TIDMUDG
RNS Number : 5429I
UDG Healthcare Public Limited Co.
27 November 2018
UDG Healthcare plc
Preliminary Announcement of Results
Year ended 30 September 2018
Solid performance drives 22% full-year constant currency EPS
growth
27 November 2018: UDG Healthcare plc ("UDG Healthcare" or
"Group"), a leading international healthcare services provider,
announces its preliminary results for the year ended 30 September
2018, in which the Group continued to deliver strong EPS
growth.
Financial Results
Constant
Increase currency
IFRS based on Increase
Adjustments(1) Adjusted 2017 on
2017
$'m $'m $'m % %
Continuing operations
Revenue 1,315.2 - 1,315.2 8 5
Net revenue(2) 1,129.7 - 1,129.7 10 6
Operating profit 5.5 142.0 147.5 14 12
Profit before tax 8.4 130.4 138.8 17 15
Diluted earnings per
share (EPS) (cent) 1.52 44.42 45.94 24 22
Dividend per share
(cent) 16.00 - 16.00 20 20
---------------------------- ------------- ----------------- ----------- ----------- -----------
2018 2017
Net debt ($'m) 60.8 53.3
Net debt/annualised EBITDA
(times) 0.34 0.32
---------------------------- ------------- ----------------- ----------- ----------- -------------
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 30-34.
(1) Adjusted operating profit, profit before tax and diluted EPS
are stated before the amortisation of acquired intangible assets
($31.0m, pre-tax), transaction costs ($2.4m, pre-tax) and
exceptional charges (operating charge $108.6m, pre-tax $97.1m and
post-tax $85.8m) relating to the disposal and impairment of
Aquilant ($90.7m charge), the Group's restructure of internal
operating structures ($18.0m charge), deferred contingent
consideration adjustments ($11.6m gain), net tax effect of these
items ($1.5m gain), and an exceptional credit to deferred tax
liabilities ($9.7m gain). See note 7.
(2) Net revenue represents gross revenue adjusted for revenue
associated with pass-through costs, for which the Group does not
earn a margin.
Financial highlights (Continuing Group)
-- Adjusted diluted earnings per share(1) (EPS) increased by 24%
(22% on a constant currency basis).
-- Net revenue growth of 10% (6% on a constant currency basis) to $1,129.7 million.
-- Adjusted operating profit(1) growth of 14% (12% on a constant
currency basis) to $147.5 million. Underlying operating profit(2)
grew by 7%, excluding the Future Fit programme and Aquilant.
o Ashfield's adjusted operating profit(1) increased by 16% on a
constant currency basis, benefiting from acquisitions
o Sharp's adjusted operating profit(1) increased by 13% on a
constant currency basis driven by very strong momentum in the US
business as the year progressed.
-- Adjusted net operating margin(3) increased to 13.1% from 12.6%.
-- Adjusted profit before tax(1) increased by 17% (15% on a constant currency basis).
-- Proposed 21% increase in final dividend to 11.75 $ cent per
share, yielding a full year dividend increase of 20% to 16.00 $
cent per share.
-- Net debt of $60.8 million at 30 September 2018 (0.34x net debt to annualised EBITDA).
Strategic & operating highlights
-- Completed the acquisitions of Create NYC and SmartAnalyst in
July 2018 for a combined consideration of up to $82.4 million.
-- Completed the disposal of Aquilant in August 2018, concluding
the Group's exit from its supply chain businesses.
-- Ashfield's offering continues to shift towards more
strategic, higher value services with Ashfield Communications &
Advisory now accounting for 63% of Ashfield's operating profit, up
from approximately 20% five years ago.
-- Three Sharp facilities upgraded in the year, providing a strengthened platform for growth.
-- Restructuring of internal operating structures completed,
with a view to achieving greater flexibility, accountability and
performance across the Group. An after tax restructuring charge of
$14.4 million has been incurred as a consequence in 2018, with the
benefits being reinvested into technology, infrastructure and a
STEM aXcellerate growth programme.
Chief Executive's comment
Commenting on the performance, Chief Executive Officer, Brendan
McAtamney said:
"The 2018 results reflect the continued execution of our
strategy and another year of continued strong growth for the Group,
with adjusted earnings per share growth of 24% (22% on a constant
currency basis). Our two global platforms, Ashfield and Sharp,
continued to drive earnings as we leveraged our leading market
positions and sector expertise.
Ashfield Communications & Advisory, including the benefit of
acquisitions, was the main driver of earnings growth supported by
Sharp US, which delivered a particularly strong performance during
the second half of the year. We are also pleased with the additions
of Create NYC and SmartAnalyst into Ashfield as we continue to
broaden the range of capabilities we offer our healthcare
clients.
Looking ahead to 2019, we expect continued progress, both
organically and through further strategic acquisitions. We expect
good underlying profit growth in both Ashfield Communications &
Advisory and Sharp, particularly in the US. In Ashfield Commercial
& Clinical we will continue to diversify and differentiate our
service offering, although in the short term we expect there to be
some ongoing softness. As we have done in previous years we will
also continue to invest in our talent, systems and infrastructure,
to ensure we continue to have an effective platform for future
sustainable growth."
(1) Before the amortisation of acquired intangible assets,
transaction costs and exceptional items.
(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
The Group continued to make good progress from a corporate
development perspective completing the acquisitions of Create NYC,
an innovative communications agency, and SmartAnalyst, a strategic
commercialisation consulting and analytics business, in July 2018
for a total combined consideration of up to $82.4 million. Both
acquisitions are a strong fit strategically, expand the Group's
capabilities, and complement the underlying growth profile of the
business.
The Group also completed the disposal of Aquilant to H2 Equity
Partners in August 2018. Aquilant represented approximately 4% of
the Group's operating profit. Following the Group's disposal of
United Drug in 2016, the disposal of Aquilant is the final step in
the Group's exit from its supply chain businesses.
At the year end, the Group's net debt was $60.8 million (0.34x
net debt to EBITDA), leaving it well placed to fund the continued
inorganic development of our two global platforms, Ashfield and
Sharp.
Ashfield Development
A key element of the Group's strategy is the continued expansion
and development of Ashfield's service proposition. This strategy
has transformed Ashfield from a tactical provider of field-based
sales reps to a strategically focused business with a broad suite
of end-to-end advisory, communication, commercial and clinical
services. Ashfield Communications & Advisory now accounts for
63% of Ashfield's operating profit, up from approximately 20% five
years ago. The acquisitions of Create NYC and SmartAnalyst further
strengthen and expand Ashfield's capabilities towards more
strategic, higher value services.
STEM aXcellerate
STEM was acquired in October 2016 and since then has delivered
significant growth. STEM continues to see considerable
opportunities to grow its core pharmaceutical customer base and in
tandem expand its unique model into other adjacent healthcare
markets which offer significant growth potential. This expansion
programme, known as STEM aXcellerate, will be undertaken on a
phased basis. While the Group is confident that STEM aXcellerate
offers the potential for attractive financial returns, this
expansion will also require considerable people investment which
will impact on underlying profit growth rates in 2019.
Sharp Development
2018 marks the tenth anniversary of the acquisition by the Group
of Sharp Packaging US. Since 2008, consistent growth has led to a
near doubling of capacity, a doubling of the workforce and a
significant increase in profitability.
Building on this trajectory, in 2018, three of Sharp's
facilities were refurbished providing it with an excellent platform
for future growth. This included Sharp's investment in its facility
in Heerenveen, Netherlands, as well as its clinical facilities
which continued to progress on schedule. When completed, these
investments will allow Sharp Clinical the capacity to offer
end-to-end clinical services both in the US and Europe.
Future Fit
The Future Fit programme was a significant focus in 2018, with
Workday fully implemented and the implementation of Oracle well
progressed. The previously communicated step-up in costs has
moderated underlying profit growth by approximately $3.5 million in
2018, primarily in Ashfield.
The Group continues to invest in technologies and systems to
deliver market-leading services and innovative solutions for its
clients. These strategic investments include front-end client
facing technologies such as Health Cloud and Avature, which help
differentiate our Ashfield Commercial & Clinical business in
particular. We will also continue to invest in support technologies
such as the Concur expense system and IT security, along with the
implementation as applicable of Workday and Oracle to our
acquisitions. These ongoing investments will future-proof the
fabric of the organisation and provide a solid foundation for the
integration of newly acquired businesses, and the long-term
sustainable growth of the Group.
Restructuring and Reinvestment Programme
The Group remains ambitious to continue the strong growth and
development of its business. Following the considerable expansion
in recent years both organically and inorganically, and the stated
intention to focus on its two global growth platforms, Ashfield and
Sharp, the Group has implemented a restructuring of its internal
operating structures, with a view to achieving greater flexibility,
accountability and performance. Furthermore, it will assist in
taking advantage of the growing market opportunities in an evolving
and increasingly complex healthcare industry.
An after tax restructuring charge of $14.4 million has been
incurred as a consequence in 2018. The Group will reinvest the
benefits gained from the restructuring into systems, infrastructure
and the STEM aXcellerate programme.
Tax
The Group had an effective tax rate for the year of 17.1% down
from 22.2% in 2017. This reflects the benefit from the reduction in
US federal corporate tax rates from 1 January 2018 along with the
benefit of a number of other gains during the second half of the
year. The Group expects an effective tax rate of approximately 18%
for 2019, reflecting the full-year impact of US tax reforms.
Outlook
For 2019, we expect the 2018 trends to continue, with good
underlying profit growth from Ashfield Communications &
Advisory and Sharp, and weaker conditions continuing in Ashfield
Commercial & Clinical. The reported growth will also be
impacted by planned investments, including the STEM aXcellerate
programme.
In line with previous practice, the Group will provide formal
2019 guidance in January 2019 as part of its First Quarter Trading
Update.
With overall market conditions remaining favourable, the Group
is well positioned to deliver sustainable future growth in line
with our existing medium term underling operating profit guidance.
In addition, the Group retains substantial financial flexibility to
supplement that underlying growth with further strategic
acquisitions.
Review of Operations
Ashfield
2018 2017 Actual Underlying
$'m $'m Growth Growth(2)
--------------------------------------- ------ ------ ------- -----------
Gross revenue
Commercial & Clinical 597.5 604.7 (1%) (7%)
Communications & Advisory 323.9 216.7 49% 8%
Total gross revenue 921.4 821.4 12% (3%)
Net revenue(1)
Commercial & Clinical 448.2 442.3 1% (6%)
Communications & Advisory 287.7 187.8 53% 10%
Total net revenue 735.9 630.1 17% (1%)
Operating profit
Commercial & Clinical 36.3 38.6 (6%) (10%)
Communications & Advisory 62.1 43.0 44% 10%
Total operating profit 98.4 81.6 21% 0%
Operating margin
Operating margin (on gross revenue) 10.7% 9.9%
Net operating margin (on net revenue) 13.4% 12.9%
--------------------------------------- ------ ------ ------- -----------
(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.
(2) Underlying growth adjusts for the impact of currency
translation movements and any acquisition or disposal activity.
Ashfield delivered a robust financial performance during the
year, driven by the benefit of acquisitions, and good underlying
momentum in Communications & Advisory, offset by challenges in
the Commercial & Clinical business. Net revenue was up 17% to
$735.9 million and operating profit was up 21% to $98.4
million.
Ashfield's underlying net revenue and underlying operating
profit were broadly flat year on year, after adjusting for the
impact of currency translation movements and the contribution of
acquisitions. As expected, Ashfield incurred approximately $3.5
million additional operating costs during the year related to the
Future Fit investments - the business generated approximately 5%
underlying operating profit growth during the year before these
additional costs.
Net operating margin increased to 13.4% from 12.9% reflecting
the continued strong momentum from the higher margin Communications
& Advisory business.
Ashfield Communications & Advisory accounted for 63% of
Ashfield's operating profit in 2018, up from 53% in 2017. Net
revenue increased by 53%, 10% on an underlying basis, and operating
profit increased by 44%, 10% on an underlying basis. Underlying
operating profit increased by 13%, excluding the impact of
additional Future Fit costs. Growth was driven by a combination of
good underlying growth and the benefit of acquisitions completed in
2017 and 2018. While the Group expects these strong underlying
growth dynamics to continue in 2019, reported growth will be
tempered by planned investments, including STEM aXcellerate.
Ashfield Commercial & Clinical experienced a challenging
year with underlying net revenues declining by 6% and underlying
operating profit declining by 10% (5% decline excluding Future Fit
costs). The decline was driven by a combination of factors
including the timing of contract activity levels and fewer new
business development opportunities during the second half of the
year. As previously indicated, we expect these challenging
conditions to continue in 2019. The market continues to evolve with
a clear shift from the development of primary care products towards
specialty care. Ashfield's diversified geographic and service mix
leaves it well placed to benefit from the growth in specialty
medicines and rise in the demand for more sophisticated
multichannel solutions.
The outlook for Ashfield over the medium term remains positive,
as the business diversifies its service offering and adds
complementary capabilities to meet the evolving needs of its client
base.
Sharp
2018 2017 Actual Underlying
$'m $'m Growth Growth(1)
------------------------- ------ ------ ------- -----------
Revenue
US 267.7 254.0 5% 5%
Europe 43.4 48.1 (10%) (17%)
Total revenue 311.1 302.1 3% 1%
Operating profit/(loss)
US 46.9 40.9 15% 15%
Europe (1.1) 0.4 - -
Total operating profit 45.8 41.3 11% 11%
Operating margin % 14.7% 13.7%
------------------------- ------ ------ ------- -----------
(1) Underlying growth adjusts for the impact of currency
translation movements and any acquisition or disposal activity.
Sharp delivered a strong financial performance for the year,
driven by improving momentum in Sharp US during the second half,
offset by a lower than anticipated performance in Sharp Europe.
Revenue was up 3% to $311.1 million and operating profit was up 11%
to $45.8 million. Operating margins increased to 14.7% from
13.7%.
After a challenging start to 2018, Sharp US generated
substantial underlying operating profit during the second half of
the year to deliver underlying operating profit growth of 15% for
the full year. This has been driven by growth in demand for the
secondary packaging of biotech injectable products, as well as with
traditional packaging formats (bottles, blister packs, etc.).
Sharp Europe generated an operating loss of $1.1 million during
the year due to activity levels with some clients being lower than
previously anticipated.
Sharp Clinical successfully completed phase one of its expansion
project in the US by relocating to its newly renovated facility at
Bethlehem. The second significant investment in Sharp Clinical was
the construction and fit out of our state-of-the-art facility in
Wales, UK. The site is now fully operational for packaging and
logistics services with analytical, manufacturing and interactive
response technology services to follow by 2020. These investments
will allow Sharp Clinical to continue its clinical supply chain
optimisation strategy by offering end-to-end services, formulation
to logistics, all within one facility in both the US and
Europe.
Based on the current activity levels and the strong pipeline of
new business, Sharp remains well positioned to deliver double-digit
underlying operating profit growth over the medium term.
Analyst presentation
A presentation for investors and analysts will be held at the
London Stock Exchange at 8.30 GMT today, 27 November 2018. If you
wish to attend, please contact Powerscourt at the details below.
Alternatively, to dial into the conference call or webcast, the
details are as follows:
Audio webcast
https://edge.media-server.com/m6/p/njnoc85w
Conference call
UK number: +44-330-336-9105
Ireland number: + 353-1-246-5638
US number: +1-929-477-0448
Participant code: 7295026
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:
Keith Byrne
SVP, IR, Strategy & Corporate Communications
UDG Healthcare plc
Tel: + 353-1-468-9000
Business / Financial media:
Lisa Kavanagh / Jack Hickey
Powerscourt
Tel: + 44-207-250-1446
About UDG Healthcare plc
UDG Healthcare plc (LON: UDG) is a leading international partner
of choice delivering advisory, communication, commercial, clinical
and packaging services to the healthcare industry, employing over
8,500 people with operations in 26 countries and delivering
services in over 50 countries.
UDG Healthcare plc operates across two divisions: Ashfield and
Sharp.
Ashfield is a global leader in advisory, communication,
commercial and clinical services for the pharmaceutical and
healthcare industries. 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
healthcare industries, operating from state-of the-art facilities
in the US and Europe.
The company is listed on the London Stock Exchange and is a
constituent of the FTSE 250. For more information, please go to:
www.udghealthcare.com
Forward-looking information
This announcement contains certain forward-looking statements,
beliefs or opinions, including statements with respect to the
Company's business, financial condition and results of operations.
By their nature these statements involve risk and uncertainty
because they relate to events and depend on circumstances that may
or may not occur in the future. These statements reflect the
reasonable beliefs and expectations of the Company, are made in
good faith and are based on the information available to the
Company at the date of this announcement. However, a number of
factors, including known and unknown risks, uncertainties and other
factors, which are in some cases beyond the Company's control,
could cause actual results and developments to differ materially
from those expressed or implied by the forward looking
statements.
Finance Review
for the year ended 30 September 2018
Revenue
Revenue of $1,315.2 million for the year was 8% ahead of 2017
(5% on a constant currency basis). Ashfield increased revenue by
12% and Sharp increased revenue by 3%. Group underlying revenue
declined by 2%, excluding the impact of foreign exchange,
acquisitions and disposals.
Adjusted operating profit
Adjusted operating profit of $147.5m was 14% ahead (12% on a
constant current basis) of 2017.
Adjusted net operating margin
The adjusted net operating margin for the year of 13.1% was an
increase on the 12.6% margin reported in 2017. The positive margin
effect of acquisitions and higher revenue growth in the higher
margin businesses more than offset the impact of additional Future
Fit operating costs.
Adjusted profit before tax
Net interest costs, pre-exceptional items, for the year of $8.7
million are 16% lower than 2017, which is as a result of the
repayment of guaranteed senior unsecured notes in September 2017.
This delivered an adjusted profit before tax of $138.8 million
which is 17% ahead of 2017 (15% on a constant currency basis).
Taxation
The effective taxation rate has decreased from 22.2% in 2017 to
17.1% in 2018 following the enactment of the US Tax Cuts and Jobs
Act, along with the benefit of a number of other gains during the
second half of the year.
Adjusted diluted earnings per share
Adjusted earnings per share (EPS) is 24% ahead (22% on a
constant currency basis) of 2017 at 45.94 $ cent. Underlying EPS
increased by 11% excluding the benefit of acquisitions completed in
2017 and during the year and favourable currency movements.
Exceptional items
The Group incurred an exceptional charge of $85.8 million after
tax for the year.
A goodwill impairment charge of $57.6 million was recognised in
the six month period to 31 March 2018 in relation to Aquilant,
partially offset by an exceptional gain of $8.9 million relating to
the exit of two Aquilant clients in the year. A tax charge of $1.0
million was incurred in relation to these items. On 8 August 2018
the Group completed the disposal of Aquilant which resulted in a
loss on disposal of $41.9 million.
A charge of $18.0 million was incurred in relation to
restructuring costs. The charge primarily relates to redundancy and
onerous lease costs incurred as part of the restructuring of the
Group's internal operating structures. A tax credit of $3.6 million
was incurred in relation to these items.
Following the enactment of the US Tax Cuts and Jobs Act, the
Group recognised an exceptional tax gain of $9.7 million in the
income statement arising on the one-off remeasurement of certain US
tax liabilities.
Deferred contingent consideration of $11.6 million in respect of
Cambridge BioMarketing, MicroMass Communications and Sellxpert was
released in the year following review of expected performance
against earn-out targets. A tax charge of $1.0 million was incurred
in relation to these items.
Disposal of Aquilant
On 8 August 2018 the Group completed the disposal of Aquilant
which resulted in a loss on disposal of $41.9 million. The total
proceeds receivable by the Group are expected to be $23.0 million
and related costs of disposals were $1.7 million. In line with the
Group's strategy, proceeds from the transaction will be used to
fund the continued development of the Group's higher growth and
higher margin Ashfield and Sharp businesses.
Aquilant contributed $82.7 million of revenue (full year 2017
$96.3 million) and $3.3 million of operating profit (full year 2017
$6.4 million) to the Group for the year.
Foreign exchange
The Group operates in 26 countries, with its primary foreign
exchange exposure being the translation of local income statements
and balance sheets into US dollar for Group reporting purposes. The
re-translation of overseas profits to US dollar has increased
constant currency EPS growth of 22% to a reported EPS growth rate
of 24%, which is primarily due to the strength in Sterling in 2018
versus 2017.
The average 2018 exchange rates were $1: GBP0.7436 and $1:
EUR0.8403 (2017 $1:GBP0.7891 and $1:EUR0.9047).
Cash flow
The following table displays cash flow information for the years
ended 30 September 2018 and 2017:
2018 2017
$'000 $'000
-------------------------------------------------------------- --------- ----------
Net cash inflow from operating activities 102,516 107,778
Net cash outflow from investing activities (76,323) (262,864)
Net cash outflow from financing activities (33,063) (91,373)
-------------------------------------------------------------- --------- ----------
Net change in cash and cash equivalents (6,870) (246,459)
Effect of exchange rate changes on cash and cash equivalents (500) 5,199
Cash and cash equivalents at beginning of year 187,469 428,729
Cash and cash equivalents end of year 180,099 187,469
-------------------------------------------------------------- --------- ----------
Net cash inflow from operating activities
The net cash inflow from operating activities was $102.5 million
(2017: $107.8 million).
2018 2017
$'000 $'000
------------------------------------------- --------- ---------
Adjusted EBITDA 181,790 156,886
Interest paid (9,682) (10,608)
Income taxes paid (18,107) (14,522)
Working capital increase (50,350) (19,269)
Other cash outflows (1,135) (4,709)
------------------------------------------- --------- ---------
Net cash inflow from operating activities 102,516 107,778
------------------------------------------- --------- ---------
Working capital increased by $50.4 million (2017: $19.3
million). The increase in working capital was due to the growth in
the business, the reversal of favourable timing inflows during
2017, and temporary cashflow delays arising from the implementation
of Oracle under the Future Fit programme. Other cash outflows of
$1.1 million relates to transaction costs paid of $5.3 million
partially offset by an exceptional items inflow of $4.2 million.
This consisted of an $8.9 million inflow relating to Aquilant
receipts from agency terminations, offset by a $4.6 million outflow
relating to the Group's restructuring.
Net cash outflow from investing activities
Net cash outflow from investing activities was $76.3 million,
compared to $262.9 million in 2017. This decrease was principally
due to reduced outflows on acquisitions. During 2018, $39.6 million
was invested in property, plant and equipment. This included
investment in Sharp's facilities, in particular the investments in
Sharp Clinical's sites in the US and UK, and its commercial
packaging facility in the Netherlands. Computer software outflows
of $21.0 million included investments in Future Fit, which will
enable our businesses to grow in an efficient manner. The Group
invested $33.5 million on the acquisition of subsidiaries, which
represented the initial consideration for the acquisitions of
Create NYC and SmartAnalyst, while additionally $5.9 million was
paid in deferred contingent consideration associated with prior
year acquisitions. Offsetting these outflows, a net cash inflow of
$21.0 million was received on the disposal of Aquilant.
Net cash outflow from financing activities
Net cash outflow from financing activities decreased by $58.3
million to $33.1 million, from $91.4 million in 2017, principally
due to the repayment of guaranteed senior unsecured notes in
September 2017. During 2018, dividend payments of $34.7 million
were made relating to the final 2017 dividend and the 2018 interim
dividend.
Balance sheet
Net debt at the end of the year was $60.8 million ($180.1
million cash and $240.9 million debt). The net debt to annualised
EBITDA ratio is 0.34 times debt (2017: 0.32 times debt) and net
interest is covered 22.0 times (2017: 16.3 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. At 30 September 2018, the Group also had $255.7
million of undrawn overdraft and loan facilities.
Return on capital employed (ROCE)
The Group's ROCE was 12.7%, compared to 12.8% in 2017. Details
on how this was calculated are on page 33.
Dividends
The directors are proposing a final dividend of 11.75 $ cent per
share representing an increase of 21% on the 2017 final dividend of
9.72 $ cent per share. This represents 20% growth in the total
dividend for the year to 16.00 $ 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 11.75 $ cent per share will
be paid on 4 February 2019 to ordinary shareholders on the
Company's register at 5.00 p.m. on 11 January 2019.
Investor relations
UDG Healthcare's executive 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 focused on increasing the awareness of
the Company among the investor and analyst community.
The Group maintains continuous engagement with its shareholders
during the year (apart from when the Group is in a close period),
specifically following the release of our interim and preliminary
results, and at the time of major developments including M&A
transactions. The Group continues to ensure that a broad geographic
base of institutional investors is reached through participation in
roadshows, attendance at conferences and investor events. During
2018, the UDG Healthcare senior management team conducted over 220
institutional investor one-on-one meetings and participated at
twelve investor conferences, including five in the US.
Additionally, the Group hosted a successful two day Capital
Markets event at its US facilities in Fort Washington, PA
(Ashfield) and Allentown, PA (Sharp) in February 2018. In addition
to various presentations during the event, attendees were given
tours of the facilities and met with the wider Ashfield and Sharp
senior management teams. The event was attended by the Group's CEO,
CFO and Chairman.
The number of independent equity analysts covering the Group
increased to thirteen during the year (from ten) reflecting the
continued 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 2018
Year ended 30 September 2018
Exceptional items Total
Pre-exceptional items (Note 7) 30 September 2018 Year ended 30 September 2017
Notes $'000 $'000 $'000 $'000
Revenue 3 1,315,186 - 1,315,186 1,219,755
Cost of sales (927,877) (5,706) (933,583) (871,909)
----------------- ------ ---------------------- ------------------ ------------------- -----------------------------
Gross profit 387,309 (5,706) 381,603 347,846
Selling and
distribution
expenses (217,475) (11,042) (228,517) (192,536)
Administration
expenses (17,250) (1,214) (18,464) (23,313)
Other operating
expenses (37,037) (99,550) (136,587) (25,450)
Other operating
income - 8,882 8,882 -
Transaction
costs (2,374) - (2,374) (4,028)
Share of joint
ventures'
profit after
tax 4 958 - 958 667
----------------- ------ ---------------------- ------------------ ------------------- -----------------------------
Operating profit 114,131 (108,630) 5,501 103,186
Finance income 5 5,235 11,576 16,811 18,905
Finance expense 5 (13,926) - (13,926) (29,257)
----------------- ------ ---------------------- ------------------ ------------------- -----------------------------
Profit before
tax 105,440 (97,054) 8,386 92,834
Income tax
expense (15,792) 11,263 (4,529) (20,976)
----------------- ------ ---------------------- ------------------ ------------------- -----------------------------
Profit for the
financial year 89,648 (85,791) 3,857 71,858
----------------- ------ ---------------------- ------------------ ------------------- -----------------------------
Profit
attributable to:
Owners of the
parent 89,586 (85,791) 3,795 71,858
Non-controlling
interest 62 - 62 -
----------------- ------ ---------------------- ------------------ ------------------- -----------------------------
89,648 (85,791) 3,857 71,858
----------------- ------ ---------------------- ------------------ ------------------- -----------------------------
Earnings per
ordinary share:
Basic earnings
per share -
cent 8 1.53c 28.97c
Diluted earnings
per share -
cent 8 1.52c 28.83c
Group Statement of Comprehensive Income
for the year ended 30 September 2018
2018 2017
Notes $'000 $'000
Profit for the financial year 3,857 71,858
Other comprehensive income/(expense):
Items that will not be reclassified
to profit or loss:
Remeasurement gain on Group defined
benefit schemes 15 2,422 11,098
Deferred tax on Group defined benefit
schemes
- Pre-exceptional item (187) (599)
- Exceptional item 408 -
-------- ---------
221 (599)
2,643 10,499
--------------------------------------------- ------ -------- -------- --------- -------
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation adjustment 12 (5,466) 10,109
Reclassification on loss of control
of subsidiary undertakings 12 33,383 -
Group cash flow hedges:
- Effective portion of cash flow hedges
- movement into reserve (433) (15,271)
- Effective portion of cash flow hedges
- movement out of reserve (3,032) 14,865
-------- ---------
Effective portion of cash flow hedges 12 (3,465) (406)
- Movement in deferred tax - movement
into reserve 54 1,909
- Movement in deferred tax - movement
out of reserve 379 (1,858)
-------- ---------
Net movement in deferred tax 12 433 51
--------------------------------------------- ------ -------- -------- --------- -------
24,885 9,754
--------------------------------------------- ------ -------- -------- --------- -------
Total other comprehensive income 27,528 20,253
--------------------------------------------- ------ -------- -------- --------- -------
Total comprehensive income for the
financial year 31,385 92,111
--------------------------------------------- ------ -------- -------- --------- -------
Total comprehensive income attributable
to:
Owners of the parent 31,323 92,111
Non-controlling interests 62 -
--------------------------------------------- ------ -------- -------- --------- -------
31,385 92,111
--------------------------------------------- ------ -------- -------- --------- -------
Group Statement of Changes in Equity
for the year ended 30 September 2018
Equity Other Attributable
share Share Retained reserves to owners of Non-controlling Total
capital premium earnings (Note 12) the parent interest equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 October 2017 14,620 196,496 836,087 (166,656) 880,547 109 880,656
Profit for the
financial year - - 3,795 - 3,795 62 3,857
Other
comprehensive
income/(expense):
Effective portion
of cash flow
hedges - - - (3,465) (3,465) - (3,465)
Deferred tax on
cash flow hedges - - - 433 433 - 433
Translation
adjustment - - - (5,466) (5,466) - (5,466)
Reclassification
on loss of
control of
subsidiary
undertakings - - - 33,383 33,383 - 33,383
Remeasurement gain
on defined
benefit schemes - - 2,422 - 2,422 - 2,422
Deferred tax on
defined benefit
schemes - - 221 - 221 - 221
Total
comprehensive
income for the
year - - 6,438 24,885 31,323 62 31,385
Transactions with
shareholders:
New shares issued 23 1,341 - - 1,364 - 1,364
Share-based
payment expense - - - 6,643 6,643 - 6,643
Dividends paid to
equity holders - - (34,705) - (34,705) - (34,705)
Release from
share-based
payment reserve - - 827 (827) - - -
At 30 September
2018 14,643 197,837 808,647 (135,955) 885,172 171 885,343
------------------- ---------- ----------- ---------- ---------- ------------- ---------------- -----------
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 12) 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
------------------- --------- -------- --------- ---------- ----------------- ---------------- ----------
Group Balance Sheet
as at 30 September 2018
2018 2017
Note $'000 $'000
ASSETS
Non-current
Property, plant and equipment 9 179,593 168,403
Goodwill 10 515,954 542,554
Intangible assets 10 241,538 227,617
Investment in joint ventures and associates 10 9,729 8,838
Derivative financial instruments 11 330 1,302
Deferred income tax assets 5,272 4,025
Employee benefits 15 12,935 12,379
Total non-current assets 965,351 965,118
--------------------------------------------- ------ ---------- ---------------
Current
Inventories 31,248 55,060
Trade and other receivables 347,192 307,388
Cash and cash equivalents 11 180,099 187,469
Current income tax assets 793 2,464
Derivative financial instruments 11 2,474 2,450
Total current assets 561,806 554,831
--------------------------------------------- ------ ---------- ---------------
Total assets 1,527,157 1,519,949
--------------------------------------------- ------ ---------- ---------------
EQUITY
Equity share capital 14,643 14,620
Share premium 197,837 196,496
Other reserves 12 (135,955) (166,656)
Retained earnings 808,647 836,087
--------------------------------------------- ------ ---------- ---------------
Equity attributable to owners of the parent 885,172 880,547
Non-controlling interest 171 109
Total equity 885,343 880,656
--------------------------------------------- ------ ---------- ---------------
LIABILITIES
Non-current
Interest-bearing loans and borrowings 11 243,099 244,077
Other payables 5,451 -
Provisions 13 68,900 58,470
Employee benefits 15 - 3,162
Deferred income tax liabilities 45,225 54,279
Derivative financial instruments 11 319 352
Total non-current liabilities 362,994 360,340
--------------------------------------------- ------ ---------- ---------------
Current
Interest-bearing loans and borrowings 11 272 58
Trade and other payables 225,526 248,145
Current income tax liabilities 13,477 16,845
Provisions 13 39,545 13,905
Total current liabilities 278,820 278,953
--------------------------------------------- ------ ---------- ---------------
Total liabilities 641,814 639,293
--------------------------------------------- ------ ---------- ---------------
Total equity and liabilities 1,527,157 1,519,949
--------------------------------------------- ------ ---------- ---------------
Group Cash Flow Statement
for the year ended 30 September 2018
2018 2017
$'000 $'000
Cash flow from operating activities
Profit before tax 8,386 92,834
Finance income (5,235) (18,905)
Finance expense 13,926 29,257
Exceptional items 97,054 -
--------------------------------------------------------------------------------------- ---------- ----------
Operating profit 114,131 103,186
Share of joint ventures' profit after tax (958) (667)
Transaction costs 2,374 4,028
Depreciation charge 24,477 21,221
(Profit)/loss on disposal of property, plant and equipment (340) 55
Amortisation of intangible assets 37,037 25,450
Share-based payment expense 5,069 3,613
Decrease in inventories 4,529 1,893
Increase in trade and other receivables (53,361) (24,612)
(Decrease)/increase in trade payables, provisions and other payables (1,518) 3,450
Exceptional items received/(paid) 4,228 (165)
Transaction costs paid (5,363) (4,544)
Cash generated from operations 130,305 132,908
Interest paid (9,682) (10,608)
Income taxes paid (18,107) (14,522)
Net cash inflow from operating activities 102,516 107,778
--------------------------------------------------------------------------------------- ---------- ----------
Cash flows from investing activities
Interest received 1,662 1,044
Purchase of property, plant and equipment (39,580) (29,466)
Proceeds from disposal of property, plant and equipment 986 146
Investment in intangible assets - computer software (21,047) (21,884)
Acquisitions of subsidiaries (net of cash and cash equivalents acquired) (33,479) (198,439)
Deferred contingent consideration paid (5,911) (14,265)
Disposal of subsidiary undertakings (net of cash and cash equivalents disposed) 21,046 -
--------------------------------------------------------------------------------------- ---------- ----------
Net cash outflow from investing activities (76,323) (262,864)
--------------------------------------------------------------------------------------- ---------- ----------
Cash flows from financing activities
Proceeds from issue of shares (including share premium thereon) 1,364 3,175
Repayments of interest-bearing loans and borrowings (2,118) (63,266)
Proceeds from interest-bearing loans and borrowings 2,507 -
Repayments of finance leases (111) (3)
Dividends paid to equity holders of the Company (34,705) (31,279)
--------------------------------------------------------------------------------------- ---------- ----------
Net cash outflow from financing activities (33,063) (91,373)
--------------------------------------------------------------------------------------- ---------- ----------
Net decrease in cash and cash equivalents (6,870) (246,459)
Translation adjustment (500) 5,199
Cash and cash equivalents at beginning of year 187,469 428,729
--------------------------------------------------------------------------------------- ---------- ----------
Cash and cash equivalents at end of year 180,099 187,469
--------------------------------------------------------------------------------------- ---------- ----------
Cash and cash equivalents is comprised of:
Cash at bank and short term deposits 180,099 187,469
--------------------------------------------------------------------------------------- ---------- ----------
Notes to the Preliminary Announcement
for the year ended 30 September 2018
1. Reporting entity
UDG Healthcare plc (the 'Company') and its subsidiaries
(together the 'Group') delivers advisory, communications,
commercial, clinical and packaging services to the healthcare
industry. The Company is a public limited company whose shares are
publicly traded. It is incorporated and domiciled in Ireland. The
address of its registered office is 20 Riverwalk, Citywest Business
Campus, Citywest, Dublin 24, Ireland. The preliminary consolidated
financial information for the year ended 30 September 2018 is for
the Company, its subsidiaries and the Group's interest in joint
ventures and associates.
2. Basis of preparation and accounting policies
This announcement has been prepared on the basis of the results
and financial position that the directors expect will be reflected
in the audited statutory accounts when these are completed. The
financial information presented in this report has been prepared in
accordance with the Group's accounting policies under International
Financial Reporting Standards ('IFRS') issued by the International
Accounting Standards Board ('IASB') as adopted by the European
Union ('EU'); and those parts of the Companies Act 2014 applicable
to companies reporting under IFRS. Full details of the accounting
policies adopted by the Group are contained in the consolidated
financial statements included in the Group's 2017 Annual Report,
which is available on the Group's website;
www.udghealthcare.com.
The accounting policies adopted are consistent with those of the
previous year. There are no new IFRS standards or amendments
effective from 1 October 2017 which had a material effect on the
financial information included in this report. A number of new
accounting standards will become effective for the Group in future
periods. These will be outlined in the consolidated financial
statements contained in the Group's Annual Report for the year
ended 30 September 2018.
The financial information presented herein does not represent
full statutory financial statements that are required by Section
347 of the Companies Act, 2014 to be annexed to the annual return
of the Company. The financial information does not include all the
information and disclosures required in the annual financial
statements. The statutory financial statements for the year ended
30 September 2017 have been annexed to the annual return and filed
with the Irish Registrar of Companies. The audit report on those
statutory financial statements was unqualified and did not contain
any matters to which attention was drawn by way of emphasis. The
statutory financial statements for the year ended 30 September 2018
will be annexed to the next annual return of the Company and filed
with the Registrar of Companies.
3. Segmental analysis
The Group's operations are divided into the following operating
segments each of which operates in a distinct sector of the
healthcare services market:
Ashfield - Ashfield is a global leader in commercialisation
services for the pharmaceutical and healthcare industry, operating
across three broad areas of activity: advisory, communications and
commercial & clinical services. It focuses on supporting
healthcare professionals and patients at all stages of the product
life cycle. The division provides field and contact centre sales
teams, healthcare communications, patient support, audit, advisory,
medical information and event management services to over 300
healthcare companies.
Sharp - Sharp is a global leader in contract commercial
packaging and clinical trial packaging services for the
pharmaceutical and biotechnology industries, operating from
state-of-the-art facilities in the US and Europe.
Aquilant - During the year, the Group disposed of Aquilant (Note
6). 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 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:
2018 2017
$'000 $'000
Revenue
Ashfield 921,406 821,412
Sharp 311,073 302,076
Aquilant 82,707 96,267
---------------------------------------------------------------------------------------------- ---------- ----------
1,315,186 1,219,755
---------------------------------------------------------------------------------------------- ---------- ----------
Operating profit before amortisation of acquired intangibles, transaction costs and
exceptional
items
Ashfield 98,451 81,567
Sharp 45,775 41,304
Aquilant 3,280 6,409
---------------------------------------------------------------------------------------------- ---------- ----------
Adjusted operating profit 147,506 129,280
Amortisation of acquired intangibles (31,001) (22,066)
Transaction costs (2,374) (4,028)
Exceptional items (108,630) -
---------------------------------------------------------------------------------------------- ---------- ----------
Operating profit 5,501 103,186
Finance income 16,811 18,905
Finance expense (13,926) (29,257)
---------------------------------------------------------------------------------------------- ---------- ----------
Profit before tax 8,386 92,834
Income tax expense (4,529) (20,976)
---------------------------------------------------------------------------------------------- ---------- ----------
Profit after tax for the year 3,857 71,858
---------------------------------------------------------------------------------------------- ---------- ----------
Geographical analysis of revenue
2018 2017
$'000 $'000
Republic of Ireland 38,724 42,178
United Kingdom 305,677 318,934
North America 715,792 629,001
Rest of World 254,993 229,642
---------------------------------- ---------- ----------
1,315,186 1,219,755
---------------------------------- ---------- ----------
4. Share of joint ventures' profit after tax
2018 2017
$'000 $'000
Revenue 66,271 61,883
Expenses, inclusive of tax (64,355) (60,549)
----------------------------------- --------- ---------
Profit after tax 1,916 1,334
Group's equity interest 49.99% 49.99%
----------------------------------- --------- ---------
Group's share of profit after tax 958 667
----------------------------------- --------- ---------
5. Finance income and expense
2018 2017
$'000 $'000
Finance income
Income arising from cash deposits 1,763 1,057
Fair value adjustment to guaranteed senior unsecured loan notes 213 2,840
Foreign currency gain on retranslation of guaranteed senior unsecured loan notes 3,032 14,865
Ineffective portion of cash flow hedges - 76
Net finance income on defined benefit pensions 227 67
5,235 18,905
---------------------------------------------------------------------------------- --------- ---------
Finance expense
Interest on overdrafts (95) (46)
Interest on bank loans and other loans:
-wholly repayable within 5 years (7,510) (5,482)
-wholly repayable after 5 years (1,997) (5,641)
Interest on finance leases (3) (3)
Unwinding of discount on provisions (840) (380)
Fair value adjustments to fair value hedges (213) (2,840)
Fair value of cash flow hedges transferred to equity (3,032) (14,865)
Ineffective portion of cash flow hedges (236) -
(13,926) (29,257)
---------------------------------------------------------------------------------- --------- ---------
Net finance expense, pre-exceptional items (8,691) (10,352)
Finance income relating to exceptional items 11,576 -
---------------------------------------------------------------------------------- --------- ---------
Net finance income/(expense) 2,885 (10,352)
---------------------------------------------------------------------------------- --------- ---------
6. Disposal of subsidiaries
On 8 August 2018 the Group completed the disposal of Aquilant.
The following tables summarise the consideration received, loss on
disposal and the net cash flow arising on the disposal:
2018
$'000
Consideration
Cash consideration received 22,389
Deferred consideration 580
------------------------------------------------------------------- ----------
Total consideration received 22,969
------------------------------------------------------------------- ----------
Assets and liabilities disposed of
Property, plant and equipment 3,871
Goodwill 7,703
Deferred tax assets 333
Inventories 18,923
Trade and other receivables 16,266
Trade and other payables (18,634)
Cash and cash equivalents 1,343
------------------------------------------------------------------- ----------
Net assets disposed of 29,805
------------------------------------------------------------------- ----------
Loss on disposal
Total consideration received 22,969
Net assets disposed of (29,805)
Recycling of foreign currency translation reserve
on disposal (33,383)
Disposal costs (1,683)
------------------------------------------------------------------- ----------
Net loss on disposal of subsidiaries (41,902)
------------------------------------------------------------------- ----------
Net cash flow from disposal of subsidiaries
Cash and cash equivalents received 22,389
Cash and cash equivalents disposed of (1,343)
------------------------------------------------------------------- ----------
Net cash inflow from disposal of subsidiaries 21,046
------------------------------------------------------------------- ----------
The cash inflow from disposal of subsidiaries is presented within cash
flows from investing activities in the Group Cash flow Statement.
The net loss on disposal is presented as an exceptional item (Note
7) within other operating expenses. The net loss on disposal includes
the recycling of the foreign currency translation reserve of $33,383,000.
This is the cumulative foreign translation difference arising from
the translation of the net assets of Aquilant denominated in Euro and
Sterling to US dollars in each reporting period. As these exchange
differences were previously recognised in the Group's other comprehensive
income and the foreign exchange reserve, this charge has a nil impact
on shareholder's equity and the Group's adjusted diluted EPS.
An impairment charge of $57,648,000 on the carrying value of goodwill
in relation to Aquilant arose in the six month period to 31 March 2018
as previously disclosed in the 2018 interim results. This is presented
as an exceptional item in Note 7.
---------------------------------------------------------------------------------
7. Exceptional items
Exceptional items are those which, in management's judgement,
should be disclosed separately by virtue of their nature or amount.
These exceptional items are separately presented in the Income
Statement caption to which they relate. An analysis of exceptional
items is disclosed below.
2018
$'000
Contract terminations (a) (8,882)
Impairment of goodwill (b) 57,648
Loss on disposal of subsidiary (c) 41,902
Restructuring costs and other (d) 14,536
Onerous lease (e) 2,924
Impairment of property, plant and equipment (f) 502
--------------------------------------------- ----- ---------
Net operating exceptional items 108,630
Deferred contingent consideration (g) (11,576)
Net exceptional items before taxation 97,054
Exceptional items tax credit (1,548)
Deferred tax (h) (9,715)
--------------------------------------------- ----- ---------
Net exceptional items after taxation 85,791
---------------------------------------------------- ---------
(a) Contract termination
On 22 December 2017, Aquilant exited the VSI contract for a
consideration of $10,135,000 in respect of the contract termination
to include certain assets of the trade including stock. On 29 March
2018, Aquilant exited the Link contract and received consideration
of $4,930,000 in respect of the contract termination to include
certain assets of the trade. Exiting these contracts included the
transfer of stock and other assets of $5,658,000 and resulted in
restructuring costs of $525,000, primarily relating to redundancy
costs. The total exceptional cash inflow net of costs and net of
stock transferred in the year was $8,865,000 and the expected total
net cash inflow is $9,021,000. A tax charge of $1,010,000 was
incurred in relation to these items.
(b) Impairment of goodwill
A goodwill impairment charge of $57,648,000 arose during the six
month period to 31 March 2018, as the Group wrote down the carrying
value of goodwill in relation to Aquilant. This impairment resulted
from the loss of contracts in the period, and an anticipated
reduction in future earnings and resultant cashflows from the lower
base. Aquilant was subsequently disposed of on 8 August 2018, see
note 6 for further details.
(c) Loss on disposal of subsidiary
On 8 August 2018 the Group announced the disposal of Aquilant
and incurred a loss on disposal of $41,902,000 which is detailed in
note 6.
(d) Restructuring costs and other
During the year, the Group implemented a restructuring of its
internal operating structures in Ashfield and Sharp, with a view to
achieving greater flexibility, accountability and performance.
Restructuring costs and other includes redundancy costs of
$12,623,000 and accelerated share-based payment expense of
$1,574,000. The balance of $339,000 relates to other costs
associated with the restructuring.
(e) Onerous lease
Onerous lease costs were incurred in relation to the exit of
leased properties as a consequence of the organisation
restructuring during the year.
(f) Impairment of property, plant and equipment
Impairment of property, plant and equipment arose due to the
exit of properties as a result of the realignment of the Group's
structure.
(g) Deferred contingent consideration
Deferred contingent consideration relates to $3,469,000 in
respect of Cambridge BioMarketing, $5,250,000 in respect of
MicroMass Communications and $2,857,000 in respect of Sellxpert.
These amounts were released in the year following a review of
expected performance against earn-out targets. A deferred tax
charge of $1,005,000 arose as a result of the release of contingent
consideration presented within exceptional item tax line.
(h) Deferred tax
The exceptional credit to the income statement of $9,715,000
reflects the one-off benefit of a reduction in the Group's deferred
tax liabilities following the enactment of the US Tax Cuts and Jobs
Act. A credit of $408,000 also arises in the statement of
comprehensive income as a further consequence of this
legislation.
The following table provides a reconciliation of the exceptional
costs to the Group Income Statement:
Selling and Other Other Total
Cost of distribution Administration operating operating Finance exceptional
sales expenses expenses expenses income income items
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Contract
terminations - - - - (8,882) (8,882)
Impairment of
goodwill - - - 57,648 - - 57,648
Loss on
disposal of
subsidiary - - - 41,902 - - 41,902
Restructuring
costs and
other 3,366 9,956 1,214 - - - 14,536
Onerous lease 1,990 934 - - - - 2,924
Impairment of
property,
plant and
equipment 350 152 - - - - 502
Deferred
contingent
consideration - - - - - (11,576) (11,576)
--------------- ------------ ------------- ---------------- ------------ ------------ ------------ ------------
Net
exceptional
items before
taxation 5,706 11,042 1,214 99,550 (8,882) (11,576) 97,054
--------------- ------------ ------------- ---------------- ------------ ------------ ------------ ------------
Exceptional
items tax
credit (1,548)
Deferred tax (9,715)
--------------- ------------ ------------- ---------------- ------------ ------------ ------------ ------------
Net
exceptional
items after
taxation 85,791
--------------- ------------ ------------- ---------------- ------------ ------------ ------------ ------------
8. Earnings per ordinary share
Total Total
2018 2017
$'000 $'000
Profit attributable to the owners of the parent 3,795 71,858
Adjustment for amortisation of acquired intangible assets (net of tax) 23,287 16,996
Adjustment for transaction costs (net of tax) 2,194 3,658
Adjustment for exceptional items (net of tax) 85,791 -
Adjusted profit attributable to owners of the parent 115,067 92,512
------------------------------------------------------------------------ ---------- ---------
2018 2017
Number Number
of shares of shares
Weighted average number of shares 248,517,745 248,001,114
Number of dilutive shares under option 1,947,043 1,238,273
------------------------------------------------------------ ------------ ------------
Weighted average number of shares, including share options 250,464,788 249,239,387
------------------------------------------------------------ ------------ ------------
2018 2017
Basic earnings per share - $ cent 1.53 28.97
Diluted earnings per share - $ cent 1.52 28.83
Adjusted basic earnings per share - $ cent(1) 46.30 37.30
Adjusted diluted earnings per share - $ cent(1) 45.94 37.12
(1) Adjusted profit attributable to equity holders of the parent
from continuing operations is stated before the amortisation of
acquired intangible assets ($23.3m, net of tax), transaction costs
($2.2m, net of tax), loss on disposal of Aquilant ($41.9m) and
other exceptional items ($43.9m, net of tax).
Non-GAAP information
The Group reports certain financial measurements that are not
required under International Financial Reporting Standards (IFRS)
which represent the generally accepted accounting principles (GAAP)
under which the Group reports. The Group believes that the
presentation of these non-GAAP measurements provides useful
supplemental information which, when viewed in conjunction with our
IFRS financial information, provides investors with a more
meaningful understanding of the underlying financial and operating
performance of the Group and its divisions. These measurements are
also used internally to evaluate the historical and planned future
performance of the Group's operations and to measure executive
management's performance based remuneration.
Treasury shares have been excluded from the weighted average
number of shares in issue used in the calculation of earnings per
share. 1,357,684 (2017: 2,567,081) 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 2018
buildings equipment Motor vehicles equipment construction Total
$'000 $'000 $'000 $'000 $'000 $'000
Year ended 30
September 2018
Opening net book
amount 76,463 80,564 271 10,014 1,091 168,403
Additions in the
year 3,637 17,016 6 1,962 19,849 42,470
Arising on
acquisition - 70 - 108 - 178
Depreciation (5,412) (13,727) (45) (5,293) - (24,477)
Impairment (502) (188) - - - (690)
Disposals in year (355) (4,033) (24) (668) - (5,080)
Reclassifications (1,778) 2,521 (55) 55 (743) -
Translation
adjustment (522) (549) (1) (139) - (1,211)
At 30 September
2018 71,531 81,674 152 6,039 20,197 179,593
------------------- ---------------- --------------- --------------- ---------------- --------------- ----------
At 30 September
2018
Cost or deemed
cost 104,783 160,280 331 25,332 20,197 310,923
Accumulated
depreciation (33,252) (78,606) (179) (19,293) - (131,330)
------------------- ---------------- --------------- --------------- ---------------- --------------- ----------
Net book amount 71,531 81,674 152 6,039 20,197 179,593
------------------- ---------------- --------------- --------------- ---------------- --------------- ----------
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 2017 542,554 227,617 8,838
Investment in computer software - 21,047 -
Amortisation of acquired intangible
assets - (31,001) -
Amortisation of computer software - (6,036) -
Impairment charge (57,648) - -
Disposals in year (7,703) - -
Arising on acquisitions - computer
software - 9 -
Arising on acquisitions 42,041 32,772 -
Share of joint ventures' profit after tax - - 958
Translation adjustment (3,290) (2,870) (67)
-------------------------------------------- ----------- ------------- ----------------------------------------
At 30 September 2018 515,954 241,538 9,729
-------------------------------------------- ----------- ------------- ----------------------------------------
11. Net debt
2018 2017
$'000 $'000
Current assets
Cash and cash equivalents 180,099 187,469
Derivative financial instruments 2,474 2,450
Non-current assets
Derivative financial instruments 330 1,302
Current liabilities
Interest bearing loans (227) 72
Finance leases (45) (130)
Non-current liabilities
Interest bearing loans (243,091) (244,043)
Finance leases (8) (34)
Derivative financial instruments (319) (352)
----------------------------------- ---------- ----------
Net debt at 30 September (60,787) (53,266)
----------------------------------- ---------- ----------
12. Other reserves
Cash flow Share-based Capital
hedge payment Foreign Treasury redemption
exchange shares reserve Total
$'000 $'000 $'000 $'000 $'000 $'000
At 1 October 2017 (12,854) 8,992 (155,465) (7,676) 347 (166,656)
Effective portion
of cash flow
hedges (3,465) - - - - (3,465)
Deferred tax on
cash flow hedges 433 - - - - 433
Share-based
payment expense - 6,643 - - - 6,643
Release from
share-based
payment reserve - (827) - - - (827)
Translation
adjustment - - (5,466) - - (5,466)
Reclassification
on loss of
control of
subsidiary
undertakings - - 33,383 - - 33,383
------------------ ---------------- --------------- ---------------- ---------------- --------------- ----------
At 30 September
2018 (15,886) 14,808 (127,548) (7,676) 347 (135,955)
------------------ ---------------- --------------- ---------------- ---------------- --------------- ----------
Cash flow Share-based Capital
hedge payment Foreign Treasury redemption
exchange shares reserve Total
$'000 $'000 $'000 $'000 $'000 $'000
At 1 October 2016 (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)
------------------ ---------------- --------------- ---------------- ---------------- --------------- ----------
13. Provisions
Deferred contingent Restructuring and
consideration Onerous leases other costs 2018 2017
Total Total
$'000 $'000 $'000 $'000 $'000
At the beginning of the
year 71,878 324 173 72,375 16,067
(Release)/charge to
income statement (11,576) 2,924 12,962 4,310 -
Arising on acquisitions 42,408 - - 42,408 65,939
Utilised during the
year (5,911) (331) (4,306) (10,548) (14,430)
Unwinding of discount 840 - - 840 380
Measurement period
adjustment - - - - 999
Translation adjustment (724) (21) (195) (940) 3,420
------------------------ ----------------------- ----------------- ----------------------- ---------- ---------
At end of year 96,915 2,896 8,634 108,445 72,375
------------------------ ----------------------- ----------------- ----------------------- ---------- ---------
Non-current 67,409 1,455 36 68,900 58,470
Current 29,506 1,441 8,598 39,545 13,905
Total 96,915 2,896 8,634 108,445 72,375
------------------------ ----------------------- ----------------- ----------------------- ---------- ---------
14. Acquisition of subsidiary undertakings
On 1 July 2018, the Group acquired 100% of the issued share
capital of Create NYC LLC, an innovative New York-based healthcare
creative communications agency, offering the tactical execution of
sales and marketing materials for its international pharmaceutical
clients. Create NYC's offering comprises a unique, disruptive model
which gives its clients high impact, on-demand flexible marketing
support with a flat fee structure. The acquisition of Create NYC is
in line with Ashfield's strategy to expand into areas of
differentiated but aligned adjacencies to its core scientific
communication capabilities. The combination of Create NYC with
Ashfield Healthcare Communications provides the opportunity to
diversify Create NYC's client base and expand internationally.
The Group acquired 100% of SmartAnalyst Inc on 1 July 2018.
SmartAnalyst is a US-based strategic consulting and analytics
business focused on the pharmaceutical and biotech sector with
operations in New York, London and Gurgaon, India. The acquisition
of SmartAnalyst is in line with Ashfield's strategy to expand its
advisory service proposition for its healthcare clients. Ashfield
will provide leverage and opportunities to grow SmartAnalyst's
customer base outside the US through Ashfield's global
business.
The provisional fair value of the assets and liabilities
acquired in the year ended 30 September 2018 are set out below:
Create
NYC SmartAnalyst Total
$'000 $'000 $'000
---------------------------------- -------- --------------- ---------
Property, plant and equipment 5 173 178
Intangible assets - arising
on acquisition 23,030 9,742 32,772
Intangible assets - computer
software - 9 9
Deferred tax assets - 49 49
Trade and other receivables 3,046 3,524 6,570
Trade and other payables (738) (2,509) (3,247)
Current tax liabilities - (50) (50)
Deferred tax liabilities - (2,435) (2,435)
Cash acquired 3,533 7,748 11,281
------------------------------------ -------- --------------- ---------
Net assets acquired 28,876 16,251 45,127
Goodwill 27,928 14,113 42,041
------------------------------------ -------- --------------- ---------
Consideration 56,804 30,364 87,168
------------------------------------ -------- --------------- ---------
Satisfied by:
Cash consideration 20,044 24,716 44,760
Deferred contingent consideration 36,760 5,648 42,408
------------------------------------ -------- --------------- ---------
Total consideration 56,804 30,364 87,168
------------------------------------ -------- --------------- ---------
Net cash outflow - arising on
acquisitions
Cash consideration 20,044 24,716 44,760
Less: Cash and cash equivalents (3,533) (7,748) (11,281)
------------------------------------ -------- --------------- ---------
Net cash outflow 16,511 16,968 33,479
------------------------------------ -------- --------------- ---------
The intangible assets arising on the acquisitions primarily
relate to the trade names, customer relationships, and customer
contracts.
The total transaction related costs for completed and aborted
acquisitions amounts to $2,374,000. 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 payments 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
$47,378,000.
Acquisitions completed during the year contributed revenue of
$7,430,000 and profit for the year of $210,000 for the period from
date of acquisition until 30 September 2018. The proforma revenue
and profit of the Group for the year ended 30 September 2018 would
have been $1,336,483,000 and $3,018,000 respectively had the
acquisitions taken place at the start of the reporting period. The
proforma results for the year includes the estimate of tax expense
and amortisation of intangible assets recognised on
acquisition.
15. Employee benefits
2018 2017
$'000 $'000
At the beginning of the year 9,217 (6,503)
Current service cost (3,033) (2,387)
Settlement gain 1,588 2,728
Interest 227 67
Contributions paid 2,578 4,218
Remeasurement gain 2,422 11,098
Translation adjustment (64) (4)
------------------------------- -------- --------
At end of year 12,935 9,217
------------------------------- -------- --------
Employee benefit asset 12,935 12,379
Employee benefit liability - (3,162)
------------------------------- -------- --------
Total 12,935 9,217
------------------------------- -------- --------
As set out in the consolidated financial statements for the year
ended 30 September 2017, 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 includes both the United States pension scheme and
the Republic of Ireland (ROI) pension schemes, while the employee
benefit liability in the prior year relates to the ROI pension
schemes. The ROI schemes have a remeasurement gain in the current
year which comprises of higher than expected returns on plan assets
and changes in the assumptions used to measure liabilities of the
plan. The US scheme has a remeasurement gain in the year arising
from a higher than expected return on plan assets, and a change in
financial assumptions. In the ROI 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 $1,588,000 (2017:
$2,728,000).
The principal assumptions and associated changes are as
follows:
Republic of Ireland Schemes United States Scheme
-------------------------------------------- ----------------------------------------
2018 2017 2016 2018 2017 2016
Rate of increase
in salaries n/a n/a n/a 2.75-4.00% 2.75-4.00% 2.75-4.00%
Rate of increase
in pensions 0-1.60% 0-1.65% 0-1.50% 0.00% 0.00% 0.00%
Inflation rate 1.60% 1.65% 1.50% 2.75% 2.75% 2.75%
Discount rate 2.00% 2.05% 1.25% 4.10% 3.60% 3.30%
16. Financial instruments
The fair values of financial assets and financial liabilities,
together with the carrying amounts in the consolidated balance
sheet at 30 September 2018, are as follows:
Carrying
value Fair value
$'000 $'000
Financial assets
Trade and other receivables 318,339 318,339
Derivative financial assets 2,804 2,804
Cash and cash equivalents 180,099 180,099
------------------------------------ ---- -----------
501,242 501,242
------------------------------------ ---- --------- -----------
Financial liabilities
Trade and other payables 163,646 163,646
Derivative financial liabilities 319 319
Interest-bearing loans
and borrowings 243,318 247,088
Finance lease liabilities 53 53
Deferred contingent consideration 96,915 96,915
504,251 508,021
------------------------------------- --- --------- -----------
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 - 2,804 - 2,804
------------------------------------- ------- ------- ------- -------
- 2,804 - 2,804
---------------------------------- ------- ------- ------- -------
Liabilities measured
at fair value
At fair value through
profit or loss
Deferred contingent consideration - - 96,915 96,915
Designated as hedging
instruments
Cross currency interest
rate swaps - 319 - 319
- 319 96,915 97,234
---------------------------------- ------- ------- ------- -------
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 2018 assets/liabilities the balance 2017
the balance sheet sheet Net as presented in sheet Net
the balance sheet
$000 $'000 $'000 $'000 $'000 $'000
Derivative
financial assets 2,804 - 2,804 3,752 - 3,752
Derivative
financial
liabilities 319 - 319 352 - 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 earn-out agreement taking into
consideration the expected level of profitability of each
acquisition. The provision for deferred contingent consideration is
principally in respect of acquisitions completed during 2012, 2016,
2017 and 2018.
The significant unobservable inputs are:
-- forecast weighted average EBIT growth rate 24% (2017: 26%); and
-- risk adjusted discount rate 0.02% - 2.75% (2017: 0.02% -
1.55%). The increase is principally due to the increase in US base
rates.
Inter-relationship between significant unobservable inputs and
fair value measurement:
The estimated fair value would increase/(decrease) if:
-- 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 2018, holding the other inputs constant,
would have the following effects:
Increase Decrease
$'000 $000
----------------------------------------- --------- ---------
Effect of change in assumption
on income statement sstatstatstatements
Annual EBIT growth rate (1% movement) 134 (134)
Risk-adjusted discount rate (1%
movement) 655 (522)
-------------------------------------------- --------- ---------
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.
2018 2017
Times Times
Net debt to annualised EBITDA 0.34 0.32
Annualised EBITDA interest cover 22.0 16.3
-------------------------------------- ------- -------
17. Dividends
The Board has proposed a final dividend of 11.75 $ cent per
share which gives a total dividend of 16.00 $ cent for 2018. This
dividend has not been provided for in the balance sheet at 30
September 2018 as there was no present obligation to pay the
dividend at year end. During the financial year, the final dividend
for 2017 (9.72 $ cent per share) and the interim dividend for 2018
(4.25 $ cent per share) were paid giving rise to a reduction in
shareholders' funds of $34,705,000.
18. Foreign currency
The principal exchange rates used in translating sterling and
dollar balance sheets and income statements were as follows:
2018 2017
$1=StgGBP $1=StgGBP
Balance sheet (closing rate) 0.7635 0.7469
Income statement (average rate) 0.7436 0.7891
$1=EuroEUR $1=EuroEUR
Balance sheet (closing rate) 0.8604 0.8470
Income statement (average rate) 0.8403 0.9047
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.
The Group has provided a loan to Magir Limited, the Group's
joint venture investment, gross of interest, of Stg GBP11,371,000
(2017: Stg GBP10,997,000).
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 $12,593,000 for the year ended 30 September 2018
(2017: $10,587,000).
20. Capital commitments
Capital expenditure authorised but not contracted for amounted
to $8,502,000 (2017: $18,900,000) at the balance sheet date.
21. Contingent liabilities
The Group is subject to various claims that arise in the
ordinary course of business. During the year, the Group received a
claim from McKesson arising from its purchase of United Drug from
the Group in 2016. At present, while the Group continues to engage
with McKesson to investigate the claim, the merit of the claim,
likely outcome, timing and potential impact on the Group cannot be
determined. Accordingly, and as a result of these uncertainties,
the Group cannot make any assessment of the likely outcome, or
estimate the financial effect of any such claim as at the date of
approval of the financial statements.
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 26 November 2018.
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
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.
2018 2017
Calculation $'000 $'000
----------------------- ----------------- --------- ---------
Revenue Income Statement 1,315,186 1,219,755
Pass - through revenue (185,494) (191,269)
------------------------------------------ --------- ---------
Net revenue 1,129,692 1,028,486
------------------------------------------ --------- ---------
Adjusted operating profit
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).
2018 2017
Calculation $'000 $'000
------------------------------------ ----------------- ------- -------
Operating profit Income Statement 5,501 103,186
Transaction costs Income Statement 2,374 4,028
Amortisation of acquired intangible
assets Note 10 31,001 22,066
Exceptional items Note 7 108,630 -
Adjusted operating profit 147,506 129,280
------------------------------------------------------- ------- -------
Adjusted profit before tax
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).
2018 2017
Calculation $'000 $'000
------------------------------------ ----------------- -------- -------
Profit before tax Income Statement 8,386 92,834
Transaction costs Income Statement 2,374 4,028
Amortisation of acquired intangible
assets Note 10 31,001 22,066
Exceptional items Note 7 97,054 -
Adjusted profit before tax 138,815 118,928
-------------------------------------------------------- ------- -------
Adjusted operating margin
Definition
Measures the adjusted operating profit as a percentage of
revenue.
2018 2017
Calculation $'000 $'000
--------------------------- ------ ---------------------------- ---------
Adjusted operating profit Per above 147,506 129,280
Revenue Income Statement 1,315,186 1,219,755
-------------------------- -------------------------- --------- ---------
Adjusted operating margin 11.2% 10.6%
------------------------------- -------------------------------- ---------
Adjusted net operating margin
Definition
Measures the adjusted operating profit as a percentage of net
revenue.
2018 2017
Calculation $'000 $'000
------------------------------- ------------- --------- ---------
Adjusted operating profit Per above 147,506 129,280
Net revenue Per above 1,129,692 1,028,486
------------------------------ -------------- --------- ---------
Adjusted net operating margin 13.1% 12.6%
----------------------------------- -------------------- ---------
Adjusted effective tax rate
Definition
The Group adjusted 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.
2018 2017
Calculation $'000 $'000
---------------------------------------------- ----------------- ------- -------
Tax charge Income Statement 4,529 20,976
Tax relief with respect to transaction
costs 180 370
Deferred tax credit with respect to acquired
intangible amortisation 7,715 5,070
Tax relief with respect to exceptional
items Note 7 1,548 -
Deferred tax credit associated with the Note 7
US Tax Cuts and Jobs Act 9,715 -
---------------------------------------------- ----------------- ------- -------
Income tax expense before exceptional,
transaction costs and deferred tax attaching
to amortisation of acquired intangible
assets 23,687 26,416
----------------------------------------------------------------- ------- -------
Adjusted profit before tax Per above 138,815 118,928
Adjusted effective tax rate 17.1% 22.2%
----------------------------------------------------------------- ------- -------
Adjusted and annualised EBITDA
Definition
Adjusted EBITDA is included as a new performance measure in 2018
as it is used internally for performance management and is also a
useful supplemental measure for external stakeholders. Adjusted
EBITDA is adjusted operating profit (operating profit before
amortisation of acquired intangible assets, transaction costs and
exceptional items) before depreciation, share-based payment
expense, amortisation of computer software, the share of joint
venture profits and profit/(loss) on disposal of property, plant
and equipment.
The annualised EBITDA used for debt covenant compliance
purposes, amends adjusted EBITDA to include the annualisation of
the EBITDA for acquisitions and exclude share-based payment
expense, transaction costs and the EBITDA of completed
disposals.
2018 2017
Calculation $'000 $'000
------------------------------------------- -------------------- ------- -------
Operating profit Income Statement 5,501 103,186
Exceptional items Note 7 108,630 -
Transaction costs Income Statement 2,374 4,028
Amortisation of acquired intangible assets Note 10 31,001 22,066
------------------------------------------- -------------------- ------- -------
Adjusted operating profit 147,506 129,280
Share-based payment expense Cash Flow Statement 5,069 3,613
Depreciation Cash Flow Statement 24,477 21,221
Amortisation of computer software Note 10 6,036 3,384
Joint venture profit share Income Statement (958) (667)
(Profit)/loss on disposal of property,
plant and equipment Cash Flow Statement (340) 55
Adjusted EBITDA 181,790 156,886
Share-based payment expense Cash Flow Statement (5,069) (3,613)
Transaction costs (2,374) (4,028)
EBITDA of completed disposals (2,845) -
Annualised EBITDA of acquisitions(1) 6,079 14,827
----------------------------------------------------------------- ------- -------
Annualised EBITDA 177,581 164,072
----------------------------------------------------------------- ------- -------
(1) Includes EBITDA for acquisitions which were not part of the
Group for the full financial year.
Financial ratios
Definition
The net debt to EBITDA and EBITDA interest cover ratios
disclosed in note 16 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 5). Net debt 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 is
calculated in note 11.
Return on capital employed (ROCE)
Definition
ROCE is the 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 adjusted for the historical amortisation of acquired
intangible assets and restructuring charges.
2018 2017
Calculation $'000 $'000
----------------------------------- ---------- --------- ---------
Balance
Net assets Sheet 885,343 880,656
Net debt Note 11 60,787 53,266
----------------------------------- ---------- --------- ---------
Assets before net debt 946,130 933,922
Historical intangible amortisation 189,206 176,997
Historical restructuring costs 38,365 47,494
----------------------------------------------- --------- ---------
Total capital employed 1,173,701 1,158,413
----------------------------------------------- --------- ---------
Average total capital employed 1,166,057 1,006,869
Adjusted operating profit Per above 147,506 129,280
----------------------------------- ---------- --------- ---------
Return on capital employed 12.7% 12.8%
----------------------------------------------- --------- ---------
Constant currency
Definition
The translation of foreign denominated earnings can be impacted
by movements in foreign exchange rates versus US dollars, the
Group's presentation currency. In order to present a better
reflection of underlying performance in the year, the Group
retranslates foreign denominated prior year earnings at current
year exchange rates.
Year ended Year ended
30 September 30 September
2018 2017
Revenue - constant currency $'000 $'000
Revenue 1,315,186 1,219,755
Currency impact - 37,176
--------------------------------------------------- -------------- --------------
Revenue - constant currency 1,315,186 1,256,931
--------------------------------------------------- -------------- --------------
Revenue - constant currency increase on 2017 58,255
Revenue - constant currency increase on 2017 % 5%
--------------------------------------------------- -------------- --------------
Net revenue - constant currency $'000 $'000
Net revenue 1,129,692 1,028,486
Currency impact - 32,340
--------------------------------------------------- -------------- --------------
Net revenue - constant currency 1,129,692 1,060,826
--------------------------------------------------- -------------- --------------
Net revenue - constant currency increase on 2017 68,866
Net revenue - constant currency increase on 2017
% 6%
--------------------------------------------------- -------------- --------------
Adjusted operating profit - constant currency $'000 $'000
Adjusted operating profit 147,506 129,280
Currency impact - 2,812
--------------------------------------------------- -------------- --------------
Adjusted operating profit - constant currency 147,506 132,092
--------------------------------------------------- -------------- --------------
Adjusted operating profit - constant currency
increase on 2017 15,414
Adjusted operating profit - constant currency
increase on 2017 % 12%
--------------------------------------------------- -------------- --------------
Adjusted profit before tax - constant currency $'000 $'000
Adjusted profit before tax 138,815 118,928
Currency impact - 2,019
--------------------------------------------------- -------------- --------------
Adjusted profit before tax - constant currency 138,815 120,947
--------------------------------------------------- -------------- --------------
Adjusted profit before tax - constant currency
increase on 2017 17,868
Adjusted profit before tax - constant currency
increase on 2017 % 15%
--------------------------------------------------- -------------- --------------
Adjusted diluted earnings per share ('EPS') -
constant currency $'000 $'000
Adjusted profit attributable to owners of the
parent 115,067 92,512
Currency impact - 1,737
--------------------------------------------------- -------------- --------------
Adjusted profit attributable to owners of the
parent - constant currency 115,067 94,249
--------------------------------------------------- -------------- --------------
Weighted average number of shares used in diluted
EPS calculation 250,464,788 249,239,387
Adjusted diluted EPS - constant currency (cent) 45.94 37.81
Adjusted diluted EPS - constant currency increase
on 2017 (cent) 8.13
Adjusted diluted EPS - constant currency increase
on 2017 % 22%
--------------------------------------------------- -------------- --------------
The dividend per share constant currency increase on 2017
percentage disclosed is the same as actual percentage increase
in dividend per share as this is based on the disclosed US
dollars dividend per share.
Measurements removed from the additional information section
that are shown elsewhere in the preliminary announcement are as
follows:
-- Adjusted diluted earnings per share - this measurement is shown in note 8
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR PGGUPGUPRGMQ
(END) Dow Jones Newswires
November 27, 2018 02:00 ET (07:00 GMT)
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