United Drug PLC
United Drug 2008 First Half Trading Update
UDG.I UDG.L
United Drug plc ('UD' or the 'Group'), a leading international provider of
services to healthcare manufacturers and pharmaceutical retailers, today issued
the following Trading Update for the six months to 31 March 2008 being the first
half of the 2008 financial year. The Group will announce results for the period
on 6 May 2008.
Period in Review
United Drug experienced good trading conditions and revenue growth in each of
its four divisions in the six months to 31 March 2008. Operating profit and
earnings for the period are expected to show double digit growth over the same
period last year, in line with expectations.
This strong performance is despite a significant weakening in the value of
sterling against the euro. The deterioration in the sterling exchange rate
relative to the euro does not impact on group cash flows but does reduce the
value of sterling profits, when translated to euro for reporting purposes.
Pharma Wholesale
The Group's Pharma Wholesale business in the Republic of Ireland continues to
show excellent progress in a market that has experienced considerable change
over the last year. A new agreement on drug prices, resulting in a reduction in
the price of off-patent drugs and medicines, took effect on 1 March 2007. With
effect from 1 March 2008 the Irish Health Service Executive (HSE) has
significantly reduced the reimbursement price it pays to community pharmacy for
any medicines it funds under various HSE schemes.
An Independent Body has now been set up to review the level of dispensing fees
paid to pharmacists. This Body has been asked to issue its recommendation by the
end of May 2008 and subject to Government approval, a revised dispensing fee
will be paid to pharmacists, backdated to 1 March 2008. An increased dispensing
fee should help offset some of the impact on pharmacists from the reduction in
the reimbursement price of medicines.
Consumption of medicines in the Republic of Ireland continues to grow strongly,
and with new business won the Group has further increased its market share in
this growing market.
In the Northern Ireland Pharma Wholesale business we have seen a continuation of
the move by pharmaceutical manufacturers to a Direct-to-Pharmacy (DTP)
distribution model. Under DTP the manufacturer appoints a limited number of
wholesalers to act as their distribution agent in the territory. The Group's
Sangers business in Northern Ireland is involved in all DTP arrangements in the
market. These arrangements change our revenue model, as we now charge a
fee-for-service rather than buying and re-selling the product. Our profitability
has not been affected by this market evolution and indeed this change has helped
us to continue to increase our market share and further improve our cash flows
in the growing Northern Ireland market.
Craig & Hayward, the UK specials distributors acquired during 2007, has
performed very well during the period, ahead of our expectations. When combined
with the Republic of Ireland and Northern Ireland wholesale businesses, the
Group's total Pharma Wholesale division will report very good growth in the
period when compared with the same period last year.
Supply Chain Services
In the manufacturer facing businesses, the Supply Chain Services division has
made considerable progress in the period. The Group's core distribution
businesses in the UK and Ireland have performed very well during the period and
we continue to expand the range of services offered to manufacturer clients.
The Group's growing pharma packaging business now incorporates operations in the
UK, Holland and Belgium. These businesses continue to perform ahead of our
expectations and provide us with a strong platform to further develop this
service for existing and prospective clients. Other businesses within this
division also performed well in the period, and combined will result in the
Supply Chain Services division reporting very strong growth for the period.
Medical & Scientific
The Group's Medical & Scientific division operates in both the Irish and UK
markets. The division has significantly increased its presence in the Irish
market during the period through the acquisition of JVA, a leading analytical
chemistry distributor.
The businesses, both in Ireland and the UK, will report good growth over the
same period last year although the timing of some capital equipment sales will
be different than originally forecast resulting in more of these sales now
falling into the second half of the year. Particularly strong performances in
the period have been recorded in the UK by Pyramed and Endoscopy UK and as a
result the full amount of the Pyramed earn-out has been paid-out ahead of
schedule.
Contract Sales & Marketing Services
The Contract Sales Outsourcing division has significantly broadened its service
offering over the last six months and to better reflect the increased service
offering to healthcare clients the division is being renamed the Contract Sales
& Marketing Services division.
The broadening of the service offering and the geographic reach has been
enhanced by the acquisition of Alliance Healthcare in Pennsylvania in the United
States and Procon in Yorkshire in the United Kingdom during the period. These
businesses compliment our market leading and growing contract sales and
marketing operations in the UK and Ireland and will allow us provide additional
value-added services to clients in existing and new markets. The division will
report a strong outcome for the period, well ahead of the same period last year.
Outlook
United Drug expects the strength of current trading to continue into the second
half of the financial year. Full year profits and earnings may be impacted by
the continuing weakness in the value of sterling relative to the euro, effecting
the translation of profits, but nonetheless are expected to show double digit
growth over the 2007 results.
The Group remains positive about the fundamentals of its core markets and its
position within those markets, despite the ongoing challenge presented by
Government regulation impacting on limited parts of the business. The Group
continues to see opportunities to expand the business, both organically and
through acquisition, and has a very strong balance sheet and positive internally
generated cash flows to support these growth objectives.
About United Drug plc
United Drug is a leading international provider of services to healthcare
manufacturers and pharmaceutical retailers, with operations in the UK, Ireland,
Holland, Belgium and the USA. The Company has a long-term track record of
delivering double-digit profit, earnings and dividend growth. Over the last 20
years pre-tax profits have grown at a compound annual rate of 21%.
The Company operates across four divisions, Pharma Wholesale, Supply Chain
Services, Medical & Scientific and Contract Sales & Marketing Services.
United Drug is the largest pharmaceutical wholesaler in the island of Ireland.
It is the market leader in contract distribution outsourcing (pre-wholesaling)
in Ireland and has achieved the No. 1 position in the UK through its joint
venture business UniDrug Distribution (UDG). The Company also provides
distribution related services in the areas of pharmaceutical contract packaging
and speciality distribution in the UK, Holland and Belgium.
Through its Medical & Scientific division, United Drug provides sales &
marketing and technical service solutions, including contract distribution
services to Medical & Scientific equipment & consumable manufacturers, with a
market leading position in Ireland and an emerging presence in the UK.
United Drug is also a leading provider of contract sales outsourcing and related
marketing services to pharmaceutical manufacturers in the UK and Ireland and
also provides these services in the US market.
Investors and analysts Media
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Mark Kenny or Jonathan Neilan Pauline McAlester
K Capital Source Murray Consultants
Tel: +353 1 631 5500 Tel: +353 1 498 0300
Email: UnitedDrug@kcapitalsource.com Email: pmcalester@murrayconsult.ie
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