TIDMUDG
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
Constant
currency
Increase/ increase/
(decrease) (decrease)
IFRS Adjustments(1) Adjusted on 2016 on 2016
based
$'m $'m $'m % %
Continuing operations
Revenue 1,219.8 - 1,219.8 13 17
Net revenue(2) 1,028.5 - 1,028.5 12 16
Operating profit 103.2 26.1 129.3 12 17
Profit before tax 92.8 26.1 118.9 17 23
Diluted earnings
per share (EPS) (cent) 28.83 8.29 37.12 17 23
Discontinued operations(3)
Diluted earnings
per share (cent) - - - (100) (100)
Total diluted earnings
per share (cent) 28.83 8.29 37.12 (5) (1)
Dividend per share
(cent) 13.30 - 13.30 7 7
------------------------------ -------- ----------------- ----------- ------------- -------------
2017 2016
Net (debt)/cash ($'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 share(1) (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 profit(1) growth of 12% (17% on a constant
currency basis) to $129.3 million. Adjusted net operating margin(3)
stable at 12.6%.
-- Adjusted profit before tax(1) up 17% (23% on a constant currency basis) driven by:
o Underlying growth of 13% including the benefit of lower
interest charges
o Acquisition growth of 10%
o 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 profit(1) increased by 16% driven by a
combination of underlying and acquisition growth (underlying
growth(2) 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 profit(1) increased by 8% (underlying
growth(2) 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 profit(2) 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."
(1) Before the amortisation of acquired intangible assets and
transaction costs.
(2) Underlying growth is reported growth adjusted for the impact
of currency translation movements and any acquisition or disposal
activity.
(3) Operating 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 Growth(2)
---------------------------- ------ ------ ------- -----------
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 revenue(1)
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 Growth(1)
------------------------- ------ ------ ------- -----------
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 Growth(1)
-------------------- ----- ------ ------- -----------
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 Keith Byrne
CFO Head of IR, Strategy & Corporate
UDG Healthcare plc Communications
Tel: + 353-1-468-9000 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:EUR0.9047 and
$1:GBP0.7891 (2016 $1:EUR0.9002 and $1:GBP0.7045).
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
As re-presented and restated
Year ended Year ended 30 September 2016
30 September
2017
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
As re-presented
and
restated
2017 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 Other Attributable to
share Share Retained reserves owners of the Non-controlling Total
capital premium earnings (note 11) parent interest 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
Other Total equity as
Equity Share Retained reserves re-presented
share capital premium $'000 earnings $'000 (note 11) $'000 and restated
$000 $'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
As re-presented (note 20) As re-presented (note 20)
2016 2015
$'000 $'000
2017
Note $'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)
Continuing operations Discontinued operations
2017 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 (EUR32,200,000) 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 Reclassification As restated As re-presented
stated EUR'000 EUR'000 $'000
EUR'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
2016 as re-presented
2017
$'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
2016 as re-presented
2017
$'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
Discontinued operations
Continuing operations as as re-presented Total as re-presented
Total 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 Number
of shares 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
------------------------------------------------------------ ------------ ------------
Discontinued
Continuing operations operations as
Total as re-presented 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 37.30(1) 31.92(1) 7.50(2) 39.42
Adjusted diluted earnings
per share - cent 37.12(1) 31.79(1) 7.47(2) 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 Plant and Computer Assets under 2017
buildings equipment Motor vehicles equipment construction 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
Investment in joint ventures and
Intangible associates
Goodwill assets
$'000 $'000 $'000
Balance at 1 October 2016 (as
re-presented) 384,520 108,322 9,067
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 - - 667
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
Share-based Capital
Cash flow payment Foreign Treasury redemption
hedge exchange shares 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)
------------------------------------ ------------ ------------ ------------ ------------ ------------ ----------
Share-based Capital
Cash flow payment Foreign Treasury redemption
hedge exchange shares 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 Restructuring and Total as
consideration Onerous leases other costs 2017 Total 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:
Measurement 2016
period 2017 Total
STEM MicroMass Other Total adjustments 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 2016
Total Total
$'000 $'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 Fair
value 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 Level Level
1 2 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 Related amounts Amount of Related amounts
assets/liabilities not offset in financial not offset in
as presented in the balance 2017 assets/liabilities the balance 2016
the balance sheet sheet Net as presented in sheet Net
the balance sheet
$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 2016
Times 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=StgGBP $1=StgGBP
Balance sheet (closing rate) 0.7469 0.7715
Income statement (average rate) 0.7891 0.7045
$1=EuroEUR $1=EuroEUR
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
StgGBP9,500,000 and a loan, gross of interest, of
StgGBP10,997,000.
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:EUR0.8960; 30 September 2015: $1:EUR0.8926).
-- 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:EUR0.9002; 30 September 2015: $1:EUR0.8709).
-- 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 re-presented
As restated and restated
(note (note
3) 3)
year ended year ended
30 September 30 September
2016 2016
EUR'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 As re-presented
reported year ended
year ended 30 September
30 September 2016
2016
EUR'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 As at 30 September
2016 2015
As originally As originally
reported As re-presented reported As re-presented
EUR'000 $'000 EUR'000 $'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.
2017 2016
Calculation $'000 $'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).
2017 2016
Calculation $'000 $'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).
2017 2016
Calculation $'000 $'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.
2017 2016
Calculation $'000 $'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.
2017 2016
Calculation $'000 $'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).
2017 2016
Calculation $'000 $'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.
2017 2016
Calculation $'000 $'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.
2017 2016
Calculation $'000 $'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 acquisitions(1) 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.
2017 2016
Calculation $'000 $'000
---------
Balance
Net assets 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
END
FR DMMZMNNVGNZM
(END) Dow Jones Newswires
November 28, 2017 02:00 ET (07:00 GMT)
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