16.2 million ($246.0 million cash and $262.2 million debt). The net debt to annualised EBITDA ratio is 0.1 times debt (2019: 0.4 times debt) and net interest is covered 23.3 times (2019: 28.1 times) 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 (ROCE)

The Group's ROCE is 13.5%, up from 13.1% in 2019. Details of this calculation are on page 34.

Dividends

The directors are proposing a final dividend of 12.54 $ cent per share representing an increase of 1.6% on the 2019 final dividend of 12.34 $ cent per share. This represents 1.2% growth in the total dividend for the year to 17.00 $ cent per share. This continues the Group's 30 year history of consistently increasing dividends.

Subject to shareholder approval at the Company's Annual General Meeting, the proposed final dividend of 12.54 $ cent per share will be paid on 5 February 2021 to ordinary shareholders on the Company's register at 5.00 p.m. on 8 January 2021.

Group Income Statement

Group Statement of Comprehensive Income

Group Balance Sheet

Group Cash Flow Statement

Notes to the Preliminary Announcement

1. Reporting entity

UDG Healthcare plc (the 'Company') and its subsidiaries (together the 'Group') delivers advisory, communications, commercial, clinical and packaging services to the healthcare industry. The Company is a public limited company whose shares are publicly traded. It is incorporated and domiciled in Ireland. The address of its registered office is 20 Riverwalk, Citywest Business Campus, Citywest, Dublin 24, Ireland. The preliminary consolidated financial information for the year ended 30 September 2020 is for the Company, its subsidiaries and the Group's interest in equity accounted investments.

2. Statement of compliance and basis of preparation

Basis of preparation

This 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') issued by the International Accounting Standards Board ('IASB') as adopted by the European Union ('EU'); and those parts of the Companies Act 2014 applicable to companies reporting under IFRS. Full details of the accounting policies adopted by the Group are contained in the consolidated financial statements included in the Group's 2019 Annual Report, which is available on the Group's website; www.udghealthcare.com.

The preparation of consolidated 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 21, the nature of the assumptions and estimates made in the preparation of the preliminary announcement 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.

The Group has assessed the principal risks and uncertainties facing the Group, including the COVID-19 pandemic and the impact it is having on economic activity. The Group is actively monitoring the impact of COVID-19 and adopting cost control measures to mitigate against the potential future impact of weaker demand in some of our businesses. These measures have included: the reduction of appropriate variable costs; tight control of discretionary expenditure; a recruitment freeze; and a temporary reduction in labour including reduced working hours in Group's businesses that are primarily impacted. The Group implemented a restructuring during the year in the businesses most impacted by the pandemic (Note 6).

The financial impact of COVID-19 is not quantifiable due to the uncertainty over the length of time that the health crisis and related restrictions will continue to exist. The Group has continued to trade profitably during the year ended 30 September 2020. In assessing the potential impact on the Group, a number of scenarios have been modelled including where the restrictions imposed as a result of the pandemic and the downturn in economic activity continues for the period to the end of September 2021. Further possible downside risk has been incorporated into forecasts through sensitivity analysis.

The Group continues to have significant liquidity headroom on its existing financing facilities. At 30 September, the Group has

· unrestricted cash and cash equivalents of $246 million;

· unused committed debt facilities of up to $245.9 million from a multi-currency revolving senior bank credit facility expiring in May 2025; and

· bank overdraft facilities of $5.9 million renewable on an annual basis.

The Group has a low gearing with a net debt of $16.2m and net debt to annualised EBITDA ratio of 0.1, excluding IFRS 16 lease liabilities. There are no material debt maturities until September 2023.

Having considered the Group's forecasts, sensitivity analysis and the Group's significant financial headroom, 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 preliminary announcement.

The financial information presented herein does not represent full 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 2019 have been annexed to the annual return and filed with the Irish 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. The statutory financial statements for the year ended 30 September 2020 will be annexed to the next annual return of the Company and filed with the Registrar of Companies.

Accounting policies

The accounting policies applied in the preparation of the Group financial information are consistent with those applied in the 2019 Annual Report, except for the adoption of new standards, interpretations and standard amendments effective for the Group for the period commencing 1 October 2019. The Group has had to change its accounting policies as a result of adopting IFRS 16 Leases. Details on the impact of adoption of new accounting standards and interpretations are outlined in Note 21.

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 U.S. and Europe.

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 by segment 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 equity accounted investments' profit after tax

5. Finance income and expense

6. Exceptional items

Exceptional items are those which, in management's judgement, should be disclosed separately by virtue of their nature or amount. These exceptional items are separately presented in the Income Statement caption to which they relate. An analysis of exceptional items is disclosed below.

(a) Restructuring costs and other

During the year, the Group implemented a restructuring of its Ashfield operations due to market conditions arising from the COVID-19 pandemic, primarily within the Meetings and Events business and the STEM business. Restructuring costs and other includes redundancy costs of $7,583,000, consulting and legal costs of $945,000, onerous contracts and termination costs of $1,857,000 and an accelerated share-based payment expense of $89,000. There was a $255,000 release of restructuring costs relating to the previous year. In the prior year, the Group incurred restructuring costs primarily relating to Ashfield Commercial & Clinical in Europe. A tax credit of $2,082,000 arose in respect of exceptional restructuring costs.

(b) Sharp Europe rationalisation

The Group completed the rationalisation of Sharp's European operations during the year with the closure of the plant at Oudehaske, Netherlands. The cost of the rationalisation was lower than previously estimated resulting in an exceptional credit in the year. The tax impact of the exceptional rationalisation credit amounted to $619,000.

(c) Impairment of assets

The Group incurred a one-off expense of $861,000 arising from the impairment of property, plant and equipment and $2,555,000 arising from the impairment of right of use assets. The impairment arose following a review of leased offices in the U.S. which resulted in a consolidation of leased space during the year. A tax credit of $881,000 arose in respect of the impairment of assets.

(d) Gain on disposal of subsidiary

In January 2020, Ashfield disposed of Ashfield Pharmacovigilance, a U.S. based subsidiary that provides safety and risk management services supporting healthcare organisations. The business was not considered core to Ashfield's operations. As further outlined in note 7, the disposal resulted in a gain of $5,257,000. The related tax charge was $41,000.

(e) Legal costs and settlements

In the prior year, the Group recognised $14,994,000 million of an exceptional charge after tax primarily relating to the settlement of a claim relating to the Group's disposal of United Drug in 2016 and other legal costs relating to protecting an Ashfield trademark.

(f) Deferred contingent consideration

Following review of expected performance of acquired business against earn-out targets, there was an increase in deferred contingent consideration of $3,539,000 primarily in respect of Putnam Associates in Ashfield. In the prior year, there was a release of contingent consideration of $4,143,000 following a review of earn-out targets.

(g) Exceptional tax credit

In the measurement of the Group's current tax liabilities, there are transactions and calculations, for which the ultimate tax determination can be both complex and uncertain. During the year, the Group recognised a credit of $4,420,000 on the remeasurement of current tax liabilities as a consequence of the resolution of a historic uncertain tax position.

7. Disposal of subsidiaries

On 10 January 2020 the Group completed the disposal of Ashfield Pharmacovigilance, which was part of the Ashfield operating segment, based in the U.S. The following tables summarise the consideration received, profit on disposal and the net cash flow arising on the disposal:

The cash inflow from disposal of subsidiaries is presented within cash flows from investing activities in the Group Cash Flow Statement. The net gain on disposal is presented as an exceptional item (Note 6) within other operating income.

8. Earnings per ordinary share

1Adjusted profit attributable to equity holders of the parent from continuing operations is stated before the amortisation of acquired intangible assets ($22.8m, net of tax), transaction costs ($1.8m, net of tax) and exceptional items ($2.7m, net of tax).

Non-GAAP 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. 1,202,686 (2019: 1,371,292) 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 year.

9. Property, plant and equipment

10. Movement in goodwill, intangible assets and investment in equity accounted investments