Preliminary results

UDG Healthcare plc

Preliminary Report 2019

26 November 2019: UDG Healthcare plc ("UDG Healthcare" or "Group"), a leading international healthcare services provider, announces its results for the year ended 30 September 2019, in which the Group delivered another year of good growth and continued strategic progress.

Results highlights (on an IAS 18 basis2)

·; Adjusted1 diluted earnings per share (EPS) increased by 5% (7% on a constant currency basis, at the top end of the Group's FY19 EPS guidance).

·; Underlying* net revenue growth of 5%. Total net revenue increased by 1% on constant currency basis.

·; Underlying* adjusted operating profit growth of 5%. Total adjusted operating profit increased by 9% on a constant currency basis, reflecting continued growth in Ashfield and Sharp.

o Ashfield's operating profit increased by 13% on a constant currency basis driven by a combination of underlying growth in Ashfield Communications and Advisory, and the benefit of acquisitions.

o Sharp's operating profit increased by 8% on a constant currency basis driven by the continued strong performance of Sharp US.

·; Adjusted net operating margin increased from 13.1% to 14.2%.

·; Strong cash flow performance with a positive working capital inflow and free cash flow conversion rate of 83%.

·; Net debt to EBITDA of 0.4x, with $80.5 million net debt at 30 September 2019.

·; Proposed 5% increase in final dividend to 12.34 $ cent per share, yielding a full year dividend increase of 5% to 16.80 $ cent per share.

·; $137 million committed to strategic acquisitions in 2019, strengthening the Group's capabilities and service offering:

o Putnam Associates and Incisive Health acquired in May 2019, and have performed well since acquisition.

o Acquired Canale Communications, a US based scientific strategic communications agency, for up to $31 million, post year end in November 2019.

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

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

"2019 was another year of strong strategic progress for UDG Healthcare. We delivered good financial growth with adjusted earnings per share increasing by 7% on a constant currency basis, the top end of guidance. Our two global platforms, Ashfield and Sharp delivered a strong performance through a combination of underlying growth and the benefit of acquisitions.

The Group has completed three acquisitions to date in 2019 for a total consideration of up to $137 million, including the acquisition of US strategic scientific communications agency Canale Communications which we have announced today. All three acquisitions are in line with our strategy to expand into higher growth and higher margin areas, complementary to our existing service offering.

Looking ahead to FY20, we expect to continue to deliver good growth across our businesses, supplemented by further strategic acquisitions utilising our strong balance sheet."

Corporate Development

In May 2019, the Group 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. Both businesses have performed well since acquisition. The Group's net debt was $80.5 million (0.4x net debt to EBITDA) at 30 September 2019, leaving it well placed to fund the continued inorganic development of its two global growth platforms, Ashfield and Sharp.

Post the year end, in November 2019, the Group completed the acquisition of Canale Communications, a San Diego based scientific strategic communications agency, providing a range of public relations, investor relations and communications services to life science and biotech companies. Canale Communications is being acquired for a total consideration of up to $31 million, comprising an initial consideration of $20 million, with an earn-out of up to $11 million payable after three years, based on the achievement of agreed profit targets.

Exceptional Item

During the year the Group incurred an exceptional charge of $37.9 million pre-tax, which primarily related to:

·; Two fully settled legal claims, as previously disclosed in the Group's H1 FY19 Interim Results Report, amounting to $15.0 million pre-tax;

·; The closure of Sharp Europe's Oudehaske facility, giving rise to a charge of $10.4 million pre-tax; and

·; Restructuring costs amounting to $12.5 million, primarily relating to Ashfield Commercial & Clinical in Europe. Post the restructuring, the European business is now better placed to evolve its service mix and diversify its offering in line with the US business.

For further information on the exceptional items included in FY18 and FY19, refer to page 18.

Outlook

The wider market conditions remain favourable and the Group remains well positioned to deliver sustainable growth in line with its medium term underlying operating profit guidance. Additionally, the Group's strong balance sheet allows it the financial flexibility to supplement this underlying growth with acquisitions aligned with the Group's strategy.

For FY20, the Group expects to continue to deliver good underlying operating profit growth across both Ashfield Communications & Advisory and Sharp, while Ashfield Commercial & Clinical is expected to stabilise. In line with previous practice, the Group will provide formal FY20 guidance in January 2020 as part of its First Quarter Trading Update.

Notes:

1All references to operating profit and earnings per share included in the highlights and review of operations refer to adjusted results. Alternative 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-for-like analysis with the comparative year. 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 32 for definitions and reconciliations to the closest 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 years presented. The impact of IFRS 15 which is outlined in Note 19 of the preliminary results 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 delivered a good performance during the year, driven by the benefit of acquisitions and good underlying growth, particularly in Ashfield Communications & Advisory.

Ashfield generated net revenue of $753.9 million and adjusted operating profit of $108.4 million, 2% and 10% respectively ahead of the prior year. Adjusting for the impact of currency translation movements and the contribution from acquisitions, underlying net revenue growth was flat and underlying operating profit was up 4%. Ashfield's net operating margin increased from 13.4% to 14.4%.

Ashfield Communications & Advisory, which now accounts for close to 70% of Ashfield's operating profits, performed strongly during the year. Net revenue increased by 18% and operating profit increased by 21%, including the benefit of acquisitions. Underlying net revenue growth increased by 6% and underlying operating profit increased by 10%, with operating margins also increasing. Ashfield's STEM aXcellerate investment programme has progressed in line with expectations, with a total investment of approximately $3 million during the year. The acquisitions of Putnam, Incisive Health and Canale Communications have further strengthened and expanded Ashfield's capabilities in this higher growth and higher margin business.

Ashfield Commercial & Clinical performed in line with expectations with revenues and operating profits both declining compared to the prior year. While the US business performed well, this was offset by softer demand for Ashfield's services in Europe. The restructuring completed during the year in the European business has adjusted its cost base and enables it to evolve its service mix to better align to client demand, and diversify its offering similar to the US Commercial & Clinical business.

During the year there have been a number of management changes within the Ashfield division:

·; As part of the division's succession planning, in September 2019 Greg Flynn was appointed President of Ashfield Commercial & Clinical, replacing Julian Tompkins, who retired after almost 20 years with the business. During Greg's 15 years with Ashfield, he established and operated Ashfield's joint venture in Japan with CMIC, he was President of Ashfield Commercial & Clinical's US business, and most recently was COO of Ashfield Commercial & Clinical.

·; Doug Burcin retired as President of Ashfield Communications in June 2019 on health grounds. A search is at an advanced stage for his successor. In the interim the business is being led by Nigel Clerkin, Group CFO.

·; Colin Stanley was appointed President of Ashfield Advisory in October 2019. Colin replaces Rob Wood who retired having joined the Group as part of the acquisition of STEM in October 2016. Colin joins from ICON plc, where he has held a number of global senior operational and management roles, most recently as President of ICON's Functional Services Group.

To all three departing leaders, both UDG Healthcare and Ashfield would like to place on record our sincere appreciation of their significant contribution.

Ashfield is well positioned to continue to deliver good underlying operating profit growth over the medium term, as the business continues to diversify its service offering and expand its global market positions.

.

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 delivered a good performance during the year generating revenue of $360.3 million and adjusted operating profit of $50.0 million, 16% and 9% ahead of the same period last year respectively.

Sharp US's underlying revenue and operating profit were 16% and 10% respectively ahead of the same period last year. This strong growth was driven by increased demand for the packaging of serialised biotech and specialty products from both new and existing clients. As previously disclosed, the accelerated demand in the second half of the year for these services, coupled with the added complexity of these product offerings, resulted in the requirement for increased investment in people and capacity to efficiently meet this demand and capitalise on the opportunity.

The performance of Sharp Europe improved during the second half of the year and for the full year delivered strong underlying revenue growth and an operating loss of $1.7 million. During the year, the business took the decision to consolidate its packaging operations in Europe and close its Oudehaske packaging plant in the Netherlands resulting in an exceptional charge of $10.5 million pre-tax. A process has begun to transfer customers at this site to Sharp's remaining three sites in Europe. The centralisation of Sharp's European operations to the existing plants will lead to greater operational and cost efficiencies for Sharp Europe. From FY20, the Sharp US and Sharp Europe financial results will be presented on a consolidated basis.

During 2019, Sharp continued to invest in new facilities and capacity across both its commercial and clinical facilities. Sharp Clinical completed the relocation of its businesses in the US and UK to new facilities while in early 2020, Sharp US Commercial will open additional capacity at its Allentown, Pennsylvania campus. These investments provide additional capacity to support the continued growth of the business.

Mike O'Hara, Managing Director of Sharp Packaging Services, will retire at the end of January 2020. A recruitment process is underway for a replacement. UDG Healthcare and Sharp would like to place on record our sincere appreciation of his significant contribution.

Sharp has a strong pipeline of business which supported by the benefit of investments made and additional resources added, leaves it well positioned to deliver underlying operating profit growth in line with the Group's medium-term expectations of double-digit growth in FY20 and beyond.

Analyst presentation

A presentation for investors and analysts will be held at the London Stock Exchange at 8.30 GMT today, 26 November 2019. If you wish to attend, please contact Powerscourt at the details below. Alternatively, to dial into the conference call or webcast, the details are as follows:

Audio webcast

https://secure.emincote.com/client/udghealthcare/udg001

Conference call

UK number: +44-203-059-5868

Ireland number: +353-1526-9451

US number: +1-760-294-1674

Please dial-in to the call 10 minutes before, and quote UDG Healthcare Full Year Results when prompted

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 8,700 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.

Finance Review

IFRS based

Following the adoption of IFRS 15 "Revenue from Contracts with Customers" on 1 October 2018, the Group's statutory results for the year ended 30 September 2019 are presented on an IFRS 15 basis, whereas the Group's statutory results for the comparative year ended 30 September 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 years presented. Note 19 to the Group financial information outlines the transition impact for the Group and discloses the financial statement line items impacted for the year ended 30 September 2019.

Revenue

Revenue of $1,298.5 million for the year is 1% behind 2018 (1% ahead on a constant currency basis).

Under IAS 18, revenue is in line with 2018 (2% ahead on a constant currency basis) with a 3% increase in Ashfield revenue and a 16% increase in Sharp revenue. Group underlying net revenue increased by 9%, excluding the impact of foreign exchange acquisitions, disposals and IFRS 15 adjustments.

Adjusted operating profit

Adjusted operating profit of $154.8 million is 5% ahead of 2018 (7% on a constant current basis).

Under IAS 18, adjusted operating profit has increased by 7% (9% on a constant currency basis).

Adjusted net operating margin

The adjusted net operating margin for the businesses for the year is 14.0%.

Under IAS 18, this is 14.2%, an increase on the 13.1% margin reported in 2018.

Adjusted profit before tax

Net interest costs, pre-exceptional items, for the year of $8.1 million are 6% lower than 2018, due to interest income on US cash deposits. This delivered an adjusted profit before tax of $146.7 million.

Under IAS 18, the adjusted profit before tax is $150.3 million, which is 8% ahead of 2018 (10% on a constant currency basis).

Taxation

The effective taxation rate has increased from 17.1% in 2018 to 19.1% in 2019, due to an increase in the proportion of profit earned in the US.

Adjusted diluted earnings per share

Adjusted earnings per share (EPS) is 3% ahead (4% on a constant currency basis) of 2018 at 47.31 $ cent.

Under IAS 18, adjusted diluted earnings per share (EPS) is 5% ahead (7% on a constant currency basis) of 2018 at 48.44 $ cent.

Exceptional items

The Group incurred an exceptional charge of $37.9 million before tax for the year.

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) at a cost of $14.3 million. The Group also incurred trademark litigation costs during the year amounting to $0.7 million.

A charge of $12.5 million was incurred in relation to restructuring of the Group's internal operating structures, principally in respect of Ashfield Commercial & Clinical's European operations. The charge primarily relates to redundancy.

Following a review of the operations in Sharp Europe, it was decided to rationalise the operations and close the Sharp plant at Oudehaske, Netherlands. The Group has incurred a charge of $10.5 million including redundancy, asset impairment, plant decommissioning and contract termination costs.

Impairment of assets relating to intangible software and property, plant and equipment resulted in a cost of $4.1 million in the year.

Deferred contingent consideration of $4.1 million in respect of Drug Safety Alliance ($2.8 million), MicroMass Communications ($0.8 million) and Sellxpert ($0.5 million) was released in the year following review of expected performance against earn-out targets.

A tax credit of $4.2 million was incurred in relation to these exceptional items.

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 re-translation of overseas profits to US dollar has decreased IAS 18 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 year versus 2018.

The average 2019 exchange rates were $1: £0.7839 and $1: €0.8865 (2018 $1: £0.7436 and $1: €0.8403).

Cash flow

The following table displays cash flow information for the years ended 30 September 2019 and 2018:

Net cash inflow from operating activities

The net cash inflow from operating activities was $129.3 million (2018: $102.5 million).

Working capital decreased by $6.5 million (2018: $50.4 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 and improved cash management. Other cash outflows of $31.8 million relates to transaction costs paid of $2.5 million and exceptional items outflow of $29.3 million primarily in respect of the McKesson legal settlement and restructuring costs (2018 cash flows of $1.1 million relates to transaction costs paid of $5.3 million and exceptional items inflow of $4.2 million).

Net cash outflow from investing activities

Net cash outflow from investing activities is $130.7 million, compared to $76.3 million in 2018. This increase is principally due to deferred consideration outflows on acquisitions of $25.1 million, higher acquisition outflows during the year of $69.1 million and lower capital expenditure in the current year. During the year, $27 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 $12.5 million included investments in Future Fit.

Net cash outflow from financing activities

Net cash outflow from financing activities increased by $6 million to $39.1 million in the year, principally due to payment of a higher dividend as compared to prior year.

Balance sheet

Net debt at the end of the year was $80.5 million ($135.2 million cash and $215.7 million debt). The net debt to annualised EBITDA ratio is 0.4 times debt (2018: 0.3 times debt) and net interest is covered 28.1 times (2018: 22.0 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 13.1%, up from 12.7% in 2018. Under IAS 18, the Group's ROCE in 2019 is 13.4%. Details on how this was calculated are on page 34.

Dividends

The directors are proposing a final dividend of 12.34 $ cent per share representing an increase of 5% on the 2018 final dividend of 11.75 $ cent per share. This represents 5% growth in the total dividend for the year to 16.80 $ 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 12.34 $ cent per share will be paid on 5 February 2020 to ordinary shareholders on the Company's register at 5.00 p.m. on 10 January 2020.

Investor relations

UDG Healthcare's executive management team spend a significant amount of time meeting with shareholders and the international financial community. We have a dedicated investor relations function, focused on increasing the awareness of the Company among the investor and analyst community.

The Group maintains continuous engagement with its shareholders during the year (apart from when the Group is in a close period), specifically following the release of our interim and preliminary results, and at the time of major developments including M&A transactions. The Group continues to ensure that a broad geographic base of institutional investors is reached through participation in both results and non-results roadshows with senior management and investor relations, and attendance at conferences and investor events. During 2019, the UDG Healthcare senior management team conducted over 250 institutional investor one-on-one and group meetings, and participated at nine investor conferences, including five in the US.

The number of independent equity analysts covering the Group remained at thirteen during the year - this is well ahead of the average number of covering analysts for a FTSE250 company of nine, and reflects the continued interest in UDG Healthcare from the equity markets.

The Board of Directors considers it important to understand the views of shareholders and receive regular updates on investor perceptions.

Our website www.udghealthcare.com, is the primary method of communication for the majority of our shareholders. We publish our annual report, preliminary results and other public announcements on our website. In addition, details of our conference calls and presentations are available through our website.

Our investor relations department provides a point of contact for shareholders and full contact details are set out in the investor relations section of our website. Shareholders can also submit an information request through the shareholder services section of our website.

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 2019 is for the Company, its subsidiaries and the Group's interest in joint ventures and associates.

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 2018 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 19, 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 directors believe 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 2018 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 2019 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 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 19. 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 Group consolidated financial statements. A number of new accounting standards will become effective for the Group in future years. These will be outlined in the consolidated financial statements contained in the Group's Annual Report.

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 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 joint ventures' 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) Legal costs and settlements

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 year of $14,250,000 (including defence costs). The Group does not expect any further costs to arise as a result of the disposal. Additionally, the Group incurred legal costs of $744,000 protecting an Ashfield trademark. The tax impact of exceptional legal costs and settlements amounted to $207,000.

(b) Restructuring costs and other

During the year, the Group implemented a restructuring of its internal operating structures, primarily within Ashfield Commercial & Clinical due to changes in market conditions in Europe. Restructuring costs and other includes redundancy costs of $11,229,000, onerous contracts of $666,000, accelerated share-based payment expense of $320,000, and other costs of $266,000 associated with the restructuring. A tax credit of $2,666,000 arose in respect of exceptional restructuring costs.

(c) Sharp Europe rationalisation

The Group implemented a rationalisation of Sharp's European operations during the year. As part of the rationalisation, it was decided to close the Sharp plant at Oudehaske, Netherlands. The exceptional rationalisation costs in Sharp Europe include redundancy costs of $2,373,000, impairment of property, plant and equipment of $3,576,000, plant decommissioning and termination costs of $4,496,000. The centralisation of Sharp's European operations to the existing plants will lead to greater operational and cost efficiencies for Sharp Europe. The tax impact of exceptional rationalisation costs amounted to $323,000.

(d) Impairment of intangible assets

The Group incurred a one-off expense of $3,744,000 arising from the impairment of intangible assets. A review of software in Ashfield during the year resulted in the decision to cease using certain software assets. A tax credit of $894,000 arose in respect of the impairment of intangible assets.

(e) Impairment of property, plant and equipment

Impairment of property, plant and equipment arose due to the exit of properties as a result of the realignment of the Group's structure. A tax credit of $75,000 arose in respect of the impairment of property, plant and equipment.

(f) Deferred contingent consideration

Deferred contingent consideration relates to $2,800,000 in respect of Drug Safety Alliance, $800,000 in respect of MicroMass Communications and $543,000 in respect of Sellxpert. These amounts were released in the year following a review of expected performance against earn-out targets.

In the prior year, the Group recognised $85.8 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 year. The disposal of Aquilant resulted in a loss of $41.9 million. During the prior year, the Group completed a restructuring programme resulting in restructuring cost of $14.5 million and onerous leases of $2.9 million as a result of exiting leases associated with the restructuring. There was an exceptional credit of $11.6 million in the prior year due to the remeasurement of contingent consideration relating to the acquisitions of Cambridge BioMarketing, MicroMass Communications and Sellxpert. The Group recognised an exceptional tax credit of $1.5 million on these items and an exceptional gain of $9.7 million arising from the remeasurement of certain US tax liabilities following the enactment of the US Tax Cuts and Jobs Act.

7. 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 ($25.3m, net of tax), transaction costs ($2.1m, net of tax) and exceptional items ($33.7m, 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. 1,371,292 (2018: 1,357,684) 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.

8. Property, plant and equipment

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