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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Udg Healthcare Public Limited Company | LSE:UDG | London | Ordinary Share | IE0033024807 | ORD EUR0.05 (CDI) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1,079.00 | 1,078.00 | 1,079.00 | 0.00 | 00:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMUDG
RNS Number : 6639Y
UDG Healthcare Public Limited Co.
19 May 2016
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 increase Increase IFRS based Adjustments(1) Adjusted on on 2015 2015 EUR'm EUR'm EUR'm % % Continuing operations Revenue 472.4 - 472.4 2 6 Operating profit 40.3 8.1 48.4 9 15 Profit before tax 33.1 8.1 41.2 10 18 Diluted earnings per share (cent) 9.86 2.91 12.77 8 15 Discontinued operations(2) Profit after tax 7.0 4.0 11.0 10 10 Diluted earnings per share (cent) 2.82 1.64 4.46 8 9 Total diluted earnings per share (cent) 12.68 4.55 17.23 8 13 Dividend per share (cent) 3.05 - 3.05 5 5 ----------------- ------------- ----------------- ------------------------ --------------- ----------- 31 31 March 30 September March 2016 2015 2015 Net debt (EUR'm) 228.0 195.8 274.9 Net debt/EBITDA(3) (times) 1.63 1.42 2.02 ----------------- ------------- ----------------- ------------------------ --------------- -----------
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 (EUR7.3m, pre-tax) and transaction costs (EUR0.8m, pre-tax).
Adjusted profit after tax from discontinued operations is stated after charging depreciation and amortisation of assets classified as held for sale (EUR3.5m, net of tax) and adding back transaction costs (EUR7.5m, net of tax). Profit after tax in the comparative period reflected a depreciation and amortisation charge of EUR3.6m, 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 EUR3.5m (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 2016.
(3) 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 H1 2016.
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 H1 2016. 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 EUR48.4 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 pass
through 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 2016.
-- 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 StgGBP10.1
million with an additional StgGBP6.7 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 pass-through costs for which the Group does not earn a margin.
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 2016. 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 2016. 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 EUR12 million. Further projects will be focused on the Group's finance and IT infrastructure.
The average 2015 financial year exchange rates were EUR1 = GBP0.7428 and $1.1482. The average exchange rates during H1 2016 were EUR1 = GBP0.7456 and $1.0986 (H1 2015 EUR1 = GBP0.7670 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 2016.
(1) 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 2016. If you wish to attend, please contact Powerscourt. Alternatively, to dial into the conference call or webcast, the details are as follows:
Audio webcast
http://edge.media-server.com/m/p/3w8qtbpi
Conference call
UK number: + 44-203-427-1907
Ireland number: + 353-1-246-5601
US number: + 1-212-444-0412
Participant code: 9775904
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.
Review of Operations
for the six months to 31 March 2016
Ashfield Commercial & Medical Services(1)
Six months to 31 March 2016 2015 Change EUR'm EUR'm ------------------------------ ------ ------ ------- Gross revenue UK 126.2 125.0 1% North America 94.5 89.6 5% Europe 70.5 69.0 2% Total gross revenue 291.2 283.6 3% Net revenue (2) UK 98.3 97.4 1% North America 77.1 60.9 27% Europe 60.5 56.5 7% Total net revenue 235.9 214.8 10% Operating profit UK (incl Japan) 15.8 14.2 11% North America 7.4 7.6 (3%) Europe 4.8 4.4 9% Total operating profit 28.0 26.2 7% 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 2016.
(2) 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 H1 2016 net revenue up 10% to EUR235.9m and operating profit up 7% to EUR28.0m.
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 H1 2016 with a net operating margin of 7.9%.
Sharp Packaging Services
Six months to 31 March 2016 2015 Change EUR'm EUR'm ------------------------- ------------------------ ------ ------- Revenue US 108.2 84.7 28% EU 24.2 25.7 (6%) Total revenue 132.4 110.4 20% Operating profit/(loss) US 16.5 12.0 38% EU (0.3) (0.3) - Total operating profit 16.2 11.7 38% Operating margin 12.2% 10.6% ------------------------- ------------------------ ------ -------
Sharp Packaging Services continued its strong financial performance during H1 2016 with revenue increasing by 20% to EUR132.4m and operating profit up 38% to EUR16.2m. 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 EUR16.5m 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 2019. 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.
Supply Chain Services (continuing)(1)
Six months to 31 March 2016 2015 Change EUR'm EUR'm ------------------------ ------ ------ ------- Revenue 48.8 52.2 (7%) Operating profit 4.2 4.1 2% 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 2016.
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 2016 2015 Change EUR'm EUR'm ------------------------ ------ ------ ------- Revenue 682.9 685.2 (0%) Profit after tax(2) 11.0 10.0 10%
(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 EUR3.6m, 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 EUR3.5m (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.
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 Keith Byrne CFO Head of Investor Relations UDG Healthcare plc and Strategy Tel: +353-1-463-2300 UDG Healthcare plc Tel: + 353-1-463-7722
Media:
Business / Financial media:
Lisa Kavanagh / Jack Hickey
Powerscourt
Tel: +44-207-250-1446
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: www.udghealthcare.com
Finance Review
for the six months to 31 March 2016
Revenue
Revenue from continuing operations of EUR472.4 million for the six months to 31 March 2016 was 6% ahead (2% on a constant currency basis) of the same period in 2015. 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 2015.
Adjusted operating profit
Adjusted operating profit from continuing operations of EUR48.4 million is 15% ahead (9% on a constant currency basis) of H1 2015.
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 H1 2015. 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 EUR7.1 million are 2% higher than H1 2015. This delivered a profit before tax from continuing operations of EUR41.2 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 H1 2015 to 23.5% in H1 2016. 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 H1 2015 at 12.77 cent. On a combined continuing and discontinued basis, adjusted diluted earnings per share increased by 13% to 17.23 cent.
Cash flow
Net debt increased by EUR32.2 million in the period to EUR228.0 million (31 March 2015: EUR274.9 million). The net cash inflow from operating activities was EUR26.3 million with EUR36.6 million being generated by continuing operations and an outflow of EUR10.3 million from discontinued operations.
EUR19.0 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. EUR5.3 million was paid in deferred consideration associated with prior year acquisitions while EUR19.9 million relating to the final 2015 dividend was paid during the period.
Balance sheet
Net debt at the end of the period was EUR228.0 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 2015.
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.
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 2016.
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 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.
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.
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 All potential acquisitions a core element of the are assessed and evaluated Group's strategy. A failure to ensure the Group's defined to execute and properly strategic and financial integrate acquisitions, criteria are met. A discreet capitalise on the synergies integration process is they bring and/or maintain developed for each acquisition. and develop their talent This process is supported pool, may adversely affect by experienced management the Group. with a view to achieving identified benefits, cultivating talent and minimising general and specific integration risks. ----------------------------------- -------------------------------------- As the Group's activities At each business review consolidate and further we monitor our client base acquisitions are completed, and the threats and opportunities the Group's client base that may arise, both from may become more concentrated our clients' activities making the Group more and any concentration of susceptible to competitive, our client base. The impact client merger or procurement that any potential acquisition led threats. may have on client concentration is considered as part of the acquisition assessment process. ----------------------------------- -------------------------------------- The Group has many legal Maintenance of legal, regulatory and regulatory obligations, and quality standards is including in respect of: a core value of the Group. (a) protection of patient We continue to build and information (such as HIPAA);(b) review our quality and patient and employee health compliance management systems and safety; and(c) promotional to ensure that they are spend. In addition many fit for purpose in the of the Group's activities context of the Group's are subject to stringent strategy and its legal licensing regulations. and regulatory obligations. A failure to meet any These reviews are supported of these could result by corporate audits on in products and services compliance, quality and being defective, harming environment, health and patients and/or giving safety. rise to very significant liability. ----------------------------------- -------------------------------------- Throughout the Group medicines Packaging and supply activity and medical devices can is carried out under licence be packaged, supplied and a contract with the or administered directly marketing authorisation to patients. The risk holder (MAH). This requires of inappropriate packaging, a regulated quality management supply or administration system to ensure the integrity could lead to a negative of the packaged product patient experience. 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 success of the Group The talent requirements is built upon effective of the Group are monitored management teams that to ensure its management consistently deliver superior teams meet prevailing requirements performance. If the Group in skills, competencies cannot attract, retain and performance. Remuneration or develop suitably qualified, policies, management development, experienced and motivated succession planning and employees, this could the systems for developing have an impact on business talent inherited from our performance. 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. ----------------------------------- -------------------------------------- The continued growth and At least once per year evolution of the Group a thorough review on Strategy requires its organisational is carried out. One element design and infrastructure of strategy is whether to be subject to review the organisational structure and successful ongoing is fit for purpose. Each development. A failure year the growth drivers to do so could adversely for the business are reviewed affect the Group's ability against the current organisation to meet its objectives. 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 ability of the Group The Group's technology to provide its services and information systems effectively and competitively and infrastructure are is dependent on technology the subject of an ongoing and information systems strategic redesign to ensure that are appropriately that they are capable of integrated and that meet meeting the Group's strategic current and anticipated intent and future requirements, future business, regulatory whilst further mitigating and security requirements. against systems failures and the increasing threat of external interference. ----------------------------------- -------------------------------------- Business continuity: The The Group is developing Group is exposed to risks and reviewing its business that, should they arise, continuity risks as part may give rise to the interruption of the risk management of critical business processes and the corporate audit that could adversely impact processes. Mitigation strategies the Group or its clients. and continuity plans are part of a structured review programme. ----------------------------------- -------------------------------------- The underlying terms of The Group has adopted processes the Group's commercial for identifying and mitigating relationships drive the against undue risks in profitability of the Group. all prospective commercial The nature of the Group's relationships, supported business means that the by personnel with expertise Group could be exposed and/or experience in key to undue cost or liability commercial risk areas. if it agrees inappropriate terms. ----------------------------------- -------------------------------------- Financial risks ----------------------------------- -------------------------------------- The Group's resources The financial controls and finances must be managed of the Group, as well as in accordance with rigorous their effectiveness, are standards and stringent monitored by the Board controls. A failure to in the context of the standards meet those standards or to which the Group is subject implement appropriate and the expectations of
controls may result in its stakeholders. This the Group's resources monitoring is supported being improperly utilised by a dedicated internal or its financial statements audit function. The Group's being inaccurate or misleading. financial function, systems and controls are also subject to periodic review to ensure that they remain robust and fit for purpose. ----------------------------------- -------------------------------------- The group is exposed to The management of the financial liquidity, interest rate, risks facing the Group currency and credit risks. 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. ----------------------------------- -------------------------------------- UDG Healthcare plc's reporting The majority of the Group's currency is the euro. activities are conducted Given the nature of the in the local currency of Group's businesses, exposure the country of operation. arises in the normal course As a consequence, the primary of business to other currencies, foreign exchange risk arises principally sterling and from the fluctuating value the US dollar. of the Group's net investment in different currencies and from translating non-euro profits into euro for reporting purposes. ----------------------------------- --------------------------------------
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, www.udghealthcare.com.
Condensed consolidated income statement
for the six months ended 31 March 2016
Six months Restated (note 7) ended 31 March Six months ended 31 March 2015 2016 Notes Pre- Total exceptional items 31 March 2016 (Unaudited) (Unaudited) EUR'000 EUR'000 Exceptional items Total (note 5) 31 March 2015 (Unaudited) (Unaudited) EUR'000 EUR'000 Continuing operations Revenue 3 472,414 446,209 - 446,209 Cost of sales (303,821) (290,128) (2,050) (292,178) -------------------- ------ ---------------- --- ------------------- ----------------------- ----------------- Gross profit 168,593 156,081 (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 1,437 693 - 693 Profit on disposal of subsidiary undertakings 5 - - 268 268 -------------------- ------ ---------------- --- ------------------- ----------------------- ----------------- 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 - 21 -------------------- ------ ---------------- --- ------------------------------ ------ ----------------------- 31,366 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 8 9.92c 4.98c Basic - discontinued operations 8 2.83c 3.72c
-------------------- ------ ---------------- --- ------------------------------ ------ ----------------------- Basic 12.75c 8.70c -------------------- ------ ---------------- --- ------------------------------ ------ ----------------------- Diluted - continuing operations 8 9.86c 4.95c Diluted - discontinued operations 8 2.82c 3.70c -------------------- ------ ---------------- --- ------------------------------ ------ ----------------------- Diluted 12.68c 8.65c -------------------- ------ ---------------- --- ------------------------------ ------ -----------------------
Condensed consolidated statement of
comprehensive income
for the six months ended 31 March 2016
Restated (note Six months 7) ended Six 31 March months 2016 ended 31 March 2015 (Unaudited) (Unaudited) Notes EUR'000 EUR'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 --------------------------------------- -------- -------- ------------- ----------- ------------ (3,998) (13,039) --------------------------------------- -------- -------- ------------- ----------- ------------ Items that may be reclassified subsequently to profit or loss: Foreign currency translation adjustment 11 * 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 11 481 (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 -------------------------------------- -------- -------
Condensed consolidated statement of changes in
equity
for the six months ended 31 March 2016
Equity Other share Share Retained reserves Total capital premium earnings (Note 11) equity EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 At 1 October 2015 12,621 152,164 433,912 10,077 608,774 Profit for the financial period - - 31,366 - 31,366 Other comprehensive income/(expense): Effective portion of cash flow hedges - - - (3,849) (3,849) Deferred tax on cash flow hedges - - - 481 481 Translation adjustment * Continuing operations - - - (26,663) (26,663) * Discontinued operations - - - (4,640) (4,640) Gain on hedge of net investment in foreign operations - - - 2,262 2,262 Remeasurement (loss)/gain on defined benefit schemes * Continuing operations - - (4,900) - (4,900) * Discontinued operations - - 469 - 469 Deferred tax on defined benefit schemes * Continuing operations - - 527 - 527 * Discontinued operations - - (94) - (94) ------------------------------------------------------- --------- -------- --------- ---------- --------- Total comprehensive income/(expense) for the period - - 27,368 (32,409) (5,041) Transactions with shareholders: New shares issued 71 3,098 - - 3,169 Share-based payment expense - - - 824 824 Dividends paid to equity holders - - (19,867) - (19,867) Release from share-based payment reserve - - 1,904 (1,904) - ------------------------------------------------------- --------- -------- --------- ---------- --------- At 31 March 2016 - unaudited 12,692 155,262 443,317 (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 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 At 1 October 2014 12,485 147,176 404,212 (30,173) 533,700 (21) 533,679 Profit for the financial period - - 21,181 - 21,181 21 21,202 Other comprehensive income/(expense): Effective portion of cash flow hedges - - - 4,626 4,626 - 4,626 Deferred tax on cash flow hedges - - - (578) (578) - (578) Translation adjustment * Continuing operations - - - 66,310 66,310 - 66,310 * Discontinued operations - - - 4,205 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 - - 124 - 124 - 124 ------------------------------------ -------- -------- --------- ---------- -------------- ---------------- ------------ Total comprehensive income for the period - - 8,142 52,676 60,818 21 60,839 Transactions with shareholders: New shares issued 117 4,512 - - 4,629 - 4,629 Share-based payment expense - - - 965 965 - 965 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 12,602 151,688 396,427 21,334 582,051 - 582,051 ------------------------------------ -------- -------- --------- ---------- -------------- ---------------- ------------
Condensed consolidated balance sheet
as at 31 March 2016
As at 31 March As at 31 March As at 30 September 2015 2016 2015 (Unaudited) (Unaudited) (Audited) Notes EUR'000 EUR'000 EUR'000 ASSETS Non-current Property, plant and equipment 9 121,702 193,902 117,903 Goodwill 10 345,962 381,384 358,213 Intangible assets 10 90,296 147,134 101,693 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 611,640 800,029 639,987 -------------------------------------------- ------ ----------------- ----------------- -------------------------- Current Inventories 55,981 169,048 55,017 Trade and other receivables 197,845 431,943 205,248 Cash and cash equivalents 12 182,949 145,461 214,078 Current income tax assets 117 4,822 1,612 Derivative financial instruments 12 4,520 4,799 4,750 Assets held for sale 7 474,684 - 473,820 Total current assets 916,096 756,073 954,525 -------------------------------------------- ------ ----------------- ----------------- -------------------------- Total assets 1,527,736 1,556,102 1,594,512 -------------------------------------------- ------ ----------------- ----------------- -------------------------- EQUITY Equity share capital 12,692 12,602 12,621 Share premium 155,262 151,688 152,164 Other reserves 11 (23,412) 21,334 10,077 Retained earnings 443,317 396,427 433,912 -------------------------------------------- ------ ----------------- ----------------- -------------------------- Total equity 587,859 582,051 608,774 LIABILITIES Non-current Interest-bearing loans and borrowings 12 409,577 453,925 415,840 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 457,970 538,027 469,701 -------------------------------------------- ------ ----------------- ----------------- -------------------------- Current Interest-bearing loans and borrowings 12 19,293 837 20,811 Trade and other payables 183,694 420,601 191,758 Current income tax liabilities 7,403 4,851 4,452 Provisions 13 11,406 9,735 18,683 Liabilities held for sale 7 260,111 - 280,333 -------------------------------------------- ------ ----------------- ----------------- -------------------------- Total current liabilities 481,907 436,024 516,037 -------------------------------------------- ------ ----------------- ----------------- -------------------------- Total liabilities 939,877 974,051 985,738 -------------------------------------------- ------ ----------------- ----------------- -------------------------- Total equity and liabilities 1,527,736 1,556,102 1,594,512 -------------------------------------------- ------ ----------------- ----------------- --------------------------
Condensed consolidated cash flow statement
for the six months ended 31 March 2016
Restated (note 7) Six months ended 31 March 2016 Six months ended 31 March 2015 (Unaudited) (Unaudited) --------------------------------------- ------------------------------------- Continuing Discontinued Continuing Discontinued operations operations Total operations operations Total EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 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 12,603 58 12,661 47,792 60 47,852 Exceptional items - - - 9,819 844 10,663 --------------------------------- ----------- ------------- ----------- --- ----------- ------------- --------- 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 1,031 - - - Amortisation of intangible assets 8,594 - 8,594 8,307 900 9,207 Share-based payment expense 824 - 824 965 - 965 (Increase)/decrease in inventories (2,838) 3,523 685 (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 7,491 - - - 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 220 7 227 197 5 202 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 267 11 278 46 153 199 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) - - - 343 - 343 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 - - - 11,558 - 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 214,078 157,255 --------------------------------- ----------- ------------- ----------- --- ----------- ------------- --------- Cash and cash equivalents at end of period 182,949 145,461 --------------------------------- ----------- ------------- ----------- --- ----------- ------------- --------- Cash and cash equivalents is comprised of: Cash at bank and short term deposits 182,949 145,461
Notes to the condensed interim financial statements
for the six months ended 31 March 2016
1. Reporting entity
UDG Healthcare plc (the "Company") is a company domiciled in Ireland. The unaudited condensed consolidated interim financial information of the Company for the six months ended 31 March 2016, 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 2011-2013 Cycle * Annual improvements to IFRSs 2010-2012 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 2012-2014 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 www.udghealthcare.com. However, if a physical copy is required, please contact the Company Secretary.
3. Segmental analysis
The Group's operations are divided into the following operating segments:
Ashfield Commercial & Medical Services - The Ashfield Commercial and Medical Services segment provides sales and marketing services ('CSO'), healthcare communications, event management and medical affairs & regulatory services to healthcare companies.
Sharp Packaging Services - The Sharp Packaging Services segment provides outsourced commercial and clinical trial packaging services to healthcare companies.
Supply Chain Services - The Supply Chain Services segment combines all of the Group's healthcare logistics based companies.
On 18 September 2015 the Group announced the proposed disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. This has resulted in a change in the composition of the operating segments during the year ended 30 September 2015. Following this change, we have revised our segmental reporting and restated the prior year segmental disclosures as required by IFRS 8. Details of the discontinued operations are included in note 7. The segmental analysis of the business corresponds with the Group's organisational structure and the Group's internal reporting for the purpose of managing the business and assessing performance as reviewed by the Group's Chief Operating Decision Maker (CODM), which the Group has defined as Brendan McAtamney (Chief Executive Officer).
The amount of revenue and operating profit under the Group's operating segments is as follows:
Six months Six months ended ended Continuing operations 31 March 31 March 2016 2015 EUR'000 EUR'000 Revenue Ashfield Commercial & Medical Services 291,189 283,602 Sharp Packaging Services 132,388 110,438 Supply Chain Services 48,837 52,169 472,414 446,209 ---------------------------------------------------------------------------------------- ------------- ------------- Operating profit before acquired intangible amortisation, transaction costs and exceptional items Ashfield Commercial & Medical Services 28,012 26,181 Sharp Packaging Services 16,187 11,760 Supply Chain Services 4,191 4,052 48,390 41,993 Amortisation of acquired intangibles (7,309) (7,354) Exceptional items - (9,819) Transaction costs (834) (276) ---------------------------------------------------------------------------------------- ------------- ------------- Operating profit 40,247 24,544 Finance income 5,493 40,853 Finance expense (12,603) (47,792) ---------------------------------------------------------------------------------------- ------------- ------------- Profit before tax 33,137 17,605 Income tax expense (8,738) (5,471) ---------------------------------------------------------------------------------------- ------------- ------------- Profit after tax for the period 24,399 12,134 ---------------------------------------------------------------------------------------- ------------- ------------- Geographical analysis of revenue United Kingdom and Republic of Ireland 188,782 190,475 North America 202,667 175,401 Continental Europe 80,965 80,333 ---------------------------------------------------------------------------------------- ------------- ------------- 472,414 446,209 ---------------------------------------------------------------------------------------- ------------- -------------
4. Share of joint ventures' profit after tax
Six months Six months ended ended 31 March 31 March 2016 2015 EUR'000 EUR'000 Group share of revenue 32,416 28,303 Group share of expenses, inclusive of tax (30,979) (27,610) ------------------------------------------- ----------- ----------- Group share of profit after tax 1,437 693 ------------------------------------------- ----------- -----------
5. Exceptional items
Six months Six months ended ended 31 March 31 March 2016 2015 EUR'000 EUR'000 Restructuring costs and other - 4,618 Impairment of assets - 4,266 Onerous leases - 1,203 Profit on disposal of subsidiary undertakings - (268) Exceptional items relating to continuing operations - 9,819 Exceptional items relating to discontinued operations - 844 ------------------------------------------------------- ------------- ------------- - 10,663 Exceptional tax credit - (1,418) ------------------------------------------------------- ------------- ------------- Net exceptional items after taxation - 9,245 ------------------------------------------------------- ------------- -------------
Restructuring costs and other, included in the six months to 31 March 2015, primarily included redundancy costs of EUR4,499,000 in relation to recently acquired and existing Group businesses. The closure of Aquilant Scientific (UK) Limited (a UK based distributor of laboratory equipment) was announced on 28 February 2015. This resulted in non-cash impairment charges in respect of goodwill (EUR2,216,000) and other assets (EUR2,050,000). Onerous lease costs were incurred in relation to the recently acquired and existing portfolio of leased properties that are no longer in use. Discontinued operations incurred redundancy costs of EUR844,000 during the prior period.
During the prior period, the Group disposed of its shareholding in Ashfield KK as part of the Group entering into a joint venture agreement with CMIC Holdings Co., Ltd. The Group also disposed of its shareholding in Pharmaceutical Trade Services, Inc. The disposals resulted in a net profit of EUR268,000.
Reconciliation to Group Income Statement - six months ended 31 March 2015
Other Disposal of Total Cost of sales Distribution Administration operating subsidiary exceptional expenses expenses expenses undertakings items EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Restructuring costs and other - 4,162 456 - - 4,618 Impairment of assets 2,050 - - 2,216 - 4,266 Onerous leases - 59 1,144 - - 1,203 Loss on disposal of subsidiary undertakings - - - - (268) (268) ---------------- --------------- -------------- ---------------- -------------- -------------- --------------- 2,050 4,221 1,600 2,216 (268) 9,819 Discontinued operations - 844 - - - 844 ---------------- --------------- -------------- ---------------- -------------- -------------- --------------- 2,050 5,065 1,600 2,216 (268) 10,663 --------------- --------------- -------------- ---------------- -------------- -------------- ---------------
6. Finance income and expense
Six months Six months ended ended 31 March 31 March 2016 2015 EUR'000 EUR'000 Finance income Income arising from cash deposits 264 197 Fair value of cash flow hedges transferred from equity - 32,891 Fair value adjustments to fair value hedges - 7,702 Fair value adjustment to guaranteed senior unsecured notes 1,654 - Foreign currency gain on retranslation of guaranteed senior unsecured loan notes 3,424 - Ineffective portion of cash flow hedges 93 63 Net finance income on pension scheme obligations 58 - ---------------------------------------------------------------------------------- ----------- ----------- 5,493 40,853 ---------------------------------------------------------------------------------- ----------- ----------- Finance expense Interest on bank loans and other loans -wholly repayable within 5 years (4,853) (3,165) -wholly repayable after 5 years (2,289) (3,491) Interest on finance leases (1) (2) Interest on overdrafts (13) (106) Unwinding of discount on provisions (369) (409) Fair value adjustments to fair value hedges (1,654) - Fair value of cash flow hedges transferred from equity (3,424) - Fair value adjustments to guaranteed senior unsecured loan notes - (7,702) Foreign currency loss on retranslation of guaranteed senior unsecured loan notes - (32,891) Net finance cost on pension scheme obligations - (26) ---------------------------------------------------------------------------------- ----------- ----------- (12,603) (47,792) ---------------------------------------------------------------------------------- ----------- ----------- Net finance expense relating to continuing operations (7,110) (6,939) Net finance expense relating to discontinued operations (51) (55) ---------------------------------------------------------------------------------- ----------- ----------- Net finance expense (7,161) (6,994) ---------------------------------------------------------------------------------- ----------- -----------
7. Net result from discontinued operations and assets and liabilities classified as held for sale
On 18 September 2015 the Group announced the proposed disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA for an aggregate cash consideration of EUR407.5 million before adjustments in respect of working capital, taxation and costs. The disposal was approved by shareholders at an EGM on 13 October 2015 and on 1 April 2016 the Group completed the disposal of these businesses. The Group has treated these operations as discontinued operations and assets held for sale in accordance with IFRS 5. The comparative Group Income Statement, Group Statement of Comprehensive Income and Group Cash Flow to 31 March 2015 have been restated to show the discontinued operations separately from continuing operations.
The following table details the results of discontinued operations included in the Group Income Statement:
31 March 31 March 2016 2015 EUR'000 EUR'000 Revenue 682,875 685,231 Cost of sales (632,961) (636,448) ------------------------------------------- --------- --------- Gross profit 49,914 48,783 Selling and distribution expenses (33,921) (33,788) Administration expenses (2,266) (2,770) Other operating expenses - (900) Settlement gain on defined benefit pension 2,404 - Transaction costs (7,534) - ------------------------------------------- --------- --------- Operating profit 8,597 11,325 Net finance expense (51) (55) ------------------------------------------- --------- --------- Profit before exceptional items and
tax 8,546 11,270 Exceptional items - (844) ------------------------------------------- --------- --------- Profit from discontinued operations before tax 8,546 10,426 Income tax expense (1,579) (1,358) ------------------------------------------- --------- --------- Profit from discontinued operations after tax 6,967 9,068 ------------------------------------------- --------- ---------
In accordance with IFRS 5, depreciation of property, plant and equipment and amortisation of intangibles has not been charged on the assets held for sale. If the assets had continued to be depreciated and amortised, the respective pre-tax charges for the current period would have been EUR3,526,000 and EUR720,000.
The profit for the year from discontinued operations is fully attributable to the equity holders of the company.
The following table details the assets and liabilities classified as held for sale in the Group Balance Sheet:
Carrying Carrying value value 31 March 30 September 2016 2015 EUR'000 EUR'000 Assets Property, plant and equipment 85,023 84,867 Goodwill 14,296 15,629 Intangible assets 46,894 40,426 Deferred income tax assets 429 527 Inventories 112,377 117,155 Trade and other receivables 215,665 215,021 Current income tax asset - 195 Assets held for sale 474,684 473,820 ----------------------------------- ---------- -------------- Liabilities Deferred income tax liabilities (381) (387) Trade and other payables (256,869) (276,682) Employee benefits (2,527) (3,264) Current income tax liabilities (334) - -------------------------------- ---------- -------------- Liabilities held for sale (260,111) (280,333) ---------------------------------- ---------- -------------- Net assets 214,573 193,487 ----------------------------------- ---------- --------------
8. Earnings per ordinary share
Continuing Discontinued Continuing Discontinued operations operations Total operations operations Total 2016 2016 2016 2015 2015 2015 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Profit attributable to the owners of the parent 24,399 6,967 31,366 12,113 9,068 21,181 Adjustment for amortisation of acquired intangible assets (net of tax) 6,347 - 6,347 6,366 206 6,572 Adjustment for transaction costs (net of tax) 834 7,534 8,368 276 - 276 Adjustment for exceptional items (net of tax) - - - 8,515 730 9,245 Adjustment for amortisation and depreciation on assets classified as held for sale (net of tax) - (3,456) (3,456) - - - Adjusted profit attributable to owners of the parent 31,580(1) 11,045(2) 42,625 27,270 10,004 37,274 ------------------ ----------------- ----------------- ---------- ------------------ ----------------- --------- 2016 2015 Number Number of shares of shares Weighted average number of shares 246,079,718 243,529,382 Number of dilutive shares under option 1,299,770 1,286,719 ------------------------------------------------------------ ------------ ------------ Weighted average number of shares, including share options 247,379,488 244,816,101 ------------------------------------------------------------ ------------ ------------ Continuing Discontinued Continuing Discontinued operations operations Total operations operations Total 2016 2016 2016 2015 2015 2015 Basic earnings per share - cent 9.92 2.83 12.75 4.98 3.72 8.70 Diluted earnings per share - cent 9.86 2.82 12.68 4.95 3.70 8.65 Adjusted basic earnings per share - cent 12.83(1) 4.49(2) 17.32 11.20 4.11 15.31 Adjusted diluted earnings per share - cent 12.77(1) 4.46(2) 17.23 11.14 4.09 15.23
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.
(1) Adjusted profit attributable to owners of the parent from continuing operations is stated before the amortisation of acquired intangible assets and transaction costs.
(2) Adjusted profit attributable to owners of the parent from discontinued operations is stated after charging depreciation and amortisation of assets classified as held for sale (EUR3.5m, net of tax) and adding back transaction costs (EUR7.5m, net of tax). Adjusted profit attributable to owners of the parent in the comparative period reflected a depreciation and amortisation charge of EUR3.6m, 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 EUR3.5m (net of tax) for depreciation and amortisation in the current period has been reflected in the adjustments above.
Treasury shares have been excluded from the weighted average number of shares in issue used in the calculation of 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 buildings equipment Motor vehicles equipment construction Total EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Cost At 1 October 2015 72,817 86,990 995 20,456 10,017 191,275 Additions in period 461 7,955 126 2,704 5,781 17,027 Disposals in period (16) (2,961) (64) (298) - (3,339) Transfer to assets held for sale - (1,163) - - - (1,163) Reclassifications - 8 (79) 71 - - Translation adjustment (2,145) (1,949) (94) (1,141) (363) (5,692) ------------------- ---------------- ---------------- --------------- ---------------- ---------------- -------- At 31 March 2016 71,117 88,880 884 21,792 15,435 198,108 ------------------- ---------------- ---------------- --------------- ---------------- ---------------- -------- Depreciation At 1 October 2015 20,929 41,294 666 10,483 - 73,372 Depreciation charge for the period 2,094 4,632 27 2,032 - 8,785 Eliminated on
disposal (12) (2,738) (63) (257) - (3,070) Transfer to assets held for sale - (238) - - - (238) Reclassifications - 8 (73) 65 - - Translation adjustment (658) (1,057) (73) (655) - (2,443) ------------------- ---------------- ---------------- --------------- ---------------- ---------------- -------- At 31 March 2016 22,353 41,901 484 11,668 - 76,406 ------------------- ---------------- ---------------- --------------- ---------------- ---------------- -------- Carrying amount ------------------- ---------------- ---------------- --------------- ---------------- ---------------- -------- At 31 March 2016 48,764 46,979 400 10,124 15,435 121,702 ------------------- ---------------- ---------------- --------------- ---------------- ---------------- -------- At 30 September 2015 51,888 45,696 329 9,973 10,017 117,903 ------------------- ---------------- ---------------- --------------- ---------------- ---------------- --------
10. Movement in goodwill, intangible assets and investment in joint ventures and associates
Investment in joint ventures Intangible and associates Goodwill assets EUR'000 EUR'000 EUR'000 Balance at 1 October 2015 358,213 101,693 23,079 Investment in computer software - 1,984 - Amortisation of acquired intangible assets - (7,309) - Amortisation of computer software - (1,285) - Share of joint ventures' profit after tax - - 1,437 Transfer to assets held for sale - (1,679) - Translation adjustment (12,251) (3,108) (782) Balance at 31 March 2016 345,962 90,296 23,734 ---------------------------------------------- ----------- ----------- -------------------
11. Other reserves
Capital Cash flow Share-based Foreign Treasury redemption hedge payment exchange shares reserve Total EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Balance at 1 October 2015 (4,357) 4,762 15,182 (5,760) 250 10,077 Effective portion of cash flow hedges (3,849) - - - - (3,849) Deferred tax on cash flow hedges 481 - - - - 481 Share-based payment expense - 824 - - - 824 Release from share-based payment reserve - (1,904) - - - (1,904) Gain on hedge of net investment in foreign operations - - 2,262 - - 2,262 Translation adjustment * Continuing operations - - (26,663) - - (26,663) * Discontinued operations - - (4,640) - - (4,640) Balance at 31 March 2016 (7,725) 3,682 (13,859) (5,760) 250 (23,412) ------------------------------------ ------------ ------------- ------------ ------------ ------------ --------- Share-based Capital Cash flow Foreign Treasury redemption hedge payment Exchange shares reserve Total EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Balance at 1 October 2014 (11,891) 5,964 (18,738) (5,758) 250 (30,173) Effective portion of cash flow hedges 4,626 - - - - 4,626 Deferred tax on cash flow hedges (578) - - - - (578) Share-based payment expense - 965 - - - 965 Release from share-based payment reserve - (2,134) - - - (2,134) Loss on hedge of net investment in foreign operations - - (21,722) - - (21,722) Translation adjustment * Continuing operations - - 66,310 - - 66,310 * Discontinued operations - - 4,205 - - 4,205 Reclassification on loss of control of subsidiary undertakings - - (165) - - (165) Balance at 31 March 2015 (7,843) 4,795 29,890 (5,758) 250 21,334 ------------------------------------ ------------ ------------- ------------ ------------ ------------ ---------
12. Net debt
As at As at As at 31 March 31 March 30 Sept 2016 2015 2015 EUR'000 EUR'000 EUR'000 Current assets Cash at bank and short term deposits 182,949 145,461 214,078 Derivative financial instruments 4,520 4,799 4,750 Non-current assets Derivative financial instruments 13,386 29,601 22,048 Current liabilities Interest bearing loans and borrowings (19,106) (767) (20,605) Finance leases (187) (70) (206) Non-current liabilities Interest bearing loans and borrowings (409,565) (453,904) (415,824) Finance leases (12) (21) (16) (228,015) (274,901) (195,775) --------------------------------------- ---------- ---------- ----------
13. Provisions
Deferred contingent consideration Onerous leases Restructuring and other costs Total EUR'000 EUR'000 EUR'000 EUR'000 Balance at 1 October 2015 22,029 372 3,790 26,191 Charge/(release) to income statement 324 - (369) (45) Utilised during the period (5,281) (26) (2,050) (7,357) Unwinding of discount 369 - - 369 Translation adjustment (587) - 2 (585) ----------------------------- --------------------------- ----------------- --------------------------- -------- Balance at 31 March 2016 16,854 346 1,373 18,573 ----------------------------- --------------------------- ----------------- --------------------------- -------- Non-current 7,167 Current 11,406 Total 16,854 346 1,373 18,573 ----------------------------- --------------------------- ----------------- --------------------------- --------
14. Employee benefits
Employee Employee Employee benefit benefit benefit asset liability total EUR'000 EUR'000 EUR'000 Employee benefit asset/(liability) at 1 October 2015 13,067 (21,567) (8,500) Current service cost (994) (233) (1,227) Curtailment gain - 328 328 Settlement gain - 3,663 3,663 Interest costs 238 (238) - Contributions paid - 6,187 6,187 Remeasurement gain/(loss) 343 (4,774) (4,431) Translation adjustment (195) 186 (9) ------------------------------------------------------- --------- ---------- --------- Employee benefit asset/(liability) at 31 March 2016 12,459 (16,448) (3,989) ------------------------------------------------------- --------- ---------- --------- Analysed as: Assets and liabilities associated with continuing operations 12,459 (13,921) (1,462) Liabilities held for sale(1) - (2,527) (2,527) -------------------------------------------------------------- ------- --------- -------- 12,459 (16,448) (3,989) -------------------------------------------------------------- ------- --------- --------
(1) This scheme relates to United Drug Sangers which is included in liabilities associated with assets classified as held for sale at 30 September 2015 and 31 March 2016.
Employee Employee Employee benefit benefit benefit asset liability total EUR'000 EUR'000 EUR'000 Employee benefit asset/(liability) at 1 October 2014 13,553 (19,780) (6,227) Current service cost (855) (326) (1,181) Interest on scheme obligations 213 (299) (86) Contributions paid - 1,170 1,170 Remeasurement gain/(loss) 633 (15,407) (14,774) Translation adjustment 2,338 (254) 2,084 ------------------------------------------------------- --------- ---------- --------- Employee benefit asset/(liability) at 31 March 2015 15,882 (34,896) (19,014) ------------------------------------------------------- --------- ---------- ---------
As set out in the consolidated financial statements for the year ended 30 September 2015, the Group operates a number of defined benefit pension schemes which are funded by the payments of contributions to separately administered trust funds. The employee benefit asset relates to the United States pension scheme and the employee benefit liability relates to the Republic of Ireland (ROI) and Northern Ireland (NI) pension schemes. The remeasurement loss during the current period primarily relates to a decrease in the discount rates in respect of the Republic of Ireland schemes. The change in the discount rate within the schemes is reflective
of changes in bond yields during the period. The United States scheme has an actuarial gain in the current period arising from a higher than expected return on plan assets. Accrual of pension benefits within the ROI schemes ceased with effect from 31 December 2015.
On 18 September 2015 the Group announced the proposed disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA for an aggregate cash consideration of EUR407.5 million. The disposal was approved by shareholders at an EGM on 13 October 2015 and on 1 April 2016 the Group completed the disposal of these businesses. Following completion of the disposal, the future funding obligations in respect of the NI scheme have ceased to be the responsibility of the Group. Responsibility for the funding requirements in respect of the ROI schemes remain within the Group.
During the current period, a general offer was made to the current 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 EUR3,663,000. Related professional fees amounted to EUR238,000, resulting in a net income statement gain of EUR3,425,000. EUR2,404,000 of this gain related to discontinued operations.
The principal assumptions and associated changes are as follows:
Republic of Ireland Schemes United States Northern Ireland Scheme Scheme(1) As at As at As at As at As at As at 31 March 30 Sept 31 March 30 Sept 31 March 30 Sept 2016 2015 2016 2015 2016 2015 Rate of increase in salaries 1.75% 2.75% 2.75%-4.00% 2.75-4.00% 0.00% 0.00% Rate of increase in pensions 0-1.75% 0-1.75% 0.00% 0.00% 1.80-3.20% 1.80-3.30% Inflation rate 1.75% 1.75% 2.75% 2.75% 2.40% 2.50% Discount rate 2.00% 2.70% 3.60% 4.00% 3.80% 4.00%
(1) This scheme relates to United Drug Sangers which is included in liabilities associated with assets classified as held for sale at 30 September 2015 and 31 March 2016.
15. Financial instruments
The fair values of financial assets and financial liabilities, together with the carrying amounts in the condensed consolidated balance sheet at 31 March 2016, are as follows:
Continuing operations Held for sale Total Total Carrying Fair Carrying Fair carrying fair value value value value value value Financial assets EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Trade and other receivables 197,845 197,845 215,665 215,665 413,510 413,510 Derivative financial instruments 17,906 17,906 - - 17,906 17,906 Cash and cash equivalents 182,949 182,949 - - 182,949 182,949 ----------------------- --------- -------- --------- -------- ---------- -------- 398,700 398,700 215,665 215,665 614,365 614,365 ----------------------- --------- -------- --------- -------- ---------- -------- Financial liabilities Trade and other payables 183,694 183,694 256,869 256,869 440,563 440,563 Interest bearing loans and borrowings 428,671 432,411 - - 428,671 432,411 Finance lease liabilities 199 199 - - 199 199 Deferred contingent consideration 16,854 16,854 - - 16,854 16,854 629,418 633,158 256,869 256,869 886,287 890,027 ----------------------- --------- -------- --------- -------- ---------- --------
The fair values of the financial assets and liabilities disclosed in the above tables have been determined using the methods and assumptions set out below.
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 period 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 Total 1 2 3 EUR'000 EUR'000 EUR'000 EUR'000 Assets measured at fair value Designated as hedging instruments Cross currency interest rate swaps 17,906 - 17,906 - --------------------------- -------- --------- ---------- --------- 17,906 - 17,906 - ------------------------ -------- --------- ---------- --------- Liabilities measured at fair value At fair value through profit or loss Deferred contingent consideration 16,854 - - 16,854 16,854 - - 16,854 ------------------------ -------- --------- ---------- ---------
Summary of derivatives:
Amount of Related financial amounts not Amount of Related assets/liabilities offset in 31 March financial amounts not 31 March as presented in the balance 2016 assets/liabilities offset in 2015 the balance sheet sheet Net as presented in the balance Net the balance sheet sheet EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Derivative financial assets 17,906 - 17,906 34,400 - 34,400 Derivative financial liabilities - - - - - - -------------- -------------------- ------------- ------------- -------------------- ------------- -------------
All derivatives entered into by the Group are included in Level 2 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 adjustments to take account of the credit risk of the Group entity and counterparty where appropriate.
Deferred contingent consideration
Details of movements in the period are included in note 13. The deferred contingent consideration liability arose from acquisitions completed by the Group. The fair value is determined considering the expected payment, discounted to present value using a risk adjusted discount rate. The expected payment is determined separately in respect of each individual earnout agreement taking into consideration the expected level of profitability of each acquisition. As there were no acquisitions completed in the current period or prior year, the provision for deferred consideration is in respect of acquisitions completed during 2012 and 2014.
The significant unobservable inputs have not changed since the last annual report and are as follows:
-- forecasted average annual net revenue growth rate 9%; -- forecast average EBIT growth rate 2%; and -- risk adjusted discount rate 6.5%.
Inter-relationship between significant unobservable inputs and fair value measurement:
The estimated fair value would increase/(decrease) if:
-- the annual net revenue growth was higher/(lower); -- the EBIT growth rate was higher/(lower); and -- the risk adjusted discount rate was lower/(higher).
For the fair value of deferred contingent consideration, a reasonable possible change to one of the significant unobservable inputs at 31 March 2016, holding the other inputs constant, would have the following effects:
Increase Decrease EUR'000 EUR'000 ------------------------------- --------- --------- Effect of change in assumption on income statements Annual EBIT growth rate (1% movement) - - Annual net revenue growth rate (1% movement) - - Risk-adjusted discount rate (1% movement) 47 (49) ---------------------------------- --------- ---------
16. Dividends
The Board has proposed an interim dividend of 3.05 cent per share. This dividend has not been provided for in the balance sheet at 31 March 2016 as there was no present obligation to pay the dividend at the reporting date. During the first half of the financial year, the final dividend for 2015 (8.10 cent per share), was paid giving rise to a reduction in shareholders' funds of EUR19,867,000.
17. Foreign currency
The principal exchange rates used in translating sterling and dollar balance sheets and income statements were as follows:
31 March 31 March 2016 2015 EUR1=StgGBP EUR1=StgGBP Balance sheet (closing rate) 0.7916 0.7295 Income statement (average rate) 0.7456 0.7670 EUR1=US$ EUR1=US$ Balance sheet (closing rate) 1.1385 1.0741 Income statement (average rate) 1.0986 1.1899
18. 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 amount due from Magir Limited, the Group's joint venture investment, at 31 March 2016 was EUR7,099,000 which represents 3.0% of total gross trade receivables classified as assets held for sale. The Group has also provided a guarantee to Magir's bankers for an amount of StgGBP12,000,000 and a loan of StgGBP8,600,000.
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 executive team as key management personnel. This 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 EUR5,897,000 for the six months ended 31 March 2016 (2015: EUR4,856,000).
19. Events after the balance sheet date
On 1 April 2016 the Group completed the disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA.
On 18 April 2016 the Group acquired Pegasus Public Relations Limited, a healthcare communications company based in the United Kingdom. The acquisition consideration of StgGBP16.8 million was comprised of a StgGBP10.1 million upfront payment and StgGBP6.7 million earn out payable for performance over three years. The initial cash payment was financed from the Group's internal resources and debt facilities.
Based on initial assessment, the fair value of the net assets and liabilities acquired are estimated to be EUR5.4 million (StgGBP4.3 million) and consist primarily of property, plant and equipment, trade and other receivables, cash, and trade and other payables.
20. Board Approval
This interim report was approved by the Board of Directors of UDG Healthcare plc on 18 May 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFLDEAITLIR
(END) Dow Jones Newswires
May 19, 2016 02:01 ET (06:01 GMT)
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