Company name United Drug PLC
Headline Interim Report 2012


RNS Number : 9315C
United Drug PLC
09 May 2012
 



United Drug plc

Interim Report 2012

 

Financial & Operating Overview

 

Financial Highlights



 

 

 

 

IFRS

 

 

Amortisation

of intangible

assets

 

 

 

 

Adjusted

 

 

 

 

%Increase




€'mn

€'mn

€'mn

on 2011


Revenue


894.2

-

894.2

-


Operating profit


32.6

6.9

39.5

7


Profit before tax


28.1

6.9

35.0

7


Diluted earnings per share (cent)


9.62

2.18

11.80

8


Dividend per share (cent)


2.48

-

2.48

3


 

 

United Drug believes that the adjusted operating profit, adjusted profit before tax and adjusted diluted earnings per share are more appropriate measures of the underlying group performance than those measurements set out in the primary financial statements, as this information is in a format communicated to and reviewed by the investment community.

 

 

 

Operating highlights

·      Earnings per share 8% up on the same period in 2011.

·      Continued internationalisation of the Group with the businesses outside of Ireland accounting for over 70% of operating profits during the period with 25% of the Group operating profit coming from the US.

·      Improvement in margins across the Group with overall EBIT margin for the period of 4.42% up from 4.14% in the prior year period.

·      A good cash flow performance with operating cash flow of €20.4 million in the period.

·      Another very strong performance in our US packaging business.

·      Excellent performance in our UK pre-wholesale business following recent contract wins.

·      Significant improvement in performance in our medical and scientific business both in the UK and Ireland.

 

Summary results for the six months to 31 March 2012

On a like-for-like basis group revenue is 2% ahead of the same period in 2011 although, as reported, group revenue for the period of €894 million is in line with revenue for the same period in 2011. The reported revenue figure is reduced as a result of a change in the contractual arrangements with certain customers in the Sales, Marketing & Medical division, resulting in the division conducting an increased proportion of business with customers on an agency rather than a principal basis.

 

Operating profit, before amortisation, increased by 7% to €39.5 million. Pre-tax profit, before amortisation, of €35.0 million is also 7% ahead of 2011 and fully diluted earnings per share, also before amortisation is 8% ahead of 2011 at 11.80 cent per share. An interim dividend of 2.48 cent per share has been declared, an increase of 3% on the 2011 interim dividend.

 

Net cash flow from operating activities for the period is €20.4 million. Net debt at 31 March 2012 is €122.3 million and the net debt to EBITDA ratio is 1.29 times.

 

Chief Executive Officer's comment:

Commenting on the 2012 interim performance, United Drug Chief Executive Officer, Liam FitzGerald said:

 

"United Drug provides world class logistics, packaging and marketing services and solutions to life science companies. Our vision is to be a truly international healthcare services group headquartered in Ireland. The first half of 2012 has seen us advance our international healthcare services offering and return to good growth in profits and earnings while continuing to invest in our physical and IT infrastructure and management talent. During the period, our businesses outside of Ireland have made significant progress in all of our outsourcing activities and these businesses now account for over 70% of our profits with our US businesses contributing 25% of profits in the period.

 

Operating profit for the period is 7% ahead of 2011 and the Group has again produced a good cash flow performance."

 

Dividend

The Board of Directors has declared an interim dividend of 2.48 cent per share, a 3% increase on the 2011 interim dividend.

 

The interim dividend is payable to shareholders on the Company's register at 5.00 p.m. on 18 May 2012 and will be paid on 13 July 2012. A Dividend Reinvestment Plan, which enables shareholders who elect to participate to use their cash dividend to acquire additional shares in the Company, is available in respect of the interim dividend.

 

Outlook

Based on the good trading performance for the year to date, the outlook for the remainder of the year and stability in current exchange rates, the Group expects adjusted diluted earnings per share for the year to 30 September 2012 to be between 4% and 8% ahead of last year.

 

The Group also expects to deliver another strong cash flow performance in the year. With relatively modest debt levels and strong cash flows the Group is well positioned to support its future growth objectives both organically and through additional acquisitions.

 

 

 

For reference:

 

 

Liam FitzGerald

United Drug plc

Tel: +353-1-463 2300

Investors and Analysts:

Barry McGrane

United Drug plc

Tel: + 353-1-463 2300

Media:

Pauline McAlester

Murray Consultants

Tel: +353-1-4980300

 

 

 

 

 



Review of Operations

for the six months to 31 March 2012

 

Sales, Marketing & Medical

The Sales, Marketing & Medical division provides outsourced sales and related marketing and medical services to the healthcare industry in the UK, the US, Ireland, Continental Europe and Asia. The revenue for the division of €86 million is 15% lower than for the same period in 2011 as a result of a change in the contractual arrangements with certain customers. Our events management business is now conducting an increased proportion of business with customers on an agency rather than a principal basis. As a result of this change certain pass through costs are no longer treated as revenue or cost of sales. On a like-for-like basis divisional revenue is 3% ahead of the same period last year.

 

We continue to be the clear market leader in the provision of Contract Sales Outsourcing (CSO) services in the UK. Despite on-going pricing pressure we have grown this business during the period with particularly strong demand for our nursing services and also increased interest in outsourced sales services from healthcare and medical device companies. Our Irish CSO business is also a market leader and continues to trade profitably in the difficult Irish healthcare market. Our US CSO business has continued to grow and has expanded its client base and service offering during the period.

 

Our medical and regulatory services business in the US is having another good year with a strong pipeline of both medical affairs and telesales opportunities. We continue to have success in combining our offering with our US CSO and packaging businesses and have a number of projects running across these business units. We have launched the medical and regulatory services business in the UK in the last twelve months, and have made a very good start with the business expected to make a profit in its first full year of trading. Services being supplied to an expanding client base include outsourced medical information and pharmacovigilance solutions, tele-detailing and digital strategy support. The business is now expanding its European offering and has been successful in securing European scope contracts with a variety of pharmaceutical and device companies.

 

Our healthcare communications and consultancy business has delivered a strong performance in the first half of the year. Both the UK and US operations have contributed to this growth, through a combination of new business wins and growth from existing clients. In addition investment in our market research segment is already showing a return with an expanded service offering and a business development drive in the US market.

 

Our events management business has also performed well in the first half of the year and the business has continued to consolidate its position as the largest global event management group specialising in the healthcare sector. Revenue growth has been led by strong performances in the UK and US markets. Global client development has helped to facilitate new business wins across our offices in Germany, France, Italy, Spain and Hong Kong.

 

Healthcare Supply Chain

The Healthcare Supply Chain division combines all of the Group's healthcare logistics based businesses. Revenue for the division for the period of €730 million is 1% ahead of 2011.

 

In Pharma Wholesale we have strengthened our position as market leader in providing services to retail pharmacy in the Republic of Ireland and Northern Ireland. In the Republic of Ireland market share gains have allowed us to maintain revenue in line with last year in a market that has fallen in value by 4% in the last year as a result of a number of regulatory changes introduced. Our business continues to focus on providing a top class full-line wholesale service to retail and hospital pharmacy customers while at the same time, driving efficiencies and pursuing cost savings to cope with the realities of a declining market. In Northern Ireland, wholesale revenue is ahead of last year despite lower consumer spending on over-the-counter products and the continuing move to Direct-to-Pharmacy (DTP) schemes.

 

In pre-wholesale, we have also strengthened our market leading positions in the provision of third party logistics services for healthcare clients in the Republic of Ireland and the UK. Significant new business wins, in the UK and increasingly in Ireland, are contributing to a strong performance that is expected to continue for the remainder of the year.

 

We continue to keep tight control over our cost base and to invest in technology and automation to assist us manage our wholesale and pre-wholesale businesses as efficiently as possible and expect a strong cash flow performance from these businesses for the full year.

 

Over the last twelve months our management team have focused on the re launch of our medical & scientific business as a "Market Services Organisation" for the life sciences sector. This has resulted in the development of a more robust model for future growth and several significant and strategically important new agency wins for the business. 2012 has seen a more formal integration of our UK, Irish and European medical device businesses to ensure a consistent approach to people, brand, standards and the realisation of cross border synergies. Our businesses are now well positioned in a number of key therapeutic areas. Our focus over the next twelve months will be to develop our existing portfolios in these key areas while also looking to exploit our distribution capabilities to create a unique offering for the medical consumable market. Despite operating in a challenging marketplace, this business has shown significant profit growth in the first half of the year, and we anticipate this trend will continue for the remainder of this year and into 2013.

 

Our pharmaceutical specials business in the UK has been significantly impacted by the NHS introduction in November 2011 of a "drug tariff" which sets the reimbursement price on the most popular products in this market. This market change had been widely anticipated and over the past year we have developed new services to source unlicensed medicines from overseas and to manage the distribution of unlicensed medicines on behalf of pharmaceutical manufacturers. Despite these new revenue streams it is likely that the overall specials business will see a moderate decline in profits over the year.

 

 

 

Packaging & Specialty

The Packaging & Specialty division combines United Drug's packaging businesses in the US and Europe, our specialty homecare business in Ireland and vaccines and travel health business in the UK. Revenue for the division for the period of €78m is 14% higher than the same period in 2011.

 

Our US packaging business has performed very strongly in the first half of 2012. The volume of business continues to grow as the level of outsourcing of packaging operations from the pharmaceutical industry increases. We have also benefited from a number of product launches in the first half of 2012 which has helped to maximise the use of our assets and drive increased margins. Recent wins with current and new customers should see the business continue to trade strongly throughout the second half of the year.

 

In Europe, we are continuing our efforts to integrate and streamline our packaging businesses across our sites in the UK, Belgium and two sites in the Netherlands. Trading performance has been challenging, below last year's levels, due to the fragmented nature of the market and delay in conversion of a number of customer wins. We are working to align our US and European businesses to generate cross selling opportunities and operational synergies while strengthening our management and business development capabilities in Europe. This is starting to show progress with a number of recent customer wins across both the US and European businesses.

 

Our vaccines and travel health business has performed well during the period. Growth has been driven by a number of new business wins and operational synergies realised with other parts of the Group. The travel clinic partnership with Boots, to develop in-store travel health clinics continues to grow and should see a significant number of clinics launched in this financial year. There are a number of other parties interested in partnering with us to develop the Pharmacy Travel Health model in the UK and potentially also in other markets.

  

 



Finance Review

for the six months to 31 March 2012

 

Revenue

Revenue for the six months to 31 March 2012 of €894 million is in line with the same period in 2011. Various pass through costs in the Sales, Marketing & Medical division, that were included in revenue in the prior year, are now excluded from revenue and cost of sales as a result of a change in the contractual relationship with our clients and suppliers. On a like-for-like basis revenue is 2% higher than the same period in 2011.

 

Adjusted Operating Profit*

Operating profit of €39.5 million is 7% ahead of the first half of 2011 with an improvement in margins in most parts of the business.

 

Adjusted Profit before Tax*

Net interest costs for the period are €4.5 million. After this interest charge, profit before tax of €35.0 million is 7% higher than in 2011.

 

Adjusted Earnings per Share*

Diluted earnings per share for the period of 11.80 cent, is 8% ahead of 2011. Earnings growth is ahead of profit growth as a result of a lower weighted average number of shares in issue following last year's share buyback programme.

 

Cash Flow

Net cash inflow from operating activities for the period was €20.4 million. This operating cash flow includes €5.3 million paid in relation to the restructuring undertaken in the prior year. Capital expenditure for the period was €18.1 million. For the six months to 31 March 2012 net debt has increased by €0.8 million.

 

Balance Sheet

Net debt at the end of the period was €122.3 million giving a gearing ratio of 31%. The net debt to EBITDA ratio is 1.29 times and interest is covered 10.5 times by EBITDA. The financial covenants in our debt facilities are based on net debt to EBITDA not to exceed 3.5 times and EBITDA interest cover to be greater than 3 times.

 

 

*before amortisation of intangible assets

 

 

Forward-looking information

Some statements in this announcement are forward looking. They represent expectations for the Group's business, and involve risks and uncertainties. The Group has based these forward-looking statements on current expectations and projections about future events. The Group believes that expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which in some cases are beyond the Group's control, actual results or performance may differ materially from those expressed or implied by such forward-looking statements.



Principal risks and uncertainties

 

The Transparency (Directive 2004/109/EC) Regulations 2007 require disclosure of the principal risks and uncertainties which could have a material impact on the Group's performance over the remainder of the financial year.

 

Risk management is an integral part of the Group's business process. A detailed risk register is maintained by each division within the Group and plans to address the identified risks are updated and reviewed by the executive directors on a regular basis. The consolidated risk register is also reviewed and approved by the Board.

 

The principal risks and uncertainties facing the Group in the six month period to 30 September 2012 include the following:

Risk


Mitigation

Changes in Government regulations, funding and pricing agreements, particularly in the healthcare and pharmaceutical sectors, may adversely affect the Group.

 


The Group's operations are diversified through product and service offerings and geographically. The Group also monitors developments and continuously seeks to improve operating efficiencies and reduce costs.

 

The Group is subject to stringent medical, quality, environmental and health and safety regulations. A failure to comply with obligations could result in legal action and damage to the Group's reputation.

 


Compliance with all regulation is managed, monitored and reviewed across the Group.

 

Group IT facilities could be subject to external interference, which could result in downtime and lead to a decline in sales and profitability.

 


The Group maintains a constant focus on IT security matters and operates extensive IT security and compliance protocols.

 

Contamination of products packaged or supplied by the Group could result in legal action and damage to the Group's reputation.

 


Appropriate quality management systems are operated locally for each service provided and are monitored and reviewed on a regular basis by Group senior management.

 

Mergers and acquisition activity amongst healthcare manufacturers could lead to existing contracts being cancelled or not renewed.

 


The Group maintains a broad distribution of customers in each business unit.

 

The success of the Group is built upon an effective management team committed to achieving a superior performance in each division. Should the Group not attract, retain or develop suitably qualified and motivated employees, this could have an impact on business performance.

 


Succession planning, remuneration policies and management development are monitored by the Group to ensure they remain relevant and appropriate.

 

Failure to appropriately integrate acquisitions into the Group could result in operational issues and reduced profitability.

 


A comprehensive due diligence process is undertaken by the Group in advance of acquisitions. The Group also has significant experience in integrating acquisitions.

 

As an international Group with substantial operations and interests outside the euro zone, the Group is subject to the risk of adverse movements in foreign currency exchange rates.

 


The Group monitors exchange rate movements and takes appropriate action in accordance with the Group's treasury policy.

 

The Group provides credit to customers as part of normal trading and there is a risk that customers may not be able to pay outstanding balances.

 


The Group operates extensive credit control checks and procedures and maintains a constant focus on debtor balances.

 



Statement of Directors

in respect of the half-yearly financial report

 

Each of the directors confirm that to the best of their knowledge and belief:

 

·      the condensed set of interim financial statements comprising the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, and the related notes have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the EU;

 

·      the half-yearly financial report includes a fair review of the information required by:

(a)  Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)  Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

 

The Group's auditor has not reviewed this condensed half-yearly financial report.

 

On behalf of the Board(i)

 

 

P. Gray

Director

 

L. FitzGerald

Director

 

4 May 2012

 

(i)   The Board of United Drug plc is disclosed on the Company's website, www.united-drug.com.

 

 

 

 

 

 

 

 

 

 

 



Condensed consolidated income statement

for the six months ended 31 March 2012





 

Six months ended

31 March 2012

 

Six months ended

31 March 2011





(Unaudited)

(Unaudited)


Notes



€'000

€'000













Revenue

3



894,224

893,617

Cost of sales




(749,641)

(755,559)







Gross profit




144,583

138,058







Distribution expenses




(102,267)

(98,091)

Administrative expenses




(5,704)

(3,452)

Other operating expenses




(6,886)

(7,788)

Share of joint ventures' profit after tax

4



2,872

502







Operating profit




32,598

29,229







Finance income

5



3,620

11,919

Finance expense

5



(8,099)

(16,211)







Profit before tax




28,119

24,937







Income tax expense




(5,165)

(4,519)

 

Profit for the period




22,954







Profit attributable to:






Owners of the parent




23,027

20,415

Non-controlling interests




(73)

3





22,954

20,418













Earnings per share






Basic

6



9.65c

8.48c

Diluted

6



9.62c

8.46c

 



Condensed consolidated statement of

comprehensive income

for the six months ended 31 March 2012



 

Six months ended

31 March 2012

 

Six months ended

31 March 2011


 

Notes

(Unaudited)

€'000

(Unaudited)

€'000





Profit for the period


22,954

20,418

Other comprehensive income:




Foreign currency translation adjustment

8

13,949

(11,208)

(Loss)/gain on hedge of net investment in foreign operations

8

(1,183)

3,012

Group defined benefit pension schemes:




- Actuarial (loss)/gain


(2,822)

8,835

- Movement in deferred tax


(29)

(1,497)

Group cash flow hedges:




- Effective portion of cash flow hedges - movement into reserve


(5,437)

5,987

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


2,758

(5,993)





Effective portion of cash flow hedges

8

(2,679)

(6)





- Movement in deferred tax - movement into reserve


680

(749)

- Movement in deferred tax - movement out of reserve


(345)

750





Net movement in deferred tax

8

335

1





Other comprehensive income/(expense) for the period


7,571

(863)





Total comprehensive income for the period


30,525

19,555





Total comprehensive income attributable to:




Owners of the parent


30,598

19,552

Non-controlling interests


(73)

3



30,525

19,555

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed consolidated statement of changes in

equity

for the six months ended 31 March 2012


 

Equity



 

Other

 

Attributable




share

Share

Retained

reserves

to owners

Non-controlling

Total


capital

premium

earnings

(Note 8)

of the parent

interests

equity


€'000

€'000

€'000

€'000

€'000

€'000

€'000









At 1 October 2011

 12,331

139,604

289,142

(61,155)

379,922

96

380,018









Profit for the financial period

-

-

23,027

-

23,027

(73)

22,954

Other comprehensive income/(expense):








Effective portion of cash flow hedges

-

-

-

(2,679)

(2,679)

-

(2,679)

Deferred tax on cash flow hedges

-

-

-

335

335

-

335

Translation adjustment

-

-

-

13,949

13,949

-

13,949

Loss on hedge of net investment in foreign operations

-

-

-

(1,183)

(1,183)

-

(1,183)

Actuarial loss on defined benefit schemes

-

-

(2,822)

-

(2,822)

-

(2,822)

Deferred tax on defined benefit schemes

-

-

(29)

-

(29)

-

(29)

Total comprehensive income for the period

-

-

20,176

10,422

30,598

(73)

30,525

New shares issued

8

301

-

-

309

-

309

Share buyback

-

-

-

(1,040)

(1,040)

-

(1,040)

Cancellation of treasury shares

(22)

-

(1,040)

1,062

-

-

-

Share-based payment expense

-

-

-

19

19

-

19

Dividends paid to equity holders

-

-

(14,915)

-

(14,915)

-

(14,915)

Release from share-based payment reserve

-

-

37

(37)

-

-

-









At 31 March 2012 - unaudited

12,317

139,905

293,400

(50,729)

394,893

23

394,916

 

 

 

for the six months ended 31 March 2011

 


Equity



Other

Attributable




share

Share

Retained

reserves

to owners

Non-controlling

Total


capital

premium

earnings

(Note 8)

of the parent

interests

equity


€'000

€'000

€'000

€'000

€'000

€'000

€'000









At 1 October 2010

 12,396

132,891

282,286

(59,214)

368,359

58

 368,417









Profit for the period

-

-

20,415

-

20,415

3

20,418

Other comprehensive income/(expense):








Effective portion of cash flow hedges

-

-

-

(6)

(6)

-

(6)

Deferred tax on cash flow hedges

-

-

-

1

1

-

1

Translation adjustment

-

-

-

(11,208)

(11,208)

-

(11,208)

Gain on hedge of net investment in foreign operations

-

-

-

3,012

3,012

-

3,012

Actuarial gain on defined benefit schemes

-

-

8,835

-

8,835

-

8,835

Deferred tax on defined benefit schemes

-

-

(1,497)

-

(1,497)

-

(1,497)

Total comprehensive income for the period

-

-

27,753

(8,201)

19,552

3

19,555

New shares issued

99

4,202

-

-

4,301

-

4,301

Share-based payment expense

-

-

-

551

551

-

551

Dividends paid to equity holders

-

-

(14,571)

-

(14,571)

-

(14,571)

Release from share-based payment reserve

-

-

346

(346)

-

-

-









At 31 March 2011 - unaudited

12,495

137,093

295,814

(67,210)

378,192

61

378,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed consolidated balance sheet

at 31 March 2012

 



As at

As at

As at



31 March

31 March

30 September



2012

2011

2011



(Unaudited)

(Unaudited)

(Audited)


Notes

€'000

€'000

€'000






ASSETS





Non-current





Property, plant and equipment


112,633

96,908

100,902

Goodwill

7

229,373

218,782

222,226

Intangible assets

7

34,573

46,154

40,419

Investment in joint ventures

7

21,979

25,937

20,036

Derivative financial instruments

9

132

-

1,460

Deferred income tax assets


1,171

515

385

Employee benefits

10

13,949

13,526

12,209






Total non-current assets


413,810

401,822

397,637






Current





Inventories


138,070

135,435

142,636

Trade and other receivables


294,398

279,020

284,687

Cash and cash equivalents

9

111,238

146,313

108,256

Derivative financial instruments

9

1,521

-

1,338

Assets classified as held for sale

7

-

-

9,243






Total current assets


545,227

560,768

546,160






Total assets


959,037

962,590

943,797






EQUITY





Equity share capital


12,317

12,495

12,331

Share premium


139,905

137,093

139,604

Other reserves

8

(50,729)

(67,210)

(61,155)

Retained earnings


293,400

295,814

289,142

Total equity attributable to owners of the Company


394,893

378,192

379,922

Non-controlling interests


23

61

96






Total equity


394,916

378,253

380,018






LIABILITIES





Non-current





Interest-bearing loans and borrowings

9

224,149

209,454

221,697

Provisions


10,015

9,223

9,606

Employee benefits

10

21,195

12,364

18,099

Derivative financial instruments

9

9,524

18,301

9,744

Deferred income tax liabilities


10,080

11,779

10,799






Total non-current liabilities


274,963

261,121

269,945






Current





Interest-bearing loans and borrowings

9

433

28,877

476

Trade and other payables


277,484

278,369

278,812

Current income tax liabilities


6,517

7,503

4,584

Provisions


3,679

3,274

9,358

Derivative financial instruments

9

1,045

5,193

604






Total current liabilities


289,158

323,216

293,834






Total liabilities


564,121

584,337

563,779






Total equity and liabilities


959,037

962,590

943,797



Condensed consolidated cash flow statement

for the six months ended 31 March 2012

 


Six months

Six months


ended

ended


31 March

31 March


2012

2011


(Unaudited)

(Unaudited)


€'000

€'000

Cash flows from operating activities



Profit before tax

28,119

24,937

Finance income

(3,620)

(11,919)

Finance expense

8,099

16,211




Operating profit

32,598

29,229




Share of joint ventures' profit after tax

(2,872)

(502)

Gain on previously held interest

-

(2,530)

Gain on sale of joint venture

(300)

-

Depreciation charge

7,801

7,170

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

9

(33)

Amortisation of intangible assets

6,886

7,788

Share-based payment expense

19

551

Decrease in inventories

6,143

3,435

Increase in trade and other receivables

(7,476)

(2,975)

Decrease in trade payables, provisions and other payables

(9,473)

(1,431)

Interest paid

(7,811)

(7,144)

Income taxes paid

(5,151)

(3,928)




Net cash inflow from operating activities

20,373

29,630




Cash flows from investing activities



Interest received

3,600

1,408

Purchase of property, plant and equipment

(18,090)

(6,268)

Proceeds from disposal of property, plant and equipment

446

118

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

-

(11,012)

Acquisition consideration refunded in respect of prior years

-

984

Deferred acquisition consideration paid

(361)

(7,539)

Investment in joint ventures

-

(5,713)

Proceeds from disposal of joint venture

9,570

-

Dividends received from joint ventures

1,773

1,167




Net cash outflow from investing activities

(3,062)

(26,855)




Cash flows from financing activities



Proceeds from issue of shares (including share premium thereon, net of scrip dividend)

309

1,456

Shares purchased under share buyback programme

(1,040)

-

Repayments of interest-bearing loans and borrowings

(100)

(581)

Decrease in finance leases

(164)

(342)

Dividends paid to equity holders of the Company

(14,915)

(11,726)




Net cash outflow from financing activities

(15,910)

(11,193)




Net increase/(decrease) in cash and cash equivalents

1,401

(8,418)

Translation adjustment

1,581

(1,481)

Cash and cash equivalents at beginning of period

108,256

156,212




Cash and cash equivalents at end of period

111,238

146,313




Cash and cash equivalents is comprised of:



Cash at bank and short term deposits

111,238

146,313



Notes to the condensed interim financial statements

for the six months ended 31 March 2012

_____________________________________________________________________________________________

 

1.  Reporting entity

United Drug plc (the "Company") is a company domiciled in Ireland. The unaudited condensed consolidated interim financial statements of the Company for the six months ended 31 March 2012 are comprised of the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in joint ventures.

 

The financial information presented herein does not amount to statutory financial statements that are required by Section 7 of the Companies (Amendment) Act, 1986 to be annexed to the annual return of the Company. The financial information does not include all the information and disclosures required in the annual financial statements. The statutory financial statements for the year ended 30 September 2011 will be 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.

 

2.  Statement of compliance

These unaudited condensed consolidated interim financial statements ("the interim accounts") have been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the European Union. These interim accounts do not include all of the information required for full annual financial statements and should be read in conjunction with the most recent published consolidated financial statements of the Group.

 

The following are the new standards that are effective for the financial year of the Group ending on 30 September 2012. These standards had no impact on the results or financial position of the Group in the period to 31 March 2012.

 

Amendments to IAS 24 - Related Party Disclosures

Amendments to IFRS 7 - Financial Instrument Disclosures

 

The Group has also adopted the Improvements to IFRS issued by the International Accounting Standards Board ("IASB"). This standard amends a number of other standards, basis of conclusions and guidance. The improvements included changes in presentation, recognition and measurement plus terminology and editorial changes. These amendments do not have a significant impact on the Group condensed consolidated interim financial statements.

 

All other accounting policies applied in these interim financial statements are the same as those applied in the consolidated financial statements for the year ended 30 September 2011 and as those expected to apply for the financial year to 30 September 2012.

 

The preparation of interim financial statements requires the use of certain critical accounting estimates, judgements and assumptions. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, relate primarily to accounting for defined benefit pension schemes, financial instruments, share-based payments, property, plant and equipment, intangible assets, provisions, goodwill impairment and deferred tax. The nature of the assumptions and estimates made in the preparation of the interim accounts are the same as those identified in our most recent annual report. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. There was no significant change to any of these key estimates or judgements in the six month period, other than a change to certain actuarial assumptions as set out in note 10.

 

The income tax expense for the six month period is calculated by applying the Directors' best estimate of the annual effective tax rate to the profit for the period.

 

The directors have a reasonable expectation that the Company, and the Group as a whole, have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

 

As permitted by the Transparency (Directive 2004/109/EC) Regulations 2007 this Interim Report is available on www.united-drug.com. However, if a physical copy is required, please contact the Company Secretary.

 

3.  Segmental analysis

The Group's operations are divided into the following segments:               

 

Healthcare Supply Chain - The Healthcare Supply Chain segment combines all of the Group's healthcare logistics based businesses.

 

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

 

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

 

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.     

 

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

 


Six months

Six months


ended

ended


31 March

31 March


2012

2011


€'000

€'000

Revenue



Healthcare Supply Chain

730,310

724,905

Sales, Marketing & Medical

85,664

100,347

Packaging & Specialty

78,250

68,365


894,224

893,617




Operating profit before intangible amortisation



Healthcare Supply Chain

21,920

21,358

Sales, Marketing & Medical

9,351

9,503

Packaging & Specialty

8,213

6,156


39,484

37,017

Intangible amortisation

(6,886)

(7,788)




Operating profit

32,598

29,229




Finance income

3,620

11,919

Finance expense

(8,099)

(16,211)

 

Profit before tax

28,119

24,937

Income tax expense

(5,165)

(4,519)

 

Profit after tax for the period

22,954

20,418




Geographical analysis of revenue



Republic of Ireland

563,731

569,996

United Kingdom

239,701

242,185

United States 

76,170

64,981

Continental Europe

14,622

16,455


894,224

893,617





Six months

Year


ended

ended


31 March

30 September


2012

2011


€'000

€'000

Operating segment assets



Healthcare Supply Chain

593,072

581,886

Sales, Marketing & Medical

166,433

155,638

Packaging & Specialty

197,879

203,475


957,384

940,999

Unallocated assets

1,653

2,798


959,037

943,797




 

4.  Share of joint ventures' profit after tax

 


Six months

Six months


ended

ended


31 March

31 March


2012

2011


€'000

€'000

Group share of revenue

274,403

286,441

Group share of expenses, inclusive of tax

(271,531)

(285,939)




Group share of profit after tax

2,872

502

 

5.  Finance income and expense

 


Six months

Six months


ended

ended


31 March

31 March


2012

2011


€'000

€'000

Finance income



Income arising from cash deposits

769

694

Fair value adjustments to fair value hedges

93

-

Foreign currency gain on retranslation of bank borrowings

2,758

5,993

Fair value movement on interest rate swaps not designated as hedges

-

743

Fair value adjustment to guaranteed senior unsecured notes

-

4,489


3,620

11,919

Finance expense



Interest on bank loans and other loans



-wholly repayable within 5 years

(2,810)

(2,651)

-wholly repayable after 5 years

(2,168)

(2,743)

Interest on finance leases

(17)

(19)

Unwinding of discount on provisions

(246)

(164)

Fair value adjustments to fair value hedges

-

(4,489)

Fair value adjustment to guaranteed senior unsecured notes

(93)

-

Fair value of cash flow hedges transferred from equity

(2,758)

(5,993)

Ineffective portion of cash flow hedges

(7)

(152)


(8,099)

(16,211)

 

Net finance expense

(4,479)

(4,292)




 

6.  Earnings per ordinary share

 


Six months

Six months


ended

ended


31 March

31 March


2012

2011


€'000

€'000

Profit attributable to the owners of the parent

23,027

20,415

Adjustment for amortisation of intangible assets (net of tax)

5,198

5,904




Earnings adjusted for amortisation of intangible assets

28,225

26,319





Number

Number


of shares

 of shares

Weighted average number of shares

238,652,336

240,804,156

Number of dilutive shares under option

619,662

647,951




Weighted average number of shares, including share options

239,271,998

241,452,107




Basic earnings per share - cent

9.65

8.48

Diluted earnings per share - cent

9.62

8.46

Adjusted basic earnings per share - cent*

11.83

10.93

Adjusted diluted earnings per share - cent*

11.80

10.90

 

* excluding amortisation of intangible assets

 

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

 

7.  Movement in goodwill, intangible assets, investment in joint ventures and assets classified as held for sale

 



 

Intangible

 

Investment in

Assets

classified as



Goodwill

assets

joint ventures

 held for sale

Total


€'000

€'000

€'000

€'000

€'000







Balance at 1 October 2011

222,226

40,419

20,036

9,243

291,924

Amortisation of intangible assets

-

(6,886)

-

-

(6,886)

Share of joint ventures' profit after tax

-

-

2,872

-

2,872

Profit on sale of joint venture

-

-

-

300

300

Dividends received from joint ventures

-

-

(1,773)

-

(1,773)

Revision to prior year acquisition

500

-

-

-

500

Sale of investment

-

-

-

(9,570)

(9,570)

Translation adjustment

6,647

1,040

844

27

8,558







Balance at 31 March 2012

229,373

34,573

21,979

-

285,925

 

The Group has revised its estimate of the fair value of trade and other receivables in respect of a prior year acquisition. This has resulted in a corresponding increase in goodwill relative to amounts previously recorded. On the basis that this adjustment was not deemed to be material, it was accounted for in the current period.

 

On 17 October 2011, the Group disposed of its 50% shareholding in Medco Health Solutions [Ireland] Limited to Medco Health Solutions, Inc. for a consideration of stg£8.2 million.  This gave rise to a gain of €300,000 being the difference between the fair value of the previously held asset at the date of sale and the consideration received. The gain has been included within the administration expenses in the Group income statement.

 

8.  Other reserves

 


 

 

Cash flow

 

 

Share-based

 

 

Foreign

 

 

Treasury

 

Capital redemption



hedge

payment

exchange

shares

reserve

Total


€'000

€'000

€'000

€'000

€'000

€'000








Balance at 1 October 2011

1,914

6,193

(63,598)

(5,892)

228

(61,155)

Effective portion of cash flow hedges

(2,679)

-

-

-

-

(2,679)

Deferred tax on cash flow hedges

335

-

-

-

-

335

Share-based payment expense

-

19

-

-

-

19

Release from share-based payment reserve

-

(37)

-

-

-

(37)

Loss on hedge of net investment in foreign operations

-

-

(1,183)

-

-

(1,183)

Translation adjustment

-

-

13,949

-

-

13,949

Share buyback

-

-

-

(1,040)

-

(1,040)

Cancellation of treasury shares

-

-

-

1,040

22

1,062








Balance at 31 March 2012

(430)

6,175

(50,832)

(5,892)

250

(50,729)


 

 

Cash flow

 

 

Share-based

 

 

Foreign

 

 

Treasury

 

Capital redemption



hedge

payment

exchange

shares

reserve

Total


€'000

€'000

€'000

€'000

€'000

€'000








Balance at 1 October 2010

1,026

5,883

(59,875)

(6,248)

-

(59,214)

Effective portion of cash flow hedges

(6)

-

-

-

-

(6)

Deferred tax on cash flow hedges

1

-

-

-

-

1

Share-based payment expense

-

551

-

-

-

551

Release from share-based payment reserve

-

(346)

-

-

-

(346)

Gain on hedge of net investment in foreign operations

-

-

3,012

-

-

3,012

Translation adjustment

-

-

(11,208)

-

-

(11,208)

Release of treasury shares on vesting

-

(356)

-

356

-

-








Balance at 31 March 2011

1,021

5,732

(68,071)

(5,892)

-

(67,210)

 

9.  Net debt


As at

As at

As at


31 March

31 March

30 Sept


2012

2011

2011


€'000

€'000

€'000

Current assets




Cash at bank and short term deposits

111,238

146,313

108,256

Derivative financial instruments

1,521

-

1,338

Non-current assets




Derivative financial instruments

132

-

1,460

Current liabilities




Interest bearing loans and borrowings

(220)

(28,651)

(200)

Finance leases

(213)

(226)

(276)

Derivative financial instruments

(1,045)

(5,193)

(604)

Non-current liabilities




Interest bearing loans and borrowings

(223,939)

(208,966)

(221,386)

Finance leases

(210)

(488)

(311)

Derivative financial instruments

(9,524)

(18,301)

(9,744)






(122,260)

(115,512)

(121,467)

 

10.  Employee benefits


Employee

Employee

Employee


benefit

benefit

benefit


asset

liability

Total


€'000

€'000

€'000





Employee benefit asset/(liability) at 1 October 2011

12,209

(18,099)

(5,890)

Current service cost

(448)

(470)

(918)

Interest on scheme obligations

(89)

(1,374)

(1,463)

Expected return on scheme assets

520

1,074

1,594

Contributions paid

-

1,059

1,059

Actuarial gain/(loss)

1,569

(4,391)

(2,822)

Curtailment gain

-

1,175

1,175

Translation adjustment

188

(169)

19

 

Employee benefit asset/(liability) at 31 March 2012

13,949

(21,195)

(7,246)

 

As set out in the consolidated financial statements for the year ended 30 September 2011, the Group operates a number of defined benefit pension schemes which are funded by the payments of contributions 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 and Northern Ireland pension schemes. The actuarial loss during the current period primarily relates to a change in the discount rates in respect of all the pension schemes. The decrease in the discount rate is reflective of changes in bond yields during the period. A number of the other assumptions used to derive the actuarial valuations at 31 March 2012 have changed from the assumptions used at 30 September 2011.

    

The principal assumptions and associated changes are as follows:                                                                  

 











Republic of Ireland Schemes

United States Scheme

Northern Ireland Scheme

 


As at

As at

As at

As at

As at

As at


 


31 March

30 Sept

31 March

30 Sept

31 March

30 Sept


 


2012

2011

2012

2011

2012

2011


 

Rate of increase in salaries

3.00%

3.00%

2.75-4.00%

2.75-4.00%

4.00%

4.00%


 

Rate of increase in pensions

2.00%

0-2.00%

0.00%

0.00%

1.90-3.30%

1.90-3.30%


 

Inflation rate

2.00%

2.00%

2.75%

2.75%

2.65%

2.60%


 

Discount rate

4.50%

5.25%

4.50%

4.70%

4.80%

5.05%


 

 

 









 

 

11.  Dividends

The Board has declared an interim dividend of 2.48 cent per share. This dividend has not been provided for in the balance sheet at 31 March 2012, as there was no present obligation to pay the dividend at the end of the reporting date. During the first half of the financial year, the final dividend for 2011 (6.25 cent per share), was paid giving rise to a reduction in shareholders' funds of €14,915,000.

 

12  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.              

 

IAS 24 also requires the disclosure of compensation paid to the Group's key management personnel. This comprises its executive and non-executive directors, together with Persons Discharging Managerial Responsibility as defined in section 12(8) of the Irish Market Abuse Directive Regulations.

 

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 €2,114,000 for the six months ended 31 March 2012 (2011: €2,181,000).

 

13.  Board Approval

This interim report was approved by the Board of Directors of United Drug plc on 4 May 2012.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR LLFEDEFITIIF