UDG Healthcare plc Interim Report 2016

Transcription

1 UDG Healthcare plc Interim Report 2016 Another period of strong growth 19 May 2016: UDG Healthcare plc ( UDG Healthcare or Group ), a leading international healthcare services provider, announces its results for the six months to 31 March 2016 after another period of financial and strategic progress for the Group. Constant currency IFRS based Adjustments 1 Adjusted increase on 2015 Increase on 2015 'm 'm 'm % % Continuing operations Revenue Operating profit Profit before tax Diluted earnings per share (cent) Discontinued operations 2 Profit after tax Diluted earnings per share (cent) Total diluted earnings per share (cent) Dividend per share (cent) March September March 2015 Net debt ( m) Net debt/ebitda 3 (times) Non-GAAP information The Group reports certain financial measures 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 measures 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 measures 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. 1 Adjusted operating profit, profit before tax and diluted EPS from continuing operations are stated before the amortisation of acquired intangible assets ( 7.3m, pre-tax) and transaction costs ( 0.8m, pre-tax). Adjusted profit after tax from discontinued operations is stated after charging depreciation and amortisation of assets classified as held for sale ( 3.5m, net of tax) and adding back transaction costs ( 7.5m, net of tax). Profit after tax in the comparative period reflected a depreciation and amortisation charge of 3.6m, net of tax, relating to assets forming part of the discontinued operations. Under IFRS, depreciation and amortisation are not charged on assets classified as held for sale, therefore, no equivalent depreciation and amortisation has been charged on these assets in the current period s results. To provide comparable information on the performance of the discontinued operations, an estimated charge of 3.5m (net of tax) for depreciation and amortisation in the current period has been reflected in the adjustments column above. 2 The discontinued operations include United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. These operations were included in the Group s proposed disposal which was announced on 18 September 2015 and completed on 1 April EBITDA of continuing and discontinued operations before any exceptional items and transaction costs for the preceding twelve months, including annualised EBITDA of companies acquired and less EBITDA of completed disposals. There were no exceptional items, acquisitions or disposals in H

2 Chief Executive s comment Commenting on the interim performance, UDG Healthcare plc Chief Executive Officer, Brendan McAtamney said: The Group s continuing business delivered another period of strong growth during H Profit before tax increased by 18% (10% on a constant currency basis) and earnings per share increased by 15% (8% on a constant currency basis) due to a combination of robust underlying growth and the benefit of currency movements. Sharp s operating profit increased by 38% during the period while Ashfield increased operating profit by 7%. The continuing Group operating margin increased from 9.4% to 10.2%, with each division increasing its operating margin during the period. We are reiterating our full year market guidance of 6-8% EPS 1 growth for the continuing Group on a constant currency basis. The Group s activities and strategy continue to be supported by the strong growth outlook for the outsourced healthcare services market. Following the completion of the disposal of the United Drug Supply Chain businesses and MASTA in April, the Group is now in a net cash position. Underpinned by our strong balance sheet and diversified client base, UDG Healthcare remains well positioned to continue to execute our international expansion strategy and meet the growing demand for our specialist services from our global healthcare clients. Financial highlights (continuing Group only) Adjusted operating profit 1 growth of 15% (9% on a constant currency basis) to 48.4 million, with profit before tax 1 up 18% (10% on a constant currency basis). Adjusted diluted earnings per share 1 (EPS) from continuing operations increased by 15% (8% on a constant currency basis). Revenue up 6%. Net revenue up 9% compared to prior period on a constant currency basis, excluding passthrough costs and adjusting for disposals. Operating margin 1 increased from 9.4% to 10.2%. Net operating margin 2 increased from 11.1% to 11.6%. 5% increase in interim dividend to 3.05 cent per share. Reiterating our full year market guidance of 6-8% EPS growth for the continuing Group on a constant currency basis. Strategic & operating highlights Disposal of the United Drug Supply Chain businesses and MASTA completed on 1 April Ashfield s operating profit increased by 7% (underlying growth of 7%), with positive underlying growth evident across the division. The Group acquired Pegasus Public Relations Limited in April 2016, for an initial consideration of Stg 10.1 million with an additional Stg 6.7 million payable, based on the achievement of agreed profit targets over the next three years. Pegasus is a UK-based healthcare communications business, complementing the existing services provided by Ashfield Healthcare Communications. Sharp Packaging s operating profit increased by 38% (underlying growth of 25%) driven by continued strong momentum in the US business. Sharp US capacity expansion has been completed providing an additional 30% capacity once fully validated. The Group s Supply Chain Services businesses (including discontinued operations) traded in line with expectations. 1 Before the amortisation of acquired intangible assets and transaction costs. 2 Operating margin as a percentage of net revenue. Net revenue represents gross revenue adjusted for revenue associated with passthrough costs for which the Group does not earn a margin. 2

3 Group development and outlook The Group reiterates its full year guidance for constant currency adjusted diluted EPS 1 growth for the continuing Group of 6-8% based on both the current momentum and positive outlook for the remainder of EPS guidance is unchanged because the positive impact from the acquisition of Pegasus is offset by the impact of allocating an extra three months central administration costs to the continuing Group in 2016, due to the earlier than expected completion of the disposal of the United Drug Supply Chain businesses and MASTA. The Group is now in a net cash position after the receipt of the disposal proceeds in April from the sale of the United Drug Supply Chain businesses and MASTA. To complement the underlying profit growth being generated by the businesses, the Group remains active from a corporate development perspective. The Group s focus will continue to be on executing strategic M&A opportunities complementary to our market leading, high-growth businesses, Ashfield and Sharp. The build and fit out of Sharp s new packaging facility in Allentown, Pennsylvania was completed in April 2016, and the first phase of packaging suites will become operational during the second half of Once fully validated and operational, the investment at this site will increase US commercial packaging capacity by approximately 30%. The Group remains focused on ensuring that scalable infrastructure is in place to support the future organic and acquisition led growth of the business, through its Future Fit initiatives. The first phase of this project will incorporate the implementation of a Groupwide Human Resource Information System, which is anticipated to go live during the second half of 2017 with a total capital investment of 12 million. Further projects will be focused on the Group s finance and IT infrastructure. The average 2015 financial year exchange rates were 1 = and $ The average exchange rates during H were 1 = and $ (H = and $1.1899). As previously guided, the Group expects to continue its long history of dividend growth in FY16. The Board has declared an interim dividend of 3.05 cent per share, a 5% increase on the 2015 interim dividend. Preliminary results: The Group will issue preliminary results for the year to 30 September 2016 on Thursday, 24 November before the amortisation of acquired intangible assets and transaction costs. Analyst presentation: A presentation for investors and analysts will be held at the London Stock Exchange at 9.00 GMT today, Thursday, 19 May If you wish to attend, please contact Powerscourt. Alternatively, to dial into the conference call or webcast, the details are as follows: Audio webcast Conference call UK number: Ireland number: US number: Participant code: 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. 3

4 Review of Operations for the six months to 31 March 2016 Ashfield Commercial & Medical Services 1 Six months to 31 March Change m m Gross revenue UK % North America % Europe % Total gross revenue % Net revenue 2 UK % North America % Europe % Total net revenue % Operating profit UK (incl Japan) % North America (3%) Europe % Total operating profit % Operating margin Operating margin (on gross revenue) 9.6% 9.2% Net operating margin (on net revenue) 11.9% 12.2% 1 Excludes MASTA in 2016 and 2015 as it was included in the proposed disposal announced on 18 September 2015 and completed on 1 April 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 Packaging Services or Supply Chain Services. Trading across the Ashfield division was good, with H net revenue up 10% to 235.9m and operating profit up 7% to 28.0m. Adjusting for the benefit of favourable currency movements and the impact of the 2015 disposal of the non-core Speaker Bureau business, Ashfield generated underlying operating profit growth of 7% during the period. Operating margin in the period was 9.6%, whilst net operating margin (allowing for pass-through costs) was 11.9%. UK operating profit increased by 11% and net operating margin by 152bps during the period. This was primarily due to continued good progress in healthcare communications and an increased contribution from the Japanese joint venture, offsetting a weaker performance from the UK commercial business which operates in a more mature market. Reported operating profit for North America was 3% behind the prior period. Adjusting for the impact of the disposal of the Speaker Bureau business during 2015, operating profit in North America grew by 15% during the period including the benefit of favourable currency movements. European operating profit increased by 9% during H with a net operating margin of 7.9%. 4

5 Sharp Packaging Services Six months to 31 March Change m m Revenue US % EU (6%) Total revenue % Operating profit/(loss) US % EU (0.3) (0.3) - Total operating profit % Operating margin 12.2% 10.6% Sharp Packaging Services continued its strong financial performance during H with revenue increasing by 20% to 132.4m and operating profit up 38% to 16.2m. The division generated underlying constant currency operating profit growth of 25% and benefited from favourable currency movements during the period. Operating margin increased significantly (+163bps) to 12.2% during the period. The Sharp US business continued to deliver strong growth. Revenue increased by 28% compared to the prior period, while operating profit increased by 38% to 16.5m due to continued strong market demand dynamics across all packaging formats. Operating margin in the US increased to 15.2% (+111bps) driven by continued high utilisation rates. The build and fit out of the new biotech packaging facility at our Allentown campus in Pennsylvania has been completed. This will provide an additional 30% capacity for the US commercial packaging business once fully validated. The first phase of packaging suites is becoming operational and this additional capacity will allow the business to meet the growing market demand which is evident across all packaging formats in the US business. The Group anticipates that further capacity investments may be required into the medium term to meet growing client demand. Sharp Europe continues to trade close to a breakeven position. Despite a realignment of the cost base and improved business development efforts, the European packaging business continues to have capacity in excess of current requirements. Addressing this excess capacity remains a key priority for the business. Demand for serialisation services continues to increase. We continue to invest in serialisation capabilities in advance of the regulatory requirement for prescription products to be serialised from November 2017 in the US and Europe in We have now enabled over 40% of our packaging lines with serialisation capability and have worked on over 30 serialisation projects with existing clients. We will continue to enable the remainder of the US prescription packaging lines over the coming twelve months to ensure the business is fully prepared to meet our clients serialisation requirements. 5

6 Supply Chain Services (continuing) 1 Six months to 31 March Change m m Revenue (7%) Operating profit % Operating margin 8.6% 7.8% 1 Excludes United Drug Supply Chain Services, United Drug Sangers and TCP Group in 2016 and 2015 as they were included in the proposed disposal announced on 18 September 2015 and completed on 1 April Continuing operations include Aquilant and the joint venture with Medicare. Revenue was 7% behind the prior period, however, adjusting for the closure of Aquilant s UK laboratory distribution business in February 2015, underlying revenue was in line with the prior period. Operating profit was 2% ahead of the prior period and operating margin increased to 8.6%. Aquilant renewed a number of important client contracts during the period and continues to trade in line with expectations. Discontinued operations Six months to 31 March Change m m Revenue (0%) Profit after tax % 2 Profit after tax from discontinued operations is stated before amortisation of acquired intangible assets, transaction costs and exceptional items. Profit after tax in the comparative period reflected a depreciation and amortisation charge of 3.6m, net of tax, relating to assets forming part of the discontinued operations. Under IFRS, depreciation and amortisation are not charged on assets classified as held for sale, therefore, no equivalent depreciation and amortisation has been charged on these assets in the current period s results. To provide comparable information on the performance of the discontinued operations, an estimated charge of 3.5m (net of tax) for depreciation and amortisation in the current period has been reflected above. See note 8 for further details. On 1 April 2016 the Group completed the disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. These businesses are treated as discontinued operations and have performed in line with expectations for the period. 6

7 Forward-looking information Some statements in this announcement are forward looking. They represent expectations for the Group s business, and involve risks and uncertainties. The Group has based these forward-looking statements on current expectations and projections about future events. The Group believes that expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which in some cases are beyond the Group s control, actual results or performance may differ materially from those expressed or implied by such forward-looking statements. For further information, please contact: Investors and Analysts: Alan Ralph CFO UDG Healthcare plc Tel: Keith Byrne Head of Investor Relations and Strategy UDG Healthcare plc Tel: Media: Business / Financial media: Lisa Kavanagh / Jack Hickey Powerscourt Tel: About UDG Healthcare plc: Listed on the London Stock Exchange, UDG Healthcare plc (LON: UDG) is a leading international provider of services to the healthcare industry, employing over 7,000 employees at operations across 19 countries including the US, UK, Ireland and Germany. UDG Healthcare plc operates across three divisions: Ashfield Commercial & Medical Services, Sharp Packaging Services and Supply Chain Services. Ashfield Commercial & Medical Services is a global leader in the provision of sales, marketing and healthcare communications services to pharmaceutical clients. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle enabling improved compliance and clinical outcomes. The division provides sales teams, healthcare communications, telesales, nurse educators, medical information, pharmacovigilance, regulatory and event management services to over 300 healthcare companies in 18 countries. Sharp Packaging Services is a global leader in contract packaging and clinical trial packaging services for pharmaceutical clients, operating from state of the art facilities across the US and Europe. Sharp is also a world leader in Track and Trace serialisation services, which will require all prescription drugs to have a unique serial code for authentication and traceability. Supply Chain Services consists of Aquilant, a leading provider of outsourced sales, marketing, distribution and engineering services to the medical and scientific sectors in the UK, Ireland and the Netherlands and our interest in Medicare, a pharmacy chain in Northern Ireland. The company is listed on the London Stock Exchange and is a constituent of the FTSE 250. For more information please go to: 7

8 Finance Review for the six months to 31 March 2016 Revenue Revenue from continuing operations of million for the six months to 31 March 2016 was 6% ahead (2% on a constant currency basis) of the same period in Ashfield Commercial & Medical Services reported revenue 3% ahead of the prior period (up 10% excluding pass through revenue) and Sharp Packaging Services reported revenue 20% ahead of the prior period. The continuing Supply Chain Services divisional revenue was 7% down on 2015 due to the closure of Aquilant s UK laboratory distribution business in February Adjusted operating profit Adjusted operating profit from continuing operations of 48.4 million is 15% ahead (9% on a constant currency basis) of H Adjusted operating margin The adjusted operating margin for the continuing businesses for the period of 10.2% was higher than the margin of 9.4% in H This continues the upward trend in operating margin in recent years as the Group focuses on operating efficiencies and achieving faster growth from businesses with higher operating margins. Adjusted profit before tax Net interest costs for the period of 7.1 million are 2% higher than H This delivered a profit before tax from continuing operations of 41.2 million which is 18% ahead of 2015 (10% on a constant currency basis). Further details on the principal exchange rates used are provided in note 17. Taxation The effective taxation rate 1 on continuing operations has increased from 22.1% in H to 23.5% in H This is because a larger proportion of profit has been generated in countries with higher taxation rates. Adjusted diluted earnings per share Earnings per share from continuing operations is 15% ahead (8% on a constant currency basis) of H at cent. On a combined continuing and discontinued basis, adjusted diluted earnings per share increased by 13% to cent. Cash flow Net debt increased by 32.2 million in the period to million (31 March 2015: million). The net cash inflow from operating activities was 26.3 million with 36.6 million being generated by continuing operations and an outflow of 10.3 million from discontinued operations million was invested in our continuing operations in property, plant and equipment and computer software. This includes IT investment to enable our businesses to grow in an efficient manner and investment in the new facility in Sharp Packaging US. 5.3 million was paid in deferred consideration associated with prior year acquisitions while 19.9 million relating to the final 2015 dividend was paid during the period. Balance sheet Net debt at the end of the period was million. The net debt to annualised EBITDA ratio is 1.63 times and net interest is covered 12.6 times by annualised EBITDA. Financial covenants in our principal debt facilities are based on net debt to EBITDA being less than 3.5 times and EBITDA interest cover being greater than three times. Return on capital employed The ROCE for continuing operations was 13.6%, up from 13.5% at the end of The Group targets ROCE of 15% within three years for all investments. The Group has invested significantly in acquisitions and capital expenditure in recent years and we anticipate that organic growth in future years will increase Group ROCE to the targeted 15% level. 1 Before the amortisation of acquired intangible assets, transaction costs and 2015 exceptional items. 8

9 Dividends The directors are proposing an interim dividend of 3.05 cent per share representing an increase of 5% on the 2015 interim dividend. The interim dividend is payable to shareholders on the Company s register at 5.00 pm on 27 May 2016 and will be paid on 20 June Investor relations UDG Healthcare s senior management team spend a significant amount of time meeting with shareholders and the international financial community. We have invested in dedicated investor relations resources and are focused on increasing the awareness of the Company among the investor and analyst community. We communicate regularly with our shareholders throughout the year, specifically following the release of our interim and preliminary results, and at the time of major developments. Our website 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. The Board of Directors considers it important to understand the views of shareholders and receive regular updates on investor perceptions. 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. 9

10 Principal risks and uncertainties The Transparency (Directive 2004/109/EC) Regulations 2007 require the disclosure of the principal risks and uncertainties which could have a material impact on the Group s performance over the remainder of the financial year. The Group operates within a highly regulated environment and the expectations of our key stakeholders, which include our clients and regulators, are very high. Our services include communicating to healthcare professionals, appropriate product use, pharmaceutical packaging and the distribution of pharmaceutical products for normal use or clinical trials. We focus on making sure that we deliver these services correctly and in a compliant way. However, failure to do so could result in adverse consequences for patients and our clients, so the risks that we face in delivering our services are potentially significant. The Group s ability to avoid or mitigate these risks is underpinned by detailed risk registers maintained by each of the Group s divisions and business units. These risk registers identify the risks, as well as the plans for addressing them, and the consolidated Group risk register is reviewed by the executive directors on a regular basis. The consolidated risk register is also reviewed by the Risk, Investment and Finance Committee and the Chairman of that committee reports to the Board on the outcome of each review. The principal risks and uncertainties identified by the risk management process as facing the Group are detailed below: Principal risk Mitigation Operational risks Acquisitive growth remains a core element of the Group's strategy. A failure to execute and properly integrate acquisitions, capitalise on the synergies they bring and/or maintain and develop their talent pool, may adversely affect the Group. As the Group's activities consolidate and further acquisitions are completed, the Group's client base may become more concentrated making the Group more susceptible to competitive, client merger or procurement led threats. The Group has many legal and regulatory obligations, including in respect of: (a) protection of patient information (such as HIPAA);(b) patient and employee health and safety; and(c) promotional spend. In addition many of the Group's activities are subject to stringent licensing regulations. A failure to meet any of these could result in products and services being defective, harming patients and/or giving rise to very significant liability. Throughout the Group medicines and medical devices can be packaged, supplied or administered directly to patients. The risk of inappropriate packaging, supply or administration could lead to a negative patient experience. The success of the Group is built upon effective management teams that consistently deliver superior performance. If the Group cannot attract, retain or develop suitably qualified, experienced and motivated employees, this could have an impact on business performance. 10 All potential acquisitions are assessed and evaluated to ensure the Group's defined strategic and financial criteria are met. A discreet integration process is developed for each acquisition. This process is supported by experienced management with a view to achieving identified benefits, cultivating talent and minimising general and specific integration risks. At each business review we monitor our client base and the threats and opportunities that may arise, both from our clients' activities and any concentration of our client base. The impact that any potential acquisition may have on client concentration is considered as part of the acquisition assessment process. Maintenance of legal, regulatory and quality standards is a core value of the Group. We continue to build and review our quality and compliance management systems to ensure that they are fit for purpose in the context of the Group s strategy and its legal and regulatory obligations. These reviews are supported by corporate audits on compliance, quality and environment, health and safety. Packaging and supply activity is carried out under licence and a contract with the marketing authorisation holder (MAH). This requires a regulated quality management system to ensure the integrity of the packaged product and the supply chain. Administration of medicines to patients is covered by a detailed client contract with the MAH and the local clinical governance framework. All of these processes are subject to risk assessment, training, management review, internal and external audits. The talent requirements of the Group are monitored to ensure its management teams meet prevailing requirements in skills, competencies and performance. Remuneration policies, management development, succession planning and the systems for developing talent inherited from our acquisitions are within a programme of review and redevelopment to ensure that they remain relevant and appropriate to the Group s ongoing strategy. Acquiring additional skill and competencies may result in external hires also to build depth in the management teams.

11 Principal risks and uncertainties (continued) Principal risk The continued growth and evolution of the Group requires its organisational design and infrastructure to be subject to review and successful ongoing development. A failure to do so could adversely affect the Group's ability to meet its objectives. The ability of the Group to provide its services effectively and competitively is dependent on technology and information systems that are appropriately integrated and that meet current and anticipated future business, regulatory and security requirements. Business continuity: The Group is exposed to risks that, should they arise, may give rise to the interruption of critical business processes that could adversely impact the Group or its clients. The underlying terms of the Group's commercial relationships drive the profitability of the Group. The nature of the Group's business means that the Group could be exposed to undue cost or liability if it agrees inappropriate terms. Mitigation At least once per year a thorough review on Strategy is carried out. One element of strategy is whether the organisational structure is fit for purpose. Each year the growth drivers for the business are reviewed against the current organisation to establish whether change is required. If there is a requirement to change, a formal review process such as the recently completed Future Fit review will ensue. The Group s technology and information systems and infrastructure are the subject of an ongoing strategic redesign to ensure that they are capable of meeting the Group's strategic intent and future requirements, whilst further mitigating against systems failures and the increasing threat of external interference. The Group is developing and reviewing its business continuity risks as part of the risk management and the corporate audit processes. Mitigation strategies and continuity plans are part of a structured review programme. The Group has adopted processes for identifying and mitigating against undue risks in all prospective commercial relationships, supported by personnel with expertise and/or experience in key commercial risk areas. Financial risks The Group s resources and finances must be managed in accordance with rigorous standards and stringent controls. A failure to meet those standards or implement appropriate controls may result in the Group s resources being improperly utilised or its financial statements being inaccurate or misleading. The group is exposed to liquidity, interest rate, currency and credit risks. UDG Healthcare plc s reporting currency is the euro. Given the nature of the Group s businesses, exposure arises in the normal course of business to other currencies, principally sterling and the US dollar. The financial controls of the Group, as well as their effectiveness, are monitored by the Board in the context of the standards to which the Group is subject and the expectations of its stakeholders. This monitoring is supported by a dedicated internal audit function. The Group s financial function, systems and controls are also subject to periodic review to ensure that they remain robust and fit for purpose. The management of the financial risks facing the Group is governed by policies reviewed and approved by the Board. These policies primarily cover liquidity risk, interest rate risk, currency risk and credit risk. The primary objective of the Group s policies is to minimise financial risk at a reasonable cost. The Group does not trade in financial instruments. The majority of the Group s activities are conducted in the local currency of the country of operation. As a consequence, the primary foreign exchange risk arises from the fluctuating value of the Group s net investment in different currencies and from translating non-euro profits into euro for reporting purposes. 11

12 Statement of Directors in respect of the half-yearly financial report Each of the directors confirms that to the best of their knowledge and belief: the condensed set of interim financial statements comprising the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, and the related notes have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the EU; the half-yearly financial report includes a fair review of the information required by: (a) Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and (b) Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so. The Group s auditor has not reviewed this condensed half-yearly financial report. On behalf of the Board (i) P. Gray B. McAtamney Director Director 18 May 2016 (i) The Board of UDG Healthcare plc is disclosed on the Company s website, 12

13 Condensed consolidated income statement Six months ended 31 March 2016 Restated (note 7) Six months ended 31 March 2015 Notes Pre- Total exceptional 31 March 2016 items (Unaudited) (Unaudited) Exceptional items (note 5) (Unaudited) 000 Total 31 March 2015 (Unaudited) 000 Continuing operations Revenue 3 472, , ,209 Cost of sales (303,821) (290,128) (2,050) (292,178) Gross profit 168, ,081 (2,050) 154,031 Selling and distribution expenses (111,737) (106,521) (4,221) (110,742) Administration expenses (8,618) (7,683) (1,600) (9,283) Other operating expenses (8,594) (7,931) (2,216) (10,147) Transaction costs (834) (276) - (276) Share of joint ventures profit after tax 4 1, Profit on disposal of subsidiary undertakings Operating profit 40,247 34,363 (9,819) 24,544 Finance income 6 5,493 40,853-40,853 Finance expense 6 (12,603) (47,792) - (47,792) Profit before tax from continuing operations 33,137 27,424 (9,819) 17,605 Income tax (expense)/credit (8,738) (6,775) 1,304 (5,471) Profit for the period from continuing operations 24,399 20,649 (8,515) 12,134 Profit after tax for the period from discontinued operations 7 6,967 9,798 (730) 9,068 Profit for the period 31,366 30,447 (9,245) 21,202 Profit attributable to: Owners of the parent 31,366 21,181 Non-controlling interests ,366 21,202 Profit attributable to: Continuing operations 24,399 12,134 Discontinued operations 6,967 9,068 31,366 21,202 Earnings per ordinary share: Basic continuing operations c 4.98c Basic discontinued operations c 3.72c Basic 12.75c 8.70c Diluted continuing operations c 4.95c Diluted discontinued operations c 3.70c Diluted 12.68c 8.65c 13

14 Condensed consolidated statement of comprehensive income Notes Six months ended 31 March 2016 (Unaudited) 000 Restated (note 7) Six months ended 31 March 2015 (Unaudited) 000 Profit for the period 31,366 21,202 Other comprehensive income/(expense): Items that will not be reclassified to profit or loss: Remeasurement (loss)/gain on Group defined benefit schemes 14 - Continuing operations (4,900) (14,156) - Discontinued operations 469 (618) Deferred tax on Group defined benefit schemes - Continuing operations 527 1,611 - Discontinued operations (94) 124 Items that may be reclassified subsequently to profit or loss: Foreign currency translation adjustment 11 (3,998) (13,039) - Continuing operations (26,663) 66,310 - Discontinued operations (4,640) 4,205 Reclassification on loss of control of subsidiary undertakings 11 - (165) Gain/(loss) on hedge of net investment in foreign operations 11 2,262 (21,722) Group cash flow hedges: - Effective portion of cash flow hedges movement into reserve 3,424 37,517 - Effective portion of cash flow hedges movement out of reserve (7,273) (32,891) Effective portion of cash flow hedges 11 (3,849) 4,626 - Movement in deferred tax movement into reserve (428) (4,689) - Movement in deferred tax movement out of reserve 909 4,111 Net movement in deferred tax (578) (32,409) 52,676 Other comprehensive (expense)/income, net of tax (36,407) 39,637 Total comprehensive (expense)/income, net of tax (5,041) 60,839 Total comprehensive (expense)/income attributable to: Owners of the parent (5,041) 60,818 Non-controlling interests - 21 (5,041) 60,839 Total comprehensive (expense)/income attributable to: Continuing operations (7,743) 48,060 Discontinued operations 2,702 12,779 (5,041) 60,839 14

15 Condensed consolidated statement of changes in equity Equity Other share Share Retained reserves Total capital premium earnings (Note 11) equity At 1 October , , ,912 10, ,774 Profit for the financial period ,366-31,366 Other comprehensive income/(expense): Effective portion of cash flow hedges (3,849) (3,849) Deferred tax on cash flow hedges Translation adjustment - Continuing operations (26,663) (26,663) - Discontinued operations (4,640) (4,640) Gain on hedge of net investment in foreign operations ,262 2,262 Remeasurement (loss)/gain on defined benefit schemes - Continuing operations - - (4,900) - (4,900) - Discontinued operations Deferred tax on defined benefit schemes - Continuing operations Discontinued operations - - (94) - (94) Total comprehensive income/(expense) for the period ,368 (32,409) (5,041) Transactions with shareholders: New shares issued 71 3, ,169 Share-based payment expense Dividends paid to equity holders - - (19,867) - (19,867) Release from share-based payment reserve - - 1,904 (1,904) - At 31 March 2016 unaudited 12, , ,317 (23,412) 587,859 for the six months ended 31 March 2015 (restated) Equity Other Attributable share Share Retained reserves to owners Non-controlling Total capital premium earnings (Note 11) of the parent interests equity At 1 October , , ,212 (30,173) 533,700 (21) 533,679 Profit for the financial period ,181-21, ,202 Other comprehensive income/(expense): Effective portion of cash flow hedges ,626 4,626-4,626 Deferred tax on cash flow hedges (578) (578) - (578) Translation adjustment - Continuing operations ,310 66,310-66,310 - Discontinued operations ,205 4,205-4,205 Reclassification on loss of control of subsidiary undertakings (165) (165) - (165) Loss on hedge of net investment in foreign operations (21,722) (21,722) - (21,722) Remeasurement loss on defined benefit schemes - Continuing operations - - (14,156) - (14,156) - (14,156) - Discontinued operations - - (618) - (618) - (618) Deferred tax on defined benefit schemes - Continuing operations - - 1,611-1,611-1,611 - Discontinued operations Total comprehensive income for the period - - 8,142 52,676 60, ,839 Transactions with shareholders: New shares issued 117 4, ,629-4,629 Share-based payment expense Dividends paid to equity holders - - (18,061) - (18,061) - (18,061) Release from share-based payment reserve - - 2,134 (2,134) At 31 March 2015 unaudited 12, , ,427 21, , ,051 15

16 Condensed consolidated balance sheet as at 31 March 2016 As at 31 March 2016 As at 31 March 2015 As at 30 September 2015 (Unaudited) (Unaudited) (Audited) Notes ASSETS Non-current Property, plant and equipment 9 121, , ,903 Goodwill , , ,213 Intangible assets 10 90, , ,693 Investment in joint ventures and associates 10 23,734 21,752 23,079 Derivative financial instruments 12 13,386 29,601 22,048 Deferred income tax assets 4,101 10,374 3,984 Employee benefits 14 12,459 15,882 13,067 Total non-current assets 611, , ,987 Current Inventories 55, ,048 55,017 Trade and other receivables 197, , ,248 Cash and cash equivalents , , ,078 Current income tax assets 117 4,822 1,612 Derivative financial instruments 12 4,520 4,799 4,750 Assets held for sale 7 474, ,820 Total current assets 916, , ,525 Total assets 1,527,736 1,556,102 1,594,512 EQUITY Equity share capital 12,692 12,602 12,621 Share premium 155, , ,164 Other reserves 11 (23,412) 21,334 10,077 Retained earnings 443, , ,912 Total equity 587, , ,774 LIABILITIES Non-current Interest-bearing loans and borrowings , , ,840 Provisions 13 7,167 15,593 7,508 Employee benefits 14 13,921 34,896 18,303 Deferred income tax liabilities 27,305 33,613 28,050 Total non-current liabilities 457, , ,701 Current Interest-bearing loans and borrowings 12 19, ,811 Trade and other payables 183, , ,758 Current income tax liabilities 7,403 4,851 4,452 Provisions 13 11,406 9,735 18,683 Liabilities held for sale 7 260, ,333 Total current liabilities 481, , ,037 Total liabilities 939, , ,738 Total equity and liabilities 1,527,736 1,556,102 1,594,512 16

17 Condensed consolidated cash flow statement Restated (note 7) Six months ended 31 March 2016 (Unaudited) Six months ended 31 March 2015 (Unaudited) Continuing operations Discontinued operations Total Continuing operations Discontinued operations Total Cash flows from operating activities Profit before tax 33,137 8,546 41,683 17,605 10,426 28,031 Finance income (5,493) (7) (5,500) (40,853) (5) (40,858) Finance expense 12, ,661 47, ,852 Exceptional items , ,663 Operating profit (pre-exceptional items) 40,247 8,597 48,844 34,363 11,325 45,688 Share of joint ventures profit after tax (1,437) - (1,437) (693) - (693) Depreciation charge 8,785-8,785 8,143 3,575 11,718 Loss/(profit) on disposal of property, plant and equipment 2 (11) (9) 3 (18) (15) Impairment of intangible assets - 1,031 1, Amortisation of intangible assets 8,594-8,594 8, ,207 Share-based payment expense (Increase)/decrease in inventories (2,838) 3, (1,936) 5,161 3,225 Decrease/(increase) in trade and other receivables 2,072 (9,170) (7,098) (4,952) (10,888) (15,840) Decrease in trade payables, provisions and other payables (8,940) (20,413) (29,353) (215) (7,414) (7,629) Exceptional items paid (2,076) - (2,076) (4,633) (946) (5,579) Increase in transaction costs accrued 672 6,819 7, Interest paid (5,969) - (5,969) (6,226) - (6,226) Income taxes paid (3,299) (707) (4,006) (5,438) (1,720) (7,158) Net cash inflow/(outflow) from operating activities 36,637 (10,331) 26,306 27,688 (25) 27,663 Cash flows from investing activities Interest received Purchase of property, plant and equipment (17,027) (2,306) (19,333) (16,890) (3,805) (20,695) Proceeds from disposal of property, plant and equipment Investment in intangible assets computer software (1,984) (6,051) (8,035) (684) (10,117) (10,801) Deferred contingent acquisition consideration paid (5,281) - (5,281) (210) - (210) Disposal of subsidiary undertakings (net of cash and cash equivalents disposed) Investment in joint ventures (6,124) - (6,124) Net cash outflow from investing activities (23,805) (8,339) (32,144) (23,322) (13,764) (37,086) Cash flows from financing activities Proceeds from issue of shares (including share premium thereon) 3,169-3,169 4,629-4,629 Proceeds from interest-bearing loans and borrowings ,558-11,558 Repayments of interest-bearing loans and borrowings (649) - (649) (12,673) - (12,673) Group transfers 10,567 (10,567) - 14,573 (14,573) - (Decrease)/increase in finance leases (23) - (23) 2-2 Dividends paid to equity holders of the Company (19,867) - (19,867) (18,061) - (18,061) Net cash (outflow)/inflow from financing activities (6,803) (10,567) (17,370) 28 (14,573) (14,545) Net increase/(decrease) in cash and cash equivalents 6,029 (29,237) (23,208) 4,394 (28,362) (23,968) Translation adjustment (7,921) 12,174 Cash and cash equivalents at beginning of period 214, ,255 Cash and cash equivalents at end of period 182, ,461 Cash and cash equivalents is comprised of: Cash at bank and short term deposits 182, ,461 17

18 Notes to the condensed interim financial statements 1. Reporting entity UDG Healthcare plc (the Company ) is a company domiciled in Ireland. The unaudited condensed consolidated interim financial information of the Company, are comprised of the Company and its subsidiaries (together referred to as the Group ) and the Group s interest in joint ventures and associates. The financial information presented herein does not amount to 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 2015 will be annexed to the annual return and filed with the Registrar of Companies. The audit report on those statutory financial statements was unqualified and did not contain any matters to which attention was drawn by way of emphasis. 2. Statement of compliance These unaudited condensed consolidated interim financial statements ( the interim accounts ) for the six months ended 31 March 2016 have been prepared in accordance with IAS 34, Interim Financial Reporting, as endorsed by the European Union. These interim accounts do not include all of the information required for full annual financial statements and should be read in conjunction with the most recent published consolidated financial statements of the Group. The accounting policies applied in the interim accounts are the same as those applied in the 2015 Annual Report. The Group has adopted the following standards and interpretations during the period but these did not have a material effect on the results or the financial position of the Group: Annual Improvements to IFRSs Cycle Annual improvements to IFRSs Cycle Amendments to IAS 19 Defined Benefit Plans: Employee Contributions The following standards, amendments to existing standards, and interpretations published by IASB are not yet effective for the period ended 31 March 2016 and have not been early adopted in preparing the financial statements: Amendments to IFRS 11: Accounting for acquisitions of interests in Joint Operations Amendments to IAS 16 and IAS 38: Clarification of acceptable methods of depreciation and amortisation Amendments to IAS 16: Property, Plant and Equipment and IAS 41: Bearer Plants Amendments to IAS 27: Equity method in Separate Financial Statements Amendments to IAS 1: Disclosure Initiative Annual Improvements to IFRSs Cycle Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the consolidation exception* IFRS 14: Regulatory Deferral Accounts* Amendments to IAS 7: Disclosure Initiative* Amendments to IAS 12: Recognition of deferred tax assets for unrealised losses* IFRS 15: Revenue from contracts with customers* IFRS 9: Financial Instruments* IFRS 16: Leases* Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint venture* A number of the standards (*) set out above have not yet been endorsed by the EU. These standards, interpretations and amendments to existing standards will be applied for the purposes of the Group and Company financial statements with effect from their respective effective dates. The Group is currently considering the impact of these accounting standards. The preparation of interim financial statements requires the use of certain critical accounting estimates, judgements and assumptions. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, relate primarily to goodwill impairment testing, revenue recognition, valuation and ownership of inventory, recoverability of trade receivables and valuation of provisions. The nature of the assumptions and estimates made in the preparation of the interim accounts are the same as those identified in our most recent annual report. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. There was no significant change to any of these key estimates or judgements in the six month period, other than a change to certain actuarial assumptions as set out in note 14. The income tax expense for the six month period is calculated by applying the directors best estimate of the annual effective tax rate to the profit for the period. The directors have a reasonable expectation that the Company, and the Group as a whole, have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements. As permitted by the Transparency (Directive 2004/109/EC) Regulations 2007 this Interim Report is available on However, if a physical copy is required, please contact the Company Secretary. 18