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RNS

Preliminary results

Released 07:00 28-Nov-2017

RNS Number : 6507X
UDG Healthcare Public Limited Co.
28 November 2017
 

UDG Healthcare plc

Preliminary Announcement of Results

Year ended 30 September 2017

Strong full year performance, driven by organic growth and further acquisitions

 

28 November 2017: UDG Healthcare plc ("UDG Healthcare" or "Group"), a leading international healthcare services provider, announces its preliminary results for the year ended 30 September 2017, which reflects another year of strong growth and strategic progress for the Group.

 

Financial Results

 

 

 

 

 

 

IFRS based

 

 

 

 

 

Adjustments1

 

 

 

 

 

Adjusted

 

 

 

Increase/

(decrease) on 2016

 

Constant currency

increase/ (decrease) on 2016

 

 

$'m

$'m

$'m

%

%

 

 

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

 

Revenue

1,219.8

-

1,219.8

13

17

 

Net revenue2

1,028.5

-

1,028.5

12

16

 

Operating profit

103.2

26.1

129.3

12

17

 

Profit before tax

92.8

26.1

118.9

17

23

 

Diluted earnings per share (EPS) (cent)

28.83

8.29

37.12

17

23

 

 

Discontinued operations3

 

 

 

 

 

 

Diluted earnings per share (cent)

-

-

-

        (100)

 (100)

 

 

 

 

 

 

 

 

Total diluted earnings per share (cent)

28.83

8.29

37.12

(5)

(1)

 

 

 

 

 

 

 

 

Dividend per share (cent)

13.30

-

13.30

7

7

 

 

 

 

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

Net (debt)/cash ($'m)

(53.3)

143.2

 

 

 

 

Net (debt)/cash/annualised EBITDA (times)

 

(0.32)

1.05

 

 

 

 

                         

 

 

Non-IFRS information

The Group reports certain financial measurements that are not required under International Financial Reporting Standards (IFRS) which represent the generally accepted accounting principles (GAAP) under which the Group reports. The Group believes that the presentation of these non-IFRS 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. Reference to these performance measurements throughout this report are to the adjusted measurements unless otherwise stated and these adjusted measurements are explained on pages 34-37.

 

 

1 Adjusted operating profit, profit before tax and diluted EPS are stated before the amortisation of acquired intangible assets ($22.1m, pre-tax) and transaction costs ($4.0m, pre-tax).

2 Net revenue represents gross revenue adjusted for revenue associated with pass-through costs, for which the Group does not earn a margin.

3 The Group has classified its joint venture arrangement with Magir Limited as a discontinued operation and an asset held for sale. The discontinued operations in 2016 also included United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. The Group's disposal of these operations was completed on 1 April 2016.

 

Financial highlights (Continuing Group)

 

·     Adjusted diluted earnings per share1 (EPS) from continuing operations increased by 17% (23% on a constant currency basis).

·     Net revenue growth of 12% (16% on a constant currency basis) to $1,028.5 million.

·     Adjusted operating profit1 growth of 12% (17% on a constant currency basis) to $129.3 million. Adjusted net operating margin3 stable at 12.6%.

·     Adjusted profit before tax1 up 17% (23% on a constant currency basis) driven by:

Underlying growth of 13% including the benefit of lower interest charges

Acquisition growth of 10%

Offset by adverse foreign exchange movements of 6%.

·     Proposed 7.5% increase in final dividend to $9.72c per share, yielding a full year dividend increase of 7% to $13.3c per share.

·     Net debt of $53.3 million at 30 September 2017 (0.32x net debt to EBITDA).

 

Strategic & operating highlights

 

·     Completed six acquisitions with a total capital commitment in excess of $270m, developing the Group's market leading positions and expanding its service offering.

·     Ashfield's operating profit1 increased by 16% driven by a combination of underlying and acquisition growth (underlying growth2 of
5% after a 3% additional Future Fit operating cost impact). Good performance by all acquired businesses since acquisition, with particularly strong growth from STEM Healthcare.

·     Significant progress enhancing the Ashfield service offering across advisory, communications, commercial and clinical services.

·     Sharp's operating profit1 increased by 8% (underlying growth2 of 11%), driven by Sharp Europe moving into profit and continued growth in Sharp US.

·     Continued development of the Sharp offering through investments in new facilities, across both the commercial and clinical packaging businesses in both the US and Europe. 

·     Aquilant's underlying operating profit2 increased by 4%, with reported performance negatively impacted by adverse currency translation movements.

·     Further progress on Future Fit investments in scalable infrastructure with the launch of Workday (Group HR system) and commencement of the implementation of Oracle Fusion (Ashfield finance system) to support continued sustainable growth.

·     Alan Ralph, UDG Healthcare's CFO, has signalled his intention to retire from his role by the end of 2018. A comprehensive process is underway to appoint a suitable successor.

 

Chief Executive's comment

 

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

 

 "2017 was another year of strong growth at UDG Healthcare, with adjusted earnings per share increasing by 17% (23% on a constant currency basis). All our divisions delivered good underlying profit growth, supplemented by the benefit of acquisitions.

 

We continued to transform UDG Healthcare, committing more than $270 million to six transactions during the year. These acquisitions enhance and broaden the range of capabilities we offer our healthcare clients. We are well positioned to continue to deliver organic growth and our strong balance sheet will enable us to execute further strategic acquisition opportunities as they arise.

 

UDG Healthcare's value proposition to our clients continues to expand and the Group also continues to benefit from the increasing trend in the healthcare industry to outsource specialist and non-core activities on an international basis."

 

 

 

1Before the amortisation of acquired intangible assets and transaction costs.

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

3Operating margin as a percentage of net revenue. Net revenue represents gross revenue adjusted for revenue associated with pass-through 
   costs, for which the Group does not earn a margin.

 

Group development and outlook

 

Corporate development activity

In line with the Group's strategy of expanding into higher growth and higher margin areas, 2017 saw the Group commit more than $270 million to six acquisitions. The Group has now redeployed over two thirds of the net proceeds from the 2016 sale of the United Drug supply chain business to McKesson.

 

These acquisitions have a strong strategic fit with the Group's existing businesses and have added further capabilities for the Group's healthcare clients. All have performed well since acquisition and are:

·      STEM Healthcare, a leading global provider of commercial, marketing and medical audits, completed October 2016;

·      A pharmaceutical-grade packaging facility in Bethlehem, PA, completed April 2017;

·      Sellxpert, a German and Swiss contract sales outsourcing business, completed July 2017;

·      Vynamic, a US-based healthcare management consultancy, completed July 2017;

·      Cambridge BioMarketing, a US-based communications agency focused on orphan and rare diseases, completed July 2017;

·      MicroMass Communications, a US-based communications agency specialising in behavioural change, completed September 2017.

 

At year end, the Group's net debt was $53.3m (0.32x net debt to EBITDA), leaving it well placed to execute further strategic acquisition opportunities as they arise.

 

Board and Management changes

After almost 20 years with the Group, UDG Healthcare Chief Financial Officer, Alan Ralph, has informed the Board that he intends to retire from his role by the end of 2018. Chief Executive Officer, Brendan McAtamney, commented "Alan has made a substantial contribution to the evolution of UDG Healthcare, particularly in his current role as Chief Financial Officer. Over the years, Alan has held many roles within the Group, including Managing Director of the Supply Chain Division. At all times, Alan has been a model professional and has made a significant input into the formulation of the Group's strategy and its successful international expansion. On behalf of the Group, we are very thankful for Alan's contribution to UDG Healthcare and we wish him and his family the very best for the future. On a personal note, I would like to thank Alan for his wise counsel and firm support since my appointment as Chief Executive. Whilst there is no firm retirement date as yet, Alan will remain with the Group to ensure a smooth succession." Planning for Chief Financial Officer succession is in progress and a replacement will be announced in due course.

 

In May 2017, Jez Moulding was appointed Chief Operating Officer of the Group and Executive Vice President of Ashfield. This followed the announcement in September 2016 of Chris Corbin's intention to retire from the Group in April 2019. Chris has transitioned to the role of Chairman of Ashfield and remains a director of the Group.

 

Gerard van Odjik has informed the Chairman that, having recently taken on a demanding new role, he will be unable to give UDG Healthcare the time and attention that his non-executive director role requires. He has therefore indicated that he will not seek re-election at the upcoming AGM on 30 January 2018. In the light of this, the Board has asked Philip Toomey, who was going to step down at the AGM, to put himself forward for a further year.

 

Ashfield service offering & office expansion

Driven by five acquisitions during the year, Ashfield continued to broaden and enhance its service proposition. The acquisitions of STEM Healthcare and Vynamic have significantly expanded Ashfield's advisory offering.  Together with Sellxpert, Cambridge BioMarketing and MicroMass Communications, these acquisitions enable Ashfield to deliver a full range of end-to-end advisory, communication, commercial and clinical services to its clients. Over the past five years, Ashfield has transitioned from a UK focused commercial and clinical services business, to become a global commercialisation partner for its healthcare clients.

 

To facilitate continued growth of the Ashfield business, Ashfield's commercial and clinical operations in the US moved to a new facility in Fort Washington, PA, in 2017. This is 60% larger than the previous office, enabling continued expansion in the strategically important US market. Ashfield Communications also doubled the size of its office in Scotland and opened new offices in Ireland and Japan.

 

Sharp investments

Sharp continued to invest in new facilities in the US and the UK. During the second half of the year, Sharp's US clinical business commenced its relocation to the Bethlehem packaging facility acquired in April 2017. The relocation is expected to be completed over the next 18 months. The facility will offer clients an integrated clinical development, packaging and distribution service. In the UK, the relocation of the clinical packaging business to the recently purchased facility in South Wales will commence once the refurbishment of the facility is completed in late 2018.

 

Future Fit

As well as successfully executing these acquisitions and facility improvements, the Group remains focused on investing in scalable infrastructure across HR, finance and IT. In April 2017, the Group launched Workday, its human resource information system and commenced the implementation of Ashfield's new Oracle Fusion finance system, which will be rolled-out on a phased basis over the next 18 months. These investments will ensure the Group has the right infrastructure to deliver long term sustainable growth and ensure the seamless integration of acquired businesses.

 

The rollout of both systems resulted in $2.5m additional operating costs during the second half of this year (primarily in Ashfield). In H1 2018, a further $3.5m increase in operating costs is expected (annualised impact of c. $6m) which will moderate organic growth during the first half of 2018.

 

Outlook

During 2017 the Group made significant progress in the execution of its strategy. The market opportunity for UDG Healthcare remains robust and the Group is well positioned to deliver sustainable future growth, both organically and through further strategic acquisitions.

 

2018 will benefit from the full year contribution of acquisitions made in 2017 and the Group expects organic growth to accelerate during the second half of the year, after the impact of the additional Future Fit operating costs have been absorbed.

 

Review of Operations

 

 

 

 

Ashfield

 

 

2017

2016

Actual

Underlying

 

$'m

$'m

Growth

Growth2

Gross revenue

 

 

 

 

Commercial & Clinical

604.7

525.1

15%

18%

Communications (including Advisory)

216.7

159.9

36%

1%

Total gross revenue

821.4

685.0

20%

14%

 

 

 

 

 

Net revenue1

 

 

 

 

Commercial & Clinical

442.3

386.3

14%

17%

Communications (including Advisory)

187.8

135.3

39%

1%

Total net revenue

630.1

521.6

21%

13%

 

 

 

 

 

Operating profit

 

 

 

 

Commercial & Clinical

38.6

37.8

2%

5%

Communications (including Advisory)

43.0

32.8

31%

5%

Total operating profit

81.6

70.6

16%

5%

 

 

 

 

 

Operating margin

 

 

 

 

Operating margin (on gross revenue)

9.9%

10.3%

 

 

Net operating margin (on net revenue)

12.9%

13.5%

 

 

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

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

 

 

Ashfield delivered a strong financial performance during the year, driven by good underlying growth and the benefit of acquisitions. Net revenue was up 21% to $630.1m and operating profit was up 16% to $81.6m.

 

Ashfield generated underlying net revenue growth of 13% and underlying operating profit growth of 5%, after adjusting for the negative impact of currency translation movements and the contribution of acquisitions.

 

Ashfield incurred additional operating costs during the second half of the year (expected to continue into the first half of 2018) related to the Future Fit investments. Ashfield generated 8% underlying operating profit growth during the year before these additional costs, which amounted to c. $2.5m in the second half of 2017.

 

Net operating margin (allowing for pass-through costs) declined from 13.5% to 12.9%. The positive margin impact of acquisitions was more than offset by the impact of the additional Future Fit operating costs and higher underlying revenue growth from the lower margin Commercial & Clinical business. 

 

Ashfield Commercial & Clinical delivered good underlying net revenue and operating profit growth of 17% and 5% respectively during the year. This was principally due to strong growth in the German business and a good performance in the US, driven by increased activity on contract wins from 2016. The acquisition of Sellxpert has further strengthened Ashfield's capabilities and established it as market leader in Germany.

 

Ashfield Communications (including Advisory) delivered strong growth during the year. Including the benefit of acquisitions, net revenue increased by 39% and operating profit increased by 31%. Underlying net revenue growth improved during the second half of the year compared to the first half of the year.  Since its acquisition in October 2016, STEM Healthcare has performed strongly and continues to gain momentum.

 

In addition to continued organic progress, Ashfield is well positioned for growth in 2018 following the acquisitions of Sellxpert, Vynamic, Cambridge BioMarketing and MicroMass Communications during the final quarter of 2017.

 

Sharp

 

 

2017

2016

Actual

Underlying

 

$'m

$'m

Growth

Growth1

Revenue

 

 

 

 

US

254.0

246.1

3%

2%

Europe

48.1

49.9

(4%)

1%

Total revenue

302.1

296.0

2%

2%

 

 

 

 

 

Operating profit/(loss)

 

 

 

 

US

40.9

39.6

3%

5%

Europe

0.4

(1.4)

-

-

Total operating profit

41.3

38.2

8%

11%

 

 

 

 

 

Operating margin %

13.7%

12.9%

 

 

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

 

Sharp delivered a good performance in 2017, with operating profit increasing by 8% to $41.3m (11% on an underlying basis). Operating margins increased to 13.7% during the year.

 

Sharp US generated underlying operating profit growth of 5%, with biotech delivering particularly strong growth. This was in part driven by the completion of the fit out of the additional capacity in Allentown, PA, which contains 13 packaging suites fully dedicated to biotech clients.

 

In addition, a new US state-of-the-art packaging site was acquired in Bethlehem, PA, in April 2017 to expand the commercial and clinical offering to Sharp's US clients. Sharp's US clinical business is currently relocating to this facility. 

 

Sharp Europe moved into operating profit following a number of years of operating losses. Underlying revenue growth was 1% as the business exited some unprofitable contracts and shifted its focus to higher margin business. Sharp Europe is increasingly well positioned to deliver future profitable growth given the improving business development pipeline, focused on injectable biotech and biosimilar products.

 

The ongoing investment in Sharp's facilities continues to improve capabilities and expand capacity. Notwithstanding the one year delay in enforcement of the serialisation 'Track & Trace' requirement by the U.S. Food and Drug Administration (FDA) and supply chain disruptions with some clients following the recent hurricane in Puerto Rico, Sharp is well positioned to deliver underlying operating profit growth in line with the Group's medium-term guidance into 2018 and beyond.  

 

Aquilant

 

 

2017

2016

Actual

Underlying

 

$'m

$'m

Growth

Growth1

Revenue

96.3

102.4

(6%)

2%

 

 

 

 

 

Operating profit

6.4

6.9

(7%)

4%

 

 

 

 

 

Operating margin %

6.6%

6.7%

 

 

 

1 Underlying growth adjusts for the impact of currency translation movements. There was no acquisition or disposal activity in 2016 or 2017.

 

Revenue was 6% behind the prior year. Adjusting for negative currency translation movements, underlying revenue was 2% ahead of 2016.   

 

Underlying operating profit was 4% ahead of 2016 reflecting a continued improvement in sales mix, including capital equipment sales, and the full benefit of new business which came on stream in 2016. Reported operating profit was 7% behind the prior year due to adverse currency translation movements.

 

 

Analyst presentation

A presentation for investors and analysts will be held at the London Stock Exchange at 8.30 GMT today, Tuesday, 28 November 2017. If you wish to attend, please contact Powerscourt. Alternatively, to dial into the conference call or webcast, the details are as follows:

 

Audio webcast

https://edge.media-server.com/m6/p/ypnmwqt7

 

Conference call

UK number:  +44-203-427-1916

Ireland number: + 353-1-246-5603

US number:  +1-646-254-3366

Participant code:  9761269

 

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.

 

For further information, please contact:

 

Investors and Analysts:

Alan Ralph

CFO

UDG Healthcare plc

Tel: + 353-1-468-9000

 

Keith Byrne

Head of IR, Strategy & Corporate Communications

UDG Healthcare plc

Tel: + 353-1-468-9000

Business / Financial media:

Lisa Kavanagh / Jack Hickey

Powerscourt

Tel: + 44-207-250-1446

 

 

 

About UDG Healthcare plc

UDG Healthcare plc (LON: UDG) is a leading international partner of choice delivering commercial, clinical, communications and packaging services to the healthcare industry, employing over 9,000 people with operations in 24 countries and delivering services in over 50 countries.

 

UDG Healthcare plc operates across three divisions: Ashfield, Sharp and Aquilant.

 

Ashfield is a global leader in commercialisation services for the pharmaceutical and healthcare industry, operating across two broad areas of activity: commercial & clinical services, and communications 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 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 is a leading provider of outsourced sales, marketing, distribution and engineering services to the medical and scientific sectors in the UK, Ireland and the Netherlands.

 

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 are or 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 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 and business factors, which in some cases 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. 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.

 

 

 

Finance Review

for the year ended 30 September 2017

 

Revenue

Revenue of $1,219.8 million for the year was 13% ahead of 2016. Underlying revenue growth was 10% ahead, excluding the impact of foreign exchange and acquisitions. Ashfield increased underlying revenue by 14% while Sharp and Aquilant both reported revenue 2% ahead of 2016 excluding the impact of foreign exchange and acquisitions.

 

Adjusted operating profit

Adjusted operating profit from continuing operations of $129.3 million is 12% ahead (17% on a constant currency basis) of 2016.

 

Adjusted net operating margin

The adjusted net operating margin for the year of 12.6% was the same as 2016. The positive margin effect of acquisitions was offset by the impact of additional Future Fit operating costs and relatively higher revenue growth in the lower margin Ashfield Commercial & Clinical business.

 

Adjusted profit before tax

Net interest costs for the year of $10.4 million are 26% lower than 2016, which is as a result of the repayment of the RCF bank facility in April 2016 and increased interest income following the disposal of the United Drug Supply Chain businesses in 2016. This delivered a profit before tax from operations of $118.9 million which is 17% ahead of 2016 (23% on a constant currency basis).

 

Taxation

The effective taxation rate has decreased from 22.7% in 2016 to 22.2% in 2017.

 

Adjusted diluted earnings per share

Earnings per share (EPS) from continuing operations is 17% ahead (23% on a constant currency basis) of 2016 at 37.12 $ cent. Underlying EPS increased by 13% excluding acquisitions completed during the year and unfavourable currency movements.

 

US Dollar reporting

In August 2016, the Group announced that it would change its reporting currency to US Dollar for the 2017 financial year as the majority of Group profits are now derived from the US. This Preliminary Announcement is presented in US Dollar and further details on the change in presentational currency are included in note 20.

 

The Group operates in 24 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 primary non-Dollar currencies are Sterling and Euro. The re-translation of overseas profits to US Dollar has decreased constant currency EPS growth of 23% to a reported EPS growth rate of 17%, which is primarily due to the weakness in Sterling in the first nine months of 2017 versus the same period in 2016.

 

The average 2017 exchange rates were $1:€0.9047 and $1:£0.7891 (2016 $1:€0.9002 and $1:£0.7045).

 

Discontinued operations

The Group has classified its joint venture arrangement with Magir Limited as a discontinued operation and asset held for sale. Discontinued operations in the prior year also included United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA, which were disposed of on 1 April 2016.

 

Cash flow

The Group moved from a net cash position of $143.2 million in 2016 to a net debt position of $53.3 million in 2017. This was primarily as a result of 2017 acquisition activity. The net cash inflow from operating activities was $107.8 million.

 

$51.4 million was invested in property, plant and equipment and computer software. This includes IT investment to enable our businesses to grow in an efficient manner and investment in the new facility in Sharp UK. $198.4 million was paid in initial consideration for the acquisition of STEM Healthcare, the Bethlehem packaging facility, Vynamic, Cambridge BioMarketing, Sellxpert and MicroMass while the Group also paid $14.3 million in deferred contingent consideration associated with current and prior year acquisitions. Dividend payments of $31.3 million relating to the final 2016 dividend and the 2017 interim dividend were made during the year. 

 

Balance sheet

Net debt at the end of the year was $53.3 million ($187.5 million cash and $240.8 million debt). The net (debt)/cash to annualised EBITDA ratio is 0.32 times debt (2016: 1.05 times cash) and net interest is covered 16.3 times (2016: 10.6 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.

 

The Group has retained its long term private placement debt as it expects to make acquisitions and other capital investments in the coming years. The Group made a scheduled repayment of $63.3 million in September 2017 of maturing private placement notes. At 30 September 2017, the Group also had $259.7 million of undrawn overdraft and loan facilities.

 

Return on capital employed (ROCE)

The ROCE for continuing operations was 12.8%, down from 13.6% at the end of 2016. Details on how this was calculated are on page 37. ROCE was 13.2% excluding the impact of acquisitions, most of which were acquired in the final quarter. ROCE has been impacted by the capital expenditure investment in 2017.

 

Dividends

The directors are proposing a final dividend of 9.72 $ cent per share representing an increase of 7.5% on the 2016 final dividend of 9.04 $ cent per share. This represents 7% growth in the total dividend for the year to 13.30 $ 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 9.72 $ cent per share will be paid on 5 February 2018 to ordinary shareholders on the Company's register at 5.00 p.m. on 12 January 2018.

 

Investor relations

UDG Healthcare's senior management team spend a significant amount of time meeting with shareholders and the international financial community. We have invested in dedicated investor relations resources and are focussed on increasing the awareness of the Group among the investor and analyst community.

 

We communicate regularly with our shareholders during the year, specifically following the release of our interim and preliminary results, and at the time of major developments including M&A transactions. During 2017, the executive management team attended and presented at eleven investor conferences, including four in the US, and conducted over 230 institutional investor one-on-one meetings. In addition, our Chairman Peter Gray, held a number of governance meetings with existing shareholders during the year, both in the UK and US. The number of independent equity analysts covering the Group increased to ten during the year reflecting the growing 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

for the year ended 30 September 2017

 

 

 

 

 

                  

                    Year ended

30 September

2017

 

As re-presented and restated

Year ended 30 September 2016

 

 

Note

$'000

                                    $'000

 

Continuing operations

 

 

 

 

Revenue

4

1,219,755

1,083,439

 

Cost of sales

 

(871,909)

(767,833)

 

 

 

 

 

 

Gross profit

 

347,846

315,606

 

 

Selling and distribution expenses

 

(192,536)

(177,543)

 

Administration expenses

 

(23,313)

(20,854)

 

Other operating expenses

 

(25,450)

(18,213)

 

Transaction costs

 

(4,028)

(2,214)

 

Share of joint ventures' profit after tax

5

667

798

 

 

 

 

 

 

Operating profit

 

103,186

97,580

 

 

 

 

 

 

Finance income

6

                       18,905

5,311

 

Finance expense

6

   (29,257)

(19,349)

 

 

 

 

 

 

Profit before tax from continuing operations

 

92,834

83,542

 

 

Income tax expense

 

(20,976)

(15,428)

 

 

Profit for the year from continuing operations

 

71,858

68,114

 

 

Profit after tax for the year from discontinued operations

 

 

7

-

150,409

 

Profit for the financial year

 

71,858

218,523

 

 

 

 

 

 

Profit attributable to:

 

 

 

 

Continuing operations

 

71,858

68,114

 

Discontinued operations

 

-

150,409

 

 

 

71,858

218,523

 

Earnings per ordinary share:

 

 

 

 

Basic - continuing operations

8

28.97c

27.64c

 

Basic - discontinued operations

8

-

61.04c

 

Basic

 

28.97c

88.68c

 

 

 

 

 

 

Diluted - continuing operations   

8

28.83c

27.53c

 

Diluted - discontinued operations  

8

-

60.79c

 

Diluted

 

28.83c

88.32c

 

           
 

Group Statement of Comprehensive Income

for the year ended 30 September 2017

 

 

 

 

 

 

 

 

 

2017

 

 

 

As re-presented and restated

             2016

 

Notes

 

$'000

 

$'000

Profit for the financial year

 

 

71,858

 

218,523

 

 

 

 

 

 

Other comprehensive income/(expense):

Items that will not be reclassified to profit or loss:

 

 

 

 

 

Remeasurement gain/(loss) on Group defined benefit schemes

15

 

 

 

 

-       Continuing operations

 

 

11,098

 

(9,409)

-       Discontinued operations

 

 

-

 

1,177

Deferred tax on Group defined benefit schemes

 

 

 

 

 

-       Continuing operations

 

 

(599)

 

599

-       Discontinued operations

 

 

-

 

(232)

 

 

 

10,499

 

(7,865)

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

 

Foreign currency translation adjustment

11

 

 

 

 

-       Continuing operations

 

 

10,109

 

(60,031)

-       Discontinued operations

 

 

-

 

(2,045)

Reclassification on loss of control of subsidiary undertakings

11

 

-

 

5,283

Group cash flow hedges:

 

 

 

 

 

- Effective portion of cash flow hedges - movement into reserve

 

(15,271)

 

 (5,483)

 

- Effective portion of cash flow hedges - movement out of reserve

 

14,865

 

  (896)

 

Effective portion of cash flow hedges

11

 

(406)

 

(6,379)

- Movement in deferred tax - movement into reserve

 

1,909

 

685

 

- Movement in deferred tax - movement out of reserve

 

(1,858)

 

113

 

Net movement in deferred tax

11

 

51

 

798

 

 

 

9,754

 

(62,374)

Other comprehensive income/(expense), net of tax

 

 

20,253

 

(70,239)

Total comprehensive income, net of tax, attributable to equity holders of the parent

 

 

92,111

 

148,284

Total comprehensive income/(expense) attributable to:

 

 

 

 

 

Continuing operations

 

 

92,111

 

(6,308)

Discontinued operations

 

 

-

 

      154,592

 

 

 

92,111

 

148,284

 

 

 

Group Statement of Changes in Equity 

for the year ended 30 September 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity share capital

Share premium

Retained earnings

Other reserves   (note 11)

Attributable to owners of the parent 

Non-controlling interest

Total equity

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

 

At 1 October 2016

14,535

187,355

784,432

(179,446)

806,876

-

806,876

 

 

 

 

 

 

 

 

 

Profit for the financial year

-

-

71,858

-

71,858

-

71,858

Other comprehensive income/(expense):

 

 

 

 

 

 

 

Effective portion of cash flow hedges

-

-

-

(406)

(406)

-

(406)

Deferred tax on cash flow hedges

-

-

-

51

51

-

51

Translation adjustment

-

-

-

10,109

10,109

-

10,109

Remeasurement gain on defined benefit schemes

-

-

11,098

-

11,098

-

11,098

Deferred tax on defined benefit schemes

-

-

(599)

-

(599)

-

(599)

Total comprehensive income for the year

-

-

   82,357

9,754

92,111

-

92,111

Transactions with shareholders:

 

 

 

 

 

 

 

New shares issued

46

3,129

-

-

3,175

-

3,175

Issued in business combination

39

6,012

-

-

6,051

-

 6,051

Share-based payment expense

-

-

-

3,613

3,613

-

3,613

Dividends paid to equity holders

-

-

(31,279)

-

(31,279)

-

(31,279)

Release from share-based payment reserve

-

-

577

(577)

-

-

-

Non-controlling interest arising on acquisition

-

-

-

-

-

109

109

 

At 30 September 2017

14,620

196,496

836,087

(166,656)

880,547

 

109

 

880,656

 

 

 

 

 

 

 

 

 

                                 

 

 

 

for the year ended 30 September 2016

 

 

 

Equity

 

 

Share

 

 

Retained

 

Other

reserves

 

Total equity as re-presented

 

share capital

$000

premium $'000

earnings $'000

 (note 11) $'000

and restated

$'000

 

 

 

 

 

 

 

 

 

 

 

 

At 1 October 2015

14,430

183,000

600,793

(116,219)

682,004

 

 

 

 

 

 

Profit for the financial year

-

-

218,523

-

218,523

Other comprehensive income/(expense):

 

 

 

 

 

Effective portion of cash flow hedges

-

-

-

(6,379)

(6,379)

Deferred tax on cash flow hedges

-

-

-

798

798

Translation adjustment

 

 

 

 

 

-           Continuing operations

-

-

-

(60,031)

(60,031)

-           Discontinued operations

-

-

-

(2,045)

(2,045)

Reclassification on loss of control of subsidiary undertakings

-

-

-

5,283

5,283

Remeasurement (loss)/gain on defined benefit schemes

 

 

 

 

 

-       Continuing operations

-

-

(9,409)

-

(9,409)

-       Discontinued operations

-

-

1,177

-

1,177

Deferred tax on defined benefit schemes

 

 

 

 

 

-       Continuing operations

-

-

599

-

599

-       Discontinued operations

-

-

(232)

-

(232)

Total comprehensive income/(expense) for the year

-

-

210,658

(62,374)

148,284

Transactions with shareholders:

 

 

 

 

 

New shares issued

105

4,355

-

-

4,460

Share-based payment expense

-

-

-

2,184

2,184

Dividends paid to equity holders

-

-

(30,056)

-

(30,056)

Release from share-based payment reserve

-

-

3,037

(3,037)

-

 

 

 

 

 

 

At 30 September 2016

14,535

187,355

784,432

(179,446)

806,876

 

 

 

 

 

 

 

               
 

Group Balance Sheet

as at 30 September 2017

 

 

 

 

 

Note

 

 

 

2017

$'000

As re-presented (note 20)

2016

$'000

As re-presented (note 20)

2015

$'000

ASSETS

 

 

 

 

Non-current

 

 

 

 

Property, plant and equipment

9

168,403

136,877

132,087

Goodwill

10

542,554

384,520

401,306

Intangible assets

10

227,617

108,322

113,927

Investment in joint ventures and associates

10

8,838

9,067

25,855

Derivative financial instruments

12

1,302

13,185

24,700

Deferred income tax assets

 

4,025

4,296

4,463

Employee benefits

15

12,379

13,939

14,639

Total non-current assets

 

965,118

670,206

716,977

 

 

 

 

 

Current

 

 

 

 

Inventories

 

55,060

54,941

61,636

Trade and other receivables

 

307,388

233,791

229,939

Cash and cash equivalents

12

187,469

428,729

239,832

Current income tax assets

 

2,464

4,532

1,806

Derivative financial instruments

12

2,450

8,239

5,321

Assets held for sale

7

-

-

530,821

Total current assets

 

554,831

730,232

1,069,355

 

 

 

 

 

Total assets

 

1,519,949

1,400,438

1,786,332

 

 

 

 

 

EQUITY

 

 

 

 

Equity share capital

 

14,620

14,535

14,430

Share premium

 

196,496

187,355

183,000

Other reserves

11

(166,656)

(179,446)

(116,219)

Retained earnings

 

836,087

784,432

600,793

Equity attributable to owners of the parent

 

880,547

806,876

682,004

Non-controlling interest

 

109

-

-

Total equity

 

880,656

806,876

682,004

 

 

 

 

 

LIABILITIES

 

 

 

 

Non-current

 

 

 

 

Interest-bearing loans and borrowings

12

244,077

242,108

465,866

Provisions

13

58,470

6,084

8,411

Employee benefits

15

3,162

20,442

20,505

Deferred income tax liabilities

 

54,279

31,008

31,424

Derivative financial instruments

12

352

-

-

Total non-current liabilities

 

360,340

299,642

526,206

 

 

 

 

 

Current

 

 

 

 

Interest-bearing loans and borrowings

12

58

64,882

23,315

Trade and other payables

 

248,145

204,468

214,831

Current income tax liabilities

 

16,845

14,587

4,988

Provisions

13

13,905

9,983

20,931

Liabilities held for sale

7

-

-

314,057

Total current liabilities

 

278,953

293,920

578,122

 

 

 

 

 

Total liabilities

 

        639,293

593,562

1,104,328

 

 

 

 

 

Total equity and liabilities

 

1,519,949

1,400,438

1,786,332

 

 

 

 

 

 

Group Cash Flow Statement

for the year ended 30 September 2017

 

 

                                                  

 

 

2016 (as re-presented)

 

 

 

 

2017

 

Continuing operations

Discontinued operations

 

Total

 

 

 

$'000

 

$'000

$'000

$'000

Cash flow from operating activities

 

 

 

 

 

 

 

Profit before tax

 

 

92,834

 

83,542

151,220

234,762

Finance income

 

 

(18,905)

 

(5,311)

(8)

(5,319)

Finance expense

 

 

29,257

 

19,349

64

19,413

Operating profit

 

 

103,186

 

97,580

151,276

248,856

Share of joint ventures' profit after tax

 

 

(667)

 

(798)

(1,659)

(2,457)

Depreciation charge

 

 

21,221

 

20,032

-

20,032

Loss/(profit) on disposal of property, plant and equipment

 

 

 

55

 

 

71

(12)

59

Impairment of intangible assets

 

 

-

 

798

1,133

1,931

Amortisation of intangible assets

 

 

25,450

 

18,213

-

18,213

Share-based payment expense

 

 

3,613

 

2,184

-

2,184

Decrease in inventories

 

 

1,893

 

3,452

3,870

7,322

Increase in trade and other receivables

 

 

(24,612)

 

(9,783)

(10,074)

(19,857)

Increase/(decrease) in trade payables, provisions and other payables

 

 

 

2,934

 

 

(8,663)

(32,081)

(40,744)

Exceptional items paid

 

 

(165)

 

(2,564)

-

(2,564)

Profit on disposal of discontinued operations

 

 

-

 

-

(150,780)

(150,780)

Impairment of asset held for sale

 

 

-

 

-

18,842

18,842

Interest paid

 

 

(10,608)

 

(12,201)

-

(12,201)

Income taxes paid

 

 

(14,522)

 

(13,716)

(777)

(14,493)

Net cash inflow/(outflow) from operating activities

 

 

 

107,778

 

 

94,605

(20,262)

74,343

Cash flows from investing activities

 

 

 

 

 

 

 

Interest received

 

 

1,044

 

663

8

671

Purchase of property, plant and equipment

 

 

(29,466)

 

(31,736)

(2,533)

(34,269)

Proceeds from disposal of property, plant and equipment

 

 

 

146

 

 

435

12

447

Investment in intangible assets - computer software

 

 

 

(21,884)

 

 

(10,926)

(6,648)

(17,574)

Acquisitions of subsidiaries (net of cash and cash equivalents acquired)

 

 

 

(198,439)

 

 

(14,446)

-

(14,446)

Deferred contingent acquisition consideration paid

 

 

(14,265)

 

(17,331)

-

(17,331)

Disposal of subsidiary undertakings (net of cash and cash equivalents disposed)

 

 

 

-

 

 

447,112

(21,389)

425,723

Net cash (outflow)/inflow from investing activities

 

 

 

(262,864)

 

 

373,771

(30,550)

343,221

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from issue of shares (including share premium thereon)

 

 

 

3,175

 

 

4,460

-

4,460

Repayments of interest-bearing loans and borrowings

 

 

 

(63,266)

 

 

(178,696)

-

(178,696)

Group transfers

 

 

-

 

2,879

(2,879)

-

Decrease in finance leases

 

 

(3)

 

(80)

-

(80)

Dividends paid to equity holders of the Company

 

 

(31,279)

 

(30,056)

-

(30,056)

Net cash outflow from financing activities

 

 

(91,373)

 

(201,493)

(2,879)

(204,372)

Net (decrease)/increase in cash and cash equivalents

 

 

 

(246,459)

 

 

266,883

(53,691)

213,192

Translation adjustment

 

 

5,199

 

 

 

(24,295)

Cash and cash equivalents at beginning of year

 

 

428,729

 

 

 

239,832

Cash and cash equivalents at end of year

 

 

187,469

 

 

 

428,729

 

Cash and cash equivalents is comprised of:

 

 

 

 

 

 

 

Cash at bank and short term deposits

 

 

187,469

 

 

 

428,729

 

 

 

 

 

 

 

 

 

 

Notes to the Preliminary Announcement

for the year ended 30 September 2017

 

1.  Reporting entity

UDG Healthcare plc (the "Company") is a company domiciled in Ireland. The preliminary consolidated financial information for the year ended 30 September 2017 is for the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in joint ventures and associates.

 

The financial information presented herein does not represent 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 2016 have been annexed to the annual return and filed with the Registrar of Companies. The audit report on those statutory financial statements was unqualified and did not contain any matters to which attention was drawn by way of emphasis. The statutory financial statements for the year ended 30 September 2017 will be annexed to the next annual return of the Company and filed with the Registrar of Companies. 

 

2.  Statement of compliance

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), as adopted by the EU and as set our more fully in the Group's last Annual Report.

 

The accounting policies adopted are consistent with those of the previous year except for the change in the Group's presentation currency from Euro to US Dollar and the following new and amended IFRSs and International Financial Reporting Interpretations Committee (IFRIC) interpretations that were adopted by the Group as of 1 October 2016:

·      Amendments to IAS 27: Equity method in Separate Financial Statements

·      Amendments to IAS 1: Disclosure initiative

·      Amendments to IFRS 11: Accounting for acquisitions of interests in Joint Operations

·      Annual Improvements to IFRSs 2012-2014 Cycle;

·      Amendments to IAS 16 and IAS 38: Clarification of acceptable methods of depreciation and amortisation

 

These are effective for the Group's financial year ended 30 September 2017 but did not have a material effect on the results or financial position of the Group.

 

The IASB and the International Financial Reporting Interpretations Committee (IFRIC) have issued the following standards, amendments to existing standards and interpretations that are not yet effective for the Group:

·      Annual Improvements to IFRSs 2014-2016 Cycle IFRS 14: Regulatory Deferral Accounts (*)

·      IFRIC Interpretation 23: Uncertainty over Income Tax Treatments (*)

·      IFRIC Interpretation 22: Foreign Currency Transactions and Advance Consideration (*)

·      Amendments to IAS 7: Disclosure Initiative

·      Amendments to IAS 12: Recognition of deferred tax assets for unrealised losses

·      Amendments to IAS 28: Long term interests in Associates and Joint Ventures (*)

·      Amendments to IAS 40: Transfers of Investment Property (*)

·      Amendments to IFRS 2: Classification and measurement of share-based payment transactions (*)

·      IFRS 9: Financial Instruments (2014)

·      Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint ventures (*)

·      Clarifications to IFRS 15: Revenue from Contracts with Customers (*)

·      IFRS 16: Leases (*)

 

A number of the standards (*) set out above have not yet been EU endorsed. These standards, interpretations and amendments to existing standards will be applied for the purposes of the Group and Company Financial Statements with effect from their respective effective dates. The Group is currently considering the impact of the above interpretations and amendments.

 

3.  Prior year reclassification

Reclassification of revenue

Pass-through revenues relate to the recharging of travel and other costs to customers at zero margin. There has been a reclassification of certain pass-through revenue from cost of sales to revenue. As a result, $35,771,000 (€32,200,000) has been reclassified from cost of sales to revenue so that the results are presented on a consistent basis in both 2017 and 2016. There is no impact on gross profit.

 

A summary of the impact on the previously reported figures is set out below:

 

 

As previously stated

€'000

Reclassification

€'000

As restated

€'000

As re-presented

$'000

Revenue

943,080

32,200

975,280

1,083,439

 

Cost of Sales

(658,981)

(32,200)

(691,181)

(767,833)

 

Gross profit

284,099

-

284,099

315,606

 

 

4. 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 - Aquilant is a leading provider of outsourced sales, marketing, distribution and engineering services to the medical and scientific sectors in the UK, Ireland and the Netherlands. 

 

At 30 September 2017 the Group has classified the joint venture investment in Magir Limited as a discontinued operation and an asset held for sale. Details of the discontinued operations are included in note 7. 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:

 

 

 

Continuing operations

 

 

 

2017

2016 as re-presented

 

$'000

$'000

Revenue

 

 

Ashfield

821,412

685,041

Sharp

302,076

295,992

Aquilant

96,267

102,406

 

1,219,755

1,083,439

Operating profit before amortisation of acquired intangibles, transaction costs and exceptional items

 

 

Ashfield

81,567

70,653

Sharp

41,304

38,208

Aquilant

6,409

6,910

Adjusted operating profit

129,280

115,771

Amortisation of acquired intangibles

(22,066)

(15,977)

Transaction costs

(4,028)

(2,214)

Operating profit

103,186

97,580

Finance income

18,905

5,311

Finance expense

(29,257)

(19,349)

 

Profit before tax

92,834

83,542

Income tax expense

(20,976)

(15,428)

Profit after tax for the year

71,858

68,114

 

 

Geographical analysis of revenue

 

 

 

2017

2016 as re-presented

 

$'000

$'000

Republic of Ireland

42,178

36,268

United Kingdom 

318,934

365,985

North America 

629,001

499,498

Rest of World

229,642

181,688

 

1,219,755

1,083,439

 

 

5.  Share of joint ventures' profit after tax

 

 

 

 

 

2017

2016 as re-presented

 

$'000

$'000

Revenue

61,883

66,287

Expenses, inclusive of tax

(60,549)

(64,690)

Profit after tax - continuing

1,334

1,597

Group's equity interest

49.99%

49.99%

Group's share of profit after tax - continuing

667

798

 

 

6.  Finance income and expense

 

 

 

2017

2016 as re-presented

 

$'000

$'000

Finance income

 

 

Income arising from cash deposits

1,057

710

Fair value of deferred contingent consideration

-

294

Fair value of cash flow hedges transferred from equity

-

896

Fair value adjustment to guaranteed senior unsecured loan notes

2,840

3,157

Foreign currency gain on retranslation of guaranteed senior unsecured loan notes

14,865

-

Ineffective portion of cash flow hedges

76

254

Net finance income on pension scheme obligations

67

-

Finance income relating to continuing operations

18,905

5,311

Finance income relating to discontinued operations

-

8

 

18,905

5,319

Finance expense

 

 

Interest on overdrafts

(46)

(31)

Interest on bank loans and other loans

 

 

-wholly repayable within 5 years

(5,482)

(7,761)

-wholly repayable after 5 years

(5,641)

(5,686)

Interest on finance leases

(3)

(1)

Unwinding of discount on provisions

(380)

(1,158)

Fair value of deferred contingent consideration

-

(647)

Fair value adjustments to fair value hedges

(2,840)

(3,157)

Fair value of cash flow hedges transferred to equity

(14,865)

-

Foreign currency loss on retranslation of guaranteed senior unsecured loan notes

-

(896)

Net finance cost on pension scheme obligations

-

(12)

Finance expense relating to continuing operations

(29,257)

(19,349)

Finance expense on pension scheme obligations relating to discontinued operations

-

(64)

 

(29,257)

(19,413)

Net finance expense

(10,352)

(14,094)

 

 

7. Net result from discontinued operations, disposals and assets and liabilities classified as held for sale

On 1 April 2016, the Group completed the disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. In accordance with IFRS 5, these businesses were considered to be discontinued. The respective profit and losses on the disposal of these businesses were recognised in the Group Income Statement within discontinued operations.

 

Profit from discontinued operations after tax included in the prior year Group Income Statement is summarised in the table below:

 

 

 

 

2016 as re-presented

 

 

 

$'000

Profit from discontinued operations after tax

-       United Drug Supply Chain Services businesses and MASTA     

 

(a)

 

16,812

-       Magir Limited                                                                                 

(c)

 

1,659

Profit from disposal of discontinued operations

(b)

 

150,780

Impairment of assets held for sale

(c)

 

(18,842)

Profit from discontinued operations after tax

 

 

150,409

 

The profit in the prior year from discontinued operations was fully attributable to the equity holders of the company.

 

 

 

2016 as re-presented

(a)

 

$'000

Revenue

 

750,206

Cost of sales

 

(695,370)

Gross profit

 

54,836

Selling and distribution expenses

 

(37,281)

Administration expenses

 

(2,517)

Settlement gain on defined benefit pension

 

2,641

Operating profit   

 

17,679

Net finance expense

 

(56)

Profit from discontinued operations before tax

 

17,623

Income tax expense

 

(811)

Profit from discontinued operations after tax

 

16,812

 

In accordance with IFRS 5, depreciation of property, plant and equipment and amortisation of intangibles was not charged on the assets disposed of during the prior year. If the assets had continued to be depreciated and amortised during the prior year, the respective pre-tax charges for the year would have been $3,873,000 and $791,000.

 

(b)  The following tables summarise the consideration received, the profit on disposal of discontinued operations and the net cash flow arising on the disposal of these businesses:

 

 

Reconciliation of consideration received to cash received

 

 

 

 

 

2016 as re-presented

 

 

$'000

Total consideration

 

463,939

Working capital and related adjustments

 

(16,827)

Cash received on completion

 

447,112

Cash and cash equivalents disposed of

 

(21,389)

Disposal related costs paid

 

(9,422)

Net consideration received on completion

 

416,301

 

 

 Assets and liabilities disposed of:

 

 

$'000

Assets:

 

 

 

Property, plant and equipment

 

96,734

 

Goodwill

 

16,276

 

Intangible assets

 

53,331

 

Deferred income tax assets

 

1,126

 

Inventories

 

127,922

 

Trade and other receivables

 

249,609

 

Total assets

 

544,998

 

 

 

 

 

Liabilities:

 

 

 

Deferred income tax liabilities

 

(391)

 

Trade and other payables

 

(287,088)

 

Employee benefits

 

(2,239)

 

Current income tax liability

 

(721)

 

Total liabilities

 

(290,439)

 

 

 

 

 

Net identifiable assets and liabilities disposed of

 

(254,559)

 

 

 

 

 

Recycling of foreign exchange loss previously recognised in foreign currency translation reserves

 

(5,283)

 

Provision for taxation

 

(5,679)

 

Profit on disposal of discontinued operations after tax

 

150,780

 

           

 

 

(c) During the current and prior year, the Group has treated the joint venture arrangement with Magir as a discontinued operation and asset held for sale in accordance with IFRS 5. Due to the absence of a power sharing administration in Northern Ireland a decision regarding historical and future drug reimbursement rates has not been made and agreeing a value on the business in the absence of this information has not been possible.  It remains the intention of the Group to dispose of the asset once the valuation can be properly established.

 

 

The following table details the results of this discontinued operation included in the prior year Group Income Statement:

 

 

 

2016 as re-presented

 

 

$'000

Share of joint ventures' profit after tax

 

1,659

Impairment charge

 

(18,842)

Loss from discontinued operations after tax

 

(17,183)

 

The assets and liabilities classified as held for sale in the Group Balance Sheet have a nil carrying value at 30 September 2017 (2016: nil).

 

 

 

8.  Earnings per ordinary share

 

 

 

 

Total

Continuing operations as re-presented

 

Discontinued operations as re-presented

 

 

Total as re-presented

 

2017

2016

2016

2016

 

$'000

$'000

$'000

$'000

Profit attributable to the owners of the parent

71,858

68,114

150,409

218,523

Adjustment for amortisation of acquired intangible assets (net of tax)

16,996

8,413

-

8,413

Adjustment for transaction costs (net of tax)

3,658

2,123

-

2,123

Adjustment for profit on disposal (net of tax)

-

-

(150,780)

(150,780)

Adjustment for impairment of asset held for sale (net of tax)

-

-

18,842

18,842

 

Adjusted profit attributable to owners of the parent

 

92,512

 

78,650

 

18,471

 

97,121

 

 

2017

2016

 

Number

of shares

Number

of shares

Weighted average number of shares

248,001,114

246,405,955

Number of dilutive shares under option

1,238,273

1,016,938

 

 

 

Weighted average number of shares, including share options

249,239,387

247,422,893

 

 

 

 

 

 

 

Total

Continuing operations as re-presented

Discontinued operations as re-presented

Total as re-presented

 

 

 

 

2017

2016

2016

2016

 

 

 

 

 

 

 

 

Basic earnings per share - cent

 

 

 

28.97

27.64

61.04

88.68

Diluted earnings per share - cent

 

 

 

28.83

27.53

60.79

88.32

Adjusted basic earnings per share - cent

 

 

 

37.301

31.921

7.502

39.42

Adjusted diluted earnings per share - cent

 

37.121

31.791

7.472

39.26

 

 

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 provide 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.

 

1  Adjusted profit attributable to equity holders of the parent from continuing operations is stated before the amortisation of acquired intangible assets and transaction costs.

2   Adjusted profit attributable to equity holders of the parent from discontinued operations is stated after deducting the profit on disposal of the discontinued operations ($150.8m, net of tax), and adding back the impairment of the investment in Magir Limited, an asset held for sale ($18.8m, 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. 2,567,081 (2016: 2,273,772) 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

 

 

Land and buildings

Plant and equipment

Motor vehicles

Computer equipment

Assets under construction

2017

Total

 

$'000

$'000

$'000

$'000

$'000

$'000

Year ended 30 September 2017

 

 

 

 

 

 

Opening net book amount (as re-presented)

61,093

65,013

290

10,481

 

-

136,877

Additions in the year

4,151

20,780

30

3,414

1,091

29,466

Arising on acquisition

15,692

5,153

-

593

-

21,438

Depreciation

(4,935)

(11,620)

(62)

(4,604)

-

(21,221)

Disposals in year

(97)

(14)

-

(90)

-

(201)

Transfer to intangibles

-

-

-

(393)

-

(393)

Reclassifications

(561)

163

-

398

-

-

Translation adjustment

1,120

1,089

13

215

-

2,437

At 30 September 2017

76,463

80,564

271

10,014

1,091

168,403

 

At 30 September 2017

 

 

 

 

 

 

Cost or deemed cost

106,815

157,112

738

27,558

1,091

293,314

Accumulated depreciation

(30,352)

(76,548)

(467)

(17,544)

-

(124,911)

Net book amount

76,463

80,564

271

10,014

1,091

168,403

 

 

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

 

 

 

 

 

 

Goodwill

 

 

Intangible

assets

 

 

 

$'000

$'000

 

 

 

 

 

Balance at 1 October 2016 (as re-presented)

 

 

384,520

108,322

Investment in computer software

 

 

-

21,884

Amortisation of acquired intangible assets

 

 

-

(22,066)

Amortisation of computer software

 

 

-

(3,384)

Arising on acquisitions - computer software

 

 

-

77

Arising on acquisitions - other intangible assets

 

 

140,626

114,693

Transfer from property, plant and equipment

 

 

-

393

Share of joint ventures' profit after tax

 

 

-

-

Measurement period adjustment

 

 

1,844

(1,005)

Translation adjustment

 

 

15,564

8,703

(896)

At 30 September 2017

 

 

542,554

227,617

8,838

 

11.  Other reserves

 

 

Cash flow hedge

Share-based payment

 

Foreign exchange

 

Treasury shares

Capital redemption reserve

 

 

Total

 

$'000

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

At 1 October 2016 (as re-presented)

(12,499)

5,956

(165,574)

(7,676)

347

(179,446)

Effective portion of cash flow hedges

(406)

 

 

-

-

(406)

Deferred tax on cash flow hedges

51

-

-

-

-

51

Share-based payment expense

-

3,613

-

-

-

3,613

Release from share-based payment reserve

-

(577)

-

-

-

(577)

Translation adjustment

-

-

10,109

-

-

10,109

At 30 September 2017

(12,854)

8,992

(155,465)

(7,676)

347

(166,656)

 

 

 

 

 

 

 

 

 

Cash flow hedge

Share-based payment

 

Foreign exchange

 

Treasury shares

Capital redemption reserve

 

 

Total

 

$'000

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

At 1 October 2015 (as re-presented)

(6,918)

6,832

(108,781)

(7,699)

347

(116,219)

Effective portion of cash flow hedges

(6,379)

-

-

-

-

(6,379)

Deferred tax on cash flow hedges

798

-

-

-

-

798

Share-based payment expense

-

2,184

-

-

-

2,184

Release from share-based payment reserve

-

(3,037)

-

-

-

(3,037)

Translation adjustment

 

 

 

 

 

 

-       Continuing operations

-

-

(60,031)

-

-

(60,031)

-       Discontinued operations

-

-

(2,045)

-

-

(2,045)

Reclassification on loss of control

-

-

5,283

-

-

5,283

Release of treasury shares on vesting

-

(23)

-

23

-

-

At 30 September 2016

(12,499)

5,956

(165,574)

(7,676)

347

(179,446)

 

12.  Net (debt)/cash

 

 

 

 

 

 

2017

As represented 2016

 

 

$'000

$'000

Current assets

 

 

 

Cash and cash equivalents

 

187,469

428,729

Derivative financial instruments

 

2,450

8,239

Non-current assets

 

 

 

Derivative financial instruments

 

1,302

13,185

Current liabilities

 

 

 

Interest bearing loans

 

72

(64,724)

Finance leases

 

(130)

(158)

Non-current liabilities

 

 

 

Interest bearing loans

 

(244,043)

(242,099)

Finance leases

 

(34)

(9)

Derivative financial instruments

 

(352)

-

Net (debt)/cash at 30 September

 

(53,266)

143,163

 

 

13. Provisions

 

 

 

 

 

 

 

 

Deferred contingent consideration

Onerous leases

Restructuring and other costs     

2017 Total

Total as re-presented 2016

 

 

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

At the beginning of the year

 

15,419

359

289

16,067

29,342

Release to income statement

 

-

-

-

-

(1,022)

Arising on acquisitions

 

65,939

-

-

65,939

8,581

Utilised during the year

 

(14,265)

(52)

(113)

(14,430)

(19,895)

Unwinding of discount

 

380

-

-

380

1,158

Measurement period adjustment

 

999

-

-

999

-

Translation adjustment

 

3,406

17

(3)

3,420

(2,097)

 

 

 

 

 

 

 

At end of year

 

71,878

324

173

72,375

16,067

 

 

 

 

 

 

 

Non-current

 

58,136

269

65

58,470

6,084

Current

 

13,742

55

108

13,905

9,983

 

Total

 

 

71,878

 

324

 

173

 

72,375

 

16,067

 

 

14. Acquisition of subsidiary undertakings

On 21 October 2016, the Group acquired STEM Marketing Limited ("STEM"), a leading global provider of commercial, marketing and medical audits to pharmaceutical companies. The Group has agreed to pay the sellers an additional amount over the next three years if predefined financial thresholds are met. The Group has included contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition.

 

On 3 April 2017, the Group acquired Steel Eagle LLC, a pharmaceutical packaging facility in Pennsylvania, USA.

 

On 1 July 2017, the Group acquired Vynamic LLC, a US-based healthcare industry management consulting firm. The Group has agreed to pay the sellers an additional amount over the next three years if predefined financial thresholds are met. The Group has included contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition.

 

On 10 July 2017, the Group acquired Sellxpert GmbH, a German contract sales organisation. The Group has agreed to pay the sellers an additional amount over the next three years if predefined financial thresholds are met. The Group has included contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition. On 10 July 2017, the Group also acquired a 50% stake in Sellxpert AG, a contract sales organisation based in Switzerland.

 

On 12 July 2017, the Group acquired Cambridge BioMarketing LLC, a US-based healthcare communications business. The Group has agreed to pay the sellers an additional amount over the next twelve months, if predefined financial thresholds are met. The Group has included contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition.

 

On 13 September 2017, the Group acquired MicroMass Communications Inc ("MicroMass"), a US-based healthcare communications agency specialising in behavioural change. The Group has agreed to pay the sellers an additional amount over the next three years, if predefined financial thresholds are met. The Group has included contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition.

 

The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of the above listed acquisitions. Any amendments to these acquisition fair values within the twelve-month timeframe from the date of acquisition will be disclosed in the relevant annual report as stipulated by IFRS 8 (revised 2008), Business Combinations.

 

In the prior financial year Pegasus Public Relations Limited, a healthcare communications company based in the UK, was acquired on 18 April 2016. The Group has revised its estimate of the acquisition date fair value of intangibles, deferred contingent consideration and trade and other receivables in respect of this acquisition. This has resulted in a corresponding increase in goodwill relative to the amount previously recorded. On the basis that this adjustment was not deemed to be material, it was accounted for in the current year as a measurement period adjustment.

 

The fair value of the assets and liabilities acquired in the year ended 30 September 2017 (excluding net cash acquired), determined on a provisional basis are set out below:

 

 

 

 

STEM

 

 

 

 

MicroMass

 

 

Other

 

 

 

 

Total

 

 

Measurement period adjustments

 

 

 

2017

Total

   2016 

Total

As re-presented

    

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Assets

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Property, plant and equipment

122

540

20,776

21,438

-

21,438

584

Intangible assets - computer software

-

-

77

77

-

77

-

Intangible assets - other intangible assets

55,332

28,300

31,061

114,693

(1,005)

113,688

10,482

Total non-current assets

55,454

28,840

51,914

136,208

(1,005)

135,203

11,066

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Inventories

-

-

800

800

-

800

-

Trade and other receivables

9,459

6,320

18,814

34,593

(11)

34,582

6,215

Total current assets

9,459

6,320

19,614

35,393

(11)

35,382

6,215

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Deferred income tax liabilities

(9,406)

(10,754)

-

(20,160)

171

(19,989)

(1,782)

Total non-current liabilities

(9,406)

(10,754)

-

(20,160)

171

(19,989)

(1,782)

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

(3,758)

(3,362)

(15,282)

(22,402)

-

(22,402)

(3,542)

Current income tax liabilities

1,167

-

(293)

874

-

874

(540)

Total current liabilities

(2,591)

(3,362)

(15,575)

(21,528)

-

(21,528)

(4,082)

 

 

 

 

 

 

 

 

Identifiable net assets acquired

52,916

21,044

55,953

129,913

(845)

129,068

11,417

Intangible assets - goodwill

50,779

53,170

36,677

140,626

1,844

142,470

11,610

Total consideration (enterprise value)

103,695

74,214

92,630

270,539

999

271,538

23,027

 

 

 

 

 

 

 

 

Satisfied by:

 

 

 

 

 

 

 

Cash

63,247

63,683

78,715

205,645

-

205,645

16,843

Net cash acquired

(3,358)

(1,120)

(2,728)

(7,206)

-

(7,206)

(2,397)

Net cash outflow

59,889

62,563

75,987

198,439

-

198,439

14,446

Equity Instruments (724,997 ordinary shares)

6,051

-

-

6,051

-

6,051

-

Deferred contingent acquisition consideration

37,755

11,651

16,533

65,939

999

66,938

8,581

Non-controlling interest

-

-

110

110

-

110

-

Total consideration

103,695

74,214

92,630

270,539

999

271,538

23,027

 

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 UDG Healthcare plc to create the combined Group. 

 

The intangible assets arising on the acquisitions are related to the trade names, customer relationships, technology and customer contracts.

 

The contractual assets are not materially different from the disclosed trade and other receivables.

 

The total transaction related costs for completed and aborted acquisitions amounts to $4,028,000 (2016: $2,214,000). These are presented separately in the Group Income Statement.

 

The fair value of contingent consideration recognised at the date of acquisition is calculated by discounting the expected future payment to present value at the acquisition date. In general, for contingent consideration to become payable, pre-defined profit thresholds must be met. On an undiscounted basis, the future payments for which the Group may be liable in respect of current year acquisitions ranges from nil to $64,420,000 at 30 September 2017 (2016: nil to $8,776,000).

 

The Group's results for the year ended 30 September 2017 and 30 September 2016 includes the following amounts in respect of the businesses acquired during the year:

 

 

 

 

 

2017

Total

$'000

2016

Total

$'000

 

 

 

 

 

 

 

Revenue

 

 

 

 

69,630

9,268

Gross profit

 

 

 

 

32,850

3,191

Selling and distribution expenses

 

 

 

 

(21,263)

(1,585)

Other operating expenses*

 

 

 

 

(8,365)

(629)

 

 

 

 

 

 

 

Operating profit

 

 

 

 

3,222

977

Net interest expense

 

 

 

 

(1,120)

4

 

 

 

 

 

 

 

Profit before tax

 

 

 

 

2,102

981

Income tax

 

 

 

 

(467)

(197)

 

 

 

 

 

 

 

Profit after tax

 

 

 

 

1,635

784

                               

*Other operating expenses represent amortisation of intangible assets.


Had these acquisitions been effected on 1 October 2017, the combined Group would have recorded total revenues of $1,315,507,000 and profit after interest and tax for the financial year of $78,525,000.

 

 

15.  Employee benefits

 

Employee

Employee

Employee

 

benefit

benefit

benefit

 

asset

liability

total

 

$'000

$'000

$'000

 

 

 

 

Employee benefit asset/(liability) at 1 October 2016 (as re-presented)

13,939

(20,442)

(6,503)

Current service cost

(2,387)

-

(2,387)

Settlement gain

-

2,728

2,728

Interest

276

(209)

67

Contributions paid

-

4,218

4,218

Remeasurement gain

551

10,547

11,098

Translation adjustment

-

(4)

(4)

Employee benefit asset/(liability) at 30 September 2017

12,379

(3,162)

9,217

 

 

 

Employee

Employee

Employee

 

benefit

benefit

benefit

 

asset

liability

total

 

$'000

$'000

$'000

 

 

 

 

Employee benefit asset/(liability) at 1 October 2015 (as re-presented)

14,639

(24,161)

(9,522)

Current service cost

(2,186)

(259)

(2,445)

Curtailment gain

-

367

367

Settlement gain

-

4,069

4,069

Interest

394

(470)

(76)

Contributions paid

-

6,870

6,870

Remeasurement gain/(loss)

1,092

(9,324)

(8,232)

Disposal of liabilities

-

2,240

2,240

Translation adjustment

-

226

226

Employee benefit asset/(liability) at 30 September 2016

13,939

(20,442)

(6,503)

 

 

As set out in the consolidated financial statements for the year ended 30 September 2016, the Group operates a number of defined benefit pension schemes which are funded by the payments of contribution to separately administered trust funds. The employee benefit asset relates to the United States pension scheme and the employee benefit liability relates to the Republic of Ireland (ROI) pension schemes. The Republic of Ireland schemes had a remeasurement gain in the current year which primarily relates to an increase in the discount rate. The change in the discount rate within the schemes is reflective of changes in bond yields during the year. The United States scheme had a remeasurement gain in the current year arising from a higher than expected return on plan assets. In the Republic of Ireland schemes, there is no longer a salary increase assumption due to the accrual of pension benefits ceasing from 1 December 2015.

 

During the current and prior year, a general offer was made to the members of the ROI schemes to transfer their accrued benefits from the schemes in exchange for a fixed monetary amount. Acceptance of the offer was at the discretion of individual members and resulted in a settlement gain of $2,728,000 (2016: $4,069,000, $2,641,000 of which related to discontinued operations). Related professional fees amount to $180,000 (2016: $261,000).

 

The principal assumptions and associated changes are as follows:                                                                                             

 

 

 

 

 

 

 

 

Republic of Ireland Schemes

 

 

 

United States Scheme

 

2017

2016

2015

 

2017

2016

2015

 

 

 

 

 

 

 

 

 

 

Rate of increase in salaries

n/a

n/a

2.75%

 

2.75-4.00%

2.75-4.00%

2.75-4.00%

 

Rate of increase in pensions

0-1.65%

0-1.75%

0-1.75%

 

0.00%

0.00%

0.00%

 

Inflation rate

1.65%

1.50%

1.75%

 

2.75%

2.75%

2.75%

 

Discount rate

2.05%

1.25%

2.70%

 

3.60%

3.30%

4.00%

 

                           

 

 

16. Financial instruments

The fair values of financial assets and financial liabilities, together with the carrying amounts in the condensed consolidated balance sheet at 30 September 2017, are as follows:

 

 

 

 

Carrying value

Fair value

 

 

 

$'000

$'000

Financial assets

 

 

 

 

Trade and other receivables

 

 

239,261

239,261

Derivative financial assets

 

 

3,752

3,752

Cash and cash equivalents

 

 

187,469

187,469

 

 

 

430,482

430,482

 

 

 

 

Financial liabilities

 

 

 

 

Trade and other payables

 

 

70,739

70,739

Derivative financial liabilities

 

 

352

352

Interest-bearing loans

 

 

243,971

248,987

Finance leases

 

 

164

164

Deferred contingent consideration

 

 

71,878

71,878

 

 

 

387,104

392,120

             

 

Trade and other receivables/payables

For receivables and payables, the carrying value less impairment provision is deemed to reflect fair value where appropriate.

 

Cash and cash equivalents

For cash and cash equivalents, the nominal amount is deemed to reflect fair value.

 

Interest-bearing loans and borrowings

The fair value of interest-bearing loans and borrowings is based on the fair value of the expected future principal and interest cash flows discounted at interest rates effective at the balance sheet date and adjusted for movements in credit spreads.

 

Finance lease liabilities

For finance lease liabilities, the fair value is the present value of future cash flows discounted at current market rates.

 

Valuation techniques and significant unobservable inputs

Fair value hierarchy of assets and liabilities measured at fair value

The Group has adopted the following fair value hierarchy in relation to its financial instruments that are carried in the balance sheet at fair value as at the year end:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either directly (as prices) or indirectly (derived from prices); and

Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

The following table sets out the fair value of all financial assets and liabilities that are measured at fair value:

 

 

 

 

 

Level 1

Level 2

Level 3

Total

 

 

 

 

   $'000

   $'000

   $'000

   $'000

Assets measured at fair value

 

 

 

 

 

 

 

 

Designated as hedging instruments

 

 

 

 

 

 

 

Cross currency interest rate swaps

 

 

 

-

3,752

-

3,752

 

 

 

 

-

3,752

-

3,752

 

 

 

 

 

 

 

 

Liabilities measured at fair value

 

 

 

 

 

 

 

At fair value through profit or loss

 

 

 

 

 

 

 

Deferred contingent consideration

 

 

 

-

-

71,878

71,878

 

 

 

 

 

 

 

 

Designated as hedging instruments

 

 

 

 

 

 

 

Cross currency interest rate swaps

 

 

 

-

352

-

352

 

 

 

 

-

352

71,878

72,230

                   

 

Summary of derivatives:

 

 

Amount of financial assets/liabilities as presented in the balance sheet

 

 

Related amounts not offset in the balance sheet

 

 

 

 

2017

Net

 

 

Amount of financial assets/liabilities as presented in the balance sheet

 

 

Related amounts not offset in the balance sheet

 

 

 

 

2016

Net

 

$000

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

Derivative financial assets

3,752

-

3,752

21,424

21,424

Derivative financial liabilities

352

-

352

-

-

-

 

All derivatives entered into by the Group are included in Level 2 of the fair value hierarchy and consist of cross currency interest rates swaps. The fair values of cross currency interest rate swaps are calculated as the present value of the estimated future cash flows based on the terms and maturity of each contract and using forward currency rates and market interest rates as applicable for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include, where appropriate, adjustments to take account of the credit risk of the Group entity and counterparty.

 

Deferred contingent consideration

Deferred contingent consideration is included in Level 3 of the fair value hierarchy. Details of the movement in the year are included in note 13. The fair value is determined considering the expected payment, discounted to present value using a risk adjusted discount rate. The expected payment is determined separately in respect of each individual earnout agreement taking into consideration the expected level of profitability of each acquisition. The provision for deferred contingent consideration is in respect of acquisitions completed during 2012, 2016 and 2017.

 

The significant unobservable inputs are:

•     forecasted average annual net revenue growth rate 13% (2016: 6%);

•     forecast average EBIT growth rate 22% (2016: 10%); and

•     risk adjusted discount rate 0.02% - 1.55% (2016: 6.5% - 8.2%).

 

Inter-relationship between significant unobservable inputs and fair value measurement:

The estimated fair value would increase/(decrease) if:

•     the annual net revenue growth rate was higher/(lower);

•     the EBIT growth rate was higher/(lower); and

•     the risk adjusted discount rate was lower/(higher).

 

For the fair value of deferred contingent consideration, a reasonably possible change to one of the significant unobservable inputs at 30 September 2017, holding the other inputs constant, would have the following effects:

 

 

 

 

Increase

Decrease

 

 

 

 

$'000

$000

Effect of change in assumption on income statements

 

 

 

 

 

 

Annual EBIT growth rate (1% movement)

 

 

 

-

-

Annual net revenue growth rate (1% movement)

 

 

 

-

-

Risk-adjusted discount rate (1% movement)

 

 

 

293

(212)

 

Financial ratios

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.

 

 

 

 

 

2017

Times

2016

Times

 

 

 

 

 

 

 

 

Net (debt)/cash to annualised EBITDA

 

 

 

 

(0.32)

1.05

Annualised EBITDA interest cover

 

 

 

 

16.3

10.6

 

 

17. Dividends

The Board has proposed a final dividend of 9.72 $ cent per share which gives a total dividend of 13.30 $ cent for 2017. This dividend has not been provided for in the balance sheet at 30 September 2017 as there was no present obligation to pay the dividend at year end. During the financial year, the final dividend for 2016 (9.04 $ cent per share) and the interim dividend for 2017 (3.58 $ cent per share) were paid giving rise to a reduction in shareholders' funds of $31,279,000.

 

18. Foreign currency

The principal exchange rates used in translating sterling and dollar balance sheets and income statements were as follows:

 

 

 

 

 

 

2017

2016

 

 

$1=Stg£

$1=Stg£

Balance sheet (closing rate)

 

0.7469

0.7715

Income statement (average rate)

 

0.7891

0.7045

 

 

 

 

 

 

$1=Euro€

$1=Euro€

Balance sheet (closing rate)

 

0.8470

0.8960

Income statement (average rate)

 

0.9047

0.9002

 

 

19. Related parties                                                                                                                                                                  .

The Group trades in the normal course of business with its joint venture undertakings. The aggregate value of these transactions is not material in the context of the Group's financial results.

 

Magir Limited, the Group's joint venture investment, has been classified as an asset held for sale at 30 September 2017. The Group has provided a guarantee to Magir's bankers for an amount of Stg£9,500,000 and a loan, gross of interest, of Stg£10,997,000.

 

IAS 24 Related Party Disclosures requires the disclosure of compensation paid to the Group's key management personnel. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. UDG Healthcare classifies directors, the Company Secretary and members of its senior executive team as key management personnel. The senior executive team is the body of senior executives that formulates business strategy along with the directors, follows through on the implementation of that strategy and directs and controls the activities of the Group on a day to day basis.

 

Key management personnel receive compensation in the form of short-term employee benefits, post-employment benefits and equity compensation benefits. Key management personnel received total compensation of $10,587,000 for the year ended 30 September 2017 (2016: $11,652,000).

 

20. Change in Presentation Currency

Following the disposal of the United Drug Supply Chain and Masta businesses in April 2016, the geographic profile of the Group's businesses has changed considerably and the vast majority of the Group's profits are now generated in currencies other than Euro. Half of the Group's profits are currently generated in US Dollars, the Group's US based businesses are demonstrating the greatest growth opportunities and future corporate development activity is likely to be US focused. Consequently, on 4 August 2016 the Group announced that from 1 October 2016, the financial results will be presented in US Dollars. The change in presentation currency has been applied retrospectively.

 

In re-presenting the Group Financial Statements for the year ended 30 September 2016, the reported information was converted to US Dollars from Euro using the following procedures:

·     Assets and liabilities were translated to US Dollars at the closing rates of exchange at each respective balance sheet date (30 September 2016: $1:€0.8960; 30 September 2015: $1:€0.8926).

·      Share capital, share premium and other reserves were translated at the historic rates prevailing at the dates of transactions.

·      Income and expenses were translated to US Dollars at an average rate at each of the respective reporting periods. This has been deemed to be a reasonable approximation (30 September 2016: $1:€0.9002; 30 September 2015: $1:€0.8709).

·      Differences resulting from the retranslation were taken to reserves.

 

 

To assist shareholders during this change, the impacts on the 2016 results, closing balance sheets and the numerator for the earnings per share as originally reported are set out below:

 

Group Income Statement

 

 

 

 

 

 

As restated

 (note 3)

year ended 30 September 2016

As re-presented and restated (note 3)

year ended 30 September 2016

 

 

 

 

€'000

$'000

Continuing operations

Revenue

 

 

 

975,280

 

1,083,439

Cost of sales

 

 

 

(691,181)

(767,833)

Gross profit

 

 

 

284,099

315,606

Selling and distribution expenses

 

 

 

(159,820)

(177,543)

Administration expenses

 

 

 

(18,771)

(20,854)

Other operating expenses

 

 

 

(16,395)

(18,213)

Transaction costs

 

 

 

(1,993)

(2,214)

Share of joint ventures' profit after tax

 

 

 

718

798

Operating profit

 

 

 

87,838

97,580

Finance income

 

 

 

4,781

5,311

Finance expense

 

 

 

(17,417)

(19,349)

Profit before tax from continuing operations

 

 

 

75,202

83,542

Income tax expense

 

 

 

(13,888)

(15,428)

Profit for the year from continuing operations

 

 

 

61,314

68,114

Profit after tax for the year from discontinued operations

 

 

 

131,958

150,409

Profit for the financial year

 

 

 

193,272

218,523

 

 

 

 

 

 

Profit attributable to:

 

 

 

 

 

Continuing operations

 

 

 

61,314

68,114

Discontinued operations

 

 

 

131,958

150,409

 

 

 

 

193,272

218,523

Earnings per ordinary share:

 

 

 

 

 

Basic - continuing operations

 

 

 

24.88c

27.64c

Basic - discontinued operations

 

 

 

53.56c

61.04c

Basic

 

 

 

78.44c

88.68c

 

 

 

 

 

 

Diluted - continuing operations

 

 

 

24.78c

27.53c

Diluted - discontinued operations

 

 

 

53.33c

60.79c

Diluted

 

 

 

78.11c

88.32c

 

 

 

Group Statement of Comprehensive Income

 

 

As originally reported

year ended 30 September 2016

As re-presented year ended 30 September 2016

 

              €'000

$'000

 

 

 

 

 

Profit for the financial year

 

193,272

 

218,523

 

 

 

 

 

Other comprehensive income/(expense):

 

 

 

 

Items that will not be reclassified to profit or loss:

 

 

 

 

Remeasurement (loss)/gain on Group defined benefit schemes

 

 

 

 

-       Continuing operations

 

(8,468)

 

(9,409)

-       Discontinued operations

 

1,057

 

1,177

Deferred tax on Group defined benefit schemes

 

 

 

 

-       Continuing operations

 

539

 

599

-       Discontinued operations

 

(211)

 

(232)

 

 

(7,083)

 

(7,865)

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

Foreign currency translation adjustment

 

 

 

 

-       Continuing operations

 

(45,373)

 

(60,031)

-       Discontinued operations

 

(7,109)

 

(2,045)

Reclassification on loss of control of subsidiary undertakings

 

4,640

 

5,283

Gain on hedge of net investment in foreign operations

 

2,262

 

-

Group cash flow hedges:

 

 

 

 

-       Effective portion of cash flow hedges - movement into reserve

(4,936)

 

(5,483)

 

-       Effective portion of cash flow hedges - movement out of reserve

(806)

 

(896)

 

Effective portion of cash flow hedges

 

(5,742)

 

(6,379)

-       Movement in deferred tax - movement into reserve

617

 

685

 

-       Movement in deferred tax - movement out of reserve

101

 

113

 

Net movement in deferred tax

 

718

 

798

 

 

(50,604)

 

(62,374)

 

 

 

 

 

Other comprehensive expense, net of tax

 

(57,687)

 

(70,239)

 

 

 

 

 

Total comprehensive income, net of tax, attributable to equity holders of the parent

 

135,585

 

 

148,284

 

 

 

 

 

Total comprehensive income/(expense) attributable to:

 

 

 

 

Continuing operations

 

5,250

 

(6,308)

Discontinued operations

 

130,335

 

154,592

 

 

135,585

 

148,284

           

 

 

 

 

Group Balance Sheet

 

 

 

 

As at 30 September 2016

 

As at 30 September 2015

 

As originally reported

€'000

As re-presented

$'000

As originally reported

€'000

As re-presented $'000

ASSETS

 

 

 

 

Non-current

 

 

 

 

Property, plant and equipment

122,638

136,877

117,903

132,087

Goodwill

344,521

384,520

358,213

401,306

Intangible assets

97,054

108,322

101,693

113,927

Investment in joint ventures and associates

8,124

9,067

23,079

25,855

Derivative financial instruments

11,814

13,185

22,048

24,700

Deferred income tax assets

3,849

4,296

3,984

4,463

Employee benefits

12,489

13,939

13,067

14,639

Total non-current assets

600,489

670,206

639,987

716,977

 

 

 

 

 

Current

 

 

 

 

Inventories

49,226

54,941

55,017

61,636

Trade and other receivables

209,472

233,791

205,248

229,939

Cash and cash equivalents

384,131

428,729

214,078

239,832

Current income tax assets

4,061

4,532

1,612

1,806

Derivative financial instruments

7,382

8,239

4,750

5,321

Assets held for sale

-

-

473,820

530,821

Total current assets

654,272

730,232

954,525

1,069,355

Total assets

1,254,761

1,400,438

1,594,512

1,786,332

 

 

 

 

 

Equity

 

 

 

 

Equity share capital

12,715

14,535

12,621

14,430

Share premium

156,084

187,355

152,164

183,000

Other reserves

(41,295)

(179,446)

10,077

(116,219)

Retained earnings

595,449

784,432

433,912

600,793

Total equity

722,953

806,876

608,774

682,004

 

 

 

 

 

LIABILITIES

 

 

 

 

Non-current

 

 

 

 

Interest-bearing loans and borrowings

216,923

242,108

415,840

465,866

Provisions

5,451

6,084

7,508

8,411

Employee benefits

18,315

20,442

18,303

20,505

Deferred income tax liabilities

27,782

31,008

28,050

31,424

Total non-current liabilities

268,471

299,642

469,701

526,206

 

 

 

 

 

Current

 

 

 

 

Interest-bearing loans and borrowings

58,133

64,882

20,811

23,315

Trade and other payables

183,190

204,468

191,758

214,831

Current income tax liabilities

13,070

14,587

4,452

4,988

Provisions

8,944

9,983

18,683

20,931

Liabilities held for sale

-

-

280,333

314,057

Total current liabilities

263,337

293,920

516,037

578,122

Total liabilities

531,808

593,562

985,738

1,104,328

Total equity and liabilities

1,254,761

1,400,438

1,594,512

1,786,332

 

 

21. Capital commitments

Capital expenditure authorised but not contracted for amounted to $18,900,000 (2016: $29,668,000) at the balance sheet date. This primarily relates to the Group's UK clinical facility move and the Group's investment in Future Fit IT initiatives.

 

22. Events after the balance sheet date

There have been no significant events after the balance sheet date which require disclosure.

 

23. Going concern

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.

 

24. Board approval

This announcement was approved by the Board of Directors of UDG Healthcare plc on 27 November 2017.

 

Additional Information

Key performance indicators and non-IFRS performance measures

 

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-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. 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.

 

None of the non-IFRS measurements should be considered as an alternative to financial measures derived in accordance with IFRS. The non-IFRS measurements can have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of results as reported under IFRS.

 

The principal non-IFRS measurements used by the Group, together with reconciliations where the non-IFRS measures are not readily identifiable from the Financial Statements, are as follows:

 

Net revenue (continuing)

 

Definition

This comprises of gross revenue as reported in the Group Income Statement, adjusted for revenue associated with pass-through costs for which the Group does not earn a margin.

 

Calculation

 

2017

$'000

2016

$'000

Revenue (continuing)             

                                     

Income Statement

 

1,219,755

1,083,439

 

Pass - through revenue

 

 

(191,269)

(163,490)

 

Net revenue (continuing)

 

1,028,486

919,949

 

 

Adjusted operating profit (continuing)

 

Definition

This comprises of operating profit as reported in the Group Income Statement before amortisation of acquired intangible assets, transaction costs and exceptional items (if any).

 

Calculation

 

2017

$'000

2016

$'000

Operating profit (continuing)

Income Statement

103,186

97,580

Transaction costs (continuing)  

Income Statement

4,028

2,214

Amortisation of acquired intangible assets (continuing)

Note 4

22,066

15,977

Adjusted operating profit (continuing)

 

129,280

115,771

 

 

Adjusted profit before tax (continuing)

 

Definition

This comprises profit before tax as reported in the Group Income Statement before amortisation of acquired intangible assets, transaction costs and exceptional items (if any).

 

Calculation

 

2017

$'000

2016

$'000

Profit before tax (continuing)

Income Statement

92,834

83,542

Transaction costs (continuing)

Income Statement

4,028

2,214

Amortisation of acquired intangible assets (continuing)

Note 4

22,066

15,977

Adjusted profit before tax (continuing)

 

118,928

101,733

 

 

Adjusted operating margin (continuing)

 

Definition

Measures the adjusted operating profit as a percentage of revenue.

 

Calculation

 

2017

$'000

2016

$'000

Adjusted operating profit (continuing)

Per above

129,280

115,771

Revenue (continuing)

 Income Statement

1,219,755

1,083,439

Adjusted operating margin (continuing)

 

10.6%

10.7%

 

 

Adjusted net operating margin (continuing)

 

Definition

Measures the adjusted operating profit as a percentage of net revenue.

 

Calculation

 

2017

$'000

2016

$'000

Adjusted operating profit (continuing)

Per above

129,280

115,771

Net revenue (continuing)

Per above

1,028,486

919,949

Net operating margin (continuing)

 

12.6%

12.6%

 

 

Adjusted diluted earnings per share

 

Definition

The Group defines adjusted earnings per share as basic earnings per share adjusted for the impact of amortisation of acquired intangible assets, transaction costs and exceptional items (if any).

 

Calculation

 

2017

$'000

2016

$'000

Adjusted earnings per share - US cent (continuing)

Note 8

37.12

31.79

Adjusted earnings per share - US cent (discontinued)

Note 8

-

7.47

Adjusted earnings per share

 

37.12

39.26

 

 

Effective tax rate (continuing)                                                        

 

Definition

The Group continuing effective tax rate expresses the income tax expense adjusted for the tax impact of exceptional items, transaction costs and the amortisation of acquired intangible assets as a percentage of adjusted profit before tax for continuing operations.

 

 

Calculation

 

2017

$'000

2016

$'000

Tax charge (continuing)

Income Statement

20,976

15,428

Tax relief with respect to transaction costs (continuing)

 

370

91

Deferred tax credit with respect to acquired intangible amortisation (continuing)

 

5,070

7,564

Income tax expense before exceptional, transaction costs and deferred tax attaching to amortisation of acquired intangible assets

 

26,416

23,083

Adjusted profit before tax (continuing)

Per above

118,928

101,733

Effective tax rate (continuing)

 

22.2%

22.7%

 

Annualised EBITDA

 

Definition

Annualised EBITDA is continuing and discontinued earnings before net interest, tax, depreciation, amortisation of intangible assets, exceptional items for the previous twelve months adjusted for the share of joint venture profits, dividends received from joint ventures, profit/(loss) on disposal of property, plant and equipment, impairment of intangible assets, the annualisation of the EBITDA of companies acquired during the year and the EBITDA of completed disposals.

 

 

Calculation

 

2017

$'000

2016

$'000

Operating profit (continuing)

Income Statement

103,186

97,580

Operating profit (discontinued)

Note 7

-

19,338

Depreciation (continuing)

Cash Flow Statement

21,221

20,032

Amortisation of computer software (continuing)

Note 10

3,384

2,236

Amortisation of acquired intangible assets (continuing)

Note 4

22,066

15,977

Joint venture profit share (continuing)

Income Statement

(667)

(798)

Joint venture profit share (discontinued)

Note 7

-

(1,659)

Loss on disposal of property, plant and equipment

Cash Flow Statement

55

59

EBITDA of completed disposals

Note 7

-

(17,679)

Annualised EBITDA of acquisitions1

 

14,827

1,735

Annualised EBITDA

 

164,072

136,821

 

1 Includes EBITDA for acquisitions which were not part of the Group for the full financial year.

 

 

Financial ratios

 

Definition

The net (debt)/cash to EBITDA and EBITDA interest cover ratios disclosed are calculated using annualised EBITDA and adjusted net finance expense (net finance expense excluding interest on pension scheme obligations and the unwinding of discount on provisions, see note 6). Net (debt)/cash represents the net total of current and non-current borrowings, current and non-current derivative financial instruments and cash and cash equivalents as presented in the Group Balance Sheet and as calculated in note 12.

 

 

Return on capital employed (ROCE)                                             

 

Definition

ROCE is the continuing adjusted operating profit expressed as a percentage of the Group's net assets employed. Net assets employed is the average of the opening and closing net assets in the year excluding net debt/(cash) adjusted for the historical amortisation of acquired intangible assets and restructuring charges.

 

Calculation

 

2017

$'000

2016

$'000

Net assets

Balance Sheet

880,656

806,876

Net debt/(cash)

Note 12

53,266

(143,163)

Assets before net debt/(cash)

 

933,922

663,713

Historical intangible amortisation

 

176,997

146,467

Historical restructuring costs

 

47,494

45,144

Total capital employed

 

1,158,413

855,324

 

 

 

 

Average total capital employed 

 

1,006,869

849,580

Adjusted operating profit (continuing)

Per above

129,280

115,771

Return on capital employed

 

12.8%

13.6%

 

Measurements removed from the additional information section that are shown elsewhere in the preliminary announcement are as follows:

 

·      Adjusted operating profit (discontinued) - this measurement is shown in note 8

·      Net interest - this measurement is shown in note 6

·      EBITDA Interest cover - this measurement is shown in note 16

·      Net (debt)/cash - this measurement is shown in note 12

·      Net (debt)/cash to EBITDA - this measurement is shown in note 16

 

 

A number of measurements have been removed from the additional information section. The Group believes these are not necessary to provide stakeholders with a more meaningful understanding of the underlying financial operating performance of the Group and its divisions as other performance measures are deemed more appropriate. Measurements removed are as follows:

 

·      Adjusted profit before tax (discontinued)

·      EBITDA (continuing)

·      EBITDA (discontinued)

·      Working capital (continuing)


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Preliminary results - RNS